Ashish Rukhaiyar, The Hindu
Mumbai, 5 April 2016
a time when both retailers and consumers are hooked to huge discounts
on products across categories, one company has braved the ‘zero
discount’ strategy, and is stil giving its competitors sleepless
nights. Consumers are not complaining either.
which is growing at a pace that is unnerving domestic and Multinational
players in the fast-moving consumer goods (FMCG) segment alike, has
barred its sellers from offering a single paisa of discount on its
products. In other words, retailers have to sell every Patanjali
product at the maximum retail price (MRP) printed on the packaging.
serious is the company about this strategy, that even modern players
like Big Bazaar and D-Mart, which have built their business on the
discounting model, have been barred from offering any discount on
Labels like ‘Patanjali products are sold on
MRP’ greet shoppers at such stores, which have been able to gain market
share by offering discounts on various products. For instance, D-Mart
has a system of offering at least two per cent discount on the MRP of
all products but Patanjali is an exception.
Aditya Pittie, chief
executive officer of Pittie Group, the pan-India modern trade
distributor for Patanjali products, says the directive has come
directly from the company. For good measure, he says, it has reason to
do so. “Patanjali products are anyway cheaper than others in almost all
segments. As such, there is no need to give a discount. The quality of
products makes them sell.”
Indeed, in almost all segments,
including fruit juices, soaps, noodles, toothpastes and shampoos,
Patanjali products are cheaper than those of other FMCG majors like
HUL, Nestle and Colgate.
Sales do not, of course, always ride on
discounts and companies can adopt strategies they deem fit to position
themselves. “Every brand has to decide the boundaries within which it
has to operate, including the positioning and pricing at which it wants
to be sold,” says Devendra Chawla, president, brands, food & FMCG,
Future Group. “The discount strategy is also decided by brands, and
trade partners have to respect it.”
Dutta, chief executive of Third Eyesight, a strategy and marketing
consultant firm, saysthat every business has to look at brands from the
point of view of positioning, customer loyalty, price premium, and the
additional benefits it brings to the business, He says, “Patanjali may
not be offering discounts, but business is growing with no sign of
diminishing demand. The push has been such that there is a lot of brand
loyalty. While the perception is that Patanjali products are cheaper,
the argument does not hold true for all segments.”
The strategy does seem to be working in Patanjali’s favour.
clocked a provisional turnover of Rs 3,266.97 crore in the first 10
months of the financial year 2015-16 (FY16), according to a rating
rationale document by Brickwork Ratings, a credit rating agency. This
is more than double of Rs 1,587.51 crore reported in the corresponding
period of the previous financial year.
turnover and profit is currently less than that of most FMCG majors, it
is growing at a much faster pace. On the profitability front, the
company, which has yoga guru Baba Ramdev as its brand ambassador,
almost doubled its profit in FY15 to Rs 308.79 crore from Rs 154.70
crore in FY14, according to Brickwork Ratings. Clearly, enough
consumers see value in the company’s products.
(Published in The Hindu)