The race for growth in Ramdev's Patanjali leads to stumbles

HARIDWAR: Three years ago, yoga guru and entrepreneur. Ramdev I was riding high.

The consumer goods empire he co-founded had reached a wave after the 2014 elections. Customers were taking advantage of India's affordable products from Patanjali Ayurved, such as coconut oil and Ayurvedic remedies, in a threat growing for foreign companies that had bet big in India.

Turnover figures will force multinational companies to go for kapalbhati, Ramdev declared in 2017, in reference to yoga breathing exercise, vowing sales would more than double to Rs 20,000 crore ($ 2.84 billion) in the year to March 2018.

But, on the other hand, Patanjali's sales fell 10% to Rs 8,100 crore, according to its annual financial report.

And in the last fiscal year, it is likely to deteriorate further, say company sources and analysts. The provisional data indicated sales of only Rs 4,700 crore in the nine months to December 31, said CARE Ratings in April, based on information from Patanjali.

According to interviews with current and former employees, suppliers, distributors, store managers and consumers, Patanjali's ambitions have been hampered by errors.

In particular, the inconsistent quality stands out as Patanjali expanded very rapidly.

The company says that its rapid expansion brought some initial problems, but that they had been overcome.

Patanjali also suffered, like many others, the prohibition of high denomination banknotes in 2016 and the introduction of a new tax on goods and services (GST) in 2017. The movements interrupted economic activity.

Problems were expected

Patanjali says it has 3,500 distributors that supply about 47,000 retail counters throughout India. The Patanjali shops, mostly popular with rural Indians who join the middle class, sell snacks such as mango sweets or Ayurvedic remedies that promise to cure joint pain.

Ramdev, a household name whose TV yoga shows are watched by millions, has been the public face of Patanjali since 2006 and remains its brand ambassador - his bearded face smiles down from ubiquitous billboards and hoardings in villages.

But the company is owned by his business partner Acharya Balkrishna, who is Ramdev at a Sanskrit school three years ago and holds 98.55% of Patanjali's shares, according to a 2018 company filing.

Balkrishna, 46, whose net worth of Forbes is $ 4.9 billion, ignored concerns about the company's health during an interview in April at one of Patanjali's yoga centers near Haridwar.

We expanded suddenly, we started with three or four new units, so we expected problems. We have solved that network problem, said Balkrishna, referring to problems in the supply chain that affected deliveries. The problems focused on configuration and networking, he said, without giving further details.

A former employee said the problems included not having long-term agreements with carriers, which complicated planning and increased costs. Patanjali executives also lacked the software necessary to effectively track sales, another former worker said.

Balkrishna refused to give sales estimates for the current or the past fiscal year, but said future results would be better.

Reuters sent follow-up questions to Patanjali's public relations officer, KK Mishra, who said the questions had been sent to a special committee. The calls and messages to Balkrishna's assistant about the consultations went unanswered.

Third-party providers

As Patanjali increased its offer to more than 2,500 products, it prioritized the scale on quality and reduced production to third parties, which affected quality, said two former office executives and a supplier.

In 2017, Nepal's drug control agency found that six Patanjali medical products had a micro-organism content above the maximum limit set by the regulator. Santosh KC, an official of the Nepal Department of Drug Administration, said there were no problems with other Patanjali products.

Balkrishna denies that there have been quality problems and noted that the national laboratory accreditation board of India approved Patanjali's central laboratory.

Quality is not a problem, said Balkrishna.

Patanjali products that are marketed as Ayurvedic are under the regulatory scope of the Ayush Ministry, created in 2014 to promote alternative therapies, including Ayurveda. The ministry did not respond to a request for comments on the quality of Patanjali's product.

The FSSAI food regulator, which oversees Patanjali's processed foods, declined to disclose data on quality tests, saying it only did so in case of safety problems.

Balkrishna said that only a few products, including wheat, pulses and rice, were obtained externally.