BUSINESS SPECIAL .....ON PATANJALI'S COATTAILS

ON PATANJALI'S COATTAILS



A raft of companies, old and new, wants to take a fresh crack at the burgeoning market for natural care products. Will consumers bite?

Arjun Vaidya grew up around ayurveda. As a sixth-generation member of a family steeped in this form of therapy, he remem bers spending endless hours with his grand father, a popular ayurvedic doctor in South Mumbai. Vaidya says he cured him of crip pling childhood asthma. Even today, four years after his passing, patients get their prescription refilled from the clinic. Now, the 26-year-old Vaidya wants to put the 150-odd years of knowhow to use, beyond just medicines. Riding on a growing wave of interest in natural products and ingredients, Vaidya has, over the past couple of years, evolved the brand Dr Vaidya's into much more. With 35 products, including those for hangovers and Chyawanprash-in-a-capsule, Dr Vaidya's wants to latch onto the trend of first building a national and then an international business around natural products and ayurveda.

Dr Vaidya's has esteemed company. Consumer goods firms such as Patanjali, Hindustan Unilever Ltd, Colgate-Palmolive and Emami are betting big bucks on this trend. As are those entrenched in the segment for decades, like Himalaya and Dabur. And, then, there are relative upstarts like Dr Vaidya's jockeying for a share of this fastevolving space. “We want to replicate the success of yoga (estimated by industry sources to be a $27 billion industry in the US and $80 billion globally) with ayurveda,“ says Vaidya. “Consumers have evolved from wariness and suspicion to rapid adoption, as the shift towards natural products has gathered speed.“

Companies of all sizes are racing to keep pace. Says Issam Bachaalani, managing director, Colgate-Palmolive (India): “As consumers and lifestyles evolve, so do the benefits that consumers seek. Currently, the segment that is growing the fastest is natu rals -a current consumer trend not just in India, but the world over. And it is so, across categories, not just in toothpaste.“

The multinational company has launched products like Colgate Herbal, Active Salt, Active Salt Neem, Cibaca Vedshakti and Sensitive Clove. “We are growing our Natu rals portfolio and will continue to provide innovations from Colgate that address spe cific consumer needs.“

Colgate may be dominant in oral care, but it is seeing increasing competition from the likes of Dabur.

Dabur Red is now the No. 3 player in the market.

Other consumer goods companies are also jumping into the nat urals market. In De cember 2015, HUL acquired the Indule kha brand for `330 crore to step up its presence and has since made significant inroads, says a company spokesperson. “As a mar ket leader, HUL has always invested in the market development of new and emerging categories. Naturals is a trend and that we have been calling out for a few quarters now, within our existing portfolio,“ the repre sentative says.

How Green is Personal Care

In the past 12 months or so, HUL has been on a naturals blitz to claim a greater share of this market. In February 2017, it re launched the master brand Lever Ayush (which consists of a wide range of products, including toothpaste, soap, hand wash, shampoo and face wash) in five south Indi an states. It has leveraged the acquisition of Indulekha to transform it from a distinctly Kerala entity into a national brand. This has been enabled by launching variants of natu rals in hair care brands like Tresemme Bota nique and Clinic Plus Ayurveda. In May, it launched Citra in India -a 33-year-old natu rals brand available in Indonesia and Thailand, among other countries.

HUL may be a consumer goods trailblazer, but not in the naturals space. Over the past couple of years, Patanjali Ayurved has set the market alight with its growth and seems set to maintain the momentum, with plans to double its turnover of `10,000 crore in the next 12 months. Besides its core consumer care products, Patanjali, part of high-profile yoga guru Ramdev's empire, is also looking further afield into businesses as disparate as apparel and juices to drive growth.

Along with the natural and ayurveda focus, Patanjali has in the past pitted itself as the flag bearer of patriotism, contending that its foreign rivals have done little for India despite doing business here for a long time. “We want to be the No. 1 consumer goods company in India,“ says Acharya Balkrishna, CEO of Patanjali. “We regard our business as a new swadeshi movement, and want an Indian company to take back an industry long dominated by foreign companies.“

Patanjali is leading the ayurveda and naturals bandwagon, having already forayed into categories such as cosmetics and personal care, while other segments like beverages and dairy are being built up. In toothpaste, for example, Patanjali's share has trebled to over 6% over the past year, even as company officials claim it has a 15% share in shampoo and half of the market for honey. Now, the Haridwar headquartered operation is set to increase its headcount five-fold from around 100,000, plans to double production capacity in two years and has opened five new food parks -taking the total to six -as it seeks to maintain this breathless momentum. The company plans to raise around `1,000 crore in debt to meet its ambitious targets.

Ramdev isn't the only spiritual head who is sizing up the ayurveda goldmine. In Bengaluru, Sri Sri Tattva has also announced plans to have 1,000 stores selling its products. “We believe that companies that can mix traditional values of ayurveda with a modern outlook to business will dominate this market,“ says Tej Katpitia, marketing chief of Sri Sri Tattva, the company started by Sri Sri Ravi Shankar, founder of the Art of Living movement. Rather than just branding and marketing products, Sri Sri Tattva wants to extend it across the value chain, from growing raw material to making products with it to establishing spas and panchakarmas that will use these offerings. Currently, Sri Sri Tattva has about 300 SKUs or stock keeping products in the market, and Katpitia says dozens more are in the pipeline, with extensions into food staples also on the anvil. “We are ready to compete with not only Patanjali but global companies like HUL,“ says Katpitia. The firm has launched products across categories such as staples and snacks and ambitiously plans to expand overseas, to 30 countries.

Natural Growth

Nearly three decades ago Vandana Luthra founded VLCC as a beauty and slimming service. Now, the company is looking to use the naturals platform to drive the growth of its consumer care business.“The personal care industry has been wit nessing a transition due to changes in consumer demands. Natural and organic products have gone up exponentially because of the increased awareness about natural products among customers and, hence, the shift in consumer behaviour,“ says Natarajan MV, chief business officer, products business, VLCC. “We have now developed propositions with the richness of ayurveda herbs such as chandan, kesar and tulsi for (products including) face washes and facial kits, which are free of parabens, synthetic colourants and soap, but having the richness of ayurvedic formulations.“

Analysts say that there are multiple reasons for this renewed interest in all things natural and ayurvedic. “The key growth factor driving the natural, herbal and ayurvedic trend in India has been the massive consumer awareness campaigns carried out by players such as Patanjali, Dabur, Sri Sri Tattva and Himalaya,“ says Shreyansh Kocheri, senior research analyst at Euromonitor International. “These companies highlighted drawbacks and long term effects of using chemical-based products (and) consumers increasingly started to look at product ingredients and demand chemical-free products.“

He reckons that strong government backing in the form of creating the AYUSH (ayurveda, yoga and naturopathy, unani, siddha and homeopathy) Ministry in 2014, establishing the All India Institute of Ayurveda and launching the International Day of Yoga have also helped propel the popularity of these concepts. The demand for natural products is driven by urban and rural consumers, with the latter's purchases being driven by the availability of mass brands priced affordably with natural ingredients. This has made them shift from unbranded, homemade variants to packaged, branded products.

Companies are queueing up to take advantage of the rapid evolution in naturals and ayurveda, which have been a sidelight for decades. “Despite the growing presence of larger rivals, we have built the No. 3 brand in oral care and have a growing interest in healthcare supplements and hair care,“ says KK Chutani, executive director, Dabur, the 133-year-old maker of popular products such as Dabur Amla Hair Oil and Hajmola digestive.

Over the past 12 months, Dabur has launched a slew of products such as what it claims to be India's first ayurvedic gel toothpaste, under the Dabur Red franchise, an ayurvedic cough and cold remedy, under the Honitus and Honey-Ginger brands, and has introduced local ingredients such as amla into its Real juice brand. To keep pace with this growing market, Dabur plans to become the largest bulk grower of rare medicinal herbs in the country, by more than doubling its area under cultivation to 4,500 acres from 2,000 acres at the end of fiscal year 2017. It has tied up with internet commerce giant Amazon to make its products available on its online market place -30 products including Meswak toothpaste to start with -and plans to add 80 more going forward.

“Mining historical data of consumer offtake in the past four or five years shows that contribution of the naturals segment in the Indian personal care (PC) industry has increased by around one percentage point every year,“ says Sameer Shukla, executive director, Nielsen India. “If the trend continues, then naturals' contribution by 2025 would be almost half of total PC sales. In absolute terms, it will be almost double the current size of total PC category.“

Over the past two decades, the Himalaya Drug Company has pioneered the shift of ayurveda's use primarily for medicinal ther apy to a wider consumer adoption. As ayurveda has gone mainstream, Himalaya's fortunes have improved, with the company expected to hit billion dollars in revenues by 2020, from `2,100 crore or around $320 million at the end of the last fiscal year. “In the personal care space, millennials are leading the herbal and naturals trend as they are becoming savvier about green choices, which is driving a marked preference for these products,“ says Philipe Haydon, CEO, Himalaya Drug Company.

The maker of the popular Liv.52 liver medication has expanded into something of a consumer care heavyweight, foraying into segments such as baby care and wellness en route. “The entry of ayurveda-based FMCG products served as a tipping point in the growth trajectory of this system of wellness. It helped in making ayurveda accessible to a younger target audience, thereby increasing its relevance,“ says Haydon.

Other legacy companies too believe these trends are giving fresh impetus to their ageold businesses. Cholayil, the maker of a range of products under the Medimix brand, has grown from soaps to several other categories including face wash and moisturiser. Now, the Chennai-based firm is looking to lean on its ayurveda legacy even as it targets a younger audience that is more aware -and less suspicious-of these products. “This sea change has been a catalyst for brands that have been offering ayurvedic products for years to hog the limelight,“ says Pradeep Cholayil, chairman and managing director, Cholayil. “The rising demand for ayurvedic personal care products in recent times can be attributed to the realisation of customers; that age-old wisdom and traditional science are good for longterm health and beauty.“

Rahul Sachitanand

Oct 15 2017 : The Economic Times (Mumbai)