Industry POV

Consumer goods firms look to take a leaf out of Patanjali’s book - Amita Karwal

7/7/2016

New Delhi: Bio Veda Action Research Co. will spend Rs.250 crore this financial year on advertising and marketing its ayurvedic personal care products brand Biotique.

It’s the first time since Biotique’s launch in 1992 that founder Vinita Jain will be spending money on advertising and marketing. So far, the brand has relied on word of mouth for growth.

Another Rs.200 crore will be invested in doubling capacity by adding new factories and to open about 100 standalone Biotique stores in the next 1-2 years.

“Things (market dynamics) are changing. When I started Biotique, the awareness about ayurveda was almost non-existent. Now, people ask for ayurvedic and herbal products. The market has expanded. So has competition. But the opportunity is huge,” said Jain.

Biotique has company. Himalaya Drug Co. has also increased its advertising budget by about 25% year-on-year in the past couple of years, according to Rajesh Krishnamurthy, business head (consumer products division), Himalaya. The company used to spend about 10% of sales on advertising.

Amita Karwal, chief operating officer (north & south) at Dentsu-owned media agency, Vizeum said consumers are slowly moving towards organic and herbal products.

“Therefore, companies choosing to increase their ad spends is a natural progression. Brands which were not spending will make investment in above the line advertising to grab bigger chunk of the pie,” Karwal said.

Himalaya expects its wellness products to account for about 30% of sales in five years from 4% now, according to Philipe Haydon, chief executive officer.

Even international brands are beefing up their herbals portfolios: French cosmetics giant L’Oreal earlier this month announced plans to launch a herbal hair care range.

India’s largest packaged consumer goods company Hindustan Unilever Ltd (HUL) last year relaunched Lever Ayush for its ayurvedic range, to be sold exclusively online. HUL also acquired ayurvedic hair oil and shampoo brand Indulekha in December 2015 to strengthen its presence in the premium category.

Suddenly, companies that sell personal care products made of ayurvedic, herbal or natural ingredients, are in expansion mode and seeking a bigger share of a market that has received a huge stimulus dose from products made by Patanjali Ayurved Ltd, the company established by yoga guru Baba Ramdev.

Patanjali more than doubled its revenue from Rs.2,006 crore in 2014-15 to around Rs.5,000 crore in 2015-16, emerging as a disruptor in the packaged goods market in India.

“Ramdev does not market products. He markets themes—yoga and ayurveda. And, this has not only created scope for Patanjali, but opened up a big market for all those who sell ayurvedic or herbal products,” said Sachin Bobade, an analyst at securities house HDFC Securities Ltd.

“While multinationals are adding herbal products to their portfolios, home-grown herbal product makers are increasing retail presence, pushing products through e-commerce market places, and some are even going heavy on advertising,” said Bobade.

Bobade said the growth of ayurvedic personal care products was almost on par with that of the larger personal care products segment, but in the last one year, herbal has outpaced the rest of the industry. “Over the next five years, ayurvedic products market is estimated to grow at 20-25% year-on-year,” he said.

Companies agree. Ramdev and Patanjali, said Biotique’s Jain, had helped in developing awareness of ayurvedic products.

“We have been selling ayurvedic products for more than two decades. Ramdev’s marketing of ayurveda, however, expanded the market, creating more scope for companies like us,” said Jain.

According to Sandeep Ahuja, managing director and group chief executive of beauty and wellness chain VLCC Healthcare Ltd, Patanjali has helped the market grow significantly.

“...where consumers were looking at unbranded herbal product options in the unorganized section, they are now looking at branded solutions,” according to Sandeep Ahuja, managing director and group chief executive, VLCC.

Krishnamurthy of Himalaya agreed: “The entry of Patanjali expanded the growth of the herbal companies and consumer awareness towards natural products. It is a huge opportunity for the herbal segment.”

Companies such as Dabur and Emami, which already have strong ayurvedic product portfolios, are also looking to scale up. Little surprise then that Emami acquired premium hair oil brand Kesh King from SBS Biotech for Rs.1,651 crore.

At an analyst meeting last year, Dabur chief executive officer Sunil Duggal said the company was betting big on the health and wellness platform.

The overall beauty and personal care market in India is estimated at Rs.74,700 crore by retail sales value, according to a June report by market research firm Euromonitor International.

According to analysts the ayurvedic market, most of which is still unorganised and dominated by unlisted companies, is estimated at Rs.4,500 crore at present.

“Competition in the natural, herbal and ayurvedic market within beauty and personal care in India is expected to remain intense. Mass brands such as Dabur, Emami and Patanjali are expected to continue to educate consumers about the benefits of using natural products through product promotions and in-store displays,” said a 27 May report by Euromonitor International.

In a September 2015 report, UBS Securities India Pvt. Ltd analyst Sunita Sachdev said herbal products made up just 6-7% of the overall personal care products market, but sales by volume are growing at about “twice the segment average”.

“We estimate herbal could grow to about 10% of the segment by FY20 as the trend accelerates,” Sachdev wrote in the report released on 14 September.

According to IMRB Kantar Worldpanel, a market research firm, about 33% of the personal care products sold in India are herbal. “Herbal personal care is being purchased by 97% of India’s households,” it said in response to an emailed questionnaire.

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