Home >Companies >Future Group, Ramdev’s Patanjali tie up to sell FMCG products

New Delhi: Kishore Biyani-led Future Retail Ltd, which operates hypermarket and retail chains such as Big Bazaar, Food Bazaar and FBB, on Friday announced a marketing partnership with yoga guru Ramdev-promoted Patanjali Ayurved.

As part of the partnership, Future Retail will promote, distribute and market all of Patanjali Ayurved’s products across its outlets in 243 cities in India. The outlets include 203 Big Bazaar and Easyday hypermarkets, 197 Food Bazaar and Easyday supermarkets and most of the 171 other retail stores comprising Home Town, eZone, FBB and Foodhall brands.

This is not Patanjali Ayurved’s first tie-up with modern trade. Earlier this year, it teamed up with Mukesh Ambani’s retail chain Reliance Fresh.

“Over the next 20 months, we hope sales of Patanjali Ayurved products will cross 1,000 crore, or more than 80 crore a month. Initially though we expect it will start with just about 30-40 crore a month," said Biyani, CEO, Future Group.

This is close to the volumes FMCG giant Hindustan Unilever Ltd (HUL) notches up through Future Group outlets—about 1,300-1,400 crore a year.

“We see Patanjali generating similar revenue, if not more, from Future Group stores over a period," Biyani said.

Ramdev said Patanjali will close the current fiscal year with a revenue of 5,000 crore, up from 2,000 crore in FY15. He added that it will become the largest FMCG company in India in the next five years.

“Yeh ek swadeshi andolan hai. Humne rashtravad ke liye haath milaya hai (This is a swadeshi movement. We have joined hands in national interest)," said Ramdev.

“I was looking for a swadeshi retail chain to sell my products. We thought there was no better person than Biyani who is the king of retail in India. We will partner with the Future Group in manufacturing also wherever possible," he added.

Over the next few months, Patanjali will launch products such as pasta, oats, muesli, organic rice and organic vegetables, among other food products. “Our effort is to give tough competition to multinational companies. MNCs should suffer and should bring down the prices," Ramdev said.

Taking a dig at Swiss packaged food company Nestle India, which had to recall its Maggi noodles from the market following a ban by the food regulator Food Safety and Standards Authority of India, he said: “On 15 October, we’ll launch atta noodles. It will be all over India. Maggi used to sell for 25, we will offer it for 15. Our taste-maker will be a health-maker. It will have no added lead or MSG (monosodium glutamate)," Ramdev said.

“Every brand builds on its inherent strengths, its appeal and the price-value relationship it seeks to define. For over 32 years, Maggi noodles has understood changing consumer needs in a systematic and significant way and pioneered offerings that have built up its equity, trust and consumer promise. Pricing is just one vector of this equation and will receive due attention when we re-launch. We will draw upon this equity, trust, value, long relationships with consumers, partners and stakeholders to define an appropriate response," said Suresh Narayanan, managing director, Nestle India, by way of reaction.

Dabur India, another home-grown company with strong Ayurvedic products in its portfolio, declined to comment.

Biyani too indicated the possibility of the two companies entering into a production partnership in the future. “We are working on it. In the long run we will develop brands together," he said.

Currently, Patanjali sells 30 products—mustard oil, flour, butter, biscuits, spices, oil, sugar, juices, honey and tooth paste being among them—at prices that are 15-30% lower than its competitors. It also plans to tap exports markets from next year.

Analysts believe Patanjali can emerge as a challenger to established packaged goods companies in the long term. Investment banking firm CLSA, in a report titled ‘Indian Consumer: Taste of India’, said Patanjali Ayurved, founded in 1997 as a small pharmacy, may be the most diversified consumer goods firm in India, bigger than Jyothi Labs and Emami.

“While competition must be keeping its fingers crossed, all we can say is: ‘Wish you were listed’," CLSA’s Vivek Maheshwari and Bhavesh Pravin Shah wrote in the report.

Sunita Sachdev, an analyst at UBS Securities India, in a September research report, noted that Patanjali recently signed a contract with the Defence Research and Development Organisation (DRDO) for manufacturing and marketing some herbal supplements and food products. “This will help DRDO’s juices, mosquito repellents and many more consumer products reach more customers in the civilian market," Sachdev said.

“Over the long term, gaining palpable distribution prowess could pose a serious threat to the competition," said Abneesh Roy, associate director, institutional equities research, Edelweiss Securities, after a visit to Patanjali’s plant.

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