New Delhi: Patanjali Ayurved Ltd, the packaged goods company founded by yoga-guru-turned-businessman Baba Ramdev, has given multinationals a run for their money over the past two to three years, forcing them to rethink their India strategy. While Ramdev has remained the “unpaid brand ambassador", the brain behind the home-grown FMCG major’s success and hockey stick growth curve has been its managing director, Acharya Balkrishna, who owns more than 96% in Patanjali.
On the sidelines of the Mint Danfoss Transformation Agenda on food processing on 9 May, Balkrishna revealed the company’s growth plans, besides charting out what the government needs to do to double farmers’ income by 2022. Edited excerpts:
Prime Minister Narendra Modi wants to double farmers’ income by 2022. Do you think it is an achievable target?
Why just double? Farmers can earn 10 times of what they get now. And it is not tough. We simply need to reduce wastage. This can be done through food processing. Just about 6% of food is processed in India. In comparison, China processes about 40%. The government needs to encourage and support food processing.
Also, companies should buy directly from farmers. On the other hand, the government needs to impose minimum support price (MSP) for every product. The problem is that MSP is not being implemented properly, and most products do not even have an MSP. This is one thing the government must address.
Can MSP alone help double farmers’ income?
See, farmers can produce more. But for that, there has to be enough demand. Price of commodities, fruits and vegetables drop drastically because there is not enough demand during crop seasons. If companies start buying these products and process them, the demand issue gets resolved. As demand rises, farmers would produce more. Thus, their income will grow. The government should ensure a robust policy and more schemes that benefit the farmers.
There’s more. The Centre has sanctioned mega food parks. But those are not being operated properly. The state governments are not in alignment with the Centre. Even being the largest food processor, Patanjali faces issues in setting up units. Both states and the Centre need to come together and support food processing companies. That would, in turn, help increase farmers’ income.
Do you buy directly from farmers?
We do. We have food processing units and we are putting up nine more units in two phases. At present, Patanjali accounts for around 3% of the country’s total food processing. In three years, we want to take this to 10-15%.
That will require huge investment...what’s your estimate?
In fiscal year 2017, we invested around Rs4,500 crore, which is about 10% of the total investments in food processing industry in India. Over the next three years, we will invest about Rs5,000 crore just for food processing.
Does this include the Ruchi Soya acquisition?
No. That is separate. There is a reason why we have taken interest in Ruchi Soya. It has the infrastructure that we can use for physical refining of edible oil. This is something that Patanjali popularised. Now, the demand has increased. To ensure supply of physically refined edible oil, we will have to increase our processing capacity. Establishing a new facility would take a lot of time. Ruchi Soya has the infrastructure that we can use immediately. We have placed our bid. Let’s see what happens.
Are you looking to buy into more stressed companies?
Almost every day, we get proposals. But we cannot do all. We will only buy into those that fit our business interests and are in sync with our ‘swadeshi’ movement that helps us serve humanity.
How will you fund these potential acquisitions?
We have arrangements with two or three banks and they have agreed to finance us.
Will you be entering new business segments?
We are working on apparel. We will offer branded quality but affordable apparel to people across smaller cities. We are also working on frozen food which we will enter soon. We have big plans for milk and milk products. We are also working on organic farming, herbal research and research on cow.
Analysts say Patanjali is facing challenges in the urban markets. Is it true?
Recently, Patanjali has been named the most trusted brand in India. We have a very high loyalty index. Repeat rate is the highest for Patanjali products.
While there was huge demand, we did have supply issues. We could not ensure supply of Patanjali products at every retail outlet. During the past one year, we have worked on correcting the supply glitches.