Mumbai: Even as consumer packaged goods companies are expected to report tepid revenue growth in 2015-16, Baba Ramdev’s Patanjali Ayurved Ltd grew 125-150% during the fiscal year to ₹ 4,500-5,000 crore from ₹ 2,000 crore a year-ago, said a report by Religare Capital Markets Ltd on Wednesday.
Moreover, the company which manufactures and markets everything from flour, ghee, biscuits, noodles, spices to honey and toothpaste aims to continue growing at 100-125% annually for the next three years. Some of this growth could also come from international expansion, an option that it may explore if the domestic market gets saturated, analysts Varun Lohchab, Manish Poddar and Premal Kamdar who met with the Patanjali management said in their report.
The yoga guru who has stated his company will beat Colgate-Palmolive (India) Ltd in revenue this year, and will overtake Unilever in India in three years, is on track to meet his projections.
In financial year 2015, Colgate had revenues of ₹ 3981.94 crore and has grown at a compounded annual growth rate of 14.85% for the last 10 years. Even if it grows at a rate of 15% this year, which is estimating on the higher side, Colgate’s revenues will be about ₹ 4600 crore, according to a Mint analysis.
Hindustan Unilever Ltd, India’s largest consumer goods company, ended fiscal 2015 with revenues of ₹ 31,972.19 crore growing at a compounded average growth rate of 12.40% for the last 10 years. The growth ambitions to even double revenues every year for the next three years will see the company at about ₹ 40,000 crore in the next three years while HUL will be about ₹ 45,000 crore if it continues to grow at a rate of 12% per annum for the next three years, as per some back-of-the-envelope calculations.
Moreover, the rapid growth in categories like oral care, personal care and honey will impact companies like Colgate, Dabur India Ltd and HUL, said analysts. In financial year 2016, categories like ghee recorded sales of ₹ 700 crore, toothpaste ₹ 300 crore and herbal cosmetics ₹ 250 crore, said the Religare report.
Nearly 45% of HUL’s portfolio is under competitive threat from Patanjali, said analysts Anand Mour and Anirudha Joshi of ICICI Securities Ltd in a report on 6 April, while toning down its earnings estimates for HUL by 3% for financial year 2016-17 and by 7% for 2017-18. It has also downgraded its rating on HUL from “buy" to “hold".
As such, the bulk of Patanjali’s growth will come from taking share from consumer companies, said a 5 January report by India Infoline Ltd (IIFL). According to the report which estimated Patanjali’s revenues to grow to ₹ 20,000 crore by 2020, the growth from market expansion is estimated at 18% and the remaining from taking share from existing consumer companies.
Currently, the company’s new products launched in fiscal 2016 are gaining traction and it plans to roll out an extensive range of baby care products, premium herbal cosmetics, guava drinks and dairy products such as whole milk powder) in the near term, said the Religare report.
The company has ramped up the in-house manufacturing capacity of honey, which was launched about six months ago, to 65 tonnes per day and the company plans to increase this to 100 tons per day.
So far, no Patanjali product has ever been withdrawn from the market. However, as the company gains scale, it would need to strengthen its focus on back-end supply chain management and quality maintenance to achieve its goals, given the increasing complexity of the business, said the Religare analysts in its reports.
To be sure, consumer companies are also accelerating their focus on ayurveda and herbal companies. HUL acquired Kerala-based hair oil brand Indulekha which has strong credentials in ayurveda in December. In June, Emami Ltd entered the rapidly growing ayurvedic hair and scalp care category by buying hair and scalp care business under the Kesh King brand from Himachal Pradesh-based SBS Biotech Pvt. Ltd.
Others like Godrej Consumer products Ltd are stepping up on the pace of product launches in the herbal and ayurveda category. “We will accelerate our herbal journey and provide a lot more herbal options," said Vivek Gambhir, managing director, GCPL while pointing out that in its soaps portfolio, already every variant available has a natural ingredient in it and the company has also launched hair colour and insecticides like Good Knight coils in a neem variant.