Hi everybody pangali has seen one of the most Sensational growth stories in the history of India pangali has taken the country by storm a tectonic shift to Indian fmcg marketing today is what Baba Ram is doing banelli Aur has disrupted the fmcg space pangali is in every single sector Aura is now India’s fastest growing consumer products brand.
And the entire country was stunned to see how pangali crushed its competitors in ways that they could never fathom company that we’re putting the spotlight on is patanjali Foods stop me if you can that’s the challenge pangali aades Baba Ram David issued to multinational companies that he’s competing against this year he is targeting 5 to 6,000 CR.
Which means that he has arrived because that that’s the scale at which the godes and the maros and the imami of the world are operating and this growth story was so crazy that well d took 140 years to hit a revenue of 11,500 crores pangali aurad took just 18 years to hit a revenue of 10,730 cror and the entire pangali group.
In 18 years touched a revenue of 45,000 cror but you know what just like its rise pangali has also made the most Sensational mistakes that has ended up causing such a dramatic downturn for the brand that now they’re embroiled in court cases with the state governments they have had terrible quality issues and and many of their products have come.
Under Fire for misleading claims Baba ramd and his Venture patanjali have not been far from controversy patanjali a household name in India has been in the news for its misleading advertising practices the patanjali hearing case is happening in Supreme Court Supreme Court has come down heavily on the misleading ads by patanjali the Supreme Court has.
Said that they are not satisfied with Baba ramdev’s apology and all of this put together has caused such a dent in their numbers that from 2017 to 2018 pangali ay’s Revenue dropped by 10% and their profits nearly dropped by 50% and even today 6 years later their numbers are still stagnating this is what makes pangali an epic case of rise and fall in.
The Indian fmcg space so the question is how on Earth did pangali become so big so fast what were patanjali’s business strategies that caused the meteoric rise in the Indian market after the rise what mistakes did they make because of which it caused an epic failure of pangali the brand and most importantly what are the business lessons that we need to learn.
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Completed his studies had learned yoga at an ashram and took a wow of renunciation and eventually he promised to be in the Sava of the people for the rest of his life so he used his knowledge of yoga to teach people in small camps of of just 50 to 100 people in the smallest Villages of India then on 5th of January 1995 with two friends.
Balakrishna and achara karamvir he founded something called Diva yoga Mand trust this trust was set up in the same asham that he learned yoga in haridwar and under this trust they offered yoga camps and established an ayurvedic Pharmacy so while Ram was busy with classes balakrishna hatched a business strategy he hired ayurvedic doctors to.
Diagnose patients for free and deployed a razor blade model so while the medical consultation was free the medicines were not free in fact we even read that in 2002 the doctors in the trust were instructed to write up medicines for no less than 1,500 rupees so this model was supposed to help them attract crowd in large numbers and also generate healthy.
Revenue for the trust so the people who came to do yoga ended up taking free consultation and eventually they bought the aurvedic medicines from the Divya Pharmacy itself and this was the business model of ramd and balakrishna for 10 long years then in 2002 something life changing happened Baba Ram was approached by a popular religious.
Channel called AA TV but for some reason he couldn’t get the slot but because of this proposal he fell in love with the idea of connecting with the people at a large scale through TV so he approached ASA TV’s competitor sansar TV and he was given a 20 minutes slot in the morning to teach yoga and this is where ladies and gentlemen Rand Baba became an OG.
Creator attracting thousands of people towards his brand this is where the third phase of ramdev brand started where his paid yoga camps became a sensation all across India look at this his Bangalore yoga Camp was attended by 7,800 people with a ticket cost ranging between 500 to 2,100 rupees so on an average the revenue from.
This 7-Day Camp is estimated to be 75 to 80 lakh rupees similarly his Nashi camp in December 2005 reportedly bobbed Up 3 CR rupees and these yoga camps became so big that even celebrities started coming to ramdev Baba this is how Ram Baba built a cash machine using his teachings and personal.
Brand and this is when he and his friends decided to level up the game with all the funds that they were receiving from yoga ramdev and balakrishna founded something called pangali yog ped which is a 200 bed ayurvedic hospital and college then then in 2006 pangali Aura limited was set up and pangali had moved from being a yoga.
Events based company and ayurvedic Pharmacy to debuting in the food processing industry of India so they established food processing units that processed corn soybean barley oats millets and even produced packaged spices and soaps now the reason why pangali as a brand became big and Drew so much traffic was because of the.
Ramdev brand Ram Baba became the face of the company and he was the perfect embod ment of Health wellness and the Indian culture so he had the right credibility and the perfect fan following to build a massive pull among the masses in fact pangali became a very successful brand based on two stories number one was the deepr rooted Indian culture of yoga and.
Ayura so if you look at their brand slogan it says prri Ka ashirvad which means blessings of nature so pangali is positioned as a company that makes natural products available at affordable prices secondly pangali banks on the super strong Narrative of making India and we all know how India fell in love with the making India campaign so with.
The perfect and trusted brandface who had added immense value to the people with yoga and with the right positioning in the Market at the right time of the making India sentiment pangali stormed the gates of the Indian fmcg market and within a decade India was in love with pangali Guru is now scripting a corporate success story and he plans to.
Take down mnc’s and International Trans in less than 3 years pangali ayurve has gone from a zero turnover company to a company which soon will be a billion dollar uh company he has been able to put together the whole uh space of herbal natural aurvedic uh something which is not Western and yet is as effective as any of the Western mnc’s.
Products in India now the question we here is marketing alone cannot build a 45,000 CR fmcg Brand right in fact the most important aspect of an fmcg brand in India is not marketing but pricing and distribution so the question is how on Earth did pangali compete with a Legends like daber in terms of scale distribution and pricing well this is.
Where ladies and gentlemen the then chairman of pangali SK Patra studied the distribution model of all other fmcg companies and came up with a unique distribution model for pangali and this model was so so powerful that it literally started wiping out competitors from the market so the question is how does this model work and why was it so.
So powerful let’s understand this model using a chart this model has pangali the brand at the top which has super Distributors who buy products from patang directly and each super distributor will have five to six Distributors who then distribute it to the retailers now if you look at how conventional Distributors work in the.
Industry they buy goods from the company on credit and until the goods are sold the products are the responsibility of the company so if the distributor is not able to sell the products to the retailer he can return the products to the to the company and not pay for the products at all but when it comes to Super Distributors they buy the goods.
Outright from the company and after the products are sold to them the goods are no longer patanjali’s responsibility this was the first Model that pangali built and on of this model pangali also built a model to have free clinics and SAA kras with a vision to set up 1 lakh swadesi kendras and these kendras were set up in the existing retail stores.
Themselves and the store also Leed out a part of their space for pangali products and in return these retailers were given permission to use Ram’s image for their store branding so the question is when pangali was directly reaching out to the retailers wasn’t that upsetting for the super Distributors well the answer is yes they were upset but you know what.
Pangali ayurveda clearly offered a 1% Commission on all the sales made by the freelance retailers to the super Distributors and thirdly patanjali also deployed another clever strategy Rand Baba formed a group called bhat swabhiman andolan with a vision to fight critical issues in the country like corruption against government and Randa.
Convinced all the members to come forward and help patanjali establish this massive network of freelance Distributors so this wasn’t a capitalistic group it was a nationalist group so if a group is formed on the basis of business the incentive is always money but in this case because of the insane falling of ramd Baba and the.
Nationalist sentiment these people joined and helped pangali not for money but to serve the country so now Distributing and selling pangali product was not an act of sales or business it was an act of service to the nation this is how pangali built a super strong ecosystem with three touch points for the customers number one was pangali.
Chital number two was pangali arogya and lastly they had swadesi kendras pangali chital are basically the clinics that we talked about where you can go and get your consultation for free and then there itself you could buy the aurvedic medicine prescribed by the doctors in the clinic pangali aroga Kendra are wellness centers where people were.
Taught the benefit of yoga and Aur through application based knowledge and lastly the swadeshi Kendra is a store of pangali where you can find almost all the products that you use in your daily life from Juices to biscuits so do you see how this model worked Baba ramdev using the power of mass media reached out to every household daily and.
Provided them with immense value eventually he built a massive falling and after the launch of pangali he started showing products on screen and if anyone is asked about their health problems they are asked to visit pangali chikitsa which helps them get consumers to their ecosystem and then these people go and buy products from pangali stores.
As well as from the normal retail stores with pangali products this is how Ram ABA built a Dependable flywheel for the company and this is how paneli cracked distribution but then the question over here is distribution is fine but how did they crack price because if you compare the price of pangali with daber products it is absolutely insane when 500 G of.
Chavan prush was being sold by darber for 160 rupees pangali was selling it at 115 rupees when a NE and turbic soap was being sold by darber at 24 rupees pangali was selling it at 15 rupees and they achieved this price difference with honey juice shampoo detergent powder and practically all their products so the question is how did they compete with.
Legends like daber in this price sensitive Market of India well the answer to this question could include everything from cheap for raw materials to lower quality of raw materials to the manufacturing capacity to even relationship with the Distributors but from what we read we could find four Reasons from the limited data that was.
Available the first reason was cheap labor according to this book godman to Tycoon an average pangali worker on the factory floor earns 6,000 rupees per month for a 12-hour shift 6 days a week that is 250 rupes per day and it is way below than the average labor wages in India which stands at 347 rupees per day and here’s where we were wondering ing.
Why were these workers working at such low salary well according to the same book pangali workers are driven by the purpose of service and not money secondly pangali for the longest time operated with ultra low marketing budget so after the immense success of his yoga sessions on TV channels Ram Baba realized that the power of media is.
Absolutely insane and this is when achara balakrishna bought a majority stake in two television networks which are ASA and sansar these channels were the medium for marketing for patanjali and if you understand the target audience of Asa and sanskar you would understand that these people have a deep connect with the Indian culture they.
Resonate with everything that has to do with Indian culture and if you look at patanjali pangali Falls Under The Canopy of Aura and Aura Falls Under The Canopy of Indian culture so if you see it was a perfect product audience fit on top of that while other fmcg companies needed celebrities just like physics Wala has Alan pande here ramdev himself became.
The brand ambassador for pangali so while dber spent 12.03% of their revenue into marketing several other fmcg companies even spent up to 12 to 18% of their revenue into marketing but if you look at pangali pangali hardly spent 2 to 3% of their revenue on Advertising thirdly paneli also keeps its margins very low and for some of its products.
It’s as low as 2 to 3% while its competitors are posting a margin of 23 to 25% now why why do they do that they do it because they achieve very high volumes and B once the trust is built with the consumers they believe that they could make higher margins with other products like ghee and toothpaste and cherry on the cake they also had.
Donations coming into their trust which could help them survive even with very low margins and lastly pangali also achieved backward integration in short they did everything from manufacturing their products to distribution to even transportation and in their Oil Business they have built such a a strong supply chain that they themselves teach Farmers.
On how to increase their yield and then they buy directly from the farmers to cut down all the middlemen in fact ramdev even set up his own logistics company called pangali perahan specially for transporting their goods this is how by cutting off the middleman pangali was able to leverage their supply chain to increase their margins and keep their.
Prices very very low and these methods were so so powerful That pangali Grew at a 67% cagr for 10 long years and by f57 they became the second largest fmcg player in the Indian market just after Hindustan uni and as of 2017 while the revenue of pangali was 9,19 cror their profits stood at 1,190 cror this is how pangali became a legend in the Indian.
Fmcg space but you know what guys this is where something terrible started happening look at this chart the revenue of pangali suddenly started flatlining and the net profits started reducing so the question over here here is what exactly suddenly went wrong well this entire story started with GST in 2017 GST has been passed this is expected to.
Be implemented in 2017 launch of the GST India’s biggest tax reform Council has finalized its recommendation on almost all issues based on consensus you see when GST was rolled out by the central government in 2017 it mandated multiple monthly returns to improve compliance but patanjali’s technology backend was not ready for GST related inventory and.
Invoicing Management in time according to this article while its competitors like H and ITC used Cutting Edge technology to make GST compatible inventory and invoicing management system pangali failed to do the same this created an inventory mismatch and resulted into something called a bad replenishment cycle and if you don’t.
Understand replenishment cycle here’s a very simple example of the same let’s say your store sells 20 cans of soda daily and has 100 cans in stock and let’s say it takes 3 days for the new stock to arrive so when you have 60 cans left you reorder 100 more cans this is called the replenishment cycle where the sale rate is of 20 cans per day the.
Reorder point is when there are 60 cans left and the lead time is 3 days this ensures that you always have enough stock to meet demand so this entire process is called the replenishment cycle which is the process of identifying the store needs and placing the order to keep the inventory always stocked up now if you see the cycle.
Carefully in the cycle if the lead time increases the orders will arrive late and eventually the store will soon run out of stock now in case of pangali very often the stores were out of stock of pangali products and nearly 90% of the small retail outlets and chicken Sal were running out of stock so from 2017 to 2018 panel’s Revenue dropped by 10%.
And profits dropped by nearly 50% and during this time pangali made another move in 2019 they acquired a bankrupt cooking oil and fmcg company called Ruchi soya for 4,350 cror and they rebranded Ruchi soya to pangali foods and eventually they started selling a wide range of products from oil to biscuits to Arta to even juices and as.
Of fi23 they had 242 products and over 500 sqs and this wasn’t the only expansion pangali had even Diversified its products and tried to get into areas that were way out of their core domain from launching a WhatsApp rival called Kimbo to a SIM card to solar panels to even their own jeans brand pangali tried everything and this rapid expansion put.
A massive load on pangali so with over 2,500 products the company had to subcontract production to third party suppliers because their own production was no longer able to take it this made it extremely difficult for them to keep tab on quality standards and then something worse came out when many tests done by the government Labs found that.
Pangali was selling substandard products in May 2017 it was reported that 32 out of its 82 product samples had failed quality tests and in 2022 a sample of their ghee was found to be adulterated and didn’t meet safety standards similarly in May 2024 their son Papi also failed to meet quality standards leading to the arrest of some officials.
Other alterated honey that has been sold by Major Brands in the country such as pangali Baba ramdev and his Venture patanjali have not been far from controversy the government has criticized pangali over allopathic medicines it has said uh pangali questioned allopathic medicine’s efficacy and denigration of a medicine.
System is discouraged by the government so all of these issues put together they put a massive dent on pangali the brand because the entire brand was built on trust and wellness and the final nail in the coffin came in with false advertising claims Ram Baba has been known to make dangerous claims to his audience for example he rejected Al.
Apathy medicines for conditions like fever typhoid liver damage and even skin problems and he asked his audience to switch to ayurvedic products by pangali in another video he also claimed that chemotherapy radiation and surgery do not address the cause of cancer instead patanjali’s anti-cancer juice combined with a strict diet regimen helps cure.
All types of cancer in 7 days to two months Pali vaccination publishing misleading advertisements despite their undertaking the Supreme Court stepped in November 20123 warning patanjali to stop such claims and threatened a penalty then in 2021 during the covid-19 pandemic pangali even launched a herbal tablet called coronal.
Which claims to be treating and to be the cure for Corona virus in fact last year the court ordered them to stop making such claims and threaten to impose a fine of 10 million rupees for every product but in spite of that patan and RAM Oba both defended their products and the marketing did not stop in fact they recently ran a front page ad in a.
Newspaper claiming to cure serious diseases like cancer blood pressure diabetes and epilepsy this led to the utarak government suspending licenses for 14 pangali products due to the repeated violation of drug advertising laws so all these factors resulted in an erosion of the trust in the brand and now pangali ayurved has stagnated to an.
Extent where they haven’t touched their revenue or prop profit numbers of f57 also so now whether they’ll be able to make a comeback or not is something that only time will tell but regardless of that with this insane rise and fall of pangali we as students of business have some very very important lessons to learn lesson number one India is a.
Highly person driven country and personal branding is a superpower that every founder must cultivate if they want to dominate the Indian market and just like Ram ABA built his personal brand using TV today every founder can build build a very strong personal brand with YouTube and Instagram now even though it seems far-fetched in 3 years.
You will realize that it is the most underrated superow to cultivate lesson number two reputation and Trust are two of the most difficult things to build but if you use that reputation to fool your customers initially you will make a lot of money but the moment people find out you will lose all of it in a JY so do not ever optimize for short-term.
Gains and do not ever misuse your reputation and lastly always remember scaling the company is not the art of growing Revenue but the art of building robust systems that do not fail and help you grow your business without compromising on your quality in this case we saw how pangali focused so much more on Revenue than their systems that.
Eventually their systems began crumbling so focus on building robust systems and the revenue will come as a result of robust systems these are the lessons that we need to learn from the rise and fall of pangali and I just hope you learn something avable from this case study that’s all from my side for today guys if you learned something valuable.
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