At a time when both retailers and consumers are hooked to huge discounts on products across categories, one company has braved the ‘zero discount’ strategy, and is stil giving its competitors sleepless nights. Consumers are not complaining either.
Patanjali Ayurved, which is growing at a pace that is unnerving domestic and Multinational players in the fast-moving consumer goods (FMCG) segment alike, has barred its sellers from offering a single paisa of discount on its products. In other words, retailers have to sell every Patanjali product at the maximum retail price (MRP) printed on the packaging.
So serious is the company about this strategy, that even modern players like Big Bazaar and D-Mart, which have built their business on the discounting model, have been barred from offering any discount on Patanjali products.
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Labels like ‘Patanjali products are sold on MRP’ greet shoppers at such stores, which have been able to gain market share by offering discounts on various products. For instance, D-Mart has a system of offering at least two per cent discount on the MRP of all products but Patanjali is an exception.
Aditya Pittie, chief executive officer of Pittie Group, the pan-India modern trade distributor for Patanjali products, says the directive has come directly from the company. For good measure, he says, it has reason to do so. “Patanjali products are anyway cheaper than others in almost all segments. As such, there is no need to give a discount. The quality of products makes them sell.”
Indeed, in almost all segments, including fruit juices, soaps, noodles, toothpastes and shampoos, Patanjali products are cheaper than those of other FMCG majors like HUL, Nestle and Colgate.
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Sales do not, of course, always ride on discounts and companies can adopt strategies they deem fit to position themselves. “Every brand has to decide the boundaries within which it has to operate, including the positioning and pricing at which it wants to be sold,” says Devendra Chawla, president, brands, food & FMCG, Future Group. “The discount strategy is also decided by brands, and trade partners have to respect it.”
Devangshu Dutta, chief executive of Third Eyesight, a strategy and marketing consultant firm, saysthat every business has to look at brands from the point of view of positioning, customer loyalty, price premium, and the additional benefits it brings to the business, He says, “Patanjali may not be offering discounts, but business is growing with no sign of diminishing demand. The push has been such that there is a lot of brand loyalty. While the perception is that Patanjali products are cheaper, the argument does not hold true for all segments.”
The strategy does seem to be working in Patanjali’s favour.
It clocked a provisional turnover of Rs 3,266.97 crore in the first 10 months of the financial year 2015-16 (FY16), according to a rating rationale document by Brickwork Ratings, a credit rating agency. This is more than double of Rs 1,587.51 crore reported in the corresponding period of the previous financial year.
While Patanjali’s turnover and profit is currently less than that of most FMCG majors, it is growing at a much faster pace. On the profitability front, the company, which has yoga guru Baba Ramdev as its brand ambassador, almost doubled its profit in FY15 to Rs 308.79 crore from Rs 154.70 crore in FY14, according to Brickwork Ratings. Clearly, enough consumers see value in the company’s products.