How Baba Ramdev’s Patanjali Cracked The FMCG Supply Chain To Dominate The Market

Back in the 1990s, he was selling chawanprash on a bicycle and teaching yoga to small groups of people. Today he is the owner of a multi-billion-dollar consumer goods empire and has taken the yoga revolution down to small-town India. Baba Ramdev has gone from being just a godman to a business tycoon. Here is a book excerpt from Priyanka Pathak-Narain’s book ‘Godman To Tycoon: The Untold Story Of Baba Ramdev’.

Part of the secret of Patanjali’s success is its threefold distribution network that [ Patanjali, former chief executive officer, S K Patra] Patra helped build. Patra analysed the distribution contracts of the large FMCG multinationals and finally created Patanjali’s own model. They decided to have super distributors, who would oversee five or six distributors who would in turn each manage fifteen to twenty retailers. The advantage of a super distributor was that, unlike the model others followed, he bought the goods outright and they were no longer Patanjali’s responsibility. This distributor — super distributor network was built in addition to an existing network of 5,000-odd seva and arogya kendras that functioned as ayurvedic doctors’ clinics, pharmacies and retails points for Patanjali Ayurveda products.

But in his efforts to streamline Patanjali Ayurveda’s distribution Patra again came up against entrenched interests. Until then, distribution was limited to people close to Ramdev. When Patra opened it up, the entrenched insiders opposed the move. ‘There was internal political pressure on the Baba. So I met with the Baba and told him: “Baba, take none of their recommendations. Make me your villain. Tell them, ‘I don’t know anything. He’s just done it.’ Otherwise this is not going to work. Every other person will have some agenda and try to influence you . . . just blame me,”’ Patra recalls suggesting to Ramdev.

‘There is a critical time in the life of every organization that determines if what you have built is going to take off or not. This was that time for Patanjali,’ says Patra. It was also going to determine if he could make good on his promise to Ramdev and drive up turnover by nearly five times to Rs1,000 crore.

Patra appointed some of his top people to liaise with the new super distributors to help them find their bearings. Then began the appointment of distributors under the super distributors. For the first three months, they had no sales targets at all. All Patra asked his employees was: ‘How many super distributors did you make? How many distributors? How many retailers?’ He says, ‘That was their performance yardstick. . . those months I did not care at all if inventory was moving or not. A network had to be built up first.’

Patra’s efforts began to pay off almost immediately: Patanjali Ayurveda’s turnover increased to Rs446 crore in 2012, from Rs317 crore at the end of 2010-11. Ramdev realized that they could realistically touch the Rs1,000 crore mark soon and that was their next target.

The ensuing plan to power such growth required another distribution channel, apart from the arogya and seva kendras, and super distributor network—a network of freelance retailers. A new network of one lakh ‘swadeshi kendras’ was to be established. These swadeshi kendras were pre-existing stores that would lease part of their shop floor space for Patanjali products. In return they would be allowed to use Ramdev’s image for their store branding. Ordinarily, an existing network of distributors and super distributors would have protested such an infringement on their rights, but Patanjali Ayurveda cleverly offered them a 1 per cent commission on all sales made by the freelancers. The idea was a hit. After all, ‘It was money without work for them, so they agreed,’ says Patra smiling.

However, translating such an ambitious idea into reality was not easy. That is when the Bharat Swabhiman Andolan’s membership was sought to be harnessed. With Ramdev’s political future in question, the organization had been at a loose end.

One thousand of their members were given a salary of Rs5,000 a month and sent off to help Patanjali Ayurveda establish a network of freelance distributors. The idea of ‘serving the country by promoting swadeshi, a.k.a. Patanjali products’ fired the Bharat Swabhiman sevaks.

Gunendar Kapur, a leading retail and consumer executive who had worked for over a decade at Unilever before joining as CEO and president of Reliance Retail, commended the structure: ‘His distribution is very different. He has these dedicated distributors and franchisee stores. He puts an Ayurveda doctor in the shop, who prescribes things also available there.’

With these measures in place, distribution simply exploded. Pictures of Ramdev loomed over cities, towns and villages. Ayurveda was also catching up in popularity. It had never before been propagated in such an organized fashion. Ramdev was now associated with everything healthy, everything ‘Indian’ and, automatically, everything he sold was seen as wholesome, pure and good. It was no surprise then that in some places even stores that were not officially carrying Patanjali products put up his pictures over their shopfronts.

Production could barely keep up and battalions of trucks left Patanjali factories loaded with products night and day. Realizing he’d begun paying truckers a small fortune, Ramdev set up his own logistics company. So now even most of the trucks ferrying his products belonged to him.

‘Everything became perfectly streamlined and formalized – stocking, processing, production – to match demand to supply,’ remembers Patra, still delighted with how it had all worked out perfectly, like clockwork.

Excerpted with permission of Juggernaut Books from Godman to Tycoon: The Untold Story of Baba Ramdev by Priyanka Pathak-Narain.