07 Feb 2018 19:54 IST

Author Analysis

For HUL, Patanjali challenge is a growth opportunity

FMCG major must leverage consumer trust in its brand, with products that appeal to every segment

The case deals with FMCG major HUL’s efforts to relaunch its ayurveda-based personal care brand Ayush. HUL has had a highly successful history in the industry, with revenues touching ₹34,000 crore in 2016-17.

As the case facts indicate, Baba Ramdev launched the Patanjali range of ayurveda based products in the Indian market in 2006, ostensibly taking advantage of the fact that HUL had lowered its guard vis-à-vis the competition at the time. By a stroke of luck, Patanjali was able to create a space for itself relying on the swadeshi plank. A dose of anti-multinational rhetoric helped to an extent. Ramdev was able to convey new meaning and benefits of naturally available ingredients and connected it with his brand of Yoga. In a just 10 years Patanjali reached a reported turnover of ₹10,000 crore and plans to touch ₹50,000 crore by 2020.

Patanjali’s success was not taken lightly by its rivals. While companies such as Colgate, Marico, Godrej and even L’Oreal were affected, HUL felt the pinch more as its personal care portfolio contributes two-thirds of its net profits. Despite a headstart with its Ayush range in 2002, it was not able to capitalise as the market was yet to connect to the naturals platform. It was only after Baba Ramdev began propagating yoga and the benefits of ayurveda that these concepts started resonating with consumers. They saw a credible alternative emerging from a home-grown brand.

The challenge from Patanjali was recognised by HUL when it launched 20 new personal care products in December 2016 at highly competitive price points ₹30-130) aimed primarily at the mass market. It shed the premium tag usually associated with most multinationals in India. Its intent was clear — reclaim the initial lost ground and reinforce its position in the naturals segment.

Inherent advantages

The challenge HUL faces is clear — take on Patanjali, create a dominant position in the segment and regain customer confidence in its Ayush range. HUL must strategise for this. In the past it took on the likes of Nirma and bounced back strongly. HUL can plan a multi-pronged approach to neutralise Patanjali’s dominance while creating a unique position for itself.

HUL has inherent advantages — the strength of eight million channel members, undiluted consumer trust in its product quality, time-tested brand and products that appeal to almost every customer segment, efficient manufacturing facilities, robust quality control processes, successful new product development and, above all, a transnational mindset that helps understand consumer aspirations better than others. Before HUL can respond to the challenge of Patanjali it needs to understand its weaknesses.

Understanding Patanjali’s weak areas: Patanjali has spread itself too thin too early by launching products in every conceivable area of personal care and foods, with little sharp focus. Such a move could misfire in terms of product quality and reliability. Patanjali has grown on virtually no market base at all. It also faces distribution challenges. Other than Baba Ramdev, the products have no credible endorsers. This is a good opportunity for HUL to strengthen its Ayush range. Given below are some strategies it can consider.

Strategies for HUL

Identify specific segments: HUL must be careful in choosing the right segments. The Beginners and Actives (segments suggested in a PWC report) seem attractive options. Their numbers are a significant proportion (approximately 200 million) in the age category of 25 + and willing to experiment. They are well-connected and respond positively to well-designed digital initiatives. The hectic lifestyles of this customer segment provides a golden opportunity to communicate the positive effects of wellness products.

Focus on Brand Ayush: Although it has done well to separate the Ayush division, HUL cannot ignore its regular range. It may compete for the same shelf space in many retail outlets. This can create competition within the organisation. To overcome this HUL needs to look at specialised and unique stores — something Himalaya did successfully more than a decade ago.

A distinct marketing mix is needed to deliver the push the brand deserves.

Reinvented marketing

Product: Concentrate on packaging, demonstrate superiority of product quality. Active use of brand communities, discussion forums on the web and social media sites can add to the buzz. HUL has the marketing prowess for such engagement. Encourage product sample trials at stores, especially during weekends

Pricing: The launch of products between ₹30-130 seems to be a move to take on Patanjali. However, HUL should price its Ayush products marginally higher than others (at least by 20 per cent) to convey a perception of superior quality. Of course, this needs to be backed by other marketing mix elements

Channel: Begin by adopting a focused retail strategy of product placement in modern trade retail outlets, buy out prime space. Educate retailers to push the Ayush range. HUL can consider moving Ayush through e-commerce channels such as Amazon, where active customer engagement is possible in the form of expert product reviews.

Promotions

The success of Ayush will, to a large extent, depend on how it reaches the consumer — the last-mile connect.

1. Reach out to target audience through FM radio, digital media, brand communities, mobile messaging. Create targeted messages with a credible narrative.

2. Create a specialised sales force and a focused customer research organisation within HUL (decentralised teams in each key market) this would help get real-time secondary sales feedback. Customer surveys can be conducted more frequently in the initial phase. Use analytics to understand the customer better.

3. Personalised selling: the premium range of Ayush can be placed in specialised stores such as Health and Glow, where trained product specialists can explain and demonstrate the benefits of Ayush; pursue tie-ups with unisex salons and parlours.

4. Create associations with the target audience through college fests and sponsorships (like Coke Studio).

5. Use of celebrity endorsements can be minimised. This can be replaced with real consumer testimonials appearing on channels such as YouTube and Facebook that might encourage formation of brand communities through formal sponsorships. Create brand spokespersons from identifiable public personalities (for instance, Dove’s campaign for real beauty) and not celebrities.

Summary and conclusion

There is no doubt that, in the short term, Patanjali has created some disruption. One must, however, appreciate that it has not come at the expense of existing players in the market as the category was virtually non-existent. Patanjali helped expand this nascent category. Established players such as HUL, Marico, Godrej and Colgate can help expand this pie further in their own unique ways rather than treat Patanjali as a rival. In fact, some of the inherent weaknesses of Patanjali can help them create credible alternatives.

Given its deep understanding of the Indian market, HUL should take up the challenge and treat this as an opportunity for growth.

(The author is Professor and Head (Marketing Area), ICFAI Business School, Hyderabad.)

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