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Dabur vs Patanjali: Veda wars

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my-learnings/dabur-vs-patanjali-veda-
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By Rajiv Singh| Oct 25, 2018

After surviving the Patanjali storm in the cities, Dabur dons an aggressive avatar to defend its rural turf. It's a battle between
ayurveda based on science versus healing hinged on faith

(Left) Amit Burman Vice Chairman, Dabur and Sunil Duggal, CEO, Dabur India
Image: Madhu Kapparath 

It took Dabur ve quarters—a good 15 months—to realise that ayurveda hinged on ‘faith’ was getting the better of the
one based on ‘science’. Patanjali, an ayurvedic upstart backed by maverick yoga guru Ramdev, had disrupted the fast-
moving consumer goods (FMCG) market in early 2015. The bunch that rst felt the heat were the multinational giants
(MNCs) led by Hindustan Unilever and Colgate, who were vili ed by Ramdev as a ‘foreign evil’ exploiting the country.

For Dabur, the fth-largest FMCG company by revenue in India, the rst vestige of a threat was in branded honey, a
relatively small (worth ₹1,100 crore) category but core to the Dabur portfolio. In a rst in over two decades, sales
dipped by 8.50 percent in the rst quarter of 2017 scal over the previous year’s corresponding period. For a company
used to robust double digit sales growth in this category, the decline came as a bolt from the blue.

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“Our competitor was selling honey at a price 30-40 percent lower than ours,” recalls Sunil Duggal, a Dabur veteran who
took over as CEO in 2002. “We erred in our thinking that these disruptive forces were of short duration.”

For the next four quarters, honey sales kept sliding, slowly but surely eroding Dabur’s dominant market share of 60
percent; it reached a new low of 40 percent. To make matters worse, the volume market share of Dabur’s agship
Chyawanprash brand also fell by almost 2 percent—from 58.9 percent in October-November 2015 to 57 percent
during the same period in 2016. 

Baba Ramdev took on MNCs with Patanjali

Image: Getty Images
Clearly, something was wrong somewhere. In Dabur’s case it was its obsession with the bottom line. “We were
concentrating more on protecting pro t and had adopted a somewhat defensive posture towards disruptive
competition,” Duggal recounts. This, he adds, was only encouraging the competition to get more disruptive.

For a company that traces its ayurvedic lineage way back to the early 1880s, ceding ground to a Johnnie-come-lately
was a bitter pill to digest. The medicine, though, was needed. And its e ect is evident today.

Three years after the Patanjali jolt, Dabur is back on song.

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In the rst quarter of scal 2019, honey sales jumped by 41.60 percent over a year ago and market share climbed to 54
percent. And Chyawanprash has hit its best value market share at 61 percent. Also, when Colgate and HUL’s
Pepsodent were losing market share to Patanjali’s Dant Kanti, Dabur managed to increase toothpaste share. “We have
changed our attitude. We will attack rather than defend, and protect market share and volumes rather than shield
pro t,” asserts Duggal, adding that there would be no let-up in the aggression.

Amit Burman, vice chairman of Dabur, asserts that Dabur’s ayurveda is based on science and not faith. “We have a
lineage going back 130 years, which nobody can claim,” he says. During the last scal, 620 health camps were
organised across the country, where ayurvedic practitioners treated close to a lakh patients. Over 250 doctor meets
were organised to showcase the core principles of ayurveda involved in processing and manufacturing ayurvedic
medicines.

The combative avatar of Dabur comes at a time when Ramdev is believed to have assembled an over-10,000-strong
sales eld force to fan out in rural India. As Patanjali starts losing steam in cities—bogged down by quality perceptions
and spreading itself too thin into areas such as dairy and agri—the next wave of growth is likely to come from the
hinterland. Dabur, which gets 46 percent of its sales from rural India, is ready for that challenge.

“We will meet re with re and will be far more aggressive in defending our market share than we have been in the
past,” Duggal thunders. If Dabur could do it in honey, by o ering a value proposition, it feels it can do it elsewhere, too.

The honey turnaround had many components: Though price was not cut, grammage was increased by 30 percent for
the same price, and quality was reinforced among consumers by communicating that the product had the backing of
regulatory body Food Safety and Standards Authority of India. “We knew that this (shift of consumers to Patanjali) may
not last for long as our product is inherently superior,” recounts Duggal, adding that a 9 percent price cut happened
after GST rates were slashed last July.

While consumers did gravitate back, what also helped Dabur were the chinks in Ramdev’s armoury. Although Patanjali
aggressively expanded the market for packaged honey, due to product quality and supply chain issues, consumers
lapsed out, reckons Credit Suisse in a recent report. Dabur’s di erentiated marketing also did its bit in expanding
sales. The company’s campaign on using honey to replace sugar for weight loss strongly resonated with health
conscious consumers.

The lessons from honey were learnt quickly. Dabur now doesn’t intend to use its scale advantage to increase prices
beyond a certain level.

In another departure from its core operational philosophy, Dabur took a tactical diversion by adopting a anking
strategy. The idea, explains Duggal, was to build moats around brands, in terms of better pricing or by launching
anker brands, which can be a satellite to the main brand. Take, for instance, Dabur’s blockbuster Amla hair oil. The
company didn’t cut the price but launched a range of anker brands that were lower priced. This not only acted as a
moat against intrusion into the mother brand, but also ring-fenced it against future disruptions.

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“Just putting more feet on the street won’t work,” asserts Duggal. Reason: Rural demand for a product is di erent from
urban; it requires massive distribution infrastructure, and a robust supply chain. One needs to build the whole
ecosystem to drive a rural franchise, including the portfolio of brands. “It’s very hard,” he adds.

Agree FMCG analysts. Rural, they reckon, will be a di erent ballgame for Patanjali. “Disruptive pricing can take you to a
certain level. That’s it,” reckons Abneesh Roy, senior vice president of institutional equities at Edelweiss Securities.
Pushing the same kind of products without any innovations and harping on the charisma of Ramdev in advertising
won’t work, he adds.

Although the jury is still out on Patanjali’s rural gambit, early signs of impending trouble are visible.

Kherli village, Greater Noida, Uttar Pradesh

Egged on by the swadeshi spirit of Ramdev and Patanjali, Tej Singh opened a Patanjali store three years back. Sales, to
begin with, were brisk. Dant Kanti toothpaste and cosmetics were the top-sellers, followed by biscuits, oats, vitality
brand Shilajit and Swet Musli Churna—described on Patanjali’s website as ‘herbal Viagra’.

Today, however, sales are stagnating. Singh, 75, doesn’t know what went wrong. What he o ers are conjectures such
as more herbal and ayurvedic options available to consumers, people getting hooked to online shopping or even
dissatisfaction with the products. One major issue, he identi es, is supply constraints and refusal of the company to
take back expired stock.

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Narottam Giri, Dabur’s rural sales promoter, visits a grocery store in Shivali village, UP, to boost toothpaste sales;
Dabur products on sale (right)
Image: Madhu Kapparath

“Look at the heap of all these products,” he says, pointing to a couple of neatly-packed cartons stu ed with expired
products lying on the top shelf of the store. “Patanjali doesn’t want it back and consumers won’t buy,” he rues. Nishant
Bhati, Singh’s grandson, chips in. “How long can you take the losses? Even the margins have fallen,” he laments, adding
that the shop has started selling cattle feed to beef up its revenue. 

Patanjali declined to comment for this story. 

As one moves deeper into the hinterland, towards

Bulandshahr district in Uttar Pradesh, the branding of
Dabur Vatika hair oil or digestive pill brand Hajmola
starts to fade away. The ubiquitous wall paintings or
advertisements in rural India get replaced by
pervasive Ramdev-branded hoardings. The di erence
though is that he is not seen advertising FMCG
products but cow milk.

Patanjali’s strategy to enter into “endless” categories,

reckon analysts, has started to take a toll. “Opening
multiple fronts and spreading itself thin mean being
all over the place,” contends Saurabh Jindal, analyst at
Bonanza Portfolio. “You can’t dislodge Dabur in rural
India if you don’t have a focussed approach.” Patanjali,
Jindal adds, can’t a ord to give Dabur a “second”
advantage. The rst was when the Haridwar-
headquartered company went all guns blazing at the
MNCs.

 “That was advantage Dabur as it was out of Patanjali’s

focus,” explains Jindal.  

“Baba’s story has been great for us. It was never a

headwind but a tailwind for Dabur,” grins Mohit
Malhotra, who was appointed chief executive o cer
of the India business of Dabur in February. Patanjali,
he points out, paved the way to mainstream ayurveda
in the country. Most of the categories in which
Ramdev entered now have a signi cant herbal or
natural component, be it toothpaste, hair oil or
shampoo; in toothpaste, for instance, it is over a
fourth, and growing rapidly. “It bene ted us a big way
in oral care,” he maintains, adding that the toothpaste
brand that got dented because of the Patanjali push

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was Colgate, not Dabur.

Credit Suisse, in its latest report ‘Changing gears after a tough phase’, points out how Dabur is on track to overtake
HUL to become the second largest toothpaste brand. Dabur, the report highlights, gained share over the past three
years, moving to 15.5 percent volume market share. Dabur, it notes, kept growing strongly even when Patanjali was on
the rise over the last three years in the naturals and ayurvedic toothpaste segment. Today it may be a di erent story.
“Patanjali is facing major issues which will help Dabur capture more of the incremental growth going ahead,” the
report maintains.

“Overall, the Baba Ramdev story has been great

for us. Patanjali has impacted the business more positively than negatively.”
Mohit Malhotra, CEO, India Business, Dabur
Image: Madhu Kapparath

Patanjali’s at revenue growth in scal 2018—revenue was reportedly over ₹10,000 crore, as against ₹10,561 crore in
scal 2017—has made it imperative for the company to spread itself wide in rural areas as its story in urban India
starts to lose steam.

In another equity research report in August titled ‘Patanjali facing headwinds’, Credit Suisse highlights how the
ayurvedic disruptor is losing the plot.
 
While FY18 revenue was at after growing at a 100 percent compound annual rate over the past four years, in many
categories the company is facing a decline in consumer o take. The drop, the report points out, is most profound in
categories where Patanjali’s products were not di erentiated, such as honey and hair care. In toothpaste and ghee,
though, the company is holding on even though the incremental gain has stalled.

Although Patanjali saw a massive surge in household penetration in 2017—from 27 percent to 45 percent—a lot of this
was driven by non-core users who bought into the ayurvedic and naturals positioning of the brand rather than core
loyalists. “We are seeing many of these consumers lapsing out as the novelty value and buzz around the brand have
gone down and other companies are o ering similar products,” the report maintains.

What’s more, from being the third biggest advertiser on TV during the rst ve months of last year, Patanjali slipped to
ninth position during the same period this year, according to data by AdEx India, a division of TAM Media Research.

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Rivals maintained or improved their rankings. While

HUL maintained its hold at the top, Procter & Gamble
—the makers of Pantene shampoo—climbed one
place to become the sixth biggest advertiser, taking it
ahead of Patanjali. Colgate Palmolive stayed at fth.

Patanjali’s dimming visibility on television comes at a

time when Dabur has stepped on the gas to aunt its
superior ayurvedic lineage through a urry of
launches over the last year. For instance, Pudin Hara
Antacid, a ready-to-use natural solution for all gastro
diseases, has been launched, loaded with a clutch of
herbs. Dabur Honitus Hot Sip, a ready-to-use remedy
for relief from cough and cold, now has an ayurvedic
coating. Other launches include Agnisandeepam
Churna, an ayurvedic medicine for improving
digestion, and Dadimavaleha, a digestive tonic with
anar juice as the main ingredient.

MNC rivals, too, have hopped on the herbal

bandwagon. While Colgate launched an economy
herbal toothpaste called Cibaca Vedshakti, it also has
a premium version called Swarna Vedshakti. HUL has
revived Ayush and launched a series of personal care
products such as shampoos and toothpaste under it.  

Rural is the Road Ahead

Dabur’s Burman stresses that the focus will be on
rural growth. With good reason. From $29.4 billion
(₹200,000 crore) in 2016, the rural FMCG market is
tipped to touch $220 billion by 2025, according to
IBEF, a trust established by the department of
commerce. With over 69 percent of 172 million
households in the middle and lower middle group,
rural India o ers signi cant potential for FMCG
companies, highlights an investor presentation by
Dabur. Add to it the low rural penetration level of some of the categories—21.2 percent for toilet cleaners, 3.7 percent
for honey, and fruit juice at 6.5 percent—and one gets to see why companies are sharpening their focus on rural India.

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Nishant Bhati, who runs a Patanjali store in Greater Noida, is worried about the recurring losses
Image: Madhu Kapparath 
Dabur is ne-tuning its hinterland strategy through rural sales promoters (RSP). Narottam Giri, one of the hundreds of
RSPs entrusted to deepen Dabur’s rural push under Project Buniyaad launched in April 2016, has his task cut out:
Reaching out to the remotest of retailers in villages across India. Shivali is one of the villages in Bulandshahr where Giri
is trying to push the sales of Dabur Red gel toothpaste.

 It’s not an easy task. Shiv Kumar, owner of a small kirana store, is a crafty retailer. ‘How much would be my margin?’
he asks Giri. “Do you have any special o er for the festive season?” Giri, 34, tries to convince him to sell more of the gel
toothpaste, and takes out his mobile and books more orders for Kumar. “Why don’t you pay more attention to the
Dabur branding? Patanjali hoardings are everywhere,” Kumar advises Giri. “Patanjali has made its branding ubiquitous;
Dabur has done that with its products,” he retorts with a smile.     
 
Patanjali and Dabur, two vedic warriors, present a contrasting picture. Though both are based on ayurveda, Dabur’s
journey is marked by its reluctance to aunt its ayurvedic parentage and work under the radar. Patanjali, on other
hand, has been in your face and over the top with a mercurial promoter who believes in waging verbal war, swearing
by his swadeshi credentials and opening as many battlefronts as possible.   

Remember April 2016? A cocky Ramdev took a dig at his MNC rivals. “Pantene ka pant gila hone waala hai, Colgate ka
gate bandh ho jayega, Unilever ka lever kharab ho jayega.” (Pantene will wet its pants, Colgate’s gate will be shut,
Unilever’s lever will not work),” the yoga guru jeered, also teasing Nestlé. “Birds in Nestlé nest (logo) will y away,” he
mocked.
 
Two years down the line, his prophecy is yet to come out true. “Pantene’s pant is still intact, Colgate has forti ed its
gate with herbal coat, Unilever’s lever are working well and birds are still living happily in Nestlé’s nest,” quips Jindal of
Bonanza Portfolio. What still remains unchanged, he adds, is the unpredictable nature of Patanjali. Though Dabur
underestimated the impact of Patanjali to begin with, it should again not err in misjudging Patanjali’s potential in rural
India. “It can’t be written o ,” he sounds a word of caution.

Dabur, for its part, would be hoping that science gets the better of faith this time.

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