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Assignment: Patanjali Ayurved Ltd.

Sr.n
Name Enrollment Number Section
o
1 Akash Gupta 20BSP0141 G
2 Rishabh Rao 20BSP3218 G
3 Harsh Bohra 20BSP3113 G
4 Gauri Rajput 20BSP0782 G
5 Komal Pandey 20BSP1099 G
6 Adesh Mishra 20BSP0075 G
7 Rakshit Prabhu 20BSP1817 G
8 Sithin Vk 20BSP2437 G
9 Divesh Bhatt 20BSP0707 G
10 Anish Mathur 20BSP0267 G
Prepared & Submitted by:
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Assignment: Patanjali Ayurved Ltd.

Table of Contents:

Sr.n Page.n
Topic
o o
1 Summary: Patanjali Ayurved Ltd 3
2 Summary: Demand & supply analysis 4
3 Demand & supply analysis on Patanjali Products 5
Related concepts of demand & supply on Patanjali
4 9
Ayurved Ltd
5 Elasticity of demand & supply on Patanjali Ayurved Ltd 12
6 Factors affecting demand & supply 15
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Assignment: Patanjali Ayurved Ltd.

Summary

Patanjali Ayurved was formed in January, 2006 as a private limited company by yoga guru Ramdev
and his partner Sri Acharya Balkrishnaji. In June, 2007, it was converted to a Public Ltd. Company. It
is registered under the Companies Act, 1956 and has its registered office in Bijwasan, New Delhi
and three other offices in Haridwar. It has grown into a 5000-crore company in 2015. It has
disrupted the entire FMCG market with its unconventional growth story. The credit goes to
Baba Ramdev who has very meticulously decided the timeline for each action and delivered
unprecedented success.
Patanjali’s vision is to provide herbal/ayurvedic/natural solutions to all the problems and in this
pursuit, it is also elevating the livelihoods of local farmers. It has leveraged the emotional route
by bringing in the ‘Swadeshi’ angle to market its products. The drivers for Patanjali purchase
are lower price points which induces sampling and when they find no noticeable difference
with the pricey brands, they tend to stick to Patanjali. The key differentiators for Patanjali are
its herbal or ayurvedic offerings and the free consultation it provides to the customers at
Arogya Kendras/ Chikitsalayas through its certified Ayurvedic doctors. Besides it has also
increased its distribution channels through franchise stores, retail chains and kirana stores.
However, the supply is not proportional to demand and a lot of customers are not able to find
the desired products. To solve this, they have invested in food parks and have outsourced
manufacturing to other SMEs while conducting stringent checks to ensure consistent quality.
Baba Ramdev has done minimal promotion by endorsing the brand in his yoga sessions
televised on national channels. The FMCG giants cannot rely on such a strategy because they
cannot sell the products at such low prices or provide free doctor consultations and other
activities on a continuous basis. Thus, it is not feasible for other companies to follow this
model. The FMCG industry has a lot of big players with dominant market leaders in each
category. Patanjali is in direct rivalry with most of them and with time has been able to take
away market share from the best-selling brands. The entrance of Patanjali has not just marked
its increased share of the pie but it has also managed to increase the size of the pie itself.
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Assignment: Patanjali Ayurved Ltd.

Summary: Demand and Supply Analysis

In a general sense, economics is the study of production, distribution, and consumption and
can be divided into two broad areas of study: macroeconomics and microeconomics.
Macroeconomics deals with aggregate economic quantities, such as national output and
national income. Macroeconomics has its roots in microeconomics, which deals with markets
and decision making of individual economic units, including consumers and businesses.
Microeconomics is a logical starting point for the study of economics.
This reading focuses on a fundamental subject in microeconomics: demand and supply analysis.
Demand and supply analysis is the study of how buyers and sellers interact to determine
transaction prices and quantities. As we will see, prices simultaneously reflect both the value to
the buyer of the next (or marginal) unit and the cost to the seller of that unit. In private
enterprise market economies, which are the chief concern of investment analysts, demand and
supply analysis encompasses the most basic set of microeconomic tools.
Traditionally, microeconomics classifies private economic units into two groups: consumers (or
households) and firms. These two groups give rise, respectively, to the theory of the consumer
and theory of the firm as two branches of study. The theory of the consumer deals with
consumption (the demand for goods and services) by utility-maximizing individuals (i.e.,
individuals who make decisions that maximize the satisfaction received from present and
future consumption). The theory of the firm deals with the supply of goods and services by
profit-maximizing firms. The theory of the consumer and the theory of the firm are important
because they help us understand the foundations of demand and supply. Subsequent readings
will focus on the theory of the consumer and the theory of the firm.
Investment analysts, particularly equity and credit analysts, must regularly analyse products
and services, their costs, prices, possible substitutes, and complements, to reach conclusions
about a company’s profitability and business risk (risk relating to operating profits).
Furthermore, unless the analyst has a sound understanding of the demand and supply model
of markets, he or she cannot hope to forecast how external events—such as a shift in
consumer tastes or changes in taxes and subsidies or other intervention in markets—will
influence a firm’s revenue, earnings, and cash flows.

ANALYSIS OF DEMAND AND SUPPLY FOR PATANJALI PRODUCTS

Demand of Patanjali:
Consumers are becoming smarter, had got a quick access to information and blindly trusted the
endorsements. But if the brand didn’t perform well then, the consumers would switch to its
substitute. In case of Patanjali, the quality of Patanjali products attracted more and more
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Assignment: Patanjali Ayurved Ltd.

consumers and not any endorsement link. The consumers were confident enough of what were
they buying. People had follow-up questions and wanted to know if the product that was being
sold to them by a renowned person was actually good.
To
De mand of brands
T h i s g r a p h d e p i c t s t h e d e m a n d o f d i ff e r e n t be
Brands from consume r’s point of vie w. sure,

2%

18%

37%

11%

33%

Patanjali Dabur Zhandu Himalaya Others

Patanjali sales growth rates in the last three years had been scorching, with revenues growing
at a 55 percent annual rate when the FMGC market was inching up at 8-9 percent. But these
growth rates were seen in the context of a low base, and the vast product portfolio that
Patanjali relied on for its critical mass.

Patanjali company manufactured 444 products including 45 types of cosmetic products and 30
types of food products. A sudden huge variety of Patanjali products had a great impact on the
consumers. Out of the population using Ayurvedic products, it was found that 51.2% of the
total Patanjali product users were the old people. Whereas only 19.50% of Adults were
Patanjali product users. Later it was found that the percentage pf Patanjali users under 19
years, exceeded the percentage of Adults by 9.76%.
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Assignment: Patanjali Ayurved Ltd.

Pat anjal i’s De mand

Thi s gr aph de pict s t he de mand of Pat anjal i
From cons ume r’s poi nt of Vie w

29%

Old People Adults

51%
Youth

20%

Patanjali had 350 products portfolios ranging from noodles and biscuits to toothpastes and
shampoos were given a head-on rivalry to the consumer goods major and it was becoming a
strong competitor in the consumer goods markets in India. One of its key competitors, Dabur
which offered honey and Chawanprash to the consumers was closely analysing the Patanjali
products. Patanjali got its entry into the market through department stores.

Retailer’s Data:
Retailers are happy with the sales of Patanjali products. 46% of the retailers reported Patanjali
sales in the range of 51% to 75%.

20% of the retailers promote Patanjali products with the help of banners to grab the attention
of the consumers for increasing the sales.

A significant amount of 95% of retailers indicates that their customers usually bought the same
Patanjali products again. 88% of these consumers do so because they knew that the product
does work, 7% because they do not have the time or energy to explore other options, 4%
because the product could be found in their relative’s home and 1% due to some other reason.
2% don’t usually buy the same product.
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Assignment: Patanjali Ayurved Ltd.

R e a s o n s f o r R e c o m m e n d a ti o n s
This graph depicts t he re asons for
r e c o m m e n d a ti o n s f r o m t h e r e t a i l e r ' s p o i n t
of view

8% 17% Affordability

Availability

25% Past experience

50% with the drug

Others

Revenue of Patanjali:
Patanjali Food and Herbal Park at Haridwar is the main production facility operated by Patanjali
Ayurved Ltd. The company has a production capacity of Rs 35,000 crore and is in the process of
expanding to a capacity of Rs 60,000 crore through its new production units at several places,
including Noida, Nagpur and Indore.

Year’s Revenue (Rs. In Crore)

2010-11 100
2011-12 300
2012-13 841
2013-14 1184
2014-15 2006
2015-16 5000
2016-17 10526
2017-18 9500
2018-19 8330

Future Group, which has tied up with Patanjali sells about Rs. 30 crore worth of Patanjali
products every month.
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Assignment: Patanjali Ayurved Ltd.

Sales & distribution:

Patanjali Ayurved sells through nearly 4,700 retail outlets as of May 2016. Patanjali also sells its
products online and is planning to open outlets at railway stations and airports. Patanjali
Ayurveda has tied up with Pittie Group and Kishore Biyani's Future Group on 9 October
2015. As per the tie-up with Future Group, all the consumer products of Patanjali will be
available for the direct sale in Future Group outlets. Patanjali Ayurveda products are also
available in modern trade stores including Reliance retail, Hyper city and Star Bazaar apart from
online channels. Patanjali Ayurved, co-founded by yoga guru Ramdev, is targeting Rs.10,000-
crore revenue in 2016–17, after sales grew 150% in the previous financial year
to Rs.5,000 crore.
Patanjali Ayurved has also started its FMGC expansion in form of dealership and distributorship
channels across the country and expects wider growth in overseas distribution as well.

Patanjali (produer)

80 super distributors

3000 distributors

15000 exclusive stores 47000 general retail counters

Customer
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Assignment: Patanjali Ayurved Ltd.

Related Concept of Demand and Supply on Patanjali Ayurved Ltd.

Earlier we have gone through the summary of demand and supply. The concept of demand and
supply is very short and sweet but it has an enormous role in managerial economics and in this
competitive market of FMCGs (Fast Market Consumer Goods). When it comes to the concept of
demand in economics, we study demand function and same with supply we have supply
function.  

Demand Function: Dx = f (Qx, Px, Y, Ps, Pc, C)   

Where,

Dx= Demand of product X Ps= Price of Substitute Goods

Px= Price of X Pc= Price of Complementary Goods

Qx= Quantity purchase of X C= Consumer Behaviour

Y= Consumer Income

Supply Function: Sx = f (Sx, Px, Pf, Pi, O, T, t, S, U)

Where,

Sx= Supply of product X O=factors outside the economic sphere

Px= Price of product X T= Technology use

Pf= Set of prices of the factor inputs T= Tax; S= Subsidies

Pi= Price of all other related products U= All other factors which are not mentioned above

Concept of Demand and Supply is based on the demand function which helps analysts to
analyse demand and supply of any company or its sector or of its product in this case we’ll be
relating these concepts with Patanjali Ltd.
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Assignment: Patanjali Ayurved Ltd.

Relating concepts of Demand and Supply:

 Patanjali can offer low prices to consumers due to very low selling, administrative and
general cost at 2.5% of revenue. 
 Advertising spend of FY 16 at 6% is also well below the peer set. 
 Retail margins at half or lower as compared to its competition. (Consumer income)
 Due to trust and credibility of Ramdev baba’s credential on yoga and Ayurveda.
(influential factor) 
 Presence of ayurvedic practitioner at the outlet is a major determinant of sales. When a
practitioner is absent sales fall 30-40% percent.
 India's major population is dependent on Ayurveda and are habitual of ayurved
treatments so here we can see exceptional demand.
 In FY 16 there was huge surge in demand and so they were facing constraints in
procurement of raw material and production (U= procurement of raw material)
 Fill rate of Patanjali is 40-50% on the other hand MNC have a fill rate of 85-90% which
directly impacts the demand of Patanjali products. 
 Ayurved treatments are ancient gifts from our forefathers and it has No or less side
effects of medicine and treatment when compared to allopathic medicines and
treatment hence, now a large no. of population is switching to Ayurveda. (Consumer
behaviour).

The law of demand says that at higher prices, buyers will demand less of an economic good.
The law of supply says that at higher prices, sellers will supply more of an economic good.
These two laws interact to determine the actual market prices and volume of goods that are
traded on a market.
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Assignment: Patanjali Ayurved Ltd.

If the demand for a good is greater than its supply, then the opposite will occur. Suppliers will
increase their prices to earn more profit with the products they already have, until eventually
the supply and demand reach an equilibrium at some peak price.

With almost 600 products scattered in multiple FMCG categories, the product portfolio of
Patanjali is large and has become inconsistent, which is causing confusion among customers
and also shifting away from its core value proposition. For example, the noodles or biscuit
category falls neither under the Ayurveda bracket nor it is an Indian food or recipe, both of
which were core to Patanjali. Also, just by flooding the market initially with the sheer volume of
their numerous products, now it is posing challenge to the company to maintain demand-
supply, to avoid stock-out of best-selling products & clearing the less selling products.
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Assignment: Patanjali Ayurved Ltd.

Factors affecting demand & supply:

Demand:

The year 2018 has witnessed many ups and downs in the entrepreneurial ecosystem. While
many businesses have registered huge profits, few have seen downhill.

One of the leading FMCG brands in India, Patanjali Ayurveda, has recorded a dip in its sales this
year. The Brain-child of Baba Ramdev, Patanjali has been consumer’s favourite due to its
affordability, use of natural & organic ingredients and its make in India factor.

Once a major disrupter in the FMCG sector, Patanjali has gone through slow sales this year.
According to a report, the key factors leading to the decline in Patanjali are brand fatigue
setting in due to lack of renovation, inability to crack general trade distribution, dilution of the
ayurvedic credentials on an excessive extension, strong competitive response from large
companies with their own ayurvedic offerings, and a sharp drop in advertising spends.

Competition:

Patanjali was the torch-bearer of natural and organic products in Indian Market, contributing to
its humungous success.

After witnessing Patanjali’s success and the potential of organic product industry, the rival
companies mostly multinationals started rolling out their own variant of the natural and herbal
product. Thus, Patanjali soon faced increased competition with many rivals, which largely
affected their sales.

Poor Management:

After garnering huge popularity among consumers, Patanjali ventured into many other sectors
besides FMCG. With such aggressive expansion, it became difficult to manage all the business
verticals and ensure quality. As a result, various quality issues emerged leading to declining in
the sales. Patanjali’s failure to keep up with consumer expectations led to losing their brand
position among consumers.

The company appointed separate distributors for different business verticals such as staples,
personal care and biscuits among others, which created an issue in service levels.

Lack of Advertising:

Many companies tend to focus more on marketing during the launch of their business.
Consistent and continuous marketing is important for the growth of your business. The
effectiveness of a marketing campaign determines the sales of a product. The growth
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Assignment: Patanjali Ayurved Ltd.

slowdown in Patanjali is a direct result of poor management of trade channels and lack of a
coherent advertising strategy.

Challenges faced by Patanjali:

In its 2017-2018 financial statement Patanjali complained that demonetization affected

consumers' spending habits, while the sales tax hit costing and pricings of inputs and products.
Ramdev also told he had withdrawn himself politically. But he popped up on the campaign trail
to support the BJP in the April-May election, saying Modi was "the pride of mother India".

Issues included not having long-term deals with transporters, which complicated planning and
increased costs. Patanjali executives also lacked the software needed to effectively track sales.
Patanjali’s technology back-end was not ready for the GST-related inventory and invoicing
management in time, a person aware of the company’s affairs.

Till last year, the company relied on exclusive partners to supply products. It’s now aggressively
adding those who also manage supplies of large consumer goods makers like HUL and ITC,
according to Dhairyashil Patil, national president of All India Consumer Products Distributors’
Federation. Its problems resulted in a mismatch between the products required and sent,
according to Patil.
Some items are in excess while there’s a shortage for others, he said. Distributors are also
sitting on damaged inventory, he said. “That’s deterred them from stocking Patanjali’s
products.

Population and Age group:

Patanjali products is meant for the children, adults and especially for the old people so the age
groups are not much affected the demand of the products so demand remain same and by the
increase in the population, the demand of the product also increases.

Price:
Lower price tags of Patanjali products help them gain market share in the short-term.
Developing an effective pricing strategy remains the most important and difficult part of the
marketing process. Patanjali uses a penetration strategy and cost is very less. Due to lower
price tags the demand of the product is directly affected.
Price of Substitutes:
Some products of Patanjali are costly than other competitive brands and some are cheap. He
urges people not to lose hope or suffer and depend on expensive treatments. The diseases for
which Indian population spend much more in hospitals, pranayama and yoga treat all the
ailments completely without costly medicines, operations or surgery. It is amazing, but it is
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Assignment: Patanjali Ayurved Ltd.

claimed to be true that this is the cheapest and the only complete cure to most of the so-called
incurable diseases like Diabetes, Cancer, HIV and AIDS too. Plus, it is currently aggressively
advertising its honey as 43% cheaper than a competitor’s product (DABUR HONEY) for a 250-
gm pack. Dabur’s 500gm is available for Rs 199; Patanjali honey 500gm is available for Rs 135
(32% cheaper).

Supply:

Upgrade in technology:

Businesses refusing to change with time will face inevitable failure. In today’s competitive
market, renovation is the key to maintain your brand position and drive sales.

Another reason behind Patanjali’s decline in turnover was primarily because of the company’s
inability to timely adapt to the GST regime and develop infrastructure and supply chain.

Suppliers:

The number of suppliers also will affect supply. For example, as Patanjali expands their
business to more countries, there are a lot of supplies for Patanjali product. An increase in
number of suppliers shifts the supply curve rightward. The greater the number of suppliers in
the market, the greater the supply of Patanjali products in the market.  There will be more
Patanjali products to go around for the consumers. Currently Patanjali says it has 3500
distributors that supply some 47,000 retail counters across India.

Government Policies:

It Implies that the different policies of government, has a greater impact on the supply of a

product. For example, increase in tax on excise duties would decrease the supply of a product.
On the other hand, if the tax rate is low, then the supply of a product would increase. Patanjali
also suffered, like many others, from Prime Minister Narendra Modi's 2016 ban on high-
denomination banknotes and 2017 introduction of a new goods and services tax. The moves
disrupted economic activity and hence lead to decrease in supply of Patanjali products.
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Assignment: Patanjali Ayurved Ltd.

Elasticity of demand & supply of Patanjali Ayurved Ltd

Elasticity of demand:

The concept of elasticity of demand has been introduced by Alfred Marshal. Elasticity of
demand means the rate of responsiveness in quantity demanded of a commodity due to
change in price.

Types of elasticity:

1. Price elasticity
2. Income elasticity
3. Cross elasticity

Formula – Price elasticity:

This is the most important and most popular elasticity.it measures the responsiveness of
demand to change in price. It is measured by using the following formula.

Elasticity of demand = Proportionate change in quantity demanded/Proportionate change

in price

A small change∈quantity demanded /Original demand

Elasticity of demand =
A small change∈ price/Original price

Sales volume (Revenue in

Year’s Retail price of product 1
Crores)
2010 30 100
2011 40 300
2012 55 841
2013 110 1184
2014 150 2006
2015 200 5000
2016 300 10526
2017 310 9500
2018 310 8330
2019 350 12050

Analysis:
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Assignment: Patanjali Ayurved Ltd.

On the basis of the given information we can calculate elasticity of demand.

Year 2010-11

Elasticity of demand = 200/33.33 = 6.0060

In this case we can see that elasticity is 6.0060. So, it is more than 1(ED>1). So, it is a Relatively
elastic demand.

Year 2016-17

Elasticity of demand = 9.747/3.333 = 2.924

In this mid-year the elasticity is 2.924. This also more than 1 so this shows a Relatively elastic
demand.

Year 2018-19

Elasticity of demand = 0.4465/0.1290 = 3.4612. Here the elasticity is 3.4612(ED>1), shows

that a Relatively elastic.

Demand:

So, all this relationship shows that a small change in price leads to a greater change in quantity
demanded.

Supply:

While consumers demand goods and services, it is the producer or firms who supply them.
simply how much of a good will be offered for sale at a given time. Thus, supply is the actual
quantity offered for sale in a given price over a given period of time by a firm or a producer

Law of supply:

The law of supply is known as 'the second law of market'. The law of supply states that at
higher prices higher quantity will be supplied and at lower prices lessor quantity will be
supplied. Marshal stated that law of supply as "other things remaining constant, more is
offered for sale at higher prices than at lower prices".

Elasticity of supply

Elasticity of Supply is Responsiveness of producers to changes in the price of their goods or

services. As a general rule, if prices rise so does the supply. Elasticity of supply is measured as
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Assignment: Patanjali Ayurved Ltd.

the ratio of proportionate changes in the quantity supplied to the proportionate change in
price. High elasticity indicates the supply is sensitive to changes in prices, low elasticity
indicates little sensitivity to price changes, and no elasticity means no relationship with price.
Also called price elasticity of supply.

Types of Elasticity of Supply:

1. Perfect Elastic Supply

2. Perfect Inelastic Supply
3. Unit Elastic Supply
4. Relatively Elastic Supply
5. Relatively Inelastic Supply.
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Assignment: Patanjali Ayurved Ltd