The #Patanjali way to #MakeInIndia
Patanjali Update – Meeting Highlights
Key product highlights
1) Current revenue run-rate at INR7-8bn per month, translates into annual revenue run-rate of INR70-80bn.
2) Current supply by Patanjali is 30% below the current demand – hence the company has visibility of easily touching INR100bn in revenues in FY17e.
3) Dant Kanti – Toothpaste currently clocking revenues of INR6-7bn annually which translates into ~10% market share. Colgate remains the key brand affected by the advent of Dant Kanti.
4) The company is mulling whether they should offer toothpastes in different segments like gel, and ‘Red’ format to be present across all sub-segments in Toothpaste. The company recently launched Dant Kanti Advanced which is targeting the consumers of Colgate Sensitive and Sensodyne (market size INR5bn currently).
5) Top products continue to remain – Toothpaste, Ghee, Amla Juice and Aloe Vera Juice and Honey. These products currently comprise 30% of total volumes for Patanjali. Other 20 newly launched products like Atta, Noodles (INR1.2bn in revenues), Dish wash bar (INR1.5bn in revenues), soaps and detergents comprise another 30% of volumes.
6) Noodles is currently sold in only one variant and one SKU of Atta Noodles – 70 gm – Rs15 per pack.
7) The company is increasing its focus on products like detergents, soaps and dish wash and is expecting a palpable increase in visibility by 3QFY17.
8) Currently ad-spends are INR5bn at company level.
9) The company has been following a cost+ basis model to decide on pricing and margins for trade channels.
Supply side constraints and capex for expansion
10) The company is facing severe supply side issues with capacity still not matching the demand and honey being the most challenging as sourcing of honey is quite difficult. Demand for honey has grown 3x in the last 3-4 months after a media campaign. Rest all of the products face capacity issues, hence the company is planning for expansion in AP, Punjab, Maharashtra. Capex will be added for Dairy, Fruit Juices and for growing herbs for making ethical products.
11) Capex laid out for future expansion ranges from INR5-10bn which will be funded through debt and SBI will be a key lender, as they are quite aggressive.
Distribution reach
12) Patanjali currently reaches all modern retail stores except Heritage (100 stores) and a couple of other chains.
13) In general trade(GT) they have a reach of 0.15mn stores currently (compared to HUVR at 7mn)
14) They will soon target oil pump stations, medical channels like Apollo Pharmacy (~2200 stores in India) and CSD to tap into more trade channels.
Key product highlights
1) Current revenue run-rate at INR7-8bn per month, translates into annual revenue run-rate of INR70-80bn.
2) Current supply by Patanjali is 30% below the current demand – hence the company has visibility of easily touching INR100bn in revenues in FY17e.
3) Dant Kanti – Toothpaste currently clocking revenues of INR6-7bn annually which translates into ~10% market share. Colgate remains the key brand affected by the advent of Dant Kanti.
4) The company is mulling whether they should offer toothpastes in different segments like gel, and ‘Red’ format to be present across all sub-segments in Toothpaste. The company recently launched Dant Kanti Advanced which is targeting the consumers of Colgate Sensitive and Sensodyne (market size INR5bn currently).
5) Top products continue to remain – Toothpaste, Ghee, Amla Juice and Aloe Vera Juice and Honey. These products currently comprise 30% of total volumes for Patanjali. Other 20 newly launched products like Atta, Noodles (INR1.2bn in revenues), Dish wash bar (INR1.5bn in revenues), soaps and detergents comprise another 30% of volumes.
6) Noodles is currently sold in only one variant and one SKU of Atta Noodles – 70 gm – Rs15 per pack.
7) The company is increasing its focus on products like detergents, soaps and dish wash and is expecting a palpable increase in visibility by 3QFY17.
8) Currently ad-spends are INR5bn at company level.
9) The company has been following a cost+ basis model to decide on pricing and margins for trade channels.
Supply side constraints and capex for expansion
10) The company is facing severe supply side issues with capacity still not matching the demand and honey being the most challenging as sourcing of honey is quite difficult. Demand for honey has grown 3x in the last 3-4 months after a media campaign. Rest all of the products face capacity issues, hence the company is planning for expansion in AP, Punjab, Maharashtra. Capex will be added for Dairy, Fruit Juices and for growing herbs for making ethical products.
11) Capex laid out for future expansion ranges from INR5-10bn which will be funded through debt and SBI will be a key lender, as they are quite aggressive.
Distribution reach
12) Patanjali currently reaches all modern retail stores except Heritage (100 stores) and a couple of other chains.
13) In general trade(GT) they have a reach of 0.15mn stores currently (compared to HUVR at 7mn)
14) They will soon target oil pump stations, medical channels like Apollo Pharmacy (~2200 stores in India) and CSD to tap into more trade channels.
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