Will Ayurveda Disrupt the Businesses of Leading FMCG Players?

Tue, 25 Oct Pre-Open

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Recently, one of the most reputed Fast Moving Consumer Goods (FMCG) player of India-Dabur made an announcement to aggressively cater to products in the Ayurveda space.

Dabur was incorporated in the year 1884 and for around 113 years the company had catered only to the Ayurveda space. However, since 1997 the management had decided to lay more stress on the non-Ayurveda space and currently a majority of its revenues come from the non-Ayurveda division.

However, the company intends to shift back to a model wherein more stress is laid on the Ayurvedic division. That brings us to an important question as to if the onslaught of Ayurveda is proving to be a real threat to the FMCG companies.

Flagship consumer products of many MNCs are under threat. With Ayurveda being the new player in town, it has gained considerable market share from customers. Why is this category becoming popular?

First and most obvious reason is the presence of Ayurvedic content. Majority of the products of these brands (Patanjali and SSA - Sri Sri Ayurveda) are herbal or Ayurvedic in nature. Indians have been traditionally inclined towards natural products for their beauty needs. India has a history and knowledge of such products. While consumers in the rest of the world have to be educated about the benefits of natural herbs, this knowledge is well inherited in India from generations. This very fact has benefited such companies.

Second is their cost competitiveness. The products of these brands are at least 10% to 30% cheaper as compared to the products offered by the FMCG majors; with certain products being perfect substitutes to those offered by MNCs. Brands such as Patanjali have also saved a lot on advertisement expenses. Word of mouth and the popularity of its founder are reasons for the same. After all, the founders of these brands attract millions of viewers on television to watch their respective programs; an easy avenue to endorse products.

These two factors combined have played a major role in taking away market share from MNCs. The figures making rounds include MNCs losing as much as 3% to 8% of their sales by 2020!

Patanjali and SSA do not yet represent an existential threat to incumbents, although it may become one for specific categories or brands. However, companies are no longer dismissive of the threats from such brands. This is a developing story that will attract attention for some time to come.

We in fact met up with the management of a leading hair oil player recently. He validated the view that 'Ayurveda' as a separate category is not a passing trend and is rather here to stay. But its dent in the market will be limited as Ayurveda has a 'functionality' aspect linked to it - it is mainly used as a form of treatment.

While it's too soon to jump to conclusions, this is definitely a space we'll be keeping an eye on.

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