08 Sep 16 Disruption is not only about technology

When we hear terms like “disruption” of industries or economies, it invariably conjures up images of technology driven innovators. Google and Facebook have altered the face of advertising. Youtube is threatening television, while Uber has changed personal transportation forever. Amazon has destroyed parts of traditional retailing, and whatsapp is up-ending telecom business models. Solar power will (hopefully) make fossil fuels redundant.

The list goes on, but always with a technology flavour. Invariably, it is technology that creates the platform for new, disruptive business models. Over time, air travel, biotechnology, GM seeds or digital photos were tech-driven disruptions.

But does this always have to be the case?

Is it possible to disrupt an industry without a technology advantage?
Well, India’s Patanjali might well fit the bill. In just about a decade, they have emerged among the top FMCG players in the country –seriously challenging the likes of Unilever, Colgate, P&G, Dabur and Godrej in several categories. In doing so, they’ve created their own rules and re-written others – especially around branding and distribution, both fundamental to success in consumer products.

Is this really disruption? I leave you to be the judge.

• To start with Baba Ramdev built a huge fan following around the themes of yoga, health and “swadeshi”.
• These ardent supporters were the early adopters of medicinal and FMCG products, and allowed Patanjali to experiment with a wide range of products.
• These devotees became unpaid marketers, driven by an almost evangelical faith in the Baba, and his mission towards healthy living. They propagate the brand because they believe in it. Way better than paid employees could ever do! These initial referrals helped spread the word to family, friends, neighbours and especially the younger generation.
• Distribution (especially in India) is critical. Getting shelf space is tough, and incumbent FMCG companies have substantial bargaining power. What did Patanjali do? They “empowered” a significant number (~10,000) of their fans to become dealers/franchisees. This helped Patanjali reach customers across India, bypassing traditional distribution channels, and enabling cheaper prices. Better still, the shopkeepers truly believe in the values of Baba Ramdev and Patanjali.
• This captive dealer network has also allowed Patanjali to test reaction to new products.
• Traditional FMCG companies are cautious, launching and building new product categories in a slow, focused manner – taking time to understand and master new markets. However, Patanjali has defied conventional wisdom, and unleashed a veritable shower of products – literally hundreds, across almost every conceivable FMCG category. More are in the pipeline!  Even small shares in so many markets leads to big bucks.
• All product sell under a single brand, so more buck for brand-building expenses.
• Today, the brand is so huge that mainstream retailers want to get onto the Patanjali bandwagon. Some are even ready to have separate sections dedicated to Patanjali! Not even Hindustan Unilever has that kind of pull.

Reports suggest that Patanjali’s revenues crossed Rs 50 billion last year, making them amongst the top 10 FMCG players in India – already! All the others have a 50+ year vintage.

In a business where brand and distribution take decades to build in a large, diverse market like India – Patanjali’s growth resembles that of an e-commerce company.

Every disruptor rides on a trend or a discontinuity. Here, healthy living, associated with natural and traditional products is a huge trend, not only in India, but globally. Whether Patanjali has just ridden the trend, or helped convert it into a tidal wave is the question.

Read ValueNotes’ recent report, “Patanjali is here to stay!”