Patanjali is creating a new market for itself: Kishore Biyani

Last year Baba Ramdev's Patanjali signed up with Kishore Biyani's Future Group to make its products available in Big Bazaar outlets in the country. Since then Biyani, the man who has come to signify Khareedo Bejo, has been upbeat about the tie-up.Patanjali has had a good beginning, he admits, adding that it has kept itself busy with new product launches like energy bars. Patanjali isn't gaining new market share so much as creating a niche for itself, believes Biyani. Three product categories of Patanjal's -- toothpaste, hair oil and ghee -- are doing well, and Biyani, for the time being, will focus on these.

The first two weeks of April have been good for the retail space, but Biyani has no guarantees to give about what it would look like in future, given the volatility of the market.

Speaking to CNBC-TV18, he said he doesn't believe the likes of Flipkart will give a good run for his money. There has been no threat from the e-commerce space. "In the US about 90 percent is still physical retail. I don’t think it will change over the next 10-20 years."

Biyani of hopeful of seeing a 40-50 percent growth in Future Consumer Enterprise in the next three years. A near-term target for the company would be about Rs 3500-4000 crore in revenues, he said.Below is the verbatim transcript of Kishore Biyani's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Give us the sense of Patanjali, what kind of growth numbers are you looking at from your perch FY17 and FY18? A: Patanjali has got a reasonably good beginning. It is getting into many categories, many products. Some of their products, at least 20 SKUs are performing phenomenally well. I just met them recently last week and saw the new range of products; they have got into confectionary, in a sense chocolates and energy bars. So, that is an interesting product they are getting in. Let us see the new launches, they also getting into premium beauty and personal care products. So, that should be another interesting launch which we are looking forward to. Sonia: Patanjali has been one of the biggest disruptive forces that we have seen in the FMCG space in the last 6-12 months. However we would like to get a little more colour from you on who is Patanjali gaining market share from, from the big boys like the Colgate’s, the Emami’s and their products where is Patanjali eating more of the market pie from? A: We have a joint venture (JV) with an analytics company and we have done some analytics on the category and the brand and all particular SKUs and we are seeing that they are also creating a new market. We are seeing a lot of new customers who are buying this product, who are not a buyer of any other brand per se. So, I don’t think so they have got into significant shares of various things but they have also created a new market. Latha: As a whole how is the retail space? This is where we will get the first impulses of growth of the economy in terms of footfalls, purchases, movement of goods, would you say that this proverbial green shoots are visible?     A: I would say that April has been really good except for last week was little slow but overall the first two and a half weeks of April was probably one of the better April’s we have seen in recent times. Latha: Therefore you can extrapolate? A: I think the markets are not so consistent at what it used to be so one can’t extrapolate but April has definitely been distinctly better across every category. Sonia: Earlier when you had spoken to us, you had indicated that from tie-up with Patanjali, you hope to do about revenues worth Rs 70-80 crore per month. Now that you are telling us that there are more avenues that Patanjali is entering into like confectionary and beauty products, would you expect to see a higher revenue run rate? A: We were expecting a lot of new categories to come in any case. Actually every category takes a little while to get adjusted, the supply chain has to setup and secondly a lot of categories are meant for small trade because we are not excited selling a bar of chocolate. That doesn’t get into significant uptick in revenues for us. We need products which are consistent like their toothpaste has been doing phenomenally well, their hair oil is doing very well, their ghee is doing very well. So, there will be 20 SKUs which are consistent and which is growing. We would like to concentrate on those categories and do them very well and efficiently. Latha: How are you seeing this evolve, do you see competition from the likes of Flipkart’s and Amazon’s now decline considerably? On the face of it, it doesn’t look like? A: I always said that online is a new way of buying goods and it is a product and brand which sells wherever it has sales. So, the consumer has a choice to buy from anywhere, so, whenever they get it cheaper, they buy it online, whenever they want to experiment, even whenever they want to try, feel, touch -- if you look at world over also, let us take the case of US, US 90 percent is still physical retail and 5 percent out of the 10 percent of online is multichannel which is physical people doing digital. So, 95 percent of business of retail of consumer goods getting sold is still controlled by physical space and I don’t think that is going to be an disruption which will change over the next 10-20 years. Let us suppose it changes and it still is 50-60 percent, that is still a huge market to be in. Sonia: You recently tied up with Trent Hypermarket as well so now a lot of your own private brands would be in lot of the Star Bazaar’s across the city I reckon. Can you tell us what the progress is there, how much are you looking to do as far as revenues from your private FMCG business? A: I can tell you that most of our SKUs, most of our brands have been introduced in Star Bazaar and we are very elated by the response we have got. Maybe some of our categories, some of our products SKUs are doing better than what they do in our stores. So, our brand had to feel other stores also and consumer had to check it out. We feel that our brands our now ready to go everywhere. We have launched some of our brands in the UP market and we have now opened our distribution in the Southern market. So, we are going to get in our brands into general trade in a significant way and tying up with other large retailers including cash and carry. Sonia: Could you put a number to that because some of our colleagues were picking up that with this tie-up your private FMCG sales could hit about Rs 20,000 crore – that is by 2021 so that could be a long-term forecast. Is that an accurate estimate? A: We expect it do much bigger than that. Rs 20,ooo crore is a conservative target which we have taken because we are into multiple categories. We are into dairy, beverages, ready-to-eat, grocery items. I think we have already launched 21 brands and all the brands are doing reasonably well. Plus our own store expansions are significant. We are going to add up close to 4,000 small stores, we will be touching 350 large hypermarkets. So, there is significant distribution which we are providing as well as lot of other people are joining hands with us. Latha: What is the more near-term target, 2020 is a distance?A: This year we are looking at anywhere between Rs 3,500 crore and 4,000 crore and we expect a growth rate of around 40-50 percent every year for the next three to four years. Latha: This comes under which branch, which company? A: Future Consumer Enterprise. Latha: What would the margins be for that company, would the margins therefore improve? A: We are in double digit gross margins. We believe as we move forward, in two years time, we would be around 20 percent plus kind of gross margins. Latha: I just want to continue the conversation we had about the digital marketplace. Will you legally move against an of those ecommerce guys?A: We are nobody to move legally to be very honest. I think there is a law of the land and people should follow it. I don’t think so I can have a personal view on this. Latha: You are not going to take up the case?A: I don’t have a personal view on this. Latha: There is a corporate view?A: There is no corporate view also on this. I think there can be an industry view on this. Sonia: On the acquisition front is there anything that you looking, at after FabFurnish, what is next on the cards? A: FabFurnish has been our recent acquisition and we feel good about what we have acquired. We are launching FabFurnish again in a new avtar on May 2. So, we are getting ready to work on building our own marketplace to start with on home goods side. So we are going to experiment with this new medium called ecommerce. Latha: We should be hearing a lot about both tie-ups where your products will be available with other chains as well as you acquiring other brands? A: I think that is a continuous process. We are into a business of ‘kharido-becho’, KB that is what a lot of people call it.