Mumbai: Danone Food and Beverages India Pvt. Ltd has introduced four products in the past 18 months in India after its French parent Groupe Danone SA split with Nusli Wadia-controlled Britannia Industries Ltd. As it tries to expand its reach, the company is experimenting with a social initiative, spearheaded in Bangladesh with Muhammad Yunus-founded Grameen Bank under Grameen Danone Foods Ltd.
Jochen Ebert, managing director and general manager, Danone India and Bangladesh, and head of its so-called base of pyramid initiative for the French company, said bringing health through food to a maximum number of people is the focus of the company’s strategy in India. Edited excerpts:
After your split with Britannia, what has been the experience?
We did some quantum leaps in the last two years in understanding the consumer and the market. We are growing really fast. I am impressed about the flavoured yogurt, which shows that there is a potential. Dahi is doing good. We have very good repurchase rates with our products.
What has been your understanding of the Indian consumer?
India is a fantastic and unique country. It’s a country used to milk, dahi, which is an opportunity (for us), as people are familiar with the product. On the other side, there is a strong habit of making dahi at home. What we are trying to do is use our technology to develop taste experiences and we believe that Indian consumers will love it.
Growth recipe: Ebert says that since Danone is a yogurt specialist, it will focus on that category to grow in the Indian market. Saanskrut Kumar/Mint
What are the other challenges?
The second challenge is how do you sell it. How do you reach the consumer? How do you get the product in the top quality to the consumer?
What about the competition? India has well-entrenched national dairy firms and even multinational companies such as Nestle India Ltd.
There is no competition. We are not a dairy company; we are not a milk company. There is a lot of competition between Mother Dairy and Amul on the milk side—who can sell cheaper and more of pouch milk. In this segment today, which is yogurt, the DNA of Danone is really yogurt ferments. We sold yogurt first only in pharmacies as health products, that is where we come from.
These companies also sell yogurt.
Fair enough, but 70% of our fresh dairy products globally is yogurt and we are the No. 1 or No. 2 in all the markets we operate. We believe we can be a serious player in this part of the business.
Where does India figure in terms of priority?
What is important for the company is bring health to maximum number of people. If you take maximum number of people seriously, then you cannot ignore 1.3 billion Indians. So obviously India is a part of the Danone strategy.
Competitors such as Nestle and Hindustan Unilever Ltd are also looking at tapping into markets at the base of pyramid as they look for growth in India.
These are big giants in India. Globally we are (a giant), but in this country we are tiny. We have a social venture with the Grameen Bank in Bangaldesh. We are managing that and learning a lot from there. I am also the managing director for Bangaldesh. We will take something from there for other countries as well.
We are experimenting and will have something to tell you in four months. This is within the company’s framework of bringing health through food to the maximum number of people. India with a maximum number of people is a focus of the strategy.
What does this mean in terms of investment? We heard that you are investing $300 million here.
I never give any investment figures. I don’t know where you heard those numbers from. We are investing much more than you expect. You have quite an Anglo-Saxon system, where Anglo-Saxon companies pretend that they can foresee into the future and Danone is a Latino company. We are a grassroot company; a bottom-up company; a consumer-driven company and this is reflected in our approach. This is the simple truth. We are in India.
Globally you are either No. 1 or No. 2 in markets that you operate in. Will your strive to be the leader here?
In markets where we are operating for little longer like Mumbai and Pune, I am sure we are No. 1, 2 or 3. Yes, for sure, we are not here to be No. 7.
Will you go for inorganic growth?
I can’t comment on that.
It’s been 18 months and you are in four cities. When will you scale up?
It’s been just two months in Bangalore and five months in Hyderabad. The roll-out with these kind of products is not simple. When I look at the Indian market, I see a lot of companies test-marketing, announcing big figures. Normally, they fail and then take it off the market. This is a fundamental mistake. You have to take time to master the market. I don’t see too much rigour in the market.
Do you see yourself gaining the scale of Amul and Mother Dairy?
We are not comparable to these companies as they do 99.5% of their business from non-yogurt products in milk, paneer, butter, ghee. We are yogurt specialists and we want the yogurt category to grow.
How big is the yogurt market?
It’s a very small market. I personally believe the market for packaged yogurt is 100,000 tonnes in India and if you multiply this with €1 a kilo, that’s the value. The market is growing in the teens in double digits, but it’s tiny compared with the home-made dahi consumption, which is in millions of tonnes.
How do you plan to develop business in the yogurt space?
In France, you have 30kg per capita consumption and we have 55 sub-categories like yogurt with Scottish raspberries and Fiji mangoes. With 0.01kg per capita consumption in India, the most important thing is to have a fantastic tasting product in the market. There is value-for-money products, but the big idea is to have the best tasting product.