New Delhi: In a press meet last week, held to announce the launch of a new product, Mayank Trivedi, general manager, dairy division, Nestle India Ltd, emphasized several times that the company’s new offering, a probiotic curd branded Nesvita Dahi, was the first product of its kind in the country.
The launch was an attempt on the part of the foods company to beat rivals such as Yakult Danone India Pvt. Ltd, National Dairy Development Board (NDDB) and Gujarat Cooperative Milk Marketing Federation (GCMMF), companies which have plans to enter the segment.
Probiotic is a special bacteria with the unique ability to reach the intestine alive and make a positive contribution in the functioning of the digestive system.
Players in the Probiotic curd/ buttermilk segment
Yakult-Danone, a global leader in the probiotic foods segment had announced plans to launch a probiotic fragmented milk drink in India two months ago.
Nestle’s claim of being a probiotic pioneer did not last long. GCMMF, the current market leader in the milk-based food products segment that markets products under the Amul brand, clarified the same day that it was already present in the space with a probiotic lassi (buttermilk) and will soon add a curd brand to its portfolio.
The same day, NDDB also announced plans to launch probiotic curd, b-Activ, under its Mother Dairy brand. Yakult Danone, meanwhile, sent out releases saying its probiotic products were also underway.
Aggressive marketing campaigns
To supplement their product launches, all these firms are now planning aggressive marketing campaigns and promotions, besides investing in logistics. While Yakult Danone is investing Rs136 crore in setting up manufacturing facilities, Mother Dairy and Amul plan to spend around Rs5 crore each on marketing their products.
“Going probiotic was a step waiting to happen for companies that are already in the milk foods business,” says Jayen Mehta, assistant general manager, Amul. “But whether these products will last or not is the question,” he quickly added.
The milk-based food products market in India has traditionally been dominated by cooperatives, thus limiting the sourcing opportunities for private players. Many multinational companies made attempts at cracking this market but with little success.
Quick entries and even quicker exits
“Britannia entered and exited the Indian market with much speed in the late ’90’s. This was simply because sourcing, other logistical problems such as storage, processing, transportation and distribution and even pricing remained big problems for all private players including MNCs,” says Sharad Gupta, editor, Dairy India Yearbook 2007, the sixth edition of the publication that chronicles the developments of dairy industry in India.
“Post-1992, some 15 domestic players entered the milk foods market, but by the turn of the century more than half of them folded,” adds Gupta. “India’s dairy industry was largely ruled by cooperatives and competing with them in terms of volumes, costs and support was a far shot,” he adds.
Those that persevered
Some of the private players that stuck on but remained small and insignificant include Hatsun Agro Product Ltd, VRS Foods Ltd. under its brand name Paras Dairy, and Sterling Agro Industries Limited under brand Nova.
In fact, Nestle also tried to stick on but not without problems. “We have had to change our product portfolio in the past because of logistical issues such as poor storage, a weak distribution system and even changing consumer tastes,” said Nestle’s Trivedi.
Scope for MNCs to grow
According to Dairy India 2007, of the total milk produced in India (valued at around Rs 300,000 crore by different industry players) only around 20% finds its way to the organized sector. Of this 20%, half is managed by cooperatives and government agencies. “Clearly, there is room for MNCs and other organized players to tap into this hugely unorganized market.
The companies only need to get a better fix on logistical issues,” says Gupta. Industry players say that growing organized retail with good storage facilities, a booming economy and changing consumer needs is what is prompting them to get into an aggressive play.
Modern trade boosts market movement
“The market has improved because of modern trade. There are better freezers and storage facilities in supermarkets and retail outlets. Our spends on distribution and supply chain have gone up 50%,” said Trivedi, claiming Nestle’s milk products portfolio has lately been growing 20%.
Analysts also point out that consumers’ focus on healthier food options is also a reason for companies to get into the fortified foods space, such as probiotic. “Indian consumers are becoming more health conscious. While they can make dahi and butter at home, they don’t mind paying some extra bucks for low-fat, skimmed or probiotic food,” says Piruz Khambatta, chairman and managing director, Rasna Private Limited and chairman of Confederation of Indian Industry’s National Committee on Food Processing.
Indeed, the dairy foods companies are pushing hard to make the best of the changing market condition. While Nestle is upgrading its existing manufacturing facilities in Moga (Punjab) and Samalkha (Haryana) and also strengthening its distribution network, Yakult-Danone is in the meanwhile setting up a manufacturing facility near Delhi for its probiotic milk.
“Value-added products also help in securing better margins. Probiotics, is in fact, a promising bet that the industry has made,” says Khambatta.