Feature

Milking it right

Dairy companies are growing by venturing beyond their home market and launching value-added products

We are a dahi company, not a dairy company,” insisted Jochen Ebert, the then managing director of Danone Foods & Beverages India in 2014, pointing out how his company differed from other dairy players in India. Four years later, the ‘dahi’ company is exiting India. The world’s largest player in yogurt, Danone thought it could tap the needs of working women for hassle-free, ready-made curd. The French company was, however, missing one key ingredient in its product portfolio — one that Ebert himself flagged as a differentiator — liquid milk.

Liquid milk or pouch milk is an important ingredient for dairy companies in India as it not only provides scale but also helps build brand equity. The latter can then be leveraged to drive other value-added products such as curd, buttermilk, cheese, butter etc that have higher margins.

To be fair to Danone, setting up a dairy business in India is tricky. Compared to the West, which has large dairy farms, India has several small dairy farmers. One needs to aggregate these farmers to ensure regular milk supply and procurement. In the first five years of its operations, Danone India procured milk from a third party vendor, Schrieber Dynamix Dairy’s facility in Baramati. However, it failed to make deeper inroads into the Indian dairy market.

While the dairy business accounts for nearly half of Danone’s €25 billion global turnover, it contributed just 10% to Danone India’s FY17 revenue of Rs.707 crore. It was hardly surprising that the French major decided to switch completely to nutrition products that made up 90% of its turnover here.

Network Building
If Danone got it wrong and exited, home-grown dairy players have spent years building a strong procurement network, and, in turn, brand equity through liquid milk. Consider Parag Milk Foods. It started operations in 1992 in Manchar near Pune, selling liquid milk in areas around Mumbai and Pune besides exporting skimmed milk powder. Parag’s procurement network today spans 200,000 farmers across 29 districts of Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu, meeting 80% of its overall needs.

Hyderabad-based Heritage is a step ahead, sou

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