You know who's got milk? India. India is the world's biggest
producer and consumer of dairy. In 2018 alone, India produced 186 million
metric tonnes of milk — about 410 billion pounds and 22 percent
of the milk produced globally. Almost all of that is consumed
domestically thanks to India's dairy-heavy diet — think creamy curries, yogurt drinks,
and a popular type of butter called ghee. A quick note before we proceed:
this includes milk from buffaloes, which are an important source of
milk in many developing countries. the point is that India loves milk. In 2011, the French dairy company Danone
hoped to capitalize on this by opening a division in India. Danone opened its own processing plant
in Haryana and tried to capture some of India's 1.2 billion dairy lovers. But less than a decade later,
Danone shuttered their dairy business in India. That same year, the company
made 28 billion dollars worldwide and was in the top
three global dairy companies. With all this success, elsewhere, why
did Danone's dairy business sour in India? Let's start with some
background on Danone. Their business is broken down
into three categories: specialized nutrition, like supplements and formula
for babies; bottled waters and seltzers; and dairy
and plant-based alternatives. That one makes up over half of their
global sales, but it's also the one that failed in India. Danone does still sell specialized nutrition
products in the country, but they don't break out
those sales figures separately. Oh, and yes — this is the
same company as Dannon in the U.S. The company decided to rebrand to
make the spelling less confusing for American consumers. Anyway, now for some background
on India's dairy industry. There are about 75 million
dairy farmers in India. Most of them are women who own one
or two buffaloes or cows to supplement the family's income. Nearly half of India's milk is not
sold, but consumed by the farmers household. This makes India's dairy
industry far more fractured and localized than other countries
where Danone operates. Take the company's native France and
one of its biggest customers, the U.S. Each has far fewer dairy farms
with herds that dwarf India's one or two animal average. This was Danone's first big problem
in India: sourcing milk is difficult. Of the half not consumed by
farmers' households, only about 15 percent goes to big organized companies
or government run cooperatives. The rest goes to hundreds
of small, local milk processors. Even the largest companies like Amul,
Mother Dairy, and Nestlé have tiny percentages of the market, and
they've been there for decades. Market research firms Mintel and
Euromonitor declined to release specific market share numbers to CNBC. However, a 2016 piece in The
Economic Times of India citing Euromonitor put the figures at about
7 percent for Amul, 3.7 percent for Mother Dairy, and 2.9 percent for Nestlé. In short, tapping into the existing
dairy infrastructure is effective but time consuming. Imagine the effort of contacting dozens
or hundreds of local and regional dairies, processors, or
individual farmers. But establishing a separate supply chain
altogether is very expensive — a lesson Danone learned the hard way. And when Danone did get milk, the
company focused on the wrong products. Danone pushed plain yogurt and flavored
yogurt drinks — popular in places like the U.S. and France with high
profit margins to boot. But in India around the time when
Danone arrived, yogurt comprised only 7 percent of the dairy consumed. The real money was in ghee, a
type of clarified butter, and plain old fluid milk, a product with razor-thin
margins dominated by those hundreds of local small-scale producers. Analysts explained to CNBC the simple
reason why Indian consumers shunned Danone's prepackaged yogurt. And if Indian consumers did want to buy
premade yogurt, they had a slew of cheaper options than Danone. Dairy never accounted for more than 10
percent of Danone's sales in India, a far cry from its global 50 percent. Its specialized nutrition arm picks up
the slack, and the company announced a renewed focus on that
division when it shuttered its dairy operation. Meanwhile, two of their
biggest competitors, Amul and Nestlé, made nearly five billion and
750 million from dairy, respectively. But not all hope is lost
for Danone's dairy in India. In January 2018, the same time
that Danone ended its dairy production there, the investment arm of the company
announced its part in a 26.5 million dollar investment in Epigamia,
an Indian yogurt startup. This could be a sustainable move
for Danone in India's dairy industry because Epigamia offers consumers products that
add value onto the plain yogurt they can make cheaply at home. But perhaps most importantly is this:
while much of the population still makes yogurt the old-fashioned way, analysts
predict that a growing number of consumers will want to buy premade
options as they move into corporate jobs in developing urban centers. Very large numbers indeed. If only 5 percent of India's 1.35 billion people decides to buy prepackaged
yogurt, that's over 67 million consumers — more than the entire
population of Danone's native France.
I want to know one thing - Why don't we have a proper dairy based whipping cream in India? The best we have is Amul whipping cream but anyone who has tried their hand at baking and cake decoration, knows that this is useless to make whipped cream. It just does not have enough fat. In fact all cakes in India have non-dairy whipping cream in it. (yes, all those "Fresh cream" cakes)
Danone went too big too fast in investment. The roi on the manufacturing didn’t stack up. It would have made more sense to use contract manufacturing to build the brand and category, before making such heavy capex investment.
GeEee
Not saying anything about this video but these days in general when I see a western channel with uploading a video with India in the title, 80% of the time I’m sure its view whoring.
Time for Ambani to start 'Jio Milk' and own this space..