French giant Danone shutting down dairy business in India
What's the story
Paris-based Danone SA -after three failed attempts to succeed in the Indian dairy industry- is discontinuing its dairy operations in the country, which is among the fastest-growing global consumer packaged goods markets. A spokesperson said they would discontinue SKUs (stock keeping units) which haven't been contributing much to their Indian business that include fresh dairy and UHT (ultra-high temperature processing) products. Here's more.
Portfolio
Despite many years' business in India, Danone had limited portfolio
Despite continuous efforts, Danone India's dairy unit remained a "small business", accounting for only 10% of its revenue in India. However, globally, dairy is Danone's largest business that contributed to over 50% of the global sales in 2016; it accounted for €10.73bn of Danone's €21.9bn global sales. Its dairy portfolio comprised only curd, flavored yogurt, UHT products like milk, buttermilk, cold coffee, and smoothies.
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Focus on nutrition portfolio
Danone India stated: "Danone has decided to rationalize its product portfolio in India to allow for accelerated investments and a sharper focus on growing its nutrition portfolio which is more than 90% of the business, and where the company already enjoys leadership position."
Indian Market
Danone re-entered India in 2010 after two failed JVs
This was the French dairy giant's third Indian venture and first independent attempt to crack the nearly Rs. 90,000cr Indian dairy market dominated by Amul owner, Gujarat Cooperative Milk Marketing Federation. Danone had two unsuccessful joint ventures with Wadia Group and Rahul Narang Group earlier. It independently re-entered Indian dairy market in 2010 and merged the dairy business with nutrition unit in 2015.
Joint Ventures
Joint ventures with Wadia Group and Rahul Narang Group
In the 1990s, Danone first entered India in a joint venture with Wadia Group for creating Britannia Industries' biscuits portfolio. It ended after 13 years; there was a dispute over Britannia's Tiger biscuits' intellectual property. In the early 2000s, Danone entered a JV with Rahul Narang to foray into India's beverage space. The partnership, which lasted until 2015, had brands like Qua and B'lue.
Danone India
Sharpening focus to accelerate investments on best performers: Danone India
A Danone India spokesperson said the company has "great ambitions" for its operations in India. Danone remains committed to invest and grow in the country through established brands like Protinex, Aptamil, Farex, Dexolac, and Neocate. The spokesperson added they are continuously analyzing their portfolio to maximize growth and accelerate investments in best-performing products and categories; that's why they are discontinuing the dairy business.
Nutrition Business
Nutrition contributes 80% of Danone's India revenue
In India, about 80% of Danone's revenue comes from the company's infant food and early-nutrition unit. Danone spent Rs. 1,800cr in India over the past seven years for building manufacturing units, Mumbai head office, and acquisition of Wockhardt Group's nutrition business in 2011. Even last year, Danone said it would focus on nutrition and not dairy to double its India revenue by 2020.
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Globally operates four major businesses
Danone spokesperson's stated: "Our focus is to bring nutritionally superior and relevant products to India, and 2017 has been a testimony of that with 10 new launches including some from our global portfolio." Globally, Danone has dairy, beverages, early-life nutrition, and advanced medical nutrition businesses.