Missing The Plot

Why Danone exited the Indian dairy business.

- Ajita Shashidhar

When French yoghurt-maker Danone (post its acrimonious break-up with Britannia) started its second innings in India in 2009, it was considered the most innovative dairy player. With products such as smoothies, flavoured yoghurt (all packaged in UHT packs for increased shelf life), as well as Bengal’s mishti doi, the yoghurt-maker nudged incumbents like Amul and Mother Dairy to strengthen their innovation pipeline.

In an interview with Business Today in 2016, Danone’s then head of dairy business in India, Jochen Ebert, had emphasised the company’s commitment to the Indian market. Ebert said the biggest opportunity lay in the fact that per capita consumption of yoghurt was just 30-40 litres vis-a-vis 300-400 litres in most mature markets.

To capitalise on that opportunity, the company had set up its own milk collection infrastructure in Punjab, built its own cold supply chain and invested in a robust innovation pipeline. “Our experience is that the per capita consumption of yoghurt grows slowly for a very long time, and then it grows steeply. It may take 10 years, but I am quite sure that the value-added segment will play an enormous role,” Ebert had said then.

But Ebert moved out of Danone in early 2017. Big players like Amul, Mother Dairy and Nestle became the market leaders in yoghurt, and Danone itself recently exited the dairy business in India altogether.

What went wrong? The recipe for success in the dairy business in India is to invest in procurement. The country’s largest dairy co-operative, Amul, for instance, sources 176.5 lakh litres of milk per day, and Danone had just started taking baby steps in that direction. They had pledged their commitment to India just a year earlier, and suddenly they called it quits.