New Zealand-based dairy major Fonterra is taking the value-added product route to make a re-entry into India. In its first innings — a joint venture (JV) with Britannia two decades ago — Fonterra had opted to work in the packet milk segment, a large but competitive category, dominated by local players such as Amul and Mother Dairy. It exited the JV in 2007, the Kiwi major has made a JV with Future Consumer, part of the Kishore-Biyani-led Future group, to launch a spate of value-added milk products such as UHT milk (tetrapak milk), milk shakes, and yoghurts at competitive price points in Mumbai and other parts of Maharashtra, before heading to the south.
The JV company has tied up with Baramati-based co-packer and processor Schreiber Dynamix Dairies for the Mumbai launch, which is expected shortly.
The JV will then head south, using the manufacturing facility of Future group in Karnataka’s Tumkur. The JV is expected to look at local tastes as it launches in phases across the country.
Sunil Sethi, chairman of Fonterra Future Dairy and managing director of the company’s Sri Lanka and India sub-continent, says the domestic value-added dairy market is growing at a faster clip than packet milk, giving the New-Zealand-based co-operative — ranked among the top five dairy companies in the world — the confidence to focus on this segment.
“While value-added dairy is growing at 20 per cent per annum in India, fresh milk is growing at half the rate. As far as market segments go, we are on the right track and will keep our attention there, since there are innovations, learnings and technology that we can bring to the table,” he says.
The JV is expected to expand its range of products to include paneer, cheese, and curd as Indians increasingly seek ready-made options in these segments for want of time, convenience and better lifestyles. Higher disposable incomes in urban areas are also fuelling growth in value-added dairy, experts tracking the market said.
Future Consumer will not only help in manufacturing and distribution of products within its stores, but will also help Fonterra tap general trade. Ashni Biyani, managing director of Future Consumer, says the JV would target a business of Rs 6,000 crore in the next five years, given the growth prospects in the category.
“Within the (Future) group, we will be selling around Rs 900 crore of dairy products across brands through our retail network this financial year. This number can go up and we see dairy as an important category within our food and fast-moving consumer goods (FMCG) business,” she says.
The Future group is looking to sell around 70 per cent of its own brands in food and FMCG at its stores in the next few years from around 20-25 per cent now.
It already has over three dozen brands covering 70 categories in food and FMCG and proposes to increase this number by either launching products on its own or via tie-ups, joint ventures and brand associations.