Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
So says Judith Swales, Fonterra’s chief operating officer, global consumer and foodservice.
“Consumers are looking to lift their dairy consumption, and they are calling for new products with new standards of safety, quality and taste,” Swales told a recent conference.
But with 23 official languages, distinct regional tastes and preferences and a huge landmass to cover, there’s a lot of work to do to reach these diverse consumers.
Swales was outlining at the India New Zealand Business Summit why Fonterra has entered India’s dairy market and how the co-op is going about it.
Today, India is the largest producer of dairy. The country’s dairy sector is valued at upwards of $20 billion. Annual consumption of dairy in India is 138 litres per person. This compares to the global average of 110 litres per person.
Over the next seven years, this consumer demand for dairy in India is set to increase by 82 billion litres – seven times the forecast growth for China, she says. Driving this growth is the country’s young population: 70% of people are below 45 years old.
“They are digital, live in urban areas, lead an active lifestyle and have more disposable income than ever before. And they’re looking for dairy products that deliver higher quality and better nutrition.
“This has resulted in a big shift away from more traditional locally based dairy businesses with limited product and brand differentiation, to a new era where more value added and innovative dairy products are in high demand across the country.”
Fonterra has more than 100 years of dairy heritage, uncompromising food safety and quality standards and global manufacturing and R&D expertise, Swales says.
“The question is how we use these qualities to make an impact for Indian consumers.
“We recognise that our expertise in dairy is only one part of the equation and if we want to make a difference in helping India strengthen its dairy industry we can’t go it alone.”
This led to the partnership with Future Consumer, one of India’s largest consumer companies.
“By leveraging each partner’s strengths we are creating a truly collaborative approach to bring a new generation of dairy products to this rapidly expanding market.
“This joint venture allows the co-op to bring our global dairy innovation, manufacturing and nutrition expertise to a diverse Indian consumer base.
“With their deep understanding of the Indian consumer, experience working with international partners and this nationwide supply chain and retail network, Future Group is an ideal partner to reach these new consumers.
“Future Group is present in 26 of 31 Indian states with over 2000 modern trade outlets and 5000 public distribution outlets and a nationwide cold chain and ambient distribution network.
“Together, we’ve got the scope to reach over 500 million consumers in over 350 cities all across India.”
They also have a partnership with Amazon and recently acquired the master franchise for 7-Eleven in India, allowing us to work together to reach a wider range of consumers.
