Danone plans India expansion to close in on rivals Unilever and Nestlé

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Danone plans to expand in India as the French consumer goods group attempts to catch up with entrenched competition in the world’s fastest growing large economy.

The company’s presence in India, where it sells milk-powder protein and baby formula, is “nowhere near where it should be”, chief executive Antoine de Saint-Affrique told the Financial Times.

Danone, which also holds a minority stake in small Indian yoghurt making start-up Epigamia, is reassessing its India strategy. Investors are attracted to country’s large market, it is the world’s most populous nation with 1.4bn people, and manufacturing potential at a time when economic activity is faltering in China.

The French company has fallen behind global rivals Unilever and Nestlé in India’s fast-moving consumer goods industry, where revenues are estimated by a government promotion agency to hit $616bn by 2027.

De Saint-Affrique, who has led Danone since 2021, has been charged with turning around lagging performance following a period of boardroom turmoil that resulted in the ousting of his predecessor Emmanuel Faber.

Since then, Danone has sought to reverse falling sales volumes and under-investment. The company’s second-quarter sales volumes this year climbed 2.9 per cent on an annual basis, beating expectations.

“If you look at the top-three countries of Danone, it’s [the] US, China, France,” said de Saint-Affrique, speaking in the north Indian city of Chandigarh. He added that it was the company’s “ambition” for India to rank among the top five.

De Saint-Affrique, who was visiting India to announce a four-year €20mn investment to expand Danone’s existing plant in Punjab, warned that if companies do not scale in India over the next decade “you will be less relevant as a global player”.

The maker of Activia yoghurt and Evian bottled water has struggled to make inroads in India, the world’s biggest producer of dairy products, according to the Food and Agriculture Organization of the United Nations.

Harit Kapoor, lead consumer analyst at Investec India, described Danone’s history in the country as “stop-start” and said its current market share was “tiny”.

Danone’s 13-year partnership with Indian biscuit giant Britannia Industries, which is owned by the billionaire Wadia family, ended in 2009 following an acrimonious branding dispute. In 2018, the French company stopped producing fresh dairy and UHT products — sterilised, long-life goods that do not need refrigeration — in India.

“[Danone’s] brands are not highly penetrated, they are very, very small,” said Sachin Bobade, analyst at Mumbai-based Dolat Capital. “I’ve not seen their products frequently.”

Bobade said that India’s dairy market is not easy to penetrate. Dairy co-operatives, such as Amul brand owner Gujarat Milk Marketing Federation, control a 60 per cent share of Indian dairy product sales, according to estimates by Investec.

“Organically creating size in the Indian market is extremely hard,” said Investec’s Kapoor.

Danone is an “exceptionally late entrant”, he said. “The only way to build up quick scale, especially in say water or dairy, is to acquire.”

De Saint-Affrique said that Danone had a later start in the country compared with rivals, including his former employer Unilever, which has been operating in India for decades. “We are only at the start of our growth journey in India,” he said.

The chief executive did not rule out Indian acquisitions, but added: “There’s plenty of things that we can do organically.”

Danone’s experience in China and Indonesia, the company’s two biggest markets in Asia, gives the company “a good blueprint on what we could do in India”, de Saint-Affrique added.

China, North Asia and Oceania is Danone’s fastest-growing region, registering 8.4 per cent annual like-for-like sales growth in the second quarter. The company does not provide country specific data for India.

India is “of high interest to us”, said de Saint-Affrique. Last year, Danone appointed former Hindustan Unilever chair Sanjiv Mehta to its board as an independent director in a move to bolster its expertise of the region.

“I’ll be back probably in the next six months,” de Saint-Affrique said. “The market matters to us.”