Why Big Dairy Companies Struggle In India

You know who’s got milk? India. India is the world’s biggest
producer and consumer of dairy. In 2018 alone, India produced 186 million
metric tonnes of milk — about 410 billion pounds and 22 percent
of the milk produced globally. Almost all of that is consumed
domestically thanks to India’s dairy-heavy diet — think creamy curries, yogurt drinks,
and a popular type of butter called ghee. A quick note before we proceed:
this includes milk from buffaloes, which are an important source of
milk in many developing countries. the point is that India loves milk. In 2011, the French dairy company Danone
hoped to capitalize on this by opening a division in India. Danone opened its own processing plant
in Haryana and tried to capture some of India’s 1.2 billion dairy lovers. But less than a decade later,
Danone shuttered their dairy business in India. That same year, the company
made 28 billion dollars worldwide and was in the top
three global dairy companies. With all this success, elsewhere, why
did Danone’s dairy business sour in India? Let’s start with some
background on Danone. Their business is broken down
into three categories: specialized nutrition, like supplements and formula
for babies; bottled waters and seltzers; and dairy
and plant-based alternatives. That one makes up over half of their
global sales, but it’s also the one that failed in India. Danone does still sell specialized nutrition
products in the country, but they don’t break out
those sales figures separately. Oh, and yes — this is the
same company as Dannon in the U.S. The company decided to rebrand to
make the spelling less confusing for American consumers. Anyway, now for some background
on India’s dairy industry. There are about 75 million
dairy farmers in India. Most of them are women who own one
or two buffaloes or cows to supplement the family’s income. Nearly half of India’s milk is not
sold, but consumed by the farmers household. This makes India’s dairy
industry far more fractured and localized than other countries
where Danone operates. Take the company’s native France and
one of its biggest customers, the U.S. Each has far fewer dairy farms
with herds that dwarf India’s one or two animal average. This was Danone’s first big problem
in India: sourcing milk is difficult. Of the half not consumed by
farmers’ households, only about 15 percent goes to big organized companies
or government run cooperatives. The rest goes to hundreds
of small, local milk processors. Even the largest companies like Amul,
Mother Dairy, and Nestlé have tiny percentages of the market, and
they’ve been there for decades. Market research firms Mintel and
Euromonitor declined to release specific market share numbers to CNBC. However, a 2016 piece in The
Economic Times of India citing Euromonitor put the figures at about
7 percent for Amul, 3.7 percent for Mother Dairy, and 2.9 percent for Nestlé. In short, tapping into the existing
dairy infrastructure is effective but time consuming. Imagine the effort of contacting dozens
or hundreds of local and regional dairies, processors, or
individual farmers. But establishing a separate supply chain
altogether is very expensive — a lesson Danone learned the hard way. And when Danone did get milk, the
company focused on the wrong products. Danone pushed plain yogurt and flavored
yogurt drinks — popular in places like the U.S. and France with high
profit margins to boot. But in India around the time when
Danone arrived, yogurt comprised only 7 percent of the dairy consumed. The real money was in ghee, a
type of clarified butter, and plain old fluid milk, a product with razor-thin
margins dominated by those hundreds of local small-scale producers. Analysts explained to CNBC the simple
reason why Indian consumers shunned Danone’s prepackaged yogurt. And if Indian consumers did want to buy
premade yogurt, they had a slew of cheaper options than Danone. Dairy never accounted for more than 10
percent of Danone’s sales in India, a far cry from its global 50 percent. Its specialized nutrition arm picks up
the slack, and the company announced a renewed focus on that
division when it shuttered its dairy operation. Meanwhile, two of their
biggest competitors, Amul and Nestlé, made nearly five billion and
750 million from dairy, respectively. But not all hope is lost
for Danone’s dairy in India. In January 2018, the same time
that Danone ended its dairy production there, the investment arm of the company
announced its part in a 26.5 million dollar investment in Epigamia,
an Indian yogurt startup. This could be a sustainable move
for Danone in India’s dairy industry because Epigamia offers consumers products that
add value onto the plain yogurt they can make cheaply at home. But perhaps most importantly is this:
while much of the population still makes yogurt the old-fashioned way, analysts
predict that a growing number of consumers will want to buy premade
options as they move into corporate jobs in developing urban centers. Very large numbers indeed. If only 5 percent of India’s 1.35 billion people decides to buy prepackaged
yogurt, that’s over 67 million consumers — more than the entire
population of Danone’s native France.

100 thoughts on “Why Big Dairy Companies Struggle In India

  1. we need to extradite India phone scammers into the us to serve prison sentences in us jails.

  2. Cow is holy. But India is second biggest country in export of beef, Spain is number one. Most beef export business is owned by BJP and RRS.

  3. Another important factor is the authenticity of milk produced. Local farmers are trusted and credible providers of milk to consumers. Large corporations often process the milk to an extent where it loses its authenticity.

  4. There is a national security team for cow enlightenment,named gaurakahaks, u can consult them.may be they can help u,even India now relies on them,half the assholes are terroring their minds in fake Whatsapp groups,half at day dreams,even if u show what’s real they will make u thief.

  5. The title of this view should be Why Danon failed in India. Just because a western company failed taking over India doesn’t mean all companies in the dairy business failed.

  6. I haven't watch the video yet, but I'm speculating. Isn't the Cow a sacred animal in India? Plus, doesn't India have the biggest vegan population in the world?

    Isn't that why dairy products in India struggle a lot? If that's the case, then I'm not surprised at all.

  7. There is another big reason . I get milk from a person who has 6 cows and sells it directly by delivering it to peoples home all my neighbours buy from him . He delivers it two times a day 5 litres each time and we heat it and proccess it at home . Therefore the government cannot tap it . The actual milk production is much more .

  8. Do you know the jootoobe website?

    it is possible to download videmos mp4 and mp3 .. it is very interesting.

    stay the tip
    …. :

  9. Honestly I still remember getting milk from the doodwala when I was growing up. I don't really remember buying milk or yogurt…

  10. be very careful about CHINESE intentions to take over India business or unlist 51% of the controlling of every single company
    Please don't allow China to empty your hands.

  11. Hold up, I though Danone was spelt Dannon….. it sure looked like it on the Danimals yogurt drink 😂

    Edit: I was in the 30 second mark and only came across it at 1:50

  12. They don't have any idea, please come and check Nandini milk in Karnataka one.of the best and biggest selling corporation

  13. Amul, Mother dairy, Vijaya, Ananda are big dairy companies in India by any standard and seem to be doing fine . I think CNBC is worried about some Global MNCs that had to shut down.

  14. Not sure form where you guys are getting data. 48% being consumed in household of farmers is a bit of too much strech. If somebody said in 90s that 36% is sold to small scale vendors, its still believable, not in 2019. Cooperatives at just 8% is a joke.

  15. its not a good thing for India actually….. an efficient economy would have people working on specialised services and products at large scale and fulfil their other requirements from others making single products at large scale… this kind of cooperation creates much more value than everyone trying to fulfil all of their own needs at small scale….at small scales u can never produce high quality products or may not even produce some products at all.

  16. Was there a company called Danone ? 80% Indians have not heard of such a company. To sell your products they have to be advertised and if no one knew about Danone they were real schmucks. The Gir cow became the mainstay of the Brazilian diary industry but here it is marginalized and no research is being done on the indigenous breeds which have very thick and healthy A2 milk.

  17. Only Business news article writers address the PM with his real name – Narendra Modi – most of the other western media including the liberal ones abuse him as "Hindu Nationalist" – amazing when you think of all these islamic majority countries imposing islam on everyone, caring nothing about the minorities in their countries and even in the west we have Christian leaders who want a Christian nation but even they are not abused for their religion, only Hindus are abused this way
    Having the right skin color does really help – there is far more racism in this world

  18. This is textbook! They opened shop in India with just 15% organized market share! Happens when MR team is caught napping and your product line doesn't understand the lay of the land! The contrary goes with Nano's positioning across the world and why it failed so miserably

  19. Living of local farmers relay on selling milk. And there customer r loyal to them since decades. There is very strong bond between them which no company or brand can fade. Even the company is Indian. Brand like Amul also depends on these local farmer.

  20. CNBC should first keep the INDIA map full intact and not remove the illegally occupied parts by Pakistan
    If you want to show the map show it full if not just STFU

  21. CNBC has been on a roll making genuinely good unbiased journalism that appeals to youth ans millennials. Good job CNBC!

  22. Foreign Companies = Expensive.

    Local Companies = Cheap.

    Indians are always looking for cheaper products. Also, Indians have been used to to the local companies & that's why they don't go looking or want foreign companies.

  23. Why is the Caption so misleading ?? Only danone struggled not others ! Our domestic companies are making huge profits .

  24. It's not big dairy companies. It's just the foreign companies are struggling in India because India loves AMUL (India's biggest dairy company).

  25. This video is not showing complete map of India. The western and northern Kashmir region is completely missing.

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