When the seven bidders surveyed Danone’s only dairy facility in India, roughly the size of a football field, they thought it was tiny. But they were there for what it could produce—15 tonnes of thick, stirred, fruit-flavoured yoghurt every day. What’s more, its location on the outskirts of Delhi made it an ideal choice for distribution in north India. Crucially, acquiring the plant would give the new owners the advantage of entering the market before their competitors; a similar facility to Danone’s would take about a year to set up. Parag Milk Foods, whose Rs 30 crore ($4.4 million) bid was successful, seems to have understood the need to act fast if it is to succeed in the yoghurt sector.

Yoghurt, dahi’s strained, thicker and more nutritious cousin, is fast becoming the most attractive dairy product for Indian consumers and producers alike. Now readily stocked in most stores, a number of city dwellers have made yoghurt a part of their lifestyle. Apart from being tasty, it also aids in digestion, making it an ideal snack, especially in summers. The yoghurt producers, too, prefer selling yoghurt rather than dahi because consumers are willing to shell out a lot more for the former. It’s also a bet on the future, because estimates suggest that number of yoghurt consumers will double in the next three years.

All of this has been encouraging enough for Parag to double down on yoghurt. However, it must be remembered that Parag’s entry was made possible because Danone, the French dairy giant, threw in the towel. Danone decided to sell its facility and shut down its dairy operations in the country this April, around a decade after entering the Indian market.

“It failed because it played both sides of the coin. It tried to compete with dairy cooperatives in capturing mass market through dahi and vied for premium payers with Greek yoghurt,” said the founder of a health food startup, who did not want to be named. “Danone may have been overconfident targeting the high-end consumer without delivering an innovative product that deserved the premium,” he added.

Danone had introduced dahi, a range of yoghurt—both flavoured and Greek, and probiotic drink Yakult (as part of joint venture with Yakult). Barring Yakult, which Danone is continuing, these products largely failed to entice customers. With neither an exceptional product, nor a compelling brand story and at a markedly higher cost, Indian customers simply didn’t bite.

Now that Parag has won the bid for Danone’s state-of-the-art yoghurt plant, is one of India’s largest private dairies prepared to deliver where Danone failed?

Why sell milk, when you can make it better?

AUTHOR

Ruhi Kandhari

Ruhi writes on the impact of healthcare policies, trends in the healthcare sector and developments on the implementation of Electronic Health Records in India. She has an M. Sc. in Development Studies from the London School of Economics.

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