With the growth of nutritional foods in India outpacing that of China, Danone’s subcontinent head for nutrition has announced plans to double sales in India over the next three years.
“We are here to expand—to grow our business,” said Laurent Marcel, managing director at Danone’s nutrition business unit in India, Nutricia.
The company has already announced its intent to focus on emerging markets to drive growth while helping offset the slump in its historically strong European markets, where demand is being affected by weak economies and unemployment.
In June, Danone head office issued a profit warning, blaming a "swift deterioration in consumption" in southern Europe, where economic conditions remain particularly poor.
And earlier this month, the company revealed it had become a target for Nelson Peltz, the activist fund manager with a record of fostering shake-ups at the likes of Heinz and Kraft, who said that the French group's performance could be improved by cutting costs and returning cash to shareholders.
Expanding through acquisition
Earlier this year, the world’s biggest yoghurt producer paid around US$355m to buy the baby nutrition business of Indian pharmaceutical major, Wockhardt.
"[Baby nutrition] is typically the kind of category where the market grows at 15-20 per cent annually. We should grow faster than the market. We should be able to double our business in three to four years. That is the ambition. It is a growing business," explained Marcel.
He added that Nutricia expected to leverage Danone and Wockhardt’s existing brands, and the sales expansion would begin by gaining a better understanding of the local market. “We will get our international products but at this time it is too early to say which products we will get,” Marcel said.
Nestlé joins praise
Arch-rival Nestlé, meanwhile, has joined Danone in heralding the long-term importance of emerging markets like India and China. “I see the emerging markets coming to the fore and that is not going to be for one year. It is going to be something that is a dynamic and this is going to be positive for a long time,” said Paul Bulcke, the Swiss giant’s global CEO, in a television interview.
“We get used to double-digit growth in these markets and we feel that should be the permanent way. We are speaking about growth on growth and if something comes to 7-8 percent, that is not bad.”
India’s baby nutrition market has been valued at around Rs25bn, with Danone holding about an 8% stake.