The Hindu Business Line : Britannia, Danone play down impact

Chennai/Bangalore, July 3 French dairy major Groupe Danone’s decision to sell its biscuits business to Kraft Foods of the US introduces a new element to the ongoing row between the former and the Wadia group over Britannia Industries and the Tiger brand.

Though both Britannia Industries and Groupe Danone sought to play down the impact of the development on their row, the entry of Kraft Foods into the equation is seen as opening up interesting avenues towards resolution of the row. Speculation is on a three-way agreement between the Wadias, Groupe Danone and Kraft Foods for Danone to sell its stake in Britannia Industries to Kraft Foods.

Affordable Products

The American company is keen on entering the country as a statement on its Web site reads: “Kraft does not currently have operations in India, but the company recognises that reaching the country’s many small retail outlets will be key to growth….if we can establish a presence and introduce affordable products with the right attributes that meet local consumer needs, we are confident that Kraft will also build a strong business in India.”

With its exit from the biscuits business, Danone obviously will have no more interest in the Tiger brand which, the Wadias allege, was introduced by Danone in other markets such as Indonesia and Pakistan without their knowledge or consent.

Litigation

Asked whether the exit from the biscuits business now meant a natural end to the dispute over the Tiger brand, Danone chose to play cautious. “India is not included in the Kraft’s offer…Danone is still in discussion with Wadia with the next meeting planned in late August/early September. In the meanwhile, there will not be further comment,” said an emailed reply by the company spokesperson, Ms Maire Ginhoux, to a query from Business Line.

For its part, Britannia Industries responded saying that “the arrangement between Kraft Foods and Groupe Danone has no relevance to Wadia Group or Britannia”.

However, an analyst felt that the dispute over the Tiger brand will now become the responsibility of the buyer of Danone’s biscuits business, Kraft Foods. “Whoever takes over the Groupe Danone’s biscuit business globally, will have to fight the litigation over the Tiger brand as well,” said Mr Salil Sharma, Partner with Kapur Sharma & Co based in Delhi.

Brands

A three-way agreement between the Wadias, Danone and Kraft may not only mean an end to litigation but could also add firepower to Britannia’s portfolio of brands. Kraft’s arsenal boasts of brands such as Toblerone(chocolates), Tang(fresh drink concentrate), Fresh(beverage) and Oreo, the world’s largest selling cookie brand.

For Danone, such an agreement along with annulment of the Wadia-BSN India Ltd joint venture, could mean freedom to enter the dairy and beverages business in the country independently, which it is keen on.