Global FMCG firms eye ‘creamy layer’ to boost margins

With co-operatives still largely dominating the India dairy segment, international players are focusing on launching niche and premium value-added dairy products, to meet the needs of the evolving Indian consumer.

These products will help companies create a differentiator as well as drive up margins, experts said.

For instance, Danone India has launched its ready-to-eat custard across cities such as Delhi-NCR, Chandigarh, Mumbai, Bengaluru, Kolkata and Chennai in both 1 litre packs and 200 ml single serve format.

The company said the launch was backed by research that showed that hectic lifestyles and achieving the perfect texture and the consistency were key challenges for consumers to be able to prepare the dish at home.

Manjari Upadhye, Country Manager for Dairy Business at Danone India told BusinessLine , “Evolving lifestyles, growing health awareness and rising affluence of middle-class has led to changing dietary habits. Consumers are looking for healthier yet pleasurable food options such as value added dairy, and that is where Danone's dairy portfolio lies.”

“The dairy market in India is all primed up for innovation and we intend to introduce new dairy products, which will be according to Indian tastes, and will be developed in response to Indian nutritional requirements, using natural ingredients,” she said, adding the company’s past innovations include chocolate smoothie, flavoured yoghurts and flavoured lassi.

Nestle India too, is making efforts to introduce Indian consumers to the internationally known Greek yoghurt segment with its product ‘Nestle a+ Grekyo’.

Launched in several variants such as strawberry, mango, pineapple and orange, the company said that these were specifically tailored for the Indian consumer.

A Nestle India spokesperson said, “Globally, the Greek yoghurt category came into prominence less than a decade back, and in certain countries, it has already captured a major share of the entire yoghurt market. In India, this category is still at a nascent stage but we are confident that Nestlé will lead the global trend for the Indian consumers soon.”

It was initially launched in Delhi-NCR and distribution will be expanded to other major cities soon.

Experts said that international companies are expected to increasingly tap into their global portfolios to bring in more such value-added dairy products.

Angshuman Bhattacharya, MD, Alvarez & Marsal India, pointed out that value-added dairy products segment has been witnessing a phenomenal growth of 25-35 per cent as consumers are gradually shifting from the unorganised to the organised segment.

He said the value-added dairy segment is poised to continue seeing fast-paced growth for the next few years with introduction of new innovations.

“Introduction of niche and premium products will help international companies create a differentiator and help create stronger brand salience as well as cut the clutter. Private players, especially international companies, are also expected to tap into their global portfolios to bring in these products,” he said.

These niche segments may not become large segments on their own, but will play a key role as companies are working to meet the needs of the evolving Indian consumers, believe experts.

“Dairy sector traditionally has been operating on low margins. So, private players will also introduce innovative products which will focus on higher margins,” Bhattacharya added.

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