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Dairy major Fonterra sets up local office as India thrust grows

Move comes at a time when auckland-headquartered group is fine-tuning its strategy for India following two aborted attempts to get a hold on the country

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New Zealand-based dairy giant Fonterra, one-time partner of Bangalore-headquartered Britannia, has announced it is setting up a in a bid to step up its presence in India. The new office, in Delhi, will be led by expatriate Hamish Gowans, who will be designated as general manager.

The move to have a local presence comes at a time when the Auckland-headquartered group, formed in 2001, is fine-tuning its strategy for following two aborted attempts to get a foothold in the country. Following the split with Britannia in 2009, when the latter acquired Fonterra's 49% stake in the seven-year-old joint venture Britannia New Zealand Foods, the Kiwi giant had attempted to tap the local market by entering into an agreement with the Indian Farmers Fertiliser Cooperative Ltd (IFFCO) to set up a large dairy farm at the latter's Nellore Kisan SEZ  This was in 2010. But the Rs 1,000-crore project, which envisaged having 40,000 high-yield cows that produced high-quality milk, did not take off following the Board of Approvals for Special Economic Zones rejecting IFFCO's proposal.

With the independent office now, Fonterra, which has revenues in excess of $17 billion, is expected to go solo in the country. Fonterra's president Greater China and India Kelvin Wickham said the opening of the new office would help the company get a better understanding of the local dairy market.

"India’s dairy industry is growing rapidly. With 20 million more mouths to feed every year and an increasingly affluent population, the demand for high quality dairy nutrition continues to grow at a rapid pace - annual dairy consumption is forecast to reach around 180-200 million tonnes by the end of the decade," Wickham said. "Today India produces around one sixth of the world’s milk and almost all of this is consumed locally. The country has a large, complex dairy industry and, while has developed a strong knowledge of the country’s dairy environment, it is clear we need to have dedicated leadership on the ground to further strengthen relationships and develop opportunities," he added.

Globally, Fonterra has three core brands - Anchor, Anlene and Anmum - producing powdered milk, ready-to-milk, yoghurt, cheese, butter and other dairy products that are exported to markets in the Middle East, Australia, Africa and Asia. According to industry estimates, Fonterra is responsible for over 25% of the world's dairy exports. In New Zealand alone, Fonterra is the largest cooperative group with over 10,000 farmers owning it. The group was formed following the merger of the two largest cooperatives in New Zealand - the New Zealand Dairy Group and Kiwi Co-operative Dairies - with the New Zealand Dairy Board.

Gowans, who takes over as the India head, has an understanding of emerging markets, says Wickham, having managed exports of Fonterra's products to countries in Asia. He is expected to help the galvanise its operations India as its seeks avenues to establish itself and grow. But with well-entrenched local players such as Amul and Mother Dairy as well as private players such as Britannia, Nestle and Danone, the road ahead, say experts, is not likely to be easy. Besides national level-players, the dairy markets in India has a number of regional brands that massively undercut to drive penetration. Thanks to all this most private players have opted to operate in the value-added or premium dairy market in India.

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