Danone looks to leverage Bangladesh experience

Groupe Danone, the $18 billion French dairy company, is understood to be exploring a strategy for India which will leverage on its experience in Bangladesh. One of the things Danone is studying is to enter with an affordable, what it calls internally, bottom of the pyramid initiative.

According to company officials, the India dairy strategy is in its early days and will try out its Bangladeshi experience to make a real business model. Danone has a joint venture with The Grameen Group, set up during early 2006, with a focus on easily affordable dairy product.

The equally held joint venture, focuses on providing daily nutrition to low income, nutritionally-deprived populations in Bangladesh and also alleviate poverty through the implementation of a proximity business model.

Grameen Danone Foods model relies on the creation of independent business and job opportunities in the farming, processing and sales and distribution sectors. To ensure sustainability of the initiative, a special emphasis is on providing appropriate micro-financing solutions together with adequate professional training to members of the local communities that will engage in business with the project.

These moves are part of Danone’s overall strategy to increase focus on emerging markets from which it derives a third of its sales. A decade ago, Danone realised 90 per cent of its sales in developed countries. Danone is present in four businesses — fresh dairy products, packaged water market, baby nutrition and medical nutrition. Danone already has an equal joint venture with Yakult Honsha to develop the Indian market for probiotics. This joint venture has invested close to Rs 150 crore for a manufacturing unit and has been increasing its presence in India in the recent past.

Danone is taking these businesses actively after it recently exited a joint venture which held around 51 per cent in Indian biscuits major Britannia Industries. Danone, by exiting the joint venture, netted a capital gain of Rs 380 crore (Euro 56 million) when it divested its indirect 25.5 per cent holding in Britannia.