Danone steps up focus on nutrition post acquisition

Last Updated: Fri, Nov 30, 2012 03:22 hrs

Dairy major Danone has prepared a blueprint that would help it accelerate growth in the area of nutrition — a category that it stepped into following the Rs 1,600-crore acquisition of pharma major Wockhardt’s nutrition business last year.

The acquisition, which was completed this July, saw Danone set up a subsidiary called Nutricia International, which would manage operations of the acquired portfolio including brands such as Farex, Dexolac, Nusobee in baby nutrition and Protinex in medical nutrition. Medical nutrition refers to doctor-prescribed health supplements.

In a conversation with Business Standard, Danone’s vice-president for baby nutrition in the Asia-Pacific region, Dariusz Kucz, said that the focus on local manufacturing would be increased as the company considers launching new variants. Danone has a manufacturing unit in Chandigarh, which came as part of the acquisition from Wockhardt. The entire baby nutrition portfolio from Farex, Dexolac and Nusobee is manufactured here.

The gameplan, according to Kucz, was to ramp up production in the coming months. Local manufacturing would also help the company bring down price points, since products are priced anywhere between Rs 200 to Rs 300 for a 500-gramme tin. Competitors such as Nestle are a bit more aggressive in their pricing, thanks to local manufacturing capabilities.

Globally, Danone ranks number two in baby nutrition after Nestle, a pecking order which is the same in India too. But Nestle leads, by a large margin, controls 80 per cent of the Rs 2,500-crore Indian market, followed by Danone with eight per cent. In April, Nestle acquired Pfizer’s infant nutrition business in a $11.85 billion (Rs 62,000 crore) deal that not only gave it additional brands such as SMA Gold, Promil Gold, Progress Gold and Promise Gold, but also blocked a potential entry by Pfizer into countries such as India considered an evolving baby nutrition market. Pfizer had a strong presence in neighbouring countries such as China, Indonesia and Philippines and could have stepped into India, where the baby nutrition category remains under-penetrated and highly regulated.

But players ranging from Nestle to Danone have said that the business here has the potential to grow, owing to increasing awareness and income levels. Nestle’s infant food business in India contributes about 16 per cent to its Rs 7,514-crore top line, say market experts, which is substantial given that the category is not huge here.

While Danone executives declined to specify the size of the infant nutrition business in India, they said that they were looking to double sales in the next three years. “We propose to do this by leveraging our expertise in nutritional science to come up with formulations that are tailor-made to Indian requirements. We also propose to drive the Indian brands aggressively,” Laurent Marcel, managing director of Danone’s baby nutrition portfolio in India, said. The company may consider introducing brands from its global portfolio a little later, Marcel added.

On the medical nutrition side, Anver Moola, managing director of the business in India said that the company would bring the focus back on doctors - something that Wockhardt had reduced in a bid to increase the brand Protinex’s over-the-counter presence.

“We won’t bring down the OTC presence of Protinex, but will look at rebuilding its equity among doctors,” he said.

The medical nutrition category, at nearly Rs 400 crore, is small compared to baby nutrition. But the category has been growing at 22 per cent per annum in comparison to baby nutrition’s 15 per cent per annum growth levels.

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