Danone in India

India is today a huge part in the work of internationalization of the French group Danone. This subsidiary was established in two steps. Danone first established in 1989 a merger with an Indian group called Britannia, they were just participative. Then in 1993, they took the control of Britannia so it became a Danone subsidiary. At this time, it was said that this buying had required an investment of RS 150 cores. Danone becomes after this merger the number one in biscuit and water on the Indian market thanks to three principal brands: Aqua, Britannia and Tiger.

The fact that these three brands were already well known and appreciate by the Indian consumers permit to Danone to win market parts very quickly. The macro environmental environment The Republic of India is a country that occupies the greater part of the Indian subcontinent. It has a coastline of over seven thousand kilometers (4349 miles). India is the seventh-largest country by geographical area and has one of the most diverse populations of wildlife, geographical terrain and climate systems. Indeed it is the second most populous country in the world with nearly 1. 1 billion people in 2005.

It also is the world’s largest liberal democracy. India has 28 states and 7 territories, and recognizes 22 official languages spoken across its diverse regions. After decades of intensive efforts to combat the widespread poverty, illiteracy and poor living conditions across the country, India’s economy is today the fourth-largest in the world in terms of purchasing power parity (PPP) and the tenth-largest in nominal terms. Once reliant heavily on agriculture, India’s economy is one of the fastest-growing in the world, and the nation is familiar with modern businesses and high-technology industries. External analysis: PEST analysis

Indian market is today still very difficult to penetrate and particularly for western firms. But the strategy of Danone which consists to penetrate the market thanks to mergers or buy- out allowed a more secure and efficient penetration. Danone is today the leader in biscuit and water thanks to the name of its three brands which were already established in India. So today the results in India are very good: India represents 20 % of the revenue of the Asian pacific area. Political analysis (see map p. 7) Population: 1. 1 billion Capital: New Delhi GNP: 620 $ per capita India has been a democracy since independence.

The prime minister is the head of the government. The president is the head of the state. India has to major political parties which are the Bharatiya Janat Party and the Congress. It is today the National Congress party which is on the head of the state, the BJP lost power in 1999. Since independence, India has maintained cordial relationships with most nations. During the Cold War , India tried to maintain its neutrality and was one of the founding members of the Non-Aligned Movement Recent overtures by the Indian government have strengthened relations with United States, China and Pakistan.

In the economic sphere, India has close relationships with other developing nations of South America, Asia and Africa, especially Brazil and Mexico. In recent years, India has played an influential role in the ASEAN, SAARC and the WTO, and it is a signatory to the landmark South Asia Free Trade Agreement. India has been a long time supporter of the United Nations, with over 55,000 Indian military and police personnel. Economical analysis The economy of India is the fourth largest in the world as measured by purchasing power parity (PPP), with a GDP of US $3. 63 trillion. India was he second fastest growing major economy in the world, with a GDP growth rate of 8. 1% at the end of the first quarter of 2005–2006. The country’s economy is diverse and contains agriculture, handicrafts, industries and a lot of services. Services are the major source of economic growth in India today, though two-thirds of the Indian workers work directly or indirectly through agriculture. In recent times, India has educated people who are fluent in English to become an important location for global companies outsourcing customer service and technical support call centers.

It is also a major exporter of skilled workers in software services, financial services, and software engineering. India has adhered to a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. Since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. Privatization of public-owned industries and opening up of certain sectors to private and foreign players has proceeded slowly amid political debate.

The socio-economic problems India faces are a burgeoning population and lack of infrastructure, as well as growing inequality and unemployment. Poverty also remains a problem although it has seen a decrease of 10% since the 1980s. Economy of India Currency 1 Indian Rupee = 0. 02283 US dollar = 0. 01897 Euro Central bank Reserve Bank of India (RBI) Trade organisations and treaties SAFTA, ASEAN, WIPO and WTO Union budget $67. 3 billion (revenue) $104 billion (expenditure) Inflation rate (monthly)3. 53% (September Social analysis Geography India is the 7th biggest country in the world with a total of 3,287,590 km.

India’s geography ranges from mountain ranges to deserts, plains, hills and plateaus, while its climate varies from tropical in the south to a more temperate climate in the north. Biggest cities are Bombay Calcutta, New Dehli, Madras, and Bangalore. Only 29% of the population lives in cities. People are concentrated all in the North and the South of the country. India’s total cultivable area is 1,269,219 km? (56. 78% of total land area), which is decreasing due to constant pressure from an ever growing population and increased urbanisation.

India’s inland water resources comprising rivers, canals, ponds and lakes and marine resources comprising the east and west coasts of the Indian ocean and other gulfs and bays provide employment to nearly 6 million people in the fisheries sector. India is the sixth largest producer of fish in the world and second largest in inland fish production. India’s oil reserves, found in Bombay High off the coast of Maharashtra, Gujarat, and in eastern Assam meet 25% of the country’s demand. Population ( see map p. 7) India is the second-most populous country in the world with an estimated 1. 9 billion people in 2006. Almost 70% of its population resides in rural areas. India’s largest urban agglomerations are Mumbai, Kolkata, Delhi, Chennai and Bangalore. Efforts to eradicate illiteracy have little success since India’s independence with only 65. 1% of its population able to read or write. Although 80. 5% of the people are Hindus, India is also home to the third-largest Muslim population in the world (13. 4%). Other religious groups include Christians (2. 3%), Sikhs (1. 84%), Buddhists (0. 76%), Jains (0. 40%), Jews, Zoroastrians and Baha’is. 5] The number of mother tongues in India is estimated to be as high as 1,652. [6] Most of these languages are derived from two major linguistic families: Indo-Aryan (spoken by about 74% of the population) and Dravidian (spoken by about 24%). Hindi is India’s national language though English is used by the government for official purposes, and in higher education. An additional 21 languages are also given official status. 29% of the population lives below the poverty line. 86% of the population lives under $2 per day, 44% under $1 and 25% does not have enough money to eat normally.

These conditions involve the drift away from the land. Religion Religious practices of various faiths are an integral part of everyday life in society. Education is highly regarded by members of every socio-economic stratum. Traditional Indian family values are highly respected, and considered sacred. Religion in India is a very public affair, with many practices imbued with pomp and vitality accompanying their underlying spiritual qualities. Technological analysis Transportation (see map p. 8) Transportation in India is a large and varied sector of the economy.

Both rail and road transports remain important. Railways are the principal mode of transportation for both freight and passengers. The government is working on improving the transportation system because the demand is today very important. Only 63% of road are paved which slow down the communication between the different areas. There are 400 airports in India and international ports such as Chennai, Haildia, Calcutta… Although there is a large private-sector involvement in transportation in India, the government plays a large regulatory and developmental role.

The central government has ministries to handle civil aviation, railroads, and surface transportation. The sector must also adjust to foreign trade expansion, demographic pressures and increasing urbanization, technological change and obsolescence, energy availability, and environmental and public safety concerns. Energy India being one of the fastest growing economies in the world has a fast growing energy demand fueled by an ever increasing rate of industrialisation and urbanisation. India’s enormous potential for energy production and consumption has enhanced investment prospects in this field.

Opportunities have widened rapidly with the opening up of this area to power developers globally. On the other hand there are related apprehensions being voiced by several NGOs relating to the inevitable increase of environmental problems including population displacements. Future expansion in energy sector would depend on the emergence of appropriate capital markets. This is true for new production capacity, both conventional and renewable, as well as measures directed at improving energy efficiency in various user sections and in the energy sector itself.

India is still in the process of evolving a sustainable and equitable energy policy for itself. Political map of India: Population density map: National Highway network: Danone India Pvt Limited Formed in 1966 the Danone group has moved from the glass industry to the food industry, from the Lyon region to all five continents. At first French, then European, the Danone Group is now a household name worldwide in dairy products, cookies & bottled water. The Group has more than 100 subsidiaries and brands worldwide. The company is ranked number one in the world in fresh dairy products and biscuits.

The group ranks second worldwide in the production of bottled waters. It also manufactures other types of food product such as yogurt, fresh cheese and dairy desserts. In India, the Danone Group first had a 22% parts in Britannia Industries. Britannia was the market leader in the organized biscuit market in India. Britannia’s product portfolio consists of Bread, Biscuits, Milk Products like butter, cheese, milk-based drink and dairy whitener. Danone has nevertheless chosen to keep the name of Britannia in India in order to be the more integrated as they can.

So the figures and the rest of the expose will mention the name of Britannia. Britannia is the market leader in the organized biscuit and bakery product market in India. Biscuits contribute to more than 80% of Britannia’s total turnover. Other products include bread and cakes. Britannia diversified into dairy products in 1997 with processed cheese and dairy whitener. The portfolio was expanded with the launch of butter, pure, flavoured milk and UHT milk. In the biscuit market, manufacturing was reserved for small scale up to 1997, which put large players at a disadvantage.

In the organized sector, Britannia and Parle are the only national players with dominant market shares. Britannia has maintained market leadership with a 40% volume share and 48% value market share in the organized sector. Britannia has been aggressive in new launches and marketing during the last 2 years anticipating the competition. It has also recently acquired Kwality Biscuits, gaining a strong foothold in the southern market. Bread is one of the most widely consumed processed foods in the country.

The industry is dominated by a large number of players in the unorganized sector, which accounts for over 80% of the market. India has emerged as the largest milk producing country in the world manufacturing. Britannia’s dairy business has been growing at a fast pace on the low base. Volume growth was 50% and value growth was 47%. Market entry Danone has progressively entered the Indian food market. So in 1989 Danone established a venture with the Indian firm Britannia. This strategy of penetration takes an important place in the Danone’s international strategy.

This strategy first permit to the group to enter the market easily even if the market is very competitive. Thanks to the firm it mergered, Danone can win very easily the market shares which belongs to the former firm. In India Danone, thanks to Britannia, won in 1993 when the group finally re buys Britannia the market share it had won. Danone has chosen to keep the name of the brand Britannia because this brand is well known in India. A change could have been a lost of all the market shares Britannia won several years ago. Finally in 2005, Danone and Japan’s Yakult Honsha Co. nnounced plans for a joint venture in India. Held equally by the two partners, the new company, to be called Yakult Danone India Private Limited, will be developing the Indian market for probiotics. India has enormous potential, with a fast-growing population of one billion and a long tradition in dairy products. Yakult Danone India has initially market Yakult brand products, beginning at the end of 2005, and Danone probiotics products and brands have been added late. Production For products, Danone is developing the products exclusively for Indian market in an R and D centre located in India.

More precisely they use the centres of Britannia. Danone through Britannia but also Tiger (biscuit) and Aqua (water) is today the leader on the water and biscuit market. The water sells under the Aqua Brand is import from Europe. But because of the good development of agriculture in India the biscuit are made in India. The production of the biscuit in India permits to make more profits first because costs are lower in India than in Europe for example and then because it avoids all the transportation problems. Indeed the legislation concerning food is very strict all around the world.

The challenge of Danone in India is not to stay at the level Britannia has reach since its creation but to become more and more innovative in doing a lot of market research for Indian consumers. For production process Danone is trying to localise. Britannia’s plants are located in the 4 major metro cities: Kolkatta, Mumbai, Delhi and Chennai. A large part of products are also outsourced from third party producers. Dairy products are out sourced from three producers – Dynamix Dairy based in Baramati, Maharashtra, Modern Dairy at Karnal in Haryana) and Thacker Dairy Products at Howrah in West Bengal.

So because it exists taxes between the different provinces in India, Danone is reducing tax expenses. Local empowerment The local management of Britannia has a lot of autonomy and independence. Danone’s European managers are only called when there is a problem, they are not living in India, just travelling. Britannia’s managers are constantly on the move, given this breadth and depth of its business and the geographic spread. The biggest challenge that the company faces then is of regulating and managing travel arrangements. This autonomy has made the employees more motivated.

Danone continues to upgrade the information technology systems to support the growth in operations and growing needs of the changing market place. They are putting in place comprehensive Enterprise Resource Planning system to cover all facets of the operations. Distribution Britannia as said before is located in four cities in India. Each branch is independent and has its own system of accounting, marketing… Like a lot of food products Britannia’s products are soled in big outlets such as supermarkets, hypermarkets…Danone had the will when owning Britannia not to change the distribution system in order not to loose the costumers.

Promotion Promotion is a key element in the strategy of Danone in India. Next year, Britannia and Walt Disney joined in order to propose a contest for all the Indian children. Britannia Industries obtains good results from its joint initiative seen in the Jetix ‘Power Your Rangers’ contest. The company stated in an official communique that the contest had drawn participation in excess of 5. 23 million kids across India and Britannia had recorded a 49 per cent increase in sales of its brand, Britannia Treat. Richa Arora,

General Manager-Head marketing and Innovation, Britannia Industries Ltd, said, “The bottom line on the promotion is that it increased sales by 49 per cent. What’s equally important is that the promotion worked well as a package – from very innovative premia to the actual contest to the on ground activation. ” Also, a TV show, Power Your Rangers, was recreated as a mobile game for cell phone users. The mobile game was available to 16 million India Mobile subscribers. Britannia also reached out to over 1. 5 million kids in Mumbai, Delhi and Bangalore through mobile van and school activities,” the communique added.

So the director of communication of Briatannia has developed a communication strategy that can be explain like this: He believed that the sponsorship message would have to be concentrated by packaging multi-dimensional interactive rights. The association between the sponsor and the event had to be for a long duration. Media and rights owners needed to act more collectively, not in isolation.