Dairy cooperative Fonterra re-entered the Indian market in 2019, to diversify its international business and sell to the world’s largest and fastest growing dairy consumers.
Fonterra had made New Zealand the biggest exporter of dairy – but when it took on India, it took on the challenge of feeding a country that was the largest producer of dairy.
Its first attempt at the Indian market in 2001 with Britannia International fell through in 2009, and the cooperative attributed this to Fonterra’s value-add approach being ahead of its time.
Fonterra’s second go at the nation of 1.36 billion was to target its rapidly growing urban population. In mid 2019, Fonterra launched its joint venture with one of India’s biggest retail conglomerates Future Group, owned then by billionaire Kishore Biyani, at a flashy event in Mumbai.
The plan was to leverage Future Group’s extensive e-commerce and retail distribution chain and established brand to sell Fonterra’s dairy as mid-range products in specialty Indian supermarkets.
Both had also teamed up to form a joint venture called Future Fonterra Dairy that was selling a range of cheeses, yoghurts, ghee, milk shakes and curd made with Indian milk and Fonterra’s know-how, reputation and expertise to create value-added products.
“The country’s young population is looking to level up its dairy consumption with new products that meet their expectations of higher quality and better nutrition.”
– Judith Swales, Fonterra Asia Pacific
But Fonterra was also selling Anchor products through Future Group’s high-end grocery stores and supplying dairy products to high-end hotels and restaurants in India.
When the joint venture was set up Fonterra’s executives told the media they hoped the market would grow to generate revenue of more than $1b in a decade. Fonterra Asia Pacific chief executive Judith Swales said demand for dairy from Indian consumers was set to increase by 82 billion litres by 2026 – seven times the forecast growth for China.
“The country’s young population is looking to level up its dairy consumption with new products that meet their expectations of higher quality and better nutrition,” Swales said.
But then early last year Fonterra’s partner Future Group sold almost half of its unlisted firms to Amazon, owned by the world’s richest man Jeff Bezos, with the plan of selling the listed company Future Retail after a few years.
When India went into lockdown and Future Group’s sales took a hit, the company’s founder Biyani looked to cut a deal with Amazon’s rival, conglomerate Reliance Industries Limited, owned by India’s richest man Mukesh Ambani.
Future Group’s listed company Future Retail posted losses over four consecutive quarters last year.
As a result, Amazon took Future Group to court and both companies were awaiting to be heard by the Supreme Court of India after the former appealed a decision by the Delhi High Court that allowed the latter to proceed with an asset sale deal with Reliance Industries.
A Fonterra spokeswoman said Amazon’s legal challenge to the transaction was being heard by India’s highest court next month.
“Many stores are closed due to restrictions, however, similar to other countries around the world, India is using different home distribution systems to continue supplying food to consumers.”
– Manish Singh, Future Fonterra Dairy
So where did this leave Fonterra’s expansion plans in India?
The joint venture’s chief operating officer Manish Singh said it was not aware Amazon was eyeing up Future Group when it founded the Future Fonterra Dairy in 2018.
While he would not comment on Amazon’s appeal he said it would work with its venture partner to discuss its future.
“Last year, Reliance Industries Limited agreed to acquire some of Future Group’s operations, including its retail business, Future Retail, subject to regulatory approvals,” he said.
“Once the acquisition is complete, we will talk with Reliance and our joint venture partner, Future Consumer, about how we can create new opportunities for the JV, with a focus on growing a long-term distribution partnership for the JV with Reliance.”
At present, Future Fonterra Dairy was dealing with the challenges of operating amid the Covid-19 crisis in India, Singh said.
“Many stores are closed due to restrictions, however, similar to other countries around the world, India is using different home distribution systems to continue supplying food to consumers.”
Latest figures from the World Health Organization show India has had more than 15.9 million confirmed cases of Covid-19 since January last year and more than 184,000 deaths.
On Thursday the country had more than 314,800 new cases.
Singh said despite the challenges posed by the pandemic, the company was focusing on growing its business there.
