With 36 staff based in Mumbai the Fonterra Future Dairy Partners venture has quickly launched five consumer dairy categories in four metropolitan areas in the south and west of the country.
The strategy is to beat all comers on taste and quality while being positioned towards the upper end of the price range of domestic and imported brands, Fonterra Sri Lanka and Indian subcontinent managing director Sunil Sethi said.
The range is called Dreamery, with packs written in English, and has begun with natural yoghurt, called curd or dahi, toned (vitamin fortified) milk, milkshake flavours, Greek yoghurt and cheese slices.
Retail prices are about 10-15% higher than those of Amul, the largest Indian dairy co-operative with about 30% of the market.
In those metropolitan markets the Dreamery milkshakes have already achieved 16% market share the curd 10% and the fortified milk 6%.
Fonterra Future has also launched four categories from Anchor Food Professionals in the $5 billion westernised quick-reservice restaurant market and higher-quality hotels and restaurants.
They are mozzarella, butter sheets, cream cheese and whipping cream, soon to be joined by cooking cream.
The first markets are in Mumbai, Pune, Bangalore and Hyderabad.
The joint venture has coined a Dairy 2.0 promise to provide a healthy, exciting and indulgent range of dairy products in the consumption habits of India.
The first products were tweaked by Fonterra’s Research and Product Development Centre in Palmerston North for Indian tastes and preferences.
The packs carry “designed in New Zealand” and “130 years of trusted dairy” claims that draw on Fonterra’s history.
Dreamery products are distributed by Future and sold in general trade stores (corner dairies) and in modern trade outlets (supermarkets).
They are made from local milk at Schreiber Dynamix Dairies’ manufacturing plant near Mumbai, majority owned by Schreiber Foods in Wisconsin, United States.
That plant also makes products for Nestle, Unilever, Danone, Starbucks, McDonald’s and Subway.
Fonterra Future has audited the milk supply chain from small farms and collection to chiller receival stations and into the Schreiber front gate.
Over time it will begin to pass back animal husbandry, genetics, feeding and milking machinery advice to the Indian dairy farmers in the same way it has done for years in Sri Lanka, Sethi said.
Because the Indian market for dairy is expanding and developing so quickly a 58% increase in milk consumption is predicted over the next seven years.
While India is technically self-sufficient in milk, the supply of 176 billion litres will need to grow to 278b.
It is predicted India will then be consuming 40% of the world’s milk and be the world’s largest dairy market, he said.
As well during that period the demand for value-added dairy products will grow at 1.5 times the base milk rate.
The increasing demand and sophistication mitigate against any farmer-government parochialism and push-backs against foreign products and companies that was common in Sri Lanka.
Nevertheless, imported dairy ingredients and products are subject to 35-55% tariffs, Fonterra Future chief executive Ishmeet Singh said.
That is why Dreamery uses Indian milk and is made locally, whereas the Anchor food service products all come from NZ and their premium prices can carry the tariffs.
Dreamery products were launched in June and Anchor products in September and have so far been received very well but the joint venture team said they are only scratching the surface of the enormous opportunities in India.
Future Group has its own payment app on mobile phones, with membership of 20m people in one year.
It can track consumption patterns and report on new product acceptances.
Sethi said the old one household, one cow dairy industry is changing rapidly as people becpme wealthier, move from unpackaged to packaged food and extend their strong preference for traditional dairy foods to value-added products.
Fonterra Future Dairy is aiming for $1b revenue in seven to 10 years and at that time will need eight or nine third-party manufacturing plants like Schreiber Dynamix.