The long-awaited union between the world’s largest dairy exporter, Fonterra, and the world’s fastest growing economy with the second largest population, India, has finally happened with a joint venture between Fonterra and Future Group, one of India’s largest consumer companies.

This is Fonterra’s second attempt of foraying into the highly sought-after Indian market, where 70 per cent of its people are below 45 years old, are digital, live in urban areas, lead an active lifestyle, have more disposable income, and want to consume higher quality and higher nutritional dairy products.

The previous effort of getting Indian market in 2001 had eventually fallen apart and could not materialise. However, experts on both sides are hopeful of a better outcome this time.

Lukas Paravicini, Fonterra’s Chief Operating Officer Global Consumer and Foodservice, said the partnership, under the name Fonterra Future Dairy Partners, will enable Fonterra to establish a presence in India.

“It will allow us to prepare the groundwork and make the most of our expertise as we enter the world’s largest and fastest growing dairy industry. Consumer demand for dairy in India over the next seven years is set to increase by 82 billion litres – seven times the forecasted growth for China.

The first line of product will be delivered in mid-2019, using both locally sourced milk and Kiwi dairy products.

It is noteworthy that this joint venture is happening at a time when the Indian dairy industry is transforming with significant changes emerging in the manner Indian consumer is consuming dairy products. 

“There is a big shift away from more traditional locally-based dairy businesses with limited product and brand differentiation, to a new era where more value-added and innovative dairy products are in high demand across the country,” Mr Paravicini said.

Future Consumer Group is one of India’s largest retail chains with presence in 26 of 31 Indian states with over 2,000 modern trade outlets and 5,000 public distribution outlets and a nationwide cold-chain and ambient distribution network, with plans to launch 1,100 stores this year.

Kishore Biyani, Group Chief Executive Officer, Future Group, said the association with Fonterra comes at a time when the dairy industry in India is flourishing.

“Consumption of milk and other dairy products in India are increasing and will continue to receive strong demand. With Fonterra, Future Consumer will enhance its food and FMCG portfolio and will offer a variety of dairy products which are high in demand and consumed daily,” Mr Biyani said.

Its right thing to do: Earl Rattray, Executive Council Member INZBC

Welcoming Fonterra’s recent foray into the Indian market, Earl Rattray, Executive Council Member of India New Zealand Business Council (INZBC), who has a long-standing dairy industry career, both in farming, and significant dairy industry leadership roles, including a founding Director of the Fonterra Co-operative Group, and a hands-on experience in a pioneering Indian-NZ dairy farming and fresh milk marketing company in Sonipat, Haryana, said, “Its right thing to do for Fonterra.”

“Doing anything in India needs the good partner on the ground in India!

“I think you have to live and breathe in Indian conditions and Indian environment to be successful.

“Future Group is a leading, progressive retailer with a significant distribution network in India and by inking a joint venture with them, Fonterra has really done well,” Mr Rattray added.

Does it mean FTA could be on the card in the near future?

Fonterra’s entry into Indian market raises an important question if the long bogged down talks on Free Trade Agreement between the two countries could finally get over the line, as experts believe that Indian policymakers’ sensitivities of Kiwi dairy products getting entry into the Indian market is the greatest inhibitor for moving forward on FTA.

High Commissioner of India, New Zealand, Sanjiv Kohli emphasised the importance of moving forward at business and trade level, without being overly getting into the trappings of FTA between the two countries.

Welcoming Fonterra’s joint venture with one of India’s leading consumer product chains, Mr Kohli said, “I very warmly welcome this partnership and wish it a success. It has the potential to take our commercial relationship to the next level.

“This partnership can illustrate why we don’t need to remain bogged down waiting for the conclusion of trade negotiations but instead seize the existing opportunities offered by a very large growing market through marrying expertise available abroad with local produce in India and offer high end and high-value products to the increasingly ambitious Indian customer.

“Trade liberalisation is an ongoing process and will continue to move but smart business need not wait. They should move and shake the market,” Mr Kohli added.