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Danone Marketing Strategy

Danone is the world’s largest fresh dairy company with a thousand cups of Danone offerings being consumed every second around the world. It operated in India through a joint venture with the Britannia group till 2009. After the split, Danone India was setup as a wholly owned subsidiary of GroupeDanone with the aim of promoting fresh diary and milk products.

The dairy industry benchmark suggests that the packaged yoghurt market in India could be about 60,000 tonnes, while the indigenous market comprising curd sold in loose pouches by local dairies may be about 140,000 tonnes. The major players in the organized segment include Amul, Nestle and some smaller regional players like Nandini in Karnataka and Milma in Kerala.

Thus, India presents a promising opportunity to Danone especially with it’s differentiated emphasis on quality and freshness. With this in mind, Danone has launched it’s line of yoghurt in the select markets of Mumbai and Pune and is now targeting a market share of 12% in 5 years. This report outlines the marketing strategy decided by Danone to achieve these targets.

Introduction

Groupe Danone is engaged in the marketing and production of fresh dairy product and beverages. It is headquartered in Paris and is the fifth largest packaged food company in the world with just over 1% shares of global sales – 1786 billion US$ in 2008. In recent years, the company has refocused it’s operation into three core markets – water, fresh dairy products, baby food and medical nutrition.

Danone’s principle product is Yoghurt. It is the world’s leading company in yogurt with 24% value sales in product category.

Mission – Danone’s mission is to provide healthy food products to as many people as possible.

Our rationale for choosing Danone yoghurt is based on the following alarming statistics –

Under-nutrition contributes to 53 percent of the 9.7 million deaths of children under five each year in developing countries such as ours

Iron deficiency is the most prevalent form of malnutrition worldwide, affecting an estimated 2 billion people. It is impairing the mental development of 40-60 percent children in developing countries

Vitamin A deficiency affects approximately 25 percent of the developing world’s pre-schoolers. It is associated with blindness, susceptibility to disease and higher mortality rates. It leads to the death of approximately 1-3 million children each year.

Iodine deficiency is the greatest single cause of mental retardation and brain damage. Worldwide, 1.9 billion people are at risk of iodine deficiency, which can easily be prevented by adding iodine to salt

In light of the above, we found the following characteristics inherent in Danone yoghurt which made it more than just a convenient tasty snack:

DANONE YOGHURT is fortified with 4 micro nutrients : Vitamin A, Iron, Zinc and Iodine keeping in mind the sheer number of Indians who suffer from deficiency of some or all of these nutrients

Other benefits of yoghurt are:

  • Nutritious texture

The smooth creamy texture of yogurt comes from lactic acid, which is formed when milk ferments. Fermentation occurs using two lactic bacteria: Streptococcus thermophilus and Lactobacillus delbrueckii var. bulgaricus.

  • Improved digestion

During fermentation, between 20 and 30% of milk’s lactose is converted to lactic acid. Since yogurt contains bacteria such as ß-galactosidase, those who are lactose-intolerant can tolerate it better when they eat it. Yogurt’s texture makes it easier to digest. Due to its thickness, yogurt takes longer to move through the digestive system, allowing the lactase enzyme to break down lactose more efficiently and absorb nutrients effectively.

  • Low fat

Recommended fat intake represents between 20% and 35% of total energy intake and is normally 65 g a day for women and 90 g for men. Eating yogurt allows one to maintain these limits. With at most 5 g of fat per serving, yogurt is pure health food that is not just low fat, but also contains a host of other nutrients

Another reason for choosing Danone yoghurt is that it has been launched very recently in Pune.

As a part of the phased launch program in India, Danone yogurts were initially made available in three flavors (strawberry, mango and vanilla) across super marts and grocery stores in Pune and now Mumbai. Danone fortified yogurts have a shelf life of 15 days. While Danone Dahi is priced at Rs 27 for 400 grams and Rs 14 for 150 grams, flavored yogurts are priced at Rs 10 each for 100 gram pack size. Such a product which is in its initial stage of launching, gives us an opportunity, as marketing students, to analyze the Indian market for flavored yoghurt and develop a marketing plan for further expansion of Danone Yoghurt.

Situational Analysis

Yogurt is a fermented milk product prepared by blending bacterial cultures into the milk. In India, traditional yoghurt products such as dahi, sour milk drinks such as lassi and buttermilk used to br produced at home at very negligible cost. Many sections of consumers still prefer preparing such items at the home because of high costs of branded products in the market. But at the same time due to growth in the middle class section of society in big cities and increased awareness of nutritional value of such dairy items, accompanied by a fall in the per unit prices of processed dairy products, the sales of packaged dairy food products has grown in the last decade.

Context

Currently yoghurt in India is available in two forms namely: set and stirred. Set yoghurt is available in plastic cup containers usually in packs of 100 to 400 grams. It is particularly popular in the northern and western parts of the country. On the other hand the stirred or loose form is available in plastic pouches in packs of 100 ml to 500 ml quantity. These loose packs are more prevalent in the southern part of the country.

Rising average income of households in the urban areas, increasing awareness about the health benefits of processed dairy products, combined with the increasing western influence in society has lead to a faster rate of growth in the demand for yoghurt and other sour milk products amongst the Indian consumers.

Till very recently there was not much demand for flavored or fruit yoghurt among Indian consumers and most of people consumed it in plain form.

Company

Groupe Danone (Danone) is a global market leader in production and marketing of fresh dairy products and beverages. The group is headquartered in Paris, France and employs 76,044 people globally. The group recorded revenues of E 15,220 million (approximately $22,393.8 million) during FY2008, an increase of 19.1% over FY2007. The operating profit of the group was E 2,270 million (approximately $3,339.9 million) during FY2008, an increase of 33.8% over FY2007. The net profit was E 1,313 million (approximately $1,931.9 million) in FY2008, an increase of 10.8% over FY2007. The product line offered by the company include bottled water, savory snacks, dairy desserts, pro-biotic dairy products, beverages and fresh dairy products under more than 25 brand names.

The key strengths of the company includes, strong global brand image, market leadership across a wide variety of product types and across geographies, diversified revenue model which reduces the risk and most importantly strategy of product innovation to strengthen group’s competitiveness.

With the focus on the healthy and nutritional dairy food products, Danone group has re-launched itself in India after its initial alliance with Britannia ended in 2007. The aim of the company is to grab a significant pie of the flavored and value-added milk product category, by differentiating itself through extensive product innovation. The key focus of the company would be on delivering products which have nutritional benefits and would be focused mainly on the health conscious people of the society.

Competitors

Karnataka Milk Corporation KMC with its flagship brand Nanadani accounted for the maximum share of yoghurt and sour milk product market in India till 2008. KMC didn’t have a national presence, but was widely available in southern India especially Karnataka, which accounted for highest per-capita consumption of sour milk and yoghurt products.

In addition to KMC, the Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF) also occupied a major chunk of the market and both the companies had recorded a growth of about 1% during 2008. Nesvita, a pro-biotic yoghurt brand of Nestle, increased the market share of Nestle on accounts of increased demand for yoghurt among the consumers in 2009.

Pricing was one of the most important factors in determining the market share of the brands. Due to low manufacturing costs, KMC and GCMMF were able to price their products at significantly lower levels as compared to national players like Nestle. For example a 200gm unit of nandani dahi is available for Rs 10 whereas the same quantity for Nestle’s Fresh and Natural Dahi costs Rs 13. Till 2009 Nestle and Yakult were only international players in the yoghurt market in India. State level cooperatives supported the domestic brands capability of having short shelf life, and so boosted the market for them compared to the international players. Also as late as 2008 there was no private label presence in the yoghurt and sour milk market in India.

Collaborators

Danone faces intense competition from local players like Karnataka Milk Corporation and Gujarat Co-operative Milk Marketing Federation Ltd. These local players have several advantages over an external player like Danone. For example due to low manufacturing costs and state funded cooperatives they are able to price their products low as compared to other players. Also, the distribution network of these local players is far more effective and penetrates deeper into the geographies, which is a major profit factor in dairy product industry. Also the supply of milk and culture to be used in the production process needs to have an efficient delivery system. To address such problems Danone has chalked out plans of joint ventures and partnerships with other players. It has partnered with Dynamix, as the co-manufacturer for Danone products in India.

Also it has entered into a joint venture with Japanese pro-biotic dairy products manufacturer Yakult Honsha to launch pro-biotic yoghurt called Yakult distributed through the direct selling channel popularly known as the Yakult Ladies. Also Danone has partnered with several retail chains and distribution networks to make its product readily available to a wide audience.

Customers

The size of the Yoghurt market in India has increased by approximately 18% in 2008-09 in current value terms to reach Rs 6.5 billion. Sour milk drinks is the fastest growing category, with about 22% value increase in 2009. With the growing awareness about the nutritional and health benefits of the organic and cultured dairy products among the urban population of India, there has been a significant rise in the demand for such products. As the number of players offering such products are currently very few, there is a good business opportunity in this segment.

The prospective consumers are people who value the nutritional and health benefits of processed and packaged diary food products. The key drivers which push the customer to look out of such products are the reliability and brand image of the vendor. The customers also place value on shelf-life and whether the product is made with natural ingredients. Packaging also plays an important role on consumer preference. The size of the packs available and the ease with which they can be consumed, stored and re-consumed is an important criteria for a consumer to make a product choice.

Pricing of the various packs plays an important role in the ultimate buying decision of the consumers in India. The price needs to be decided by keeping in mind the per unit cost of production as well as the competitor’s price for the same quantity.

Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates

 

Porter’s Diamond – Determining Factors of National Advantage

  • Factor Conditions:

India has readily available cheap labor.

Also skilled workers are in abundance in urban and semi-urban areas at low costs.

The raw materials like the milk, culture are readily available all over the country.

Setting up a manufacturing unit is comparatively easy in certain parts of the country due favorable state laws

  • Demand Conditions

With increasing awareness of nutritional and health benefits of packaged dairy products there has been a tremendous increase in the demand of such products

The size of the Yoghurt market in India has increased by approximately 18% in 2008-09 in current value terms to reach Rs 6.5 billion

Western influence over the middle and upper middle class has increased the demand

  • Related and Supporting Industries

Plans of joint ventures and partnerships with other players like Dynamix, as the co-manufacturer for Danone products in India

Also it had entered into a joint venture with Japanese pro-biotic dairy products manufacturer Yakult Honsha to launch pro-biotic yoghurt called ‘Yakult Ladies’

Denone has partnered with several retail chains and distribution networks to make its product readily available to the targeted customer segment

  • Firm Strategy, Structure, and Rivalry

Currently not many people aware of flavored and fruit yoghurt in India

Local players like Karnataka Milk Corporation KMC etc enjoy a number of benefits over external players in terms of lower costs and better distribution systems

No private label presence in the yoghurt and sour milk market in India currently

Pricing plays an important role in decision making for Indian consumers

Marketing Objectives

Danone’s marketing objective is to gain 12% market share in five years till 2014. In a category dominated by well-established players, it will take considerable time to establish market leadership. While this would naturally be a long term goal for the company, its immediate goal should be to incrementally gain market share and create awareness for flavoured yoghurt as well as brand Danone.

Marketing Strategies

Segmentation Scheme, Segments Profile

The market segmentation can be done using demographic and geographic variables. The demographic variables used are income, gender and age. The geographic segments are divided based on urban or rural locality inhabited by the population being segmented.

By 2016, the share of middle-class households (defined as those having annual income of US$6,000-$30,000) in the top 20 Indian cities is estimated to move from 39% in 2007-08 to more 55%. High-income households (more than US$30,000) will triple in the same period to 13%. More importantly, the share of low-income households (below US$3,000) could halve to just 7% by 2016 compared to 16% in 2007-08. Such a gigantic shift in household demographics will have a huge impact on demand for everything from food and beverages and consumer electronics to clothing and personal transport. The urbanization of India is taking place at a faster rate than in the rest of the world. By 2030, 40.8% of India’s population will be living in urban areas compared to about 28.4% in 2007-08. The population in urban India saw rapid growth driven by birth and migration during 1995-2007 which will continue until 2015. The percentage of urban households increased from 26.9% to 29.3% in the period 1995-2007, and is expected to reach 31.8% by 2015.

Target Segment and Rationale

Thus based on the various socio-economic indicators mentioned above, the urban middle-class Indian family would prove to be a very attractive target segment. The choices of women and children play a huge part in deciding the food items consumed by a family. Married women who are educated and who are balancing busy careers with their families have comparatively less time to spend on daily cooking which has resulted in the increased popularity of packaged food. This trend is likely to continue as the number of working women is expected to increase over the coming years.

Tweenagers (children in the age-group 10-14 years) have a high level of media awareness and influence family decision-making in urban India. An example of their influence is the success of breakfast cereals in urban India. Cereals are increasingly being consumed by young urban children within rich and middle-income families and Kellogg India has successfully taken advantage of this by positioning its cornflakes as a nutritious snack for children after school. Therefore it is important to target this segment of the population. But influential as they are, a singular focus on just the children can be detrimental as the proportion of tweenagers in the total population is estimated to fall by 0.2% from 2007 to 2015, owing to families opting to have fewer children.

Positioning and Rationale

For many years Indians have had a negative perception of packaged food as stale and inferior. But with greater information about product quality, the growing affordability and necessity of such goods has contributed to the changed perception of packaged goods as ‘hygienic and high in quality’, which in turn has led to the increased popularity of branded packaged goods. Due to greater investment in the power sector and the penetration of electricity to most parts of the country, the sale of domestic electrical appliances such as refrigerators is increasing. This factor too has led to an increase in sales of frozen and refrigerated packaged foods.

Consumption of yoghurt in India is highest in Northern and western Indian where Indian yoghurt(curd ) is eaten sweet (as opposed to consuming yoghurt with savory foods like in most of South India)and this would provide an easier progression to flavoured yoghurt in terms of consumer tastes and preferences. The concept of flavoured yoghurt is common in western cuisine, and with middle-class urban Indian families eating out and expanding their culinary horizons more than ever before, they are highly likely to be open to the concept of flavoured yoghurt.

Taking into consideration the above mentioned demographic, economic and social factors, Danone yoghurt can be positioned as a tasty and healthy versatile food option. It can be consumed as a snack between meals, as dessert, or even as part of a meal like breakfast. It differentiates itself based on the superior health benefits, taste and quality offered. Danone yoghurt is uniquely positioned as it offers the taste and enjoyment derived from consuming an indulgence food-item like ice-cream as well as the health and nutritional benefits of a health drink (Eg: malted health drinks). In this way it can marry the benefits of both products and differentiate itself from other value-added dairy and health food options present in the market.

Market Research

MARKET RESEARCH

Background: When Danone launched Danone Yoghurt in Pune, they didn’t undertake a very extensive market research process. The company was new to India therefore collecting valuable feedback on customer preferences and their attitude towards health snacks was more important. They conducted surveys and got feedback on aspects like their eating habits, number and type of flavors to launch etc. The company was reasonably confident of Danone’s acceptance in India as it has made the product work in countries with no exposure to fermented dairy whatsoever such as Indonesia.

The Problem: What is the consumer perception of yoghurt in general and is there a profitable potential market for flavored yoghurt in India?

  • Decision Alternatives:

To increase the scope of Danone yoghurt in other cities beyond Pune and Mumbai

To halt expansion

The former would require expanding the manufacturing capacity and setting up more factories. Currently there is only one in Baramati (near Pune) in Maharashtra which caters to both Pune and Mumbai markets.

Research Objective: To determine if India is ready for Flavored yoghurt and to see which specifications and preferences of consumers can the company cater to in order to capture a larger market share.

Data sources: Primary data collected through a survey. This seemed to be the most effective way to gauge people’s knowledge, belief, preferences and satisfaction. For this purpose we developed a questionnaire.

Total number of respondents: 76

The sample of people asked to fill the questionnaire ranged from children to elderly to working professionals, to adults who stay home. Danone has not specifically targeted any particular segment of people. The company has decided to cater to families as a whole.

 

ANALYSIS OF RESULTS: Based on the responses to the questionnaire we can infer the following:

Most respondents believe in eating and living healthy and feel that yoghurt is a healthy and nutritional alternative to other snacks and eatables. This is no surprise as there is a trend towards health consciousness among children and adults alike

In purchasing a snack such as yoghurt, people rank flavor as the main criteria for making a decision. Price and fat content are considered to be other important factors.

Among flavors, we found plain yoghurt (or dahi) is the most preferred followed by chocolate. This is expected as dahi is now part and parcel of our everyday meals and chocolate is popular among kids and adults. Besides these, strawberry and vanilla are also liked by the respondents. Danone is the first to offer vanilla flavored yoghurt in India.

When asked to rate attributes in yoghurt on a scale of 1 to 5 (1 being the least important and 5 being the most important) respondents rated taste, flavor and health benefits (low fat) as the most important features.

RECOMMENDATIONS BASED ON ANALYSIS

People regard yoghurt first as tasty and then as healthy. Danone’s mission is “providing healthy food products to as many people as possible”. Danone is a food company and not a pharmaceutical company therefore while the basis of all their products is healthy content, they cannot and do not ignore the taste aspect.

Respondents consume curd and other forms of yoghurt mostly between once to 5 times in a week. This boils down to a maximum of once a day. They purchase yoghurt mostly through food chains such as Reliance, More etc. and only about 36% purchase from local shops.

Respondents gave considerable importance to availability of yoghurt. It is interesting to note that people are not willing to go out of their way to buy a particular brand of yoghurt especially if substitutes are available. Therefore, yoghurt should be readily available (even in local shops) to induce people to make a purchase and inch towards building brand loyalty for Danone.

Since people are willing to pay Rs. 10 to 12 for plain yoghurt, flavored yoghurt can probably be priced marginally higher as it is viewed as a premium product.

Marketing Action Plan

The Marketing Action Plan deals with the 4P’s of marketing, i.e. Product, Price, Promotion and Place. We have outlined the marketing action plan for Danone Flavored Yoghurt below:

Product

Danone Flavoured Yoghurt is flavored spoonable yoghurt made from milk, Yoghurt cultures, flavors, stabilizers, whey protein concentrate and color. It is fortified with four micro nutrients – Zinc, Vitamin A, Iodine and Iron. Danone Flavored Yoghurt does not contain any preservatives. It has a shelf life of 15 days. The product would be primarily positioned as a healthy snack that tastes good.

It is currently available in four flavours in India. They are:

  • Mango
  • Strawberry
  • Vanilla
  • Plain

The product is available in 100 g packages. Currently no other product sizes are available.

Product Packaging

Danone Yoghurt is packaged in a plastic container and vaccum-sealed using an Aluminium foil bearing the attractive logo and branding. The containers are well sterilized before the fermented milk is poured in so as to remove the yeast since that leads to the creation of moulds that destroy the yoghurt. In addition, some stabilizers are added at the final stage that prevent the occurrence of ‘whey’, the watery coat that is formed above the set yoghurt.

Price

The price of the Danone Flavoured Yoghurt is Rs.10 for 100 gm yoghurt.

Since the main marketing strategy of Danone is to establish the brand in India and increase the market share, Danone has to apply market-penetration pricing techniques. The product is competitively priced to ensure wider consumer reach and to secure high volume growth. The operational cost involved in the manufacturing, marketing, distribution and retailing of 100 gm of flavoured product are as follows –

 

Advertising Objectives

The aim of the advertising program will be to create awareness about the brand, to highlight the quality,taste and nutritional benefits of the product. Since Danone is new to India and flavoured yoghurt is in the introduction stage in the Indian market, the advertising has to create sufficient awareness about the product category among the customers and stimulate enough interest to promote trial of the product. The advertisements should also increase the brand awareness of Group Danone and communicate to the consumers that Danone is the largest company in dairy products in the world. The advertisements would be primarily targeted at the segment of urban, middle class families.

Choice of media

The main focus should be on television ads, as it reaches more urban families than any other medium. Display media such as billboards, signs etc., innovative promotion programs and point-of-sale promotions could also be implemented to ensure wider reach.

Advertising Program

Television Advertisements

The television advertisements would be targeted at the urban, middle class families. We suggest that there should be two separate television advertisement strategies – one for increasing the brand equity of Group Danone in India and one focused on building the awareness of Danone Flavoured Yoghurt.

It is important to build the brand awareness of Danone as the urban middle class consumers in India are highly aspirational and would love to be associated with a world-class brand. Aspiration-led marketing and portrayal of brands as status symbols has worked well in the past with the Indian consumers. This could also create an edge against established competitors such as Amul or Nestle and aid in brand recall. The advertisement should be informative; the purpose here is to introduce the average Indian consumer to Danone as the world’s largest dairy group. The creative execution can focus on Danone’s history, its popularity across the world and essentially, the arrival of Danone in India.

The product related television advertisement should be built around the product features, taste and health benefits, appetite appeal and the snacking occasions. One of the main intentions is to ensure that potential customers try out the product. The plain yoghurt is a part of Indian diet and is generally preferred over the flavoured yoghurt which has less appeal to the Indian palate. Hence, the advertising has to actively motivate the consumers to switch from traditional sour yoghurt to the flavoured yoghurt emphasizing on both the taste and the added health benefits and can feature men, women and children consuming flavoured yoghurt as part of their meals. It should have eye-catching visual imagery that promotes appetite, appealing music and preferably a story line that involves an urban family that represents the general consumer lifestyle and preferences.

The strategy for the implementation of the advertising should be:

Launch with a high-decibel advertising campaign to maximize the impact. This can be continued for three to four weeks.

The advertisements should be mainly featured on television channels popular in the urban middle class families. General entertainment channels in Hindi as well as English and the television channels that target ‘tweens’ and English movie channels have more viewership among the target segment.

The programs which are most popular with the target segment and those that emphasize health and wellness should be focused on.

Outdoor media

Billboard and poster ads that complement the television advertisements and enhance the brand appeal should also be a major part of the communication plan. Danone already has implemented innovative promotion media such as the Blue Danone buses in Pune. These ads should contain memorable visuals and communicate detailed information to give the product greater visibility and appetite appeal.

Print Media

The print media advertisement can deliver detailed information about the brand and the nutritional and taste attributes of the product to the target customers. English newspapers and family magazines such as Reader’s Digest, Good Housekeeping etc. and health and wellness magazines reach a large base of urban consumers.

Sales Promotions

The purpose of the sales promotions such as coupons, contests, premiums etc. are to gain attention and to lead the consumer to purchase the product. Since the product is in the introduction stage, the main goal is to encourage trials and thereby adoption. The following sales promotion methods are suggested:

Distribute free samples with popular family and health magazines

Banded packs with other branded health foods such as breakfast cereals or fruit juices.

Point-of-sale displays that are eye-catching

Social Media Marketing

The urban population is characterized by extensive use of internet media. Internet represents a powerful channel that can be proliferated for effective advertisement campaign.

Social media marketing can be employed in the form of presence on networking sites like facebook, orkut and myspace. Forums can be created on these sites that can inform the users of the health benefits of yoghurt, latest technology and its effect on product quality.

First hand feedback and consumer sentiments can be analyzed from what they say on these forums. This information can be used to improve product quality, packaging, introduce new flavours and improve consumer interaction and further reinforce the brand image in the minds of the consumer.

Place

The primary mode of distribution of Danone flavoured yoghurt is a single-level channel with only the retailer as the intermediary between Danone and the consumer. To ensure the freshness of the product, it is put in cold storage at 4 degrees Celsius after packaging and is transported in trucks to the warehouse. Danone is the first company in India to have cold chain from factory to warehouse and from warehouse to the retail shop.

At present, Danone flavoured yoghurt is available only in Mumbai and Pune. Danone will be launched across India in three phases:

Phase I: It would include marketing in the top 10 metros with use of modern retail chains

Phase II: It would include the next 20 Tier 1 citi

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