Nestlé’s Indian subsidiary is looking at heavily trimming its dairy products portfolio. This comes as no surprise given the lacklustre performance of the company’s dairy food portfolio in this market, argues Bhavna Rathore.

Already a number of products including Nestlé Butter and Nestlé Chocostik have been withdrawn from the market while others like UHT Milk and Fruit n Dahi (fruit yoghurt) are not performing well. Some other dairy products like Everyday Dairy Milk powder and Nestlé Milkmaid condensed milk have also been under pressure.

A spokesperson for the New Delhi-based company told just-food: “In the past year, we witnessed slower growth on some brands which was not in line with the company’s internal benchmarks and expectations.” The company suggested that there were “plans to accelerate growth” but refused to share them.

The company further attributed the reduction in portfolio as “Continuous review of its product portfolio to maximize shareholder value on a long-term basis. In line with this, the dairy product portfolio has also been periodically reviewed and optimised in order to focus on the growth drivers and to withdraw non-strategic or slow moving parts of the portfolio.”

Nestlé India claimed that parts of its dairy products portfolio had gained in popularity and the company had stepped up their production. The company claimed that Nestlé Dahi, launched in 2001 in the Delhi market, had seen an increase in demand and as a result was now being manufactured from several locations and was available in all major cities. Nestlé has also been experimenting with new dairy products like raita (garnished yoghurt), which has been introduced recently.

The dairy products business in India is dominated by large cooperative brands like Amul and Mother Dairy. Private players like Britannia and Nestlé have a very small share of the dairy products market. Also the perishable nature of dairy products has ensured that several local players still remain popular in their respective markets.

Nestlé is one of the oldest multinational food businesses in India, where it has had a presence for over a century. For a long time, Nestlé India’s operations were restricted to importing and trading condensed milk and infant food even though the last two decades have seen the company achieve greater recognition for its instant coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery. The dairy products foray only began in earnest in the last decade.

Nestlé India’s recent annual report mentions that the company was feeling pressure from the rise in milk prices and would focus on the culinary segment where it sees a great opportunity in the out-of-home consumption market. The company plans to start a new facility in the state of Uttaranchal with an investment of INR1.0bn (US$22.2m) to manufacture culinary products.

To offset the pressure from its dairy products portfolio, Nestlé India has been looking at various options and has announced a number of new launches such as Nestlé Ceremeal Daliya (porridge). The company is also planning a ‘health’ focus around its new products and has introduced Maggi Atta (wheat flour) noodles and fortified Maggi soups.

According to the company’s annual report, the pressure from dairy and weaning foods restricted growth to 8.2% year-on-year, as compared to the industry growth average of 10.6%. Nestlé India posted a 3.04% decline in net profit at INR741.6m for the quarter ended 31 December, 2005 as compared to INR764.9m for the corresponding period in the last fiscal year.