Quick Take | Does Danone’s investment in Epigamia make sense?

Answer: Danone (Image source: Wikimedia Commons)

Sounak Mitra

Danone just can’t keep its hands off India’s dairy market. Despite failing to crack the market three times since 1990s, the French company has made a comeback, exactly a year after it formally announced an exit. This time, Danone is entering the top niche-end of the market as a venture investor by buying an undisclosed stake in Epigamia, makers of Greek yoghurt.

There are two things that could work in Danone’s favour. First, it will not be targeting the mass market unlike earlier when it came through joint ventures with the Wadias and the Narangs, and finally on its own. Greek yogurt is expensive, and constitutes a miniscule portion of the market. Epigamia itself hopes to reach Rs 100 crore sales only by the end of this financial year. That said, the segment is growing very fast (at least 50 percent higher than the overall sector’s growth) and Epigamia’s only competition here is Nestle.

Second, Danone is the largest yogurt maker in Europe. So, it knows the business. If, at a later stage, it wants to expand in the premium value-added dairy market in India, it would be able to leverage its experience. And as a venture investor, it will not need to deal with the nitty-gritties of the local market, unlike its earlier attempts.

For Epigamia, which raised around Rs 90 crore in July 2017 in Series B (undisclosed valuation) from Verlinvest (the family office of the founders of AB InBev) and early stage investor DSG Consumer Products, Danone’s investment may not be just funding. This could be strategic to its product development and portfolio expansion where the start-up could leverage Danone’s expertise.