In 2007, the German company Dr. Oetker, known for its frozen pizzas and cake mixes, ventured into the Indian market. Although the first test of home baking products seems to be going well, it soon becomes clear that their successful products are not at all popular in India. Dr. Oetker is faced with a difficult dilemma: leave India or reinvent itself.
"The start of Dr. Oetker in India was certainly not smooth," says Oliver Mirza, who has now been CEO of Dr. Oetker in India for more than 12 years. "The idea was to use an importer to bring our best-selling products - frozen pizzas, desserts and baking products - to India. To make sure there was demand for these products, we did a product test, as we do around the world. We gave 250 households two boxes of cake mix, a cheesecake and a traditional, German Schwarzwälder Kirschtorte, asking them to test them at home. During the follow-up, all 250 participants were wildly enthusiastic about our product and we thought we had a success formula on our hands. But we found out later that none of the participants had been able to buy cottage cheese or cream cheese to make the cakes with, as it was not sold in India. Also, only a handful had an oven at home. Whether and how they were able to test the product is still a mystery, but they all gave it a ten."
A specific product aimed at the Indian consumer
It wasn't just the cake mixes that hit the spot in India. "We were too early with all our European products. There was no market yet for frozen pizza, even in the big cities like Mumbai, and people didn't yet understand the idea of a mix product," Mirza says. "For example, our vanilla milkshake mix is one of our most popular products in Europe, but in India it didn't sell for anything. I thought that was partly due to the fact that it didn't have real vanilla in it. So we decided to add that. This made the sales of the product go down even further, because people thought there was dust in the mix." Dr. Oetker now had two options: either teach consumers how to use the products and hope that this will increase popularity or jettison the strategy and try something new.
It became option two. "We started looking for an acquisition in the comfort food sector and in 2008 we ended up with Fun Foods, a small producer of mayonnaise and pizza toppings. With them, we slowly got to know the Indian consumer and really saw that we had to jettison all the lessons we had learned up to that point in Europe. 'They simply don't apply to India, because the market here is so unique,' says Mirza. "Fortunately, Dr. Oetker is a decentralized organization that encourages entrepreneurial freedom in the countries where it operates. This has allowed us to be creative and move into a new sector, sauces, which has allowed us to cater to the preferences and demands of Indian consumers."
Dr. Oetker's India strategy
Before Indian sauce maker Fun Foods became part of Dr. Oetker, the Indian company made sales of about 1.5 million euros. By 2020, twelve years later, sales have almost tripled to about 4 million euros. "To achieve this, we focused on two main things: new products that fill a gap in the market and smartly expanding our distribution," Mirza explains. "Fun Foods, when we bought it, specialized in mayonnaise. That was still a very small market in 2008 with a value of half a million euros. Fun Foods sold two mayos, one with egg and one without. In India, almost 40 percent of the population is vegetarian and, unlike in Europe, that means they don't eat eggs either. But the mayo without egg was not necessarily suitable for vegetarians, because it was made in the same factory as the normal mayo and therefore could contain traces of egg. So we decided to create a special veggie mayonnaise line and it caught on immediately. It proves once again that without knowledge of the Indian consumer, it is difficult to come up with a successful product for this market."
"It is difficult to identify suitable outlets in India."
After finding the right product, the next question is: how do you reach the consumer? "In terms of distribution, there are two strategies that are often used," Mirza explains. "You have large companies, like a Britannia or a Nestlé, who bet on mass distribution and have their products in about half of all stores, about five million, in India. Then you have importers who focus on niche distribution and focus on about 5,000 outlets. With Dr. Oetker, we decided to sit in between those and become a mass distributor within our own niche. We are in about 100,000 stores in India and have developed a benchmarking strategy with our sales team to determine which outlets match our products in terms of clientele. Our rule is that if they can sell Nutella, there is a market for our products. Finding these locations is really a challenge in India though, because there is no dataset available on the possible outlets where you can offer your product. So you need a sales team that can build their own database and knows the market well enough to identify new potential outlets."
The opportunities for European luxury products in India
Even before the pandemic, products that make cooking easier and faster and ready-to-eat foods were making inroads, Mirza knows. "But the lockdowns have accelerated this development. This is interesting for Western producers, because our more expensive products are often a good fit for this segment. But it is also challenging to respond quickly to these trends. Dr. Oetker India works closely with major fast food chains like Pizza Hut and Domino's Pizza. This may sound crazy to Europeans, but in India it is normal to put sauce on your pizza, like mayonnaise. By working with other big players, you discover such opportunities for your product and can learn from each other when it comes to trends that are developing."
In addition, the pandemic also created an e-commerce boom in India. "From groceries to ordering ready-to-eat food, Indian consumers now prefer to have everything delivered to their homes. And that was also an important turning point for Dr. Oetker. "Companies need to be as digital savvy in India as they are in Europe. At Dr. Oetker, for example, we have opened our own online store to be able to serve the customer as well as possible. Especially in the metropolises, you really see a lightning-fast development in this area, so as a European company, don't think you have quiet time to start up the digital branch of your company in India. The customer wants it now, so then we as companies have to follow."