Wattle Health signs baby food deal with Vasudevan and Sons in India

Infant formula and baby food company Wattle Health is making its first foray into India having signed a deal with a local distributor to sell a range of Wattle Baby puree products into a market where the middle class is growing rapidly but the bureaucracy and red tape can prove difficult for Australian companies.

Wattle has secured a deal with Chennai-based distributors Vasudevan and Sons to sell a full range of baby foods first up, and talks are continuing over the potential for that to extend to infant formula.

India, with a population of 1.3 billion and rapidly rising middle-class population estimated to reach 550 million by 2025, has proven a tough market for Australian consumer goods companies, even with the “clean and green” reputation built up in China by big vitamin firms Blackmores and Swisse, and infant formula firms such as Bellamy’s.

Blackmores doesn’t currently sell into India, but the market is on its longer-term radar as a potential expansion region. Swisse also is yet to enter India.

Swisse uses former Test cricket captain Ricky Ponting as one of its celebrity ambassadors alongside actor Nicole Kidman, and he filmed a television commercial in Mumbai in late 2016 to help promote the brand in Australia.

He is well-known among Indian cricket fans as the coach of the Delhi Daredevils in the Indian Premier League Twenty 20 cricket competition.

The vitamins market leader in India is Nutrilite owned by direct seller Amway, which is heavily promoted by Bollywood celebrity actor Farhan Akhtar.

Wattle’s shares have been on a roller-coaster ride since listing on the ASX in March, 2017 at an issue point price of 20 cents.

The shares soared to $2.70 in mid-November even though it was registering modest sales revenue, largely on the strength of future upside in China and a small stake in a Melbourne infant formula packaging facility acquired by a large Hong Kong-based consortium. The shares gained 3 per cent on Tuesday morning to be sitting around $2.22.

Wattle executive chairman Lazarus Karasavvidis said the order had allowed Wattle to enter one of the fastest-growing and most dynamic economies. “We will take advantage of this opportunity to enter the Indian market and use it to increase distribution channels for our baby food range,” he said.

It also reduced the risk profile of the company by diversifying into a new jurisdiction, he said. Investors have been buying into Wattle because of the perceived upside in China, even though it is a young company with a short track record and limited sales.

Austrade says Australian manufactured foods are establishing a reputation of “clean and green” and good quality as they compete for shelf space against companies from Europe and North America.

Austrade says India’s middles class is expected to have reached 550 million people by 2025, with a noticeable increase in purchasing power in urban centres which will continue to drive consumer demand. India’s current population is around 1.3 billion and the middle class is estimated to be between 250 to 275 million.

Austrade classifies the food and grocery sector in India as “unorganised”, with street markets, kiosks and small vendors at the forefront. Modern retailing makes up only a small proportion of the food and grocery retailing sector.

As seen in the Financial Review on January 30th 2018.