Danone's dairy foray will need Wadias' nod

The government has ruled that French dairy giant Groupe Danone cannot make a solo entry into the dairy business in India without the consent of the Wadia group, its 11-year-old joint venture partner in India. A decision to this effect was taken by the industry department on Wednesday.

"The government has taken a decision on Danone as far as its plans for the dairy business are concerned. The company has to comply with Press Note 1 (2005) and would therefore require the consent of the Wadias," said a senior official of the Ministry of Commerce and Industry. Groupe Danone and the Wadia group were unavailable for comment.

According to Press Note 1, government approval is necessary if the foreign partner of a joint venture in India wants to make investments in the same field.

The onus to provide proof that the new project would not jeopardise the interests of the existing joint venture lies equally with the foreign investor and the Indian partner.

Groupe Danone is reportedly in the process of introducing its products in India on its own. According to earlier reports, the company has entered into a co-packing agreement with an Indian dairy company and is evaluating a greenfield site to set up a factory soon.

In India, Groupe Danone and the Wadia group have an equal stake in dairy major Britannia Industries through a holding company, Associated Biscuits International Holdings (ABIH), for which an agreement was signed in September 1995. Britannia Industries entered the dairy business in 1997.

Over the last few months, the Wadias and Groupe Danone have been engaged in discussions to sort out issues ranging from Danone's investment in a Bangalore-based nutraceuticals company, Avesthagen, to sorting out royalty payments on Britannia's Tiger brand.

Government officials added that they will also be looking at the other issues between Groupe Danone and the Wadias, such as the Avesthagen acquisition. "All cases will be reviewed separately," said an official.