Dr. Oetker made the classic mistake in India

In 2007, German company Dr. Oetker known for its frozen pizzas and cake mix, ventured into the Indian market. Despite the fact that an initial test with home baking products seemed to work out well, it soon became apparent that their products were not a success at all in India. Dr. Oetker was faced with a difficult dilemma: leave India or reinvent itself.

“Dr. Oetker’s launch in India was certainly not without its challenges,” says Oliver Mirza, who has been CEO of Dr. Oetker in India for over twelve years. “The idea was to bring our best-selling products – frozen pizzas, desserts and baked goods – to India with an importer. To make sure there was demand for these products, we did a product test, as we do everywhere in 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 extremely enthusiastic about our product and we thought we had a recipe for success.” Mirza continues: “But we only found out later that none of the participants had been able to buy quark or cream cheese to make the cakes with, because this 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 was not only the cake mixes that missed the mark in India. “We were too early with all our European products. There was no market for frozen pizza yet, not even in the big cities like Mumbai, and people did not understand the idea of ​​a mixed product,” says Mirza. “For example, our vanilla milkshake mix is ​​one of our most popular products in Europe, but it did not sell at all in India. I thought that this was partly due to the fact that it did not contain real vanilla. So we decided to add it. This caused the sales of the product to decline even further, as people thought there was dust in the mix.”

Dr. Oetker now had two options: either educate the consumer on how to use the products and hope that this would increase their popularity or throw the strategy overboard and try something new.

Option two was chosen. “We started looking for an acquisition in the comfort food sector and in 2008 we found Fun Foods, a small producer of mayonnaise and pizza toppings. With them we slowly got to know the Indian consumer and it was only then that we really saw that we had to throw overboard all the lessons we had learned in Europe. They simply did not 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 allowed us to be creative and venture into a new sector, sauces, where we could respond to the preferences and demand of the Indian consumer.”

Filling a gap in the market

Before Indian sauce maker Fun Foods became part of Dr. Oetker, the Indian company had a turnover of around 1.5 million euros. In 2020, twelve years later, turnover had almost tripled to around 4 million euros. “To achieve this, we focused on two important things: new products that fill a gap in the market and smartly expanding our distribution,” Mirza explains.

“When we bought Fun Foods, it was specialized in mayonnaise. In 2008, that was still a very small market 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, this means that they do not eat eggs. But the mayo without egg was not necessarily suitable for vegetarians, because it was made in the same factory as the normal mayo and could therefore contain traces of egg. So we decided to set up a special veggie mayonnaise line and that was an immediate success. It proves once again that without knowledge of the Indian consumer, it is difficult to come up with a successful product for this market.”

Dr. Oetker’s India strategy

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,” says Mirza. “You have large companies, such as Britannia or Nestlé, who focus 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 points of sale. With Dr. Oetker, we decided to sit in between and become a mass distributor within our own niche.”

“We are in about 100,000 stores in India and have developed a benchmark strategy together with our sales team to determine which points of sale match our products in terms of clientele,” says the CEO. “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, because there is no dataset available about the possible points of sale where you can offer your product. So you need a sales team that can create a database and knows the market well enough to identify new potential sales outlets.”