Abbott Nutrition Eyes Local Product Sourcing

The company identified at least half a dozen Indian vendors to partner with and started upgrading its procurement system

April 21--MUMBAI -- Abbott Nutrition, the world's largest adult nutrition maker and part of US-healthcare group Abbott Laboratories, aims to locally manufacture its entire range of products sold in India once its globally compliant production facility in Gujarat goes on stream.

The Indian plant, which will be opened for its first phase of production in the next few months, will start with the largest-selling pediatric nutrition brand PediaSure and then move on to the other eight key brands, covering the complete range in the next two years.

The company, which has invested substantially in the country since 2010 to set up the production and research bases and to ensure quality input supply along with expansion of distribution network, has identified at least half a dozen Indian vendors to partner with and started upgrading their procurement and processing system to match its global quality standards, an Abbott official said, requesting anonymity.

Abbott, which grew over 30% in India's Rs.4,500 crore nutrition market in the past four years, is importing all the products from its parent's factories abroad.

Key Abbott brands in the Indian specialty nutrition market include PediaSure and Ensure for child and adult nutrition, respectively, and therapeutic nutrition products such as Glucerna and Nepro, among others.

Although the specialty and therapeutic nutrition market is still nascent in India, industry studies estimate high growth potential for this segment with increasing social awareness and progressing economy.

"We will be able to substitute almost the entire imports with local sourcing from the new Indian unit coming up at Jhagadia (in Gujarat)," Amal Kelshikar, country head, Abbott Nutrition India, said in an interview last week.

Abbott, which had to drop its plan to acquire the nutrition business of local drug maker Wockhardt Ltd for about Rs.650 crore in 2010 due to legal issues involving the seller, was moving ahead with an alternative strategy to build a strong local business fully organically.

"We have put almost the same investment in building the market and to establish a strong back-end operation including manufacturing in the country," Kelshikar said. He did not disclose the actual investment and the production capacity of the new Indian plant.

The Abbott group, currently the largest in Indian pharmaceuticals market by sales after it bought the local drug formulation business of Piramal Healthcare Ltd (known as Piramal Enterprises Ltd) in a $3.72 billion deal in 2010, had set up a nutrition research and development centre in Bangalore in 2012.

This research facility with a team of at least 50 scientists was set up in collaboration with Syngene International Ltd, a contract research subsidiary of Biocon Ltd. It will focus on the development of science-based nutrition products for the country and enable the expansion of Abbott's nutrition product portfolio.

While opening this centre, Abbott Nutrition's divisional vice president Robert Miller had said India is a priority market for investment, growth and innovation. The US group had in a global growth guidance formulated a year ago identified eight countries including the US, Canada, Brazil, India, Russia, China, Mexico and Taiwan as priority markets.

A recent study by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci) had projected the growth of Indian nutrition industry at 11-12%.

"A rapidly expanding middle-class, increasing incidence of diabetes and longer life spans are strong factors to drive demand for nutrition products," said the study by the industry lobby group.

The Indian specialty nutrition market, which is dominated by multinational firms, has at least five other large competitors including Nestle SA, GlaxoSmithKline Plc, Heinz Co., Cadbury Ltd and Danone SA to Abbott.

Copyright 2014 - Mint, New Delhi