In ancient Greece, Epigamia was the law that defined the rules of marriage between people from different cities or states. It also formalised relations between two countries. And just this past week, it was Epigamia, the Greek yoghurt brand produced by health food makers Drums Food, that cemented an unusual relationship in the world of Indian startups.

New York-based Danone Manifesto Ventures, the venture investment arm of food and beverages major Danone, made its first investment in Asia. After investing in over 10 startups in the US and Europe, it picked Drums for its latest investment. Participating in the Series C round, Danone Manifesto comes bearing more than just finance. It has brought with it the expertise Drums needs to scale rapidly.

A Path Of Progress

To be certain, it is an interesting development. After all, Danone itself exited the Indian dairy market just last year. The Ken reported in May 2018 that Parag Milk Foods acquired Danone’s only dairy facility in India—a facility on the outskirts of Delhi—which Drums, too, had bid for. The Parag deal signalled the French dairy major’s departure from Indian dairy market.

Danone’s exit came as the dairy major found itself under attack on two fronts. On one hand, it was challenged by large Indian dairies like Mother Dairy and Amul in basic products like dahi. On the other, it was competing with upstarts like Drums, which focused on value-added dairy products like Greek yoghurt, Drums second-ever offering. While Danone, which had global revenues of $28 billion in 2017, found India’s yoghurt market—projected to be worth $169 million by FY20—too crowded for its own liking, the investment by Danone Manifesto shows that it still sees potential in the Indian market.

Since Danone’s departure, the line between dairies and Indian and multinational corporations has blurred as far as value-added snacks are concerned. The likes of Parag and Amul have launched products such as chocolate cheese and camel milk, respectively. Both products have been positioned as healthy and nutritious. Corporations have followed suit. In May 2017, PepsiCo expanded its nutrition portfolio by launching a dairy beverage, even roping in cricketing legend Sachin Tendulkar as brand ambassador. More recently, ITC launched a line of milkshakes. All of these are positioned as protein-rich dairy snacks, making them challengers to what Drums’ forte—value-added protein-rich fresh and preservative-free snacks.

In the Greek yoghurt segment, which drives over 75% of Drums’ revenue, Drums really has only one competitor as of now. Global consumer food giant Nestle, which launched Greek yoghurt under the brand name Nestle a+ Grekyo in April 2016. Drums claims that it has captured a larger share of the Greek yoghurt segment than Nestle. Although, Nestle refused to share its sales data with The Ken and no independent market share data exists, a senior executive with Schreiber Dynamix—which manufactures Greek yoghurt for both Nestle and Drums—confirmed that Drums has higher production than Nestle.

However, while it is a market leader in Greek yoghurt, not to mention a trend-setter as the first Greek yoghurt maker in India, Drums has faced hurdles to its growth. For starters, the market for premium snacks in India is limited as only a small section of the country can afford these snacks. Further, Drums must expand its portfolio of products. To this end, it has plans to launch five more product lines to its current portfolio of curd, yoghurt and smoothies in the next 3-4 years. These may or may not be dairy. However, its competitors, across segments, will grow as well. Expanding in the Greek yoghurt sector as well is no easy task, with distribution being a major hurdle.

But Drums now has a vital arrow in its quiver—Danone’s expertise.

Marriage of a startup and a multinational

Since Drums launched Greek yoghurt in India in 2015, its production capacity has grown in fits and starts. From 500 to 2,000 to 10,000 to 20,000 to 50,000 to 80,000 to 140,000 cups a day. Its reach, too, has gradually grown to 10,000 stores across five Indian cities. Over the last four years, Drums has seen its revenue double year-on-year, posting its highest-ever revenues—Rs 52.5 crore ($7.4 million)—in FY18. Drums expects to cross Rs 100 crore ($14 million) in revenues for FY19.

Danone Manifesto’s entry, however, will be key in taking Drums to the next level.

Using Danone’s expertise via Danone Manifesto Ventures, Drums intends to expand from 100,000 cups sold daily via 10,000 stores to 1 million cups sold via 50,000 stores in India. Before its exit, Danone sold its products via 200,000 retail outlets across 20 Indian cities.