EXECUTIVE SUMMARY

1

EXECUTIVE SUMMARY

The brand name Amul means “AMULYA”. This word is derived form the Sanskrit word “AMULYA” which means “PRICELESS”. Mr. Verghese Kurien showed main interest in establishing union who was supported by Shri Tribhuvandas Patel who lead the farmers in forming the Co-operative unions at the village level. First plant is at ANAND, which engaged in the manufacturing of milk, butter, ghee, milk powder, flavored milk and buttermilk.

First plant is at ANAND, Second plant is at MOGAR, Third plant is at Kanjari,

Fourth plant is at Khatraj. AMUL’s business strategy is driven by its twin objectives of (i) long-term,

sustainable growth to its member farmers, and (ii) value proposition to a large customer

base by providing milk and other dairy products a low price. AMUL is organized as a cooperative of cooperatives (i.e., each village

society, a cooperative itself, is a member of the AMUL cooperative) thereby deriving the advantage of scale.

Amul products are available in over 500,000 retail outlets across India

through its network of over 3,500 distributors. There are 47 depots with

dry and cold warehouses to buffer inventory of the entire range of

products.

Research was done through questionnaire to retailers and customers.

In all 50 retailers located in Santacruz(e) was surveyed and 50 customers

in age group of 18-30 years located all over Mumbai were surveyed. 35%

of customer respondent were male and 65% were Female.

From the research we conclude that Amul is a trusted and preferred brand

fore its products such as milk, cheese, butter and Ice-cream. For the

popular product we suggest Amul continues with the current strategies.

Product such as choclate are not equally popular. For chocolates Amul

compets with Cadbury which is a very strong brand. In case of “Amul

Kool Flavor Milk” Amul Competes with drink such as energy. In order to

improve sales of the weaker products Amul must improve on the

availability as well as implement advertising campaign.

.

2

OBJECTIVES OF STUDY

1. To understand the market potential of Amul

2. To conduct a market analysis in order to study the usage pattern and

customer buying behavior of Amul

3. To know the awareness levels of consumers of Amul

4. To know the reasons why some customers do not opt for Amul products

5. To understand the awareness levels of dealers of Amul

3

INTRODUCTION AND HISTORY

4

INTRODUCTION AND HISTORY

In the year 1946 the first milk union was established. This union was

started with 250 liters of milk per day. In the year 1955 AMUL was established. In

the year 1946 the union was known as KAIRA DISTRICT CO-OPERATIVE

MILK PRODUCERS’ UNION. This union selected the brand name AMUL in

1955.

The brand name Amul means “AMULYA”. This word derived form the

Sanskrit word “AMULYA” which means “PRICELESS”. A quality control

expert in Anand had suggested the brand name “AMUL”. Amul products have

been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder,

Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul

Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food

brand in India. (The total sale is Rs. 6 billion in 2005). Today Amul is a symbol of

many things like of the high-quality products sold at reasonable prices, of the

genesis of a vast co-operative network, of the triumph of indigenous technology, of

the marketing savvy of a farmers' organization. And have a proven model for dairy

development (Generally known as “ANAND PATTERN”).

In the early 40’s, the main sources of earning for the farmers of Kaira

district were farming and selling of milk. That time there was high demand for

milk in Bombay. The main supplier of the milk was Polson dairy limited, which

was a privately owned company and held monopoly over the supply of milk at

Bombay from the Kaira district. This system leads to exploitation of poor and

illiterates’ farmers by the private traders. The traders used to decide the prices of

milk and the farmers were forced to accept it without uttering a single word.

However, when the exploitation became intolerable, the farmers were

frustrated. They collectively appealed to Sardar Vallabhbhai Patel, who was a

leading activist in the freedom movement. Sardar Patel advised the farmers to sell

the milk on their own by establishing a co-operative union, Instead of supplying

milk to private traders. Sardar Patel sent the farmers to Shri Morarji Desai in

order to gain his co-operation and help. Shri Desai held a meeting at Samarkha

village near Anand, on 4th January 1946. He advised the farmers to form a society

for collection of the milk.

5

These village societies would collect the milk themselves and would decide

the prices at which they can sell the milk. The district union was also form to

collect the milk from such village co-operative societies and to sell them. It was

also resolved that the Government should be asked to buy milk from the union.

However, the govt. did not seem to help farmers by any means. It gave the

negative response by turning down the demand for the milk. To respond to this

action of govt., the farmers of Kaira district went on a milk strike. For 15 whole

days not a single drop of milk was sold to the traders. As a result the Bombay milk

scheme was severely affected. The milk commissioner of Bombay then visited

Anand to assess the situation. Having seemed the condition, he decided to fulfill

the farmers demand.

Thus their cooperative unions were forced at the village and district level to

collect and sell milk on a cooperative basis, without the intervention of

Government. Mr. Verghese Kurien showed main interest in establishing union

who was supported by Shri Tribhuvandas Patel who lead the farmers in forming

the Co-operative unions at the village level. The Kaira district milk producers

union was thus established in ANAND and was registered formally on 14th

6

December 1946. Since farmers sold all the milk in Anand through a co-operative

union, it was commonly resolved to sell the milk under the brand name AMUL.

At the initial stage only 250 liters of milk was collected everyday. But with

the growing awareness of the benefits of the cooperativeness, the collection of milk

increased. Today Amul collect 11 lakhs liters of milk everyday. Since milk was a

perishable commodity it becomes difficult to preserve milk flora longer period.

Besides when the milk was to be collected from the far places, there was a fear of

spoiling of milk. To overcome this problem the union thought out to develop the

chilling unit at various junctions, which would collect the milk and could chill it,

so as to preserve it for a longer period. Thus, today Amul has more than 150

chilling centers in various villages. Milk is collected from almost 1073 societies.

7

With the financial help from UNICEF, assistance from the govt. of New

Zealand under the Colombo plan, of Rs. 50 millions for factory to manufacture

milk powder and butter was planned. Dr.Rajendra Prasad, the president of India

laid the foundation on November 15, 1954. Shri Pandit Jawaharlal Nehru, the

prime minister of India declared it open at Amul dairy on November 20, 1955.

8

PEOPLE POWER: AMUL'S SECRET OF SUCCESS

The system succeeded mainly because it provides an assured market at

remunerative prices for producers' milk besides acting as a channel to market

the production enhancement package. What's more, it does not disturb the

agro-system of the farmers. It also enables the consumer an access to high

quality milk and milk products. Contrary to the traditional system, when the

profit of the business was cornered by the middlemen, the system ensured that

the profit goes to the participants for their socio-economic upliftment and

common good.

Looking back on the path traversed by Amul, the following features make it a

pattern and model for emulation elsewhere.

Amul has been able to:

Produce an appropriate blend of the policy makers farmers board of

management and the professionals: each group appreciating its rotes and

limitations,

Bring at the command of the rural milk producers the best of the

technology and harness its fruit for betterment.

Provide a support system to the milk producers without disturbing their

agro-economic systems,

Plough back the profits, by prudent use of men, material and machines, in

the rural sector for the common good and betterment of the member

producers and

Even though, growing with time and on scale, it has remained with the

smallest producer members. In that sense. Amul is an example par

excellence, of an intervention for rural change.

9

The Union looks after policy formulation, processing and marketing of milk,

provision of technical inputs to enhance milk yield of animals, the artificial

insemination service, veterinary care, better feeds and the like - all through the

village societies. Basically the union and cooperation of people brought Amul

into fame i.e. AMUL (ANAND MILK UNION LIMITED), a name which

suggest THE TASTE OF INDIA.

10

PLANTS

First plant is at ANAND, which engaged in the manufacturing of milk, butter,

ghee, milk powder, flavored milk and buttermilk.

Second plant is at MOGAR, which engaged in manufacturing chocolate,

nutramul, Amul Ganthia and Amul lite.

11

Third plant is at Kanjari, which produces cattelfeed.

Fourth plant is at

Khatraj, which engaged in producing cheese.

Today, twelve dairies are producing different products under the brand name

Amul. Today Amul dairy is no. 1 dairy in Asia and no. 2 in the world, which is

matter of proud for Gujarat and whole India.

12

13

AMUL’s Journey towards Excellence

AMUL’s journey towards excellence is marked by some critical understanding of the business environment in large emerging economies like India where markets have to be developed by combining efficiency related initiatives with increasing the base of marginal suppliers and consumers. The essence of AMUL’s efforts were as follows:

It combined market and social development in an emerging economy. It recognized the inter- linkages between various environments that governed the lives of marginal milk farmers and the unmet needs of consumers. It also changed the supply chain paradigm in order to reduce the cost to the consumer while increasing the return to the supplier.

It realized that in order to achieve their objectives, it had to benefit a large number of people –both suppliers and consumers. While large scale had the danger of failure due to poor control and required more resources, it also had the advantage of creating a momentum that would be necessary to bring more people into the fold and thereby help more suppliers and consumers.

It also realized that its goal could only be achieved in the long run and this required developing values in people and processes that were robust, replicable and transparent.

It also realized that the cooperative would not be independent and viable in the face of competition if it were not financially sound. This implied that AMUL had to develop distinct capabilities that would deliver competitive advantage to its operations. This would include long term cost containment, world-class deployment of technological resources and R&D, and better leveraging of scarce resources.

There are some characteristics of this unique movement and how AMUL went about building a culture of excellence. The salient features of this approach (which has been termed as the “Anand Pattern”) are discussed in subsequent paragraphs.

14

Leadership

While Kaira Union (or AMUL) had the support of national leaders who were at the forefront of the Indian independence movement, its local leaders were trained in Gandhian simplicity their feet rooted firmly amongst people whom they had mobilized – the poor farmers of Anand. The foremost amongst them was Tribhuvandas Patel Who had led the movement for the formation of cooperatives of small and marginal farmers in order to compete against investor owned enterprises on one hand, and keep bureaucracy away on the other hand. Tribhuvandas was the first Chairman of the cooperative. His skills lay in organizing the village producers, in making them believe in the power of cooperation and their rights towards improvement of human condition. He is remembered as fair and honest person whose highest sense of accountability to the members of the union laid the foundation of trust between network members. Another important aspect of his remarkable management style was his gentleness and ability to repose trust in people – he gave complete autonomy to managers of the union and earned complete commitment from them Kurien was one such manager who would, first, shape the destiny of the Union and then the milk movement throughout the country.

Kurien emerged as the father of the dairy movement in India. He managed to keep the government and bureaucrats away from the cooperative and gave shape to the modern structure of the cooperative, worked tirelessly to establish the values of modern economics, technology and concern for farmers within the cooperative. He interfaced with global financing agencies to build new projects at AMUL. He worked with the Unions to bring the best of technology to the plants. He worked with marginal village farmers to create systems that would increase milk yields. He understood that without meeting the needs of customers he would not be able to satisfy his obligations to the farmers. In short, Kurien shaped the destiny of the milk movement in India through NDDB (as its Chairman) and particularly at GCMMF and cooperatives in Gujarat. He helped build a modern organization with professional management systems that would support the aspirations of farmers and customers. Several young people left better paying jobs to help create a dream of making India the milk capital of the world. Kurien had learnt the persuasive charm of Tribhuvandas through plain speaking and had soon created a cadre of highly capable managers to whom he had delegated both management as well as commitment. These leaders were created at the village, district and state levels in different organizations of the network.

Tribhuvandas knew that his fledgling cooperative needed a technocrat manager who shared his concern for the farmers and also had the tenacity to organize marginal producers. Convincing farmers to join the cooperative required commitment bordering on stubbornness, a can do attitude and a desire to change lives of poor people. Verghese Kurien had those skills and had linkages to the government. He was charismatic in his communication and committed in his effort. Over a period of time, he developed a very close link with the poor farmers who, as he always says, “were his employers” at the cooperative. He would travel through the villages along with Tribhuvandas and work out the details of how the milk collection cooperative would work, how trucks would pickup milk from village societies, how the cattle

15

would have to be taken care of and how all of this would help the poor milk farmer come out of poverty and the clutches of the middleman. Operational details were meticulously planned and executed. And then, he along with two of his close associates would work on the design of the dairy plant including conducting experiments to create powder out of buffalo milk – a task that was ridiculed by all who heard of it including the international aid agencies in the dairy industry. Tribhuvandas and Kurien were able to convince the government also of the value of his efforts and secured funding for several projects of the cooperative. He was slowly laying the foundation of a modern dairy industry in India. Membership of the cooperative started to increase, professional managers started to join AMUL and production capacity at AMUL started to expand (and this expansion was done through innovative changes to processes at the plant and through equipment designed and fabricated in-house). Kurien had transformed AMUL from a dream into a major industrial entity – a network of plants, cooperative societies, research centers, an institute for training future managers in rural management, secondary services like veterinary/artificial insemination expertise/feed factory etc. Kurien’s biggest strength lay in his ability to convince people that the cause of rural farmers was important thus establishing an important shared value. Subsequently, he could convince the government to replicate the AMUL model in almost all states of the country.

16

Strategy

AMUL’s business strategy is driven by its twin objectives of (i) long-term, sustainable growth to its member farmers, and (ii) value proposition to a large customer base by providing milk and other dairy products a low price. Its strategy, which evolved over time, comprises of elements described below.

Simultaneous Development of Suppliers and Customers:

From the very early stages of the formation of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. Further, given the primitive state of the market and the suppliers of milk, their development in a synchronous manner was critical for the continued growth of the industry. The organization also recognized that in view of the poor infrastructure in India, such development could not be left to market forces and proactive interventions were required. Accordingly, AMUL and GCMMF adopted a number of strategies to assure such growth. For example, at the time AMUL was formed, the vast majority of consumers had limited purchasing power and was value conscious with very low levels of consumption of milk and other dairy products. Thus, AMUL adopted a low price strategy to make their products affordable and guarantee value to the consumer. The success of this strategy is well recognized and remains the main plank of AMUL's strategy even today. The choice of product mix and the sequence in which AMUL introduced its products is consistent with this philosophy. Beginning with liquid milk, the product mix was enhanced slowly by progressive addition of higher value products while maintaining desired growth in existing products. Even today, while competing in the market for high value dairy products, GCMMF ensures that adequate supplies of low value products are maintained.

On the supply side, as mentioned earlier, the member-suppliers were typically small and marginal- farmers had severe liquidity problems, were illiterate and had no prior training in dairy farming. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and assure steady growth. First, for the short term, the procurement prices were set so as to provide fair and reasonable return. Second, aware of the liquidity problems, cash payments for milk supply was made with minimum of delay. For the long-term, the Unions followed a multi- pronged strategy of education and support. For example, only part of the surplus generated by the Unions is paid to the members in the form of dividends. A substantial part of this surplus is used for activities that promote growth of milk supply and improve yields. These include provision of veterinary services, support for cold storage facilities at the village societies etc. In parallel, the Unions have put in place a number of initiatives to help educate the members. To summarize, the dual strategy of simultaneous development of the market and member farmers has resulted in parallel growth of demand and supply at a steady pace and in turn assured the growth of the industry over an extended period of time.

Cost Leadership:

17

AMUL’s objective of providing a value proposition to a large customer base led naturally to a choice of cost leadership position. Given the low purchasing power of the Indian consumer and the marginal discretionary spending power, the only viable option for AMUL was to price its products as low as possible. This in turn led to a focus on costs and had significant implications for managing its operations and supply chain practices (described later).

Focus on Core Activities:

In view of its small beginnings and limited resources, it became clear fairly early that AMUL would not be in a position to be an integrated player from milk production to delivery to the consumer. Accordingly, it chose a strategy to focus on core dairy activities and rely on third parties for other complementary needs. This philosophy is reflected in almost all phases of MUL network spanning R&D, production, collection, processing, marketing, distribution, retailing etc. For example, AMUL focused on processing of liquid milk and conversion to variety of dairy products and associated research and development. On the other hand, logistics of milk collection and distribution of products to customers was managed through third parties.

However, it played a proactive role in making support services available to its members wherever it found that markets for such services were not developed. For example, in the initial stages, its small and marginal member farmers did not have access to finance, veterinary service, knowledge of basic animal husbandry etc. Thus to assure continued growth in milk production and supply, AMUL actively sought and worked with partners to provide these required services. In cases where such partnerships could not be established, AMUL developed the necessary capabilities and provided the services. These aspects are elaborated later in this section.

Managing Third Party Service Providers:

Well before the ideas of core competence and the role of third parties in managing the supply chain were recognized and became fashionable, these concepts were practiced by GCMMF and AMUL. From the beginning, it was recognized that the core activity for the Unions lay in processing of milk and production of dairy products. Accordingly, the Unions focused efforts on these activities and related technology development. Marketing efforts (including brand development) were assumed by GCMMF. All other activities were entrusted to third party service providers. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc. It is worth noting that a number of these third parties are not in the organized sector, and many are not professionally managed. Hence, while third parties perform the activities, the Unions and GCMMF have developed a number of mechanisms to retain control and assure quality and timely deliveries (see the sub-section on Coordination for Competitiveness later in the paper for more details). This is particularly critical for a perishable product such as liquid milk.

Financial Strategy:

18

AMUL’s finance strategy is driven primarily by its desire to be self-reliant and thus depend on internally generated resources for funding its growth and development. This choice was motivated by the relatively underdeveloped financial markets with limited access to funds, and the reluctance to depend on Government support and thus be obliged to cede control to bureaucracy. AMUL’s financial strategy may thus be characterized by two elements: (a) retention of surplus to fund growth and development, and (b) limited/ no credit, i.e., all transactions are essentially cash only. For example, payment for milk procured by village societies is in cash and within 12 hours of procurement (most, however, pay at the same time as the receipt of milk). Similarly, no dispatches of finished products are made without advance payment from distributors etc. This was particularly important, given the limited liquidity position of farmer/suppliers and the absence of banking facilities in rural India. This strategy strongly helped AMUL implement its own vision of growth and development. It is important to mention that many of the above approaches were at variance with industry practices of both domestic and MNC competitors of AMUL.

19

Organization

AMUL is organized as a cooperative of cooperatives (i.e., each village society, a cooperative in itself, is a member of the AMUL cooperative) thereby deriving the advantage of scale and uniformity in decision making. The founders of Kaira Union realized that to fulfill their objectives, a large number of marginal farmers had to benefit from the cooperative – a network of stakeholders had to be built. And once built, it had to grow so as to draw more rural poor to undertake dairy farming as a means of livelihood. The network had to have several layers – the organizational network where the voice of the owners governed all decisions, a physical network of support services and product delivery process and a network of small farmers that could deliver the benefit of a large corporation in the market place. More importantly, a process had to be put in place to build these networks.

Building an organizational network that would represent the farmers and the customers was the most complicated task. A loose confederation was developed with GCMMF representing the voice of the customers, the Unions representing the milk processors and the village societies representing the farmers. Competition in the markets ensured that the entire network was responding to the requirements of the customers at prices that were very competitive. The task of ensuring that returns to the farmers was commensurate with the objectives with which the cooperatives were setup was achieved through representation of farmers at different levels of decision making throughout the network – the board of directors of societies, Unions and the Federation comprised farmers themselves. In order to ensure that most returns from sales went to the producers, the intermediaries had to operate very effectively and on razor thin margins. This turned out to be a blessing in disguise – the operations remained very “lean” and started to provide cost based advantage to the entire network.

AMUL established a group to standardize the process of organizing farmers into village societies. In addition to establishing the criteria for selecting members, the group had to train the VS to run the cooperative democratically, profitably and with concern for its members. This included establishing procedures for milk collection, testing, payment for milk purchased from member farmers and its subsequent sale to the union, accounting, ensuring timely collection and dispatch of milk on milk routes established by the union, etc. The Village Societies Division at AMUL acts as the internal representative of village societies in their dealings with the Union. Cooperative development programmes at the village level for educating & training its members have become an important part of the strategy to build this extensive network

Milk procurement activity at AMUL comprises development and servicing of village societies, increasing milk collection, procurement of milk from societies & its transport to the societies, increasing milk collection, procurement of milk from societies & its transport to the chilling locations, and resolving problems of farmers and village societies. Their stated objective is to ensure that producers get maximum benefits. The Village Societies Division coordinates these activities. Milk

20

collection takes place over a large number of pre-defined routes according to a precise timetable. The field staff of this division also help village societies interface with the Union on various issues ranging from improvement of collection, resolving disputes, repair of equipments to obtaining financing for purchase of equipment etc. In addition, they are also responsible for the formation of new societies, which is an important activity at AMUL. In essence, the organization structure of AMUL allows effective utilization of resources without losing the democratic aspiration of individual members. It is obvious that such a system needs charismatic leadership to achieve consensus across issues – a process that has long-term benefits for any organization.

21

Marketing

GCMMF is the marketing arm of the network and manages the physical delivery and distribution of milk and dairy products from all the Unions to customers. GCMMF is also responsible for all decisions related to market development and customer management. These activities, which range from long-term planning to medium-term and short-term operational decisions are described below.

As mentioned earlier, introduction of new products and choice of product mix and markets should be consistent with the growth strategy, and synchronous with growth in milk supply. GCMMF’s demand growth strategy may be characterized by two key elements: (i) developing markets for its high value products by graduating customer segments from low value products, and (ii) maintaining a healthy level of customer base for its base products (low value segment). This strategy often requires GCMMF to allocate sufficient quantity of milk supply to low value products, thereby sacrificing additional profits that could be generated by converting the same to high value products.

Interestingly, advertisement & promotion (a la FMCG) was not considered to be enough of value addition and hence the budget was kept relatively small. Instead, GCMMF preferred a lower price with emphasis on efficiency in advertising. In this context, GCMMF provides umbrella branding to all the products of the network. For example, liquid milk as well as various milk products produced by different Unions are sold under the same brand name of AMUL. Interestingly, the advertising has centered on building a common identity (e.g., a happy & healthy “cartoon” AMUL girl) and evoking national emotion (e.g., the key advertising slogan says “AMUL - The Taste of India”).

GCMMF also plays a key role in working with the Unions to coordinate the supply of milk and dairy products. In essence, it procures from multiple production plants (the thirteen Unions), which in turn procure from the Village Societies registered with each Union. GCMMF distributes its products through third party distribution depots that are managed by distributors who are exclusive to GCMMF. These distributors are also responsible for servicing retail outlets all over the country. GCMMF sales staff manages this process. Retailing of GCMMF’s products takes place through the FMCG retail network in India most of whom are small retailers. Liquid milk is distributed by vendors who deliver milk at homes. Since 1999, GCMMF has started web based ordering facilities for its customers. A well-defined supply chain has been developed to service customers who order in this manner.

Operations & Supply Chain Management

As mentioned earlier, the strategy, design and practices in AMUL’s network are strongly driven by the objective of establishing and operating an efficient supply chain from milk production and procurement to product delivery to customers.

22

Management of this network is built around two key elements – (a) coordination of the diverse elements of the network and (b) use of appropriate technology that includes product, process and information technology and managerial practices and systems. In what follows, we describe various features of these elements that have contributed to the evolution of an efficient supply chain.

Coordination for Competitiveness

Robust coordination is one of the key reasons for the success of operations involving such an extensive network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These range from ensuring fair share allocation of benefits to various stakeholders in the chain to coordinated planning of production and distribution. More importantly, the reason for setting up of this cooperative is not amiss to any one in this large network organization. Employees, third part service providers, and distributors are constantly reminded that they work for the farmers and the entire network strives to provide the best returns to the farmers, the real owners of the cooperative. It may be remembered that coordination mechanisms have to link the lives and activities of 2.12 million small suppliers and 0.5 million retailers!

There appear to be two critical mechanisms of coordination that ensure that decision making is coherent and that the farmers gain the most from this effort. These mechanisms are:

• Inter-locking Control• Coordination Agency: Unique Role of Federation

Inter-locking Control

Each Village Society elects a chairperson and a secretary from amongst its member farmers of good standing to manage the administration of the VS. Nine of these chairpersons (from amongst those VS affiliated to a Union) are elected to form the Board of Directors of the Union. The Chairperson of the Union Board is elected from amongst these members. The managing director of the Union, who is a professional manager, reports to the chairperson and the board. All chairpersons of all the Unions form the Board of Directors of GCMMF. The managing director of GCMMF reports to its Board of Directors. Each individual organization, the Union or GCMMF, is run by professional managers and highly trained staff. It must be pointed that all members of all the boards in the chain are farmers who pour milk each day in their respective Village Societies.

A key reason for developing such an inter-locking control mechanism is to ensure that the interest of the farmer is always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain. This form of direct representation also ensures that professional managers and farmers work together as a team to strengthen the cooperative . This helps in coordinating decisions across different entities as well as speeding both the flow of information to the respective constituents and decisions.

23

Coordination Agency: Unique Role of the Federation

In addition to being the marketing and distribution arm of the Unions, GCMMF plays the role of a coordinator to the entire network within the State – coordinating procurement requirements with other Federations (in other states), determining the best production allocation for its product mix from amongst its Unions, managing inter-dairy movements, etc. It works with two very clear objectives: to ensure that all milk that the farmers produce gets sold in the market either as milk or as value added products and to ensure that milk is made available to an increasingly large sections of the society at affordable prices. In addition, it has to plan its production at different Unions in achieve better balance in surpluses accruing to the Unions. willing to sacrifice realizable surplus and allocate products to “less efficient” Unions in order to maintaining equity among unions for the surplus realized. In this regard, very often GCMMF is GCMMF is guided by two main objectives – (i) maximizing the network surplus, and (ii) to each other making the planning problem more complex. In making allocations to Unions, products and supply of milk vary with the season. Further, demand and supply seasons run counter volumes at different Unions, distribution costs from various locations etc. Demand for daily products in its region as well as the country, long term strategy of each Union, procurement Some considerations that govern this choice are the strengths of each Union, the demand for various GCMMF, in consultation with all the Unions, decides on the product mix at each Union location. them also gets a fair return on its capacity. In this regard, GCMMF follows an interesting strategy. such a way that market requirement matches with unique strengths of each Union and that each of of the society at affordable prices. In addition, it has to plan its production at different Unions in

24

Technology for Effectiveness

Service to customers required the following: better and newer "products", "processes" that deliver the low cost advantage to the network and "practices" that would ensure high and delivery of the right product at the right time. Thus technology or knowledge that was in products, processes, and practices became an important factor in delivering effectiveness to network of cooperatives. One distinguishing feature of AMUL (in comparison with other similar cooperatives globally) is the large variety in their product mix. Producing them not only diverse skills but also knowledge of different types of processes. AMUL dairy led the way developing many of these products and establishing the processes for other member. Equally impressive are the achievements on process technology. While several innovations to equipment and processes have been done at AMUL, the most significant one been the development of processes for using buffalo milk to produce a variety of end products. Gujarat (and most of India) is a buffalo predominant area. As more farmers joined the cooperatives, the need to develop a mechanism for storage of increasing quantities of milk became Moreover, the cooperative was established on the promise that it would buy any quantity of that a member farmer wanted to sell. The need to store milk in powder form increases as milk quantities in winter seasons could then be used in lean summer seasons. Moreover, demand liquid milk was not growing along with growth in milk production. No technology, existed worldwide to produce powder from buffalo milk. Engineers at AMUL successfully developed a commercially viable process for the same - first time in the history of global industry. Subsequently, it also developed a process for making baby food out of this milk powder, has also developed a unique process for making good quality cheese out of buffalo milk converting a perceived liability into a source of comparative advantage - the task was done process technology research. Most of its plants are state of art and automated. Similar efforts in area of "embryo transfer technology" have helped create a high yield breed of cattle in the country. AMUL's innovations in the areas of energy conservation and recovery have also contributed reduction in cost of its operations. AMUL also indigenously developed a low cost process providing long shelf life to many of its perishable products.

TQM at the grassroots has been a strong movement to develop leadership, operational strategic capabilities in the entire network - farmers, village cooperatives, dairy plants, distributors wholesalers and retailers. Key elements of this TQM movement have been:

Friday Departmental Meetings: Each Friday, at a prescribed time, every one in the network (from the fanners to the carry & forwarding agents) joins their respective departmental meeting to quality initiatives and share policy related information.

Training for Transformational Leadership so that individuals are able to control their feelings and behavior and take more responsibility in one's life and surrounding environment.

25

Application of Hoshin Kanri principles to bring about a bottom-up setting of objectives -policies for effective management of Unions & village societies on hand with those of member on the other hand. ISO/HACCP certification was obtained for all the Unions and village society is in the process of obtaining the Training for farmers and their families emphasizing the need for good health care for not only cattle during its pregnancy and feeding but also for expecting and feeding mothers and the family. This effort has brought about a significant social change towards such issues in villages have cooperative milk societies.

Retail Census: GCMMF undertakes a census of all retail outlets (over 500,000) to customer perceptions and distribution efficacy of their network. Interestingly, this is being by wholesalers in their respective territories at their own cost. This information is used for policy deployment. The extent of IT usage includes a B2C ordering portal, an ERP based supply chain system for the flow of material in the network, a net based dairy kiosk at some village societies dissemination of dairy related information), automated milk collection stations at village and a GIS based data network connecting villages societies to markets. Milk collection at more than 10,000 villages is available to all dairies (or Unions) to enable them make decisions in terms of production & distribution planning, and disease control in more 6,700,000 animals. Similarly, this is linked with information at all 45 distribution offices and distributors. This network is being extended to cover all related field offices in the network. The GCMMF cyber store delivers AMUL products at the doorsteps of the consumers in 125 cities the What is remarkable about the above is implementation of very contemporary practices rural areas where both education and infrastructure are generally low. One of the key sources of competitive advantage has been the ability of the cooperative to continuously implement practices across all elements of the network - the federation, unions, village societies and distribution channel. Whether it is implementation of small group activities or quality circles at federation or SPC and TQM at the Unions or housekeeping and good accounting practices at village societies level, the network has developed very interesting ways of rolling out programmes across different entities. While these programs may not be very unique, the scale impressive. One of the key strengths of GCMMF & AMUL can surely be characterized development of processes that allow them to implement these practices across a large number members.

Growth and Challenges : From its inception with the formation of its first milk cooperative, AMUL network has sustained impressive growth rate for more than 50 years culminating in the emergence of Indian dairy industry as the world's leading milk producer. However, it is unclear whether AMUL's and practices that have worked well for long can maintain this growth trajectory in a environment with globalization and increased competition. In this section we describe some AMUL's initiatives and discuss briefly opportunities for growth and challenges that need to be overcome.

AMUL's growth during the past five decades has been fuelled primarily by

26

growth in milk supply with corresponding pricing strategy to generate demand. This growth has been sustained a two-pronged strategy - (a) growth in the number of member farmers by widening its coverage with more village societies and increasing the membership in each society, and (b) growth in capita milk supply from its members. This growth is achieved by increasing milk yields and helping members raise their investments in cattle. It is worth noting that AMUL has funded support activities from its earnings (instead of repatriating them to the members either as or with a higher procurement price). It is expected that AMUL's growth in the immediate future will continue to rely on this strategy.

However, in the new emerging environment, challenges have become apparent and AMUL network needs to evolve proactive mechanisms counter these threats. First, competitors are cutting into milk supply by offering marginally procurement prices thereby challenging the practice of provision of services for long-term growth in lieu of higher prices in the short-term. Second, for a section of its membership, dairy activity is a stepping-stone for upward mobility in the society. Typically, such members move on to other occupations after raising their economic position through milk production. As a result, AMUL is unable to realize the full benefits of its long-term strategy, and finds new members (mostly farmers) to replace those who have higher potential and capacity. While this is a welcome development for the society as a whole, it is unclear whether AMUL would be able to sustain it the light of increased competition.

27

Products of AmulAmul has never spent more than 1% on Brand Building.Mr. Verghese Kurien Believed in Umbrella Branding.

Bread Spread:-Products in Bread Spread are Amul Butter,

Amul lite:- which has low fats and low Cholestrol And

Delicious Table Margarine:- which is the way to eat Healthy.

Cheese range:-

Products included in cheese are Amul Pasteurized Processed Cheese:- which is 100% vegetarian cheese and is made up of microbial rennet.

Amul Cheese Spreads:- which has great taste and is in 3 flavours.It is highly acceptable product made from the most modern dairy play through a special formulation,

Amul Emmental Cheese:-In this the great swiss cheese of Amul has a sweet dry flavor and hazelnut aroma.

Amul Pizza Mozzarella Cheese:-This makes great tasting pizza.

Gouda Cheese

Mithai range:-

Amul Brand's desserts are sold under many names like Amul Basundi, Amul Lassee, Gulab Jamun Mix, Amul Shrikhand,

Milk range:-

Amul's powder milk are sold under many names like Amulya Dairy Whitener, Sugar Tea Coffee Whitener, Sugar Skimmed Milk Powder, and Amul Instant Full Cream Milk Powder.

Pure Ghee

Infant Milk drinks:-

The Brand Amul's milk drinks are sold under various names such as Amul Kool, Amul Kool Cafe, Kool Koko, Amul Kool Chocolate Milk, and Amul Masti Spiced Buttermilk.

Curd Products

There are two sub products in Curds they are masti dahi and the other one is newly launched that is Flavio.It is a flavoured Dahi.

Ice Creams

28

Product Development

Amul's product development was driven both by the spirit of the cooperative system and profitability. Being a cattle farmers' cooperative, Amul was committed to buying all the milk offered by the farmer. The perishable nature of milk made it imperative for Amul to process the surplus milk and enter new product categories as production increased...

ButterLaunched in 1955, butter was one of the first milk products offered by Amul. It was also the first time Amul successfully challenged the hegemony of an established brand. Amul's earliest competitor, Polson had been the monopoly milk supplier to the Bombay Milk Scheme. Amul displaced Polson to emerge as the undisputed leader in the butter market...

Pricing

Amul's philosophy had all along been to deliver value for money to its customers. Despite being priced economically, Amul maintained its product quality...

Distribution

GCMMF's formidable distribution network comprised 300 stock keeping units, 46 sales offices, 3,000 distributors, 100,000 retailers with refrigerators, an 18,000-strong cold chain, and 500,000 non-refrigerated retail outlets...

Advertising and Sales Promotion

Over the years, Amul's advertising philosophy had been "to be simple, fresh and innovative". The clean, emotion-based ads refrained from using hi-tech special effects, and aimed at maintaining the perfect balance between the traditional and the modern...

Looking Ahead

The liberalization of the dairy industry in 1991 had seen a number of multinational players like Britannia, Le Bon, Dabon and Hi-Life enter the sector.

Analysts wondered whether a co-operative with limited financial means could stand up to the might of these MNCs, and if its low pricing strategy would continue to stay relevant. MNCs like Pizza Hut, Domino's, Hindustan Lever Limited and Cadbury had also become competitors. Amul had proved its detractors wrong and firmed up ambitious growth plans...

29

GUJARAT COOPERATIVE MILK MARKETING

FEDERATION(GCMMF)

GCMMF is India's largest food products marketing organisation. It is a state level

apex body of milk cooperatives in Gujarat, which aims to provide remunerative

returns to the farmers and also serve the interest of consumers by providing quality

products, which are good value for money. GCMMF markets and manages the

Amul brand.

The distribution network

Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products.

GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return on investment (ROI).All GCMMF branches engage in route scheduling and have dedicated vehicle operations.

Largest Cold Chain:

AMUL has the largest cold chain network in India (i.e. 18000 refrigerators) as compared to any other company. The chemical components of milk are water, SNF and solids. Milk is very perishable product so it has to be consumed within 24 hours. In order to avoid wastage AMUL converts the milk in to SNF and milk solids by evaporating the water, which comprises up to 60-70% of milk contents. This is possible only if the distribution channel right from the producer to the consumer is well organized. It will be surprising to know that AMUL makes even the Sarpanch to eat pizza i.e. it supplies pizzas even to rural market.

30

THE BUSINESS MODEL

31

THE BUSINESS MODEL

From the very beginning, in the early 1950s,AMUL adopted the network as the basic model for long-term growth.

The network explicitly includes secondary services to the farmer-suppliers.

Several of the entities in the network are organized as cooperatives linked in ahierarchical fashion.

Customers: 

In comparison with developed economies, the market for dairy products in India is still in an evolutionary stage with tremendous potential for high value products such as ice cream, cheese etc. The distribution network, on the other hand, is quite reasonable with access to rural areas of the country. Traditional methods practiced in western economies are not adequate to realize the market potential and alternative approaches are necessary to tap this market.

Suppliers: A majority of the suppliers are small or marginal farmers who are often illiterate, poor, and with liquidity problems as they lack direct access to financial institutions. Again, traditional market mechanisms are not adequate to assure sustenance and growth of these suppliers.

Third Party Logistics Services: 

In addition to the weaknesses in the basic infrastructure, logistics and transportation services are typically not professionally managed, with little regardfor quality and service. In addition to outbound logistics, GCMMF takes responsibility for coordinating with the distributors to assure adequate and timely supply of products. It also works with the Unions in determining product mix, product allocations and in developing production plans. The Unions, on the other hand, coordinate collection logistics and support services to the member-farmers. In what follows we elaborate on these aspects in more detail and provide a rationale for the model and strategies adopted by GCMMF.

Simultaneous Development of Suppliers and Customers: 

From the very early stages of the formation of AMUL, the cooperative realized that sustained growth for the long-term was contingent on matching supply and demand. The member-suppliers were typically small and marginal farmers with severe liquidity problems, illiterate and untrained. AMUL and other cooperative Unions adopted a number of strategies to develop the supply of milk and assuresteady growth. First, for the short term, the procurement prices were set so as to provide fair and reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay. This practice continues today with many village societies making payments upon the receipt of

32

milk. For the long-term, the Unions followed a multi- pronged strategy of education and support. For example, only part of the surplus generated bythe Unions is paid to the members in the form of dividends

Managing Third Party Service Providers:

Unions focused efforts on these activities and related technology development. The

marketing efforts were assumed by GCMMF.All other activities were entrusted to

third parties. These include logistics of milk collection, distribution of dairy

products, sale of products through dealers and retail stores, some veterinary

services etc. It is worth noting that a number of these third parties are not in the

organized sector, and many are not professionally managed. Hence, while third

parties perform the activities, the Unions and GCMMF have developed a number

of mechanisms to retain control and assure quality and timely deliveries. This is

particularly critical for a perishable product such as liquid milk.

Coordination for Competitiveness:

Coordination is one of the key reasons for the success of operations involving such

an extensive network of producers and distributors at GCMMF. Some interesting

mechanisms exist for coordinating the supply chain at GCMMF.

These mechanisms are:

Inter-locking Control :

The objective for developing such an inter-locking control mechanism is to ensure

that the interest of the farmer is always kept at the top of the agenda through its

representatives who constitute the Boards of different entities that comprise the

supply chain. This form of direct representation also ensures that professional

managers and farmers work together as a team to strengthen the cooperative. This

helps in coordinating decisions across different entities as well as speeding both

the flow of information to the respective constituents and decisions.

Coordination Agency: Unique Role of Federation

Its objective is to ensure that all milk that the farmers produce gets sold in the

market either as milk or as value added products and to ensure that milk is made

available to an increasingly large section of the society at affordable prices.

33

Supplier Enhancement and Network servicing

Their objective is to ensure that producers get maximum benefit and to resolve all

their problems. They manage the procurement of milk that comes via trucks &

tankers from the VSs. They negotiate annual contracts with truckers, ensure

availability of trucks for procurement,

34

The Three-tier “Amul Model"

The Amul Model is a three-tier cooperative structure. This structure consists of a

Dairy Cooperative Society at the village level affiliated to a Milk Union at the

District level which in turn is furthler federated into a Milk Federation at the State

level. The above three-tier structure was set up in order to delegate the various

functions, milk collection is done at the Village Dairy Society, Milk Procurement

& Processing at the District Milk Union and Milk & Milk Products Marketing at

the State Milk Federation. This helps in eliminating not only internal competition

but also ensuring that economies of scale is achieved. As the above structure was

first evolved at Amul in Gujarat and thereafter replicated all over the country under

the Operation Flood Programme, it is known as the ‘Amul Model’ or ‘Anand

Pattern’ of Dairy Cooperatives.

Responsible for Marketing of Milk & Milk Products Responsible for Procurement

& Processing of Milk Responsible for Collection of Milk Responsible for Milk

Production

Village Dairy Cooperative Society (VDCS)

The main functions of the VDCS are as follows:

Collection of surplus milk from the milk producers of the village & payment

based on quality & quantity

Providing support services to the members like Veterinary First Aid, Artificial

Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder

seed sales, conducting training on Animal Husbandry & Dairying, etc.

Selling liquid milk for local consumers of the village

Supplying milk to the District Milk Union

Thus, the VDCS in an independent entity managed locally by the milk producers

and assisted by the District Milk Union.

35

District Cooperative Milk Producers’ Union (Milk Union)

The main functions of the Milk Union are as follows:

Procurement of milk from the Village Dairy Societies of the District

Arranging transportation of raw milk from the VDCS to the Milk Union.

Providing input services to the producers like Veterinary Care, Artificial

Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder

seed sales, etc.

Conducting training on Cooperative Development, Animal Husbandry &

Dairying for milk producers and conducting specialised skill development &

Leadership Development training for VDCS staff & Management Committee

members.

Providing management support to the VDCS along with regular supervision of

its activities.

Establish Chilling Centres & Dairy Plants for processing the milk received

from the villages.

Selling liquid milk & milk products within the District

Process milk into various milk & milk products as per the requirement of State

Marketing Federation.

Decide on the prices of milk to be paid to milk producers as well on the prices

of support services provided to members.

 State Cooperative Milk Federation (Federation) 

The main functions of the Federation are as follows:

Marketing of milk & milk products processed / manufactured by Milk Unions.

Establish distribution network for marketing of milk & milk products.

Arranging transportation of milk & milk products from the Milk Unions to the

market.

Creating & maintaining a brand for marketing of milk & milk products (brand

building).

Providing support services to the Milk Unions & members like Technical

Inputs, management support & advisory services.

Pooling surplus milk from the Milk Unions and supplying it to deficit Milk

Unions.

36

Establish feeder-balancing Dairy Plants for processing the surplus milk of the

Milk Unions.

Arranging for common purchase of raw materials used in manufacture /

packaging of milk products.

Decide on the prices of milk & milk products to be paid to Milk Unions.

Decide on the products to be manufactured at various Milk Unions (product-

mix) and capacity required for the same.

Conduct long-term Milk Production, Procurement & Processing as well as

Marketing Planning.

Arranging Finance for the Milk Unions and providing them technical know-

how.

Designing & Providing training on Cooperative Development, Technical &

Marketing functions.

Conflict Resolution & keeping the entire structure intact.

Today, we have around 176 cooperative dairy Unions formed by 1,25,000 dairy

cooperative societies having a total membership of around 13 million farmers on

the same pattern, who are processing and marketing milk and milk products

profitably, be it Amul in Gujarat or Verka in Punjab, Vijaya in Andhra Pradesh or

a Nandini in Karnataka. This entire process has created more than 190 dairy

processing plants spread all over India with large investments by these farmers’

institutions. These cooperatives today collect approximately 23 million kgs. of

milk per day and pay an aggregate amount of more than Rs.125 billion to the milk

producers in a year.

37

Impact of the "Amul Model"

The effects of Operation Flood Programme are more appraised by the World Bank

in its recent evaluation report. It has been proved that an investment of Rs.

20 billion over 20 years under Operation Flood Programme in 70s & 80s has

contributed in increase of India’s milk production by 40 Million Metric Tonne

(MMT) i.e. from about 20 MMT in pre- Operation Flood period to more than

60 MMT at the end of Operation flood Programme. Thus, an incremental return of

Rs. 400 billion annually have been generated by an investment of Rs. 20 billion

over a period of 20 years. This has been the most beneficial project funded by the

World Bank anywhere in the World. One can continue to see the effect of these

efforts as India’s milk production continues to increase and now stands at

90 MMT. Despite this fourfold increase in milk production, there has not been

drop in the prices of milk during the period and has continued to grow.

Due to this movement, the country’s milk production tripled between the years

1971 to 1996. Similarly, the per capita milk consumption doubled from 111 gms

per day in 1973 to 222 gms per day in 2000. Thus, these cooperatives have not just

been instrumental in economic development of the rural society of India but it also

has provided vital ingredient for improving health & nutritional requirement of the

Indian society. Very few industries of India have such parallels of development

encompassing such a large population.

These dairy cooperatives have been responsible in uplifting the social & economic

status of the women folk in particular as women are basically involved in dairying

while the men are busy with their agriculture. This has also provided a definite

source of income to the women leading to their economic emancipation.

The three-tier ‘Amul Model’ has been instrumental in bringing about the White

Revolution in the country. As per the assessment report of the World Bank on the

Impact of Dairy Development in India, the ‘Anand Pattern’ has demonstrated the

following benefits:

have multi-dimensional impacts

The importance of getting government out of commercial enterprises

The importance of market failure in agriculture

The power & problems of participatory organisations

The importance of policy

38

Achievements of the "Amul Movement"

.

The dairy cooperatives have been able to maintain democratic structure at

least at the grass-root level with the management committee of the village

level unit elected from among the members in majority of the villages.

The dairy cooperatives have also been instrumental in bridging the social

divide of caste, creed, race, religion & language at the villages, by offering

open and voluntary membership.

Achievements of GCMMF

2.8 million milk producer member families

13,759 village societies

13 District Unions

8.5 million liters of milk procured per day

Rs. 150 million disbursed in cash daily

GCMMF is the largest cooperative business of small producers with an annual

turnover of Rs. 53 billion

The Govt. of India has honoured Amul with the “Best of all categories Rajiv

Gandhi National Quality Award”.

Largest milk handling capacity in Asia

Largest Cold Chain Network

48 Sales offices, 3000 Wholesale Distributors, 5 lakh retail outlets

Export to 37 countries worth Rs. 150 crores

Winner of APEDA award for nine consecutive years

Amul Brand Building

GCMMF (AMUL) has the largest distribution network for any FMCG company. It

has nearly 50 sales offices spread all over the country, more than 3,000 wholesale

dealers and more than 5,00,000 retailers.

AMUL is also the largest exporter of dairy products in the country. AMUL is

available today in over 40 countries of the world. AMUL is exporting a wide

39

variety of products which include Whole and Skimmed Milk Powder, Cottage

Cheese (Paneer), UHT Milk, Clarified Butter (Ghee) and Indigenous Sweets. The

major markets are USA, West Indies, and countries in Africa, the Gulf Region, and

[SAARC] Singapore, The Philippines, Thailand, Japan and China.

40

Logistics management

41

LOGISTICS MANAGEMENTGCMMF(AMUL) – Managing Logistics to Align Customer

DemandsGujarat Cooperative Milk Marketing Federation (GCMMF) is the largest food

products marketing organization in India. It is state-level apex body of milk

cooperatives in Gujarat, which aims to provide remunerative returns to farmers and

also serves the interest of customers by providing quality products and value for

their money. It had Amul as the flagship brand, which is a market leader in the

milk products. The annual sales turnover of GCMMF in 2006-07 was INR 4278

crores ($1020mn). The product mix includes bread spread, powder milk, cheese,

dessert, health drink and fresh milk. The State marketing Federation comprises all

17 dairies, 10,675 villages and 2.2 million milk producers in Gujarat State. The

value chain is shown:-

GCMMF Value chain

GCMMF has a very wide network of milk collection. It requires management of a

very complex logistics of collection from members spread over wider geographical

area, Weighing the milk at collection point, determining the fat content and

calculation of purchase price. The logistics of milk collection makes it further

difficult owing to the limitations in delivering the milk within 8 hours to the dairy

for processing to avoid decay. The job of milk collection has been outsourced to

third-party logistics service suppliers (3PLs). The supply chain operations are

carried out with military-like precision using Information Technology. Over 3000

Automatic Milk Collection System Units (AMCUS) have been installed at village

societies. AMCUS helps in collecting 2.8 billion (2006-07) liters of milk from 2.6

million members.

AMCUS also helps monitoring and managing collection cycle, reduction in

pilferages, reduced human errors, on-the-spot payments to farmers, wastage

reduction, transparency of operation and operational integration. AMCUS

42

Retails

Farmers 2.6

Millions

12792Villages co-op

Societies

13 MilkProducing

UnitsGCMMF

L

3000Distribution

Points

schedules the ‘Milk Runs’ using operation research techniques for route planning

and maximum asset (milk truck tanker) utilization considering the limitation of raw

milk life. The distribution of dairy (finished) product is done nationwide through

47 depots

Using a network of 3000 dealers to serve 500,000 retailers. Another milestone in

e-commerce and e-logistics by GCMMF is AMUL’s cyber stores gifting service is

capable of serving consumers in more than 125 cities through the distributors’

network connected through AMUL’s network

43

`

Company Financials

The sales turnover of the Brand Amul :

Sales Turnover Figures

Year Rs (million)

1999-00 22185

2000-01 22588

2001-02 23365

2002-03 27457

2003-04 28941

2004-05 29225

2005-06 37736

2006-07 42778

2007-08 52554

2008-09 67113

2009-10 80053

2010-11(till August)

9251

Amul targets Rs 30,000Crore Sales by 2020.

.

`

Marketing Mix

MARKETING MIX

`

Product:

Create awareness about its different brands thereby enabling the customer to differentiate between its various brands.

Copy-write the packaging design to preserve the distinguishing identity barring competitors from imitating the same.

Introduction of larger volume pouches in line with economy packs to provide large scale buyers price benefits.

Different shaped pouches for its products for easy identification, e.g Square shaped pouch for Amul Tazaa, rectangular shaped for Amul Gold, etc.

Place:

Place refers to marketing activities that make products available to

consumers at the right time in aconvenient location. It is the process of

moving products from the producer to the consumer, which mayinvolve

several steps and the participation of multiple.

AMUL has developed federation and AMUL parlors located in several part

of country. The GCMMFhandles the works relating to managing of stocks

and distributors in country. Thus GCMMF look after thedisbursement of

product to the various marketing channels.

Amul Parlours :

`

Gujarat Cooperative Milk Marketing Federation (GCMMF) is an organization created and managed by 2.7 million farmers has been marketing dairy and food products like milk in pouch and tetra pack, butter, cheese, ghee, ice cream, beverages, pizza, milk powder etc. under the brand name Amul across the country through its strong network of branch offices and distributor network. GCMMF has ventured into organized retailing through Amul parlours in various formats. These parlours stores and sell entire range of Amul products from early morning till late in the night. We have already created a network of 3000 such parlours in prominent public places like municipal corporations, government places, educational institutions, universities/IITs/IIMs, railway stations, bus stations, airports, famous temples and tourist spots etc. Our Amul Preferred Outlet (APO) format is a specially designed franchisee formats that requires a space of 150 to 250 sq ft and an investment of Rs. 1.50 lakhs approx to start business which will fetch attractive margins. GCMMF invites young entrepreneurs to join hands with Amul in their venture of organized retailing. Essentials: A shop or an open place of 100 sq.ft to 300 sq.ft preferably on ground floor.

`

Investments: Amul Preferred Outlets or APOs are least cost business model with an estimated investment of Rs.1.5 lacs towards interiors of shop, equipment and a refundable deposit of Rs.25,000/- 

Price:

It is the value, usually in monetary terms that sellers ask for in exchange for the products they are offering.Pricing and product image are closely related. Customers will pay a higher price for well – known, well –regarded products, partly because of the image created through advertising and other promotions. Thisincludes list price, discount, allowance, and credit terms. The prices of products of AMUL are also decidedby the GCMMF. The GCMMF conducts the market survey to check the validity and feasibility of prices in the market and accordingly decides the prices of AMUL products.However, the price is inclusive of several elements like,

Cost of milk.

Labour cost.

Processing cost.

Packaging cost.

Advertising cost.

Transportation cost.

Sales promotion costs.

Taxes etc.

The GCMMF considers all these cost aspects and set them up in pricing structure to decide the selling price of milk and milk products.

Promotion

Place refers to marketing activities used to communicate positive, information

about an organization, its products and activities to directly or indirectly expedite

exchanges in target market. It includes a variety of techniques including

advertisement, sale promotion, public relation and personal selling that are used to

communicate with customers and potential customers.

`

AMUL promotes its products through newspaper, T.V.; hoarding etc.

television is the best media for advertising. The GCMMF however uses hoarding

for advertising in local areas. Hoarding designed on the creative basis attract the

customer more

ADVERTISEMENT OF AMUL IN RURAL AREA

In 1966, Amul hired Sylvester daCunha, then managing director of the advertising

agency ASto design a new ad campaign for Amul Butter. daCunha designed an add

campaign as series of hoardings with topical ads, relating to day-to-day issues.

[14] The campaign was widely popular and earned a Guiness world record for the

longest running ad campaign in the world. Since the 1980s, cartoon artist Bharat

Dabholkar has been involved with sketching the Amul ads, who rejected the trend

of using celebrities in advertisement campaigns. Dabholkar credited chairman

Varghese Kurien with creating a free atmosphere that fostered the development of

the ads.[15]

`

Despite encountering political pressure on several occasions, daCunha's agency has

made it a policy of not backing down. Some of the more controversial Amul ads

include one commenting on Naxalite uprising in West Bengal, on the Indian

Airlines employees strike, and the one depicting the Amul butter girl wearing

a Gandhi cap. World's leading dairy brand Amul has announced the launch of a

new TV campaign. The present campaign has been re created from the  2001

campaign which was consecreted from Shyam Benegal's classic National Award

Winning film –“Manthan” in the year 1976.

The title song of Manthan film (Mero gaam kathaparey…) was first used by

Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF)  in 2001 to create

the corporate television commercial for Amul. It is a folk song played to the clips

from the movie Manthan that showcases the economic independence celebrated by

the women farmers, thanks to the co-operative movement called Amul. A line was

added to the song "mare ghar jhanjar laxmi ke baje"(in my house, the bells of

wealth ring), as a symbol of the success of Amul.

Hoardings are very popular to create awareness among the people of any new

products launched by Amul.

In popular culture:-

The establishment of Amul is also known as White Revolution. The White

Revolution of India inspired the notable Indian film-maker Shyam Benegal to base

his film Manthan (1976) on it. The film starred Smita Patil, Girish

Karnad, Naseeruddin Shah and Amrish Puri. The film itself was financed by over

five lakh rural farmers in Gujarat who contributed Rs 2 each to the film'š budget.

Upon its release, these same farmers went in truckloads to watch 'their' film,

making it a commercial success.,[16] [17]  the film was chosen for the

1977 National Film Award for Best Feature Film in Hindi. The Amul success story

is taken up as a case study in marketing in many premier management institutes

across the world.

The White Revolution ushered an era of plenty from a measly amount of milk

production and distribution. Aside from the great measurable success that this

project was, it also demonstrated the power of "collective might". A small set of

poor farmers of Kheda district in Gujarat had the vision and foresight to act in a

way that was good for the society and not for the self alone.

`

COMPETITORS OF AMUL

Nestle

(Competes Amul in Choclates)

Danone

(Competes in Ice-Cream, Milkshake)

Hindustan Uniliver Limited

(Competes in Ice-Cream)

Mother Dairy

(Competes Amul in Milk)

Britania

(Competes Amul in Cheese)

`

Kraft

(Competes Amul in choclates, milkshake)

Saras

(Competes Amul in Milk)

Nandini

(Competes Amul in Ghee)

Goverdhan

Hatson

(Competes Amul in Butter)

`

RESEARCH METHODOLOGY

`

RESEARCH METHODOLOGY

PRIMARY DATA:

Collected through questionnaire to retailers

No of retailers: 50

Location: Santacruz (E), Mumbai

Collected through questionnaire to customers

No of respondents : 50

Location: All over Mumbai

`

FIELD WORK- METHOD USED FOR DATA COLLECTION

Questionnaire was prepared keeping the objective of research in mind.

Questions were asked to respondents as regards to there willingness to purchase Amul products.

The help of questionnaires conducted direct interviews, in order to get accurate information.

In order to get correct information I had to approach consumers ranging from above 18years.

I visited as many respondents as I could and asked them their real likings about any Amul product and also got an idea, How a product should be?

It is really a Herculean task to understand Consumer Behaviour, as the definition suggest, “Consumer behaviour is a physical activity as well as decision process individual engaged in when evaluating, acquiring, using and disposing goods and services”.

In order to collect accurate information I visited shops, market, Churchgate, Superstores, and Amul gallery each and every question was filled by the respondents.

Most people were not willing to answer, when they were contacted between 1.00 pm to 5.00 pm, the time when most of the people take rest during the scorching heat.

`

QUESTIONNAIRE FOR RETAILERS

SHOP NAME:AREA: ADDRESS:

1 Do you keep Amul’s products? Yes [ ] No [ ] If no plz specify the reason:-

2 How do you come to know about new products of “Amul”? By distributors [ ] By customers [ ]

By other shopkeepers [ ] By Advertisements[ ]

If Others please mention:-

3 Which product of amul is the most popular in your shop? Milk [ ] Butter [ ] Cheese [ ] Drink[ ] Ice-Cream[ ]

4. Reasons why customers prefer “Amul ”?

Better quality. [ ] Good taste. [ ]

Cheaper than other products. [ ] Branded [ ]

5. In your opinion how can amul increase their sale?

6. Do you think that the packaging of “Amul " attractive?

Yes [ ] No [ ]

7. Does the company provides you with sufficient stock of the product?

Yes [ ] No [ ]

8. How much profit do you get on other products?Less than Amul [ ] Same as Amul [ ] More than Amul [ ]

9. Retailers view about why consumers do not prefer “Amul”?

THANK YOU

`

QUESTIONNAIRE FOR CONSUMERS

1. Age

Less than 18[ ] 18-30[ ] More than 30[ ]

2. Gender:

Male[ ] Female[ ]

3. Annual income

Less than 1,00,000[ ] 1,00,000-5,00,000[ ] More than 5,00,000[ ]

4. How did you come to know about new products of “Amul"? By friends [ ] By relatives [ ]

By shopkeepers [ ] By advertisement[ ] Others [ ]

5. Which Television channel you like to watch most?

Star[ ] Zee[ ] Sony[ ] Colours[ ] Others

6. By which media of advertisement you knew about “Amul"? Newspaper [ ] Television [ ] Magazine [ ] Hoardings[ ] Others [ ]

7. Why do you prefer “Amul”?

Good quality [ ] Good taste [ ] Cheaper than other products [ ] Branded company [ ] Other reasons [ ]

8. Which brand do you like most?

9. Are Amul products easily available to you?

Yes [ ] No [ ]

THANK YOU

`

RESEARCH ANALYSIS

`

RESEARCH ANALYSIS

RETAILERS

[1] Do you keep Amul’s products?

YES 94%

NO 06%

INFERENCE:

94% of retailers surveyed stock Amul products. 6% of retailers

surveyed do not stock Amul products as Amul product are made from

cow’s milk which is thin. These retailers stock products made from

buffaloes milk as it is thick.

`

2 How do you come to know about new products of “Amul”?

By Distributors 18%

By Customers 02%

By Other Shopkeepers 11%

By Advertisements 67%

If Others please mention 03%

INFERENCE:

67% retailers who get to know about new products of Amul through

advertisement, followed 18% retailers who get information from

distributors. 11% retailers get to know about new products from other

shopkeepers and 2% from customers. 3% get to know about new

products through hoardings of Amul.

`

[3] Which product of Amul is the most popular in your shop?

Milk 63%

Butter 22%

Cheese 16%

Drink 04%

Ice-Cream 05%

INFERENCE:

Amul has many products among which Milk is the most preferred

product which is around 63% and followed by butter and then cheese.

Amul drink and chocolates have a low preference level at 4%. Sale of

Milk is nearby 49.1 llpd (lakhs litre per day).

`

[4] Reasons why customers prefer “Amul ”?

Better quality 36.84 %

Good taste 47.37%

Cheaper than other products 1.75%

Branded 14.04%

INFERENCE:In my research with retailers I found that the customers take Amul

products mostly because of its taste and Quality. Though Amul

products are not cheaper as compared to other products, it is a brand

known because of its quality and taste.

`

[5] In your opinion how can Amul increase their sale?

Ans: Amul is a well known, strong and trusted brand name,

popular amongst consumers of all generation. Sales of products

happen largely on account of product quality, trusted brand

name and value for money. Hence Amul must continue with its

current strategies and focus on appealing reminder

advertisements. Amul must also ensure an efficient supply chain

which will prevent any stock-out situations, ensuring that every

retailer or outlet stocks adequate stocks of Amul products.

`

[6] Do you think that the packaging of “Amul “attractive?

YES 98%

NO 2%

INFERENCE:-

The packaging was found attractive by 98% retailers. The pillow pack

of Amul cheese was compact and not space consuming in the

refrigerator. 2% retailers dislike the outer card board packaging of

Amul butter because of its thin quality.

`

[7] Does the company provides you with sufficient stock of the product?

YES 100%

NO 0%

INFERENCE:-

There was a 100% response yes to the availability of the stock

indicating that Amul products are never in short supply.

`

8. How much profit do you get on other products?

Less than Amul 73%

Same as Amul 19%

More than Amul 8%

INFERENCE:-

The profitability of other brands is relatively less than Amul products.

As the demand for these products are less as compared to Amul

products, Amul products generate volume sales across the counter thus

generating more profit.

`

[9] Retailers view about why consumers do not prefer “Amul”?

Ans: The only products of Amul that is not opted for are Amul Milk

Chocolates and Amul Kool Flavor Milk. This is because the

product Amul Chocolate competes with a very strong brand viz

Cadbury's Dairy Milk and Amul Kool Flavor Milk competes

with Energy drinks. Also the level of awareness of Amul

Chocolates and Amul Kool Flavor Milk is low.

`

CUSTOMERS

[1] Age

Less than 18 years 35%

18 – 30 years 40%

More than 30 years 25%

INFERENCE:-

The survey was conducted amongst respondents between the ages of

18 to 30 years. Teenagers generally like eating fast foods which

include items such as butter and cheese. They also like ice creams.

Respondents aged more than 30 years of age are the ones who mostly

buy the products as per their own and family preferences. These would

include purchases made for children who like products like cheese,

butter, ice creams and chocolates.

2. Gender:

`

Male 35%

Female 65%

INFERENCE:-

Among the respondents 35% of men and 75% of women buy the product due for their own or household consumption.

`

3. Annual income

Less than 1,00,000 20%

1,00,000-5,00,000 60%

More than 5,00,000 20%

INFERENCE:-

Respondents annual income was asked because consumers buying behavior depends on their budget.

`

4. How did you come to know about new products of “Amul"?

By friends 20%

By relatives 12%

By shopkeepers 20%

By advertisement 48%

Others 0%

INFERENCE:-

In today’s times respondents are gaining awareness through media and

friends. In some cases the shopkeepers and relatives make the

customers aware about the products.

`

[5] Which Television channel you like to watch most?

STAR 100

ZEE 15

SONY 30

COLOURS 30

Others 25

INFERENCE

About 90% of respondents prefer STAR channel. This channel is very popular among respondents of all the age groups. Thereafter SONY & Colours channels are popular but not as much as STAR. Hence it will be more beneficial to Amul to air advertisements on STAR channels.

`

(6) By which media of advertisement you knew about “Amul"?

Television 67 %

Hoardings 17%

Newspapers 08%

Magazines 05 %

Others (Mention) 03 %

INFERENCE

67% of the respondents watch advertisements through television. Thereafter rank hoardings at 17%. Over the years, legendary hoardings have been put up by Amul. Although cost of hoardings is much lower as compared to advertisements on TV but TV is the preferred media. Hence Amul should focus on advertising on TV as well.

`

7. Why do you prefer “Amul”?

Good quality 36.84 %

Good taste 47.37%

Cheaper than other products 1.75%

Branded 14.04%

INFERENCE:-

Most respondents prefer Amul on account of taste followed by product quality followed by brand name.

`

8. Which brand do you like most?

Ans :- Most respondents said they preferred Amul for all of Amul's

product lines except chocolate. For chocolates the respondents prefer

Dairy Milk.

`

9. Are Amul products easily available to you?

Yes 100%

No 0%

INFERENCE:-

100% response stated that Amul products were always available

indicating that Amul products are never in short supply. In recent years

Amul has started distributing through their own outlets “Amul

Parlours” where all the Amul products are available. In all they have

105 outlets in Mumbai.

`

LIMITATIONS

When I interviewed children and teenagers, sometimes they gave answers

under the influence of their parents or elders.

In some cases language caused a communication barrier which may have

led to flaws in respondents response.

Several respondents were reluctant to fill the questionnaire. This may have

led to flawed respondent responses.

If the respondents answer does not fall amongst the options provided in the

questionnaire, the response provided could lead to flaws in the research.

`

CONCLUSION

As we know that Amul is very big organization and market leader in dairy

products. It has maximum market share in Milk, Butter and Cheese, which are its

main/core products. As we know Amul is a co-operative organisaion but chocolate

industry is a profitable industry we can’t ignore it. With the help of research,

company can find out its week points in chocolate product and can increase its

market share through rectify mistakes. People have believed in Amul’s product

and they will accept its chocolates also if effective actions were taken.

The survey resulted into following conclusions :

In the chocolate category Amul is competing with a giant such as Cadbury's

Dairy Milk. Amul must push their chocolate range of products more

aggressively by conducting new promotional activities so that people

become aware about Amul Chocolates like Chocozoo, Bindaaz, and

Fundoo.

Quality is the dominant aspect which influences consumer to purchase

Amul product. But a brand preference for other chocolate brands and

aggressive promotional activities by competitors influences the consumer

towards them and also leads to increase sales.

In comparison to Amul Chocolate, the other players such as Cadbury,

Nestle, and Perfetti provide a better availability and give competition to

the hilt.

`

Some of the retailers felt that the cardboard package of Amul butter was too

thin. Amul can improve the packaging of this product.

Although over the years Amul has put up some legendary hoardings, in

keeping with modern times, Amul should increase advertising in television

media.

Most respondents are satisfied , People are mostly satisfied with the

overall quality of Amul Chocolate, but for the existence in the local market

Amul must use aggressive selling techniques.

`

SUGGESTIONS

Amul's dairy products are performing satisfactorily in Mumbai. For these products Amul must continue with its current strategies.

In increase the sales of Amul Chocolates in the city of Mumbai , the following recommendations regarding advertisement, distribution, promotional policies, etc, are hereby suggested:

In advertisement campaigns for Amul Chocolates, Amul should use brand ambassador which attracts each age segment i.e. Saniya Mirza, Shaktimaan, Amitabh Bacchan, Superman, Krrish, Jadoo etc.

Amul should give local advertisements apart from the advertisements given at the national level. Local advertisement must mention the exclusive Amul shops of the city.

Try and change the perception of the people through word of mouth about Amul in advertisements, because they are the best source to reach Children and families.

Though Amul chocolate advertisements are rarely shown on television yet many people could recall it as per the data of research. This shows that there is only need to give reminder advertisements.

Company should launch chocolate in new attractive packing to change image of Amul chocolate in consumers mind.

Company should introduce sales promotion schemes like free weight, pranky, tattoo, contest, free gifts etc.

Advertisement can be done with the help of animations that attracts children and teenagers because chocolates are consumed largely in this segment.

`

BIBLIOGRAPHY

www.amul.com

www.amuldairy.com

www.marketresearch.com

www.dairy.com

Newspaper(Economics times)

case study on Marketing - Symboisis Institute of Management

Logistics Management - Vinod Sople

Research Methodology - Harper W.Boyd, C. R. Kothari