Amul marketing project report

Micro Analysis of Amul Dairy and Gujarat Co-operative Milk Marketing Federation

Chapter 1

Evolution of AMUL

Before the cooperative movement began, middlemen who supplied milk to the consumers

were exploiting the dairy industry in the Kaira District. It began as a response to this

exploitation and put an end to it. It grew because it responded to the farmers

financially as well as with services. It has thrived because farmers who have a stake in

its success, own it. And because it has been managed by capable professionals and

strengthened by dedicated scientists, technologists and workers, it has forged ahead.

Today in India, there are 75,000 dairy cooperative societies, spread all over the country

with a membership of 10 million. The farmer in the village is now assured of a better

future thanks to these cooperatives. Recently one of the European Embassies in Delhi

requested Amul for information on the five biggest "companies" in the dairy business.

The first three are in the cooperative sector - The Gujarat Cooperative Milk Marketing

Federation (GCMMF), The Kaira District Cooperative Milk Producers' Union Limited

and The Mehsana District Cooperative Milk Producers' Union. The Kaira District

Cooperative is the second best in the country. It helped to create GCMMF, the apex body

of all cooperatives in Gujarat.

The Root Cause

In the forties one firm - Polsons, dominated the dairy industry. Established by a rather

enterprising gentleman who discovered that Kaira District, of what was then Bombay

Presidency, produced a good deal of milk. He established a creamery and for a while the

name Polsons was synonymous with butter - much as Amul is today.

One of Polson's businesses was to supply milk to Bombay. As Kaira district was an

abundant source of the commodity, Polson was chosen to procure it from there. He in

turn, entered into an arrangement with a number of contractors who actually went to the

villages and collected the milk. Everyone was happy. Bombay received reasonably good

quality milk and Polson made a handsome profit. The contractors too managed to earn

1 | P a g ePritesh Solanki


large margins by over quoting the farmers. It was only the poor farmers who were

unhappy for it. They invested in the animal feed and fodder and they put in their labor.

Yet, it was they who received the smallest share of the Bombay consumers' rupee. The

arrangement benefited everyone but them.

The First step: formation of Kaira union

Realizing that something needed to be done about the unequal balance of wealth, they

turned to Sardar Vallabhbhai Patel for advice. Sardar Patel knew that their only chance of

earning a decent income was when they themselves gained control over the resources

they created. He also knew that the cooperatives offered them the best chance of gaining

that control. So he advised them to stop selling milk to Polson and form a cooperative of

their own. In his opinion they were to own their own dairy unit. He said, "Throw out

Polson and his milk contractors". They followed his advice and the Kaira District

Cooperative Milk Producers' Union (AMUL) was born, in 1946. By good fortune, they

could get as Chairman - Shri Tribhuvandas Patel, an equally remarkable man. He

understood the concept of cooperation and he understood people. His integrity was

absolute. Because the farmers of Kaira district trusted and respected Tribhuvandas Patel,

the cooperative was able to pass through some very difficult times and eventually become

a model of cooperative dairying throughout the world.

The Kaira Union began with a clear goal, to ensure that its producer members received

the highest possible share of the consumers' rupee. This goal itself defined their direction.

The focus was on production by the masses, not mass production. By the early 'sixties,

the modest experiment in Kaira had not only become a success, people began to

recognize it as such. Farmers came from all parts of Gujarat to learn. They went back to

their own districts and started their own cooperatives. The result - Together, the district

milk producers unions of Gujarat own the Gujarat Cooperative Milk Marketing

Federation, which markets the milk and milk products manufactured by its owners. The

Federation's turnover was over Rs. 1700 crore making it the largest in the food industry.



In 1964, the then Prime Minister Shri Lal Bahadur Shastri came to inaugurate cattle feed

factory owned by Amul near Anand. Impressed by the cooperative's success, he

expressed his wish to "transplant the spirit of Anand in many other places". He wanted

the Anand model of dairy development replicated in other parts of the country. With

institutions owned by rural producers, which were sensitive to their needs and responsive

to their demands, it was an ideal tool for progress. The National Dairy Development

Board was created in 1965 in response to this call.

Amul: The origin

The mighty Ganges at its origin is but a tiny stream in the Gangotri ranges of the

Himalayas. Similar is the story of Amul, which inspired 'Operation Flood' and heralded

the 'White Revolution' in India. It began with two village cooperatives and 250 liters of

milk per day, nothing but a trickle compared to the flood it has become today. Today

Amul collects processes and distributes over a million liters of milk and milk

products per day, during the peak, on behalf of more than a thousand village cooperatives

owned by half a million-farmer members. Further, as Ganga-ma carries the aspirations of

generations for moksha, Amul too has become a symbol of the aspirations of millions of

farmers, creating a pattern of liberation and self-reliance for every farmer to follow.

The start of a revolution

The revolution started as awareness among the farmers that grew and matured into a

protest movement and the determination to liberate them. Over four decades ago, the life

of a farmer in Kaira District was very much like that of his counterpart anywhere else in

India. His income was derived almost entirely from seasonal crops. The income from

milch buffaloes was undependable. Private traders and middlemen controlled the

marketing and distribution system for the milk. As milk is perishable, farmers were

compelled to sell it for whatever they were offered. Often, they had to sell cream and

ghee at throwaway prices. In this situation, the one who gained was the private trader.



Gradually, the realization dawned on the farmers that the exploitation by the trader could

be checked only if marketed their milk themselves. In order to do that they needed to

form some sort of an organization. This realization is what led to the establishment of the

Kaira District Cooperative Milk Producers' Union Limited (popularly known as

Amul) that was formally registered on December 14, 1946.

The Kaira Union began pasteurizing milk for the Bombay Milk Scheme in June 1948. An

assured market proved a great incentive to the milk producers of the district. By the end

of 1948, more than 400 farmers joined in more village societies, and the quantity of milk

handled by one Union increased from 250 to 5,000 liters a day.

Obstacles: Springboards for success

Each failure, each obstacle, each stumbling block can be turned into a success story. In

the early years, Amul had to face a number of problems. With every problem came

opportunity. A chance to turn a negative into a positive. Milk by products and

supplementary yield, which suffered from the same lack of marketing and distribution

facilities, became encumbrance. Instead of being bogged down by their fate they were

used as stepping-stones for expansion. Backward integration of the process led the

cooperatives to advances in animal husbandry and veterinary practice.

Milk by products: An excuse to expand

The response to these provided stimulus for further growth. For example, as the

movement spread in the district, it was found that the Bombay Milk Scheme could not

absorb the extra milk collected by the Kaira Union in winter, when the production on an

average was 2.5 times more than in summer. Thus, even by 1953, the farmer-members

had no assured market for the extra milk produced in winter. They were again forced to

sell a large surplus at low rates to the middlemen. The remedy was to set up a plant to

process milk into products like butter and milk powder. A Rs 5 million plant to

manufacture milk powder and butter was completed in 1955. In 1958, the factory was

expanded to manufacture sweetened condensed milk. Two years later, a new wing was

added for the manufacture of 2500 tons of roller-dried baby food and 600 tons of cheese



per year, the former based on a formula developed with the assistance of Central Food

Technological Research Institute (CFTRI), Mysore. It was the first time anywhere in the

world that cheese or baby food was made from buffalo milk on a large, commercial scale.

Another milestone was the completion of a project to manufacture balanced cattle feed.

The plant was donated by OXFAM under the Freedom from Hunger Campaign of the

FAO.

To meet the requirement of milk powder for the Defense, the Kaira Union was asked by

the Government of India in 1963 to setup additional milk drying capacity. A new dairy

capable of producing 40 tons of milk powder and 20 tons of butter a day was speedily

completed. It was declared open in 1965. The Mogar Complex where high protein

weaning food, chocolate and malted food are being made was another initiative by Amul

to ensure that while it fulfilled the social responsibility to meet the demand for liquid

milk, its members were not deprived of the benefits to be had from the sale of high value-

added products.

Cattle: From stumbling blocks to building blocks

Traditionally dairying was a subsidiary occupation of the farmers of Kaira. However, the

contribution to the farmer's income was not as prominent as his attachment to dairying as

a tradition handed down from one generation to the next. The milk yield from animals,

which were maintained mainly on the by products of the farm, was decidedly low. That

together with the lack of facilities to market even the little produced rendered the

scientific practice of animal husbandry irrational as well as unaffordable. The return on

the investment as well as the prospects of being able to market the product looked very

bleak. It was a vicious cycle reinforced by generations of beliefs.

The Kaira Union broke the cycle by not only taking upon themselves the responsibility of

collecting the marketable surplus of milk but also provided the members with every

provision needed to enhance production. Thus the Kaira Union has full-fledged

machinery geared to provide animal health care and breeding facilities. As early as late

fifties, the Union started making high quality buffalo semen. Through village society



workers artificial insemination service was made available to the rural animal population.

The Union started its mobile veterinary services to render animal health care at the

farmers' doorstep. Probably for the first time in the country, veterinary first aid services,

by trained personnel, were made available in the villages. Fully qualified staff mans the

Union’s 16 mobile veterinary dispensaries. All the villages are visited bi-monthly, on a

predetermined day, to provide animal health care. A 24-hour Emergency Service is also

available at a fee (Rs. 35 for members and Rs. 100 for non-members). All the mobile

veterinary vans are equipped with Radio Telephones.

The Union runs a semen production center where it maintains high pedigreed Surti

buffalo bulls; Holstein Friesian bulls, Jersey bulls and 50 per cent crossbred bulls. The

semen obtained from these bulls is used for artificial breeding of buffaloes and cows

belonging to the farmer members of the district. The artificial insemination service has

become very popular because it regulates the frequency of calving in cows and buffaloes

thus reducing their dry period. Not only that, a balanced feed concentrate is manufactured

in the Union's Cattle Feed Plant and sold to the members through the societies at cost

price.

Impressive though its growth, the unique feature of the Amul sagas did not lie in the

extensive use of modern technology, nor the range of its products, not even the rapid

inroads it made into the market for dairy products. The essence of the Amul story lies in

the breakthrough it achieved in modernizing the subsistence economy of a sector by

organizing the rural producers in the areas.



Chapter 2

Production Function

Introduction

Explosion of the production technology and changes in technical field is going to bring

out revolution in the industry sector which eventually gives stand to study and favors the

come backing subject i.e. production and management.

Production and operation management is planning, organizing, staffing, directing and

controlling of all the production system those portion of organization that convert inputs

into products and services. In general production system takes raw material, personnel,

machines, buildings and other resources and produce products and services.

The core of production system is its conversion subsystem where in workers; raw

materials are used to convert inputs into products and services. This production

department is at heart of the firm, as it is able to produce low cost products and superior

quality in timely manners.

Thus, there arises enormous need of giving due importance to this department as a whole

and a strong concrete base being foundation pillars of a manufacturing organization, if

the intention is to succeed domestically and globally.

Co operative Milk Producing Societies in Gujarat

Following are the cooperatives that function under GCMMF.

Ahmedabad Dist Coop Milk Producers’ Union Ltd, Ahmedabad. Soc: 433, Mems:

52,428. Av Milk Proc: 90,000 lpd.

Banaskantha Dist Coop Milk Producers’ Union Ltd, Palanpur. Soc: 1,130, Mems:

97,251. Av Milk Proc: 295,000 lpd.



Baroda Dist Coop Milk Producers’ Union Ltd, Baroda. Soc: 783, Mems: 156,691. Av

Milk Proc: 225,000 lpd.

Bharuch Dist Coop Milk Producers’ Union Ltd, Bharuch. Soc: 289, Mems: 37,900.

Av Milk Proc: 38,000 lpd.

Bhavnagar Dist Coop Milk Producers’ Union Ltd, Bhavnagar. Soc: 190, Mems:

25,532. Av Milk Proc: 23,000 lpd.

Gandhinagar Dist Coop Milk Producers’ Union Ltd, Gandhinagar. Soc: 56, Mems:

13,000. Av Milk Proc: 46,500 lpd.

Junagadh Dist Coop Milk Producers’ Union Ltd, Junagadh. Soc: 400, Mems: 41,500.

Av Milk Proc: 73,000 lpd.

Kaira Dist Coop Milk Producers’ Union Ltd, Amul Dairy, Anand. Soc: 943, Mems:

513,280. Av Milk Proc: 740,000 lpd.

Kutch Dist Coop Milk Producers’ Union Ltd, Kutch Dairy, Madhapar. Av Milk Proc:

25,000 lpd.

Mehsana Dist Coop Milk Producers’ Union Ltd, Dudhsagar Dairy, Mehsana. Soc:

1,020, Mems: 292,800. Av Milk Proc: 704,402 lpd.

Panchmahal Dist Coop Milk Producers’ Union Ltd, Godhra. Soc: 1,133, Mems:

126,510. Av Milk Proc: 112,000 lpd.

Rajkot Dist Coop Milk Producers’ Union Ltd, Rajkot. Soc: 193, Mems: 29,620. Av

Milk Proc: 50,000 lpd.

Sabarkantha Dist Coop Milk Producers’ Union Ltd, Sabar Dairy, Himatnagar. Soc:

1,315, Mems: 200,482. Av Milk Proc: 322,346 lpd.

Surat Dist Coop Milk Producers’ Union Ltd, Sumul Dairy, Surat. Soc: 864, Mems:

160,000. Av Milk Proc: 300,000 lpd.

Surendranagar Dist Coop Milk Producers’ Union Ltd, Surendranagar. Soc: 486,

Mems: 31,000. Av Milk Proc: 30,000 lpd.

Valsad Dist Coop Milk Producers’ Union Ltd, Vasudhara Dairy, Valsad. Soc: 348,

Mems: 35,900. Av Milk Proc: 74,400 lpd.



Plant Layout

Plant layout is the overall arrangement of the machine tools, handling equipments,

storeroom and other various accessories required for facilitating production in a factory.

These arrangements are pre-planned with the results that the building has been

constructed to fit a layout of a given process.

AMUL plant is indigenously worked out with facilitation of various production processes

and production of multi products under one plant. The total plot is nearly about 2.27 kms.

Separate buildings are provided with required arrangements of machine tools handling

and computers connection through the control room to fit for varying product-

manufacturing departments.

The plant is engaged in producing milk, ice creams, milk powder and ghee. Entire

department is uniquely provided with facilities for the processing each product. There are

4 production departments and packaging departments pertaining to each product

respectively.

Thus, plant layout encompasses all production and service facilities and provides for the

most effective utilization of the men, materials and machines constituting the process. It

is the master blue print of coordinating all operations.

A good layout results in elimination or minimization of accidents and hazards and cost

while increases the output. Thus a good layout specifically is observed to be beneficial on

the following grounds:

Efforts minimization

Fewer material handling will be provided manufacturing units cost will be lover

Bottlenecking of production will be eliminated

Total item in process will be less

Specialization of operations is facilitated

Less inspection will be required

Production control will be easier to achieve



Plant investment can be held to the necessary minimum

Plant and equipment obsolescence may be less

Wastage space will be eliminated

Thus, a true beneficiary is provided to the plant through good and sound planning for

plant layout.

Operating Analysis

Amul’s only source of raw material is Village Milk societies. Milk is brought from such

village milk societies every morning and evening. This milk is then sent to the dairy

plant. In the dairy plant the milk is processed i.e. it is made free from germs.

Milk Processing

The entire process of milk can be divided into following steps:

Steps:

Milk Processing Chart:

Collection of Raw-Milk

Electronic Milk Test

Methyline Blue Reduction Test

Purchasing And Standardizing Process

Separation Process

Quality Check



Packaging Process

Cold Storage

Steps in Production Process

1. Collection of Raw Milk

Raw milk is collected from different co-operative societies of Gujarat. About 122000

liters of raw milk is collected per day. Before this milk is sent to the laboratory for testing

the ‘FAT & SNF’ proportion, the milk is separated from the raw milk. The milk is taken

from the chilling centers to Ahmedabad with the help of trucks.

After collecting the samples of milk, they are taken to the laboratory ,where two types of

tests are conducted.

Electronic milk test

Methyline blue reduction test

Electronic Milk Test

Before pasteurizing the milk the samples are taken to the laboratory. In the laboratory

with the help of machine called electronic milk tester, the proportion of SNF & FAT is

checked with phosphate solution. When the colour of the milk becomes yellow, it is sent

for pasteurisation.



Methyline blue reduction test

Another test, which is taken in the laboratory, is called Methyline blue reduction test.

This test is conducted for checking for how long the milk will remain fresh. To check

this, 10 ml of milk is taken and 1 ml of methyline blue solution is added to it. It is then

kept under water at 57-degree C. After one hour, if the solution losses its colour than it is

called raw milk. If the solution remains the same even after 5 hours than it is considered

as fresh milk, which remains constant for a long period of time.

The dairy fixes the proportion of FAT & SAF.

MILK SNF FAT

Buffalo 9% 6%

Cow 8.5% 4.5%

After laboratory gives green signal and confirming the raw milk at the reception dock is

brought in to the house connected with the pump is sent to the milk processing plant. This

is than chilled below 4 degree C. and then stored in milk silos. After that milk is

processed which has two steps i.e. pasteurising and standardizing.

2. Pasteurising & standardizing

After collecting and checking and conducting laboratory tests, the pasteurising process is

conducted. To pasteurized the milk means to kill all the germs in the milk by a particular

method which was invented by a scientist called James Pasteur and so the name

pasteurisation.

In pasteurizing, the milk is first heated at 72 C to 76 C for 15 seconds and then it is

immediately cooled below 4 C. By this method they destroy the pathogenic bacteria

present in the raw milk. But if the right degree of temperature is not provided there are

chances that the milk might still contain germs. After this process some milk goes to

separator machine and remaining is proportionately sent for standardization.

Standardization process is known such as it bifurcates the milk in 3 categories varying

according to that FAT & SNF contents. The equipment named OSTA. Auto



standardization adjusts the fat directly. The computer is just ordered whether gold or

standard milk is to be rationed and the same will be received with appropriate contents.

Ready Milk = Pasteurised + Standardized.

3. Separation process

Separator machine separates two kinds of products, skimmed milk & cream, through

channels. There are 100 disks fixed in separator machines, which revolve at 5000 rpm

(revolution per minute). It is taken to the tanks, which has the capacity of 20000 litres.

Whenever the milk is needed from the tank, it is tested in the laboratory and the deficit

proportion fat is added by mixing cream. This process continues for 24 hours.

4 Quality Check

Pasteurized milk is sent for a quality check in the Quality Assurance laboratory of the

dairy plant. Within 14 seconds FAT and SNF proportion is received regarding 30 lack

litres of milk. The total investment put into the lab by the Dairy plant is of Rs. 6 crores.

This laboratory only checks and analyses the powder, milk and ghee. There is a separate

ice-cream analysing laboratory.

5 Packing Process

After this the milk is sent for packing to the milk packing station in the dairy plant. In the

milk packaging station there are huge pipelines and behind each of them there is polyfill

machine from which the material to pack milk comes out. There are 12 such polyfill

machines in the packaging station from which the materials to pack milk comes out.

From each of these 12 machines 100 pouches are packed in one single minute.

6. Storage

Then the milk is sent to the cold storage of the dairy where the milk is stored until it is

dispatched. Here the milk is stored at temperature ranging from 5 C to 10 C, it is

maintained with the help of exhaust fans having silicon chips. About 40000 litres of milk

is dispatched from the cold storage of the dairy plant everyday. The damaged pouches are

kept a side and the milk is once again put to the tank.



Milk Powder

For converting milk powder first of all water content is evaporated in condensing plant.

By this process they get condensed milk, it is used as a raw material. There after the milk

is sent to the drying plant. The spray drying plant is huge in size with a height of 70 feet.

The plant is divided into many floors to enable easy use of the plant. First of all the raw

material i.e. condensed milk is put into the first floor of the plant along with air at 200 C.

By this process the remaining water, which the condensed milk might have retained is

also evaporated and milk comes as powder but this is not the last stage.

This powder is again put in to a machine called milk calendaria, where it is turned in to

real milk powder. Its capacity is 1000 litres per 15 minutes. Then again this milk powder

is put into a Dense Waise Vessel. Here the lumps are removed and uniform milk powder

is sent up.

After processing the powder is sent for quality checking at quality assurance laboratory.

After the quality confirms, this milk powder is differentiated, by adding different flavors

to them like elaichi, chocolate & sugar free milk powder. Thereafter they are packed in

tins and boxes. Afterwards it is stored at storage department.



Chapter 3

GCMMF: An Overview

Gujarat Cooperative Milk Marketing Federation (GCMMF) is the India’s largest food

product marketing organization. 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 that are good value for money.

Members 12 district cooperative milk producers' Union

No. of Producer Members 2.36 million

No. of Village Societies 11,333

Total Milk handling capacity 6.9 million litres per day

Milk collection (Total – 2003-04) 1.81 billion litres

Milk collection (Daily Average 2003-04) 4.97 million litres

Milk Drying Capacity 511 metric Tons per day

Cattle feed manufacturing Capacity 2340 MTs per day

Sales Turnover Rs (million) US $ (in million)

1996-97 15540 450

1997-98 18840 455

1998-99 22192 493

1999-00 22185 493

2000-01 22588 500

2001-02 23365 500

2002-03 27457 575

2003-04 28941 616



List of Products Marketed

Bread spreads

Amul Butter

Amul Lite Low Fat Breadspread

Amul Cooking Butter

Cheese Range

Amul Pasteurized Processed Cheddar Cheese

Amul Processed Cheese Spread

Amul Pizza (Mozarella) Cheese

Amul Shredded Pizza Cheese

Amul Emmental Cheese

Amul Gouda Cheese

Amul Malai Paneer (cottage cheese), Frozen, Refrigerated and Tinned

Utterly Delicious Pizza

Mithaee Range (Ethnic sweets)

Amul Shrikhand (Mango, Saffron, Almond Pistachio, Cardamom)

Amul Amrakhand

Amul Mithaee Gulabjamuns

Amul Mithaee Gulabjamun Mix

Amul Mithaee Kulfi Mix

Avsar Ladoos

UHT Milk Range

Amul Shakti 3% fat Milk

Amul Taaza 1.5% fat Milk



Amul Gold 4.5% fat Milk

Amul Lite Slim-n-Trim Milk 0% fat milk

Amul Shakti Toned Milk

Amul Fresh Cream

Amul Snowcap Softy Mix

Pure Ghee

Amul Pure Ghee

Sagar Pure Ghee

Amul Cow Ghee

Infant Milk Range

Amul Infant Milk Formula 1 (0-6 months)

Amul Infant Milk Formula 2 (6 months above)

Amulspray Infant Milk Food

Milk Powders

Amul Full Cream Milk Powder

Amulya Dairy Whitener

Sagar Skimmed Milk Powder

Sagar Tea and Coffee Whitener

Sweetened Condensed Milk

Amul Mithaimate Sweetened Condensed Milk

Fresh Milk

Amul Taaza Toned Milk 3% fat

Amul Gold Full Cream Milk 6% fat

Amul Shakti Standardized Milk 4.5% fat



Amul Slim & Trim Double Toned Milk 1.5% fat

Amul Saathi Skimmed Milk 0% fat

Amul Cow Milk

Curd Products

Yogi Sweetened Flavored Dahi (Dessert)

Amul Masti Dahi (fresh curd)

Amul Butter Milk

Amul Lassee

Amul Ice creams

Royal Treat Range (Rajbhog, Cappuchino, Chocochips, Butterscotch, Tutti

Frutti)

Nut-o-Mania Range (Kaju Drakshi, Kesar Pista, Roasted Almond, Kesar

Carnival, Badshahi Badam Kulfi, Shista Pista Kulfi)

Utsav Range (Anjir, Roasted Almond)

Simply Delicious Range (Vanilla, Strawberry, Pineapple, Rose, Chocolate)

Nature's Treat (Alphanso Mango, Fresh Litchi, Anjir, Fresh Strawberry, Black

Currant)

Sundae Range (Mango, Black Currant, Chocolate, Strawberry)

Millennium Ice cream (Cheese with Almonds, Dates with Honey)

Milk Bars (Chocobar, Mango Dolly, Raspberry Dolly, Shahi Badam Kulfi, Shahi

Pista Kulfi, Mawa Malai Kulfi, Green Pista Kulfi)

Cool Candies (Orange, Mango)

Cassatta

Tricone Cones (Butterscotch, Chocolate)

Megabite Almond Cone

Frostik - 3 layer chocolate Bar

Fundoo Range - exclusively for kids

SlimScoop Fat Free Frozen Dessert (Vanilla, Banana, Mango, Pineapple)



Health Isabcool

Chocolate & Confectionery

Amul Milk Chocolate

Amul Fruit & Nut Chocolate

Brown Beverage

Nutramul Malted Milk Food

Milk Drink

Amul Kool Flavoured Milk

Health Beverage

Amul Shakti White Milk Food

Ready to Serve Soups

Masti Tomato Soup

Masti Hot & Sour Soup

Recently launched

Amul Ganthiya



Organisation Structure

Organization Structure is divided into two parts:

External Organization Structure

Internal Organization Structure

External Organization Structure

External Organization Structure is the organization structure that affects the organization

from the out side.

State Level Marketing Federation

District Milk Product Union Ltd.

Village Milk Product Union Ltd.

Villagers

As we know, GCMMF is unit of Gujarat Milk Marketing Federation, which is a co-

operative organization. The villagers of more than 10000 villages of Gujarat are the bases

of this structure. They all make village milk producers union, district level milk

producers union and then a state level marketing federation is established. The structure

is line relationship, which provides easy way to operation. It also provides better

communication between two stages.



Internal Organization Structure:

The following is internal organisation chart of Amul:

Organization Structure Chart

Chairman

Managing Director

General Manager

Ass. General Manager

Finance Production Marketing Sales & Purchase Personnel Dept. Dept. Dept. Dept. Dept.

Senior Senior Senior Senior SeniorManager Manager Manager Manager Manager

Finance Production Marketing Sales PersonnelManager Manager Manager Manager Manager

Accountant Officer Marketing Officer P.R.F.Executive

Officers Supervisor F.S.R. Salesmen Executive



A systematic & well-defined organizational structure plays a vital role & provides

accurate information to the top-level management. An organisation structure defines a

clear-cut line of authorities & responsibilities among the employees of GCMMF. The

Organisation structure of Amul is well-arranged structure. At a glance a person can

completely come to know about the organization structure.

Amul is leaded by the director under him five branches viz. Factory, Marketing,

Accounts, Purchase, Human Resources Department.

Factory department has a separate general manager under him there are six braches viz.

Production, Stores, Distribution, Cold Storage, Quality, and Deep-freezing. This

department takes care of the factory work.

Marketing department has regional senior marketing manager and under him there is a

regional manager. This department takes care of the marketing aspects of Amul.

Accounts department takes care regarding accounts i.e. day-to-day work. Under the

accountant there is one clerk.

Purchase department takes care regarding the purchase of raw materials and many other

things.



Chapter 4

Marketing Function

Gujarat Co-operative Milk Marketing Federation (GCMMF)

GCMMF was the first co-operative to be set up under operation flood. GCMMF’S dairy

plant commissioned in 1994 is one of the most modern and largest plants. It can handle

up to 1million litres of milk per day. The plant also has facilities for pasteurizing and

packing. It was funded by NDDB. GCMMF’s milk is sold under its flagship brand Amul.

GCMMF was formed in 1973. As an apex marketing federation of 12 district milk unions

of Gujarat to operate own marketing and distribution network in India and abroad.

GCMMF sales turnover grew by 21% Rs. 15.5 billion to Rs. 18.8 billion including

consignment sales of Rs. 3.7 billion sale of Amul milk in Gujarat and Maharastra

increased by 11% and 16% respectively. Dairy product turnover registered a 19% growth.

Amul butter registered 18% growth. The sale of Amul & Sagar Ghee increased by 47%.

Amul Cheese registered 60% value growth.

GCMMF’s sales to the defense services were Rs.233 million during the year, were

mainly to Burma, Uganda and West Africa. The company plans to expand its export

markets in Saudi Arabia and other Middle East countries.

During 1999, launching it in 8 states and 2 union territories extended the Amul ice-cream

brand franchise. Amul ice creams have become India’s 2nd largest brand. Recently it has

commissioned a dairy at Kolkata.

New products launched during the early 2000 were Amul Pizza, Cheese and Amul slice

cheese, Amul paneer and Amul Mithaee range. Safal mango drink has been launched by

Strategic alliance with Safal (A union of NDDB). The product range to be launched

under the Safal brand will include fruit drinks, squashes, pickles, jams, and ketchup and

mango pulp.



Amul ice-cream brand franchise was extended with launch in 8 states & 2 union

territories. Amul ice cream has become the 2nd largest brand in the country & has

garnered major share in its existing markets in a short time span of 3 years. Amul’s main

ice-cream manufacturing facility is located at Gandhinagar which is Asia’s largest and

most modern integrated ice-cream manufacturing plant and uses world renewed

refrigeration units and an efficient cold chain. GCMMF has become very popular because

of its excellent marketing strategy. GCMMF marketing strategy is to understand the

consumer needs, develop products that provide superior value at fewer prices. GCMMF

has shown a tremendous commitment to the floodwater situations. GCMMF has never

stopped the supply of milk and other milk products. And unlike other competitors, it has

never taken wrong benefits in these kinds of situations. It has developed an excellent

distribution channel to provide its products to the consumers. It has made its products

available in each part of Gujarat & India.

Market Segmentation

Market segment is a very important function for the market department of the GCMMF,

because the market consists of buyers different in many ways. They are different in their

wants resources, locating buying practices. Because buyers have unique needs and wants,

each buyer is potentially separate market.

Geographic segmentation

Under these variables, GCMMF has divided market into different geographic units such

as region, states, cities etc. GCMMF sells its products by geographic segment action like

in the north where production of milk is very high the sale of Amul’s product is not

much. But in the western region it is high. GCMMF identifies this kind of variables and

deals with it.

Demographic Segmentation

Under this variable GCMMF has divided market into several segments such as age,

gender, family, size, income, occupation etc. For each group GCMMF marketing strategy



is different. In milk Amul targets all the class where as in the other products like butter,

ghee, ice-cream etc. it targets to the middle and higher middle class.

Distribution Network

Most producers work with marketing intermediaries to bring their products to market.

The marketing intermediaries make up a marketing channel also called distribution

cannel. Distribution channels are sets of interdependent organizations involved in the

process of making a product or service available for use or consumption.

The Head Office of GCMMF is located at Anand. The entire market is divided in 5

zones. The zonal offices are located at Ahmedabad, Mumbai, New Delhi, Kolkata and

Chennai. Moreover there are 49 Depots located across the country and GCMMF caters to

13 Export markets.

A zero level of channel also called a direct marketing channel consists of a manufacturer

selling directly to the final customers. A one level channel; contains one selling

intermediary such as retailer to the final customers. A two level channel two

intermediaries are typically wholesaler and retailer. A three level channel are typically

wholesaler, retailer and jobber in between.

GCMMF has an excellent distribution. It is its distribution channel, which has made it so

popular. GCMMF’s products like milk and milk products are perishable. It becomes that

much important for them to have a good distribution.



Distribution Chart

We can see from above figure that GCMMF distribution channel is simple and clear. The

products change hands for three times before it reaches to the final consumer. First of all

the products are stored at the Agents end who are mere facilitators in the network. Then

the products are sold to wholesale dealers who then sell to retailers and then the product

finally reaches the consumers.

Amul Parlors

Amul has come out with a unique concept of Amul Parlours. They have classified them

under four types namely:

Center for excellence

On the Move

Amul Parlours

Amul Preferred Outlets

Center for Excellence: These Amul Parlours are specifically at a place, which has a

class of excellence of its own. We can find such parlors at the Infosys, IIMA, NID

Ahmedabad etc.


Products

Agents

Wholesaler

Retailer

Consumer


On the Move: These parlors are at the railway stations and at different state bus depots

across different cities.

Amul Parlours: These parlors can be seen at different gardens across different cities.

These are fully owned by Amul.

Amul Preferred Outlets: These are the private shops that keep the entire of product

range of Amul. They also agree not to keep any competitor brands in the outlets. They

can keep other brands that are in the non-competitor category.

Amul has more than 200 such outlets right now. It wants to have 1,00,000 parlors by the

end of the year 2010.

Managing Competition

The Indian market is dominated by a large number of small local and regional players.

There are an estimated 150 manufacturers in the organized segment, which accounts for

30-35% of sales and about 1000 units in the unorganized segments of the market. In the

organized segment the significant brands are Kwality Walls , Vadilal, Amul, Havmor,

Mother dairy and Baskins & Robbins. GCMMF is facing very tough competition from

both in and outside India.

Amul combats competition from its competitors by providing quality products at a price

which its customers value. Along with good quality products and reasonable price the

packaging is also very good. Most of its products are available in many flavors. Excellent

advertising backs its products and helps GCMMF (AMUL) to leave its competitors a

tough time. Also Amul has come out with Amul Parlours to cater to various segments of

customers. Amul has a very strong Brand Image in the Domestic market. Many products

are exported by GCMMF.



Exports

GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading

House" status. GCMMF has received the APEDA Award from Government of India for

Excellence in Dairy Product Exports for the last 9 years.

The major export products are:

Consumer Packs

Amul Pure Ghee

Amul Butter

Amul Shrikhand

Amul Mithaee Gulabjamun

Nutramul Brown Beverage

Amulspray Infant Milk Food

Amul Cheese

Amul Malai Paneer

Amul UHT Milk (Long Life)

Amul Fresh Cream

Bulk Packs

Amul Skimmed Milk Powder

Amul Full Cream Milk Powder

The products are exported to 18 countries namely, USA, Kuwait, Qatar, UAE, Yemen,

Bahrain, Muscat, Saudi Arabia, Tanzania, Madagascar, Sri Lanka, Singapore, Nepal,

Bangladesh, Nepal Thailand and Australia.



Advertising by Amul

Amul has two agencies that look after its entire range of products namely FCB Ulka and

Da Cunha.

FCB Ulka looks after a broad range of products namely, Amul Lite Breadspread, Amul

Shrikhand, Amul Chocolates, Amul Paneer, Amul SnowCap Softy Mix Ice cream,

Amul/Sagar Ghee, Amul Infant Milk Formula 1 & 2, Sagar Tea and Coffee whitener,

Amul Spray Infant Milk Food, Amul Mithaee, Amul Gulab Jamun, Amulya Dairy

Whitener, Mithaimate Sweetened Condensed Milk, Amul Ice cream, Sagar Skimmed

Milk Powder and Amul Whole milk Powder.

Da Cunha looks after the Amul butter. Da Cunha also prepares the very popular Amul

butter billboard campaigns, which we see at various locations. Over and above the Amul

butter, Da Cunha also looks after the Amul Cheese, Cheese spread, Gouda Cheese,

Emmental Cheese, Masti Dahi and Buttermilk, Amul Slim-n-Trim, Amul Taaza and

Amul Gold (all different brands of milk), Amul Fresh Cream, Amul Chocolate Milk,

Amul Fresh Milk and Nutramul.

FCB Ulka also looks after the corporate campaign.



Chapter 5

Finance Function

Introduction

Financial management is that managerial activity which is concerned with the planning

and controlling of the firm’s financial resources. Finance is nothing to other but the

money. Money is necessary input for economic activities. In the other wards “Finance is

the common denominator for carrying out vast range of corporate objectives.” This is a

co-operative unit, so the finance is raised from members by a way of share capital. In this

share capital is limited. This unit has invested so many rupees in the structure of

organization. Amul has a long-term finance project.

Financial Details

Name of bankers

The Kaira District Central Co-op. Bank Ltd.

State Bank of India

State Bank of Saurashtra

UTI Bank Ltd

Corporation Bank

Name of the Auditor: A.B. GadhviSpecial Auditor (Milk)Milk Audit OfficeAnand



Financial Analysis

Analysis of Relevant Ratios

Debt – Equity v/s Long Term Debt – Equity

The debt – equity ratio shows the percentage of debt and net worth. Long-term debt to

equity ratio shows the percentage of long-term debt to net worth.

It seems that GCMMF has used more of long – term debt as compared to Short – term

debt. As a result it has ended up paying more of interest. But as far as the percentage of

debt to equity is concerned the use of debt has been declining over years. Of the total

capital employed debt is more as compared to equity. Thus, it can be concluded that the

stake of creditors and bankers is more in the total capital employed.



Interest Coverage Ratio

Interest coverage ratio is used to test the firm’s debt servicing capacity. It shows the

number of times interest charges are covered by funds that are ordinarily available for

payment.

Interpretation

Interest coverage ratio of the firm was 1.84 times in 2001, which has increased to 8.28

times in 2004. This indicates that firm is easily able to pay the interest charges out of its

present earnings.



Dupont Analysis

Interpretation

The company’s profit before depreciation, interest and tax has remained constant over the

years. In 2003, though the sales/CE has increased the PBDIT/Sales ratio has declined.

This can be attributed increasing level of expenditure of the company. But the ROCE has

increased due to decreasing capital employed in the year 2003. Overall ROCE has

remained around 26%.



Components of ROE

Interpretation

The trend in CE/Net Worth has remained steady over the years except during 2003 where

the CE/Net Worth ratio has declined. This can be attributed to an increase in Net Worth

and a decrease in the Capital Employed. PAT/PBDIT showing an increasing trend, this

can be attributed to the declining taxes over the years. PBDIT/CE ratio has increased in

2003 because of decrease in capital employed and decreased in 2004 due to increase in

capital employed. ROE has increased due to an increase in PAT.



ROCE v/s ROE

Interpretation

ROCE and ROE have shown an increasing trend up to year 2002, but after that in the

year 2003 it is showing an opposite trend. This is due to an increase in Net worth and

decrease in capital employed. Again, in 2004 there is an opposite trend in both ROCE

and ROE because of increase in capital employed.



Common Size Statement of P & L Statement of GCMMF

2001 2002 2003 2004

Total Income 100.00 100.00 100.00 100.00

EXPENDITURE:

Raw Materials 92.09 90.92 91.08 74.77

Power & Fuel Cost 0.57 0.66 0.71 0.50

Employee Cost 0.84 0.96 0.95 0.86

Other Manufacturing Expenses 1.03 1.31 1.58 17.91

Selling and Administration Expenses 3.89 4.07 4.22 0.81

Miscellaneous Expenses 0.16 0.41 0.11 3.85

Less: Pre-operative Expenses Capitalised 0.00 0.00 0.00 0.00

Total Expenditure 98.59 98.33 98.65 98.71

Operating Profit 1.41 1.67 1.35 1.29

Interest 0.37 0.36 0.24 0.08

Gross Profit 1.04 1.31 1.11 1.21

Depreciation 0.73 0.83 0.72 0.61

Profit Before Tax 0.31 0.49 0.39 0.59

Tax 0.06 0.14 0.11 0.18

Deferred Tax 0.00 0.00 0.00 0.00

Reported Net Profit 0.25 0.35 0.29 0.41

Extraordinary Items 0.00 0.00 0.00 0.00

Adjusted Net Profit 0.25 0.35 0.29 0.41

Adjst. below Net Profit 0.00 0.00 0.00 0.00

P & L Balance brought forward 0.00 0.00 0.00 0.00

Statutory Appropriations 0.00 0.00 0.00 0.00

Appropriations 0.25 0.35 0.29 0.41

P & L Balance carried down 0.00 0.00 0.00 0.00



Dividend 0.18 0.17 0.19 0.14

Preference Dividend 0.00 0.00 0.00 0.00

Equity Dividend % 0.59 0.58 0.51 0.36

Interpretation

Up to 2003 raw material cost has remained steady, but in 2004 it has declined by 18%.

Selling and Administrative expenses have also shown a declining trend such that in 2004

it is showing only a nominal part of total expenditure. Even though there is a decline in

the above-mentioned expenditures, the total expenditure has almost remained constant.

This is due to a drastic increase of 1033% in other manufacturing expenses. Operating

profit is showing a declining trend since 2002.

Common Size Statement of Balance sheet of GCMMF

2001 2002 2003 2004

SOURCES OF FUNDS:

Share Capital 23.63 22.31 40.62 25.20

Reserves Total 30.55 30.32 42.32 27.60

Total Shareholders Funds 54.18 52.64 82.94 52.80

Secured Loans 45.82 47.36 17.06 4.65

Unsecured Loans 0.00 0.00 0.00 42.55

Total Debt 45.82 47.36 17.06 47.20

Total Liabilities 100.00 100.00 100.00 100.00

APPLICATION OF FUNDS:

Gross Block 154.14 167.74 248.28 171.55

Less : Accumulated Depreciation 83.73 92.89 145.19 101.20

Net Block 70.41 74.85 103.10 70.35

Lease Adjustment 0.00 0.00 0.00 0.00

Capital Work in Progress 11.76 3.60 2.15 0.00



Investments 0.26 0.25 0.34 0.21

Current Assets, Loans & Advances

Inventories 123.18 139.46 203.27 79.91

Sundry Debtors 19.40 21.84 32.71 12.28

Cash and Bank 62.36 62.54 74.11 42.34

Loans and Advances 6.87 10.13 17.64 40.26

Total Current Assets 211.81 233.97 327.72 174.80

Less : Current Liabilities and Provisions

Current Liabilities 193.31 207.72 325.27 124.08

Provisions 4.67 4.95 8.03 18.67

Total Current Liabilities 197.98 212.67 333.31 142.74

Net Current Assets 13.82 21.30 -5.58 32.05

Miscellaneous Expenses not written off 0.00 0.00 0.00 0.00

Deferred Tax Assets 3.75 0.00 0.00 1.20

Deferred Tax Liability 0.00 0.00 0.00 3.80

Net Deferred Tax 3.75 0.00 0.00 -2.61

Total Assets 100.00 100.00 100.00 100.00

Contingent Liabilities 302.18 263.26 204.48 10.89

Interpretation

The proportion of debt in total liabilities has increased from 17.06% in 2003 to 47.20% in

2004. Total Shareholders funds have decreased from 82.94% in 2003 to 52.80% in 2004.

Assets have reduced by around 30% in the year 2004; this may be due the sale of assets.

Current assets have reduced as compared to 2003. Working capital was negative in 2003

and in 2004 there has been a considerable improvement of around 670%. Also,

contingent liabilities have reduced to a great extent, which is a positive sign.



Cash Flow Analysis of GCMMF

Rs. In crore2004 2003

Cash Flow Summary Cash and Cash Equivalents at Beginning of the year 84.08 79.18 Net Cash from Operating Activities 50.41 29.5 Net Cash Used in Investing Activities -13.95 -17.39 Net Cash Used in Financing Activities -47.56 -7.21 Net Inc/(Dec) in Cash and Cash Equivalent -11.1 4.9 Cash and Cash Equivalents at End of the year 72.98 84.08

Interpretation

Gains from operating activities have increased 70.44% in 2004. Uses of cash in

investment activities have decreased 19% in 2004. There has been whopping increase in

financing activities that is at 559% in 2004.

Thus there has been a decrease 13% in cash in 2004 from 2003.



Chapter 6

Human Resource Function

Introduction

The success to any industrial unit depends upon their effective personnel department.

Personnel department is basically commercial with human resource of an enterprise and it

also continues procurement, development, non-monetary comparison, integration and

maintenance of the personnel purpose of contribution towards the accomplishment of the

organization’s major goal and objectives. Personnel management in opinion of many

authors is true management. So sometimes it is told that management means to manage

human behaviour. Personnel management is that phase of management, which deals with

the effective control of use of manpower as distinguished from other source of power.

The management includes all aspects of works such as recruitment, selection, medical

checkups, various types of training, transfer, welfare activities, union activities, etc.

Recruitment

Recruitment forms the first stage in the process which continues with selection and cased

with the placement of the candidate recruitment makes it possible to acquire the number

and types of people necessary to ensure to continues operation of the organization

requirement has, been regarded as the most important function of personnel

administration.

Amul’s recruitment and selection process is very systematic and comprehensive. All

division head in inform about their manpower requirements. According to the

requirement of the personnel division they get require employees by resources like postal

services employment exchange education institution and advertisement.



Amul Dairy receives lots of applications in response to their advertisement. These forms

contain general information about the candidates. Then forms are to be checked by

authorized person and after scrutinizing eliminates the unqualified applications. Short

listed Applicants are called for personal interview. Interview committee conducts this

interview. When applicants are too many, then they conduct a written test. Those who

pass this test are called for interview and are selected on the basis of smart selection

process.

Sources of Recruitment

By giving advertisement in news papers

Labour Union

Voluntary Organisation

Leasing Contract

Private Employment Agency

Government Employment Exchange

School, Colleges, Universities and Professional Institutes

Recommendation of present Employee

Recruitment as Temporary Workers

Selection

Selection process is concerned with screening relevant information about an applicant.

The objective of selection process is to determine whether an applicant meets the

qualification for a specific job and to choose the applicant who is most likely to perform

well in that job.

Training & Development

Training and management development are the two separate things. Training is required

for persons working at operation level and it is required for increasing the knowledge and



skills of employees so that they can perform their tasks in the best manner while

management development refers to the activities that take place in order to improve the

performance of the managerial level personnel. Training and management development

contribute a lot in increasing the productivity. To facilitate newly selected person at

operation level, he is placed at the work under supervision of a senior worker who gives

guidance and instructions about the particular work. For the managerial level personnel,

they select only those people who are having an experience of at least three years in

similar fields. Then a newly selected person’s performance is observed for three months.

Promotion & Transfer Policy

Promotion

Two main policies followed by the organisation are:

Automatic promotion

Merit cum seniority

During the period of 1972, promotion was given automatically to a person who had

completed his 6 yrs and 2nd promotion was given after 7 yrs. At that time they had a

policy of rewarding merit on the basis of seniority. But now it is solely based on merit.

Managing Director signs the promotion order after the recommendation by the personnel

& Administration department.

Transfer

Transfer is the pre-relative right of the management. Transfer is done if it is necessary for

the organization. Transfer is generally affected to build up a more satisfactory work team

& to achieve a specific purpose. In this organisation transfer takes place in flash season.

Transfers are also to adjust the work forces of one plant with another.

Wage & Salary Administration

Attendance is considered to be one of the major & important factors responsible for the

Wage & Salary Administration.



At present catalogue record is received from the time keeping office and is maintained in

the register, which is known as master roll. Timekeeper sends this master roll to the

accounts department. Attendance of each & every employee is analyzed & entered into

the computer. The record is scrutinized and a statutory and non-statutory deduction is

made and then after salary is calculated for each employee.

The wages are paid in cash & also credited in corporate salary a/c. Employee wages are

deducted according to grades of workers. It consists of A, B, C, D, E, and F grade of

workers.

Job Description

Job Description is an important document, which is basically descriptive in nature and

contains a statement of job analysis. It defines the scope of job activities i.e. major

responsibilities & positioning of job in organization. It provides the worker and

supervisor with a clear idea of what kind of work they need to do to meet the demands of

the job. Here those who are at senior Level make job description regarding managerial

position.



Chapter 7

SWOT Analysis

Strengths

Demand profile: Absolutely optimistic. Milk being a necessity product, the demand

will stay and the sales at GCMMF are bound to increase over a period of time.

Margins: Quite reasonable, even on packed liquid milk. The margins are enough to

limit the entry of potential entrants.

Flexibility of product mix: Tremendous. With balancing equipment, GCMMF has

kept adding a wide array of products to its product line.

Availability of raw material: Abundant. Presently, more than 80 per cent of milk

produced is flowing into the unorganized sector, which requires proper channelization.

Amul & GCMMF have leveraged this and has got itself a strong base of suppliers who

provide them milk throughout the year. Large number of dairy plants in public and

cooperative sectors besides several others coming up in the private sector would result in

competition. Because of this the end consumer would benefit and a good product mix

would emerge.

Technical manpower: Professionally trained, technical human resource pool, built

over last 30 years is the strength that GCMMF has. The employees of GCCMF are highly

recognized in the industry and have earned name for themselves as well as the federation.

Enhanced Milk Production: Increase in the milk production with consequently

increased availability of milk processing has led to increase in consumption and faster

access to the consumers through effective distribution. The technology is brought from

Denmark and the production of milk has benefited from that.

Transportation: The transportation facilities and the easy availability of the special

trucks have provided a boost. Cold refrigerated trucks are there in place and the

warehouses also have the cold storage facilities that facilitate the transportation.



Vast resources: Country has vast natural resources which offer immense potential

growth and development for dairying. Moreover the financial resources available with the

federation are immense and the reputation is such that in case of any further

requirements, it can approach any institution and raise any form of capital.

Increasing purchase power and changing tastes of the consumers: The purchasing

power of the residents is increasing. As a result a lot of products are being consumed.

Moreover, the consuming habits are changing. As a result, the demand for products such

as butter and cheese is increasing at a very rapid rate.

Weaknesses

Perishability: Pasteurization has overcome this weakness partially. UHT gives milk

long life. Still perishability is there at the milk vendors end. This does result in loss of

some production. But Amul Dairy is taking steps to store milk at the vendors end.

Surely, many new processes will follow to improve milk quality and extend its shelf life.

Lack of control over yield: Theoretically, there is little control over milk yield. A lot

depends upon the monsoon in the country. This is because of the quality of cattle feed

that would be available will not have the required nutritional content. Steps are taken to

provide awareness regarding these and the penetration of quality feed is being increased.

Moreover, increased awareness of developments like embryo transplant, artificial

insemination and properly managed animal husbandry practices, coupled with higher

income to rural milk producers should automatically lead to improvement in milk yields.

Logistics of procurement: Woes of bad roads and inadequate transportation facility

make milk procurement problematic. All these factors lead to perishability of the

procured milk. But with the overall economic improvement in India, these problems

would also get solved.

Erratic power supply: The erratic power supply would cause harm in the processing

of milk.

Underdeveloped systems: There still exist underdeveloped raw milk collection

systems in some parts of the country. However steps are being taken such as setting up of

cold storage points at key collection centers to combat the situation.



Lack of proper implementation: Dairy development programmes have not been

fully implemented as per the needs of the region in different agro-climatic zones.

Infrastructure: The infrastructure that is available is not up to the current world

standards. Also lack of infrastructure for offering dairy business management

programmes to the trained personnel is creating a hindrance.

Opportunities

"Failure is never final, and success never ending”. Dr Kurien bears out this statement

perfectly. He entered the industry when there were only threats. He met failure head-on,

and now he clearly is an example of ‘never ending success’! If dairy entrepreneurs are

looking for opportunities in India, the following areas must be tapped:

Competition: With so many newcomers entering this industry, competition is

becoming tougher day by day. But then competition has to be faced as a ground reality.

The market is large enough for many to carve out their niche. Moreover due to

competition, there is a chance to better serve the market with innovative products.

Value addition: There is a phenomenal scope for innovations in product

development, packaging and presentation. Given below are potential areas of value

addition:

o Steps should be taken to introduce value-added products like shrikhand, ice

creams, paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater

presence and flexibility in the market place along with opportunities in the field of

brand building.

o Addition of cultured products like yoghurt and cheese lend further strength - both

in terms of utilization of resources and presence in the market place.

o Yet another aspect can be the addition of infant foods, geriatric foods and

nutritional.

Export potential: Efforts to exploit export potential are already on. Amul is

exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new

GATT treaty, opportunities will increase tremendously for the export of agri-products in



general and dairy products in particular. There is a strong basis of cost efficiency, which

GCMMF can leverage in the world market.

Markets: The market for the traditional as wells as processed dairy products is

expanding both at the domestic and international front.

IT support: Software is now available for project formulation for dairy enterprise. It

has also computerized its production processes. Mother Dairy was the first fully

computerized dairy in India. In its Anand plant all products are processed computerized,

which does not have any hand touch during any stage of process.

Threats

Milk vendors, the un-organized sector: Today milk vendors are occupying the

pride of place in the industry. Organized dissemination of information about the harm

that they are doing to producers and consumers should see a steady decline in their

importance.

Infestation: There are increasing incidents of chemical contaminants as well as

residual antibiotics in milk.

Quality: The quality of the milk is found to be poor as compared to the international

standards. One of the reasons for these according to the EU and America is the method of

milching the milk. In these nations the milk is hands by the farmers owning the cattle do

milched with the help of machines, while in India.

Exploitation: The liberalization of the Dairy Industry is likely to be exploited by the

multinationals. They will be interested manufacturing the milk products, which yield high

profits. It will create milk shortage in the country adversely affecting the consumers.

Subsidy by Western Nations: There have been incidences wherein the Western

nations subsidizing the dairy products by a few means like transportation. Because of

such reasons the final price of the product goes below the prices prevailing in the Indian

Market. Hence it proves a threat to GCMMF’s and other Indian dairy products.

Creation of Non Tariff Barriers by Developed Nations: The Developed Nations

have created Non Tariff Barriers related to Quality of the milk specifically. They want

that the milk be processed with potable Air and Water. They also want that the milching

of cattle be done with the help of machines. However this type if system is yet to evolve



in India. Because of these reasons they are reducing the market potential of Indian made

products, where GCMMF holds a lions share.

The study of this SWOT analysis shows that the ‘strengths’ and ‘opportunities’ far

outweigh ‘weaknesses’ and ‘threats’. Strengths and opportunities are fundamental and

weaknesses and threats are transitory. Any investment idea can do well only when you

have three essential ingredients: entrepreneurship (the ability to take risks), innovative

approach (in product lines and marketing) and values (of quality/ethics).



Chapter 8

Michael Porter’s Five-Force Analysis

According to Porter (1980) a firm must be analyzed in relation to its industry. Factors

outside the industry tend to influence all the industry’s firms in the same way and are thus

not as important to study.

To a large extent, industry structure governs the strategies open to the firms. The

profitability and attractiveness of an industry is dependent of the level of competition.

Competition in an industry originates from industry structure and goes well beyond the

behavior of individual competitors.

According to Porter, each industry has a potential profitability and the profitability for the

firms is dependent on the competitive forces in the industry. Porter identifies five

competitive forces that derive from the ambition to obtain as large share of the

profitability as possible. The five forces are the foundation of the five-force model.

Porter’s Five-Force Model

The major competitors of the Amul dairy include:

Milk Gayatri

Royal

Sardar

Uttam

Shreshtha

Ice Crean Vadilal



Havmor

Kwality Walls Max

Local & Regional players

Ghee Gayatri

Nestle

Milk Powder Nestle

Chocolate Nestle

Cadbury

The success of the national and local competitor’s brands includes effective distribution

system, advertising, good pricing policy etc. The factors ascribed by porter are:

Threats of new entrants

Bargaining power of suppliers

Bargaining power of buyers

Rivalry among competitors

Threats from substitutes

These factors can be explained in context to GCMMF as below:

Threats of New Entrants

Economies of Scale: GCMMF enjoys economies of scale, which is difficult

to match by any other competitor. It is because of this reason that no regional

competitor has grown to a national level.

Cost and Resource advantages: Amul dairy is co-operative society. That

means “cooperation among competitive” is the fundamental principle. Amul dairy



is managed under the norms of GCMMF and market the products under the brand

name ‘Amul’, which has a very good reputation at domestic and international

level. Here, the raw material procurement is very difficult for the new entrants.

Consequently Capital requirement is also high. Still new entrants are emerging

such as domestic and international players. So the threats of new entrants are

moderate.

Brand Preferences and Consumer Loyalty: There is an immense level of

Brand Preference of Amul in the minds of the people. The level of preference

specifically in the liquid milk sector is that they would go to other retailer if the

retailer does not have milk.

Access to Distribution Channels: The distribution channel of GCMMF is a

very planned and perfect one. For any new entrant to enter it would be a very

difficult task. For GCMMF the result is years of hard work and its investment in

its employees as well as at different levels in the distribution network.

Inability to match the technology and specialized know-how of firms

already in the industry: The technology used by Amul is imported from

Denmark. It is a state of art technology. To get this technology in India, a firm

would require a huge amount of resources.

Capital Requirements: The total investment required in the industry is huge

and is a decision worth considering even for MNC’s. The investment decisions

cover the processing costs as well as the marketing costs. To compete with the

brand Amul in India is difficult as Amul is synonymous to Quality.

Bargaining power of supplier

The objective of Amul dairy is not profiting. As it is a part of co-operative

society, it runs for the benefit of farmers those are the suppliers of milk and users

of milk products. According the concept of the cooperative society supplier has

bargaining power to have a good return on his or her supply. However, supplier

has limited rights to bargain with the cooperative society because it is made and

run for the sake of mass and not for individual benefit. But it is made sure that the

supplier gets his fair share of return.



There is appropriate bargaining power of the supplier. In olden days there

were not any kind of cooperative societies as the farmer was exploited. But,

nowadays the farmer’s rights are protected under the cooperative rules and

regulations, which ultimately results in moderate power of bargaining from the

supplier.

Bargaining power of buyers

Cost of switching to competitor brands: The switching of brands is seen

very much in products such as ice cream, curd, milk powders, milk additives etc.

but it can be seen comparatively less in liquid milk category. Even if the buyers

shift to the other brands of milk, the value that they get is less than they would get

from consuming Amul.

Large no. of buyers: Milk is a necessity product and hence is a mass product.

It has a considerable share of the rupee spent by any Indian. Moreover the buyers

are spread evenly over the country and do not have any bargaining power.

Rivalry among competitors

Demand for the product: The demand of the products of GCMMF is

increasing at a very healthy rate. To stand against the rivalry GCMMF is coming

with a wide range of products.

Nature of Competitors: In different business category GCMMF faces

competition from different players. In the Milk powder category it faces

competition from Cadbury & Nestle, in the chocolate category also I faces

competition from Cadbury & Nestle. While in the ice cream market it faces

competition from Kwality Walls Max and Havmor. In butter and chesses it faces

competition from Britannia. Moreover in almost all categories there is presence of

local retailers and processors and milk vendors. Rivalry intensifies as each of the



competitors has different lines and this would in turn depend on the importance

the line holds for the competitor.

Mergers and Acquisitions: As such in the industry there are no mergers or

acquisitions. However if any MNC wishes to enter through this route then the

competition might be severe.

Threats Of Substitute

Availability of attractive priced substitutes: Different substitutes are

available for different category of products. There is ample availability of low

priced substitutes from local vendors and retailers. This is a front where GCMMF

is still finding hard to combat.

Satisfaction level of substitutes: Customers do consider these products as

equal on quality if not better then the products of GCMMF. Hence the rate of

customers switching to the substitutes is very high. Moreover the buyers also can

switch to the customers easily without any hurdles.

Not immediate substitutes: Distant substitutes are present in many of the

categories of business of GCMMF. For example in the Masti Buttermilk category

it faces competition from cold drinks and ice cream.

These 5 forces interact among themselves at different degrees over a period of time.

Moreover it will get intense or loosen up depending upon the moves of its competitors,

buyers, suppliers, etc. However GCMMF has been able to outperform on almost all fronts

excluding a few lines of business.



Chapter 9

Future Plans

To achieve and maintain competitive advantage, innovation in product design and

delivery are increasingly essential.

To innovate at each stage in value chain – production, procurement, processing,

marketing and branding.

To devise more effective ways of attracting and retaining skilled human resources.

To provide them an adequately self-motivating work environment that draws the best

out of them on a sustained basis.

The ‘Dairy Demonstration Project’ is a collective effort of the Union and Bank. The

project envisages encouraging the farmers to use high yielding animals and modern aids

to increase production. The union will provide necessary guidance to the milk producers

on various techniques and required financial support will be forthcoming with the co-

participation of Bank. To illustrate and bring about better understanding of the project, a

“model farm” is being set up at Mogar and Khatraj to impart training to the participants.

“Suvarna Jayanti Gram Swarojgar Yojana” helps its beneficiaries to avail loan from

the bank with the Government approval. Under this scheme a marginal producer

intending to avail the benefits, is allocated an amount adequate for purchase of 2 milch

animals along with required other implements on a soft loan basis. This scheme not only

help enhance the productivity and living standards of subscribing producers, the union in

turn will also be benefited by the way of enlarged membership and increased milk

procurement.

Future Challenges

The organization may face the following challenges in the future:



Global demands and changes.

Foreign affiliations.

Competition.

Liberalisation.

Changing values.

Urban shifting.

Changing interests.

Adoption of latest technology.

Production according to international standards with foremost quality.

Increase need for R&D.

To keep the prices steady and reduce production and maintenance expenses.

To enhance milk production by adopting better animal husbandry practices and

improving calf rearing practices in order to assure a stand in international market in the

foreseeable future.

Expansion and upgrading of plant and equipment to meet increasing demanded for

quality and quantity with the help of better-qualified personnel.

Rapid increase in productivity while respecting the basic man and animal dynamic i.e.,

to control dairy and agriculture development in India.

Development of new markets and expansion of old ones replacing additional system

with quality packaged milk products and vegetable.

Creating a national information network to ensure that accurate timely information is

available to all who need it.

These are some of the challenges, which the organisation foresees and requires coping up

with.



Chapter 10

Conclusion

Amul means different things to different people.

To a milk producer – A life enriching experience

To a consumer – Assurance of having wholesome milk

To a mother – A reliable source of nourishment for her child

To the country – Rural development and self reliance

Amul has given a new dimension to marketing. It showed that a democratically owned

and managed farmer organisation can successfully develop national market, but by doing

this Amul provided virtually guaranteed marketing service to the milk producer at his

door step. Amul has displayed dynamic initiative at a time when its multinational

competitors were merely content to use depreciated machinery.

Following factors have given us the insight to conclude, why Amul is thriving with

success today:

Emphasis on Quality: All the products of Amul are of highest grade. Consumers

were very quick to perceive this and the sales success that followed reflected the public’s

stamp of approval.

Modern marketing: A good product alone cannot succeed unless backed by

innovative marketing, including packaging, price and promotion. Amul’s advertising

campaigns created a splash in the market that eventually led to a tidal wave that rocked

the competition.

Management: The judicious handling of people, recognition of performance and

encouragement for a good try has gone a long way to build a sound foundation of people.

All the basic components of management that is production, marketing, finance and

organisation behavior are nicely arrayed at Amul.



The co-operative concept: The fundamental thesis underlying the Anand model is that

the rural producer must own and enjoy the assets they have helped to create. The model

has inspired the creation of hundreds of other Anand.

The system has succeeded mainly because of involvement of people on such a large

scale, providing assured market at remunerated prices for milk producers, enables the

consumers access to high quality milk and milk products, ploughing back the profit to the

members, part of the profit is used by the society for common good and community

development.

Amul is doing everything in the best possible manner. Just look at its product quality,

packaging, advertising and nation wide marketing network. This has given Amul an edge

over its competitors.



BIBLIOGRAPHY

Johnson Gerry, Scholes Kevan; “Exploring Corporate Strategy-Text and Cases”,

Sixth Edition, Prentice Hall of India Pvt. Ltd. 2004, pp 100-102,134,183.

Thompson Arthur A. Jr., Strickland J. A. III; “Strategic Management-Concepts and

Cases”, Thirteenth Edition, Tata McGraw-Hill Publishing Co. Ltd. 2003, pp 117, 123 –

127.

Patel, Rameshbhai P., “Amul, The Kaira District Cooperative Milk Producers’ Union

Ltd. Anand, 50 Years of Milk & Health.”

Dr. Kurien., “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.

Anand, 50 Years of Milk & Health.”

Carter, Thomas R., “Amul, The Kaira District Cooperative Milk Producers’ Union


Patel, T. K., “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.


Gowda, Shri Deve, “Amul, The Kaira District Cooperative Milk Producers’ Union


Halse, Michael, “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.


Baxi, J. J. “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd. Anand,

50 Years of Milk & Health.”

Singh, Katar, Mittal, S. P., Singh Virendra, “Amul, The Kaira District Cooperative

Milk Producers’ Union Ltd. Anand, 50 Years of Milk & Health.”

Dr. Oza, D. R., “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.


Thodarson, Bruce, “Amul, The Kaira District Cooperative Milk Producers’ Union


Singh, Katar, “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.


GCMMF, 30th Annual Report 2003 –2004.



The Kaira District Cooperative Milk Producers’ Union Ltd. Anand, 58 th Annual

Report 2003 –2004.

Website Visited

www.amul.coop

www.indiadairy.com

www.indianmilkproducts.com



Annexure

Annexure I - Profit & loss account of GCMMF ltd.

Particulars Mar 1999 Mar 2000 Mar 2001 Mar 2002 Mar 2003 Mar 2004

Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths-

Income Operating income 1818.59 1909.15 1983.28 2057.5 2362.46 2833.78 Other income 2.46 2.54 3.8 4.69 3.98 4.3 Change in stocks -20.7 26.91 44.84 29.03 13.44 -72.19 Non-recurring income 1.86 1.34 1.3 0.48 1 0.88-

Expenditure Operating expenses 240.69 295.46 345.98 395.01 472.61 489.78 Purchase of finished goods 1453.3 1518.71 1544.21 1521.02 1715.58 2068.72 Energy (power & fuel) 0 9.36 11.61 12.72 15.63 13.96 Salaries & wages 11.32 13.36 17.15 20.18 22.64 23.85 VRS expenses 0 0 0 0 0 0 Indirect taxes 0.71 9.94 8.62 18.04 22.34 22.34 Other expenses 60.93 64.59 76.64 89.92 99.72 111.68 Less: expenses capitalized 0 0 0 0 0 0 Non-recurring expenses 0.07 0 0.3 0.09 0.29 0.72-

Profits / losses PBDIT 35.19 28.52 28.71 34.72 32.07 35.72 Financial charges 6.8 7.01 7.53 7.44 5.7 2.26PBDT 28.39 21.51 21.18 27.28 26.37 33.46 Depreciation 13.88 14.42 14.86 17.18 17.07 17.01PBT 14.51 7.09 6.32 10.1 9.3 16.45 Tax provision 1.5 1.3 1.25 2.85 2.5 5.11PAT 13.01 5.79 5.07 7.25 6.8 11.34-

Appropriation of profits Dividends 3 3.6 3.6 3.6 4.5 4 Retained earnings 10.01 2.19 1.47 3.65 2.3 7.34



Annexure II - Assets of Gujarat Co-Op. Milk Mktg. Federation Ltd.


Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths- Gross fixed assets 160.98 183.59 210.64 230.37 246.63 272.32 Land & building 22.77 23.61 28.2 34.16 35.65 37.24 Plant & machinery 124.52 135.53 151.94 174.3 190.03 207.82 Other fixed assets 13.37 14.45 15.57 17.07 18.83 20.58 Capital WIP 0.32 10 14.93 4.84 2.12 6.68 Less: cumulative depreciation 73.39 89.81 106.31 124.89 142.97 160.65Net fixed assets 87.59 93.78 104.33 105.48 103.66 111.67

Investments 0.33 0.33 0.33 0.33 0.33 0.33 In group / associate cos. 0 0 0 0.09 0.09 0.09 In mutual funds 0 0 0 0 0 0 Other investments 0.33 0.33 0.33 0.24 0.24 0.24- Marketable investment 0.09 0 0.09 0.09 0.09 0.09 In group / associate cos. 0 0 0 0.09 0.09 0.09Quoted investment 0.09 0.09 0.09 0.09 0.09 0.09Market value of quoted investment 0 0 2.18 0 3.42 7.47- Deferred tax assets 0 0 0 0 0 1.9- Inventories 83.7 111.49 156.4 187.52 200.16 126.85 Raw materials and stores 4.82 5.85 5.92 8.01 7.21 6.09 Finished and semi-finished goods 78.88 105.64 150.48 179.51 192.95 120.76 Stock of traded / finished goods 78.18 104.79 148.91 178.51 191.82 119.97- Receivables 27.05 40.85 49.83 57.56 66.66 83.41 Sundry debtors 8.28 18.04 24.63 29.36 32.21 19.5 Debtors exceeding six months 0.25 0.05 0.46 2.21 1.51 0.65 Accrued income 0 0.21 0.41 1.37 2.51 0.09 Advances / loans to corporate bodies 0 0 0 0 0 0 Group / associate cos. 0 0 0 0 0 0 Other cos. 0 0 0 0 0 0 Deposits with govt. / agencies 0.21 4.91 5.64 0.68 0.62 0.59 Advance payment of tax 11.41 12.71 14.81 16.42 21.25 23.55 Other receivables 7.15 4.98 4.34 9.73 10.07 39.68- Cash & bank balance 57.11 82.84 79.18 84.08 72.98 67.21 Cash in hand 21.33 44.51 34.8 37.47 36.28 26.84 Bank balance 35.78 38.33 44.38 46.61 36.7 40.37Total assets 255.78 329.29 390.07 434.97 443.79 391.37



Annexure III – Liabilities of Gujarat Co-Op. Milk Mktg. Federation Ltd.


Rs. Crore (Non-Annualised) 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths- Net worth 69.36 69.23 68.78 70.77 81.68 83.81 Authorised capital 50 50 50 50 50 50 Issued equity capital 20 30 30 30 40 40 Paid-up equity capital 20 30 30 30 40 40 Bonus equity capital 0 10 10 0 10 10- Reserves & surplus 49.36 39.23 38.78 40.77 41.68 43.81 Free reserves 34.07 26.23 27.67 15.22 15.8 17.27 Other free reserves 34.07 26.23 27.67 15.22 15.8 17.27 Specific reserves 15.29 13 11.11 25.55 25.88 26.54- Borrowings 60.75 63.62 58.18 63.68 153.7 74.93 Bank borrowings 5.24 8.27 4.43 12.16 153.7 74.93 Short term bank borrowings 5.24 8.27 4.43 12.16 153.7 74.93 Govt. / sales tax deferral borrowings 55.51 55.35 53.75 51.52 0 0- Secured borrowings 60.75 63.62 58.18 63.68 16.8 7.38Unsecured borrowings 0 0 0 0 136.9 67.55- Deferred tax liabilities 0 0 0 0 0 6.04- Current liabilities & provisions 125.67 196.44 263.11 300.52 208.41 226.59 Current liabilities 113.46 182.34 245.64 279.29 183.42 196.96 Sundry creditors 68.11 148.43 206.06 244.75 138.95 136.49 Interest accrued / due 0 0 0 0 0 0 Creditors for capital goods 0 0 0 0 0 0 Other current liabilities 45.35 33.91 39.58 34.54 44.47 60.47 Share application money 0 0 0 0 0 0 Advance against wip 0 0 0 0 0 0 Provisions 12.21 14.1 17.47 21.23 24.99 29.63 Tax provision 9.18 10.48 11.73 14.58 17.08 22.08 Dividend provision 3 3.6 3.6 3.6 4.5 4 Dividend tax provision 0 0 0 0 0 0 Other provisions 0.03 0.02 2.14 3.05 3.41 3.55Total liabilities 255.78 329.29 390.07 434.97 443.79 391.37Contingent liabilities Disputed taxes 1.84 1.98 5.14 4.63 6.73 3.16 Total guarantees 291.57 340.83 377.59 348.4 193.6 14.12 Liabilities on capital account 2.67 25.38 11.43 7.99 4.02 2.31


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