To counter effectively the competition and to increase the market share of Amul Milk in Allahabad city

Summer Internship Report by Durgesh Tiwari, Class of 2015

Introduction

Amul has been marketing its milk products in Allahabad since 2006. So far, it has launched its lower end products milk, curd and buttermilk. Higher end products such as cheese and ice cream are not marketed on a large scale. Such products may be available in Lucknow but not in Allahabad.

Durgesh Tiwari student of MBA Rural Development Programme of the G.B. Pant Social Science Institute Allahabad undertook summer internship with Marketing Manager (Allahabad) of the Gujarat Cooperative Milk Marketing Federation (hereafter, GCMMF). We met the Marketing Manager in his Allahabad office. As a marketing manager his concerns were to increase the market share of Amul Milk in Allahabad and to counter his competitors in an effective manner.

Objectives:

After discussions with the Marketing Manager, we arrived at the following objectives of our task:

(a) To assess the existing market share of Amul Milk among branded milk in Allahabad city;

(b) To identify the problem in marketing of Amul Milk and to support strategies to enhance the market share of Amul Milk;

(c) To assess sufficiency of stock relative to demand at the retail outlet; and

(d) To assess the relative performance of retailers for various brands and reasons thereof.

Methodology:

According to the marketing manager there are approximately 15,000 outlets in Allahabad, out of which 5000 stores are selling milk of Amul. There are 15 distributors in the city of Allahabad. We selected 700 outlets at random covering all 15 distributors. A short questionnaire was administered to elicit information (Appendix 1).

Main findings

1. The percent retailers holding stock of Amul Milk were 66. The marketing manager did not approve of our findings and insisted that 94 percent retailers kept stock of Amul products. We did not argue with him for same reasons explained later.

Percent retailers holding stock of Amul Milk in Al-

lahabad city

YesNo

2. Retailers not holding Amul products gave a number of reasons for the same (see table 1). These reasons relate to Amul policies and strategies as well as to the distribution and financial management. We shall discuss each of these in subsequent sections.

Table: Per cent responses by reason of retailers for not stocking Amul products

Reasons for not stocking Amul Products

Percent Retailers

Area not accessed by Amul distributors 13Low margin 25Leakage of milk pouch 41No return of leaked pouch and unsold Pack

21

Source: Our survey, 2014

3. Distributors did not access 13 percent of sample retailers in the sample as these were located in narrow lanes of Allahabad city where transport is a problem. Besides, the distributors do not give less than 5 litres to retailers and there are some small retailers who can sell only one or two litres in a day. Such small retailers told us that the neighboring big retailer joined hands with big distributors to not allow supply milk to them. The big retailers wanted the potential small retailers to buy milk from them .The small retailers also informed us that the distributors wanted security from them. Amul does not have a policy of security, informed the marketing manager. When we asked the distributors, he said that the small retailers do not pay in time. In our opinion, the distributors minimize their transaction costs of reaching out to small retailers, and the time taken to negotiate with them.

4. Another reason for not holding Amul stock was the no return policy of leaked pouches and unsold packs. Almost 62 percent retailers did not keep Amul milk stock for this reason. The small retailers are also wary of problem of leakages as this would reduce their earnings to near zero.

5. Last but not the least, lowest margin on every unit of the Amul milk product sold also dissuaded retailers. In case of Amul some distributors sold the crate for Rs. 563.00 instead of Rs 561.60, which further reduced the commission to Rs. 0.48 per ½ litre. Amul is also the price leader in the sense when it increases its price, other brands follow and keep their prices slightly lower.

Table: Commission given by different brands on ½ litre of milk and price of milk

Brand name Commission (in Rs)

Price of half litre milk (in Rs)

Amul 0.54 22Namaste India 0.64 20Shyam 0.80 21Gyan 0.80 21Parag 1.00 20

Source: Our survey, 2014

6. Given the above considerations, only 59 per cent retailers preferred to keep Amul milk as the demand is highest and the total returns are also high despite the low margins. We reiterate that Amul brand is kept per force because of consumer demand who are willing to pay a little extra for Amul’s quality. The Quality rating of Amul milk was described as very good by 57 percent retailers. Reasons for good quality was that the Amul Milk was odorless and good Dahi was obtained .

Table: Retailer preference for various brands

Brand name Percent retailers

Amul 59Shyam 19Namaste India 08Parag 02Gyan 12

Source: Our survey, 2014

7. Namaste India has emerged as the main competitor of Amul. 58 percent retailers held Namaste, 23 percent Shyam, 14 percent Gyan, 3 percent Parag as the main competitors of the Amul. The main reason for Namste being the first competitor is that its milk is thick. Some retailers said that milk powder is added by Namaste India.

8. The delivery of all brands except Amul is in early morning, where Namaste India takes the lead. Amul is supplied by most distributors around 8 AM.

9. According to retailers, competition with Amul is mainly due to non-availability in time. Other brands have better services as well as margins and lower price. Very few retailers described packaging as a factor.

10. Only one percent retailers obtained incentive from Amul. These retailers won a small lucky draw.

SWOT Analysis:SWOT analysis is necessary to understand the strength, weakness, opportunity and threats. We present below a SWOT analysis of Marking of Amul products in Allahabad city.

Strengths: Amul has the highest demand among all milk brands in the city of Allahabad. Despite poor distribution and retailers’ apathy towards the product, customers are satisfied and force the retailers to sell Amul Products. The sale in Allahabad is driven by strong consumer preferences and shall continue until an equally formidable competitor emerges selling quality products.

Weakness: The supply chain management is the poorest as in most outlets, milk reaches around 8 am while other brands reach around 6 am. Distributors are not reaching small retailers to minimize their transaction costs. The tradeoff between distributors profit and maximization of sales is in the favor of the distributor. They also do not collect the leaked pouches or packets. In customer relationship all other brands are doing better than Amul.

Opportunity: In our estimation there are one third outlets unreached by Amul. Opportunities could increase with popular modes of advertisements .The consumer demand is for quality Amul products and is likely to increase as economy grows and there is increased disposable income.

Threat: The main threat if any, to Amul is good distribution networks of other brands

Limitation of the study:The study has not been able to get a full perspective of the distributors. We could have also taken a small sample of consumer to elicit their responses to Amul products.

Some recommendations:

1. Amul is known to have involved small producers in its network. Amul could also be a pioneer to access small retailers as well who are more than willing to sell Amul milk.

2. Amul needs to enforce the distributors to take back leaked pouches and to check their rentier behaviour.

3. Amul may also consider reducing price to bring it at par with other competitors and if that may not be possible to increase the margins of the retailers. This may increase their sales.