Amul - Report

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Distribution ChannelAmul

OBJECTIVE The objective of this report is to analyse the distribution channel of Amul. ABSRACT The place variable in the marketing mix plays an important role in overall fortune of any brand. Place refers to the mechanism by which goods/services are moved from the manufacturer to consumer. It is also known as channel, distribution or intermediary. All other marketing decisions are affected by the sel ction of distribution channel. The key e decisions regarding distribution channel are about the channels to use and how many channels to be used to reach the consumer. The final aim is to make available the product whenever and wherever the consumers demand it. Proctor & Gamble and Wal-Mart in the grocery industry, Ford and GM in auto industry are some of the well known examples of firms that have realized substantial benefits by shifting the focus to supply chain.

Here we will discuss the distribution channel of Amul. Amul is a dairy cooperative in Gujarat that has been primarily responsible for India becoming the largest milk producer of the world. Amul has brought a paradigm shift in the milk industry through its innovative practices of managing the large decentralized network of suppliers and producers and simultaneously developing the new markets and distribution channel. This report draws various aspects of distribution channel of Amul. We interviewed ten channe members from Delhi to find out l the real practices followed in the channel.

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Distribution ChannelAmul

ACKNOWLEDGEMENT A successful project is a combined effort of the teacher for guidance and inspiration,channel members for the invaluable help and the project report developers.

I wish to extend my gratitude to Mr. Asif Zameer, facilitator of Sales and Distribution Management at FORE School of Management, for providing in-depth knowledge of distribution channel and guiding us to develop a meaningful report.

I also wish to thank, Vishnu Milk Product Dairy, Durga Dairy, Anand Mik Agency, Amit Traders, Master Ji Mother Dairy, R P Traders and Pappi Distributors for providing the invaluable help whenever required for successful completion of the project.

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Distribution ChannelAmul

CONTACT LIST OF THE DISTRIBUTORS VISITED S. No. Distributor Visited AMUL/Mother Dairy 1 2 3 4 5 6 Vishnu Milk Product Dairy AMUL Durga Dairy Anand Mik Agency Amit Traders Master Ji Mother Dairy R P Traders AMUL AMUL Mother Dairy Mother Dairy AMUL Tilak Nagar, Saket, 01166363120 Saket, 01166358159 Amit Singh, NH-1, NIT Faridabad 9968071497 Gurgaon, 9999106109 Mr. Vinod, 9990488245, Gurgaon 7 Pappi Distributors AMUL Katwaria Sarai, 9910020998 Contact Details

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Distribution ChannelAmul

INTRODUCTION On December 14, 1946 the Kaira District Cooperative Milk Producers Union Limited was established in response to exploitation of farmers by traders of existing dairies. In Anand city of Kaira district farmers produced and supplied milk to the then largest dairy Polson Dairy which in turn supplied milk to the Bombay city. The government had given monopoly rights to the Polson Dairy. The traders and agents of Polson Dairy brought the milk from marginal producers (farmers) at very lower prices and sold it to Bombay city at very higher prices. Farmers suffered heavy losses.

The farmers of Kaira district took advice of nationalist leaders Sardar Ballabh Bhai Patel and Morarji Desai. They advised the farmers to form a cooperative and supply milk directly to the Bombay city. This Kaira district cooperative was established to process and supply the milk directly to the city. Since most of the milk producers were marginal farmers who produced only 1-2 litre milk per day, the milk collection process was d ecentralised. Village level cooperative were established to collect milk from each village.

The first modern dairy of the Kaira Union was established at Anand. It popularly came to be known as AMUL dairy after its brand name. The capacity of new plant has been given as follows:

Process Pasteurization Manufacturing of Butter Manufacturing of milk powder Manufacturing of Casein

Capacity ( pounds per day) 300,000 10,000 12,500 1,200

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Distribution ChannelAmul

The Research and Development centre was also established to develop new indigenous technologies in processing of milk. The technology had lead to successful production of skimmed milk powder from buffalos milk first time in the world. This helped India to become the largest producer of milk as India has the highest population of buffalos in the world.

The current scenario is like this

Members

13 district cooperative milk producers' Union

No. of Producer Members No. of Village Societies Total Milk handling capacity Milk collection (Total - 2008-09) Milk collection (Daily Average 2008-09) Milk Drying Capacity Cattle feed manufacturing Capacity

2.79 million 13,328 11.22 million litres per day 3.05 billion litres 8.4 million litres 626 Mts. per day 3500 Mts per day

Gujarat Cooperative Milk Marketing Federation (GCMMF) is the marketing entity for the State of Gujarat. GCMMF has 42 regional distribution centres in India, serves over 5 00,000 , retail outlets and exports to more than 15 countries. All these organizations are independent legal entities yet loosely tied together with a common destiny.

Interestingly, the Gujarat movement spread all over India and a similar structure was replicated. Two national organizations, the National Dairy Development Board (NDDB) and the National Co-operative Dairy Federation of India (NCDFI) were established to coordinate the dairy activities through cooperatives in all the States of the country. The former provides financing for development while the latter manages a national milk grid and coordinates the deficit and surplus milk and milk powder across the states of India. In the early nineties,

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Distribution ChannelAmul

AMUL was asked by the Government of Sri Lanka to establish a dairy on similar lines in Sri Lanka. Today AMUL is a symbol of many things like high-quality products sold at reasonable price, developing and coordinating a vast co-operative network, making a strong business, proposition of serving a large number of small and marginal suppliers, the triumph of indigenous technology and marketing savvy of a farmers' organisation. (Source: http://www.amul.com/products.html)

SUPPLY SIDE OF THE NETWORK

The structure of the supply side of network has been shown in the figurebelow. The whole system is decentralised. The cooperative has been established at village level are known as Village Society (VS). All farmers of a village supply their milk to VS. Then VS supplies milk to the thirteen district level Unions. Amul is one of thos Unions. These thirteen Unions e finally process the milk and produce various products. The marketing of these products is done by the GCMMF. The products of these thirteen Unions are stored in warehouses of GCMMF from where it is finally distributed to the distributors and retailers. The prices of products of different Unions do not differ by greater extent. Though GCMMF sets the price of the products according to the production level and quality (of the product) of each Union, the pricing strategy has been designed in such a way that these Unions should not compete with each other rather they should cooperate with each other. Success of network depends on high collection rate of milk. It requires increasing membership of VSs and increasing number of member in each VS and improving the milk s yield. There was a constant concern about the cost of farmers in the network and delivering high quality products to consumers at affordable prices. The cooperative set following objective as part of its value: y y y y To charge for each service provided to the supplier To purchase all milk that member farmers produced To sell liquid milk at affordable prices so as to serve a large number of consumers To develop and deliver services that will improve lives of people in the networ k

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Distribution ChannelAmul

y

To hire professional managers, to run the federation and unions, whose values included upliftment of rural poor.

DAIRY COOPERATIVE STRUCTURE

NDDB/NCDFI

Federation in other states

GCMMF

UNIONSAmul and 13 others district level

VILLAGE SOCIETIES13,328 Village Level Milk Collection centres Centres

INDIVIDUAL MILK PRODUCERS2.79 million Milk Farmers

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Distribution ChannelAmul

CGMMFS SUPPLY CHAIN

Farmers

Village Cooperative Societies (with Chilling Units)

Village Cooperative Societies (without Chilling Units)

Local Restaurants/ Other Milk related businesses

Milk Sold to Village & Local Residents

Chilling Plants Milk Processing Union & Warehouses GCMMF Warehouses

Network Services * Veterinary Services * Animal Husbandry * Animal Feed Factory * Milk Can Producers * Agriculture University * Rural Mgmt Institute * Trucking Facilities

Wholesalers/C&S

Retailers

Home Delivery Contractors

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Distribution ChannelAmul

THE DEMAND-SUPPLY LINKAGES

3P Services

GCMMF

Suppliers/ FarmersNote1

UnionsNote2

3POL Customers/ Consumers Milk Supply 3PIL

VS

Distributor

Retailer Demand Material flow of Milk and Dairy Products Support Services Major Influencing factors Coordination & Planing activities Note 1: Procurement Price Note 2: Product pricing strategy|Page 10

Distribution ChannelAmul

3PIL: Third Party Inbound Logistic 3POL: Third party outbound logistics A brief outline of