Amul - The Taste of India

Business Economics

Case Study on

Prepared by:

Maitreyee B. Shukla

MBA Tech – IT

122

Business Economics: Case Study – Amul 122

Contents:

Introduction 3

Origin 4

Where does Amul stand in the global market? 5

SWOT Analysis 6

Strengths 6

Weaknesses 8

Opportunities 9

Threats 10

My view 11

Bibliography 11


Amul The Taste of India

Introduction:

Amul is a dairy cooperative formed in India in the year 1946. It is a brand name managed by an apex cooperative organisation, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by some 2.8 million milk producers in Gujarat, India.

The word “Amul” means “priceless” in Sanskrit. The brand name “Amul”, from the Sanskrit “Amoolya” (meaning “precious”) was suggested by a quality control expert in Anand, Gujarat.

Amul is the largest food brand in India and world's Largest Pouched Milk Brand with an annual turnover of US $1504 million as stated in the year 2008-09, which when further

converted into INR gives around 67113 million.

Amul has spurred the White Revolution of India, which has made India the largest producer of milk in the world. Also, it is the world’s largest vegetarian cheese brand.

Amul is the largest food brand in India and world's Largest Pouched Milk Brand with an annual turnover of US $1050 million (2006–07). Currently Unions making up GCMMF have 2.8 million producer members with milk collection average of 10.16 million litres per day. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 did not succeed, but now it has fresh plans entering the Japanese markets. Other potential markets being considered include Sri Lanka.

The establishment of Amul is also known as White Revolution. The White Revolution ushered an era of plenty from a measly amount of milk production and distribution. Aside from the great measurable success that this project was, it also demonstrated the power of "collective might". A small set of poor farmers of Kheda district in Gujarat had the vision and foresight to act in a way that was good for the society and not for the self alone.


Origin:

The birth of Amul at Anand provided the impetus to the cooperative dairy movement in the country. The Kaira District Cooperative Milk Producers’ Union Limited was registered on December 14, 1946 as a response to exploitation of marginal milk producers by traders or agents of existing dairies in the small town named Anand (in Kaira District of Gujarat). Milk Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand. Often milk went sour as producers had to physically carry the milk in individual containers, especially in the summer season. These agents arbitrarily decided the prices depending on the production and the season. In winter, the producer was either left with surplus / unsold milk or had to sell it at very low prices. Moreover, the government at that time had given monopoly rights to Polson Dairy (around that time Polson was the most well known butter brand in the country) to collect milk from Anand and supply it to Bombay city in turn. India ranked nowhere amongst milk producing countries in the world in 1946.

Angered by the unfair and manipulative trade practices, the farmers of Kaira District approached Sardar Vallabhbhai Patel (who later became the first Deputy Prime Minister and Home Minister of free India) under the leadership of the local farmer leader Tribhuvandas Patel. Sardar Patel advised the farmers to form a Cooperative and supply milk directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low prices to the producers). He sent Morarji Desai (who later became Prime Minister of India) to organize the farmers. In 1946, the farmers of the area went on a milk strike refusing to be further oppressed. Thus the Kaira District Cooperative was established to collect and process milk in the District of Kaira in 1946. Milk collection was also decentralized, as most producers were marginal farmers who were in a position to deliver 1-2 litres of milk per day. Village level cooperatives were established to organize the marginal milk producers in each of these villages.

Indigenous R&D and technology development at the Cooperative had led to the successful production of skimmed milk powder from buffalo milk – the first time on a commercial scale anywhere in the world. The foundations of a modern dairy industry in India were thus laid since India had one of the largest buffalo populations in the world.

The success of the dairy co-operative movement spread rapidly in Gujarat. Within a short span five other district unions – Mehsana, Banaskantha, Baroda, Sabarkantha and Surat were organized. In order to combine forces and expand the market while saving on advertising and avoid a situation where milk cooperatives would compete against each other, it was decided to set up an apex marketing body of dairy cooperative unions in Gujarat.

Thus, in 1973, the Gujarat Co-operative Milk Marketing Federation (GCMMF) was established. The Kaira District Co-operative Milk Producers’ Union Ltd., which had established the brand name “Amul” in 1955, decided to hand over the brand name to GCMMF (AMUL). With the creation of GCMMF (AMUL), they managed to eliminate competition between Gujarat’s cooperatives while competing with the private sector as a combined stronger force. GCMMF (AMUL) has ensured remunerative returns to the farmers while providing consumers with products under the brand name “Amul”.


Where does Amul stand in the global market?

Amul topped as the winner of the “Best of All” Rajiv Gandhi National Quality Award for the year 1999.The award which is considered to be equivalent to the Malcolm Balridge National Quality Award of USA and the European Quality Award is the most prestigious award which recognizes achievements of an organization in terms of excellence in business results, business processes, customer satisfaction as well as societal and environmental impact.

In January 2007, for the first time in India and the world GCMMF introduced the Amul range of Pro-biotic and sugar free ice-creams aimed at the health- conscious and diabetic. Probiotics are live beneficial culture which, when administered in adequate amounts, confer a beneficial health effect on the host. They help in digestion, especially of milk sugar (lactose).

After emerging as India’s topmost brand, Amul has gone to win one of the world’s most prestigious awards – The International Dairy Federation Marketing Award (2007) for Amul pro-biotic ice-cream launch. GCMMF is the first and the only Indian organisation to receive the 2007 IDF Marketing Award which covered 3 categories:

o Nutri-marketingo Innovationo Marketing Communication

Amul Pro-biotic Ice-cream received the award in the Nutri-marketing category.

Amul has also been ranked among “the top 21 largest dairy businesses in the world” according to the findings published by the International Farm Comparison Network (IFCN) at the 10th IFCN Dairy Conference 2009, held at Stockholm during June 14-17.

The IFCN is a network of dairy researchers responsible for analysing global dairy trends and creating knowledge to guide various stakeholders in the dairy sector covering about 80 countries, over 60 dairy-related companies, a number of dairy-related institutions and dairy farmers.

In its recent report, IFCN has provided ranking of dairy processors by its milk intake, representing milk volumes collected plus commodity purchased in home country and subsidiaries in other countries. Accordingly, Fonterra of New Zealand, Dairy Farmers of America and Nestle of Switzerland secured the first three places with market share of 2.7 per cent, 2.3 per cent and 1.7 per cent globally.

Amul, with 0.4 per cent market share, stood 21st in the list, thus entering the top league for the first time. This IFCN analysis was based on IFCN Daily Report 2008 with data representing the year 2007.

However, with substantial growth having taken place during the last two years at Amul, its ranking would improve to almost at the 16th place in the current year. Thanks to the White Revolution pioneered by Amul, India with its milk production touching 114.4 million tonne during the year under review is the largest milk producer in the world, way ahead of the US and Germany with 79.3 million tonne and 39.4 million tonne respectively.


SWOT Analysis:

Strengths

Competitive Sustainable Advantage (CSA): Amul’s CSA lies in its procurement part. The ability to collect 7 million litres of milk from 2.6 million farmers everyday,

converting it into goods worth 6 crore and distributing it to more then 5, 00,000 retailers across the entire country is not an easy job. However, Amul has so far been extremely organized and thus successful in managing its large scale supply chain, which begins with the milk producer and ends with the goods being supplied to the customers all over the country via retailers. No other dairy in India has such a sustainable procurement network.

Very strong presence in Indian market:

Category Market share Market positionButter 85% 1

Milk powder 40% 1Cheese 50% 1

Ice-cream 24.75% (HUL – 28.22%) 2Sweets 50% 1

Chocolate drink 90% 1Chocolate 10% (Cadbury – 70%) 3

Impressive product portfolio : Amul has shown a vast range of products. It has introduced products for target audience ranging from youth, to diabetic people, and from the health conscious to the urban class. Thus, it enjoys enormous support from a large target audience.

Some of the numerous products introduced by Amul are listed below:

1) Chocolate milk under the brand name of “Amul Kool Koko” targeting the youth of today.

2) India’s first pro-biotic “Wellness Ice cream” and “Sugar free Delights” for diabetic people.

3) “Low Fat, Low Cholesterol Bread Spreads” for the health conscious.4) “Emmental”, “Gouda” and “Pizza Mozzarella Cheese” for the likes of the urban class.5) Product for the ‘price sensitive India’ – “Low priced Amul Ice Creams” and the very

affordable “Sagar” whitener.6) It also entered the pizza business, where the base and the recipes were made available

to restaurant owners who could price it as low as 30 per pizza when the other

players were charging more than 100.


High quality, affordable price: The quality of all the products of Amul is on par with international standards. However, the price is comparatively less and affordable as all the products are manufactured within the country. Also, as their distribution network is very strong, the availability of all the products is very good. At the same time, due to affordable fares, the demand for Amul products is very high from the consumers.

Marketing strategy: Amul has had a very strong marketing strategy at its disposal. It has very good communication with its customers, be it through advertisements, hoardings, television or even radio. Unlike maintaining standard products on the shelves, it continuously comes out with new products and new schemes, as well as advertisements as a tool to connect with the audiences. As a result of this, it has been possible for them to keep their customers loyal, as well as attract new customers.

I personally feel that one of the best methods used by Amul to promote their No.1 product, Amul Butter, was the 1966 launch of the round-eyed, chubby-cheeked Amul moppet who put Amul on India’s breakfast table - “The Utterly Butterly” girl. Since its launch, every time an event of local, national or global importance occurred, it has been very beautifully been depicted by in the “Utterly Butterly Delicious” ad-campaigns on billboards and hoardings. The Amul ads are one of the longest running ads based on a theme, now vying for the Guinness records for the longest running ad campaign ever.


Weaknesses

Risks of highly complex supply chain system:

As shown above, the GCMMF supply chain system has a huge amount of human labour under its wings. It forms a chain of people – farmers, VCS, MUs, Distributors, Retailers and finally the consumer (i.e. we, the people consuming their products). Even if there is a small glitch in the working of one of these departments as a result of some political disturbance or even a natural calamity, it hits the manufacturing unit hard, and that can result into delay in supply.

Short shelf life of products: As it is known, Amul mainly manufactures dairy products i.e. most of its products are made from milk. Whole milk keeps for about a week after the store expiration date. However, many of the dairy products including skim milk, ice cream and frozen yogurt have a very short shelf life of not more then 3-4 days. Consumption of dairy products that have crossed their expiry dates is extremely unhealthy and harmful for health. Also, you need to store all dairy products, including milk and cheese, in the refrigerator. However, after refrigerating dairy products, if there is a power failure, then these products need to be consumed


within 4-6 hours, because the chances of them getting spoiled increase considerably after 6-7 hours.

Dependency on villages: Amul has an extremely strong dependency on weak infrastructure and is completely dependent on villages for its raw materials. Up to the mark infrastructure for the manufacture of the various dairy products is not available at many of its manufacturing units. Further, the transportation link in the supply chain may get delayed due to many political as well natural reasons, which can cause damage to the products due to their limited shelf life.

Opportunities

Going global: GCMMF has signed an agreement with Wal-Mart to stock its shelves with products under its Amul brand name. Amul Processed Cheese, Pure Ghee, Shrikhand, Nutramul, Amul’s Mithaee Gulab Jamuns are some of the products being marketed in the American markets. Its overseas markets include Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 did not succeed, but now it has fresh plans entering the Japanese markets. One of the other potential market being considered at this stage is neighbouring Sri Lanka.

Use of internet to sell its products: As a first step towards eCommerce in India, Amul has offered the cyber shopping experience with a wide range of Amul dairy products in all the major cities of our country. Thus, the “Taste of India” has now become just a few clicks away from our doorstep.

Huge scope in the American market : More then 50% of Americans are medically obese. If Amul is really looking forward to capture the hearts of the Indians settled in the USA, offering low-fat versions of its brands would make a lot of commercial sense. Hence, targeting the large Indian community in the USA markets with its niche products like Mithaee, packaged ready-to-eat foods etc., it can definitely expand its market to a large extent, and at the same time make its presence felt at the global level.

In order to improve further, Amul can take advantage of the following ideas and opportunities:

Amul can venture out on new products like Toned Milk and Condensed Milk that can be used for preparing baby food products and sweets.

Though Amul’s hoardings have been a huge hit in the cities, it can penetrate even better in the rural areas by advertising through the media like cable channels and newspapers. Sponsoring shows on TV and sports events can be of great help.


There are certain Amul products like Amul Basundi, Gulab Jamun, Chocolates etc., which have not been as successful and popular as compared to Amul Ice Cream. Amul can try to understand the cause of this through market research and work on improving these products and thus gaining the audience’s trust and loyalty.

Threats Competitors:

Given below are some of the major competitors for Amul:

Product/Brands Competitors

Cheese Britannia

Butter Britannia, Nestle

Ice creams HUL

Curd Nestle, Mother Dairy

Paneer Britannia

Flavoured milk Britannia, Nestle

Baby food Nestle, Heinz

Stiff competition : In the past few years, there are various dairy companies, MNCs as well as local, which have given a stiff competition to Amul. HUL (for Ice Creams) and Cadbury (for Chocolates) have been very strong contenders for the top spot against Amul. Also, Amul has seen excellent competition from Vijaya (for Cheese, Butter and Ghee). The new entrant in the dairy market has been Govardhan (for Cheese, Butter, Ghee and most importantly Pasteurized Milk).

Standard of Indian cattle: At today’s date, India has the highest population of cattle around the world. However, the yield of Indian cattle is still much lower than other dairy countries because of unhygienic conditions and non-availability of proper food for the cattle. This may prove to be a hindrance for Amul in the global market.

Growing price of milk and milk products: The rates of milk have kept on increasing over the years. There was a time in the 90s when it was available at around


18 per litre in retail. However, over the last 10 years, due to change in government policies, the price of all the commodities including milk has increased to a

considerable extent, now costing around 34 per litre. As a result of this, the production cost of dairy products for Amul has increased too. These further results into increased rates of dairy products.

Government Import Policy: In the span of the last 5 years, there have been modifications in the Import Policies made by the Government of India. It has now become possible to import milk products from various countries around the world. So, the demand for Amul products had seen a dip as when compared to earlier times.

Soya Products & Margarine: Now-a-days, there has been a growth in production of Soy Products like, Soya Paneer, Soya Milk, and even ice creams made from soya (Baskin Robbins)! Also, as people have become health conscious, they tend to consume margarine as a substitute.

My view:

Looking at the current trend, I feel that Amul will definitely have a consistent growth in the national as well as international market.

The product quality is very good…. the taste has been accepted by the masses… Amul is rightly said to be “The Taste of India”.

Bibliography:

http://www.amul.com

http://en.wikipedia.org

http://www.google.co.in

http://www.thehindubusinessline.com


http://www.thehindubusinessline.com/

http://www.google.co.in/

http://en.wikipedia.org/

http://www.amul.com/

Amul - The Taste of India

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