Strategic Marketing Amul

7/30/2019 Strategic Marketing Amul

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Strategic Marketing:

GCMMF Case


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Objectives

To analyze the feasibility ofdiversification of GCMMF from its coredairy business into

Agro Processing

Edible Oils

To suggest strategies (Corporate, SBU,Product levels) for growth of GCMMF


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Problems

Milk Supply Constraints

Competition from private players

Government policies (Co-operative VSCorporation)

How to remain both Customer and Supplier

Centric?

Opportunities to diversify in Agro processing andEdible Oils


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Agenda - Strategy Formulation

Corporate Strategy

(GCMMF)

SBU 1 (Dairy)

Bread Spread

Milk Powder

Fresh Milk

Cheese

Cooking Products

Milk Drinks

Desserts

SBU 2 (ProcessedFoods)

Fruits & Vegetables

SBU 3 (Edible Oil)


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PROPOSED CORPORATE

STRATEGY


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Proposed Vision and Mission

Vision

GCMMF shall be a partner in progress for the

Indian Dairy Sector and a provider of quality lowcost nutrition products to the World populace

Mission

To judiciously enhance milk procurementcapabilities and become the market leader atevery stage of value added milk products


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SBU STRATEGIES


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Star

Butter

Cheese Milk Powder

Yoghurt

Question Mark

Edible Oil

Ice Cream Sweets

Chocolates

Fruits &vegetables

Cash Cow

Liquid Milk

Ghee Baby Food

Dog

Nutramul

BCG

Matrix


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Growth Strategies

GCMMF (Corporate)

Dairy

(AMUL

SBU 1)

Enhance Procurement

Increase SupplierBase

Increase Procurementfrom existing base

Increase contributionfrom value added

products

Exclusive FranchiseRetailing

Export Orientation

Edible Oil

(DHARA - SBU 2)

Transfer Operations toNDDB

Agro Food Processing

(SAFAL

SBU 3)

Transfer Operations toNDDB

A dairy co-operativemarketing company


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ENHANCE PROCUREMENTCAPABILITIES

SBU DAIRY PRODUCE


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Challenges

Milk market saturated from supply side

6 % milk production growth rate; 8 to 10 % demand growth rate

Low per capita consumption of milk (225 mg)

Low milk yielding cattle

Low procurement penetration (1.7% of total milk produce inspite ofhaving a base of 22%)

Challenges to maintain supplier loyalty


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HOW TO CAPTURE MORE MARKET?BECOME NO 1 FROM NO 2 ?

ICE CREAMS


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Market Share

HLL

50%

Amul35%

Vadilal9%

Others6%

Vadilal strong in west

HLL traditionally the leader in organized sector with Kwality Walls

Amul making rapid inroads

Organized sector


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Indian Ice Cream Market

Total Size: 10 billion Rs

Organized sector: 3.5 billion Rs (30-35%)

Major Players: HLL (Kwality, Walls), Amul, Vadilal

West - 40% ice creams consumed

North 30%

South 20%

Western Region most important

Expected to grow continuously for few years due to lowerbase

Per capita Ice cream consumption: 0.12 Liters (USA: 23.3Liters)````


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Challenges Established players entrenched

Impulse product, so visibility means purchase

Difficult to reach consumer

Costly distribution infrastructure

Opportunities

Huge opportunity to tap Rs. 10 bn unorganized market Since Amul ice creams are low priced, ensure greaterconsumer base if availability is ensured.


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Two pronged

Market Penetration

New Products

Attack the market leader using a combination of price and distribution, aim tobecome the market leader

Ice Cream industry has wide open gaps, recognize them and create multiple nicheproducts to capture the market

In accordance with the vision of Mr. Kurien, capture the premium segment of ice

creams before other players (Indian/MNC) move in

Strengthen the distribution and cold chain specific to ice cream, especially in nonmetros

Strategy - Ice Cream


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Exclusive retail outlets in Metros Amul Parlors

Mobile vendors to increase penetration and availability around residential areasand schools

Use its existing good connections with the super markets to get more visibility atPOS

Strategy - Ice Cream

Pro

Increased availability

increased purchase

Attractive market worth

investing

Con

Increased cost of distribution,

NPD

High real estate cost of parlor in

up-market areas


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Exclusive AMUL retail outlets

A retailer cannot stock the entire productrange that GCMMF has to offer

An exclusive parlor for ice-creams and allied

milk products

Based on response extend the full productline to the franchise

To be opened in metros as well as developednon metros exclusive franchise model


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VALUE ADDED MILK

PRODUCTS

HOW TO GET HIGHER SWEET PROFITS

FROM MILK?


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Challenge

Milk Supply < Milk Demand

Local Mithai sellers offer better prices to dairyfarmers,(due to better margins in mithai) further reducing

our procured volume.

R&D to increase shelf life of milk sweets

Change consumer attitude towards packaged sweets asopposed to Fresh from the neighborhood mithai shop.This will take time


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Opportunity

Liquid milk

Market Size: Rs. 1,67,000 Cr

Stagnating segment of the Indian Dairy Industry

Operating Profit Margin: 36%

Market Share:

Mithai

Market Size: Rs. 50,000 Cr

Fastest growing segment of Indian Dairy Industry Profit Margin: 94% (Highest in the dairy industry

Acceptability of mithai of 1 region by the other

Hence Amul may think of entering the traditional Indian Sweet marketwith Gulab Jamun, Rasgulla, Barfee, Kheer, Mishti Doi, Peda,

Kalakand, Chenna sweets etc.


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Strategy

Contract Manufacturing of Mithai

Sold under the Amul brand name

Selling through existing retail outlets by

tying it with other Amul products

Leverage supplier skills to manufacturesweets (village SHGs and Gram Udyogs)


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Pros

Higher marginsbetter price tofarmershigher

volumeprocurement ofmilk.

Better use of

existing supplychain

Export Opportunity

Cons

New business,increasedcomplexity

New category,higher adexpenditure

Branded sweets,

not an easy switchfor consumers asyet.


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Exports and other product strategies

Other value added products

Butter & Cheese

Smaller SKUs

Contract Manufacturing from

other state MMFs Low Fat Low Sodium Table

Spreads

Penetration beyond metros andtier -1

Ghee

Commercial packs(15kgs)

Smaller SKUs for consumersegment

Exports

The Middle East, SAARC,ASEAN

No significant dairy processingfacilities

Zero import duty on specificdairy products

Significant cost advantage overEuropean manufacturers

Large Indian populace (est. 8million)

Opportunities Indian Sweets

Cottage Cheese

Condensed Milk

Table Spread


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SBU - EDIBLE OIL


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Challenges Challenges

Low margins

Low penetration of branded oils

Shrinking supply base (60% imported)

Opportunities

Growing demand

Leveraging existing supply chain

Rural market yet to be captured by branded players


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Strategy

Rationale:

Zero Percent Import duty on edible oils (40% ondairy products)

Stiff Competition from MNCs in the sector

Shifting trends towards Palm and Soyabean Oilsfrom Sunflower and Groundnut

Co-operative model for procurement ineffective(trials in MP 1995 for soyabean)

Scattered procurement hubs (beyond Gujarat)

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01 02 03 04 05 06 07

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5 5.6 66.65

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5.36

5.41

5.59

5.63

5.7

Edible Oil Production VS Import (MMTPA)

India Production Import

Do not enter the segment. Transfer marketing

operations to NDDB


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SBU

PROCESSED FOODS


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Strategy

Rationale

Fruits and vegetables are dependent on environmental conditions andhence grown in geographically disparate locations.

Gujarat produces only guava, potato, onion, cumin and banana

GCMMF has always leveraged its deep roots in the state of Gujarat

whereas fruits and vegetables need procurement at a national level

This makes procurement a challenge.

Significant threat from the Farm to Fork Model of Private Players

Do not enter into fruits and vegetables processing

Focus only on Dairy


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Conclusion

GCMMFs competency is in milk procurement which is beingchallenged

Concentrate on growth in milk procurement and create large

entry barriers for competitors by enhancing supplier loyalty

Concentrate on further enhancing contributions of value addedmilk products

Look for business opportunities where simultaneousdevelopment of supplier and market is possible and profitable


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GCMMF(Corporate)

Dairy

(AMUL SBU 1)

EnhanceProcurement

Increase SupplierBase

IncreaseProcurementfrom existing

base

Increasecontribution from

value addedproducts

ExclusiveFranchiseRetailing

ExportOrientation

Edible Oil

(DHARA - SBU 2)

TransferOperations to

NDDB

Agro FoodProcessing

(SAFAL SBU 3)

TransferOperations to

NDDB

A dairy co-operativemarketingcompany


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THANK YOU

Strategic Marketing Amul

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