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Transcript of Amul - Report
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 selection of distribution channel. The key
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 channel members from Delhi to find out
the real practices followed in the channel.
|Page 2
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.
|Page 3
CONTACT LIST OF THE DISTRIBUTORS VISITED
S. No. Distributor Visited AMUL/Mother
Dairy
Contact Details
1 Vishnu Milk Product Dairy AMUL Tilak Nagar,
2 Durga Dairy AMUL Saket, 01166363120
3 Anand Mik Agency AMUL Saket, 01166358159
4 Amit Traders Mother Dairy Amit Singh, NH-1, NIT Faridabad 9968071497
5 Master Ji Mother Dairy Mother Dairy Gurgaon, 9999106109
6 R P Traders AMUL Mr. Vinod, 9990488245,
Gurgaon
7 Pappi Distributors AMUL Katwaria Sarai,
9910020998
|Page 4
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 decentralised. 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 Capacity ( pounds per day)
Pasteurization 300,000
Manufacturing of Butter 10,000
Manufacturing of milk powder 12,500
Manufacturing of Casein 1,200
|Page 5
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 buffalo’s 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 2.79 million
No. of Village Societies 13,328
Total Milk handling capacity 11.22 million litres per day
Milk collection (Total - 2008-09) 3.05 billion litres
Milk collection (Daily Average 2008-09) 8.4 million litres
Milk Drying Capacity 626 Mts. per day
Cattle feed manufacturing Capacity 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,
|Page 6
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 figure below. 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 those Unions. These thirteen Unions
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 members in each VS and improving the milk
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:
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 network
|Page 7
To hire professional managers, to run the federation and unions, whose values
included upliftment of rural poor.
DAIRY COOPERATIVE STRUCTURE
|Page 8
NDDB/NCDFI
GCMMF
UNIONS
Amul and 13 others district level
VILLAGE SOCIETIES
13,328 Village Level Milk Collection centresCentres
Federation in other states
INDIVIDUAL MILK PRODUCERS
2.79 million Milk Farmers
CGMMF’S SUPPLY CHAIN
|Page 9
Farmers
VillageCooperativeSocieties (withChilling Units)
VillageCooperativeSocieties(without ChillingUnits)
LocalRestaurants/Other Milkrelatedbusinesses
Milk Sold toVillage &Local Residents
Milk ProcessingUnion &Warehouses
GCMMFWarehouses
Wholesalers/C&S
Retailers
Chilling Plants
Home DeliveryContractors
NetworkServices
* VeterinaryServices* AnimalHusbandry* AnimalFeed Factory* Milk CanProducers* AgricultureUniversity* Rural MgmtInstitute* TruckingFacilities
THE DEMAND-SUPPLY LINKAGES
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
3PServices
VS
Suppliers/Farmers
Distributor
3POL
Retailer
Unions
Customers/Consumers
GCMMF
3PIL
Demand
MilkSupply
Note1
Note2
3PIL: Third Party Inbound Logistic
3POL: Third party outbound logistics
A brief outline of the demand supply linkages has been shown in the above figure. It depicts
how various factors are interrelated and how this network effectively handles this complexity.
As we can see in the figure that major influencing factor in milk supply is farmers/producers
which are influenced mainly by the procurement price set by the unions. The green arrows
show the actual material flow of the milk in the network. The demand is mainly affected by
the pricing of the product. The blue arrows show the support activities supported by one
entity to the other in the network. For eg Unions support farmers in cattle management etc.
The black arrows show the coordination and planning activities which are required for the
effectiveness of this network.
|Page 11
DISTRIBUTION CHANNEL OF AMUL
The main objective of distribution channel of Amul is to provide best quality products to
consumers at affordable price while giving maximum possible return to its suppliers.
This dual objective of satisfying consumers as well as suppliers has led Amul to find
innovative ways to manage its network effectively and make lean and efficient supply-chain.
Amul has chosen intensive channel to ensure that its product should be available everywhere
even in rural areas. Following are the channel intermediaries of Amul:
Agents, Distributors/Wholesaler and retailers
Amul Parlours
Exclusive Amul Outlets
Internet ( Amul Cyber stores)
We are considering two products of AMUL which are milk and ice-cream and we
are also comparing each of the aspect with its closest competitor i.e. Mother Dairy
For AMUL
Packet milk sold/day = 1.5 millions
Total number of retail outlet = 9,000
Presence in Delhi = 5 years
Strength = Strong brand name.
Amul’s Strategy: To increase number of retail outlets in Delhi to push up sales.
For Mother Dairy:
Packet milk sold/day = 2.8 millions
Total number of retail outlet = 14,000
|Page 12
Total number of exclusive stores = 845
Presence in Delhi = 35 years
Strength = Strong distribution Network and large number of retail outlets which facilitate
sales in Delhi.
Main Distribution Centres
AMUL Mother Dairy
Manesar ( 8 km from Gurgaon) Pilkwa , UP
Alwar , Rajasthan
Analysis of Distribution Channel
We interacted with 5 distributors in Delhi, Gurgaon and Faridabad to understand the various
aspects of the distribution channel. All the channel members agreed to the fact that demand of
Amul products are very high so they do not need to push the Amul product. Here we will
analyse our findings and discuss the main issued related to the channel.
To bring put a comparative analysis with Mother Dairy, we also visited 2 distributors of
Mother Dairy.
Number of distributors
AMUL
Delhi 200 approx
Gurgaon 8-10
Faridabad 12
Each distributors caters to about 100 retailer in Delhi. This number varies with region to
region. In Gurgaon and Faridabad, this figure varies from 35 to 80.
Number of retailers covered by AMUL distributors
|Page 13
Delhi 100
Gurgaon 35-80
Faridabad 35-80
In kalkji and Govindpuri area there are six milk distributors while one ice cream distributors.
Territory size of milk distributors is generally smaller as compared to ice cream distributors.
In Kalkaji area there is a milk distributor for every 2.5 square kilometers area. The territory
size is not fixed and depends on population density and sales volume.
Role of marketing channels
The main role of the various channels is to cater to the consumer market. They do not need
to make new market for the Amul products as demand for these products are already high. In
rare cases the marketing channels also provide feedback to the company. In festive seasons
channel members estimate demand of Amul products and inform company in advance about
the fluctuations in the demand. This helps Amul forecasting demand of its products
accurately and hence improved inventory management.
Channel function and flows
In case of Amul channel member follows following function:
Develop and disseminate persuasive communication to stimulate purchasing specially
when Amul launches new schemes
They place orders with Amul
Assume risks connected with carrying out channel work
Provide for the successive storage and movement of physical products
Provide for buyers’ payment of their bills through banks and other financial institution
Reach agreements on price and other terms so that the transfer of ownership or
possession can be affected
Customers’ Desired Service Output Levels
|Page 14
Lot Size: Customers prefers channel from which they can buy desired lot size. Amul’s
distribution channel is designed in such a way that consumers can buy desired lot size from
many stores.
Waiting and Delivery time: The waiting and delivery time for Amul products is low. Except
for the internet channel which takes 48-72 hours for delivery of the products other channels
are quite efficient in these parameters.
Spatial Convenience: Consumers can find Amul products in any Kirana stores nearby their
residence. So the channel provides excellent spatial convenience. Even in distant rural areas
consumers can find Amul products very easily.
Out of 5 channel members we contacted in Delhi, Gurgaon and Faridabad, two members
specifically mentioned that there is a problem of availability of Amul products like butter.
For example many one may not find Amul milk at many stores after 10AM. Other products
like butter, curd etc. is also not available (during winter season) many a times at the stores.
The retailers say that margin on Amul products are very less so they don’t order extra milk
products for which refrigerator is required because it costs an extra cost.
Product Variety: The assortment breadth provided by the marketing channel is very high.
For example, even at grocery stores consumer can find variety of Amul products.
Service backup: Amul do not sell its product to distributors on credit. But distributors may
provide credit services sometimes to maintain its relationships with retailers and wholesalers.
At the end of the day retailers and customers enjoy a limited credit period only due to
marketing channel of Amul.
COMPRISON BETWEEN AMUL AND MOTHER DAIRY ON VARIOUS ASPECTS
We are considering two products of AMUL which are milk and ice-cream and we are also
comparing each of the aspect with its closest competitor i.e. Mother Dairy
|Page 15
Product Range
AMUL Gold 32 Mother Dairy full cream 32
AMUL Taaza 25 Mother Dairy tonned 24
AMUL Slim 22 Mother Dairy double tonned 21
Mother Dairy light 18
Adaptation of Channel with Seasonal Variation
For AMUL:
Amul chooses distributors who have at least five-six years of experience in distribution of
other products. If a new distributor enters the distribution network of Amul he has to work
with at least one distributor for first few years. In this way the new distributor gets idea of the
distribution channel.
In case of festive or channel variation distributors have a fair idea of demand of Amul
products. They also analyse the market situation by taking feedback of retailers, wholesalers
and customers to anticipate the demand. On the basis of their market analysis, they place
order in advance or at least they inform company in advance about their observations. In this
way Amul manages the seasonal variation in demand.
For Mother Dairy:
Mother dairy estimates its sales in the seasonal variation through its data forecasting
techniques and based on demand in the previous years it estimates its production. However,
the distributors also place their demand according to the expected demand (from their past
experience) to meet the demand requirements. In this way Mother Dairy manages the
seasonal variation in demand.
|Page 16
Channel Members Margin
Distributors: The margin of distributors depends on the sales volume. Amul
encourages higher sales of milk through various reward schemes. Generally Rs.1.80
per crate is the margin of distributors. Apart from this they also get some incentives if
they achieve certain target which distributors term as Base volume of sales. Amul
launches many schemes for distributors.
Wholesalers: There are two types of wholesalers: (1) those who buy milk from
company itself. Their margin is similar to the distributors. (2) Those who buy milk
from distributors and sales to retailers. They get a margin of Rs 3.60 to Rs. 4.80 per
crate. For example, if milk is Rs. 32 per Kg then distributors sells it to retailers at Rs.
31.20. It means retailers and wholesalers have to share a margin of 80 paise between
them. Now the actual margins of wholesalers depend upon the environment (like
competition, rural or urban area) and their relationship with retailers.
Retailers and other grocery stores: They get margin of 40 paise to 80 paise per litre
of milk depending on either they are buying directly from distributors or from
wholesalers. If they buy directly from the distributors then they get a margin of 80
paise per litre but fewer margins in other case.
Note: If a retailer is at such a place where distributor’s vehicle can’t reach then they buy milk
from wholesalers. In this case they need to visit wholesalers’ store for procurement. So they
get fewer margins in such cases.
For Mother Dairy
The margins for the distributors and retailers have recently been revised. For Distributors the
set margin is now 43p/L that has been revised from 40p/L. For the retailers the set margin is
now 90p/L that has been revised from 80p/L.
|Page 17
Credit policy
For Amul: Amul do not sell its product to distributors on credit. But distributors may provide
credit services sometimes to maintain its relationships with retailers and wholesalers. At the
end of the day retailers and customers enjoy a limited credit period only due to marketing
channel of Amul.
For Mother Dairy: 1 Day credit from the company to the distributors. No Credit from the
distributor to the retailers
AMUL Mother Dairy
Credit to distributors No credit 1 Day credit
Credit to retailers/ who
sellers by distributors
May provide credit services to
maintain its relationships with
them
No Credit
Payment System
For AMUL: The payment to the company is done by the distributors through account and
the payment to the distributors is also done through account.
For Mother Dairy: The payment to the company is done by the distributors via cheque and
the payment to the distributors is also done via cheque.
AMUL Mother Dairy
Payment to company Account Account
Payment to distributor Cheque Cheque
Infrastructure Requirement
For Amul: AMUL does not help in any sort of infrastructure; however, it facilitates the
distributors to gain financial help from the bank. AMUL acts as a guarantor to help get loans.
For Mother Dairy: For mother dairy booth, Mother Dairy provides the required
infrastructure to the distributors. It provides the initial set up, pays for the electricity and
|Page 18
various others bills. It also gives the maintenance charges to the booth. However, it does not
provide these facilities to the distributor.
Company Pricing Strategy
Company pricing strategy largely depends on the overall cost of production of its product. Its
product prices are not much affected by the channel costs. This is evident from following
observation.
The channel members claim that they get the same margin now as they were getting few
years back when milk was sold at Rs. 15 per lt. Right now selling price of milk is Rs. 32 per
lt (for full cream) still channel member gets same margin as they were getting when milk was
Rs. 15 per lt. There is no significant change in the margin while selling prices of milk has
been doubled. It indicates that company sets prices keeping in mind the overall production
cost of the milk.
This is in sync with the company’s objective of providing best quality products at affordable
prices and at the same time give maximum return to the suppliers. Though channel members
complain about the margins on Amul products still they sell products because of volume sales
of Amul products (Also to maintain the product assortment at their stores).
Long Term Commitments
Amul has long term commitments with their distributors and retailers. In our case we found
that distributors are in their business for long term ranging from 7-8 years to 28-30 years. It
increases the loyalty of distributors towards the company. Also we found that old players
were more satisfied with their business with Amul and they have a notion that their voice gets
heard in the company. While new players said that they are not frequently heard. Company
people listen to them only when there is a large scale problem and whole market is talking
about that problem.
Channel Choice
Amul has used all the available channels to sell its products. So the distribution channel of
Amul can be termed as an Intensive channel. Company constantly explores the development
of new innovative channels for eg Amul Parlours. The main objective of the company is
ensuring availability of its product at every corner of India.
|Page 19
Amul Parlours requires some attention here as it is new and successful channel: They have
classified Amul parlours into five categories namely
Centre for Excellence: These Amul parlours are specifically at a place which is
known for centre of excellence on its own. We can find such parlours at IIMA,
Infosys campuses etc.
On the Move: These parlours are at different Railway stations and at state bus depots
across different cities.
Amul Parlours: These parlours can be seen at different gardens across different cities.
These are fully owned by Amul.
Amul Preferred outlets: These are the private shops (Franchises) which sells entire
range of Amul products. They also agree not to keep competitors’ brand in the outlet.
Scooping Parlours: These parlours are especially for Amul Ice creams.
There are 4968 approvals for Amul parlours till now.
Hybrid channels: Amul also uses the concept of hybrid channels where customers can place
order online and receive products offline. The main drawback of this channel is longer
waiting-and-delivery time and minimum sales value of Rs. 600 for placing the order.
Channels through which AMUL and Mother Diary sells it products
AMUL Mother Dairy
Agents, Distributors/Wholesaler and retailers Mother Dairy Booth Vending Machine
(token milk)
Amul Parlours Mother Dairy Booth (Packet milk)
Exclusive Amul Outlets Agents, Distributors/Wholesaler and retailers
Internet ( Amul Cyber stores)
Push versus Pull Strategy
For AMUL:
The demand of Amul products are very high because of the quality of the products and
innovative advertising adopted by the company. So Amul do not need any push strategy for
its existing product. This also gets reflected in its distribution channel where company do not
|Page 20
set any target level for its distributors and even distributors do not make special effort to sell
Amul products.
For Mother Dairy:
The demand for products of Mother Dairy is equally high hence; there is no requirement of
any push strategy. The pull strategy is only exercised during a launch of new product.
Compensation for Defective Products
For AMUL:
In case of milk Amul gives a compensation of Rs. 2.50 per crate in advance, for any kind of
leakage and other defects. Any additional cost (due to any other factor or more leakage) has
to be incurred by channel members.
Channel members are satisfied with this compensation.
For Mother Dairy:
If there is problem with more than 50 % of the milk supplied then the company replaces the
whole of the milk. No replacement of individual milk packets is done. No measures for
advance payment are done for loss or leakage. For both distributor and retailer supplies is to
be checked at the time of purchase
AMUL Mother Dairy
Rs. 2.50 per crate Replacement only if more than 50% of the
milk supply has defect or leakage.
The payment is made in advance for leakage
and other defects
No advance payment
|Page 21
Understanding the Consumers Need
Amul get an insight into the consumers need through its R & D centre. Amul uses latest
technologies to monitor sales performances and get an insight into the consumer behaviour.
GCMMF has advanced its Information Technology solutions by linking all the Milk Plants of
the member unions with its customized ERP System (EIAS & Web EIAS) to improve the
liquid milk marketing operations. The Federation has also enhanced the Financial Control
System in EIAS. It has also developed Sales Performance Monitoring System across various
levels.
GCMMF has further advanced the use of Geographical Information systems by enhancing the
GIS application and implementing GIS based Sales Analytics solution across various offices.
It has also developed a GIS based Decision Support System (DSS) for the top management
for effective & geographically monitoring of the sales performance of WDs, ADAs,
Retailers, and Products etc.
Channel members play an important role in understanding the consumer need in festive
seasons (or other seasonal variation).
CHANNEL INTEGRATION
Channel Conflict, Cooperation and Competition
For AMUL:
In distribution channel of Amul there are two kinds of conflicts:
Margin Conflict: Channel members especially retailers are not satisfied with their
margin. According to them, price of Amul products have raised constantly but their
margins have increased only marginally.
Amul try to resolve this conflict by launching various schemes in which it gives financial
incentives to distributors and retailers for higher sales volume.
Area Conflict: One distributor serves an area of 500 metres (in urban areas) and this
figure varies from region to region. There can’t be any other distributor within that
area. But sometimes Amul gives distributing rights to small distributors within the
|Page 22
area of other distributors. Such kind of conflict is also resolved by Amul by clearly
redefining the area of each distributor.
We can see that these conflicts (and all other conflicts) are resolved by Amul itself. Many
times Amul imposes its decision to other members which they have to follow in any case.
This implies that Amul is a channel steward.
As far as competition between various channels is concerned the distributors and wholesalers
are not much concerned about other channels as they are satisfied by the sales of Amul
product. In many cases they doubt that other cases might have affected their sales.
For Mother Dairy:
Area Conflict: If a distributor’s delivery vehicle is caught in other’s area red handed, then
his/her distribution license is cancelled immediately. Mother Dairy is very strict with their
policy of cancellation of license.
Margin Conflict: Since, the margin has been revised recently. The channel members are
little satisfied by the margin. Hence, there exists no margin conflict for the time being
Training and Motivating Channel Members
Amul claims that it motivates channel member by giving financial incentives as well as by
providing extensive training. But the channels members said that they are not aware of such
training. They only get some guidance from the company (that is too infrequently). It may
indicate that company gives training to only few largest channel members (or distributors)
while for smaller distributors they give only financial incentives. They should communicate
their training strategy with each channel member.
|Page 23
MARKET LOGISTICS AND TRANSPORTATION
For AMUL: Amul pays the transportation cost to the distributors but the distributors have to themselves collect the product. They encourage them to buy their own transport. For example in Vishnu Dairy’s case, they get the crates of milk for other two distributors and the company pays the transportation charges of the other two distributors to Vishnu Dairy. However, if Vishnu Dairy gets the order late (later than 6 -7 pm) then Vishnu Dairy is responsible for the additional crates of milk of the other two distributors.
Amul pays Rs. 4.50 per crate – Rs. 4. 80 per crate to the distributors for transportation. The variation in margin depends on the location. One distributor sells nearly 400-500 crates per day in Delhi. (1 crate = 12 litres)
AMUL Margin for transporterDelhi Rs. 4.80 per crateGurgaon Rs. 4.50 per crateGurgaon Rs. 4.50 per crate
For Mother Dairy: No transportation is provided by the company instead company pays the transportation cost to the distributor. Transportation charges – 22p/L which comes out to be Rs. 2.70 per crate. Distributor has to take the supplies from the plant and distribute it to the retailers. The transportation charges are almost same for all the regions.
CAPACITY UTILIZATION:
For Amul: The capacity of the truck various from 350 crates to 800 crates. This depends on the number of crates the distributor is able to sell. A small lorry can carry 350 crates where as a large lorry can 800 crates. The lorry is owned by the distributors.
For Mother dairy: A similar pattern is observed in case of mother dairy, however, in case of booth vending machines (BVM) , the closed truck is owned by the company and has a capacity of 8000 litres which is supplied to at least 8-9 booths which have a capacity of around 1000lt.
|Page 24
ICE CREAM DISTRIBUTION FOR AMUL
The Ice cream distribution for AMUL can be explained under the following heads for Gurgaon region
Number of distributors
There are two distributors of ice-cream are
1. RP Traders2. Haryana Traders
Territory distribution for the distribution
The whole of the Gurgaon is divided into two regions
1. Left to the NH82. Right to the NH8
This has also been shown in the map below.
This way there will be no territorial clashes between the two distributors as the area is very clearly demarcated.
|Page 25
Number of retailers covered by each distributor
Each distributor serves around 170 to 180 retailers under him. That comes out to be around 350 retailers selling Amul ice-cream in the Gurgaon region.
The reason for such low number of retailers selling ice cream is that investment is required by the retailers in terms of money and space for holding ice-creams.
Infrastructure needed by the distributor
As ice cream is a very perishable kind of thing ,a large amount of money has to be invested in taking care of the ice-cream
This includes cold storage houses, commercial refrigerator and air conditioned vehicles to transport ice cream.
Support provided by the company
The company doesn’t provide any direct help to the distributor in setting up the infrastructure. But the company does have some collaboration with the manufacturers of the commercial refrigerators and companies proving cold storage facilities
Models Voltas Western Carrier Haier HARD TOP FREEZER 300 HT 14288 14278 14278 14186 400 HT 20000 20402 20310 19016 500 HT 23400 23464 23474 23748 GLASS TOP FREEZER 300 GT 20208 21422 23474 18843 400 GT 23474 23474 26331 22396
This way the company is having collaboration with different deep freezers manufacturers where not only the retailer but also the distributor can take help of.
Margins provided by the company
The company provides a margin of 17.5 % on the MRP to the retailers for the ice-cream,
Also the company provides a margin of 8 % to the distributor.
That means if the MRP of the ice cream is 100 rupees the retailer gets the ice-cream from the distributor at the price of Rs 82.5
|Page 26
That is the selling price to the distributor. On which he earns a margin of 8 %
That means the company gives that ice cream to the distributor at the Price of Rs 75.9
Distribution strategy of the company
The distribution strategy that the company is following is shown in the figure as below.
Now along with this some ice cream is also being manufactured at the Manesar plant due to the growing demand of ice cream in northern region
But most of the ice cream is still stored in the godown in palwal Haryana from where it is sent to the distributors by the company vehicle.
Now since ice cream is a very perishable item it is stored at a temperature of -18® C.
So the company takes the responsibility of distributing it itself rather the outsourcing it other transporters.
Because if some issues arise then the brand image of Amul will be effected.
What makes the company far more worried is that since it is very new in the ice cream market in the northern region and is competing against the Mother Diary and the mighty Kwality Walls from the FMCG major HUL.
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Credit terms for ice-cream
The company doesn’t allow any credit terms to the distributor. First the money is transferred to Amul through the RTGS (Real time gross settlement) then only the order is executed.
Now it is the choice of the distributor to extend any credit to the retailer or not.Sometimes it does other time it doesn’t.
Ordering Ice cream
The distributor orders the required ice cream through an Email.Generally the company takes around 24- 48 hours to deliver the goods.
The distributor takes the order from the retailers through the telephone.
Transportation of ice cream
The company transports the ice cream to the distributors without any charge. Similarly, the distributor charges the ice cream to the retailers without any charge.
The company uses it own trucks to transport the ice cream whereas the distributor has his own trucks to distribute the ice cream to the retailers.
New distribution strategy-of Amul : Amul Preferred Outlet
Amul has justified its undisputed leadership in foods business by creating 5000 Amul preferred outlets in a record time which exclusively sell wide range of Amul products. This has been possible due to strong brand equity and immense consumer support. They have now ambitious plans of creating 10,000 Amul parlours by 2012
To have a better idea
The criteria for selection of APOs would be –
1. Visibility - How prominent is the location of your shop?
2. Shop area: 100 - 300 sq. ft.
3. Good Business potential
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4. Exclusive Amul outlet - no other products are to be sold
Renovation Work of the Shop to give it a standard look - would be done to meet the design and specifications at your cost. The cost of renovation of a typical shop would normally be between Rs. 60,000 to Rs. 1 lac.
Branding- The cost of the signage’s fabrication and installation is borne by GCMMF Ltd.
Equipment- You would require the following equipment:
1. 1or 2 deep freezers (Can be purchased through Hamara Apna Deep Freezer Scheme )
2. 1 pizza oven
3. 1 Chest Milk Cooler for Pouch Milk
Security Deposit- You would be required to furnish an interest free refundable security deposit of Rs. 25,000 to us locked in for one year. The entire amount would be forfeited in case the parlour closes down within the first year of operation.
Supplies- The delivery of products would be done through our wholesale dealers.
Agreement- An agreement bringing us together would be signed.
Help provided by AMUL
Amul would provide the design and specifications for renovation of the outlet. It will provide consultancy if required and will also inspect the work of the contractor.
Amul will help in assessing the business potential of the shop and will help in making the business plan.
Amul will guide you in purchase of various equipment. It will also help you in choosing between the various sizes and types available based on its experience of the business.
Amul will provide signage’s and glow-sign to the outlet at its own cost.
Amul shall help in the inauguration activities by way of local promotions.
Exclusive consumer offers would be made available through Amul preferred outlets which are not extended elsewhere.
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CONCLUSION
We can draw following conclusion from this study
Amul is a channel steward
Consumers buy Amul products due to quality and pricing of the same
Amul is slow in reacting to the channel members’ concern
Amul mainly gives financial incentive to its channel members. It should also give
non-financial incentives to motivate them
Amul’s channel selection is consistent with its long tem vision
Amul should take channel members’ feedback seriously (currently they do not pay
individual attention to the channel members
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REFERENCES
Chandra Pankaj and Devanath Tirupati, “managing complex networks in Emerging markets: the story of Amul”, IIM Ahmedabad.
http://www.amul.com
Kotler Philip, K.L. Keller, A. Khoshy, M. Jha, “Marketing Management, A south Indian Prospective”
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