ASIAN CASE RESEARCH JOURNAL, VOL.

11, ISSUE 2, 293 326 (2007)

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This case was prepared by Harish Chawla as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative or business situation. Please address all correspondence to Harish Chawla, B-183, Lane #2, Majlis Park, New Delhi, 110033, India. E-mail: harish@alum. wpi.edu.

Amul India: A Social Development Enterprise

Cooperatives are a rather strange and unlikely enterprise. Their success depends on all that is good in our people. We must invest, not to obtain a speculative return, but to build an enterprise that will benet us and our grandchildren, our neighbours and their grandchildren. Cooperatives require wise and honest leaders; they require capable and committed professionals. Amul is evidence that all those ingredients can be found [in India] and in good measure. Dr. Verghese Kurien, Founder/Chairman Gujarat Cooperative Milk Marketing Federation (GCMMF)1

The pioneering cooperative commenced with two villages in the state of Gujarat, with fewer than a hundred members and collected approximately 250 kg of milk per day. Over the course of its 50-year journey, the cooperative has progressed through the three life stages of an enterprise: startup, growth and maturity. Leaps in growth were observed as Amul adapted new technology, diversied into new markets, or when it replicated its model across India. Today, Amul Cooperative boasts of more than 600,000 members with collection approximating to six million kg of milk daily. From a major importer of milk and dairy products, as of 2003 India had become the largest producer of milk worldwide.
1Speech

delivered on the occasion of Amul Dairys 50th anniversary, 1996.

2007 by World Scientic Publishing Co.

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Dr. Verghese Kurien reected upon his long involvement with the cooperative movement in dairy. Progressive challenges guided the development of Amul that began as a small movement to overcome the exploitation of the rural farmers. Farmers were satised due to the progress that had been feasible through the trials and tribulations, efforts and accomplishments of Amul. Consumers across India were pleased with the widespread availability of dairy products at reasonable prices. This effort eliminated the abusive intermediaries, provided appropriate benets to the farmers, which led to rural development and altered the very nature of this business and village dynamics. What led to this revolutionary transformation? What were the characteristics of this cooperative that dened its success? The three phases of evolution offered new challenges, trials and tribulations, while revealing new opportunities prospects and potential. What were the critical elements of its sustained success over the course of its journey? How did leadership respond to the changing dynamics of the industry and the cooperative? Moreover, what was the secret of amicable human relations amongst the farmers and management? How can a cooperative become the catalyst for social change and rural development? In brief, what was the rationale of its success?

IDEOLOGICAL LEADERSHIP The rural folk appealed to Sardar Vallabhbhai Patel for his assistance against the detrimental and exploitative Polson. His recommendation for the cooperative was pursued and Tribhuvandas Patel was appointed chairman. Over the course of the developments, Sardar Patel resolutely repeated an indispensable question for Tribhuvan as the metric for progress, Are the farmers happy? With the same passion and spirit, Tribhuvandas and Kurien led the cooperative to decimate competition and overcome numerous challenges, ensuring that the farmers are happy and beneting. The year was 1946. India was soon to become independent of British rule. India was searching for a model

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that would integrate economic prosperity with the imminent political freedom. Espousing a deep-rooted love and understanding of rural India, Sardar Vallabhbhai Patel, son of a farmer, had an appreciation for the evolved structures and systems that dene village life. His knowledge of the economics of farming combined with his native sagacity provided him with an unrivalled comprehension of the workings of the Indian peasants mind. Indian village structures and systems exemplied resilience and social integrity that withstood foreign invasions and social disruptions. Sardar Patel committed that for democratic republic of India to thrive it must be rooted in its organic continuity instead of following the concept of industrialization. Raised in a village community himself, Sardar Patel understood the trials and tribulations, concerns and challenges of rural societies. He desired an evolutionary change in the rural communities that would not upset its solidarity. A prominent element of Vallabhbhai Patels strategy was to organize producer cooperatives to augment rural income while developing local industry. There was continuous exploitation of the farmers, and Vallabhbhai believed that cooperation was the desired and optimal solution. He initiated his experiment in the district of Kaira, the region he knew and loved most. He recognized the need for someone to lead the cooperative, as his aging physical strength could not complement his aspirations for a free India. Cooperative societies do not emerge without visionary leadership. Furthermore, they are imperiled with selsh desires of individuals within and without the cooperative. Tribhuvandas, a young freedom ghter, was identied and asked to instigate the cooperative movement. Tribhuvandas Patel was inuenced by many altruistic and devoted ne men since a young age. These men depicted moral courage to ght for their beliefs, challenged status quo, and in this course sacriced their lives. Mahatma Gandhi himself was a role model for young Tribhuvan, who attended many of his public meetings. The visionary zeal and enthusiasm of Sardar Patel caught Tribhuvan in 1938. The latter was overwhelmed by

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Sardar Patels ideals for rural development. Sardar Patel instructed Tribhuvan to return to his village of Anand and work for the people. Over the course of his activities that had included Civil Disobedience and Quit India movements, Tribhuvan had proven himself as a worthy leader. He was nothing if not tenacious once convinced of his rightness of action. Without any selsh or vested interests, Tribhuvan accepted the responsibility to organize the milk producers cooperative in 1946. Thereon, working with the cooperative remained his goal as India struggled for freedom and economic prosperity. He was unaware of the intricacies of dairy technology, thus he sought the assistance of Kurien. Verghese Kurien, a Malyali Christian, was looking for a career in engineering, with intentions of inhabiting the metropolis of India. Destiny brought him to Anand in return for a government scholarship he had received to study abroad. Self-condent and determined, his versatility allowed him to engineer a comfortable living on his own accord. His independent spirit, creativity and drive for perfection persistently clashed with the submissive behaviour of the other government employees at the creamery. Though Kurien found himself placed in this unhappy situation, he was determined to nd productive pursuits. This is what anyone with a good education would do; otherwise the so-called good education is worthless,b he contended. Tribhuvan offered young Kurien the opportunity to be part of the cooperative that was much in need of his professional expertise. Tribhuvan, an exceptional man with tremendous integrity and commitment to the cause of the farmers, was a difcult man to refuse. His vision motivated Kurien to contribute his services to build the farmers cooperative. He was delighted to get the opportunity to work with Tribhuvan, and in 1950 accepted the position of general manager of the cooperative. The challenges of the cooperative consumed the young engineer. This denoted his lifelong commitment to this movement for rural development.

bI

Too Had A Dream, p. 22.

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Kurien was initially focused on the operations of the plant, which was followed by comprehending market dynamics and establishing relationships with potential customers. Tribhuvan gradually involved him deeper into the internal functioning of the cooperative. Kurien developed skills to listen and communicate, accept criticism and suggestions from the farmers, while assisting to develop a protable cooperative. He resonated with the vision of Tribhuvandas and Sardar Patel to bring economic independence to the dairy farmers of Kaira.

DAIRY KING OF KAIRA Pestonji Dalal (Polson) built his enterprise during the war footings, initially supplying coffee followed by butter and cheese to the British army. Recognizing the benets of establishing his plant closer to where cream was collected brought Polson to Kaira, the region where milk was overowing. His model dairy was setup in Anand in 1930, modern, well equipped and highly automated. With limited alternatives for the housewives, Polson became synonymous to butter, as Xerox is interchangeable to photocopy. Polson had established a milk collection network in Kaira district. With the end of World War II, milk was diverted from butter and cheese to supplying pasteurized milk to the bustling city of Bombay, through the Bombay Milk Scheme (BMS).c Over the years, the plant capacity of the dairy enterprise grew, as it was handling the requirements of the army, government and high-income customers. To ensure consistent supply to Bombay, Polson obtained an executive order sanctioning monopolistic practices in Kaira, i.e. only Polson, the shrewd businessmen, would be allowed to purchase milk from 14 villages surrounding Anand. Hereon, Polson would set the purchase price of raw milk and the selling price to the market,
cThe

Bombay State Government established BMS to ensure a steady supply of milk for its residents.

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practically reigning as the Dairy King of Kaira. The dejected farmers received a small part of the selling price, while Polson and his contractors pocketed the lions share. Polsons iniquitous and cunning practices resulted in the ill treatment of the dairy farmers. Unscientic methods were employed to determine fat-content and quality of produce for payment practices. Polson would pay less for the milk claiming it to be sour. Lack of alternatives and his monopoly over procurement rights became unbearable for the producers and small traders. They voiced their troubles to Sardar Patel, who reiterated his recommendation of the cooperative society. Collaboration had become the means for self-defense against the unjust practices of Polson. Tribhuvandas Patel, under the guidance of Sardar Patel, led a 15-day boycott where no milk was supplied to Polsons agents. Succumbing to the pressure, BMS withdrew its earlier order, eradicating the monopolistic practices. This was the rst victory of the Milk Producers Cooperative. The signs of change were evident, and the cooperative was establishing itself in Kaira district.

AMUL: SERVING FARMERS Following the proposal of Sardar Patel, multiple village milk cooperatives were established. The overarching producers cooperative owned and operated a milk-processing plant to challenge Polsons dominance and eliminate intermediaries. Kaira Milk Cooperative expanded its functions to include procuring, processing and selling dairy products to Bombay, a close and vibrant market. January 1946 marked the birth of the milk cooperatives in India, and on October 7, 1946 milk collection began in the rst two registered villages. This was the beginning of rural renaissance in Kaira. A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.d The common need
dThordarson,

Bruce, The Lessons of Amul for Cooperative Development.

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to ght the abusive practices of Polson was the primary force for establishing the cooperative. From the outset, it was expected to be an autonomous organization with no interference from the government. The spirit of democracy was at the helm with the belief of joint ownership by the farmers. Finally, entrepreneurial in nature, the cooperative was expected to function as an efcient enterprise.

Objectives/Principles The ideology of Sardar Patel was the source of inspiration for the emerging milk cooperative. Economic liberation from the exploitation of moneylenders and intermediaries was the primary objective for establishing this enterprise. This system would provide control over their resources, thus developing economic and social sovereignty. The ideological commitment, the fundamental principal of the cooperative was to Serve the Farmers. This was a way of life for the members and workers of the cooperative, encompassing values of modesty, diligence, perseverance, and frugality. Farmers were the primary stakeholders. Consumers were equally important in this structure, as without a market the cooperative would not exist. Belief in fairness towards the producers and consumers ensured that the cooperative kept prices low and quality high. This led to the second principle: Quality Takes Precedence. Quality control had the nal decision. Democracy and fairness were at the helm, the ideological value that penetrated the organization structure in its daily affairs. This was reinforced by transparency at all levels, with the principal that audit can access the Chairman any time it considers necessary.

The Anand Pattern True to its belief, the organizational structure was established with the farmers at the helm, the owners and primary stakeholders of the cooperative. Pursuant to the federal

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system of representation, Amul established a three-tier structure that comprised village cooperative societies, district level dairy unions and state-level federations (Exhibits 3 & 4). The Village Dairy Cooperative Society (VS), the primary tier, comprised of milk producers, residents of the village who have committed to sell to the cooperative at a mutually determined price. Nominal membership of Rs.10 was their equity stake in this enterprise. Annually, the VS members elected a managing committee, which thereon voted for a chairperson for each VS. In 2004 there were 1017 village cooperative societies registered in the state of Gujarat. To ensure freshness and quality of raw milk, the market came to the village doorsteps in the form of village milk collection centers. Producers delivered milk twice a day to the collection centers, which was then transported to the union dairy plant. Collection centers scientically tested the milk for fat content and weight, and accordingly paid a fair price to the producers. Villlage Societies are prot centers that derive earnings from the sale of milk to the union. The second tier in this structure was the district union processor, which collected, processed and marketed the milk. The district union board is composed of the chairperson representing each Village Society. These board members elected a chairman and vice-chairman and appointed a managing director who administered the operations of the milk union. Each district had an independent milk union. Kaira Union was one of 12 district unions in Gujarat (1998). Gujarats district unions banded together in 1973 to form the apex marketing federation, the Gujarat Cooperative Milk Marketing Federation (GCMMF). This was the third tier of the Amul Structure. It was established to operate its own marketing and distribution network for the Cooperative dairy products across India under a single brand name Amul. The word came from the Sanskrit word amulya which means priceless and denoted and symbolized the pride of swadeshi production.e By 2004 India boasted 22 state federations across the country.
eI

Too Had A Dream, p. 55.

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The system had internal controls and measures to ensure quality and fairness. Payment was made on the basis of fat content, a disincentive to adulterate. The VS milk was further tested when it reached the union plant, and if found contaminated or spoilt, the whole society suffered through lost payment for the milk. These measures complemented by community supervision, restrained and disciplined each member without external controls. On the positive side, fair prices, ownership of the enterprise and a transparent system were incentives for the farmers to increase production and partake in the prots and annual bonuses. Condence in the efciency, honesty, transparency and fairness of the system brought these humble villagers to the cooperative. The policies and procedures remained transparent and endeavored to provide benets to the village producers. Bringing the marketplace to their villages and accepting all the milk produced are examples where the cooperative exemplied its values, objectives and focus on the farmers.

DIVERSIFICATION Membership in the Kaira cooperative was increasing, while milk production was also on the rise. Surplus milk collection in the winter needed to nd new markets or be directed towards new products. The urban middle and upper class residents of Bombay were unable to change their demand based on ever-increasing and uctuating supplyf. Kurien recognized the need to diversify operations. With the support of HM Dalaya, the dairy technologist, they decided to venture into manufacturing butter and milk powder, vertically integrate into dairy products. In 1953 UNICEF proposed to donate eight lakh rupees (Rs.800,000) to the Bombay government in return for distributing 12 lakh rupees (Rs.1,200,000) of free milk to undernourished children. The nance minister of Bombay
fCattle

produce more milk in the winter compared to the summer, thus uctuations in supply.

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approached Kurien and asked for his consideration and response. The farmer-members recognized the challenge of surplus milk, while also looking for additional means to augment their income. The terms of the proposal were accepted and Kaira Cooperative decided to venture into producing milk powder with the provided funds. The Milk Commissioner of Bombay, Khurody, was not too friendly towards the cooperative. He had equal interest in the funds proposed by UNICEF for establishing milk production facilities in Bombay. During discussions with Sabin, the senior UNICEF personnel, Khurody insisted that milk powder could not be produced from buffalo milk.g His tenacious argument was anchored on the fact that developed countries produce milk powder from cows milk. Furthermore, Khurody obtained feedback from dairy professionals, William Riddet of New Zealand and HD Kay of U.K., supporting his stand. Kurien found himself cornered. Was Khurody undermining the cooperatives ground? UNICEF would not provide the funds for the milk powder equipment if Khurodys statement were true. Nevertheless, the dairy technologists, Kurien and Dalaya, believed it possible to produce milk powder from buffalo milk. They would have to demonstrate the same in a conclusive manner. Taking calculated risks, they borrowed spray-drying equipment from Larsen & Toubros factory in Bombay. The group consisting of the UNICEF men, Khurody, Kurien and Dalaya, gathered around the laboratory table in Andheri, Mumbai. The tension was palpable as Dalaya poured skimmed milk into the feed vat and threw on the power switch. The humming of the machinery disrupted the silence before the rst snowy akes of powder milk entered the glass-receiving chamber. This was the moment of vindication for the cooperative. Yet unsatised, Khurody insisted on testing its solubility and taste. It has now been proven that milk powder can be produced from
was primarily produced from buffaloes, as they were more dominant in numbers. Buffalo milk is much higher in fat quantity, thus the challenge of producing dairy products in India.
gMilk

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buffalo milk. UNICEF will assist Kaira Union to set up the powder plant,h an excited Sabin announced. The Bombay government nally approved the project. The cooperative was victorious yet again. It had identied protable markets for surplus milk. Kurien contemplated that at times expert advice can be biased towards the economic interests of advanced nations, not for the needs of developing economiesi. On 31 October 1955, which is Sardar Patels birth anniversary, then Prime Minister Pandit Jawaharlal Nehru, inaugurated the countrys most technologically advanced dairy plant. As they demonstrated production of milk powder, Pandit Nehru praised the efforts, Kurien, Im so glad that our country has people like you people who will go ahead and achieve that which seems unachievable.j Amuls growth had picked up, as diversication into other products was rising. Market research and market analysis activities led to additional product introductions. Kurien recognized the high demand for baby food and cheese. Manufacturing of cheese and baby food from buffalo milk was also unheard of by the developed dairy industries, and refuted by the experts. Amul, nevertheless, pioneered this technology through persistent research and experimentation. An FAO expert, Dr. Wilster, assisted in this project and Amul cheese was made available to the market in 19631964. Production leaped to 41,000 kg within one year. Glaxo had market dominance in baby food, entering that market niche appeared daunting. Kurien, with his procient and adept management skills, approached the Government of India requesting the cancellation of Glaxos unused import licenses. The socialist government was well disposed towards Kurien, trusting his judgment and reputation. Glaxo licenses were cancelled and Amul was able to enter this niche. Yet another vindication for the professional management and Amuls credibility. Research, development and technology enabled leap in growth, a reallife illustration that success begets success.
hI

Too Had A Dream, p. 45. to Robin, Broad, Washington Consensus Meets the Global Backlash. jI Too Had A Dream, p. 53.
iRefer

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STAGED PROGRESSION During the establishment of the cooperative, sale of liquid milk was the primary focus, the prot center. Kaira Cooperative attempted to maximize production and sale of milk to Bombay through the BMS. This policy required arduous competition against predominant rivals. There appeared no apparent reason to invest in new technology, capital, research and training, thus innovation was on hold. Establishment of the system and basic survival dened the rst stage. The government had kept the price of milk stable while prices of dairy products soared. This became an incentive for transitioning into the manufacturing of dairy products. The Cooperative built a dairy to manage the surplus production of milk while enhancing its prots from sales of dairy products. Basic dairy products such as butter were initially produced that did not require considerable innovation. Product diversication was the second stage of the cooperative effort. The third stage led to extensive innovation, as the Kaira Cooperative embarked on a range of new products during the 1950s. Processing facilities were expanded, new technologies researched and processing activities broadened. The production of dairy products was initially to balance and nd new sources for the surplus milk. Marketing activities of the fourth stage played a central role in dairy development due to its unexpected success. Demand was booming from various segments. Defense services also procured their requirements from Amul. Kaira Cooperative intended to utilize its plant to capacity and provide for the increasing demand, which required a signicant rise in milk production. In 1961 1962, Kaira Cooperative initiated a program to double milk production in the district. Rupees four crore were marked for this investment directed towards improving cattle feed, cattle health care and hygiene and improved breeding. The effort did not provide the results within the expected duration. In 1964 a cattle feed factory was commissioned to provide better nutrients and concentrate

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feed to the cattle. Earlier, cattle were primarily fed straw and feed concentrate in the form of cottonseed. This assumed 60 70% of the total cost of milk. As the price of cottonseed was on the rise, a substitute was required; otherwise it would have a depressive effect on milk production. The Cooperative sought a balanced feed manufactured from nutrients and grains available locally. Feed-grains were ground and mixed with local supplies, while accounting for price, availability and a balanced nutrition for the cattle. The cooperative established the factory producing composite cattle feed, Amuldan, which was provided to the farmers at cost price and available throughout the year. This met the producers need perfectly and resulted in a gradual increase in milk production within the district. Prime Minister Lal Bahadur Shastri commissioned the cattle feed factory on October 31, 1964.

NATIONAL DAIRY DEVELOPMENT BOARD Within 20 years of its establishment, the Kaira cooperative attained national eminence and recognition for its work in Gujarat. Anand had gained a reputation as a place where something different was happening in the dairy industry. Various awards and recognition were bestowed upon Dr. Kurien and Amul, which included the Magsaysay Award, and Padma Bhushan to mention a few. The Indian government had established a few cooperatives in different parts of the country, but none of them enjoyed the success comparable to Amul. Puzzled, Shastri desired a rst-hand perspective. He requested Kurien to organize his stay in one of the cooperative villages, without the fanfare and security. Analyzing the farmers and farm conditions in its natural condition was essential. For that one night, Shastri had deep conversations with the villagers, asking questions and listening attentively. He learnt about their lifestyle, their farmlands, buffaloes, milk production, incentives to increase production and their relationship with the cooperative. Shastri was impressed to learn about this system that provided additional income

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to the farmers and raised their standard of living. To his surprise, this all was done without any direct nancial assistance from the government. Though government facilitation through public-private partnership was fundamental and critical in the growth and expansion phases.k It was a taxing but an informative evening for the Prime Minister. The following afternoon, Shastri, still perplexed, asked Kurien why this particular dairy succeeded while all others in India had failed. He iterated his observations. The soil was good, but not as good as the Indo-Gangetic plains. The climate was similar to most other parts in India cold in the winter, very hot in the summer with thirty inches of rainfall during the three months of monsoon, just like other parts of the country. The buffaloes were healthy, but not as good as the ones found in Uttar Pradesh, which were able to provide more milk. The farmers were good people, but not as hardworking as the farmers in Punjab. I cant nd a single reason why Anand is such a great success, the mystied Prime Minister questioned. While Shastri was able to observe and comment on the apparent observations, the subtleness of the Anand structure was overlooked. The solitary, yet most vital difference between Anand and the other cooperatives was that Amul dairy was owned by the farmers. The elected representatives from among the farmers managed it. These elected representatives had employed Kurien as the professional manager to run the dairy, who was thus an employee of the farmer. Ownership of the cooperative and the farmerprofessional management relationship provided the impetus. This was a dairy sensitive to the needs and responsive to the demands of the farmers. He further explained that there could be an Amul because Bombay was not too far away. Impressed and satised, Shastri requested Kurien to work not just for Anand, nor only for Gujarat, but for the whole of India. An Anand should be established in every state of India. This led to the creation of the National Dairy Development Board (NDDB) in September 1965. Its objective
kReinventing

Government by Osborne & Gaebler.

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was to establish milk production, procurement, processing and marketing in the country by making available the needed support services technical, manpower, consultation etc. NDDB developed audacious plans of genetic upgrading of milch cattle, scientic breeding processes, and signicant increase in milk production. Organization of dairy programs across the country would cost a whopping Rs.650 crore (Rs.6.5 billion). Funding from the Government of India would come with many demands and strings attached, making the whole effort bureaucratic and slow. Thus, an alternate source of funding was required.

GUJARAT COOPERATIVE MILK MARKETING FEDERATION Over the course of Operation Flood, district unions (tier 2 of Amul structure) multiplied within the state of Gujarat: Baroda, Surat, Banaskantha, Sabarkantha, Bharuch, Valsad, Rajkot and others. Each district union was independently responsible for its production, marketing and sale of dairy products. Kurien recognized that there could arise a situation where the milk cooperatives would compete with each other. This was not acceptable, and countered the objectives of cooperation. Kurien suggested developing agreements where all dairies in Gujarat would employ a common distributor and a common brand name. Thus, instead of competing with each other, the district cooperatives would integrate forces and expand markets while saving on advertising and brand building. This led to brand-integration and formation of the marketing federation, the third tier in the cooperative structure. The Gujarat Cooperatives Milk Marketing Federation (GCMMF) was established in 1973, and Kurien was elected as the rst Chairman and Managing Director of the federation, at which time he quit his position as the General Manager of Amul. GCMMF brought about economic and political benets to its cooperative members, specially beneting the small ones, further encouraging growth of more cooperative

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societies. Concentrating on developing and implementing marketing initiatives, the federation ensured full utilization of capacity, formulated production priorities, standardized systems and ensured greater consumer acceptance by strengthening the brand image. GCMMF was required to accept all the milk produced, assuring the members of stability and long-term growth. This effort was an important achievement of Operation Flood, borne out of the need for integration. In 2005, GCMMF was Indias largest food products marketing organization with an annual turnover of Rs.30 billion. Twelve district cooperative unions, 2.12 million producer members, 10,411 village milk societies comprise this organization. The average daily milk collection of the GCMMF was about 4.5 million liters. This effort of integrating the cooperative unions was merely an extension of the cooperative philosophy, of bringing value to the farmers through mutual collaboration. The federation had ensured remunerative returns to the farmers while providing consumers with high quality products under the brand names of Amul and Sagar. Exhibits 6 and 7 illustrates the growth of the federation over the years. The federation concerted in marketing and sales activities, developing new markets and determining higher valued products. Sales revenue leaped and Amul entered another level of expansion, the second phase of the enterprise lifecycle, the growth phase.

TEAMWORK Tribhuvandas Patel, unselsh, sincere and unassuming, promoted the cooperative structure and challenged Polsons dominance. He was a benign, thoughtful and a serious observer with strong links to the farmers as he was one of them himself. Tribhuvandas was a man of steadfast loyalty and integrity, with a relaxed style that got results with deceptive ease. Over the course of his journey throughout Kaira, the growth of cooperatives and their relationship with GCMMF is an indication of his abilities to effectively

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manage people. Tribhuvandas had the charisma to mobilize rural milk producers and convince them of the power of the cooperative, its democratic principles and the overwhelming vision of rural development. His unimpeachable personality and integrity earned him the affection and trust of the farmers. Here was a leader who had wielded power through the strength of his ideals and an example of his service to his fellow men. He is the kind of person that makes you feel happy to be a fellow human being.l Initially taking pride in the engineering and technology aspects of the dairy business, Kurien became gradually involved in all aspects of Amul, to the point where it became an integral part of his life. Kurien, the extrovert, was appointed General Manager of Amul, who learnt to share and appreciate the belief that he was an employee of the farmers. He strategized the battle against Polson butter, innovated the manufacturing of milk powder and condensed milk from buffalo milk and found other means of using the surplus produced by the cooperative. Schooled in adversity, challenged at every stage of the progression of the cooperative, Kuriens creativity and ingenuity always found a way out of the prevalent tribulations. As the toughminded and innovative manager of Amuls development, he championed the producers cooperative against threats from the urban bureaucracies and politics. Amul was, after all, a for-prot business enterprise, thus he needed professionals to run the factories effectively. Recognizing the need for a dairy technologist, Kurien requested HM Dalaya, a college friend from Michigan, to participate in this dream. The drive for changing society and village communities, the idealism and commitment of the other two led Dalaya to stay with Amul till his retirement. This brilliant dairyman innovated on dairy production techniques and methods to meet the need of the Kaira cooperative. He was tasked to work while Kurien did the talking. These three men, with clear objectives and a disciplined attitude, formed a formidable team where rights
lThe

Amul India Story, p. 277.

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and responsibilities were tacit yet shared. They maintained a compliant countenance without challenging another in public. Private discussions were the opportunity to argue and learn to iron out uncertainty and possible differences. Each had their set of expertise, where they were not challenged, but allowed to work independently. Mutual trust that each is focused towards the collective objective increased motivation, cultivated better communication and understanding amongst the team. Respect for the others was a fundamental force, which enabled them to work effectively and achieve impossible heights. The shared vision and commitment towards a larger cause ensured that the principal of economic rural development is preserved.
when you work merely for your own prot, the pleasure is transitory; but if you work for others, there is a deeper sense of fulllment and if things are handled well, the money, too, is more than adequate.m

DEVELOPING PEOPLE The primary objective of the Amul dairy is the wellbeing and development of its owners, the milk producers themselves. The dairy is the means and not the end in itself. The primary philosophy of the Anand model is to connect the producers directly to the consumers, ensuring that the largest share of the customers rupee is transferred to the producer. This provides an incentive for the farmer-producer to increase the quantity and quality of their production. The Anand pattern coalesces the power of the people with professional management in the integrated cooperative structure. The farmer is the owner and intimately involved in the production. Thereon, he also becomes involved in the process of development through observations and working with professional management. The democratic system of the Cooperative provides the underpinnings for democracy in the country. A visiting economist in the 1960s commented,
mI

Too Had A Dream, p. 28.

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Democracy seems to be growing here as fast as the milk supply. The producers have been able to develop managerial skills and familiarity with technology through their observations, association with professional management and experience with the managing committees of primary cooperatives. As milk cooperatives are established, producer members tend to sell more milk. They benet from the better price and swift monetary distribution, while realizing that the cooperative must be nancially viable in order to succeed. For the villagers of Gamadi, milk sales provided a steady and increasing income, which signicantly helped in the support and development. Traders, who earlier did not provide them credit, extended them support for seeds and fertilizers. The banks loaned them money to buy cows and buffalos. As villagers worked harder and prospered, alcoholism declined. Hope and self-respect enlightened their lives as they found more opportunities for growth and development. Another shining example of the effects the cooperative system can be found in the village of Khadgodhara, about 72 km from Anand. This village was two km away from a collection center, thus did not have a cooperative society of its own. The women would trudge the distance twice a day, against the wishes of their husbands. When a women sarpanchn was elected, she organized the women to form a cooperative society in their village, requesting Amul headquarters to take note of their effort. The women were disciplined and developed self-condence. Within the rst year they boasted annual revenue reaching Rs.1.5 lakhs (Rs.150,000) one and a half times the earnings of the entire village through farming. With the women heading this effort, schools were established in the village, better homes constructed, electricity was brought and other rural developments were observed. The need for family planning was recognized, as education had become a necessity. The battle against apathy, suspicion to change, and undesirable traditional practices continue, though the
nHead

of Village Community.

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villagers have become more aware and receptive. Positive change is apparent as the growth and development of the people is observed. The village cooperative societies have become dynamic institutions that have led to economic and social welfare activities, stimulating educational, health and integrative development of their community. Kurien repeatedly stated that the underlying goal is not the development of dairies or cows, but the development of people and rural neighborhoods.

LOOKING AHEAD The illustrious journey of Amul began some sixty years ago in a small shady town of Gujarat. Its overarching objective of serving the farmer and catering to the consumer had remained unaffected through the course of its evolution. For the farmers, Amul reected the power to direct their destinies, secure a stable livelihood through assured employment, empowerment for the village folk, most specically for the women. For the girl, Amul implied education and consequent emancipation. Amul represented high quality for the consumers, a name they could trust and depend on, an assurance of wholesome milk. India takes pride in Amul as a successful model for self-reliance and rural development, a model depicting that hard work, management expertise and capable leadership could achieve miracles. Amul Member Unions procured an average of 5.9 million kg of milk per day in 20042005, which represented a growth of about 15% from the previous year. Sales reached Rs.29.22 billion, where most dairy products indicated an increase, depicting the strength of the Amul brand nationwide. Distribution network expanded into smaller towns as the emergence of markets in smaller towns was observed. As of 2005, there were about 1059 village societies as part of the Amul network, comprising 600,000 members. Since its inception in the late 1940s, Amul had experienced the different stages of an enterprise lifecycle. The establishment marked the initiation, which was followed

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 313

by growth through diversication and employing new technology. Innovation, structural change, replication of the model and renewing its vigor has enabled Amul to soar its growth instead of stagnating into maturity. Exhibit 9 illustrates the periods of growth, including its most current challenge of direct sales and marketing, i.e. widening its distribution network and establishing Amul outlets across the country. The consistent growth indicates the visionary leadership that is in constant pursuit of expansion, aligned to its mission of serving the farmer. While Dr. Kurien reects on the successes of Amul, he realized that the effort and task at hand are ongoing. Business opportunities are expanding with the growth of the Indian economy. Disposable income at the hand of the consumers is keeping pace. The challenge ahead of GCMMF is to reach the most remote markets with innovative products and services such that more consumers benet. To achieve this challenge, Gujarat cooperatives need to increase production and productivity, requiring better management practices in the village. An incessant initiative of Amul had been vertical integration of the value chain. Member unions added value by moving from procurement and processing towards branding and marketing. The predominant need was direct contact with the customer, practically to their doorsteps. This was also in accordance with the Amul philosophy to eliminate intermediaries between the producer and consumer. Amul faced this competitive challenge through a foray into retailing and e-business. Amul envisions opening up retail outlets across the major cities in India, bringing the range of Amul products directly to the consumer. Providing the branded dairy products under one roof was their attempt to broach themselves even closer to the valued customer. While Amul has enjoyed decades of success, the challenges continue with the fast changing marketplace. Dr. Kurien, nevertheless, does not overlook the strength which has brought Amul so far.
We are in the business of development; not just marketing. Development, be it of products, people or processes. The spirit of development can be seen and

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felt in everything we do. Marketing is simply our tool to achieve our ultimate objective Human Development.o

PERSISTENT CHALLENGES This system was not awless, Managing Director Mr. Vyas reminded. It encompassed real challenges within the system and in relation to the external world. As in any democracy, if the voting members were not informed but ignorant the entire elections process becomes a farce or the elections could be hijacked. This had been observed in the past at the Village Society level elections. Education of the members, solidarity and integrity would enable to keep the members informed and thus reduce the potential of ignorant voting. Another commonly observed pattern was conicts between the farmer-members and professional managers. As each adopted a different perspective, and as their sophistication of comprehension differed, these groups were unable to communicate effectively, lending to greater confusion and misunderstanding. Though all had the same objective in mind, the lack of leadership skills burnt bridges. The conviction and leadership were what the founders portrayed, which appeared to be absent in the current generation of professional managers. The farmer-manager relationship was equally essential for the system to progress and expand. During its early startup and growth phase, the government bureaucracy was critical for the success of Amul. Various services and favors were forwarded as the objectives of the socialist government and Amul were aligned. As India transitioned towards open capitalism, there was a growing splinter between the two philosophies. Constant pressure to introduce government representatives on the Anand Dairy board was observed. Other forms of interference were equally vulnerable for the institutions. India had decreased its tariff structures after the 1991 liberalization process, and considered reducing it further.
oAmul

Annual Report 2000.

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 315

This would be detrimental for the milk industry, as it would not ensure an equal playing eld for all dairy economies. When the White Revolution was ongoing in the 1980s, critics, skeptics and opponents were voicing their apprehension. They did not appreciate the manner in which Kurien handled the expansion of the industry. General belief amongst the critics was that milk grant would be the better alternative, not assuming the milk powder for sale. Kuriens plans were termed the White Lie. The media carried out signicant coverage of both sides of the story, and it had become an internal crisis for Amul. Though Amul came out of this with stronger determination and courage, challenges from the external environment were another threat to their existence. While it is easier to create a manager, developing a leader is a much more complex process. This is true at the grassroots level as well as at a professional managerial level. Amuls focus had been in developing managers, not leaders. This aspect challenged the system, with limited innovation in their product line, systems and processes in the last 5 10 years. Leaders could think differently, plan differently, and strategize differently. NDDB was in the process of a transition in 2005 as Dr. Kurien resigned and appointed his apprentice as chairperson. Transition of leadership in GCMMF would be observed in the near future also. What are the associated challenges with transitioning of leadership in a social enterprise? Is it possible to sustain the cooperative objectives after the original/founding leadership shifts to other pastures? Or should the objectives change with a new breed of leaders? Amul is facing these challenging questions today, and is unsure of the parameters/characteristics in determining and preparing for new leadership. Is leadership transition actually possible in an ideology based, for-prot organizations?

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RESOURCES
Carter, Thomas, They Shaped AMUL, Senior FAO Advisor, NDDB, Amul 50th Celebration Address, 1996. Halse, Michel, Talent and Character: Sources of effective management at Amul, Amul 50th Celebration Address, 1996. Heredia, Ruth, The Amul India Story, Tata McGraw-Hill Publications, 1999. Kurien, Verghese, I Too Had A Dream, Lotus Collection, India, 2005. Mittal, S.P., The Eventful 50 Years, Amul 50th Celebration Address, 1996. Patel, Tribhuvandas, Cooperative movement and its role in the dairy industry of India, Speech, 1963. Thordarson, Bruce, The Lessons of Amul for Cooperative Development, Amul 50th Celebration Address, 1996. Amul Annual Report, 1996 & 2000. Kaira District Cooperative Milk Producers Union Limited, Anand, Annual Report, 20042005.

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 317

Exhibit 1 Location of Anand, Gujarat in India

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Exhibit 2 Amul India Timeline

1900
1930 1944

First dairy plant in Kaira established

Polsons model dairy established in Anand Govt. creamery in Anand reopened for research work Polson establishes a plant to process & transport milk to Bombay Executive order from Bombay giving Polson monopolistic powers First disorganized strike by farmers fails Sardar Patel suggestion 2nd 15-day boycott. Govt. withdrew exec. Order. Tribhuvan appointed chairman First milk collection fro Hadgud village KDCMPUL registered Inaugurated first processing plant Kurien arrives in Anand Dalaya joins as assistant manager, dairy technologist Kaira Union receives exclusive distribution from BMS Kurien studies dairy technology in Australia & NZ UNICEF proposal for milk powder donation received. Dalaya sent to Denmark to study dairy technology PM Nehru inaugurates new dairy plant for milk powder manuf. Amul brand name registered Manuf. Condensed milk from buffalo milk Cheese added to product line Cattle feed factory commissioned by PM Shastri NDDB Registered with Govt. of India EEC Surplus stock offered as free aid WFP accepts Kuriens proposal. Billion Liter Idea launched. OF I initiated GCMMF Established New Product Innovations continue Tribhuvandas Foundation established
IRMA Established

1945
1946

Oct. 7, 1947 Dec. 14, 1946 1948 May 1949 1950 1951 1952 Oct 1952 April 1953 1953 1954 1957 1958 1961 1964 1965 1968 1970 1973 1973 - 1989 1975
1979 1981

EXPERIMENT BEGINS IN 1946

Kurien becomes General Manager of Kaira Union. Sardar Patel passes away

P H A S E

-- O N E

START UP

GCMMF ESTABLISHED P H A S E -- T W O

1985 1994
1996 1998

Phase II Operation Flood commences

Phase III Operation Flood commences
Tribhuvandas Patel passes away

G R O W T H
OPERATION FLOOD COMPLETES P H A S E -- T H R E E

Operation Flood successfully completes

Kurien resigned from NDDB
26-Mar-06
24-Sep-06

MATURITY

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 319

Exhibit 3 Amul Cooperative Structure

AMUL
GCMMF in Gujarat
SALES REVENUE

MODEL
SALES REVENUE

22 State Fedns. in India

176 District Unions in India

12 District Unions in Gujarat

BONUS
DIVIDEND ON SHARES

ADDL. PRICE DIFF.

CATTLE FEED

RURAL HEALTH SCHEMES

VET. & AH SERVICE

1,08,574 Villages in India

11,615 Villages in Gujarat

2.4 million in Gujarat

12 million in India

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Exhibit 4 From the Farmer to the Consumer

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 321

Exhibit 5 Salient Features of Operation Flood Features Period # of milksheds covered # of Amul Pattern Centers setup (000) # of Members (millions) Average milk procurement (million kg per day) Processing capacity in rural dairies (million ltrs per day) Drying capactiy (MTS per day) Liquid milk marketing (million ltrs per day) OFI 19701981 39 13.3 1.8 2.6 3.6 261 2.8 OFII 19811985 136 34.5 3.6 5.8 8.8 508 5 OFIII 19851996 170 72.7 9.3 10.9 19.2 842 9.9

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Exhibit 6 Gujarat Cooperative Milk Marketing Federation GCMMF: Mission Statement We, at GCMMF, endeavour to satisfy the taste and nutritional requirements of the customers of the world, through excellence in marketing by our committed team. Through co-operative networking, we are committed to offering quality products that provide best value for money. GCMMF: Business Philosophy To serve the interests of milk producers To provide quality products to consumers Value for money GCMMF Sales Turnover 199495 199596 199697 199798 199899 199900 200001 200102 200203 200304 200405 Rs (million) 11140 13790 15540 18840 22192 22185 22588 23365 27457 28941 29225 US $ (in million) 355 400 450 455 493 493 500 500 575 616 672

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 323

Exhibit 7 GCMMF/India Trends in Milk Production & Cooperative Societies

GCMMF Member Village District Coop Societies
11400 11615 10852 11200

GCMMF Milk Producer Members (Million)

2.36 2.4

12000 10000 8000 6000 4000 2000 0

-8 5 -8 9 -9 4
5580 6240 8690

10180

2.5 2 1.5 1 0.5

2.22 1.67 1 1.23

2.27

'0 1-

'0 2-

'0 4-

'0 3-

93

84

88

97

-9 8

02

03

04

05

84 -8 5

89

93 -9 4

-0 4 '0 3

-0 2

88 -

03

'0 1

2-

GCMMF: Average Milk Procurement

(Million kgs. per day)
5.7

6 5 4 3 2 1 0 1.7 2.5 3 4

4.6

5.2

5.1

84 -8

89 -9

93 -9

97 -9

-0 2

'01

Milk Production: India (Million Metric Tons)

100 90 80 70 60 50 40 30 20 10 0 1950 1968

Phase I

'04

'03

'02

-0 5

-0 3

-0 4

'0

66.3 53.9 31.6

70.8

74.3

78.1

84

88

91

17

20

21.2

23.2

1980

1995
Phase II

1997

2002
Phase III

2004

'0

4-

05

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Exhibit 8 Amul Support Services Animal Breeding Amul owned a semen production center with high-pedigreed buffalo, the Holstein-Friesian. Amul provided articial insemination, which enabled it to control the supply surplus and decit. A cluster of villages had available AI subcenters. This crossbreed bull enabled the increase of the quality and milk productivity of the members herds. Veterinary Services In 1950 the concept of veterinary services were introduced to the cooperative. Farmers were not educated in this respect, and on many occasions would simply commiserate the illness or loss of their buffalo. A team of dedicated veterinarians was assembled who visited every village twice a month to treat the sick animals free of charge. Moreover, the vet services were available on call for immediate attention. In 1997, Amul operated 16 mobile veterinary dispensaries with radio telephones, providing emergency services on call. Subsidized medicines were also provided within the village society rst-aid ofces. Cattle Feed Nutritious cattle feed developed from local produce lends to improved milk quality and productivity. Amul setup its rst cattle feed plant in 1964, and its second in 1981. Balanced cattle feed is sold to the villagers at cost. The village collection centers are the point of sale, facilitating and encouraging the farmers to use the nutritious cattle feed. Value Addition & Marketing As milk production increased, Amul had to nd new methods of utilizing the produce. New dairy products were introduced, though branding was the solution that differentiated Amul from competition. Vertical integration into processing, packaging and marketing was followed. GCMMF was established to develop the markets and provide the services to the cooperatives. By 1980, Amul was the most recognized brand in India, primarily due to its slick, snappy and contemporary billboard commercials. Education Amul performed educational and training activities to ensure that its cooperative members exercised their rights and responsibilities prudently. Women members were provided special attention, as they were typically responsible for the animals in the house while the men tended the farms. The constant interaction with the members ensured that Amul remained responsive to the needs of the farmers. Institute of Rural Management, Anand As a professional himself, Kurien observed the growth in rural enterprises without a parallel increase of professional managers capable of serving the rural

AMUL INDIA: A SOCIAL DEVELOPMENT ENTERPRISE 325

poor. He found that too many managers had knowledge without values; intellect without wisdom; understanding without empathy; information without communication; skills and techniques without practice; and work without commitment. Recognizing the immense need for relevant management education and a training ground for professionals, IRMA was established in 1979. The professional graduates would pursue rural based opportunities. IRMA was also training managers to lead the Amul system into the future. Rural Health As Dr. Rajendra Prasad, the President of India, inspected the veterinary van in 1950, he was amazed and impressed by the large, spanking new van, gleaming with modern equipment. Round-eyed, he exclaimed In Bihar we dont have anything like this for humans! Yet you have it for your cattle.p This was the impetus, which led to the endeavor of the Tribhuvandas Foundation, providing healthcare programs for the villagers, especially for the women and children. This program initiated integrated rural development activities across India as part of the cooperative efforts.

The Amul India Story, p. 247.

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Exhibit 9 Growth and Expansion Phases Amul The diagram below illustrates the growth and expansion phases of Amul over its last 60 years of illustrious journey. Growth Phases due to technology, marketing or operational improvements/innovations.

Technology Upgrades 1990's

G R O W T H & E X P A N S I O N
GCMMF Established 1973

Product Diversification 1980's

Amul Brand Name Selected -- 1957

STARTUP 1946

Milk Powder Prodn 1952

TI ME