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4/6/2012

4/6/2012 AMUL SUMMER INTERNSHIP ANALYSIS OF READY TO DRINK AMUL MILK BEVERAGES AND DESIGNING ( PROMOTIONAL

AMUL

SUMMER INTERNSHIP

4/6/2012 AMUL SUMMER INTERNSHIP ANALYSIS OF READY TO DRINK AMUL MILK BEVERAGES AND DESIGNING ( PROMOTIONAL

ANALYSIS OF READY TO DRINK AMUL MILK BEVERAGES

AND

DESIGNING (PROMOTIONAL ACTIVITY)

IN

HYDERABAD AND SECUNDERABAD

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2 | P a g e A REPORT ON ANALYSIS OF READY TO DRINK AMUL MILK

A REPORT ON

ANALYSIS OF READY TO DRINK AMUL MILK BEVERAGES AND

DESIGNING (promotional activity) IN

HYDERABAD AND SECUNDERABAD.

BY

ABHISHEK BHATIA

[Enrollment no: 11BSPHH010027]

AND DESIGNING (promotional activity) IN HYDERABAD AND SECUNDERABAD. BY ABHISHEK BHATIA [Enrollment no: 11BSPHH010027 ]

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A REPORT ON

ANALYSIS OF READY TO DRINK AMUL MILK BEVERAGES AND

DESIGNING (promotional activity) IN

HYDERABAD AND SECUNDERABAD.

A report submitted in partial fulfillment of the requirements of MBA Program of IBS, Hyderabad.

of the requirements of MBA Program of IBS, Hyderabad. Submitted By: ABHISHEK BHATIA ( 11BSPHH010027 ).

Submitted By: ABHISHEK BHATIA ( 11BSPHH010027 ).

Date of Submission- 01/06/2012.

Submitted to:

Mr. S.V. CHARY (COMPANY GUIDE AMUL HYDERABAD).

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TABLE OF CONTENTS

S. no.

TOPICS

PAGE NO.

i.

INTERNSHIP CERTIFICATE

5

ii.

ACKNOWLEDGEMENT

6

iii.

EXECUTIVE SUMMARY

7

1.

INTRODUCTION

11

BACKGROUND

OBJECTIVE

METHODOLOGY

SCOPE AND LIMITATIONS

2.

ECONOMY INDUSTRY ANALYSIS

21

3.

COMPANY ANALYSIS

76

4.

PROJECT SPECIFIC ANALYSIS

122

5.

CONCLUSION AND RECOMMENDATION

207

6.

OUTCOME/CONTRIBUTION

214

7.

LEARNING FROM SIP

220

8.

REFERENCES

222

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INTERNSHIP CERTIFICATE

5 | P a g e INTERNSHIP CERTIFICATE

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ACKNOWLEDGEMENT

I would like to express my deepest gratitude to all those who gave me the possibility to complete this Project. I take this opportunity to express my sincere thanks to GCMMF Ltd, Hyderabad for giving me permission and opportunity to commence this project, do the necessary research work and to use official data. I would like to thank my company guide Mr. S. V. R Chary, Branch Head who gave me permission and encouraged me to go ahead with my project.

It has been an enriching experience for me to undergo my summer training at

AMUL, which would not have possible without the goodwill of ICFAI Business

School.

Words are insufficient to express my gratitude to the faculty guide Mr. G SURESH, IBS HYDERABAD who helped me at each and every step and for having spared his valuable time and for all the guidance given in executing the project as per requirements.

I would also take this opportunity to thank Mr. M. S PRASAD, IBS

HYDERABAD for providing me the opportunity to work with AMUL, Mr. ATUL

MISHRA, Executive (Sales [Vizag]) and Mr. SURESH REDDY, (Field Sales Representative) for their tremendous support and encouragement.

ABHISHEK BHATIA

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EXECUTIVE SUMMARY

The project focuses on the current scenario of ready to drink milk beverages market in Hyderabad and Secunderabad. It lays emphasis on how Amul has managed to reach the mass of the city having faced fierce competition from the other major market players. This project will measure the effectiveness of the company in tapping the beverage market in the Hyderabad city. This in turn, will give us a brief overview of how the company is performing in maintaining the brand image and retailers and consumers perception in this segment. It reflects the mass appeal for the brand on various parameters.

Description of the project in brief: The focus of the project is to conduct an extensive market research in order to study the retail penetration of Amul Milk beverages .The area of study is Hyderabad and Secunderabad. The product line under study for retail penetration includes Amul Masti Butter Milk, Amul Lassee, Amul Kool Flavoured Milk, Amul Milk Shakes, Amul Kool Café, Amul Kool Koko and tetra family packs (1 litre for Amul Buttermilk and Lassee). The survey will give a glimpse of the penetration percentage of Amul milk beverages in retail outlets and the performance of its distribution network. The survey report will help the company in identifying the areas of distribution where the availability of the product line is less and also the retailers‘ reasons for dissatisfaction. The survey will also help in identifying potential retailers who wish to stock Amul products. This study will also help us in identifying potential competitors for Amul in the milk beverages market and analyzes competitors` activities in terms of factors such as pricing, product variants, packaging and profit margins to retailers.

My project will deal with the following factors stated below -

To find out the penetration level of Amul beverages at Hyderabad and Secunderabad.

To find out various factors influencing the buying decision of retailers.

To find out the problems faced by retailers in selling and stocking.

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To recommend the suitable market strategies to be adopted by AMUL to increase its market share in Hyderabad and Secunderabad.

To study the consumer perception regarding Amul Beverages.

cans and bottles with respect to

Designing

brochures,

hoardings,

consumer perception.

To carry out a detailed analysis of Amul milk Beverages with its competitors

In brief, we will be evaluating the extent to which the image of the company, quality of the product, variants that it offers and value for money that it provides to the customers affects the purchasing decision of the buyers. This project helped us get an insight about the perception that a consumer holds while purchasing milk beverages. The various factors which determined the buying behavior of a customer includes the location of the store, ambience of the store, variety offered by the company and the most important factor being the quality offered. This clearly shows that a consumer gives proper thought before deciding on the brand of product to be bought.

To make it more simply and easy to attain the desired objectives, I have classified my project into three segments

1. Retail penetration In this segment, I will be dealing with the APO‘s where I will

o

Understand retailers‘ perspective with reference to factors influencing them to keep ready to drink milk beverages.

o

Keep a check on the which SKU is moving fast which in turn, will ensure meeting the potential demand requirements.

o

Study on the APO‘s planning to shut down.

For the study of penetration of RTD Amul milk beverages in retail outlets, survey method is used. The sampling technique used for selecting the sample space is Random sampling. The Sample space consists of the following retail outlets like general stores, eateries and Amul preferred outlets. A sample size

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of 60 is taken. The Questionnaire aims at capturing data regarding the availability of RTD (ready to drink) Amul milk beverages in retail outlet, availability of competitors RTD milk beverages, reasons for not stocking Amul products by retailers. The Questionnaire also helps in rating Amul`s replacement policy, distribution efficiency, credit policies, etc and also helps in analyzing the factors influencing the retailers pertaining to ready to drink milk beverages. I have used the following tools to get an appropriate analysis of the data collected

Data Analysis:

Factor analysis with reference to identifying the factors influencing the retailers pertaining to ready to drink milk beverages.

Percentage and graphical analysis on the retailer‘s reasons for not stocking Amul products and at the same time , analyzing which SKU is moving fast.

2. Consumer perception - In this segment, I will be dealing with consumers where I will study the consumer perception regarding Amul Beverages and at the same time, find factors influencing their decision with reference to buying the ready to milk drink beverages. This will help in carrying out a detailed analysis of Amul milk Beverages with its competitors on account of factors making them switch to other brands.

I have used the following tools to get an appropriate analysis of the data collected

Data Analysis:

Factor analysis with reference to identifying the factors influencing the consumers pertaining to ready to drink milk beverages.

Percentage and graphical analysis on the consumers‘ response with reference to Amul product range in this segment reflecting the product which the consumers demand the most.

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Weighted mean calculation with reference to competitive analysis on various parameters reflecting that the company (AMUL) should work upon, keeping the consumer insights into consideration.

3. Designing (promotional activity) This segment relates the above discussed consumer perception segment, where all the designing part (promotional activity) is done taking consumer perception into account. As we all know, product attributes, packaging, labelling, mascot, jingles, advertisement, etc all are essential tools to enhance brand equity. Here, we use the historical data from which we can state our hypothesis which is an unproven proposition or possible solution to a problem. Hypothetical statements assert probable answers, at empirical level a theory may be developed with inductive reasoning. Inductive reasoning is the logical process of establishing a general proposition on the basis of observation of particular facts. In this segment, I have used several examples such askMICKEY MOUSE MASCOT OF WALT DISNEY, MAHARAJA MASCOT OF AIR INDIA, etc to justify my null hypothesis - AMUL GIRL (mascot) in beverage segment would enhance the overall visibility and will have a positive impact on sales.

- AMUL GIRL (mascot) in beverage segment would enhance the overall visibility and will have a
- AMUL GIRL (mascot) in beverage segment would enhance the overall visibility and will have a

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INTRODUCTION

BACKGROUND

HISTORY

The Kaira District Cooperative Milk Producers‘ Union Limited was registered on December 14, 1946 in response to exploitation of marginal milk producers by traders or agents of existing dairies in the small town ,named Anand (in Kaira District of Gujarat). Government had given monopoly rights to Polson Dairy (around that time Polson was the most well known butter brand in the country) to collect milk from Anand and supply it to Bombay city in turn. Indian ranked nowhere amongst milk producing countries in the world in 1946.

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

The Cooperative was further developed & managed by Dr. V Kurien alongwith Shri H M Dalaya. The first modern dairy of the Kaira Union was established at Anand (which popularly came to be known as AMUL dairy after its brand name). Indigenous R&D and technology development at the Cooperative led to the successful production of skimmed milk powder from buffalo milk the first time on a commercial scale anywhere in the world. The foundations of a modern

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dairy industry in India were thus laid since. The fact being that India has one of the largest buffalo populations in the world.

COMPANY PROFILE

Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products marketing organization. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to farmers and also serve the interests of consumers by providing quality products which have good value for money. Over the last five and a half decades, Dairy Cooperatives in Gujarat has created an economic network that links more than 3.03 million village milk producers with millions of consumers in India and Abroad through a cooperative system that includes 15,712 Village Dairy Cooperative Societies (VDCS) at the village level, affiliated to 17 District Cooperative Milk Producers‘ Unions at the District level and GCMMF at the State level. These cooperatives collect an average of 9.20 million liters of milk per day from their producer members, more than 70% of whom are small, marginal farmers and landless laborers. Moreover, it also includes a sizeable population of tribal folk and people belonging to the Scheduled castes( SCs). The company was able to achieve a growth of 20% in 2011-12(April).

The turnover of GCMMF (AMUL) during 2011-12( April) was at $.4 billion. Amul has 85% share in the butter category, 65% each in cheese and milk powder, 40% share in ice cream and 20% in ghee. It markets the products produced by the district milk unions in 30 dairy plants, under the renowned brand name of AMUL. The combined milk handling capacity of these plants is 13.67 million liters per day, with four dairy plants having processing capacity in excess of 1 million liters per day. During the last year, 3.45 billion liters of milk was collected by Member Union of GCMMF. Huge capacities have been installed for milk drying, product manufacture and cattle-feed manufacture. All its products are manufactured under the most hygienic conditions. All dairy plants of the unions are ISO 9001-2000, ISO 22000 and HACCP certified. GCMMF (AMUL)‘s Total Quality Management

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ensures the right quality of products right from the starting point (milk producer) through the value chain until it reaches the end consumers.

The Gujarat Cooperative Milk Marketing Federation Ltd. cannot be viewed simply as a business enterprise, it has more to offer. It is an institution created by the milk producers themselves to primarily safeguard their interest economically, socially and democratically. Business houses create profits in order to distribute it to the shareholders. In the case of GCMMF, the surplus is ploughed back to farmers through District Unions as well as village societies. This circulation of capital alongwith value addition within the structure, not only benefits the final beneficiary the farmer, but also eventually contributes to the development of the village community. This is the most significant contribution made by Amul Model cooperatives towards Nation building.

Some facts and figure are given below:

 

17 District Cooperative Milk Producers' Unions (15 Members & 2 Nominal Members).

Members.

 

No. of Producer Members.

3.03

Million.

No. of Village Societies.

15,712.

Total Milk handling capacity per day.

 

13.67 Million litres per day

 

Milk Collection (Total - 2010-11)

3.45

billion litres.

Milk collection (Daily Average

 

9.2 million litres (peak 12 million).

2010-11).

 

Milk Drying Capacity.

647 Mts. per day.

Cattle feed manufacturing Capacity.

 

3690 Mts. per day.

 

Sales Turnover -(2010-11).

Rs. 9774 Crores (US $2.2 Billion).

Reference: http://www.amul.com/organisation.html

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Some essential key points :

Amul - Symbol of many things:-

Of high-quality products sold at reasonable prices.

Of developing and co-coordinating a vast co-operative network.

Of making a strong business proposition out of serving a large number of small and marginal suppliers.

Of the triumph of indigenous technology.

Of the marketing savvy of a farmers' organization.

Vision: Liberate our farmers from economic oppression and lead them towards prosperity.

Mission 2020: Dairy cooperatives of Gujarat to achieve turnover of Rs. 27000 crores by the year 2020.

Objective: To ensure that the maximum share of the consumer‟s rupee goes back to the milk producers.

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Twin objectives :

long-term, sustainable growth to its member farmers value proposition to a large customer base by
long-term,
sustainable growth
to its member
farmers
value proposition to a large
customer base by providing
milk and other dairy
products at a low price

INDUSTRY PROFILE

The Flavored milk industry in Hyderabad is highly competitive not only because of the existence of National and International brands, but also because the Local brands are also prominent. AMUL definitely has the advantage of being an early mover however, others are also picking up quickly. There are a rapidly increasing number of competitors in Hyderabad for AMUL making it a matter of concern.

All the competitors given below are of great prominence currently in Hyderabad. Local brands like Vijaya, Visakha and Dodla are getting more margins on dairy products compared to AMUL. This is because they have an advantage of close vicinity presence.

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There are many products under Amul in different categories. These are:

Amul

kool

milk

Amul Kool Chocolate Milk.

Shake .

Amul Kool .

 

Amul Kool Flavored Milk.

Amul Kool Café .

Amul Kool Flavored Tetra Pack.

Kool koko.

 

Amul

Masti

Spiced

 

Buttermilk.

Nutramul

Energy

Amul Lassee.

 

Drink.

 

Amul Kool Thandai

Amul Shakti .

 

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OBJECTIVE

To study the penetration of Ready To Drink Amul milk beverages in Retail outlets in Hyderabad and Secunderabad.

To find out various factors influencing the buying decision of retailers.

To find out the problems faced by retailers in selling and stocking.

Identify the reasons for reluctance of retailers to stock Amul products and suggest corrective measures to improve penetration in the retail market.

Understanding, learning and interpreting the Consumer behavior, attitude and perception towards consumption of beverages in general.

To recommend the suitable market strategies to be adopted by AMUL in order to increase its market share in Hyderabad and Secunderabad.

To carry out a competitive analysis of Ready To Drink Amul Milk Beverages vis-à-vis competitor brands in the same segment available in Hyderabad and Secunderabad .

To perform a SWOT Analysis for Ready To Drink Milk Beverage Industry in India.

To figure out a BCG growth share Matrix for the Ready to Drink Amul Milk Beverage product line.

Research on statistical methods to be used in order to accomplish the study.

A thorough research has been undertaken to understand the various statistical techniques that would be used to study and analyze the data collection through questionnaires. Based on the findings, recommendations would be made to the management to take necessary steps and promote profitability.

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METHODOLOGY

Data source: Primary and secondary data .

Methodology: The survey research method is the basic research design. This study includes two types of marketing research method:-

Exploratory research.

 

Descriptive research.

Research

Instruments:

Questionnaires

focus

group

discussions

and

direct

interviews.

Research Approach: Surveys.

Other details: This is an analytical study based mainly on primary and secondary data collected through various channels such as questionnaires, previous AMUL studies, focus group discussion and personal interviews. The questionnaire will be administered on general people or common mass from all age-groups and also among the employees, partners and clients of various AMUL franchises and regional offices. The questionnaire has been designed on the basis of interviews and guidance provided by various qualified personnel and using appropriate literature.

As I have segregated my project into three segments, I have used various tools to reach to conclusion which would enhance my learning standards and at the same time, help the company to frame certain policies in a better way.

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SCOPE AND LIMITATIONS

SCOPE

The research project helps in formulating an analysis on availability of the Ready To Drink Amul milk beverage product line in retail outlets. A detailed area wise survey report with retailers comments is provided to the GCMMF sales office at Hyderabad. The survey report will help the company in identifying the areas of distribution where the availability of product line is less and also the retailers ` reasons for dissatisfaction. The survey will also help in identifying potential retailers who wish to stock Amul products. The study also helps in identifying competitors for Amul in the milk beverages market and analyzing competitors` activities in terms of factors such as pricing, product variants, packaging, profit margins to retailers. The project analyzes the Strength, Weakness, Opportunities & Threats (SWOT Analysis) prevailing in the Ready To Drink milk beverage market. It also helps in figuring a BCG (Boston Consulting Group) growth share matrix for ready to drink product line of Amul. Adding to the above facts, this project will deal with consumer perception where the scope in this segment will be to get an insight of the customers with reference to milk beverages as to what are the primary consumer demands and which factor influences the most while buying a product. Another segment is designing (promotional activity) which is based on inductive reasoning and consumer perception. This segment will highlight the essence of mascots with reference to sub brands.

Key points:

o

The area of study of this project will be in the twin city of Hyderabad and Secunderabad.

o

The study will mainly concentrate on customers, retailers’ perception and preference of particular products (milk beverages).

o

The project will also give insights about the essence of mascots - as a promotion medium for brand recalling value.

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The sample will include all the buyers of AMUL irrespective of age, sex and profession. The basic aim behind my study is to find out the key elements towards making this brand the most preferred brand by studying the needs and preferences of customers and retailers

LIMITATIONS OF THE STUDY:

1) Sampling error- The sample is taken randomly from the population of Hyderabad and Secunderabad because the survey is limited to APO’s , eateries and grocery stores which might not provide a complete picture of the sales of Amul beverage market in Hyderabad. Hence, there is always a probability of sampling error in the procedure.

2) Response error-Since responses will be solicited from retailers and consumers, information collected from the retailers as well as consumers is considered to be true, interviewee being the only source of primary information and there is no method of verifying the information given by them.Hence, the research will be done on whatever data has been shared. Also, the respondents might not understand certain questions which could result in response error.

3) Time Factor - Since the study is done during summer season, the results of the analysis would be applicable only under such condition. Also, the tastes and preferences of consumers might change in due course of time. Hence, this research will be valid only for a particular period of time.

4) Factors taken into considerations-The factors that are considered for a research work may vary from researcher to researcher. Hence, the factors for this study are very subjective.

5) Secondary data accuracy -The secondary data collected from Internet Journals, Online News Articles, Research Papers and Online Blogs are assumed to be accurate and efficient.

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ECONOMY INDUSTRY ANALYSIS OF INDIAN DAIRY INDUSTRY

India is the world‟s largest producer of dairy products and has the world‟s largest dairy herd. India accounts for more than 13% of world‘s total milk production and is also the world‘s largest consumer of dairy products, consuming almost all of its milk production. Dairying has been regarded as one of the activities contributes to alleviating poverty and unemployment especially, in the droughtprone and rainfed areas. In India, almost threefourths of the population live in rural areas and about 38% of them are poor.

In India, the dairy sector plays an important role in the it‘s socio-economic development, and constitutes an important segment of the rural economy. Dairy industry provides livelihood to millions of homes in villages, thereby, ensuring supply of quality milk and milk products to people in urban as well as rural areas. The industry has been growing rapidly to keeping pace with the country‘s increasing demand for milk and milk products.

India is 'The Oyster' of the global dairy industry. It offers wide opportunities to entrepreneurs worldwide, who wish to capitalize on one of the world's largest and fastest growing markets for milk and milk products. A bagful of 'pearls' awaits the international dairy processors in India. The Indian dairy industry is growing rapidly and trying to keep pace with the galloping progress around the world. As MNCs expands its overseas operations to India, many profitable options have

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come up such as transferring technology, signing of joint ventures or using India as a sourcing center for regional exports. The liberalization of the Indian economy beckons to MNC's and foreign investors in the same manner.

Prior to the year 2000, India was not noticed by most international dairy companies, as it was neither an active importer nor an exporter of dairy products. Exports from India were insignificantly small and it was not until 2000 onwards, when Indian dairy products started having more and more presence in global markets.

Milk production in India has developed significantly in the past few decades. The Indian dairy market is growing at an annual rate of 7%. Demand- supply gap has become imminent in the dairy industry due to the changing consumption habits, dynamic demographic patterns, and the rapid urbanization of rural India, despite an increase in production. Hence, there is an urgent need for the growth rate of the dairy sector to match the rapidly growing Indian economy.

Here are some key statistics for India‟s dairy industry:-

Key

Statistics:-

Annual

Milk Production

108.5

Million Tonnes.

(20082009) .

   

Annual Export Volume (20082009) .

70,790 Tonnes.

Share of world dairy production (2010).

15%.

Share of world trade in (2003) .

dairy

products

0.3%.

Milking herd size .

 

115.5

million.

Number

of

milk

producers‟

cooperative

170.

unions .

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Number of local dairy cooperatives .

96,000.

Number of state cooperatives .

15.

Per capita consumption (Drinking milk).

250g/day.

Estimated percentage of dairy farmers in the organised sector .

4050%.

% of dairy produce consumed by the unorganised sector .

65%.

Dairy industry workforce .

75 million women/ 15 million men

Indian dairy sector is expected to triple its production in the next 10 years with respect to expanding potential for export to Europe and the West. Moreover, with WTO regulations expected to come into force in coming years all the developed countries which are among big exporters today, will have to withdraw their support and subsidy to the domestic milk products sector.

The emergence of India as a premier dairy nation of the world can be attributed mainly to the intensive crossbreeding programmes implemented over the last few decades. The population pressure and emerging global opportunities further necessitate that efforts for enhancing animal productivity are increased. Technologies for raising male buffalo calves economically should be developed as this potential source of income of farmers is going waste. The government is also taking several initiatives and running plans and programs like National Diary Plan and Intensive Dairy Development Program to meet the growing demand requirements for milk in the country.

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Overall Dimensions Of The Indian Dairy Industry

Dairying is considered as an important part of the Indian agricultural economy. About 17% of the total value of output from agriculture is derived from the dairy sector at the national level. India has now become the largest producer of milk in the world, with estimated production of about 81 million tons in 2001. In India, dairying is dominated by smallholder production systems; almost 70% of milk producers in India are landless, small and marginal farmers who own one or two animals. The Indian dairy sector has developed in a highly regulated and protectionist economy. However, India initiated major macro-economic reforms in the early 1990s that encouraged the liberalization of all sectors of the economy, alongwith the dairy sector. This was further reinforced with the signing of the Uruguay Round Agreement on Agriculture (URAA) in 1994. This exposed the Indian dairy sector to world dairy markets that have been highly disturbed by policies of high tariffs, domestic support, and export subsidies in developed countries. There is likely to be a restructuring of the dairy sector around the world, and changes for the Indian dairy sector as well under the new economic environment of trade liberalization and globalization.

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Contribution to the National Economy (income and employment)

Dairy enterprise is considered to be the "treasure" of the Indian economy, particularly for rural systems. It provides nutrition, draft animal power, organic manure, supplementary employment, cash income, and 'cushion' for 'drought proofing' in India .The dairy sector involves millions of resource-poor farmers, for whom animal ownership ensures basic livelihood, sustainable farming, and economic stability. Dairying is considered to be a vital component in the diversification of Indian agriculture, where crop farming is characterized by stagnating growth and low absorption of unskilled agricultural laborers.

At the macro-level, gross domestic product (GDP) from livestock is estimated to be about Rs. 98,421 crore (current prices), contributing to about 22% to the agricultural gross domestic product (GDP) and about 5.5% to the national GDP (CSO, 2001).Milk constitutes the major share (67%) in value of outputs from the livestock sector and is the single largest commodity contributing to the value of output from agriculture.

Socioeconomic Profile of Dairy Farmers.

Indian dairy farming is mainly a smallholder production system, characterized by milk production by the masses rather than mass production of milk. More than 80 million households (about 73% of rural households) keep some or the other type of livestock. Although dairying is becoming more and more commercialized in certain areas, it basically, remains subsistence farming catapulting a complementary/supplementary enterprise to crop farming, with continuous sales of

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surplus production. Dairy farmers in India are illiterate, resource-poor, and low risk-bearers. In the majority of the cases, they are either non-adapters or late adopters of modern technologies.

On marginal farms, it was estimated that introduction of dairy enterprise increases the average farm income from Rs. 12,801 to Rs. 18,163 denoting an increase of 42% per annum. On small farms, a similar trend was observed, with average farm increasing from Rs. 33,301 to Rs. 70,664 (an increase of 112%) resulting from introduction of dairy. Owing to poor financial condition and poor networks of organized financial institutions, farmers approach private money lenders for credit and enter into marketing contracts for selling milk.

Demand for Milk and Milk Products.

The demand for livestock products, especially milk and meat, in India has increased considerably, and has a strong potential for further growth. The per capita consumption of milk in many parts of the country is low compared to the minimum nutritional standards and to that of developed and developing countries. The demand for milk and dairy products is income-elastic, and the growth in per capita income is expected to increase the demand for milk and milk products. Other socioeconomic and demographic factors such as urbanization, changing food habits, and better lifestyle also reinforce the growth in demand for dairy products.

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Marketing Channels for Milk and the Role of Informal Sector.

India has co-existing "organized" and "unorganized" sectors for marketing of milk and dairy products. The organized or formal sector is relatively new in historical terms, and consists of Western-style dairy processing based on pasteurization, though it may be adapted to the Indian market in terms of products. In certain cases, the traditional sector is quite well organized, with a complex network of market agents, and shows variation in the number and roles of market intermediaries. It may also be relatively formal.In such a case, market agents may pay municipal fees and have vendor licenses. The reasons underlying the existence of a large informal or traditional sector are the same as found in other countries- consumers are unwilling to pay the additional costs of pasteurization and packaging, which can raise retail prices. The Indian government has adopted a laissez-faire approach to the informal sector, which has allowed it to expand with the growth in demand, and serve both the small farmers and resource-poor consumers.

With the recent changes in domestic policy (the repealing of licensing requirements under the MMPO) and trade policy, the share of the private sector in milk procurement is expected to increase. This could lead to some structural changes in production sector, whereby the private processors will try to reduce the transaction costs and may promote large commercial dairy farms.

Dairy farms located within the city or in its periphery (peri-urban and urban dairy farms) still have a major sway over their traditional customers. Customers often

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have a long association with the farm owner, and the quality and purity of milk is perceived to be the major advantage of these farms. Private vendors are dominant in the periphery of the cities and typically serve low and middle-income consumers. They are not particularly known for good quality of milk and also offer the lowest retail prices to consumers. In contrast to these operators in the unorganized sector, the cooperatives and some private units sell through the network of retailers. The commission offered by the cooperatives to these retailers is lower than what is offered to them by private sector units.Morepver, the penetration of packaged branded liquid milk is expected to increase due to increased awareness.

Stakeholder Groups in Indian Dairy Policy and their Interests.

The dairy sector can be represented by three separate segments/activities.

The first activity, farm production, consists of milk production and transportation to milk plants. In the formal sector, processing is the second activity, with raw milk as the input and pasteurized milk and dairy products as outputs. Transportation of products to wholesale market and marketing (domestic and export markets) is the third activity.

The major stakeholders in the Indian dairy policy are milk producers, processors (cooperatives, private enterprises, government, etc.), traders, wholesalers, retailers, informal sector processors and sellers, middlemen/contractors, consumers, the non-dairy industries, the government (Central and State), veterinary drug manufacturing and marketing companies, as well as households without dairy .

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KEY POINTS:-

The following characterizes India‘s dairy farming and its relevance to inclusive

growth:-

Small and marginal farmers own 33 percent of land and about 60 percent of female cattle and buffaloes.

75 percent of rural households own, on an average, two to four animals.

Dairying is a part of the farming system, not a separate enterprise.

Dairying provides a source of regular income, whereas income from agriculture is seasonal. This regular source of income has a huge impact on minimizing risks to income. There is some indication that areas where dairy is well developed have less incidence of farmer suicide.

About one-third of rural income is dependent upon dairying.

Livestock is a security asset to be sold in times of crisis.

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SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY

Strengths:-

A large number of small and marginal farmers are involved in dairying.

An effective marketing channel helps to meet the needs and demands of the urban consumers.

Presence of a very large number of animals and huge scope to enhance productivity.

Self-sufficiency in medicine production and do not have to rely on exports hence self-reliable.

How to build on them:-

Strengthen the economic viability of dairy farms by interventions on the input side as well as ensuring more and fairer farmer prices.

Increasing the link between rural production areas and urban markets.

Focus on strengthening the indigenous breed in order to help in significantly enhancing productivity.

Ensure availability of quality medicines by strengthening regulatory framework for enhancing quality.

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Weaknesses:-

A large share of milk (7085%) of marketable surplus goes through informal channels where quality is a big concern.

Sometimes, quality comes across as a big issue in the formal channels as well.

Very little competition to cooperatives because private sector was not allowed to participate in until recently

Farmers do not share in the benefits of high demand because of the poor governance of cooperatives.

Milk production is scattered over a large number of farmers producing miniscule quantities of milk.

Milk distribution is limited to urban and peri-urban areas.

Low milk prices because of lower prices declared by the cooperatives results in low prices of milk paid by all players.

Ad hoc export policies and ban on exports.

Quality of milk and milk products are a barrier to entry to the export market, especially in the EU and the USA.

Lack of policy focus on strengthening the indigenous breeds.

Non-existent extension facilities.

Farmers‘ prices are not based on fat measurements, which in turn affects their profitability

Because of low access to credit and risk-taking ability, farmers cannot increase their herd size.

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How to correct them:-

Focus on quality issues even in the informal channels by training traders and by enforcing food quality regulations.

Developing requisite infrastructure and training for clean milk production.

Supporting a fair playing field for the private sector.

Bring about changes in the cooperatives to make them true representatives of farmers instead of functioning just as parastatals.

Support to dairying as an enterprise in order to encourage commercial dairy farming and encourage production and productivity by extension and breed development.

Enhance packaged milk distribution in more and more areas.

Strengthen dairy farmer cooperatives in order to enable farmers to get a higher price for milk.

Create rational export policy in order to enable farmers to take advantage of higher prices.

Strictly implement quality regulations and improve the infrastructure and training for quality.

Strengthening the breed development programmes.

Strengthening the extension facilities.

Create policy regulations to make mandatory testing, a basis for setting milk price.

Increase access to credit through dairy farmer organizations and other such agencies.

Opportunities:-

Increased farmer income by exploiting high demands.

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Increased consumer sophistication and awareness of quality reception of quality packaged products (though slowly).

Entry of large corporations in retailing, which can lead to more and more investment.

Immense scope to enhance governance of dairy farmer organizations and thus enable dairy farmers to demand higher prices.

Potential for exports due to the low cost of production.

Overall a very positive growth environment, which is triggering the Government to enhance infrastructure.

How to pursue them:-

Create policies and activities geared towards enhancing dairy farming activity by increasing production, productivity and ensuring fair farmer prices of milk.

Establish an enabling policy environment to enhance investment.

Create policy support to enhance governance of producer companies.

Focus on quality issues that are act as barrier to exports.

Encourage private sector to increase investments in dairying.

Threats:-

A large portion of the population does not care about quality issues in milk.

Because of reasons of high price sensitivity for dairy products, people are not willing to pay for quality.

Significant increase in maize prices can lead to increase in feed prices.

Large informal markets that extend credit are constraining farmers.

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Low productivity and scattered production leading to high transportation cost.

Emphasis on milk fat and not on SNF content, thereby, maintaining relatively lower prices of milk.

How to avert them:-

Initiate consumer education about the negative health impacts of unpackaged products.

Develop packaging in smaller quantities to meet the needs of the poor.

Increase milk prices in accordance with feed prices.

Support expansion of dairy farmer organizations.

Enhance productivity by breed improvement and extension.

Enforce price setting of milk based on fat and SNF content to encourage production of cow milk.

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MAJOR MICRO AND MACRO IMPLICATIONS ON THE INDIAN DAIRY INDUSTRY

INDUSTRY STRUCTURE AND DEVELOPMENT:- The dairy industry plays an important role in the socio-economic development of India .India is the largest producer and consumer of milk

accounting for about 15% world‘s total milk production. The annual milk production is growing at the rate of about 4% pa. Currently, dairy products constitute about 19% of the total packaged food industry in India. About 37% of all the milk produced is utilized for processing in India both at the

organized and unorganized sectors. The share of organized sector is just about 15%. With the projected growth rate of 15 to 20% for dairy products over the next 5 years, the processed dairy industry is catching the fancy of organized players. While it is estimated that around 40 to 50 percent of Indian dairy farmers are employed by the organised sector, approximately 65

percent of milk in India is consumed (in fluid or processed forms) on farm or by the unorganised sector including local milk vendors, wholesalers, retailers, and the producers themselves. The co-operatives usually follow a 3 tier model (popularly known as ―Anand Model‖, after the successful Anand

based co-operative). The village co-operative societies collect and cool milk from villagers. The district unions consolidate society shipment and operate

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manufacturing plants to handle fluid surpluses. Marketing and coordination is handled by the state federations. It includes the following under its wings:-

Market for dairy products .

India is the largest dairy products consumer in the world, and milk constitutes a part of daily diet of people. Growing population coupled with increasing affluence has resulted in a rise of demand for milk products, with majority of consumers shifting their diet from basic foods to value-added ones.There are ample opportunities for export of value-added products in neighboring & milk-deficit markets of the Middle East, Far East & South East Asia. Moreover, changes in consumer preferences are driving the growth of food chains like Pizza Hut, Dominos, McDonalds, etc, which use dairy products, thus becoming the main destinations of consumers.

Changing trends.

There has been a shift from packaged to branded foods. There is also a shift from artificial ingredients to natural ones in dairy products. Besides, consumers, these days prefer traditional beverages like butter milk, lassi, etc as compared to carbonated beverages. Today, consumers are slowly and gradually shifting from high fat products like butter to healthier options like cheese.

Issues to be addressed.

Low productivity of dairy cattle, lack of availability of modern milk production technologies to dairy farmers, and inadequate cold-chain infrastructure are some of the challenges faced by the dairy industry. Moreover, there is also a growing

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demand for value-addition and R&D for product innovations as well as process development, which is not up to the mark presently. Also, there is need for appropriate distribution infrastructure to cover the entire length and breadth of India. The frequent changes in government policies also pose a challenge to the industry.

Future demand scenario.

The demand for dairy products in India is growing by more than 5 per cent every year due to rapid urbanization, increasing income levels and rising preferences for value-added foods. The key growth drivers of dairy business are availability of large quantities of milk and its good accessibility among consumers, as India has more than one billion consumers, who demand healthy and nutritious food. This demand is expected to increase at a fast pace in the next two decades.\

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DEMAND DRIVERS

The major growth drivers in milk and dairy products market are- increase in health consciousness among consumers, increase in disposable incomes, increasing urbanization, and rise in popularity of consumer foods and standards of living. Demand for dairy products in India is likely to grow in the coming years, as a result of more consumers, higher incomes and greater interest in nutrition. Consumption of processed and packaged dairy products is increasing in urban areas. Because of increasing competition from the private sector, several national and international brands have entered the market and expanded consumers‟ expectations of quality

Through implementing various incentive schemes, Indian policy makers are aiming to increase the country‘s dairy output. Examples of these schemes include the Ministry of Agriculture‟s research programs, imports of bovine semen and embryos, the National Project for Cattle and Buffalo Breeding, which focuses on improving Indian indigenous breeds with an allocation of USD 255 million. On the other hand, support is also offered by the private sector through activities such as artificial insemination services, training for veterinary care and other livestock management skills. In 2010, the government and the National Dairy Development Board have drawn up a National Dairy Plan (NDP) that proposed an expenditure of around USD 378 millions in order to nearly double India‘s milk production by 2020. This plan will aim to increase the country‘s milk productivity, improve access to quality feeds and improve farmer access to the organised market through increasing

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cooperative membership and growing the network of milk collection facilities throughout India. In addition, the new Food Safety and Standards Authority of India has consolidated various previous policies that set sanitary requirements for food safety, machinery, premises, quality control, certification, packing, marking and labelling standards for all food products, including milk and milk products and aims at regulating food safety in India through one overarching regulation. The forthcoming regulation is named The Food Safety and Standards Regulation and was implemented in 2011.

EMERGING DAIRY MARKETS-

Defense market:- An important growing market for quality products at reasonable prices.

Ingredients market:- A boom is forecast in the market of dairy products used as raw materials in pharmaceutical and allied industries.

Parlour market:- The increasing away-from-home consumption trend opens new vistas for ready-to-serve dairy products which would ride piggyback on the fast food revolution sweeping the urban India.

.

Demand conditions

Market size and growth.

Market growth is due to the high per capita consumption, increasing population and health consciousness.

Consumption patterns.

Consumption of processed and packaged dairy products is increasing in urban areas.

Consumption patterns.

Unpackaged milk is still preferred because of the taste and price.

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Sophistication of consumers.

 

Consumer awareness on product quality is increasing but in a very small portion of population.

Receptivity to new products.

 

Mainly urban consumers have a very low but increasing interest in new products.

Price elasticity.

 

Price elasticity is high.

Impact

of

market

opening

on

Consumers now have a variety of quality products.

demand.

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CRITICAL SUCCESS FACTORS

The reasons for the success of dairy cooperatives are very simple in its own way. It is empowerment. These cooperatives are not controlled by the government.

The biggest strength of dairy cooperatives is its labour intensiveness. Cost effectiveness being another important factor. Dairy cooperatives have effectively used the toil of farmers to develop self-reliance which is quite unique in making the future indeed bright for dairy cooperatives. The other critical success factors accruing to the Indian dairy industry can be elaborated as follows:-

Price Mechanism (Low Cost Of Production) :- Milk production is economies of scale sensitive and labour intensive. Due to the low labour cost, cost of production of milk is significantly lower in India. Thereby serving as a very significant advantage and has a huge role to play in the growth and success of the industry in a country like India where consumers are mainly price-sensitive. The more efficient the cost structure, the more efficiently can the value be distributed among the various actors of the value chain.

Moreover, the basic infrastructural elements for a successful industry are in place:-

Key elements of free market system,

Raw material (milk) availability and accessibility,

An established infrastructure of the latest technology, and

Supporting and abundant manpower.

An entrepreneur's active participation is likely to provide attractive returns on the investment in a fast growing market such as India, as well as high export potential

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in the Middle East, Singapore, Malaysia, Indonesia, Korea, Thailand, Hong Kong and other countries in the region. Other factors includes the presence of-

Biotechnology:-

Dairy cattle breeding of the finest buffaloes and hybrid cows.

Milk yield increase as a result of recombinant somatotropin

Recombinant chymosis is used which is acceptable to vegetarian consumers

Dairy cultures, probiotics, dairy biologics, enzymes and coloring materials for food processing are used.

Fermentation derived foods and industrial products alcohol, citric acid, lysine, flavor preparations, etc.

Biopreservative ingredients based on dairy fermentation, viz., Nisin, pediococcin, acidophilin, bulgarican contained in dairy powders are used.

(a) Dairy processing equipment:-

Dairy processing machinery of world-class quality is used for the purpose of manufacturing and marketing of milk and milk related products.

(b) Packaging equipments:-

Packaging materials and equipments used have the potential to develop brand loyalty and provide a clear edge in the marketing of dairy foods.

(c) Distribution channels:-

For products that require refrigeration and frozen food distribution system, a world class cold chain system helps in providing quality assurance to the consumers around the world.

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(d) Product development opportunity:-

Dairy products can be manufactured and packaged for export to countries where Indian food enjoys basic acceptance. Various opportunities can be explored such as-

The manufacturing may be carried out in contract plants in India. An option to market the products in collaboration with local establishments or entrepreneurs can also be explored. Products exhibiting potential include typical indigenous dairy foods either not available in foreign countries or products whose authenticity may be questionable.

(e) Ingredient manufacture:-

Export markets for commodities like dry milk, condensed milk, ghee and certain cheese varieties are well established. These items are utilized as ingredients in foreign countries. These markets can be expanded to include value-added ingredients like aseptically packaged cheese sauce and dehydrated cheese powders. Examples include-

Cheese sauce: Canned cheese sauce is made from real cheese to which milk, whey, modified food starch, vegetable oil, colorings and spices may be added. Cheese sauce is useful in kitchens for the preparation of omelet, sandwiches, entrees, and soups. Additionally, cheese sauce is used as a topping on potatoes and vegetables and may be incorporated in pasta dishes.

Cheese powders: Cheese powders are formulated for dusting or smearing of popular snacks like potato chips, crackers, etc. They impart flavor and may be blended with spices.

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(f) Technology-driven manufacturing units:-

Potential state-of-the-art contract-pack units are used specializing in cheese slicing, or dicing line, cheese packaging, butter printing, and aseptic packaged fluid products. These plants fulfill an essential need by providing a centralized and specialized facility for hire by the units which cannot justify capital investment but do need such services .

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DOMESTIC ECONOMIC CONDITIONS

Agriculture along with animal husbandry has been and will continue to be the lifeline of Indian economy. India is the largest and one of the most economical milk producers of the world (estimated production of 105 MT). It is the most important sector particularly in poverty alleviation and employment generation. This sector contributes close to one-fourth of India‘s National income and total work force engaged in agriculture is about 60 per cent.

About 70 million dairy farmers produce more than 50 per cent of the milk in the country. Milk and milk products are one of the important components of the Indian food industry. Consumption of milk and milk products is deeply rooted in our tradition and it is an essential item during rituals, festivals and other auspicious events.

Dairy market in India is very huge and according to an estimate, the unorganized milk and milk product market is about Rs 470 billion while the market for processed organized dairy segment is only Rs 10000 crores. The market is currently growing at around 5% pa in terms of volume.

India with its population of more than 1 billion and diverse food habits, cultures, tradition and religions, offers great market for milk and milk products. Milk products with well defined quality characteristics and packaging in attractive containers can be marketed at different places. Most dairy food delicacies are value added products thereby,generating high profits. The market for traditional dairy products in India is estimated to be US $ 10 billion, being the largest and fastest growing segment of the Indian dairy industry.

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FISCAL, MONETARY AND TRADE POLICY

FISCAL CONSOLIDATION.

The government is trying to impose fiscal consolidation so that monetary policy can be more accommodative. Lower debts, deficits and interest rates are useful traits for a more open economy to have. But rather than raising tax rates that push up prices costs, a better approach to fiscal consolidation is to reduce wasteful government expenditure. Plugging leakages and cutting allocations in areas where budgets have not been spent would create better incentives to spend.The Government has a poor record in spending effectively. Tax revenues have started rising again with growth, but this boom should not be wasted like last one.

MONETARY POLICY.

A sharp rise in interest rates has severe consequences. The policy should follow a path of gradual rise in interest rates conditional to inflation. The knowledge of future rise will reduce inflationary expectations, if combined with action to reduce costs.A short-term nominal exchange rate appreciation reduces costs. This can be very useful to contain temporary spike in oil or food prices and will become more with respect to inflation rates, which in turn will reduce the real value of government debt and compensate for current higher interest rates.

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TRADE POLICY.

Almost all of India‘s dairy exports are meant for Asian and African countries. In Asia, neighboring countries of South Asia and Middle East are the main buyers. Around half of India‘s exported dairy products are shipped to Bangladesh, the United States, U.A.E, and Singapore .Despite many efforts, India has not been able to reach the European markets, while the market in South America remains untapped. Export figures clearly illustrate that the Indian dairy export is still developing and the surpluses are neither systemic nor consistent. However, future outlook for export of Indian dairy products is rather positive, as indigenous milk products and desserts are becoming popular with the ethnic population, spread all across the world and there is a strong likelihood that the export demand for these products will grow.

Indian Dairy Exports by Product Types (2008/9)

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GLOBAL ECONOMIC ENVIRONMENT

Globalization is a key force in driving Indian economy and India‘s dairy industry products acknowledge the demands and preferences around the world by the end consumers. New imperatives includes production systems issues such as animal welfare , environmental footprint, and also product quality attributes such as traceability and product safety. Dairy farmers need immediate solutions in order to retain their competitiveness and access to global markets and for this innovation is important so that the industry maintains a unified approach and adapts to the changing nature of the people involved.

Despite having the world‘s largest milk production, India is a very small player in the international market. Prior to 1970s, India was an import dependent country and anhydrous milk fat, butter and dry milk powders were imported to meet the needs of urban consumers. However, with the implementation of Operation Flood Programme in 1971, the situation changed significantly and imports of dairy products reduced to very small quantities. After 2003, India‘s dairy import has dipped while exports have increased at a fast rate, yet India‘s share in global dairy trade still remains at minor levels of 0.3 and 0.4 percent for exports and imports respectively. This is due to the direct consumption of liquid milk by the producer households as well as the demand for processed dairy products that has increased with the growth of income levels, and hence have left little dairy surpluses for export.

While the decade of 200010 had seen positive level of dairy exports from India, the next decade is predicted to be different and signs of change are already visible. Due to low global dairy prices and high domestic costs, India is finding it

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difficult to sustain the exports of dairy products. On the other hand, factors such as the reintroduction of subsidies by European Union, devaluation of currency of New Zealand (a major dairy exporting country), combined with continuing global economic downturn, have made dairy imports into India attractive. It is predicted that dairy commodities will be the first largescale imports and will be used by Indian dairy cooperatives and companies to make reconstituted milk and other branded dairy products. This may be followed by imports of branded dairy products.

In the past, India was not permitting free import of dairy products. As the country‟s dairy sector employs 90 million people, India has advocated that milk and cheese be excluded from the scope of free trade agreement under negotiations with the European Union. India is now facing strong pressure to open up its market to dairy products from Europe. There are arguments suggesting that removing such tariff would leave India‘s farmers unable to withstand competition from European imports. Often these imports have been highly subsidized and can be sold at lower prices rather than domestically produced goods.

Other than the strong pressure from EU to open up its market, India‘s dairy sector may also become jeopardized by the proposed free trade agreement with Australia and New Zealand. Currently, the plan is also to reduce the tariff rate for New Zealand and Australia in order to encourage trade. It is feared that entering into a free trade agreement with Australia and New Zealand would bring adverse effects to the dairy sector in India, as the cost of milk production in Australia and New Zealand is far lower than that of India due to their pastoral system. In contrast, in India dairy animals are raised by concentrate feed and fodder, therefore the cost of production is much higher.

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MAJOR PLAYERS

KEY PLAYERS AND OWNERSHIP

The dairy industry is dominated by the co-operative sector. About 60% of the installed processing capacity is in the co-operative sector.Major players in the dairy sector with dairy products include Gujarat Co-operative Milk Marketing Federation (GCMMF) and Nestle .Others include Milkfood Limited, SmithKline Beecham Limited, Indodan Industries Limited, H.J. Heinz Limited, Britannia, Cadbury, etc.

All other local dairy cooperatives have their local brands (For e.g. Gokul, Warana in Maharashtra, Saras in Rajasthan, Verka in Punjab, Vijaya in Andhra Pradesh, Aavin in Tamil Nadu, etc). Other private players include J K Dairy, Heritage Foods, Indiana Dairy, Dairy Specialties, etc.

The major brands in milk and dairy products are:

GCMMF (Amul)

Nestlé (Everyday)

Mother Dairy(Kream Kountry)

Britannia (Milk Man Dairy Whitener)

The major players in the dairy products market are:

National Dairy Development Board (NDDB)

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SmithKline Beecham Consumer Healthcare

Nestlé India

Heinz India

Other players include:

Indiana Dairy Specialties

Jagatjit Industries Ltd.

Milk Powder/Dairy Whiteners :-

Major skimmed milk brands are-Sagar (GCMMF) and Nandini (Karnataka Milk Federation).Amul Full Cream milk powder is a whole milk powder brand.

Major dairy products manufacturers

Some of the major dairy products manufacturers in the country are as

follows:-

Company

Brands

Major Products

Nestle

India

Milkmaid,Cerelac,

Sweetened condensed milk, malted foods, milk powder and Dairy whitener.

Limited

Lactogen,

Milo,

Everyday

 

Milk

food

Milkfood

Ghee, ice cream, and other milk products.

Limited

Smith

Kline

Horlicks,

Maltova,

Malted Milkfood, ghee, butter, powdered milk, milk fluid and other milk based baby foods.

Beecham

Viva

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Limited

   

Indodan

Indana

Condensed milk, skimmed milk powder, whole milk powder, dairy milk whitener, chilled and processed milk

Industries

Limited

Gujarat

Co-

Amul

Butter, cheese and other milk products

operative

milk

Marketing

Federation

Limited

H.J.

Heinz

Farex,

Complan,

Infant Milkfood, malted Milkfood

Limited

Glactose,

Bonniemix,

Vitamilk

Britannia

Milkman

Flavoured milk, cheese, Milk Powder, Ghee

Cadbury

Bournvita

Malted food

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REGULATORY ISSUES

Government and the enabling environment

The dairy sector in India has traditionally been highly regulated. The government projects and programmes for enhancing dairy development includes subsidies for developing infrastructure for the purpose of milk processing and testing. The Clean Milk Production Programme is a centrally sponsored scheme that is being implemented by the State Department of Animal Husbandry, Dairying and Fisheries with several objectives:-

i) The creation and strengthening of necessary infrastructure for the production of quality milk and milk products at the farm level up to the points of consumption

ii) Improvement of milking technique

iii) Training in order to enhance awareness on the importance of hygienic milk production.

Several other rural development initiatives support dairying includes District Rural Development Agency and women‟s self-help groups.

Policy and regulatory issues.

Agriculture is a State responsibility in India, and the State Department of Animal Husbandry, Dairying and Fisheries, within the Ministry of Agriculture, is responsible for all dairy activities. Consequently, the focus of the activities as well as the budgetary allocation is biased towards agriculture rather than livestock.

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Enabling environment

 

National sector regulation

 

Key regulatory actors (ministries)

Department of Animal Husbandry is under the Ministry of Agriculture; hence the focus on livestock is underemphasized, particularly in the light of high value of the sector.

Price regulation

Rice setting by the cooperatives.

 

Food safety

Regulated

through

Milk

and

Milk

Products

Order.

Informal regulations

Very difficult to control quality in traditional channels.

Huge premium on fat content of milk as compared to formal regulations; thus buffalo milk fetches much higher price.

Formal sector support

 

Domestic sector (national)

Approaches

being

taken

to

modernize

the

sector.

Subsidy support

Various subsidies are available for milk processing and testing infrastructure.

Inward investment promotion

Very little investment is made for the promotion of health or quality of milk.

Provincial/local

Key regulatory actors (ministries)

State Department of Animal Husbandry, Dairying and Fisheries is the implementing agency at the state level.

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Informal regulation & transparency

Lack of milk testing equipment and thus low transparency, leading to low payments

Formal sector support

Availability of veterinary services; paravets are working with the Department of Animal Husbandry. Dairying and Fisheries

Formal sector support

Availability of services in remote areas through the government support.

Donor/NGO roles

Donor agencies are very actively involved in livestock sector development

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Government Policy towards Dairy Development in India

Despite the importance of dairying in the Indian economy, government policy towards this sector has suffered from lack of a clear and strong focus. Agriculture including animal husbandry is a State subject under the Indian Constitution, and the responsibility for the development of the sector lies with the state governments, with the exception of specific tasks being assigned to the Central government. The Royal Commission on Agriculture (1928) first recognized the role of draft animals, the problem of excessive numbers of cattle, and the scarcity of feed and fodder in the Indian agriculture. Government policies can be divided into three distinct phases- pre-Operation Flood, post-Operation Flood, and post-reform period and three distinct-areas -animal husbandry policy, policy on dairy processing and marketing, and policy towards cooperatives.

Regulatory Framework.

The dairy industry was de-licensed in 1991 in order to encourage private investment and flow of capital and new technology. Although de-licensing attracted a large number of major players, concerns on issues like excess capacity, sale of contaminated/ substandard quality of milk etc, it also induced the Government to promulgate the MMPO (Milk and Milk Products Order) in 1992. Milk and Milk Products Order (MMPO) regulates milk and milk products production in India. The order requires no prior permission for units handling less than 10,000 litres of liquid milk per day or milk solids up to 500 tpa. The stringent regulations, government control and licensing requirements for new capacities have restricted large Indian and MNC players from making significant investments in this product category. Most of the private sector players have restricted

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themselves to the manufacture of value added milk products like baby food, dairy whiteners, condensed milk etc.

All milk products with the sole exception of malted foods are covered in the category of industries for which foreign equity participation up to 51% is automatically allowed

Subsequent to de-canalization, exports of some milk based products are freely allowed, provided these units comply with the mandatory inspection requirements of concerned agencies like: National Dairy Development Board, Export Inspection Council etc. The Bureau of Indian standards has prescribed the necessary standards for almost all milk-based products, which are to be adhered to by the industry.

Pre-Operation Flood Period.

The budget allocation under five-year plans to the animal husbandry sector is an indication of the prioritization of the sector. However, in most states, the bulk of these allocations are eaten up by wages, salaries, and other administrative costs of the government animal husbandry departments. The plan outlay (at current prices) of central and centrally sponsored schemes under animal husbandry and dairying has increased from Rs. 22 crore in the First Plan to Rs. 1,545.64 crore in the Ninth Plan. The outlay for dairying increased from Rs. 781 crore in the First Plan to Rs. 900 crore in the Eighth Plan, and then declined in the Ninth Plan to Rs. 469.5 crore, which is substantially lower than the previous plan period.Moreover, these figures are at current prices. The allocation of animal husbandry and dairying as a percentage of total plan outlay varied from 0.98% during the Fourth plan to about 0.18% during the Ninth plan . In case of animal husbandry, a jump in plan outlay was seen in the Fourth Plan, when it almost doubled compared to the previous plan

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outlay. During this plan period, the efforts of crossbreeding programs and the establishment of veterinary health care facilities were increased. The percentage expenditure on the dairy sector compared to expenditure on animal husbandry and dairying varied from about 23.2% in the Fifth Plan to 88.4% in the Sixth Plan .The plan allocation for dairying declined to about 30% in the Ninth plan (one of the lowest in all plans). The declining trend of expenditure for dairying during the Ninth Plan was mainly due to the completion of OPERATION FLOOD. Although dairy sector occupies a pivotal position and its contribution to Indian agriculture is the largest, the planned investment made so far does not appear appropriate with respect to its contribution and future potential for growth and development.

Outlay and expenditure of central and centrally sponsored schemes under animal husbandry and dairying in India: First to Ninth Plan

(Rs. in crore)

 

Plan

Total

Plan

Animal

Dairying

Total

Outlay

Husbandry

Outlay

Exp.

Outlay

Exp.

Outlay

Exp.

First

1960

14.19

8.22

7.81

7.78

22.00

16.00

Second

4600

38.50

21.42

17.44

12.05

55.94

33.47

Third

8575.6

54.44

43.40

36.08

33.60

90.52

77.00

Annual

Plan

6625.4

41.33

34.00

26.14

25.70

67.47

59.70

1966-67

Fourth

15778.8

94.10

75.51

139.0

78.75

233.10

154.26

Fifth

39426.2

-

178.43

-

54.03

437.54

232.46

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Sixth 97500.0 60.46 * 39.08 336.10 298.34 396.56 * 337.42
Sixth
97500.0
60.46 *
39.08
336.10
298.34 396.56 * 337.42

Seventh

180000.0

165.19

*

102.35

302.75

*

374.43

467.94

*

476.78

Annual

Plan

-

43.71

36.18

79.67

41.43

123.38

77.61

1990-91

Annual

Plan

-

57.97

43.28

97.49

77.99

155.46

121.27

1991-92

Eighth

434100.0

400.00

305.43

900.00

818.05

1300.00

1125.60

Ninth 859200.0 1076.12 - 469.52 - 1545.64 -
Ninth
859200.0
1076.12
-
469.52
-
1545.64 -

* : Outlay recommended by the Planning Commission and it includes works components

61 | P a g e

AMUL’s Journey towards Excellence

AMUL‘s journey towards excellence is marked by critical understanding of the business environment in large emerging economies like, India, where markets have to be developed by combining efficiency related initiatives with increasing marginal base of suppliers and consumers. The basic essence of AMUL‘s remarkable progress is as follows:-

It combined market and social development in an emerging economy. It recognized the inter-linkages between the various facets that governed the lives of marginal milk farmers and the unmet needs of consumers. It changed the supply chain paradigm in order to reduce costs for the consumers and at the same time, increased returns for the suppliers.

It realized the fact that in order to achieve their organisation objectives, it had to provide benefit to a large section of people both suppliers and consumers. Large scale economy had the danger of failure due to poor control and usage of a large amount of resources; however, it also had the advantage of creating a momentum that would be necessary to bring more and more people into the fold and thereby help in increasing number of suppliers and consumers.

• It realized that its goals and objectives could

be achieved only in the long run

and in order to fulfill this, it required developing of values in people and

processes that were robust, replicable and transparent by nature.

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It also realized the fact that cooperatives would not be independent and viable in order to face competition if it were not financially sound. This implied that AMUL had to develop distinct capabilities that would be capable of delivering competitive advantage to its operations. This would include long term cost containment, world-class deployment of technological resources and R&D, and better leveraging of scarce resources.

The following are the characteristics of the unique movement that has helped AMUL in building a culture of excellence and reaching pinnacle of success. The salient features of this approach also termed as „ANAND PATTERN‟ are as follows:-

Leadership.

The FORERUNNER of this movement was Tribhuvandas Patel who had led the

movement for the formation of cooperatives of small and marginal farmers in order to compete against investor owned enterprises, and keep bureaucracy away.

Tribhuvandas was the first Chairman of the cooperative

of his remarkable management style was his gentleness and ability to repose trust in people he gave complete autonomy to managers of the union and earned complete commitment from them. Verghese Kurien was one such manager who first shaped the destiny of the Union and then that of the milk movement throughout the country. Kurien emerged as the father of the dairy movement in India. He managed to keep the government and bureaucrats away from the cooperative and gave shape to the modern structure of cooperatives, worked tirelessly to establish the values of

important aspect

An

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modern economics, technology and concern for farmers within the cooperative. He interfaced with global financing agencies to build new projects at AMUL. He worked with the Unions to bring the best of technology to the plants. In short, Kurien shaped the destiny of the milk movement in India through NDDB (as its Chairman) and particularly at GCMMF and cooperatives in Gujarat. He helped build a modern organization with professional management systems that would support the aspirations of farmers and customers and help in fulfilling the dream of making India the milk capital of the world. Kurien created a cadre of highly capable managers to whom he had delegated both management as well as commitment. Tribhuvandas knew that his fledgling cooperative needed a technocrat manager who shared his concern for the farmers and also had the tenacity to organize marginal producers. Verghese Kurien had the requisite skills and also had strong linkages with the government. He was charismatic in his communication and committed in his effort. He would travel through the villages and work out the details of how the milk collection cooperative would work, how trucks would pickup milk from village societies, how the cattle would have to be taken care of and how all of this would help the poor milk farmer come out of poverty and the clutches of the middleman. Tribhuvandas and Kurien were able to convince the government of the value of their efforts and secured funding for several projects of the cooperative. They were slowly laying the foundation of a modern dairy industry in India. Membership of the cooperative started to increase, professional managers started to join AMUL and production capacity at AMUL started to expand . Kurien had transformed AMUL from a dream into a major industrial entity a network of plants, cooperative societies, research centers, an institute for training future managers in rural management, secondary services like veterinary/artificial

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insemination expertise/feed factory etc. Subsequently, he could convince the government to replicate the AMUL model in almost all states of the country.

Strategy.

AMUL‘s business strategy is driven by its twin objectives of (i) Long-term, sustainable growth to its member (farmers), and (ii) Value proposition to a large customer base by providing milk and other dairy products a low price.

Its strategy, which has evolved over time, comprises of the elements described

below:-

Simultaneous Development of Suppliers and Customers:- Since the early stages of foundation of AMUL, the cooperatives realized that long-term sustained growth was contingent for matching supply and demand. Further, given the primitive state of the market and of the suppliers of milk, their development in a coordinated manner was critical for the continued growth and development of the industry. The organization also recognized that because of the poor infrastructure in India, such development could not be left to market forces and certain proactive interventions were required.AMUL and GCMMF adopted a number of strategies to achieve high growth. For example, when AMUL was formed, majority of consumers had limited purchasing power and were value conscious, undertaking very low levels of consumption of milk and other dairy products. Thus, AMUL adopted a low price strategy to make their products affordable and guarantee value to the

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consumers. The success of this strategy is well recognized and remains the main crux of AMUL's strategy even today. On the supply side, the member-suppliers were typically small and the marginal- farmers had severe liquidity problems, were illiterate and had no prior training in dairy farming. AMUL and other cooperative Unions adopted a number of strategies to develop the milk supply and assure steady growth.

Firstly, in the short term, the procurement prices were set in such a manner to provide fair and reasonable returns. Secondly, because of liquidity problems, cash payments for milk supply was made with minimum of delay. For the long-term, the Unions followed a multi- prolonged strategy of education and support.

The dual strategy of simultaneous development of the market and member farmers has resulted in parallel growth of demand and supply at a steady pace and in turn assured the growth of the industry over an extended period of time.

Cost Leadership:- AMUL‘s objective of providing a value proposition to a large customer naturally led to a choice of cost leadership position. Given the low purchasing power of the Indian consumers and the marginal discretionary spending power, the only viable option for AMUL was to price its products as low as possible. This in turn led to focus on costs and had important implications for managing its operations and supply chain practices.

Focus on Core Activities: - AMUL was initially not in a position to be an integrated player starting from milk production to delivery to the consumers. Accordingly, it chose a strategy to focus on core dairy activities and rely on

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third parties for other complementary needs. This philosophy is reflected in almost all phases of AMUL network spanning across R&D, production, collection, processing, marketing, distribution, retailing etc. For example, AMUL focused on processing of liquid milk and its conversion to variety of dairy products and the associated research and development.Paradoxically, logistics of milk collection and distribution of products to customers was managed through third parties. However, it played a proactive role in making support services available to its members wherever it found that markets for such services were not developed. For example, in the initial stages, its small and marginal member farmers did not have access to finance, veterinary service, knowledge of basic animal husbandry etc. Thus to guarantee continued growth in milk production and supply, AMUL actively sought and worked with partners to provide these required services Managing Third Party Service Providers:- It was recognized by GCMMF and AMUL that the core activity for the Unions lay in processing of milk and production of dairy products. The Unions focused efforts on marketing activities, and related technology development. All other activities were entrusted to third party service providers. These include logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc.The Unions and GCMMF have developed a number of mechanisms to retain control and assure quality and timely deliveries. This is particularly important for perishable products like liquid milk.

Financial Strategy:- AMUL‘s financial strategy is driven primarily by its desire to become self-reliant and thus it depends on internally generated resources for funding its growth and development. AMUL‘s financial strategy may thus be characterized by two elements:-

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(a)

Retention of surplus to fund growth and development, and

(b)

Limited or no credit transactions, i.e., all transactions are essentially cash

only.

For example, payment for milk procured by village societies is to be made in cash and within 12 hours of procurement (most, however, pay at the same time as the receipt of milk). Similarly, no dispatches of finished products are made without advance payment from distributors etc. This was particularly important, given the limited liquidity position of farmer/suppliers and the absence of banking facilities in rural India. This strategy strongly helped AMUL implement its vision of growth and development.

Organization

AMUL is organized as cooperative of cooperatives (i.e., in each village society, a cooperative in itself, is a member of the AMUL cooperative) thereby deriving the advantage of economies of scale and uniformity in decision making. The founders of Kaira Union realized that in order to fulfill their objectives, a large number of marginal farmers had to benefit from the cooperative for which a network of stakeholders had to be built. And once built, it had to expand so as to draw more rural poor to undertake dairy farming as a means of livelihood. The network had to have several layers organizational network where the voice of the owners governed all decisions, physical network of support services and product delivery process and a network of small farmers that could deliver the benefit of a large corporation in the market place. Moreover, a process had to be put in place to build these networks.

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A loose confederation was developed with GCMMF representing the voice of the customers, the Unions representing the milk processors and the village societies representing the farmers. Competition in these markets ensured that the entire network was responding to the requirements of the customers at prices that were competitive. The task of ensuring that returns to the farmers was in accordance with the objectives with which the cooperatives were setup and was achieved through representation of farmers at different levels of decision making throughout the network. In order to ensure that most returns from sales went to the producers, the intermediaries had to operate very effectively and on razor thin margins. This turned out to be a blessing in disguise the operations remained very “lean” and started to provide cost based advantage to the entire network. AMUL established a group to standardize the process of organizing farmers into village societies. The group had to train the VS to run the cooperative democratically, profitably and with concern for its members alongwith establishing the criteria for selecting members This included establishing procedures for milk collection, testing, payment for milk purchased from member farmers and its subsequent sale to the union, accounting, ensuring timely collection and dispatch of milk on milk routes established by the union, etc. The Village Societies Division at AMUL acts as the internal representative of village societies in their dealings with the Union. Cooperative development programmes at the village level for educating & training its members have become a significant part of the strategy to build this extensive network. The organization structure of AMUL allows effective utilization of resources without losing the democratic aspiration of individual members. Such a system needs charismatic leadership to achieve consensus across issues which is a process that has long-term benefits for any organization.

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Marketing .

GCMMF is the marketing arm of the network and manages the physical delivery and distribution of milk and dairy products from all the Unions to the end customers. GCMMF is also responsible for all decisions related to market development and customer management. Introduction of new products and choice of product mix and markets should be consistent with the growth strategy. GCMMF‘s demand growth strategy is characterized by two key elements:-

(i) Developing markets for its high value products by graduating customer

segments from low value products, and

(ii) Maintaining a healthy level of customer base for its base products.

This strategy requires GCMMF to allocate sufficient quantity of milk supply to low value products, thereby sacrificing additional profits that could be generated by converting low value products to high value products. It is worthwhile noting that advertisement & promotion was not considered to

be enough of value addition and hence the budget was kept relatively small. Instead, GCMMF preferred a lower price with emphasis on efficiency in advertising. In this context, GCMMF provides umbrella branding to all the products of the network.

For example, liquid milk as well as various milk products produced by different Unions is sold under the same brand name of AMUL. Interestingly, the advertising has been centered on building a common identity (e.g, a happy & healthy ―cartoon‖ AMUL girl) and evoking national emotions (e.g., the key advertising slogan says “AMUL - The Taste of India”).

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GCMMF also plays a key role in working with Unions to coordinate the supply of milk and dairy products. It procures it from multiple production plants , which in turn procures it from the Village Societies registered with each Union. GCMMF distributes its products through third party distribution depots that are managed by distributors who are exclusive to GCMMF. These distributors are also responsible for servicing retail outlets all over the country. GCMMF sales staff manages this process.

Operations & Supply Chain Management.

The strategies, designs and practices in AMUL‘s network are strongly driven by the objective of establishing and operating an efficient supply chain starting from milk production and procurement to product delivery to the end customers. Management of this network is built around two key elements

(a) Coordination of the diverse elements of the network and, (b) Use of appropriate technology that includes product, process, information technology and managerial practices and systems.

The various features of these elements that have contributed to the evolution of an efficient supply chain are-

Coordination for Competitiveness

Robust coordination is one of the main reasons for the success of operations involving such an extensive network of producers and distributors at GCMMF. Some interesting mechanisms exist for coordinating the supply chain at GCMMF. These range from ensuring fair allocation of benefits to various stakeholders to

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coordinated planning of production and distribution. More importantly, the reasons for setting up of this cooperative is available to everyone in this large network organization. Employees, third part service providers, and distributors are constantly reminded that they work for the farmers and the entire network strives to provide the best returns to the farmers who are the real owners of the cooperatives. There appears to be two critical mechanisms of coordination that ensures that decision making is coherent and that farmers gain the most from this effort. These mechanisms are:

• Inter-locking Control

• Coordination Agency: Unique Role of Federation

Inter-locking Control

Each Village Society elects a chairperson and a secretary from its member farmers of good standing to manage the administration of VS. 9 of these chairpersons are elected to form the Board of Directors of the Union. The Managing Director of the Union, reports to the chairperson and the board. All chairpersons of all the Unions form the Board of Directors of GCMMF. Each individual organization, the Union or GCMMF, is run by professional managers and highly trained staff A key reason for developing such an inter-locking control mechanism is to ensure that the interests of the farmer is always kept at the top of the agenda through its representatives who constitute the Boards of different entities that comprise the supply chain. This form of direct representation also ensures that professional managers and farmers work together as a team to strengthen the cooperative. This helps in coordinating and speeding decisions and information across different entities.

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Coordination Agency- Unique role of Federation.

GCMMF along with being the marketing and distribution arm of the Unions also plays the role of a coordinator to the entire network within the State coordinating procurement requirements with other Federations , determining the best production allocation for its product mix from amongst its Unions, managing inter-dairy movements, etc. It works with two very clear objectives:-

i) to ensure that all milk that farmers produce gets sold in the market either as milk or as value added products, and,

ii) to ensure that milk is made available to an increasingly larger section of the society at affordable prices.

Different Unions has to plan its production in such a way that market requirement matches with unique strengths of each Union and that each of them also gets a fair return on its capacity. GCMMF decides on the product mix at each Union location. Some considerations that govern this choice are the strengths of each Union, demand for various products in its region as well as the country, long term strategy of each Union, procurement volumes at different Unions, distribution costs from various locations, etc. Demand for daily products and supply of milk vary with seasons. Further, demand and supply seasons run counter to each other making the planning problem more and more complicated. GCMMF is guided by two main objectives in making allocations to Unions

(i) Maximizing the network surplus, and

(ii) Maintaining equity for the surplus realized among unions.

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AMUL ALL SET TO RISE PRICES !!!!!!!
AMUL
ALL SET
TO RISE
PRICES
!!!!!!!

Gujarat Cooperative Milk Marketing Federation Limited (GCMMF), owner of Amul brand, is planning to increase milk prices in the range of 5-7 per cent as a result of inflation for different categories of milk anytime this month .

Due to inflation the costs have gone up for the farmers. In order to keep farmers interested in dairy industry, AMUL had to revise prices. However, the price rise will not be as high as it was one and a half years back. The milk prices are expected to increase in the range of 5-7 per cent anytime this month

The impact of the price rise would lead to an increase of around Rs 2 per litre

Currently, GCMMF pays an aggregate Rs 32 per

litre Rs 21-22 per litre for buffalo milk (7 per cent fat) and cow milk respectively.

Amul pays maximum procurement price in the entire country and that is the reason, the number of member farmers with GCMMF has increased close to 3.1 million. GCMMF's turnover for the year stood at around Rs 11,660 crore, having about Rs 100 crore worth of exports. The turnover has since then grown by about 20 per cent on a year-on-year basis.

in different varieties of milk

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The turnover for Amul brand, is expected to be more than Rs 16,000 crore. Next year AMUL is looking at better growth of about 25 per cent with focus on some new launches and increased sales of milk.

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AMUL- THE ROAD AHEAD
AMUL- THE ROAD AHEAD

Amul chalks out investment plan of Rs 3000 cr for the next five years

GCMMF has chalked out the investment plan for the next five years. The federation is planning to invest Rs 3,000 crore over the next five years towards new product development and capacity enhancement.

Amul is planning to set up at least six new milk processing all over India. The plants in Delhi, Mumbai and Saurashtra are likely to start by this year end while plants in Kolkata are also being planned.

GCMMF has a combined milk processing capacity of around 14.5 million litres per day, which it plans to increase to about 18 million litres per day over the next five years.

AMUL is all set to the launch its whey protein malt beverage - Amul PRO.With this, Amul is set to compete with some of the chocolate-flavoured milk additive brands such as Boost, Complan, Bournvita and Horlicks in the Rs 2500-crore to Rs 3000-crore milk additives market. Amul aims to achieve the target Rs 300 crore sales or 10 per cent of market share in the first year of its launch. It is superior as compared to other brown health drinks brands in nutrition value and cost. This makes nutrition affordable to consumers. Amul PRO is aimed to cater to children between age group of 2 years to 15 years.

Amul has achieved a total turnover of Rs 11,660 crore for the year 2011-12 and holds commanding market share in branded butter market in India with 85 percent share, while the federation is exploring milk additive market through its latest launch.

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COMPANY ANALYSIS

INTRODUCTION

AMUL means ―pricelessin Sanskrit. The brand name ―Amul‖, has come from the Sanskrit word Amoolya‖.

Amul products have been in used by millions since 1946. Today, Amul is the leading brand of INDIA. It is a brand name that is managed by an apex cooperative organization named Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), jointly owned by some 3.03 million producers of milk in Gujarat, India.

BRIEF HISTORY OF AMUL COMPANY:

Formed in 1946 by Dr. Verghese Kurien.

It was founded in Gujarat.

Full name ―Anand milk Producers Union Ltd.‖

Managed by GCMMF (Gujarat Cooperative Milk Marketing Federation).

Amul has spurred the White Revolution of India, which has made India the largest producer of milk and its products in the world.

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THE MANAGEMENT PARADIGM: “ANAND PATTERN”
THE MANAGEMENT PARADIGM:
“ANAND PATTERN”

The Amul Model refers to a three-tier cooperative structure. This structure consists of the following - a Dairy Cooperative Society placed at the village level, affiliated to a Milk Union at the District level which in turn is further affiliated into a Milk Federation at the State level. The above three-tier structure was designed or set-up in order to delegate authorities and the various functions like milk collection which is done at the Village Dairy Society, whereas Milk Procurement & Processing is done at the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation. This not only helps in eliminating internal competition, but also ensures that economies of scale are achieved. The above structure was first evolved at Amul in Gujarat and thereafter it was replicated all over the country under the Operation Flood Programme. It is also known as the Amul Model or Anand Pattern of Dairy Cooperatives.

THE THREE-TIER AMUL MODEL HAS PLAYED A VITAL ROLE IN SPURRING OUT THE

WHITE REVOLUTION IN THE COUNTRY.

KEY POINTS:

Inspiring Leadership and Consuming Values.

Building Networks.

Coordination for Competitiveness.

Technology for Effectiveness.

and Consuming Values.  Building Networks.  Coordination for Competitiveness.  Technology for Effectiveness.

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Distribution model of Amul

There are essentially 2 methods of distribution used by Amul, namely, the downstream channel and the direct distribution channel. The Downstream Channel is the distribution part of the supply chain, starting from manufacturing to the retailing. The direct distribution channel comprise of Amul Preferred Outlets (APOs), which sell Amul products directly to the consumer. These are shown in the flowchart below:

APO1 APO2 APO 'n'
APO1
APO2
APO 'n'
Retailer 1 Retailer 2 Retailer 'n'
Retailer 1
Retailer 2
Retailer 'n'
Depot 1 Depot 2 Depot 'n'
Depot 1
Depot 2
Depot 'n'
2 Retailer 'n' Depot 1 Depot 2 Depot 'n' WD1 WD2 WD 'n' Manufacturing Customers Customers
WD1 WD2 WD 'n'
WD1
WD2
WD 'n'
Depot 1 Depot 2 Depot 'n' WD1 WD2 WD 'n' Manufacturing Customers Customers  D OWNSTREAM
Depot 1 Depot 2 Depot 'n' WD1 WD2 WD 'n' Manufacturing Customers Customers  D OWNSTREAM
Depot 1 Depot 2 Depot 'n' WD1 WD2 WD 'n' Manufacturing Customers Customers  D OWNSTREAM
Manufacturing
Manufacturing
Customers
Customers
Customers
Customers

DOWNSTREAM CHANNEL

First leg of transport is from the manufacturing unit to the company depots.

Second leg is from the depot to the WD‘s (wholesale dealer), and

Third leg is the flow of goods from WD‘s to retailers.

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DIRECT DISTRIBUTION CHANNEL

With the products being highly perishable, the supply chain ought to have maintained correct temperature, humidity, etc, and the chain should move faster.

To reach out to its consumers more directly and let them enjoy the total brand experience, Amul has come up with Amul parlours. These are called Amul preferred Outlets. These parlors are set at prominent locations such as offices, college campuses, temples, and metros.

Amul has a franchisee plan for Amul parlours. The interested party needs to pay a deposit of Rs.1.5 lakh to GCMMF in order to get this franchisee. Amul provides it with the necessary equipment and products, and a distributor is assigned through which the transactions can be carried out on a regular basis. These Franchisees get a higher margin as compared to the other retailers, as there is no wholesaler involved in this channel.

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80 | P a g e Amul today needs no further introduction; it is a brand

Amul today needs no further introduction; it is a brand which has spurred the white revolution in India. It is a brand which not only speaks about the essence of the members in the company, but also tells the need for grooming and providing the requisite knowledge to its members in a specified field. It is the organisational structure, policies and strategies framed and implemented that have helped evolve AMUL as a giant in the Indian dairy industry.

People in India are emotionally attached to this brand which evolved in 1946. They have framed certain perception about the brand with respect to various parameters. They are as follows:-

o

Personality : INDIAN.

o

Relationship : SOCIABLE.

o

Culture : COOPEARATIVE , SHARING.

o

Physique : TASTE AND QUALITY.

o

Reflection : VALUE ORIENTED.

Amu has formulated certain strategies for uplifting its brand value. They are as

follows:-

It combined market and social development Amul has very well

realized the essence of its suppliers and consumers. The dual strategy of market and the concerned farmers members of the Amul family has resulted in parallel growth of demand and supply at a steady pace. They realized the potential of the untapped portion in this market arena and focused on world class deployment of technological resources, scarce resources and multi prolonged strategy of education.

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Market Penetration Strategy:

81 | P a g e  Market Penetration Strategy :  Amul is all set

Amul is all set to come up with 10,000 `Amul Parlours' all across the country.

Amul‘s next strategy is to acquire a shelf in the Wal-Mart (yet to come).

Market Development Strategy:

Amul has shifted its focus to rural markets and smaller towns.

Amul has captured the market of diabetic and health conscious people

through sugar free ice-creams.

Amul has also increased its market base for milk through a new version

the Amul Tazaa. Tazaa milk has a longer shelf life when compared to

normal fresh milk.

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AMUL’s Best Practices :-

Umbrella Brand Strategy.

The GCMMF skillfully avoids inter-union conflicts through this strategy by giving every union and sub-brand the opportunity to contribute in the development of products.

BUSINESS MODEL:-

o

Follows a unique business model.

o

Protect the interest of milk-producing farmers.

ORGANISATIONAL STRUCTURE:-

o

The cooperative came to be known as the "Anand pattern" cooperative system.

o

It has a three-tier structure.

o

Each tier is economically independent.

PRODUCT DEVELOPMENT:-

o

Cooperative system.

o

Profitability.

o

Commitment towards farmers.

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IMPROVEMENT PROGRAMS:-

o

Employees of the GCMMF meet every Friday between 10 to 11 am to discuss quality issues at a depot.

o

Every meeting has a Purpose, Agenda and Limit (PAL).

CONSTANT INNOVATION:-

o Cooperatives ensure that the sequence and product mix of high value brands is consistent with Amul‘s philosophy of low pricing and affordability.

COORDINATION:-

o

GCMMF ensures the distribution of final products by coordinating with retailers and dealers.

o

Unions take care of the supply side which includes- monitoring milk collection, supplying animal feed, educational activities, etc, all ensuring that the product reaches the consumer on time.

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ALL ABOUT BRANDING

ALL ABOUT BRANDING

ALL ABOUT BRANDING

The term brand reflects different things to the different roles of buyers and sellers, with buyers generally associating brand with a product or service, and merchants associating brand with identity. Brand can also help in identifying the company behind the specific product. For example- that's not just a biscuit, that's Britannia biscuit. This use of brand puts a "face" behind the name, so as to speak. For the typical merchant, branding is a way of talking everything that is good about the company - positive shopping experience, professionalism, superior services, product knowledge, whatever the company decides is important for a customer to believe about the company - and wrapping these characteristics into a package that can be evoked by the brand as signifier.

BRAND ELEMENTS:-

characteristics into a package that can be evoked by the brand as signifier. BRAND ELEMENTS :-

Keller Brand Elements Model

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Brand Name: ―Amul‖ is the acronym of Anand Milk Union Limited.

The Logo:

is the acronym of Anand Milk Union Limited.  The Logo:  The Tagline / Slogan:

The Tagline / Slogan: ―The taste of India‖.

The Jingle: Utterly, butterly, delicious… Amul.

The Character / Mascot: The Amul moppet has been the

mascot of Amul since 1967, sporting a young girl in red

polka dotted frock with 'utterly butterly delicious‘ jingle.

The URL: www.amul.com.

butterly delicious‘ jingle.  The URL: www.amul.com.  Mental Map to Brand Mantra:- • Mental Map
butterly delicious‘ jingle.  The URL: www.amul.com.  Mental Map to Brand Mantra:- • Mental Map

Mental Map to Brand Mantra:-

Mental Map:- A mental map is generally a visual depiction of the core brand association. From this mental map, brand Mantra can be defined . Brand mantra for Amul butter is given here:-

core brand association. From this mental map, brand Mantra can be defined . Brand mantra for

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BRAND VALUES & BRAND EQUITY:-

Brand Values: The core values of the company are-

To provide remunerative returns to farmers, give the best quality product to consumers, and at the best possible price.

SOURCES OF BRAND EQUITY:-

The Core team and the core values associated with the brand is still the same that has helped them to maintain consistency in communication.

Strategy of Umbrella branding has also helped established the brand firmly.

Amul‘s utterly butterly campaign has the track-record of being the longest running campaign.

Playing the role of a social observer through its weekly comments on Amul girl.

Taste of Indiatagline is in line with their positing strategy.

BRAND HOUSE AND HOUSE OF BRAND:-

girl. • ― Taste of India ‖ tagline is in line with their positing strategy. 

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BRAND ARCHITECTURE:-

87 | P a g e  BRAND ARCHITECTURE:-

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BRAND PORTFOLIO:-

88 | P a g e  BRAND PORTFOLIO:-

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PRODUCTS

90 | P a g e PRODUCTS THE PRODUCT RANGE :- • UHT milk. • Milk

THE PRODUCT RANGE:-

UHT milk.

Milk powders.

Fresh milk.

Chocolates.

Liquid Milk (nine varieties).

Milk Powders (five varieties).

Butter.

Ghee (two varieties).

Bread Spread.

Cheese (three varieties).

Cocoa Products (two varieties).

Sweets (three varieties).

Ice Cream (several varieties).

Condensed Milk.

Edible Oil (nine varieties).

Mineral Water.

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Fruit Drinks.

It can further be enumerated as:-

Bread Spreads. Amul Butter, Amul Lite, Delicious Table Margarine (Or Butter substitute).

Milk Drinks .

Amul Kool Milk shake, Amul Kool, Amul Kool Café, Kool Koko, Nutramul Energy Drink, Amul Kool chocolate milk, Amul Kool flavoured Bottled Milk, Amul Kool Flavoured Tetra Pack, Amul Masti Spiced Buttermilk, Amul Lasee, Amul Kool Thandai .

Powder Milk .

Amul Spray Infant milk Food, Amul Instant Full Cream Milk Powder, Sagar Skimmed Milk Powder, Sagar tea Coffee whitener.

Amul Fresh Milk, Amul Gold Milk, Amul Taaza Double toned Milk, Amul lite slim and trimmed milk, Amul Fresh Cream, Amul Shakti Toned Milk, Amul Calci+, Amul butter Milk.

Cheese .

Amul Pasteurised Processed Cheese, Amul cheese Spread, Amul Emmental Cheese, Amul Pizza Mozzarella Cheese, Gouda Cheese.

For Cooking .

Amul Sagar Pure Ghee, Cooking Butter, Amul Malai Paneer, Utterly Delicious Pizza, Mithai Mate, Masti Dahi, Pro Biotic Dahi.

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Desserts .

Amul Ice Creams, Amul Shrikhand, Amul Mithaee Gulab Jamuns, Gulab Chocolates, Amul Basundi, Amul Yogi Yoghurt.

Health Drinks.

Nutramul, Amul Shakti Health Food Drink.

The diagrammatic representation is as follows:-

Yoghurt.  Health Drinks . Nutramul, Amul Shakti Health Food Drink. The diagrammatic representation is as

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93 | P a g e SEGMENTATION  INDUSTRY BASED MARKET SEGMENTATION:-
SEGMENTATION
SEGMENTATION
93 | P a g e SEGMENTATION  INDUSTRY BASED MARKET SEGMENTATION:-
93 | P a g e SEGMENTATION  INDUSTRY BASED MARKET SEGMENTATION:-
93 | P a g e SEGMENTATION  INDUSTRY BASED MARKET SEGMENTATION:-

INDUSTRY BASED MARKET SEGMENTATION:-

93 | P a g e SEGMENTATION  INDUSTRY BASED MARKET SEGMENTATION:-

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CUSTOMER BASED MARKET SEGMENTATION:-

For Kids For women For youth For calorie conscious For Health conscious
For Kids
For
women
For youth
For calorie
conscious
For Health
conscious
For youth For calorie conscious For Health conscious KIDS:-  Amul Kool .  Chocolate Milk.

KIDS:-

Amul Kool .

Chocolate Milk.

Nutramul Energy Drink.

Milk Shake.

WOMEN:-

Amul calci

YOUTH:-

UtterlyDelicious Pizza.

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Amul Emmental Cheese.

Amul Cheese Spreads.

HEALTH CONSCIOUS:-

Nutramul .

Amul Shakti Health Food Drink .

SEGMENTATION OF MILK DRINKS:-

Wide range of product categories cater to consumers across all market segments. For example, Amul Kool is targeted at children, while teenagers prefer Kool Café, as it has a cool image associated with it.

Segmentation is not an easy task in case of curd and low fat products, due to mixed audience, various culinary applications , eg. ghee, butter and cheese.

Segmentation is done keeping a number of factors into consideration like:-

Youth.

Children.

Urban Family.

Interests and preferences.

TARGETING OF MILK DRINKS:-

Amul has targeted its milk products to various segments of the market.

Products Like Nutramul Energy Drink, Amul Kool chocolate milk, Amul Kool flavoured Bottled Milk are targeted for kids aged 4-16 years especially, school going kids.

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Products such as Amul Kool Milk shake, Amul Kool, Amul Kool Café, Kool Koko, Nutramul Energy Drink are mainly targeted for college going young people.

Products such as Amul Masti Spiced Buttermilk, Amul Lassee, Amul Kool Thandai are targeted in specific seasons. The steps involved in targeting are as follows:-.

Define The Segments

Define Targeting Of

Milk Drinks

List the benefits of the product

Target audience description

MARKET POSITIONING:-

A mass market player, no premium offerings .

USP Quality alongwith affordability .

Up against niche players value addition to customers.

Sheer size and scale of operations.

New offerings for health conscious and vibrant India Health and energy drinks , Stamina, Chocolates , Ice-cream,sugar-free brand called Choco-Mini to target diabetic persons.

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AMUL:-

Amul Milk has positioned itself as a healthy substitute for Soft Drinks (Carbonated Drinks).

Ready to serve Milk Products (Amul Kool) have been positioned.

Position in the beverages market with the introduction of milk shakes.

Brings goodness of Coca (Chocolate and Coffee) all year around.

Different packaging is meant to attract generation Y.

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4 P’s
4 P’s

FOUR P’S OF AMUL (PRODUCT, PRICE, PLACE AND PROMOTION)

PRODUCT ANALYSIS
PRODUCT
ANALYSIS

Product specification:- Meets ―AGMARK‖ standards, and

BIS specification .no IS. 13690.1992.

Product personality:- It is a “UNISEX‖ product.

Unique USP (unique selling point):- USP of Amul is its ―TASTE‖.

Amul butter is made from fresh cream by continuous butter making modern machines (Purely vegetarian).

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PRICE
PRICE

The factors involved in pricing the product are as follows:-

Cost of milk,

Processing cost,

Labour cost,

Transportation,

Sales promotion cost ,

Taxes etc.

PLACE
PLACE
 Sales promotion cost ,  Taxes etc. PLACE o Amul products are generally found in:

o Amul products are generally found in: - Retail shops, Modern format stores, Amul Preferred outlets( APOs), Scooping Parlours, online sales through company website.

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PROMOTIONAL ACTIVITIES
PROMOTIONAL
ACTIVITIES

PROMOTIONAL ACTIVITY:-

• Given this wide product portfolio, Amul‘s approach is to promote its brands in a rotational cycle of two to three years.

After ice-creams were launched in 1996, the category was re-visited in 1999 in order to improve availability of the products and make it affordable.

The focus shifted to cheese in 2001, Amul Masti Chaas in 2004-05 (sales of Masti dahi grew by 25%), Nutramul and Kool Kafe in 2006 and this year the focus is on Amul Koko cold chocolate drink .

Amul uses a variety of media to communicate .

The most famous is the billboard campaign.

The endearing polka dressed girl and the added pun at various issues increased brand‘s fan following.

Below-the-line activity has grown too such as the Amul food festival, which is being held for the last four years between October and December in about 50,000 retail outlets.

The Chef Of India promo invites hotel chefs to come up with recipes using as many Amul products as possible, and is conducted at city, state and national level.

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PROMOTION IS CARRIED OUT THROUGH THE FOLLOWING MEANS OF MEDIA:-

Media Platform: Amul has used following media platform for creating a high brand equity:-

1. Broadcast Media: Television.

2.

3.

Non Broadcast Media: Cinema-

amul.tv.com.

Print Media: Newspapers, General interest Magazines.

Print Media : Newspapers, General interest Magazines. websites, Portals, CSR activities . Outdoor Media: Hoarding

websites, Portals, CSR activities.

Outdoor Media: Hoarding / Billboards.

Media : Newspapers, General interest Magazines. websites, Portals, CSR activities . Outdoor Media: Hoarding / Billboards.
Media : Newspapers, General interest Magazines. websites, Portals, CSR activities . Outdoor Media: Hoarding / Billboards.

4.

Internet

or

Social

Media:

Independent

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103 | P a g e is carried out through:-  Word of mouth  Adverisements

is carried out through:-

Word of mouth

Adverisements on Aakashwani

Posters

Hoardings

Road shows

e is carried out through:-  Word of mouth  Adverisements on Aakashwani  Posters 
e is carried out through:-  Word of mouth  Adverisements on Aakashwani  Posters 

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CUSTOMER RELATION
CUSTOMER
RELATION

CUSTOMER RELATION:-

Amul has adopted Integrated Marketing Communication.

Communication Strategies:- Amul mainly uses indirect action advertising in order to create a long term relationship with the consumers & has never adopted aggressive selling practices.

Mainly two type of communication strategy was adopted by Amul:-

1.

Consumer Advertising, and

2.

Institutional Advertising.

People in India are emotionally attached to this brand which was evolved in 1946. They have framed certain perceptions about this the brand with respect to various parameters. They are as follows:-

o

Personality : INDIAN.

o

Relationship : SOCIABLE.

o

Culture : COOPEARATIVE , SHARING.

o

Physique : TASTE AND QUALITY.

o

Reflection : VALUE ORIENTED.

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