Indias Amul: Keeping Up with the Times

Case Summary
Amul is the brand name of the Gujarat Cooperative Milk Marketing Federation
(GCMMF). Founded in 1946, and led by Dr. Verghese Kurien for around half a
century, the Indian Dairy Cooperative was owned by around 3.2 million Indian
Farmers. It produced 46 types of dairy based foods. The organisation paid nearly
80% of its revenues to its farmer owners. It had one of the largest distribution
networks in the country reaching around 3,000 Indian towns.
The Indian Dairy Industry

In 2013, India was the largest milk producing and consuming nation. This
was largely because animal husbandry was the a popular ancillary
occupation to farming. Unlike the west with its large mechanised farms,
Indian farmers owned an average of 2 cattlle.
About 50% was consumed at home, 50% sold outside. Out of this 80% was
through unorganised sector, and 20% through the organised sector.
Total Dairy market was estimated at 47.6 bn USD. Rising per capita
incomes in the country were leading to rising consumption

Amuls Early Years

In the pre-independence era, the district Kaira became a huge milk pocket
selling its produce to Polson at unreasonable prices. After protests, the
British govt. allowed the locals to form their own cooperative societies.
In Dec 1946, they established a milk union in Anand. By 1948 it was
supplying around 5000L of milk a day to the Bombay Milk Scheme (BMS)
Dr. Verghese Kurien reported to his job in a Govt. Research Creamery, a
small milk powder factory at Anand; and,
in 1955 under Kuriens
leadership, it set up a 1 million dollar plant to process milk.
The cooperative members were also provided with various services such
as
veterinary
services,
artificial
insemination,
etc.

Operation Flood

In 1964, the then PM Lal Bahaudur Shastri requested Dr. Kurient to scale
up his model to a pan-India level. Thus, was formed the NDDB and the
Operation Flood was initiated, which eventually helped connect 70,000
villages across 170 milk cooperative societies, leading the country to selfsufficiency.
Operation Flood increased the incomes of around 80 to 100 million Indian
farmers.

The Three-Tier Cooperative Structure

It consisted to the village level, the district level and the federation of
GCMMF.
GCMMF also established a common distribution network for unions,
planned their individual product mixes and capacity requirements.
The election of chairpersons was held democratically, thus, elected
officials felt a sense of responsibility for those in lower tiers.

Building a Brand

In the butter market, Amul decided to take Polson butter, then, the market
leader head-on. It gave tis butter account to ASP headed by Sylvester
DaCunha, who helmed the Utterly Butterly Delicious Campaign with the
Amul girl.
By specificity and relevance of its advertising, Amul had established its
national presence as a brand.

Continuous

Growth

In 1987, GCMMF started selling liquid milk along with its basked of valueadded dairy products.
In 1990s, Amul lauched its ice-cream brand (Real Milk, Real Ice Cream) as
a competitor to Unilever ice-creams typically produced using vegetable
fat.
Amul continued to build its distribution system for frozed foods such as
pizza and yoghurts. It entered the market for cottage cheese and
buttermilk as well.
It sold packs of varying sizes in different markets. Large in urban, small in
rural.
Amul was Indias largest food products marketing organisation with 2013
sales of USD 2.5bn, against USD 1.5bn for Nestle India.

Managing Competition

Amuls competitiors varied by product category and it did not have single
entity competition with it on all fronts. Amuls prices set benchmarks for
pricing competitors offerings.
Amul spent surprisingly lesser on advertising than its competitors (around
1%, as against 18% for Unilever). Its advertising campagins also ran
longer than the others.
Amul used higher volumes to keep competitors at bay. No other
competitor could generate enough volumes to stay competitive in the
butter business in India. Nestle withdrew its butter within 4 years of its
launch.
Amul had over the years managed to remain free form political
interference.

Growing Challenges

Increased competition from multinationals such as Unilever, Nestle, etc.

Maintaining the brands relevance with the younger population of
consumers.
FDI in multi-brand retail will allow strong international players to operate
at higher margins.
Younger generation in Indias rural areas not willing to join dairy farming.
Growing political interference as 3.2mn farmers form a significant vote
bank.
Weakening leadership after Dr. Kurien.