Amul

2011

Submitted To: Pradeep Kumar Mishra

Submitted by:
Akramul Hoque (10201002) Piyush Shankar (10201036) Ranjan Prasad (10201040) P Krishna Bharath Varma( 10201034) Soumyajit Auddy(10201053)

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Table of Contents
1. 2. Introduction .......................................................................................................................................... 3 Rationale of the study .......................................................................................................................... 4 2.1 Size of Indian Dairy Industry .............................................................................................................. 4 2.2 Growth Potential (Market).................................................................................................................. 4 2.3 Importance of Dairy Farm in economy ................................................................................................... 4 3. 4. 5. 5.1 6. 7. 8. 9. 9.1 10. Organization Description ...................................................................................................................... 5 Methodology......................................................................................................................................... 6 AMUL'S SECRET OF SUCCESS ................................................................................................................ 6 SWOT ANALYSIS ................................................................................................................................ 7 Competitors Amul: ............................................................................................................................ 11 The 3CS Model ................................................................................................................................... 12 Michael Porters Five-Force Analysis .................................................................................................. 12 Future Plans ........................................................................................................................................ 16 Future Challenge ............................................................................................................................. 16 Conclusion ....................................................................................................................................... 18

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1. Introduction
India is the largest producer of milk in the world and accounts 21% of the worlds production. India is with highest livestock populations in the world, it accounts 50% of the buffaloes and 20% of the worlds cattle population, most of which are milch cows and milch buffaloes. Indias dairy industry is considered as one of the most successful development industry in the postIndependence era. In 2005-06 total milk productions in the country was over 90 million tones with a per capita availability of 229 gms per day. During 1993-2005, the dairy industry recorded an annual growth of 4%, which is almost 3 times the average growth rate of the dairy industry in the world. The total milk processing in India is around 35%, of which the organized dairy industry accounts for 13% while remaining is either consumed at farm level, or sold as fresh, non-pasteurized milk through unorganized channels. The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The manufacturing of milk products is very much concentrated in these states due to the availability of milk in huge quantity. According to the Ministry of Food Processing Industries, exports of dairy products have been growing at the rate of 25% per annum in terms of quantity and 28% in terms of value since 2001. Significant investment opportunities exist for the manufacturing of value-added milk products like milk powder, packaged milk, butter, ghee, cheese and ready-to-drink milk products.

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Amul 2. Rationale of the study

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Dairying is an important source of subsidiary income to small/marginal farmers and agricultural labourers other than agriculture. The manure from animals provides a good source of organic matter for improving soil fertility and crop yields. The main aim of the Indian dairy industry is only to better manage the national resources to enhance milk production and upgrade milk processing using innovative technologies. Since agriculture is mostly seasonal, there is a possibility of finding employment throughout the year for many persons through dairy farming. Thus, dairy also provides employment throughout the year. The main beneficiaries of dairy programmes are small/marginal farmers and landless laborers.

2.1 Size of Indian Dairy Industry

Dairy India 2007 has estimated the size of Indias dairy sector in 2005 at Rs 227,340 core (valued at consumer prices). The largest contributor to this is liquid milk (at Rs 82,835 core), followed by ghee (Rs 22,980 core), khoa/chhana/paneer (Rs 24,100 core), milk powder (Rs 4,680 core), table butter (Rs 770 core), cheese/edible casein (Rs 975 core) and other products such ethnic sweets, ice-cream, etc (Rs 9,100 core). Out of the total milk production of 94.5 mt, 77 per cent or 73.1 mt is sold as liquid milk, with the balance 23 per cent or 21.4 mt converted into products. Further, the organized industry handles only 18 per cent or 17 mt of milk, with 36 per cent (34.5 mt) being handled by private dudhias and unorganized players and 46 per cent (43 mt)being retained in rural areas. Within the 18 per cent organized sector share, private and cooperative/government dairies handle an equal 8.5 mt each.

2.2 Growth Potential (Market)

The total milk production in the country for the year 2008-09 was estimated at 108.5 million metric tonnes and the demand is expected to be 180 million tons by 2020. To achieve this demand annual growth rate in milk production has to be increased from the present 2.5 % to 5%. Thus, there is a tremendous scope/potential for increasing the milk production through profitable dairy farming.

2.3 Importance of Dairy Farm in economy

By 2011, Dairy India projects the value of the industry to more than double to Rs 520,780 core, which includes Rs 159,600 core from liquid milk, Rs 42,680 core from ghee, Rs 50,500 core from khoa/chhana/paneer, Rs 9,100 core from milk powder, Rs 2,250 core from table butter, Rs 6,150 core from cheese/edible casein and Rs 25,050 core from other products. Interestingly, out of the anticipated milk output of 120 mt, the share of liquid milk will rise to 81 per cent or 97.5 mt and only the rest 19 per cent (22.5 mt) would get converted into products. But the organized

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industrys share of total milk handling will go up to 30 per cent (36 mt), while the small players will see their share dip to 22 per cent (26 mt). At the same time, higher rural incomes will marginally boost the share of milk retained in rural areas to 48 per cent or 58 mt. The other significant feature is that within the 30 per cent overall share of organized dairies, the major 20 per cent (24 mt) will be accounted for by the private sector. The cooperatives and government dairies will handle 10 per cent or 12 mt of milk, which will be lower than that of the organized private sector.

3. Organization Description GCMMF(Amul)

Description- Amul ("priceless" in Hindi. The brand name "Amul," from the Sanskrit "Amoolya," (meaning Precious) was suggested by a quality control expert in Anand.), formed in 1946, is a dairy cooperative in India. It is a brand name managed by an apex cooperative organisation, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by some 2.8 million milk producers in Gujarat, India. Amul is based in Anand, Gujarat and has been an example of a co-operative organization's success in the long term. "Anyone who has seen the dairy cooperatives in the state of Gujarat, especially the highly successful one known as AMUL, will naturally wonder what combination of influences and incentives is needed to multiply such a model a thousand times over in developing regions everywhere." The Amul Pattern has established itself as a uniquely appropriate model for rural development. Amul has spurred the White Revolution of India, which has made India the largest producer of milk and milk products in the world. It is also the world's biggest vegetarian cheese brand. Amul is the largest food brand in India and world's Largest Pouched Milk Brand with an annual turnover of US $1700 million (200910).[5] Currently Unions making up GCMMF have 2.9 million producer members with milk collection average of 9.10 million litres per day. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 did not succeed, but now it has fresh plans entering the Japanese markets.

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Amul 4. Methodology
Collection of Secondary Data Profile of dairy companies Market analysis through websites

2011

5. AMUL'S SECRET OF SUCCESS

The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as a channel to market the production enhancement package. What's more, it does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economic upliftment and common good. Looking back on the path traversed by Amul, the following features make it a pattern and model for emulation elsewhere.

Amul has been able to:

Produce an appropriate blend of the policy makers farmers board of management and the professionals: each group appreciating its roles and limitations Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment. Provide a support system to the milk producers without disturbing their agro-economic systems, Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common good and betterment of the member producers and

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5.1

SWOT ANALYSIS

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Strengths
Demand Profile: Absolutely optimistic. Milk being a necessity product, the demand will stay and the sales at GCMMF are bound to increase over a period of time. Margins: Quite responsible, even on packed liquid milk. The margins are enough to limit the entry of potential entrants. Flexibility of product mix: Tremendous. With balancing equipment, GCMMF has kept adding a wide array of products to its product line. Availability of raw material: Abundant. Presently, more than 80 percent of milk produced is flowing into the unorganized sector, which requires proper channelization. Amul & GCMMF have leveraged this and has got itself a strong base of suppliers Technical Manpower: Professionally trained, technical human resource pool, built over last 30 years is the strength that GCMMF has. The employees of GCMMF are highly recognized in the industry and have earned name for themselves as well as the federation. Enhanced Milk Production: Increase in the milk production with consequently increased availability of milk processing has led to increase in consumption and faster access to the consumers through effective distribution. The technology is brought from Denmark and the production of milk has benefitted from that. Transportation: The transportation facilities and the easy availability of the special trucks have provided a boost. Cold refrigerated trucks are there in place and the warehouses also have the cold storage facilities that facilitates the transportation. Vast Resources: Country has vast natural resources which offer immense potential growth and development for dairying. Moreover the financial resources available for the federation are immense and the reputation is such that in case of any further requirements, it can approach any institution and raise any form of capital. Increasing Purchase Power and changing tastes of the consumers: The purchasing power of the residents is increasing. As a result a lot of products are being consumed. Moreover, the consuming habits are changing. As a result, the demand for products such as butter and cheese is increasing at a very rapid rate.

Weaknesses:
Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long life. Still perishability is there at the milk vendors end. This does result in loss of some production. But Amul Dairy is taking steps to store milk at the vendors end. Surely, many new processes will follow to improve milk quality and extend its shelf life. Lack of control over yield: Theoretically, there is little control over milk yield. A lot depends upon the monsoon in the country. This is because of the quality of cattle feed

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that would be available will not have the required nutritional content. Steps are taken to provide awareness regarding these and the penetration of quality feed is being increased. Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. All these factors lead to perishability of the procured milk. But with the overall economic improvement in India, these problems would also et solved. Erratic power supply: The erratic power supply would cause harm in the processing of milk. Underdeveloped systems: There still exist underdeveloped raw milk collection systems in some parts of the country. However steps are being taken such as setting up of cold storage points at key collection centers to combat the situation. Lack of proper implementation: Dairy development programmes have not been fully implemented as per the needs of the region in different agro-climatic zones. Infrastructure: The infrastructure that is available is not upto the current world standards. Also lack of infrastructure for offering dairy business management prorammes to the trained personnel is creating a hindrance.

Opportunities
Failure is never final, and success never ending. Dr Kurein bears out this statement perfectly. He entered this industry when there were only threats. He met failure head-on, and now he clearly is an example of never ending processes. If dairy entrepreneurs are looking for opportunities in India, the following areas must be tapped.

Competition: With so many newcomers enerin this industry, competition is becoming tougher day by day. By then competition has to be faced as a round reality. The market is large enough for many to carve out their niche. Moreover due to competition, there is a chance to beter serve the market with innovative products. Value Addition: There is a phenomenal scope for innovations in product development, packaging and presentation. Given below are potential areas of value addition:
Steps should be taken to introduce value-added products like shrikhand, ice-creams, paneer, khoa, flavoured milk, dairy sweets etc. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. Addition of cultured products like yoghurt and cheese lend further strength both in terms of utilization of resources and presence in the market place. Yet another aspect can be the addition of infant foods, eiatic foods and nutritional.

Export Potential: Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Srilanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunity will increase tremendously for the export of agri products in general and

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dairy products in particular. There is a strong basis of cost efficiency, which GCMMF can leverage in the world market. Markets: The market for traditional as well as processed dairy products is expanding both at domestic and international front. IT Support: Software is now available for project formulation for dairy enterprise. It has also computerized its production processes. Mother Dairy was the first fully computerized dairy in India. In its Anand plant all products are processed and computerized which does not have any hand touch during any stage of process.

Threats
Milk vendors, the un organized sector: today milk vendors are occupying the pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance. Infestation: there are increasing incidents of chemical contaminants as well as residual antibiotics in milk. Quality: the quality of the milk is found to be poor as to the international standards. One of the reasons for these according to the EU and America is the method of milched with the help of machines, while in India. Exploitation: the liberalization of the Dairy Industry is likely to be expoited by the multinational. They will be interested manufacturing the milk products, which yield high profits. It will create milk shortage in the country adversely affecting the consumers. Subsidy by Western Nations: there have been incidences wherein in the Western nations subsidizing the dairy products by a few means like transportation. Because of such reasons the final price of the product goes below the price prevailing in the Indian Market. Hence it proves a threat to GCMMFs and other Indian dairy products. Creation of Non tariff Barriers by Developments Nations: The Developments Nations have created Non Tariff Barriers related to Quality of the milk specifically. They want that the milk be processed with potable Air and Water. They want the milching of cattle done with the help of machines. However this types if system is yet to evolve in India. Because of there reasons they are reducing the market potential of Indian made products, where GCMMF holds a lions share.
The study of this SWOT analysis shows that the Strengths and Opportunities far outweigh Weaknesses and Threats . Strengths and Opportunities are fundamental and Weaknesses and Threats are transitory, Entrepreneurship (The ability to take risk), innovative approach (in product lines and marketing and values (of quality/ethics).

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6. Competitors Amul: Private competitors and small dairy cooperatives (In an organized dairy industry, dairy cooperatives account for the major share of processed liquid milk marketed in India. Milk is processed and marketed by 170 Milk Producers Cooperative Unions, which federate into 15 State Cooperative Milk Marketing Federations. Over the years, several brands have been created by cooperatives Amul (GCMMF) these are like Vijaya (AP), Verka (Punjab), Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur).

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Amul 7. The 3CS Model

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8. Michael Porters Five-Force Analysis

According to porter (1980) a firm must be analyzed in relation to its industry. Factors outside the industry tend to influence all the industrys firm in the same way and are thus not as important to study. To a large extent, industry structure governs the strategies open to the firms. The profitability and attractiveness of industry is dependent of the level of competition. Competition in an industry originates from industry structure and goes well beyond the behaviour of individual competitors. According to Porter, each industry has a potential profitability and the profitability for the firms is dependent on the competitive forces in the industry. Porter identifies five competitive forces that derive from the ambition to obtain as large share of the profitability possible. The five forces are foundation of the five force model.

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Porters Five-Force Model

The success of the national and local competitors brands includes effectives distribution system, advertising, good pricing policy etc. the factors ascribed by porter are.

Threats of new entrants Bargaining power of suppliers Bargaining power of buyers Rivalry among competitors Threats from substitutes

These factors can be explained in context to GCMMF as below

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Threats of new Entrants

Economies of Scale: GCMMF enjoys economies of scale, which is difficult to match by any other competitor. It is because of his reasons that no regional competitor has grown to a national level. Cost and Resources advantages: Amul dairy is co-operative society. That means cooperation among competitive is the fundamental principle. Amul dairy is managed the norms of GCMMF and market the products under the brand name Amul which has very good reputation at domestic and international level. Here the raw material procurement is very difficult for the new entrants. Consequently capital requirement is also high. Still new entrants are moderate. Brand preferences and consumer loyalty: there is an immense level of Brand preference of Amul in the mind of the people. The level of preference specifically in the liquid in the milk sector is that would go to other retailer if the retailer does not have milk. Access to distribution channels: The distribution channel of GCMMF is a very planned and perfect one. For any new entrant to enter it would be a very difficult task. For GCMMF the result is years of hard work and its investment in its employees as well as at different levels in the distribution network. Inability to much the technology and specialized know- how of firms already in the industry: The technology used by Amul is imported from Denmark. It is a state of art technology in India, a firm would require a huge amount of resources. Capital Requirements: the total investments required in the industry is huge and is a decision worth considering even for MNCs . The investments decision cover the processing costs as well as marketing costs. To compete with the brand Amul in India is difficult as Amul is synonymous to Quality.

Bargaining power of supplier

The objective of Amul dairy is not profiting. As it is a part of cooperative society, it runs for the benefit of farmers those are suppliers of milk and users of milk products. According the concept of the cooperative society supplier has bargaining power to have a good return on his or her supply. However, supplier has limited rights to bargain with the cooperative society because it is made and run for the sake of mass and not for individual benefit. But it is made sure that the supplier gets his fair share of return. There is appropriate bargaining power of the supplier. In olden days there were not any kind of cooperative societies as the farmer was exploited. But, nowadays the farmers rights are protected under the cooperative rules and regulation, which ultimately results in moderate power of bargaining from the supplier.

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Bargaining power of buyers

Cost of switching to competitor brands: The switching of brand is seen very much in products such as ice cream, curd, milk powders, milk additives etc. but it can be seen comparatively less in liquid milk category. Even if the buyers shift to the other brands of milk, the value that they get is less than they would get from consuming Amul. Large no. of buyers: Milk is a necessity product and hence is a mass product. It has a considerable share of the rupee spent by any Indian. Moreover the buyers are spread evenly over the country and do not have any bargaining power.

Rivalry among competitors

Demand for the product: The demand of the products of GCMMF is increasing at a very healthy rate. To stand against the rivalry GCMMF is coming with a wide range of products. Nature of competitors: In different business category GCMMF faces competition from different players. In the milk power category it faces competition from Cadbury & Nestle, in the chocolate category also I faces competition from Cadbury & Nestle. While in the ice cream market it faces competition from Britannia. Moreover in almost al categories there is presence of local retailers and processors and milk vendors. Rivalry intensifies as each of the competitors has different lines and this would in turn depend on the importance the line hold for competitor. Mergers and acquisition: As such in the industry there are no mergers or acquisitions. However if any MNC wishes to enter through this route then the competition might be severe.

Threats of Substitute
Availability of attractive priced substitutes: Different substitutes are available for different category of products. There is ample availability of low priced substitutes from local vendors retailers. This is a front where GCMMF is still finding hard to combat. Satisfaction level of substitutes: Customers do consider these products as equal on quality if not better then products of GCMMF. Hence the rate of customers switching to the substitutes is very high. Moreover the buyers also can switch to the customers easily without any hurdles.

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Not immediate substitutes: Distant substitutes are present in many of the categories of business of GCMMF. For example in the Masti Buttermilk category it faces competition cold drinks and ice Cream.
These 5 force interact among themselves at different degrees over a period of time. Moreover it will get intense or loosen up depending upon there of competitors, buyers, suppliers etc. However GCMMF has been able to outperform on almost all fronts excluding a few lines of business.

9. Future Plans
To achieve and maintain competitive advantage, innovation in product design and delivery increasingly essential. To innovate at each stage in value chain production, procurement, processing marketing and branding. To devise more effective ways of attracting and retaining skilled human resources. To provided them an adequately self motivating work environment that draws the best out of them on a sustained basis. The Dairy Demonstration project is a collective effort of the Union and Bank. The project envisages encouraging the farmers to provide to use high yielding animals and modern aids to increase production. The union will provided necessary guidance to the milk producer on various techniques and required financial support will be forthcoming of the project, a model farm is being set up at Mogar and Khatraj to impart training to the participants. Suvrna Jayanti Gram Swarojgar Yojana help its beneficiaries to the avail loan from the bank with the Government approval. Under this scheme a marginal producer intending to avail the benefits, is allocated an amounts adequate for purchase of 2 milch animals along with required other implements on a soft loan basis. This scheme not only help enhance the productivity and living standards of subscribing producer, the union in turn will also be benefited by the way of enlarged membership and increased milk procurement.

9.1 Future Challenge

The organization may face the following challenges in the future

Global demands and changes Foreign affiliations Competition Liberalisation

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Changing values Urban shifting Changing interests Adoption of latest technology. Production according to international standards with foremost quality Increase need for R&D To keep the price steady and reduce production and maintenance expenses. To enhance milk production by adopting better animal husbandry practices and improving calf rearing practices in order to assure a stand in international market in the foreseeable future. Expansion and upgrading of plant an d equipment to meet increasing demanded for quality with quantity with help of better qualified personnel Rapid increase in productivity while respecting the basic man animal dynamic. i.e to control dairy and agriculture developments in India. Developments of new market and expansion of old ones replacing additional system with quality packaged milk production and vegetable. Creating a national information network to ensure that accurate timely information is available to all who need it.

These are some of challenges which the organization foresees and requires up with.

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Amul 10. Conclusion

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Thus looking at the challenges and the opportunities which rural marketing offer to the marketers it can be said that the future is very promising for those who can understand the dynamics of rural markets and exploit them to their best advantage. A radical change in attitudes of marketers towards the vibrant and burgeoning rural markets is called for so they can successful impress on the 230 million rural consumers spread over approximately six hundred thousand villages in rural India. The rural market is very large compare to the urban market as well as it is more challenging market. The consumer wants those products which are long lasting, good, easy to use and cheaper. The income level of rural consumers is not as high as the income level of urban consumers thats they want price goods. It is one of the reasons that the sell of sachet is much larger in the area in all segments. It is necessary for all the major companies to provide those products which are easy to available and affordable to the consumers. It is right that the profits margin is very low in the FMCG products, but at the same time the market size is much large in the rural area. The companies can reduce their prices by cutting the cost on the packaging because the rural consumers dont need attractive packaging. Application of 4A is also a major task for the major companies in this area. Rural marketing has an untapped potential like rain but it is different from the urban market so it requires the different marketing strategies and marketer has to meet the challenges to be successful in rural market.

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