1.

Why do you think, Amul was diversifying into pizzas, cheeseburgers, tomato sauce,
ketchup and other eatables?
With the liberalization of the Indian economy in the early 1990s, and the subsequent entry of
new players, there was a change in lifestyles and the food tastes of people. The new team
that took over the management of the GCMMF in the mid-1990s hoped to take advantage of
the change. The management adopted Total Quality Management (TQM) and set for itself
higher benchmarks (in terms of growth). They also diversified the Amul portfolio, offering a
range of food stuffs such as ketchup, jam, ice-cream, confectionaries, cheese, and
shrikhand.

According to some analysts, this diversification was probably not entirely demand-driven.
Being a cooperative, GCMMF was compelled to buy all the milk that was produced in Gujarat.
And with milk production having increased since the mid 1990s, GCMMF had to make use of
additional milk, and hence the pressure to make and market more and more processed-milk
products. Amul had to expand the consumption base of milk-based products in India. It
planned to make its products (butter and cheese) a part of the regular diet in most households.

Amul launched its new products with the intention of increasing the offtake of its basic milk
products, including cheese. This in turn was expected to increase the earnings of the farmers.
The pizzas were expected to increase the sale of its cheese. The entry into the confectioneries
market was another avenue for increasing milk consumption. This flurry of launches helped
Amul broaden its appeal across all segments. Price was an advantage that Amul enjoyed over
its competitors. Amul's products were priced 20-40 % less than those of its competitors.

Analysts felt that Amul could price its products low because of the economies of scale it
enjoyed. Amul created two new distribution set-ups: a cold chain for ice-cream, and another
for limited life fresh foods like curd. Expecting the demand for ready-to- eat foods to grow,
Amul prepared to leverage the ice-cream cold chain for a new range of frozen foods,
beginning with pizza. However, some analysts felt that as the pizza's would be made by the
retailers, Amul would have little control over the quality of the pizzas. That was why Amul
was marketing the pizzas under the brand name SnowCap.

Said S K Bhalla, Chief of Quality Control, "The product has received premature hype.
Meeting consumer expectations will be a challenge, until we make the frozen pizza in our
own facilities." According to some analysts, Amul's obsession with keeping down manpower
costs and dealer commissions could be a weakness. In ice-creams for example, Amul's
retail commission in Ahmedabad city was 17.5% which was 10% lower than what
competitors offered.

They also pointed out that Amul might not have the financial muscle that multinationals had
to achieve rapid growth. However, all said and done, Amul seemed to be all set to make
steady progress in the coming years with its products having become quite popular in both
rural and urban households. Said Vyas, "We've handled liberalisation and globalisation far
better than our transnational rivals. It has made us fitter than ever."

2. Why do you think, GCMMF used the brand name SnowCap for its pizzas and not
Amul?
GCMMF officials clarified that the pizzas would be sold in a new `Snowcap', rather than the
`Amul' brand. ``This is a separately registered brandname for our new product line, which
apart from pizza, includes softies, sandwiches, burgers, paneer snacks, etc,'' Mr Singh said.
As volumes pick up, GCMMF would also explore the possibility of offering pizzas in a ready,
frozen form to retailers.

``We can perhaps have our own bakery to make the pizza base, which is essentially a
mixture of maida, yeast and some sugar. We could even use our ice-cream cone making
facility at Kaira Cans (a GCMMF sister concern) for this purpose. Similarly, there cou ld be a
centralised kitchen for buying and grading the vegetables, making the sauce, grating the
cheese and putting the ingredients into the base, which then can be sterilised, frozen and
shrink-wrapped into individual pieces before being dispatched in o ur refrigerated trucks,'' Dr
Khanna noted.

Marketing analysts say that Amul's pizza marketing strategy is unique because it aims at
boosting sales of an `elite' product (cheese) by pushing down prices of another `elite'
product (pizza). The maximum retail price for Amul's Mozzarella cheese is now Rs 48 per
250 gm, while its processed cheese slices sell at Rs 43 per 200 gm. ``The pizza route would
promote sales of an otherwise premium product as cheese,'' they pointed out.

Dr Khanna claimed that Amul would do to pizza what it has already done for ice-cream. ``We
want pizzas to become a mass consumption item like kulcha chola or chole bhature. And as
in the case of ice-cream, we will force other pizza manufacturers to also slash prices.
Eventually, this would further expand the market for cheese,'' he added.

Amul is now offering its pizzas in four flavours: plain tomato-onion-capsicum, fruit pizza
(pineapple-topped), mushroom and `Jain pizzas' (i.e sans onion or garlic).

3. What kind of pricing strategy has Amul adopted to see pizzas under the brand name
of SnowCap? Is it the right approach?

Ans 3- THE Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) hopes to more
than double its cheese sales through its recent foray into the marketing of vegetable pizzas.

The Rs 2,258.80-crore turnover cooperative, better known by its `Amul' brandname,

Amul has targeted opening 3,000 pizza retail franchise outlets all over the country by the
year-end, which, it believes, would boost its annual sales of Mozzarella cheese alone by
over 4,000 tonnes. GCMMF claims that one of its outlets -- Royal Sweet Mar t in
Ahmedabad's CG Road-has already achieved daily sales of 1,500 pizzas within a week of its
operation.

``Even if each outlet sells 100 pizzas daily, it would mean sales of three lakh pizzas per day.
Considering that each six-inch diameter pizza consumes 40 gm of Mozzarella cheese, it
translates into additional volumes of over 4,000 tonnes,'' said Dr R.S. Khanna, General
Manager (North Zone), GCMMF.
Amul's initial gameplan envisages the production of pizza at the retailer's own end. ``On our
part, we will supply them with the cheese along with the technical training and recipe for
pizza-making. Besides, we will negotiate with bulk suppliers of veget ables and the pizza
base to offer these at wholesale rates to the outlets,'' Dr Khanna said.

GCMMF claims that its pizza marketing strategy would be an `instant winner', given the
`hugely affordable' price tag of Rs 20 per pizza. For the retailer, the main cost would be the
Mozzarella cheese. ``If we offer this at our bulk rate of around Rs 140 per kg, the retailer
would incur a cost of less than Rs six per pizza,'' Dr Khanna said.

The other major ingredient is the base material, which can be bulk supplied at Rs 2.50-3
each. Adds to these, the expenses on vegetables and the gravy sauce, the total cost per
pizza would be hardly Rs 11-12. ``The retailer can easily make a margin of Rs 8-9 per pizza.
All he has to invest is around Rs 4,000 for an oven, which he will recover within no time. The
cost of setting up the glowsigns as well as media publicity for his outlet would be fully borne
by us,'' Mr Pawan Kumar Singh, Brand Manager, GCMMF, said.