CASE

15 AMUL-India's Pridel
Competing with Global Gianth

Professor Arun Kumar Jain

Indian Institute of Management, Lucknow

AMUL-HUMBLE BEGINNINGS
which means invaluable. Formed in 1946, it
Amul is the name derived from the Sanskrit word "Amulya,"
Milk Marketing
is a brand name managed by an Indian co-operative organization, Gujarat Co-operative
Federation Ltd. (GCMMF), which in 2012 isjointly owned by 3.03 million milk producers in Gujarat,India.
Amul
Amul is based in Anand, Gujarat and has been a successful example of co-operative organization.
of milk and milk
spurred the White Revolution in India which in turn made India the largest producer
products in the world. It is also the world's largest vegetarian cheese brand.
Amul is the largest food brand in India and world's largest pouched milk brand with an annual turnover
of US $2.2 billion (2010-11). GCMMF is the largest food products marketing organization of India. Over
the last five and a half decades, dairy co-operatives in Gujarat have created an economic network that links
more than 3.1 million village milk producers with millions of consumers in India. These co-operatives col
lect on an average 9.4 million liters of milk per day from their
producer members, more than 70% of wn
are small,
marginal farmers and landless laborers and include a sizeable
population of tribal folk and
peu
belonging to the scheduled castes.
Currently, the Unions making up GCMMF have 3.1 million lection

average of 9.10 million liters per day. Besides producer members with
mikari
India, Amul has entered overseas markets suchn
tius, UAE, USA, Oman, Bangladesh, Australia, as an
China, Singapore, Hong Kong, and a few Soutn African
Countries.

History
The seeds of this unusual saga were sown more than 65 of
years back in Anand, a small town in thestate
Gujarat in western India. The exploitative trade practices followed by the local inaf the
trade cartel triggere
co-operative movement. Angered by untair and manipulative practices followed by the trade, tne
ion ot
Malerial for case prepared by Apurv Raj, Paridhi Agarwal, Rachita Rattan, and Rama Kant Pandey (all MBA students) under superv
Prolessor Arun Kumar Jain, Indian Institute of Management, Lucknow. Case Arun Kumar Jain, 2012.
 AMUL-1ndia's Pride C-221
of the district
to ge
approached the great ndian patriot Sardar Vallabhbhai Patel for a solution. He advised themn
rid of middlemen and torm their own
cooperative, which would have procurement, processing, and
marketing under their control.
In 1946, the farmers of this area went on a milk strike
of Sardar Patel, and the refusing to be cowed down by the cartel. Under
the inspiration guidance of leaders like Morarji Desai and Tribhuvandas Patel, they
formed their own co-operative in 1946.

cooperative, the Kaira District Co-operative Milk Producers Union Ltd.

This
lage dairy cooperative societies and 247 liters of milk and is began with just two vil
from strength to strength thanks to the inspired today better known as Amul Dairy. Amul grev
and the committed protessionalism of Dr. leadership of Tribhuvandas Patel, the founder Chairman
from 1950.
Verghese Kurien, who was entrusted the task of running the dairy
Lal Bahadur Shastri, then-Prime Minister of
India, decided that the same approach should become the
basis of a National Dairy Development policy. He understood
that the success of Amul could be attributed
to four important factors. The farmers owned the
societies and the district union, they employed
dairy, their elected representatives managed the village
professionals to operate the dairy and manage its business.
Most importantly, the cooperatives were sensitive to the needs of
farmers and responsive to their demands.
The National Dairy Development Board was set in 1965 with the basic objective of replicating the
up
Amul model. Dr. Kurien was chosen to head the institution as its Chairman and asked to replicate this
model throughout the country.

VISION AND CORE VALUES

AMULs business strategy is driven by its twin objectives of
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

External Considerations Milk production has to compete in economic terms for allocation of
resources of production with other competing options such as crop cultivation. In recent years, Indian dairy
farmers have been facing soaring input costs which have adversely impacted viability of milk production as
an economic activity. Some reports even suggest that in certain regions of India, farmers are finding it more
proftable to sell their cattle to meat & leather industry, rather than continue in milk business.
The same reports also suggest that this phenomenon has already led to closure of some milk coopera-
ves in many parts of India. If true, this indicates a disturbing trend, which if it continues unchecked can

verely undermine the self-sufficiency of Indian dairy sector, if this throughfurther

achieved sixty years of hard work.
implies increase in prices of
ne must ensure remunerative price of milk to the farmers, even have to bear the
the consumers in the short term. While urban consumer may
and dairy products to term price stability
urden of short-term inflation in milk and milk products, they will benefit through long
ue
accelerated growth in milk production.
to
1owever there is a trade off in the short run: while
focused on the farmers, the company may not be
conditions would really
It is not sure as to such market
enkProVide value-for-money to the customers.
nhance the
company's prospects.
a leadership role in dairy
Indian
nternal considerations The company's play
main focus is to
milk
sector thereby making
AMUL the world's largest
Proda d leading the Indian dairy co-operative
its product line i.e. milk
and its variants after having experi
can see AMUL is sticking to
e
Mented with etc.
other product lines like pizzas, cheese burgers, ketchup
 Strategy
C222 Crafting & Executing

AMUL's Vision
intends to take in developing and strengthening its besi
describes the route a company
A strategic vision course in preparing
tor the future. AMULs strategic vision has een
ness. It lays
out the company's strategic
articulated as:
returns to the farmers and
also serve the interest of consumers by providin
"Provide remunerative
which are good value for money"
quality products
Values
Ethical and Stated Core
vision and ethical aspects of the company:
has been the measures for fulfilling the
The following
the fair
pricing model for the consumer as welas
Fair Pricing Amul has long been implementing The first step towards discharging the
the farmer, who sells the milk to the respective cooperative society. It is two-fold-to serve
is the business philosophy of the GCMME.
Corporate Social Responsibility (CSR) c o n s u m e r s as value for money. The
producers and two, to provide quality products
to
the interests of milk
market forces and realization of value for their
milk producers are paid for their milk in accordance with
produce.
of its product It
Quality Quality Management (TQM) to ensure higharequality
Amul follows Total
one step ahead in qual-
ensure that they
has carried out comprehensive change processes in TQM to
assurance program, the federation has supported
the member unions for
ity management. Under quality
milk production by implementing various Central ánd
strengthening infrastructure for quality and clean
State government programs.

Advertising & Promotion Honesty in advertising, to misrepresent products and servicesis

Wrong regardless of the setting
or target market developed or developing markets, rich or poor consum
to advertise the true and key features regarding quality of
the products.
ers. Amul consciously made efforts
At Amul, CSR has been defined as the commitment of business to contribute to sus
Distribution
tainable economic development working with employees, their families,
the local community, society
and
in ways that are both good for business and good for development.
at large to improve their quality of life,
taken visit to Anand. During this visit they
In Amul "Yatrathe" distributors and
their salesmen are on a

international standards of hyYgiene and quality, the practices adop

re shown dairy plants, their upkeep,
the co-operative philosophy. Through one to one talk with the
for clean milk production, and above all
realize AMUL is a large business of small farmers.
farmers, the distributors and salesmen

AMUL'S BUSINESS MODEL

structure. This structure consists ofa Dairy Co-operative Sq
The Amul Model is a three-tierco-operative which in turn is further federaed
the village level affiliated to a Milk Union at the District level
ety (DCS) at
level. The above three-tier structure was set up
in order to delegate tne
into Milk Federation at the State
a Procurement & Processinga
is done at the Village Dairy Society, Milk
various functions; milk collection Milk Federation. This helps
Milk Union, and Milk & Milk Products Marketing at the State
the District are achieved. As
but also ensuring that economies of scale
not only internal competition
eliminating all over the country under
was first evolved at
Amul in Gujarat and thereafter replicated
Anand Pattern' of Dairy Co-operatives
above structure
it is known as the 'Amul Model or delivery of du
Operation Flood Programme,at farmer's profitwhile ensuring efficient
aims maximizing the social development challeng
The Amul pattern thus meeting a marketing as well as
cost to the c o n s u m e r ,
milk at a reasonable structure:
three-tier
in a
It operates
 AMUL-India's Pride C223

The
Anan Village Society Replicating the
Anand model, a village Dairy Co-operative So
aety (DCS) is formed by milk producers. Any
producer can become DCS member by buying
a The Consumer
a share and
committing to sell his stock of milk
excusively to it. Each DCS has a milk collection
center where members take their
milk Each member's milk daily stock of
supply is tested for
guality, and the payments are based on the
centage of fat and the SNF content. At the endper-
of
each year, a portion of the DCS
profits used to
is State Co-op
pay each member a patronage bonus,
on the quantity of milk depending Milk Mktg. Fed.

The District Union A district co-op-

erative milk producers' union' is "owned"
by
the dairy co-operative societies. The union
buys
the milk from all the societies and
processes
and markets the fluid milk and products. Most
unions also provide a range of inputs and ser- Dist. Milk
vices to DCSs and their members, such as feed, Co-op. Union
veterinary care, and artificial insemination. The
employees of these district unions train and
provide consulting services to support the local
DCS leaders and staf.
The State Federation The district level
co-operative milk producers' unions in the state Vill. Diary
comprises of the 'state federation, which in turn Co-op.
is responsible for marketing milk and milk prod-
ucts of the member unions. Some federations
aso manufacture feed and support other union
activities.
The Amul pattern involves people in their
Own development through co-operatives where
professionals are accountable to leaders elected Milk Producer
DY producers. The institutional infrastructure-
llage co-operative, dairy and cattle feed plants,
and state and national marketing-is owned and
Controlled by farmers.
ne Amul pattern's success led to the cre- on Amuls experience in
ation
Dro mlar structures of milk producers in other districts of Gujarat, drawing
increased
and execution. Between 1977-78 and 1991-92, the production of milk in Gujarat
ftomdning
m 4.3 per cent per annum.
mt to approximately 3.6-mt-an average growth of about

nancial Strategy and the AMUL Model

AMULS finance st its desire to be self-reliant
and thus depend on internally
generated resource
ted retrategy
is driven primarily by motivated by the relatively
and development. This choice was
0T its
unding growth
C-224 Ctafting & Executing Strategy
the reluctance
with limited access to funds, and ance to
to denes
underdeveloped tinancial markets
to cede control to bureaucracy.
depend on Grve
ment support and thus be obliged
characterized by two elements:
AMUL financial strategy may thus be
Retention of surplus to fund growth and development
2. Limited/no credit, i.e., all transactions are essentially cash only
For example. payment for milk procured by village societies is in cash and within 12 hous
ours
curement (most, however, pay at the same time as the receipt of milk). Similarly, no «dispatches of finisk
products are made without advance payment from distributors etc. This was particularly importans
the limited liquidity position of farmer/suppliers and the absence of banking facilities in rurall
strategy strongly helped AMUL implement its own vision of growth and development. It is importaThis
mention that many of the above approaches were at variance with industry practices of both domestic
MNC competitors of AMUL

Revenue Patterns
GCMME has crossed the USD 2-billion turnover mark (9,774 crore) in 2010-11. Thefederation's turnover
grew at compounded annual growth rate (CAGR) of 23% in the last four years.
The organization achieved USD 1-billion turn over in the 33rd year of its formation, while it tok
just four more years to add another 1 billion USD to it. GCMMF has set an ambitious target of crosing
12,000-crore turnover mark in 2011-12. The market share ofvarious categories of products hasalsogone
up. The butter sales showed growth of26% in 2010-11, while the milk pouch sales shot up 34% inthesame
period. The beverage range of dairy products sold under Amul like lassi, flavored-milk, and butter-
have shown growth of 28%.
The federation has undertaken its largest ever distribution expansion exercise to extend its rea
smallertownsand semi-urban areas. GCMMF plans to appoint 150super distributors with a view toexte
its reach to 3,000 new smaller towns and semi-urban areas in 2011-12.
GCMMFs plan to add 2,000 more outlets during the current fiscal year take the total numberdter
clusive parlors in parts of the country to 8,000. Further to expand the network and make chilled produ
dsold
available, the co-operative will be hiring 200
super distributors this year. During 2010-11, Amul otne
70-lakh liter of packaged milk every
day. GCMMF is selling 17-lakh liter of Amul pouched m nt it
alone out of the total 35 lakh liter milk sold outside
2010-11 was 93 lakh kilograms
Gujarat. Milk procurement by the coopera
per day which has now touched 96 lakh ot
In addition, 6 to 7 lakh kilograms
rocured mi rriceC0e
from other coop
kilograms
tives in the country to take care
per day milk and milk solid is being proc paidto

of additional demand the consumers. The average

farmer has also increased from 337 per kg fat last year of to average prices
of 425 per Kga
STRATEGICANALYSIS OF AMUL
Response to Changing Market Conditions
In 1970s Amul was the 1980'% Cad
market leader in chocolate In late
dma

entered the Indian market

which led to
industry (which wasn't very large). int
large). Amul introduc
e l o to f e t o r

new variants like change

Bindaas' and 'Nuts about You.
in market
conditions. In the
7 under

In 2003 its share was 2%. But the market share It

In 2004 Amul went
for
kept on
decu hocolate
brand
Foloni

took a series of a
complete
aggressive initiatives to increase visibility repositioning or 1

are some of the initiatives taken

by the and brand loyalty amos
company:
 AMUL-India's Pride C225

1. Amul launched CHOCozoo. This was a move to capture the hearts ofyoung children fond ofwatch
ing cartoons. Introduction of economic variants of chocolates were prized at 1, 3, and 5.
2. Took a trendier look in its packaging and promotions. It removed the cute little butter girl and
the cheese boy from its wrappers and introduced new packaging designed by a US firm.
onitted emphasis from festivals and special occasions to spreading love on all occasions.
4.
placed its chocolate products at lesser price points compared with its competitors. It
Amul
trated on the niche segment such as health chocolates.
concen
a nched Trix, a wafer biscuit coated with rich milk chocolate. Cadbury's Perk and Munch from
Nestlewere the two
.
major players in the wafer chocolate segment.
Amul introduced father-son
advertisement, rose-day advertisement, and a corporate image
advertise-
ment.
Asresult of these measures, the market share
a
of the chocolates touched 10%, the highest since early
1990s. However this
peak was short lived as Cadbury pumped up its Celebrations' campaign by
heavily on advertising and spending
is not promotions.Currently
it has 5% share of the chocolate market but the
company
spending on its advertising as it's not priority for Amul.
a

Entering New Geographic Markets

Amul has entered overseas markets such as
Mauritius, UAE, USA, Bangladesh, Australia, China,
Hong Kong, Cambodia, and a few South African countries. Its Singapore,
Japan, China, and Sri Lanka. products are also available in U Philippines,

Entering New Product Lines

Amul Pizza: Though Amul entered the
pizza category, it mostly failed. It also tried to launch cheeseburgers,
tomato ketchup etc. which failed. Then Amul
decided to enter the ready-to-eat stuffed
burger, cheese and paneer pakoda, and cheese sandwich segments.
paratha, cheese
Amul lce-cream Parlors: Amul launched Indias first Probiotic
Ice-cream for the health conscious and
Sugar free ice cream for the Diabetics and then opened Ice Cream Parlors.

Strategic Alliances
In Uttar Pradesh Amul has an alliance with Parag forco-packaging and have more efficient distribution
in the
region. In June 2003 Amul tied up with petro-retailer IBP for selling its products like ice creams,
lavored milk. pizzas, and sweets from its retail outlets. This alliance
lions but also
not only adds value to the petrol sta-
provides Amul a whole new nation-wide retailing
chain through which it can tap currently
unexplored markets. Logos of the dairy major Amul will appear on the two Sauber F1 Team race cars, which
includes rear wing, front face, and the helmets of the drivers. This move can be
seen as part of re-branding
strategy among urban consumers.
Actions in R&D
sAs more farmers joined the co-operatives, the need to develop a mechanism for storage of increasing quan
tities
became
tity of milk that
intense. The co-operative was established on the promise that it would buy any quan
tha a member farmer wanted to sell. The need to store milk in powder form increases as excess
miquantities in winter seasons could then be used in lean summer seasons. Moreover, demand tor ligul
milk was not
not gro
growing along with the growth in milk production.
C226 Ctaiting & Executing Strategy
buffalo milk. Engineers at As
powder from
technology, however, existed worldwide produce
to
No same-first time in the history of glohal
AUL
successfully developed commercially
viable process for the global di:
for making baby food out of this milk powdo y
a

industry. Subsequently, it also developed process

a
cheese out of buffalo milk thereby COmuas
a unique process for making good quality
also
developed was
done through process techno
perceived liability into a source of comparative advantage-the task
transfer technology" have helped create a high vield h
research. Similar efforts in the area of "embryo
in the areas of energy conservation and recovery have ale
of cattle in the country. AMULs innovations
contributed to reduction in cost of its operations. AMUL also indigenously developed a low cost process fo

providing a long shelf life to many of its perishable products.

Actions to Capture Emerging Market Opportunities by Merger and
Acquisition
The GCMMF Amul's parent company, is relying heavily on merger and acquisitions to double its dairy col
lection. It has already acquired plants in Mumbai and Nagpur and are close to acquire a Pune based Kapila
Dairy. It is also planning to acquire dairies in several other parts of India such as Bhopal, Indore etc. In the
ice cream sector Amul is planning to acquire plants of Vadilal and Kwality.

Competitiveness Strengthening Via Strategic Alliances and

Collaborative Partnerships
By 2012 Amul isplanning to double its Amul Preferred Outlets (APO) across India from 5000 to10,00
These outlets will be on franchise model. Amul has also rolled out "Super Distributor Model" to enhance
reach of products across rural India. It has started 30 Super distributors across 8 states covering more than
500 smaller towns.
To impart knowledge to village girls and women about milk production management, the company has
started "Mahila Pashupalan Talim Karyakram, in alliance with village councils.

Competitive Capabilities and Correct Competitive Weaknesses

Amul has taken some big risks in its bid to emerge as a diversified foods
company witha targeted turnover
of Rs. 10,000 crore by 2006-07. The big question is whether Amul can leverage its existing brand equity
these newbusinesses. As Amul diversifies, risk of diluting its brand
equity cannot be underestimated. ra
experience indicates that diversification is not all that easy. Take the case of chocolates, which Amul entcie
in the 1970s. Amul's market share is
only 2% against market leader Cadbury's 70%.
However, Amulis no pushover, since its ability to keep prices low is well established. The distribution
network includes cold chains and number of retail outlets. In ice creams, which Amul entered in the
1990s, it has a creditable 27% market share compared to market leader HLs 40%.

Amul's Proactive and Reactive Strategy Elements

that
The former chairman Dr. Kurein in his Chairman's
speech in year 2000-01 (27th Annual Report the
"Since 1991, anybody and everybody has been free to enter the and
dairy industry to
reap benc hw their
markets that our federation created and nurtured with our sweat and blood.
Multinationai
surplus capital, are seeking a hefty share of our milk and milk products market. At the saniene regiona
d e Dossible
private companies have been able to penetrate markets on the strength of aggressive pricing mu llowed
by cavalier treatment of taxation laws and quality standards. More recently, Government has evc
 AMUL-In dia's Pride C227
reeimportof dairy products, leaving the door open to subsidized imports from the advanced dairying na
tions. The dynamics of the Indian dairy industry are now increasingly linked to the global dairy industry.
I
we are to survive, it is no longer sufficient for us to be the best in the country. We must be the best in the
worid. The key to retaining our competitive advantage lies in keeping focused on the basic business
ciples: prin
1. Be Customer-Driven
2. Adapt
quickly to the changing environment
3. Anticipate
change and act today to meet tomorrows challenges
Our success has been
grounded in two strengths:
1. Our distribution
network, serving more than five lakh retail outlets
2. Our superior
productquality-Value for money"
This was further
acknowledged by P G Bhatol in 2011 (the 37th Annual Report). One can see that the
proactive values of
the past continue to
play a leadership role in Amul's present day business decisions.
AMUL has been adapting itself to the changing circumstances.
Some examples throw more
light on the adaptive reactions to changing circumstances:
1. The e-Commerce Road: Having a "first mover
advantage" in the net business. In the year 1999-2000,
Amul launched a dedicated website and had embraced the e-revolution.
2. Total Quality Management (TQM): AMUL carried out
to ensure they are one step ahead.
comprehensive change processes in its TQM
3. Information Systems Management: IT has played a major and crucial role in the development of
Amul brand. The logistics behind the processing and producing of milk products is carried out with
military-like precisions. The installation ofmorethan 3.000 Automatic Milk Collection Systems Units
at village societies to capture milk fat content, member information, amount payable to each other,
and volume collected has proved extremely beneficial in ensuring fairness and transparency through-
out the entire organization and thus, has leveraged IT to the maximum.

THEMACRO-ENVIRONMENT
he following macro-environmental factors play a major role in Amul's life:

Changing Demographics & Lifestyle

and middle class populations impact consumer needs and
S there is a significant increase of ageing, urban middle class are driving demand for
populations, urbanization, and an emerging global
enavior. Ageing and developing countries.
Wtypes of liquid dairy products in both developed in every region of the world due to lower birth rates
fastest growing segment
e 0+ population is the in countries from
Mexico to Greece to Indonesia
are offering

thene life expectancy. Dairy producers fortified with calcium, vitamins, and minerals
that help reduce cho
milk
leste umers products such as to maintain active lifestyles.
lesterol and prote
dprotect against osteoporosis-all helping billion by 2050 and they
are
to reach more than six
The number of people living in cities is expected disposable than their rural counterparts
better edue
eter
educated, and have higher
a
income

wn
more brand conscious,
to cater their products
to
this groupdistri-
according
cordina e
alue-add
to United Nations. Dairy producers
are starting
Urbanization is
drinking yoghurt.
also changing
urban
as enriched
milk and LDP to growing
obution mode
mod In ts such are now delivering
producers
Saudi Arabia, for example, dairy
Populations from the
countryside
 Executing Strate gy
C228 Crafting &
Regulatory Environment

a view to encourage private investment and low c

de-licensed in 1991 with apita
attracted a large number of plavers
was
The dairy industry
in the segment. Although de-licensing on
and new technology etc. induced th
and sale of contaminated- substandard quality of milk vern Govern
issues like excess capacity Milk Products Order) in 1992. Milk and Milk p
the MMPO (Milk and
ment to promulgate in the country. The order requires no n der
milk and milk products production mission
(MMPO) regulates solids up to 500 tonnes per:
less than 10,000 liters ofliquid milk per day or milk
for units handling to 75,000 liters of mil
to plants producing between 10,000 day
MMPO prescribes State registration
between 500 to 3,750 tonnes of milk solids per vear Di
or manufacturing
milk products containing
more than 3,750 tonnes per year
of milk solids have to be registerad
producing over 75,000 liters per day or
with the Central Government.
in the category of industries for which foreign eauit
All milk products except malted foods are covered
allowed. Ice cream, which was earlier reserved for man.
participation up to 51 per cent is automatically no license is required for setting u
facturing in the small-scale sector, has now been de-reserved. such,
As
of large-scale production facilities for manufacture of ice cream. Subsequent to de-canalization, exports of
some milk-based products are freely allowed provided these units comply with the compulsory inspection
Board and Export Inspection
requirements of concerned agencies like the National Dairy Development
Council etc. Bureau of Indian Standards (BIS) has prescribed the necessary standards for almost all milk
based products, which are to be adhered to by the industry.

Local Competitors
Local competitors are the major problem facing by AMUL. They sell their products at a lower price since
being a low capital company they have fewer expenses to take care of. Secondly, as the environmental
costs
are rising day by day, its getting tough to carry the same pricing throughout. Thus cutting down the extra
trom
cost will Adulteration-also a major threat to quality-takes place due to illiterate farmers
surely help.
remote villages.
With so many newcomers entering this industry, competition is becoming tougher day by day
However competition has to be faced as a ground reality. The market is large enough for many to carve out
their niche.

Global Forces
Dairy industry globally remains one of the highly supported agricultural activities, and the use of pro

tionist policies and export subsidies continue to distort world trade in dairy products. The Uruguay Kouand
of Multilateral Trade Negotiations' (MTN) achieved only limited success in increasing market acces s in
reducing export subsidies. It did, however, establish a framework for negotiating further reductio
support.
Under the World Trade Organization Agreement on Agriculture, it was agreed that non-tan reduced
such as import quotas, would be converted to tariff equivalents and these tariffs then progressivey a-
A small in-quota tariff would be applied to a minimum access quantity, and a higher above reduced.
plied to quantities beyond this minimum. Domestic support and Export subsidies were also the
While the changes established a framework for reform, they are yet to have an appreciadie
dairy market. will change
every
talk w1u ch
tool of the future. The Internet, they say, i the
People today of e-commerce as a
the meaning or entty
thing-the freedom ofchoice, the way markets function, the nature of work, Amul to e
and international trade has helped
empowerment of consumers. Increased globalization
 AMUL-India's Pride C229
the foreign markets. Initially it was catering only to the Indian market; now Amul has been siunnluina
Australia, China
PrOducts to lot of other countries such as

COMPETITIVE FORCES ON AMUL

he various competitive forces in the context of AMUL and the Indian dairy industry

Bargaining Power of Buyers

Cost of Switching to competitor brands: The switching of brands 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 number of buyers: Milk is a necessity and hence is a mass product. It has a considerable share of
the rupee spent by any Indian. Moreover, the spread evenly over the country and do not have any
buyers are
bargaining power.
Bargaining Power of Suppliers
The objective of Amul dairy is not only profiting. As it is a part of a cooperative society, it runs for the
beneft of farmers those are the suppliers of milk and users of milk products. According the concept of the
co-operative society supplier has bargaining power to have a good return on his or her supply. However, a
supplier has limited rights to bargain with the co-operative society because it is made and run for the sake
of mass and not for individual benefit. However, it is made sure that the supplier gets his fair share of return.
There is appropriate bargaining power of the supplier. In the olden days there were no any kind of co-
operative societies as the farmer was exploited. Nowadays, however, the farmer's rights are protected under
the co-operative rules and regulations which ultimately results in a moderate power of bargaining from the
supplier.

Threats of New Entrants

Economies of Scale: GCMMF enjoys economies of scale which is difficult to match by any other competitor.
t is because of this reason that no regional competitor has grown to a national level.
Cost and Resource Advantages: Amul dairy is a cooperative society. That means "cooperation among
under the norms of GCMMF and
Competitors is the fundamental principle here. Amul dairy is managed
which has a very good reputation at the domestic and
market the products under the brand name 'Amul' difficult for the new entrants. Consequently
ternational level. Here, the raw material procurement is very So
as domestic and international players.
apital requirement is also high. Still, new entrants are emerging
the threats of new entrants are moderate.
is an immense level of brand preference
of Amul in
and Consumer Loyalty: There
Brand Preferences level of preference specifically in the liquid milk sector is that they
would go to
of the people. The
e minds
aother retailer if the retailer does not have Amul milk
channel of GCMME is a very planned and pertect
ACCess to Distributionto enter it woulddistribution
Channels: The
it is the result of years of
be a very difficult task. For GCMMF
E. For any new entrant as well as different levels in the
distribution network.
investment in its employees
work and its
C-230 Crafting & Executing Strategy
Capital Requirements: The total investment required in the industry is huge and is a decision worth
considering even for MNCs. The investment decisions cover the processing costs as well as the marketing
costs. To compete with brand Amul in India is dificult as Amul is synonymous to Quality.

Threats from Substitutes

Availability of attractive priced substitutes: Different substitutes are available for difterent category of prod
ucts. There is ample availability of low-priced substitutes from local vendors and retailers. This is a front
where GCMMF is still finding it hard to combat.
Satisfaction level of Substitutes: Customers do consider these products as equal on quality if not better
than the products of GCMME Hence the rate of customers switching to the substitutes is very high. More
over, the buyers can switch to the customers easily without any hurdles as well.

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 every different business category GCMMF
faces competition from different
In the milk-powder and chocolates categories it faces competition
from Cadbury & Nestle. In the
players.
from Kwality Walls Max and Havmor while in butter and chesses it
ice cream market it faces competition
in almost all the categories there is presence of local retail-
faces competition from Britannia. Moreover,
milk vendors. Rivalry intensifies as each of the competitors has different lines and this
ers, processors, and
would in turn depend on the importance the line holds for the competitor.
Mergers and Acquisitions: As
such in the industry there are no mergers or acquisitions. However, it any
MNC wishes to enter through this route then the competition might be severe.

PROMOTIONS
Promotion is critically important in positioning and for recollecting the brand inthemind of the consum-
ers. A USDA report suggeststhat
"advertising also bolsters per capita consumption of some dairy products,
especially fluid milk and cheese. Research indicates that promotion can result in higher sales."
Various promotional mix techniques such as websites on the internet advertising, sales promotion etc.

are essential to promote their product and services. There is need for marketing promotion and since it is
unavoidable to be successful in the dynamic environment, a producer must not only offer a good product
at a reasonable price, righttime, right quality, and right quantity, but also inform actual and potential cus-
tomers about the product and where they can buy the products and services in the constantly rapidchang
ing market environment.
With clever use of topical events, Amul's 'utterly-butterly' campaign has the distinction of
enterig
Guinness Book of World Records as the longest running campaign and has won several other accolades

sUCCESS METRICS
Success of the company can be assessed by seeing how well its
objectives are accomplished. Objective o
AMUL's business strategy 1s to beneit both the consumers as
well as the suppliers.
 AMUL-India s Pride C231

Success Categories Indicator of Success Successful Outcomes

Farmer Profitability and Price/Rate Differential, Total Improved farmer skills, Technological
Wealth Improvement including genetics-FIP
owner return
(Fertility limprovement Program), DISK,
and improved milk yield of mulching cattlee
Manufacturing Success Manufacturing costs Improved Technology- SAP and
ERP, Improved Pricing regimes, and
Economies of scale and scope
Market Success
Stable ownership structures, Effective connections to market demand
increase in market share, and
New market development
Social Success
Vitality of rural towns, Political Improved communication and negotiation-
clout bridging social divides; Literate rural
suppliers and Legislative support

OTHER MAJOR PLAYERS

Amul has got several product lines but
its main revenue earning source is dairy products. There are several
competitors of Amul in this product line. There are virtually 15 dairy co-operatives in India. These are:
1. Andhra Pradesh Dairy
Co-operative Federation Ltd. (APDDCF)
2. Bihar State Co- operative Milk Producers'
Federation Ltd. (COMPFED)
3. Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF)
4. Haryana Dairy Development Co-
operative Federation Ltd. (HDDCF)
5. Himachal Pradesh State Cooperative Milk Producers' Federation Ltd
(HPSCMPF)
6. Cooperative Milk Producers' Federation Ltd (KMF)
7.
Karnataka
Kerala State Cooperative Milk Marketing Federation Ltd (KCMMF)
8. Madhya Pradesh State Cooperative Dairy Federation Ltd (MPCDF)
9. Maharashtra Rajya Sahakari Maryadit Dugdh Mahasangh (Mahasangh)
10. Orissa State Cooperative Milk Producers' Federation Ltd (OMFED)
11. Pradeshik Cooperative Dairy Federation Ltd (UP) (PCDF)
12. Punjab State Cooperative Milk Producers' Federation Ltd (MILKFED)
13. Rajasthan Cooperative Dairy Federation Ltd (RCDF)
14. Tamil Nadu Cooperative Milk Producers' Federation Ltd. (TCMPF)
15, West Bengal Cooperative Milk Producers' Federation Ltd. (WBCMPF)
There are two main players-Amul of GCMMF and Mother Dairy of NDDB. Our focus will be to ana-
threat to Amul and other small co-
yze Mother Dairy separately which is the main competitor and a strong
small in size to pose a significant threat to GCMME.
Operatives together as individually since they are very
in India as well as in Asia, marketing about 2.2 million
Mother Dairy" is the single largest brand of milk40% market share in the organized sector in and around
of milk per day.Mother Dairycommands
ters presently
and service. Mother Dairy, Patparganj, Delhi, is
primarily because of consistent quality
Deihi,
liters of toned milk through bulk vending shops.
utacturing and selling around 8.5 lakh

Djectives and Business Philosophy

of Mother Dairy
whose welfare it existed,
aln stakeholder of Mother Dairy was the farmer member for