CASESTUDY

The competition in the INDIAN DAIRY sector suddenly seems heating up. With many private
dairies also joining the bandwagon. For the first time ,INDIA'S largest global player in this
industry "AMUL" is facing the heat. Can you suggest some Brand Promotion strategies
to AMUL ?

History
A dairy is a business enterprise established for the harvesting or processing (or both) of
animal milk – mostly from cows or goats, but also from buffaloes, sheep, horses, or camels – for
human consumption. A dairy is typically located on a dedicated dairy farm or in a section of a
multi-purpose farm (mixed farm) that is concerned with the harvesting of milk.

Structure of the industry

While most countries produce their own milk products, the structure of the dairy industry varies
in different parts of the world. In major milk-producing countries most milk is distributed
through whole sale markets. In Ireland and Australia, for example, farmers' co-operatives own
many of the large-scale processors, while in the United States many farmers and processors do
business through individual contracts. In the United States, the country's 196 farmers'
cooperatives sold 86% of milk in the U.S. in 2002, with five cooperatives accounting for half
that. This was down from 2,300 cooperatives in the 1940s. In developing countries, the past
practice of farmers marketing milk in their own neighborhoods is changing rapidly. Notable
developments include considerable foreign investment in the dairy industry and a growing role
for dairy cooperatives. Output of milk is growing rapidly in such countries and presents a major
source of income growth for many farmers.
SCOPE

Why Dairy Farming in India Profitable business?

 Dairy farming business is a traditional business. So, you don’t have to worry about
marketing your products. You can easily sell your products in almost every place of
India. And dairy product market is active round the year.

 Dairy farming is eco-friendly and it doesn’t pollute the environment.

 Dairy farming business doesn’t required highly skilled labor. You can easily setup
small scale dairy farm with your family labor.

 Great business opportunities for unemployed educated young people. Proper plan
and management can ensure maximum production.

 Numerous highly productive native Indian and foreign breeds are suitable for
farming according to the climate and environment of India.

 You can apply for loan in your local NGO or banks.

 Finally turnover is depend on many factores such as

 Business Growth
 Marketing
 No. of Cows/Dairy

According to the National Sample Survey of 1993-94, livestock sector produces regular
employment to about 9.8 million persons in principal status and 8.6 million in subsidiary status,
which constitute about 5% of the total work force. The progress in this sector will result in a
more balanced development of the rural economy.
Policy

The total amount of milk produced has more than tripled from 23 million tonnes back in 1973 to
74.70 million tonnes 26 years later in 1998. The tremendous rise in milk production is primarily
the fallout of the dairy farming policy reflected in Operation Flood. Following the success of
dairy farming policy, the Government has set up a dairy processing policy, reflected in the Milk
and Milk Products Order. In addition, the Government uses a a variety of import restrictions to
protect its domestic dairy market.

Milk Processing

The milk processing industry is small compared to the huge amount of milk produced every year.
Only 10% of all the milk is delivered to some 400 dairy plants. A specific Indian phenomenon is
the unorganised sector of milkmen, vendors who collect the milk from local producers and sell
the milk in both, urban and non-urban areas, which handles around 65-70% of the national milk
production. In the organised dairy industry, the cooperative milk processors have a 60% market
share. The cooperative dairies process 90% of the collected milk as liquid milk whereas the
private dairies process and sell only 20% of the milk collected as liquid milk and 80% for other
dairy products with a focus on value-added products.

Domestic Consumption

The huge volume of milk produced in India is consumed almost entirely by the Indian population
itself, in a 50-50 division between urban and nonurban areas. Increasingly, important consumers
of the dairy industry are fast-food chains and food and non-food industries using dairy
ingredients in a wide range of products. Trade In spite of having largest milk production, India is
a very minor player in the world market. India was primarily an import dependent country till
early seventies. Most of the demand-supply gaps of liquid milk requirements for urban
consumers were met by importing anhydrous milk fat / butter and dry milk powders
Key Areas of Concern in the Dairy Industry

(i) Competitiveness, cost of production, productivity of animals etc.

The demand for quality dairy products is rising and production is also increasing in many
developing countries. The countries which are expected to benefit most from any increase in
world demand for dairy products are those which have low cost of production. Therefore, in
order to increase the competitiveness of Indian dairy industry, efforts should be made to reduce
cost of production. Increasing productivity of animals, better health care and breeding facilities
and management of dairy animals can reduce the cost of milk production. The Government and
dairy industry can play a vital role in this direction.

(ii) Production, processing and marketing infrastructure

If India has to emerge as an exporting country, it is imperative that we should develop proper
production, processing and marketing infrastructure, which is capable of meeting international
quality requirements. A comprehensive strategy for producing quality and safe dairy products
should be formulated with suitable legal backup.

(iii) Focus on buffalo milk based specialty

Dairy industry in India is also unique with regard to availability of large proportion of buffalo
milk. Thus, India can focus on buffalo milk based specialty products, like Mozzarella cheese,
tailored to meet the needs of the target consumers.

(iv) Import of value-added products and export of lower value products

With the trade liberalisation, despite the attempts of Indian companies to develop their product
range, it could well be that in the future, more value-added products will be imported and lower
value products will be exported. The industry has to prepare themselves to meet the challenges.

(v) Provisions of SPS and TBT

At the international level, we have to ensure that provisions of SPS and TBT are based on
application of sound scientific principles and should become defacto barriers to trade.

Amul

Amul is an Indian dairy cooperative , based at Anand in the state of Gujarat, India.
Formed in 1948, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3.6 million milk
producers in Gujarat. Amul is actually the abbreviated form of Anand Milk Union Limited.
The white revolution was spearheaded by Tribhuvandas Patel under the guidance of Sardar Patel
and Verghese Kurien. As a result, Kaira District Milk Union Limited was born in 1946.
Tribhuvan das became the founding chairman of the organization which he led till his last day of
his life. He hired Dr. Kurien three years after the white revolution. He convinced Dr.Kurien to
stay and help with the mission rest was history in the dairying industry.
Amul spurred India's White Revolution, which made the country the world's largest producer of
milk and milk products. In the process Amul became the largest food brand in India and has
ventured into markets overseas.
Dr Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (1973–2006), is
credited with the success of Amul. Amul products are now available in more than 60 countries in
the world.

History
Amul-cooperative registered on 14 December 1946 as a response to the exploitation of marginal
milk producers by traders or agents of the only existing dairy, the Polson dairy, in the small city
distances to deliver milk, which often went sour in summer, to Polsn. The prices of milk were
arbitrarily determined. Government had given monopoly rights to Polson to collect milk from
Kaira and supply it to Bombay city.
Angered by the unfair trade practices, the farmers of Kaira approached Sardar Vallabhbhai
Patel under the leadership of local farmer leader Tribhuvandas K. Patel. He advised them to form
a cooperative and supply milk directly to the Bombay Milk Scheme instead of Polson (who did
the same but gave them low prices). He sent Morarji Desai to organise the farmers. In 1946, the
milk farmers of the area went on a strike which led to the setting up of the cooperative to collect
and process milk. Milk collection was decentralized, as most producers were marginal farmers
who could deliver, at most, 1–2 litres of milk per day. Cooperatives were formed for each
village, too.
In 1999, it was awarded the "Best of all" Rajiv Gandhi National Quality Award.
Technological developments at Amul have subsequently spread to other parts of India.
The GCMMF is the largest food products marketing organisation of India. It is the apex
organisation of the dairy cooperatives of Gujarat. It is the exclusive marketing organisation for
products under the brand name of Amul and Sagar. Over the last five and a half decades, dairy
cooperatives in Gujarat have created an economic network that links more than 3.1 million
village milk products with millions of consumers in India. Gujarat Cooperative Milk Marketing
Federation Ltd.

OBJECTIVE OF AMUL
· The White Revolution. The Amul Model was the main contributor to the beginning of the
White Revolution. The revolution led to India becoming the country with the most milk
production in the world. It also helped reduce malpractices carried out by merchants and milk
traders. The White Revolution was a huge contribution to the alleviation of poverty
and faminelevels from levels that were dangerously low.
· The Three-Tier Amul Model. The cooperative structure of the Amul Model is three-tier. The
Village Dairy Cooperative Society is affiliated with the District Cooperative Milk Producers'
Union that, in turn, is linked with the State Cooperative Milk Federation. This structure allows
various functions to be delegated across the three tiers. For example, milk collection is carried
out at the Village Dairy Society level, milk procurement and processing takes place at the
District Milk Producers' Union level and milk and milk products marketing occurs at the State
Milk Federation tier. Designating the functions in such a way avoids the problems of internal
competition and ensures that the economies of scale are achieved.
· Impacts
of the Amul Model. This three-tier model has led to India increasing its production of milk by 40
million metric tonnes. The model has been instrumental in improving the economy of India.
However, it has also introduced on a much bigger scale, an ingredient that has helped improve
the health and nutrition of many within the country.

SWOT analysis of Amul

Strengths

Very high market share in ice cream – Amul has the top market share in ice cream segment
which further helps it push other products into the market.

Excellent brand equity – amul is a beloved brand over the years and the contribution of amul
girl and her outdoor ads should specifically be mentioned here.

Excellent quality management – even though amul has such a wide and large distribution
network, hardly any quality complaints come for amul.

Strong distribution network – This is one company which is strong in urban as well as rural
distribution. You will find amul present even in small towns and villages.
Weaknesses

Cost of Operations – Amul’s operation is huge. And so is the cost. Plus the sector is such that
maintaining margins becomes difficult day by day. Thus, to face international players,
Amul needs to maintain the operations in the same manner it is carrying out today. It is not a
weakness but rather a constant challenge for Amul. In fact, during summers, the brand faces
severe shortage of supply.

Chocolates – Amuls expansion to chocolate has failed and hardly any product of Amul
chocolates is selling in the market. Amul needs further products to expand its product line and
increase bottomline.

Opportunities

Export – Amul can export its product to other countries thereby increasing its turnover and
margins exponentially.

Concentrate more on chocolate market – Amul has a no advertisement policy which creates a
problem for its foray into additional products. Amul should in fact have separate SBU’s and
concentrate more on increasing its product line through chocolates or other such products.

Threats

Increasing competition in Ice cream segment – Many players, local and international, are
entering the ice cream market thereby taking away share of wallet from Amul. Kwality walls,
Naturals, London dairy, Havmor, Arun ice cream, Vadilal, Ramani, are some of the few brands
who are directly in competition with Amul.

Bandwagon Effect:
The existence of positive network externalities gives rise to Bandwagon effect. Bandwagon
effect refers to the desire or demand for a good by a person who wants to be in style because
possession of a good is in fashion and therefore many others have it. It may be noted that this
bandwagon effect is the important objective of marketing and advertising strategies of several
manufacturing companies who appeal to go in for a good as people of style are buying it.

Let us explain how to derive a demand curve for a good incorporating the bandwagon effect.
This is illustrated in Figure 6.4 on whose X-axis we measure the number of units of a good in
question. Suppose consumers think that only 10 thousand people in Delhi have purchased the
good.
This is a relatively small number of people compared to the total population of Delhi. So the
other people have little incentive to buy the good to satisfy their instinct of living in style.
However, some people may still purchase because it has a intrinsic value for them. In this case
the demand for the good is given by the demand curve D10.