R S Sodhi

Magazine:

Biz@India

Posted On:

February 2016

Spelling Success With 3Es

 
Nearly 70-year-old Gujarat-based milk cooperative Amul is a household name in India. Working on its three ‘Es’ formula for expansion in procurement, milk processing and distribution since the past three years, it aims on taking its revenues to USD 10 billion within four years, says R S Sodhi.
 
With Amul being one of the oldest dairy firms in India, how has its journey been?
 
Ever since our inception in 1946, Amul has been a trendsetter – both in innovation and marketing of milk and milk products. Our cooperative model has been well acclaimed – the ‘Amul model’ gave birth to the ‘Operation Flood’ movement that made India the largest milk producer in the world. Amul has constantly innovated by challenging the technological and marketing barriers. Like manufacturing milk powder and cheese from buffalo milk – for the first time in the world to managing a supply chain that comprises of four distinct networks – fresh, frozen, chilled and ambient product range, which no other company in India has done.

The seeds of this unusual saga were sown more than 68 years ago in Anand, a small town in Gujarat in western India. The exploitative trade practices followed by the local trade cartel triggered off the cooperative movement. The farmers of the district approached a prominent leader, Sardar Vallabhbhai Patel who went on to become India’s first deputy Prime Minister. He advised them to get rid of middlemen and form their own co-operative, which would have procurement, processing and marketing under their control. The farmers heeded the advise and in December 1946, the ‘Kaira District Co-operative Milk Producers Union’ was born, which went on to become the role model for India’s dairy cooperative movement.

The birth of Amul at Anand provided the impetus to the cooperative dairy movement in the country. The cooperative was further developed and managed by Dr V Kurien, father of ‘White Revolution’ in India. The first modern dairy of the Kaira Union was established at Anand that popularly came to be known as AMUL dairy after its brand name. Indigenous R&D and technology development at the cooperative had led to the successful production of skimmed milk powder from buffalo milk as India has the world’s largest buffalo population. The foundations of a modern dairy industry in India were thus laid.

Within a short span, five other district unions were organised. In order to combine forces and expand the market while saving on advertising and avoid a situation where milk cooperatives would compete against each other it was decided to set up an apex marketing body of dairy cooperative unions in Gujarat. Thus, in 1973, the Gujarat Co-operative Milk Marketing Federation (GCMMF) (AMUL) was established.

Today, member unions of GCMMF procure milk from 3.6 million milk producer members and supply over 15 million litres of milk from around 18,500 villages of Gujarat. The turnover last year was USD 4.83 billion, which comes not only from India but also exports to 49 nations. We want to take our revenues to USD 10 billion within four years.

How was the last fiscal in terms of production and export?

The global dairy trade is less than 7pc of world’s total milk production. Also as India is the largest consumer of milk products, our main focus remains on fulfilling domestic market. As a result our exports are about 2-3 pc of total turnover.

What are the key overseas markets for India and what challenges these markets pose?

As we are focusing on consumer product marketing, our focus is on Indians and NRIs (North Resident Indians) – hence our key markets are wherever NRIs are settled like the USA, Australia, Middle East and Singapore. Though EU (European Union) has a large NRI population, unfortunately whole of EU does not permit import of dairy products from India and hence our products are not available in EU.

The basic challenge that we face in global market is artificial barriers created by nations only. As mentioned for EU, we have been facing non-tariff barriers related to veterinary issues that have restricted our exports. Countries like the USA are also protective with an import tariff of 60-80 pc, which makes imports much more expensive as compared to local producers.

We are present across all markets of Gulf including UAE, Oman, Kuwait, Bahrain, Qatar and Saudi Arabia. Their governments oblige labelling in Arabic for which we need to have separate packaging.

What is the overseas competition that the sector has especially from Europe and what can the Indian dairy firms learn from their overseas counterparts?

The situation is actually other way round as far as co-operatives are concerned. At Amul, we are paying about 80 pc of consumer money back to farmers as against 35-50 pc being paid by developed world. As of now, farmers of Gujarat are getting much better farm gate price than a farmer in New Zealand or the EU.

The major threat to us is from subsidy support given by developed world to their farmers that India cannot afford. This makes their prices artificially lower in the market and as a result Indian dairy products are rarely competitive in the global market. But we must also learn how to protect the interests of our farmers.

With food safety being the talk of the town, what is Amul’s take on it and how does the company keep a check on the quality?

Milk procured by us is tested at different locations to check various quality parameters to ensure that consumer gets best quality of milk and milk products.

Every milk producer who is a member of village dairy cooperative society comes twice a day to the cooperative society to pour raw milk. The raw milk is tested for its qualitative aspects like FAT and SNF and the quantity aspect in terms of weight. Since last few years, we have also been educating our members about the importance of clean milk production and advising them to use only good quality stainless steel utensils for collection of milk.

Raw milk received at village dairy cooperative society is chilled below 4 degrees in the bulk coolers to enhance the shelf life of raw milk before it reaches the dairy plant. These coolers have a capacity varying from 5,000 litres to 15,000 litres depending upon milk production of the village. Most of the village cooperative societies are equipped with bulk milk coolers. By using these coolers, we are able to control microbial count in the milk.

The milk is then transferred to insulated milk tankers and brought to the chilling centre of the district cooperative union or directly to the dairy plant for further processing and converting it into value added milk products.

All plants of Amul are certified with ISO 9001:2008 (Quality Management System) and ISO 22000:2005 (Food Safety Management System) through M/s DNV-GL.

How good has your marketing communication been?

We feel that consistency in strategising and communication has been the key to our success. Both in terms of advertising agency and the client, almost the same team has guided the campaign across five decades. This campaign has ensured that brand Amul remains contemporary, fresh and relevant to society and the nation at any time. The humour and topicality in the campaign has struck a chord with the general public, while being seen as a fresh sort of marketing. The campaign has helped us reap the benefits and keep the brand at top of consumers’ minds – the Amul girl has helped us remain young, energetic and fresh across 50 years. While the campaign still talks about Amul butter, it has now become the face of umbrella brand Amul with positive impact across the entire range of Amul products.

What are your plans of expansion in terms of products and markets in the near future?

Since last three years, we have adopted the formula of three ‘Es’, meaning expansion in milk procurement, expansion in distribution and expansion in milk processing capacity.

We have begun milk procurement from outside Gujarat as well. Currently, we procure around 15 pc of milk from Maharashtra, Rajasthan, West Bengal, Uttar Pradesh, Madhya Pradesh, Haryana and Punjab. This is only about 15 pc of our total milk procurement, but we would like to build on our nationwide procurement, while maintaining our quality and methods to benefit the members of the cooperative.

Similarly, we have expanded our distribution network. We have started eight new branches in last two years so that we can supply milk and milk products to our consumers. Since last three years, we have also started selling our milk powder through Global Dairy Trade (GDT).

We also plan to expand our milk processing capacity from 24 million litres per day to 36 million litres.

How do food fairs such as Gulfood act as a platform?

Gulfood is more useful for our commodity products like milk powder wherein we get opportunity to meet all the major buyers and sellers at single point, helping us to discuss out future business strategy.