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Amul Strategy PDF
Amul Strategy PDF
Submitted by:
Akramul Hoque (10201002)
Soumyajit Auddy(10201053)
Table of Contents
1. Introduction .......................................................................................................................................... 3
2. 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. Organization Description ...................................................................................................................... 5
4. Methodology......................................................................................................................................... 6
5. AMUL'S SECRET OF SUCCESS ................................................................................................................ 6
5.1 SWOT ANALYSIS ................................................................................................................................ 7
6. Competitors Amul: ............................................................................................................................ 11
7. The 3C’S Model ................................................................................................................................... 12
8. Michael Porter’s Five-Force Analysis .................................................................................................. 12
9. Future Plans ........................................................................................................................................ 16
9.1 Future Challenge ............................................................................................................................. 16
10. Conclusion ....................................................................................................................................... 18
1. Introduction
India is the largest producer of milk in the world and accounts 21% of the world‟s production.
India is with highest livestock populations in the world, it accounts 50% of the buffaloes and
20% of the world‟s cattle population, most of which are milch cows and milch buffaloes. India‟s
dairy industry is considered as one of the most successful development industry in the post-
Independence 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.
Dairy India 2007 has estimated the size of India‟s 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.
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.
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
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 (2009–10).[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.
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.
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
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.
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
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 GCMMF‟s 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).
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).
According to porter (1980) a firm must be analyzed in relation to its industry. Factors
outside the industry tend to influence all the industry‟s 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.
The success of the national and local competitor‟s brands includes effectives distribution system,
advertising, good pricing policy etc. the factors ascribed by porter are.
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 farmer‟s
rights are protected under the cooperative rules and regulation, which ultimately results
in moderate power of bargaining from the supplier.
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.
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
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
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 that‟s 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 don‟t 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.