PRESENTED BY GROUP 7 SDM 1

RAJAT GARG AJIT KUMAR

DIBYASOBHAN ROY NIVEDITA RAJU
TRIPTI JANGPANGI AVANTIKA TIKMANY
OSHIN GOEL NITIKA
EVOLUTION OF MILK INDUSTRY IN INDIA
• India accounts for 17% of
the worlds milk production
• India is also the highest
consumer of milk
(118-120 billion litres)
1996-2006:
Operation Flood
1985-1994: Phase IV
Operation Flood Focus on
Phase III infrastructure
1981-1985: 70000 dairy development and
Operation Flood cooperatives creating democratic
Phase II values
93.14 lakh farmers
34500 village level became members of Strengthening
1970-1981: cooperatives 170 milk sheds cooperatives by
Operation Flood
36 lakh farmers 115 lakh litres/day providing funds on
Phase I
became members of procurement 50:50 bases from
13000 dairy 136 milk sheds centre and state
cooperatives Marketing of 100
1960s 79 lakh litres/day lakh litres/day Education, Personal
established
procurement Training, Marketing
Poor growth 18 lakh farmers 26000 tonnes of Support, Product
of dairy became members Marketing of 50 lakh balanced feed, Development and
industry of 39 milk sheds litres/day 24000 tonnes of Improving
bypass protein feed Standards
Production 34 lakh litres/day sold through
and procurement cooperatives
Availability of Source: CRISIL Research
28 lakh litres/day
milk and milk
marketing
products: LOW
MILK PRODUCTION & CONSUMPTION PATTERNS
Milk and Milk Products Segment is 70.00
expected to record 12-13% CAGR 60.00
between 2015-18 50.00

Kgs/Year
Production 40.00

of milk in 30.00

India has a 20.00

CAGR of 10.00

0.00
4.2% 1987-88 1993-94 1999-00 2004-05 2009-10
Rural 38.93 47.94 46.11 47.09 50.09
Urban 51.83 59.50 62.05 62.17 65.19

The per capita milk consumption in rural

households registered an increase of 28%

Consumption The per capita milk consumption in urban

of fluid milk households registered an increase of 25%
in India has a
CAGR of 5%
7 Indian States contribute
65% of all the milk produced
in the country
 BUSINESS MODELS IN THE DAIRY INDUSTRY
CO-OPERATIVE MODEL FORWARD INTEGRATED PVT. COMPANY
First tranche: Based on quality & quantity of milk, The company does not deal directly with the dairy farmers and
payment within 15 days of procuring milk procures milk (processed/ unprocessed) through other routes
such as village collection centres, franchisee chilling centres,
Second tranche: Based on the sale of various bulk private coolers, district union factories and regional
value-added products manufactured during the cooperative federation factories.
year, profits are paid back to farmers on the basis Eg: DudhSagar, Schreiber Dynamic Dairy
of their shareholding in the cooperative.
Private player Packs, brands and
Eg: Amul, Mother Dairy Milk is processed Wholesalers and
procures milk from sells it various
into various value retailers sell to end
sources other than distributors and
Products are added products consumers
transported to
the dairy farmer wholesalers
Pasteurized milk the various
is transported to wholesale and
the regional milk retail stores
federation
Chilled milk is factories where
transported from dairy products
the VCC to the
ditrict union
are manufactured FULLY INTEGRATED PVT. COMPANY
and branded
Dairy farmers
where the milk is
pasteurized
• The farmer is paid only once, as against dual payments made in
get milk to the
VCC where milk
the cooperative model.
is cooled using
chillers
• More commission is paid to the farmers as the initial payment,
to incentivise farmers to supply milk.
CLASSIFICATION OF INDIAN DAIRY AND MILK INDUSTRY
Dairy Industry in India
Liquid milk has the
highest market share

Cheese and ice cream

Processed Milk Milk Products have the highest
growth rate

Curd and
Butter/Ghee/Ice
Yogurt/Buttermilk Cheese/Paneer/Khoa Milk Powder
Cream/ Frozen Desert
and Lassi

Market Share (%) Liquid Milk

1% Ghee
1% Paneer/Khoa
2% 1% 1%
6% Curd/Yogurt
Buttermilk/Lassi
12% Ice Cream
Butter
57% Cheese
19%
Milk Powder
 OPERATING MARGINS AND ROCE
Processed Milk 4
High margins
Ghee 6
for value
Butter 7
addition Operating
Curd/Yogurt 8

Paneer 8
margins and
Cheese 12
ROCE depend on
Ice Cream 13
the extent of
0 2 4 6 8 10 12 14
value addition
Operating Margin (%)

OPERATING MARGINS
TO IMPROVE HIGH Value
Addition

HIGH EBITDA
LOW ROCE
 PRICES AND RATINGS

NEW
TREND

Future outlook of milk and dairy

companies in India is going to be
mostly stable as the demand and
consumption of milk and milk products
grows in the years to come.
 GROWTH DRIVERS/RISKS OF MILK INDUSTRY
Growth is fuelled Dominance of Co-
Favourable
Government
Demographic by various Rise in MSP of operatives limits
Incentives external dynamics Cattle Fodder Crops Pricing Power of
Trends
Private Companies
GROWTH
DRIVERS
KEY RISKS
Risks have
Improvements in Technological increased due to Geographic
Volatility in Milk
Supply Chain Innovations for lack of dispersion Concentration of
Prices
Infrastructure Better Quality Production

Other Factors Other Factors

• Rising share of high margin milk products
• Priority lending status via National Dairy Plan
• Changing lifestyle of consumers
• Rising need for convenience
• Better health awareness among consumers
• Overall growth in food services industry
• Quality of milking animal difficult to judge
• Milk handling practices to prevent microbial
contamination
• Free rider problems due to mixing different milk
quantities in one storage facility
• Small probability of transportation failure
 INDUSTRY ANALYSIS- PORTER’S 5 FORCES
Competitive Rivalry - HIGH Bargaining Power of Suppliers - LOW
Bargaining
• New brands are coming up each day and the • Farmers, rural households and
Power of
major factor on which they play in this industry is Suppliers small cooperatives sell at the going
prices LOW
market rate.
• The big giants and the government
Threat of Substitutes - LOW control the sector and regulate
• Essential item for beverages prices
like tea, coffee
• Traditional consumption Threat of New Entrants -
habits make milk a favorite Threat of Competitive Threat of HIGH
New
• There is no other offering that Substitutes Rivalry Entrants • Not many entry barriers
can substitute milk. LOW • Many local players have
HIGH HIGH
come up with their own
Bargaining Power of Consumers - LOW local brands
• The prices of packaged and branded milk • New company just has to
and milk products is fixed follow the defined
• Bargain with the local milk vendors in standards and it can come
Bargaining up with its offerings in this
unorganized sector and local shops selling Power of
milk products Consumers sector
LOW
 AMUL- THE TASTE OF INDIA
MILK
ICE CREAM
MILK
POWDER SHRIKHAND

GHEE PANEER

BUTTER GULAB
JAMUN
CHEEESE
BASUNDI
CURD
NUTRAMUL
CHOCOLATE
 AMUL DISTRIBUTION SYSTEM STRUCTURE
Farmers

Village Local
Village Milk sold to
Cooperative Restaurants
Cooperative village and
Societies and Other
Societies with local
without Milk related
Chilling Units
Chilling Units Businesses
restaurants AMUL ANAND
MODEL PATTERN
Network Chilling Plants
AMUL products are
Services
available in over • Veterinary Milk Processing Three-tier Cooperative
Union & Warehouses
500,000 retail outlets Services Structure
• Animal
across India through its Husbandry • Dairy cooperative
network of over 3,500 • Animal Feed societies at village
GCMMF Warehouses
Factory
distributors. • Milk Can level
Producers • Milk Union at district
• Agriculture Wholesalers/ C&S
University level
• Rural • Milk Federation at
Management
Institute Retailers
Home Delivery state level
• Trucking Contractors
Facilities

Consumers
 SALES & MANAGEMENT AT AMUL
Year of Establishment 1973

Members 17 District Cooperative Milk Producers' Unions

No. of Producer Members 3.37 Million GCMMF

No. of Village Societies 18,536
Overview 21% 5-yr
Total Milk handling capacity per day 24 Million litres per day
CAGR
Sales
Milk Collection (Total - 2014-15) 5.42 billion litres
Management
Milk collection (Daily Average 2014-15) 14.85 million litres
Process
Cattlefeed manufacturing Capacity 6340 Mts. per day

Sales Turnover -(2014-15) Rs. 20733 Crores (US $ 3.4 Billion) INR 20733
crores in sales
Distributors have sales persons who collect orders almost weekly from
retailers and mass merchandisers. The order is forwarded to the
warehouse.
230 lakh litres
per day
Upto 10 days of credit period received by the
distributor is passed on to the retailers. This The retailers are helped by the distributors
kind of a benefit further helps in boosting in enhancing sale by on time delivery.
sales.
 AMUL SUPPLY CHAIN AT DISTRIBUTOR LEVEL
Category-wise
Amul’s Supply Chain at Distributor – Sri Patodia Sales
Margin Structure
Sri Patodia
Company
GCMMF
Wholesaler
(Dewas Naka)
Sales
(Retailer/
Customers Category Product
Customer) Dairy (Buttermilk,
2.75-3.5%
Ghee Butter)
Small Retailers Fresh (Milk, Curd) 3%-4%
Frozen (Ice cream,
9%-10%
Distribution Management: Chocolates)

 7 to 8 people are employed who work
under the distributor.
 Orders are collected from the retailers via
phone or visits by the labour employed by
the distributor.
 Transportation cost is borne by Amul
 Orders received are placed online with
GCMMF (Dewas Naka).
 Robust IT Mechanism helps to collect
orders and places them quickly from the
company.
 It takes maximum 1-2 days to get materials from Warehouse to the
distributor.
 As there is a large demand for goods, frequents checks need to be
performed regarding the stocks in the shop which is done using
calculation on basis of sales.
 Sometimes clashes with other distributors occur for territory.
 If products get expired then claims are refunded within fifteen days.
However, this may sometimes take a bit longer time also.
 Sales Figures:10 -12 lakhs per month
 SALES MANAGEMENT PROCESS BY DISTRIBUTOR
• The distributors have an area assigned to them which is done by the company itself and
they use area mapping system depending on the population and distance from the Gujarat
warehouse.
Distribution Headquarters

Sales Management Structure

• The distributor not only sells to retailers but also sells to large mass merchandiser and
function other outlets who order in large quantities.

• Distributor gets the material from Amul on a credit period of 15 days. And he gives a
credit period of 10 days to the retailer. Amul
Credit and • Each distributor has a sales force of 7 to 8 people who are responsible for collecting
order from various retailers on phone or physically go and collect orders.
Warehouse
Sales

• The distributor has the DMS (Distributor Management System) facilitated by the
company which is installed in his computer. This system helps the company to keep a
track of the amount of products a particular distributor is selling over the year and this
helps in distribution of incentives and benefits to the distributors at the end of year. Distributor
Territories • Each territory has 10-15 APO (Amul Preferred Outlets) i.e. exclusive retailers for Amul
which are managed by the distributors.
 ANALYSIS AT RETAILER LEVEL – Tirupati Enterprises
The functioning of the distribution network was also analysed from the perspective of the retailers. One such retailer
that we visited and surveyed is Tirupati Enterprises.
-Distributor sends material
Distribution System
Margins
when ordered over
telephone.
-Lead time is 2 to 3 hours
only since the distributor is
located in close vicinity.
-Orders are send either on
pickups or 2 wheeler also
depending on the quantity
ordered. The costs are borne
by the distributor.
-Lead time for delivery of
goods is 2 hours.
-Sales amount ranges -Poor service levels have
Problems
from Rs. 30,000-35000 a made Amul less competitive.
month. -Old and expired Products
are not exchanged and
-3% extra margin which repeated reminders also fail
available on goods that to wake the distributors.
have invoices are
-No incentives are provided if
transferred to the extra products are sold or if
retailers by the extra orders are made.
distributors.
-All advertisement costs are
-17% margin for all paid by the retail store.
products.
-More margin on frozen
segment than dairy and
fresh segment.
 ANALYSIS AT HYPERMARKET LEVEL – MORE
The functioning of the distribution network was also analysed from the perspective of the hyper-retailers. One such
hyper-market that we visited and surveyed is MORE.

More Retail Outlets Orders placed to Order is placed with Orders shipped to
Places Orders Mumbai office GCMMMF More by GCMMF

CENTRALISED ORDER MECHANISM FOR MORE OUTLETS ACROSS THE COUNTRY TO

TAKE ADVANTAGE OF ECONOMIES OF SCALE

They have a warehouse to
stock their goods that they
receive and have refrigerators
to keep the SKU’s.
Transportation and shipping
charges are paid by AMUL
Margins of 3-4% on AMUL
213 SKU’s available out of
which 144 have very less
probability of a stock-out
In case of expiry, MORE has to
destroy the product since
AMUL does not have a return
or refund policy
Cash rewards and related
benefits are awarded to outlets
based on the EBITDA values.
480 stores and 18 hyper
markets are used for the
calculation of EBITDA.
 EXISTING SALES MANAGEMENT AT AMUL
Distribution chain: The flow from State Co-
farmers to final retailers Farmers & operative
District Dairy GCMMF
Milk Milk Distributor Retailer
Cooperatives Warehouse
Producers Marketing
Federation

 AMUL is also part of

Global Dairy Trade (GDT)
platform, where only the
top 6 dairy players of the
world sell their products.
 GCMMF operates through
56 Sales Offices, has a
dealer network of 10000
dealers and 10 lakh
retailers. It has one of the
largest such networks in
India.
The Sales Management System
SALES & MANAGEMENT AT AMUL
Amul has a very wide range
of products available for
distribution. More has as
many as 213 SKUs.
Inventory management
throughout the distribution
system is quite well
maintained.

The larger distributors and

Thus, sales are higher as the
stores like more, with higher
retailers have a variety of
inventory being carried, have
products that they can offer to
electronic systems for tracking
the customers.
the inventory.

It is necessary for the

distributors to be sure of which
products to be pushed forward
and which are the most
profitable along with the speed
with which they sell.
Thereby cost is minimized,
problems of excessive carrying
costs or that of stock outs is
also easily taken care of.

Inventory management and product portfolio at Amul

retail stores
SALES MANAGEMENT FRAMEWORK
 COMPARISON: AMUL v/s SANCHI
SANCHI
Dairy co-operative under the
Madhya Pradesh State Cooperative
Management Dairy Federation Limited
(MPSCDF), largely based out of
Bhopal and Indore.
Three-tier structure with MPSCDF
at the State-level Federation,
Organization Structure followed by Regional Level Milk
Unions and then Village Level
Dairy Cooperative Societies.
No of SKUs sold in Indore
10-12
Most preferred SKU Liquid Milk
Product Categories Less diversified
Highest selling product in
500 ml pouch milk
terms of packaging
A total of 450 litres of Sanchi milk
Sales is sold in Indore in a day.
AMUL
Formed in 1946 in Anand, Gujarat.
It is managed by the Gujarat
Cooperative Milk Marketing
Federation Ltd (GCMMF).
Amul's structure has the National,
State, District and Village levels,
with GCMMF coming under the
National Cooperative Dairy
Federation of India.
In general 144 but nationally it is
more than 400
Butter
Too much diversified portfolio of
products.
1 Litre pouch milk
A total of 450-500 litres of milk is
sold per day(rough estimates)
COMPARISON: AMUL v/s SANCHI (contd.)
SANCHI AMUL
Distribution margin is Rs. 1.42 Distribution margin is Rs. 1.30
Distribution Margins on a litre, irrespective of the SKU on a litre, and it varies depending
size. on the SKU size.

Shelf life Lower i.e. 50-60 days higher, 180 days from MFD date

No. of Distributors in
7 10-12
Indore
Stocks are kept in a godown
Inventory management No godowns. Direct shipping (only one in entire M.P ) in
Indore
Incentives structure Rs 1000 worth products free for
Not much incentives provided
To Retailers the first 5 months
After the recent price hike, Amul
Sanchi Milk is priced at Rs.38
Pricing Gold costs Rs. 48 for the 1 litre
for the 1-litre Gold pack.
SKU.
 RECOMMENDATIONS
• There is a huge demand for Amul Products in Madhya Pradesh and it becomes very difficult to operate from a single point of sale
i.e. warehouse only in Indore. Amul could look to increase the number of Warehouses and Distributors so that it can have greater
1 ease of operation and at the same time increase its customer base.

• Goods incentives based on sales target are being currently being stopped by Amul which is de-motivating the Amul retailers. Needs
2 to offer a better Incentive than Amul Yatra which is currently offered.

• Investment from company’s side is decreasing down the chain. So the company must focus on various aspects of Promotion,
3 Advertisements, and Providing incentives to retailers.

• The current demand forecasting system needs to be better managed and needs to be redesigned as retailer and distributors are
4 always in a fear of Stock out.

• It is unaware of the competition it is facing from local dairies. They have similar product lines with no preservatives in their
5 products. They can become a major competitor in the future. Need to focus on them also.

• Use of IT systems should be made mandatory at both retailer and distributor level
6
 RECOMMENDATIONS (contd.)
• Amul can also go for better deals with the supermarket chains and the unreached hypermarts which
will help them to capture a larger consumer base.
7

• Claims related to refund and return policies of the retailers and distributors needs to be looked at
because if the promises made by the company are not fulfilled it creates a lack of trust for them.
8

• The company can focus on their entire system to help them grow in Indore and
9 make an impact on ‘Make in India’ initiative

• Amul could also build a perception in the mind of consumer and project itself as a more health-
focussed brand as consumers are increasingly becoming health conscious and looking for sources of
10 nutrition
 REFERENCES
 http://timesofindia.indiatimes.com/business/india-business/Amul-achieves-turnover-of-Rs-20733-crore-in-2014-
15/articleshow/47284976.cms
 http://www.amul.com/m/organisation
 http://www.business-standard.com/article/companies/amul-turnover-grows-14-to-cross-rs-20k-cr-in-fy15-
115051400858_1.html
 http://www.iimahd.ernet.in/publications/data/2002-05-06PankajChandra.pdf
 https://www.facebook.com/sanchimilk
 http://mpcdf.nic.in/
 http://www.amul.com/
 industryhttps://www.facebook.com/amul.coop/?fref=ts
 http://timesofindia.indiatimes.com/
 http://zeenews.india.com/
 http://www.amul.com/m/faqs-on-amul
 http://timesofindia.indiatimes.com/city/vadodara/Amul-Dairy-inaugurates-modernized-semen-
station/articleshow/50784250.cms
 http://articles.economictimes.indiatimes.com/2013-12-06/news/44864199_1_amul-gcmmf-co-operative-milk-
marketing-federation
 http://amul.com/m/amul-parlour-consumer-zone