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Business Standard On Wednesday, "While We Are
Business Standard On Wednesday, "While We Are
Business Standard On Wednesday, "While We Are
Harish Damodaran
IT is no more a secret now that an ordinary `family quarrel' within the co-operative fold between
the National Dairy Development Board (NDDB) and the Gujarat Cooperative Milk Marketing
Federation (GCMMF or Amul) has degenerated into a full-blown kurukshetra in the
marketplace.
On the one side, Amul has, from May 2002, been selling its ice cream in Delhi, which was
hitherto the domain of NDDB's subsidiary, Mother Dairy. On its part, Mother Dairy has
launched its own butter and stopped sourcing milk from Amul since the start of this year. Prior to
this, GCMMF was supplying 1-1.5 lakh litres per day (LLPD) of milk for the Delhi market.
Mother Dairy's 650-odd outlets in the capital also no longer vend Amul's products.
But hold on, it is not yet time to announce a formal divorce. A vital link connecting the two
organisations still remains. And that has to do with `Dhara', the Rs 320-crore edible oil brand of
yet another wholly owned NDDB subsidiary, Dhara Vegetable Oil and Foods Company Ltd
(DOFCO).
GCMMF has been the sole selling agent for Dhara right from its launch in 1989, a status that has
not changed even after DOFCO was set up in December 11, 2000. The question doing the rounds
now is how long will this arrangement last, given the extent of open hostility witnessed between
the two co-operative giants over the last year. Will DOFCO appoint a new sole selling agent for
Dhara, which could probably be NDDB's own marketing arm, Mother Dairy Foods Ltd
(MDFL)? Alternatively, would it be Amul's turn now to do a Mother Dairy on DOFCO?
Industry sources say while the present agreement between DOFCO and GCMMF extends till
December 2005, there is nothing preventing either of the parties to serve a notice period for its
termination. It is a different matter though that neither would really benefit from such a move.
For GCMMF, Dhara generates significant business volumes, accounting for nearly 12 per cent of
the former's sales of Rs 2,736 crore during 2002-03.
Moreover, considering that Amul already has an established nation-wide marketing base of 3,000
wholesale distributors covering five lakh-odd retailers, sale of Dhara does not add much to its
overheads.
On the contrary, Dhara - rated among the country's 10 `fastest-growing' FMCG brands by AC
Nielsen - has enhanced GCMMF's own marketing profile and overall positioning.
NDDB, on the other hand, does not possess GCMMF's marketing muscle and will find it difficult
and costly to set up its own distribution network for Dhara. "Amul is charging us a commission
of less than 2 per cent on the sale price. This is low by any standards and extremely difficult to
match," an NDDB spokesperson admitted.
However, such is the level of distrust that there is a distinct element of uncertainty over the
future of the marketing tie-up. "As of now, we have not allowed our differences to come in the
way of marketing of Dhara. But whether this arrangement will continue is something that we
cannot be sure about," a GCMMF official said.
DHARA'S sales peaked at Rs 382 crore during 1998-99. Subsequently, a series of setbacks -
including the `dropsy' epidemic in late-1998 and falling price realisations - led to a decline in
turnover to Rs 285 crore in 1999-2000 and Rs 265 crore in 2000-01. The last couple of years
have seen sales recover to Rs 281 crore and Rs 320 crore.
Around 70 per cent of Dhara's business currently comes from refined vegetable oil (RVO),
which is essentially refined mustard or imported rapeseed oil, and unrefined (double-filtered)
mustard oil. Besides, it also sells refined groundnut oil and sunflower oil, the latter being
marketed as `Dhara Health'. Late last year, the company also launched refined soya oil under the
`Fit and Fine' sub-brand.