Strategic Management

Gujarat Co-Operative Milk

Marketing Federation

GROUP MEMBERS:
Budhaditya Banerjee
Sourabh Dhariwal
Tarun Daga
Uma Balakrishnan
 AGENDA
• The Origin of Amul
• Organization Structure
• Distribution & Cold Storage Network
• Markets Catered To
• GCMMF- SWOT Analysis
• Ratio Analysis
– Profitability Ratios
– Liquidity Ratios
– Solvency Ratios
• Processed Food & Vegetables Industry
– SWOT Analysis
– Porter’s Five Forces
• The Way Forward
 THE ORIGIN OF AMUL
• Originated in Kaira to counter exploitation by Polson’s Dairy
(Anand)

• Dr. Verghese Kurien was instrumental in spearheading the co-

operative and Operation Flood to immense success

• Run as a collection and selling agent with complete involvement

and decision-making of farmers

• Cash settlement to milk suppliers to ensure ready money

• Services provided:
– Veterinary Care
– Fine Cattle Feed
– Education on Animal Husbandry
– Facilities for Artificial Insemination

• Milk procurement grew from 250 litres per day in 1946 to 4 million
litres per day in 1999
ORGANIZATION STRUCTURE
LEVEL MEMBE DECISION-
RS MAKING
•Price paid to district
State unions (fixed across
Federatio unions)
n •Product mix and
quantity

•Price paid to
District village co-
operative societies

•Membership
•Price paid to milk
Village
suppliers
 DISTRIBUTION & COLD
STORAGE NETWORK
• Chillers in proximity of villages

• Prompt transport to district facilities for further

dispatch to consumers/ processing units

• Chilled trucks to transport processed products

• Delivery to local chillers by insulated rail

tankers and chilled trucks

• Refrigerators and freezers with retailers and

departmental stores to retain freshness
 MARKETS CATERED TO
• Objective: Tries to reach every Indian
consumer through a basic food i.e. milk,
and its products

• Diversification: Products which serve

myriad palates and needs

• Products: Milk, milk powder, bread-spread,

cheese, sweets, ghee, curd products,
condensed milk, ice-cream, milk drinks &
confectionery
 SWOT ANALYSIS- GCMMF
Strengths Weaknesses
•Modernization of traditional milk •Bound by dated legislation
production •Less control over milch yield
•Robust distribution chain •Cannot accommodate
•Extensive cold storage system transport delays
•Trust of producers & consumers (perishables)
both •Dependence on poor
•Provision of services to cattle infrastructure for supply
farmers (roads, electricity etc)
•Presence in all milk product
ranges
•Opportunities
Value in quality & price Threats
••Trained
New product development
graduates from reputed •Unorganized players
•Increase in export of
institutes •Other dairy co-operative
product range
societies
•Favourable changes in
•Risk of contamination
tastes and disposable
throughout channel
income of consumers
•Competitors are companies,
•Penetration into areas
not bound by inherent
where SHGs etc have not
obligations of co-operatives
 PROFITABILITY RATIOS

• RETURN ON SALES
– (Profit after Tax/Sales)*100

Year Ratio
1993-1994 0.07%
1994-1995 0.12%
1995-1996 0.60%
1996-1997 0.50%
1997-1998 0.45%
1998-1999 0.59%
 PROFITABILITY RATIOS

• ASSET TURNOVER RATIO

– Sales/Total Assets

Year Ratio
1993-1994 4.124
1994-1995 5.13
1995-1996 5.246
1996-1997 4.97
1997-1998 7.27
1998-1999 9
 PROFITABILITY RATIOS

• ROI/ROA
– Return on Sales/Asset Turnover

Year Ratio
1993-1994 0.288
1994-1995 0.62
1995-1996 3.12
1996-1997 2.485
1997-1998 3.27
1998-1999 5.31
 PROFITABILITY RATIOS
• RETURN ON EQUITY
– PAT/Shareholder’s Equity

Year Ratio
1993-1994 0.11
1994-1995 0.17
1995-1996 1.02
1996-1997 0.6
1997-1998 0.424
1998-1999 0.6506
 LIQUIDITY RATIOS

• CURRENT RATIO
– Current Assets/Current Liabilities

Year Ratio
1993-1994 1.04
1994-1995 1.23
1995-1996 1.01
1996-1997 1.06
1997-1998 1.22
1998-1999 1.36
 LIQUIDITY RATIOS

• QUICK RATIO
– Quick Assets/Current Liabilities

Year Ratio
1993-1994 0.53
1994-1995 0.52
1995-1996 0.55
1996-1997 0.45
1997-1998 0.46
1998-1999 0.64
 LIQUIDITY RATIOS
• DEBTOR TURNOVER RATIO
– Net Sales/Average Debtor, Average Debtor/(Sales/360)

Year Ratio Days

1993-1994 18.43 1.95

1994-1995 54.1 6.6

1995-1996 40.72 8.8

1996-1997 61.54 5.8

1997-1998 114.04 3.1

1998-1999 124.18 2.9

 LIQUIDITY RATIOS
• INVENTORY TURNOVER RATIO
– COGS/Average Inventory, Average Inventory/
(Sales/360)

Year Ratio Days

1993- 12.94 26.78
1994
1994- 16 21.51
1995
1995- 17.15 19.89
1996
1996- 12.14 28.1
1997
1997- 17.04 20.08
1998
1998- 25.26 13.59
 SOLVENCY RATIOS

• DEBT to EQUITY RATIO

– (Secured Loans + Unsecured
Loans)/Total Equity
Year Ratio
1993-1994 8.89
1994-1995 10.26
1995-1996 6.99
1996-1997 4.49
1997-1998 2.93
1998-1999 3.04
 SOLVENCY RATIOS

• INTEREST COVERAGE RATIO

– PBIT/Interest Expenses

Year Ratio
1993-1994 1.17
1994-1995 1.16
1995-1996 2.15
1996-1997 2.18
1997-1998 2.49
1998-1999 2.91
PROCESSED FRUITS & VEGETABLES
INDUSTRY:
SWOT ANALYSIS
STRENGTHS
•Large section of population in
agriculture ensures availability of
raw material
•High priority status for agro-
processing given by the central
Government
•Focus on technology to better
yields
•Cost synergy to players
WEAKNESSES
•Legal and political interference
•High investments and working
capital required
•Quality control and testing not
comparable to international
standards
•Vested interests of intermediaries
reduce supply chain efficiency
•Seasonality of raw material require
ensuring supply through other
means
PROCESSED FRUITS & VEGETABLES
INDUSTRY:
SWOT ANALYSIS
OPPORTUNITIES THREATS
•Setting of SEZ & food • Mindset regarding hygiene
parks to encourage and affordability
development of
Greenfield projects •High monetary and social
costs of poor packaging and
•Rising income levels mishandling
and changing
consumption patterns •Susceptibility to economic
fluctuations
•Globalization and
export potential •Low availability of adequate
infrastructural facilities
•Robust economic
growth

•Large domestic market

not catered to
 PROCESSED FRUITS AND
VEGETABLES:
PORTER’S FIVE FORCES
• Threat of New Entrants:
 Intense Competition-Sustaining is difficult among existing big players

 Legal barriers

 High capital investment in initial years

 Entry barriers are high

• Threat of Substitutes:
 Variety in processed foods is high

 Local players offer low-priced substitutes

• Rivalry Among Competitors

 Highly Competitive: Presence of and competition from regional,
national and international players; visibility a must
 PROCESSED FRUITS AND
VEGETABLES:
PORTER’S FIVE FORCES
• Bargaining Power of Buyers:
 Tendency of established local, national and international
entrants to foray into the market
 Tendency of established retailers to introduce their own
brands
 Variety seeking behaviour due to choices; loyalty very low

 Hence, power is high

• Bargaining Power of Suppliers:

 Prone to seasonal fluctuations

 Power is low as dependence on limited buyers for revenue

 WHY THEY SHOULD NOT
DIVERSIFY
• Profit margins of the company is very low and hence
diversifying into new segment will require huge
investments which may lead to losses in the initial years to
the entire company.

• For a company in an industry which is exposed to

perishability, liquidity and working capital plays a very
important role. In case of GCMMF the current ratio though
improving over the years is not up to the standards. Hence,
diversifying may further worsen this ratio.

• The quick ratio of the company is also not favorable.

 WHY THEY SHOULD
DIVERSIFY
• Good asset turnover ratio
– Indicates optimum exploitation of resources
– Organizations which cater to masses are judged on their ROA.
Diversification may not generate high ROI but can certainly have good ROA.
• Excellent debtor turnover ratio
– Average days for debt collection is very low
– Suggests good relationships with customers which can be harnessed during
diversification.
• Inventory turnover ratio suggests efficiency is not a concern. This has
gradually improved over time and does not block working capital
• GCMMF depends more on savings for new investments. Debt equity
ratio has been reduced, which is fair now and raising debt for
investment could be easy
• Improved interest coverage ratio because of better profitability.
GCMMF can pay interests on debts with ease in this situation.
 The way forward
Pilot projects on Gujarat and Maharashtra which are GCMMF strongholds

GCMMF has to look into greener pastures

• Increased milk supply poses a challenge having reached saturation
• Technological stagnation and poor quality of cattle and livestock

Completely fitted GCMMF’s plans to break into the western market

• Processed fruits and vegetables earn more revenue from exports
• Milk is already being exported to many countries

One of the main limitations of this sector has been inefficient food logistics and
distribution, one that can be easily mitigated by GCMMF

Problems of marked-up commercials in every stage of procurement has been

alleviated by GCMMF before
THANK YOU