Project Report: Amul Dairy

From: Vipul Vyas

Sub: Resource and value chain

Introduction:

THE TASTE OF INDIA, AMUL comes from the Sanskrit word

Amoolya, means priceless. It was suggested by a quality control expert
in Anand and it was chosen because it was a perfect acronym for
Anand Milk Union Limited . AMUL was formed under the dairy
cooperative movement in India in 1946.

Gujarat Cooperative Milk Marketing Federation (GCMMF) is

India's largest food products marketing organisation. It is a state level
apex body of milk cooperatives in Gujarat which aims to provide
remunerative returns to the farmers and also serve the interest of
consumers by providing quality products which are good value for
money. AMUL is the brand under this organization.

Amul is the largest food brand in India and world's Largest Pouched
Milk Brand with an annual turnover of US $1050 million (2006-07).
Currently Amul has 2.6 million producer members with milk collection
average of 10.16 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 had not succeeded, but now it has
fresh plans of
flooding the Japanese markets .Other potential markets being
considered include Sri Lanka.

Dr Verghese Kurien, former chairman of the GCMMF, is recognised as

the man behind the success of Amul. On 10 Aug 2006 Parthi G Bhatol,
chairman of the Banaskantha Union, was elected chairman of GCMMF.
1. Discuss Amul's Umbrella Branding and Distribution network strategy.

An umbrella brand is a brand that covers diverse kinds of products which are
more or less related. It applies also to any company that is identified only by its
brand and history. It is contrasted with individual branding in which each product
in a portfolio is given a unique identity and brand name.

Amul has high brand equity and umbrella branding of Amul has helped the
company in bigger sense. Amuls’s brand name has helped its other brands also
like Mitahi made, Amul Ice creams, chocolates, Amul Kool etc. So umbrella
Brand, Amul is used to build and offer value to customers in bigger sense. In
literal sense, a company has high brand equity if it has multi dimensions. Amul
has explored various available opportunities to reach to mass customers. It has
opened a community on public forums like orkut, sponsored events like Amul
voice of India etc. The brand value of Amul will surely help company to maintain
the status of largest food brand in India at least for sometime in future.

Amul’s strategy of using “umbrella branding” has really paid off. Amul’s
advertising and marketing spend has never exceeded 1% of its revenues.
Amul’s creatives—in the form of billboards or the Taste of India campaign—have
always managed to evoke a larger-than-life brand feel, consistency and spirit of
Indian culture in a contemporary way.

Distribution Network
Consumers expect marketers to deliver products in the locations and forms they
require. To meet expectations of such demanding consumers, alignments of our
four Distribution Highways of Fresh, Chilled, Frozen and Ambient products were
already made by introducing Project DIL. Subsequently, a major initiative was
taken to enhance distribution network to smaller towns. About 1200 distributors in
small towns across India were added during this initiative. Today about 3000
Distributors ensure availability of our products across India, whether it is in Leh
or Lakshadweep, in Kutch or Arunachal. Simultaneously, to augment fresh milk
distribution in various markets of India, approximately 1400 exclusive Milk
Distributors have been inducted.
 Distribution Process
Company

Dealer Franchisee

Wholesaler

Retailer

Shopkeeper

Consumers

GCMMF’s Supply Chain

***Source: IIM(A), Working Paper No. 2002-05-06

AMUL has the largest cold chain network in India (i.e. 18000 refrigerators) as
compared to any other company. The chemical components of milk are water,
SNF and solids. Milk is very perishable product so it has to be consumed within
24 hours. In order to avoid wastage AMUL converts the milk in to SNF and milk
solids by evaporating the water, which comprises up to 60-70% of milk contents.
This is possible only if the distribution channel right from the producer to the
consumer is well organized. It will be surprising to know that AMUL makes even
the ‘Sarpanch’ to eat pizza i.e. it supplies pizzas even to rural market.
Last year, theye divided the retail market into 14 specific segments to achieve
further distribution efficiency. This year our focus was on inducting distributors
having expertise in servicing such specific market segments. This initiative is
yielding results by way of ensuring wider availability of our product range.

The role of distributors in our business process has never been more diverse or
more important, as it is today. As a matter of fact, we consider our Distributor to
be the real “Marketing Manager” of our organization. To enhance business
performance of our Distributors, a workshop on Marketing and Sales Management
was designed in collaboration with a premier business school. The objective of the
entire initiative was to upgrade the knowledge of our Distributors in terms of
contemporary Business Management Practices, so that they can perform well not
only as our business partner but also as Marketing Managers. During the year, 659
Distributors have undergone this programme in 39 locations. Cold Storage is an
extremely essential component in the Federation’s distribution process.
Unfortunately, availability of efficient cold storage facilities is grossly inadequate
in our country. To cope up with the increasing need of suitable cold stores closer
to our markets, we have continued our endeavour of creating the Federation’s own
cold stores this year in various locations across the country. We now own 24 state-
of- the art cold rooms of different sizes.

To get an exposure to our cooperative structure, our culture as well as operational

systems and processes, every year we invite our distributors, major retailers and
other business partners to Anand, for Amul Yatra. So far, about 7000 Distributors
and other business partners have participated in this Amul Yatra.

Over recent years, the Federation has successfully introduced new product lines.
This year, in order to leverage their distribution network strengths, to optimize
market supervision expenditures, to achieve increasing efficiency while keeping
the distribution infrastructure lean, focused and productive, the Federation
amalgamated its different distribution networks. Today, they operate an efficient
distribution infrastructure consisting of 46 sales offices, catering to 3,000
distributors and five lac retailers. Almost every Federation stockist has visited
Anand to participate in a unique programme called 'Amul Yatra'. During this
programme, stockists are exposed to the Federation Philosophy, the culture of
Cooperation, as well as operational Systems and Processes. The Federation has
also invited distributor's salesmen from all over the country to Anand for a
 training program focused on the Federation's philosophy and developing their
selling skills.

2. How do you spell out the importance of establishing the Best Practices by
Amul to have competitive advantage?

Amul has Competitive sustainable advantage (CSA) over its competitors. Amul’s
CSA lies in its procurement part ,the ability to collect 447,000 litres of milk every
day from 2.12 million farmers ,convert them into goods worth Rs 6 crore and
distribute them to 5,00,000 retailers across country ,is not easy. No other dairy in
India has such a sustainable procurement network.
Managing the large scale supply chain of Amul which begins from milk producer
and ends with supply to customer from retailer is very critical job. It requires lot
of dedication and hard work from all members of the corporation and also
distributors and retailers across country
It is not that Amul had a successful campaign, many of its ads backfired. One ad
meant to target Marathi segment during Ganpati festival had to be removed under
political pressure. In another incident on advertisement in which Amul girl was
wearing Gandhi cap had to be again removed. In one another incident Amul had
aired an ad portraying Hussain as “Heroine addiction”, for this Amul was taken to
court.
Most of Amul’s communication is based on latest happenings in the country. That
is why its ads are termed different from what is that of its nearest rival, Mother
dairy. Most of Mother dairy ads are directly targeted to children where as Amul’s
ad are on current affairs, in which adults are also involved.
The key to retaining their competitive advantage lies in keeping focused on the
basic business principles:
• Be Customer-Driven
• Adapt quickly to the changing environment.
• Anticipate change and act today to meet tomorrow's challenges.
The Federation has invested substantially over the last few years in improving
the quality of its products and services, keeping in mind the emerging
challenges of globalization. In recognition of its achievements in Quality
Management Initiatives.

Their core business is marketing branded food products to household

consumers. Their success has been grounded in two strengths :-
• Distribution network, serving more than five lac retail outlets.
• Superior product quality - 'Value for money'
The key to maintaining these two competitive advantages rests on their ability
to attract and retain the very best manpower. In this age of intensive
competition, only dedicated and committed professionals can successfully
manage their business.
3. What is the role and importance of Technology and E- Initiatives by
GCMMF?

Amul assigned the ERP software development project named as Enterprise-

wide integrated application system (EIAS), on a turnkey basis to Tata
Consultancy Services. At present, the EIAS system covers a plethora of
operations like market planning, advertising and promotion, distribution
network planning, stock control, sales and accounting, budgetary control,
quality control management and co-operative service management. Amul has
also connected all its zonal offices, regional offices and members dairies
through VSATs for seamless exchange of information.

Each of Amul’s offices is connected by e-mail and all of them send a daily
report on sales and inventory to the main system at Anand. Also, sales offices,
C&F points and wholesale distributors of GCMMF have been connected
through the Internet for timely exchange of information. The customised ERP
EIAS is designed in such a way that it can be plugged into various points of
the supply chain and external system. Moreover, the software is platform
independent and can work on any operating system. Amul is also in the
process of Web-enabling the entire supply chain so that it can capture key
information at the source, and use the same for decision-making. This would
include the likes of transporters, member-manufacturing units, oil packing
stations, suppliers, depots and the entire field force.

The federation has now integrated it's country-wide operations through

successful implementation of the "Enterprise-wide Integrated Application
System". They believe that introduction of similar integrated ERP systems at
their Member Unions will help them ensure that the IT revolution serves their
members better. The Federation is among the Top 100 IT Users in the country.
Currently, there are more than 3,000 computers installed in their village
societies, which support the Automated Milk Collection System. Their goal is
to install computers in all their village societies and to integrate them with
their respective unions. On the market side, their distributors have responded
enthusiastically to their suggestion of computerizing their operations and
getting email connectivity for better communication with their sales offices.
The distributors can now place their orders on our internet website
www.Amulb2b.com. They continue to receive a good consumer response to
their website www.Amul.com which is noted for its distinct features like
cyberstore for ice-cream and other milk products, cricket rankings and the
recently launched e-greetings site.
To strengthen business linkages with the business partners, GCMMF has
enhanced its “Amul e-Groupware System” by adding more features like e-
mailing the invoices and ledgers to business partners, announcing various
schemes online, calendar facility etc.
“Video conferencing” is rapidly gaining in popularity, which provides business
with the ability to meet and to work with others over a distance. For real time
communication, better brainstorming, knowledge sharing and information
gathering, we have installed and implemented Video conferencing System at
our Head Office, Zonal Offices and a few Sales Offices.
The world is moving towards virtual reality by creating virtual world on the
Internet. Our Federation has taken the initiatives towards virtual commerce by
creating an online virtual Amul Parlor in the Second Life, an online virtual
world. GCMMF has further advanced the use of Geographical Information
systems by implementing GIS based Sales Analytics solution across various
offices.

The history of Amul shows that it radically changed the way business was
done—by eliminating the middleman and bringing the producer closer to the
consumer—resulting in benefits for both. Incidentally, it was also one of the
first Indian companies to have a Web presence. Today, Amul’s cyberstore
gifting service is capable of servicing consumers in more than 125 cities. Says
Hegde, “We have also linked our distributors to our network and also
incorporated Web pages of top retailers in our site, amul.com, as part of our
B2B initiatives.” Distributors can place their orders on the website,
amulb2b.com, especially meant for accepting orders from stockists and
promoting Amul’s products via e-commerce. Currently, the company receives
queries from overseas agents for distributing its products in countries like the
US, Britain, New Zealand, Singapore and Thailand. As a result of the online
initiatives, today, Amul exports products worth around Rs 100 crore, to
countries in West Asia, Africa and the US. Amul has also launched sites like
amulgreetings.com and amulkids.com to extend the brand identity to kids and
teenagers who are its target market for its ice-cream and chocolates products.
Also, as a strategy, Amul has a customer feedback channel which uses e-mail
like cheese@amul.com for cheese products and butter@amul.com for butter
products.

In addition, the organisation’s corporate intranet site contains all the

company’s updates including policies, procedures, functional role and
responsibilities of each person in the organisation. Another example that puts
Amul in a league of its own, is its recruitment policy. For instance, for any new
requirement in different functional areas, candidates have to compulsorily
undergo a computer literacy test, where the minimum passing mark is 80
percent. Explains Vyas, “Our main emphasis is to increase competency at the
end user level with the help of IT. All our employees have undergone computer
training according to the departmental needs so that they can take charge of
their responsibilities in an effective way at the respective supply points.”

Amul’s success in leveraging IT to its advantage lies in the simple fact that the
organisation has a clear IT vision. For example, after a top-level domain co-
operative was made available, Amul embraced it with gusto. Hegde says that
by developing the ‘Amul.coop’ Web portal, the organisation will be in a
position to communicate with other similar co-operative movements. As co-
operatives can interact with each other with similar organisations sharing this
domain, knowledge can be shared on a pro-active basis, which can lead to
further productivity benefits.

While it has always been argued that investments related to information

technology made in rural India are a disaster, the case of Amul proves that
where there is a will, there is a way. From catchy billboards to being a
e-commerce success story, Amul is truly rural India’s flag-bearer in the IT
revolution.