AMUL

Company Profile
Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food product marketing organisation with annual turnover (2011-12) US$ 2.5 billion. Its daily milk procurement is approx 13 million lit (peak period) per day from 16,117 village milk cooperative societies, 17 member unions covering 24 districts, and 3.18 million milk producer members. It is the Apex organisation of the Dairy Cooperatives of Gujarat, popularly known as 'AMUL', 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. Its success has not only been emulated in India but serves as a model for rest of the World. It is exclusive marketing organisation of 'Amul' and 'Sagar' branded products. It operates through 47 Sales Offices and has a dealer network of 5000 dealers and 10 lakh retailers, one of the largest such networks in India. Its product range comprises milk, milk powder, health beverages, ghee, butter, cheese, Pizza cheese, Ice-cream, Paneer, chocolates, and traditional Indian sweets, etc GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading House" status. Many of our products are available in USA, Gulf Countries, Singapore, The Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from Government of India for Excellence in Dairy Product Exports for the last 13 years. For the year 2009-10, GCMMF has been awarded "Golden Trophy' for its outstanding export performance and contribution in dairy products sector by APEDA. For its consistent adherence to quality, customer focus and dependability, GCMMF has received numerous awards and accolades over the years. It received the Rajiv Gandhi National Quality Award in1999 in Best of All Category. In 2002 GCMMF bagged India's Most Respected Company Award instituted by Business World. In 2003, it was awarded the The IMC Ramkrishna Bajaj National Quality Award - 2003 for adopting noteworthy quality management practices for logistics and procurement. GCMMF is the first and only Indian organisation to win topmost International Dairy Federation Marketing Award for probiotic ice cream launch in 2007. The Amul brand is not only a product, but also a movement. It is in one way, the representation of the economic freedom of farmers. It has given farmers the courage to dream. To hope. To live. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Oman, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese market in 1994 did not succeed, but it plans to venture again. Milestones of GCMMF:

2.8 million milk producer member families 13,759 village societies 13 District Unions 8.5 million liters of milk procured per day Rs. 150 million disbursed in cash daily

GCMMF is the largest cooperative business of small producers with an annual turnover of Rs. 53 billion The Govt. of India has honoured Amul with the Best of all categories Rajiv Gandhi National Quality Award. Largest milk handling capacity in Asia Largest Cold Chain Network 48 Sales offices, 3000 Wholesale Distributors, 5 lakh retail outlets Export to 37 countries worth Rs. 150 crores Winner of APEDA(The Agricultural and Processed Food products Export Development Authority) award for nine consecutive years

Countries where Amul exports

Industry Analysis
Porters five forces for dairy and processed food industry in India

Threat of Entry (high)

Capital Requirements (low) Economies of Scale (low) Absolute Cost Advantages (high) Product Differentiation (high)

Access to Channels of Distribution (low) Governmental and Legal Barriers (high) Retaliation (high)

Industry Rivalry (high)

Concentration (high) Diversity of competitors (low) Product differentiation (high) Excess capacity and exit barriers (moderate) Cost conditions (high)

Bargaining power of buyers (high)

Due to large number of options and substitute products present from competitors, the buyers have very high bargaining power. Buyer switching cost is minimal and availability of information makes the buyers all the more powerful.

Bargaining power of suppliers (low)

In food processing and dairy industry, the huge number of available suppliers makes it easier for the companies to negotiate with them. Threat of backward integration is also present.

Threat of substitutes (high)

Pressure from Substitutes Emerges Mainly From Two Factors Switching costs for customers to the substitute (low) Buyer willingness to search out for substitutes (very high)

Overall its a highly competitive industry having very high effect of all the Porters forces. So its not an attractive industry.

Value Chain
Customer Large customer population consisting of households and businesses of various sizes. Suppliers 2.12 million farmers and milk producers, more than 10,000 village level milk collection
centres.

Competitors Competition from organised as well as unorganised sectors. ITC, HUL, Nestle,
Brittania etc are competing in the organised sector with Amul whereas unorganised sector gives a tough competition in the form of milkmen and delivery boys etc

Complementors Hotel, catering houses and corporations.

Industry driving forces of dairy and processed food industry

Abundant availability of raw material

India has varied agro climatic conditions; it has a wide-ranging and large raw material base suitable for food-processing industries.

Demographic trends

The food-processing industry has a bright future due to demographic environment in India, which is a key positive. Rising income levels leading to large customer base India with its population of more than 1 billion accounts for close to 17% of the global population. It is one of the most attractive consumer markets in the world with the increase in income levels across the population segments. The increase in income levels and higher tendency to spend provides great opportunities for companies across various sectors Relatively young population

India has a relatively young population with close to 55% of population in the age group of 20- 59 years. This group is also high in consumption and therefore, this trend is expected to provide a further boost to the growth of consumption in India.

Key success factors for companies involved in food processing in India:

Development of effective distribution network and supply chain Various range of product offerings, which is customized to meet local market requirements Superior processing technology to compete with other players in the market Brand building and marketing to gain market share; increasing penetration in domestic market; Competitive pricing

Core competency of Amul

The 3 tier revolutionary Amul model which has changed lives of millions of milk producers across villages and improved their lives is the biggest core competency of Amul when compared with other companies in the market. It is a model which no company can replicate and boast of in the dairy industry.

Unmatched supply chain network in the entire country leading to optimum product reach even to the remotest village in India

SWOT Analysis of Amul

Strengths 1. Huge brand name and trust factor associated with the company. The company is having Indian origin thus creating feeling of oneness in the mind of the customers. 2. It manufactures milk, milk products, sweets and processed food which is purely vegetarian thus providing quality confidence in the minds of the customers. 3. It aims at rural segment, which covers a large area of loyal customers, which other companies had failed to do. 4. People are quite confident for the quality products provided by Amul. Weaknesses 1. Lack of investment as compared to other MNEs 2. Poor product replacement policy Opportunities 1. There is a lot of potential for growth and development as huge population stay in rural market where other companies are not targeting. 2. The chocolate market is at growth stage with very less competition so by introducing new brand and intensive advertising there can be a very good scope in future. Threats 1. The major threat is from other companies who hold the majority share of consumers in Indian market i.e. Cadburys and Nestle. 2. There exists no brand loyalty in the chocolate market and consumers frequently shift their brands.

BCG Matrix of Amul

Amul Pro

Challenges faced by the SBU

Food-processing industry and the food processing business unit (SBU) in Amul is facing constraints like non-availability of adequate infrastructural facilities, lack of adequate quality control & testing infrastructure, inefficient supply chain, seasonality of raw material, high inventory carrying cost, high taxation, high packaging cost, affordability and cultural preference of fresh food. Unprocessed foods are prone to spoilage by biochemical processes, microbial attack and infestation. Good processing techniques, packaging, transportation and storage can play an important role in reducing spoilage and extending shelf life. The challenge is to retain the nutritional value, aroma, flavour and texture of foods, and presenting them in near natural form with added conveniences. Processed foods need to be offered to the consumer in hygienic and attractive packaging, and at low incremental costs. Major Challenges are: Consumer education on nutritional facts of processed foods Low price-elasticity for processed food products Need for distribution network and cold chain Backward-forward integration from farm to consumers Development of marketing channels Development of linkages between industry, government and institutions Taxation in line with other nations Streamlining of food laws

Recommendations (as per the observations made during the project)

The company should take note of the marketing strategy it adopts for the particular product. The TV commercials are less visible despite the launch during IPL-5. The customers are still unaware of any such product from Amul. More stress should be given to the advertisements in various forms of media (print, electronic and social networking) to make the people aware that there is a product which is of lesser cost as compared to Bournvita but of higher nutritional value and better taste. Amul should increase their hoarding ads about Amul Pro as this is the best way in which Amul connects with the common people. Ladies coaches in the Mumbai local trains can be the ideal place to market and advertise Amul Pro. This will get the attention of the working women having kids and can act as a positive reinforcement to the already existing marketing strategies for the product. Branding and promotion activities like distributing free samples in the schools can be a good option to make the target consumer, the kids in the growing age, aware about the product. Increase in the margin of the retailers will attract the retailers to shelf the product.

The sales officer must do random checks in order to ensure that the salesman are actually informing the retailer about the new products and pushing the sales of the same. As per our observation, there is a lack of awareness about Amul Pro among the shopkeepers. College canteens and ice cream parlours which serve cold chocolate drinks could also be targeted for sales. Amul can make it mandatory for the distributor to train its salesman in terms of the product portfolio knowledge as he is the one who pitches in to every customer/retailer for the Amul products. Micro size packs (250 gm, 200 gm etc) could increase the product placement possibilities in smaller stores.

Business Policy Assignment

By

Mrinal Banerji PGDM-IB Roll No 21