Gujarat Co-operative Milk Marketing Federation Ltd.

(GCMMF), Union Limited

was established on December 14, 1946 as a response to exploitation of marginal
milk producers in the city of Anand (in Kaira district of the western state of
Gujarat in India) by traders or agents of existing dairies.

Producers had to travel long distances to deliver milk to the only dairy, the Polson
Dairy in Anand – often milk went sour, especially in the summer season, as
producers had to physically carry in individual containers. These agents decided
the prices and the off-take from the farmers by the season.

Milk is a commodity that has to be collected twice a day from each cow/buffalo.
In winter, the producer was either left with surplus unsold milk or had to sell it at
very low prices. Moreover, the government at that time had given monopoly
rights to Polson Dairy (around that time Polson was the most well known butter
brand in the country) to collect milk from Anand and supply to Bombay city in
turn(about 400 kilometers away).

India ranked nowhere amongst milk producing countries in the world in 1946.
The producers of Kaira district took advice of the nationalist leaders, Sardar
Vallabhbhai Patel (who later became the first Home Minister of free India) and
Morarji Desai (who later become the Prime Minister of India). They advised the
farmers to form a Cooperative and supply directly to the Bombay Milk Scheme
instead of selling it to Polson (who did the same but gave low prices to the
producers). Thus the Kaira District Cooperative was established to collect and
process milk in the district of Kaira.

At the initial stage only 250 litres of milk was collected every day . But with the
growing awareness of the benefits of the cooperatives, the collection of milk
increased. Today AMUL Collects 8.4 millon litres per day.
Since milk was a perishable commodity it becomes difficult to preserve milk flora
for a longer period. Besides when the milk was to be collected from the far
places,there was a fear of spoiling the milk. To overcome this problem the union
thought to develop the chilling units at various junctions, which would collect the
milk and cool chill it , so as to preserve it for a longer period.

Village level cooperatives were established to organize the marginal milk

producers in each of these villages. The first modern dairy of the Kaira Union was
established at Anand (which popularly came to be known as AMUL dairy after its
brand name). Indigenous R&D and technology development at the Cooperative
had led to the successful production of skimmed milk powder from buffalo milk–
the first time on a commercial scale anywhere in the world. The foundations of a
modern dairy industry in India had just been laid as India had one of the largest
buffalo populations in the world. We move to year 2000.

The dairy industry in India and particularly in the State of Gujarat looks very
different. India for one has emerged as the largest milk producing country in the
world .Gujarat emerges as the most successful State in terms of milk and milk
product production through its cooperative dairy movement. The Kaira District
Cooperative Milk Producers’ Union Limited, Anand becomes the focal point of
dairy development in the entire region and AMUL emerges as one of the most
recognized brands in India, ahead of many international brands.
PHOTOGRAPH OF BHUMIPUJAN OF AMUL:
FMCG PRODUCTS
Products which have a quick turnover, and relatively low cost are known as Fast
Moving Consumer Goods (FMCG). FMCG products are those that get replaced
within a year. Examples of FMCG generally include a wide range of frequently
purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning
products, shaving products and detergents, as well as other non-durables such as
glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also
include pharmaceuticals, consumer electronics, packaged food products, soft
drinks, tissue paper, and chocolate bar

INDIAN FMCG SECTOR

The Indian FMCG sector is the fourth largest in the economy and has a market
size of US$13.1 billion. Well-established distribution networks, as well as intense
competition between the organised and unorganised segments are the
characteristics of this sector. FMCG in India has a strong and competitive MNC
presence across the entire value chain. It has been predicted that the FMCG
market will reach to US$ 33.4 billion in 2015 from US $ billion 11.6 in 2003. The
middle class and the rural segments of the Indian population are the most
promising market for FMCG, and give brand makers the opportunity to convert
them to branded products. Most of the product categories like jams, toothpaste,
skin care, shampoos, etc, in India, have low per capita consumption as well as low
penetration level, but the potential for growth is huge. The Indian Economy is
surging ahead by leaps and bounds, keeping pace with rapid urbanization,
increased literacy levels, and rising per capita income.

INDIAN DAIRY INDUSTRY

India is the world’s largest producer of dairy products by volume, accounting for
more than 13% of world’s total milk production, and it also has the world’s largest
dairy herd. As the country consumes almost all of its own milk production, India
was neither an active importer nor an exporter of dairy products prior to year
2000. However, since the implementation of Operation Flood Programme, the
situation changed significantly and imports of dairy products reduced to very
small quantities. From 2001, India has become a net exporter of dairy products
and after 2003 India’s dairy import has dipped while exports have increased at a
fast rate. Yet the country’s share in global dairy trade still remains at minor levels
of 0.3 and 0.4 percent for exports and imports respectively. This is due to the
direct consumption of liquid milk by the producer households as well as the
demand for processed dairy products that has increased with the growth of
income levels, which have left little dairy surpluses for export. Nevertheless, India
consistently exports specialty products such as casein for food processing or
pharmaceuticals. The Indian dairy sector is also different from other dairy
producing countries as India places its emphasis on both cattle and buffalo milk.
In 2010, the government and the National Dairy Development Board have drawn
up a National Dairy Plan (NDP) that proposes to nearly double India’s milk
production by 2020. This plan will endeavour to increase the country’s milk
productivity, improve access to quality feeds and improve farmer access to the
organised market. These goals will be achieved through activities that focus on
increasing cooperative membership and growing the network of milk collection
facilities throughout India.

Despite its huge production volume, India nevertheless faces a milk supply gap
due to increasing demand from a growing middle class population. Estimation
suggests that Indian dairy production is growing at a rate of about four percent
per year, yet consumer demand is growing at approximately double that rate.
Apart from the rapidly increasing demand for milk and dairy products, other
reasons such as the increased cattle feed cost and low availability of dairy farm
labour in the rural areas have also resulted in increase in the cost of production.
On the other hand, the strong pressure from EU to open up its market as well as
the proposed free trade agreement with Australia and New Zealand may also put
India’s dairy sector in the risk of being jeopardised. In order to maintain the
development of its dairy industry, focus needs to be placed on several areas. First,
cost of production has to be reduced through increasing productivity of animals,
improve animal health care and breeding facilities and management of dairy
animals. Second, Indian dairy industry needs to further develop proper dairy
production, processing and marketing infrastructure, which is capable of meeting
international quality requirements. Third, India can focus on buffalo milk based
speciality products, such as Mozzarella cheese, in order to meet the needs of the
target consumers.
DISTRIBUTION CHANNEL
A channel of distribution or trade channel is the path or route along which goods
move from producers to ultimate consumers or industrial users. In otherwords, it
is the distribution network through which a producer puts his product in the
hands of actual users. The channel of distribution includes the original producer,
the final buyer and any middlemen-either wholesaler or retailer. The term
middleman refers to any institution or individual in the channel which either
acquires title to the goods or negotiates or sells in the capacity of an agent or
broker. But facilitating agencies who perform or assist in marketing function are
not included as middlemen in the channel of distribution. This is because they
neither acquire title to the goods nor negotiate purchase or sale. Such facilitating
agencies include banks, railways, roadways, warehouses, insurance companies,
advertising agencies, etc. The following diagram (chart) is illustrative of the
channel of distribution which may exist in a market.

The above image indicates that the number of middlemen may vary. If there is
direct sale by the produce to the consumers then there is no middleman. But that
is very rare. As the image shows the producer may sell goods to retailer who may
then sell the same to consumers. The producer may sell goods to wholesalers
who may inturn sell to retailers and the retailer may sell to consumers. The fourth
alternative channel of distribution is when any agent/dealer intervenes between
the producer and retailers and acts as a middlemen. The agent is appointed by
the producer for the sale of goods to the retailers. Another alternative channel is
there when producer’s agent sells goods to wholesalers who sell to retailers.
Agent/dealer is an independent person/firm buying goods and selling them to
retailers. Agent/dealer may also sell to wholesalers who may then sell to retailers
and goods are thus made available to consumers. In the channel of distribution
there may be more than one agent/dealer and wholesaler.

Role of middlemen in the distribution of goods

The middlemen perform the following marketing functions which are listed in sequence.

I. Searching out buyers and sellers (contacting & Mechandising), matching

goods to the requirements of market.
II. Offering goods in the form of assortments or packages.
III. Persuading and influencing the prospective buyers to favour a certain
product and its maker (personal selling/sales promotion).
IV. Implementing pricing policies in such a manner that would be acceptable to
buyers and ensure effective distribution.
V. Providing feed back information, marketing intelligence and sales
forecasting services for the regions to their suppliers.
VI. Looking after the process of distribution where necessary.
VII. Participating actively in the creation and establishment of a market for a
new product.
VIII. Offering pre and after sale services to consumers.
IX. Communicating the use of technique of the product to the users
X. Offering credit to retailers and consumers.
XI. Risk bearing with reference to stock hoarding/transport.
AMUL CHANNEL NETWORK
AMUL has got two type of channel networks which support its procurement and distribution aspect,
they are

1) Procurement channel (upstream flow)

2) Distribution channel (downstream flow)

PROCUREMENT CHANNEL (upstream channel):-

In general, the success of dairying is depemd on four component procurement, production, processing,
distribution of milk and its product.among these four compounent procurement play important
role.Milk Procurement is the starting point of dairy industry supply chain. The procurement process
starts on the farm, where producers are advised, quality is monitored and raw milk is collected daily
from various Farmers/progressive farmers by mini-suppliers and village milk collection centers
countrywide and transported to factories in the most cost-effective manner. Raw milk quality is the
cornerstone of excellent dairy products. Milk Procurement guards this quality with an eagle eye and
ensures that company’s production needs are met. Through teamwork within the supply chain,
procurement teams of companies ensure that raw milk losses are kept to the absolute minimum

Milk procurement is basically of two types:

1. Supplier’s collection

2. Self collection

1. Supplier Milk collection system: In this case supplier brings milk with his or her own sources
at factory. Quality assurance department of dairy as per their standards scrutinizes the milk. If milk
passes the entire quality test then this milk is received otherwise the milk is rejected.
2. Self Milk collection system:
A. Village Milk Collection (VMC): In this case a local community nominated person (VMC agent) collects
milk from local farmers on behalf of company by using company facilities. The VMC agent gets
commission from company on per litter-collected milk. After collection VMC agent either himself
approach the nearby center of company for handing over of collected milk or company vehicle collect
milk from that VMC agent as per written agreement. Very good quality milk is collected through the
VMCs. No doodhi is involved in this type of collection

DISTRIBUTION CHANNEL (downstream channel):-

THREE-TIER “AMUL MODEL”: The Amul Model is a three-tier cooperative
structure. This structure consists of a Dairy Cooperative Society at the village level
affiliated to a Milk Union at the District level which in turn is further federated
into a Milk Federation at the State level. The above three-tier structure was set-
up in order to delegate the various functions, milk collection is done at the Village
Dairy Society, Milk Procurement & Processing at the District Milk Union and Milk
& Milk Products Marketing at the State Milk Federation. This helps in eliminating
not only internal competition but also ensuring that economies of scale is
achieved. As the above structure was first evolved at Amul in Gujarat and
thereafter replicated all over the country under the Operation Flood Programme,
it is known as the ‘Amul Model’ or ‘Anand Pattern’ of Dairy Cooperatives.
Responsible for Marketing of Milk & Milk Products Responsible for Procurement
& Processing of Milk Responsible for Collection of Milk Responsible for Milk
Production .
1 Village Dairy Cooperative Society (VDCS):
The milk producers of a village, having surplus milk after own consumption, come
together and form a Village Dairy Cooperative Society (VDCS). The Village Dairy
Cooperative is the primary society under the three-tier structure. It has
membership of milk producers of the village and is governed by an elected
Management Committee consisting of 9 to 12 elected representatives of the milk
producers based on the principle of one member, one vote. The village society
further appoints a Secretary (a paid employee and member secretary of the
Management Committee) for management of the day-to-day functions. It also
employs various people for assisting the Secretary in accomplishing his / her daily
duties. The main functions of the VDCS are as follows: Collection of surplus milk
from the milk producers of the village & payment based on quality & quantity
Providing support services to the members like Veterinary First Aid, Artificial
Insemination services, cattle-feed sales, mineral mixture sales, fodder & fodder
seed sales, conducting training on Animal Husbandry & Dairying, etc. Selling
liquid milk for local consumers of the village Supplying milk to the District Milk
Union Thus, the VDCS in an independent entity managed locally by the milk
producers and assisted by the District Milk Union.

2 District Cooperative Milk Producers’ Union (Milk Union)

The Village Societies of a District (ranging from 75 to 1653 per Milk Union in
Gujarat) having surplus milk after local sales come together and form a District
Milk Union. The Milk Union is the second tier under the three-tier structure. It has
membership of Village Dairy Societies of the District and is governed by a Board of
Directors consisting of 9 to 18 elected representatives of the Village Societies. The
Milk Union further appoints a professional Managing Director (paid employee and
member secretary of the Board) for management of the day-to-day functions. It
also employs various people for assisting the Managing Director in accomplishing
his / her daily duties. The main functions of the Milk Union are as follows:
Procurement of milk from the Village Dairy Societies of the District Arranging
transportation of raw milk from the VDCS to the Milk Union. Providing input
services to the producers like Veterinary Care, Artificial Insemination services,
cattle-feed sales, mineral mixture sales, fodder & fodder seed sales, etc.
Conducting training on Cooperative Development, Animal Husbandry & Dairying
for milk producers and conducting specialised skill development & Leadership
Development training for VDCS staff & Management Committee members.
Providing management support to the VDCS along with regular supervision of its
activities.

3 State Cooperative Milk Federation (Federation):

The Milk Unions of a State are federated into a State Cooperative Milk Federation.
The Federation is the apex tier under the three-tier structure. It has membership
of all the cooperative Milk Unions of the State and is governed by a Board of
Directors consisting of one elected representative of each Milk Union. The State
Federation further appoints a Managing Director (paid employee and member
secretary of the Board) for management of the day-to-day functions. It also
employs various people for assisting the Managing Director in accomplishing his
daily duties. The main functions of the Federation are as follows: Marketing of
milk & milk products processed / manufactured by Milk Unions. Establish
distribution network for marketing of milk & milk products. Arranging
transportation of milk & milk products from the Milk Unions to the market.
Creating & maintaining a brand for marketing of milk & milk products (brand
building). Providing support services to the Milk Unions & members like Technical
Inputs, management support & advisory services. Pooling surplus milk from the
Milk Unions and supplying it to deficit Milk Unions.