FMCG-AMUL

BUlllR GIRL GETS

Never before has Amul been

'I buffetedbyas much competition
:1 as it is today. But India's largest
I dairy foods player has an edge:
1

Its unique "cow-to-customer"

model T.V. MAHALINGAM

t a dairy farm
-z

A
in Manchar on
the outskirts of
Pune. a four­
hour drive from
Mumbai, about 200 cows await

~
their tum to be milked. They wait
like shoppers in the billing queue
of a supermarket. quiet and orderly.
One by one. the cows step onto a 20-feet
rotating circular platform and rubber hoses
are attached to their udders. Once milked.
the cows themselves kick away the hoses.
"Minimal human effort. maximum milk pro­
duce." gushes Devendra Shah. Chairman.
Parag Milk: Foods. which started its operations
in Mancharin 1993.
 --~/
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The company has spent over Rs 4 crore on its rotary The Challe.rs...
milking parlour, the first in India. The 3,000-plus Holstein Parag Milk Foods (Go and Gowardhan brand).

cows, purchased at Rs 40,000 apiece. are treated to a spe­ AREA OF COMPETITION: Cheese and ghee.

cial diet of calcium-rich feed and mellifluous bhajans in PERFORMANCE: Targeting the high-end cheese segment.

their sheds. "'the music increases their milk produce." Claims a30% share in MUmbai modem retail outlets for packaged cheese.
claims Shah. citing that each cow produces 2 5 litres of
Britannia
mllk a day. "It's total cow comfort technology. These are the _
standards we need to adopt if we need to compete with
l:!;hjiilt1 AREA OF COMPETITION: Cheese, mainly.
.. - PERFORMANCE: A24% market share in the Rs 300-crore
international players in products like cheese." he adds. cheese market and can chip away at Amul's dominant 65% share.
And cheese is where Shah's immediate ambitions lie.
With a turnover of about Rs 550 crore, Parag Milk Foods has Kraft-Cadbury
been selling milk and ghee in Pune and Mumbai since the AREA OF COMPETITION: Plans to launch its range of cheese
mid-90s. But in the last one year, the company's focus has using the Cadbury distribution network.
shifted to products like cheese and flavoured yogurt. It has
invested Rs 110 crore to build what it claims is Asia's ~. ;.i Mother Dairy
~! AREA OF COMPETITION: In milk and has big plans for
largest cheese plant (with a capacity to process
cheese. ice cream and butter. r
40 tonnes of raw cheddar daily). "Cheese from this plant is PERFORMANCE: Amul continues to dominate pouched milk markets like I
right now being sold in South Korea. Within a few months Kolkata and Mumbai. i
of our launch. we have cornered a 30 per cent market
share ofcheese sales at modern retail outlets in Mumbai. Our
!'
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Groupe Danone
competitors are the Krafts and Laughing Cows of the world. AREA OF COMPETITION: Flavoured milk.
With our superior product quality. we are not even com­ PERFORMANCE: Just started test marketing its chocolate

peting with the Indian dairy players," says Shah. flavoured milk in Hyderabad.
Some 450 km away. lounging in his spartan office in
HUL
Anand in Gujarat, the mecca of the Indian cooperative
movement, B.M. Vyas would be tempted to disagree with
Shah's claims. After all, as MD of India's largest and only bil­
U ..
AREA OF COMPETITION: Ice cream.
PERFORMANCE: Amul is the market leader with over
35% share in the Rs 1.300-crore se9ment. HUL has ashare in sin91e
Iion-dollar cooperative dairy player, the Gujarat Cooperative di9its and focusses on the upper end of the market.
Milk Marketing Federation (GCMMF). Vyas has seen com­
petitors make more audacious claims in his 16-year Zydus Zydus Wellness
tenure as MD. GCMMF sounds like a mouthful, but the brand "/~ AREA OF COMPETITION: Butter.
PERFORMANCE: Amul dominates the Rs 80o-crore butter market with
name under which the cooperative sells its products,
an 80% share. Zydus. with its product Nutralite. claims to have
Amul. is. perhaps, the most recognised and revered dairy 9t1rnered a75% share of the "butter alternative" market.
brand across the country.
This despite the fact that. unlike Parag Milk Foods'

state-of-the-art dairy farm, Amul's milk is collected by
dairy farmers every morning largely by hand. "The fact that
2.7 million fanners wake up early each morning to mllk their
cows and then give it to us is our biggest strength," says Vyas.
He is no stranger to pretenders challenging Amul's
dominance. "Amul has seen competition in the past. It
really does not worry us," he says matter-of-factly. Amild­
mannered, portly man of 59 years, Vyas has managed the
cooperative since 1994. When he took over Amul. GCMMF'S
turnover was a Iiitle over Rs 1,000 crore. Today, that has inc­
reased over six tUnes to Rs 6,700 cron.l. Back then, Amul was
viewed as a brand that would not survive the pressures of
competition in the post-llberalisation era. Vyas and Amul
have not just mnvived the onslaught ofcompetition. but have
often taken the fight to their territory (as it did in ice creams
a decade ago. when it dethroned Hindustan Unilever Ltd
(HUL}-then Hindustan Lever Ltd-from pole position).
Taking on competitors in a category or two at
~
Amrit Group
AREA OF COMPETITION: Plans to launch value-added
milk products like cheese, paneerand ice cream in
AMR Eastern India.
... And Amu/'s Counters
~ More procurement: Amul will procure milk from more
catchment areas. For instance, it recently started procuring milk
from the Kutch-Saurashtra area.
~ Product diversmcatlon: Take clieese, for instance. Arnul is
investing In capacities to build more varieties of cheese. It's also
focussing on more fresh products like dahl. flavoured milk, etc.
~ Focus: Arnul is focussing on its core strengths-dairy products.
Segments like pizza are no longer a focus area.
~ Invest In the future: Arnul is looking not just ayear or two
ahead_It has aplan in place, which includes Investments to the
tune of Rs 2.600 crore to tap market opportunites by 2020.

April 18 2010 BUSI"IESS TODAY 73

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FMCG-AMUL

,Amul Growing Up with Competition

Dec. 1946., 1950., 1952., 1955., 1956., 1962., 1965., 1967.,

I Tribhuvandas
Patel, Founder,
Under Kurien's
leadership,
Butter IauncIIed,
the first brand
Amulstarts
makincJ
Amullaunches
cheese to take
!1 GCMMF, orr,anises KDCMPUL's of AmuI. Kurien condensed mHk onforeiqn
dairy farmers mHk capacity starts with an after Nestle's imports in
to register in reaches advertising brass SIIIIbs urban markets.
the !laira District ZO,OOOlitres budQet of Rs Z KurIen. contending
Cooperative Milk per day, up IakII to take on that condensed
Producers Union from ZOO litres competition milk manu­
In revolt against in 1948. fromMNCs. fadurilllJ was
the monopolistic something It
practices of
Polson, aMumbai- DrVerghese "could not The Amut "Butter
based dairy Kurien joins leave to the Girt" is born in
sanctioned by the
KDCMPUl natives to response to the
British to collect NDDD registered as asociety
mNk from Gujarat. asGM. make". under Kur1en's leadership. Polson butter girl.

"You cannot procure milk from somebtvl\l, slap alabel, UUJI

advertise it and hope to succeed"
R.S. Sodhi. Chief General ManalJer (MarketlnlJ), Amul
the same time is something Amul has done before. But
the threat today is dilIerent. and huge. That's because
never before has Amul been buffeted by as much compe­
tition as it is today. across every category it operates in-right
from pouched milk and butter to cheese and ice creams.
Other than HUL and Nestle, multinational giants like Kraft
(which recently acquired Cadbury globally, thereby getting
a passage into India) and Groupe Danone are beginning to
flex their muscle. "We hope to bring some of our big brands
like Kraft Cheese and Oreo cookies to India With Cadbury's
distribution strengths, we can push some of these brands in
India." Sanjay Khosla. President (Developing Markets).
Kraft. recently told BT. Groupe Danone is looking
at tapping into the small. but fast-growing flavoured milk
market. It's currently testing a chocolate-flavoured fortified
milk in Hyderabad.
Regional players, too, are upping the tempo. Other
than Parag, there's Amrit Group in Kolkata,
which plans to launch value-
added milk products. Says ~" ,\\i
Harish Bagla. MD. Amrit ~",'( to 1:..
Group: "We are coming up ~~,
with various value-added ~\
products like flavoured milk.
da/li. lassi. cheese, butter.
paneer and ice cream." Bagla's
also exploring tie-ups with int­
ernational companies. Finally.
don't forget Johnnies-come-lately
like Zydus Wellness--which has
carved a niche for itself in butter
altematives--that are opening up
new markets.
The biggest threat to Amul.
though, could well come from its
one-time friend but now a bitter rival. Mother Dairy, a
subsidiary of the National Dairy Development Board (NDDB).
In mid-February, Amul made a bold claim when it declared
itself as the # 1 player in the branded packaged milk segment.
with sales of 1,45 million lUres daily. in the Delhi market.
a traditional stronghold of Mother Dairy. Within a day. the
New Delhi-headquartered Mother Dairy shot back. "Mother
Dairy sells apprOximately 29lakh litres of milk per day in
Delhi NCR, which is about twice as much as that of the
nearest competitor;' says Paul Thachil. coo (Dairy & Foods).
Mother Dairy Fruit & Vegetable.
Amul's counter: "We do not operate in the loose
milk segment and our figures are only for the pouched
milk category." says R.s. Sodhi, Chief General Manager
(Marketing). Amul. Mother Dairy is the
leader in the loose milk segment.
"These little things happen in
marketing," chuckles Sodhi
l\."\''\ about the game of one­
upmanship.
Incidentally,
Mother Dairy
was set up by Dr
Verghese Kurien.
the man who
transformed GCMMF
from a struggling
dairy in Anand into
India's largest foods
producer. "We will
1970. 1m. 1996. 199h 200Z. 2003. 200h 2008.

~ion Mantflan, a
movie made by
Amul Alnullaunches
ice creams In
Alnullaunches
retail parlours
HUl'sll\illllet
share is below
Shyam IleneQaI revenues Mumbai after to reacII out 10% as COI'IIpiII1!d
Phase I and produced top entering the to consumers to almost 30%
launched. ~MMF
I the
cooperative
movement In
Rs 1,500
crore.
seqmeniin
1996. Claims
#1 spot
byZOO3.
and avoid
"vettillCJ
squeezed"
by retailers.
icecream
seQment. U
il1991 iI the i:
,!
;1

Anand,wIns Today,over ~
J
the national 5.000 parlours
Amullaunches Alnul becomes the
award It is, Qenerate
pouched milk COII1try's first and
perhaps, the RsZOOcrore
ilDeUta only blllIon-dolIar 2010.
only "corporate worth of
strOIIQhoId of cooperative. Also, tile AmuI daims #1
film" to win SIEh revenues. Mother Dairy; first cooperative to spot iI the Delhi
I prestIGious founded by iltroduce SI.ICJ8I"free. pouched milk
prize. NDDB. probIotic Ice creams. IIIiDet.

grow the market when we com­ the Delhi NCR market. Our distri­
pete." says Vyas. "Amul and bution network is very strong and
Mother Dairy are both different we further plan to expand it by
sides of the same coin." he adds 15 per cent in milk and 25 per
rather diplomatically. Quiz him cent in the ~er two categories in
about why then did Amul choose . the coming year. We also have
to drop the "milk drop" symbol·· 1.100 own outlets in Delhi NCR."
(which is owned by NDDB but says Thachil. who expects the
which both cooperatives willingly dairy to touch a turnover of
shared for years) from all its Rs 4,000 crore this fiscal. Mother
pouched milk packets and the ans­ Dairy. he says. has been growing
wer is a wry: "Amul is Amul. We at 25 per cent year-on-year and is
were born"before every other likely to do so in the near future.
droplet." Incidentally, both NDDB . Other competitors. too. are
and GCMMF have boon battling each _ lining up for a slice of the fast­
other for milk procurement in the .~ growing Rs 2.30.000 crore Indian
SauraShtra-Kutch region after ~ dairy market. the bulk ofwhich is
. GCMMF startOO procuring milk there g unorganised. Just the organised
earlier this year. The dairy fanners ::; branded milk distribution mar­
in the region are not complain- ; ket is estimated to be close
::>
ing as milk prices have gone up.
Make no mistake: With their
common cooperative roots and
"The fact that 2.7 million fanners wake up early to milk
procurement strengths. Amul ver­ their cows and then give it to us is our biggest strength" .
sus Mother Dairy is going to be B.M. YYIS. Manaalna Director. GCMMF
the big battle ahead. "It may take
some time for Amul to dislodge Mother Dairy in the North, Rs 30.000 crore. "More importantly. value-added products
where the latter has a great distribution network. But like cheese are growing at the fastest rates globally. Our per
think about ~Amul entered the pouched milk seg­ capita consumption of cheese. for example. has tripled
ment in Delhi only in 2005 and today it's giving Mother since 1995. The market is growing at 25 per cent per
Dairy a run for its money." says an analyst with a foreign annum at least." says an analyst with a foreign brokerage.
broking finn who covers the PMCG sector. Another factor that has contributed to the renewed
Mother Dairy has over 14,000 retail outlets and 845 interest in the dairy sector has been the growth of mod­
exclusive outlets. mostly in the northern region. "We are em retail. "The cold chain is very crucial to the dairy busi­
present in milk, ice cream and fresh dairy categories in ness." explains Anand Ramanathan. Manager. KPMG

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April 18 2010 BUSINE..<;STOIJAY 75 I,

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Advisory Services. "With modem retail coming of age in
the last 3-4 years. the cold chain fell into place. For the
dairy players themselves, to set up a cold chain was not
possible earlier as it is a very capital intensive affair." he
adds. Market watchers believe that Mukesh Ambani's
Reliance Retail. which is readying to sell milk to general
distributors under the brand name llie. is a great example
of a company attempting to utilise its cold chain better by
entering the dairy business.
A cold chain is just one of the important pieces that has
to be in place. Another is the product itself and how dif­
ferent it is from those ofthe established players. A company
selling plain cheese slices is unlikely to loosen Amul's
or Britannia's grip on the cheese segment. The new play­
ers seem to be aware of this. Amrit Group's Bagla, for
instance, is targeting milk products ror different con­
sumer segments. including kids, senior citizens and preg­
nant women. Parag will also launch chilli, Spanish
tomato and pepper-flavoured cheese, all under the Go
brand and customised for the Indian palate.
Parag splurged another Rs 6 crore on an advertising
blitz. between January and March this year. to push it
products under the brand name Go. "We will differenti­
76 HllSI'.;ESS TOO/\ Y April 18 1010
ate ourselves by offering international quality products
and a bouquet of variants like pizza cheese. cheddar,
mozzarella, wedges, slices," says Rahul Akkara. VP
(Marketing). Parag Milk Foods. InCidentally, the Go
cheese mascot. a rather lascivious looking cow, looks like
a not-so-distant cousin of French cheese maker
Fromageries Bel's Laughing Cow.
Another key parameter for success in the dairy business
is backward integration. "In the fresh foods business, pro­
curement is everything. The farmer is the backbone of
this business." says Vyas. That would explain why big
names like Nestle and Britannia couldn't make a dent in the
butter and pouched milk markets, respectively. "Without
backward integration, you are bound to fail. You have to be
a C-to-C (cow to consumer) company to succeed. You
cannot procure milk from somebody. slap a label, advertise
it and hope to succeed. That's been the failing of the MNCS in
India ... it's a long-term game of patience." explains Sodhi.
It's a game Vyas is very good at playing. And he has
had a lot of practice. "Vyas is a person who never loses
heart if something does not work out," says a rormer
Amul employee. "He just moves on and attributes the
losses to learning," he adds, citing examples of Amul's not­

FMCG-AMUL
Amul's SheerSpread,
Size andDepth_
Members: 13 district cooperative milk
producers' unions
. . .u . . " . . . . . . . . .u . . . . . . . . . .u .... ~ ••
product categories. from paneer to pouched milk. from gulab
Producer Members: 2.79 million
Village Societies:13.328
. . . . . . . . . .,. . . . . . . . . . . . . . . u
Total Milk Handling Capacity: 11.22 million
libes per day
Total Milk Collection: 105 billion libes ('08-()9)
Daily Aver~e Milk Collection: 8.4 million
libes ('OS-09)
___ as Well as its Unique
Competitive Advantages_
• Procurement Alnul's Iow-cost, high-qualily milk
procurement network allows it to price its products
competitively. . infrastructure, investments to the tune of Rs 2,600 crore
• AbIlity to catch up: Alnul got into ice creams
late. It got into the pouched milk markets like Delhi
despite the presence of established players. Now,
it's on top in these markets and categories.
• AmuI has over 5,000 parlours in the country: It
plans to take that number to 10,000 within ayear:.
• Not afraid to fail: Amul has Iatl1Ched more than
50 products in less than adecade. Some like pizzas,
chocolates. Alnul card have not done well That has
not deterred it from trying new things.
__ Help it LordOver the
Indian Market
Butter: 80% of the Rs aOQ-crore organised
market
Cheese: Controls 650/0 of the Rs 30o-crore
branded market
Pouch Milk: The 11 pouched milk
brand in India
78 BUSINESS TODA Y /\pril 18 2010
,-.
so-successful outings with pizzas, chocolates and an Amul card
(a kind of a debit card for Amul customers), Every evening.
Vyas gets an Excel sheet on his e-mail. something called aaj ka
scorecard (today's scorecard). It details sales data across
jamun to Ice creams.
More crucially. Vyas is already looking at the future. On his
......................
desk lies a ISO-page tome called Vision 2020 (an internal
business plan). It's something Vyas is reluctant to talk about. in
detaiL But here's a teaser. "By 2020. at the current growth rate
(of 28 per cent). we expect to be generating revenues of around
Rs 30.000 crore, ffwe go by our 2008 growth rate (23 per cent).
we should be about Rs 28.000 crore." says Vyas. "That means
that everything we have built in tenns of capacity. market
size since 1947 will have to be doubled in the next 12 years."
Amul has already ordered equipment to build plants to address
market opportunities in 2015. Insiders reveal that prelimi­
runy groundwork, including site identification, for a massive milk
powder plant at Ahmedabad (to be commissioned five years
hence) is under way. In his annual address in June 2009.
P. Bhatol. Chainnan. GCMMF, had suggested that to create such
would have to be made by 2020.
Another focus area lOr Amul is retailing. Back in 2002. Vyas
had been invited by Future Group boss Kishore Biyani for a
social function. "At the function. Biyani had suggested that we
become strategic sourcing partners of the Future Group."
recalls Vyas. "Around the same time, I read in the newspapers
that dairy fanners in Germany and France had gone on strike,
asking for better prices from large retail groups. The big retail
groups relented quickly and I realised that they had big mar­
gins and were exploiting the fanners." he adds. To avoid a sim­
ilar situation, Amul experimented with a small store format.
starting with a store inside a park whose upkeep Amul had
taken up, Now, Amul opens almost three stores a day and has
over 5,000 retail outlets. Vyas expects to have to 10,000
Amul outlets by 2011. Revenues from the stores have crossed
the Rs 2oo-crore mark.
Brand AInul is also, perhaps, changing in subtle ways.
During the past year, the Amul Butter Girl the Peter Pan-esque
mascot which has graced Indian hoardings since 1966. started
appearing on Amul milk packets. "The Butter Girl has come to
symbolise the goodness of Amul's products." says Rahul
DaCunha, whose agency DaCunha Communications has
been handling the Amul Butter Girl for over four decades.
UHT Milk·:60% "It's come to symbolise the whole brand, in some ways. AInul
is the last of the great Indian brands from that era that's still
Milk Beverages: 70% relevant," he adds, citing that his agency has churned over
Ice Cream: About 35%
2,600 campaigns.
Vyas. though, does not dwell in nostalgia. "What we are
·Ultra-high temperature processed milk today is because of the homework we did 10 years ago. I am lay­
Figures are market shares provided by
the company ing the groundwork for 2020 now." he sums up, The compe­
Source: Industry; Amul tition will be watching. 0
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