FORE SCHOOL OF MANAGEMENT

CASE STUDY RURAL MANAGEMENT

GCMMFS COOPERATIVE STRUCTURE

SUBMITTED TO: Dr. S.K. Pandey

SUBMITTED BY: VARUN BHATIA 191181

INTRODUCTION On December 14, 1946 the Kaira District Cooperative Milk Producers Union Limited was established in response to exploitation of farmers by traders of existing dairies. In Anand city of Kaira district farmers produced and supplied milk to the then largest dairy Polson Dairy which in turn supplied milk to the Bombay city. The government had given monopoly rights to the Polson Dairy. The traders and agents of Polson Dairy brought the milk from marginal producers (farmers) at very lower prices and sold it to Bombay city at very higher prices. Farmers suffered heavy losses.

The farmers of Kaira district took advice of nationalist leaders Sardar Ballabh Bhai Patel and Morarji Desai. They advised the farmers to form a cooperative and supply milk directly to the Bombay city. This Kaira district cooperative was established to process and supply the milk directly to the city. Since most of the milk producers were marginal farmers who produced only 1-2 litre milk per day, the milk collection process was decentralised. Village level cooperative were established to collect milk from each village. The Research and Development centre was also established to develop new indigenous technologies in processing of milk. The technology had lead to successful production of skimmed milk powder from buffalos milk first time in the world. This helped India to become the largest producer of milk as India has the highest population of buffalos in the world. The first modern dairy of the Kaira Union was established at Anand. It popularly came to be known as AMUL dairy after its brand name. Gujarat Cooperative Milk Marketing Federation (GCMMF) established in the year 1973 with a view to streamline the milk production and supply process in Gujrat is the marketing entity for the State of Gujarat. . Its main aim was not to maximize profits but to give the dairy farmers a fair deal, who until then were being exploited by the private milk contractors. GCMMF was a great success since its inception. By providing on-time payments to the dairy farmers, veterinary services, cattle feed of good quality, education on better feeding of cattle and facilities for artificial insemination of cattle at cost or below cost gave dairy farmers an incentive to be a member of the cooperative. GCMMF has 42 regional distribution centres in India, serves over 5, 00,000 retail outlets and exports to more than 15 countries. All these organizations are independent legal entities yet loosely tied together with a common destiny. Interestingly, the Gujarat movement spread all over India and a similar structure was replicated. Two national organizations, the National Dairy Development Board (NDDB) and the National Co-operative Dairy Federation of India (NCDFI) were established to coordinate the dairy activities through cooperatives in all the States of the country. The former provides financing for development while the latter manages a national milk grid and coordinates the deficit and surplus milk and milk powder across the states of India. In the early nineties,

AMUL was asked by the Government of Sri Lanka to establish a dairy on similar lines in Sri Lanka.
ANAND MODEL

The Anand Pattern had a three-tier structure; at the bottom of the three-tier structure were VCSs. These were associated with milk unions at the district. The district unions collectively formed a state level federation. The VCS procured milk from the members; district unions transported and processed the milk products, while the role of the federation was that of marketing, strategic planning and investment. The milk from the farmers was managed by professionals, while the facilities to process the milk were owned by the farmers themselves.

GCMMF

Coordinate activities of unions. Avoid competition among different unions. To establish strict quality standards. Processed the milk and took care of the manufacturing of the final product. Transporting milk from villages to the processing plants. Collect milk from members and make payments based on the quality and quantity of the produce Support in terms of veterinary, first aid, cattle feed etc.

District dairy unions (12)

village cooperative societies (11615)

milk producers (2.41 mn)

actual producers of milk (farmers)

SUPPLY SIDE OF THE NETWORK The structure of the supply side of network has been shown in the figure below. The whole system is decentralised. The cooperative has been established at village level are known as Village Society (VS). All farmers of a village supply their milk to VS. Then VS supplies milk to the thirteen district level Unions. Amul is one of those Unions. These thirteen Unions finally process the milk and produce various products. The marketing of these products is done by the GCMMF. The products of these thirteen Unions are stored in warehouses of GCMMF from where it is finally distributed to the distributors and retailers. The prices of products of different Unions do not differ by greater extent. Though GCMMF sets the price of the products according to the production level and quality (of the product) of each Union, the pricing strategy has been designed in such a way

that these Unions should not compete with each other rather they should cooperate with each other. Success of network depends on high collection rate of milk. It requires increasing membership of VSs and increasing number of members in each VS and improving the milk yield. There was a constant concern about the cost of farmers in the network and delivering high quality products to consumers at affordable prices. The cooperative set following objective as part of its value:

To charge for each service provided to the supplier To purchase all milk that member farmers produced To sell liquid milk at affordable prices so as to serve a large number of consumers To develop and deliver services that will improve lives of people in the network To hire professional managers, to run the federation and unions, whose values included upliftment of rural poor. DAIRY COOPERATIVE STRUCTURE

NDDB/NCDFI

Federation in other states

GCMMF

UNIONS

Amuland 13 others district level

VILLAGE SOCIETIES 13,328 Village Level Milk Collection centres Centres

INDIVIDUAL MILK PRODUCERS

2.79 million Milk Farmers

CGMMFS SUPPLY CHAIN

Farmers

Village Cooperative Societies (with Chilling Units)

Village Cooperative Societies (without Chilling Units)

Local Restaurants/ Other Milk related businesses

Milk Sold to Village & Local Residents

Chilling Plants Milk Processing Union & Warehouses GCMMF Warehouses

Network Services * Veterinary Services * Animal Husbandry * Animal Feed Factory * Milk Can Producers * Agriculture University * Rural Mgmt Institute * Trucking Facilities

Wholesalers/C&S

Retailers

Home Delivery Contractors

DISTRIBUTION CHART

We can see from above figure that GCMMF distribution channel is simple and clear. The products change hands for three times before it reaches to the final consumer. First of all the products are stored at the Agents end who are mere facilitators in the network. Then the products are sold to wholesale dealers who then sell to retailers and then the product finally reaches the consumers. SWOT ANALYSIS: Strengths High quality, low price Robust Distribution Network Extensive cold chain network Varied product range Excellent relationship with the farmers Constant innovations Excellent relationship with supermarkets/departmental stores Strong brand names

Weakness Completely dependent on villages for its raw material Short self life of most of their products Supplier centred Tax implications because of Co-operative structures Opportunities Increase per capita milk consumption Penetrate international markets

Concentrate on process food sector

Threats Competitors HUL, Nestle, Britannia other local players The yield of Indian cow is much lower than that of cow in other dairy countries

LEARNING:

Here we see that the milk was taken by the villagers to the VCS. This tackled a major supply chain and logistical problem. Instead of having uniform pricing, they introduced pricing based on quality and quantity by checking the fat content etc. This took care of the problem of farmers adding water into milk to increase the quantity. DDU and VCS were allowed to formulate their own rules under given guidelines. This ensured flexibility. Payment would be daily or weekly in many cases. This ensured steady supply of money for the farmers