India’s Amul: Keeping up with the Times

Priyanju HR039 Vrushali HR040 Arun Karthik HR042

Somnath HR044 Uzma HR047
Rohit HR048 Saloni HR043 Trishala HR046
CONTENTS
• Case Background
• Internal Business Environment
• SWOT Analysis
• PESTEL Analysis
• Porter’s Five Forces - Industry Analysis
• VRIO Analysis
• Porter’s Value Chain
• Advertising campaigns
• Pricing strategy
• Diversification strategy
• Future prospects

March 22, 2015

CASE BACKGROUND
• All district milk producers unions of Gujarat came together to form
a federation “Gujarat Cooperative Milk Marketing Federation”
• Dr. Verghese Kurien : Father of white revolution in India
• Founded in 1946,Amul is a Indian dairy cooperative owned by 3.2
million farmers in the Western state of Gujarat
• AMUL - "priceless" in Sanskrit from the Sanskrit "Amulya," and
symbolizing the pride of Swadeshi
• Amul produced 46 types of dairy based foods having a sales
turnover of US $2.5 billion as of March 2013
• The “Bottom of the Pyramid” Structure
• Successful “value for many and value for money” strategy
• A successful cooperative society that always take care of the
farmers and loyal customers

March 22, 2015

INTERNAL BUSINESS ENVIRONMENT
Culture Customer Relationship Operations Technology Supplier Relationship

• Consistent focus • Advertising on • Strategy focusing • Established • Integration of

on Indian culture popular current on high margin supply chain fragmented dairy
• 80% of revenues events consumer using chilled vans societies
back to farmers • Prime site products against to minimize • Society and cattle
• Corruption-free hoardings only low margin spoilage support and
• Largest exporter wholesale deals • Convert buffalo training farmers
• Democratic
system of dairy products • Strong milk into milk • Exclusive
representing fair targeting NRIs procurement powder distribution
selection without staying abroad. network for large • Mobile vet vans arrangements
political influence • Youth - connect amounts of milk • Artificial with partners
• No promotion, (sponsoring • 4 distinct insemination • Largest retail
no free products Olympics) distribution • Training chain in terms of
• First ice-cream networks programs on number of stores
parlour • All-day animal • Low margin- High
• Umbrella brand availability husbandry. volume strategy,
marketing • Independent thus reducing
• Smaller SKUs financial sourcing costs &
focussing rural of new projects competition
market • Change in
• Dedicated procurement
franchised strategy (state to
outlets national)
• Less expenditure
on advertising

March 22, 2015

SWOT ANALYSIS
Highly diverse product mix
Robust distribution network and
channels; Arrangements with
distribution partners
Cost effective advertising campaigns
and marketing strategies
Leadership
Penetration in international markets
Expand existing categories like
processed foods, chocolates, etc
March 22, 2015
Risk of highly complex supply chain
system
Procurement issues
Competitors like Nestle, HUL, Britannia
Growing price of milk and milk products
Large foreign retailers
Younger generations shying away from
dairy farming
Political interferences
PESTEL ANALYSIS
Political interference in cooperatives
Cooperative elections and parties

High growth rate

Prevention of Food Adulteration
FDI of 51% in multi-brand retail
Act
Credit/Finance facilities
Child Labour
Rural market
Cooperative Societies Act
Procurement of quality raw material
The Milk and Milk Products Order
Favourable demographic dividend
Dairy products as a culture Dairy waste management
Vegetarian culture Waste to commercial products
Convenience and health consciousness
Increasing education levels

Packaging Technology
Efficient Distribution and Transportation channel
Information Communication Technology
Cold chain and low temperature technologies

March 22, 2015

INDUSTRY ANALYSIS – PORTER’S
Threat of New Entrants
Bargaining Power of Buyers
LOW
HIGH
- Requires high capital investment
- Presence of multiple
and difficult to achieve economies
competitors, Dudhwallas
of scale
- Home delivery and freshness of
- Access to very complex and well
local dairy products make this
established distribution channel
more complex
Customer Loyalty

Rivalry among Competitors

HIGH
-Large no. of competitors
-Local Dudhwallas

Threat of Substitutes
MEDIUM Bargaining Power of Supplier
Although many drinking LOW
substitutes to milk are available, Mainly the suppliers are local milk
the dairy industry enjoys high producers; hence their bargaining
profitability in case of other dairy power is low
products

March 22, 2015

AD CAMPAIGNS
• ‘Utterly Butterly Amul! Utterly Butterly Delicious…’ by
Sylvester DaCunha of Advertising and Sales Promotion
in 1966
• Use of strategic sites for minimum expense and
maximum output
• Socially relevant issues like Leftist Struggle in Calcutta
or The Indian Airlines Strikes.
• Amuls ads and sponsorships reflects indian roots and
values, for example, Amul Surabhi programme
• In 1994, to bring all its brand under one umbrella it goes
with the tagline ‘The Taste of India’
• Also in order to be relevant with the young generation ,
they have sponsored the Indian Contingent at the
London Olympics 2012, and they have given 50000
awards to school children for academic excellence

March 22, 2015

PRICING STRATEGY

March 22, 2015

PRICING STRATEGY
• The Bottom of the Pyramid – In cities it sell large packs of its products at 30-
175 INR whereas in smaller towns, same products in smaller packs at 5-10
INR
• Value-added products like Cheese, Dairy Whiteners, etc. are priced lower
than its competitors. Multinationals incur higher expense than Amul in
advertising, retailing and royalty to parent companies.
• However, Amul prices fresh milk at a premium price to its competitors
because of its higher transportation costs compared to local diaries
• Overall it maintains an affordable price due to a variety of reasons - only 1%
of its turnover is used in advertising as compared to 14% of Unilever or 8-
10% of Nestle
• Advertising campaigns are longer, thus helping Amul to reduce on the
communication costs.
• The co-operative business model also helps to source raw-material,
especially milk economically, allowing to pass the savings to consumers. For
example, The Crème Rich Ice-Cream is priced at Rs.40-45 whereas HUL’s
Magnum is priced at Rs.80-85
March 22, 2015
VRIO ANALYSIS
Valuable Rare Imitable Organized Result
Milk (60%) Yes Yes No Yes Sustainable
competitive
advantage
Butter (86%) Yes Yes No Yes Sustainable
competitive
advantage
Cheese (65%) Yes Yes No Yes Sustainable
competitive
advantage
Chocolates No No Yes No No
(10%, 2011) advantage
Ice-Cream Yes Yes No Yes Sustainable
(39%) competitive
advantage

*Percentages indicate market share as on 2013 given in the case, except chocolates

March 22, 2015

PORTER’S VALUE CHAIN

Firm Infrastructure- Head, zonal and overseas offices

ACTIVITIES
SUPPORT

Human Resource Management- Leadership & open culture

Technology Development- Integration from farmers to customers; B2B

Procurement

Inbound Outbound Service and

Logistics: Logistics: Support:
Operations Sales and
Production
Milk Village Marketing: After sales
by co-
processing, Diary Co-op Distributors, services
operative
Packing society, Retailers
and union
members Milk unions

March 22, 2015

DIVERSIFICATION STRATEGY

March 22, 2015

DIVERSIFICATION STRATEGY
• Related diversification – Milk and Milk products
• Cost leadership
Amul Milk Amul Gold, Amul Taaza

Bread Spreads Amul Butter, Amul Lite, Delicius, Table Margarine

Cheese Processed Cheese, Cheese Pizza, Amul Gouda, Mozzarella Cheese

Beverages Amul Kool, Kool Café, Prolife Lassi/Butter Milk, Spiced buttermilk

Ice-Cream Frozen Yoghurt, Amul Ice Creams, Amul Flaavyo

Paneer Malai Paneer, Fresh Paneer

Dahi Masti Dahi, Probiotic Dahi, Flaavyo

March 22, 2015

FUTURE PROSPECTS
• By expanding (In terms of milk procurement base,
manufacturing capacity, adding new Wholesale Dealers and
retailers Amul plans to achieve Rs. 30,000 Crores turnover
by 2018-19

• The company has plans to increase its milk processing

capability by 90 lakh litres in the coming years and will be
coming up with ten new milk processing units across the
country

• Amul to become the first Indian dairy firm to export to Russia

March 22, 2015

 Priyanju HR039
Vrushali HR040
Arun Karthik HR042
Saloni HR043
Somnath HR044
Shubhanker HR045
Trishala HR046
Uzma HR047
Rohit HR048