AMUL

Strategic Analysis of Amul

1/24/2013

Group 4: Anish Gulati ( 063006) Harsh Rakesh (063016) Naveen Kumar Singh (063028) Raunaq Singh Juneja (063039) Shivakshi Agarwal (063049) Urvashi Mishra (063059)

Contents
Mission and Vision statement of AMUL India: ....................................................................................... 3 PESTLE ANALYSIS ..................................................................................................................................... 3 POLITICAL ............................................................................................................................................ 3 ECONOMICAL ...................................................................................................................................... 4 SOCIAL .............................................................................................................................................. 4 TECHNOOGICAL .................................................................................................................................. 5 LEGAL ENVIRONMENT ........................................................................................................................ 5 ENVIRONMENTAL ISSUES.................................................................................................................... 6 Porters five forces for AMUL India:........................................................................................................ 6 Threat of new entrant:........................................................................................................................ 6 Bargaining power of suppliers: ........................................................................................................... 6 Bargaining power of customers: ......................................................................................................... 7 Threat from existing competitors: ...................................................................................................... 7 Threat of substitutes: .......................................................................................................................... 7 Product wise Competitor Analysis .......................................................................................................... 7 BUTTER ................................................................................................................................................ 8 CHEESE ................................................................................................................................................ 8 ICE CREAM........................................................................................................................................... 8 POUCHED MILK ................................................................................................................................... 9 MILK POWDER..................................................................................................................................... 9 FLAVORED MILK .............................................................................................................................. 9 References ............................................................................................................................................ 10

Mission and Vision statement of AMUL India:

The vision of the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF) while establishing AMUL was to supply milk to the Indian consumers so that the country can turn from a milk-deficient country to one of the largest producer of milk. This was what was called as the white revolution or Operation Flood and was completed under the able guidance of late Mr Verghese Kurien. AMUL thus follows the tag line: The taste of India. With time AMUL extended from just supplying milk to manufacture other dairy products. The model that AMUL follows is the evidence of how even today it follows its unmentioned mission and objective. This model is a beautiful mix of rural and corporate India. The AMUL Model of dairy development is working on a three-tiered structure with the dairy cooperative society of ANAND which is 1st- village level federated under a milk union 2nd- district level and a federation of member unions and 3rd- at the state level. The three tier structure includes:

Establish a direct link between milk producers and consumers by eliminating intermediaries: This is done by establishing the AMUL outlets and by selecting few retail outlets to distribute the milk to final consumers. Strengthening Milk Producers (farmers) control on milk procurement, processing and marketing: this was the first objective of Amul to provide number of opportunities to the farmers at village level so that they can become leading milk producers. It was done by introducing new technologies and method for effective milk procurement. Professional management: The financial decisions, procurement decisions, distribution decisions and other top management decisions are taken so as to maintain the brand image of AMUL.

Amul has established them in Indian Dairy market in a way which has given India the status of leading milk producer in the world. In India about 15 million of milk farmer procure milk and pour it at 1,44,246 dairy co-operative society around the country. In India milk process takes place in 177 district co-operatives and its marketing take place from 22 state marketing federation which ensure better life of millions of the people. Thus in this way AMUL is being driven in accordance to its mission and objective.

PESTLE ANALYSIS
POLITICAL In India Government is giving special attention to Dairy sector. Department
of Animal Husbandry Dairying & Fisheries (DADF) is one of the Departments in the Ministry of Agriculture which efficiently control Dairy Industry in INDIA. In todays condition there is political stability which is in not only favouring Dairy but also favouring every other sector at the same time. 1. To encourage growth and development in Dairy sector government has allowed 100% Foreign Direct Investment (FDI). 2. Implementation takes place at three different level; Implementation of State Schemes, Central Government Schemes, and by both Centre and State shared Schemes.

3. In each state, State has their own federation or dairy department but in large, Indian market is Tightly controlled by many large number of private companies like. AMUL, MOTHER DAIRY etc. 4. For good health of Cattles government provide monetary as well as technical support to the cattle owners which include free Insurance also. 5. Government provide assistance to strengthening and expanding village level infrastructure so that milk procurement can be done in more efficient way which indirectly provides producers golden opportunities to access to markets. 6. For the betterment of the processes government has introduced Degree/Diploma course in Food Processing and Technology. 7. Latest focus of Indian Government is on the establishment as well as modernisation of FPI (Food Processing Industry) district level and in some cases on the village level too.

ECONOMICAL - India comes under the growing economy. India was less affected by the
recession in compare to the other developed country so there are bright chances for continuous economic growth in India in near future. 1. GDP growth rate is approx. 5.3 to 5.5% currently. 2. In India large proportion of the population comes under the middle class and at the same time it has been also observed that there has been a rapid growth in the disposable income. At an average household savings rises from 15-16 % of GDP in 1980s to 31 percent in 2011-12 (1), in recent years and most important thing is that the working population of India is nearly 56 to 57% of total population. 3. In India department of Agriculture and food processing both together contributes around 20.5% GDP and within this 31 % of the agriculture contribution in the GDP comes only from Dairy Industry. (2) 4. To start Dairy business at small/large level government provide a very easy loaning facility through its dedicated department of GRAMODHYOG VIBHAG.

SOCIAL
1. Because of the changes in the consumer lifestyle and orientation toward health government has fixed many norms within that every dairy industry will have maintain a certain standard of the milk product. 2. Dairy business helps in overall improvement of rural economy of India. 3. By having Dairy business with few number of Milch animal a person can easily make business of around Rs. 20000 to 25000 Rs/year (3) (milk productivity depending largely upon the cow/buffalo breed and region). Prior conducted Studies shows that dairy business alone capable to provide at least 180 days business to a family (cattles gives milk for at least 180 days, in large it depends upon the breed and ragion). BREED wise Milk Productivity a. SAHIWAL 12-16 ltr/day b. HF Cross 15-16 ltr/day

c. JERSEY CROSS 12-18 ltr/day d. Red sindhi 10-15 ltr/day e. MURRA 10-15 ltr/day Calculation On the basis of above breed wise productivity of cattles we calculate the value of business provided by them Suppose a person has 2 cow/buffalo, he can easily get 24 ltr. of milk from them (at least 12 ltr. Per day). If he use 4 ltr of milk for his household consumption them he will leave with 20 ltr. Revenue = 20 ltr./day *40 Rs./ltr. * 180 days = 144000 Rs. He will have to spend at least 100-125 Rs,/day each cow on each cow so total expenditure will be 125 Rs/day * 2 cow * 365 = 91250 Rs. Net Profit = 144000-91250 = 52750 Rs/year, around 25000 Rs/Animal

4. Rising need of milk product in urban as well as in rural area generate a large amount of waste that destroy fertility of soil as well as destroy the soil and ground level water. Foul odours usually emanate from animal and wastes if not managed/treated/disposed of properly, can lead to air pollution. Livestock product processing plants release large amounts of waste into the environment, polluting land and surface waters as well as posing a serious human health risk.

TECHNOOGICAL
1. Milk is a perishable item and Advancement of newer technologies is highly needed for dairy industry for measurement of purity (concentration), procurement and processing. 2. Government providing thrust on research and development to create value for customer as well as for farmer also. 3. Usually cost of machinery in dairy industry is very high and government has taken several initiatives for up-gradation of equipment. 4. Recently every industry has started using RFID (Radio frequency identification) technology to track movement of milk van. 5. As the point mention earlier every dairy product based company are also focusing on the implementation of SAP and ERP across their organisation to achieve the best supply chain advantages, which not only improve supply chain but also help organisation for forecasting & planning of raw material, monitoring performance.

LEGAL ENVIRONMENT Dairy industries in India are controlled by The Department of

Animal Husbandry and Dairying (AH&D) - now renamed as Department of Animal Husbandry Dairying & Fisheries (DADF) is one of the Departments in the Ministry of Agriculture. Generally legal framework in dairy industry is divided into two parts. 1. Legal framework and Regulations of State government

2. Legal framework and Regulations of central government Government has announced 100% FDI in dairy industry to attract foreign investor to start business in India, and indirectly it help in modernization of the industry.

ENVIRONMENTAL ISSUES
1. Generally Milk sold in plastic pack in very high quantity and because of nondisposability it increase pollution level. 2. Generally cow emits a large amount of methane gas through belching; a methane gas is 23 times more powerful than carbon dioxide. 3. Sometime dairy business causes some health issues like. Asthma and skin problem to the people who took care of the animals it also attract flies. 4. Improper management of waste causes air pollution in nearby areas and some time it also causes to unnatural growth of fungi and bacterias. 5. Using waste material properly help environment as well as former too, Cattle waste material is highly needed in farming as a fertilizer and for growth of plants.

Porters five forces for AMUL India:

Threat of new entrant:

There is very stiff competition in the dairy market and it requires time and money to get established in the market. There has to be a magnificent distribution strategy so as to provide the packaged milk in time and also there has to be a brand image so as to enter into other dairy market such as chocolates, curd et cetera. Packaged milk faces huge competition even at state level and it requires a lot of efforts to overcome these problems for a new entrant. But it is a lucrative industry and there is opportunity to get established like Mother Dairy did when it entered in Uttar Pradesh recently. Thus it is difficult yet not impossible to enter the market and hence this force is medium in strength. Hence we can say threat of new entrant is MODERATE.

Bargaining power of suppliers:

We have to consider that AMUL is being managed by a cooperative body which is known as Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which lets the suppliers (generally from rural area) to bargain for higher prices for their supply to be made. But, there are some reasons as to the regulations which restrict their bargaining power and there is lack of awareness among rural suppliers that makes this factors force medium. Hence we can say that the bargaining power supplier is Medium.

Bargaining power of customers:

The dairy industry includes not only milk, but milk products such as curd, ice cream, butter, chocolates and milk powders et cetera. There are various options available for the customers to choose from. They can choose from various brands and even there is availability of substitutes as many homes still consume buffalo and cow milk instead of packaged milk. There is availability of substitutes for other dairy products which consumers generally prefer. . This makes their bargaining power high. Hence on the basis of the above we can say the bargaining power of customer is HIGH.

Threat from existing competitors:

A lot of players are present in the dairy market. There are various companies such as Nestle, Mother Dairy, Parag and even there is Britannia which provides tetra pack milk variants. Then there are other state level local dairy milk providers such as Shudh, Gayatri et cetera that further adds to the list of existing competitors. For ice creams, there is Mother Dairy and Kwality Walls. Mother Dairy and Parag offer stiff competition in almost every dairy milk sector. Paras offers competition in bottled milk variants. Products such as cheese and cheese spread also have huge competition such as there is Britannia, Nestle which adds to huge competition in this sector. So on the basis of the above we can say threat of existing competitor is HIGH.

Threat of substitutes:
The packaged milk can be substituted by open milk, i.e. milk obtained directly from cows and buffaloes. In India, the rural area and even some parts of tier one and two cities consume open milk. But as the mass is realizing the effect of open milk on health and are becoming more health conscious, they are moving towards packaged milk. For other products such as curd, the packaged curd is consumed mostly by college students or single and busy people. Housewives still prefer to make curd at home and even lassi at home. These act as substitutes. But products such as ice creams, butters, cheese and cheese spread cannot be easily substituted. Hence on the basis of above argument we can say the threat of substitute is MODERATE.

Product wise Competitor Analysis

Indian dairy industry is one of the most successful development program initiated by the government of India after independence period. Indias Total dairy industry consists many organise and unorganised sector e.g. milk processing in India is around 35% of total milk production and of which organised sector consist account of around 13% of milk processed and rest of them is covered by unorganised sector (it sold as non-posturised milk, Or fresh milk). Cooperative firm claim a major part of the processed milk industry in India, cooperative federate in 15 state as state milk cooperative federation but as the time passes many new player enters in this attractive sector like Amul (GCMMF), SARAS (RAJASTHAN), Verka (PUNJAB), Vijaya (ANDHRA PRADESH), and also it has been observed that Indian market

showed their interest in some specific milk products like packaged milk, butter, cheese, ghee and ready-to-drink-milk products. As Amul have presence in market with large number of products and within certain type of product it has many varieties, below is the analysis of some of Amul product which has high market share and huge sources of Revenue in India.

BUTTER
Amul is the market leader in butter segment, it account around 90 % of the market. Butter market value is around Rs.1200-1400 Cr. And it is one of the major revenue sources for Amul. Other players are Nutrilite, Nestle and Britannia. For being a market leader in butter segment Amuls strategy was to position himself as health conscious low fat and low cholesterol Bread spread provider because currently every customer is highly health conscious.

CHEESE
Cheese market is worth of Rs. 400-500 cr. in India, and again Amul is market leader in cheese segment it account around 80% of the market share and this is one of the main revenue source for Amul. In cheese segment Amul is competing with its own product example Amul Processed cheese and Cheese Spread but the strategy was to keep competitor out of the market. Initially Britannia launched cheese cubes with slice and within few months Amul too come up with sliced cheese with pack of 5 and 10 slice per pack. Major players in cheese market are Britannia and Nestle.

ICE CREAM
Current Indian ICE-CREAM market is worth of Rs. 1500Cr. and Amul account 40 % of the total market. Amul is number 1 ice-cream brand in India and its market share is about 4 times to the closest competitor HLL. In year 2007 Amul launched sugar free and prolife probiotic wellness ice-cream basically the aim was to provide low fat, sugar free diabetic delight & wellness ice-cream is to target health conscious customer. The strategy followed by Amul was to provide low price ice-cream to the customer and this work in two way for Amul, 1. Amul has its own dairy and they know that they can provide product at minimum margin level but it was not possible to any other players. E.g. Kwality, vedilal etc. 2. Before 2007 no any other player launched low price and low fat ice cream, and this created another customer segment for Amul apart from targeted Child and young segment.

POUCHED MILK
Indian pouched milk market value is around Rs. 50000 cr. and Amul is leading player not everywhere but only in some of specific states its Overall market share in India is around 25%. Amul faces direct competition with state dairy federation they have their wide network in that particular state only. E.g. SARAS in Rajasthan, Verka (PUNJAB), Vijaya (ANDHRA PRADESH), Mother Dairy had its monopoly in NCR region and is one of close competitor in pouched milk market. Pouched milk is a low margin product but demanded volume is very high. But recently Mother dairy has started following the pattern followed by Amul to capture market and very slowly Mother dairy is expanding its business from NCR to other part of India.

MILK POWDER
Milk whitener is widely known as milk powder and it market value in India is around Rs. 3000 mn. Amul constitute 45 % of the milk powder market share followed by Nestles 23 %. Again Amul is dominant in this market. Amul initiated in this market with small pouches of whitener which were affordable and anyone can be used any time and within a short span of time Amul become market leader in this segment. Major competitors for milk whitener are Nestle, Britannia, Dynamix Diary, Sterling Agro, Mohan Food. To trap large portion of market Amul decided to introduce low price and very easily they eliminated the competition from its competitor.
FLAVORED MILK

Total flavoured milk market in India is around Rs. 300 cr. Amul has a long variety of flavoured milk in the market like Amul KOOL, Nutramul energy drink, Amul Masti Spiced
Buttermilk, Amul Kool Chocolate Milk etc. this concept of flavoured milk come into picture after the research made by the company and they founded that there is a good scope to introduce such product which do not require to be process after purchase and people can consume it anywhere and anytime. In this segment it has direct competition with Britannia and Mother dairy, Coca-Cola and Radbull. Recently Amul launched energy drink (Nutramul Energy Drink) and sports drink (Stamina Sports Drink) to compete with existing players. Apart from all mentioned above Amul is also planning to take initiatives for capturing tourist who board train from railway station, so to capture this market they have plan to allot stall on some big railway stations. This initiative will help Amul to capture a new market segment

References
1. 2. 3. 4. http://data.worldbank.org/indicator/NY.GDS.TOTL.ZS http://www.manage.gov.in/pgdm-abm/spice/Spice-Nov-Dec-2011.pdf
http://www.ndri.res.in/ndri/Design/breeding.html

http://www.amul.com/m/38th-annual-general-body-meeting-held-on-31st-may-2012 (Link for Amul annual report)

5. http://www.bharatbook.com/market-research-reports/dairy-products-market-researchreport/indian-dairy-industry-analysis.html 6. http://www.britannia-superfine.com/productlist.html 7. http://articles.economictimes.indiatimes.com/2012-02-12/news/31050324_1_parag-milkfoods-amul-private-dairy (FOR MARKET SHARE and competitor analysis) 8. http://www.dahd.nic.in/dahd/division/dairy-development.aspx