The Commodity Chain Analysis On Amul Marketing Essay

Introduction:

Amul means “priceless” in Sanskrit. The brand name “Amul” from the Sanskrit “Amoolya” was suggested by a quality control expert in Anand. It is a brand name managed by an apex cooperative organisation, Gujarat co-operative milk marketing federation ltd. (GCMMF), which today is jointly owned by some 2.8 million milk producers in Gujarat, India.

Gujarat cooperative milk marketing federation (GCMMF) is India’s largest food products marketing organisation. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and also provides quality products to consumers which are good value for money.

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Members:

13 district cooperative milk producers

No. of Producer Members:

2.79 million

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No. of Village Societies:

13,328

Total Milk handling capacity:

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11.22 million Litres per day

Milk collection (Total – 2008-09):

3.05 billion Litres

Milk collection (Daily Average 2008-

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09):

8.4 million Litres

Milk Drying Capacity:

626 Mts. per day

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Cattle feed manufacturing Capacity:

3500 Mts per day

Amul is the largest food brand in India and world’s largest milk brand with an annual turnover of US$1050 million (2006-07). Currently unions making up GCMMF have 2.8 million producer members with average collection of milk of 10.16 million litres per day. Besides India, Amul has entered overseas markets such as Mauritius, UAE, USA, Bangladesh, Australia, China, Singapore, Hong Kong and few African countries in south. Other potential markets include Srilanka.

History:

Amul was formally registered on December 14, 1946. Dr Varghese Kurien is the man behind the success of Amul. The ‘Amul revolution’ started as awareness among the farmers, grew and matured into a protest movement that was channelled towards economic prosperity. Over five decades ago, the life of a farmer in Kheda District wasvery much likes that of his/her counterpart anywhere else in India. His/her income was derived almost entirely from seasonal crops. The income from milk buffaloes was undependable. Private traders and middlemen controlled the marketing and distribution system for the milk. As milk is perishable, farmers were compelled to sell it for whatever they were offered. Often, they had to sell cream and ghee at throw-away prices. In this situation, the private trader made a killing. Gradually, the realization dawned on the farmers that the exploitation by the trader could be checked only if marketed their milk themselves. Amul was the result of that realization.

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The Kaira Union began pasteurizing milk for the Bombay Milk Scheme in June 1948. By the end of 1948, more than 400 farmers joined in more Village Society, and the quantity of milk handled by one Union increased from 250 to 5,000 litres a day. The success of Amul was instrumental in launching the White Revolution that resulted in increased milk production in India

“AMUL “Model:

FEDERATION

GCMMF

UNIONS

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AMUL & 13 OTHER DISTRICT LEVEL

VILLAGE SOCIETIES

10,411 VILLAGE LEVEL MILK COLLECTION CENTERS

INDIVIDUAL MILK PRODUCERS

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2.12 MILLION MILK FARMERS

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

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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 is done at the District Milk Union and Milk & Milk Products Marketing at the State Milk Federation. This helps in eliminating not only the internal competition ensuring that economies of scale are achieved. The above structure is implied in Amul after that same structure is followed in rest of the country under operation flood programme it is known as Anand pattern or Amul model of dairy cooperatives. This helps in eliminating not only internal competition but also achieving the economies of scale.

AMUL SUPPLY CHAIN:

Farmers

Milk sold to village & local residents

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Local restaurants/ other milk related business

Village cooperative (without chilling units)

Village cooperative (with chilling units)

Network services Vetinary services Animal husbandry Animal food factory Milk can producers & Trucking facilities.

Chilling plants

Milk processing union & ware house

.

GCMMF Warehouse

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Wholesalers

Home delivery contractors

Retailers

CONSUMERS

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Farmers:

Farmers are the milk producers, who produces the milk and sell to village cooperatives, local residents, restaurants and to other parts of villages. In India, Gujarat state is more of dry land and hot temperature the farmers in Gujarat of Kaira district has a more no of buffalos and cows which is their main income for their survival. But the farmers cannot make a good income for their milk; they were sold to a throw away prices. This is time where village cooperatives came to exist; the farmers sell the milk to cooperatives where they get a good income for their milk.

Village diary cooperatives:

The milk producers of a village, having surplus milk after own consumption, come together and form a Village Dairy Cooperative Society (VDCS). The main functions of VDCS are

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

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Supplying milk to the District Milk Union

Village cooperative with chilling units:

Milk purchased from the farmers where collected and stored in the chilling units and later the milk is carried in milk vans to the unions and warehouse. The milk which is stored in unions and warehouse is sent to GCMMF for test and purification.

Village cooperative without chilling units:

Milk is collected in village cooperatives where it does not have chilling units so the milk is sent to chilling units to preserve the milk. In this cooperative stores the milk is supplied to people for their needs for the good pay. The rest of milk is carried out to the chilling units.

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Chilling Units:

Chilling unit is a place where the milk is collected from various village societies and deposited. The chilling unit is used to maintain the milk temperature. The milk from the cooperatives without chilling units and local restaurants are collected and stored. Here the milk is maintained in the temperature of 5c to 10c.

Milk Unions:

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 functions of the milk union are,

Procurement of milk from the Village Dairy Societies of the District

Arranging transportation of raw milk from the VDCS to the Milk Union.

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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.

Establish Chilling Centres & Dairy Plants for processing the milk received from the villages.

Selling liquid milk & milk products within the District

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Process milk into various milk & milk products as per the requirement of State Marketing Federation.

Decide on the prices of milk to be paid to milk producers as well on the prices of support services provided to members.

GCMMF WAREHOUSE:

It is a covered area used for storage of goods before distribution. It performs the actions like receipt and inspection of quantity, quality, price, storing and docking, packing, sorting, tagging and handling logistics. GCMMF is a refrigerated warehouse. From GCMMF the milk is send to retailers, merchandise and orders.

Wholesalers, Retailers and Consumers:

Wholesalers are the franchise who bought it in bulk and sell to retailers and bulk orders. The retailers are the shop, one sells milk in retail to customers. And consumers are the end person who uses the milk. The most prominent in supply chain includes the following

Information sharing

Focus on core competence of each player in chain

Helping network partners to improve their capability and making them competitive

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Price distribution:

Distribution INR (1 CAD = 44 INR)

To farmers ( producers)

12

In cooperatives (directly selling to people)

14

To GCMMF (From cooperatives)

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19

To whole sellers (from GCMMF)

21.5

To retailers (from whole sellers)

22.5

To consumers (people)

24

Chilling cost, transportation cost, packing cost, employee salary.

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5.5

AMUL earns a profit for 1 litre is

2.5

EARNINGS, EXPENSE & PROFIT:

MEMBER

TOTAL EARNINGS

EXPENSE

PROFIT

FARMER

12

8

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4

COOPERATIVES

14

1

1

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GCMMF

19

6.5

2.5

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21.5

.5

.5

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22.5

.25

.75

From the above table earnings, expenses and profit for the every individual is calculated.

The farmer earns RS 12 per litre but he meet with expenses like food to cattle, transport and made expense of RS 8 per litre and earns a profit of RS 4 per litre. In cooperative the expense meet is only the refrigeration and salary to employee, they spend RS 1 per litre which is given by GCMMF. They sell to GCMMF at the cost of RS 13 per litre. The profit for GCMMF is RS 2.5. GCMMF collects the milk from cooperatives at the cost of RS 13 per litre and sells at RS 21.5. The expenses made by employees, transport cost, packing, chilling cost are RS 6.5 per litre. The whole sellers earns a profit of RS 0.5 per litre where they collects for RS 20.5 and sells at RS 21.5.the expense are employee and transportation .Retailers earns a profit of RS 0.75 and expense of RS 0.25 for electricity and employee.

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BUSINESS MODEL:

RAW MILK

PASTEURIZATION

CONDENSED

GHEE BUTTER CREAM

DRIED SKIMMED MILK POWDER

PACKAGED MILK

ICE CREAM BEVERAGES

The objective of the network was to deliver profitable and equitable returns to a large number of farmers for a long period of time. This follows rather directly from the fact that the member farmers own essentially the network of cooperatives. An additional objective was to develop the supplier over the long term through social change. Consequently, the business model had to include both the costs and benefits of services that would be needed to deliver milk with high productivity as well as to assist farmers in improving their social environment.

The success of the network depended on high collection rate of milk. This required increasing membership with more Village societies, raising the number of members per Village Societies, and improving the milk yield (i.e., better cattle management), constant concern about the cost to farmers in the network and delivering quality to customers at low prices.

Two aspects of this network deserves special attention they are,

The network explicitly includes secondary services to the farmer-suppliers.

Several of the entities in the network are organized as cooperatives linked in a hierarchical fashion.

Marketing Strategy of AMUL:

The marketing strategic of AMUL is based on four principles,

Quality

Value for money

Availability

Service

Quality:

In case of a food product the brand must always represent the highest hygienic standards. It must taste good and it must good. No brand survives long if its quality does not equal or exceeds what the buyers expect; there is no compromise on food products. That’s the essence of AMUL.

Value for Money:

If the customer buys an AMUL product, they get what they pay for and more. AMUL has taken pride in the fact that earns a good income for owners (dairy farmers of Gujarat). They do not do it at the cost of exploiting the consumer. Even when adverse conditions have reduced supplies of milk, they have resisted the common practice of raising prices, charging what the market would bear. Rather, they have kept prices fair and done our best to ensure that retailers do not gain at the consumers’ expense.

Availability:

A brand should be available when and where the customer wants it. There is no benefit achieved in creating a positive brand image, and then being unable to supply the customer who wants to buy it. AMUL has reached hundreds of cities, towns and villages through a cold chain that the product is available but also reaches the customer at the farthest end of the nation with the same quality as you would find it in Chennai or Delhi.

Service:

AMUL has commitment to total quality. But, occasionally, they may make a mistake – or, their customer may think they have made a mistake, and the customer, as they say, is always right. That is why, for Amul, every customer complaint must be heard – not just listened to. And, every customer complaint must be rectified to the extent humanly possible.

For close to fifty years now, Amul has honoured its contract with the consumer. The contract that is symbolized by the Amul brand means quality. It means value for money. It means availability

000 (1).jpg

It means service and it means value for money.

Facts:

At present 1500 parlours and planning to open 10000 parlours in 2012.

Network of over 3500 distributors

Covering 130000 villages and benefiting 2.7 million farmers

Collecting447000 milk/day from 2.12 million farmers

Delivery of goods to over 500000 retailers

International market: available in 40 countries.

REVIEW OF AMUL:

VALUE

POWER

EMBEDDEDNESS

VALUE:

Building an organization network that would represents the farmers and the customer is most complicated task. The task of Amul is to ensure the good returns to farmers.

Gujarat farmers has a good income on daily basis

They are assured with food, job and education.

By the success of Amul in Gujarat, the other states in India followed same mechanism and become an eye opener to farmers.

By the Amul rural Gujarat is developed with transport and road facility.

Charging for each service provided by the supplier.

Purchasing of all milk that member farmer produced.

Professional managers running the unions and federation helps to improve the rural poor.

Power:

Amul has justified its undisputed leadership in food business by creating 5000 Amul outlets and 1400 Amul parlours in India. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to farmers and also provides quality products which are good value for money.

Dr Varghese Kurien the former chairman is the man behind the success of Amul.

The power is Amul who created this huge diary business and real source of income is returned to farmers, cooperative members and milk unions of GCMMF. The AMUL has a power that fixes the rate, estimates the product, introduces the product and takes the standards to the international level.

EMBEDDEDNESS:

AMUL has impacted the transformation of the Indian communities in many ways. For example Indians are drinking three to four times more milk than they did four decades ago. This has an immeasurable on health, nutrition and life expectancy.

Positive impact:

The greatest impacts were experienced by the villages.

Amul has effected social change at the village level in multiple ways,

People stand in line to deliver milks without taking shortcuts.

They do not complain if they have to stand behind an untouchable in the line. Hence the cooperative has given a death blow to the caste system.

Amul provided women an opportunity to have a voice in the home economy.

Amul is a builder of technical man powers who were illiterates.

Amul brings a rural India of Gujarat in a lighten path.

Negative impact:

Woes of bad roads and inadequate transportation facility make milk procurement problematic.

Erratic power supply case harm in the milk supply.

Underdevelopment systems which causes harm to collected milk.

Infrastructure that is available is not up to the current world standards.

Conclusion:

“AMUL” – “TASTE OF INDIA”

Today Amul is a symbol of many things. They are

High quality products sold at low price.

The genesis of a vast co-operative network.

The triumph of indigenous network.

Proven model for a diary development.

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