S tra te g ic M a n a g e m e n t

Gujarat Co-Operative Milk

Marketing Federation

GROUP MEMBERS:
Budhaditya Banerjee
Sourabh Dhariwal
Tarun Daga
Uma Balakrishnan
 AGENDA
• The Origin of Amul
• Organization Structure
• Distribution & Cold Storage Network
• Markets Catered To
• GCMMF- SWOT Analysis
• Ratio Analysis
– Profitability Ratios
– Liquidity Ratios
– Solvency Ratios
• Processed Food & Vegetables Industry
– SWOT Analysis
– Porter’s Five Forces
• The Way Forward
 THE ORIGIN OF AMUL
• Originated in Kaira to counter exploitation by Polson’s Dairy
(Anand)


• Dr. Verghese Kurien was instrumental in spearheading the

co-operative and Operation Flood to immense success


• Run as a collection and selling agent with complete

involvement and decision-making of farmers


• Cash settlement to milk suppliers to ensure ready money



• Services provided:
– Veterinary Care
– Fine Cattle Feed
– Education on Animal Husbandry
– Facilities for Artificial Insemination
 ORGANIZATION STRUCTURE
LEVEL MEMBERS DECISION - MAKING

Price paid to
S ta te district unions (fixed
across unions)
Fe d e ra tio Product mix and
n quantity

Price paid to
D istrict village co-operative
societies

Membership
Price paid to milk
V illa g e suppliers
 DISTRIBUTION & COLD STORAGE
NETWORK
• Chillers in proximity of villages
•
• Prompt transport to district facilities for
further dispatch to consumers/ processing
units
•
• Chilled trucks to transport processed products
•
• Delivery to local chillers by insulated rail
tankers and chilled trucks
•
• Refrigerators and freezers with retailers and
departmental stores to retain freshness
 MARKETS CATERED TO
• Objective: Tries to reach every Indian
consumer through a basic food i.e.
milk, and its products
•
• Diversification: Products which serve
myriad palates and needs
•
• Products: Milk, milk powder, bread-
spread, cheese, sweets, ghee, curd
products, condensed milk, ice-cream,
 SWOT ANALYSIS- GCMMF
Strengths
Modernization of traditional milk
production
Robust distribution chain
Extensive cold storage system
Trust of producers & consumers
both
Provision of services to cattle
farmers
Presence in all milk product ranges
Value in quality & price
Trained graduates from reputed
institutes
Opportunities
New product development
Increase in export of product
range
Favourable changes in tastes
and disposable income of
consumers
Penetration into areas where
SHGs etc have not entered
Capturing the segment which
is tilting towards branded
products
Weaknesses
Bound by dated legislation
Less control over milch yield
Cannot accommodate transport
delays (perishables)
Dependence on poor
infrastructure for supply
(roads, electricity etc)
Threats
Unorganized players
Other dairy co-operative
societies
Risk of contamination
throughout channel
Competitors are companies,
not bound by inherent
obligations of co-operatives
 PROFITABILITY RATIOS

• RETURN ON SALES
– (Profit after Tax/Sales)*100

Year Ratio
1993-1994 0.07%
1994-1995 0.12%
1995-1996 0.60%
1996-1997 0.50%
1997-1998 0.45%
1998-1999 0.59%
 PROFITABILITY RATIOS

• ASSET TURNOVER RATIO

– Sales/Total Assets

Year Ratio
1993-1994 4.124
1994-1995 5.13
1995-1996 5.246
1996-1997 4.97
1997-1998 7.27
1998-1999 9
 PROFITABILITY RATIOS

• ROI/ROA
– Return on Sales/Asset Turnover

Year Ratio
1993-1994 0.288
1994-1995 0.62
1995-1996 3.12
1996-1997 2.485
1997-1998 3.27
1998-1999 5.31
 PROFITABILITY RATIOS
• RETURN ON EQUITY
– PAT/Shareholder’s Equity

Year Ratio
1993-1994 0.11
1994-1995 0.17
1995-1996 1.02
1996-1997 0.6
1997-1998 0.424
1998-1999 0.6506
 LIQUIDITY RATIOS

• CURRENT RATIO
– Current Assets/Current Liabilities

Year Ratio
1993-1994 1.04
1994-1995 1.23
1995-1996 1.01
1996-1997 1.06
1997-1998 1.22
1998-1999 1.36
 LIQUIDITY RATIOS

• QUICK RATIO
– Quick Assets/Current Liabilities

Year Ratio
1993-1994 0.53
1994-1995 0.52
1995-1996 0.55
1996-1997 0.45
1997-1998 0.46
1998-1999 0.64
 LIQUIDITY RATIOS
• DEBTOR TURNOVER RATIO
– Net Sales/Average Debtor, Average Debtor/
(Sales/360)

Year Ratio Days

1993- 18.43 1.95
1994
1994- 54.1 6.6
1995
1995- 40.72 8.8
1996
1996- 61.54 5.8
1997
1997- 114.04 3.1
1998
1998- 124.18 2.9
1999
 LIQUIDITY RATIOS
• INVENTORY TURNOVER RATIO
– COGS/Average Inventory, Average Inventory/
(Sales/360)

Year Ratio Days

1993- 12.94 26.78
1994
1994- 16 21.51
1995
1995- 17.15 19.89
1996
1996- 12.14 28.1
1997
1997- 17.04 20.08
1998
1998- 25.26 13.59
1999
 SOLVENCY RATIOS

• DEBT to EQUITY RATIO

– (Secured Loans + Unsecured
Loans)/Total Equity

Year Ratio
1993-1994 8.89
1994-1995 10.26
1995-1996 6.99
1996-1997 4.49
1997-1998 2.93
1998-1999 3.04
 SOLVENCY RATIOS

• INTEREST COVERAGE RATIO

– PBIT/Interest Expenses

Year Ratio
1993-1994 1.17
1994-1995 1.16
1995-1996 2.15
1996-1997 2.18
1997-1998 2.49
1998-1999 2.91
 PROCESSED FRUITS & VEGETABLES
INDUSTRY:
SWOT ANALYSIS
STRENGTHS WEAKNESSES
Large section of population in Legal and political interference
agriculture ensures availability High investments and working
of raw material capital required
Quality control and testing not
High priority status for agro- comparable to international
processing given by the central standards
Government Vested interests of intermediaries
 reduce supply chain efficiency
Focus on technology to better Seasonality of raw material require
yields ensuring supply through other means

Cost synergy to players
diversifying into this field
 PROCESSED FRUITS & VEGETABLES
INDUSTRY:
SWOT ANALYSIS
OPPORTUNITIES THREATS
Setting of SEZ & food Mindset regarding hygiene and
parks to encourage affordability
development of Greenfield 
projects High monetary and social costs
of poor packaging and
Rising income levels and mishandling
changing consumption 
patterns Susceptibility to economic
 fluctuations
Globalization and export 
potential Low availability of adequate
 infrastructural facilities
Robust economic growth

Large domestic market
not catered to
 PROCESSED FRUITS AND VEGETABLES:
PORTER’S FIVE FORCES
• Threat of New Entrants:
q Intense Competition-Sustaining is difficult among existing
big players
q Legal barriers
q High capital investment in initial years
q Entry barriers are high

• Threat of Substitutes:
q Variety in processed foods is high
q Local players offer low-priced substitutes

• Rivalry Among Competitors

q Highly Competitive: Presence of and competition from
regional, national and international players; visibility a
must
 PROCESSED FRUITS AND VEGETABLES:
PORTER’S FIVE FORCES
B a rg a in in g Po w e r o f B u ye rs:
qTe n d e n cy o f e sta b lish e d lo ca l, n a tio n a la n d
in te rn a tio n a le n tra n ts to fo ra y in to th e m a rke t
qTe n d e n cy o f e sta b lish e d re ta ile rs to in tro d u ce
th e ir o w n b ra n d s
qV a rie ty se e kin g b e h a vio u r d u e to ch o ice s; lo ya lty
ve ry lo w
qH e n ce , p o w e r is h ig h
B a rg a in in g Po w e r o f S u p p lie rs:
qPro n e to se a so n a lflu ctu a tio n s
qPo w e r is lo w a s d e p e n d e n ce o n lim ite d b u ye rs fo r
 WHY THEY SHOULD NOT DIVERSIFY
•
• Profit margins of the company is very low and hence
diversifying into new segment will require huge
investments which may lead to losses in the initial years
to the entire company.
•
• For a company in an industry which is exposed to
perishability, liquidity and working capital plays a very
important role. In case of GCMMF the current ratio
though improving over the years is not up to the
standards. Hence, diversifying may further worsen this
ratio.
•
• The quick ratio of the company is also not favorable.
 WHY THEY SHOULD DIVERSIFY
• Good asset turnover ratio
– Indicates optimum exploitation of resources
– Organizations which cater to masses are judged on their
ROA. Diversification may not generate high ROI but can
certainly have good ROA.
• Excellent debtor turnover ratio
– Average days for debt collection is very low
– Suggests good relationships with customers which can be
harnessed during diversification.
• Inventory turnover ratio suggests efficiency is not a
concern. This has gradually improved over time and does
not block working capital
• GCMMF depends more on savings for new investments.
Debt equity ratio has been reduced, which is fair now
and raising debt for investment could be easy
• Improved interest coverage ratio because of better
profitability. GCMMF can pay interests on debts with ease
in this situation.
 The way forward
 Pilot projects on Gujarat and Maharashtra which are GCMMF
strongholds


GCMMF has to look into greener pastures



• Increased milk supply poses a challenge having reached

saturation
• Technological stagnation and poor quality of cattle and
livestock


Completely fitted GCMMF’s plans to break into the western



market
• Processed fruits and vegetables earn more revenue from
exports
• Milk is already being exported to many countries


 One of the main limitations of this sector has been inefficient

food logistics and distribution, one that can be easily
mitigated by GCMMF
THANK YOU