The Birth of Amul

It all began when milk became a symbol of protest Founded in 1946 to stop the exploitation by middlemen Inspired by the freedom movement

The seeds of this unusual saga were sown more than 65 years back in Anand, a small town in the state of Gujarat in western India. The exploitative trade practices followed by the local trade cartel triggered off the cooperative movement. Angered by unfair and manipulative practices followed by the trade, the farmers of the district approached the great Indian patriot Sardar Vallabhbhai Patel for a solution. He advised them to get rid of middlemen and form their own cooperative, which would have procurement, processing and marketing under their control. In 1946, the farmers of this area went on a milk strike refusing to be cowed down by the cartel. Under the inspiration of Sardar Patel, and the guidance of leaders like Morarji Desai and Tribhuvandas Patel, they formed their own cooperative in 1946.

This co-operative, the Kaira District Co-operative Milk Producers Union Ltd. began with just two village dairy co-operative societies and 247 litres of milk and is today better known as Amul Dairy. Amul grew from strength to strength thanks to the inspired leadership of Tribhuvandas Patel, the founder Chairman and the committed professionalism of Dr Verghese Kurien,who was entrusted the task of running the dairy from 1950.

The then Prime Minister of India, Lal Bahadur Shastri decided that the same approach should become the basis of a National Dairy Development policy. He understood that the success of Amul could be attributed to four important factors. The farmers owned the dairy, their elected representatives managed the village societies and the district union, were sensitive to the needs of farmers and responsive to they employed their demands. professionals to operate the dairy and manage its business. Most importantly, the co-operatives

At his instance in 1965 the National Dairy Development Board was set up with the basic objective of replicating the Amul model. Dr. Kurien was chosen to head the institution as its Chairman and asked to replicate this model throughout the country.

The Amul Model

The Amul Model of dairy development is a three-tiered structure with the dairy cooperative societies at the village level federated under a milk union at the district level and a federation of member unions at the state level.

Establishment of a direct linkage between milk producers and consumers by eliminating middlemen

Milk Producers (farmers) control procurement, processing and marketing

Professional management

The Amul model has helped India to emerge as the largest milk producer in the world. More than 15 million milk producers pour their milk in 1,44,246 dairy cooperative societies across the country. Their milk is processed in 177 District Co-operative Unions and marketed by 22 State Marketing Federations, ensuring a better life for millions.

GCMMF

Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food product marketing organisation with annual turnover (2011-12) US$ 2.5 billion. Its daily milk procurement is approx 13 million lit (peak period) per day from 16,117 village milk cooperative societies, 17 member unions covering 24 districts, and 3.18 million milk producer members. It is the Apex organisation of the Dairy Cooperatives of Gujarat, popularly known as 'AMUL', which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money. Its success has not only been emulated in India but serves as a model for rest of the World. It is exclusive marketing organisation of 'Amul' and 'Sagar' branded products. It operates through 47 Sales Offices and has a dealer network of 5000 dealers and 10 lakh retailers, one of the largest such networks in India. Its product range comprises milk, milk powder, health beverages, ghee, butter, cheese, Pizza cheese, Ice-cream, Paneer, chocolates, and traditional Indian sweets, etc GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading House" status. Many of our products are available in USA, Gulf Countries, Singapore, The Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from Government of India for Excellence in Dairy Product Exports for the last 13 years. For the year 2009-10, GCMMF has been awarded "Golden Trophy' for its outstanding export performance and contribution in dairy products sector by APEDA.

For its consistent adherence to quality, customer focus and dependability, GCMMF has received numerous awards and accolades over the years. It received the Rajiv Gandhi National Quality Award in1999 in Best of All Category. In 2002 GCMMF bagged India's Most Respected Company Award instituted by Business World. In 2003, it was awarded the The IMC Ramkrishna Bajaj National Quality Award - 2003 for adopting noteworthy quality management practices for logistics and procurement. GCMMF is the first and only Indian organisation to win topmost International Dairy Federation Marketing Award for probiotic ice cream launch in 2007. The Amul brand is not only a product, but also a movement. It is in one way, the representation of the economic freedom of farmers. It has given farmers the courage to dream. To hope. To live. GCMMF - An Overview Year of Establishment Members No. of Producer Members No. of Village Societies Total Milk handling capacity per day Milk Collection (Total - 2011-12) Milk collection (Daily Average 2011-12) Milk Drying Capacity 1973 17 District Cooperative Milk Producers' Unions (16 Members & 1 Nominal Members) 3.18 Million 16,117 13.67 Million litres per day 3.88 billion litres 10.6 million litres (peak 13 million) 647 Mts. per day

Cattlefeed manufacturing Capacity 3690 Mts. per day Sales Turnover -(2011-12) Rs. 11668 Crores (US $2.5 Billion) Unions Producers' Union Ltd., Anand Producers' Union Ltd, Mehsana Producers' Union Ltd., Himatnagar Producers' Union Ltd., Palanpur Producers' Union Ltd., Surat Producers' Union Ltd., Vadodara Producers' Union Ltd., Godhra Producers' Union Ltd., Valsad Producers' Union Ltd., Bharuch Producers' Union Ltd., Ahmedabad Producers' Union Ltd., Rajkot Producers' Union Ltd., Gandhinagar Producers' Union Ltd., Surendranagar

CRISIL Rating for GCMMF Our Member 1. Kaira District Cooperative Milk 2. Mehsana District Cooperative Milk 3. Sabarkantha District Cooperative Milk 4. Banaskantha District Cooperative Milk 5. Surat District Cooperative Milk 6. Baroda District Cooperative Milk 7. Panchmahal District Cooperative Milk 8. Valsad District Cooperative Milk 9. Bharuch District Cooperative Milk 10. Ahmedabad District Cooperative Milk 11. Rajkot District Cooperative Milk 12. Gandhinagar District Cooperative Milk 13. Surendranagar District Cooperative Milk

14. Amreli District Cooperative Milk Producers 15. Bhavnagar District Cooperative Milk Producers 16. Kutch District Cooperative Milk Producers' Union Ltd., Anjar Sales Turnover 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 The Product Range Breadspreads Cheese Range Rs (million) 11140 13790 15540 18840 22192 22185 22588 23365 27457 28941 29225 37736 42778 52554 67113 80053 97742 116680

Union Ltd., Amreli Union Ltd., Bhavnagar

US $ (in million) 355 400 450 455 493 493 500 500 575 616 672 850 1050 1325 1504 1700 2172 2500

Amul Butter, Amul Lite, Delicious Table Margarine Amul Pasteurized Processed Cheddar Cheese, Amul Processed Cheese Spread, Amul Pizza (Mozarella) Cheese,Amul Emmental Cheese, Amul Gouda Cheese, Amul Malai Paneer (cottage cheese), Utterly Delicious Pizza Amul Gold Full Cream Milk 6% fat, Amul Shakti Standardised Milk 4.5% Fat, Amul Taaza Toned Milk 3% fat,Amul Slim & Trim, Amul Cow Milk Amul Gold 4.5% fat Milk, Amul Shakti 3% fat Milk, Amul Taaza 1.5% fat Milk, Amul Lite Slim-n-Trim Milk, Amul Fresh Cream

Fresh Milk UHT Milk Range

Milk Powders Milk Drink Health Drink Brown Beverage Curd Products Pure Ghee Sweetened Condensed Milk Mithaee Range (Ethnic Sweets) Ice-cream Chocolate & Confectionery

Amul Full Cream Milk Powder, Amulya Dairy Whitener, Sagar Skimmed Milk Powder, Amulspray Infant Milk Food, Sagar Tea and Coffee Whitener Amul Kool Flavoured Milk, Amul Kool Cafe, Amul Kool Koko,Amul Kool Millk Shaake, Amul Kool Chocolate Milk,Nutramul Energy Drink Stamina Instant Energy Drink Nutramul Malted Milk Food Amul Masti Dahi (fresh curd), Amul Masti Spiced Butter Milk,Amul Lassee, Amul Flaavyo Yoghurt Amul Pure Ghee, Sagar Pure Ghee Amul Mithaimate Amul Shrikhand, Amul Mithaee Gulabjamuns, Amul Basundi,Avsar Ladoos Sundae Range, probiotic,,sugarfree and probiotic Amul Milk Chocolate, Amul Fruit & Nut Chocolate, Amul Chocozoo, Amul Bindass, Amul Fundoo

Case study 4 India Amul/National Dairy Development Board (Amul/NDDB) Total cost: NA Financier Government Year of establishment: 1946 Value chain approach: Relational chain, producer-driven Although Amul and NDDB are presented as one case study, they are in fact two separate chains that compete with each other under their respective brand names: Amul and Mother Dairy. Background. Amul derives its name from a Sanskrit word, Amoolya, which means priceless. It is the biggest dairy cooperative in India, based in Anand, in the state of Gujarat. It had its genesis in preindependence India when the dairy sector was dominated by private companies that exploited the poor farmers. In 1946, the milk producers in the state of Gujarat, led by Sardar Vallabhai Patel, started developing revolutionary ideas against the privately owned Polson dairy and established the first cooperative society: the Kaira District Cooperative Milk Producers Union Limited (KDCMPUL). The motto No Cooperation, No Progress! started spreading very fast and milk was used as a symbol of protest against British hegemony, through a 15-day farmers strike. Amul is the foremost dairy brand name in India and has held its position against competition from international giants such as Nestle. Intervention. Patels vision was to organize the farmers to enable them to gain control over procurement, processing and marketing while eliminating the middlemen. Amul started with 2 village societies and 247 liters of milk collected per day. The movement grew and, in 1973, the Gujarat Cooperative Milk Marketing Federation (GCMMF) was established, an apex organization responsible for marketing the milk and milk products of cooperative unions in the state of Gujarat. In the 80s the word Amul was converted into a brand. Currently, in the state of Gujarat, Amul produces

10.16 million liters of milk daily, which is collected from 2.7 million farmers, processed through 30 dairy plants, and distributed through 500,000 retail outlets. The annual sales turnover has reached USD 1,504 million (2008-2009). The Amul model became so successful that it was replicated in the 70s, after the government recognized the importance of milk cooperatives as a means of promoting socio-economic development in rural areas while simultaneously increasing milk production in India. The National Dairy Development Board (NDDB) launched the Operation Flood programme (OF) to create a nationwide milk grid. During the 26 years from 1970 to 1996, OF established linkages between rural milk producers and urban consumers by organizing farmer dairy cooperative societies. An investment of USD 439 million has generated an incremental return of USD 8.778 billion. OF was one of the worlds largest rural development programmes that: helped dairy farmers direct their own development, placing control of the resources they create in their own hands. A National Milk Grid links milk producers throughout India with consumers in over 700 towns and cities, reducing seasonal and regional price variations while ensuring that the producer gets fair market prices in a transparent manner on a regular basis 1 . Dr. Varghese Kurien, a dairy engineer who was chairman of NDDB at that time, was the architect of the OF programme and is considered the father of Indias White Revolution. The Amul model. Under the model, the entire value chain from procurement, to processing and marketing is controlled by the farmers cooperative, which is directly linked to the final customer

1 http://www.nddb.org/aboutnddb/operationflood.html(see Figure 1). There are no middlemen; the cooperative collects the milk directly at the producers doorsteps. The model envisages that democratic elections are held every three years, to elect the

members of the management committees who, in turn, elect the chairman. This ensures an active participation of farmers in decision-making, as well as transparency and democratic management. Membership is open to anyone who owns at least one cow and is able to provide at least 700 litres of milk per year. The final price of Amul products are decided by GCMMF, which conducts market surveys on aspects including the costs of milk, labour, processing, packaging, advertising, transportation and taxes. Figure 1: Amul value chain and model Impact on the target group. The intervention has reached a total of 13 million households all over India. Even the smallest producer, producing only 2 litres a day, can benefit from the programme. Farmers receive 80% of the retail price through up-front payments when the milk is sold and subsequent distribution of profits as corporate members, i.e.: for every INR 1 sold (USD 0.022), INR 0.80 (USD 0.017) goes to the farmer and INR 0.20 (USD 0.0043) towards the cooperatives administrative costs. There has been substantial social impact with cooperative members succeeding in demanding services like roads, schools, health centers in their communities, by acting together as a society. The case of a young milk producer: Dolly Patel 2 . Discussions held with a milk producer, Dolly Patel, 19-year old, female, in Navli village, gave an insight of the socio-economic scenario in that village. The level of education appears to be high in the village, with younger generations even attaining master degrees. Dolly Patels family owns 3.5 acres of land, and Dolly personally owns a cow that produces an average of 10 litres per day; the milk is sold to the Navli Milk Producers Cooperative Society Ltd. Estimates show a daily profit of USD 3, consideration taken of: daily production costs of USD 0.43 per cow and USD 0.35/litre farm-gate price. This implies a yearly profit of USD 1,106 for Dolly Patel; this is partly saved, and partly used to

contribute towards family expenses. Dolly Patel, beneficiary interviewed during the field mission.

2 Source: beneficiary interviewed during field mission. VETERINARY SERVICES FEED, FODDER TRAINING MILK PRODUCERS MILK COLLECTION POINTS PROCESSING, PACKAGING MARKETING, DISTRIBUTION FINAL CUSTOMER Amul model Village Dairy Cooperative Society

District Milk Cooperative Union Marketing FederationImpact on women and minorities. The Amul dairy cooperatives have given women some measure of economic independence, empowering them to participate more actively in household decisionmaking. Women in rural India are traditionally responsible for 60 to 80% of the dairy-related activities, and usually the owners of cows and buffaloes. Discussions with project beneficiaries revealed that women are involved mainly in the primary production stage of the chain, while men usually dominate other stages of the chain, such as marketing and processing. Figures show that numbers of female cooperative members have increased from 0.22 million in 1981 to 3.7 million in 2008. Key features Effective governance. In the Amul model, farmers own the company that controls the postproduction stages of procurement, processing, and marketing of milk and milk products. Democratic elections are held every three years to elect members of the management committees who then elect their chairman. This ensures active participation of farmers in decision-making, transparency, and democratic management. Membership in the cooperative is open to all farmers who own a cow and are able to provide an annual supply of 700 liters of milk. Coordinated delivery of services. These include technical support, collection, market access and brand name development and distribution. Amul provides support for animal husbandry, breeding services and veterinary services. It operates an animal feed factory, makes its own milk cans, and appropriate vehicles to ensure the right temperature and humidity. An agriculture university and a rural management institute are also part of the Amul set-up. In the event of droughts, Amul also subsidizes animal feed. Value added/Vertical integration. Amul is vertically integrated from production to retail.

Information flow. Procurement prices are announced in advance and variable according to fat content. Amul was one of the first major organizations in India to create a website in 1996, to facilitate communications amongst producers, distributors and consumers. One of Amuls members, Banas Dairy, has also started a unique project involving the establishment of information kiosks in each village for internet and e-governance activities within the cooperative. Villagers use the kiosk to obtain official forms, agriculture and veterinary details. Trust. Trust has been established through farmers participation in the ownership of the enterprise and through transparency with regard to business transactions, elections, etc. Horizontal integration. The company is owned by the farmers cooperatives. Policy/Enabling measures. The initial Government intervention played a significant role in facilitating the development of the dairy industry. PPP. Substantial support has been provided by Government, which initially financed the project by recycling the profits from the sale of imported powdered milk. The funds were used to develop the dairy industry, including NDDB, which received over 50% of the funding in grants. Diversification. Amul is a dairy chain with a broad range of end products (i.e. milk, ice cream, ghee and many others). Capacity building. There is considerable focus on capacity building.Infrastructure. Infrastructure is not financed by Amul. However, the cooperative members have been able to put pressure on local politicians to provide financing for water, roads, schools, etc. Chain efficiency/Competitiveness. Amul established a direct linkage between milk producers and consumers by eliminating the middlemen. Production and marketing functions have been integrated along the chain, reducing transaction costs for farmers. Amul has been accredited with 9001 and HACCP certifications. Inputs. Members are provided with animal feed. Technology transfer. The installation of 4,000 Automatic Milk Collection Units at Village Dairy Cooperative Societies is used to collect information on animals, milk fat content, volumes, and

amounts payable to each member. This information is also used with the objective of improving the breed. Market linkages. The chain is fully integrated, from the producers to the retail outlets. Sustainability. Amul is now a well-established company, entirely owned by over 2.5 million milk producers. It is managed by professional managers who have a strong track record of innovation in marketing, manufacturing and logistics. Driving success factors. The success of the model was heavily determined by substantial government support and very dedicated management. Drawbacks. There has been criticism that not enough attention has been paid to women. For this reason, both Amul and NDDB are currently trying to address gender issues and forming women cooperatives. Sources:

th June 2008. dhyay (Amul) and B.S. Khanna (NDDB).

AgroIndustries Forum for Asia and the Pacific, China, Nov 2009. ation of Amul Milk in Retail Outlets of Pune City, study conducted by the Asian School of Management, Aug 2009. Investing in Rural Producer Organizations. Dr. Verghese Kurien, WB, EEC Food Aid, May 2004. -based and driven development: a critical review, G. Mansuri, V. Rao, The World Bank Research Observer, 2004.

http://www.nddb.org/aboutnddb/operationflood.html