Economics Project

THE TASTE OF INDIA

(Gujarat co-operative milk marketing federation)

1

DAIRYING IN INDIA: A RETROSPECT
Dairying has been a part of the cultural life of our people since time immemorial. In the ancient traditions of India, cow was & is not merely a source of milk and milk products but it is considered sacred and auspicious. Cow is considered Go Mata and people worship it by offering water, fruits and flowers. Cow is considered as Kamdhenu--provider of all needs of a person. Our Rishis and Munis of yore subsisted on cow’s milk only. Although they renounced many worldly provisions, they retained cow for worship and as the supplier of their sustenance. Cow milk is considered complete food and there are many instances in India where people have survived on a glass of cow's milk only. Kheer prepared out of cow's milk is offered as prasad to God. There are numerous ways in which cow's milk is used as an offering to God and in various religious practices. India's rural population value not only cow's milk but its dung also as purifier and all sacred functions are held in a place where it is washed with cowdung. Cattle are considered as the main source of draughtpower for conducting agriculture. Indian agriculture will collapse if cows do not deliver calves, which later become bullocks and bulls for cultivation purposes.

2

Cow is the hub of our rural life while modern means of transportation is yet to reach many of the 5,87,000 villages in India, it is the bullock which

provides motive power for rural transportation and bullock cart is considered to be the sinews of rural life. Despite modernisation it still continues to be main source of rural transportation. Besides, dairying also plays a dominant role as provider of employment, particularly in rural areas. Cattle raising needs intensive labour and at least one member of the family has to be continuously milking and its protection. With swelling population, cultivation of land alone cannot provide gainful opportunities of engagement and dairying has emerged as alternative to crop production for raising their income.

3

92 litres per person per year in Latin America.OVERVIEW The average milk consumption is around 35 litres per person per year in Asia. and 300-400 litres per person in Western Europe. milk production in the low and middle income tropics has been increasing at around three per cent a year while. The increasing demand for milk and dairy products in most low and middle-income countries has mostly been met by imports. The milk produced in India is distinctly seasonal. consumption varies widely between and within social groups. Demand for milk and dairy products has increased in tropical areas where people's incomes have been growing. demand has been increasing at a slightly faster rate. buffalo milk 4 . 20 litres per person per year in Africa. It comes from cows and buffalo in equal proportion. on average. 446 litres of milk annually and buffalo produce 861 litres of milk annually. Within countries. While growth of milk output has exceeded the growth rate of the populations in industrialized economies since 1960. Cows produce. on average. with a small contribution from goats.

the milk distribution network.A PYRAMID India's dairy market is multi-layered. inhabited by 5 .millions of litres per day. Nevertheless. THE INDIAN MARKET . In the major cities lies an immense growth potential for the modern sector. Eighty per cent of all local milk is consumed in liquid form. The bulk of the demand for milk is among the poor in urban areas whose individual requirement is small. The effective milk market is largely confined to urban areas.700 cities and towns. Presently. The narrow tip at the top is a small but affluent market for western type milk products. the packed milk segment would double in the next five years. serves barely 778 out of 3. maybe a glassful for use as whitener for their tea and coffee. It's shaped like a pyramid with the base made up of a vast market for low-cost milk. quality pasteurized milk. According to one estimate. giving both strength and volume to the modern sector. it adds up to a sizable volume .ranges from six to nine per cent fat content. dispensing hygienically packed wholesome.

1 milk producing country. with output in 1999-200 forecasted at 78 million tonnes. India has become the world's No. against the worlds at 1 per cent. The expected rise in urban population would be a boon to Indian dairying. Furthermore. India. assisted by many multi-lateral agencies. would have a place in the sun of prosperity for many decades to come. the World Bank. at 71 million tonnes. the annual rate of growth in milk production in India is between 5-6 per cent. India's milk production was on par with the U. India's annual milk production has more than trebled in the last 30 years. An estimated 50 per cent of the total milk produced is consumed here. In the year 1997.S. under the Operation Flood (OF) Project. 6 . This rapid growth and modernization is largely credited to the contribution of dairy cooperatives. with her sizable dairy industry growing rapidly and on the path of modernization.over 25 per cent of the country's population. FAO and WFP (World Food Program). rising from 21 million tonnes in 1968 to an anticipated 80 million tonnes in 2001. including the European Union.

Demand for milk is not all in fluid form. 7 . is quite a complicated task. if the producers of milk are to be ensured a remunerative price for it. Arranging such a huge finance (for creating milk marketing and processing infrastructure) is practically impossible for an individual. butter. Undertaking marketing of milk on modern lines calls for creating a lot of marketing and processing infrastructure involving huge finance apart from expertise. Margins: Quite reasonable. Milk is demanded for various milk productscurds. Milk is a highly perishable commodity and it cannot be preserved in its natural form for a long time. SWOT ANALYSIS OF INDIAN DAIRY INDUSTRY STRENGTHS: • • Demand profile: Absolutely optimistic. Milk is produced in villages but its buyers are in distant urban areas.Marketing of milk. Marketing of milk has to be taken on modern scientific lines. Local demand may be only for a portion of fluid milk. more so for a poor milk producer. even on packed liquid milk. cheese and sweets made of milk. in fact. ghee.

Presently. technical human resource pool. With balancing equipment. WEAKNESSES: • Perishability: Pasteurization has overcome this weakness partially. more than 80 per cent of milk produced is flowing into the unorganized sector. competition is becoming tougher day by day. UHT gives milk long life • Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. which requires proper channelization. Thus the manufacturers have to provide the distributors with refrigerators as well as good packaging so that the consumer gets the milk in the best quantity and quality. But then 8 . • Competition: With MNCs like Nestle and Britannia entering this industry. • Problematic distribution: Milk being a perishable commodity. • Availability of raw material: Abundant. you can keep on adding to your product line. cannot be stored for a long period of time. built over last 30 years.• Flexibility of product mix: Tremendous. • Technical manpower: Professionally trained. But with the overall economic improvement in India. these problems would also get solved.

both in terms of utilization of resources and presence in the market place. o Addition of cultured products like yoghurt and cheese lend further strength .competition has to be faced as a ground reality. and dairy sweets. and the Middle East. Given below are potential areas of value addition: o Steps should be taken to introduce value-added products like shrikhand. Amul is exporting to Bangladesh. • Export potential: Efforts to exploit export potential are already on. opportunities will increase tremendously for the export of agri-products in general and dairy products in particular. flavored milk. The market is large enough for many to carve out their niche OPPORTUNITIES: • Value addition: There is a phenomenal scope for innovations in product development. Sri Lanka. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. ice creams. Nigeria. packaging and presentation. paneer. Following the new WTO treaty. 9 . pizzas.

Any investment idea can do well only when you have three essential ingredients: entrepreneurship (the ability to take risks). has been attracting a large number of entrepreneurs. following it’s delicensing. 10 . Strengths and opportunities are fundamental and weaknesses and threats are transitory. the no un-organized bargaining sector: capacity. All that needs to be done is: to innovate. Their success in dairying depends on factors such as an efficient yet economical procurement network. hygienic and cost-effective processing facilities and innovativeness in the market place. The no producers have knowledge of market conditions. The Indian dairy industry. innovative approach (in product lines and marketing) and values (of quality/ethics). are devoid of the services of the experts and as such incapable of marketing milk in value added forms The SWOT analysis shows that the ‘strengths’ and ‘opportunities’ far outweigh ‘weaknesses’ and ‘threats’.THREATS: Milk unorganized vendors. convert products into commercially exploitable ideas.

who some fifty years ago rebelled against the exploitative prices. which they were receiving for their milk from a privately owned dairy in Bombay. this process was replicated across the country in a project called "Operation Flood". dollars annually in earnings for their farmer-members. The dairy farmers have benefited economically to a great extent. This impressive network grew from a small group of farmers in Gujarat State. Not only do they receive fair prices. 11 .DAIRY CO-OPERATIVES IN INDIA One of the areas where co-operatives have made the greatest impact is in the dairy sector in India. They have become among the largest and most successful businesses in India.S. Over time the village co-operatives federated themselves into a regional union. With development assistance from many international and national development agencies. They also share in the proceeds from marketing their product by way of patronage refunds from their co-operatives.000 dairy co-operatives across the country. and generate more than one billion U. Today more than six million dairy farmers belong to more than 60. which owned and operated a processing plant and marketed the dairy products. but also they are paid twice a day after their milk is delivered and tested.

Aavin in Tamil Nadu. Gujarat Co-operative Milk Marketing Federation (GCMMF) is the largest player. etc).The dairy co-operatives have also put a high emphasis on educating their members and involving them in the decision-making process of the co-operative. once a leading player in the sector has turned bankrupt and is facing liquidation. Heritage Foods. Vijaya in Andhra Pradesh. Dairy Specialties. Gokul. Saras in Rajasthan. The milk segment is dominated by the dairy cooperatives. Verka in Punjab. Indiana Dairy. Other private players include J K Dairy. All other local dairy cooperatives have their local brands (For e. Amrut Industries.g. etc. 12 . Warana in Maharashtra.

The basic objective of OF was to create a virtual “flood” of rurally produced milk in India by helping rural milk producers in 18 milk sheds in 10 selected states of India to organize Anand pattern dairy cooperatives. It covers roughly 10 million rural milk producing households all over India and initially launched on July 1. It has got the unique distinction of being the biggest dairy development programme of the world in terms of coverage and longevity. processing and marketing organization was to be developed on the pattern of Anand model of cooperatives. it is still underway. The Operation Flood is an integrated programme of the dairy development in the cooperative sector based on three-tier structure comprising the primary dairy cooperatives at the village level. milk producers' union at the district level and apex federations at the state 13 . 1970. The very rationale behind OF was that milk channel and a ready remunerative market for the rurally produced milk. The milk production. procurement.OPERATION FLOOD Operation Flood (OF) is widely held today as a mostly successful programme launched in our country over the past fifty years.

to increase organized milk production. procurement and processing. First. 14 . • To facilitate long term productive investment in dairying and cattle development • To ensure efficient supply of personnel to handle each facet of the project.level. Secondly. and to stabilize the major liquid milk schemes' position in their markets. • To identify and satisfy the needs of milk consumers and producers. The main objective of the programme is to build a viable and selfsustaining national dairy industry capable of meeting the domestic demand for fresh liquid milk and milk products and competing in the international arena. the donated milk products were used to reconstitute milk. the funds realized from reconstitution and sale of donated products were used to resettle city-kept milch animals and permit their progeny to multiply. and therefore provide the major cities' liquid milk schemes with enough milk to obtain a commanding share of their markets. The objectives of Operation Flood can be summarized as follows: • To enable each city’s liquid milk scheme to restructure and capture a commanding share of its market. The surpluses were used in two ways to speed up Indian dairy development. so that consumers’ preferences can be fulfilled economically and producers can obtain a larger share of the rupees paid by consumers for their milk.

It is being funded by a World Bank loan of US $ 360 million besides food aid worth Rs. Chennai and Calcutta.000 primary dairy cooperative societies. 2. There are 200 milk processing plants in the cooperative. The main focus of this phase is on achieving financial viability of the milk unions and the state federations.063 million generated from the internal resources of the NDDB. Delhi. helped build a national milk grid. linking scores of milk sheds in different states with the urban demand centres and creating the infrastructure required to support a viable dairy industry. The Phase-II.OF was launched in three phases: The Phase-I of the Operation Flood was launched in the 1970s with assistance from the World Food Programme in the form of food aid of 126. With this. the programme is expected to cover about 170 milk sheds of the country by organizing some 70. The Operation Flood Phase-III is meant primarily to consolidate the gains of the earlier phases. daily supplies of milk are 15 . Funds generated through the sale of these commodities were used in the development of 27 rural milk sheds in 10 states and for setting up dairies in the rural hinterlands as well as the four milk-starved metropolitan cities of Mumbai.000 tonnes of skimmed milk powder and 42. government and private sectors which receive 11 million litres of milk per day. Under Operation Flood scheme.000 tonnes of butter oil. 2. 227 million by the EEC and Rs. Operation Flood is now in its third stage and involves eight million dairy farming families. Operation Flood dairies market three quarters of this total. which began in 1981.

Bangladesh and Sri Lanka. Fresh liquid milk. is marketed in over 1000 cities and towns in India by these cooperatives. there are 22 states federations in India. These cooperatives collect an average of 15 million litres of milk everyday. Sri Lanka has indeed hired the services of Dr. New Delhi. such as Philippines. The remaining 90 per cent of milk is utilized on farm. Also many developing countries. led to the establishment of a National Milk Supply Grid system via train and road tankers.5 million tonnes or ten percent of total milk produced. POST OPERATION FLOOD: - The programme has attracted worldwide attention because of its spectacular success as the three phases of Operation flood succeeded in fulfilling a major part of their objectives. or used to produced ghee or other products. The demands of consumers in the four major cities of India: Bombay. packed and branded. This accounts for 5. Today. sold to small operators in nearby towns. 16 . intend to use OF as a model for organizing their own dairy development programmes. more than 76 thousand village level cooperative societies and 11 million milk producer members in the different states. with 170 district level unions.collected from over 60.000 village milk procurement centers to meet consumer demand for drinking milk. Calcutta and Madras and the regional variations in milk supply.

V. Kurien, the main force behind India's white revolution to emulate the Operation Flood in that country. A recent evaluation of the Operation Flood programme by the World Bank has revealed that it has not only brought about a dairy revolution in India but has had a multi-dimensional beneficial impact on the rural masses, especially the poor. Operation Flood had clear benefits for the poor and women. For those landless people who own or have been able to purchase a milch animal, it has been a boon. It has facilitated establishment of 6,000

women's dairy cooperatives to generate higher incomes for women. Indirectly, it has expanded the number of children attending school because of the high-income elasticity of demand for education in Indian villages. The two key policy changes which had played a role in the success of the programme were direct financial assistance to the cooperatives to develop the dairy industry and the move to sell dairy food aid at commercial prices within India to generate resources for developmental work. Dumping of the items received, as free gifts in the local market would have depressed domestic prices, discouraging the local producers from raising production. It is now clear that with this kind of approach followed by India even a single commodity project like the Operation

17

Flood could have multiple beneficial effects on areas like nutrition, education and job-creation, besides raising income levels.

SPREAD EFFECTS OF DAIRY COOPERATIVES
Dairy cooperatives are acclaimed as an effective instrument for economic uplift of the rural poor, as they provide opportunities for gainful employment and income. The opportunities provided by the dairy cooperatives for easy sale of milk, periodic payment and incentive bonus act as stimuli for easy sale of milk, periodic payments and incentive bonus act as for the farmers to take up dairying on a more permanent and regular basis; and on a larger scale albeit, within the framework of the farm size investment and fodder resources. The unprecedented

18

regular cash flow injected into the rural economy by the dairy cooperatives has supplied a new framework to the rural economy, which in itself was an epoch-making event. Increase adoption of dairying has created a metamorphosis and has led to many desirable changes on the economy of milk producers-members of co-operatives. Studies

conducted in Gujarat and elsewhere have identified three dimensions of the spreads-effects of the dairy cooperatives –  Economic.  Social.  Peripheral.

19

higher price. It is an important income generating source among the landless families which earned as much as 65% of their total income from dairy occupation.  The possession of wet animals by different categories of milk producers were higher in the village served by cooperatives than in the villages. 20 .  The milk producers of dairy village obtained significantly higher milk yield than those of their counter parts in control villages not served by cooperatives. improvement in milk production.  Dairy farming is the important occupation in rural areas.  The level of adoption of improves animal husbandry practices was considerably superior in the village served by the cooperatives. it is the economic incentives yielding direct and tangible returns for the milk producers’ which provide lasting solution to their problems. better income and employment to the family members of the milk producers and improvements in the productive traits of the animals. which did not have dairy cooperatives.  There was a significant improvement in the price received by the milk producers of dairy village than that received at the control village. The direct economic impact of the dairy cooperatives on the producers’ households are varied and many such as: increase in the number of milch animals owned.ECONOMIC BENEFITS Of all the benefits that accrue due to the development of dairy cooperatives.

⇒ The dairy co-op has stimulated the desire for social participation of milk producers across social and economic divisions. 21 . The above findings lead to the conclusion that the milk cooperatives were instrumental in stepping up the income of the milk producers who had adopted dairying for generation of income and gainful employment in rural areas. by providing means for upward social mobility of the low caste milk producers and ex-untouchables. It is in fact the social dimension which renders the dairy cooperatives more relevant to rural transformation than even the economic dimension. SOCIAL BENEFITS The social dimension of the benefits of cooperative dairying is intangible and long term in nature. The traditional power politics and group rivalry and ethnic conflicts have been relegated to background.  The dairy farmers of the dairy village had obtained significantly higher income than that obtained by their counter parts. Some important social benefits of dairying are outlined below: ⇒ It cuts at the very root of the age-old caste system.

The milk co-op has made valuable contribution to enhance the status of rural women. Poverty is mostly confined to certain sections the rural society who are in the lower rungs of the social ladder. The happenings in a rural community called Khadgodhra are a convincing ⇒ proof of the potentialities of dairy co-op in changing the role of women folk. It is this section which is largely benefited by the milk co-op. organization This concept and of democratic organization and management of an economic institution is being applied to other facets of life and other social and economic actions 22 .⇒ It is an instrument of ethnic reshuffle and a great social equalizer. ⇒ Rural dairy co-operatives are an effective means to fight rural poverty. ⇒ ⇒ ⇒ The role of women in the traditional rural society had been consistently undermined and underrated. ⇒ The rural co-op introduces concepts of management of the villages. regular income from sale of milk has enlarged their perception on saving and investment and enhanced their levels of poverty aspirations.

23 . film shows.⇒ The perception of health and family planning has vastly changed as a result of the health care and veterinary services undertaken by dairy co-op. even to the poorest producer. act as a constant source of education and information. It is this cooperatives institutional infrastructure.  The development of dairying on cooperatives lines places at the disposal of the community a network of institutions which are the points for collective actions. agencies for procuring and supplying technical inputs and hiring technical personnel and in short. making available to the producers all the economies of the large scale dairying. ⇒ The dairy co-operatives have a great educative value to the rural masses. The various educational and extension media such as newsletters. ⇒ INDIRECT BENEFITS  The dairy cooperatives have the capacity to generate substantial employment opportunities in rural areas. demonstrations etc. collective bargaining. Apart from providing employment to the milk producing families each milk union employs hundreds of skilled and unskilled labours and every village society employs 3 to 10 persons depending upon the volume of milk handed.

repairs and maintenance. furniture and fixtures. It also demands for services such as. wells.  Dairy development also requires the supportive infrastructure. water supply schemes. insurance. clinics. street lights. The primary cooperatives and district unions have programmes to undertake the creation of such institutions like kindergarten. the production and marketing of other agricultural and animal husbandry products gets modernized on the lines of the milk 24 . roads. public conveniences. testing equipments. banking. hospitals. and development of transportation are the indirect and ancillary industries. Cattle feed plants. maternity homes.which is responsible for fulfilling the aspirations of rural producers by innovation and change.  The successful working of dairy cooperatives and their modernisation influences the technical modernisation of rural areas in a variety of ways. which are developed as a result of the dairy projects.  The creation of public institutions and aid to welfare activities and public amenities is yet another dimension of the spreadeffects of   the cooperatives dairies. libraries and such other welfare measures. which crop up as a result of dairy development. factories to produce milk cans. electricity. appliances. primary schools. Besides the ancillary industries.

political and the like.producers' cooperatives and developed strategy is adopted for procurement. deciding the prices both of the procured as well as the sold milk. which supplied milk to the metropolis of Bombay. The company had a virtual stranglehold on the farmers. Polson's Dairy in Anand. At that time. chill and supply milk to the Bombay Milk Scheme. Polson's Dairy 25 . In a nutshell. However there are success stories of dairy cooperatives such as AMUL. social. the headquarters of the district. a unique experiment was conducted that has become one of the most celebrated success stories of India. managerial. THE AMUL STORY In the 1940s. milk was obtained from farmers by private milk contractors and by a private company. The company arranged to collect. dairy cooperatives are faced with a multiplicity of problems – Economic. processing and marketing. India. in Gujarat. in the district of Kaira in the State of Gujarat. and to cities in Gujarat.

which would procure milk from the farmers. inspired by Sardar Vallabhbhai Patel. Purely by chance. and the decisions of the company regarding the quality and even the quantity of the milk supplied by the farmers were final. In 1955. KDCMPUL changed its name to Anand Milk Union Limited. In 1946. process the milk and sell it in Bombay to customers including the Bombay Milk Scheme. the farmers were forced to accept very low prices for their products. Initially he merely provided technical assistance in repairing. easy to remember and 26 . maintaining and ordering new equipment but subsequently he became involved with the larger sociological issues involved in organising the farmers into co-operatives and running these co-operatives effectively. The word was also easy to pronounce. freedom fighter and social worker. which lent itself to a catchy abbreviation. which meant “priceless” in Sanskrit. a local farmer. named Tribhuvandas Patel. in 1949. came to India and was posted by the Government of India to a job at the Dairy Research Institute at Anand. Amul.also extracted dairy products such as cheese and butter. This was known as Kaira District Co-operative Milk Producers' Union Limited. Polson's Dairy exploited its monopoly fully. organised the farmers into co-operatives. who had just completed his studies in engineering in the USA. a mechanical engineer named Verghese Kurien.

carried a wholly positive connotation. It became the flagship brand name for the entire dairy products made by this union. the farmers (or actually. A variety of support services are also provided to enable the farmers continue selling milk of adequate quality and to avoid disasters such as the death of their cattle (for a family owning just one or two 27 . their wives and daughters) bring their milk to the village collection centres where quantity of milk is checked in full view of all and quality (milk fat content) is checked using a simple device. Each day. The most important feature of these co-operatives is that they are run purely as farmers' co-operatives. Thanks to the above system. The farmers are paid in the evening for the milk they supplied in the morning. with all the major decisions being taken by the farmers themselves. the farmers are truly in charge of their own decisions. The co-operatives are not 'run' by a separate bureaucracy with vested interests of its own. there are no disputes regarding quantity or quality of the milk supplied by each farmer. Any farmer can become a member by committing to supply a certain quantity of milk for a certain number of days in a year and shall continue to be a member only if he keeps up this commitment. in most cases. and in the morning for the evening's milk. This prompt settlement in cash is a great attraction to the farmers who are usually cash starved. again in full view of all.

Subsequent years saw the addition of more plants to produce different products. With good prices paid for their milk. Amul built a plant to convert surplus milk produced in the cold seasons into milk powder and butter. raising milch cattle could become a good supplementary source of revenue to many households. a plant to manufacture cheese and one to produce baby food were added—for the first time in the world. a network of local village level co-operatives and district level co-operatives were formed on a pattern similar to that at Anand (the so called Anand Pattern).cattle and depending on its/their milk for their income. The cooperatives were expanded to cover more and more areas of Gujarat and in each area. In 1958. The farmers are progressively given new services such as • • • • Veterinary care for their cattle Supply of good quality cattle feed Education on better feeding of cattle Facilities for artificial insemination of their cattle. Starting from a 28 . these products were made from buffalo milk. In 1954. death of a cow could indeed be a disaster).

Amul had become a milk giant with a large procurement base and a product mix that had evolved by challenging the conventional technology. On his visit to Anand in 1965. What impressed him the most was that Amul had done all this without government assistance. This was carried out under a programme launched by the Government of India. The operation was co-ordinated by the National Dairy Development Board (NDDB). Lal Bahadur Shastri. Shastri asked Dr Kurien to replicate Anand's success all over India. a body formed by the Government of India with this specific objective. processed and delivered high quality milk to distant markets cost efficiently.daily procurement of 250 litres in 1946. was impressed by what he saw—a system that procured. 29 . the then Prime Minister of India. A pattern similar to the Anand Pattern was to be built in other states of India. entitled 'Operation Flood'. Shastri could also see the difference that the income from milk had made to the standard of living of farmers in the area. in marked contrast to a number of government sponsored dairy programmes that were doing poorly in terms of procuring and marketing good quality milk and boosting farmers' incomes.

Every milk producer can become a member of the co-operative society. Thus. The union also operates a network of veterinary services to provide routine and emergency services for animal health care. All of the village milk producers' co-operatives (primaries) in a district are members of their district cooperative milk producers' union. 30 . At a general meeting of members. on the basis of the quality of the milk. Milk collection. which frames the policies for the day-to-day management of the union's centralised facilities for milk collection. the testing for milk fat content. is handled by paid employees from the same village. which owns and operates a feeder/balancing dairy cattle feed plant and facilities for production of semen and its distribution. Each society also provides artificial insemination (AI) services and veterinary first aid (VFA). The primary milk producers' societies are affiliated to a district union. which frames the policies of the society to govern the day-to-day affairs relating to milk. The chairpersons of village societies elect the board of directors of the union. these primaries also generate local employment in the rural community.STRUCTURE OF THE ANAND PATTERN The basic unit in the Anand Pattern is the village milk producers' co-operative—a voluntary association of milk producers in a village who wish to market their milk collectively. and sale of cattle feed etc. Each producer's milk is tested for fat percentage (many also measure solids-not-fat) and is paid for. representatives are selected to form a managing committee.

The village milk producers' co-operative societies (primaries) market this cattle feed. The cattle feed plant owned and operated by the co-operative is able to provide nutritionally balanced cattle feed at prices 40% lower than the prices of traditional feeds. The milk collected from the village is usually sent to the co-operative dairy using trucks hired by the co-operative union. With the help of the dairy plant. usually has a milk processing plant to convert seasonal surpluses of liquid milk into milk powder and other conserved products. who reports to the elected chairman and a board of directors. owned by a union. Before the co-operatives. able to get a good price for the bulk of the milk that is produced in the flush season. Milk producers are able to substantially increase their returns from milk production because of better returns for their milk and lower feeding costs. the union is able to ensure that the milk producers get 80–90% of the lean season price even in the flush season. therefore. The dairy. This has enabled the farmers to get 20– 40% higher prices than they would have if they had not been a part of the co-operative system. Each co-operative dairy tries to market the bulk of 31 . cottonseed etc. The farmers are.processing and marketing and also technical inputs. such as oilseed cakes. Each union is managed professionally by a managing director. the middlemen usually paid only 60–70% of the lean season price in the flush season. Earlier the bulk of out-of-pocket expenditure on milk production was for the purchase of cattle feed ingredients.

based on the proportion of business contributed to the co-operatives. Today in Gujarat.79 million 13. Many societies are able to pay substantial amounts as bonuses to their milk producers. Members: No.2008-09): Milk collection (Daily Average 2008-09): Milk Drying Capacity: 13 district cooperative milk producers' Union 2. of Producer Members: No.05 billion litres 8. under the Anand Pattern system.4 million litres 626 Mts. per day 32 .1 million milk producers affiliated to 12 district level unions .328 11. of Village Societies: Total Milk handling capacity: Milk collection (Total .22 million litres per day 3. Professional managers employed by the co-operative ensure that they get the best returns for their produce. The profits made by the dairy are redistributed to the milk producers as a subsidiary payment. there are 11 thousand village level cooperatives with a total membership of 2.its milk as liquid milk and converts surplus milk into products with a longer shelf life. These unions federate into a state level apex marketing organisation known as the Gujarat Co-operative Milk Marketing Federation (GCMMF).

GCMMF is India's largest food products marketing organisation with annual sales turnover exceeding Rs 22 billion (about US$ 483. The farmers had realised that marketing was the key to the success of the Anand Pattern and to their success when they had control over the marketing system.Cattlefeed manufacturing Capacity: 3500 Mts per day The GCMMF was established in 1973 with the objective of providing the milk producers of Gujarat with their own marketing and distribution network. The results are evident. 33 . Today. This aimed to give them access to the most important link in the system-the customer.5 million).

veterinary medicines.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 Rs (million) 11140 13790 15540 18840 22192 22185 22588 23365 27457 28941 29225 37736 42778 52554 67113 US $ (in million) 355 400 450 455 493 493 500 500 575 616 672 850 1050 1325 1504 OBJECTIVES OF GCMMF The main stakeholder of GCMMF is the farmer member for whose welfare GCMMF exists. vaccines and other animal health 34 . GCMMF states that its main objective is the 'carrying out of activities for the economic development of agriculturists by efficiently organising marketing of milk and dairy produce.

The biggest strength of GCMMF is the trust that it has created in the minds of its consumers regarding the quality of its products. Amul stands for guaranteed purity of whatever products it produces. gain access to markets and thereby ensure maximum returns for their efforts. where such trust is hard to come by. None of its products are adulterated. agricultural produce in raw and/or processed form and other allied produce'. GCMMF has declared that its business philosophy is as follows: • To serve the interests of milk producers and • To provide quality products that offer the best value to consumers for money spent. this could provide a central anchor for GCMMF's future business plans. ORGANISATIONAL STRUCTURE OF GCMMF It all started in December 1946 with a group of farmers keen to free themselves from intermediaries. GCMMF aims to market the dairy and agricultural products of cooperatives through: • common branding • centralised marketing • centralised quality control • centralised purchases and • efficient pooling of milk. 35 .products. In India.

that sustained growth for the long term would depend on matching supply and demand. which today forms the robust supply chain behind GCMMF's endeavors. There are similar federations in other states. The first.12 million farmers. GCMMF is a lean organisation. the Kaira District Milk Cooperative Union (better known as Amul) expanded exponentially. and the Gujarat network now covers 2.Based in the village of Anand. Management of this network is made more complex by the fact that GCMMF is directly responsible only for a small part of the chain.411 village level milk collection centers and fourteen district level plants (unions) under the overall supervision of GCMMF. that effective management of the network and commercial viability would require professional managers and technocrats. At its headquarters in Anand. Amul and GCMMF acknowledged that development and growth could not be left to market forces and that proactive intervention was required. a strategy that is believed to provide it with a cost advantage. with a number of third party players (distributors. Right from the beginning. Markets. To implement their vision while retaining their focus on farmers. there was recognition that this initiative would directly benefit and transform small farmers and contribute to the development of society. The vast and complex supply chain stretches from small suppliers to large fragmented markets. Managing this supply chain efficiently is critical as GCMMF's competitive position is driven by low consumer prices supported by a low cost system. retailers and logistics support providers) playing large roles. 10. four 36 . Second. a hierarchical network of cooperatives was developed. are primitive and poor in infrastructure. It would need heavy investment in the simultaneous development of suppliers and consumers. It joined hands with other milk cooperatives. then and even today. Two key requirements were identified.

The entire country has been represented in this structure. GCMMF has one overseas office in Dubai. finance and quality assurance. respectively.general managers (GMs) and four assistant general managers (AGMs) assist the managing director (MD). human resources development and marketing (Dhara and new business). co-operative services and technical projects. systems. The four AGMs look after the functions of marketing. a sales manager heads each office and is assisted by sales officers and field salespersons. respectively. THE DISTRIBUTION WORK 37 . These managers report to the MD but functionally each also reports to the various AGMs/GMs at the headquarters. There are 50 sales offices spread across the country (of which only two are in Gujarat). each headed by a zonal manager responsible for the sales of all products within his zone. The whole country is divided into five zones. The four GMs are in charge of marketing (dairy products).

and modest consumption levels of milk and other dairy products. consumers had limited purchasing power. milk powders.000 retail outlets across India through its network of over 3. sweets. This just-in-time inventory strategy improves dealers' return on investment (ROI).500 distributors.Amul products are available in over 500. UMBRELLA BRAND The network follows an umbrella branding strategy. cocoa products. ghee. butter. All GCMMF branches engage in route scheduling and have dedicated vehicle operations. cheese. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products. icecream and condensed milk. Thus Amul adopted a low-cost price strategy to make its products affordable and attractive to consumers by guaranteeing them value for money. 38 . This practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout the supply chain and it also minimizes dumping. Wholesale dealers carry inventory that is just adequate to take care of the transit time from the branch warehouse to their premises. DEVELOPING DEMAND At the time Amul was formed. GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. Amul is the common brand for most product categories produced by various unions: liquid milk.

mineral water is sold under the Jal Dhara brand while fruit drinks bear the Safal name. it was recognised that professional managers and technocrats would be required to manage the network effectively and make it commercially viable. MANAGING THE SUPPLY CHAIN Even though the cooperative was formed to bring together farmers. Amulya and Nutramul. GCMMF enhanced the product mix through the progressive addition of higher value products while maintaining the desired growth in existing products. By insisting on an umbrella brand. Despite competition in the high value dairy product segments from firms such as Hindustan Lever Nestle and Britannia GCMMF ensures that the product mix and the sequence in which Amul introduces its products is consistent with the core philosophy of providing milk at a basic. Amul's sub-brands include variants such as Amulspray. COORDINATION 39 . GCMMF not only skillfully avoided inter-union conflicts but also created an opportunity for the union members to cooperate in developing products. affordable price. The edible oil products are grouped around Dhara and Lokdhara. Amulspree.INTRODUCING HIGHER VALUE PRODUCTS Beginning with liquid milk.

and educational activities. provision of animal feed.Given the large number of organisations and entities in the supply chain and decentralised responsibility for various activities. and veterinary services. Accordingly. and the boards of the unions comprise of farmers elected through village societies. thereby creating a situation of interlocking control. and many are not professionally managed with little regard for quality and service. These include logistics of milk collection. These include monitoring milk collection contractors. sale of products through dealers and retail stores. marketing efforts (including brand development) were assumed by GCMMF. The unions coordinate the supply side activities. The board is drawn from the heads of all the unions. the supply of animal feed and other supplies. It is worth noting that a number of these third parties are not in the organized sector. provision of veterinary services. MANANGING THIRD PARTY SERVICE PROVIDER From the beginning. GCMMF and the unions play a major role in this process and jointly achieve the desired degree of control. 40 . effective coordination is critical for efficiency and cost control. The federation handles the distribution of end products and coordination with retailers and the dealers. This is a particularly critical issue in the logistics and transport of a perishable commodity where there are already weaknesses in the basic infrastructure.board. All other activities were entrusted to third parties. it was recognised that the unions' core activity lay in milk processing and the production of dairy products. distribution of dairy products.

the network has been able to regularly roll out improvement programs across to a large number of members and the implementation rate is consistently high.00 a.m. improvement in ROI of wholesale dealers.00 a. the federation and the unions have adapted successful models from around the world. without fail. It could be the implementation of small group activities or quality circles at the federation.. the unions.ESTABLISHING BEST PRACTICES A key source of competitive advantage has been the enterprise's ability to continuously implement best practices across all elements of the network: the federation. between 10. every Friday. be it a department or a branch or a depot to discuss their various quality concerns. Examples of benefits from recent initiatives include reduction in transportation time from the depots to the wholesale dealers.m. and 11. Or a TQM program at the unions. the village societies and the distribution channel. 41 . implementation of Zero Stock Out through improved availability of products at depots and also the implementation of Just-in-Time in finance to reduce the float. For example. all employees of GCMMF meet at the closest office.In developing these practices. More important. Similar processes are in place at the village societies. Or housekeeping and good accounting practices at the village society level. Agenda and Limit (PAL) with a process check at the end to record how the meeting was conducted. the unions and even at the wholesaler and C&F agent levels as well. Each meeting has its pre-set format in terms of Purpose.

reliant on a structured approach based on data gathering and analysis. process technology. TECHNOLOGIES AND E-INITIATIVES GCMMF's technology strategy is characterized by four distinct components: new products. milk collection as well as the marketing process. i. Sabar Union's records show a reduction from 2. (Undertaken by multi-disciplined teams. Amul actively pursues developments in embryo transfer and cattle breeding in order to improve cattle quality and increases in milk yields.5% in the amount of sour milk/curd received at the union. GCMMF has also implemented a Geographical Information System (GIS) at both ends of the supply chain. 42 . and complementary assets to enhance milk production and e-commerce. Another e-initiative underway is to provide farmers access to information relating to markets.e. technology and best practices in the dairy industry through net enabled kiosks in the villages.) For example.0% to 0. Village societies are encouraged through subsidies to install chilling units. GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to employ Internet technologies to implement B2C commerce. as is HACCP certification. Automation in processing and packaging areas is common. Kaizens are highly focussed projects.The most impressive aspect of this large-scale roll out is that improvement processes are turning the village societies into individual improvement centers.Kaizens at the unions have helped improve the quality of milk in terms of acidity and sour milk. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. Few dairies of the world have the wide variety of products produced by the GCMMF network.

not only can GCMMF sell the fat derivatives (such as cream and butter) but also the resultant skimmed milks can be made available at cheaper prices. a low-fat. many new products were added to its range. it sells full cream milk. Amul introduced its processed cheddar cheese. Amul launched its Amul brand ice cream. butter and milk powder. these products are labelled and sold in readily identifiable pouches. In 1983. a malt based beverage called Nutramul and chocolates. it also entered the sweet product market (milk based) through the introduction of Amul shrikhand. and Amul ice cream. a dairy whitener was introduced and it soon became the market leader. a sweetish sour item produced from milk and curd (a form of yoghurt). Amul Lite. Amulya. In 1996. GCMMF launched its ice creams in 43 . GCMMFs GROWTH CHART Even at the time of its formation. semi-skim milk and skim milk. cheese spread was launched by GCMMF. Gradually. Amul introduced a variety of new products: a condensed milk called Amul Mithaimate. largely milk derivatives. India's ice cream market was estimated to be worth around Rs 8 billion in the year 2000 (about US$ 175. In the 1990s. so that poorer people can also afford to drink milk.Farmers now have better access to information on the output as well as support services while providing a better planning tool to marketing personnel. In the 1970s. low cholesterol spread. In liquid milk alone. GCMMF had three major products in its portfolio: liquid milk.8 million). By reducing the fat content of milk. In the same year.

prices were about 30% lower than the prevailing prices and GCMMF also emphasised that the ice cream did not contain any gelatin. edible oils and fruit and vegetable based products. By the year 2000. In 1997. In less than a year. At launch. trying to launch their own ice cream brands. GCMMF had a total turnover of Rs 22. to sell all their ice creams under the Amul brand name.fourteen flavours in the city of Mumbai (Bombay) and Gujarat State. ice cream.2 billion (about US$ 550 million). Amul ice cream commanded a market share of about 55% in Gujarat and 30% in Mumbai. its share in India as a whole had reached 30%. 44 . The latest additions to the range of brands marketed by GCMMF are Masti Dahi (curd) and Amul Taaza (long-life milk). two varieties of ghee (clarified butter). four varieties of milk powder. In the -/year 1999–2000. with a milk procurement of more than 15 million litres/day. by the year 2000. sweets. Amul achieved further success when it managed to get various cooperatives in the country. chocolates. chocolate drinks. two varieties of butter. its product range was truly expansive: three varieties of milk. located close to the markets. buttermilk. flavoured milk. five varieties of cheese. This enabled GCMMF to benefit from the capacity of many of the more than 170 co-operative unions in the country.

AMUL PRODUCTS Breadspreads: • • Amul Butter Amul Lite Low Fat Breadspread Am ul Britannia Verka Others Amul plans to protect its dominance in low-margin market with price. Verka & Nestle. Major Competitors include Britannia. While 45 .

87 13.P.00 Amul Mothers Dairy Nestle 11.P 13.50 Note: T. Nestle outsources the product to complete its dairy range.92 11.00 63.P.78 57.80 13.R. BUTTER PRICES Brand 100gm T.27 M.R.Trade Price.00 63. 57.00 500 gm T.R.00 57..P – Maximum retail price Cheese Range: • Amul Processed Cheese Spread Am ul Britannia Others • • • • • • Amul Pasteurized Processed Cheddar Cheese Amul Mozarella Cheese Amul Emmental Cheese Amul Gouda Cheese Amul Malai Paneer (cottage cheese) Utterly Delicious Pizza 46 .P.00 63.00 13. 11.00 57.P 63.Britannia is focusing on just top 30 cities. M.53 Britannia 11.82 M.

000 10. Almond Pistachio.000 40. Saffron.000 20.000 30.50.000 0 Amul Pizza Hut Nirulas Domino's Amul Pizza Hut Nirulas Domino's Mithaee Range (Ethnic sweets): • • • • • Amul Amul Amul Amul Amul Shrikhand (Mango.5% fat Milk Slim-n-Trim 0% fat milk Chocolate Milk Fresh Cream Snowcap Softy Mix Amul Nestle Vijaya Goodlife Saras Others 47 . Cardamom) Amrakhand Mithaee Gulabjamuns Mithaee Gulabjamun Mix Mithaee Kulfi Mix UHT Milk Range: • • • • • • Amul Amul Amul Amul Amul Amul Taaza 3% fat Milk Gold 4.

Pure Ghee: • • Amul Pure Ghee Sagar Pure Ghee Dhara Edible Oils: • • • • • Dhara Refined Vegetable Oil Dhara Groundnut Oil Dhara Mustard Oil Dhara Health Refined Sunflower Oil Dhara Fit-n-Fine Refined Soyabean Oil Infant Milk Range: • • • Amul Infant Milk Formula 1 (0-6 months) Amul Infant Milk Formula 2 ( 6 months above) Amulspray Infant Milk Food Amulspray Lactogen Others 48 .Amul plans to develop the white milk market. It plans to capture major markets.

Amul 2 will.Amul 2 is poised to create a dent in market leader Nestle's fort. Amul recently entered the infant food market by introducing Amul 1. Amul 2 is priced a good 20 per cent less than the products offered by Nestle. Priced at about Rs 55 for a 500 gms pack. The non-weaning milk food market is currently dominated by Nestle with sub-brands like Cerelac and Nestum. however. Milk Powders: • • • • Amul Full Cream Milk Powder Amulya Dairy Whitener Sagar Skimmed Milk Powder Sagar Tea and Coffee Whitener Amulya Nestle Britannia Others Sweetened Condensed Milk: • Amul Mithaimate Sweetened Condensed Milk 49 . The Rs 2300-crore GCMMF aims to plant Amul 2 to take on Nestle with this distinct price advantage. a weaning infant milk product. Nestle as of now enjoys a near monopoly in this segment. be priced at about Rs 44 for 500 gms.

Kesar Carnival. Tutti Frutti) • Nut-o-Mania Range (Kaju Drakshi.Am ul Nestle Amul plans to emphasize price-leadership to drive Mithai-Mate to market leader. Roasted Almond. Butterscotch. Shista 50 .5% fat Curd Products: • • Amul Masti Dahi (fresh curd) Amul Butter Milk Amul Ice creams The following table gives the list of Amul ice creams currently being sold in the market • Royal Treat Range (Rajbhog. Fresh Milk: • • • • Amul Amul Amul Amul Taaza Toned Milk 3% fat Gold Full Cream Milk 6% fat Shakti Standardised Milk 3% fat Smart Double Toned Milk 1. Cappuchino. Chocochips. Badshahi Badam Kulfi. Kesar Pista.

Strawberry. Mango. Fresh Strawberry. Strawberry) Milk Bars (Chocobar.3 layer chocolate Bar SlimScoop Fat Free Frozen Dessert (Vanilla. Green Pista Kulfi) Cassatta Megabite Almond Cone Fundoo Range . Black Currant. Fresh Litchi. This will be achieved by  Expanding market with Snowcap (the ice cream mix). Pineapple. Chocolate) Frostik . Shahi Pista Kulfi. Banana. 51 .exclusively for kids • • • • • • Cool Candies (Orange.  Launching Fundoo to combat HLL’s Max.Pista Kulfi) • Utsav Range (Anjir. The company’s immediate objective is to create a market for ice cream mixes. Dates with Honey) • • • Simply Delicious Range (Vanilla. Shahi Badam Kulfi. Rose. Mango) Tricone Cones (Butterscotch. Chocolate) Sundae Range (Mango. Roasted Almond) Nature's Treat (Alphanso Mango. Black Currant) Millennium Icecream (Cheese with Almonds. Anjir. Chocolate. Mango Dolly. Pineapple) • • • Amul plans to expand its reach. Raspberry Dolly. Mawa Malai Kulfi.

Max. In the organized segment. Yum of Dairy Den (in Gujarat only) North South Mother Dairy. Havmor (in Gujarat only). There are an estimated 150 manufacturers in the organized segment. Vadilal. the significant brands are Kwality Walls. Pastonji. Dinshaw's (in Maharashtra only).The total size of ice cream industry is around Rs 15-16 billion. Maharashtra Dairy Products Region East West Brands Tulika. Major National Players Hindustan Lever Vadilal International GCMMF/Other operatives Milk Brands Kwality Walls. Joy.Amul.9 billion. Nirula's Arun (Hatsun Foods). Amul. Magnum Vadilal. Mother Dairy and Baskin Robbins. The Indian Ice cream market is dominated by a large number of small local manufacturers and regional players. rest all is with the unorganized sector. which accounts for 30-35% of sales and about 2000 units in the unorganized market. Mother Dairy Baskin Robbins Classic. Naturals (in Mumbai only). around 30-32% is in the hands of organized sector valued at Rs4. Dairy Cornetto. Nandini(Karnataka only) 52 . Rollicks (Induss Ice creams) Nature World. Dairy Fresh Co.

Hindustan Lever has a market share of around 40%. with an estimated market share of 27% and is rapidly gaining market share. Amul is the second largest player at the national level. Vadilal is another player in the national market with 8-9% of the market share but that too is shrinking. HLL Amul Mother Dairy Others Chocolate & Confectionery: • • • Amul Milk Chocolate Amul Fruit & Nut Chocolate Amul Eclairs 53 . represented mainly by Kwality Walls brand.

It has been accorded a "Trading House" status. GCMMF has received the APEDA Award from Government of India for Excellence in Dairy Product Exports for the last 11 years.Cadbury Nestle Amul Cam pco AMULs EXPORT GCMMF is India's largest exporter of Dairy Products. The major export products are: Consumer Packs Amul Pure Ghee Amul Butter Amul Shrikhand Amul Mithaee Gulabjamun Nutramul Brown Beverage Amul Cheese Amul Malai Paneer Amul UHT Milk (Long Life) 54 .

In order to come closer to the customer. Amul has plans to create a large chain of such outlets to be managed by franchisees throughout the country. 55 . We have created Amul Parlours at some prominent locations in the country. Baroda. Delhi. Gulf Countries and Singapore AMULs PARLOUR Amul has recently entered into direct retailing through "Amul Utterly Delicious" parlours created in major cities Ahmedabad. which are run by the company or its wholesale dealers "Amul Utterly Delicious" parlours are an excellent business opportunity for investors. shopkeepers and organizations. which would be known as "Amul Preferred Outlets"(APO).Amul Gold Milk Amul Taaza Double Toned Milk Amul Lite Slim and Trim Milk Amul Fresh Cream Bulk Packs Amul Skimmed Milk Powder Amul Full Cream Milk Powder Many of the productsavailable in the USA. Bangalore. Mumbai. Hyderabad and Surat. we have decided to create a model for retail outlets.

AMULs STRENGHT  Price is without doubt the source of Amul’s edge over the competition. Amuls new offering Infant Milk Substitute is priced lower than Nestle’s Nestum & Cerelac.000 cold chains & 5. It has helped Amul score over HLL – simply 56 .000 retailers with refrigerators. It is during the launch of new products the GCMMF will find this distribution network useful. 300 stock keeping units. 1.000 non-refrigerator retailer outlets.  Distribution network. Amul has over 40 product.00.00. 18.

000 tonnes of cocoa products every year. BIBLIOGRAPHY Websites: www. This alliance will help it in the confectionary business. cocoa farmer cooperative which produces 5.  Amuls brand mascot. the Amul Girl has helped.  Capital cost is low due to their alliance and their ability to outsource products from other co-operatives.com www. the co-operative to get away spending just 1% of its revenue on advertising. while the competition spends anything between 7-10% on advertising.because it controlled the milk and butter outlets that also stock ice creams. Amul spends close to 40% of its annual advertising budget on the umbrella brand through its best-selling “Taste of India” campaign.indiadairy.responservice. This will help reduce wage cost. GCMMF has an alliance with CAMPCO.com 57 .

org www.amul.www.com Newspapers: The Economic Times ACKNOWLEDGEMENT 58 .ssdairy.

We would like to thank Mrs. It gives us a platform to understand and evaluate a company from a realistic and an educational point of view. Adarsh suri for giving us the opportunity to be able to understand the working of a co-operative house also amul been such a big brand. In this way we have been successfully exposed to the cooperate world where we would like to be professional. 59 .

PROJECT DONE BY: AKHIL DHADHA (06) DEEPIKA GUPTA (12) ESHANT JAIN (15) SASHANK JAIN (19) NIDHI MERCHANT (34) VISHAL ROHIRA (46) POOJA SHAH (52) 60 .

Sign up to vote on this title
UsefulNot useful