SUPPLEMENTARY PROJECT OF COMPETITOR ON EXTERNAL ANALYSIS OF AMUL

SUBMITTED TO Prof Sanchita Ghosh

SUBMITTED BY Gagandeep Singh FT-11-1079

AMUL

INTRODUCTION
Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India.The word Amul is derived from the Sanskrit word Amulya , meaning invaluable. The co-operative is also sometimes referred to by the unofficial backronym: Anand Milk Union Limited. Formed in 1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3.03 million milk producers in Gujarat. Amul spurred India's White Revolution, which made the country the world's largest producer of milk and milk products. In the process Amul became the largest food brand in India and has also ventured into markets overseas. Dr Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (19732006), is credited with the success of Amul.

HISTORY
The Kaira District Co-operative Milk Producers' Union Ltd. was registered on 1 December 1946 as a response to the exploitation of marginal milk producers by traders or agents of the only existing dairy, the Polson (brand) dairy, in the small town of Anand (in Kaira District of Gujarat). Milk Producers had to travel long distances to deliver milk, which often went sour in summer, to Polson. The prices of buffalo and cow milk were arbitrarily determined. Moreover, the government at that time had given monopoly rights to Polson to collect milk from Anand and supply it to Bombay city. Angered by the unfair and manipulative trade practices, the farmers of Kaira approached Sardar Vallabhbhai Patel under the leadership of local farmer leader Tribhuvandas K. Patel. He advised them to form a cooperative and supply milk directly to the Bombay Milk Scheme instead of Polson (who did the same but gave them low prices). He sent Morarji Desai to organise the farmers. In 1946, the milk farmers of the area went on a strike which led to the setting up of the cooperative to collect and process milk. Milk collection was also decentralized, as most producers were marginal farmers who could deliver atmost 12 litres of milk per day. Cooperatives were formed for each village too. The Cooperative was further developed and managed by Dr.Verghese Kurien along with H.M. Dalaya. Dalaya's innovation of making skim milk powder from buffalo milk for the first time anywhere in the world and a little later, along with Kurien's help, making it on a commercial scale, led to the first modern dairy of the cooperative at Anand, which would successfully compete against established players in the market.

The trio's (T. K. Patel, Kurien and Dalaya's) success at the cooperative's dairy soon spread to Anand's neighbourhood in Gujarat, and within a short span, five unions in other districts Mehsana, Banaskantha, Baroda, Sabarkantha and Surat were set up. In order to combine forces and expand the market while saving on advertising and avoid competing against each other, the GCMMF, an apex marketing body of these district cooperatives was set up in 1973. The Kaira Union which had the brand name of Amul with it since 1955, transferred it to GCMMF.

COMPANY INFOThe GCMMF is the largest food products marketing organisation of India. It is the apex organisation of the Dairy Cooperatives of Gujarat. Over the last five and a half decades, Dairy Cooperatives in Gujarat have created an economic network that links more than 3.1 million village milk producers with millions of consumers in India. These cooperatives collect on an average 9.4 million litres of milk per day from their producer members, more than 70% of whom are small, marginal farmers and landless labourers and include a sizeable population of tribal folk and people belonging to the scheduled castes. The turnover of GCMMF (AMUL) during 201011 was 97.74 billion (US$1.78 billion). It markets the products, produced by the district milk unions in 30 dairy plants. The farmers of Gujarat own the largest state of the art dairy plant in Asia Mother Dairy, Gandhinagar, Gujarat which can handle 3.0 million litres of milk per day and process 160 MTs of milk powder daily. Amul Dairy established at Anand is the crown glory of the district. By launching the milk business in a scientific way, the dairy heralded White Revolution in Gujarat which is well established now. The dairy has provided the farmers an important source of supplementary income through animal husbandry. Today it has become a world renowned organisation. On 18 Aug 2012, Vipul Chaudhary of Mehsana district's milk cooperative was elected chairman of GCMMF, following a court's intervention.

FACTS ABOUT THE KAIRA DISTRICT PRODUCERS UNION (AMUL)

COOPERATIVE MILK

Established in 1946 - two societies collected 250 lures of milk. Competed with Polsons to supply milk to Bombay. 1952 - Bombay Government terminated Polsons contract and signed with AMUL. 1955 - Dairy and milk powder plant was established with aid from the United Nations Children's Fund (UNICEF). 1960 - AMUL pioneered production of milk powder and baby food from buffalo milk. AMUL - meets producer demand for critical inputs, veterinary services, artificial insemination and feed. Today AMUL members supply more than 1 million lures of milk per day. AMUL sells 400 tonnes of cattle feed every month.

PRODUCTS

Amul's product range includes milk powders, milk, butter, ghee, cheese, Masti Dahi, Yoghurt, Buttermilk, chocolate, ice cream, cream, shrikhand, paneer, gulab jamuns, flavoured milk, basundi, Amul Pro brand and others. Amul PRO is a recently launched brown beverage just like bournvita and horlicks offering whey protein, DHA and essential nutrients. In January 2006, Amul launched India's first sports drink Stamina, which competes with Coca Cola's Powerade and PepsiCo's Gatorade. Amul also offers mithaimate which successfully competes with milkmaid by nestle by offering more fat% at lower price. In August 2007, Amul introduced Kool Koko, a chocolate milk brand extending its product offering in the milk products segment. Other Amul brands are Amul Kool, a low calorie thirst quenching drink; Masti Butter Milk; Kool Cafe, ready to drink coffee and India's first sports drink Stamina. Amul's Icecreams are made from milk fat and thus are icecreams in real sense of the word, while many brands in India sell frozen desserts made from vegetable fat. Amul's sugar-free Pro-Biotic Ice-cream won The International Dairy Federation Marketing Award for 2007.

BRANDS UNDER AMUL

Amul Milk Bread Spreads Cheese UHT Milk Beverage Range Amul PRO Ice Cream Paneer Dahi Ghee Milk Powders Nutramul Mithai Range Mithai Mate Chocolates Fresh Cream Pouch Butter Milk Recipes

SWOT ANALYSIS

STRENGTHS
Demand profile: Absolutely optimistic. Milk being a necessity product, the demand will stay and the sales at GCMMF are bound to increase over a period of time. Margins: Quite reasonable, even on packed liquid milk. The margins are enough to limit the entry of potential entrants. Flexibility of product mix: Tremendous. With balancing equipment, GCMMF has kept adding a wide array of products to its product line. Availability of raw material: Abundant. Presently, more than 80 per cent of milk produced is flowing into the unorganized sector, which requires proper channelization. Amul & GCMMF have leveraged this and has got itself a strong base of suppliers who provide them milk throughout the year. Large number of dairy plants in public and cooperative sectors besides several others coming up in the private sector would result in competition. Because of this the end consumer would benefit and a good product mix would emerge. Technical manpower: Professionally trained, technical human resource pool, built over last 30 years is the strength that GCMMF has. The employees of GCCMF are highly recognized in the industry and have earned name for themselves as well as the federation. Enhanced Milk Production: Increase in the milk production with consequently increased availability of milk processing has led to increase in consumption and faster access to the consumers through effective distribution. The technology is brought from Denmark and the production of milk has benefited from that. Transportation: The transportation facilities and the easy availability of the special trucks have provided a boost. Cold refrigerated trucks are there in place and the warehouses also have the cold storage facilities that facilitate the transportation. Vast resources: Country has vast natural resources which offer immense potential growth and development for dairying. Moreover the financial resources available with the federation are immense and the reputation is such that in case of any further requirements, it can approach any institution and raise any form of capital. Increasing purchase power and changing tastes of the consumers: The purchasing power of the residents is increasing. As a result a lot of products are being consumed. Moreover, the consuming habits are changing. As a result, the demand for products such as butter and cheese is increasing at a very rapid rate.

WEAKNESSES

Perishability: Pasteurization has overcome this weakness partially. UHT gives milk long life. Still perishability is there at the milk vendors end. This does result in loss of some production. But Amul Dairy is taking steps to store milk atthe vendors end. Surely, many new processes will follow to improve milk quality and extend its shelf life. Lack of control over yield: Theoretically, there is little control over milk yield. A lot depends upon the monsoon in the country. This is because of the quality of cattle feed that would be available will not have the required nutritional content. Steps are taken to provide awareness regarding these and the penetration of quality feed is being increased. Moreover, increased awareness of developments like embryo transplant, artificial insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers should a utomatically lead to improvement in milk yields. Logistics of procurement: Woes of bad roads and inadequate transportation facility make milk procurement problematic. All these factors lead to perishability of the procured milk. But with the overall economic improvement in India, these problems would also get solved Erratic power supply: The erratic power supply would cause harm in the processing of milk. Underdeveloped systems: There still exist underdeveloped raw milk collection systems in some parts of the country. However steps are being taken such as setting up of cold storage points at key collection centers to combat the situation. Lack of proper implementation: Dairy development programmes have not been fully implemented as per the needs of the region in different agro-climatic zones. Infrastructure: The infrastructure that is available is not up to the current world standards. Also lack of infrastructure for offering dairy business management programmes to the trained personnel is creating a hindrance.

OPPORTUNITIES
"Failure is never final, and success never ending. Dr Kurien bears out this statement perfectly. He entered the industry when there were only threats. Hemet failure head-on, and now he clearly is an example of never ending success If dairy entrepreneurs are looking for opportunities in India, the following areas must be tapped: Competition: With so many newcomers entering this industry, competition is becoming tougher day by day. But then competition has to be faced as a ground reality. The market is large enough for many to carve out their niche. Moreover due to competition, there is a chance to better serve the market with innovative products. Value addition: There is a phenomenal scope for innovations in product development, packaging and presentation. Given below are potential areas of value addition: Steps should be taken to introduce value-added products like shrikhand, ice creams, paneer, khoa, flavored milk, dairy sweets, etc. This will lead to a greater presence and flexibility in the market place along with opportunities in the field of brand building. Addition of cultured products like yoghurt and cheese lend further strength- both in terms of utilization of resources and presence in the market place. Yet another aspect can be the addition of infant foods, geriatric foods and nutritional. Export potential: Efforts to exploit export potential are already on. Amul is exporting to Bangladesh, Sri Lanka, Nigeria, and the Middle East. Following the new GATT treaty, opportunities will increase tremendously for the export of agri-products in general and dairy products in particular. There is a strong basis of cost efficiency, which GCMMF can leverage in the world market. Markets: The market for the traditional as wells as processed dairy products is expanding both at the domestic and international front. IT support: Software is now available for project formulation for dairy enterprise. It has also computerized its production processes. Mother Dairy was the first fully computerized dairy in India. In its Anand plant all products are processed computerized, which does not have any hand touch during any stage of process.

THREATS
Milk vendors, the un-organized sector: Today milk vendors are occupyingthe pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance. Infestation: There are increasing incidents of chemical contaminants as well as residual antibiotics in milk. Quality: The quality of the milk is found to be poor as compared to the international standards. One of the reasons for these according to the EU and America is the method of milching the milk. In these nations the milk is hands by the farmers owning the cattle do milched with the help of machines, while in India. Exploitation: The liberalization of the Dairy Industry is likely to be exploited by the multinationals. They will be interested manufacturing the milk products, which yield high profits. It will create milk shortage in the country adversely affecting the consumers. Subsidy by Western Nations: There have been incidences wherein the Western nations subsidizing the dairy products by a few means like transportation. Because of such reasons the final price of the product goes below the prices prevailing in the Indian Market. Hence it proves a threat to GCMMF sand other Indian dairy products. Creation of Non Tariff Barriers by Developed Nations: The Developed Nations have created Non Tariff Barriers related to Quality of the milk specifically. They want that the milk be processed with potable Air and Water. They also want that the milching of cattle be done with the help of machines. However this type if system is yet to evolve in India. Because of these reasons they are reducing the market potential of Indian made products, where GCMMF holds a lions share. The study of this SWOT analysis shows that the strengths and opportunities far outweigh weaknesses and threats. Strengths and opportunities are fundamental and weaknesses and threats are transitory. Any investment ideacan do well only when you have three essential ingredients: entrepreneurship (the ability to take risks), innovative approach (in product lines and marketing) and values (of quality/ethics).

Michael Porters Five-Force Analysis

According to Porter (1980) a firm must be analyzed in relation to its industry. Factors outside the industry tend to influence all the industrys firms in the same way and are thus not as important to study. To a large extent, industry structure governs the strategies open to the firms. The profitability and attractiveness of an industry is dependent of the level of competition. Competition in an industry originates from industry structure and goes well beyond the behavior of individual competitors. According to Porter, each industry has a potential profitability and the profitability for the firms is dependent on the competitive forces in the industry. Porter identifies five competitive forces that derive from the ambition to obtain as large share of the profitability as possible. The five forces are the foundation of the five-force model.

Porters Five-Force Model The major competitors of the Amul dairy include: Milk Gayatri, Royal, Sardar, Uttam, Shreshtha Ice Crean Vadilal, Havmor, Kwality Walls, MaxLocal & Regional players Ghee Gayatri, Nestle Milk Powder Nestle Chocolate Nestle, Cadbury. The success of the national and local competitors brands includes effective distribution system, advertising, good pricing policy etc. The factors ascribed byporter are: Threats of new entrants Bargaining power of suppliers Bargaining power of buyers Rivalry among competitors Threats from substitutes These factors can be explained in context to GCMMF as below:

Threats of New Entrants Economies of Scale: GCMMF enjoys economies of scale, which is difficult to match by any other competitor. It is because of this reason that no regional competitor has grown to a national level. Cost and Resource advantages: Amul dairy is co-operative society. That means cooperation among competitive is the fundamental principle. Amul dairy is managed under the norms of GCMMF and market the products under the brand name Amul, which has a very good reputation at domestic and international level. Here, the raw material procurement is very difficult for the new entrants. Consequently Capital requirement is also high. Still new entrants are emerging such as domestic and international players. So the threats of new entrants are moderate. Brand Preferences and Consumer Loyalty: There is an immense level of Brand Preference of Amul in the minds of the people. The level of preference specifically in the liquid milk sector is that they would go to other retailer if the retailer does not have milk. Access to Distribution Channels: The distribution channel of GCMMF is a very planned and perfect one. For any new entrant to enter it would be a very difficult task. For GCMMF the result is years of hard work and its investment in its employees as well as at different levels in the distribution network. Inability to match the technology and specialized know-how of firms already in the industry: The technology used by Amul is imported from Denmark. It is a state of art technology. To get this technology in India, a firm would require a huge amount of resources. Capital Requirements: The total investment required in the industry is huge and is a decision worth considering even for MNCs. The investment decisions cover the processing costs as well as the marketing costs. To compete with the brand Amul in India is difficult as Amul is synonymous to Quality.

Bargaining power of supplier

The objective of Amul dairy is not profiting. As it is a part of co-operative society, it runs for the benefit of farmers those are the suppliers of milk and users of milk products. According the concept of the cooperative society supplier has bargaining power to have a good return on his or her supply. However, supplier has limited rights to bargain with the cooperative society because it is made and run for the sake of mass and not for individual benefit. But it is made sure that the supplier gets his fair share of return. There is appropriate bargaining power of the supplier. In olden days there were not any kind of cooperative societies as the farmer was exploited. But, nowadays the farmers rights are protected under the cooperative rules and regulations, which ultimately results in moderate power of bargaining from the supplier.

Bargaining power of buyers

Cost of switching to competitor brands: The switching of brands is seen very much in products such as ice cream, curd, milk powders, milk additives etc. but it can be seen comparatively less in liquid milk category. Even if the buyers shift to the other brands of milk, the value that they get is less than they would get from consuming Amul. Large no. of buyers: Milk is a necessity product and hence is a mass product. It has a considerable share of the rupee spent by any Indian. Moreover the buyers are spread evenly over the country and do not have any bargaining power.

Rivalry among competitors

Demand for the product: The demand of the products of GCMMF is increasing at a very healthy rate. To stand against the rivalry GCMMF is coming with a wide range of products. Nature of Competitors: In different business category GCMMF faces competition from different players. In the Milk powder category it faces competition from Cadbury & Nestle, in the chocolate category also I faces competition from Cadbury & Nestle. While in the ice cream market it faces competition from Kwality Walls Max and Havmor. In butter and chesses it faces competition from Britannia. Moreover in almost all categories ther is presence of local retailers and processors and milk vendors. Rivalry intensifies as each of the competitors has different lines and this would inturn depend on the importance the line holds for the competitor. Mergers and Acquisitions: As such in the industry there are no mergers or acquisitions. However if any MNC wishes to enter through this route then the competition might be severe.

Threats Of Substitute
Availability of attractive priced substitutes: Different substitutes are available for different category of products. There is ample availability of low priced substitutes from local vendors and retailers. This is a front where GCMMF is still finding hard to combat. Satisfaction level of substitutes: Customers do consider these products as equal on quality if not better then the products of GCMMF. Hence the rate of customers switching to the substitutes is very high. Moreover the buyers also can switch to the customers easily without any hurdles. Not immediate substitutes: Distant substitutes are present in many of the categories of business of GCMMF. For example in the Masti Buttermilk category it faces competition from cold drinks and ice cream. These 5 forces interact among themselves at different degrees over a period of time. Moreover it will get intense or loosen up depending upon the moves of its competitors, buyers, suppliers, etc. However GCMMF has been able to outperform on almost all fronts excluding a few lines of business

CONCLUSION
Amul has performed outstandingly in its area of operation and even with a tough competition Amul has been able to overcome it and they have increasing their share constantly. So, this was an effort of analysis of external environment by me.

REFERENCES

www.wikipedia.org www.amul.com