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Dr Amit Rangnekar

Case
Inspiring story of the transformation of a milk producers coop movement into Indias largest food brand
Case Objectives- Insights into:
Brand building strategy of a distinctly Indian mega brand
Co-operative marketing
Penetrative pricing

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Brand Amul 2008

Rs 7500 Crores
Total milk collection 1.86 billion litres Sales Rs 7500 crore
India's largest food brand, strong emotional connect
Symbol of the milk co-operative movement, value & trust
Quality products at reasonable prices
Intrinsic part of Indian life for over 5 decades
Amul hoardings- Social observer

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Polson Dairy
Polson Dairy, monopoly rights from British times to collect
milk from Anand & supply to Bombay (400 kms)
Polson butter- generic
Biggest buyer of the milk in Kaira
Superior quality products, up-market consumers
Polsons exploitative practices

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Founding thought
Farmer- seasonal crop income, undependable milk income
Trudged long distances to deliver milk to Polson Dairy, Anand
Private traders & middlemen controlled milk distribution &
prices, exploited farmers
To avoid exploitation, the Milk producers Co-op movement,
born in Charotar, Kaira dist, Gujarat
To empower milk producers, create own brand, break Polsons
monopoly

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Evolution

1948- Kaira District Co-operative Milk Producers' Union


Informal distribution, supply milk & allied products
Dr Verghese Kurien, Indias Milkman, joins KDCMPUL
Breakthrough technology to spray-dry & process buffalo
milk- key factors that contributed to the Revolution.
1954- plant to convert surplus milk to milk powder &
butter
1958- plants to manufacture cheese & baby food
White Revolution increased milk production in India

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White Revolution
Milk Production (Million Tonnes)
Country

1961

Japan

2.10

Canada
Australia
New Zealand
US
India

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6.28
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8.32

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1999

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8.20
10.49

5.22

10.88

57.02

73.8

20.38

78.90

Source: www.fao.org; Bulletin of the IDF, 339, 1999

Dr V Kurien, Chairman GCMMF


Build a strong Indian society through an
innovative cooperative network, provide
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quality service and products to end-consumers
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and good returns to farmer members.
We
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traversed a path few have
dared to. We
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continue on a path ithat
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to follow. We must
pursue a path that even
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fewer can dream
of pursuing. Yet, we must. We
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hold in trust the aims and aspirations of
millions of our countrymen.

Amul

Amul (Amulya (Gujarati) = priceless)


Implies matchless excellence
Indian, Short, catchy and easily pronounced
Introduced 1946, registered 1957
Began pasteurizing milk in 1948
Focus on value addition- dairy products range- 1950s
Expand processing facilities, add new technologies
Consumers- limited purchasing power & modest consumption
Strategy- Affordable price to make quality products attractive
to consumers
1974- marketing under single brand- Amul

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Range

1946- Amul Butter to take on Polson


1950s- Sweetened condensed milk like Nestle
Baby food , like Glaxo
1960s- Sweet buttermilk powder, Baby food (Amulspray)
High protein food (Balamul)
1970s- Amul Milk Chocolate & extensions
Nutramul- malted cocoa beverage, Amul Cheese powder
1980s- Amul Cheese spread
Amul Shrikhand, new flavours
Amul UHT milk in tetra packs, shelf life of 15/60 days
Amul Choco/ Elaichi Shake, Amul Lassi

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1990s+

Amul Cheese extensions


Amul Malai Paneer
Pizza Cheese
Amul Mithaee extensions- Gulab jam & and Kulfi mix
UHT milk range
Fresh milk range- Amul Taaza, Amul Gold, Amul Smart
Amul Fresh Cream, Amul Shakti
Amul Masti Dahi
Flavored Milk drink Amul Shakti
Amul Ice creams
Amul Masti soups

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Strategy

Value pricing
Wide range in allied milk food categories
Leverage economies from Cooperative movement
Emphasise on reach
Branding

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The Amul Girl


Staid image, routine advertising- food taken
seriously
1967, Bombay- first Amul hoarding, at traffic
lights- Utterly Butterly, delicious- huge hit
Round eyed, chubby cheeked, winking girl
Little polka dotted dress and red & white bow
Created to rival the Polson butter girl
We needed a little girl who would worm her way
into a housewife's heart." DaCunha
Distinct Amul touch- tongue in cheek humour
Catchy lines, Customer delight, relevant issues
World Record- 40 years running campaign
Consistent communication in line with brand
positioning strategy.

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Amul Market Share (2001)


Category

Amul

Cheese

63

Chocolates

Butter

86

Infant Milk

68

Dairy Whitener

45

Yogurt
UHT Milk
Ice Cream

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75

Condensed Milk

Cadburys Britannia Nestle HUL


36

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Business Today, 30 Sep 2001

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40

Amul Butter

86% market share


Made butter consumption, mass
Wide distribution network
Our backward integration cannot be captured by our
competitors. We have strong relationships with 25 lakh
farmers, focused communication & a sound supply chain
which helps us maintain consistent quality, RS Sodhi, GM-M
Major mass media investments
Stunning reminder ads, wittily capturing current trends
High brand salience, brand generic to category
Maska generic to Amul and to pestering for favour

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Pizza

Boost cheese sales, make cheese products more accessible


Adding service dimension necessitated by Britannia entry
Target- 1 lakh pizzas daily, 3000 outlets, @Rs 25 / 8 Pizza
Dearth of adequate retailers was a key reason for the low
performance of our frozen pizzas. Many outlets offering pizzas did
not know how to serve them Vyas
Pizzas is a smalller category than even namkeens. We wanted to
promote the consumption of mozzarella cheese which we
succeeded in R S Sodhi, GM-M
''We will not allow anyone to walk away with our customers in the
North'' Nirula's, who sell 5,000 pizzas daily
''We dont plan to lower prices '' Pankaj Batra, Pizza Hut
Pizza flop- Taste & Cheesiness issues- poor performance despite
great price

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Amul Ice Cream

1996- Gujarat, Mumbai, 2003-National roll out


Portfolio- sticks/cones/cups/home & catering packs
Expand capacity & production beyond Gujarat
2007- Sugar Free, Low Fat, Diabetic Delight & ProLife
Probiotic Wellness Ice Cream- for the health conscious
Small town availability & visibility thro pushcarts & small
outlets- kiranas, panwallas, STDs, chemists & bakeries
(Anyone with deep freezers)

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Ice Cream Strategy


Scope- Per capita ice cream consumption in India < 200 ml,
global average of 2 litre per person per annum
We want to penetrate the market by increasing the number of
outlets, and by growing the market through continuous
introduction of new flavours and products"
Target- Youth, Impulse segment, families
Positioning- Real Milk. Real Ice Cream
Differentiation- Amul wholesomeness v/s HULs Frozen
Desserts Kwality Walls (vegetable oil), gelatin free
Benefits- Penetrative pricing (30% lower), quality milk product,
extensive reach (small towns) & intensive promotion (1+1 free)
Impact- No 1 since 2001, dominant 38% share, 4 times HUL 9%

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Amul Chocolates

Generic chocolate variants- Milk and Fruit & Nut


Modest success despite economy pricing
Cater to `impulse & `teen segments, most likely to consume
Harness existing cold chain
Focus- growing moulded chocolates & confectionery market
Launched fundoo & animal shaped chocolates, Amul Rejoice gift
brand
To succeed with branded clairs- Chocolair and Milklair, we
must get our focus right. In the Re 1 confectionery market;
product-led segmentation will not work as it is a price sensitive
category. Through our cost leadership, we need to ensure priceleadership. To grow, the number of consumers interacting with
Amul has to grow at a faster rate than of those interacting with
our competitors'' Vyas

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Range
Shrikhand

Lassi

Ice Creams

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Milk Powders
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Cond. Milk

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Dahi

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Fresh Milk

Milk Drinks

Range
Pizza

Butter & Low fat

Malts

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Cheese & Spreads

Chocolates

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Mithai

Complex Logistics
District co-operatives
Producer Members
Village Societies
Milk collection points
Milk collection (Daily 2007)

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Milk collection (Annual 2007) R
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Product categories
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SKUs
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Refrigerated outlets
Milk handling capacity

13
2.6 million
12,792

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6.5e
million litres
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3000

2.38 bn litres
40
350
100,000

Cold chain

18,000

Non- refrigerated outlets

500,000

Competition

Pizza- Pizza Hut, Domino's


Chocolates- Cadbury
Milk & milk products- Nestl, Britannia
Ice Creams- HUL
Amul competes with marketing majors across product
categories
''We know the modus operandi of the MNCs, we'll embarrass
them everywhere.'
Amul's performance in chocolates & pizza is below par

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Sustainable Competitive Advantages


Cost leadership

Efficient procurement
& production

Value-added portfolio

Milk products, pizzas,


confectioneries

Brand Amul

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Distribution reach
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Strong relationships

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reassures loyal customers
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6 lakh retail outlets,
well-established cold chain

Farmer partners ensure inflows,


networks ensure availability,
consumer franchise, ensures off ta

Cold Chain
Amuls cold chain was a critical competitive advantage.
They scored over HUL in ice creams as they controlled the
milk and butter outlets that also stock ice creams' Motilal
Ostwal
Major Amul products are available with retailers, exactly
as per demand. But during competitive launches,
refrigerators of key retailers mysteriously over flow with
Amul products

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Branding
An umbrella brand has a universal core value like a family
tree. But, until the umbrella brand is strong and trustworthy
enough, consumers and retailers will be hesitant to easily
accept any new product doled out from the same company,
even if the new product category is associated with its
umbrella brand
A successful umbrella brand like Amul tots up an annual ad
spend company of 1% only, as compared to 6-7% for
competitive brands RS Sodhi, GM-M, GCMMF
Brand Amul is extensively and aggressively promoted
Amul branding endows extensions with associations that
brand Amul stands for- Value, Quality, Trust, Indian

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Alliances
Milk, Cocoa, Vegetables, Sugar, Milk products- Across other
milk co-operatives- North, Maharashtra, Karnataka
Alliances with dairies in & around Delhi, to ramp up daily
capacity from 80,000 to 3 lakh litres
Our biggest competitive strength is the relationship we enjoy
with all other farmer- co-ops across India. We can enter any
new food category, without much time or investment, by
tapping into farmer co-operatives. To succeed as a food
company, we can procure & manufacture through other cooperatives. To enter sugar-boiled confectionery, all we have to
do is tie up with a sugar co-operative.'' Vyas
Alliances keep Amuls capital costs and wage bills lower
Alliances are critical in catering to diverse geographies for lowshelf life products (milk & curd)

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"Amul Utterly Delicious" parlours


Direct retailing- Ahmedabad, Bangalore, Baroda, Delhi,
Mumbai, Hyderabad & Surat
Rs. 100 crore in turnover in 3 years
Nationwide large chain of franchisee managed outlets
Dish out ready-to-eat stuff- parathas, lassi, buttermilk, pizzas
& sandwiches, using ingredients from Amul and franchisees

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New Markets
Delhi Fresh milk market, unprecedented demand
2003- tie up with petro retailer IBP, new nation-wide retailing
chain for Amul brands to tap currently unexplored markets
Amul products- USA, Gulf & Singapore
Walmart keen to stock Amul brands
Cyberstores across 125 locations in India and abroad, average
Indian purchases Rs. 300
Achieved despite high touch-and-feel consumer culture in
India
The Taste of India is now a few clicks away from your
doorstep...

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Amul story replication


Similar co-operatives across India, by state governments, with
reasonable success
Milma (Kerala)
Vijaya (Andhra Pradesh)
Aavin (Tamil Nadu)
K.M.F (Nandini ) Karnataka
Sudha (Bihar)
Co-operative rivals include National Dairy Development
Board (NDDB) (Mother Dairy & Sugam brands)

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Financials
Raising money is the least of GCMMF's concerns. I have a
father-in-law in NDDB, for money as and when I need. Why
should I then tap the market'' Dr. Kurien
Besides NDDB, other sources of funds include bank loans and
debentures issued to co-operative members
New law allows multi-state co-ops like GCMMF, to produce,
brings autonomy & reduces state control and interference
'A GCMMF middle / senior level executive gets 40-50% of
what he will get in HLL. How much should a farmer pay his
employee? 50 times his own earnings? Well, he at least needs
to pay him enough to ensure he's not tempted by competition
Kurien

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Brand challenges
Will over extension weaken brand Amul
Price positioning may give wrong consumer perceptions in
value-added categories- cheese, ice creams, UHT milk, pizzas
and infant foods
Threat from other state milk/agro/sugar- co-ops
Spreading distribution/marketing resources thin across 40
product-plus portfolio
Global competition

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CEO speak
Earlier, our consumer value chain stopped at the stove. You
can't eat our butter, ghee or even cheese straight away. We
want to get into products that go straight into the consumer's
mouth. Amul will be a food brand for pizzas, Indian sweets,
confectionery, baby foods, long life milk, curd. We are
building products for the future Vyas
We have no competition in butter! Britannia is forever on a
promotional crutch, with very low availability and off take at
retailer level. Nestle is trying hard to market its brand of long
life milk (Nestle Doodh), but we beat them on sheer price and
geographically-spread manufacturing capacities
Our faith is that we're a co-op, and our vision is to give the
farmer the best price for his milk and the consumer the lowest
price for the products he buys

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Chairman Speak
If Amul has become a successful brand if it
enjoys brand equity - then it is because we have
honoured our contract with consumers for 50
years. If we had failed to do so, then Amul
would have been consigned to the dustbin of
history, along with thousands of other brands.
For 50 years now, Amul has honoured its
contract with the consumer. The contract that is
symbolized by the Amul brand means quality. It
means value for money. It means availability.
And it means service."
Varghese Kurien, Chairman GCMMF

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Amul- A taste of India


Before Amul butter came into the market, the butter available
was quite often rancid, or smelt unpleasant or was thin and
looked unwholesome. All that has now changed because Amul
butter swamped the market with good wholesome butter which
drove the inferior varieties away. The point is not that Amul
butter did this so much as the fact that inferior varieties were
all we could get till Amul came into the market. The principle
was; make your money and give the customer the bare
minimum
Bhaskar Ghose, Former Secy, I&B GoI
Telegraph, 15 Dec, 2003
http://www.telegraphindia.com/1031215/asp/opinion/story_26
35801.asp

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References

Gupta, Rita (2004). The Amul Story, http://www.etgmr.com/GMRjan-mar04/art7.html


http://www.amul.com
Kaul P. (2003). Amul eyes alliances to increase capacity. The Indian Express
Rath A. (1999). Amul's new brand strategy -- The utterly butterly girl to come alive!
The Indian Express, Mumbai.
Heredia R. (1997). The Amul India Story. GCMMF
Varma M. (1996). Amul Butter Girl. The Asian Age. Retrieved 5th June 2008.
http://www.amul.com
Goel A. (2004). A Brand Story of Amul, IIM Kozhikode.
ICMR case (2004). Amul : Evolution of Marketing Strategy.
Chandra P. & Tirupati, D. (2002). Managing complex networks in emerging markets:
The story of Amul. WP No. 2002-05-06, IIM-Ahmedabad
Vyas BM (2001). Institutional structure to sustain smallholder dairy marketingThe
Amul model. Retrieved 5th June 2008.
http://www.ilri.org/InfoServ/Webpub/Fulldocs/South_South/theme4_2.htm
Dobhal S. (2001). The Taste Of Competition. Retrieved 5th June 2008
http://www.india-today.com/btoday/20010930/cover.html

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