Amul - Report

Distribution Channel Amul

OBJECTIVE

The objective of this report is to analyse the distribution distribution cha nnel of Amul. ABSR ACT

The µplace¶ variable in the marketing mix plays an important role in overall fortune of any brand. Place refers to the mechanism by which goods/services are moved from the manufacturer to consumer. It is is also known as channel, distribution or or intermediary. All other marketing decisions dec isions are affected by the selection ection of distribution channel. T he key decisions regarding distribution channel ar e about the t he channels to use and how many channels to be used to reach the consumer. The final aim is to make available the product whenever and wherever the consumers demand it. Proctor & Gamble and Wal-Mart in the grocery industry, Ford and GM in auto industry are some of the well known examples of firms that have realized substantial benefits by shifting the focus to supply chain.

Here we will discuss the distribution channel of Amul. Amul is a dairy cooperative in Gujarat that has been primarily responsible for India becoming the largest milk producer of the world. Amul has brought brou ght a paradigm s hift in the milk industry through its innovative practices pra ctices of managing the large decentralized network of suppliers and producers and simultaneously developing the new markets and distribution distribut ion channel. This report draws various aspects as pects of distributio distri bution n channel of Amul. We interviewed interviewe d ten channel members from Delhi Del hi to find out the real practices followed in the t he channel.

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OBJECTIVE

The objective of this report is to analyse the distribution distribution cha nnel of Amul. ABSR ACT

The µplace¶ variable in the marketing mix plays an important role in overall fortune of any brand. Place refers to the mechanism by which goods/services are moved from the manufacturer to consumer. It is is also known as channel, distribution or or intermediary. All other marketing decisions dec isions are affected by the selection ection of distribution channel. T he key decisions regarding distribution channel ar e about the t he channels to use and how many channels to be used to reach the consumer. The final aim is to make available the product whenever and wherever the consumers demand it. Proctor & Gamble and Wal-Mart in the grocery industry, Ford and GM in auto industry are some of the well known examples of firms that have realized substantial benefits by shifting the focus to supply chain.

Here we will discuss the distribution channel of Amul. Amul is a dairy cooperative in Gujarat that has been primarily responsible for India becoming the largest milk producer of the world. Amul has brought brou ght a paradigm s hift in the milk industry through its innovative practices pra ctices of managing the large decentralized network of suppliers and producers and simultaneously developing the new markets and distribution distribut ion channel. This report draws various aspects as pects of distributio distri bution n channel of Amul. We interviewed interviewe d ten channel members from Delhi Del hi to find out the real practices followed in the t he channel.

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ACKNOWLEDGEMENT

A successful project is a combined effort of the teacher for guidance and inspiration, channel members for the invaluable help and the project report r eport developers.

I wish to extend my gratitude to t o Mr. Mr. Asif Zameer, facilitator of Sales and Distribution Management at FORE School of Manage ment, for providing in-depth in-depth knowledge of distribution channel and guiding us to develop a meaningful report.

I also wish to thank, Vishnu Milk Product Dairy, Durga Dairy, Anand Mik Agency, Amit Traders, Master Ji Mother Dairy, Da iry, R P Tra ders and Pappi Pa ppi Distributors for providing the invaluable help whenever required for successful completion of the project.

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CONTACT LIST OF THE DISTRIBUTORS VISITED S. No.

Distributor Visited

AMUL/Mother

Contact Details

Dairy 1

Vishnu Milk Product Dairy

AMUL

Tilak Nagar,

2

Durga Dairy

AMUL

Saket, 011663631 20

3

Anand Mik Agency

AMUL

Saket, 01166358159

4

Amit Traders

Mother Dairy

5

Master Ji Mother Dairy

Mother Dairy

Amit Singh, NH-1, NIT Faridabad 9968 071497 Gurgaon, 9999106109

6

R P Traders

AMUL

Mr. Vinod, 9990488245, Gurgaon

7

Pappi Distributors

AMUL

Katwaria Sarai, 991 0020 998

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INTRODUCTION

On December 14,

1946

the Kaira District Cooperative Milk Producers¶ Union Limited was

established in response to exploitation of farmers by traders of existing dairies. In Anand city of Kaira district farmers produced and supplied milk to the then largest dairy Polson Dairy which in turn supplied milk to the Bombay city. The government had given monopoly rights to the Polson Dairy. The traders and agents of Polson Dairy brought the milk from marginal producers (farmers) at very lower prices and sold it to Bombay city at very higher prices. Farmers suffered heavy losses.

The farmers of Kaira district took advice of nationalist leaders Sardar Ballabh Bhai Patel and Morarji Desai. They advised the farmers to form a cooperat ive and supply milk directly to the Bombay city. This Kaira district cooperative was established to process and supply the milk directly to the city. Since most of the milk producers were marginal farmers who produced only

1-2

litre milk per day, the milk collection process was decentralised. Village level

cooperative were established to collect milk from each village.

The first modern dairy of the Kaira Union was established at Anand. It popularly came to be known as AMUL dairy after its brand name. The capacity of new plant has been given as follows:

Process

Capacity ( pounds per day)

Pasteurization

300,000

Manufacturing of Butter

10,000

Manufacturing of milk powder

12,500

Manufacturing of Casein

1,200

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The Research and Development centre was also established to develop new indigenous technologies in processing of milk. The technology had lead to successful production of skimmed milk powder from buffalo¶s milk ± first time in the world. This helped India to become the largest producer of milk as India has the highest population of buffalos in the world.

The current scenario is like this

Members

district cooperative milk producers'

13

Union

No. of Producer Members

9 2.7 million

No. of Village Societies

13,328

Total Milk handling capacity

11.22

Milk collection (Total - 200 8-09)

3.05

Milk collection (Daily Average 200 8-09)

8.4

Milk Drying Capacity

62 6

Cattle feed manufacturing Capacity

3500

million litres per day

billion litres

million litres Mts. per day Mts per day

Gujarat Cooperative Milk Marketing Federation (GCMMF) is the marketing entity for the State of Gujarat. GCMMF has 42 regional distribution centres in India, serves over 5, 00,000 retail outlets and exports to more than

15

countries. All these organizations are independent

legal entities yet loosely tied together with a common d estiny.

Interestingly, the Gujarat movement spread all over India and a similar structure was replicated. Two national organizations, the National Dairy Development Board (NDDB) and the National Co-operative Dairy Federation of India (NCDFI) were established to coordinate the dairy activities through cooperatives in all the States of the country. The former provides financing for development while the latter manages a national milk grid and coordinates the deficit and surplus milk and milk powder across the states of India. In the early nineties,

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AMUL was asked by the Government of Sri Lanka to establish a dairy on similar lines in Sri Lanka. Today AMUL is a symbol of many things like high-quality products sold at reasonable price, developing and coordinating a vast co-operative network, making a strong business, proposition of serving a large number of small and marginal suppliers, the triumph of indigenous technology and marketing savvy of a farmers' organisation. (Source: http://www.amul.com/products.html)

SUPPLY SIDE OF THE NETWORK

The structure of the supply side of network has been shown in the figurebelow. The whole system is decentralised. The cooperative has been established at village level are known as Village Society (VS). All farmers of a villa ge supply their milk to VS. Then VS supplies milk to the thirteen district level Unions. Amul is one of those Unions. These thirteen Unions finally process the milk and produce various products. The marketing of these products is done by the GCMMF. The products of these thirteen Unions are stored in warehouses of GCMMF from where it is finally distributed to the distributors and retailers. The prices of products of different Unions do not differ by greater extent. Though GCMMF sets the price of the products according to the production level and quality (of the product) of each Union, the pricing strategy has been designed in such a way that these Unions should not compete with each other rather they should cooperate with each other. Success of network depends on high collection rate of milk. It requires increasing membership of VSs and increasing number of members in each VS and improving the milk yield. There was a constant concern about the cost of farmers in the network and delivering high quality products to consumers at affordable prices. The cooperative set following objective as part of its value: y

To charge for each service provided to the su pplier

y

To purchase all milk that member farmers produced

y

To sell liquid milk at affordable prices so as t o serve a large number of consumers

y

To develop and deliver services that will improve lives of people in the network

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To hire professional managers, to run the federation and unions, whose values

y

included upliftment of rural poor.

DAIRY COOPER ATIVE STRUCTURE

NDDB/NCDFI

Federation in other states

GCMMF

UNIONS Amul and 13 others district level

VILLAGE SOCIETIES 13,328

Village Level Milk Collection centres

INDIVIDUAL MILK PRODUCERS 2.79 million Milk Farmers

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CGMMF¶S SUPPLY CHAIN

Farmers

Village Cooperative Societies (with Chilling Units)

Village Cooperative Societies (without Chilling Units)

Local Restaurants/ Other Milk related businesses

Milk Sold to Village & Local Residents

Chilling Plants

Network Services * Veterinary Services * Animal Husbandry * Animal Feed Factory * Milk Can Producers * Agriculture University * Rural Mgmt Institute * Trucking Facilities

Milk Processing Union & Warehouses

GCMMF Warehouses

Wholesalers/C&S

Retailers

Home Delivery Contractors

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THE DEMAND-SUPPLY LINK AGES

3P

GCMMF

Services

Suppliers/ Farmers

Unions Note2

Note1

3POL

Customers/ Consumers Milk Supply

3PIL

VS

Distributor

Retailer Demand Material flow of Milk and Dairy Products Support Services Major Influencing factors Coordination & Planing activities Note 1: Procurement Price Note 2: Product pricing strategy

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3PIL:

Third Party Inbound Logistic

3POL:

Third party outbound logistics

A brief outline of t he demand supply linkages has b een shown in theabove figure. It depicts how various factors are interrelated and how this n etwork effectively handles this complexity. As we can see in the figure that major influencing factor in milk supply is farmers/producers which are influenced mainly by the procurement price set by the unions. The green arrows show the actual material flow of the milk in the network. The demand is mainly affected by the pricing of the product. The blue arrows show the support activities supported by one entity to the other in the network. For eg Unions support farmers in cattle management etc. The black arrows show the coordination and planning activities which are required for the effectiveness of this network.

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DISTRIBUTION CH ANNEL OF AMUL

The main objective of distribution channel of Amul is to provide best quality products to consumers at affordable price while giving maximum possible return to its suppliers. This dual objective of satisfying consumers as well as suppliers has led Amul to find innovative ways to manage its network effectively and make lean and effici ent supply-chain. Amul has chosen intensive channel to ensure that its product should be available everywhere even in rural areas. Following are the channel intermediaries of Amul:



y

Agents, Distributors/Wholesaler and retailers

y

Amul Parlours

y

Exclusive Amul Outlets

y

Internet ( Amul Cyber stores)

We are considering two products of AMUL which are milk and ice-cream and we are also comparing each of the aspect with its closest competitor i.e. Mother Dairy

For AMUL

Packet milk sold/day = 1.5 millions Total number of retail outlet = 9,000 Presence in Delhi =

5

years

Strength = Strong brand name. Amul¶s Strategy: To increase number of retail outlets in Delhi to push up sales.

For Mother Dairy:

Packet milk sold/day = 2. 8 millions Total number of retail outlet = 14,000 |Page 12


Total number of exclusive stores = 845 Presence in Delhi =

35

years

Strength = Strong distribution Network and large number of retail outlets which facilitate sales in Delhi. Main Distribution Centres AMUL

Mother Dairy

Manesar ( 8 km from Gurgaon)

Pilkwa , UP Alwar , Rajasthan

Analysis

of Distribution Channel

We interacted with

5

distributors in Delhi, Gurgaon and Faridabad to understand the various

aspects of the distribution channel. All the channel members agreed to the fact that demand of Amul products are very high so they do not need to push the Amul product. Here we will analyse our findings and discuss the main issued related to the channel. To bring put a comparative analysis with Mother Dairy, we also visited 2 distributors of Mother Dairy.

Number of distributors AMUL

Delhi

200 approx

Gurgaon

8 -1 0

Faridabad

12

Each distributors caters to about

100

retailer in Delhi. This number varies with region to

region. In Gurgaon and Faridabad, this figure varies from

35

to 80.

Number of retailers covered by AMUL distributors

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Delhi

100

Gurgaon

35-80

Faridabad

35-80

In kalkji and Govindpuri area there are six milk distributors while one ice cream distributors. Territory size of milk distributors is generally smaller as compared to ice cream distributors. In Kalkaji area there is a milk distributor for every 2. 5 square kilometers area. The territory size is not fixed and depends on population density and sales volume.

Role of marketing channels

The main role of the various channels is to cater t o the consumer market. They do not need to make new market for the Amul products as demand for these products are already high. In rare cases the marketing channels also provide feedback to the company. In festive seasons channel members estimate demand of Amul products and inform company in advance about the fluctuations in the demand. This helps Amul forecasting demand of its products accurately and hence improved inventory management. Channel function and flows

In case of Amul channel member follows following function: y

Develop and disseminate persuasive communication to stimulate purchasing specially when Amul launches new schemes

y

They place orders with Amul

y

Assume risks connected with carrying out channel work

y

Provide for the successive storage and movement of physical products

y

Provide for buyers¶ payment of their bills through banks and other financial institution

y

Reach agreements on price and other terms so that the transfer of ownership or possession can be affected

Customers¶ Desired Service Output Levels

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Lot Size: Customers prefers channel from which they can buy desired lot size. Amul¶s

distribution channel is designed in such a way that consumers can buy desired lot size from many stores. Waiting and Delivery time: The waiting and delivery time for Amul products is low. Except

for the internet channel which takes 4 8-72 hours for delivery of the products other channels are quite efficient in these parameters. Spatial Convenience: Consumers can find Amul products in any Kirana stores nearby their

residence. So the channel provides excellent spatial convenience. Even in distant rural areas consumers can find Amul products very easily. Out of 5 channel members we contacted in Delhi, Gurgaon and Faridabad, two members specifically mentioned that there is a problem of availability of Amul products like butter. For example many one may not find Amul milk at many stores after 10AM. Other products like butter, curd etc. is also not available (during winter season) many a times at the stores. The retailers say that margin on Amul products are very less so they don¶t order extra milk products for which refrigerator is required becau se it costs an extra cost. Product Variety: The assortment breadth provided by the marketing channel is very high.

For example, even at groc ery stores consumer can find variety of Amul products. Service backup: Amul do not sell its product to distributors on credit. But distributors may

provide credit services sometimes to maintain its relationships with retailers and wholesalers. At the end of the day retailers and customers enjoy a limited credit period only due to marketing channel of Amul.

COMPRISON BETWEEN AMUL AND MOTHER D AIRY ON VARIOUS ASPECTS

We are considering two products of AMUL which are milk and ice-cream and we are also comparing each of the aspect with its closest competitor i.e. Mother Dairy

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Product Range AMUL

Gold

32

Mother Dairy full cream

32

AMUL

Taaza

25

Mother Dairy tonned

24

AMUL

Slim

22

Mother Dairy double tonned

21

Mother Dairy light

18

Adaptation

of Channel with Seasonal Variation

For AMUL:

Amul chooses distributors who have at least five-six years of experience in distribution of other products. If a new distributor enters the distribution network of Amul he has to work with at least one distributor for first few years. In this way the new distributor gets idea of the distribution channel. In case of festive or channel variation distributors have a fair idea of demand of Amul products. They also analyse the market situation by taking feedback of retailers, wholesalers and customers to anticipate the demand. On the basis of their market analysis, they place order in advance or at least they inform company in advance about their observations. In this way Amul manages the seasonal variation in demand.

For Mother Dairy:

Mother dairy estimates its sales in the seasonal variation through its data forecasting techniques and based on demand in the previous years it estimates its production. However, the distributors also place their demand according to the expected demand(from their past experience) to meet the demand requirements. In this way Mother Dairy manages the seasonal variation in demand.

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Channel Members Margin y

Distributors: The margin of distributors depends on the sales volume. Amul

encourages higher sales of milk through various reward schemes. Generally Rs. 1.80 per crate is the margin of distributors. Apart from this they also get some incentives if they achieve certain target which distributors term as Base volume of sales. Amul launches many schemes for distributors. y

Wholesalers: There are two types of wholesalers: ( 1) those who buy milk from

company itself. Their margin is similar to the distributors. (2) Those who buy milk from distributors and sales to retailers. They get a margin of Rs

3.60

to Rs. 4. 80 per

crate. For example, if milk is Rs. 32 per Kg then distributors sells it to retailers at Rs. 31.20.

It means retailers and wholesalers have to share a margin of 80 paise between

them. Now the actual margins of wholesalers depend upon the environment (like competition, rural or urban area) a nd their relationship with retailers. y

Retailers and other grocery stores: They get margin of 40 paise to 80 paise per litre

of milk depending on either they are buying directly from distributors or from wholesalers. If they buy directly from the distributors then they get a margin of 80 paise per litre but fewer margins in other case. Note: If a retailer is at such a place where distributor¶s vehicle can¶t reach then they buy milk from wholesalers. In this case they need to visit wholesalers¶store for procurement. So they get fewer margins in such cases. For Mother Dairy

The margins for the distributors and retailers have recently been revised. For Distributors the set margin is now 4 3 p/L that has been r evised from 40p/L. For the retailers the set margin is now 90p/L that has been revised from 80p/L.

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Credit policy For Amul: Amul do not sell its product to distribut ors on credit. But distributors may provide

credit services sometimes to maintain its relationships with retailers and wholesalers. At the end of the day retailers and customers enjoy a limited credit period only due to marketing channel of Amul. For Mother Dairy:

1

Day credit from the company to the distributors. No Credit from the

distributor to the retailers AMUL

Mother Dairy

Credit to distributors

No credit

1

Credit to retailers/ who

May provide credit services to

sellers by distributors

maintain its relationships with

Day credit

No Credit

them

Payment System For

AMUL:

The payment to the company is done by the distributors through account and

the payment to the distributors is also done through account. For Mother Dairy: The payment to the company is done by the distributors via cheque and

the payment to the distributors is also done via cheque. AMUL

Mother Dairy

Payment to company

Account

Account

Payment to distributor

Cheque

Cheque

Infrastructure Requirement For

Amul:

AMUL does not help in any sort of infrastructure; however, it facilitates the

distributors to gain financial help from the ba nk. AMUL acts as a guarantor to help get loans. For Mother Dairy: For mother dairy booth, Mother Dairy provides the required

infrastructure to the distributors. It provides the initial set up, pays for the electricity and

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various others bills. It also gives the maintenance charges to the booth. However, it does not provide these facilities to the distributor. Company Pricing Strategy

Company pricing strategy largely depends on the overall cost of production of its product. Its product prices are not much affected by the channel costs. This is evident from following observation. The channel members claim that t hey get the sa me margin now as they were getting few years back when milk was sold at Rs.

15

per lt. Right now selling price of milk is Rs. 32 per

lt (for full cream) still channel member gets same margin as they were getting when milk was Rs.

15

per lt. There is no significant change in the margin while selling prices of milk has

been doubled. It indicates that company sets prices keeping in mind the overall production cost of the milk. This is in sync with the company¶s objective of providing best quality products at affordable prices and at the same time give maximum return to the suppliers. Though channel members complain about the margins on Amul products still they sell products because of volume sales of Amul products (Also to maintain the product assortment at their stores). Long Term Commitments

Amul has long term commitments with their distributors and retailers. In our case we found that distributors are in their business for long term rangi ng from 7- 8 years to 28-30 years. It increases the loyalty of distributors towards the company. Also we found that old players were more satisfied with their business with Amul and they have a notion that their voice gets heard in the company. While new players said that they are not frequently heard. Company people listen to them only when there is a large scale problem and whole market is talking about that problem. Channel Choice

Amul has used all the available channels to sell its products. So the distribution channel of Amul can be termed as an Intensive channel. Company constantly explores the development of new innovative channels for eg Amul Parlours. The main objective of the company is ensuring availability of its product at every corner of I ndia. |Page 19


Amul Parlours requires some attention here as it is new and successful channel: They have classified Amul parlours into five categories namely y

Centre for Excellence: These Amul parlours are specifically at a place which is known for centre of excellence on its own. We can find such parlours at IIMA, Infosys campuses etc.

y

On the Move: These parlours are at different Railway stations and at state bus depots across different cities.

y

Amul Parlours: These parlours can be seen at different gardens across different cities. These are fully owned by Amul.

y

Amul Preferred outlets: These are the private shops (Franchises) which sells entire range of Amul products. They also agree not to keep competitors¶ brand in the outlet.

y

Scooping Parlours: These parlours are especially for Amul Ice creams.

There are 4968 approvals for Amul parlours till now. Hybrid channels: Amul also uses the concept of hybrid channels where customers can place order online and receive products offline. The main drawback of this channel is longer waiting-and-delivery time and minimum sales value of Rs. 600 for placing the order. Channels through which

AMUL

and Mother Diary sells it products

AMUL

Mother Dairy


Mother

Dairy

Booth

Vending

Machine

(token milk) Amul Parlours

Mother Dairy Booth (Packet milk)

Exclusive Amul Outlets


Internet ( Amul Cyber stores)

Push versus Pull Strategy For AMUL:

The demand of Amul products are very high because of the quality of the products and innovative advertising adopted by the company. So Amul do not need any push strategy for |Page 20


its existing product. This also gets reflected in its distribution channel where company do not set any target level for its distributors and even distributors do not make special effort to sell Amul products. For Mother Dairy:

The demand for products of Mother Dairy is equally high hence; there is no requirement of any push strategy. The pull strategy is only exercised during a launch of new product.

Compensation for Defective Products For AMUL:

In case of milk Amul gives a compensation of Rs. 2. 50 per crate in advance, for any kind of leakage and other defects. Any additional cost (due to any other factor or more leakage) has to be incurred by channel members. Channel members are satisfied with this co mpensation.

For Mother Dairy:

If there is problem with more than 50 % of the milk supplied then the company replaces the whole of the milk. No replacement of individual milk packets is done. No measures for advance payment are done for loss or leakage.For both distributor and retailer supplies is to be checked at the time of purchase

AMUL

Mother Dairy

Rs. 2.50 per crate

Replacement only if more than

50%

of the

milk supply has defect or leakage. The payment is made in advance for leakage No advance payment and other defects

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Understanding the Consumers Need

Amul get an insight into the consumers need through its R & D centre.Amul uses latest technologies to monitor sales performances and get an insight into the consumer behaviour. GCMMF has advanced its Information Technology solutions by linking all the Milk Plants of the member unions with its customized ERP System (EIAS & Web EIAS) to improve the liquid milk marketing operations. The Federation has also enhanced the Financial Control System in EIAS. It has also developed Sales Performance Monitoring System across various levels. GCMMF has further advanced the use of Geographical Information systems by enhancing the GIS application and implementing GIS based Sales Analytics solution across various offices. It has also developed a GIS based Decision Support System (DSS) for the top management for effective & geographically monitoring of the sales performance of WDs, ADAs, Retailers, and Products etc. Channel members play an important role in understanding the consumer need in festive seasons (or other seasonal variation). CHANNEL INTEGR ATION Channel Conflict, Cooperation and Competition For AMUL:

In distribution channel of Amul there are two kinds of conflicts: y

Margin Conflict: Channel members especially retailers are not satisfied with their

margin. According to them, price of Amul products have raised constantly but their margins have increased only marginally. Amul try to resolve this conflict by launching various schemes in which it gives financial incentives to distributors and retailers for higher sa les volume. y

Area

Conflict: One distributor serves an area of 500 metres (in urban areas) and this

figure varies from region to region. There can¶t be any other distributor within that |Page 22


area. But sometimes Amul gives distributing rights to small distributors within the area of other distributors. Such kind of conflict is also resolved by Amul by clearly redefining the area of each distributor. We can see that these conflicts (and all other conflicts) are resolved by Amul itself. Many times Amul imposes its decision to other members which they have to follow in any case. This implies that Amul is a channel steward. As far as competition between various channels is concerned the distributors and wholesalers are not much concerned about other channels as they are satisfied by the sales of Amul product. In many cases they doubt that other cases might have affected their sales.

For Mother Dairy: Area

Conflict: If a distributor¶s delivery vehicle is caught in other¶s area red handed, then

his/her distribution license is cancelled immediately. Mother Dairy is very strict with their policy of cancellation of license. Margin Conflict: Since, the margin has been revised recently. The channel members are

little satisfied by the margin. Hence, there exists no margin conflict for the time being

Training and Motivating Channel Members

Amul claims that it motivates channel member by giving financial incentives as well as by providing extensive training. But the channels members said that they are not aware of such training. They only get some guidance from the company (that is too infrequently). It may indicate that company gives training to only few largest channel members (or distributors) while for smaller distributors they give only financial incentives. They should communicate their training strategy with each channel member.

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MARKET LOGISTICS AND TR ANSPORTATION For AMUL: Amul pays the transportation cost to the distributors but the distributors have to themselves collect the product. They encourage them to buy their own transport. For example in Vishnu Dairy¶s case, they get the crates of milk for other two distributors and the company pays the transportation charges of the other two distributors to Vishnu Dairy. However, if Vishnu Dairy gets the order late (later than 6 -7 pm) then Vishnu Dairy is responsible for the additional crates of milk of the other two distributors.

Amul pays Rs. 4. 50 per crate ± Rs. 4. 80 per crate to the distributors for transportation. The variation in margin depends on the location. One distributor sells nearly 400- 500 crates per day in Delhi. ( 1 crate = 12 litres) AMUL

Delhi Gurgaon Gurgaon

Margin for transporter

Rs. 4.80 per crate Rs. 4.50 per crate Rs. 4.50 per crate

For Mother Dairy: No transportation is provided by the company instead company pays the transportation cost to the distributor. Transportation charges ± 22p/L which comes out to be Rs. 2.70 per crate. Distributor has to take the supplies from the plant and distribute it to the retailers. The transportation charges are almost same for all the regio ns.

CAPACITY UTILIZATION: For Amul: The capacity of the truck various from 350 crates to 800 crates. This depends on the number of crates the distributor is able to sell. A small lorry can carry 350 crates where as a large lorry can 800 crates. The lorry is owned by the distributors.

For Mother dairy: A similar pattern is observed in case of mother dairy, however, in case of booth vending machines (BVM) , the closed truck is owned by the company and has a capacity of 8000 litres which is supplied to at least 8-9 booths which have a capacity of around 1000lt.

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ICE CRE AM DISTRIBUTION FOR AMUL

The Ice cream distribution for AMUL can be explained under the following heads for Gurgaon region

Number of distributors

There are two distributors of i ce-cream are 1.

2.

RP Traders Haryana Traders

Territory distribution for the distribution

The whole of the Gurgaon is divided into two regions 1.

2.

Left to the NH 8 Right to the NH 8

This has also been shown in the map below. This way there will be no t erritorial clashes between the two distributors as the area is very clearly demarcated.

|Page 25


Number of retailers covered by each distributor Each distributor serves around 170 to 18 0 retailers under him. That comes out to be around retailers selling Amul ice-cream in the Gurga on region.

35 0

The reason for such l ow number of retailers selling ice cream is that investment is required b y the retailers in terms of money and space for holding ice-creams.

Infrastructure needed by the distributor As ice cream is a very perishable kind of thing ,a large amount of mone y has to be invested in taking care of the ice-cream This includes cold storage hous es, commercial refrigerator and air conditioned vehicles to transport ice cream.

Support provided by the company The compan y doesn¶t provide an y direct help to the distributor in setting up the infrastructure. But the company does have some collaboration with the manufa cturers of the commercial refrigerators and companies proving cold storage facilities

Models Voltas HARD TOP FREEZER 300 HT 142 88 400 HT 20000 23400 500 HT GLASS TOP FREEZER 20208 300 GT 400 GT 23474

Western

Carrier

Haier

14278

14278

14186

20402 23464

20310 23474

19016

21422 23474

23474 26331

18843

23748

22396

This way the compan y is having collaboration with different deep freezers manufacturers where not only the retailer but also the distributor can take h elp of.

Margins provided by the company The company provides a margin of 17. 5 % on the MRP to the retailers for the ice-cream, Also the company provides a margin of 8 % to the distributor. That means if the MRP of the ice cream is 100 rupees the retailer gets the ice-cream from the distributor at the price of Rs 82. 5 |Page 26


That is the selling price to the distributor. On which he earns a margin of 8 % That means the co mpany gives that ice cream to the distributor at the Price of Rs 7 5.9

Distribution strategy of the company The distribution strategy that the company is following is shown in the figure as below. Now along with this some i ce cream is also being manufactured at the Ma nesar plant due to the growing demand o f ice cream in northern region But most of the ice cream is still stored in the godown in palwal Haryana from where it is sent to the distributors by the compan y vehicle. Now since ice cream is a very perishable item it is stored at a temperature of - 18® C. So the compan y takes the responsibility of distributing it itself rather the outsourcing it other transporters. Because if some issues arise then th e brand image of Amul will be effected. What makes the company far more worried is that since it is very n ew in the ice cream market i n the northern region and is competing against the Mother Diary and the mighty Kwality Walls from the FMCG major HUL.

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Credit terms for ice-cream The company doesn¶t allow any credit terms to the distributor. First the money is transferred to Amul through the RTGS (Real time gross settlement) then on ly the order is executed. Now it is the choice of the distributor to extend any credit to the retailer or not.Sometimes it does other time it doesn¶t.

Ordering Ice cream The distributor orders the required ice cream throu gh an Email. Generally the compan y takes around 24- 48 hours to deliver the goods. The distributor takes the order from the retailers through the t elephone.

Transportation of ice cream The compan y transports the ice cream to the distributors without any charg e. Similarly, the distributor charges the ice cream to the retailers without any charge. The compan y uses it own trucks to transport the ice cream whereas the distributor has his own tru cks to distribute the ice cream to the retailers.

New distribution strategy-of Amul :

A mul

Preferred Outlet

Amul has justified its undisputed leadership in foods business by creating 5000 Amul preferred outlets in a record time which exclusively sell wide range of Amul prod ucts. This has been possible due to strong brand equity and immense consumer support. They have now ambitious plans of creating 10,000 Amul parlours by 20 12 To have a better idea The criteria for selection of APOs would be ± 1.

Visibility - How prominent is the location of your sh op?

2.

Shop area: 100 - 300 sq. ft.

3.

Good Business potential

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4.

Exclusive Amul outlet - no other products are to be sold

Renovation Work of the Shop to give it a standard look - would be done to meet the design and specifications at your cost. The cost of renovation of a typical shop would normally be between Rs. 60,000

to Rs.

1

lac.

Branding- The cost of the signage¶s fabrication and installation is borne by GCM MF Ltd. Equipment- You would require the following equipment: 1.

1or

2 deep freezers (Can be purchased through Hamara Apna Deep Freezer Scheme )

2.

1

pizza oven

3.

1

Chest Milk Cooler for Pouch Milk

Security Deposit- You would b e required to furnish an interest free refundable security deposit of Rs. 25,000 to us locked in for one year. The entire amount would be forfeited in case the parlour closes down within the first year of operation. Supplies- The delivery of products would be done throug h our wholesale dealers. Agreement- An agreement bringing us together would b e signed. Help provided by AMUL y

y

y

Amul would provid e the design and specifications for renovation of the outlet. It will provide consultancy if required and will also inspect the work of the contractor. Amul will help in assessing the business potential of the shop and will help in making the business plan. Amul will guide you in purchase of various equipment. It will also help you in choosing between the various sizes and types available based on its experience o f the business.

y

Amul will provide signage¶s and glow-sign to the o utlet at its own cost.

y

Amul shall help in the ina uguration activities b y way of local promotions.

y

Exclusive consumer offers would be made a vailable through Amul preferred outlets which are not extended elsewhere.

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CONCLUSION

We can draw following conclusion from this study y

Amul is a channel steward

y

Consumers buy Amul products due to quality and pricing of the same

y

Amul is slow in reacting to the channel members¶ concern

y

Amul mainly gives financial incentive to its channel members. It should also give non-financial incentives to motivate them

y

Amul¶s channel selection is consistent with its long tem vision

y

Amul should take channel members¶ feedback seriously (currently they do not pay individual attention to the channel members

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Amul - Report

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