Distribution Channel AMUL

DISTRIBUTION CHANNEL OF AMUL

A PROJECT REPORT ON


2012-13

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A PROJECT REPORT ON

“DISTRIBUTION CHANNEL OF AMUL”

SUBMITTED BY “___________ ”

FOR THE DEGREE OF THE BACHELOR OF MANAGEMENT STUDIES

UNDER THE GUIDANCE OF

“MISS _____________” _____________”

___________ COLLEGE OF COMMERCE AND ECONOMICS _________, MUMBAI – 4000____ ACADEMIC YEAR 2010 - 2011

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2


DECLARATION I,

_ _ _ _ _ _ _ _ __ _ ,

OF

T HE

_________

COLLEGE

OF

COMMERCE

AND

ECONOMICS ICS, _____ ______ ____ ____ __(( E ) , HEREBY DECLARE THAT I HAVE COMPLETED THE PROJECT ENTITLED “DISTRIBUTION CHANNEL OF AMUL ” IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE THIRD YEAR OF THE BACHELOR OF MANAGEMENT STUDIES COURSE FOR THE ACADEMIC YEAR 2012-2013

I FURTHER DECLARE THAT INFORMATION SUBMITTED BY ME IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED:

_________ Name of the student

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CERTIFICATE I

HEREBY BY CERT CERTIF IFY Y THAT THAT ROSH ROSHAN ANII PARE PAREKH KH MISS ________ ____________ ______ __ HERE

_________________ ___________ ______ STUDYING IN TYBMS AT ______COLLEGE ______ COLLEGE OF COMMERCE AND

ECONOMICS ICS,

_____ ______ ____ ___, _,

HAS

COMPLETED

A

PROJEC JECT

ON

“DISTRIBUTION CHANNEL OF AMUL” IN THE ACADEMIC YEAR 2012-2013 UNDER MY GUIDANCE.

I FURTHER CERTIFY THAT THE INFORMATION SUBMITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

DATED: Place:

Name of the guide

Examiner’s Sign &Date

PROJECT GUIDE

_____________________ _____________________ College Seal

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PRINCIPAL

4


ACKNOWLEDEGEMENT I EXPRE XPRESS SS MY SINC SINCE ERE THANK HANKS S TO

HER MISS ________ ____________ ______ __ FOR HER

VALUABLE GUIDANCE IN DOING THIS PROJECT.

I WISH WISH TO TAKE TAKE THE THE OPPO OPPORT RTUN UNIT ITY Y TO EXPR EXPRES ESS S MY DEEP DEEP SENC SENCE E OF GRATITUDE TO PRINCIPAL _______________________ ___________________________ ____ AND PROF. (Mr.) FOR _______________________ ________________________ _ FOR

THEIR HEIR

INVA INVAL LUABL UABLE E

GUIDA UIDAN NCE

AND

SUPPORT IN THIS ENDEAVOUR. THEY HAVE BEEN A CONSTANT SOURCE OF INSPIRATION.

FINALLY IT IS THE FOREMOST DUTY TO THANK ALL MY RESPONDENTS, FAMILY & FRIENDS WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN COMPLETING MY FIELD WORK, WITHOUT WHICH THIS PROJECT WOULD NOT HAVE BEEN SUCCESSFUL. SUCCESSFUL.

Name of the student

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TABLE OF CONTENTS

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CHAPTER 1

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1.1 EXECUTIVE SUMMARY Imagine going for a morning walk in the wee hours to a park, making a brief stopover and coming back home with a belly-full of tasty flavored milk and hot pizza topped with cheese! Defeats the purpose of the walk, but may make you feel on top of the world.

Now, imagine the CEO of a dairy company saying, “Ours is not a food company, it is an IT company in the food business. The most efficient way of building links between milk producers and consumers so as to provide the best returns for both is through IT and innovation.”

Or better still, imagine a cooperative movement that has delivered a Rs. 2746 crore turnover and has been planning actively to take it up to the 10000 crore mark. Amul India limited, and its team of energetic professionals have planned to take on HLL in ice-creams, ice-creams, Cadbury in chocolates, and NDDB in a verbal duel to uphold the cooperative movement. On top of all this, set up a retailing network that would be the toast of the town.

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CHAPTER 2

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2.1 AMUL STORY formed ed in 1946 1946,, is a dairy cooperative Amul Amul (Anand (Anand Milk Milk Union Union Limited Limited)), form movement in India. India. It is a brand name managed by an apex cooperative organisation, organisation, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which today is jointly owned by some 2.8 2 .8 million milk producers in Gujarat, Gujarat, India.

AMUL is based in Anand, Anand, Gujarat and has been a sterling example of a co-operative organization's organization's success in the long term. It is one of the best examples of co-operative achie achievem vement ent in the the devel developi oping ng econo economy my.. "Any "Anyone one who who has has seen seen ... ... the dairy dairy cooperatives in the state of Gujarat, especially the highly successful one known as AMUL, AMUL, will will natural naturally ly wonder wonder what what combina combination tion of influenc influences es and incenti incentives ves is neede needed d to mu mult ltipl iply y such such a mo model del a thousa thousand nd time timess over over in devel developi oping ng regio regions ns everywhere." everywhere." The Amul Pattern has established itself as a uniquely appropriate model for rural development. Amul has spurred the White Revolution of India, which has made India the largest producer of milk and milk products in the world. It is also the world's biggest vegetarian cheese brand.

Amul is the largest food brand in India and world's Largest Pouched Pouched Milk Brand with an annual turnover of US $1050 million (2006-07). Currently Amul has 2.8 million producer members with milk collection average of 10.16 million litres per day. Besides India, Amul has entered overseas markets such as Mauritius, Mauritius, UAE, USA, Bangladesh, Bangladesh, Australia, Australia, China, China, Singapore, Singapore, Hong Kong and a few South African countries. Its bid to enter Japanese enter Japanese market in 1994 had not succeeded, but now it has fresh fresh plans plans of floodi flooding ng the the Japane Japanese se marke markets ts.. Othe Otherr poten potenti tial al marke markets ts being being considered include Sri Lanka.

Dr Verghese Kurien, former chairman of the GCMMF, is recognised as the man behind the success of Amul. On 10 Aug 2006 Parthi Bhatol, Bhatol, chai chairm rman an of the the Banaskantha Union, was elected chairman of GCMMF.

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2.1.1 MASCOT

Since 1967 Amul products' mascot has been the very recognisable "Amul baby" (a chubby butter girl usually dressed in polka in polka dotted dress) showing up on hoardings and product wrappers with the equally recognisable tagline Utterly Butterly Delicious .The mascot was first used for Amul butter. But in recent years in a second wave Amul .The of ad campaign for Amul products, she has also been used for other product like ghee and milk .

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2.2 EVOLUTION OF THE CO-OPERATIVE MOVEMENT One of the most powerful co-operative co-operative movements originating originating from the birth state of Mahatma Gandhi is responsible for the birth and growth of the popular FMCG brandAMUL. Before the cooperative movement began, middlemen who supplied milk to the consumers were exploiting the dairy industry in the Kaira District. It began as a response to this exploitation and put an end to it. It grew because it responded to the farmers financially as well as with services. It has thrived because farmers who have a stak stakee in its its succ succes ess, s, own own it. it. And beca becaus usee it has has been been mana manage ged d by capa capabl blee professionals and strengthened by dedicated scientists, technologists and workers, it has forged ahead. Today in India, there are 75,000 dairy cooperative societies, spread all over the country with a membership of 10 million. The farmer in the village is now assured of a better future thanks to these cooperatives. Recently one of the European Embassies in Delhi requested Amul for information on the five biggest "companies" in the dairy business. The first three are in the cooperative sector - The Gujarat Cooperative Milk Marketing Federation (GCMMF), The Kaira District Cooperative Milk Milk Produ Producer cers' s' Union Union Limi Limited ted and Th Thee Mehsa Mehsana na Dist Distri rict ct Coope Cooperat rativ ivee Milk Milk Producers' Producers' Union. The Kaira District District Cooperative is the second best in the country. It helped to create GCMMF, the apex body of all cooperatives in Gujarat.

2.2.1 - THE HUMBLE BEGINNING

In the forties one firm - Polsons, dominated the dairy industry. Established by a rather enterprising enterprising gentleman who discovered that Kaira District, of what was then Bombay Presidency, Presidency, produced a good deal of milk. He established a creamery creamery and for a while the name Polsons was synonymous with butter - much as Amul is today.

One of Polson's businesses was to supply milk to Bombay. As Kaira district was an abundant source of the commodity, Polson was chosen to procure it from there. He in turn, entered into an arrangement with a number of contractors who actually went to the the vill villag ages es and and coll collec ecte ted d the the milk milk.. Ev Ever eryo yone ne was was happ happy y. Bomb Bombay ay rece receiv ived ed reasonably good quality milk and Polson made a handsome profit. The contractors too managed to earn large margins by over quoting the farmers. It was only the poor

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farmers who were unhappy for it. They invested in the animal feed and fodder and they put in their labor. Yet, it was they who received the smallest share of the Bombay consumers' rupee. The arrangement benefited everyone but them.

2.2.2 - THE FIRST STEP: FORMATION OF KAIRA UNION

Realizing that something needed to be done about the unequal balance of wealth, they turned to Sardar Vallabhbhai Patel for advice. Sardar Patel knew that their only chance of earning a decent income was when they themselves gained control over the resources they created. He also knew that the cooperatives offered them the best chance of gaining that control. So he advised them to stop selling milk to Polson and form a cooperative of their own. In his opinion they were to own their own dairy unit. He said, "Throw out Polson and his milk contractors". They followed his advice and the Kaira District Cooperative Milk Producers' Union (AMUL) was born, in 1946. By good fortune, fortune, they could could get as Chairm Chairman an - Shri Shri Tribhuv Tribhuvanda andass Patel, Patel, an equally equally remarkable man. He understood the concept of cooperation and he understood people. His integrity was absolute. Because the farmers of Kaira district trusted and respected respected Tribhuvandas Patel, the cooperative was able to pass through some very difficult times and eventually become a model of cooperative dairying throughout the world. The Kaira Union began with a clear goal, to ensure that its producer members received the highest possible share of the consumers' rupee. This goal itself defined their direction. The focus was on production by the masses, not mass production. By the early 'sixties, the modest experiment in Kaira had not only become a success, people began to recognize it as such. Farmers came from all parts of Gujarat to learn.They went back to their own districts and started their own cooperatives. The result - Together, the district milk producers unions of Gujarat owned the Gujarat Cooperative Milk Marketing Federation, which markets the milk and milk products manufac manufacture tured d by its owners. owners. The Federat Federation' ion'ss turnover turnover was over Rs. 1700 crore making it the largest in the food industry.

In 1964, the then Prime Minister Shri Lal Bahadur Shastri came to inaugurate cattle feed factory owned by Amul near Anand. Impressed by the cooperative's success, he expressed his wish to "transplant the spirit of Anand in many other places". He wante wanted d the Anand Anand mo model del of dairy dairy devel developm opment ent repli replica cate ted d in other other parts parts of the the

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country. With institutions owned by rural producers, which were sensitive to their needs and responsive to their demands, it was an ideal tool for progress. The National Dairy Development Board was created in 1965 in response to this call.

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2.3 OPERATION FLOOD The mighty Ganges at its origin is but a tiny stream in the Gangotri ranges of the Himalayas. Similar is the story of Amul, which inspired 'Operation 'Operation Flood' and heralded the 'White Revolution' in India. It began with two village cooperatives cooperatives and 250 liters of milk per day, nothing but a trickle compared to the flood it has become today. Today Amul collects , processes and distributes over a million liters of milk and milk products per day, during the peak, on behalf of more than a thousand village cooperatives owned by half a million-farmer members. Further, as Ganga-ma carries the aspirations of generations for moksha, Amul too has become a symbol of the aspirations aspirations of millions millions of farmers, creating creating a pattern of liberation and self-reliance for every farmer to follow.

2.3.1 - THE START OF A REVOLUTION

The revolution started as awareness among the farmers that grew and matured into a protest movement and the determination to liberate lib erate them. Over four f our decades ago, the th e life of a farmer in Kaira District was very much like that of his counterpart counterpart anywhere else in India. His income was derived almost entirely from seasonal crops. The income income from milch milch buffaloe buffaloess was undepend undependable able.. Private Private traders traders and middle middlemen men controlled the marketing and distribution system for the milk. As milk is perishable, farmers were compelled to sell it for whatever they were offered. Often, they had to sell cream and ghee at throwaway prices. In this situation, the one who gained was the private trader. Gradually, the realization dawned on the farmers that the exploitation by the trader could be b e checked check ed only on ly if marketed their milk themselves. In order ord er to do that they needed to form some sort of an organization. This realization is what led to the the establ establish ishme ment nt of the the Kaira Kaira Distri District ct Cooper Cooperati ative ve Milk Milk Produc Producer ers' s' Union Union December 14, Limited (popularly known as Amul) that was formally registered on December 1946.

The Kaira Union began pasteurizing milk for the Bombay Milk Scheme in June 1948. An assured market proved a great incentive to the milk producers of the district. By

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the end of 1948, more than 400 farmers joined in more village societies, and the quantity of milk handled by one Union increased from 250 to 5,000 liters a day.

2.3.2 - OBSTACLES: SPRINGBOARDS FOR SUCCESS

Each failure, each obstacle, each stumbling block can be turned into a success story. In the early years, Amul had to face a number of problems. With every problem came opport opp ortuni unity ty-- a chanc chancee to turn turn a negat negative ive into into a pos posit itive ive.. Milk Milk by-pr by-produ oduct ctss and supplementary yield, which suffered from the same lack of marketing and distribution facilities, became encumbrance. Instead of being bogged down by their fate they were used as stepping-stones for expansion. Backward integration of the process led the cooperatives to advances in animal husbandry and veterinary practice.

2.3.3 - MILK BY PRODUCTS: AN EXCUSE TO EXPAND

The response to these provided stimulus for further growth. For example, as the movement spread in the district, it was found that the Bombay Milk Scheme could not absorb the extra milk collected by the Kaira Union in winter, when the production production on an average was 2.5 times more than in summer. Thus, even by 1953, the farmermembers had no assured market for the extra milk produced in winter. They were again forced to sell a large surplus at low rates to the middlemen. The remedy remedy was to set up a plant to process milk into products like butter and milk powder. A Rs 5 million million plant to manufacture milk powder and butter was completed completed in 1955. In 1958, the factory was expanded to manufacture sweetened condensed milk. Two years later, a new wing was added for the manufacture of 2500 tons of roller-dried baby food and 600 tons of cheese per year, the former based on a formula developed with the assistance of Central Food Technological Research Institute (CFTRI), Mysore. It was the first time anywhere in the world that cheese or baby food was made from buffalo milk on a large, commercial commercial scale. Another milestone milestone was the completion of a project to manufacture balanced cattle feed. The plant was donated by OXFAM under the Freedom from Hunger Campaign of the FAO.

To meet the requirement of milk powder for the Defense, the Kaira Union was asked by the Government of India in 1963 to setup additional milk drying capacity. A new n ew

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dairy capable of producing 40 tons of milk powder and 20 tons of butter a day was speedily completed. It was declared open in 1965. The Mogar Complex where high protein weaning food, chocolate and malted food are being made was another initiative initiative by Amul to ensure that while it fulfilled the social responsibility to meet the demand for liquid milk, its members were not deprived of the benefits to be had from the sale of high value-added products.

2.3.4 - CATTLE: FROM STUMBLING BLOCKS TO BUILDING BLOCKS

Traditionally Traditionally dairying was a subsidiary occupation occupation of the farmers of Kaira. However, However, the contribution to the farmer's income was not as prominent as his attachment to dairying as a tradition handed down from one generation to the next. The milk yield from animals, which were maintained mainly on the by products of the farm, was decidedly low. That together with the lack of facilities to market even the little produced rendered the scientific practice of animal husbandry irrational as well as unaffordable. unaffordable. The return on the investment investment as well as the prospects of being able to market the product looked very bleak. It was a vicious cycle reinforced by generations of beliefs.

The Kair Kairaa Unio Union n brok brokee the the cycl cyclee by not not only only taki taking ng upon upon them themse selv lves es the the responsibility of collecting the marketable surplus of milk but also provided the members with every provision needed to enhance production. Thus the Kaira Union has full full-fl -fledg edged ed mach machine inery ry geare geared d to provi provide de anima animall healt health h care care and breedi breeding ng facilities. As early as late fifties, the Union started making high quality buffalo semen. Through village society workers artificial insemination insemination service was made available to the rural animal population. The Union started its mobile veterinary services to render animal health care at the farmers' farmers' doorstep. Probably for the first time in the country, country, veterinary first aid services, by trained personnel, were made available in the villages. Fully qualified staff mans the Union’s 16 mobile veterinary dispensaries. All the villages are visited bi-monthly, on a predetermined day, to provide animal health care. A 24-hour Emergency Service is also available at a fee (Rs. 35 for members and Rs. 100 for non-mem non-members bers). ). All the mob mobile ile veterina veterinary ry vans are equipped equipped with Radio Radio Telephone.

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The Union runs a semen production center where it maintains high pedigreed Surti buffalo bulls; Holstein Friesian bulls, Jersey bulls and 50 per cent crossbred bulls. The semen obtained from these bulls is used for artificial breeding of buffaloes and cows belonging to the farmer members of the district. The artificial insemination service has become very popular because it regulates the frequency of calving in cows and buffaloes thus reducing red ucing their the ir dry period. Not No t only that, a balanced feed concentrate con centrate is manufactured in the Union's Cattle Feed Plant and sold to the members through the societies at cost price. Impressive though its growth, the unique feature of the Amul sagas did not lie in the extensive use of modern technology, nor the range of its products, not even the rapid inroads it made into the market for dairy products. The essence of the Amul story lies in the breakthrough it achieved in modernizing the subsistence economy of a sector by organizing the rural r ural producers in the areas.

2.3.5 - PEOPLE POWER: AMUL'S SECRET OF SUCCESS

The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as a channel to market the production enhancement package.

What's more, it does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economic upliftment and common good.

Looking back on the path traversed traversed by Amul, the following features features make it a pattern and model for emulation elsewhere. Amul has been able to: Produce an appropriate blend of the policy makers farmers board of management and the professionals: each group appreciating its roles and limitations Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment

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Provi Provide de a sup suppor portt syste system m to the the milk milk produc producer erss with without out distur disturbi bing ng their their agroagroeconomic systems

Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common common good and betterment of the member producers and Even though, growing with time and on scale, it has remained with the smallest producer members. In that sense, Amul is an example par excellence, of an intervention for rural change.

Thee Union Th Union looks looks afte afterr policy policy formu formulat lation ion,, proces processin sing g and marke marketin ting g of milk milk,, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like - all through the village societies.

Thee villa Th village ge socie society ty also also facil facilita itates tes the the imple impleme ment ntati ation on of variou variouss produc producti tion on enhancement enhancement and member education education programs undertaken by the Union. The staffs of the village societies have been trained to undertake the veterinary first-aid and the artificial insemination activities on their own.

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CHAPTER 3

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3.1 GCMMF: AN OVERVIEW Gujarat Cooperative Milk Marketing Federation (GCMMF) is the India’s largest food product marketing organization. It is a state level apex body of milk cooperatives in Gujarat, which aims to provide remunerative returns to the farmers. 12 district cooperative milk producers' Union

Members

No. of Producer Members

2.36 million

No. of Village Societies

11,333

Total Milk handling capacity

6.9 million litres per day

Milk co collection (Total – 2008-09)

2.81 billion litres

State Level Marketing Federation

Milk collec collection tion (Daily (Daily Aver Average age 200 2008-0 8-09) 9)

5.97 5.97 millio million n litres litres

Milk Drying Capacity

511 metric Tons per day

Cattle fe feed m maanufacturing Ca Capacity

2340 MT MTs pe per da day

District Milk Product Union Ltd.

3.1.1 - ORGANIZATION STRUCTURE IS DIVIDED INTO TWO PARTS:

External Organization Structure Village Milk Product Union Ltd. Internal Organization Structure Villagers

External Organization Structure

Exte Ex terna rnall Organi Organiza zati tion on Struc Structur turee is the organi organiza zati tion on struc structur turee that that affec affects ts the the organization from the out side.

V i l l a g e r s As we know, GCMMF is unit of Gujarat Milk Marketing Federation, which is a cooperative organization. The villagers of more than 10000 villages of Gujarat are the bases of this structure. They all make village milk producers union, district distr ict level milk

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l a DISTRIBUTION CHANNEL OF AMUL g e r producers union and then a state level marketing federation is established. The s structure is line relationship, which provides easy way to operation. It also provides better communication between two stages.

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Internal Organization Structure of Amul

A systematic & well-defined organizational structure plays a vital role & provides accurate information to the top-level management. An organisation structure defines a clear-cut line of authorities & responsibilities responsibilities among the employees of GCMMF. GCMMF. The Organisation structure of Amul is well-arranged structure. At a glance a person can

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completely come to know about the organization structure. Amul is leaded by the director under him five branches viz. Factory, Marketing, Accounts, Purchase, Human Resources Department.

Factory department has a separate general manager under him there are six braches viz. Production, Stores, Distribution, Cold Storage, Quality, and Deep-freezing. Deep-freezing. This department takes care of the factory work.

Marketing department has regional senior marketing manager and under him there is a regional manager. This department takes care of the marketing aspects of Amul. Accounts department takes care regarding accounts i.e. day-to-day work. Under the accountant there is one clerk. Purchase department takes care regarding the purchase of raw materials and many other things.

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Sales Turnover

Rs (million)

US $ (in million)

1994-95

11 140

3 55

1995-96

13 790

4 00

1996-97

15 540

4 50

1997-98

18 840

4 55

1998-99

22 192

4 93

1999-00

22 185

4 93

2000-01

22 588

5 00

2001-02

23 365

5 00

2002-03

27 457

5 75

2003-04

28 941

6 16

2004-05

29 225

6 72

2005-06

37 736

8 50

2006-07

42 778

1 05 0

2007-08

52 554

1 32 5

2008-09

67 113

1 50 4

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3.2 ANAND PATTERN OF DEVELOPMENT It began with two village co-operatives and 250 liters of milk per day -- anything but a trickle compared to the flood it has become today. Today AMUL collects processes and distributes over 9 lakh liters of milk per day during the peak on behalf of 962 village co-operatives owned by 5.42 lakh farmer members. AMUL has become the sign and symbol of the aspirations of millions of farmers, and the pattern of liberation and self-reliance for every farmer. The Kheda District Co-operative Milk Producers' Union Limited (popularly known as AMUL) was formally registered on December 14, 1946.

The Kheda Union began pasteurizing milk for the Bombay Milk Scheme in June 1948. An assured market proved a great incentive to the milk producers of the district. By the end of 1948, more than 400 farmers joined in more village societies, and the quantity of milk handled by the Union increased increased from 250 to 5000 litres a day. In the early years, AMUL had to face a number of problems. The response to these provided stimulus for further growth. For example, as the movement spread in the district, it was found that the Bombay Milk Scheme could not absorb the extra milk collected by the Kheda Union in winter, when the production on an average was 2.5 times the summer. Thus, even by 1953, the farmer-members had no assured market for the extra

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milk produced in winter. They were again forced to sell a large surplus at low rates to the middlemen.

The remedy was to set up a plant to process milk into products like butter and milk powder. A Rs. 5 million plant pl ant to manufacture milk powder powd er and butter was completed complete d in 1955. In 1958, the factory was expanded to manufacture sweetened condensed milk. Two years later, a new wing was added for the manufacture of 2500 tons of roller-dried baby food and 600 tons of cheese per year, the former based on a formula develope developed d with with the assistan assistance ce of Central Central Food Technol Technologic ogical al Research Research Institut Institutee (CFTRI), Mysore.

It was the first time anywhere in the world that cheese or baby food was made from buffalo milk on a large, commercial scale. Another milestone was the completion completio n of a project to manufacture balanced b alanced cattle feed. The plant was donated by OXFAM under the Freedom From Hunger Campaign of the F A O . To meet the requirement of milk powder for the Defense, the Kheda Union was asked by the Government of India in 1963 to set-up additional milk drying capacity.

A new dairy capable of producing 40 tons of milk powder and 20 tons of butter a day was speedily completed. It was declared open in 1965. The Mogar Complex where high protein weaning food, chocolate and malted food are being made was another initiative by AMUL to ensure that while it fulfilled the social responsibility to meet the demand for liquid milk, its members were not deprived of the benefits to be had from from the sale sale of high high value value-ad -added ded produc products ts.. Th Thee Mog Mogar ar comp comple lex x also also start started ed manufacturing Amullite a substitute for butter in 1994. Amul has also set up a new Dairy Plant to handle 6.5 lakh liters per day with facilities to produce 60 tonnes of powder and 70 tonnes of butter bu tter in a highly high ly automated plant. It has recently r ecently set up u p a 20 MT Cheese plant at Khatraj near Memdabad.

Impressive though its growth, the unique feature of the AMUL sagas did not lie in the extensive extensive use of modern technology, nor the range of its products, nor even the rapid inroads it made into the market for dairy products. The essence of the AMUL story

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lies in the breakthrough it achieved in modernizing the subsistence economy of a sector by organizing the rural producers in the area.

True, traditionally dairying was a subsidiary occupation of the farmers of Kheda. Howe However ver,, the contr contribu ibuti tion on to the farm farmer' er'ss incom incomee was was not as promi prominen nentt as his his attachment to dairying as a tradition handed down from one generation to the next. Low milk yield of animals maintained on the by-products of the farm, together with lack of facilities to market even the little produced, turned the decision to invest in scientific practice of animal husbandry and nutrition, decidedly irrational; the return on the investment as well as the prospects of being able to market the product looked very bleak indeed.

Since its inception, the Kheda Union also believed that the responsibility to collect the marketable surplus of milk should be coupled with the provision of making the production enhancement inputs reach the members. The Kheda Union has thus a fullfledged machinery to provide animal health care and breeding facilities. As early as late fifties, the Union started making high quality buffalo semen and the artificial insemin inseminatio ation n service service availabl availablee to the rural rural animal animal populati population on through through the village village society workers. The Union started its mobile veterinary services to render animal health care at the door steps of the farmers. Probably for the first time in the country, country, the veterinary first aid service was made available in the villages through trained village-society workers.

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The Union's 16 mobile veterinary dispensaries have fully qualified staff. All the villages are visited bi-monthly on a pre-determined day, to provide animal health care. A 24-hour Emergency Service is also available at a fee (Rs.35 for members and Rs.100 for non-members). All the mobile veterinary vans are equipped with Radio Telephones.

The Union runs a semen production centre where it maintains high pedigreed Surti buffalo bulls, Holstein Fresian bulls, Jersey bulls and 50 per cent cross-bred bulls to cater to the need of semen for artificial breeding of buffaloes and cows belonging to the farmer members of the district. Artificial insemination service has become very popular and effective because it regulates the frequency of calving in cows and buffaloes and thus reduces their dry period. A balanced feed concentrate is manufactured in the Union's Cattle Feed Plant and sold to the members through the societies at cost price.

The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk, besides acting as a channel to market the production enhancement package; and does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the the trad tradit itio iona nall syst system em,, when when the the prof profit it of the the busi busine ness ss was was corn corner ered ed by the the middlemen, middlemen, the system ensured that the profit goes to the participants participants for their socioeconomic upliftment and common good. The Union looks after policy formulation, processing and marketing of milk and provision of technical inputs to enhance milk

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yield of animals: artificial insemination service, veterinary care, better feeds and the like, all through the village societies.

Thee villa Th village ge socie society ty also also facil facilita itates tes the the imple impleme ment ntati ation on of variou variouss produc producti tion on enhancement, and member education programmers undertaken by the Union. The staffs of the village societies have been trained to undertake the veterinary first-aid and the artificial insemination activities on their own.

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CHAPTER 4

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4.1 AMUL – THE COMMERCIAL BRAND AMUL means "priceless" in Sanskrit. The brand name "Amul," from the Sanskrit "Amo "Amooly olya," a," was was sug sugges geste ted d by a quali quality ty contro controll expert expert in Anand Anand.. Varia Variants nts,, all all meaning "priceless", "priceless", are found in several Indian languages. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspr Amulspray, ay, Amul Amul Cheese, Cheese, Amul Amul Chocola Chocolates, tes, Am Amul ul Shrikhan Shrikhand, d, Amul Amul Ice cream, cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (Turnover: Rs. 37.74 billion in 2005-06). Today Amul is a symbol of many things. Of high-quality products sold at reasonable prices. Of the genesis of a vast co-operative network. Of the triumph of indigenous technology. Of the marketing savvy of a farmers' organisation. And of a proven model for dairy development.

4.1 – PRODUCT RANGE Bread Spreads

Amul Butter

Amul Lite

Utterly

Low fat, low

Butterly

Delicious

Cholesterol Bread Spread

D el e l ic i c io i o us us

T ab a b le le

Dairy

Margarine

Whitener

Thee Deli Th Delicio cious us way way

The Richest Richest,, Purest Purest

to eat healthy

Dairy Whitener

Powder Milk

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A mu l ya

31


Amul

Spray

Infant

Milk

Amu l

Instant

Full Cream Milk

Food

Powder

Still, Mother's Milk

A dairy in your

is Best for your

home

baby S a ga ga r

S k im i m me me d

Milk

Po w d e r

Sagar

Tea

Coffee Whitener

Which is especially useful

fo r

diet

preparations or for use use by peop people le on low

calorie

a nd

high protein diet.

Fresh Milk

Amul Fresh Milk This

is

th e

most

hygienic available

Amul Gold Milk

milk in

the

market. market. Pasteuri Pasteurised sed in

stat statee-of of-t -the he-a -art rt

processing and and

plants

pouc pouchh-pa pack cked ed

for convenience. Amu l

Taaza

A mu mu l

Double

Toned

and Trim Milk

Milk

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Lit e

S l im im


Amu l

Fresh

Cream

A mu l

Ko o l

Chocolate Milk

Amu l

Kool

A mu l

Ko o l

Flavoured

F la l a vo v o ur u r ed ed

T et e t ra ra

Bottled Milk

Pack

Amu l

A mu l

Shakti

Toned Milk

Masti

Spiced Buttermilk Amul introduces the Be s t

Thirst

Quenching Drink

Amul cheese

A mu mu l

P a st s t e ur u r i se se d

A mu l

Cheese

P r o c es e s s e d C h e e se se

Spreads

100%

Tasty Cheese Spreads

Vegetarian

Chee Cheese se made ade

from from

in 3 great flavours.

microbial rennet Amu l

E m m e nt nt a l

Cheese The

Pizza

Mozzarella

Great

Swiss

Cheese

Chee Cheese se from from Am Amul ul,,

Pizza cheese...make cheese...makess

has

great tasting pizzas!

a

sweet-dry

flavour flavour and hazelnut hazelnut aroma

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33


Gouda Cheese

For Cooking

Amul / Sagar Pure

Cooking Butter

Ghee M a de

fr o m

f res h

cream. Has typical rich arom aromaa

and and

gran granul ular ar

texture.

An

product

made

ethnic by

diaries with decades of experience. Amul Malai Paneer

U tt t t er er l y

Ready to cook paneer

Pizza

D el e l ic i c io i o us us

to make your favourite favourite recipes! Mithai

Mate

Sweetened Sweetened Condensed Condensed Milk Milk - Free Free flow flowin ing g and and

smoo sm ooth th text textur ure. e.

White to creamy color with a pleasant taste.

Health Drink

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Masti Dahi


Nu N u t r a m u l

Amul

Malt Malted ed Milk Milk Food Food

Health

made

Drink

from

malt

has

the

extract highest

Shakti Food

Availab Available le in KesarKesar-

protein

Almond

cont conten entt amon among g all all

an d

Chocolate flavours.

the brown beverage powders

sold

in

India.

Desserts

A mu m u l I c e C r ea e a ms ms

A mu mu l

Prem Premium ium Ice Cream Cream

A

made

anytime.

in

various

S hr h r ik i k ha ha n nd d

delicious

treat,

varieties and flavours with with dry dry frui fruits ts and and nuts.

A mu l

Mithaee

Gulab

J a mu n s

Pure

Khoya oya

Gulab Jamun Mix

Gulab

Jamums...best Jamums...best served piping hot. A mu mu l

C h oc o c o la l a t es es

Amul Lassee

Thee perf Th perfec ectt gift gift for for someone you love.

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Amul Basundi

4.2 BCG MATRIX The BCG Growth-Share Matrix is a portfolio planning model.. It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability.

4.2.1 BCG GROWTH-SHARE MATRIX

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This framework assumes that an increase in relative market share will result in an increase in the generation of cash. This assumption often is true because of the experience curve; curve ; increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage. A second assumption is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption.

It is observed that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born.

Here, we shall consider the products of GCMMF (Amul India). The products to be placed in the BCG matrix for the study are, Amul Butter, Amul Ice – cream, Amul Kool and Amul Chocolates.

THE FOUR CATEGORIES ARE: Question Question marks marks - Question marks are growing rapidly and thus consume large

amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash comsumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

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For For Am Amul ul brand, brand, Amul Kool Kool and and Am Amul ul Choco Chocola lates tes are are a perfec perfectt examp example le of a Question mark product or a problem child. Question marks business are wait and watch business. Amul kool and the chocolates.are businesses the company entered because it felt that both bo th these product category categ ory have high growth gr owth potential.

Stars - Stars generate large amounts of cash because of their strong relative market

share, but also consume large amounts of cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified diversified company always should have stars that will become the next cash cows and ensure future cash generation. Amul Ice – cream, is a star generating huge amounts of cash for the company. No doubts it demands huge amount of investments as well but at the same time has enormous growth rate. It has still maintained its large market share in competition with other large brands like ‘Kwality Walls Ice – cream’ and ‘Dullops’ etc. It has earned very high returns compared to its investments and continues to be so. The company hopes to cash on this product in future.

Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that

is great greater er than than the marke markett growt growth h rate, rate, and thus thus genera generate te mo more re cash cash than than they they consume. consume. Such business units should be "milked", extracting the profits and investing investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends dividends to shareholders. shareholders. Beca Because use the the cash cash cow cow gener generat ates es a relat relativ ively ely stabl stablee cash cash flow flow,, its its value value can can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis.

Amul Butter is one of the unbeatable product in the product profile of the company. It is primarily their most successful product with hardly any competitors in the market. The pricing of this product is absolutely strategic so as to avoid further competitors from from enter entering ing this this segme segment nt of the the produc productt consum consumer ers. s. Th Thee advert advertis isem ement entss and and billboards of this product is major contributor to the sales. It is the oldest in the

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market and hence still enjoys the First Mover Advantage, as per the law of marketing. This product has been a thorough cash cow from the beginning since it gave huge returns with lowest investments which made it easy for the company to plough those profits for other products, pro ducts, i.e the Question Mark and the Star segments.

Dogs - Dogs have low market share and a low growth rate and thus neither generate

nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture.

The unfortunate product for any company is when it enters the Dog segment. The most unsuccessful unsuccessful product for the company has been Amul – Ready to eat Pizza. The company had to call off the product from its list of products. Inspite of all the marketing marketing strategies the company undertook to make this product a success it proved to be futile. Somehow, the company could not induce the idea of ready –to-eat pizza in the minds of the consumers. With tough competitors like ‘Pizza Hut’ and ‘Dominos Pizza’ it was wise for them to withdraw the product from the market to avoid further losses for the company

4.3 SWOT ANALYSIS 4.3.1 - STRENGTHS

Absolutely ly optimis optimistic tic.. Milk Milk being being a necessit necessity y product product,, the D e m an an d p r of o f i l e : Absolute demand will stay and the sales at GCMMF are bound to increase over a period of time.

reasonable, even on packed liquid milk. The margins are enough to Margins: Quite reasonable, limit the entry of potential entrants.

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Tremendous. With balancing equipment, GCMMF Flexibility of product mix : Tremendous. 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 milk produ produced ced is flowi flowing ng into into the uno unorga rgani nized zed secto sector, r, which which requi requires res proper proper channelization. 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 pl p l a n t s i n p u b l i c a n d c o o p e r a t i v e s e c t o r s b e s i d e s s e v e r a l o t h e r s c o m i n g up in the private sector would result in competition. Because of this the end consumer would benefit and a good product mix would emerge.

Professional onally ly trained, trained, technic technical al hum human an resource resource pool, pool, Technical Technical manpower manpower : Professi built over last 30 years is the t he 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.

n c re r e as a s e i n t he h e m il i l k p ro r o d uc u c ti t i on o n w it it h E n h an an c ed e d M i l k P r od o d u ct c t i o n: n : I nc c on o n se s e qu q u een n tl t l y i nc n c re r e as a s eed d a va v a il i l ab a b i li li t y o f m il i l k p ro r o ccee ss s s iin n g h aass l ed ed t o i n cr c r e as a s e i n c o ns n s u mp mp t io i o n a n d f a st s t e r a c ce c e s s t o t h e c o ns n s u me m e r s t h ro r o u gh gh effective distribution. The technology is brought from Denmark and the pr p r o d u c t i o n o f m i l k h a s b e n e f i t e d f r o m t h a t . Transportation: The transportation facilities and the easy availability

of the special trucks have provided a boost. Cold refrigerated trucks are t h e r e i n p l a c e a n d t h e w a r e ho h o u s e s a l s o h a v e t h e c o l d s t o r ag ag e f a c i l i t i es es that facilitate the transportation.

V a st st

r e so s o u rrcc e s: s:

C ou o u nt n t ry r y h aass v aass t n aatt ur u r al a l r es e s ou o u rc r c es e s w hi h i ch c h o ff f f er er

immense potential growth and development for dairying. Moreover the f i n a n c i a l r e s o u r c e s a v a i l a b l e w i t h t h e f e d e r a t i o n ar e i m m e n s e a n d t h e r ep e p ut u t at a t io i o n i s s uc u c h t ha h a t i n c as a s e o f a ny n y f ur u r th t h eerr r eq e q ui u i re r e me m e nt n t ss,, i t c an an approach any institution and raise any form of capital.

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Increasing purchase power and changing tastes of the consumers:

The purchasing power of the residents is increasing. As a result a lot of pr p r o d u c t s a r e b e i n g c o n s u m e d . M o r e o v e r , t h e c o n s u m i n g h a b i t s a r e c ha h a ng n g in i n g. g . A s a r es e s ul u l t, t , t he h e d eem m aan n d f or o r p ro r o du d u cctt s s uc u c h a s b ut u t te t e r a nd nd cheese is increasing at a very rapid rate.

4.3.2 WEAKNESSES

Pasteurizat ization ion has overcom overcomee this weakness weakness partial partially. ly. UHT gives gives Perishability: Pasteur milk long life. Still perishability is there at the milk vendors end. This does result in loss of some production. production. But Amul Dairy Dairy is taking steps to store store milk at the vendors end. Surely, many new processes will follow to improve milk quality and extend its shelf life.

Theoretically, there is little control over milk yield. Lack of control over yield : Theoretically, A lot depends depends upon the monsoon monsoon in the country country.. This is because because of the quality 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, transplant, artificial insemination insemination and properly managed animal husbandry practices, coupled with higher income to rural milk producers should automatically lead to improvement in milk yields. Logistics of procurement : Woes of bad roads and inadequate transportation

facility make milk procurement problematic. problematic. All these factors lead to perishability of the the procur procured ed milk. milk. But But with with the the overal overalll econom economic ic impro improvem vement ent in India India,, these these problems would also get solved.

Thee errat erratic ic power power sup suppl ply y woul would d cause cause harm harm in the the E r ra r a t i c p o w er er s u p pp p l y : Th processing of milk.

e r e s t il i l l e x is i s t u n de d e r de d e v el e l o pe p e d r a w m il il k Underdevelope Underdeveloped d systems : T h er collection systems in some parts of the country. However steps are be b e i n g t a k e n s u c h a s s e t t i n g u p o f c o l d s t o r a g e p o i n t s a t k e y c o l l e c t i o n centers to combat the situation.

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Lack of proper implementation : Dairy development programmes have not

been fully implemented as per the needs of the region reg ion in different agro-climatic agro -climatic zones. Infrastructure: The infrastructure that is available is not up to the current world standard standards. s.

Also lack of infrastruct infrastructure ure for offering offering dairy dairy business business managem management ent

programmes to the trained personnel is creating creatin g a hindrance.

4.3.3 OPPORTUNITIES "Failu "Failure re is never never final, final, and succe success ss never never endin ending” g” . Dr Kurien bears out this

statement perfectly. He entered the industry when there were only threats. He met 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:

With so many newcomers newcomers enterin entering g this this industry industry,, competi competition tion is Competition: With 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.

Ther eree is a phen phenom omen enal al scop scopee for for inno innova vati tion onss in prod produc uctt V a lu l u e a d d it i t i o n : Th development, packaging and presentation. Given below are potential areas of value addition:

Step Stepss sho should uld be taken taken to intro introduc ducee valuevalue-add added ed produc products ts like like shrikhand , shrikhand , ice creams, paneer, khoa , 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 addition of infant foods, geriatric foods and nutritional. nutritional. Ex po rt po te nt ia l: Effo Effort rtss to explo exploit it expor exportt pote potent ntia iall are are alre alread ady y on. on. Am Amul ul is

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exporting exporting to Bangladesh, 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.

available for project formulation formulation for dairy enterprise. enterprise. It IT support: Software is now available has also computerized its production processes. Mother Dairy was the first fully com compute puteri rize zed d dair dairy y in Indi India. a. In its its Anan Anand d plan plantt all all prod produc ucts ts are are proc proces esse sed d computerized, which does not have any hand touch during any stage of process.

4.3.4 THREATS

Mil k ve nd or s, th e un -o rg an ize d se ct or : Toda Today y mil milk k ven vendo dors rs are are occ occup upy ying ing the the pride of place in the industry. indus try. Organized dissemination of information informatio n about the harm that they are doing to producers and consumers should see a steady decline in their importance. There are increas increasing ing incident incidentss of chemical chemical contaminan contaminants ts as well well as Infestation: There 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.

liberalization of the Dairy Industry is likely to be exploited exploited by the Exploitation: The liberalization multinationals. multinationals. They will be interested manufacturing the milk products, which yield high high profi profits. ts. It will will creat createe milk milk sho short rtage age in the count country ry adver adversel sely y affect affectin ing g the the consumers.

Subsidy by Western Nations: There have been incidences wherein the Western

nations subsidizing subsidizing the dairy products by a few means like transportation. transportation. Because of

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such reasons the final price of the product goes below the prices prevailing in the Indian Market. Hence it proves a threat to GCMMF’s and 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’ ‘opportunities’’ ‘strengths’ and ‘opportunities far far outw outweeigh igh ‘weaknesses’ Streng ngth thss and and oppo opport rtun unit itie iess are are weaknesses ’ and ‘threats’. threats’. Stre fundamental and weaknesses and threats are transitory. Any investment idea can 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).

4.4 MICHAEL PORTERS FIVE FORCES ANALYSIS According According to Porter (1980) a firm must be analyzed analyzed in relation relation to its industry. Factors outside the industry tend to influence all the industry’s industry’s 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 attractive ness of an industry industr y is dependent depen dent 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 identifies five competitive forces that derive from the ambition to obtain as large share of the profitability as possible. pos sible. The five forces are the th e foundation of the five-force model.

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Milk

4.4.1

Gayatri

PORTER’S

Royal

FIVE-FORCE

Sardar

MODEL

Uttam Shreshtha

The

major

competi competitors tors of the Amul dairy include:

Ice Crean

Vadilal Havmor Kwality Walls Max Local & Regional players

The success of t he

national

an d

local

Ghee

Gayatri Nestle

competitor’s brands includes in cludes Milk Powder 2012-13

Nestle 45

Nestle


effec effecti tive ve distr distribu ibuti tion on syste system, m, advert advertis ising ing,, goo good d prici pricing ng policy policy etc. etc. Th Thee facto factors rs ascribed by porter 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

“coope “coopera rati tion on among among compe competit titiv ive” e” is the fundam fundament ental al princ principl iple. e. Am Amul ul dairy 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 Preference of Amul in the minds of the people. The level of preference 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 p erfect one. For any an y new entrant to enter it would be b e 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.

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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.

investment required in the industry is huge and is a Capital Requirements: The total investment decision worth considering even for MNC’s. 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 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 goo d return on his or o r her supply. However, supplier s upplier 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 farmer’s farmer’s rights rights are protect protected ed under under the coopera cooperative tive rules rules and regulat regulations ions,, which 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.

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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. rate. To stand against against the rivalry GCMMF GCMMF is coming with with a wide range of products.

Nature of Competitors: In different business category GCMMF faces competition

from from diffe differe rent nt playe players. rs. In the the Milk Milk powde powderr categ category ory it faces faces comp competi etiti tion on from 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 there is presence of local retailers and processors and milk vendors. Rivalry intensifies as each of the competitors has different lines and this would in turn depend on the importance the line holds for the competitor.

such in the the indu indust stry ry ther theree are are no merg merger erss or Mergers Mergers and Acquisitio Acquisitions: ns: As such acqui acquisit sitio ions. ns. Howev However er if any any MNC MNC wishe wishess to enter enter throug through h this this route route then then the 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

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switching to the substitutes is very high. Moreover the buyers also can switch to the customers easily without any hurdles.

substitutes are present in many of the categories categories Not immediate substitutes: Distant substitutes of business business of GCMMF. GCMMF. For example example in the Masti Buttermil Buttermilk k category category it faces faces competition from cold drinks and ice cream.

These 5 forces interact among themselves at different degrees over a period of time. More Mo reov over er it will will get get inte intens nsee or loos loosen en up depe depend ndin ing g upon upon the the mo move vess of its its competitors, buyers, suppliers, etc. However GCMMF has been able to outperform on almost all fronts excluding a few lines of business.

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CHAPTER 5

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5.1 PRODUCTION Explosion of the production technology and changes in technical field is going to bring out revolution in the industry sector which eventually gives stand to study and favors the come backing subject i.e. production and management.

Production Production and operation operation management is planning, organizing, organizing, staffing, directing and controlling of all the production system those portion of organization that convert inputs into products and services. In general production system takes raw material, personnel, machines, buildings and other resources and produce products and services.

The core of production system is its conversion subsystem where in workers; raw materia materials ls are used to convert convert inputs inputs into into products products and services services.. This This producti production on department is at heart of the firm, as it is able to produce low cost products and superior quality in timely manners.

Thus, there arises enormous need of giving due importance to this department as a whole whole and a strong strong concre concrete te base base being being founda foundati tion on pilla pillars rs of a manuf manufac actur turing ing organization, if the intention is to succeed domestically and globally.

5.1.1 CO OPERATIVE MILK PRODUCING SOCIETIES IN GUJARAT

Following are the cooperatives that function under GCMMF. •

Ahmedabad Dist Coop Milk Producers’ Union Ltd, Ahmedabad. Soc: 433, Mems: 52,428. Av Milk Proc: 90,000 lpd.

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•

Banaskantha Dist Coop Milk Producers’ Union Ltd, Palanpur. Soc: 1,130, Mems: 97,251. Av Milk Proc: 295,000 lpd.

•

Baroda Dist Coop Milk Producers’ Union Ltd, Baroda. Soc: 783, Mems: 156,691. Av Milk Proc: 225,000 lpd.

•

Bharu Bharuch ch Dist Dist Coop Coop Milk Milk Produ Produce cers’ rs’ Union Union Ltd, Ltd, Bharu Bharuch. ch. Soc: Soc: 289 289,, Mems: Mems: 37,900. Av Milk Proc: 38,000 lpd.

•

Bhavnagar Dist Coop Milk Producers’ Union Ltd, Bhavnagar. Soc: 190, Mems: 25,532. Av Milk Proc: 23,000 lpd.

•

Gandh Gandhin inaga agarr Dist Dist Coop Coop Milk Milk Produ Produce cers’ rs’ Union Union Ltd, Ltd, Gandh Gandhin inaga agar. r. Soc: Soc: 56, Mems: 13,000. Av Milk Proc: 46,500 lpd.

•

Junagadh Junagadh Dist Coop Coop Milk Milk Produce Producers’ rs’ Union Union Ltd, Ltd, Junagadh Junagadh.. Soc: 400, Mems: Mems: 41,500. Av Milk Proc: 73,000 lpd.

•

Kaira Kaira Dist Dist Coop Milk Producers’ Producers’ Union Ltd, Amul Dairy, Dairy, Anand. Soc: 943, Mems: 513,280. Av Milk Proc: 740,000 lpd.

•

Kutch Dist Coop Milk Producers’ Union Ltd, Kutch Dairy, Madhapar. Av Milk Proc: 25,000 lpd.

•

Mehsana Dist Coop Milk Producers’ Union Ltd, Dudhsagar Dairy, Mehsana. Soc: 1,020, Mems: 292,800. Av Milk Proc: 704,402 lpd.

•

Panchmahal Dist Coop Milk Producers’ Union Ltd, Godhra. Soc: 1,133, Mems: 126,510. Av Milk Proc: 112,000 lpd.

•

Rajkot Dist Coop Milk Producers’ Union Ltd, Rajkot. Soc: 193, Mems: 29,620. Av Milk Proc: 50,000 lpd.

•

Sabarkantha Dist Coop Milk Producers’ Union Ltd, Sabar Dairy, Himatnagar. Soc: 1,315, Mems: 200,482. Av Milk Proc: 322,346 lpd.

•

Surat Surat Dist Dist Coop Coop Milk Milk Produ Produce cers’ rs’ Unio Union n Ltd, Ltd, Sumu Sumull Dairy Dairy,, Sura Surat. t. Soc: Soc: 864 864,, Mems: 160,000. Av Milk Proc: 300,000 lpd.

•

Surendranagar Dist Coop Milk Producers’ Union Ltd, Surendranagar. Soc: 486, Mems: 31,000. Av Milk Proc: 30,000 lpd.

•

Valsad Dist Coop Milk Producers’ Union Ltd, Vasudhara Dairy, Valsad. Soc: 348, Mems: 35,900. Av Milk Proc: 74,400 lpd.

5.1.2 - PLANT LAYOUT

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Plant layout is the overall arrangement of the machine tools, handling equipments, storeroo storeroom m and other other various various accessor accessories ies required required for facilit facilitatin ating g producti production on in a factory. These arrangements are pre-planned with the results that the building has been constructed to fit a layout of a given process. p rocess.

AMUL AMUL plant plant is indigeno indigenously usly worked out with with facilit facilitatio ation n of various various product production ion processes and production of multi products under one plant. The total plot is nearly about about 2.27 2.27 kms kms.. Separat Separatee building buildingss are provided provided with required required arrangement arrangementss of machine tools handling and computers connection through the control room to fit for varying product-manufacturing departments.

The plant is engaged in producing milk, ice creams, milk powder and ghee. Entire department department is uniquely provided with facilities for the processing processing each product. There are 4 production departments and packaging departments pertaining to each product respectively.

Thus, plant layout encompasses all production and service facilities and provides for the most effective utilization of the men, materials and machines constituting the process. It is the master blue print of coordinating all operations. A good layout results in elimination or minimization of accidents and hazards and cost while increases the output. Thus a good layout specifically is observed to be beneficial on the following fo llowing grounds: •

Efforts minimization

•

Fewer material handling will be provided manufacturing units cost will be lover

•

Bottlenecking of production will be eliminated

•

Total item in process will be less

•

Specialization of operations is facilitated

•

Less inspection will be required

•

Production control will be easier to achieve

•

Plant investment can be held to the necessary minimum

•

Plant and equipment obsolescence may be less

•

Wastage space will be eliminated

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Thus, a true beneficiary is provided to the plant through good and sound planning for plant layout.

5.1.3 - OPERATING ANALYSIS

Amul’s only source of raw material is Village Milk societies. Milk is brought from such village milk societies every morning and evening. This milk is then sent to the dairy plant. In the dairy plant the milk is processed i.e. it is made free from germs.

5.1.4 - MILK PROCESSING

The entire process of milk can be divided into following steps: Milk Processing Chart:

Collection of Raw-Milk Electronic Milk Test

MethylineBlu Reduction Test Purchasing And Standardizing Process

Separation Process

Quality Check

Packaging Process

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Cold Storage

Steps in Production Process 1. Collection of Raw Milk

Raw milk is collected collected from different different co-operative societies of Gujarat. About 122000 liters of raw milk is collected per day. Before this milk is sent to the laboratory for testing the ‘FAT & SNF’ proportion, the milk is separated from the raw milk. The milk is taken from the chilling centers to Ahmedabad with the help of trucks.

After collecting the samples of milk, they are taken to the laboratory, where two types of tests are conducted.

•

Electronic milk test

•

Methyline blue reduction test

Electronic Milk Test

Before pasteurizing pasteurizing the milk the samples are taken to the laboratory. laboratory. In the laboratory laboratory with the help of machine called electronic milk tester, the proportion of SNF & FAT is checked with phosphate solution. When the colour of the milk becomes yellow, it is sent for pasteurization.

Methyline Blue Reduction Test

Another test, which is taken in the laboratory, laboratory, is called Methyline Methyline blue reduction reduction test. This test is conducted for checking for how long the milk will remain fresh. To check this, 10 ml of milk is taken and 1 ml of methyline blue solution is added to it. It is then kept under water at 57-degree C. After one hour, if the solution losses its colour than it is called raw milk. If the solution remains the same even after 5 hours than it is considered as fresh milk, which remains constant for a long period of time.

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The dairy fixes the proportion of FAT & SAF. MILK Buffalo Cow

SNF

FAT

9% 8.5%

6% 4.5%

After laboratory gives green signal and confirming the raw milk at the reception dock is brought in to the house connected with the pump is sent to the milk processing plant. This is than chilled below 4 degree d egree C. and then stored in milk silos. After that milk is processed this has two steps i.e. pasteurizing and standardizing.

2. Pasteurizing & standardizing

After After collecti collecting ng and checking checking and conduct conducting ing laborat laboratory ory tests, tests, the pasteuri pasteurizin zing g process is conducted. co nducted. To pasteurized pas teurized the milk means to kill all the germs in the milk by a particular method which wh ich was invented by a scientist called James Pasteur and so the name pasteurization.

In pasteurizing, the milk is first heated at 72 C to 76 C for 15 seconds and then it is immediately cooled below 4 C. By this method they destroy the pathogenic bacteria present in the raw milk. But if the right degree of temperature is not provided there are chances that the milk might still contain germs. After this process some milk goes to separator machine and remaining is proportionately sent for standardization.

Standardization process is known such as it bifurcates the milk in 3 categories varying acco accord rdin ing g to that that FAT FAT & SNF SNF cont conten ents ts.. Th Thee equi equipm pmen entt name named d OSTA OSTA.. Auto Auto standardization adjusts the fat directly. The computer is just ordered whether gold or standa standard rd milk milk is to be ratio rationed ned and the same same will will be recei received ved with with appro appropr priat iatee contents.

Ready Milk = Pasteurized + Standardized.

3.

Separation Process

Separator machine separates two kinds of products, skimmed milk & cream, through channels. There are 100 disks fixed in separator machines, which revolve at 5000 rpm (revolution per minute). It is taken to the tanks, which has the capacity of 20000 litres.

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Whenever the milk is needed from the tank, it is tested in the laboratory and the deficit proportion fat is added by mixing cream. This process continues for 24 hours.

4. Quality Check

Pasteurized milk is sent for a quality check in the Quality Assurance laboratory of the dairy plant. Within 14 seconds FAT and SNF proportion is received regarding 30 lack litres of milk. The total investment put into the lab by the Dairy plant is of Rs. 6 crores.

This laboratory only checks and analyses the powder, milk and ghee. There is a separate ice-cream analysing laboratory.

5. Packing Process

After this the milk is sent for packing to the milk packing station in the dairy plant. In the milk packaging station there are huge pipelines and behind each of them there is polyfill machine from which the material to pack milk comes out. There are 12 such polyfill machines in the packaging station from which the materials to pack milk comes out. From each of these 12 machines 100 pouches are packed in one single minute.

6. Storage

Then the milk is sent to the cold storage of the dairy where the milk is stored until it is dispatched. Here the milk is stored at temperature ranging from 5 C to 10 C, it is maintained with the help of exhaust fans having silicon chips. About 40000 litres of milk is dispatched from the cold storage of the dairy plant everyday. The damaged pouches are kept a side s ide and the milk is once again put to the tank.

7. Milk Powder

For converting milk powder first of all water content is evaporated in condensing plant. By this process they get condensed milk, it is used as a raw material. There after the milk is sent to the drying plant. The spray drying plant is huge in size with a height of 70 feet. The plant is divided into many floors to enable easy use of the plant.

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First of all the raw material i.e. condensed milk is put into the first floor of the plant along with air at 200° C. By this process the remaining water, which the condensed milk might have retained is also evaporated evaporated and milk comes as powder but this is not the last stage. This powder is again put in to a machine machine called milk calendaria, where it is turned in to real milk powder. Its capacity is 1000 litres per 15 minutes. Then again this milk powder is put into a Dense Waise Vessel. Here the lumps are removed and uniform milk powder is sent up.

Afte Afterr proce processi ssing ng the powder powder is sent sent for quali quality ty check checking ing at quali quality ty assur assuranc ancee laboratory. After the quality confirms, this milk powder is differentiated, by adding different different flavors to them like elaichi, chocolate & sugar free milk powder. Thereafter Thereafter they are packed in tins and boxes. Afterwards it is stored at storage department.

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5.2 DISTRIBUTION NETWORK Distribution Network

Most producers work with marketing intermediaries to bring their products to market. The marketing intermediaries make up a marketing channel also called distribution cannel. Distribution Distribution channels are sets of interdependent interdependent organizations organizations involved in the process of making a product pro duct or service available availa ble for use or consumption. consu mption.

The Head Office Office of GCMMF is located located at Anand. The entire market market is divided in 5 zones. The zonal offices are located at Ahmedabad, Mumbai, New Delhi, Kolkata and Chennai. Moreover there are 49 Depots located across the country and GCMMF caters to 13 Export markets.

A zero zero leve levell of chan channe nell also also call called ed a dire direct ct mark market etin ing g chan channe nell cons consis ists ts of a manufacturer selling directly to the final customers. A one level channel; contains one selling intermediary such as retailer to the final customers. A two level channel two intermediaries are typically wholesaler and retailer. A three level channel are typically wholesaler, retailer and jobber in between.

GCMMF has an excellent distribution. It is its distribution channel, which has made it so pop popul ular. ar. GCMM GCMMF’ F’ss produ products cts like like milk milk and and milk milk produc products ts are are peris perishab hable. le. It becomes that much important importan t for them to have a good distribution. d istribution.

Products 5.2.2 DISTRIBUTION CHART

Agents

Wholesaler

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We can see from above figure that GCMMF distribution channel is simple and clear. The products change hands for three times before it reaches to the final consumer. First of all the products are stored at the Agents end who are mere facilitators in the network. Then the products are sold to wholesale dealers who then sell to retailers and then the product finally reaches the consumers.

Amul Parlors

Amul has come out with a unique concept of Amul Parlours. They have classified those under four types namely: •

Center for excellence

•

On the Move

•

Amul Parlours

•

Amul Preferred Outlets

Center for Excellence: These Amul Parlours are specifically at a place, which has a

class of excellence of its own. We can find such parlors at the Infosys, IIMA, NID Ahmedabad etc.

On the Move: These parlors are at the railway stations and at different state bus

depots across different cities.

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

Amul Preferred Outlets: These are the private shops that keep the entire of product

range of Amul. They also agree not to keep any competitor brands in the outlets. They can keep other brands that are in the non-competitor category.

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Amul has more than 200 such outlets right now. It wants to have 1,00,000 parlors by the end of the year 2010.

5.2.3 - MANAGING COMPETITION

The Indian market is dominated by a large number of small local and regional players. There are an estimated 150 manufacturers in the organized segment, which accounts for 30-35% of sales and about 1000 units in the unorganized segments segments of the market. In the organized segment the significant brands are Kwality Walls , Vadilal, Amul, Havm Havmor, or, Mo Moth ther er dairy dairy and and Baski Baskins ns & Robbin Robbins. s. GCMM GCMMF F is facin facing g very very tough tough competition from both in and outside India.

Amul combats competition from its competitors by providing quality products at a price which its customers value. Along with good quality products and reasonable price the packaging is also very good. Most of its products are available in many flavors. Excellent advertising backs its products and helps GCMMF (AMUL) to leave its competitors competitors a tough time. Also Amul has come out with Amul Parlours to cater to various segments segments of customers. customers. Amul has a very strong Brand Image in the Domestic Domestic market. Many products are exported by GCMMF.

Exports: GCMMF is India's largest exporter of Dairy Products. 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 9 years. The major export products are: •

Consumer Packs

•

Amul Pure Ghee

•

Amul Butter

•

Amul Shrikhand

•

Amul Mithaee Gulabjamun

• •

Nutramul Brown Beverage Amulspray Infant Milk Food

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•

Amul Cheese

•

Amul Malai Paneer

•

Amul UHT Milk (Long Life)

•

Amul Fresh Cream

•

Bulk Packs

•

Amul Skimmed Milk Powder

•

Amul Full Cream Milk Powder

Thee produc Th products ts are are expor exporte ted d to 18 countr countrie iess name namely ly,, USA, USA, Kuwai Kuwait, t, Qatar Qatar,, UAE, UAE, Yemen, Bahrain, Muscat, Saudi Arabia, Tanzania, Madagascar, Sri Lanka, Singapore, Nepal, Bangladesh, Nepal Thailand and Australia.

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5.3 SUPPLY CHAIN FRAMEWORK The supply chain of Amul can be described in the following steps:•

Some Some 2.2 million million farmer farmerss from 12 district districtss of Kaira Kaira (kheda), (kheda), Sabar Kantha, Kantha, Baro Baroda da,, Panc Panchm hmah ahal al,, Rajk Rajkot ot,, Bhar Bharuc uch, h, Mehs Mehsan ana, a, Bana Banass Kant Kantha ha,, Sura Surat, t, Ahmedabad, Valsad and Gandhi nagar reach the milk collection centers every day in the morning morning and afternoon afternoon to sell the milk their buffalo buffaloes es have given in the morning and in the noon

•

The total milk procurement in the last year 2002 was an average 47.32 l per day where the peak the peak procurement touched a high of 62 l. All the milk procurement centers are equipped with computers and electronic milk testers (EMTs). EMTs ensure efficient testing and measurement of milk constituents. The computers run the automatic milk collection system, which ensures immediate preparation of milk payment bills, transparency of operations and greater efficiency of milk collection.

•

The milk is then sent to chilling depots in each village of the member unions. There are 10852 villages under GCMMF and each one has a village Cooperative society. VDC also runs the automatic milk collection system.

•

The milk is then sent to the 12 member unions. All of them run an ultra modern dairy that processes this raw material, which has traveled from faraway villages to the district headquarters.

•

The various products made under the flagship of AMUL such as butter, milk powder, cheese, dahi, ready made foods such as gulab jamun, pizza etc. Are manuf manufact acture ured d at these these variou variouss plant plantss and and distr distribu ibuted ted throu through gh the variou variouss distributors across the country and abroad through GCMMF.

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FARMERS 2.2 million

VCS 10675

MEMBER UNIONS 12 units

GCMMF 700 Emp

DISTRIBUTORS 3000+

RETAILERS 500000+

END USERS

Fig: - The flow of materials and information at AMUL

One reason that Amul is the giant it is because it’s built on the back of a co-operative co-operative movement. It encourages women and farmers to collect milk from their cows and pass it on to them for a price. By managing milk supplies from the cattle farmer and sendin sending g it strai straight ght to the the facto factory ry,, it’s it’s been been able able to elimi eliminat natee the middl middlem eman an.. Complexity and dynamics of the supply chain make it very difficult to assess the interaction effects.

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Increased cooperation among network members has resulted in a number of changes at all levels -- operational, tactical and strategic, and has led to the emergence of practices and strategies for improving the chain's performance. Most prominent among these include the following:

(i) Information sharing, often dynamically, to improve planning and execution. Sharing of POS data is a classic example for minimizing the distortions due to bullwhip effect and reducing perceived variability variability of demand by the partners in the chain. Typically, information sharing extends to costs as well.

(ii) Focus on core competence of each player in the chain. The objective is to ensure that each task is performed by the entity best suited for it. As a result, firms have become willing partners in ceding control to a network partner for improving performance. VMI in many industries indu stries is a direct result of such change chan ge in management managemen t thinking. Similarly, the role of third parties for providing specific expertise such as logistics has grown substantially with emphasis on supply chain.

(iii) Capacity improvement: It helps network partners in improving their capability and making them competitive.

Milk procurement Total milk procurement by our Member Unions during the year 2012-13 averaged 93.02 lakhs kilograms (9.30 million kgs) per day representing a growth of 6.68% over 87.19 lakhs kgs (8.7 million kgs) per day achieved during the year 2008-09. The highest procurement as usual was recorded during January, 2012 at 122.5 lakhs kgs per day

The distribution network Amul products are available in over 500,000 retail outlets across India through its network of over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of the entire range of products.

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GCMMF transacts on an advance demand draft basis from its wholesale dealers instead of the cheque system adopted by other major FMCG companies. This practice is consistent with GCMMF's GCMMF's philosophy of maintaining maintaining cash transactions transactions throughout the supply chain and it also minimizes dumping.

Managing third party service providers Its core activity lay in milk processing and the production of dairy products and all other activities such as logistics of milk collection, distribution of dairy products, sale of products through dealers and retail stores, provision provision of animal feed, and veterinary services were entrusted to third parties.

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5.4 PROBLEMS & ISSUES WITH SUPPLY CHAIN

•

Managi Managing ng this this sup suppl ply y chain chain effic efficie ientl ntly y is crit critica icall as GCMMF GCMMF's 's compet competit itive ive position is driven by low consumer prices supported by a low cost system. s ystem.

•

In the past years the concept of just-in-time was not introduced, all GCMMF branches were engaged enga ged in route scheduling and have dedicated vehicle operations.

•

Even though the cooperative was formed to bring together farmers, professional manag managers ers and and techn technocr ocrat atss would would be stil stilll requi required red to manag managee the netw network ork effectively and make it commercially viable.

•

It is worth noting that a number of third parties are not in the organized sector, and many are not professionally managed with little regard for quality and service. This is a particularly critical issue in the logistics and transport of a perishable commodity where there are already weaknesses in the basic infrastructure.

•

Its network which consists of large number of members requires regular roll out improvement programs and high implementation rate of these programs.

•

Having a strong supply chain is only the beginning, the remaining part includes making consumer products that sell well and that the same consumers are able to be impacted by marketing and advertising movements. movements .

•

The organization was also suffering from the high middleman cost which was tackled by managing milk supplies from the cattle farmer and sending it straight to the factory.

•

Due to the perishable nature of the product, it has to invest in cold storage which is an extra burden in distribution and warehousing.

•

At the time Amul was formed; consumers had limited purchasing power, and modest consumption consumption levels of milk and other dairy products. Thus Amul adopted

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a low-c low-cost ost price price strat strategy egy to make make its its produc products ts afford affordabl ablee and attr attract activ ivee to consumers by guaranteeing them value for money. •

In addi additi tion on to the the weak weakne ness sses es in the the basi basicc infr infras astr truc uctu ture re,, logi logist stic icss and and transportation transportation services are typically typically not professionally professionally managed, with little regard for quality and service.

•

GCMMF was one of the first FMCG (fast-moving consumer goods) firms in India to employ Internet technologies to implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. Another e-initiative underway is to provide farmers access to information relating to markets, technology and best practices in the dairy industry ind ustry through net enabled kiosks k iosks in the villages. GCMMF has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process.

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CHAPTER 6

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6.1 RESEARCH OBJECTIVES To study consumer perception towards brand AMUL

6.2 SAMPLE SIZE 100 respondents

6.3 RESEARCH LIMITATION

•

Research is limited to 100 respondents

•

Research is limited to study of consumer perception only towards brand AMUL

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6.4 DATA INTERPRETATION INTERPRETATION AGE GROUP

42

45 40 35

30

30 25

20-30 30-40

21

20

40-50

15

50-60

10 5

7

0 •

42 % respondents were of the age group 40 – 50

•

30 % respondents were of the age group 30-40

•


•


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SEX

70

61

60 50

39

40

Male

30

Female

20 10 0 •

61 % respondents were Male

•

39 % respondents were Female

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OCCUPATION

45 42 40 35 30

Salaried

21

25

Professional

20

Proprietor

15

Housewife

8

10 5 0 •

42 % respondents were salaried

•

21 % respondents were professional

•

8 % respondents were Proprietor

•

29 % respondents were Housewife

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CONSUMPTION

100

100

80 60 Yes 40 20 0 All the 100 respondents consume brand AMUL

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BRAND IDENTIFICATION

100

100 80 60

Nestle Cadbury

40 20

Amul 0 0

0 100 % respondents identified accurately as AMUL brands.

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PURCHASE

60

56

50 40 30 20

Kirana store 21

Dairy

13 20

Super market Malls

10 0 •

21 % respondents purchase from Kirana store

•

56 % Respondents purchase from Dairy

•

13 % respondents purchase from Super market

•

20 % respondents purchase from Malls

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FREQUENCY

70

67

60 50

Once in a week

40

Twice in a week

30

Once in 15 days

20 10

20

Once in month

12 1

0 •

67 % respondents purchase once in a week

•

12 % respondents purchase Twice in a week

•

20 % respondents purchase once in month

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REASONS FOR PURCHASE

67

70 60 50 40

Daily requirement

33

House hold use

30 20 10 0 •

33 % respondent purchase as it is their daily requirement.

•

67 % respondent purchase as it is their household use requirement

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TASTE AS A PURCHASE FACTOR

77

80 70 60 50

Yes

40 30

No 23

20 10 0 23 % respondent says that taste act as a prime factor for purchase factor

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PRODUCT TRUST AS A PURCHASE FACTOR

64

70 60 50 40

36

Yes No

30 20 10 0 36 % respondent says that product trust act as a prime factor for purchase.

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HABITUAL CONSUMPTION AS A PURCHASE REASON

90

90 80 70 60 50

Yes

40

No

30 20 10

10

0 10 % respondent says that habitual consumption act as a prime factor for purchase of

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6.5 SURVEY FINDINGS •

Majority of the respondents were in the group of 40-50

•

Dairies were prime purchase of product.

•

Almost 3/4th respondent consume at least once in a week

•

Taste, Trust, Habitual are the prime reasons for consumption of the product

•

AMUL is the primary preference when compared to other brands

•

AMUL was primarily associated with household requirement

6.6 RECOMMENDATION

•

Trust has to be maintained through out as people are purchasing only due to

trust •

More retail outlets to be explored for Avaibility

•

Should be supplied as daily product like milk and news paper

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CHAPTER 7

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7.1 OBSERVATION OF SCM ISSUES Following are the major issues analyzed with respect to the SCM of Amul:

Larger lead time:-

A numb number er of thir third d part partie iess are are not not in the the orga organi nize zed d sect sector or,, and and many many are are not not professionally managed with little regard for quality and service. Due to the old and obsolete means of transportation, transportation, failure of machinery machinery etc. leads the delay in reaching to retailers and end users. In the past years the concept of just-in-time was not intro introduc duced, ed, all all GCMM GCMMF F branch branches es were were engage engaged d in route route sched scheduli uling ng and have have dedicated vehicle operations. Due to the perishable nature of the product, it has to invest in cold storage which is an extra burden in distribution and warehousing. As a result need of JIT were felt and the concept has introduced to avoid any kind of delay and destruction of products. Introduction of just-in-time inventory strategy improves dealers' return on investment (ROI).

Gap between demand and supply:-

Due to the unprofessional unprofessional and inexperienced inexperienced 3PL providers there is vast gap between demand and supply. In the peak season, the company fails to satisfy the retailers’ demand on certain products. Since the lead time was high so company were unable to get raw material on time and also were unable to produce final product to match with the quantity demanded by retailers retailers and consumers. consumers. Amul decided to focus on farmers farmers facing business processes such as supply, distribution distribution and its own internal operations. The main goals of the supply chain initiative were improving forecast accuracy to match supply with demand, delivery performance to avoid stock-outs thereby creating a dependable and reliable brand image without excessive spend. These steps were taken to reduce dependency on cold storage.

SUPPLIERS:-

Thee memb Th member er-su -suppl pplier ierss were were typic typicall ally y sm small all and margi marginal nal farm farmers ers with with severe severe liquidity problems, illiterate and untrained. AMUL and other cooperative Unions

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adopted a number of strategies to develop the supply of milk and assure steady growth. First, for the short term, the procurement prices were set so as to provide fair and reasonable return. Second, aware of the liquidity problems, cash payments for the milk supply was made with minimum of delay.

Managing Third Party Service Providers:

Well before the ideas of core competence and the role of third parties in managing the supply chain were recognized recognized and became fashionable, these concepts were practiced by GCMMF and AMUL. From the beginning, it was recognized that the core activity activi ty for for the the unio unions ns lay lay in proc proces essi sing ng of milk milk and and prod produc ucti tion on of dair dairy y prod produc ucts ts.. Accordingly, the unions focused efforts on these activities and related technology development. development. The marketing marketing efforts (including brand development) development) were assumed assumed by GCMMF. All other activities were entrusted to third parties. These include logistics of milk collection, Distribution of dairy products, sale of products through dealers and retail stores, some veterinary services etc.

Some other issues found in its supply chain are as follows:•

It has excellent ability to anticipate the right type of product at the right time through the years.

•

Amul is a cooperative where the milk suppliers are the shareholders. The owners decide what they should pay themselves for the raw material they supply. A unique situation where the owners of the company are also its largest vendors!

•

To implement their vision while retaining their focus on farmers, a hierarchical network of cooperatives was developed, which today forms the robust supply chain behind GCMMF's endeavors.

•

Intro Introduc ducti tion on of justjust-inin-tim timee inven inventor tory y strat strategy egy impro improves ves deale dealers' rs' retur return n on investment (ROI).

•

In order to manage the network effectively and make it commercially viable professional managers and technocrats were introduced. intr oduced.

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The company has core competency in milk processing and the production of dairy products and all other oth er activities were entrusted entru sted to 3PLs

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•

Infreight logistics solutions limited, Transport Corporation of India, Gammon India ltd. are some of its main 3PL providers.

Amul was one of the first FMCG firms in India to employ Internet technologies to implement implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. It has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process.

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7.2 RECOMMENDATION & SUGGESTION •

Amul should improve its distribution system, as it has already implemented on ERP in the company, company, still still due to in discipl disciplined ined behavior behavior of its distributo distributors, rs, retailers suffers which ultimately affect the consumers.

•

We know that the time schedule of the distributors & their transportation system cannot be capsuled, but they can reduce their errors. E.g. drive carefully to prevent accidents.

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Manpower should be more than 18 years of age. (in some of the areas, we have observed small children engaged in loading & unloading the trays from the truck)

•

Before Before offering offering any extra extra benefit benefitss or schemes schemes to their their retailer retailers, s, Amul Amul shou should ld aware them in advance, so that the incentives can be reached in the right hands at right time. Otherwise distributors enjoy the benefits of retailers.

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Codification of raw material should be done in an easily understand manner.

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Reduce the solving time of the consumer/retailers’ complaints.

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Payment to the milk suppliers should be made on time to ensure the proper inflow of milk.

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Amul should also launch certain schemes for households. It has schemes for retailers but not for households. This section being the major user of milk and in order to enter into a new area such starting schemes can be very helpful.

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For refrigerated refrigerated and frozen food distribution, distribution, a world class cold chain would help in providing quality assurance to the consumers around the region.

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Logistics and transportation services should be professionally managed to avoid wastes.

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Use of internet for exploring the unknown terrain.

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Active customer feedback should be taken regularly for increasing product line.

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Employees of GCMMF should involved actively in all activities of the member unions.

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Relationship with business associates like wholesaler should be made closer and deeper.

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The company should take initiative initiative to reduce transportation transportation time from the depots to the the whol wholes esal alee deal dealer ers, s, impr improv ovem emen entt in ROI ROI of whole holesa sale le deal dealer ers, s, 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.

•

Comp Comple lete tely ly in tune tune with with the the grou ground nd real realit ity y an enqu enquir iry y is init initia iate ted d on the the organizational climate. This gave detail about the core competencies and most importantly gave details about the handicaps and inadequacies.

•

Have recognized “change” as an essential factor governing business needs and hence incorporates changes in every form at every stage. employees, suppliers and distributors also “change ready” always

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CHAPTER 8

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8.1 CONCLUSION Am A m u l m e a n s d i f f e r e n t t h i n g s t o d i f f e r e n t p e o p l e .

To a milk producer – A life enriching experience To a consumer – Assurance of having wholesome milk To a mother – A reliable source of nourishment for her child To the country – Rural development and self reliance

Amul has given a new dimension to marketing. It showed that a democratically owned owned and managed managed farmer farmer organisati organisation on can successfull successfully y develop develop and sustain sustain a commer commercial cial product product in a nationa nationall market. market.By By doing doing this this Amul Amul provided provided virtually virtually guaran guarante teed ed marke marketi ting ng servic servicee to the the milk milk produc producer er at his doo doorr step. step. Am Amul ul has has displayed dynamic initiative at a time when its multinational competitors were merely content to use depreciated machinery.

Following factors have given us the insight to conclude, why Amul is thriving with success today:

Emphasis on Quality: All the products of Amul are of highest grade. Consumers

were very quick to perceive this and the sales success that followed reflected the public’s stamp of approval. appr oval.

good prod produc uctt alon alonee cann cannot ot succ succee eed d unle unless ss back backed ed by Modern Modern marketing marketing: A good innovative innovative marketing, marketing, including packaging, packaging, price and promotion. promotion. Amul’s advertising advertising campaigns created a splash in the market that eventually led to a tidal wave that rocked the competition.

Management: The judicious handling of people, recognition of performance and

encouragement for a good try has gone a long way to build a sound foundation of

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people. All the basic components of management that is production, marketing, finance and organisation behavior are nicely arrayed at Amul. The co-operative concept : The fundamental thesis underlying the Anand model is

that the rural producer must own and enjoy the assets they have helped to create. The model has inspired the creation of hundreds of other Anand.

The system has succeeded mainly because of involvement of people on such a large scale, providing assured market at remunerated remunerated prices for milk producers, enables the consumers consumers access to high quality milk and milk products, ploughing ploughing back the profit to the the memb member ers, s, part part of the the prof profit it is used used by the the soci societ ety y for for comm common on good good and and community development.

Amul has established itself as a uniquely appropriate model for rural development. Amul has spurred the white revolution of India, which has made India the largest producer of milk and milk products in the world. Amul products have been in use in millions of homes since 1946. Today Amul is a symbol of many things like of highquali quality ty produc products ts sold sold at reaso reasona nable ble price pricess & the the genes genesis is of a vast vast co-op co-opera erati tive ve network. Its supply chain is easily one of the most complicated in the world. The supply chain linking farmer-suppliers of milk with the millions of consumers. Amul encourages encourages women and farmers to collect milk from their cows and pass it on to them for a price price directly directly eliminat eliminating ing cost of middlem middleman. an. Introduc Introductio tion n of just-in just-in-tim -timee inventory strategy improves improves dealers' return on investment (ROI).Amul (ROI).Amul was one of the first first FMCG FMCG firm firmss in India India to emplo employ y Inter Internet net techn technolo ologie giess to imple impleme ment nt B2C B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery de livery with cash payment upon receipt. It has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process.

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8.2 BIBLIOGRAPHY

•

Johnson John son Gerry, Gerry, Scholes Scholes Kevan; Kevan; “Explor “Exploring ing Corporat Corporatee Strate Strategy-T gy-Text ext and

Cases”, Sixth Edition, Prentice Hall of India Pvt. Ltd. 2004, pp 100-102,134,183. •

Thom Th ompso pson n Arth Arthur ur A. Jr., Jr., Stri Strickl cklan and d J. A. III; III; “Str “Strat ategi egicc Manag Managem ement ent--

Concepts and Cases”, Thirteenth Edition, Tata McGraw-Hill Publishing Co. Ltd. 2003, pp 117, 123 –127. •

Patel, Rameshbhai P., “Amul, The Kaira District Cooperative Milk Producers’

Union Ltd. Anand, 50 Years of Milk & Health.” •

Dr. Kurien., “Amul, The Kaira District Cooperative Milk Producers’ Union

Ltd. Anand, 50 Years of Milk & Health.” •

Carter, Thomas R., “Amul, The Kaira District Cooperative Milk Producers’


Patel, T. K., “Amul, The Kaira District Cooperative Milk Producers’ Union


Gowda, Shri Deve, “Amul, The Kaira District Cooperative Milk Producers’


Halse, Halse, Michael Michael,, “Amul, “Amul, The Kaira Kaira Distri District ct Coopera Cooperative tive Milk Milk Produce Producers’ rs’


Baxi, J. J. “Amul, The Kaira District Cooperative Milk Producers’ Union Ltd.

Anand, 50 Years of Milk & Health.” •

Sing Singh, h, Kata Katar, r, Mitta Mittal, l, S. P., P., Singh Singh Viren Virendra dra,, “Amul, “Amul, Th Thee Kair Kairaa Dist Distric rictt

Cooperative Milk Producers’ Union Ltd. Anand, 50 Years of Milk & Health.” •

Dr. Oza, D. R., “Amul, The Kaira District Cooperative Milk Producers’ Union


Thodarson, Bruce, “Amul, The Kaira District Cooperative Milk Producers’

Union Ltd. Anand, 50 Years of Milk & Health.”

WEBSITE VISITED

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•

www.amul.coop

•

www.indiadairy.com

•

www.indianmilkproducts.com

BOOKS •

White revoltion - Dr. Kurien

•

Management of Co-Operatives - Romeo S Mascarenhas

•

Management of Co-Operatives - Ramkison

•

Tapping of Rural India

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Distribution Channel AMUL

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