Amul Case Study

Amul-GCMMF The Taste of India to Taste of reality Project Case outside(a)ist seam SECTION D GROUP Ashutosh Singh Khushwaha (GL) 269 Sachin Maan clxxv Frana James 219 Paran Gupta 240 Parth Shah 249 Pratik Upadhyay Amul The Taste of India to The Taste of humankind With a presence in entirely oer 40 countries in 2012, Amul has d unrivalled more than testing its results in the e rattlingplaceseas securities diligences. Since its run a risk into the world(prenominal) securities industrys in late 80s, it has steadily grown in gross gross revenue and right away it has more than Rs. 00 crores revenues from tradeations. Though the world dairy farm farm farm farm farm farm harvesting pr sorbets be change magnitude unceasingly and the Government of India has banned the exporting of take out Powder since February 2011, Mr. R. S. Sodhi, the Managing Director of GCMMF expects exports to increase by 20% on the back of billow demand. Mr. Sodhi, a ample with the top direction of the accommodative now faces some(prenominal)(prenominal) questions which go out regulate Amuls internationalist dodge for the approach shot twelvemonths.With the increasing demand and prospered venture in abroad merchandises, should Amul restrict to export and distri merelyion or partner with/ encounter opposite firms in these countries or should it go further towards turn a world(a) vane by compensateting up manufacturing and process computer programmets across the globe? If so, what products should it effect and what should be the degree of localization in order to succeed? Should it stick to dairy products or should it look towards the non-dairy solid regimen products as well? How impart it source take out and early(a)wise raw materials in these countries with assorted forms of complete dairy communicates?These argon fundamental decisions that need to be do because they will help Amul realize the goal of becoming worlds leading v ictuals target. Major food brands such(prenominal)(prenominal) as Britannia and hold tight are already take into Amuls municipal address. The top management has to decide a st trampgy that will help Amul compete against world rank dairy and food brands in Indian merchandise and in the oversea marts. indite Amul is the worlds 18th largest dairy firm with a 0. 5% share in spheric draw intersection, according to the internationalist bring somewhat Comparison Ne iirk 2011 list.The brand Amul is managed by Gujarat Cooperative Milk Marketing Federation, GCMMF which has several interchangeable dairies operating across the rude. During the m nonpareiltary course 2010-11, GCMMF registered a top hunt maturement of 22. 1%, achieving turnover of Rs 9774 crore. Amul is the largest food brand in India and worlds largest pouched take out brand with an annual turnover ofUS$2. 2billion(2010-11). Currently married couples reservation up GCMMF hire 3. 1 integrity one bil lion cardinal million producer members with take out collection number of 9. 10 million liters per day.AMUL is besides the largest exporter of dairy products in the country. AMUL is available today in over 40 countries of the world. AMUL is exporting a wide variety of products which include solid and Skimmed Milk Powder, Cottage tall mallow (Paneer), UHT Milk, Clarified Butter (Ghee), Indigenous Sweets, Amul cover, Amul thoter draw, Amul pizza tall mallow, Amul shrikhand, Amulya dairy whitener, Amul fresh cream, Amul flesh out draw, Amul cheese spread, Sagar Tea and Coffee whitener, Amul frappe creams homogeneous cassata , cool fueldy and frostik, Amul draw chocolate and Amul Eclairs.It has too started preparing and selling pizza slices which feature generous portions of Amul cheese. These pizza slices tint the customers through super marketplaces and large departmental stores that cod snack counters. It has tied up with Walmart to sell its dairy products, in it s shelves, downstairs the brand name of Amul itself. It similarly has tie-ups with Glaxo, for the deed of baby foods. The study overseas markets for Amul are USA, West Indies, and countries in Africa, the Gulf Region, andSAARCneighbors, Singapore, Hong Kong, The Philippines, Thailand, lacquer and China.Its emersion is more than 20% in these markets. Market presence has also gone up by 25 to 30 per cent in some markets such as Singapore, Hong Kong, UAE, the US and Bangladesh. Global dairy perseverance at a contemplate The emergence story of the dairy exertion in India is centered on the introduction of Operation Flood of the 1970s, recognizing the power of accommodative farming giving rise to the GCMMF and the locomotive behind the whole revolution was the brand Amul (Anand Milk Union Limited). This model helped the dairy sodbusters to direct their own development by placing control of their resources in their own hands.This conjunctive model resulted in do India on e of the largest producers of take out and take out products. In monetary honor of the harvest-home of the dairy market communicate over the historic period 2011-2016, India ranks fourth, behind the early(a) BRIC nations, i. e. Brazil, China and Russia. manifest 1 The scenario of the all important(p) dairy industries in early(a) countries was non on the corresponding barriers. To think of the expansion plan in toll of geographic location as well as the strategy that Amul would utilize would be dependent on the prehistoric and the current nature of the industry in those countries. dairy farm Industry in European Union The European Union, inclusive of 27 countries, is the largest milk producer in the world with Ger some and France universe the largest within the EU. However, within the EU, dairy end product is non uniform delinquent to unhomogeneous administration regulations and production quotas in some countries. In Germany, the drinking milk product categor y is button up driven by health and wellness. The drinking milk product category which saw a origin in 2010 by 1% ascertained a growth in the value sales by the a analogous(p) marrow in 2011.In the eastern European dairy market, Lactalis, becoming the fourth largest player in the region in 2008 with a 3. 3 % value share targeting countries a kindred Croatia, Ukaraine and Czech Republic. Lactalis followed the expansion through acquisition strategy and it is through these intense acquisition activities that Lactalis aforethought(ip) its move into the Hesperian European countries where it had to induce much heavier investments. The Western European dairy market is quite vaned as the expected CAGR for these countries is merely close to 0. % over the span of five vast time from 2011-16. This market is different from the other markets since they are not driven by milk usance but the key driving opportunities deceitfulness in milk products like cheese, yoghourt and sour m ilk drinks and thus fashioning these markets more value growth preferably than volume growth. Muller dairy farm, already competing in the yoghurt and chilled/shelf-stable desserts market in UK is desire to expand into other fast- increase dairy categories using its be statistical distribution network and leveraging on the brand amongst the British consumers. deliver 2 To gain market share in this mature market, some companies like Kraft Foods utilise unique merchandising strategy of positioning its Philadelphia drub tall mallow both as a spreadable cheese and as a cooking ingredient. This move reignited the growth in the otherwise mature spreadable neat cheese category. Dairy Industry in Japan In the year 2004, with 28800 domestic dairy farms, 8. 3 million tons of cows milk used to be produced. 60% of this was processed into milk for drinking economic consumptions and the rest was used for consumption as dairy products.The Nipponese believed that processing plants must b e locate close to the source of production since milk, universe a perishable entire, must be processed and sold when fresh. In 2004, on that point were 692 processing facilities throughout Japan. Expecting a growth in the consumption of milk products, maintaining a stable supply of safe, fresh milk was viewed as a challenge since it was important to Japanese consumers. To answer this demand for fresh-cut products, a solution was to develop stronger cooperation betwixt dairy producers and processors.However, by 2005, Japans aging population had essentially stabilize and the nation was being termed as a mature economy. As a result of this, the total milk production sojourned unchanged approximately at 8. 4 million tons. Amul failed to enter the market one time in 1994 but succeeded in 2005 when it grabbed a major(ip) exports order. GCMMF managing director B M Vyas then said , We relieve oneself had a distributor in Japan since 1994 but no major presence in that country.Bu t a few days agone a delegation from Japan, under the protection of Agri refinement and Livestock Industry tummy (ALIC), visited our facilities at Anand (Gujarat) and were pleasantly surprised with the classical scale of our dairy operations. It exports Ghee and Paneer to the country currently with a single major importer. Dairy Industry in Australia Australias trine largest rural industry is the dairy industry which is also a major regional employer, not only on-farm but also through processing, manufacturing and distribution of a flow of high persona products.With near 7950 dairy farms located across Australia, the industry produced 9. 2 billion liters of milk during 2007-08. The Australian dairy manufacturing sector isdiverse and includes farmer-owned co-operatives, public, private and multinational companies. The Farmer owned co-operatives is no month considerable the dominant players in the industry as they now account for less than 35% of the entire market share. In 2 011, the Australian Dairy market faced some other challenge of being considered to be one of the most competitive in impairment of retailing the milk products in supermarkets.In January 2011, Coles and Woolworths, two supermarket companies, entered into a price war during which the prices of base brand staples like milk, bread and midpoint were pushed down. This trend continued for the entire year and as a result the Dairy lobby groups demanded for a mandatory Australian Drinking Milk Code of acquit to look into such matters. Despite the self-assertive selling efforts, fresh/pasteurized milk registered a growth of only 3%.However, niche products in fresh milk category contract all(prenominal) hold or have shown significant growth. or so 60% of manufactured milk-products are exported and the stay 40% is sold on the Australian market. In drinking milk, some 97% is consumed in the domestic market. Cheese products, utilizing around one third of Australias milk production in 2010-11, have contain that spot for a few long time now. Dairy Industry in Sri Lanka As a country, Sri Lanka is self-sufficient in terms of all types of animal products except milk products.Their self-sufficiency in dairy products is about 1520% though that take aim has been achieved mostly with imported milk powder. Sri Lankan government adopted the open economic policies in the 1970s and since then the consumption of the nonchalant products has increased. asunder from the Northern conflict regions of the country, milk is produced in all the regulates. The marketing of milk in Sri Lanka is done through mingled channels and so becomes very complex. thither are individual farmers who sell now to processors, consumers, hotels, cafeterias and canteens * Cooperatives are organized primarily for the purpose of collecting and selling milk to either hotels or processors * The formal, or processed dairy, market consists of small dairy accommodatings, larger local cooperatives, rule dairy cooperatives, dairy cooperative unions and networks of collection points and milk chilling centers operated by cooperatives or the main dairy processors Apart from the above mentioned ways, some farmers do not see the need to become members of the farmer societies or cooperatives.There are a few large-scale processors who have organized such farmers to sell their milk instantaneously to them. Amul set up a milk processing plant in Sri Lanka in 2005 producing several products such as sterilized milk, milk powder, yoghurt,etc. It was a 51-49 knock venture between the GCMMF and the Sri-Lankan government. It handed over the operations entirely to the Sri-Lankan government after an year of successful running. Before planning the project, Mr. Verghese Kurien, often called the Milkman of India said, We are located right in the diaphragm of this milk-deficient region.So, we are planning to take value of this. Even China is a likely market in the future. global Ventures GCMMF is Indias largest exporter of Dairy Products. It has been accorded a Trading business firm status. GCMMF has received the APEDA Award from Government of India for excellence in Dairy Product exports for the get 13 years. The decision of going International Reasons that lead to the foray of Amul into International Markets * trim subsidies on milk products as per WTO guidelines made Indian milk products competitive in worldwide markets. Significant demand for its products amongst Indian families in foreign markets * Local installation would enable better control over logistics and cut 45 days of raptus time * Tie up with retail chains like Wal-Mart, use established distribution channel * Non-availability of single products like ghee in other markets presented a good opportunity * Long term lot to become a global food brand The problems and issues faced are * Non-tariff barriers in European countries * Competition with global players absence of proper distribution channel Expor t Main exports products are Amul UHT Milk (Long Life) ,Amul opulent Extra Cream Milk,Amul Taaza Full Cream Milk,Amul Slim and Trim Milk,Amul unadulterated Ghee,Amul Mithaee Gulabjamun,Nutramul cook Beverage,Amul Fresh Cream,Amul Kool Beverages,Flavoured Milk,Butter Milk,Lassee,Amulspray,Amul Butter,Amul Shrikhand,Amul Cheese,Amul Malai Paneer,Amul Ice Cream,etc. Despite disapproving conditions in international dairy market, their export business r from each oneed Rs. 133 crores against Rs. 125 crore in 2011.They have further consolidated their growth in consumer products including Paneer, Butter, Cheese, UHT Milk etc. This is extremely load-bearing(a) and indicates the high trust that the customers place in Amul Brand. They have not been able to export Milk Powder in great deal packing in larger metre due to fall of world market prices by nearly 50% as compared to previous year. Distribution Amuls strategy when it first entered international markets was to use the brisk dist ributors and partner with local companies to market its products.Amul has been in the US since 1998 through Kanan Dairy, which markets Amul processed cheese, clarifiedghee, Shrikhand, Nutramul, AmulsMithaee Gulab Jamunsto more than 1,000 pagan Indian foodstuff stores in the US through a network of seven distributors. Then Amul determine major supermarket and chain stores as the vehicles overseas to nurture Amul dairy products ranging from milk powder, butter, ghee, cheese, butter, ice creams and tinned Indian sweets. As growth through bulk exports was variable, GCMMF opted for sustained growth through retail sales that encounter brand recall and customer loyalty.It still did not decide on pose up manufacturing and processing plants as it was ease successful with its marketing and distribution plan for overseas markets. Then Amul identified major supermarket and chain stores as the vehicles overseas to promote Amul Amul sells products through Wal-Marts extensive distribution s ystem, having a separate counter for stocking and selling their products. It also has an arrangement with Mustafa supermarket chain in Singapore, Lanka Milk Foods (CWE) Ltd and John Keels chain in Sri Lanka, as also Choithram, Carrefour and strike chains in the UAE. MarketingIn India Amul caters to Intelligent marketing. It spends only 1% of gross revenue turnover on advertising and it is illustrious to come up with innovative adds. volition it be able to sustain the same strategy in international markets is a very important decision from the marketing point of view for GCMMF. Amul will have to customize its products and look outside the heathenish box to suit the American and other ethnic palates. It simply cannot use its home-ground strategies in the US and expect to make a mark, even if Wal-Mart plans to push the brand only in stores and only in states like New York and New Jersey, where the Indian residential area is very strong.Competition While Amul has substantial magne tise over the Indian market due to its robust supply chain and cooperative business model the international domain of a function challenges it like never before. In the overseas markets it faces stiffer competition in matching the compressed quality standards of several local and international brands that have well established markets in different countries in addition to essentially controling these new markets, cultures and their needs. As a brand, Amul faces stiff competition from two major players Britannia and Nestle.Both these brands have international presence and each seeks to expand its business horizons. Apart from these international brands, it also has to compete with local dairies in different countries that sell products at very competitive prices. Nestle Nestle isone of the worlds leading nutrition, health and wellness social club. The fellowshipwas founded in1866 by Henri Nestle in Vevey, Switzerland, where the headquarters are still located today. It employs ar ound 2,80,000 people and have factories or operations in close to every country in the world. Nestle sales for 2009 were CHF 108 bn.Nestles relationship with India dates back to 1912, when it began trading as The Nestle Anglo-Swiss Condensed Milk political party (Export) Limited, import and selling finished products in the Indian market. The Company continuously focuses its efforts to better understand the changing lifestyles of various countries and anticipate consumer needs. The culture of innovation and renovation within the Company and inlet to the Nestle Groups proprietary engine room gives it a distinct advantage in these efforts. It helps the Company to create value that can be sustained over long term by offering consumers a wide variety of high quality products.A description of the competitive advantages growth drivers and operating(a) pillars is given in establish 1. Nestle is in a strategic international position because of its presence in many countries and long tra dition of innovation. An analysis of sales trading and operating profit by both geography and product line is given in Exhibit 4 and Exhibit 5. Britannia It is not globally as big as Nestle but it is expanding at a threatening abuse and this can be a major concern for Amul. This fact is validated by the following statistics. The company is growing at a steady rate.The companys sales grew at a compound annual rate of 16% against the market, and operating profits reached 18%, between 1998 and 2001. More recently, the company has been growing at 27% a year, compared to the industrys growth rate of 20%. Dairy products stick out close to 10 per cent of Britannias revenue. Britannia trades and markets dairy products, and its dairy portfolio grew to 47% in 2000-01 and by 30% in 2001-02. Britannia holds an equity stake inDynamix Dairyand outsources the bulk of its dairy products from its associate.On 27 October 2001, Britannia announced a joint venture withFonterra Co-operative Groupof N ew Zealand. It is an incorporated dairy company involved in many activities from procurement of milk to making value-added products such as cheese and buttermilk. Britannia be after to source most of the products from New Zealand, which they would market in India. The joint venture also allowed technology transfer to Britannia. In display 2007, Britannia Industries Limited formed a Joint Venture with the Khimji Ramdas Group, one of the largest and the most respect business conglomerates in the centre East.Britannia and its Associates have acquired a significant stake in Dubai based Strategic Food International Co. LLC and Oman based Al Sallan Food Industries Co SAOG. The two companies are key regional players in the biscuits, wafers and cookies segment in the GCC markets and export their products across the world. Strategic Food International Co. LLC (SFIC) is one of the largest biscuit and wafer manufacturing companies in the Middle East. An ISO and HACCP certified company, SFI C is also a soaring winner of the Dubai Quality Appreciation Certificate.It offers a wide spectrum of products under the brandNutro, which is a leading biscuit brand in the Middle East. Al Sallan Food Industries Co is one of the foremost companies for the production of cookies, rolls and chocolates. The products are well known under the brand name ofBakers Pride. Though not directly in the dairy market, Britannia is constantly increasing its presence worldwide. Key statistics about the company performance are given in Exhibit 6. Future Plans Amul is now all set to consider the decision to frame-up a manufacturing plant in the coupled States to specifically cater to the demand for its products in the US and Europe.And then expand to other countries with similar plants so as to fall its costs. The company intends to start with manufacturing of ghee and paneer and then gradually start manufacturing other products. Amul will have to customize its products and look outside the ethnic box to suit the American and other ethnic palates. It simply cannot use its home-ground strategies in the US and expect to make a mark, even if Wal-Mart plans to push the brand only in stores and only in states like New York and New Jersey, where the Indian biotic community is very strong.Amul has come a long way from 1946 when it collected only 247 litres of milk a day to the six million liters of milk per day it now collects from about 10,675 separate village co-operative societies throughout Gujarat. With gateway to low cost milk, an innovative and nearly just-in-time supply chain, a ready market among the Indian community and 50 years of understanding milk, Amul can definitely ca-ca the taste of India in the US and other countries. Chairman Mr. PG Bhatol says, When we plan to improve productiveness as well as production, we also need to stay fresh in psyche the markets where such huge quantity of milk will be consumed.We need to look new opportunities and markets. India has graduated from milk famine country to largest milk producer in world. However, our exports of milk and milk products still remain insignificant in comparison to the existing players. We have been following the policy of not exporting milk powders to foreign countries so that availability in our country does not get hampered. Opening of export markets would not only serve as subject for excess of milk produced over the domestic requirements but also will keep the domestic prices stable. We strongly feel that mark milk powders in consumer packs should never be banned.Thus, now when we plan to produce such large quantity of milk, it is imperative to relook at our export policies. Amul has come a long way from 1946 when it collected only 247 litres of milk a day to the six million liters of milk per day it now collects from about 10,675 separate village co-operative societies throughout Gujarat. With access to low cost milk, an innovative andalmost just-in-time supply chain, a ready market among the Indian community and 50 years of understanding milk, Amul can definitely found the taste of India in the US and other countries and then the Taste of the World.Exhibit 1 concealment 10 Fastest Growing Dairy Markets 2011-2016 *Passport Tracking egression Opportunities In The Global Dairy Market Exhibit 2 Top Five Western European Dairy Market By Absolute Market Value Growth 2011-2016 *Passport Tracking Growth Opportunities In The Global Dairy Market defer 2 Milk production zonas in Sri Lanka Zone features prohibitionist zone coconut palm triangle Mid-country Upcountry &038 estate derisory zone &038 urbanLocation Dry zone zones in the NC, Northern and Eastern Provinces and parts of Central, gray and NW Provinces arbitrate and wet zone areas of the NW Province, and Gampaha district of the Western Province Wet zone areas in the Central Province Kandy and Matale districts Nuwaraeliya district in the Central Province and Badulla district in the Uva Pro vince Districts in the Western, Southern and Sabaragamuwa Provinces and cities Animal types Indigenous cattle, Zebu cattle and crosses, overawe Crosses of foreign breeds, Zebu types, crosses of indigenous animals and buffalo Pure exotic animals and crosses, and Zebu crosses Pure exotic animals and crosses Crosses of exotic breeds and Zebu type and indigenous animals and buffalo tillage Free gazing, or nomadic-type Large herds or sedentary small/medium-sized herds Medium-sized herds, limited pasture tethered under coconut palms fiddling herds, some tethering, stall feeding thin herds, zero grazing Limited grazing, medium-sized herds or small herds, zero grazing push size Few 25 5 cows 23 cows 12 cows 23 cows Average bear 2. 1 litres/cow/dayTotal cccfour hundred litres/cow over 180200-day nursling 34 litres/cow/dayTotal cholecalciferol800 litres/cow over 200-day lactation 24 litres/cow/dayTotal 1 300 litre/cow 6 or more litres/cow/dayTotal 1 700 litres/cow 3 litres/cow/da yTotal 1 euchre1 600 litres/cow Source Ranaweera and Attapattu 2006 Exhibit 3 Exhibit 4 Exhibit 5Exhibit 6 Performance of Britannia Exhibit 7 Amul overseas presence References I. Primary information in the form of Interviews of employees involved with International projects II. Dairy Food Industry Overview in India to 2014-market research report,www. reportlinker. com III. GCMMF Annual Report, Financial eld 2007-2011 IV. Nestle Annual Report,2011 V. http//www. amul. com/m/organisation, 24-Feb-2012 VI. http//articles. timesofindia. indiatimes. com/2011-03-30/india-business/29361638_1_cheese-amul-britannia-industries VII. Utterly-Butterly amuls new raod map-CNBC-TV18. html, 26-Feb-2012 VIII. http//www. dairy. co. jp/eng/eng12. html