Sunday, November 13, 2011

Amul in increasingly looking beyond Gujarat for procuring its Milk needs. Will it be successful?

Amul in increasingly looking beyond Gujarat for procuring its Milk needs. Do you think this will add to their huge success story or is it taking a wrong step moving out of its core zone?


Aneesh Dubey | IIT Delhi

For more than three decades Amul has been spending considerable branding effort in establishing itself as ‘The taste of India’; it never was the ‘taste of Gujarat’ and hence it is surprising to see that people are even asking questions about the rationale of the co-operative foraying beyond the borders of its mother state. The long term strategy was always right there in the tag-line, it has only started to pan out now.

Naysayers to growth and expansion have always existed, and they are usually the metaphorical frogs in the well; croaking away about the bad bad world outside. It is good that forward looking corporations like Amul choose to ignore them. Let us consider those croaks, for argument’s sake – the sourcing model cannot be transferred to other locations due to cultural differences. That’s a laugh, in India the culture changes with every milestone and if Amul has been able to implement its sourcing model combining the cultures of Kutch, Saurashtra, Southern Rajasthan and parts of Madhya Pradesh, it already has enough competency and confidence that replicating it in other areas won’t be that difficult. Another prophecy of these Cassandras is that the consumption patterns are so diverse that the product line would not be able to match up to the market demands. To this I would request them to look at the Amul product strategy over the last fifteen years, with variants in every sub-category, Amul has not only invested heavily in product innovation but has learnt considerably about what India wants to buy.
The brand has always invoked feelings of belonging and trust and I see no reason why the consumers or suppliers outside Gujarat would not be supportive and willing to be a part of what is one of the greatest success stories of the country. I believe it is time that they lived up to what they said ‘Amul- The taste of India’.


Neha Garg | IIM S

We have never heard of farmer suicides in Gujarat. Some people think that it is because Narendra Modi is a good Chief Minister. But, a better explanation might be related to Amul. The dairy cooperative procures about 10 million litres of milk daily from its 2.5 million active farmer-members. The average Amul farmer supplies 4 litres, thus, receives over Rs. 100 in cash daily, round the year. The business of milk brings farmers a steady flow of cash. The procurement of milk from other states would lead to sharing of their earnings with other states which would lead to unrest among farmers. Secondly, Amul adopted a low price strategy to make their products affordable and to guarantee value to the consumer.

The milk prices in the Eastern and Western regions are higher compared to Northern region, whereas the prices in Southern region are the lowest. Difference in supply and demand of milk in a state, which causes variation in milk pricing, would lead to disparity in pricing of Amul products across states. Also, if same prices are kept across various states, then costing would be difficult complications will arise due to difference between the states. Thirdly, customers have a perception of Amul as a brand of trust and loyalty because of the quality of its products. Procurement of milk from various states would cause difficulty in maintenance of the quality of milk and hence lead to dilution of the brand. There would also be business risk involved in the operational issues for transport of milk from other states. If factories for conversion of milk into various products are built in different states then there would be high initial investment. It is a double edged sword and Amul should tread carefully.

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