India’s Amul: Keeping Up with the Times

9-516-116 R E V : J U N E 1 6 , 2 0 1 7

Professors Rohit Deshpande and Tarun Khanna and Research Associate Tanya Bijlani prepared the original version of this case, “India’s Amul: Keeping up with the Times,” HBS No. 514-067, which is being replaced by this version prepared by Professors Rohit Deshpande and Tarun Khanna and Associate Director Namrata Arora and Research Associate Tanya Bijlani (both of the India Research Center). HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2016, 2017 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

R O H I T D E S H P A N D E

T A R U N K H A N N A

N A M R A T A A R O R A

T A N Y A B I J L A N I

India’s Amul: Keeping Up with the Times

I was convinced that the biggest power in India is the power of its people—the power of millions of farmers and their families. What if we mobilized them, if we combined this farmer power with professional management? What could they not achieve? What could India not become?1

— Dr. Verghese Kurien, former Chairman and Managing Director, Gujarat Cooperative Milk Marketing Federation

On a sunny morning in March 2013, R. S. Sodhi, Managing Director of Gujarat Cooperative Milk Marketing Federation (GCMMF), commonly known as Amul after the brand name for milk products it had popularized, sat in his office gazing at Verghese Kurien’s wall portrait. Kurien, who led the company for 50 years, had died a year earlier, but his legacy hung over Sodhi’s office and the 3.2 million farmers who were the backbone of Amul.

Amul was founded in 1946, eight months before India’s independence from Great Britain. By 2013, Amul was producing 46 types of dairy-based foods—including cheese, butter, ice cream, and pouched milk—and was India’s largest food product marketing organization, with sales of $2.5 billion.a Amul controlled a large portion of the dairy value chain from milk production to processing, packaging, and branding. Its iconic butter advertising campaign, launched in the 1960s, spoofed popular current events and was believed to be the world’s longest-running outdoor advertising campaign.2 It had resulted in Amul becoming one of India’s most recognizable brands.

Sodhi was torn by a desire to maintain the course set by Kurien and the need to keep up with the times, as economic and social transitions were changing India steadily. India’s millennials, constituting 60% of the population (roughly 700 million people),3 straddled the line between modernity and tradition. Sodhi had to navigate the changing aspirations of Amul’s consumers and the talent that Amul sought to attract, while dealing with the local and global competitors nipping at Amul’s heels. Sodhi wondered to what extent, and in what direction, he should alter Amul’s growth trajectory. He could not help but look to Kurien’s portrait for inspiration and answers.

a Converted using an exchange rate of 54.29 Indian rupees (INR) for1 USD as on March 31, 2013.

This document is authorized for use only in Dr. S Saibaba Assistant Professor - Marketing's Marketing Management - I 2021-2022 at SDM Institute for Management and Development (SDMIMD) from Aug 2021 to Feb 2022.

516-116 India’s Amul: Keeping Up with the Times

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The Indian Dairy Industry

In 2013, India was the world’s largest milk-producing and milk-consuming nation, with approximately 90 million families and 400 million individuals involved in dairy farming.4 These farmers came from a rural population of 830 million people living in over 600,000 villages.b Cultivation was the primary agricultural activity in the country, with farmers using by-products to sustain their cattle. Dairy farming provided a secondary source of income and was often managed by the women of the household.

Whereas in Western countries milk production featured large mechanized farms of 2,000–5,000 cattle, in India milk was produced mainly by small farmers owning an average of 2 cows. In 2011, 138 million individual landholdings in India spanned 159 million hectares—roughly 82% of farms were smaller than 2 hectares. Farmland was customarily inherited and divided from one generation to the next, further shrinking the size of the average landholding of an Indian farmer.

Approximately 50% of milk produced in India was retained for self-consumption, while 40% was distributed by unorganized milkmen who sold it to local consumers.5 The remaining 10% formed the organized sector, of which large private players and local cooperative organizations accounted for 55% and 45%, respectively.6 India had 177 milk producers’ unions, which collected milk from 133,000 village-level cooperative societies and 14 million farmers.7 The products from these collectives were distributed under brands like Gujarat’s “Amul,” Karnataka’s “Nandini,” and Punjab’s “Verka.”8 While cooperative organizations had traditionally focused on liquid milk—46% of India’s milk was consumed in liquid form—private companies focused on higher-margin value-added products like cheese, ice cream, paneer, and ghee.9,c (See Exhibit 1 for India’s dairy market by product category.)

A unique aspect of the Indian dairy sector was the inclusion of buffalo milk with traditional cow milk. Often the two types of milk were mixed together at production and collection points. Buffalo milk—more fatty and long-lasting than cow’s milk—was ideal for making products such as yogurt, paneer, and ghee. Cow’s milk contained less fat, spoiled faster, and was better suited for making cheese and Indian desserts.10 Crossbred cattle—a mix of indigenous cows with exotic dairy breeds, including Holstein and Jersey cows—were another source of milk production. In 2010, the average annual yield for a cow was 1,350 liters of milk, a buffalo 1,800 liters, and a crossbred cow 2,600 liters.11 Although crossbreeds had helped in increasing milk production, the cost of cultivating these breeds was high, as they were more sensitive to disease, heat, and diet than indigenous cows were.

In 2013, India’s entire organized and unorganized dairy market was estimated at $47.6 billion.12 The sector had grown by 7.5% annually in recent years, outpacing the country’s average GDP growth of about 6%.13 Growth in demand was expected to continue. With India’s large vegetarian population, dairy products comprised 18%–20% of the average household’s food bill.14 While the country was largely able to meet its demand for milk and dairy products, rising per capita incomes and a growing population were pushing demand.

While dairy cooperatives and foreign multinational dairies largely dominated the market, new dairy entrepreneurs were entering the fray.15 Often these smaller outfits focused on higher-end value-added and premium products. For instance, companies in Mumbai and New Delhi had begun to offer farm-to-home milk services for clients desiring locally sourced and organic products. Other premium products included probiotic Greek yogurt, whey protein, and on-the-go products.

b As per the Census 2011.

c Paneer is a cottage cheese, and ghee is a type of clarified butter, both commonly used in South Asian cooking.


India’s Amul: Keeping Up with the Times 516-116

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Amul’s Early Years

In the 1930s, Polson Dairy began manufacturing its own brand of butter in Anand, a town in the state of Gujarat. In 1943, Polson began to pasteurize and supply milk to the Bombay Milk Scheme (BMS), organized by the British colonial government to procure milk for India’s largest city, Mumbai, further increasing milk production in the district. Since Polson was granted monopoly status, farmers in the surrounding Kaira district were forced to sell their milk at unreasonably low prices. Seeing those low prices as another example of economic exploitation by the colonial government, Kaira farmers went on strike with Sardar Patel, a famed freedom fighter from a nearby village. In 1946, the government relented, giving farmers permission to form their own cooperative. In June 1948, the Kaira Union began pasteurizing milk; by the end of the year, it was processing 5,000 liters of milk a day.

Not a farmer by trade, Dr. Verghese Kurien joined the Kaira Union in 1951 as its General Manager. In 1946, with a scholarship from the British colonial government, Kurien had enrolled at Michigan State University to qualify as a dairy engineer. Despite the specifics of his scholarship, he had returned to India in 1948 with a master’s degree in metallurgy and nuclear physics and no interest in dairy. However, the government gave him a stark choice: accept a post at the Government Research Creamery in Anand or return the amount of his scholarship.

In 1949, Kurien arrived in Anand, a sleepy town of just 10,000 people, missing the opportunity he had left behind in the U.S.16 Despite initial frustrations, Kurien dived into his assignment and spent his spare time helping the Kaira Union farmers fix the secondhand machines they used to pasteurize milk. In working directly with the farmers, Kurien became sympathetic to their challenges—the economic consequences of fragmented landholdings that limited development of arable land and weakened bargaining power—and interested in helping them operate their dairy plant.

By 1953, the Kaira Union was collecting over 20,000 liters of milk daily, exceeding the demand of the BMS. Between 1955 and 1960, the union expanded its facilities and began producing milk powder, butter, ghee, sweetened condensed milk, baby food, and cheese. Improvements in distribution and refrigerated transportation allowed the expanded product portfolio to reach new markets. During this time, the union also began marketing its products under the brand name “Amul.”

A similar emphasis on technology and training also helped Amul increase the yield of its farmers’ cattle. It began providing artificial insemination services, increasing the frequency of calving and milk productivity; it also offered mobile veterinary services, established a plant to manufacture cattle feed, and trained its farmers on animal husbandry. Most significantly, Amul proved Western dairy experts wrong by manufacturing products like milk powder and cheese using buffalo milk.

Amul’s success was celebrated in the critically acclaimed Bollywood production Manthan. The fictionalized film closely followed the events of Amul’s development, including the leadership of a well-educated outsider, the travails of local farmers, the societal and economic challenges the cooperative faced, and the importance of collective benefit over individual pursuits. Winning India’s Best Hindi Film award in 1977 and submitted as India’s 1976 Best Foreign Language Film to the American Academy Awards, the well-received film publicized Amul and celebrated its contribution to India’s rural development.



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Operation Flood

Amul’s success was recognized in 1964, when Indian Prime Minister Lal Bahadur Shastri asked Kurien to set up the National Dairy Development Board (NDDB) with the task of replicating Amul’s success throughout India. In 1965, the newly minted NDDB launched “Operation Flood” to create milk cooperatives across several Indian states that would connect rural dairy farmers with urban consumers in Delhi, Kolkata, Mumbai, and Chennai.

The NDDB sold milk powder and butter oil, gifted by the European Economic Community, in targeted urban areas to generate demand. Once established, the demand was filled by locally procured milk products and not imported milk powder. The initial demand also created brand recognition, developed a market for milk products, and created an ecosystem in which farmers felt comfortable investing time and money. The NDDB set up over 70,000 village cooperative societies across 170 dairy shedsd with district-level dairy cooperatives and processing plants. India’s per capita availability of milk, which had previously been declining, grew from 0.13 liters per day in 1950–1951 to 0.3 liters per day in 2012–2013.17

Operation Flood was lauded as an economic, agricultural, and social success. In constant (1995) dollars, the annual payment by the cooperative system to dairy farmers had risen from $60.1 million in 1972 to $973.7 million in 1995.18,e The increased income benefited almost 100 million Indian families, the majority of whom were impoverished small farmers, women, or landless laborers.19 The phenomenon became known as the “white revolution,” and the benefiting villages were said to have added “milk roads”—areas where the streets were cleaner, kids better fed, and houses better built. Kurien was proud that a common commitment to the cooperative often transcended religious, ethnic, caste, and gender tensions. He elaborated:

In many ways, the milk collection at the village societies transformed the very social fabric of communities. Take for example the farmer and his wife. . . . With the dairy business picking up, her income through milk soon became equal to her husband’s income through farming and that led to more equality between them. There were other implications too. From the very beginning the village cooperative societies insisted that the queues for milk collection would be formed not on the basis of caste but strictly on a first come first serve basis. . . . What the process certainly did was to begin chipping away at such [societal] biases.20

In 1979, the white revolution prompted the establishment of the Institute of Rural Management Anand (IRMA), a training institute for leaders and innovators in rural society.21 Over the years, numerous members of Amul’s senior managers, including R. S. Sodhi, who was a member of the first graduating class, were drawn from IRMA’s ranks. Amul hired 10–15 graduates a year, and others often took positions in agricultural finance, with NGOs, or with food companies such as Hindustan Unilever. Sodhi explained, “IRMA provided a sound and reputable technical education in rural management, and in an agrarian society like ours, that seems like a smart career choice.”

d A dairy shed is a region producing milk for a particular city or community.

e Converted using 1995’s exchange rate of INR 34.92 for 1 USD.



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The Three-Tier Cooperative Structure

Cooperative societies first emerged in the late nineteenth century, well after investor-owned business corporations were established as a form of organizing firms.22 Cooperatives varied greatly in their mission, structure, and size across the world. In the United States, they were commonly seen in industries like agricultural supplies, electricity generation and distribution, housing, banking, and insurance; in India, farmer cooperatives in the sugar and dairy industries were common, as were cooperative banks.

As the number of dairy cooperatives in the Kaira district grew, they evolved into a three-tier model. At the village level was a society that residents owning cows or buffalo could join by purchasing a share and committing all surplus milk beyond their household consumption. In the mornings and evenings, farmers brought their milk to the collection center, where employees paid them in cash according to the milk’s weight and fat content, precisely and transparently. Farmers were also able to purchase affordable cattle feed and other services at the society. (See Exhibits 2 and

3 for pictures of an Amul dairy farm and dairy cooperative society.)

At the district level was a union owned by its contributing dairy cooperative societies. Unions purchased milk from each society and transported it via tanker or truck once or twice daily to their dairy plants, where they processed and packaged value-added products. The finished goods were sold within the district. Unions also manufactured cattle feed, provided societies with cattle-support services such as veterinary care and artificial insemination, and trained farmers in animal husbandry and dairying. (See Exhibit 4 for an Amul district union plant.)

By the late 1960s, each of the six district unions in Gujarat marketed its products under separate brand names. Concerned about competition among them, Kurien and his team formed the Gujarat GCMMF in 1973, an apex body owned by the district unions to market their products under a common brand. The GCMMF’s board of directors consisted of an elected member from each cooperative represented in the district union. The GCMMF also established a common distribution network for the unions, planned individual product mixes and capacity requirements, jointly procured raw materials (with the exception of raw milk), provided technical and management support, arranged for financing, and resolved conflicts when necessary.

Societies, unions, and the GCMMF were registered under the state’s Cooperative Societies Act. They retained part of their earnings to meet expenses and shared profits with their farmer members according to the quantity of milk each supplied. The cooperative contributed to community development by investing in activities such as the construction of educational institutions, roads, and wells. (See Exhibit 5 for the 2013 financials of a dairy cooperative society.) Farmers also controlled the cooperative’s functions through a system of elections. (See Exhibit 6 for Amul’s election structure.)

Building a Brand

Although it had a captive customer for milk in the BMS, the Kaira Union found it difficult to compete against established brands like Polson’s butter. In 1957, Kurien and his team were brainstorming ideas for a brand name that would help the union market its products, when a chemist in its laboratory suggested the name “Amul.” Kurien elaborated:

It seemed to be just what we were looking for in terms of portraying the image and the ideals behind our cooperative venture. The name Amul came from the Sanskrit word amulya, which means “priceless” and denoted and symbolized the pride of swadeshi



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(indigenous production). It was also short, catchy, and it could, rather effectively, be used as an acronym for Anand Milk Union Limited.23

The Kaira Union registered the Amul brand, and the advertising agency Press Syndicate gave Amul butter the tagline “purely the best,” positioning it as a high-quality, trustworthy, value-for-money product.

In 1966, Kurien’s team gave its butter account to the Indian advertising agency Advertising and Sales Promotion (ASP) with the directive to dislodge Polson as the leading butter brand in Bombay. Sylvester DaCunha, who headed the Amul campaign for ASP, elaborated:

A new slogan dropped out of the sky when I told my wife Nisha about our new ad assignment. She spontaneously remarked, “Why don’t you say ‘Utterly Amul.’” To which I added, “Hey, what about ‘Utterly butterly Amul!’” . . . So there we had a very promising selling line. What we now needed was a spokesman to voice it. But, who? Instinctively, I sensed it should be a child, someone impish and lovable. I explained this to my then art director, Eustace Fernandes. After a few tries, he came up with a charming little poppet in a polka dotted frock and a matching ribbon in her ponytail. She was licking her lips as though to say, “Utterly butterly delicious.” Yes, she had all the qualities I was groping for—she was naughty, cuddly, innocent, smart; I knew we had a winner.24

Thus the “Amul Girl,” the face of the new brand, was born. DaCunha’s team built an outdoor campaign around her. The first set of billboards, released in 1966 on lampposts and prime bus stops, showed the girl praying by her bedside with the tagline “Give us this day our daily bread: with Amul Butter.” (See Exhibits 7 and 8 for Amul’s billboards.) During the horseracing season, they developed a billboard showing the girl dressed as a jockey, sitting on a horse and holding a slice of buttered toast, with the tagline “Thoroughbread.” Soon, ASP’s phones were ringing with feedback from enthusiastic viewers, including children, and the campaign became a rage. Alyque Padamsee, former head of Lowe Lintas, an Indian advertising agency, recalled:

The first butter we ate in Bombay was Polson butter, and we all loved it. . . . But Sylvie [Sylvester] DaCunha played a brilliant stroke and came up with an idea that would require only a small budget. . . . He started off the Amul branding with just six hoardings [billboards] located at prime sites. One of these was at the Chowpatty traffic light, where one invariably stopped, and it would never go unnoticed—one always wanted to wait and see what it said. Six months later, Amul became a major brand in Bombay and the Polson family quietly faded away!25

Over time, DaCunha’s team felt that associating the Amul brand with important current events would create greater impact. In the 1960s, when the city of Kolkata was in the middle of a leftist movement, protesters commonly chanted slogans such as “Cholbe Na,” which in Bengali meant “Will not do.” Amul soon released an ad that proclaimed, “Toast without Amul? Cholbe Na! Cholbe Na!” Similarly, a strike by Indian Airlines, the country’s national airline, led to a controversial ad in which the Amul Girl, dressed as a stewardess, proclaimed, “Indian Airlines serves Amul butter—when it flies.”26 Leading Indian actor Amitabh Bachchan, who collected posters of the Amul advertisements in which he was featured, highlighted the popularity of the campaign:

For the films that get mention in the campaign, it’s free publicity. . . . And yes, it does reflect and become a yardstick for success. I cannot say for the others, but when the



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campaign covers a film of mine, I take it as an endorsement by the public of its success. It goes the same way for failure too.27

By 2013, Amul had released over 4,000 such billboards covering a vast range of topics from politics to sports to entertainment to issues of regional, national, and international importance. DaCunha summarized, “You might say that the ads represent a history of modern India acted out by a little heroine, healthy and confident about the future.”28

Continuous Growth

Having established a toehold in the butter market, Amul expanded into value-added products such as milk powder, condensed milk, cheese, and baby food.29 Despite the growth in the value-added sector, Amul’s milk channel dried up in 1980 when the BMS was disbanded. Hence, in 1987, the company began marketing fresh milk under its own brand in the city of Ahmedabad, followed a few years later by other major metropolitan areas. Sodhi elaborated on this decision:

The name of our organization was Gujarat Cooperative Milk Marketing Federation, but we weren’t marketing milk—we were selling long-life dairy products such as butter, infant milk food, dairy whiteners, cheese, and ghee. We would convert any surplus milk into commodities like milk powder and butter oil, and sell them to bulk buyers. Fluctuating prices in the dairy commodity business give inconsistent realization compared to value-added, branded consumer products. With increasing milk production, we decided to expand our footprint and sell branded liquid milk in consumer packs.

Because of its perishable nature, fresh milk was a logistical challenge for dairies and consequently a scarcity in India. In response, Amul established a supply chain to ensure that its freshly pouched milk could be distributed and stored without spoilage, ensuring its widespread availability. Furthermore, Amul also began supplying milk both in the mornings and afternoons in key markets. By 2013, Amul’s 3.2 million farmers were producing an average of 12.8 million liters of milk daily, processed at 49 dairy processing plants by 17 district member unions. Amul’s dairy plants were among the most advanced in the world, and the GCMMF was planning to invest around $500 millionf to further upgrade them.30 (See Exhibit 9 for Amul’s milk production statistics.) Furthermore, Amul was the only national brand in India and was selling milk in approximately 30 Indian cities. Milk comprised 50% of Amul’s revenues.

Amul enforced stringent quality assurance measures to improve its distribution and consumer trust. Sodhi described the controls involved in the “cow-to-consumer” distribution chain:

We purchase milk twice daily from 3.2 million farmers in 17,000 village cooperatives. There is a quality check at each cooperative every time a farmer brings in the milk. It is chilled immediately and goes to the nearest plant, where the entire batch is rechecked for spoilage. Finally, a last check is run before products are dispatched to retail outlets. The checks are seamless, as each quality control team wants to preserve the quality and reputation within the cooperative chain.

While Amul’s growth in liquid milk was impressive, yield restricted further growth. Poor feed systems and underdeveloped breeding programs contributed further to the inconsistency of yields.

f Converted using an exchange rate of INR 60 for 1 USD.



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The variation of milk production over time created uncertainty in the market. Procurement was further complicated by uneven seasonal yields. On average, Amul collected 2.5 million liters in summer and 3.5 million liters in winter. To counter fluctuations, Amul varied production of longer-shelf-life products like milk powder or ultra-high temperature (UHT) processed packets while employing the use of a swing capacity plant, balancing supply and demand.

As Amul built its distribution network, it added ice cream, frozen pizzas, yogurt-based drinks, cottage cheese, and buttermilk to its product mix. Amul operated a distribution network for chilled products like butter and cheese; and another for long-life room-temperature products like ghee and milk powder, making it the only organization in the world to operate four distinct distribution channels: frozen, fresh, chilled, and ambient.

In addition to product diversification, Amul sought growth through expansion into India’s villages. Jayen Mehta, General Manager (Planning & Marketing) at Amul, explained, “The bottom of the pyramid, including those who are on daily wages, matter a lot to us. We want to reach every nook and corner of the country.” To penetrate diverse markets, Amul had differential pricing, charging urban consumers more than rural ones. For example, in cities it sold large packs of its products such as butter, cheese, and ice cream at price points of $0.50–$3.00, while in smaller towns it sold the same products in smaller packs at $0.09–$0.18.

By March 2013, Amul had 46 products across eight categories: bread spreads, milk drinks, powdered milk, fresh milk, cheese, cooking products, and desserts. Its products were available in 3,000 Indian towns at nearly 1 million retail outlets from mom-and-pop stores to larger chains. Unlike any other major dairy brand, it had also established approximately 7,000 franchised “Amul parlors,” which exclusively retailed its products in high-traffic areas. Finally, Amul had opened dedicated ice cream parlors and experimented with casual restaurants that served fast food like pizzas and burgers using its own ingredients. (See Exhibit 10 for details on Amul’s product portfolio and market share.)

In 2013, Amul reported sales of approximately $2.5 billion, had recorded 20% growth for five consecutive years, and was India’s largest food product marketing organization. In contrast, Nestlé India had sales of $1.5 billion in 2012.31 Nestlé priced its milk at a 20% premium compared to Amul but often ended up offering discounts on milk to remain competitive. Amul was the Indian market leader in all its products, with the exception of chocolates and milk additives, and was also India’s largest exporter of dairy products, targeting overseas residents of Indian descent. (See Exhibits 11

and 12 for Amul’s 2013 financials.)

Managing Competition

Amul did not have a single national-level competitor across categories, but competition varied by product. Amul competed with multinational fast-moving consumer goods (FMCG) firms like Nestlé, Kraft (Mondelez), Unilever, and India’s Britannia in baby food, dairy whiteners, chocolates, and ice cream; with Coca-Cola and PepsiCo in beverages; and with local cooperatives and private dairies in milk. (See Exhibit 13 for popular regional dairy brands in India.)

Two of Amul’s largest regional competitors were the Karnataka Cooperative Milk Federation (KCMF) and the Tamil Nadu Cooperative Milk Producer’s Federation (TNCMPF). Both regional cooperatives were established as part of NDDB’s mandate to promote the Amul model across India and shared Amul’s three-tier cooperative system. In 2013, KCMF’s brand “Nandini” managed 14 milk unions with revenues of $1.3 billion, while TNCMPF’s brand “Aavin” covered 17 unions and reported revenues of $671 million.



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Price

Amul priced its value-added products like cheese and baby food slightly lower than those of its competitors. Multinationals in India typically incurred higher advertising expenses than Amul, offered retailers higher margins, and incurred additional expenses such as royalty payments to parent companies. Conversely, Amul priced fresh milk at a slight premium because of its higher transportation costs compared to local dairies. For most product categories, Amul’s prices served as a benchmark for its competitors. “Generally Amul is considered the best quality product and value for money,” Sodhi explained. “Consumers believe blindfolded that Amul will charge them the correct price. That is the level of trust that Indian consumers have in Amul.”

Amul used its scale in distribution and procurement to keep its prices low and its competitors at bay. It entered into exclusive arrangements with its distribution partners, such as transporters and warehousing agents, and paid them relatively low margins per unit, keeping distribution costs and prices low. Sodhi elaborated:

Nestlé launched a butter brand in India [in 2001], but its traffic on its highway [distribution channel] was so low that its supply chain partners did not find it profitable. Many butter brands have launched in India, but nobody can survive because our competitive prices serve as an entry barrier. If you have deep pockets you can build a highway, but to maintain it, from transportation to cold storage, you need traffic.

Industry observers agreed that no player apart from Amul had managed to generate sufficient volumes to compete profitably in the market for butter. “Any dairy firm can manufacture butter,” one analyst noted. “The trouble, however, is that the actual volumes are not sufficient to justify the investments made in the cold chain.”32 Nestlé withdrew its butter from the Indian market in 2005, four years after its launch.

Amul also had an advantage over private players in procuring milk, given its focus on maximizing farmer income. Amul passed on approximately 80%–85% of revenues to its farmers. In 2012, it offered them $0.52 per liter of milk, compared with $0.45 per liter for similar quality milk at other dairies.33 Amul’s executives felt that it would be difficult for multinational firms to match cooperatives in developing a widespread milk procurement network through large, mechanized cattle farms. Rahul Kumar, Managing Director of Kaira District Cooperative Milk Producers Union, explained, “Dairy farming requires two acres of land to support 20 cattle, and given India’s fragmented landholdings, we can have 100- or 200-cattle farms here, but larger ones will not be possible.”

The well-being of farmers and the development of rural India were intertwined with the dairy market. Nanda Kumar, the head of the NDDB, described India’s unique competitive landscape: “The difference is that, in India, dairy is not about commercial farming, the agenda clearly is developmental. They [multinationals] have to keep that in mind.”34 Sodhi commented on Amul’s advantage vis-à-vis multinationals: “Not having a profit motive is a huge asset.”

Advertising

Amul spent less than its competitors on advertising. “We spend less than 1% of our turnover on advertising, which is very low compared with companies like Unilever, which spends 14% on advertising in India; and Nestlé, which spends 8% to 12%,” Mehta elaborated. To maximize its advertising budget, Amul employed an innovative “umbrella brand” strategy, showcasing its entire product range. The organization ran its first umbrella television commercial in 1994, with the slogan



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“Taste of India.” Over time, Amul began to spend 40%–50% of its advertising budget on such commercials, while its competitors focused on advertising individual products.

Amul also ran its advertising campaigns longer than its competitors ran theirs. Mehta explained, “Dr. Kurien taught us that consistency is a very important part of our campaign. We don’t mount very large campaigns or keep changing things. This allows us to leverage our budgets effectively and reduce our communication costs.” For instance, Amul Surabhi (Amul’s Fragrance), a cultural television show that Amul sponsored, ran for 12 years before it was discontinued.

Despite its smaller advertising budgets and value-for-money offerings, Amul positioned itself as a premium brand in India. Shashidhar Sinha, Executive Director of Draft FCB Ulka, Amul’s advertising agency that managed the campaign, explained, “Dr. Kurien felt that although our pricing might be competitive, our image doesn’t have to be cheap. He wanted us to buy the best advertising spots—even if we didn’t run them often or throughout the year. He was also completely against running promotions and offering things for free. He would tell us not to try and bribe consumers.” Kurien’s emphasis on brand stewardship was not lost on Amul’s current executives. Pavan Singh, Assistant General Manager of Marketing at Amul, proudly referred to himself as the “fourth-generation brand custodian.”

Amul’s advertisements and sponsorships also reflected its Indian roots and values. Rather than sponsoring television shows with high ratings, Amul sponsored those that were culturally focused and for the entire family. Additionally, one of Amul’s umbrella brand commercials produced in its 50th year told the proud story of the cooperative movement. “Given all the multinationals coming into India, there’s a sense of national pride that we built, and the cooperative story resonates beautifully with upscale audiences,” Sinha shared. Speaking of the Amul Girl’s golden birthday, he proudly proclaimed, “Our girl is 50 years old!”

Government Relations and Transparency

Amul’s ability to remain free of political interference—including bureaucratic oversight, party affiliation, or perceptions of impropriety—added to its competitive advantage. Sodhi explained the pitfalls: “In certain other states, the government owns some equity in the cooperative federation, and can appoint its managing director. In Gujarat, the state government does not have any financial stake in GCMMF; and it is the board that appoints its managing director.” Rahul Kumar added, “[The government-appointed] officers are posted for shorter periods of time; they may not have the required long-term commitment and vision, and are accountable to the government rather than the organization.”

Kurien’s leadership had also ensured that Amul stayed free of vested political interests. Although most of its cooperative elections at the village, district, and federal levels were fought along party lines, they put their differences aside when it came to making decisions that affected the organization. Several Amul executives commented that, “politics have to be left at the door when you enter Amul.” Kishore Jhala, Chief General Manager at Amul, was glad that this apolitical attitude had remained at Amul despite general cynicism about modern politics. He recalled the idealism of India’s politicians in Kurien’s early years, all committed to nation-building following India’s independence struggle:

Although the GCMMF board has members from several political parties, the culture Kurien created was that when they sat on the board, they didn’t talk politics, or make decisions based on their affiliations. He was very good at keeping politicians at bay, and would tell them that they had to protect the interests of the farmer, and that nothing else mattered. He also had direct access to the prime ministers and presidents of the country.



11

Amul also prided itself on its record of transparency and public trust. Sinha stated, “At Amul’s cooperatives, anywhere from $700,000 to $900,000 is transacted in cash daily, but there isn’t a penny unaccounted for, even though India is one of the most corrupt countries in the world. Even multinationals in India have scope for cleaning up, but Amul is absolutely, scrupulously, brutally clean.”

Growing Challenges

Sodhi mused about what it would mean to modernize a company that had risen with modern India. He had to rethink the relevance of the Amul brand to India’s youth. On the one hand, there were the consumers—sophisticated urban professionals with international tastes. On the other hand, there were the producers—village youth skeptical about following their parents’ career path to farms. Both demographics were key to Amul’s future success. He also had to balance the desire to spread the brand outside India with solidifying the traditional product mix and brand name in India against the influx of multinationals and upstart domestic challengers.

Brand Loyalty and Competition

Private dairies, particularly in South India, were increasing their procurement and distribution footprints and expanding their offerings beyond milk to include cheese, butter, and ice cream. As many of these cooperatives replicated the Amul model, creating brand differentiation became a challenge. Singh elaborated: “The local cooperative brands in some states are keeping us on our toes, and we have to be at our best to maintain our supremacy in those markets.” Similarly, multinational firms like Danone, Nestlé, and Unilever and large Indian players like Britannia were also expanding their presence in the country, targeting urban customers with premium products like yogurt and flavored milk.35

Another source of competition for Amul was the entrance of large dairies in the business-to-business (B2B) segment. New Zealand’s Fonterra entered India in 2001 with the goal of procuring basic dairy products such as milk powder and butter from India and selling them to foreign dairies.36 Although Fonterra eventually exited the Indian market in 2004 due to procurement and supply chain issues, Amul remained wary of its business model.

As competition increased, Amul’s executives also grew concerned about the brand’s connection with India’s large young population. Singh explained, “Amul is a brand that’s been around for 60 years. Today’s youth may view the brand slightly differently as compared to the way previous generations did. Connecting with today’s youth is a challenge that we are taking very seriously.” To attract younger consumers, the organization had begun sponsoring popular sporting events like Formula One racing, cricket’s World Cup, and the Indian contingent at the 2012 London Olympics. Each year, it also awarded over 50,000 Amul-branded prizes to school-age children for academic excellence. “These children will definitely spread goodwill for brand Amul as they grow up,” Singh explained.

Amul’s executives also had an eye on foreign players in multibrand retail. In 2012, the central government began allowing state governments to implement policies allowing 51% foreign direct investment (FDI) in multibrand retail.g While Amul paid its distributors and retailers combined

g “Multibrand retail” refers to the selling of multiple, competing brands under a single roof.



12

margins of 5% for fresh products, 12% for chilled and long-life products, and 22% for frozen products, Western retailers operated at margins of over 30%. Mehta explained the challenge:

In India, producers still receive 70% to 80% of the consumer’s dollar; whereas in countries like the U.S. and UK, it has reduced to just 35% to 40% because large retailers can squeeze margins. However, with the arrival of FDI in multibrand retail, large foreign players like Walmart and Carrefour will use their deep pockets to try to dictate terms of trade. We have been aggressively setting up Amul parlors where customers can buy our products directly, to protect ourselves from foreign retail chains.

Procurement

To meet the challenges of increased competition and growing demand, Amul needed to secure its source of raw liquid milk. The battle for procurement required that Amul retain and grow its network of farmers and that those farmers obtained optimal yield from their herds.

In 2010, Amul’s unions began procuring milk from states like West Bengal, Maharashtra, and Rajasthan. However, Gujarat’s Cooperative Societies Act required them to take permission before expanding across states. Rahul Kumar explained:

Amul is a national brand with a national distribution network, but our procurement has been limited mainly to Gujarat. Our market share will shrink if we don’t procure outside this region; and if we continue to transfer milk to cities like Delhi or Kolkata, 2,000 kilometers away, we will not be able to compete with local players. . . . The process [or expansion] needs to be regularized and we need to modify our laws accordingly. If the Kaira Union begins to collect milk from farmers in another state, they too will demand a role on the board, but will the farmers of Kaira agree?

Improving the yield of existing farmers was also a challenge. Amul was not the only large-scale dairy that struggled with procurement. In 2012, the average yield of Indian cows was roughly 3.4 liters per day. The world average was 6.3 liters.37 In 2010, Indian cows averaged 1,241 liters a year of whole milk yield. In comparison, the United States averaged 9,902 liters, the European Union 5,601 liters, and China 2,918 liters.38 In general, the yield of Indian milk animals was largely hindered by poor genetics, limited access to water, urban sprawl, disease, and poor feed and fodder management.39

In 2013, on average, Amul procured 12.8 million liters of milk daily, a 17% increase from the prior year’s average of 10.9 million liters per day.40 Amul credited the rise in procurement to offering higher payments to their farmers, which had increased by 68% over the previous four years.41 To improve procurement, Amul maintained programs that allowed farmers to buy fortified feed and operated mobile veterinary units to improve fertility and milk production. However, further improvements in feed quality, breeding technology, and veterinary services would require Amul to pass on the cost to the customer.

Some headway had been made in addressing the feed issues on a national level. Over the previous few years, programs worth hundreds of millions of dollars had been announced partly by the NDDB, and partly by programs initiated by the government of India and the World Bank, to improve breeding practices and feed quality to upgrade the dairy ecosystem. These efforts would take time to bear fruit since farmers were wedded to traditional farming techniques. The literacy rate among unorganized small-landholding farmers was only 53%, suggesting that they lacked awareness of global cutting-edge technologies.



13

Migration to Urban Areas

The brain drain from rural to urban areas or abroad posed a significant threat to Amul and a public policy challenge to the government of India. Amul’s executives found that younger generations in India’s rural areas were reluctant to join dairy farming, which added to their concerns about future procurement. Mehta explained:

Looking after a cow is a very difficult job, and the woman of the house does all the dirty work. She has to nurture and feed the cow daily, milk it twice a day, deal with the cow dung and dirt; there’s no holiday for her. Her son’s wife would rather work in the city and make half the money than take up her job.

For Amul, the move of younger generations from villages to the city was bittersweet. On the one hand, it demonstrated success of the milk roads and surrounding communities. Farmers were prospering and their children were positioned to pursue non-agricultural careers. Many successful farmers could send their children abroad—for example, to London and New Jersey—for education and employment opportunities, opening the door for social mobility. This created a vacuum that could be filled by farmers from the lower echelons of rural society. On the other hand, this exodus undermined the social fabric and institutional knowledge of the farms and threatened the procurement process. For India, any action that augmented the population of already overcrowded urban areas, and away from the farms meant to feed these megacities, was a policy nightmare.

To attract youth to dairy farming, Amul encouraged the creation of larger farms with 20–30 cattle, which had the scale to benefit from newer technologies. Amul had identified local banks willing to offer loans of around $30,000 for start-up capital. Amul believed that young entrepreneurial farmers with a desire to work hard could earn about $700 per month, a much larger salary than they could earn in cities. Mehta described his vision: “Millions of young famers could become entrepreneurs, putting in their money, taking bank loans, and using modern technology to rear and feed their cattle scientifically, with Amul as their captive buyer.” Rahul Kumar added, “We should not ignore the poor, but we cannot be totally dependent on them.”

Keeping Up with the Times

Sodhi looked away from Kurien’s portrait and to Board Chairman Vipulbhai Chaudhary’s eulogy for Kurien, released a few days after his death in September 2012. Sodhi read one of the opening lines:

With renewed zeal we commit ourselves to the betterment of Indian farmers and betterment of the most vulnerable sections of Indian society—causes towards which Dr. Kurien devoted his entire life.42

Sodhi was again reminded of the many issues needing resolution as he steered Amul into the next decade. He knew that the expectations were huge.



14

Exhibit 1 India’s Dairy Market by Product Category

Source: National Dairy Development Board, quoted in “A Snapshot of the Indian Dairy Industry,” Gyan Research and Analytics Pvt. Ltd., 2013, p. 12.

* Khoa is a milk food made of thickened or dried whole milk, and is widely used in Indian desserts.

FluidMilk46%

Ghee28%

Yogurt7%

Bu er6%

Khoa*6%

MilkPowders4%

Co ageCheese2%

Others(IncludingCream,IceCream)1%



15

Exhibit 2 An Amul Dairy Farm

Source: Casewriters.



16

Exhibit 3 An Amul Dairy Cooperative Society


Exhibit 4 An Amul District Union Plant



51

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19

Exhibit 7 Amul’s “Daily Bread” Billboard

Source: Company documents.

Exhibit 8 Amul’s “Thoroughbread” Billboard

Source: Company documents.


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21

Exhibit 11 Amul’s Balance Sheet, March 2013 (US$)

Source: Company annual report.

Notes: Converted using an exchange rate of INR 54.29 to 1 USD as on March 31, 2013, and INR 50.87 to 1 USD as on March 31, 2012.

Liabilities March 2013

Share Capital 18,425,124

Reserve Fund 12,225,861

Grans (For Capital Assets) 314,773

General Fund 7,193,664

Bad Debt Reserve Fund 3,823,669

Current Liabilities 207,011,660

Bank Overdraft 2,900,368

Provisions 22,552,385

TOTAL 274,447,504

Assets March 2013

Fixed Assets 49,343,397

Investments 135,329

Deferred Tax Assets (Net) 24,553

Inventories 160,120,464

Sundry Debtors 20,752,054

Cash & Bank Balances 34,894,400

Loans & Advances 9,177,307

TOTAL 274,447,504



22

Exhibit 12 Amul’s Income Statement, 2012–2013 (US$)

Source: Adapted by casewriter from company annual report.

Converted using an exchange rate of INR 54.29 to 1 USD as on March 31, 2013, and INR 50.87 to 1 USD as on March 31, 2012.

* Other Income includes Fees & Commissions, Dividend on Long-Term Investments, Interest on Deposits and Exchange Rate Differences.

** Other Expenses include Purchase of Finished Goods, Salaries and other benefits, Raw Materials Consumed, Administrative expenses, and Marketing Expenses.

Income 2012-2013Milk & Milk Products 2,507,473,255Interdairy Cattle Feed, Liquid Nitrogen and Other Non-Milk Products 25,582,851(a) 2,533,056,106Less: Excise Duty 3,097,071

(a) 2,529,959,035

Other Income* (b ) 6,273,697Closing Stock -Finished Goods 154,736,066Stock-in-progress 921,422Scrap Stock generated by Packaging Plants 50,433

(c) 155,707,921TOTAL (a+b+c) 2,691,940,653

Expenses 2012-2013Payout to Milk Producers 2,300,976,239Other Expenses** 384,762,995TOTAL 2,685,739,234

TOTAL PROFIT 6,201,418



23

Exhibit 13 Popular Regional Dairy Brands in India

Source: Adapted by casewriters from Maps of India, http://www.mapsofindia.com.

Punjab: Verka

(milk, ghee)

Karnataka:

Nandini (milk, ghee, cheese)

Rajasthan: Saras

(milk ghee, cheese)

Kerala: Milma(milk, ice cream,

yogurt)

Delhi: Mother Dairy (milk, ice cream, yogurt)

Tamil Nadu: Aavin(milk, milk

powder, butter, cheese, yogurt,

ice cream)

Maharashta: Gokul (milk, skim

milk powder, ghee)

Andhra Pradesh:

Vijaya (milk, ghee, yogurt)



24

Endnotes

1 Verghese Kurien and Gouri Salvi, I Too Had a Dream (New Delhi: Roli Books, 2005), p. 82.

2 Mitul Thakkar, “Amul’s campaign claims place in Guinness Book,” Economic Times, October 13, 2007, http://articles.economictimes.indiatimes.com/2007-10-13/news/28411197_1_advertising-campaign-amul-butter-butter-girl, accessed June 12, 2013.

3 Keith J. Fernandez, “7 things you need to know about India’s millenials,” Gulf News, August 15, 2015, http://gulfnews.com/gn-focus/country-guides/reports/india/7-things-you-need-to-know-about-india-s-millennials-1.1565524, accessed April 2016.

4 Rahul Kumar, interview by author, Anand, Gujarat, February 21, 2012.

5 “Dairy Sector in India,” E-Research and Publications India Pvt. Ltd., December 5, 2012, p. 2.

6 R. G. Chandramogan, “Private Sector’s White Revolution,” Hindu Business Line, January 16, 2013, http://www.thehindubusinessline.com/opinion/private-sectors-white-revolution/article4313042.ece

7 “Dairy Sector in India,” E-Research and Publications India Pvt. Ltd., December 5, 2012, p. 1.

8 “Dairy Sector in India,” p. 2.

9 “India Agribusiness Report—Dairy Outlook—Q3 2013,” Business Monitor International, May 3, 2013.

10 The India Dairy Industry, “Buffalo vs. Cow Milk,” http://www.indiadairy.com/info_buffalo_milk_vs.html, accessed February 3, 2016.

11 Food and Agriculture Organization of the United Nations, “FAO Stat: 2010 Whole Milk Yield,” http://faostat3.fao.org/download/FB/BL/E, accessed January 25, 2016.

12 ”India Agribusiness Report—Dairy Outlook—Q3 2013.”

13 ”India Agribusiness Report—Dairy Outlook—Q3 2013.”

14 National Dairy Development Board, “Per Capita Monthly Consumption Expenditure in Milk & Milk Products,” http://www.nddb.org/information/stats/percapitacomsp, accessed July 2016.

15 Ajita Shashidhar, “White Gold: The 80,000 Crore Milk Business,” Business Today, June 5, 2016.

16 Verghese Kurien and Gouri Salvi, I Too Had a Dream, p. 19.

17 Government of India, “Milk Production in India,” https://community.data.gov.in/milk-production-in-india/, accessed May 1, 2016.

18 World Bank Operations Evaluation Department, “India: The Dairy Revolution,” http://lnweb90.worldbank.org/oed/oeddoclib.nsf/fb71ec897615187985256885007b6ad0/1bdd436f3bb1c0d68525684800767e4e/$FILE/India_Dairy.pdf, accessed August 4, 2016.

19 “Operation Flood: A White Revolution,” Articlesbase, February 6, 2010, http://www.articlesbase.com/human-resources-articles/operation-flood-a-white-revolution-1827143.html, accessed June 18, 2013.


21 Institute of Rural Management, “History,” https://www.irma.ac.in/article.php?menuid=15, accessed February 2015.

22 Jennifer Wilhoit, “Cooperatives: A Short History,” Cultural Survival Quarterly (Fall 2005), https://www.culturalsurvival.org/publications/cultural-survival-quarterly/none/cooperatives-short-history.


24 GCMMF, Amul’s India (Noida: HarperCollins Publishers, 2012), pp. 14-17.

25 GCMMF, Amul’s India, p. 149.


http://www.nddb.org/information/stats/percapitacomsp

https://community.data.gov.in/milk-production-in-india/

http://lnweb90.worldbank.org/oed/oeddoclib.nsf/fb71ec897615187985256885007b6ad0/1bdd436f3bb1c0d68525684800767e4e/$FILE/India_Dairy.pdf

http://lnweb90.worldbank.org/oed/oeddoclib.nsf/fb71ec897615187985256885007b6ad0/1bdd436f3bb1c0d68525684800767e4e/$FILE/India_Dairy.pdf


25


27 GCMMF, Amul’s India, pp. 56-58.



30 Manoj Kushwah, “GCMMF: Taste of India to widen its reach,” Indian Cooperative, August 26, 2013, http://indiancooperative.com/dairy/gcmmf-taste-of-india-to-widen-its-reach/.

31 “Nestle India net up 11% in 2012,” Business Standard, February 21, 2013, http://www.business-standard.com/article/companies/nestle-india-net-up-11-in-2012-113022100026_1.html, accessed July 2013.

32 “Nestle India withdraws three products from market,” Hindu Business Line, December 9, 2005, http://www.thehindubusinessline.in/2005/12/10/stories/2005121002540300.htm, accessed June 12, 2013.

33 Nachiketa Desai, “Never Too Old for Growth,” Business India, May 13, 2012, pp. 44-52.

34 Ajita Shashidhar, “White Gold: The 80,000 Crore Milk Business.”

35 Nachiketa Desai, “Never Too Old for Growth.”

36 Ajita Shashidhar, “White Gold: The 80,000 Crore Milk Business.”

37 “Project Signing: Government of India and World Bank Sign US$ 352 Million Agreement for National Dairy Support Project,” World Bank press release, April 13, 2012, http://www.worldbank.org/en/news/press-release/2012/04/13/project-signing-government-of-india-and-world-bank-sign-us-352-million-agreement-for-national-dairy-support-project, accessed February 3, 2016.

38 “FAO Stat: 2010 Whole Milk Yield.”

39 Joshua Emmanuel Lagos and Vijay Intodia, “India: Dairy and Products Annual 2015,” USDA Foreign Agricultural Services—Global Agricultural Information Network, October 15, 2015.

40 “39th Annual General Body Meeting Held on 25th June, 2013,” Amul website, http://www.amul.com/m/39th-annual-general-body-meeting-held-on-25th-june-2013, accessed February 3, 2016.

41 “39th Annual General Body Meeting Held on 25th June, 2013.”

42 “39th Annual General Body Meeting Held on 25th June, 2013.”


India’s Amul: Keeping Up with the Times

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