According to Mr Khanna, an AMUL director ‘with special assignments’ – as his business card says – the milk supply to his co-operative is increasing all the time. In the 2003/04 financial year, the milk collection was up to 5.1 million litres per day, a rise of some 15.2%. By contrast, the co-operative’s turnover rose by just 1.4% in the financial year 2004/05, bringing it to INR 29.22 billion or EUR 584 million. This growth is lower than expected and due, believes Khanna, to the reduced milk supply in the latter months of 2004 and the poor increase in the price of basic products in the early months of 2005.
Co-operative operation
From what Khanna is saying, it is evident that AMUL is a co-operative operation without equal. The 2.4 million members/ dairy farmers in the state of Gujarat are grouped into 11,615 village co-operatives equipped with both testing equipment and a milk cooling tank. Some of the unpasteurised milk is sold to the villagers. The rest is transported by milk tankers twice a day to the 12 district Milk Unions in the state. These Milk Unions process the milk by using the services of 24 processing companies. The output of dairy products reflects the order submitted by the state’s marketing body, the Gujarat Co-operative Milk Marketing Federation. These products are then sold throughout India under the AMUL and Sagar brand names.
In addition, AMUL’s dairy exports are showing an upward trend. For example, in the last financial year (2004/05) exports reached INR 1.15 billion or EUR 2.3 million. ‘The EU’s reduced export subsidies have given us an excellent opportunity to export low-fat and full-fat milk powder,’ says AMUL’s chairman Verghese Kurien, explaining the export trend. ‘We have shown that if a level playing field is created, Indian dairy products can be successful in the world market. AMUL’s exports of consumer ready dairy products grew by no less than 40% in the financial year 2004/05. At the same time, we were able to maintain our exports of UHT milk, ghee and paneer or cottage cheese at the previous year’s levels.’
Paneer (cottage cheese)
is an ingredient in many Indian dishes. It is an important source of animal protein, especially since many Indians eat neither pork nor beef. |
Pasteurised milk is one of the most important products of the Gujarat-based dairy co-operative,known for its brands AMUL and Sagar. |
Wide range
The co-operative dairy’s product information reveals a wide product range. But the relationship between the major product groups isn’t evident from either the annual reports or the words of the co-operative’s spokespeople. One trend is clear, however.
Indian consumers are increasingly showing a preference for packaged dairy products, due to food safety concerns. This explains in part why the revenues of AMUL’s consumer range of packaged dairy products grew by 11.8% in the last financial year. The sales revenue of pasteurised drinking milk in plastic pouches under the AMUL brand rose in 2004/05 by no less than 36%. This rise was attributable chiefly to the successful introduction of AMUL milk more than a year ago in the Indian city of Kolkata (formerly Calcutta), home to millions of people. Thanks to this success, the pasteurised milk pouches are the biggest contributor to AMUL’s total turnover. In the 2004/05 financial year, this range brought in a turnover of INR 6.26 billion or EUR 125 million.
The turnover of UHT milk grew 23% in the last financial year compared to preceding year. The turnover of ice cream rose by 10%, consolidating AMUL’s position as market leader. And despite cut-throat competition, the sales of AMUL brand butter rose by 4.5%. The sales of cheese and cheese spreads rose by 21%. Cheese includes cheese for pizzas. And, says Kurien, other packaged products such as flavoured milk, fresh cream, paneer or cottage cheese also have the potential to become major products bearing the AMUL brand within a couple of years.
Complex distribution
While the annual report mentions rising exports, AMUL’s opportunities to continue increasing turnover lie principally in the Indian domestic market. AMUL currently has 47 sales offices throughout India. These offices maintain links with more than 3,000 wholesalers and more than 500,000 shops of varying size. But this infrastructure has room to grow: it is too small to make AMUL a national brand in the domestic market of more than one billion residents. As the country’s largest co-operative dairy, AMUL has developed a two-pronged strategy to address this issue and develop national presence. Firstly, last year AMUL expanded its distribution network to include some of India’s smaller cities. In so doing, the co-operative has responded quickly to rapidly changing market conditions.
Situated all over India, these smaller cities are now promising markets with great purchasing power as the incomes of India’s middle class are rapidly rising and the better-off rural families are migrating to these developing cities. In the last financial year AMUL has introduced some 900 food wholesalers in these smaller cities to its product range. ‘This initiative has already started yielding results. AMUL products are increasingly available in smaller cities throughout India. This initiative, which we’ll be continuing for the time being, is generating additional turnover,’ says Kurien. Director Khanna describes the second prong of AMUL’s expansion plan. ‘We expect that the milk production in our procurement area, the state of Gujarat, will increase by 5% or more per year in the coming period. That’s the first source of growth. As not only the dairy market but also the market for farm milk has been liberalised, we are now collecting milk in six other places in India milk.
What is new that we would like to talk to other co-operative dairy companies. Most of them are also organised by state following the Anand model. Our standpoint is clear. They know about milk processing and we know about marketing. They can continue to produce dairy products that we will sell under our strong AMUL and SAGAR brands. In this way, our partners will be able to piggy-back on the success of AMUL’s ever expanding distribution network.’ He foresees a future in which the players in India’s co-operative dairy world increasingly cooperate to offer the Indian consumer a wide range of dairy products. It is completely obvious to him that AMUL will be a driving force in shaping this new future. ‘AMUL is India’s oldest dairy brand.
But it is more than a brand. It is also a question of belief. Belief in the co-operative, in a dairy world owned by the dairy farmers.That is important because they and the rest of the population in the villages must be pulled up to a higher standard of living,’ says AMUL director Khanna, speaking straight from the heart.
Mithaee is an example of Indian sweets made with sweetened condensed milk. As AMUL delivers this product in cans, it has a shelf life of nine months and can be stored outside the cooling chain.
Article from India Dossier, ZuivelZicht - 14 december 2005  |