India’s Amul: Keeping up with the Times Priyanju HR039 Vrushali HR040 Arun Karthik HR042 Somnath HR044 Uzma HR047 Rohit HR048 Saloni HR043 Trishala HR046

CONTENTS Case Background Internal Business Environment SWOT Analysis PESTEL Analysis Porter’s Five Forces - Industry Analysis VRIO Analysis Porter’s Value Chain Advertising campaigns Pricing strategy Diversification strategy Future prospects March 22, 2015

CASE BACKGROUND All district milk producers unions of Gujarat came together to form a federation “Gujarat Cooperative Milk Marketing Federation” Dr. Verghese Kurien : Father of white revolution in India Founded in 1946,Amul is a Indian dairy cooperative owned by 3.2 million farmers in the Western state of Gujarat AMUL - "priceless" in Sanskrit from the Sanskrit "Amulya," and symbolizing the pride of Swadeshi Amul produced 46 types of dairy based foods having a sales turnover of US $2.5 billion as of March 2013 The “Bottom of the Pyramid” Structure Successful “value for many and value for money” strategy A successful cooperative society that always take care of the farmers and loyal customers March 22, 2015

INTERNAL BUSINESS ENVIRONMENT Culture Consistent focus on Indian culture 80% of revenues back to farmers Corruption-free Democratic system representing fair selection without political influence No promotion, no free products Customer Relationship Advertising on popular current events Prime site hoardings only Largest exporter of dairy products targeting NRIs staying abroad. Youth - connect (sponsoring Olympics) First ice-cream parlour Umbrella brand marketing Smaller SKUs focussing rural market Dedicated franchised outlets Operations Strategy focusing on high margin consumer products against low margin wholesale deals Strong procurement network for large amounts of milk 4 distinct distribution networks All-day availability Independent financial sourcing of new projects Change in procurement strategy (state to national) Less expenditure on advertising Technology Established supply chain using chilled vans to minimize spoilage Convert buffalo milk into milk powder Mobile vet vans Artificial insemination Training programs on animal husbandry. Supplier Relationship Integration of fragmented dairy societies Society and cattle support and training farmers Exclusive distribution arrangements with partners Largest retail chain in terms of number of stores Low margin- High volume strategy, thus reducing costs & competition March 22, 2015

W S O T SWOT ANALYSIS Highly diverse product mix Robust distribution network and channels; Arrangements with distribution partners Cost effective advertising campaigns and marketing strategies Leadership Risk of highly complex supply chain system Procurement issues Penetration in international markets Expand existing categories like processed foods, chocolates, etc Competitors like Nestle, HUL, Britannia Growing price of milk and milk products Large foreign retailers Younger generations shying away from dairy farming Political interferences O T March 22, 2015

PESTEL ANALYSIS Political interference in cooperatives Cooperative elections and parties High growth rate FDI of 51% in multi-brand retail Credit/Finance facilities Rural market Procurement of quality raw material Prevention of Food Adulteration Act Child Labour Cooperative Societies Act The Milk and Milk Products Order Favourable demographic dividend Dairy products as a culture Vegetarian culture Convenience and health consciousness Increasing education levels Dairy waste management Waste to commercial products Packaging Technology Efficient Distribution and Transportation channel Information Communication Technology Cold chain and low temperature technologies March 22, 2015

INDUSTRY ANALYSIS – PORTER’S Threat of New Entrants LOW - Requires high capital investment and difficult to achieve economies of scale - Access to very complex and well established distribution channel Customer Loyalty Bargaining Power of Buyers HIGH - Presence of multiple competitors, Dudhwallas - Home delivery and freshness of local dairy products make this more complex Rivalry among Competitors HIGH Large no. of competitors Local Dudhwallas Threat of Substitutes MEDIUM Although many drinking substitutes to milk are available, the dairy industry enjoys high profitability in case of other dairy products Bargaining Power of Supplier LOW Mainly the suppliers are local milk producers; hence their bargaining power is low March 22, 2015

AD CAMPAIGNS ‘Utterly Butterly Amul! Utterly Butterly Delicious…’ by Sylvester DaCunha of Advertising and Sales Promotion in 1966 Use of strategic sites for minimum expense and maximum output Socially relevant issues like Leftist Struggle in Calcutta or The Indian Airlines Strikes. Amuls ads and sponsorships reflects indian roots and values, for example, Amul Surabhi programme In 1994, to bring all its brand under one umbrella it goes with the tagline ‘The Taste of India’ Also in order to be relevant with the young generation , they have sponsored the Indian Contingent at the London Olympics 2012, and they have given 50000 awards to school children for academic excellence March 22, 2015

PRICING STRATEGY March 22, 2015

PRICING STRATEGY The Bottom of the Pyramid – In cities it sell large packs of its products at 30-175 INR whereas in smaller towns, same products in smaller packs at 5-10 INR Value-added products like Cheese, Dairy Whiteners, etc. are priced lower than its competitors. Multinationals incur higher expense than Amul in advertising, retailing and royalty to parent companies. However, Amul prices fresh milk at a premium price to its competitors because of its higher transportation costs compared to local diaries Overall it maintains an affordable price due to a variety of reasons - only 1% of its turnover is used in advertising as compared to 14% of Unilever or 8-10% of Nestle Advertising campaigns are longer, thus helping Amul to reduce on the communication costs. The co-operative business model also helps to source raw-material, especially milk economically, allowing to pass the savings to consumers. For example, The Crème Rich Ice-Cream is priced at Rs.40-45 whereas HUL’s Magnum is priced at Rs.80-85 March 22, 2015

Sustainable competitive advantage VRIO ANALYSIS Valuable Rare Imitable Organized Result Milk (60%) Yes No Sustainable competitive advantage Butter (86%) Cheese (65%) Chocolates (10%, 2011) No advantage Ice-Cream (39%) *Percentages indicate market share as on 2013 given in the case, except chocolates March 22, 2015

PORTER’S VALUE CHAIN SUPPORT ACTIVITIES Margin Margin Procurement Firm Infrastructure- Head, zonal and overseas offices SUPPORT ACTIVITIES Human Resource Management- Leadership & open culture Customer Value Technology Development- Integration from farmers to customers; B2B Margin Procurement Inbound Logistics: Production by co-operative and union members Operations Milk processing, Packing Outbound Logistics: Village Diary Co-op society, Milk unions Sales and Marketing: Distributors, Retailers Service and Support: After sales services Customer Value Margin March 22, 2015

DIVERSIFICATION STRATEGY March 22, 2015

DIVERSIFICATION STRATEGY Related diversification – Milk and Milk products Cost leadership Amul Milk Amul Gold, Amul Taaza Bread Spreads Amul Butter, Amul Lite, Delicius, Table Margarine Cheese Processed Cheese, Cheese Pizza, Amul Gouda, Mozzarella Cheese Beverages Amul Kool, Kool Café, Prolife Lassi/Butter Milk, Spiced buttermilk Ice-Cream Frozen Yoghurt, Amul Ice Creams, Amul Flaavyo Paneer Malai Paneer, Fresh Paneer Dahi Masti Dahi, Probiotic Dahi, Flaavyo March 22, 2015

FUTURE PROSPECTS By expanding (In terms of milk procurement base, manufacturing capacity, adding new Wholesale Dealers and retailers Amul plans to achieve Rs. 30,000 Crores turnover by 2018-19 The company has plans to increase its milk processing capability by 90 lakh litres in the coming years and will be coming up with ten new milk processing units across the country Amul to become the first Indian dairy firm to export to Russia March 22, 2015

Thank You! Priyanju HR039 Vrushali HR040 Arun Karthik HR042 Saloni Somnath Shubhanker Trishala Uzma Rohit HR039 HR040 HR042 HR043 HR044 HR045 HR046 HR047 HR048 Thank You!