To understand the working of a milk distributor, study his concerns in accordance to the market scenario, calculate his ROI,

suggest strategies to increase his ROI

By

Rashi Garg
019

Under the guidance of

Shri Dhaval Doshi Area Manager Amul

Kiran Sharma Associate Professor K J SIMSR

K J Somaiya Institute of Management Studies & Research

May-June, 2013

DECLARATION I, Ms. Rashi Garg hereby declare that this project report is the record of authentic work carried out by me during the period from May 2, 2013 to June 29, 2013 and has not been submitted to any other University or Institute for the award of any degree / diploma etc.

Rashi Garg 019 03rd July, 2013

Certificate from Faculty Guide

This is to certify that Ms. Rashi Garg, a student of the Post-Graduate Diploma in Management, has worked under my guidance and supervision. This Summer Project Report has the requisite standard and to the best of our knowledge no part of it has been reproduced from any other summer project, monograph, report or book.

Kiran Sharma Associate Professor KJ SIMSR Vidyavihar, Mumbai 3rd July, 2013

Executive Summary This report was commissioned to examine the working process of Amul milk distributor, study his concerns in accordance to the market scenario, calculate his ROI, suggest strategies to increase his ROI. The research draws attention to the fact that Amul started its operations in Mumbai only in 2006 when all other brands were already prevalent in Mumbai. Since then Amul is capturing their market share gradually. By doing this research I realized how important is the connection between retailers and distributors in the entire supply chain. Both retailers and distributors are not satisfied with very less margins provided by Amul. Retailers face supply related issues and distributors were majorly concerned about the dumping problem faced by them. There were various retailers who wanted to keep Amul products, but were fed up of supply services given by Amuls distributors. Hence this was the major concerned handled by us by giving them assurance that they will be supplied with their orders regularly and wont face any such issues in future. Dumping extra orders is the strategy followed by Amul so that distributor supplies products to all the big and small retail stores and do not left any one behind. Some distributors are seen to be pushing other brands and not Amul due to less margins. Distributors form the most important part of entire supply chain of Amul. If a distributor doesnt work properly, it can rupture the entire supply chain to a large extent. Promotional activities such as kiosks and free sampling was being carried out which generated very high positive response. Kiosk activities increased brand value and it reached directly to the minds of end consumers. Sales were increased after conducting kiosk activities. Free sampling was targeted to hotel, restaurants and canteens for a new product Pouch Dahi. Immediate bulk orders were generated for the same. It was observed that retailers were willing to keep Amul products provided supply is improved by the companys end. Also some retailers were interested to become distributors provided security deposit is somewhat reduced and few attractive schemes are being offered.

To increase ROI of distributors, following things are recommended: Distributor should try to increase volume of sales. It will automatically increase their ROI Also, Amul incentivize distributors on the basis of their sales Little flexibility in terms of security deposit may be in terms of some other form of bank deposit will be of great help Some occasional schemes should be provided Amul should communicate more frequently with their retailer by maintaining a proper database.

Table of Contents
1 Introduction:............................................................................................................................................... 8 1.1 Background of the study: .................................................................................................................... 8 1.2 Background of the topic: ..................................................................................................................... 8 1.3 Company profile: ................................................................................................................................ 9 1.4 Statement of the problem/assigned work: ......................................................................................... 11 1.6 Scope of the study / work done: ........................................................................................................ 11 1.7 Objectives of the study: .................................................................................................................... 12 2. Review of Literature ............................................................................................................................... 13 2.1 Indian Dairy Industry ........................................................................................................................ 13 2.1.1 Introduction and History ............................................................................................................ 14 2.1.2 GCMMF Overview .................................................................................................................... 19 2.3.1 Vision ......................................................................................................................................... 19 2.3.2 Mission....................................................................................................................................... 19 2.3.3 Objective .................................................................................................................................... 20 2.3.4 Future Plan ................................................................................................................................. 20 2.4 Lines of business:.............................................................................................................................. 21 2.4.2 Distribution Network ................................................................................................................. 25 2.4.2 Amul Model ............................................................................................................................... 28 2.4.3 Managing Competition: ............................................................................................................. 29 2.4.5 Market Share of Different Products ........................................................................................... 29 2.4.5 Advertising by Amul:................................................................................................................. 30 2.4.6 Amul Abroad: ............................................................................................................................ 31 3. Description of the business problem: ...................................................................................................... 35 3.1 Description of work assigned:........................................................................................................... 35 3.2 Description of work carried out: ....................................................................................................... 35 3.2.1 Research Methodology .............................................................................................................. 35 3.2.2 Method of Study ........................................................................................................................ 36 6

3.2.3 Product for which study was conducted..................................................................................... 36 4. Conclusion and Recommendation .......................................................................................................... 57 4.1 Observation and Learning ................................................................................................................. 57 4.2 Conclusions ....................................................................................................................................... 57 4.3 Suggestions and Recommendations .................................................................................................. 58 5. Bibliography ....................................................................................................................................... 60

1 Introduction: 1.1 Background of the study:

Amul started its operations in Mumbai in the year 2006. At that point of time competitors like Mahananda, Govardhan, Gokul were dominating the market share. After Amul entered the market, its sales is growing since then. Competitors are facing decline in sales but it is gradual. Amul is expanding its product range but in recent times it was facing decline in sales of its established products such as Milk, Curd, ButterMilk, Lassi, etc specially in Zone 4 and Zone 5 region of Mumbai. This study was conducted for Fresh Product Department of Zone 5 of Amul basically to increase the market share, finding out the issues with retailers and distributors, addressing their concerns and increasing Amuls Visibility and Availability.

1.2 Background of the topic:

The work at Amul was totally related to increasing Availability and Visibility of brand Amul in minds of retailers, distributors which itself in turn results in increase in end consumers mind as well. The structure in which Amul operates currently is shown below:

Whole salers Plant ADA

Retailers

End Consumers APO

Here, ADA : Area Delivery Agents/ Distributors

APO : Amul Preferred Outlets Amul wanted us to eliminate middlemen, for eg. wholesalers and directly reach end consumers as far as possible. For achieving this target it was mandatory to address the concerns faced by distributors who form the crucial part of Amuls supply chain. To address their concerns, it was necessary for us to understand the working of a Amul distributor so that we can suggest them and Amul proper measures to increase their ROI and keep them happy and loyal towards Amul.

1.3 Company profile:

Amul is the largest food brand in India, much loved by customers and the world's largest pouched milk brand with an annual turnover of US $2.15 billion (2012-13). Amul is into the business of dairy products and has around 40 products in its portfolio, with some like butter, cheese and milk being the front runners in the dairy industry. It enjoys immense popularity and loyalty amongst Indians. Currently Unions making up GCMMF have 3.1 million producer members with milk collection average of 9.4 million litres per day. With its presence felt not just in India, Amul has entered overseas markets such as Mauritius, UAE, USA, Oman, Bangladesh, Australia, China, Singapore, Hong Kong and a few South African countries. With more than 48 sales offices, 5000 wholesale distributors and 7 lakh retail outlets, Amul reaches around 2500 small towns. The credit for its success goes to GCMMF. The Gujarat Cooperative Milk Marketing Federation Ltd, Anand (GCMMF) is the largest food products marketing organization of India. It is the apex organization of the Dairy Cooperatives of Gujarat and is the backbone of Amul. Over the last five and a half decades, Dairy Cooperatives in Gujarat have created an economic network that links more than 3.1 million village milk producers with millions of consumers in India. Hence, distributors are the soul of Amul in a way. These cooperatives collect on an average 9.4 million litres of milk per day from their producer members, more than 70% of whom are small, marginal farmers and landless laborers and include a sizeable population of tribal folk and people belonging to the scheduled castes.
9

GCMMF An Overview Year of Establishment 1973

Members

17 District Cooperative Milk Producers' Unions (16 Members & 1 Nominal Members)

No. of Producer Members

3.18 Million

No. of Village Societies

16,914

Total Milk handling capacity per day

16.8 Million litres per day

Milk Collection (Total - 2012-13)

4.66 billion litres

Milk collection (Daily Average 2012- 12.7 million litres 13) Cattle feed manufacturing Capacity 5890 Mts. per day

Sales Turnover -(2012-13)

Rs. 13735 Crores (US $ 2.54 Billion)

10

1.4 Statement of the problem/assigned work:

The major problem faced by Amul was the decreased availability and visibility of Amuls products at retail stores. Hence the major task was to make Amul available and visible to end consumers through proper chain of distributors and retailers. The tasks assigned were to initially study and know the market that included visits to several retail stores, listening their concerns, studying the overall distribution process, addressing the concerns of distributor, calculating their ROI, suggesting them strategies to increase the same by promoting the products through various means such as kiosks, free sampling etc. to overall increase the sales of Amul by creating interest and compelling consumers to buy Amul products. 1.5 Need of the study: Even after having excellent quality products and reasonable prices, Amul was facing decrease in its sales volume for the past few months. So it was necessary for the management to know if the building blocks of their supply chain, i.e. distributors and retailers if they are satisfied or not by checking and solving their issues and concerns. For this intensive survey of retailers & Distributors was needed to know their position in the market in comparison with other competitor brands. It helps the organization to find out the brand being sold most by the retailers along with their stocking and also consumer buying preferences. Especially in Dairy Industry the distribution network and the retailers play a significant role in increasing the sales of the products. Its necessary to understand the attitude of the distributors and the retailers towards the brand to increase the market share and profit.

1.6 Scope of the study / work done:

The study and activities undertaken for Amul products was limited to the Fresh Products Department (FPD) which included Fresh Milk, Curd, Buttermilk, Lassi in Zone 5 (
11

Vidyavihar, Chembur, Tilak Nagar, Kurla, Sion, Matunga, Dadar). It involved continuous and repeated interaction with retailers and distributors to instil a confidence in them regarding Amuls availability and regaining their trust. Apart from this, it involved studying: Retailers concerns Distributors concerns Generating orders Pitching in to more distributors Promotion activities through Kiosks Promotion activities through Free Sampling Competitor analysis Suggestions to the company to improve the sales

1.7 Objectives of the study:

Primary Objectives: To map out the retail network of Amul fresh products in Zone 5 (Vidyavihar Dadar) To find the problems and understand the concerns of the retailers of Amul Fresh Products To find the problems and understand the concerns of the distributors of Amul Fresh Products To suggest strategies to distributors to increase their ROI To promote Amul fresh products by running promotional campaigns

Secondary Objectives: To increase the sales of Amul Fresh Products in Zone 5 To make Amul Fresh Products available at retail stores To make Amul Fresh Products visible at retail stores Persuade retailers to sell more Amul Fresh Products To remove the unwanted middle men from the whole supply chain

12

2. Review of Literature 2.1 Indian Dairy Industry

Indias dairy sector is expected to triple its production in the next 10 years in view of expanding potential for export to Europe and the West Moreover with WTO regulations expected to come into force in coming years all the developed countries which are among big exporters today would have to withdraw the support and subsidy to their domestic milk product sector. Also India is the lowest cost producer of per liter of milk in the world, at 27 cents, compared with the US63 cent. Also to take advantage of this lowest cost of milk production and increasing production inched country multinational companies are planning to expand their activities here. Some of those milk producers have already obtained quality standard certificates from the authorities. This will help them in marketing their products in foreign countries in processed form. The urban market for milk products is expected to grow at an accelerated pace of around33% per annum to around Rs.83, 500 crores by year 2010. This growth is going to come from the greater emphasis on the processed food sector and also by increase in the conversion of milk into milk products. In 2010, the value of Indian dairy produce was Rs 10, 00,000 million. Presently the market is valued at around Rs7, 00,000million.

The Dairy Cooperative Network Includes 170 milk unions Operates in over 338 districts Covers nearly 1, 08574 village level societies Is owned by nearly 12 million farmer members.

Apart from making India self sufficient in milk, these dairy co-operatives have established our country as the largest milk-producing nation in the world.
13

2.1.1 Introduction and History

In the year 1946 the first milk union was established. This union was started with 250 liters of milk per day. In the year 1955 AMUL was established. In the year 1946 the union was known as KAIRA DISTRICT CO-OPERATIVE MILK PRODUCERS UNION. This union selected the brand name AMUL in 1955. The brand name Amul means AMULYA. This word derived from the Sanskrit wordAMULYA which means PRICELESS. A quality control expert in Anand had suggested the brand name AMUL. Amul products have been in use in millions of homes since 1946. Amul Butter, Amul Milk Powder, Amul Ghee, Amulspray, Amul Cheese, Amul Chocolates, Amul Shrikhand, Amul Ice cream, Nutramul, Amul Milk and Amulya have made Amul a leading food brand in India. (The total sale is Rs. 6 billion in 2005). Today Amul is a symbol of many things like of the high-quality products sold at reasonable prices, of the genesis of a vast co-operative network, of the triumph of indigenous technology, of the marketing savvy of a farmers' organization. And have a proven model for dairy development (Generally known as ANAND PATTERN). In the early 40s, the main sources of earning for the farmers of Kaira district was farming and selling of milk. That time there was high demand for milk in Bombay. The main supplier of the milk was Polson dairy limited, which was a privately owned company and held monopoly over the supply of milk at Bombay from the Kaira district. This system leads to exploitation of poor illiterates farmers by the private traders. The traders used to beside the prices of milk and the farmers were forced to accept it without uttering a single word. However, when the exploitation became intolerable, the farmers were frustrated. They collectively appealed to Shir Sardar Vallabhbhai Patel, who was a leading activist in the freedom movement. Shir Sardar Patel advised the farmers to sell the milk on their own by establishing a co-operative union, Instead of supplying milk to private traders. Sardar Patel sent the farmers to Shri Morarji Desai in order to gain his co-operation and help. Shri Desai held a meeting at Samarkh village near Anand, on 4th January 1946. He advised the farmers to form a society for collection of the milk.
14

These village societies would collect the milk themselves and would decide the prices at which they can sell the milk. The district union was also form to collect the milk from such village cooperative societies and to sell them. It was also resolved that the Government should be asked to buy milk from the union However, the govt. did not seem to help farmers by any means. It gave the negative response by turning down the demand for the milk. To respond to this action of govt., the farmers of Kaira district

went on a milk strike. For 15 whole days not a single drop of milk was sold to the traders. As a result the Bombay milk scheme was severely affected. The milk commissioner of Bombay then visited Anand to assess the situation. Having seemed the condition, he decided to fulfill the farmers demand. Thus their cooperative unions were forced at the village and district level to collect and sell milk on a cooperative basis, without the intervention of Government. Mr. Varghese Kurien showed main interest in establishing union who was supported by Shri Tribhuvandas Patel who lead the farmers in forming the Cooperative unions at the village level. The Kaira district milk producers union was thus established in ANAND and was registered formally on 14th December 1946. Since farmers sold all the milk in Anand through a co-operative union, it was commonly resolved to sell the milk under the brand name AMUL.
15

At the initial stage only 250 liters of milk was collected every day. But with the growing awareness of the benefits of the cooperativeness, the collection of milk increased. Today Amul collect 11 lakhs liters of milk every day. Since milk was a perishable commodity it becomes difficult to preserve milk for a longer period. Besides when the milk was to be collected from the far places, there was a fear of spoiling of milk. To overcome this problem the union thought out to develop the chilling unit at various junctions, which would collect the milk and could chill it, so as to preserve it for a longer

period. Thus, today Amul has more than 150 chilling centers in various villages. Milk is collected from almost 1073 societies. With the financial help from UNICEF, assistance from the govt. of New Zealand under the Colombo plan, of Rs. 50 millions for factory to manufacture milk powder and butter was planned. [Link] Prasad, the president of India laid the foundation on November 15, 1954. Shri Pundit Jawaharlal Nehru, the prime minister of India declared it open at Amul dairy on November 20, 1955.
16

Amuls Secret of Success

The system succeeded mainly because it provides an assured market at remunerative prices for producers' milk besides acting as a channel to market the production enhancement package. Whats more, it does not disturb the agro-system of the farmers. It also enables the consumer an access to high quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economic upliftment and common good. Looking back on the path traversed by Amul, the following features make it a pattern and model for emulation elsewhere.

Amul has been able to: Produce an appropriate blend of the policy makers farmers board of management and the professionals: each group appreciating its rotes and limitations.

Bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment.

Provide a support system to the milk producers without disturbing their agro-economic systems.

Plough back the profits, by prudent use of men, material and machines, in the rural sector for the common good and betterment of the member producers.

17

Even though, growing with time and on scale, it has remained with the smallest producer members. In that sense, Amul is an example par excellence, of an intervention for rural change.

The Union looks after policy formulation, processing and marketing of milk, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds and the like - all through the village societies. Basically the union and cooperation of people brought Amul into fame i.e. AMUL (ANAND MILK UNION LIMITED), a name which suggest THE TASTE OF INDIA.

Amul (Anand milk union ltd.) is based on four hands, which are coordinated with each other.

18

The actual meaning of this symbol is co-ordination of four hands of different people by whom this union is at the top position in Asia.

First hand is of farmers, without whom the organization would not have existed. Second hand is of processors, who process the row material (milk) into finished goods. Third hand is of marketer, without whom the product would have not reached the customers. Fourth hand is of customers, without whom the products would have not carried on.

2.1.2 GCMMF Overview

Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products marketing organization. It is a state level apex body of milk cooperatives in Gujarat which aims to provide remunerative returns to the farmers and also serve the interest of consumers by providing quality products which are good value for money.

Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF) is the largest Organization in FMCG industry engaged in marketing of milk & milk products under the brand names of AMUL and SAGAR with an annual turnover exceeding Rs 5000 crores. GCMMF is a unique organization. It's a body created by Farmers, managed by competent professionals serving a very competitive and challenging consumer market. It is a true testimony of synergistic national development through the practice of modern management methods.

2.3.1 Vision

Liberate our farmers from economic oppression and lead them to prosperity.

2.3.2 Mission

- Dairy cooperatives of Gujarat turnover of Rs. 27000 crores by the year 2020.

19

- To satisfy the taste and nutritional requirements of the consumers and increasing numbers of these consumers today are to be found only at the large format stores. Hence, in order to reach these consumers, we need to form equitable alliances with organized retail chains wherever possible.
2.3.3 Objective

It is to ensure that the maximum share of the consumers rupee goes back to the milk producers.

2.3.4 Future Plan

Expansion of distribution network, creative marketing, consumer education and product innovation, we will leverage effectively on rising income levels and growing affluence among Indian consumers.

Tapping the rising demand for new value-added products. Milk shed area will increase to 231 lakh kg per day (23.1 million kg per day), at an annual growth rate of 4% Installing Bulk Milk Chillers and Automatic Milk Collection Systems in all our village cooperative societies. Collect as much as 195 lakh kg per day (19.5 million kg per day) of milk in the peak flush season. Satellite dairies with combined processing and liquid milk packaging capacity of 50 LKPD will be established in major metro market We plan to double to processing capacity of our dairy plants to 20.7 million kg per day, by 2020 Milk drying capacity will also be enhanced by 200 MTs per day Plan to expand our cattle feed manufacturing capacity, more than four times to 12,000 MTs per day, by 2020.

20

Total investments envisaged for creating all the required infrastructure would be Rs. 2,600 crores (Rs. 26 billion) till the year 2020.

2.4 Lines of business:

Table 2.4: Amul Product Range Product type Milk Products 1. Calci+ 2. Gold 4.5% fat extra cream 3. Taaza 1.5% fat double toned 4. Lite 0.2% fat 5. Taaza Toned 3% fat Milk powders 1. Amulya 2. Sagar Bread spreads 1. Butter 2. Lite 3. Delicious 4. Reduced salt 5. School pack Cheese range 1. Gouda 2. Cheese 3. Pizza cheese (Mozarella) 4. A+ cheese 5. Processed cheese 6. Paneer
21

7. Amul Pasteurized Processed Cheddar Cheese Ghee 1. Amul Pure Ghee 2. Sagar Ghee Infant milk Sweet Condensed milk 1. Amulspray 1. Mithai mate 2. Amul Mithaee Gulabjamuns 3. Amul Basundi Amul fresh cream Kool beverages 1. Lassi 2. Amul Kafe and other types 3. Amul Kool Flavoured Milk 4. Amul Kool Caf 5. Amul Kool Koko 6. Amul Kool Millk Shake 7. Amul Kool Chocolate Milk 8. Nutramul Energy Drink Curd 1. Masti 2. Lassi 3. Prolife 4. Flaavyo flavoured yogurt Malt Beverage Ice cream 1. Amul PRO 1. Sundae Range 2. Probiotic 3. Sugarfree and probiotic
22

Chocolates

1. Amul Milk Chocolate 2. Amul Fruit & Nut Chocolate 3. Amul Dark Chocolate 4. Amul Chocozoo 5. Amul Bindass 6. Amul Fundoo

Ethnic sweets

1. Basundi 2. Shrikhand 3. Gulab Jamun

Product Portfolio

Butter

Margarine

Amul lite

Cheese

Cheese Spread

Paneer

Pizza Cheese

Pizza

23

Tetra milk

Pouch milk

Chocolates

Milk shake

Flavored Milk

Buttermilk

Lassi

Amulya

Amul spray

SMP

Nutramul

Ghee

Mithai Mate

Basundi

Gulabjamun

Fresh cream

Ice cream

Shrikhand

Dahi

Yogurt

2.4.1

Milk Processing

The entire process of milk can be divided into following steps:

24

2.4.2 Distribution Network

Most producers work with marketing intermediaries to bring their products to market. The marketing intermediaries make up a marketing channel also called distribution channel. Distribution channels are sets of interdependent organizations involved in the process of making a product or service available for use or consumption. The Head Office of GCMMF is located at Anand. The entire market is divided in 5 zones. The zonal offices are located at Ahmadabad, Mumbai, New Delhi, Kolkata and Chennai. Moreover there are 49 Depots located across the country and GCMMF caters to 13 Export markets.
25

A zero level of channel also called a direct marketing channel consists of a manufacturer selling directly to the final customers. A one level channel; contains one selling intermediary such as retailer to the final customers. A two level channel two intermediaries are typically wholesaler and retailer. A three level channel are typically wholesaler, retailer and jobber in between. GCMMF has an excellent distribution. It is its distribution channel, which has made it so popular. GCMMFs products like milk and milk products are perishable. It becomes that much important for them to have a good distribution.

We can see from above figure that GCMMF distribution channel is simple and clear. The products change hands for three times before it reaches to the final consumer. First of all the products are stored at the Agents end who are mere facilitators in the network. Then the products are sold to wholesale dealers who then sell to retailers and then the product finally reaches the consumers.

26

27

2.4.2 Amul Model

28

2.4.3 Managing Competition:

The Indian market is dominated by a large number of small local and regional players. There are an estimated 150 manufacturers in the organized segment, which accounts for 30-35% of sales and about 1000 units in the unorganized segments of the market. In the organized segment the significant brands are Kwality Walls , Vadilal, Amul, Havmor, Mother dairy and Baskins & Robbins. GCMMF is facing very tough competition from both in and outside India. Amul combats competition from its competitors by providing quality products at a price which its customers value. Along with good quality products and reasonable price the packaging is also very good. Most of its products are available in many flavors. Excellent advertising backs its products and helps GCMMF (AMUL) to leave its competitors a tough time. Also Amul has come out with Amul Parlours to cater to various segments of customers. Amul has a very strong Brand Image in the Domestic market. Many products are exported by GCMMF.
2.4.5 Market Share of Different Products

Figure-2.7

29

2.4.5 Advertising by Amul:

Amul has two agencies that look after its entire range of products namely FCB Ulka and Da Cunha. FCB Ulka looks after a broad range of products namely, Amul Lite Breadspread, Amul Shrikhand, Amul Chocolates, Amul Paneer, Amul SnowCap Softy Mix Ice cream, Amul/Sagar Ghee, Amul Infant Milk Formula 1 & 2, Sagar Tea and Coffee whitener, Amul Spray Infant Milk Food, Amul Mithaee, Amul Gulab Jamun, Amulya Dairy Whitener, Mithaimate Sweetened Condensed Milk, Amul Ice cream, Sagar Skimmed Milk Powder and Amul Whole milk Powder. Da Cunha looks after the Amul butter. Da Cunha also prepares the very popular Amul butter billboard campaigns, which we see at various locations. Over and above the Amul butter, Da Cunha also looks after the Amul Cheese, Cheese spread, Gouda Cheese, Emmental Cheese, Masti Dahi and Buttermilk, Amul Slim-n-Trim, Amul Taaza
30

and Amul Gold (all different brands of milk), Amul Fresh Cream, Amul Chocolate Milk, Amul Fresh Milk and Nutramul. FCB Ulka also looks after the corporate campaign.

2.4.6 Amul Abroad:

Amul is going places. Literally. After having established its presence in China, Mauritius and Hong Kong, Gujarat Cooperative Milk Marketing Federation (GCMMF), Indias largest milk cooperative, is waiting to flood the Japanese market. Then, GCMMF is also looking at Sri Lanka as one of its next export destinations. Amul products are already available on shelves across several countries, including the US, China, Australia, West Asian countries and Africa. GCMMF recorded a turnover of Rs 2,922 crore last fiscal. Its products include pouch milk, ultra heat treated (UHT) milk, ice-cream, butter, cheese and buttermilk.

31

2.5 Financial Background

32

33

100000

120000

140000

20000

40000

60000

80000

0 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Graphical Representation

34
2008-09
2009-10 2010-11 2011-12 US $ (in million)

Rs (million)

3. Description of the business problem: 3.1 Description of work assigned:

The following activities were assigned to me over a period of 2 months: 1. Detailed study of Amuls fresh product market in Zone 5 2. Map out the retail network of Amul fresh products in Zone 5 3. Address the problems and understand the concerns of the retailers of Amul Fresh Products 4. Address the problems and understand the concerns of the distributors of Amul Fresh Products 5. Observation and analysis of consumer buying behavior specific to dairy products 6. Understand the working process of milk distributor 7. To suggest strategies to distributors to increase their ROI 8. To promote Amul fresh products by running promotional campaigns 9. Regularly raising purchase orders for Amuls fresh products and make sure that order is completed on time 10. Expand the network of Amul by pitching in more people to turn into distributors 11. Expanding the reach of Amuls fresh products to untapped market i.e. mainly loose milk users 12. Study of various competitors and various schemes and offers provided by them.

3.2 Description of work carried out:

3.2.1 Research Methodology

This was a qualitative research conducted from 2nd May to 29th June 2013 .The research included meetings with the distributors and retailers, it involved face to face communication and asking them questions in order to understand the concerns and issues faced by them. The views of the retailers and distributors were recorded in the research. Also promotional campaigns were being carried out through which buying pattern and preferences of end consumer was noticed.

35

3.2.2 Method of Study

It is direct form of investigation, involving face-to-face communication with free feedback information. It offers a sense of participation. It is more flexible form of data collection. Use of unstructured, open-end questions is possible. Rate of refusal is low .Depth interview is possible. Complex questions can be asked. The interview can have questions to secure more information. Also, good observation power itself helped to answer some questions which we did not get directly from the retailers or distributors.

3.2.3 Product for which study was conducted

1. Fresh Milk

Amul Gold

Amul Taaza

Description Packing Shelf Life

Pasteurised milk Amul milk meets the PFA standards for the respective type of milk. Poly Pack - 500ml, 1000ml, 5 Ltr 48 Hours from the date of packing if kept under refrigeration below 8C

Varity Amul Gold

Fat% 6

SNF% 9

36

Amul Taaza

8.5

Pricing of the Milk ( in Rs./crt of 10 l)

Variety Taaza Gold Slim & Trim

ADA 302.8 399.40 273.20

Retailer 309.40 406.40 279.60

MRP 320 420 310

2. Curd

Product Name Description Packing Shelf Life

Amul Masti Dahi Curd made from Pasteurised Toned Milk Poly Pack 200 gm, 400 gm, 1 kg *

PP Cup - 200 gm, 400 gm, 100 gm Poly Pack - 7 Days from the date of packaging PP Cup - 15 Days
37

Pricing of the Pouch Dahi

Weight 200 gm 400 gm 1 kg

ADA 11.46 22.08 43.89

Retailer 12 23 45

MRP 13 25 50

3. Butter Milk

Product Name Description Packing

Amul Pouch Butter Milk Pasteurized Buttermilk meets the PFA standards. Poly Pack - 500ml FAT(%) 1.0 (%) 5.5

Composition

SNF Acidity 0.8% Max

Shelf Life

48 Hours from the date of packing if kept under Refrigeration below 8C

38

4. Lassi

Product Name Description Packing Composition Nutritional Information Shelf Life

Amul Prolife Probiotic Lassee Flavoured Probiotic Lassee (Drinking Yoghurt) 200 ml Glass Toned Milk, Sugar / Salt, Fruit Pulp Compound, Stabilizer , Active Probiotic Culture 60 kcal/100 ml Best Before 10 days from Packaging

MRP

Rs. 15 /cup

Area of operation

The areas of operation where the study was conducted are as follows:

Vidyavihar
39

Tilak Nagar Chembur Kurla Sion Matunga Vadala Dadar

How the survey conducted

To approach the outlets with the following requirements in mind

Addendum:

Outlets may include institutions, general stores, hotels, restaurants, mithai shops, super market, canteens, juice bars, ice-cream corners etc. These sectors were chosen because the company believed that these segments could be the best potential buyers for this product.

Phases of Project : We carried out the entire project in six different phases: Phase 1 : Retail store visit Phase 2 : Distributor Visit Phase 3 : Kiosk Activity Phase 4 : Market visit for collecting truck sheet, pitching in for distributors/APOs
40

Phase 5 : Free sampling Phase 6 : Competitor analysis

Detailed description of Phases Phase 1 : Retail store Visits Duration : 15 days Time Frame : 03rd May 13 to 18th May 13 Aim : To know the market and understand retailers perception about Amul Description : During this phase, I use to visit around 20 retail outlets daily in a particular area assigned for that day. By general inquiry and observation, I use to gather data like : Whether Amul is stocked or not? What all products of Amul is being stocked? Quantity of each product ordered daily? Rate at which they get the product from the distributor? Other competitor brands being stocked and their quantities? Customer demands which brand? Distributors name Shops address and contact details Supply is proper or not? Any complaints? Orders?

All this data was being recorded and sent to our Area Manager and Zonal Manager on daily basis in the form of DMR Sheet. A sample of same is shown below :

41

We also placed posters on retails stores walls for Curd and Chaach at a strategic location where they are most visible to increase brand visibility and promoting the brands relatively new products.

Insights : In this phase,

42

We got clear idea about the market of Amul Understood retailers perception about Amul Retailers were majorly concerned about very low margins being provided by the market They had issues regarding backdated Curd provided to them Other competitors were providing better margins and better schemes Worried about No replacement policy Most of the retailers were not supplied adequately by their respective distributors Demand of brand depended on area/locality to a large extent Some of the retailers were not happy with the distributors behaviour Retailers wanted some additional schemes by Amul Retailers were more than happy to place Amul posters at their outlet provided there is regular supply of that product at their store

Phase 2 : Distributor Visits Duration : 7 days Time Frame : 20th May 13 to 25th May 13 Aim : To understand the working of a milk distributor, study his concerns in accordance to the market scenario, calculate his ROI, suggest strategies to increase his ROI Description : In this phase, I visited few distributors and understood their process of working.

There are 2 kinds of distributor: ADA : milk is supplied to them at their location by Amul i.e. they do not need to incur transport cost to bring the milk from plant to their place General Distributor : they use their own transport to get and distribute the milk
43

So by general process, milk is delivered from the Amul plant to the distributors location in the trucks at around 2 am- 3 am in the morning. Bill is given at the same time. At the same time, empty crates of previous day are collected by them. Distributor then takes the milk in his own vehicle and supplies to all the retailers and whole sellers in his region. This activity is generally done between 3 am to 6 am. After that, distributor generally sells the milk to end consumers from his own place and sends milk through bicycle wallas to smaller retailers or wholesalers. Till 10 o clock , he is done with all the selling process and recording and maintaining his calculation books. After that generally distributor revisits retailers to collect the empty crates and the payment. Some distributor do offer 1 day credit policy of payment to retailers. They then generally have to pay the amount to Amul on a daily basis. It can be done through draft or cheque. Generally distributors prefer draft system as they dont believe in cheque system.

Amul reimburses the charges of transportation according to distance being travelled in following manner: For every 50 to 100 km travelled, 3Rs/crate/ day is reimbursed For every 100 to 250 km travelled, 3.3 Rs/crate/ day is reimbursed For 250 km and above travel, 3.6 Rs/crate/ day is reimbursed

ROI ( Return on Investment ) Calculation : For calculation, suppose we consider a distributor who takes 250 crates/ day. Number of crates = 250 Margin earned per crate = Rs. 6 (approx) Per day profit = Rs. 6 * 250 = Rs. 1500 Monthly profit = Rs. 1500 * 30 = Rs. 45000
44

Cost incurred: Transportation Cost = Rs 5000 ( approx) Manpower Cost = Rs 5000 Other Miscellaneous Costs ( including Maintenance costs) = Rs 3000 (say) Total Cost = Rs. 13000

Return on Investment = Monthly Profit Total Cost = Rs. 45000- Rs. 13000 = Rs. 32000

Thus an average Amul distributor selling around 250 crates earns a decent amount of Rs. 32000 only from Amul. Apart from that generally distributor keeps other brands as well and also they run side business simultaneously.

Concerns of Amul Milk Distributor :

Following were the major concerns faced by distributors: Forced distribution of Curd. This is a concern as their is no demand of curd from retail side. So it gets wasted. Dumping is their major problem. According to distributors, they are generally dumped around 10% of the quantity they order. They are highly dissatisfied due to this tendency of Amul Because of this some distributors prefer to take Amul from outside and not directly from the company. Distributors who are associated with Amul since long time expect some kind of extra incentives. Less margin provided by Amul but lot of formalities and bad policies

45

Damaged product or leakage problem : No replacement provided. Daily some milk gets wasted Some customers complaining about product quality Number of empty crates issue. Empty crates taken by Amul every morning is not synchronized with the number of crates being supplied They do not believe in cheque system of payment to Amul. They do not want to submit the security deposit.

Insights : On discussion with our seniors at Amul , we came to know that dumping is intentionally done by the company to the distributors so that distributor supplies milk to each and every store and doesnt ignores smaller stores. This serves the purpose of Amul to make its product Available everywhere. On observing minutely, I found that some of the distributors were trying to push other brands like Aarey which give them relatively very high margins. As quality of Amul milk is very good, distributor prefers to sell them at the end as it wont get spoiled. Even if it is left it can be used at later point of time The leaked packets doesnt actually get wasted, distributor generally sells them as loose milk

Strategies for distributors: As we saw, for an average distributor selling 250 crates/day he earns around Rs. 32,000. If the distributor increases his volume of sales, he will definitely be able to earn more and increase his ROI Product Complaint Form (PCF) : One of the major concern faced by distributor is packet leakages. This is taken care by Amul by providing
46

facility of PCF. By using this facility, they can claim for reimbursement from the company for all the damages they faced in an entire year. Dumping problem they wont face if they try to reach out to as many retailers as possible and fulfilling their demands Amul also incentivize their distributor on the basis of their sales. More the sales, more the incentives If they use their own transport, Amul reimburses that amount as well At place of security deposit, bank guarantee of any form can also be submitted If distributor supplies properly in his area, he can gain retailers confidence and then retailers will take from him only and this way he can increase his volume of sales and hence profits

Phase 3 : Kiosk Activity Duration : 7 days Time Frame : 27th May 13 to 01st June 13 Aim : To promote Brand Amul and target end customers directly Description : Kiosk activity itself was carried out in various steps. 1. Selection of proper store : First of all, we tried to look out for a retail store where kiosk can be organized. They were judged on the basis of locality, size of store, number of competitor brands present, etc. Store should be easily approachable, frequented by lot of customers. The more the presence of competitors over the store, better it is for organizing a kiosk. 2. Pamphlet distribution and creating a buzz in the market : Once kiosk location and date was finalized, proper pamphlet distribution in the adjacent area was carried out. We made sure that they are distributed properly. Pamphlets had all the required information about date, place and discount provided on the products.

47

3. Kiosk : At each location kiosk was carried out for 3 continuous days. We interacted with customers, gained their trust, did Amuls branding, sold products, made sure customer revisits us and atleast taste our product. We also entertained their demands and took reviews about particular products.

4. Finances: We were also responsible for maintaining proper financial data and submitting it to the office. Over the 3 days, sales increased substantially each day.

Discount provided : Rs. 2/ litre on milk Rs. 5 / 400gm pouch of curd Rs. 3/ 200 gm pouch of curd Rs. 5 / cup of Lassi Sales generated : Day 1 : Rs. 850 Day 2 : Rs. 1660 Day 3 : Rs. 2720

48

49

Insights: Understanding customer need is of prime importance Before doing any promotional activity, proper awareness campaign is essential. Our voice should reach customers directly Language of the community needs to be taken care of. Pamphlets were printed in both Hindi and English depending upon the area of kiosk Customer generally doesnt give second chance. So their demands should be given highest priority Proper branding needs to be done in order to make people believe that you are genuine Promotion effects are seen gradually. It is not immediate Places where coupon system is used, is not a good place to run such a promotional campaign If a person is 100% brand loyal, then no promotional campaign can shift his brand loyalty

Phase 4 : Market visit for collecting truck sheet, pitching in for distributors/APOs Duration : 10 days Time Frame : 02nd June 13 to 12nd June 13 Aim : Remove middlemen from Amuls supply chain. Description : In this phase, I went to market and did multiple activities such as : Took truck sheet from the distributor. Truck sheet is the document provided by the distributors to the company in which all the details regarding number of retailers it provides milk to , quantity provided, etc are mentioned on a monthly

50

basis. Company uses this truck sheet to keep proper track of the distributors and check their network of retailers Checked if the data provided in the truck sheet is valid or not by cross checking it with the retailers. Once we got the truck sheet from the distributor, it was essential to check its validity by going to each and every retailer and confirming whether the amount given is correct or not

Pitched in few whole sellers/ retailers to turn into Amuls distributors by telling them proper advantages of doing the same. Amul wants to remove middle men from the system. So in order to achieve that , it was necessary to make people
51

aware about the advantages of being the distributor. So I went into the market, tried to identify wholesellers/ retailers who could be potential distributors. More margin is a lucrative factor by which people generally get attracted to become a distributor. The major concern some of the people faced in this scheme was the high security deposit of minimum 50,000 being charged by Amul. Everybody is not able to afford that amount and they dont want to get into so many formalities and all. Pitched in few retail stores to turn into APO (Amul Preferred Outlet) or open an ice cream parlour by telling the schemes and advantages of the same. Advantage of opening a APO is the additional margin of 1.5% in dairy item and 2.5% in icecream. There is minimum area requirement of 100 sq feet. Also some initial investment in the form of security deposit, deep freezer, visi cooler, counter and other furniture, electricity equipment, colour and tiles needs to be borne by the owner which amount to total of somewhere around 1.5 lakhs.

Insights/ Learning: Learned pitching and convincing distributors Distributors concerned about security deposit could be convinced by telling them the alternate option of bank deposit Importance of maintaining truck sheet was observed

Phase 5 : Free Sampling of Pouch Dahi Duration : 10 days Time Frame : 13th June 13 to 22nd June 13

52

Aim : To promote the new product Pouch Dahi amongst masses by free sampling Description : Pouch Dahi is a new product launched by Amul recently. It is cheaper than Amul Cup Dahi and has got many other advantages still its sales is less. People are not aware of its advantages or they are so much use to of having Cup Dahi that do not even want to try Pouch Dahi. To eliminate this problem and increasing Pouch Dahis visibility in the market we came up with another promotional campaign in which we distributed free samples of 400gm Dahi to canteens, restaurants, cafes, hotels, local chat wallas and other similar store. We distributed free samples and tried convincing the owners to try our product for once and if they liked the product, they could order it. This campaign was carried out in Sion, Matunga and Chemur region of Zone 5. Results: Free sampling activity generated amazing results as we immediately got orders of 1 crate of Dahi per day per region which was itself a achievement. Insights: Most of the eating joints we targeted were using loose milk to make their own Dahi. Convincing these customers to switch to Amul was quite difficult as it becomes quite expensive for them. All outlets were not willing to take the free sample. If people were sure that they are not going to switch, they did not accept free sample also. Regular follow ups were needed. Quality of free sample had to be ensured. Phase 6 : Competitor Analysis Duration : 7 days Time Frame : 24th June 13 to 29nd June 13 Aim : To get competitors info about the rates and schemes being provided by them

Description: In this phase, we were supposed to go to wholesalers and get the info such as : competitors distributors name, contact no. & sale & area, competitors wholesaler
53

sale, rate, contact no., area, competitor price structure, competitors market activity like schemes, banner, wall painting, coupons to consumer etc.

Insights : Major competitors to Amul are : Mahananda, Gokul, Mother Dairy, Gowardhan, Paras, Kanhaiya, etc. Rates of all major brands of millk are almost similar but margins provided differs Amul provides least margin Mother Dairy is preferred in Dahi because of good packaging and creamy curd Mother Dairy provides replacement facility i.e. they take back the unsold product Amul doesnt provide any regular schemes whereas brands like Radhika/ Shivsagar provides regular schemes such as 2 litre free on 1 tray Mother Dairy had some promotional offer consisting of scratch coupons Some brands provided scheme on Dahi like one biscuit free on 1 box of Dahi

Limitations and Constraints This report had to work under several constraints and limitations. Some of the key limitations are: This study is limited to only Zone 5 of Mumbai. Time period of the project was 8 weeks, which may not be enough to understand the whole market. Convenient sampling was used as the mode of conducting the research. The sample size taken was small, therefore it can be said that the chosen sample is not a representative of the whole population and this hindered the quantitative research. The psychology and temperament of a retailer play a significant role. Some respondents are more sensitive as against others who are more tolerant. A change in the composition of the retailer can affect the answers adversely or favourably. Retailers may have not been true in answering various questions and may be biased to certain other questions.
54

 Out of the whole research and analysis, only four major brands could be highlighted. The sample size of retailers/distributors was very small and therefore response from them does not reflect the exact view. Heavy rainfall in Mumbai hindered the sales process

55

56

4. Conclusion and Recommendation 4.1 Observation and Learning

For developing marketing strategies, proper understanding of the market is crucial Both retailers and distributors are not willing to sell Amul products because of very less margin offered by Amul Still they have to keep Amul products in their stores due to its high demand in the market They keep Amul as it helps them in selling other products also They are least interested in keeping Amul dahi because of its less demand At most of the outlets, Dahi has backdated issues Measurable amount of retailers were not happy with their distributors because of frequent change in supply of milk, replacement of leak pouches and high prices charged by the distributors. All the retailers are not getting Amul Milk directly from the distributors appointed by the Company and a new intermediate has joined the supply chain which further reduced the margins for the retailers. Retailers were not interested to start APO because to start APO one required large amount investment i.e. near about 2 Lakhs and with this it is mandatory to sale only Amul products, so most of the retailers did not show interest in APO. During off season company do a lot of dumping of Milk and other products on the distributors and this dumping is further carried to the retailers.

4.2 Conclusions
During my internship at Amul, I realized that Amul is a very strong brand in the mind of consumers, retailers and distributors. It still occupies the major market share. But as Amul provides less margins, retailers and distributors are unwilling to keep that. Hence it doesnt reaches end consumers. Competitor brands like Mother Dairy, Mahananda, Gokul though less preferred but still are favourites of retailers and distributors due to comparatively high
57

margins and more schemes. Also there is problem of supply between distributors and retailers. Some retailers desperately wants Amul but are not getting served properly by their distributors. Hence distribution channel needs to be taken care by Amul.

With the help of this research the company can find out its week points in Milk product and can increase its market share. People have believed in Amuls product and they will accept it also if effective actions are taken. Quality is the dominating aspect which influences consumer to purchase Amul product, but prompt availability of other Milk brands and aggressive promotional activities by others influences the consumer towards them and also leads to increase sales. In comparison to Amul Milk, the other players such as Mahanand, Mother Dairy, Gokul & G o w a r d h a n provide a better availability and give competition to the hilt. People are mostly satisfied with the overall quality of Amul Milk, but for the existence in the local market Amul must use aggressive selling techniques.

4.3 Suggestions and Recommendations

The Milk products market has reached Maturity stage in India a s large no. of Cooperatives having a variety of product range have entered the market, thus there is one way for Amul to sustain their milk business in the market by delivering outstanding satisfaction to their distributors and retailers, so that they can take interest in selling of Amul milk products. This can be done as follows:-

58

Amul has a relatively good distribution network, but still company is not able to fulfil the demand of outlet in the peak season when demand is very high. Here company should focus on the supply of product in the peak season.

Supply should be regular to all the outlets including those that lie in the pocket roads and not just in the outlets which lie on the easily accessible routes. 250 ml milk pouch should make available to retailers for selling, because lower income family has intention to buy small pouch milk. Do not change distributor frequently, because he is the only person who act as a connecting link between company and retailers. Do not place more than one distributor in same market area.. Incentives & schemes should be given to the retailers and some scrutiny should be follow to check the scheme get being communicated properly by distributors or sales person.

Timely visit should be given to the retail shops. This gives them surety that Amul is still there for them and there is some place where they can raise their concerns. Try to minimize bank deposits for APO and Distributors, which will help retailers to convert themselves in APO. Improve delivery schedule to provide products on time for the retailers about who claimed that Amul milk is not available to them on time. Provide consistent service to retailers as this will help gain company goodwill in the market. Unnecessary dumping of products should be avoided to the distributors Some direct form of communication medium between retailer and Amul should be present so that both the parties are on same line. This can easily be done by using the database of retailers provided by us to Amul

59

5. Bibliography
1. [Link] 2. Naresh K Malhotra., Marketing Research An Applied Orientation, 4th Edition, Pearson Education Pvt. Ltd, New Delhi, 2003. 3. Abraham Koshy, Mileshwar Jha -- Marketing Management, Pearson Prentice Hall, New Delhi, 2007. 4. Marketing Management Philip Kotler, Kellar, Jha, Koshy, 13th Edition 5. Business India 6. [Link]/wiki/Amul

60