AMUL- The Taste of India

Born: 1946, christened in 1955n 1955

History: Originally marketed by the Kaira District Cooperative Milk Producers’ Union, Anand, it was taken over by the Gujarat
Cooperative Milk Marketing Federation (GCMMF) in 1973

Status: Has a 15% market share in the Rs15,000 crore milk category, and a 37% share in the
Rs900 crore organized ice-cream segment.

Starting with milk and milk powder, the Amul brand today covers a range of dairy products—
from chocolates to cheese and, of course, butter

Brand story: If a brand’s value is to be judged by the ease with which it can be recalled, then
Amul’s marketing campaign wins hands down.

With its clever use of topical events, Amul’s utterly butterly campaign—it has the distinction of
entering the Guinness World Records as the longest running campaign—has won the brand
several accolades.

Playing the role of a social observer, its weekly comments have tickled India’s funny bone since
1967, when Sylvester Da Cunha’s irrepressible Amul girl first had her say.

But what’s kept the brand going all these years? “We have changed the packag ing, our
technology and our approach to mar keting based on the changing taste buds of our consumers.

However, the only thing that has helped us sail smoothly is that we have not changed our core
values—give the best quality product to the consumer, and the best possible price. It holds true in
any era,” says B.M. Vyas, managing director, GCMMF.

In fact, it is not just the core values at Amul that have remained the same; the core team
associated with the brand is still the same. Even the advertising agency hasn’t changed, and Da
Cunha and FCB Ulka, have played a pivotal role in the growth of Amul.

“This has helped us maintain consistency in our communication. Our strategy of umbrella
branding has also helped establish our brand firmly in people’s minds. This, despite the fact that
we do not spend more than 1% of our turnover for marketing, compared with 7-8% (spent) by
most of the food and consumer product companies,” R.S. Sodhi, head of marketing, GCMMF,
says.

Here is an interesting case study on the dairy giant AMUL :

Every day Amul collects 447,000 litres of milk from 2.12 million
farmers (many illiterate), converts the milk into branded, packaged
products, and delivers goods worth Rs 6 crore (Rs 60 million) to over
500,000 retail outlets across the country. 

Every day Amul collects 447,000 litres of milk from 2.12 million
farmers (many illiterate), converts the milk into branded, packaged
products, and delivers goods worth Rs 6 crore (Rs 60 million) to over
500,000 retail outlets across the country. 

Its supply chain is easily one of the most complicated in the world.
How do managers at Amul prevent the milk from souring? 

Walk in to any Amul or Gujarat Cooperative Milk Marketing Federation

(GCMMF) office, and you may or may not see a photograph of
Mahatma Gandhi, but you will certainly see one particular photograph.
It shows a long line of Gujarati women waiting patiently for a union
truck to come and collect the milk they have brought in shining brass
matkas. 

The picture is always prominently displayed. The message is clear:

never forget your primary customer. If you don't, success is certain.
The proof? A unique, Rs 2,200 crore (Rs 22 billion) enterprise. 

Organization structure 
It all started in December 1946 with a group of farmers keen to free
themselves from intermediaries, gain access to markets and thereby
ensure maximum returns for their efforts. 

Based in the village of Anand, the Kaira District Milk Cooperative

Union (better known as Amul) expanded exponentially. It joined hands
with other milk cooperatives, and the Gujarat network now covers 2.12
million farmers, 10,411 village level milk collection centers and
fourteen district level plants (unions) under the overall supervision of
GCMMF. 

There are similar federations in other states. Right from the beginning,
there was recognition that this initiative would directly benefit and
transform small farmers and contribute to the development of society. 
Markets, then and even today are primitive and poor in infrastructure.
Amul and GCMMF acknowledged that development and growth could
not be left to market forces and that proactive intervention was
required. Two key requirements were identified. 

The first, that sustained growth for the long term would depend on
matching supply and demand. It would need heavy investment in the
simultaneous development of suppliers and consumers. 

Second, that effective management of the network and commercial

viability would require professional managers and technocrats. 

To implement their vision while retaining their focus on farmers, a

hierarchical network of cooperatives was developed, which today
forms the robust supply chain behind GCMMF's endeavors. The vast
and complex supply chain stretches from small suppliers to large
fragmented markets. 

Management of this network is made more complex by the fact that

GCMMF is directly responsible only for a small part of the chain, with
a number of third party players (distributors, retailers and logistics
support providers) playing large roles. 

Managing this supply chain efficiently is critical as GCMMF's

competitive position is driven by low consumer prices supported by a
low cost system. 

Developing demand 
At the time Amul was formed, consumers had limited purchasing
power, and modest consumption levels of milk and other dairy
products. Thus Amul adopted a low-cost price strategy to make its
products affordable and attractive to consumers by guaranteeing them
value for money. 

Introducing higher value products 

Beginning with liquid milk, GCMMF enhanced the product mix through
the progressive addition of higher value products while maintaining the
desired growth in existing products. 

Despite competition in the high value dairy product segments from

firms such as Hindustan Lever, Nestle and Britannia, GCMMF ensures
that the product mix and the sequence in which Amul introduces its
products is consistent with the core philosophy of providing milk at a
basic, affordable price. 

The distribution network 

Amul products are available in over 500,000 retail outlets across India
through its network of over 3,500 distributors. There are 47 depots
with dry and cold warehouses to buffer inventory of the entire range of
products. 

GCMMF transacts on an advance demand draft basis from its

wholesale dealers instead of the cheque system adopted by other
major FMCG companies. This practice is consistent with GCMMF's
philosophy of maintaining cash transactions throughout the supply
chain and it also minimizes dumping. 

Wholesale dealers carry inventory that is just adequate to take care of

the transit time from the branch warehouse to their premises. This
just-in-time inventory strategy improves dealers' return on investment
(ROI). All GCMMF branches engage in route scheduling and have
dedicated vehicle operations. 

Umbrella brand 
The network follows an umbrella branding strategy. Amul is the
common brand for most product categories produced by various
unions: liquid milk, milk powders, butter, ghee, cheese, cocoa
products, sweets, ice-cream and condensed milk. 

Amul's sub-brands include variants such as Amulspray, Amulspree,

Amulya and Nutramul. The edible oil products are grouped around
Dhara and Lokdhara, mineral water is sold under the Jal Dhara brand
while fruit drinks bear the Safal name. 
By insisting on an umbrella brand, GCMMF not only skillfully avoided
inter-union conflicts but also created an opportunity for the union
members to cooperate in developing products. 

Managing the supply chain 

Even though the cooperative was formed to bring together farmers, it
was recognized that professional managers and technocrats would be
required to manage the network effectively and make it commercially
viable. 

Coordination 
Given the large number of organizations and entities in the supply
chain and decentralized responsibility for various activities, effective
coordination is critical for efficiency and cost control. GCMMF and the
unions play a major role in this process and jointly achieve the desired
degree of control. 

Buy-in from the unions is assured as the plans are approved by

GCMMF's board. The board is drawn from the heads of all the unions,
and the boards of the unions comprise of farmers elected through
village societies, thereby creating a situation of interlocking control. 

The federation handles the distribution of end products and

coordination with retailers and the dealers. The unions coordinate the
supply side activities. 

These include monitoring milk collection contractors, the supply of

animal feed and other supplies, provision of veterinary services, and
educational activities. 

Managing third party service providers 

From the beginning, it was recognized that the unions' core activity lay
in milk processing and the production of dairy products. Accordingly,
marketing efforts (including brand development) were assumed by
GCMMF. All other activities were entrusted to third parties. These
include logistics of milk collection, distribution of dairy products, sale of
products through dealers and retail stores, provision of animal feed,
and veterinary services. 

It is worth noting that a number of these third parties are not in the
organized sector, and many are not professionally managed with little
regard for quality and service. 

This is a particularly critical issue in the logistics and transport of a

perishable commodity where there are already weaknesses in the
basic infrastructure. 

Establishing best practices 

A key source of competitive advantage has been the enterprise's
ability to continuously implement best practices across all elements of
the network: the federation, the unions, the village societies and the
distribution channel. 

In developing these practices, the federation and the unions have

adapted successful models from around the world. It could be the
implementation of small group activities or quality circles at the
federation. Or a TQM program at the unions. Or housekeeping and
good accounting practices at the village society level. 

More important, the network has been able to regularly roll out
improvement programs across to a large number of members and the
implementation rate is consistently high. 

For example, every Friday, without fail, between 10.00 a.m. and 11.00
a.m., all employees of GCMMF meet at the closest office, be it a
department or a branch or a depot to discuss their various quality
concerns. 

Each meeting has its pre-set format in terms of Purpose, Agenda and
Limit (PAL) with a process check at the end to record how the meeting
was conducted. Similar processes are in place at the village societies,
the unions and even at the wholesaler and C&F agent levels as well. 
Examples of benefits from recent initiatives include reduction in
transportation time from the depots to the wholesale dealers,
improvement in ROI of wholesale dealers, implementation of Zero
Stock Out through improved availability of products at depots and also
the implementation of Just-in-Time in finance to reduce the float. 

Kaizens at the unions have helped improve the quality of milk in terms
of acidity and sour milk. (Undertaken by multi-disciplined teams,
Kaizens are highly focussed projects, reliant on a structured approach
based on data gathering and analysis.) For example, Sabar Union's
records show a reduction from 2.0% to 0.5% in the amount of sour
milk/curd received at the union. 

The most impressive aspect of this large-scale roll out is that

improvement processes are turning the village societies into individual
improvement centers. 

Technology and e-initiatives 

GCMMF's technology strategy is characterized by four distinct
components: new products, process technology, and complementary
assets to enhance milk production and e-commerce. 

Few dairies of the world have the wide variety of products produced
by the GCMMF network. Village societies are encouraged through
subsidies to install chilling units. Automation in processing and
packaging areas is common, as is HACCP certification. Amul actively
pursues developments in embryo transfer and cattle breeding in order
to improve cattle quality and increases in milk yields. 

GCMMF was one of the first FMCG (fast-moving consumer goods)

firms in India to employ Internet technologies to implement B2C
commerce. 

Today customers can order a variety of products through the Internet

and be assured of timely delivery with cash payment upon receipt. 

Another e-initiative underway is to provide farmers access to

information relating to markets, technology and best practices in the
dairy industry through net enabled kiosks in the villages. 

GCMMF has also implemented a Geographical Information System

(GIS) at both ends of the supply chain, i.e. milk collection as well as
the marketing process. 

Farmers now have better access to information on the output as well

as support services while providing a better planning tool to marketing
personnel. 

MADURA GARMENTS
In December 2002, leading Indian branded apparel manufacturer,
Madura Garments Ltd (MG), announced its plans to enter the fashion
and accessories segment of the country's branded men's wear
market. MG, a division of Indian Rayon Industries Ltd (Indian Rayon 1),
was reportedly attracted by the immense potential of this business.

In 2002, of the Rs 12 billion branded fashion and accessories market,

only 20% accounted for branded products. Vikram Rao (Rao), Group
President, Indian Rayon, said, “This segment is slated to grow rapidly
in the near future as increasingly customers are becoming more
'personal image/fashion conscious'.”2

Industry analysts observed that MG's decision to foray into the

accessories business made a lot of sense. The company's market
leader status in the country's branded men's wear market was
expected to go a long way in ensuring the success of the new
venture. In 2002, MG was the undisputed leader in the Rs 60 billion
ready to wear business with a 25% market share. It reigned supreme
in categories like premium shirts (30% market share), mid-priced
shirts (10% market share), trousers (17% market share) and mid-
priced trousers (6% market share). The company owned a portfolio of
highly successful brands such as Peter England, Van Heusen, Louis
Phillipe, Allen Solly, San Frisco and ByFord (Refer Exhibit I).

Most of these brands were extremely successful in their own

categories - a fact that is reflected in the company's strong financial
performance over the years. In 2002, MG generated revenues of Rs
3.5 billion - around 23% of Indian Rayon's revenues in that year.

Background Note

The growth of readymade men's wear business in India was very slow
till the early-1980s. The main reason for this was that Indian men
were used to buying cloth and getting their outfits tailored - mainly
through local tailoring shops from the unorganized segment.

Consequently, there were no national level brands in this category for

a long period. By the mid-1980s however, customer mindset seemed
to have started changing gradually along with increasing urbanization,
and changes in the social and economic status and lifestyles...

Capturing the Market through 'Peter England'

The first move came from MG in 1997, when it launched the 'Peter
England' range of men's ready to wear clothing.
Peter England brand targeted the young executives segment between
the age group of 25-28 years.

The brand was launched in the mid price segment in the Rs 345-Rs
445 range for shirts and Rs 645-Rs 745 for trousers...

Madura Garments' Growth Trajectory

In October 1999, MG announced that it had chalked out a new

retailing strategy for marketing its portfolio of men's wear brands. It
planned to open a chain of retail outlets, branded Mega Store that
would retail all brands under one roof...

Furthering Growth Opportunities

In April 2002, keeping up its tradition of regular launching innovative

products, MG announced new product lines for its brands in the
premium segment. The Louis Phillipe brand launched its summer-
spring collection of shirts under the name 'Mozart'...

Entering New Markets & Restructuring Existing Brands

Having established its hold in so many segments of the Indian

branded men's wear market, MG began looking towards newer
opportunities. The company's research showed that the growth in
jeans market was expected to go up from 8% in 2003 to 15%-20%
per annum by 2006-2008. The decision to tap the jeans and
accessories market was thus a natural choice...
ARVIND
In the year 1931, three brothers Kasturbhai, Narottambhai and
Chimanbhai, started a company called Arvind Mills. The company,
with state-of-the-art machinery imported from England, was to
produce high quality fabric. In 1993, Arvind Mills's operations were
split into 3 units viz., textile division, telecom division and garments
division. The garments division, Arvind Brands Ltd. (Arvind) was a
Rs.3.50 billion subsidiary of Arvind Mills. ICICI Ventures picked up a
majority stake in Arvind in May 2004. In 2005, Arvind Mills reacquired
ICICI Venture's stake in Arvind by raising $37.19 million through the
issue of 13.5 million Global Depositary Receipts (GDRs). As of 2005,
Arvind had again become a 100% subsidiary of Arvind Mills.

In 2005, Arvind launched a major retail initiative for all its brands.
Arvind's licensed brands (Arrow, Lee and Wrangler) had grown at a
healthy 35 per cent rate in 2004 and the company planned to sustain
the growth by increasing their retail presence.

Arvind also widened the geographical presence of its home-grown

brands such as Newport and Ruf n Tuf, targeting small towns across
India. Arvind planned to increase the number of outlets where its
domestic brands would be available and draw in new customers for
ready-mades.

To improve its presence in the high-end market, Arvind started

negotiating with an international brand in May 2005, and was likely to
launch the brand around the end of 2005. In April 2005, Arvind
appointed Saif Ali Khan4 as the brand ambassador for its Newport
brand. "Indian Youth are more fashion conscious than they have ever
been", said Darshan Mehta (Mehta), Managing Director, Arvind.
He added, "Newport is uniquely placed to lead this style revolution.
It's a brand that understands youth fashion. The new campaign is
designed to showcase Newport's strong sense of style ..." 5. Arvind
planned to expand the retail presence of Newport jeans, from 1,200
outlets across 480 towns in May 2005 to 3,000 outlets covering 800
towns by March 2006. Similarly, Ruf n Tuf- the entry-level jeans
brand, entered into an exclusive distribution arrangement with Big
Bazaar6. Arvind extended its market development strategy to its mid-
priced formalwear Excalibur as well. It planned to increase the retail
presence of this brand from 1,200 stores in May 2005 to 1,800 stores
in March 2006.

Arvind followed a selective distribution approach in the case of its

international labels such as Arrow, Lee, Tommy Hilfiger and Wrangler.
According to an industry estimate, in 2003, the tailored clothes
business was valued at around Rs.400 billion, and Arvind's strategy
was to convert a significant part of this market into market for ready-
mades.

"The idea lies in increasing distribution and penetration. Zero excise

duty on mass apparels and economies of scale through its completely
integrated business gave Arvind the competitive edge against other
players,"7 said Mehta. Arvind set a turnover target of Rs.4.35 billion by
March 2006. The company closed the financial year 2004-05 at
Rs.3.50 billion.

The Branded Apparel Industry

With the multi-fiber agreement (Refer Exhibit I) getting phased out,

the year 2005 has been a landmark year for textiles. As a result of
these developments, international trade in textiles is likely to see
healthy growth. The introduction of VAT and the growth of organized
retail industry are also likely to push up growth in the textiles and
apparel sector domestically too. In the late 1980s, the use of
readymade garments had not permeated into all sections of the
Indian market. Traditionally, Indians preferred dresses stitched by
local tailors, who catered exclusively to local demand.

The growth in fashion consciousness during the 1980s and the

convenience offered by ready-to-wear garments contributed to the
development of the branded apparel industry in India during the
decade. Other factors which contributed to its growth were greater
purchasing power in the hands of the youth, access to fashion trends
outside the country, and the superior quality of fabrics...

Arvind's Brand Basket

According to a study by KSA-Technopak, the two companies that have

the greatest potential (because of their presence in all the stages of
the garment manufacturing process) to benefit from the post-MFA
trade scenario are Raymonds and Arvind. Arvind sourced its fabric
from the parent company- Arvind Mills, which gave it advantages over
other players...

Competition

The major competitors for Arvind were Madura Garments, Raymond

Apparel, Indus-League clothing, Levi Strauss & Co, Provogue (India),
Zodiac Clothing, and Bombay Dyeing (Refer Exhibit IV).

Madura Garments

Madura Garments was the garments division of Indian Rayon and

Industries Ltd, a flagship company of the Aditya Birla Group. Madura
Garments was the market leader in the branded apparel industry in
2004...
Growth Strategies

As of 2005, Arvind with its formidable set of brands was in a

comfortable position. Most of its brands had high recall value and
enjoyed a fair share of loyalty. From the perspective of its parent
company, Arvind Mills, which produced 110 million metres of denim
every year, the garment division, i.e Arvind was the future growth
engine...

Growth Strategies

As of 2005, Arvind with its formidable set of brands was in a

comfortable position. Most of its brands had high recall value and
enjoyed a fair share of loyalty. From the perspective of its parent
company, Arvind Mills, which produced 110 million metres of denim
every year, the garment division, i.e Arvind was the future growth
engine...