Building a Quintessentially Indian Brand

Aiming for a group business turnover target of Rs.1 lakh crore by 2024-25, the Gujarat Co-operative Milk Marketing Federation (GCMMF), that nestles its umbrella brand ‘Amul’, achieved a consolidated turnover exceeding Rs.52,000 crore during 2019-20. Helming the affairs is Dr Rupinder Singh Sodhi - Managing Director, GCMMF who took over when Amul’s annual revenue was Rs.8000 crores. He believes that India offers 21% of the world’s milk production and by 2030, will be producing 1/3rd of the world’s milk, mobilising some 100 million farmers. His 38 years with Amul is as intriguing as is the effervescent ‘butter girl’ brand imagery. An alumnus of the Institute of Rural Management Anand (IRMA), he views Amul as a supply chain company within the dairy co-operative model that has had the bandwidth to recognise opportunities in the most difficult situations including the Covid-19 crisis. In a TiE Pune Adda session - ‘Journey of Amul-India’s largest FMCG organisation and the man behind building this multibillion-dollar consumer brand’, Dr Sodhi engaged with host and Startup Evangelist, Ramesh Mirakhur on the brand’s past, present and the future

REVITALISING THE ‘WHITE’ REVOLUTION

Ramesh Mirakhur: Do give us a small primer on the organisation structure.

Dr Rupinder Singh Sodhi: Amul is a 74-yearold co-operative organisation owned by 3.6 billion farmers and governed by an III-tier ownership structure. Each village in Gujarat has a village co-operative society with an average of 200 members. Their role is to collect milk and make payments to these 200 members based on the quality and quantity of milk. We are all aware of this Automatic Milk Collection system and its vivid imagery of farmers pouring milk at the centres. The quality and quantity of milk is automatically checked, computerised, and based on the price, money is transferred to the farmers’ account. The 200 members democratically elect the management committee of the village co-operative society comprising of 10 to 12 members and also its chairman. The next in the tier is the district union, which on average has 1000 village co-operative societies between them. Each of the district union comprises of two or three revenue districts.

What are the roles of the societies, the district unions and the federation?

The representatives of the 1000 village co-operative societies who own the district union also elect their district board members and a chairman amongst them. Their job is to process all the milk collected by the 1000 village co-operative societies and convert it into various value-added Amul branded products. It provides various inputs to these milk producers like cattle feed or fertility services or artificial insemination. There are 18 district unions in Gujarat. So, the 200 members in each village co-operative society, each of the district Union with its 1000 members and 18 district unions together form the Gujarat Co-operative Milk Marketing Federation (GCMMF), where I work. Our job is to market and sell all the products that these 18 district unions manufacture under the ‘Amul’ umbrella brand across India and abroad, including brand building, innovation, centralised purchase etc. And all the 18 chairmen of the district unions are a part of the GCMMF board.

What is your role in relation to the GCMMF?

On my board, there are 19 members, 18 farmer members and I am the only professional. And amongst all these 18 members, one is elected as the Chairman. So, if somebody wants to become the chairman of GCMMF, like Shamalbhai B Patel is, first you must become a member of the village co-operative society and pool your milk for 250 days in a year. You then must get elected to the village co-operative society and become its chairman. The final step is to get elected to the district union as its chairman.

"Dr Kurien used to tell us that if you want to launch a new product you do not need the market research. All you do is get your wives to taste the products and if they approve it, we will launch the product"

What factors have contributed to Amul’s 6X success?

We are extremely fortunate that Amul as a company has a strong DNA and was made stronger by our founder-chairman, Tribhuvandas Kishibhai Patel and by the professional acumen of Dr Verghese Kurien. The value system, the structure, the culture of the organisation is particularly good. The opportunity we have in India where the organised dairy sector is only 1/3rd of the total and the remaining 2/3rd comprises of unorganised players. In India, consumption of dairy or protein or fat in the diet is increasing as people are upgrading themselves away from carbohydrates. So, we have an advantage, as consumption is increasing at 5 to 5.5% and secondly, people are shifting from loose and unbranded products to the organised sector. There is an existing and a growing market and we have the potential to exploit this growth.

What has impacted Amul’s growth in the 10 years since you took over as the MD?

It is the distribution and the entire system where everything is linked-including the 3.6 million farmers to each retailer who is integrated through our IT system. We have a centralised ACP system. The other crucial factor has been the gradual expansion of our distributor network going beyond our existing 10,000 distributors, and its million retailers. Amul will have its own distributors, including 10 to 20 villages that I have covered.

Can farmers supplying outside your 18 unions in Gujarat become shareholders?

In the states, that we have formed our co-operatives for procurement, we cannot have members legally from outside Gujarat as Amul is registered under the Gujarat Co-operative Societies Act, 1961. But we are paying them the same price for the milk procured at the same price difference at the end of the year. Amul may procure 10% of the total milk there but the remaining 90% players have to compete and pay the same price. It is mainly market intervention that govern procurement terms.

How do you work on new product development?

We do not have any separate new product development for this sector. We have 84 plants and for any new food idea, we get 4-5 dairy production plants that make that product, send to us every day and we have a tasting session of any new product-ours, or our competitors. Dr Kurien used to tell us that if you want to launch a new product you do not the need market research. All you do is get your wives to taste the products and if they approve it, we will launch the product. If it suits the Indian tastebuds, there is no need for market research, especially, in the traditional product markets.

A COVID-19 WARRIOR TOO

"Emergencies like lockdowns or curfews are not new to us and in the 90s too, we used to ensure our milk supply continued amidst religious riots and curfews"

How did you gauge the opportunity to step up when Covid-19 hit or was it just a question of selfless service to the nation?

The onset of Covid-19 outbreak was not a shock or a surprise as we could see it coming anytime because it had started in January and we were observing its spread and anticipated it to come to India anytime. Therefore, we had started preparing ourselves much before the lockdown of March 24, 2020. In fact, by March 12th, we sent communication to all our 18,000 village co-operative societies on precautionary and safety measures to be followed. We had to be cautious, especially for the 200 members as per our process, are required to pool and pour milk into the village co-operative society centres. Whether it is sanitisation or social distancing between members or collection by our big tankers from the 18000 village co-operative societies, we had to set safety and Covid -19-specific protocols including that for our tanker operators.

How did you shape up your response amongst the farmers and middlemen, who would not even understand Covid-19?

Emergencies like lockdowns or curfews are not new to us and in the 90s too, we used to ensure our milk supply continued amidst religious riots and curfews. We knew that whatever be the situation, milk or food will be exempted from any such curfews. Also, lockdowns or Covid-19 is for humans; it was not a curfew for our 300 million cows and buffaloes. They need to milk twice a day.

How did you sustain despite the 2020 disruptions in demand with the hospitality sector almost wiped out?

An aspect is that our whole supply chain works on backward integration from the farmers to the processing plants. Therefore, the running of the dairy supply chain uninterruptedly serves livelihoods of the farmers while providing food to our consumers. Once the Prime Minister announced the lockdown, all we had to do was swing into action based on our 10-day advance planning. We acted upon the permissions to be taken, the communique to our milk collection tankers for the exemption from traffic restrictions, proper approach for traffic passes and also setting up all means to keep our factories open and mobilise our workers. In the first two weeks, we relied on effective communication with our existing supply chain.

Did the government machinery support you in ensuring supplies?

I must have spoken to more than 50-60 collectors, Principal Secretaries, Chief Secretaries, CM’s office, and everyone helped us. On March 25, 2020, instead of me approaching anybody, I started getting phone calls from the top ministry officials in the home affairs and the CMO’s office to extend help. We were given assurance and assistance to enable us in continuing with our milk procurement and distribution. We kept communicating with higher-ups, spoke to various collectors nationwide on packaging status, plant capacities and statistics through Zoom and video conferencing. We kept a constant dialogue with all our distributors. Just like the police and health-line workers, our distributors and retailers too became Covid-19 warriors.

What were the unique challenges faced in keeping the supply chain up and running?

The unique challenge was to motivate our channel members to come out as everyone was afraid. We told them that this is not only our job but our responsibility and a duty to the nation and that if they do not come out or provide food or collect milk, where would the people go. Thereon, everybody has given their best, and we have compensated, incentivised, and increased our distributor’s, retailer’s, and transporters’ margins by 25% to 30%. Workers were given incentives to come to the factories, provided 24 hours langar (kitchen service). Food was provided in the plants not only for our people but also for the transporters and labour with living arrangements at the plant premises. Constant communication with our farmer-suppliers as well as consumers with an enhanced media spent ensured a steady supply of milk and milk products during the lockdown phase and beyond.

A SHOT IN THE ‘BRAND’S’ ARM

What was the strategy behind increasing your TV advertisement spent during the pandemic?

At home, we are the fourth-generation watching TV together. Likewise, the Amul family consists of third-generation consumers and moving on to the next. We realised that our consumers are in difficulty and are apprehensive about the pandemic situation. So, when your family members are in distress or difficulty, you do not stop communication, rather reach out more effectively in their hour of need. We understood that brand building and advertising is not just about sales pitch but is an asset-building exercise. At the beginning of the second week of March, we also realised that we must talk to the various channels and told them that we wished to double the advertising spent and requested the best deal. Because it was the March financial year ending, and with most other brands stopping their advertising spent, we got double or triple of the benefits for the same money spent.

How has e-commerce channels impacted your sales during and post the pandemic?

When the lockdown was declared, the general kirana stores were allowed to remain open for 2-3 hours, the rest of the days they were shut. In the first 2 or 3 days, even the e-commerce online channels could not do much business. We soon realised that our business through online or e-commerce modes increased by 2 to 3 times, especially in the bigger cities like Mumbai, Bengaluru, and Pune, where the maximum number of people were homebound. As per our data, before Covid-19, we were doing 85% of business through our general trade, around 12- 13% through modern trade and 2-3% through online or e-commerce. Today, our e-commerce sales have increased from 2-3% to 7-8%, which is thrice more than the pre-pandemic sales. While modern trade channels reduced to 3-4%, the general trade has remained the same.

What has been the financial implications and other shifts in trade?

Financially, our turnover in consumer product has increased by 15-20% because people have consumed more branded products. We did suffer in our commodity business because we procured 15 to 17% more milk as the unorganised players and small dairy stopped milk procurement. We started getting more milk, say in Maharashtra, we were collecting around 10 to 11 lakh litres of milk daily and then when the lockdown happened, we got a request from the state government to double our milk collection in Maharashtra to 21-22 lakh liters. The demand for Amul’s packaged milk went up by 5-7% compared to pre-covid times as households chose a trusted brand over loose milk. The positive impact will show up in the next few years because it is going to be irreversible. The shift that happened was the market moved from the unorganised and unpacked goods with the maximum shift taking place in tier-II and tier-III cities for smaller pack sizes. The packaged branded products had a growth rate of 7% to 8%. During Covid-19, it further multiplied 2 to 3 times, especially for trustworthy brands, which are available, and most importantly affordable.

LEADERSHIP QUOTIENT

"You hire advertising agencies because of their professional aptitude and inputs, and for the type of competence that you do not have, while they know what is best for your brand"

How do you balance your drive for getting things done and your people relation skills so perfectly?

More than leadership style, it is a team effort. In your team, there are a number of members and you have to project the positive aspects of each of your team members. The second thing is you have to welcome ides from anybody, everybody and at any time. Any new product, any new system, any change should look like an idea from others and those that report to you. It will more likely be accepted and people will give in their best. I am lucky that we have a consistent team and most like me have been around for as long as I have been, & this has been a big advantage.

How was it working with the former legendary Chairman, Dr Kurien?

I was extremely fortunate to have worked with Dr Varghese Kurien, the ‘Father of the White Revolution’, for 30 years and every day has been new learning. He was extremely clear about his ideas. He emphasised a lot of importance of values, integrity, and experience, which is particularly important to any farmer-led organisation. Integrity, because you are working for the farmers, for the shareholders who are not very shrewd or intelligent enough to understand what you are doing. People should not deal with farmer’s organisation with a conservative outlook or lower technology. It has to be excellent in terms of the infrastructure, technology, packaging and even advertising. It is the outbursts of the disparity between the rural and urban income which is leading to agitations. When India got independence, the average rural and urban family income was more or less equal. Today, disparity is 1:5 and we are not able to share the prosperity of India with rural Bharat.

RIDING ON THE SUSTENANCE WAVE

Who owns the Amul brand?

Amul was founded on December 14, 1946 and registered by the Kaira District Co-operative Milk Producers’ Union and by 1973, about six district unions were developed in Gujarat on the Amul model. We are a district level milk processing industry registered under Gujarat State Co-operative Societies Act, 1964. While Amul propagated the milk revolution, every other union started marketing their products under their respective brands. The Mehsana co-operative started with its ‘Sagar’ Brand, the Sabarkantha District Co-operative Milk Producers’ Union Limited (Sabar Dairy) with its ‘Sabar’ and likewise, the Surat union operated as Sumul (Surat District Co-operative Milk Producers’ Union Ltd). The then General Manager, Verghese Kurien who became the Chairman in later years felt that instead of competing against each other, let us form a centralised marketing organisation which should be owned by us and by marketing, under a common brand name it should be given to the centralised body. So, in 1973, GCMMF was formed to market their products under the Amul brand name.

So, how did the emergence of the GCMMF impact the founder entity - Kaira District Co-operative Milk Producers’ Union (KDMPU)?

The Amul brand which was under the ownership of KDMPU or Amul’s original dairy producers were handed over to the GCMMF at a Re 1 royalty price. So, you can understand that a member, an owner for 74 years, the original shareholders of Amul had to relinquish their hold for a pittance. This means if you joined Amul yesterday, the ownership of the Amul brand is the same without any royalty, one of the biggest examples of wealth sharing. This shows that the poorer of the people, believe in prosperity and sharing the wealth with everybody.

Why aren’t there many more profit-sharing corporates like Amul in India?

There are two aspects that make Amul different from the other co-operatives of the world-it is one co-operative which is owned and operated throughout as a supplychain of farmers, from the production stage to the consumers’ plate. Amul does not sell a single litre of loose milk to anybody. Everything is packed and branded. As against most of the dairy co-operatives in the world who either limit themselves to milk procurement, handing over milk as a commodity to big corporates or multinationals to value add, or at times, market a part of the commodity themselves. Therefore, the benefit of value addition does not actually pass on to the cooperatives but is pocketed by the multinationals receiving the milk.

"Constant communication with our farmersuppliers as well as consumers with an enhanced media spent ensured a steady supply of milk and milk products during the lockdown phase and beyond"

What is the status of other milk co-operatives in India?

In milk as a commodity too, Amul may be the number one brand in India but if you go to the respective States, the local milk co-operatives are branded. The number one brands across Karnataka is Nandini; in Punjab, it is Verka; likewise, it is Sudha in Bihar and Saras in Rajasthan as market leaders within the co-operative model. Amul is successful because of the selfless and dedicated political leadership of Tribhuvandas Kishibhai Patel, who championed the 1946 Amul co-operative movement in Anand and the committed professional leadership of Dr Verghese Kurian., who joined Amul in 1949. The fusion of this political and professional leadership along with the farmer’s wisdom provides a business model that can be replicated if you combine professional know-how with political conviction.

With over lakhs of collection points, how do you ensure the quality standard of the raw material viz. the independent farmer suppliers?

Amul is a supply chain company with 3.6 million farmers and one million outlets selling various dairy products with four types of distribution highways. Products like ghee, powder or tetra pack milk, chilled products like butter or cheese or our frozen products like ice cream and most difficult fresh product like milk and buttermilk must be packed near the markets and then distributed within four to five hours. We run four types of quality checks on the milk procured. First is at the time of milk collection at the village co-operatives. We check for adulteration. If detected, red colour is added to the rejected milk and the entire milk is drained out. The second quality check is when the milk is transported from milk collection centres to the dairy. When a tanker arrives at the dairy, a sample is taken from the tanker followed by a number of modern tests. Thereafter, the tested and approved milk is unloaded in the silos. The third test is done before packing of milk or making various products. The products have to meet the FSSAI standards and other food laws. Besides that, we regularly take samples from the market and test them in our laboratories across India.

Do share your unique relationship with your advertising agency.

Whether it is DaCunha Associates or the FCB Ulka team, they have been with us for decades now, as we have never changed any of our advertising agencies. They are a part of our family. You hire advertising agencies because of their professional aptitude and inputs, and for the type of competence that you do not have, while they know what is best for your brand. DaCunha Associates have been handling our famous more than 55 years old Butter Topical Campaign with the iconic ‘Butter girl’ commenting events and happenings in India or abroad across topics related to politics, sports, Bollywood or Hollywood. She does not favour anybody, is not afraid of anybody and is unbiased and nobody minds her too. So, while I am attending this session, if anything were to happen in Delhi or anywhere now, Da Cunha Associates can work on their creative license without permission from us. They can put it up and as a company see the advert when you see it.

SUSTAINING THE CO-OPERATIVE MODEL

What is the best model, the farmer producer company or a co-operative society?

Both are equally good but as per my experience, the farmer-producer organisation is good if you operate within smaller geographies. The model is better if the corporate is also a farmer-producer organisation as this model can be registered under the Companies Act as well as under the Co-operative Society Act. But checks and balances are better in the co-operative system because there is a state government, and a registrar, who will check if you do indulge in misdeeds. If you register under the company act, I think there are surveillances, but the supervision is not as stringent as in the co-operative system. Also, here are very few examples of the bigger farmer-producer organisation registered under the Companies Act.

How do you support farmers and bring in more innovation in terms of quality and productivity?

The Indian farmer’s milk production model is low input and low output model. We feed our animals on the leftovers after human consumption. While people say our product is of low standard in comparison with Israel or USA, it is as we cannot afford 1000 acres farms. If we do, how can we support the 150 million rural families? It is not a business but a livelihood, so for people who propagate that the product has to mimic standards of developed countries, it is not possible. Bigger farms mean that small farmers will be out of jobs. We can enhance the product by working on better breeding and feeding practices. A good breed of cattle can produce quality milk and also within the limited local resources and feeding alternatives that are most economical with a good productivity spent.

What is your advice for agri startups?

Food is the best sector in India, and you can get a business of Rs.100 crore even out of a city brand. Also, 90% of the market is currently unorganised with consumers shifting more towards branded and packaged food. One should not think of making a State or a National brand but focus on making a tasty recipe with the best and latest technology with an attractive packaging design. Make your brand a local ‘gully’, or a ‘mohalla’ or a single or a dual city-centric brand and then propagate further. This business does not start and end with the laptop and follows a brick-and-mortar long term vision; there is no short cut.