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INTRODUCTION
For nearly half a century, Indias most subversive social satirist has been a bluehaired, roundfaced
moppet who wields dairybased puns on everything from multibillion dollar financial scandals to
government corruption and celebrity gossip. The Amul girl, the cartoon mascot of a 3mstrong collective
of dairy farmers, is Indias most famous advertising mascot and has helped turn the company she
represents into one of the countrys most trusted brands.
Amul, the nations biggest dairy products company with revenues of $2.5bn, sits at the nexus of old and
new India, linking the Gandhian ideal of a country based on co operative rural villages and todays
emerging 21stcentury economic powerhouse. Its completely Indian, says Rama Bijapurkar, a market
research expert. Its a brand that belongs in the canvas of life [here] and I cant think of many other
brands that do that
it deals with my life, my country, my family, it understands the local idiom so its beyond simple
marketing.
Gurcharan Das, a former chief executive of the Indian operations of Procter & Gamble, the fastmoving
consumer goods company, and an economic commentator, echoes this view. The values it is conveying
are modern liberal values through those hoardings and through those messages, he says. Its not just
selling a product its actually selling ideas about things that are right and wrong with our country.
Amuls enduring success is best understood through its marketing. Amul spends just 1 per cent of its
annual turnover on advertising but its campaigns built round the Amul girl and cartoon characters that
send up current events have made the brand part of the national conversation. The organisation was
founded as the Kaira District CoOperative Milk Producers Union in 1946. At that time, farmers were
seeking to escape exploitation from middlemen and Britains colonial dominance of the milk sector, and
sought help from Sardar Patel, one of the countrys independence leaders. He proposed the model that
remains in place: professional management of a union of local village co operatives through which
farmers control the procurement, production and marketing for at that time the governmentrun
Mumbai Milk Scheme. The Amul brand, short for Anand Milk Union Ltd, was launched in 1957 by Verghese
Kurien, a SyrianChristian from Kerala who had studied nuclear physics. Over the course of subsequent
decades, his model was exported to other states, creating a network of linked co operatives that
continues to underpin the Indian dairy industry. In terms of a country rapidly coming out of poverty and
with a growing middle class, that kind of structure is ideal because it has enormous trust and confidence
within the subcontinent, and it has been supporting the livelihoods [of many farmers] for many, many
decades, says Dame Pauline Green, president of the International Cooperative Alliance. That model has
also made it hard for big international food groups to gain a foothold in the dairy market. Amul is a very
reputed brand if you talk India as a nation, says Mr Sodhi. Even in individual states where Amul has
domestic competitors, they too are run as cooperatives All are cooperative brands, all are number one
in their states and that is why still in India no private brand is able to emerge as a leader, because at a
national level Amul is there to compete and at state level, regional brands are there to compete.
The companys reliance on a diffuse network of milk procurement centres, because poor Indian farmers
cannot afford to travel far to sell their milk, has also proved a powerful defense against foreign
competitors. Where more commercial ventures might require big contracts with industrial farms to
increase margins in order to meet shareholder demands, Amuls suppliers can choose to sell their milk in
whatever volume they can muster on that particular day. The average intake per farmer is just over 3 litres
per day. While this is a small amount, the Amul model allows the company more flexibility than any
international entrant might have. With so many suppliers on which to call, even if thousands of their
suppliers were unable to supply milk on a certain day, they would not struggle to meet demand. This is
an extremely efficient company when it comes to supply, says Arvind Singhal, head of Technopak, an
Indian retail consultancy. Their cooperative model gives them incredible options. Paradoxically, Amul
has succeeded both despite and because of the rapidly changing India that surrounds it. In the wake of
the countrys breakneck, twodecade modernisation, the Amul girl stands out as a nostalgic link to a
simpler past. This, says Rahul daCunha, whose father created the Amul advertising campaign 50 years ago,
which he now runs himself, explains why he has had it so much easier than global companies such as
Nestl. [It] is a big brand, dont get me wrong, but they are under the pressure of being international,
with branding and advertising, he says. We have the freedom to be wholly Indian.
What is a cooperative?
A cooperative is an autonomous association of persons united voluntarily to meet their common
economic, social and cultural needs and aspirations through a jointly-owned and democratically
controlled enterpriseThey are business entities where people work together to solve common problems,
seize exciting opportunities and provide themselves with goods and services. A cooperative is managed
on the basis that the customers of a business are also the owners of the business. Each customer is entitled
to become a member of the cooperative society, thereby receiving the benefit of success via a dividend
payout.
The beginning of this great movement is dated back to 1844, when a group of men known as the Rochdale
Pioneers began trade in grocery produces in England, based on a new principles of fair prices for reliable
quality goods. These organizations are better recognized world wide, for their non-profit character and
root level social functioning on voluntary basis. Voluntary and open membership, democratic member
control, member economic participation, autonomy and independence, education, training and
information, cooperation among cooperatives and concern for community are the principles of
cooperatives. Self help, self responsibility, democracy, equality, equity and solidarity are the values of
cooperative organizations. In the tradition of its founders, the movement also follows such ethical values
as honesty, openness, social responsibility and caring for others. Needless to say, it is a social movement
and its growth will unanimously result in the wholesome growth of the society.
Cooperatives in India
Cooperative movement in India has celebrated its centenary year of service recently. Indian cooperatives
are unique as they were initiated and supported by the government. Elsewhere it had always been
organized only by volunteer members with least or no government intervention. In India it was introduced
in 1904, as the planners of the country firmly believed that it could serve for national development and
also could serve as a shied in protecting the vulnerable section of populace, especially the farmers from
certain social evils like agricultural backwardness, poverty and rural indebtness.
Though they were initially organized only as the credit institutions, Indian cooperatives today, tirelessly
serve in endless areas of services. They serve in credit and non credit areas. They deliver credits for
agriculture as well as non agriculture purposes. They operate their businesses in numerous non credit
phases too. They work for milk producers, agricultural producers, weavers, consumers, fishermen, coir
makers, employees, students of universities and colleges, and for many others.
Utopian principles: The principles themselves are the strength of cooperative business. The open and
voluntary membership and democratic member control (one member; one vote) concepts strives to
ensure equal growth opportunities to all citizens of the state who have common business needs and
aspirations. It also ensures their direct participation in the business.
Non profit character: Cooperatives are basically welfare driven rather than being profit driven. This
doesnt mean they are charitable like, but protecting and promoting the economic and social well being
of their members is the primary concern of cooperatives. The concept of member economic participation
insists economic benefits to members via dividend payout in proportion to their business involvement,
the higher you participate in the business; higher will be your dividend. This is an effective stimulus which
encourages members involvement in cooperative business.
Root level functioning: They are root level organizations familiar to all, as they effectively operate public
distribution system in each village of the country. Everywhere you go; there will be some cooperative
society or bank. The point is they need no introduction and if they could offer attractive products which
exactly meet their customer needs, cooperative businesses could be made successful and prosperous with
their known customer band.
Governmental backing: Cooperatives are legally recognized institutions supported by governments. This
legal backing is their main strength. They are exempted from taxes, stamp duties etc. further they are
offered with technical, financial and administrative assistance by the governments. This enables the
cooperative businesses to generate the sufficient capital investments for their business operations with
least effort.
Internationally recognized: The principle cooperation among cooperative is really unique. It serves as
the base to cooperatives to expand their business operation as far as possible. Now a handloom product
woven at Chennimalai area of Coimbatore district in Tamilnadu is being exported to Germany and USA.
Diluted management
The success of cooperative businesses lies in their democratic way of management. The boards of cooperative
societies in many places, for example in Tamilnadu, have been liquidated, and the businesses are handed over
to bureaucrats who are more administrative like than being businesslike. But the members interest and
participation is vital for success than any other thing. When the members have no say in their own business,
their patronizing can not be expected to continue. It is after all their business, why they should be refused to
administer it anyway? The justification for such unhealthy official intervention is given on the basis that
governments have made huge financial investments in cooperatives. But this too, should be remodeled.
Losses and increasing NPAs
Cooperative businesses are loss making and dormant with few exemptions. Especially the ever growing bad
debts and non performing assets in credit cooperatives have made their financial shape the worst. Increased
number of willful defaulters, political interferences in loan recovery, waiver practices of governments, weak
and delaying recovery tribunal processes, ineffective credit administration and supervision, artificial profit
showing in the accounts, increased frauds and misappropriation of money etc are the causes for their business
losses. Lesser product strength, inability to attract customer due to poor quality or limited variety, absence of
effective advertisements and successful marketing plans are the main reasons for their failures in non credit
businesses.
Corruption and frauds
Red tapism in business operations, vested interests of bureaucrats and increased corruption and frauds are
the other challenges which affect the efficiency of cooperative businesses. Unless such offences are severely
punished it will erode their financial soundness like anything and will hinder their successful operation in the
market. Regular audit of accounts, sincere action against misappropriation of funds if any are mandatory to
ensure their viability.
What morphing is needed?
Cooperatives today are viewed as failed institutions encircled by inefficiency and corruption. This should be
changed. People dont believe what you intent to do, rather they judge you only by the things what you have
done. If cooperatives can give successful products, sure they will believe cooperatives are kick and alive. But
can cooperatives give such products? Yes they can. All that needed is their morphing into new design of
working so that these weaknesses can be managed effectively.
THE BEGINNING
It all started in 1946. Polson (the most popular butter brand in India, then) used to collect milk from the marginal
milk producers from the city of Anand in Gujrat through its agents and delivering it to Bombay Milk Scheme in
Mumbai.
The marginal milk producers were facing the following problems.
On the advice of Vallabhbhai Patel (the first Home Minister of independent India) and Morarji Desai (Ex. Prime
Minister of India) the farmers formed The Kaira District Cooperative Milk Producers Union Limited on 14
December,1946 which came to be known as AMUL in future after its popular Brand of its butter.
A major technology breakthrough was made by the indigenous R & D at AMUL by producing milk powder from
buffalo milk for the first time in the world.
By 2000 the picture of the dairy industry in the state of Gujrat was totally changed mainly due to the snow
balling effect of the cooperative initiative shown by the Kaira District Cooperative Milk Producers Union Limited.
The following table shows the phenomenal growth of the dairy industry in Gujrat between years 1946 and 2014.
Item
1946
2014
A few thousand
2.12 million.
Two
10,411
None
13
None
None
42
retail outlets
None
500,000
Export to countries
None
15
(** Gujarat Cooperative Milk Marketing Federation or GCMMF is the marketing entity for products of all Unions
in the State of Gujarat.)
Encouraged by the glaring success of cooperatives in the state of Gujrat, Government of India established Two
national organizations, the National Dairy Development Board (NDDB) and the National Co-operative Dairy
Federation of India (NCDFI) to coordinate the dairy activities through cooperatives in all the States of the
country. The former provides financing for development while the latter manages a national milk grid and
coordinates the deficit and surplus milk and milk powder across the states of India.
The highlights of the AMULs successful business model were,
Distributing profits out of business activity to the large number of small and marginal farmers.
The success of AMUL can be attributed to six main attributes as shown below.
Organization
Marketing
Sustained
Excellence
of AMUL
Operations
Leadership
Effective
& Supply
Chain
Organization :
The desired network of cooperatives had to be such that it helps in achieving the objectives of benefiting large
number of marginal milk producers and drawing more rural poor to undertake dairy farming as a means of
livelihood. A multilevel organization was designed to meet these objectives as shown below.
FERERATION
UNIONS
(AMUL and 12 Other
District Level Plants)
VILLAGE SOCIETIES
(10,411 Village Level Milk
Collection Centres)
INDIVIDUAL MILK
PRODUCERS
(2.12 million Milk Farmers)
Marketing :
GCMMF is the marketing arm of the network and manages the physical delivery and distribution of milk and
dairy products. It is authorized to take decisions about new product introduction, distribution and advertising
as well as marketing of AMUL products.
The strategy of first capturing the low purchasing capacity customers and then introducing high value products
made the task of marketing AMUL products somewhat complex.
The task required catering to high value segments with value added products on one side and on the other
hand ensuring that the large low value segment is not affected in supply of low value products. Thus, allocation
of milk for these two segments was a challenge and at times the high value segment was required to be
sacrificed in preference to low value segment in order not to disturb the major base of customers.
Leadership
AMUL was started at the initiative of two national leaders Mr. Vallabhbhai Patel and Mr. Morarji Desai.
However, the ground leadership was provided by Mr. Tribhovandas Patel, a local leader trained in the Gandhian
philosophy and life style. He was the first chairman of the cooperative and was instrumental in making the
farmers believe in the power of cooperation and their rights towards improvement of human condition
He could achieve this because of his fairness, honesty and sense of accountability towards the members. He
was a very gentle person and possessed an immense skill of making people trust in him and in the cooperative
movement. He traded autonomy to managers with their full commitment to the cause of AMUL.
Mr. Verghese Kurian was one such manager - a technocrat with a background in mechanical engineering - who
shared his concern for the farmers and also had the tenacity to organize marginal milk producers. He along
with Tribhovandas Patel transformed AMUL from a dream into a major industrial entity. Due to his contribution
to the cooperative dairy industry in India, Mr. Verghese Kurian was known as the father of the dairy movement
in India. As a leader, he worked tirelessly to establish the values of modern economics, technology and concern
for farmers within the cooperative. He brought funds from international financing agencies for the various
projects at AMUL. He worked with farmers to increase milk yield. He motivated many young managers to leave
their financially lucrative jobs and join AMUL which was developed by Mr. Kurian as a professional management
systems that would support the aspirations of farmers and customers. While working with Mr. Tribhovandas
Patel, Mr. Kurian learnt the skills of polite persuasion. and was able to imbibe an attitude of We can do it
amongst his managers. Mr. Kurian called himself as an employee of the farmer members of the cooperative of
which he was the chairman. He would travel through the villages along with Tribhuvandas and work out the
details of how the milk collection cooperative would work, how trucks would pickup milk from village societies,
how the cattle would have to be taken care of and how all of this would help the poor milk farmer come out
of poverty and the clutches of the middleman. Thus, he was able to link the activities of the society with its
ultimate purpose of wellbeing of the marginal milk producers. With his insistence and tenacity he along with
his two engineers could developed a process of creating milk powder from buffalo milk an idea which was
ridiculed by one and all of the dairy industry all over the world. As a result of his leadership, membership of
the cooperative started to increase, professional managers started to join AMUL and production capacity at
AMUL started to expand. Kuriens biggest strength lay in his ability to convince people that the cause of rural
farmers was important thus establishing an important shared value.
DISTRIBUTION
AMUL has appointed exclusive distributors for its products. These distributors are responsible for supplying
AMUL products to end-customers through FMCG retailers all over India.
Liquid milk is home delivered in pouches through corner shops or small retailers.
Since 1999, GCMMF has started web based ordering facilities for its customers. A well-defined supply chain
has been developed to service customers who order in this manner.
AMUL has followed a consistent advertising policy with the healthy and happy cartoon girl, the tag line of
AMUL the taste of India and the jingle Utterly Butterly Delicious.
AMUL is the umbrella brand under which all varieties of milk and milk products are promoted.
Further, process was also developed to convert this powder into baby food and cheese, thus, taking care of
surplus milk that was being collected as the members and yield both increased. AMUL also indigenously
developed a low cost process for providing long shelf life to many of its perishable products.
Breed of cattle with high yield of milk was possible due to embryo transfer technology. Information Technology
was also effectively used for the following purposes.
Some of the good practices at AMUL include Total Quality Management through
Friday Meetings - Every Friday everyone in the network joins their respective departmental
meeting to discuss quality initiatives and share policy related information.
Training for Transformational Leadership,
Health training for farmers and their families emphasizing the need for good health,
Evaluation of retail outlets (over 500,000).
Village
Cooperative
societies
(with chilling
Units)
Village
Local
societies
(without
chilling
Units)
other milk
related
businesses
Milk sold to
villagers
Support Services
Milk
Processing
Unions and
Network
Veterinary
Animal
Animal Feed
Factory
Milk Can
Producers
Agriculture
University
Rural
Plants
GCMMF
Warehouses
Wholesales/
C&S
Institute
Retailers
Consumers