1. PRESENTED BY GROUP 7 SDM 1
RAJAT GARG AJIT KUMAR
DIBYASOBHAN ROY NIVEDITA RAJU
TRIPTI JANGPANGI AVANTIKA TIKMANY
OSHIN GOEL NITIKA
2. EVOLUTION OF MILK INDUSTRY IN INDIA
Source: CRISIL Research
1960s
Poor growth
of dairy
industry
Production
and
Availability of
milk and milk
products: LOW
1970-1981:
Operation Flood
Phase I
13000 dairy
cooperatives
established
18 lakh farmers
became members
of 39 milk sheds
34 lakh litres/day
procurement
28 lakh litres/day
marketing
1981-1985:
Operation Flood
Phase II
34500 village level
cooperatives
36 lakh farmers
became members of
136 milk sheds
79 lakh litres/day
procurement
Marketing of 50 lakh
litres/day
1985-1994:
Operation Flood
Phase III
70000 dairy
cooperatives
93.14 lakh farmers
became members of
170 milk sheds
115 lakh litres/day
procurement
Marketing of 100
lakh litres/day
26000 tonnes of
balanced feed,
24000 tonnes of
bypass protein feed
sold through
cooperatives
1996-2006:
Operation Flood
Phase IV
Focus on
infrastructure
development and
creating democratic
values
Strengthening
cooperatives by
providing funds on
50:50 bases from
centre and state
Education, Personal
Training, Marketing
Support, Product
Development and
Improving
Standards
• India accounts for 17% of
the worlds milk production
• India is also the highest
consumer of milk
(118-120 billion litres)
3. The per capita milk consumption in rural
households registered an increase of 28%
The per capita milk consumption in urban
households registered an increase of 25%
MILK PRODUCTION & CONSUMPTION PATTERNS
Production
of milk in
India has a
CAGR of
4.2% 1987-88 1993-94 1999-00 2004-05 2009-10
Rural 38.93 47.94 46.11 47.09 50.09
Urban 51.83 59.50 62.05 62.17 65.19
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Kgs/Year
Consumption
of fluid milk
in India has a
CAGR of 5%
7 Indian States contribute
65% of all the milk produced
in the country
Milk and Milk Products Segment is
expected to record 12-13% CAGR
between 2015-18
4. BUSINESS MODELS IN THE DAIRY INDUSTRY
Dairy farmers
get milk to the
VCC where milk
is cooled using
chillers
Chilled milk is
transported from
the VCC to the
ditrict union
where the milk is
pasteurized
Pasteurized milk
is transported to
the regional milk
federation
factories where
dairy products
are manufactured
and branded
Products are
transported to
the various
wholesale and
retail stores
Private player
procures milk from
sources other than
the dairy farmer
Milk is processed
into various value
added products
Packs, brands and
sells it various
distributors and
wholesalers
Wholesalers and
retailers sell to end
consumers
CO-OPERATIVE MODEL FORWARD INTEGRATED PVT. COMPANY
First tranche: Based on quality & quantity of milk,
payment within 15 days of procuring milk
Second tranche: Based on the sale of various
value-added products manufactured during the
year, profits are paid back to farmers on the basis
of their shareholding in the cooperative.
Eg: Amul, Mother Dairy
The company does not deal directly with the dairy farmers and
procures milk (processed/ unprocessed) through other routes
such as village collection centres, franchisee chilling centres,
bulk private coolers, district union factories and regional
cooperative federation factories.
Eg: DudhSagar, Schreiber Dynamic Dairy
FULLY INTEGRATED PVT. COMPANY
• The farmer is paid only once, as against dual payments made in
the cooperative model.
• More commission is paid to the farmers as the initial payment,
to incentivise farmers to supply milk.
5. CLASSIFICATION OF INDIAN DAIRY AND MILK INDUSTRY
Dairy Industry in India
Processed Milk Milk Products
Curd and
Yogurt/Buttermilk
and Lassi
Butter/Ghee/Ice
Cream/ Frozen Desert
Cheese/Paneer/Khoa Milk Powder
57%
19%
12%
6% 2% 1%
1%
1%
1%
Market Share (%) Liquid Milk
Ghee
Paneer/Khoa
Curd/Yogurt
Buttermilk/Lassi
Ice Cream
Butter
Cheese
Milk Powder
Liquid milk has the
highest market share
Cheese and ice cream
have the highest
growth rate
6. OPERATING MARGINS AND ROCE
OPERATING MARGINS
TO IMPROVE
13
12
8
8
7
6
4
Ice Cream
Cheese
Paneer
Curd/Yogurt
Butter
Ghee
Processed Milk
0 2 4 6 8 10 12 14
Operating Margin (%)
Operating
margins and
ROCE depend on
the extent of
value addition
HIGH Value
Addition
HIGH EBITDA
LOW ROCE
High margins
for value
addition
7. PRICES AND RATINGS
NEW
TREND
Future outlook of milk and dairy
companies in India is going to be
mostly stable as the demand and
consumption of milk and milk products
grows in the years to come.
8. GROWTH DRIVERS/RISKS OF MILK INDUSTRY
Government
Incentives
Favourable
Demographic
Trends
Improvements in
Supply Chain
Infrastructure
Technological
Innovations for
Better Quality
GROWTH
DRIVERS
Rise in MSP of
Cattle Fodder Crops
Dominance of Co-
operatives limits
Pricing Power of
Private Companies
Geographic
Concentration of
Production
Volatility in Milk
Prices
KEY RISKS
Growth is fuelled
by various
external dynamics
Risks have
increased due to
lack of dispersion
Other Factors
• Rising share of high margin milk products
• Priority lending status via National Dairy Plan
• Changing lifestyle of consumers
• Rising need for convenience
• Better health awareness among consumers
• Overall growth in food services industry
Other Factors
• Quality of milking animal difficult to judge
• Milk handling practices to prevent microbial
contamination
• Free rider problems due to mixing different milk
quantities in one storage facility
• Small probability of transportation failure
9. INDUSTRY ANALYSIS- PORTER’S 5 FORCES
Competitive
Rivalry
HIGH
Bargaining
Power of
Suppliers
LOW
Threat of
New
Entrants
HIGH
Bargaining
Power of
Consumers
LOW
Threat of
Substitutes
LOW
Competitive Rivalry - HIGH
• New brands are coming up each day and the
major factor on which they play in this industry is
prices
Threat of Substitutes - LOW
• Essential item for beverages
like tea, coffee
• Traditional consumption
habits make milk a favorite
• There is no other offering that
can substitute milk.
Threat of New Entrants -
HIGH
• Not many entry barriers
• Many local players have
come up with their own
local brands
• New company just has to
follow the defined
standards and it can come
up with its offerings in this
sector
Bargaining Power of Consumers - LOW
• The prices of packaged and branded milk
and milk products is fixed
• Bargain with the local milk vendors in
unorganized sector and local shops selling
milk products
Bargaining Power of Suppliers - LOW
• Farmers, rural households and
small cooperatives sell at the going
market rate.
• The big giants and the government
control the sector and regulate
prices
10. AMUL- THE TASTE OF INDIA
MILK
MILK
POWDER
GHEE
BUTTER
CHEEESE
CURD
CHOCOLATE
ICE CREAM
SHRIKHAND
PANEER
GULAB
JAMUN
BASUNDI
NUTRAMUL
11. AMUL DISTRIBUTION SYSTEM STRUCTURE
Village
Cooperative
Societies with
Chilling Units
Village
Cooperative
Societies
without
Chilling Units
Local
Restaurants
and Other
Milk related
Businesses
Milk sold to
village and
local
restaurants
Farmers
Chilling PlantsNetwork
Services
• Veterinary
Services
• Animal
Husbandry
• Animal Feed
Factory
• Milk Can
Producers
• Agriculture
University
• Rural
Management
Institute
• Trucking
Facilities
Milk Processing
Union & Warehouses
GCMMF Warehouses
Wholesalers/ C&S
Retailers
Home Delivery
Contractors
Consumers
AMUL products are
available in over
500,000 retail outlets
across India through its
network of over 3,500
distributors.
Three-tier Cooperative
Structure
• Dairy cooperative
societies at village
level
• Milk Union at district
level
• Milk Federation at
state level
AMUL
MODEL
ANAND
PATTERN
12. SALES & MANAGEMENT AT AMUL
Year of Establishment 1973
Members 17 District Cooperative Milk Producers' Unions
No. of Producer Members 3.37 Million
No. of Village Societies 18,536
Total Milk handling capacity per day 24 Million litres per day
Milk Collection (Total - 2014-15) 5.42 billion litres
Milk collection (Daily Average 2014-15) 14.85 million litres
Cattlefeed manufacturing Capacity 6340 Mts. per day
Sales Turnover -(2014-15) Rs. 20733 Crores (US $ 3.4 Billion)
21% 5-yr
CAGR
INR 20733
crores in sales
230 lakh litres
per day
Distributors have sales persons who collect orders almost weekly from
retailers and mass merchandisers. The order is forwarded to the
warehouse.
Upto 10 days of credit period received by the
distributor is passed on to the retailers. This
kind of a benefit further helps in boosting
sales.
The retailers are helped by the distributors
in enhancing sale by on time delivery.
GCMMF
Overview
Sales
Management
Process
13. AMUL SUPPLY CHAIN AT DISTRIBUTOR LEVEL
Company
GCMMF
Wholesaler
(Dewas Naka)
Small Retailers
Sri Patodia
Sales
(Retailer/
Customer)
Customers
Amul’s Supply Chain at Distributor – Sri Patodia Sales
Distribution Management:
7 to 8 people are employed who work
under the distributor.
Orders are collected from the retailers via
phone or visits by the labour employed by
the distributor.
Transportation cost is borne by Amul
Orders received are placed online with
GCMMF (Dewas Naka).
Robust IT Mechanism helps to collect
orders and places them quickly from the
company.
It takes maximum 1-2 days to get materials from Warehouse to the
distributor.
As there is a large demand for goods, frequents checks need to be
performed regarding the stocks in the shop which is done using
calculation on basis of sales.
Sometimes clashes with other distributors occur for territory.
If products get expired then claims are refunded within fifteen days.
However, this may sometimes take a bit longer time also.
Sales Figures:10 -12 lakhs per month
Category Product
Dairy (Buttermilk,
Ghee Butter)
2.75-3.5%
Fresh (Milk, Curd) 3%-4%
Frozen (Ice cream,
Chocolates)
9%-10%
Category-wise
Margin Structure
14. SALES MANAGEMENT PROCESS BY DISTRIBUTOR
Distribution
function
•The distributors have an area assigned to them which is done by the company itself and
they use area mapping system depending on the population and distance from the
warehouse.
•The distributor not only sells to retailers but also sells to large mass merchandiser and
other outlets who order in large quantities.
Credit and
Sales
•Distributor gets the material from Amul on a credit period of 15 days. And he gives a
credit period of 10 days to the retailer.
•Each distributor has a sales force of 7 to 8 people who are responsible for collecting
order from various retailers on phone or physically go and collect orders.
Territories
•The distributor has the DMS (Distributor Management System) facilitated by the
company which is installed in his computer. This system helps the company to keep a
track of the amount of products a particular distributor is selling over the year and this
helps in distribution of incentives and benefits to the distributors at the end of year.
•Each territory has 10-15 APO (Amul Preferred Outlets) i.e. exclusive retailers for Amul
which are managed by the distributors.
Gujarat
Headquarters
Amul
Warehouse
Distributor
SalesManagementStructure
15. ANALYSIS AT RETAILER LEVEL – Tirupati Enterprises
DistributionSystem
-Distributor sends material
when ordered over
telephone.
-Lead time is 2 to 3 hours
only since the distributor is
located in close vicinity.
-Orders are send either on
pickups or 2 wheeler also
depending on the quantity
ordered. The costs are borne
by the distributor.
-Lead time for delivery of
goods is 2 hours.
Margins
-Sales amount ranges
from Rs. 30,000-35000 a
month.
-3% extra margin which
available on goods that
have invoices are
transferred to the
retailers by the
distributors.
-17% margin for all
products.
-More margin on frozen
segment than dairy and
fresh segment.
Problems
-Poor service levels have
made Amul less competitive.
-Old and expired Products
are not exchanged and
repeated reminders also fail
to wake the distributors.
-No incentives are provided if
extra products are sold or if
extra orders are made.
-All advertisement costs are
paid by the retail store.
The functioning of the distribution network was also analysed from the perspective of the retailers. One such retailer
that we visited and surveyed is Tirupati Enterprises.
16. ANALYSIS AT HYPERMARKET LEVEL – MORE
The functioning of the distribution network was also analysed from the perspective of the hyper-retailers. One such
hyper-market that we visited and surveyed is MORE.
More Retail Outlets
Places Orders
Orders placed to
Mumbai office
Order is placed with
GCMMMF
Orders shipped to
More by GCMMF
CENTRALISED ORDER MECHANISM FOR MORE OUTLETS ACROSS THE COUNTRY TO
TAKE ADVANTAGE OF ECONOMIES OF SCALE
They have a warehouse to
stock their goods that they
receive and have refrigerators
to keep the SKU’s.
Transportation and shipping
charges are paid by AMUL
Margins of 3-4% on AMUL
213 SKU’s available out of
which 144 have very less
probability of a stock-out
In case of expiry, MORE has to
destroy the product since
AMUL does not have a return
or refund policy
Cash rewards and related
benefits are awarded to outlets
based on the EBITDA values.
480 stores and 18 hyper
markets are used for the
calculation of EBITDA.
17. EXISTING SALES MANAGEMENT AT AMUL
The Sales Management System
RetailerDistributor
GCMMF
Warehouse
State Co-
operative
Milk
Marketing
Federation
District Dairy
Cooperatives
Farmers &
Milk
Producers
Distribution chain: The flow from
farmers to final retailers
AMUL is also part of
Global Dairy Trade (GDT)
platform, where only the
top 6 dairy players of the
world sell their products.
GCMMF operates through
56 Sales Offices, has a
dealer network of 10000
dealers and 10 lakh
retailers. It has one of the
largest such networks in
India.
18. SALES & MANAGEMENT AT AMUL
Amul has a very wide range
of products available for
distribution. More has as
many as 213 SKUs.
Thus, sales are higher as the
retailers have a variety of
products that they can offer to
the customers.
It is necessary for the
distributors to be sure of which
products to be pushed forward
and which are the most
profitable along with the speed
with which they sell.
Inventory management
throughout the distribution
system is quite well
maintained.
The larger distributors and
stores like more, with higher
inventory being carried, have
electronic systems for tracking
the inventory.
Thereby cost is minimized,
problems of excessive carrying
costs or that of stock outs is
also easily taken care of.
Inventory management and product portfolio at Amul
retail stores
20. COMPARISON: AMUL v/s SANCHI
SANCHI AMUL
Management
Dairy co-operative under the
Madhya Pradesh State Cooperative
Dairy Federation Limited
(MPSCDF), largely based out of
Bhopal and Indore.
Formed in 1946 in Anand, Gujarat.
It is managed by the Gujarat
Cooperative Milk Marketing
Federation Ltd (GCMMF).
Organization Structure
Three-tier structure with MPSCDF
at the State-level Federation,
followed by Regional Level Milk
Unions and then Village Level
Dairy Cooperative Societies.
Amul's structure has the National,
State, District and Village levels,
with GCMMF coming under the
National Cooperative Dairy
Federation of India.
No of SKUs sold in Indore
10-12
In general 144 but nationally it is
more than 400
Most preferred SKU Liquid Milk Butter
Product Categories Less diversified
Too much diversified portfolio of
products.
Highest selling product in
terms of packaging
500 ml pouch milk 1 Litre pouch milk
Sales
A total of 450 litres of Sanchi milk
is sold in Indore in a day.
A total of 450-500 litres of milk is
sold per day(rough estimates)
21. COMPARISON: AMUL v/s SANCHI (contd.)
SANCHI AMUL
Distribution Margins
Distribution margin is Rs. 1.42
on a litre, irrespective of the SKU
size.
Distribution margin is Rs. 1.30
on a litre, and it varies depending
on the SKU size.
Shelf life Lower i.e. 50-60 days higher, 180 days from MFD date
No. of Distributors in
Indore
7 10-12
Inventory management No godowns. Direct shipping
Stocks are kept in a godown
(only one in entire M.P ) in
Indore
Incentives structure
To Retailers
Rs 1000 worth products free for
the first 5 months
Not much incentives provided
Pricing
Sanchi Milk is priced at Rs.38
for the 1-litre Gold pack.
After the recent price hike, Amul
Gold costs Rs. 48 for the 1 litre
SKU.
22. RECOMMENDATIONS
1
• There is a huge demand for Amul Products in Madhya Pradesh and it becomes very difficult to operate from a single point of sale
i.e. warehouse only in Indore. Amul could look to increase the number of Warehouses and Distributors so that it can have greater
ease of operation and at the same time increase its customer base.
2
• Goods incentives based on sales target are being currently being stopped by Amul which is de-motivating the Amul retailers. Needs
to offer a better Incentive than Amul Yatra which is currently offered.
3
• Investment from company’s side is decreasing down the chain. So the company must focus on various aspects of Promotion,
Advertisements, and Providing incentives to retailers.
4
• The current demand forecasting system needs to be better managed and needs to be redesigned as retailer and distributors are
always in a fear of Stock out.
5
• It is unaware of the competition it is facing from local dairies. They have similar product lines with no preservatives in their
products. They can become a major competitor in the future. Need to focus on them also.
6
• Use of IT systems should be made mandatory at both retailer and distributor level
23. RECOMMENDATIONS (contd.)
7
• Amul can also go for better deals with the supermarket chains and the unreached hypermarts which
will help them to capture a larger consumer base.
8
• Claims related to refund and return policies of the retailers and distributors needs to be looked at
because if the promises made by the company are not fulfilled it creates a lack of trust for them.
9
• The company can focus on their entire system to help them grow in Indore and
make an impact on ‘Make in India’ initiative
10
• Amul could also build a perception in the mind of consumer and project itself as a more health-
focussed brand as consumers are increasingly becoming health conscious and looking for sources of
nutrition
