A Management Research Project ( MRP- II ) On “Strategic Analysis and Analyzing SWOT of GCMMF w.r.t. Amul” Submitted To: Hemchandracharya North Gujarat University On 19 th April, 2004 In Partial Fulfillment of the requirements For the Management Research Project Course in the Master of Business Administration Submitted By : Vipul Prajapati (335) “Amul – The Taste of India” 1
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A
Management Research Project ( MRP-II )
On
“Strategic Analysis and Analyzing SWOT of GCMMF w.r.t. Amul”
Submitted To:
Hemchandracharya North Gujarat UniversityOn 19th April, 2004
In Partial Fulfillment of the requirementsFor the Management Research Project Course in the
Master of Business Administration
Submitted By :
Vipul Prajapati (335) Tejas Shah (357) Mayur Solanki (344)
S.V. INSTITUTE OF MANAGEMENT, KADI
“Amul – The Taste of India” 1
PREFACE
Management ideas are widely tested in actual proactive with rapid,
industrialization the management of business enterprise has acquired great
theoretical as well as practical significance. As a result a formal study of MBA
has become essential. Management is increasingly being re-organization. Many
institution are engaged in providing management studies with practical training.
Being a student of MBA, we get knowledge of management theoretical as
well as practical. However the study of management together with some
practical training such as study of Functional Area will enhance the value of
subject even more.
We have visited “GCMMF” which is leading liquid milk processing
plant. It is a well known unit as it is a part of “AMUL INDUSTRIES”.
“Amul – The Taste of India” 2
ACKNOWLEDGEMENT
First of all, we are very thankful to North Gujarat University that they have included this type of practical work in our study.
We are also thankful to S.V.I.M. that they have given me permission to go visit at working days. They have given me opportunity to apply my theoretical knowledge in business world and how they are functioning.
First of all, we take this opportunity to thank out Director Dr. Hitesh
Ruparel who guided us regarding the project contents and issues related to it.
Further, we are very grateful to Mr. Tejas Dave, Mr. Bhavin Pandya, Mr.
Nikunj Patel and Aashish Vashani who provided their valuable guidance
throughout the project.
We are also thankful to unit of AMUL at Anand, about giving permission
and they have given good amount of understanding about working of unit and
all such necessary inputs which we have re-produced them in our project report.
Lastly we are very thankful my friends and all those who have helped us
directly and indirectly in preparation of this project report.
Name Roll No.Vipul Prajapati 335Mayur Solanki 344Tejas Shah 357
“Amul – The Taste of India” 3
Executive Summary
India, with its status as the largest milk producer in the world, is on the verge of assuming as
important position in the global dairy industry. Many international dairy companies are
viewing India with an eye to tapping its vast, growing market for dairy products. Similarly,
many Indian dairy companies are now trying to acquire international scale, and would like to
tap other markets.
Indian Dairy Industry is dominated by cooperative sectors for so many years. Indian dairying
is emerging as a sunrise industry. India represents one of the world's largest and fastest
growing markets for milk and milk products. Dairy industry occupies a prominent position in
the industrial structure of India. Dairy industry has very rapidly infrastructure facilities due to
which severe bottlenecks have been created in the way of rapid industrialization. Dairy
industry occupies important place in Indian economy. The rate of growth of this industry was
around 1% only. It has gone up 4.2% later on cows and buffaloes are important animals
for producing milk.
The organised dairy industry in India is estimated at INR 145 bn(USD 3 bn) and is expected
to witness a CAGR of over 13% over the next 4 years, to reach a size of INR 240 bn (USD 5
bn) by 2005.
India offers several attractive features to players interested in coming to the country.
- Free regulatory regime, providing equal opportunities for domestic as well as foreign
players.
- Huge scope for growth – Organised industry accounts for less than 20% of the milk
produced in India.
- Large growth expected in consumption of packed dairy products due to several
demographic factors, including increased affordability, increased no. of nuclear families
and working women, and rising exposure to Western diary products, as well as packed
dairy products such as yoghurts and UHT milk.
- The emergence of organised food retail chains has led to greater availability of shelf
space for chilled/frozen dairy products, which is expected to boost growth in sales of
“Amul – The Taste of India” 4
packed dairy products. Organised food retail in India is expected to grow from USD 230
mn to USD 2.3 bn by 2006.
Some of the major international dairy companies, which have already established operations
in India, include Nestle, Unilever (through HLL), Danone (through Britannia) and Nutricia.
Britannia has recently entered into an alliance with Fonterra for accessing technology and
providing market access to Fonterra. The Britannia-Fonterra alliance has heightened other
Indian companies’ need for securing international partnerships in order to remain
competitive.
GCMMF was the first co-operative to be set up under operation flood in the year 1973. It
is an apex marketing federation of 12 district milk unions of Gujarat. It has most modern and
largest plant which can handle up to 6.7 million litre of milk per day. GCMMF sold its all
dairy products under the brand name of “AMUL”.
GCMMF has become very popular because of its excellence marketing strategy. GCMMF
marketing strategy is to understand the consumer needs, develop products that provide
superior value at fewer prices. This type of marketing has made GCMMF on of the leading
dairy in India. GCMMF has shown a tremendous commitment to the flood water situations.
GCMMF has never stopped the supply of milk and other milk products. And unlike other
competitors, it has never taken wrong benefits in these kinds of situations. All these have
made Mother Dairy No. 1 dairy in Gujarat and in India. GCMMF has developed an excellent
distribution channel to provide its products to the consumers. It has made its products in each
part of Gujarat & India.
GCMMF is the largest player. All other local dairy cooperatives have their local brands e.g.
Warana in Maharastra, Saras in Rajasthan, Vijaya in A.P etc. other private players include J
K Dairy, Heritage Foods, Indian Dairy etc.
The industry, which is co-operatives and milk is produce by different dairy and is marketed by regionally like
Sumul milk, Sabar milk, Sughsagar milk etc but other milks products like ice-crème, cheese, ghee, butter etc is
marketed by under the brand name “AMUL”.
The Indian market is dominated by a large number of small local manufacturer 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
“Amul – The Taste of India” 5
organized segment the significant brands are Kwality Walls, Vadilal, Amul, Mother dairy and
Baking Robbins. There is intense competition in ice-crème with player like Havemor,
Vadilal, Quality Walls, Gokul etc, in milk like Payal, Gayatri, and Sardar etc. in Ghee like
Krishna, Abad, and Gopi etc.
The project highlights the functional area of GCMMF with a prime focus on marketing. By
studying these functional areas we had done some analysis like five force, SWOT etc.
“Amul – The Taste of India” 6
RESEACH METHODOLOGY
RESEARCH OBJECTIVE:
To get the overall idea regarding industrial environment.
To study the functional areas like Marketing, Finance, Production, and
Personnel of the organization.
To evaluate the performance of the Organization.
To study the Strength and Weakness of organization.
To find out the Opportunities and Threats for the organization.
To suggest the strategies to smoothen the operations of the organization.
RESEARCH DESIGN:
Data source:
“Amul – The Taste of India” 7
Primary source: We have taken the in depth interview of the concerned persons of
AMUL to collect the required functional information.
Secondary source: Websites, Magazines, Books
Sampling Plan
Sampling Unit: MD, and HODs of related department, Executives of Marketing
Department
Method: Non- probability judgment sampling in which we have selected the members
who are good prospects for accurate information.
Research Instrument: We have conducted in depth interview with Descriptive
Questionnaire.
Method of Contact: Personally conducted the interview.
“Amul – The Taste of India” 8
IndexPreface……………………………………………………………………… … iAcknowledgement……………………………………………………………..iiExecutive Summary…………………………………………………………..iiiResearch Methodology………………………………………………………. iv
Chapter No. Particulars Page No.
1 About Dairy Industry
1.1 About AMUL1.1.1 Introduction of Amul Dairy1.1.2 Growth and Development of Amul1.1.3 Secrets of Amul Success1.1.4 Organisation Structure1.1.5 Achievements1.1.6 Strategic Focus of Amul
2 Industry Structure2.1 Global Scenario2.2 Indian Scenario
2.2.1 Scope for Foreign Investment in Dairy Industry
2.2.2 Problems Faces by Dairy Industry2.2.3 Consumer Habits and Practices2.2.4 Market Size and Growth2.2.5 Market Share2.2.6 Major Players2.2.7 Export Prospects for India2.2.8 India’s Export of Milk Products
Macro Environment 3 PEST Analysis
3.1 Political and Legal Factors3.2 Economical Factors3.3 Social Factors3.4 Technological Factors3.5
Micro Environment 4 Functional Analysis
4.1 Personnel Department
“Amul – The Taste of India” 9
4.1.1 Introduction4.1.2 Recruitment 4.1.3 Selection 4.1.4 Training and Development4.1.5 Promotion and Transfer Policy4.1.6 Wages and Salary Administration4.1.7 Job Description 4.1.8 Performance Appraisal4.1.9 Social Welfare Activities4.1.10 Total Employees and Time Keeping
4.2 Production Department4.2.1 Plant Layout4.2.2 Product Profile4.2.3 Sources of Raw-Material4.2.4 Operating Analysis
4.3 Marketing Department4.3.1 Introduction4.3.2 Marketing Environment4.3.3 Marketing Aspects of Dairy Industry4.3.4 Marketing Chart4.3.5 Marketing Function of GCMMF 4.3.6 Mission of GCMMF4.3.7 Market Segmentation4.3.8 Market Mix
(1) Product Mix Packaging and Labeling Strategy(2) Price Mix(3) Place Mix(4) Promotion Mix
4.3.9 Advertising4.3.10 Entertainment Zone4.3.11 Distribution Channel4.3.12 Forecasting Demand4.3.13 Branding4.3.14 Management Information System4.3.15 Managing Competition
“Amul – The Taste of India” 10
4.3.16 Product Life Cycle4.3.17 Strategy as a Market Leader4.3.18 Differentiation and Positioning Strategies4.3.19 Marketing Ethics
4.4 Finance Department4.4.1 Highlights of Trading P & L A/c.4.4.2 Highlights of Balance Sheet4.4.3 Ratio Analysis4.4.4 Significance of Accounting Policy4.4.5 DuPont Analysis
4.5 R & D Department
5 Michal Portar’s Five Force
6 SWOT Analysis of GCMMF
7 Challenges To Be Met
8 Suggestions9 Future prospects for Dairy Industry10 Conclusion11 Bibliography
“Amul – The Taste of India” 11
ABOUT DAIRY INDUSTRY
Introduction Of Dairy Industry
An industry whereby milk and milk products are handled are known as Dairy
Industry. Dairy Industry includes all the firms dealing with the processing of milk and
manufacturing of milk products and their marketing in industrial scale. Dairy Industry is a
very important and the basic industry for country like India. Nearly 70% of the people in
India is based on agriculture and most of them have cattle's (cows and buffaloes) in their
houses. Indian Dairy Industry is dominated by cooperative sectors for so many years. Indian
dairying is emerging as a sunrise industry. India represents one of the world's largest and
fastest growing markets for milk and milk products. World focus on India for this industry
are because of low cost economy, liberalisation process, low inflation rate, inexpensive
labour, largest democracy, no government interference, etc.
Dairy industry occupies a prominent position in the industrial structure of India. Dairy
industry has very rapidly infrastructure facilities due to which severe bottlenecks have been
created in the way of rapid industrialisation. Milk consumption in India has much less than
the developed countries. Dairy industry occupies important place in Indian economy. It is one
of the consumer goods industries. Its products is more useful items in popular diet, large
proportion of Indian population is vegetarian, therefore for milk and milk products assume
importance and only source of animal fat in their diet and importance source of animal
protein.
On the peasant milk producers of Khaira district, Gujarat the NDDB (National Dairy
Development Board) was set up under the chairmanship of Dr. Verghese Kuriene in 1970
under the programme, the Anand Dairy of Khaira was developed first. Khaira is one of the
India's flushest milk tracts and is distinguished by a famous dairy procurement, processing
and marketing co-operative established at Anand in 1946.
India has a long tradition of keeping milk animals as a part of the farming household.
Animals are cared for highly rated milk and milk products are also greatly valued in the
society as a source of good nutrition. Cow is considered to be a sacred animal since time
“Amul – The Taste of India” 12
immemorial. Milk is used in most of the rituals. Milk production and consumption is always
been a part of Indian culture.
Industrial sector has played a crucial role in the development of Indian economy.
Industrialisation holds the embryo of employment and fuller utilisation of resources.
After 53 years of independence India has come a long way an her journey towards the goal of
industrialisation and has become self-sufficient in respect of the consumer goods. Dairy
industry a prominent position in the industrial structure of India. Dairy industry has very
rapidly infrastructure facilities due to which severe bottlenecks have been created in the way
of rapid industrialisation.
Milk is complete a food. Though widely used per capita milk consumption in India was much
less than the developed countries the dairymen were also not developed on commercial lines.
In 1965, in order to support the farm economy by developing dairy sector on the request by
peasant milk producers of Khaira district, Gujarat the NDDB (National Dairy Development
Board) was set up under the chairmanship of Dr. Verghese Kuriene.
During 1960s, the European countries were facing over production of milk, converted into
dried skimmed milk and butter oil for which there was no adequate commercial outlet. In the
latter part of 1960s the EEC (European Economic Community offered some part of these
stocks as a donation to India through, the aid channels of the WFP (World Food Programme).
The aid was to be handled by NDDB reasoned to sell those commodities within India rather
than to distribute them as relief, which could be realised for twin purpose of enhancing milk
production in India and establishing a national dairy marketing grid. To handle the financial
aspects of such a programme the IDC (Indian Dairy Corporation) was set up by NDDB in
1970, the programme 'Operation Flood' or the 'White Revolution' as it is popularly known
was launched. The programme was mainly to restructure India's diary industry on the lines of
advanced dairying countries in order to enhance productivity and efficiency, while at the
same time directing income benefits towards the rural poor. Under the programme, the Anand
Dairy of Khaira was developed first. Khaira is one of the India's flushest milk tracts and is
distinguished by a famous dairy procurement, processing and marketing co-operative
established at Anand in 1946.
In 1965, “The National Dairy Development Board” came to existence & as a result
India at pioneers in dairy development.
“Amul – The Taste of India” 13
First union exist in Maharashtra mane “Dooth Sagar Dairy” then in “Baroda Dairy”, Valsad
has “Vasundhara Dairy”, Ahmedabad has “Utter Dairy” & Gandhinagar has “Gandhinagar
Dairy”
All these daries make milk, powder, cheese, ghee, butter & other Amul’s products. All dairies
have 4.6% crores of members jointly trade union has Rs 2200 crores.
At the time of independence there were 106 dairy plans in the country. There were 92 liquid
milk plants and 60 pilot milk societies. There were 26 product factories and 3 cream
industries, 51 dairy projects were in different stage of implementation. In 1984-85 the
number of dairy plants went up to 138. By March 1996 there were 72500 dairy co-operative
in 1170 milk shades 9.2 million farmers were participated in those societies.
* In 1997 India produced 74.3 million tones to occupy 2nd position in the world.
* U.P. is to be largest producer of milk in India followed by Punjab, Bihar, A.P. and
Rajasthan sharing 34% of the national production.
* Bulk of milk production is in rural areas. In urban areas there are only 4% of milk cows
and in the cities and town milk buffaloes are about 61%.
* The rate of growth of this industry was around 1% only. It has gone up 4.2% later on
cows and buffaloes are important animals for producing milk. 53% of milk is provided
by buffaloes, 33% of milk is provided by cows. Government milk is used in some parts of
the country.
Distribution Pattern
StateCow
Milk
Buffalo Milk
Cow Ghee
Buffalo Ghee
UP, Bihar &
Orissa
19.56% 42.08% 11.16% 39.26%
West Bengal & Assam
30.16% 60% 6.02% 3%
“Amul – The Taste of India” 14
Maharashtra & Gujarat
11% 15.55% 11.26% 12.49%
Karnataka,Chennai,Jammu &Kashmir
11% 7.77% 10.04% 9.90%
M P & A P 11.18% 6.31% 8.57% 9.97%Rajasthan, Punjab & Himachal Pradesh
18% 22.18% 52% to 92% 27% to 38%
From the view point of economy dairy industry has several points of significant to this credit.
(1) It gives production of milk and milk products which are dietcurious.
(2) It brings significant change in social economy structure of rural economy.
(3) It has important role in employment generation.
(4) By sound growth of co-operation this industry mutual help and self- sufficient are
cultivated among the masses.
(5) It provides regular source of income as supplementary. Employment to small
and marginal farmers and agricultural labours, therefore it acts as a cattail
change in the directions of equitable society.
“Amul – The Taste of India” 15
ABOUT AMUL
Introduction
Amul is nothing but an experiment. The Kaira District Co-operative Milk Producers union
selected the board name ‘AMUL’ for its product range in 1995.
Amul means ‘priceless’ in Sanskrit. The brand name ‘AMUL’ is from the Sanskrit
‘AMULYA’ was suggested by the quality control ‘priceless’ are found in several Indian
languages.
Amul is situated at Anand in Gujarat. The chairman of Amul Dairy is Shri Ratan Singh A
Rathod. Also there are many partners in the organization. It is a large -scale unit, so it
requires a large number of employees. It has a co-operative society. It is also an association
of personnel who joins together in a solvantary basis for further increase of their common
economic interests.
Amul Dairy is the largest dairy in Asia. It’s full name is “Kaira District Co-operative Milk
Producing Committee” today Amul is symbol of many things.
(1) Of high quality products sold at reasonable prices.
(2) Of the genesis of vast co-operative network
(3) Of the triumph of indigenous technology
(4) Of a proven model for dairy development
AMUL
Amul is an experiment, successful run since last 56 years with the objective of up liftment of
rural economy.
Amul word is derived from the Sanskrit word ‘AMULYA’ which means priceless. In other
words precious or which is price is not evaluated.
Amul is a co-operative unit established on 14th December 1946 at Anand. The union was
established under ‘Kaira District Milk Product Limited’.
The logo of Amul has four hands joined together, which indicates :
“Amul – The Taste of India” 16
Milk producers hand
Milk processors hand
Milk dealers hand
Milk consumers hand
Mission Statement of Amul
Committed to producer world class production
Latest available technology must be upgraded.
Most effective distribution network of marketing
Confidence of large number of consumer of global level.
General Information
Name of the unit Amul Registration office AnandFactory site AnandHead office AnandEstablishment year 14th December,1946 Form of organization Co-operativeAccounting year 1st April to 31th MarchChairman K S Desai (Milk)Vice chairman Shri Ramesh P Patel Managing director Shri Shiva M VyasManager (account) Shri Dipak Roy
Name of banker The Kaira District
Co-operative Bank limited
“Amul – The Taste of India” 17
Growth & Development Of Amul
In beginning there were just a few farmers supplying about 250 litters of milk a day. Soon the
number increased to 400 farmers and quantity of milk handled rise to 5000 litters a day.
Milk yield is higher in winter and in winter, the Bombay milk scheme could not absorb the
extra milk offered. the farmers were forced to sell the surplus milk to traders at very low
rates. This leads to the decision to set up a plant to process the surplus milk into butter and
milk powder.
With financial help from UNICEF, assistance from the government of New Zealand under
the columbo plan & technical assistance provided by FAD, Rs. 5 million factories to
manufacture milk powder & butter was planned.
In 1958, the plant was expanded to manufacture sweetened condensed milk. Two years later
Shri Morarji Desai by then the finance minister, inaugurated a new wing designed to produce
600 tones of cheese and 2500 tones of baby food was processed from buffalo milk on a large,
commercial scale.
A plant to produce balanced cattle food, donated by DXFAM was formally commissioned on
October 31, 1964 by Lal Bahadur Shastri, then the PM of India.
At the request of the government of India in 1963, a new dairy with a capacity of 40 tones of
milk powder and 20 tones of butter a day was speedily completed. This was meant to meet
the requirement of India’s defence forces. The dairy was declared open by Morarji Desai in
April 1965. By now the dairy complex could hand 500000 liters of milk a day.
The capacity was raised to 350000 liters a day in 1974. The same year the Kaira union set up
a plant to produce high protein weaving food, chocolate & malted food at Mogar about 8 km,
south of Anand.
In September 1981, the cattle field plant at Kanjari, was started. The successful completion of
the co-generation project on September 11, 1985 marked a new milestone on the energy front
“Amul – The Taste of India” 18
when two gas turbines generation of 1.5 M.W, each based on natural gas were commissioned
Kaira up a bread spread plant at Mogar with the assistance of NDDB in 1994.
On October 31, 1992 Dr V Kurian, chairman of NDDB laid the foundation of Kaira unions
third dairy with a processing capacity of 6.5 lakhs liters of milk a day. Work on the union’s
satelite dairy & cheese plant at Khatraj began in February 1994.
There were about 250000 breedable buffaloes in Kaira which is helping Amul to ensure a
regular & quality milk output for various parts of the country. Moreover, the district also had
50000 crores breed cows, which yield milk of high quality.
The experiment in co-operation that began in Kaira district at the instance of Sardar Patel has
new been replicated throughout the country in more than 160 milk sheds. Today there are 8
million dairy farmers who belong to the co-operative supporting between 4.5 to 5 crores
family members.
Urban Chart Of Amul
AreaRank Score
North 2nd 52.92East 4th 59.41West 1st
Amul, which want’s on the chart last year, comes straight on the top
52.08
South ----- -----Metro 1st
Amul was on No4 in metro segment, last year its jumps on 1st
58.10
Urban 1st
Colgate vacates the top spot for Amul, which didn’t feature on last year’s urban segment in top 10 dart
condensed milk infants food. Ghee alone accounts for 85%.
It is estimated that around 20% of the total milk produced in the country is consumed at
producer- household level & remaining is marketed through various cooperatives, private
“Amul – The Taste of India” 30
dairies & vendors. Also of the total produce more than 50% is procured by cooperatives and
other private dairies.
While for cooperatives of the total milk procured 60% is consumed in fluid from and rest is
used for manufacturing processed value added dairy products; for private dairies only 45% is
marketed in fluid form and rest is processed into value added dairy products like ghee,
makhan etc.
Still several consumers in urban areas prefer to buy loose milk from vendors due to the strong
perception that loose milk is fresh. Also, the current level of processing and packaging
capacity limits.
The preferred dairy animal in India is buffalo unlike the majority of the world market, which
is dominated by cow milk .As high as 98% of milk is produced in rural India, which caters to
72% of the total population, whereas urban sector with 28 % population consumes 56% of
total milk produced. Even in urban India, as high as 83% of the consumed milk comes from
the unorganized tradinitional sector.
Presently only 12% of the milk market is represented by packaged and branded pasteurized
milk, valued at about Rs. 8,000 crores. Quality of milk sold by organized sector however is
inconsistent and so is the price across the season in local areas. . Also these vendors add
water and caustic soda, which makes the milk unhygienic.
Market Size and Growth
Market size for milk is estimated to be 36mn MT valued at Rs.470billion. The market is
currently growing at round 4% p.a. in volume terms. The milk surplus states in India are U.P.,
Punjab, Haryana, Rajasthan, Gujarat, Maharastra, A.P., Karnataka, and Tamil Nadu. The
manufacturing of milk products is concentrate Tamil Nadu d in these milk surplus states. The
top 6 states are U.P, Punjab, Rajasthan, Gujarat, Tamil Nadu, and A.P together account for
58% of national production.
Milk production grew by a 1% p.a. between 1947 to 1970. Since the early 70’s, under
operation flood, production growth increased at 5% p.a.
“Amul – The Taste of India” 31
About 75% of milk is consumed at the household level, which is not a part of commercial
dairy industry. Loose milk has a larger market in India as it is perceived to be fresh by most
consumers, in reality however, it poses a higher risk of adulteration and contamination.
The production of milk products, i.e. milk products including infant milk food, malted food,
condensed milk & cheesed stood at 3.07 lakh MT in 2003. Production of milk powder
including infant milk food has raised 2.25 lakh MT in 2003. Where as that of malted food is
at 65000 MT. cheese and condensed milk production stands at 5000 and 11000 MT
respectively in same year.
Market Share
GCMMF faces tough competition in the Indian market by different companies like Britannia,
Vadialal Cadbury etc. Though it is quite new in the Indian market it shares a fair amount of
dairy products in India. By advertising and promoting its product GCMMF has become one
of the leading dairies in India. In western of India GCMMF shares the most of the market
while in other parts of India it is next so. But slowly and surely GCMMF is growing in
sharing the market with other competitors industries.
Major Players
The packaged milk segment is dominated by the dairy cooperatives. GCMMF is the largest
player. All other local dairy cooperatives have their local brands.e.g.Warana in Maharastra,
Saras in Rajasthan, Vijaya in A.P etc. other private players include J K Dairy, Heritage
Foods, Indian Dairy etc.
Export Prospects For India
Presently, India a non-entity in international dairy market. However exports of milk products
are picking up, having gone up by 40 times by value in the first half of the nineties, the value
worth of RS. 400 million in 1994-95. Today GCMMF (Gujarat Co-operative Milk Marketing
Federation) is India’s largest exported of dairy products valued at Rs. 18.3 crores in 1995-96.
Its exports earnings are likely to get doubled in 1998-99. Two note worthy export
opportunities are emerging one in South-east Asia and other in Russia, the immediate future
is the prospects of an additional demand of over 3 million tonnes of milk products in the
Asian region. Equally significant is the rise of Russia as the world’s biggest dairy importer.
“Amul – The Taste of India” 32
India is not fully utilizing its export potential in respect of dairy products. The cost of milk
production in India is the lowest. And the dairy industry is not getting any subsidy. There is
an urgent need to pay special attention to the quality if India has to compete with other
countries. At present the county is exporting the malted milk foods, ghee, butter, and cheese
to other countries like Bangladesh, UAE, Nepal, Shri Lanka, Oman and Bahrain. Of course
world milk prices are subject to dramatic fluctuations.
Export earning from the live-stock sector and related products rose to Rs. 19,250 million in
1996-97 from Rs. 7,920 million in 1988-89.
India’s Export Of Milk Products
India is evident that except for baby food, the exports for all other milk products are showing
an increasing trend in terms of quantity as well as in terms of value.
On the other hand India’s imports of milk production specially milk powder and baby food is
showing a declining trend.
Looking at the growing export opportunities in the post GATT ERA, Indian planners have
measures areas already adopted become quality conscious. Corrective measures areas already
adopted to meet the sanitary and phyto-sanitary specifications prescribed by WTO. Besides,
covering processed dairy products, the specifications of the WTO silos extended to the health
status of cattle and other live stock. Consequently, the main thrust of the ninth plan proposals
is on the improvement of animal health and adoption of sanitary and phyto sanitary
specifications for dairy products. Towards this end, the TMDD (Technology Mission on
Dairy Development) has initiated wide ranging programmes.
Concerns in export competitiveness are
Low cost Of Production
Milk production is a combination of labour & capital intensive. Due to low labour cost, cost
of production of milk is significantly to there in India.
Quality
“Amul – The Taste of India” 33
Significant investment has to be made in milk procurement, equipment, chilling and
refrigeration facilities. Also, training has to be imparted to improve the quality to bring it up
to international standards.
Productivity
To have an exportable surplus in the long term and also to maintain cost competitiveness, it is
imperative to improve productivity of Indian cattle.
There is a vast market for the export of traditional milk products such as ghee, paneer,
shrikhand, rasgolas, etc.
“Amul – The Taste of India” 34
MACRO ENVIRONMENT
PEST ANALYSIS
POLITICAL FACTORS
Political factor is very important aspect for the growth of any industry, thus the political
factor can immerge as opportunity or threat for that industry.
Regulatory Environment in the Dairy Processing SectorThe Indian processed dairy industry has grown and diversified enormously in the last few
years. To ensure the proper development and growth of this industrial sector, the Government
of India has instituted various laws and regulations. The various regulations that govern the
dairy processing industry can broadly be classified into:
“Amul – The Taste of India”
Internal Environment
Structure Culture
Resources
Task Environment
(Industry)
Societal Environment
Technological Forces
Political-Legal Forces
Sociocultural Forces
Economic Forces
Stockholders
Governments
Suppliers
Employees/ Labour Unions
Special interest groups
Customers
Creditors
Communities
Competitors
Trade Associations
35
Compulsory Legislation
Prevention of Food Adulteration Act, 1954This Act is the basic statute that is intended to protect the common consumer against the
supply of adulterated food. This specifies different standards for various food articles. The
standards are in terms of minimum quality levels intended for ensuring safety in the
consumption of these food items and for safeguarding against harmful impurities and
adulteration. The Central Committee for Food Standards, under the Directorate General of
Health Services, Ministry of Health and Family Welfare, is responsible for the operation of
this Act. The provisions of the Act are mandatory and contravention of the rules can lead to
both fines and imprisonment.
Milk and Milk Product Order (MMPO) 1992
The Milk and Milk Product Order (MMPO), 1992, issued on June 9, 1992 seeks to ensure the
supply of liquid milk, an essential commodity, to consumers by regulating its processing and
distribution. Within eight years of its operation, the Central/State Registering Authorities
have till December 2000 registered 666 units with a total processing capacity of 65.8 million
litres per day (mlpd).
Silent Features of the MMPO Order include the following:
Registrations for units handling up to 75,000 litres of milk per day are granted by the State
Governments and units with more than 75,000 litres per day capacity are registered by the
Central Registering Authority.
The Certificate also specifies the milkshed area, which, under the order is defined as a
geographical area demarcated by the Registering Authority for the collection of milk by the
registered unit.
Maintenance of specified hygienic conditions in the premises where milk and milk products
are handled, processed, manufactured or stored.
The collection, transportation and processing of milk normally centres around the operations
of a processing plant. The region from which the marketable surplus of milk production finds
its way to a processing plant is called a 'milkshed'. The concept of milkshed areas is pivotal to
the MMPO. For an orderly development of the dairy industry, a proper assignment/allocation
of milkshed is critical.
“Amul – The Taste of India” 36
The dairy industry is regulated in most countries through various ways. Many subsidise part
or whole of domestic production. Imports are commonly restricted, and exports frequently
subsidised. High dairy price supports in many countries are put in place to stimulate
production to the extent that subsidies for exports are necessitated to maintain domestic dairy
programmes
In the United Kingdom, all the milk produced by farmers is procured by the cooperatives.
Private dairies are required to buy their milk requirement from cooperatives. New Zealand
has no private sector dairy plants. As many as 90 per cent of dairies in the erstwhile West
Germany and 100 per cent in Denmark, Netherlands and Sweden are in the cooperative
sector.
In the United States, 70 per cent of the dairy industry is cooperative. Dairy programmes are
subject to more Government participation or regulation than most other domestic agricultural
industries in the USA. There are also Federal Milk Marketing Orders and movement barriers
in the USA for "orderly marketing control, which is associated with stabilising fluid milk
prices, providing secured and dependable markets for individual farmers producing milk
primarily for the fluid market and improving the balance of market power between farmers
and handlers.
In the emerging liberalised global scenario, trade-distorting agricultural policies have been
the focus of the GATT multilateral trade negotiations. With the liberalisation of agricultural
trade under the new GATT regime, the heavy subsidies prevalent in the dairy sector in the
countries of the EU as well as in the USA will have to be brought down in the next few years.
The competitive advantages of the Indian dairy industry are then considered to be substantial.
With substantial and continued investment in building up milk production, India can emerge
as a major exporter of dairy products in the next few decades.
Standards on Weights and Measures (Packaged Commodities) Rules, 1977These Rules lay down certain obligatory conditions for all commodities that are packed form,
with respect to declarations on quantities contained. These Rules are operated by the
Directorate of Weights and Measures, under the Ministry of Food and Civil Supplies.
Export (Quality Control & Inspection) Act, 1963
“Amul – The Taste of India” 37
The Export Inspection Council is responsible for the operation of this Act. Under the Act, a
large number of exportable commodities have been notified for compulsory pre-shipment
inspection. The quality control and inspection of various export products is administered
through a network of more than fifty offices located around major production centres and
ports of shipment. In addition, organizations may be recognized as agencies for inspection
and /or quality control. Recently, the government has exempted agriculture and food
products, fruit products and fish and fishery products from compulsory pre-shipment
inspections, provided that the exporter has a firm letter from the overseas buyer stating that
the overseas buyer does not require pre-shipment inspection from official Indian inspection
agencies.
Pollution ControlNo Objection Certificate from Pollution Control Board is a must.
Voluntary StandardsThere are two organizations that deal with voluntary standardization and certification systems
in the food sector. The Bureau of Indian Standards looks after standardization of processed
foods and standardization of raw agricultural produce is under the purview of the Directorate
of Marketing and Inspection.
Bureau of Indian Standards (BIS)The activities of BIS are two fold, the formulation of Indian standards in the processed foods
sector and the implementation of standards through promotion and through voluntary and
third party certification systems. BIS has on record, standards for most of processed foods. In
general, these standards cover raw materials permitted and their quality parameters, hygienic
conditions under which products are manufactured and packaging and labelling requirements.
Manufacturers complying with standards laid down by the BIS can obtain and "ISI" mark that
can be exhibited on product packages. BIS has identified certain items like food
colours/additives, vanaspati, containers for packing, milk powder and condensed milk, for
compulsory certification.
Directorate of Marketing and Inspection (DMI)The DMI enforces the Agricultural Products (Grading and Marketing) Act, 1937. Under this
Act, Grade Standards are prescribed for agricultural and allied commodities. These are
known as "Agmark" Standards. Grading under the provisions of this Act is voluntary.
Manufacturers who comply with standard laid down by DMI are allowed to use "Agmark"
labels on their products.
“Amul – The Taste of India” 38
Other Government RegulationsIndustrial Licence: No licence is required for setting up a Dairy Project in India. Only a Memorandum has to be submitted to the Secretariat for Industrial Approvals (SIA) and an acknowledgment is to be obtained.
However Certificate of Registration is required under the Milk and Milk Products Control
Order (MMPO) 1992.
Foreign Investment:Foreign Investment in dairying requires prior approval from the Secretariat of Industrial
Approvals, Ministry of Industry, as dairying has not been included in the list of High Priority
Industries.
Automatic approval will be given upto 51% Foreign Investment in High Priority Industries.
In case of other Industries, proposals will be cleared on case to case basis. Government may
allow 51% without enforcing the old limit of 40% applicable under Foreign Exchange
Regulations Act at its discretion.
Foreign Technology Agreements: Foreign Technology Agreements are freely allowed in high priority industries under the
following terms:
Lump sum payment of Rs 10 million
Royalty payment of 5% on domestic sales and 8% as exports subject to total payment of 8%
on sales turnover, over a 10 year period from the date of agreement or 7 years from
commencement of production.
Foreign Technology Agreements in dairying also need prior approval. Foreign Exchange
required for payment of Royalty will have to be purchased at market rates.
Foreign Technicians can be freely hired.
Import of Capital Goods
Import of capital goods is automatically allowed if it is financed through Foreign Equity.
Alternatively, approval is needed from the Secretariat of Industrial Approvals. The approval
depends on the availability of Foreign Exchange Resources.
“Amul – The Taste of India” 39
Import of Second Hand Capital GoodsImport of Second hand goods is allowed subject to the following conditions:
Minimum Residual life of 5 years The equipment should not be more than 7 years old. A
certificate from the Chartered Engineers of the country of origin certifying the age and the
Residual life is to be produced. Import will be allowed only for actual users.
Dividend BalancingRemittances of dividend should be covered by earnings from exports recorded in the years
prior to the payment of dividend or in the years of the payment of the dividend.
WTO norms may milk Indian dairy dryIN INDIA, dairy farming contributes significantly to the generation of employment in the
rural areas, supplementing the income of small and marginal farmers and landless labourers,
particularly in the rain-fed and drought-prone areas. Allied sectors, such as animal husbandry
and fisheries, which have a negligible share of GDP in agriculture, grew rapidly compared to
the crop sector in 1980-96.
Today, about a fourth of the GDP in agriculture is accounted for by the allied sectors, in
which animal husbandry accounts for the lion's share. The growing diversification of
agriculture is also an indication of changing consumption preferences and income levels. So
far, this activity was protected from international competition through import duties and
restrictions. However, consequent to the Uruguay Round of Multilateral Trade Negotiations
in 1994, to which India is a signatory, this sector is being gradually exposed to the
international market.
The WTO provisions may affect the Indian dairy in two ways. First, Indian dairy products
may have to compete with the major producers of processed dairy products such as the
European Union (EU), the US and the Oceania countries, such as Australia and New Zealand.
Second, in the absence of import restrictions, domestic dairy products may have to compete
with cheaper imports. Will Indian consumers then discard domestic products? Will Indian
butter become bitter? If this happens, the pattern of dairy development will go askew,
affecting income distribution and may lead to social unrest. It is, therefore, necessary to
effectively fortify the dairy industry from international onslaught and help the poor generate
income and raise their standards of living.
“Amul – The Taste of India” 40
According to FAO statistics, of the world milk production of 556 million tonne (MT),
roughly two-thirds is concentrated in the developed countries. The erstwhile East European
bloc and West Europe together account for 18 per cent and South Asia, including India, 17
per cent. North America, consisting of the US, Canada and Central America, produces 24 per
cent, the Oceania countries produce 4 per cent, while the rest is from the remaining countries.
About 86 per cent of the world production comprises cow milk and only 10.3 per cent is
buffalo milk, mostly confined to the South Asian countries.
About 72 per cent of the production of cow milk is concentrated in developed countries such
as the US and the EU, accounting for about 50 per cent of total world milk production.
Today, India ranks first in milk production and has the largest cattle and buffalo population.
Thanks to Operation Flood, or the `white revolution', and cooperative efforts, which raised
milk output from 22.5 MT in 1971 to 71 MT in 1997, the annual growth rate is 4.7 per cent,
perhaps the highest in the world. The per capita availability of milk rose by around 2 per cent
per annum in the same period.
Milk trade
Of the total milk production, only 5-6 per cent is traded globally. Liquid milk is not traded.
The trade is confined only to processed milk products such as skimmed milk powder (SMP),
whole milk powder (WMP), butter and ghee (BG) and cheese. More than 90 per cent of the
total production of processed dairy products is concentrated in the EU, the US, India,
Pakistan, Brazil, Poland, Australia and New Zealand. About 75 per cent of the demand comes
from 8-9 nations. The pattern of world trade in milk production is also segmented. Most of
the low-value dairy products are exported to developing countries while the high-value milk
products are exchanged among developed countries. India has been exporting negligible
quantities of SMP and WMP.
WTO provisions
To make the dairy product market more competitive and improve efficiency of production,
multilateral negotiations in 1994 adopted a package of measures for countries producing
dairy products. These measures have to be adhered to by all WTO signatories. Some of the
important provisions are liberalising trade and government policies to augment world import
demand for dairy products, commitments on market access, reduction of domestic support
and subsidies on exports for the removal of distortions in the domestic market. India is a
signatory to the WTO and has already removed quantitative restrictions (QRs) on 714 items.
“Amul – The Taste of India” 41
The impact
Provisions such as the commitment of domestic support and subsidies on exports under
normal circumstances may not have a negative impact on the Indian dairy industry, at least in
the short run. The Agreement on Agriculture (AoA) mentions that these provisions are
applicable only to select dairy products. Even among these products, only a few are
important. A country can successfully reduce support to unimportant items and support the
important ones, bringing down the total support well within the GATT permitted limit.
As for subsidies on exports, though India tops in milk production, the export of milk and milk
products is negligible. Among the processed dairy products, India exports only butter and
ghee and has a negligible presence in SMP and WMP trade. However, these provisions might
affect Indian dairy through a change in the import demand. A substantial cut in the export
subsidies by the developed countries, which are also bound by the WTO agreement, may
push up world prices, making domestic products, such as butter, cheaper. However, the
impact of these provisions will largely be determined by world price behaviour.
Other provisions, such as market access, removal of QRs, non-tariff barriers (sanitary and
phyto-sanitary regulations) and GMO issues are real cause for concern. The WTO supporters
argue that the withdrawal of domestic support and subsidies on exports will increase the
international prices of the dairy products. Countries with relatively lower costs of production
may enjoy comparative advantages and cash in on the external demand.
As per these provisions, the EU, which accounts for 40 per cent of the world trade of dairy
products, reduced the subsidy on butter from $1,481 a tonne in 1990 to $1,392 in 1995, with
a commitment to reduce it to $947 by 2000. Similarly on SMP, the subsidy was reduced from
$430 a tonne in 1990 to $406 in 1995 with a commitment to reduce it to $275. Thus, the
commitment of the EU has been to reduce 36 per cent of the subsidies uniformly.
The US is also committed to slashing subsidy on these products. However, looking at the
behaviour of the world prices of dairy products, one gets a contrary picture. Instead of the
world prices being pushed up, as was believed, they actually declined. For SMP, the price
declined from $2,025 a tonne (fob) in 1995 to $1,452 a tonne. WMP experienced a similar
“Amul – The Taste of India” 42
price reduction. In some quarters this is attributed to the increased subsidy by the EU and the
US and to the policy of differential subsidy across the globe. In the US, the rate of subsidy is
reported to be higher on the consignments of milk powder destined to South Asia, perhaps to
nullify the freight advantage enjoyed by Oceania countries such as Australia and New
Zealand, which are nearer to South Asia.
Another reason is the dampened demand for dairy products from the crisis-stricken Russian
Federation, which has the largest share in the total demand for milk products. In fact, the
world market structure for dairy products appears to be oligoponist-oligopoly, wherein the
price determination does not follow the rules of supply and demand but of price leadership
and price wars. In fact, the EU has become the price-setter in international trade. In such a
situation, however, questions arise over how the WTO provisions can increase the
competition in the world market. This does not defy the efficiency argument. The only
beneficiary of depressed world prices is New Zealand which produces dairy products more
economically, even without subsidy. As a result, its share in the total exports rose more than
20 per cent.
India has already agreed to zero tariffs on SMP and other imports (the other country being
Singapore). Due to the depressed world price of SMP, the cheaper product would be available
to the domestic consumers. This may disturb SMP production, its price structure and the price
structure of milk and milk products. The Indian dairy industry should immediately advocate
the imposition of tariff equivalent to the difference between the world and domestic prices of
dairy products with some premium on it.
Countries such as New Zealand and Australia, which produce dairy products at the least cost
without subsidy, have imposed 10-20 per cent tariff on SMP imports. India would also have
to minimise production costs to protect the Indian dairy industry. A wide gap between the
cost of production and the world market price may enhance the competitive advantage to
increase exports and insulate the domestic market from cheaper imports. This calls for dairy
development on a more systematic and scientific lines, additional investment in
infrastructure, improved quality and better breeds of animals, transfer of technology and a
more professional approach to dairying.
Non-tariff barriers
“Amul – The Taste of India” 43
Apart from the tariffs, there could be many non-tariff barriers, either under provisions of
Technical Barriers to Trade (TBT) or imposed by the countries, to be overcome by Indian
dairy products to make inroads into the markets of developed countries. Though the WTO
provision lays down that the minimum five per cent market access may have to be given by
importing countries, the developed countries impose certain quality norms and product
specifications and other sanitary and phyto-sanitary regulations. The EU now insists that
milking cows be fully mechanised to avoid contamination, and potable water used to process
milk. It also prescribes that only steel machinery and filtered air be used for processing. To
adhere to these specifications, the Indian dairy industry may have to invest much capital in
the required infrastructure, either through co-operative efforts or corporate sector
intervention. However, this may increase the cost of milk at the present yield levels. The
expansion of milk production through better animal variety, and breeds, therefore, becomes a
precondition for such an approach.
Quality Control & Pre-Shipment Inspection
The Export Inspection Council of India (EIC) was set up by the Government of India under
Section 3 of the Export (Quality Control and Inspection) Act, 1963 to provide for sound
development of export trade through quality control and pre-shipment inspection
Approval Of Food Products Processing Units Under Fsms
EIC continued to operate mandatory export certification under the above system for fish and
Market segment is a very important function for the market department of the GCMMF,
because the market consists of buyers different in any ways. They are different their wants
resources, locating buying practices. Because buyers have unique needs and wants each buyer
is potentially separate market GCMMF has segmented its market in following variables.
Geographic segmentation:
Under these variables GCMMF has divides market into difference geographic units such as
region, states, cities etc. GCMMF sells its products by geographic segment action like in the
north where production of milk is very high the sale of Amul’s product is not much. But in
the western region it is high. GCMMF identifies this kind of variables and deals with it.
Demographic Segmentation:
Under this variable GCMMF has dividend market into several graphs such as age, genders
family, size, income, occupation etc. for the every group GCMMF marketing strategy is
different. In milk Amul targets all the class where as in the other products like butter, ghee,
ice-cream etc. is targeted to the middle and higher middle class.
“Amul – The Taste of India” 83
Marketing Mix
Product Mix
What is Product?
A product in simple words means a set of tangible physical and chemical attributes assembled
in an identifiable and recently reorganized form.
Anything that can be offer to a market for attention acquisition use for consumption that
might satisfy a want or need. Product is a bundle of utilities consisting of various product
features and accompanying service.
Soap, Shampoo, Powder, etc. are some example of product.
Product mix is the set of all products and items that a particular seller offers for a sell. A
product mix consists of all the product lines and item that are sold by the company.
Check out this vast and ever-growing range of 'tasteful' Amul delectables!
Bread Spreads
Amul ButterUtterly Butterly Delicous
Amul LiteThe Low at Fat Bread Spread. It is made from a blend of hydrogenated refined oils, milk fats, skimmed milk powder, common salt, emulsifier, class – II preservatives, and antioxidants. Vitamin A not less than 30 IU/gm and Vitamin clamps 2 IU/gm.
Raw material consumption 51.52 53.87Marketing expenses 0.19 0.17Miscellaneous expenses 0.15 0.15Total Expenses 100 100
Interpretation:
The proportion of other income is increased. So that the reducing in decrease in stock. The
proportion of processing, packing, marketing, power & fuel expenses is decreasing. The
salary & wages and repair & maintenance expenses is increasing. So that company is try to
reduce their expenses.
Highlights Of Balance Sheet
Particulars 2001-2002 2000-2001
“Amul – The Taste of India” 119
Share capital
Reserves & surplus
Loans
Current liabilities
Fixed Assets
Investment
Stock
Advances & debtors
Cash & bank balance
200000000
729968022
1180019189
569515380
2402873468
135732554
742763385
464370707
331549715
200000000
727935581
150985785
557005785
2390406846
132240711
761026395
618710965
326145366
Trend Analysis of Balance Sheets As On that Date
Particulars 31/03/2001 31/03/2002 Capital & Liabilities:Sources Of Funds:Share capital 100 100Reserves & surplus 100 101Loans 100 7.82Current liabilities 100 102.25Total Sources of Funds 100 163.79Assets
Uses of FundsFixed Assets 100 100.52Investment 100 102.64Current AssetsInventories 100 97.60Advance & Sundry Debtors 100 75.05Cash & Bank Balance 100 101.66Total Uses Of Funds 100 163.79
Interpretation:
“Amul – The Taste of India” 120
The reserve & surplus is increased so that most of the profit is distributed to reserve &
surplus. So that it is good for the company. Net fixed assets is increased. The investment is
also increased. Inventories is decreased. So that it is good of the company. So that company
in not face the working capital, problem. The loans decreased 100 to 7.82 so that company is
to pay less interest. So that profit is increased. The company has relied on long term debt for
equity. So that it is good or the company.
Common Size Statement for B/S as On Date
Particulars 31/03/2001 31/03/2002 Capital & LiabilitiesSources Of FundsShare capital 12.23 7.46Reserve & Surplus 44.50 27.25Loans 9.23 44.04Current Liabilities 34.04 21.25Total sources of fund 100 100AssetsFixed Assets 56.53 58.93Investment 3.13 3.33Current AssetsInventories 18.00 18.22Advance & Sundry Debtors 14.63 11.39Cash & Bank Balance 7.71 8.13Total Uses Of Funds 100 100
Interpretation:
The proportion of the capital is reduced. Because of increasing the loan. So that the company
is to pay higher interest rate. The debt of the company is increased. The reserve & surplus of
the company is reducing. The proportion of the liability of the company is reducing from
34.04 to 21.25. The company has efficiently used fix assets to augment sales. Half of the
capital is invested in fix assets. The proportion of the inventory is moderate. The recovery of
the bill receivable is fast. Company is trying to reduce the fix cost.
Ratio Analysis
Ratios 2000-2001 2001-2002
“Amul – The Taste of India” 121
Liquidity Ratio
Current ratio 3.30 2.36Quick ratio 1.93 1.64
Turnover Ratio
Inventory turn Over ratio 1.17times 1.36timesDebtor turnover ratio 44days 36daysCreditor turnover ratio 20days 18days
Leverage Ratio
Debt equity ratio 0.75 5.90
Profitability Ratio
Net profit margin 0.25 0.31Return on Assets 0.54 0.61ROCE 1.00 1.32Return on total assets Turnover
0.26times 0.25times
Interpretation:
The company has high current ratio so it has the ability to discharge current liabilities by
generating cash from current assets. So it is good for the company.
The company enjoys high debt equity ratio it shows the aggressive entrepreneurial spirit of promoters. So the company has to increase the burden. Because company is to pay high interest.
Inventory ratio is low. So it shows the inefficiency of inventory mgt. Soothe Company is try
to increase the inventory turnover ration. It is bad for the company.
So that average collection period is low. So that it is good for the company.
The net profit margin is around o.31. So that company is try to increase the net profit. The
return on fixed assets is low. So that the money is blocked. The financial position is
historical cost convention and in accordance with the generally accepted accounting
principles.
Fixed Assets are values at cost.
Depreciation on fixed assets is provided on
written down values methods.
Raw Materials, packing Material, Semi Packed
Goods And Goods in Transit are valued at cost on FIFO basis.
“Amul – The Taste of India” 124
Finished goods in case of Anand, Kanjari,
Mogar and Khatraj are valued at the Ex-
factory price less 8%, which is fair estimation of the Direct Cost.
Excise duty applicable on Finished Goods stock
has been include in the valuation of Finished Goods.
Sales includes excise Duty.
Investment is for long term period and is stated at cost.
“Amul – The Taste of India” 125
DUPOINT ANALYSIS FOR THE YEAR 2001-02
“Amul – The Taste of India” 126
Return on Total Assets : 0.61 %
Net Profit Margin : 0.31% Total Assets Turnover : 0.26 times
N.P. : 14574181 Net Sales : 4687806783
Net Sales : 4687806783
Total Assets : 4077289829
Net Sales : 4690030381
Total Cost : 1485178511
COGS : 1024615466 Operating Exp.: 460563045
Fixed Assets:2402873468
Current Assets:1674416361
Cash + Bank:331549715
Debtors :464370707
Inventory :742763385
Others:135732554
R & D DEPARTMENT
The Research and Development facilities of Amul dairy endeavors continuously to bring out
new and delivery flavors. The company does not a point any special staff for approval of its
new vanities managers themselves keeping contributed in this regard.
The main purpose of its plant to increase export. They develop their production process to use
new technology. Research and Development has also taken a sponsored project.
“Amul – The Taste of India” 127
MICHALE PORTER`S FIVE FORCE ANALYSIS
According to Porter (1980) a firm must be analyzed in relation to its industry. Factors
outside the industry tend to influence all the industry’s firms in the same way and are
thus not as important to study.
To a large extent, industry structure governs the strategies open to the firms. The
profitability and attractiveness of an industry is dependent of the level of competition.
Competition in an industry originates from industry structure and goes well beyond
the behavior of individual competitors.
According to Porter, each industry has a potential profitability and the profitability for
the firms is dependent on the competitive forces in the industry. Porter identifies five
competitive forces that derive from the ambition to obtain as large share of the
profitability as possible. The five forces are the foundation of the five-force model.
Porter’s Five-Force Model:
In coping with the five forces, there are three potentially successful generic strategic
approaches to outperform other firms in an industry:
“Amul – The Taste of India” 128
Overall cost leadership:
The firm commits it self to being the cheapest alternative. Cost reduction must be
applied throughout the firm. The cost leader competes head on with all other firms in
the industry. Favourable history with first mover advantages
Amul dairy face tremendous level of competition. Further there is old and
conventional culture still exists in the Amul dairy. Every is trying to capture other’s
pie in the market share. Every day each player comes out with the new strategies and
innovative products. They always diffentiate their brand with those of competitors.
The major competitors of the Amul dairy include:
FOR MILK
I. Gayatri
II. Royal
III. Sardar
IV. Uttam
“Amul – The Taste of India” 129
V. Shreshta
FOR ICE CREAM:
I. Vadilal
II. Havmore
III. Dairy den
FOR GHEE:
I. Gayatri
II. Nestle
FOR MILK POWDER:
Nestle
FOR CHOCOLATE:
I. Nestle
II. Cadbury
The success of the national and local competitor’s brands includes effective
distribution system, advertising, good pricing policy etc. The major porter’s factor
can be listed and described in context of Amul dairy such as
1) Threats of new entrants
2) Bargaining power of suppliers
3) Bargaining power of buyers
4) Rivalry among competitors
5) Threats substitutes
Above factor can be shortly briefly known by following points.
“Amul – The Taste of India” 130
1) Threats Of New Entrants :
Amul dairy is co-operative society. That means “cooperation among
competitive” is the fundamental principle. Amul dairy is managed under the
norms of GCMMF and market the products under the brand name ‘Amul’,
which has good reputation at domestic and international level. Here, the raw
material procurement is very difficult for the new entrants. Consequently
Capital requirement is also high. Still new entrants are emerging such as
domestic and international players. So the treats of new entrants are moderate.
Government rules and regulation are not favourable for new entrants. Raw
material is also depending on the villagers who are mostly depend on good
rain. In the seasonal uncertainties will also restrict the new entrants to
establish the new plant.
“Amul – The Taste of India” 131
2) Bargaining power of supplier :
The objective of Amul dairy is not profit making. As it is a part of co-
operative society, it runs for the benefit of farmers those are the supplier of
milk and users of milk product. According the concept of the cooperative
society supplier has bargaining power to have a good return on his or her
supply. However, supplier has limited rights to bargain with the cooperative
society because it made and run for the sake of mass not for individual
benefit.
There is moderate bargaining power of the supplier. In olden days there were
not any kind of cooperative societies as the farmer was exploited. But,
nowadays the farmer’s right has been protected under the cooperative rules
and regulations, which ultimately result in moderate power of bargaining from
the supplier.
3) Bargaining power of buyers :
Amul dairy is having state of the art technology bring down from Denmark
German. And except loose milk vendor mother dairy is the single district level
seller of the milk. However the Amul dairy is bound by the norms of
federation. So, the pricing policy will be decided only by GCMMF and
customer would have not have bargaining power. In nutshell, the bargaining
power of the buyer is low.
4) Rivalry among competitors:
The products of the most of dairy which are listed under the Gujarat
cooperative milk marketing federation are marketed under the one unique
name ‘Amul’. Though, it is not having competition from the domestic level.
Amul dairy which is at the state level faces the competion from Nestle,
Britania, Gayatri dairy, sugam, Dairy dan. The major competitor of the Amul
“Amul – The Taste of India” 132
in ice-cream category is HLL’s kwality wall’s.Although, dairy is not having
tough competition from the local players but international level it is exist.
5) Threats Of Substitute :
Most of the milk and milk products substitute are very low. Milk powder can
be taken as a close substitute for the milk. In case of the ice-cream category
the close substitute is cold drink and soft drinks. So, the substitute of the milk
and milk product is completely low.
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SWOT Analysis of GCMMF
STRENGTHS:
Demand profile: Absolutely optimistic
Margins: Quite reasonable, even on packed liquid milk.
Flexibility of product mix: Tremendous. With balancing equipment, you can keep on
adding
to your product line.
Availability of raw material: Abundant. Presently, more than 80% of milk produced is
flowing into the unorganized sector, which requires proper channelization.
Technical manpower: Professionally-trained, technical human resource pool, built over last
30 years.
WEAKNESSES:
Parishability:
Pasteurization has overcome this weakness partially. UHT gives milk long life. Surely,
many new processes will follow to improve milk quality and extend its shelf life.
Lack of control over yield: Theoretically, there is little control over milk yield.
However, increased awareness of development like embryo transplant, artificial
insemination and properly managed animal husbandry practices, coupled with higher
income to rural milk producers should automatically lead to improvement in milk yields.
Logistics of procurement:
Woes of bad roads and inadequate transportation facility make milk procurement
problematic. But with the overall economic improvement in India, these problems would
also get solved.
Problematic distribution:
Yes, all is not will with distribution. But then if ice creams can be sold virtually at every
nook and corner, why can’t they sell other dairy products too? Moreover, it is only a
matter of time before they see the emergence of a cold chain linking the producer to the
refrigerator at the consumer’s home.
“Amul – The Taste of India” 134
Competition:
With so many newcomers entering this industry, competition is becoming tougher day
by day. But then competition has to be faced as a ground reality. The market is large
enough for many to carve out their niche.
OPPORTUNITIES:
“Failure is never final and success never ending.” Dr. Kurien bears out this statement
perfectly. He entered the industry when there are only threats. He met failure head-on and
now he clearly is an example of “ Never ending success.” If dairy entrepreneurs are looking
for opportunities in India, the following areas must be tapped.
Value addition:
There is a phenomenal scope for innovations in product development, packaging and
presentation. Given below are potential areas of value addition.
Steps should be taken to introduce value addition products like shrikhand, ice-cream,
panner, khoa, favored milk etc. This will lead to a greater presence and flexibility in the
market place along with opportunities in the field of brand building.
Addition cultured product like yoghurt and cheese lend further strength both in terms of
utilization of resources and presence in the market place.
A lateral view opens up opportunities in milk proteins thro’ casein, caseinates and other
dietary protein, future opening up export opportunities.
Yet another aspect can be addition of infant foods geriatric foods and nutritionals.
Export potential:
Efforts to exploit export potential are already on. Amul is exporting to Bangladesh,
Srilanka, Nigeria, and Middle East. Following the new GATT treaty, opportunities will
increase tremendously for the export of agri-products in general and dairy products in
particular.
THREATS:
“Amul – The Taste of India” 135
Milk vendors, The un-organized sector
Today milk vendor are occupying the pride of place in the industry. Organized dissemination of information about the harm that they are doing to producers and consumers should see a steady decline in their importance.
“Amul – The Taste of India” 136
CHALLENGES TO BE MET
Expansion up grading of plant and equipment to meet increasing demanded for quality and
quantity with the help of better qualified personnel.
Rapid increase in productivity while respecting the basic man land animal dynamic that is
control to dairy and agriculture development in India.
Development of new markets and expansion of old ones replacing additional system with
quality packaged milk products and vegetable.
Creating a national information network to ensure that accurate timely information is
available to all who need it.
Rapid progress towards the highest quality standard strengthens institutions leaders,
managers and members.
“Amul – The Taste of India” 137
RECOMMENDATION
Suggestion to Production department
1) Sources of raw materials the one and only source from where they procure milk are
village milk societies so they need to strengthen relation with villagers.
2) Department must have to develop strict standard for Quality control milk because
milk is perishable product so advance testing lab is required.
3) Though the good technology used by the dairy advance and automated technology
will be introduce to lower the rate of exposure of the product to human being.
4) All the workers should be allowed with good safety.
5) Sanitation shall be kept clean and hygienic.
Suggestion to marketing department
1) The Company should adopt scientific ways to allocate and manage the resources
for advertisements and sales promotion so as to gain optimum results
2) Amul should design it’s own marketing research system. It should hire people to
carry out systematic market research and surveying the following areas.
- To know consumer taste, preferences and their consumption and buying
pattern.
- Before launching new products in the market.
- Retailers and distributors survey from time to time to know competitors tricks
and practices as well as the satisfaction level.
3) Instead of advertising on national level, one more option that the company should try for
promotion of its brands is to give add on local cable TV network.
4) There should be no gaps in products like more flavor, more scheme, reasonable price etc to
compete the local players as well as competitors.
Suggestion to H.R. department
1) There should be professional approach.
2) They should provide professional training to field force for specific time period for
sharpening selling skills.
“Amul – The Taste of India” 138
FUTURE PROSPECTS for Dairy Industry
India’s dairy sector is expected to triple its production in the next 10 years in view of
expanding to triple its production in the next 10 years in view of expanding potential for
export to Europe. More over with WTO regulation 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 products sector. Also India today if
the low cost producer of milk in the world at 27% compare with U.S, 63% and Japan $2.8.
Also to take advantage of this low cost of milk production and increasing production in the
country. MNC are planning to expand their activities. Some of the milk producer have
already obtain quality standard certificate from the authorities this will help them in
marketing their products in foreign countries.
The urban market for milk products is expected to grow at 33% p.a to around Rs. 43500 crore
by year 2005. This growth is going to come from the greater emphasize on the processed
food sector and also increased in the conversion of milk into milk products. By 2005 the
value of Indian dairy produce is expected to be Rs. 10 lac million. Presently the market is
valued at around Rs. 700000 million.
“Amul – The Taste of India” 139
CONCLUSION
Our overall impression about the unit and GCMMF is inexpressible. In this report after
analyzing we can conclude that “GCMMF” is progressive very rapidly in the Indian market.
The performance of the unit is very impressive in the past year. Though there is tough
competition with Britannia, Nestle, Vadilal, Havemore etc. It has shown a good progress.
According to Amul and GCMMF organization – MARG surveys GCMMF remarked 24 th last
year among the top 60 industry in India.
In present Amul is become popular as The Taste of India. 50 years is a very big time for any
brand to establish itself successfully in the market. This give us golden opportunity to know
all functional area of amul. We know about the products of GCMMF, their quality, packaging
and price. The product of GCMMF demanded at very large scale because of their very
reasonable price.
Marketing of GCMMF made it so popular. Under the guidance of Dr. Vergees Kurein Mother
Dairy is growing day by day.
Hope and wise that the success story of AMUL going forever and other industries should take
inspiration from this successfully story.
We are sure and confident that successor capable and innovative my best wishes for future
success of the industry is an important part of our visit.
“Amul – The Taste of India” 140
BIBLIOGRAPHY
1. Books:
Kotlar Philip “Marketing Management”, Published by Pearson Education, 10th edition
K. Aswathappa, Human Resource And Personal Management 3rd edition