And now, an app for milk

Amul to launch mobile app in a month; Mother Dairy, too, plans an app to increase consumer loyalty

Soon, your morning walks to the nearest milk booths might become a thing of the past as dairy majors such as Amul and Mother Dairy plan to launch mobile applications to reach out to consumers directly.

While the move is expected to enhance consumer engagement with the brand and boost sales, margins would be a concern.

R S Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and sells milk and dairy products under brand Amul, said they were test-marketing a mobile application in the Ahmedabad market and a launch could happen soon.

Amul already sells through e-grocers, but the share of online sales in its overall volume is less than one per cent of its turnover. For that matter, Amul has not tasted success with modern trade as well, which comprises just about seven per cent of its overall sales, Sodhi said.

Senior officials in the Federation pointed out that modern retail itself has seen ups and downs in recent times with several of the major retailers closing down outlets that were not profitable.

Amul, however, has tried its hands at different modes of reaching out to its consumer even in the 1990s. Around 1998-99, Amul had tried to connect with the consumer directly, through emails. One could send an e-mail to Amul ordering products (a minimum value of ~200 or so), and the mails would be distributed across Amul's branches, which would then organise for a delivery through the distributor. The move, definitely ahead of its time, did not see much traction then as internet penetration was low at that time.

This time around, Amul has engaged Ahmedabad-based firm Infibeam to develop the application and the latter would also be responsible for the last-mile connectivity. Sodhi said once a customer places an order through the app, Infibeam would make arrangements for picking up the product directly from the distributor and delivering it to the customer's doorstep.

At present, the distributor's margin is 3.5-5 per cent. So, will this model work for low-margin products such as liquid milk, which is the most bought item by any household. Liquid milk comprised Rs 1,100 crore of Amul's Rs 2,300-crore turnover last month.

"The idea is to make the entire product range available to the consumer, which he or she does not get at the nearby store she visits. Plus, they can also order a big assortment. Margins would be thin," said an official. The app may be launched in a month-and-a-half and it would be a city-wise phased launch, starting with Ahmedabad.

It is definitely not a game of margins. Subhashis Basu, business head (dairy products), Mother Dairy Fruit & Vegetable, said: "We are selling through e-grocers. However, volumes are not even 0.5 per cent of our sales. It is a growing medium. Customers, however, would prefer to buy their needs under one umbrella application, which can cater to their entire grocery needs, rather than logging into different apps for different products."

Pouched milk -- a high-volume, low-margin item -- is largely bought by households through retail outlets. The supply chain for milk is already well established, and only large online grocers can afford to manage the cold-chain logistics involved with storage and delivery of milk efficiently. Amul has around 10,000 distributors and one million retail outlets.

Infibeam did not comment on the matter citing a confidentiality agreement. It had informed the BSE sometime back that the company had executed an agreement with GCMMF to provide online e-commerce and mobile platform with integrated logistics framework for on-demand customer purchase of Amul products.

Mails sent to BigBasket on what was the demand for dairy products in its overall sales did not elicit any response.

The success of the mobile application, however, could help Amul achieve its ambitious target of a turnover of Rs 30,000 crore by 2017-18. The dairy major clocked a turnover of Rs 23,000 crore in FY16, and the cooperative has grown 187 per cent in the past six years, which implies a cumulative average growth rate of 19.2 per cent during the period.