Since he took charge as the managing director at Gujarat Co-operative Milk Marketing Federation (GCMMF), R S Sodhi has been working towards making Amul a younger brand. To achieve this, this 53-year old has been constantly interacting with youth from both farming and consumer circles. However, there are several challenges for the country’s largest dairy product company from home-grown as well as global majors in dairy products. In an interview with Kalpesh Damor and Vinay Umarji, Sodhi talks about how regional players have also emerged as strong competitors. Edited excerpts:
Nestle is setting up a plant in Gujarat; does that pose a threat to Amul?
For Amul, competition is not a new thing; neither on the procurement side nor on the market side. Be it in ice cream, baby food, dairy whitener, condensed milk or cheese, we have been fighting it out with big multinationals. On the procurement side, Gujarat farmers own the production, processing and marketing activities and hence they get the maximum out of a consumer rupee. In Gujarat, a farmer gets Rs 450 per kg of fat, while a farmer in states like Punjab gets Rs 400-410 per kg of fat.
Amul faces competition across all product categories. We are the leader in packed liquid milk in the country but state-wise we have competition from local co-operatives in milk. In baby food or dairy whitener, we have competition from multinationals like Nestle. In ice cream and cheese, again, we have competition. But more than the national players, the competition we find tough to fight is from regional dairy players. Even in the near future, we don’t see any private dairy company fighting out with us nationally in a big way. This is also because the easier thing is to set up a processing plant. If you have a deep pocket, you can set up 10 to 15 plants. After that comes building the brand. Even that can be built if you have enough money. But the most difficult thing to do is to have a full-fledged procurement system. Creating a network of milk procurement from 3.2 million farmers, that too twice a day, like Amul does, will take decades for a new player. Throughout the year, they will have to give good prices and gain farmers’ confidence.
Amul has forayed into a number of new products. Are you spreading yourself too thin?
We are a dairy company. If we don’t launch, who will? Amul caters to a mass consumption category. Name at least one of our products that are meant for the elite. Be it paneer, buttermilk, baby food or ice cream, it is consumed by the masses. Our pricing is also meant for the masses. We have to ensure that all of the 115 lakh litres per day of milk is consumed. Moreover, if any value addition takes place, our farmers get to earn a few extra rupees.
Plus, there is so much demand and growth potential in the market that if we don’t do it, someone else will. For us, it doesn’t amount to being involved in too many things. We feel there is much more to do. For instance, we are yet to get into Indian sweets. But its long shelf life and lack of research in packaging for such long shelf life has limited us in launching our own range of sweets. Even if we make Amul barfi we won’t be able to market it the way we do Amul chocolates or cheese across India.
Amul has four different types of distribution channels. Are you fine-tuning them?
Yes. We are opening more depots, which houses all four kinds of our distribution channels — ambient, chilled, frozen and fresh. We have 48 depots across the country and are looking to add five more in places like Jabalpur, Srinagar and Rajkot, apart from the east. We are also expanding our Amul Parlours that are currently 7,000. With our stand-alone stores, we are able to reach to the remotest parts at our consumers’ doorsteps. So, tomorrow you are not pressured if big retailers come and threaten your margins.
Can you sustain against the opening up of FDI [foreign direct investment] in retail?
Yes absolutely. Ours is an open economy. This will definitely open up competition. But don’t say the opening up of FDI in retail will benefit farmers. Don’t say “we are allowing FDI for the benefit of farmers”. Don’t give that excuse. Experience says farmers in countries where the sector was opened earlier have not benefited. Anyway, Indian supply chain works at a very low margin, which will be difficult for them [multinationals].
Amul has been trying to make the transition to connect with younger customers. Have the efforts been enough?
In all our communication including the recent advertisements on Olympics, our sponsorship of the Olympic Indian team as well as our latest packaging have focused on the younger generation. All our new products like frozen yogurts or “Kool” beverages are targeted towards the younger generation and have received wide acceptance. On our Twitter account, most of the comments highlight our youthful products like Amul Lassi and Amul Kool.
However, we cannot spend on advertising, branding and communications as much as other carbonated cola drink companies are spending. We can’t even spend 10 per cent of what they do. But awareness for healthy foods is increasing among youths.
There are so many income channels available for farmers. Is it a challenge for Amul to keep farmers interested in milk production?
It is a serious challenge for us to keep the next generation interested in dairy farming. This is also one of the reasons for offering competitive procurement prices to farmers. The young generation is not interested in continuing dairy farming the way his or her father was. The young generation want dairy farming to be a very honourable and dependable source of income, and not a second option to agriculture. For this, we are looking at commercialising dairy farming by helping them maintain 25 to 30 strong cattle, buy modern milking machines and follow best practices for higher productivity.
Amul is not strong in southern India. Any plans for that region?
After Amul, the second-largest dairy company is Nandini of Karnataka. So far we were able to set up most of our distribution networks in terms of depots and outlets in north, east and west India. Now that we are getting more milk, we will look into expanding in southern India. We are today not present in terms of fresh dairy products in south. There are very strong players in consumer dairy products in the south and that gives us healthy competition.
The likes of Nestle and Cadbury are market leaders in chocolates. Where does Amul stand?
We entered the chocolates industry 35 to 40 years ago to give cocoa growers in Kerala remunerative prices. We have put a small plant that runs on 100 per cent capacity. But we have to see our priorities. We have to think whether we should invest in brand building for our dairy products or for chocolates. Nevertheless, we are investing in chocolates. We are not a chocolate company, we are a dairy company.
