Business Today

Butter girl gets tough!

Never before has Amul been buffeted by as much competition as it is today. But India's largest dairy foods player has an edge: Its unique "cow-to-customer" model.

T.V. Mahalingam        Print Edition: April 18, 2010

At a dairy farm in Manchar on the outskirts of Pune, a fourhour drive from Mumbai, about 200 cows await their turn to be milked. They wait like shoppers in the billing queue of a supermarket, quiet and orderly. One by one, the cows step onto a 20-feet rotating circular platform and rubber hoses are attached to their udders. Once milked, the cows themselves kick away the hoses. "Minimal human effort, maximum milk produce," gushes Devendra Shah, Chairman, Parag Milk Foods, which started its operations in Manchar in 1993.

The company has spent over Rs 4 crore on its rotary milking parlour, the first in India. The 3,000-plus Holstein cows, purchased at Rs 40,000 apiece, are treated to a special diet of calcium-rich feed and mellifluous bhajans in their sheds. "The music increases their milk produce," claims Shah, citing that each cow produces 25 litres of milk a day. "It's total cow comfort technology. These are the standards we need to adopt if we need to compete with international players in products like cheese," he adds. And cheese is where Shah's immediate ambitions lie.

With a turnover of about Rs 550 crore, Parag Milk Foods has been selling milk and ghee in Pune and Mumbai since the mid-90s. But in the last one year, the company's focus has shifted to products like cheese and flavoured yogurt. It has invested Rs 110 crore to build what it claims is Asia's largest cheese plant (with a capacity to process 40 tonnes of raw cheddar daily). "Cheese from this plant is right now being sold in South Korea. Within a few months of our launch, we have cornered a 30 per cent market share of cheese sales at modern retail outlets in Mumbai. Our competitors are the Krafts and Laughing Cows of the world. With our superior product quality, we are not even competing with the Indian dairy players," says Shah.

Some 450 km away, lounging in his spartan office in Anand in Gujarat, the mecca of the Indian cooperative movement, B.M. Vyas would be tempted to disagree with Shah's claims. After all, as MD of India's largest and only billion-dollar cooperative dairy player, the Gujarat Cooperative Milk Marketing Federation (GCMMF), Vyas has seen competitors make more audacious claims in his 16-year tenure as MD. GCMMF sounds like a mouthful, but the brand name under which the cooperative sells its products, Amul, is, perhaps, the most recognised and revered dairy brand across the country.

This despite the fact that, unlike Parag Milk Foods' state-of-the-art dairy farm, Amul's milk is collected by dairy farmers every morning largely by hand. "The fact that 2.7 million farmers wake up early each morning to milk their cows and then give it to us is our biggest strength," says Vyas. He is no stranger to pretenders challenging Amul's dominance. "Amul has seen competition in the past. It really does not worry us," he says matter-of-factly.

A mildmannered, portly man of 59 years, Vyas has managed the cooperative since 1994. When he took over Amul, GCMMF's turnover was a little over Rs 1,000 crore. Today, that has increased over six times to Rs 6,700 crore. Back then, Amul was viewed as a brand that would not survive the pressures of competition in the post-liberalisation era. Vyas and Amul have not just survived the onslaught of competition, but have often taken the fight to their territory (as it did in ice creams a decade ago, when it dethroned Hindustan Unilever Ltd (HUL)—then Hindustan Lever Ltd—from pole position).

Taking on competitors in a category or two at the same time is something Amul has done before. But the threat today is different, and huge. That's because never before has Amul been buffeted by as much competition as it is today, across every category it operates in—right from pouched milk and butter to cheese and ice creams. Other than HUL and Nestle, multinational giants like Kraft (which recently acquired Cadbury globally, thereby getting a passage into India) and Groupe Danone are beginning to flex their muscle. "We hope to bring some of our big brands like Kraft Cheese and Oreo cookies to India. With Cadbury's distribution strengths, we can push some of these brands in India," Sanjay Khosla, President (Developing Markets), Kraft, recently told BT. Groupe Danone is looking at tapping into the small, but fast-growing flavoured milk market. It's currently testing a chocolate-flavoured fortified milk in Hyderabad.

Regional players, too, are upping the tempo. Other than Parag, there's Amrit Group in Kolkata, which plans to launch valueadded milk products. Says Harish Bagla, MD, Amrit Group: "We are coming up with various value-added products like flavoured milk, dahi, lassi, cheese, butter, paneer and ice cream." Bagla's also exploring tie-ups with international companies. Finally, don't forget Johnnies-come-lately like Zydus Wellness—which has carved a niche for itself in butter alternatives—that are opening up new markets.

The biggest threat to Amul, though, could well come from its one-time friend but now a bitter rival, Mother Dairy, a subsidiary of the National Dairy Development Board (NDDB). In mid-February, Amul made a bold claim when it declared itself as the #1 player in the branded packaged milk segment, with sales of 1.45 million litres daily, in the Delhi market, a traditional stronghold of Mother Dairy. Within a day, the New Delhi-headquartered Mother Dairy shot back. "Mother Dairy sells approximately 29 lakh litres of milk per day in Delhi NCR, which is about twice as much as that of the nearest competitor," says Paul Thachil, CEO (Dairy & Foods), Mother Dairy Fruit & Vegetable.

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