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Operation Flood & Amul

India Story

Symposium on Trade Networking for Cooperatives,


International Cooperative Alliance
26 July 2007 – Bali, Indonesia
Empowering the Milk Producer
ƒ Amul is owned by farmers –
the milk producers

ƒ Amul symbolises faith in the


Co-operative system which
places the instruments of
development in the hands of
farmers

ƒ Amul is the brand of 2.6


million milk producers of
Gujarat
ƒ Annual Turnover – Rs. 5500
crores (US $ 1.25 billion)
„ Dairying occupation of women mainly
„ Dairying provide women with means of sustenance
„ Enables them to make most household expenditures
without having to ask husbands for money
„ Saves small amounts for emergencies
„ Lead role played by all women dairy societies
Beyond a Brand
ƒ But Amul is much more than a brand

ƒ A vehicle for economic and social transformation

ƒ Amul signifies our farmers’ determination to


manage their own resources

ƒ Amul has a glorious tradition and legacy of more


than 60 years
The Genesis
ƒ It all began when milk became a
symbol of protest

ƒ Inspired by the freedom movement

ƒ Guidance from Sardar Vallabhbhai


Patel and Morarji Desai

ƒ Implemented by local committed


and selfless farmer leaders like
Tribhuvandas Patel

ƒ Founded in 1946 to stop the


exploitation of milk producers at the
hands of middlemen
The Birth of Amul

ƒ A humble beginning with 2 village societies and 247


litres of milk...

ƒ Registered on December 14, 1946, as the Kaira District


Co-operative Milk Producers’ Union Ltd.

ƒ Became role model for Co-operative Dairy development


The Turning Point
ƒ Visit of Prime Minister Lal
Bahadur Shastri in 1964

ƒ Impressed by the Amul


Model, he wanted to
“transplant the spirit of
Anand (Amul)” to other
places

ƒ At his instance, the National


Dairy Development Board
was set up in 1965 to
replicate the Amul Model
across the country
The Amul Model The Consumer

State Co-op.
ƒ Establishment of a direct Milk Mktg. Fed.
linkage between milk
producers and consumers by
eliminating middlemen
Dist. Milk Co-op.
Union
ƒ Milk Producers (farmers)
control procurement,
processing and marketing
Vill. Dairy Co-op.

ƒ Professional management

Milk Producer
The Village Dairy Co-op. Society
ƒ Voluntary Association of Milk Producers
ƒ Any one owning Cow/Buffalo can become member
ƒ One member – One Vote
ƒ Managing Committee elected by members who elect Chairman
ƒ Managing Committee hires employees
ƒ Milk Collection, testing for milk fat, sale of cattle feed – key tasks
ƒ Payment to milk producers on the basis of quality and quantity
The District Union
ƒ Primary Milk Producers Societies affiliated to a District Union
ƒ Owns and operates a feeder/balancing dairy plant
ƒ Fixing milk prices for village co-operatives a key task
ƒ Processing milk/milk products and managing macro-level inputs like
vet. health clinics, semen banks and cattle feed distribution to village
dairy co-op. societies – major activities
ƒ Chairpersons of village societies elect Board of Directors
ƒ Board of Directors elect the Chairman of the District Union
ƒ Union managed by professional team headed by Managing Director
The State Federation
ƒ Federal Body at the state level – Apex body of District Co-
operative Milk Unions
ƒ Marketing of Milk/Milk Products of Member Unions – key task
ƒ Common branding
ƒ Centralised marketing, Quality Control and Purchases
ƒ Efficient Pooling of Milk
ƒ Chairmen of Milk Unions are Board Members
ƒ Board Members elect Chairman of Federation
ƒ CEO is a Professional
AMUL MODEL
SALES SALES
REVENUE REVENUE
GCMMF 22 State
in Fedns.
Gujarat in India

13 District ADDL. RURAL


176 District
BONUS CATTLE
Unions in PRICE
FEED
HEALTH Unions in
DIFF. SCHEMES
Gujarat India
DIVIDEND
ON
VET. & AH
SHARES
SERVICES

12,792 1,13,152
Villages Villages
in Gujarat in India

2.6 million 12.6 million


in Gujarat in India
Amul and the Regional Avatars
Operation Flood

ƒ Launched in 1970

ƒ World’s largest Food & Development Programme

ƒ Producers’ Cooperatives Central Plank

ƒ Linking Dairy Development to Milk Marketing

ƒ Innovative Use of Commodity aid as investment to


finance dairy development

ƒ Three phases – 1970 to 1996


Operation Flood - I
ƒ Aim to capture a commanding
share of the milk market in the 4
metro cities

ƒ Financed by sale of Skimmed


Milk Powder and Butter Oil
gifted by the EEC through the
World Food Programme

ƒ Gifted commodities – 1,27,000


tonnes of Skimmed Milk Powder
and 40,000 tonnes of Butter Oil
recombined as Liquid Milk and
sold in 4 metros
ƒ Sold at prevailing market prices generating Rs. 1154 million

ƒ Stimulated milk production in hinterland areas


Operation Flood - II
ƒ Objective to establish
modern, viable and self-
sustaining dairy industry
ƒ Extended to cover 136
major milksheds linked to
386 urban consumption
centres
ƒ National Milk Grid formed to eliminate imbalances
ƒ 5 fold increase in domestic Milk Powder production

ƒ Seed capital raised from sale of gifted commodities –


242,000 tonnes of SMP; 68,000 tonnes Butter Oil and
23,000 tonnes Butter

ƒ Soft loan from World Bank worth Rs. 1536 million


Operation Flood - III
ƒ Consolidating achievements of
OF- I and OF- II
ƒ Rise in Milk Production leads to
significant drop in commodity
aid
ƒ Significant funding from internal
resources obtained by recycling
and reinvesting initial
commodity aid

ƒ World Bank Loan of Rs. 7550 million

ƒ Sale of EC donated commodities yield Rs. 1893 million


Salient Features of Operation Flood
Features OF - I OF - II OF - III
1970- 1981- 1985-
Period
1981 1985 1996
No. of Milksheds covered 39 136 170
No. of Amul Pattern DCs set
13.3 34.5 72.7
up (‘000)
No. of Members (Million) 1.8 3.6 9.3
Average Milk Procurement
2.6 5.8 10.9
(Million Kg. Per Day)
Processing Capacity in Rural
3.6 8.8 19.2
Dairies (Million Ltrs. Per Day)
Drying Capacity ) MTS per
261 508 842
day)
Liquid Milk Marketing
2.8 5 9.9
(Million Ltrs. Per day)
Operation Flood – Heralding Changes
ƒ Dairying made a remunerative
occupation for millions of India’s rural
poor
ƒ More than Rs. 70 billion flows back
annually to nearly 12.6 million members
of dairy cooperatives
ƒ Enormous Urban Market stimulus leads
to substantial production increase
ƒ Self-sufficiency in Milk Production
ƒ Modernisation and expansion of dairy
industry
ƒ Incremental return of Rs. 400 billion against a total
investment of Rs. 20 billion
Milk Production : India
120
94 100
100 84
88 91
74.378.1
70.8
80 66.3
53.9
60
31.6
40 23.2
17 20 21.2
20

0
1950 1968 1980 1995 1997 2002 2004 2007

MMT
Per Capita Availability: India
235
250 225
208 214 217
199
200 178

150 132 127 113 128


111
100

50

0
1950 1968 1980 1995 1997 2002

gms/day
Statistics
ƒ Milk Production – 94.5 MMTs, Expected 135 MMTs
by 2015
ƒ 278 Million Livestock – 180.5 million cattle, 82.8
million Buffaloes
ƒ 4 Million Sheep, 9.2 million Goats
ƒ Livestock population to rise to 322 million by 2015
ƒ Definition of milk should be enlarged to include
SMP, WMP, White Butter
Lessons from the Amul Model ….

„ Study demand system first rather than


production system
„ First mount successful marketing strategy
rather than organising producers
„ Superior design concept required to avoid
mismatch
„ Member control and professional mgmnt
Lessons from the Amul Model ….

„ Capturing commanding share of milk


market must precede growth of Village
Dairy Co-operatives
„ Important to capture market through
external intervention and then increase
procurement commensurate with
withdrawal of intervention
„ Milch animals must remain in hinterland
„ Different interventions needed for Dairy
Development
Key Learnings
„ Dairying has provided gainful employment to
millions, primarily women, in the villages
„ An investment of Rs 2000 Crores under Operation
Flood Program over 25 years is yielding annual
returns amounting to Rs 90,000 Crores every year
„ The producer price of milk has not dropped despite
four fold increase in production
„ Vibrant dairy industry has provided nutrition to the
masses
„ Self Sufficiency has been achieved in the vital food
sector !
Coops Empower Farmers through:

ƒ Strong Brands
ƒ Market Access to Rural produce
ƒ Incentive Prices
ƒ Employment to women
ƒ Nutrition to masses
ƒ Democracy in action
ƒ Education – focus on the girl child
World Bank observed that the Amul
Model has demonstrated that :
„ Rural development involves more than agricultural
production
„ High value of national “ownership” in development
„ The beneficial effects of dairy incomes in relieving
worst aspects of poverty even during droughts
„ The capacity of dairying to benefit the poor at low
cost

Source : World Bank Operations Evaluation Dept. Report


India : The Dairy Revolution, 1998
Amul Model has also demonstrated :

„ The capacity of single-commodity projects to


have multi-dimensional effects
„ The importance of commercial approach to
development
„ The importance of getting Government out of
commercial enterprises
Source : World Bank Operations Evaluation Dept. Report
India : The Dairy Revolution, 1998
AMUL TODAY
The Market Leader

ƒ India’s largest Food Products Marketing Organisation


ƒ A Billion Dollar Organisation
ƒ Annual turnover over Rs. 4278crores (US$ 1.1 billion)
ƒ Milk Procured from 2.6 million farmer members
ƒ 12792 Village Dairy Co-op. Societies
The District Unions

AMUL DAIRY, ANAND SABAR DAIRY, HIMATNAGAR

DUDHSAGAR DAIRY, MEHSANA BANAS DAIRY, PALANPUR


The District Unions

DUDHDHARA DAIRY, BHARUCH UTTAM DAIRY, AHMEDABAD

SURSAGAR DAIRY, SURENDRA NAGAR

RAJKOT DAIRY, RAJKOT GANDHINAGAR DAIRY, G’NAGAR


The District Unions

SUMUL DAIRY, SURAT BARODA DAIRY, VADODARA

PANCHAMRUT DAIRY, GODHRA VASUDHARA DAIRY, VALSAD


Mother Dairy, Gandhinagar

ƒ A Unit of Gujarat Co-operative Milk Marketing Federation Ltd.


ƒ Commissioned in September 1994
ƒ New 100 MTS per day Powder Plant installed in March 2006
ƒ State of the art dairy
Manufacturing Facilities
ƒ Own Dairy Plants : 30

ƒ Outsourcing from Dairies across India:9

ƒ Total Milk Handling Capacity : 10.16 mlpd

ƒ Milk Collection in 2006-07 : 2.38 billion ltrs

ƒ Plants with one mlpd Capacity : 5

ƒ Milk Drying Capacity: 600 tpd

ƒ Cattle Feed Mfg. Capacity : 3200 mtd


GCMMF – Member VDCS
12340 12792
13000
11200 11400 11615
10852
11000 10180
8690
9000
6240
7000 5580

5000

3000

1000

-1000
2

7
5

'01-0

'02-0

'03-0

'04-0

'05-0

'06-0
84-8

88-8

93-9

97-9
GCMMF : Milk Producer Members
(Million)
3
2.5 2.6
2.4
2.5 2.22 2.27 2.36

2 1.67

1.5 1.23
1
1

0.5

0
5

02

03

04

05

06

07
-8

-8

-9

1-

2-

3-

4-

5-

6-
84

88

93

'0

'0

'0

'0

'0

'0
GCMMF:Average Milk Procurement
(Million kgs. per day)
7 6.3 6.7

6 5.8
5.2 5.1
4.6
5
4
4 3
3 2.5
1.7
2
1
0
5

7
-8

-9

-9

-9

-0

-0

-0

-0

-0

-0
84

89

93

97

'01

'02

'03

'04

'05

'06
The Largest Exporter

ƒ India’s Largest Exporter Of Dairy Products


ƒ UHT Milk, Ghee, Cheese, Butter, Paneer, etc. exported in
consumer packs
ƒ Whole Milk Powder, Skimmed Milk Powder in bulk
ƒ Major Markets : Gulf, SAARC Region, USA, Singapore,
Hong Kong, The Philippines, Cambodia, Japan, Vietnam,
China, Australia and Africa
IT Company in Food Business
ƒ Adopted Information Technology Integration
as a Strategic Thrust in 1995

ƒ I.T. right from Automatic Milk Collection


Systems, e-mail and internet connectivity at
village level

ƒ Customized enterprise resource planning for manufacturing units

ƒ Introduction of cyber-shops all over India and in some parts of


USA, Singapore and Dubai

ƒ Geographical Information System with digital city maps at major


cities implemented for distribution planning

ƒ All sales offices spread over the country have e-mail connectivity
and send daily reports on sales and inventory to Anand
Growing from Strength to Strength
ƒ 47 Sales Offices
ƒ 3,000+ Dealers

ƒ 500,000 + Retailers

ƒ Reach extends to all


parts of the country
and many parts of
the world
Awards
ƒ GCMMF bags Rajiv Gandhi
National Quality Award -
1999 in Best of All Category

ƒ Award a tribute to vision,


commitment and
professionalism in journey
towards quality

ƒ The IMC Ramkrishna Bajaj


National Quality Award –
2003 for adopting
noteworthy quality
management practices for
logistics and procurement
ƒ APEDA Export Award continuously for 10 years
BRAND BUILDING OF AMUL
Origin of the Brand
10 Create
Brand
1 Brand Know
Responsibility Identity 2 Value
Proposition

Track Have
8 Brand 3 Brand
Equity Building Position
a Strong
Brand
4 Execute
Communication
Leverage on Program
7 Existing
Brands Consistency
Synergize 5 Over
6 Brand Time
System
Source- David Aaker
Create an Identity for the Brand

BRAND AS SYMBOL
Create an Identity for the Brand

BRAND AS PERSON – ‘CCC’