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5% shift from loose to packed milk can create one Amul

To wear the hat of Amul Managing Director is not easy, and who would know it better than Jayen Mehta, the man who succeeded RS Sodhi as the chieftain. Amul, symbolic of India’s white revolution, has witnessed to its own set of controversies. “We take controversies in our stride,” said Mehta.

Despite the competition, Amul has retained its brand value. Is it just because of having the first mover advantage or a proper strategy? businessline’s Richa Mishra and Rutam Vora caught up with the Managing Director of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), makers of brand Amul, on the sidelines of the recently-held Food Conclave 2023 at Hyderabad on issues relating to new approaches in the dairy market development, one region one product concept, margin pressures and some controversies around Amul.

Amul is controversy’s best child. You seem to be attracting controversies like anything. So, how do you deal with that being in this position?

There are some things you can’t control. There are some things you can’t oppose as well. People who talk about Amul in one way or another other are consumers of Amul products, if not current, then potential. So, we take controversies in our stride. We deal with them with facts. End of the day, truth prevails. Besides, the target is to convey the factual position on any issue. The issue we are talking about is our entry into a neighbouring State. Our intention is always clear working with producers and consumers consistently across the length and breadth of the country. And that’s what helps the brand sustain, keep its relevance and sometimes benefit also from some controversies.

Amul brand has always been seen as a game changer. Today we see people talking about the sachet economy also. What is your take on the concept of a sachet economy with more players in the market?

Talking specifically about milk, there is a big shift of consumers moving in from loose and unorganised sectors to packaged and branded products. This has been a trend in the urban areas for a long time. But post-Covid we realised this shift has got accelerated across India. When people move from unorganised to organised, from loose to packaged, they look for trusted brands. That’s where brands such as Amul come in. We have the legacy of providing value-added products with the best quality at affordable prices. The opportunity is very large. In India, even if 5 per cent of people decide to shift from loose milk to packaged milk, it can create one more Amul every year — a $9 billion company with nearly 300 lakh litres of milk daily.  We are sensing this shift happening in a very big way. Therefore, we are using this opportunity to expand our presence by increasing milk processing capabilities, going to a large number of villages, encouraging more farmers to get into organised co-operative dairy.  We are very clear that this is one trend we want to catch on and grow the business for the benefit of both the producers as well as the consumers.

Today the industry is talking about region-specific categories. Can you elaborate on the concept of one region, one product?

This is a unique but very important concept because if the consumers are willing to pay a premium for a certain type of products, then it makes sense for the producers to tap this demand by creating a portfolio around it. In our case, our producers are the owners of this brand. So, it is all the more important for us to be able to segregate, say buffalo milk and market it. Also products such as paneer and Buffalo mozzarella is globally accepted with premium over regular cheese. These are opportunities by adding value and meet the unmet demand of the customers who choose this. So this pent-up demand can be translated at a higher value to the consumers. Same applies to the different breed of cattle. There are people who seek variety, who seek certain premium in what they consume and after we meet the technical challenges of product of processing a pure cow milk or Gir cow milk or pure buffalo milk, all these are opportunities. In Kutch region, we are working with camel breeders and developing that market.

Amidst increased thrust on growing milk production, where do we see growth coming from?

The opportunity for organised sector and all the players is huge. Growth is bound to come in a big way, as it is supported by consumer shift, which I mentioned earlier. It is not to grow from one side of the spectrum. It is the entire supply chain that will contribute in growth.  Starting from feeding of the cattle in the villages to setting up modern processing plants and distribution network of milk and milk products. We have a unique supply chain to handle milk and milk products in all the four different distribution highways, as we call them. Fresh products with just 48-hour shelf life are sent from the plant to market, we have 98 dairy plants across India. Second is the ambient products that move at room temperature and chilled products like butter, cheese and chocolates which move at 0-4°c, while ice cream and frozen range at -20°c . We do business in a very cost-effective manner and ensure value for many as we deal with millions of producers and are value for money for our millions of consumers.

Have you identified challenges coming your way particularly in the backdrop of issues like inflation, availability of fodder among others?

Yes. Inflation to consumers is actually income to producer. It is a very tightrope balancing that we need to do. The farming community is under pressure and milk producers are basically small and marginal farmers. So, as a cooperative which is owned by farmers, we need to always look into their interest. But simultaneously, on the other side, for consumers who are also depending on milk for their nutrition requirements, it’s a family product. So, It has to stay within that affordability bracket. We always ensure that the price of milk is always in line with the inflation and ensure that the consumers are not bearing that excessive pressure from the producer side. And to support the producers, we continuously work on improving the productivity, try to bring down the cost of production so the producers stay happy and consumers stay happy. And together we are able to grow the market.

This is not an easy thing, but this is not a recent thing too.

In this backdrop, are the margins sustainable right now for the dairy sector broadly and Amul in particular?

I can’t talk about the rest of the players because private sector works with different EBITDA margins.  But if you have the mandate to pass on the largest share of the consumers’ rupee to producers, you have to operate very efficiently with very low cost, very low overheads and manage the business extremely professionally. For instance, for marketing we spend less than 1 per cent of our turnover, whereas private companies in any other sector would spend 5-12 per cent on this. This is a genuine benefit for both producer and consumers.

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