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Going Organic is fine but Amul not interested in going public in the stock markets Jayen Mehta

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Jayen Mehta, MD, Amul India, says as a brand, if Amul can connect the producers with the consumers, giving them good quality food, free from chemical fertilisers and pesticides, I think there will be a great contribution not just to the health of the country but also to improving the carbon content and productivity and regenerating the soil so that we can feed 1.5 billion people over the next several decades.

Let’s chat regarding your organic food foray. It is a big market. How differentiated would your product lines be? There are already very aggressive incumbents out there. How much do you aim to carve out for yourself in the next two to three years?

Jayen Mehta: The point which we are going to discuss is affecting all of us, for what we eat and what is the quality of food that we eat, is it free of chemical fertilisers or pesticides and that is what brings Amul into the space of organics and that is where our effort is to connect the producer who wants to convert to organics and find a market to consumers who want good quality certified organic products from a brand which they trust. This is what our effort has been and we launched about 25 products in the organic space be it atta or the different types of rice or different types of dals and pulses and also ginger and haldi and also getting into sugar and jaggery and different types of masalas and bajra and all that stuff.

As a brand, if we can connect the producers with the consumers, giving them good quality food, free from chemical fertilisers and pesticides, I think there will be a great contribution not just to the health of the country but also to improving the carbon content and productivity and regenerating the soil so that we can feed 1.5 billion people over the next several decades.

Just to probe a little bit more about the organic foray that you are making right now because the kind of might and the kind of brand and the kind of trust that Amul brings with it, it can take on all the MNC and all the private companies which are in the food market right now. But is the procurement going to be like your milk businesses, is it various suppliers that are going to come together under Amul, and then you take it forward and supply it forward?

Yes, you need to connect the producer with the consumer and when it comes to Amul and when it comes to organic, it is more of the certified farmers and producers, So, there is a whole lot of activities happening in the background. We collect milk from the farmers, we collect the raw material which is the grains or the wheat and the pulses from certified organic farmers, and then process it in facilities that are certified organic.

We have a lab that tests the products which are free from pesticides and chemical fertilisers and so on. So, it is a lot of more collaborative effort and more importantly, a new multi-state cooperative which has been formed recently. It is the multi-state cooperative on organics that Amul along with NDDB, KRIBHCO, NCDC, NAFED has promoted it. So, the job of getting farmers into organic, helping them convert to organic, helping them getting certification, waiting and handholding with them for the three-year period which is required to get them certified and eventually setting up facilities to process and market it.

So, while we are doing it, it appears that Amul is doing it on its own. There is a whole lot of institutional and cooperative support in the background which has also started working on this initiative and together we want to make this change happen at scale nationally and not just with Amul brand. They also have a brand, which the new multi-state cooperative we are promoting is having, the Bharat brand. So, together we will be able to make a big difference in this initiative that we have taken recently.

That is the other thing that I wanted to probe in the next four to five years. How will Amul reach and cover the entire span of the country now barring a few products, it is a very region-specific brand right now. How do you plan to take this pan-India and even globally?
Jayen Mehta: We need to reach out to farmers who are already certified or keen to do certification. There are several states of the country where you find organic products, but then nobody has done handholding for them. So, yes, it is a nationwide initiative, almost from Gujarat to the northeast of Sikkim and Himachal and the Himalayas down south, we find a lot of good work happening across the country.

So, Amul and the new multi-state cooperative organics both will do handholding of all these farmers, even encourage more farmers elsewhere to get into this space, work on getting the certification of their soil, and use Amul economy model where they can even convert the dunk of our cattle into organic manure, get back to the field, use it extensively with the support that is required for a farmer and make this change happen and, of course, the brand has to have a nation-wide distribution network which already we are there in more than 50,000 outlets.

Amul is there in a million outlets, we need to catch up a lot but that requires a lot of consumer education as well and that is where we also want to democratise organic people, think that organic products are two to three times more expensive than the normal stuff, which is not the case. So, this is what our effort in educating the farmers, educating the customers, and being a bridge between both so that we can make a difference both in the lives of the farmers and consumers as well.

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Amul will be s such a desirable company to have in portfolios with a Rs 80,000-crore turnover. It has the best of products. But you are a cooperative. Would you ever be a listed company? Would India see its largest FMCG company come to the market anytime?
Jayen Mehta: We are part of your portfolio in any case. If any Indian spends on food and dairy products, Amul and the dairy products is the single largest segment, so I am sure we touch each one of you. India’s largest listed company has slightly fewer shareholders as compared to us, which is the 3.6 million farmers. So, you need to be a person who has a cow or buffalo to own a share of Amul right at the village cooperative society level.

Unfortunately, the model does not permit the equity market presence for a very simple reason if we are in the market, then we need to be facing the investors and trying to please them, which means we will displease our producers because when you spend Rs 100 on Amul products, 85% goes back to the farmer and we work on very low margins, very low EBITDA and the entire purpose is very clear that consumers get the best quality products at most affordable price and the producers gets the higher shares of the consumer revenue.

Now, this is the highest in the world. Nowhere in the world does a producer get more than two-thirds share of the consumer’s rupee whereas in Europe, the US, Australia, and New Zealand producer only gets one-third share of what the consumer spends. So, fortunately, this model is working well for the producers. It is working well for the consumers. It is seen as a model which can be replicated not just in India but around the world and obviously, more than a million Indian consumers are part of the Amul family as well. We will be a part of the journey that you are but the capital market does not seem to be a possibility for us, at least in the near future.

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