Operation Flood & AmulIndia Story

Symposium on Trade Networking for Cooperatives,

International Cooperative Alliance

26 July 2007 – Bali, Indonesia

Empowering the Milk Producer

Amul is owned by farmers –the milk producers

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

Amul is the brand of 2.6 million milk producers of GujaratAnnual Turnover – Rs. 5500 crores (US $ 1.25 billion)

Dairying occupation of women mainlyDairying provide women with means of sustenanceEnables them to make most household expenditures without having to ask husbands for moneySaves small amounts for emergenciesLead role played by all women dairy societies

Beyond a Brand But Amul is much more than a brand

A vehicle for economic and social transformation

Amul signifies our farmers’ determination to manage their own resources

Amul has a glorious tradition and legacy of more than 60 years

The GenesisIt all began when milk became a symbol of protest

Inspired by the freedom movement

Guidance from Sardar VallabhbhaiPatel and Morarji Desai

Implemented by local committed and selfless farmer leaders like Tribhuvandas Patel

Founded in 1946 to stop the exploitation of milk producers at the hands of middlemen

The Birth of Amul

A humble beginning with 2 village societies and 247 litres of milk...

Registered on December 14, 1946, as the Kaira District Co-operative Milk Producers’ Union Ltd.

Became role model for Co-operative Dairy development

The Turning PointVisit of Prime Minister LalBahadur Shastri in 1964

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

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. Milk Mktg. Fed.Establishment of a direct

linkage between milk producers and consumers by eliminating middlemen

Milk Producers (farmers) control procurement, processing and marketing

Professional management

Dist. Milk Co-op. Union

Vill. Dairy Co-op.

Milk Producer

The Village Dairy Co-op. SocietyVoluntary Association of Milk ProducersAny one owning Cow/Buffalo can become memberOne member – One VoteManaging Committee elected by members who elect ChairmanManaging Committee hires employeesMilk Collection, testing for milk fat, sale of cattle feed – key tasks Payment to milk producers on the basis of quality and quantity

The District UnionPrimary Milk Producers Societies affiliated to a District UnionOwns and operates a feeder/balancing dairy plant Fixing milk prices for village co-operatives a key taskProcessing 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 activitiesChairpersons of village societies elect Board of Directors Board of Directors elect the Chairman of the District UnionUnion managed by professional team headed by Managing Director

Federal Body at the state level – Apex body of District Co-operative Milk UnionsMarketing of Milk/Milk Products of Member Unions – key taskCommon brandingCentralised marketing, Quality Control and PurchasesEfficient Pooling of MilkChairmen of Milk Unions are Board MembersBoard Members elect Chairman of FederationCEO is a Professional

The State Federation

12.6 million in India

1,13,152 Villages in India

176 District Unions in

India

22 State Fedns. in India

AMUL MODEL

SALES REVENUE

SALES REVENUE

BONUS

DIVIDEND ON

SHARES

ADDL. PRICE DIFF.

CATTLE FEED

VET. & AH SERVICES

RURAL HEALTH

SCHEMES

GCMMF in

Gujarat

13 District Unions in Gujarat

12,792 Villages

in Gujarat

2.6 million in Gujarat

Amul and the Regional Avatars

Operation Flood

Launched in 1970

World’s largest Food & Development Programme

Producers’ Cooperatives Central Plank

Linking Dairy Development to Milk Marketing

Innovative Use of Commodity aid as investment to finance dairy development

Three phases – 1970 to 1996

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

Financed by sale of Skimmed Milk Powder and Butter Oil gifted by the EEC through the World Food Programme

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

Sold at prevailing market prices generating Rs. 1154 million

Stimulated milk production in hinterland areas

Operation Flood - IIObjective to establish modern, viable and self-sustaining dairy industry

Extended to cover 136 major milksheds linked to 386 urban consumption centresNational Milk Grid formed to eliminate imbalances

5 fold increase in domestic Milk Powder production

Seed capital raised from sale of gifted commodities –242,000 tonnes of SMP; 68,000 tonnes Butter Oil and 23,000 tonnes Butter

Soft loan from World Bank worth Rs. 1536 million

Operation Flood - IIIConsolidating achievements of OF- I and OF- II

Rise in Milk Production leads to significant drop in commodity aid

Significant funding from internal resources obtained by recycling and reinvesting initial commodity aid

World Bank Loan of Rs. 7550 million

Sale of EC donated commodities yield Rs. 1893 million

Salient Features of Operation Flood

9.952.8Liquid Milk Marketing (Million Ltrs. Per day)

842508261Drying Capacity ) MTS per day)

19.28.83.6Processing Capacity in Rural Dairies (Million Ltrs. Per Day)

10.95.82.6Average Milk Procurement (Million Kg. Per Day)

9.33.61.8No. of Members (Million)

72.734.513.3No. of Amul Pattern DCs set up (‘000)

17013639No. of Milksheds covered

1985-1996

1981-1985

1970-1981Period

OF - IIIOF - IIOF - IFeatures

Operation Flood – Heralding ChangesDairying made a remunerative occupation for millions of India’s rural poor

More than Rs. 70 billion flows back annually to nearly 12.6 million members of dairy cooperatives

Enormous Urban Market stimulus leads to substantial production increase

Self-sufficiency in Milk Production

Modernisation and expansion of dairy industry Incremental return of Rs. 400 billion against a total investment of Rs. 20 billion

Milk Production : India

17 20 21.2 23.231.6

53.966.370.8 74.378.1 84 88 91

94 100

0

20

40

60

80

100

120

1950 1968 1980 1995 1997 2002 2004 2007

MMT

Per Capita Availability: India

132 127 113 111128

178199 208 214 217 225 235

0

50

100

150

200

250

1950 1968 1980 1995 1997 2002

gms/day

Statistics

Milk Production – 94.5 MMTs, Expected 135 MMTsby 2015

278 Million Livestock – 180.5 million cattle, 82.8 million Buffaloes

4 Million Sheep, 9.2 million Goats

Livestock population to rise to 322 million by 2015

Definition of milk should be enlarged to include SMP, WMP, White Butter

Lessons from the Amul Model ….

Study demand system first rather than production systemFirst mount successful marketing strategy rather than organising producersSuperior design concept required to avoid mismatchMember control and professional mgmnt

Lessons from the Amul Model ….

Capturing commanding share of milk market must precede growth of Village Dairy Co-operativesImportant to capture market through external intervention and then increase procurement commensurate with withdrawal of interventionMilch animals must remain in hinterland Different interventions needed for Dairy Development

Key LearningsDairying has provided gainful employment to millions, primarily women, in the villagesAn investment of Rs 2000 Crores under Operation Flood Program over 25 years is yielding annual returns amounting to Rs 90,000 Crores every yearThe producer price of milk has not dropped despite four fold increase in productionVibrant dairy industry has provided nutrition to the masses Self Sufficiency has been achieved in the vital food sector !

Coops Empower Farmers through:

Strong BrandsMarket Access to Rural produceIncentive PricesEmployment to womenNutrition to massesDemocracy in actionEducation – focus on the girl child

World Bank observed that the Amul Model has demonstrated that :

Rural development involves more than agricultural productionHigh value of national “ownership” in developmentThe beneficial effects of dairy incomes in relieving worst aspects of poverty even during droughtsThe capacity of dairying to benefit the poor at low cost

Source : World Bank Operations Evaluation Dept. ReportIndia : The Dairy Revolution, 1998

Amul Model has also demonstrated :

The capacity of single-commodity projects to have multi-dimensional effectsThe importance of commercial approach to developmentThe importance of getting Government out of commercial enterprises

Source : World Bank Operations Evaluation Dept. ReportIndia : The Dairy Revolution, 1998

AMUL TODAY

The Market Leader

India’s largest Food Products Marketing OrganisationA Billion Dollar OrganisationAnnual turnover over Rs. 4278crores (US$ 1.1 billion)Milk Procured from 2.6 million farmer members12792 Village Dairy Co-op. Societies

The District Unions

AMUL DAIRY, ANAND SABAR DAIRY, HIMATNAGAR

BANAS DAIRY, PALANPURDUDHSAGAR DAIRY, MEHSANA

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

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

Commissioned in September 1994

New 100 MTS per day Powder Plant installed in March 2006

State of the art dairy

Manufacturing FacilitiesOwn Dairy Plants : 30

Outsourcing from Dairies across India:9

Total Milk Handling Capacity : 10.16 mlpd

Milk Collection in 2006-07 : 2.38 billion ltrs

Plants with one mlpd Capacity : 5

Milk Drying Capacity: 600 tpd

Cattle Feed Mfg. Capacity : 3200 mtd

GCMMF – Member VDCS

55806240

8690

10180 1085211200114001161512340 12792

-1000

1000

3000

5000

7000

9000

11000

1300084

-85

88-8

9

93-9

4

97-9

8

'01-

02

'02-

03

'03-

04

'04-

05

'05-

06

'06-

07

GCMMF : Milk Producer Members(Million)

11.23

1.67

2.22 2.27 2.36 2.4 2.5 2.6

0

0.5

1

1.5

2

2.5

3

84-85

88-89

93-94

'01-02

'02-03

'03-04

'04-05

'05-06

'06-07

GCMMF:Average Milk Procurement(Million kgs. per day)

1.72.5

3

44.6

5.2 5.15.8

6.3 6.7

0

1

2

3

4

5

6

784

-85

89-9

093

-94

97-9

8'01

-02

'02-0

3'03

-04

'04-0

5'05

-06

'06-0

7

The Largest Exporter

India’s Largest Exporter Of Dairy ProductsUHT Milk, Ghee, Cheese, Butter, Paneer, etc. exported in consumer packsWhole Milk Powder, Skimmed Milk Powder in bulkMajor Markets : Gulf, SAARC Region, USA, Singapore, Hong Kong, The Philippines, Cambodia, Japan, Vietnam, China, Australia and Africa

IT Company in Food BusinessAdopted Information Technology Integration as a Strategic Thrust in 1995

I.T. right from Automatic Milk Collection Systems, e-mail and internet connectivity at village level

Customized enterprise resource planning for manufacturing units

Introduction of cyber-shops all over India and in some parts of USA, Singapore and Dubai

Geographical Information System with digital city maps at major cities implemented for distribution planning

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

47 Sales Offices3,000+ Dealers

500,000 + Retailers

Reach extends to all parts of the country and many parts of the world

GCMMF bags Rajiv Gandhi National Quality Award -1999 in Best of All Category

Award a tribute to vision, commitment and professionalism in journey towards quality

The IMC Ramkrishna BajajNational Quality Award –2003 for adopting noteworthy quality management practices for logistics and procurement

Awards

APEDA Export Award continuously for 10 years

BRAND BUILDING OF AMUL

Origin of the Brand

CreateCreateBrand Brand IdentityIdentity

SynergizeSynergizeBrand Brand SystemSystem

11

66

Building Building a Stronga StrongBrandBrand

Brand Responsibility

1010Know Know ValueValue

Proposition22

Proposition

Track BrandEquity

Have Have Brand Brand

Position88

Position33

ExecuteExecuteCommunicationCommunication

ProgramProgram

44

Leverage onExisting Brands

77ConsistencyConsistency

OverOverTime

5Time

5

SourceSource-- David David AakerAaker

Create an Identity for the Brand

BRAND AS SYMBOLBRAND AS SYMBOL

Create an Identity for the Brand

BRAND AS PERSON BRAND AS PERSON –– ‘‘CCC’CCC’