Case on Market Competition and promotional Strategies. The Case describes how a new brand can compete with the market leader and what should be done by the market leader to be on top of the market.

1. AMUL MILK
Case on a Milk Company
MIP Case
Submitted By:
Shalabh Srivastava
Roll No.: 10334

2. AMUL MILK
The Manager of Kanpur branch of the AMUL dairy, Mr. Alok Gupta, had a worried look in his
face. AMUL milk, the market leader in Kanpur district over the years, had lost the market share
of AMUL milk drastically. With the introduction of a competitor brand “Namaste India” milk in
the market a few months before, a lot of people have moved on to that brand and have left
AMUL. Alok Gupta did not know what should be the strategy of AMUL: whether they should
change their action plan or should continue with what they are doing. He had scheduled a
meeting with the sales in-charge of Kanpur and Lucknow district and made a point to discuss
this issue with them.
The Company
The AMUL Dairy was established in the year 1955 when the small milk producers from
Gujarat came together to collect and process milk and then sell them. The company is an
example of how to develop a network of firms in order to overcome the complexities of a large
yet fragmented market like those in emerging economies by creating value for suppliers as well
as the customers. Indigenous R&D and technology development had led to the successful
production of skimmed milk powder from buffalo milk – the first time on a commercial scale
anywhere in the world.
Starting with a single shared plant at Anand and two village cooperative societies for
milk procurement, the dairy cooperative movement in the State of Gujarat had evolved into a
network of more than 2.9 million milk producers (called farmers) who are organized in around
14000 milk collection independent cooperatives (called Village Societies). These Village
Societies supply milk to thirteen independent dairy cooperatives (called Unions). AMUL is one
such Union. Milk and milk products from these Unions are marketed by a common marketing
organization (called Federation). The hierarchical structure of this extensive network of co-
operatives is given in Exhibit-1. In 1973, Amul was managed by Gujarat Co-operative Milk
Marketing Federation or GCMMF. The Mission of the Federation is to satisfy the taste and
nutrition requirements of the customers, of the world through excellence in marketing by their
committed team. Through cooperative networking, they are committed to offer quality
products that provide best value for money.
Every day AMUL collects approximately 10 million liters of milk from more than 2.9
million farmers (many illiterate), converts the milk into branded, packaged products, and
delivers goods to over 500,000 retail outlets across the country. AMUL milk goes through
various stages of processing before it reaches the customers. The main emphasis of the
processing is to maintain the quality and taste of the milk without adding any chemicals and
preservatives that could affect the customers. The various stages include Adding Vitamin D,

3. Homogenization, Pasteurization, Packaging milk and Storing milk. All the stages help to
preserve the fresh and creamy quality of milk without adding any extra chemicals or
preservatives.
The GCMMF, which markets AMUL milk and dairy products, recently disclosed that it
was targeting over 22% growth in revenue in 2011-12 fiscal year to touch Rs 12,000 crore. The
company had successfully closed the last financial year with sales of Rs 9,774 crore ($2.2
billion). The Sales turnover of AMUL over the last 15 years is given in Exhibit-2.
Buoyed by its persistent growth, GCMMF has now set the target of taking the
cumulative turnover of all its 13 member dairy co-operatives to Rs. 27,000 crore by the year
2020. GCMMF has chalked out a mission 2020, as part of which it aims to increase the turnover
of all the dairy co-operatives in Western India to Rs. 27,000 crore by the year 2020[1]*.
AMUL Kanpur Branch
AMUL is the chief packaged milk producer in Kanpur. Kanpur district comes under Delhi
zone, and the office is Kanpur is its sales office. The turnover of AMUL milk division in Kanpur is
21 crores per month and that of dairy & Ice cream is 10 crores per month. The customers of
Kanpur City still prefer Loose Milk as compared to packaged milk, and the market share of
packaged milk is around 15%. In 2010, AMUL market share in terms of packaged milk was 86%
in Kanpur. Majority of the customers are satisfied with its quality and taste. It is readily
available in the market and is the most visible brand. There were other brands in the city like
PARAG, Veri Fresh etc. but none of them were even close to AMUL milk in terms of packaged
milk sales. PARAG is a state government owned brand, but its market share in the city has
decreased in the past decade and in 2010-11, its market share was around 12% before 2010-11.
Veri Fresh on the other hand is still struggling since its launch a few years back and is not
preferred much by the customers. In 2010-11, its market share was around 2%.
According to AMUL employees, AMUL is a highly recognized brand among the
customers and given their wide product portfolio, AMUL’s approach is to promote its brands in
a rotational cycle of two to three years. Yearly, they spend around one per cent of their
turnover on promotional activities. They promote through roadside hoardings in various cities.
In Kanpur these roadside hoardings are very scarce and they promote their brand through
promotional items wall paintings, umbrellas etc., which are kept outside the retailer’s outlets
where AMUL milk is sold. They use a wide variety of media to communicate. They even
organize a food festival held every year since last 5 years in about 50,000 retailers. GCMMF
goes for intelligent marketing of milk, ice-cream and butter milk.
[1]*
Refer References section

4. Competition
During March 2011, Namaste India Milk was introduced in the market. It was launched by RSPL
group, who launched the famous “Ghari” detergent in the market. Just before its launch, they
used to promote their brand through radio FM, newspaper, local magazines, Local TV channels
etc. and they projected themselves as a brand which gives a solid start to the mornings of the
customers. They promoted themselves as a brand that will give the customers thick milk and
there was a craze in the minds of the customers before its launch and as soon as it was
launched, many customers switched to Namaste India to try it. As AMUL was the market leader
before the launch of Namaste India and had more than 86% market share in terms of Packet
milk sales, the sale of AMUL was most affected after the launch of Namaste India. Exhibit-3
shows the sale of AMUL before and after the launch of Namaste India in different areas of
Kanpur and the decline in the market share of AMUL milk.
The Market Survey
When asked the customers as to why they are switching their brands a majority of the
customers said that the quality of Namaste India is much better than AMUL. While majority of
the customers (around 68%) still thinks that AMUL milk has better quality and taste than all
other packet milk brands, many said that AMUL milk’s quality is not better than Namaste India
and they feel that since AMUL milk is not manufactured in Kanpur so they might be adding
some chemicals to it to make it fresh and to retain the taste of the milk (Exhibit-4). Many of the
customers are not even aware of the milk processing techniques used by AMUL milk union. Also
after the recent price rice of AMUL milk, the demand of 200ml packet has decreased drastically
(around two-third), while the demand of normal 500ml packet is not much affected by the price
rice. The price of various quantities of milk packets are compared in Exhibit-5.
Many customers (around 65%) accepted that they are influenced by the promotional
activities and would like to try a new brand if it belongs to a trusted group. This was further
confirmed by the retailers who told that the promotional items and ads are important factors
which affect many customers.
The retailers too are switching towards Namaste India. Many retailers have now
partially switched over to Namaste India. Now they are selling both AMUL and Namaste India
milk. According to retailers AMUL milk demand is much more than Namaste India but they are
getting more margins from Namaste India (50 paise in Rs. 17 packet) than from AMUL (45 paise
in Rs. 17 packet). Also while collecting data from the retailers, it was discovered that the supply
of Namaste India is not proper and there is no timely supply of the same. According to them if
Namaste India’s supply becomes proper then sale of AMUL will decrease further. Exhibit-6

5. gives data of retailer satisfaction. Many retailers (around 40%) even complained about the
leakage problems in AMUL milk. According to them AMUL milk never listens if they come across
a leaked packet after delivery but Namaste India and other brands do listen and provide full
compensation in case of leaked packets. The Weaknesses of AMUL according to Retailers selling
AMUL milk are given in Exhibit-7.
The Problem
Mr. Alok Gupta has noted all these points and is in deep thought as to what should be their
strategy. They are the market leaders and their demand is still around 68%, so is the launch of
Namaste India is just another brand being introduced in the market or is it a time to hit the
panic button and rethink their strategy. He was afraid that if this could happen in one city then
this could happen anywhere in India and that would seriously affect them. He was thinking
about all this when his secretary informed him about his meeting. He collected his notes and
went to discuss about the issues to his colleagues.

6. Exhibit-1: Dairy Co-operative Structure
FEDERATION
(GCMMF)
UNIONS
AMUL & 12 other Plants
VILLAGE SOCIETIES
14000 Village Level Milk
Collection Centers
INDIVIDUAL MILK PRODUCERS
More than 2.9 Million Milk producing
Farmers

7. Exhibit-2: The sales turnover of AMUL Milk Union
Sales Turnover Rs (million) US $ (in million)
1994-95 11140 355
1995-96 13790 400
1996-97 15540 450
1997-98 18840 455
1998-99 22192 493
1999-00 22185 493
2000-01 22588 500
2001-02 23365 500
2002-03 27457 575
2003-04 28941 616
2004-05 29225 672
2005-06 37736 850
2006-07 42778 1050
2007-08 52554 1325
2008-09 67113 1504
2009-10 80053 1778
2010-11 97740 2172
*The above data is taken from the annual sales book of AMUL Milk Union

8. Exhibit-3: Area wise Analysis of Sales of AMUL Milk
Area No of Total Sale (in Sale of AMUL Sale of AMUL
retailers Crates) Before Namaste India After Namaste India
Launch (in Crates) Launch (in Crates)
Kidwai Nagar 10 55 50 42
Moolganj 2 57 48 35
Chauraha
Jagai Purwa 3 24 14 12
Chand Nagar 1 6 5 5
Lal Bangla 3 145 133 122
Kakadev 2 100 87 60
Ravatpur 4 64 57 49
Krishna Nagar 5 19.5 19.5 19.5
Gandhi gram 1 6 6 6
PAC 1 20 20 20
Naubasta 8 44.5 38 27
Govind Nagar 10 87.5 81.5 64.5
Coca Cola 2 7 7 6
Chauraha
Arya Nagar 7 157.5 116.5 102
Ashok Nagar 1 6 5 4
Parmat 9 92.5 69 56.8
Bakarmandi 1 6 6 5
Phoolbagh 2 50 40 24
Panchakki 2 5.75 5.5 5.5
Chauraha
P Road 7 132.5 122.5 85.5
TOTAL 81 1086 930.5 750.80

9. Exhibit-4: Weakness of AMUL according to customers of Kanpur
Weakness of ANMOL according to customers
None 68.28%
Weakness of Amul
High Chemicals Added 8.41%
30.10%
Lower Quality
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
Percentage of customers
According to the above graph 68.28 per cent of the customers feel that AMUL milk is good and
there is no weakness in AMUL milk, while 8.41 per cent customers feel that it contains High
Chemicals and 30.10 per cent customers feel that its quality is lower than other brands of milk.
Exhibit-5: Price Comparison of Various brands in Kanpur (as on June 2011)
Price of Namaste
Quantity Price of AMUL India Price of State owned Dairy
In Rs. In Rs. (PARAG) In Rs.
200ml 6 5 5
500ml 17 17 17
1000ml 34 34 34

10. Exhibit-6: Reasons of Dissatisfaction of retailers selling AMUL milk
Reasons for Dissatisfaction percentage
of retailers
Leakage Issue 39.51%
Lower Quality 4.94%
Irregular Supply 6.17%
Decreasing Demand 7.41%
Aggressive Behaviour 1.23%
Lower Margin 3.70%
No reason (Satisfied with AMUL) 39.51%
Exhibit-7: Weaknesses of AMUL According to retailers selling AMUL Milk
Weakness of ANMOL According to Retailers
No Weakness 33.33%
Aggressive Behaviour 1.23%
poor packaging 1.23%
Decreasing Demand 4.94%
leakage Issue 33.33%
lower quality 28.40%
Lower Margin 12.35%
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%
Percentage of Retailers
The above graph states that 33.33 per cent of the total retailers feel that leakage issue is a
problem. Similarly, 28.4 per cent of the total retailers feel that AMUL quality is not up to the
mark, and around 1.23 per cent retailers feel that the aggressive behavior of AMUL
employees/Distributor staff is there biggest weakness. Around 12.35 per cent feel that its
margin is quite low and 4.94 per cent feel that its demand is decreasing which is a cause for
worry. 1.23 per cent feels that its packaging is not that good and the rest (33.33 per cent) feel
that AMUL is still the market leader and it is better than other brands.

11. References:
• www.amul.com from 1.06.2011 to 11.06.2011, the website is referred to get
information given in the introduction of the case.
• www.amuldairy.com from 1.06.2011 to 11.06.2011, to get the history of the company
given in the introduction.
• http://www.business-standard.com/india/news on 20.07.2011 [1]*
• Amul Sale record book for the year 2010-2011 to get the annual growth chart given in
Exhibit-2