Amul is a household name in India. For those who have not lived in India, Amul is a dairy brand in India. Amul is possibly the biggest FMCG brand in India by revenue – $5.3billion in 2020 according to Global Dairy Top 20 report by Rabobank.
The organisation behind this brand is Gujarat Co-operative Milk Marketing Federation.
The structure of this co-op has been the subject of several research projects and movies, as the purpose of the co-op is to minimise profits. The co-op sells dairy products to customers and consumers at the lowest possible prices and pays its farmers the highest possible price for the milk and maintains skinny to zero profit margins. They sell the Amul brand through their own retail outlets and also through supermarkets, convenience stores and kirana stores (bodega stores/independents)
Amul’s unique structure is not the reason for our case study. Today we explore how Amul was able to foresee the consequences of the pandemic and pivot in time to meet demand.
Learning from others’ experiences
As the MD for Amul, R S Sodhi, had been tracking the spread of infections in China, he already had a plan for how to amend operations within Amul facilities and offices to curb the spread of infection. He immediately put this plan in place.
‘I remember, on March 17, we looked at different aspects of our operations like precautions, social distancing, sanitisation, invoicing and warehousing and figured how to have a robust IT backbone to carry out our operations smoothly. Anticipating disruption, we started stocking up products in our 77 warehouses, transporting much more than what we normally would. At the head office, we split the team into two, working in two sets.’ said Sodhi, the MD of Amul.
Social distancing norms were introduced in village societies beginning 17 March along with new sanitisation protocols.
Amul’s MD predicted consumer reaction based on his family’s reaction
According to an interview of the the MD, when Prime Minister Modi announced lockdowns in March 2020, his wife encouraged him to go out and stock up on essentials and this included milk, yogurt, butter and paneer.
He realised that millions of other households would be doing the same thing and that there would be concerns around availability.
The next day he sent out a 2min phone recording to all their stakeholders, customers and farmers, and re-assured them regarding continued operations.
Predicted changes in consumer behaviour based on previous curfews and lockdowns
Gujarat, as many of you may know, has had curfews and lockdowns imposed previously, in the 1980s/1990s. R S Sodhi knew that his consumers would behave in similar ways as they did during those times, with the new nationwide lockdowns. So he diverted production to consumer focussed SKUs. Instead of packaging milk, yogurt, butter, ghee and paneer in bulk for the on-trade, he increased production of shelf ready SKUs to be sold through their retail outlets and stores.
Agile decision making
As ice creams are sold primarily through the on-trade in India, Sodhi knew that there would be a weakening of demand for Ice-creams. He also knew that school and office closures meant that demand for at-home consumption of milk (including flavoured milk), yogurt, butter, ghee and paneer would increase. So they diverted production from Ice-creams to packaged milk (incl. flavoured milk), yogurt, paneer, butter & ghee.
Increased investment in the business at a time when everyone else chose not to
When most other companies were pausing further investment into their businesses, Amul chose to go the other way. They increased employee salaries by 40-50% on average, increased margin distribution and increased advertising activity. They also invested in plant hygiene and social distancing initiatives. When they realised that people were watching a lot more TV, especially old re-runs, they re-ran Amul ads from those times taking advantage of the nostalgia element.
Their policy to never turn a farmer away paid off
During this time, several other milk co-operatives and unions were struggling with infections and absenteeism, causing them to shut down their plants. This, in turn, impacted the farmers who supplied these plants as they could no longer sell their milk. GCMMF(the co-op behind the brand, Amul) has a policy to never turn a farmer away. This meant that the co-op always had a steady supply of milk.
So what did/does this mean for Amul?
During a time when several other FMCG companies were struggling to keep their supply chains and sales going, Amul was well set up for supply chain and sales shocks. There wasn’t ever a single instance of Amul going out of stock in stores or at their outlets.
As they were still running their ads on TV and continuing with their marketing activities, they were able to not just retain market share, but also grow share exponentially.
Despite the pandemic and the resulting loss of sales through the on-trade, Amul posted a 2% growth in revenues for the YE 2020/21. Their consumer focussed SKUs grew by 8% and was offset by the significant decline in sales in the on-trade sector in 2020/21. For YE 2021/22, they’re expecting an 18% growth in sales.
Sources: Economic Times, Live Mint, ICMR Case Study – Unlocking in the lockdown