Amul – how they grew during the pandemic through their (inadvertent) use of data

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

Breakfast cereal revival – a pandemic boost?

2o20 has been a very interesting year for breakfast cereals.

The breakfast cereal aisle is the one aisle I skip when I do my weekly grocery shopping. Not because I don’t eat breakfast, but because this segment had too much and too little choice all at the same time. That may sound contradictory.

The choice this aisle offered was purely contained to flavour. You had the usual suspects – vanilla, strawberry & chocolate and then other flavours like coconut, banana & berry. Consumers had too much choice (a minimum of 60 options at the average large format supermarket) and the paradox of choice struck.

People started eating less cereal for breakfast. They were also eating more breakfast bars and picking up breakfast to go from cafes. This was a double whammy for the industry as consumers wanted healthier choices as well – less added (natural or otherwise) sugar in their cereals, more fibre, more proteins etc – which the industry was not prepared for and this impacted breakfast cereal perception & consumption and resultantly, sales. According to a Forbes article in Aug 2019, the average US consumer has eaten 14 fewer bowls of cereal over the last 28 years and according to an article by Kerry in October 2019, US retail sales of cereal was expected to decline by 6% between 2017 & 2022.

In February 2020, before the pandemic brought the world to its knees, CNBC ran an article on the breakfast cereal sector and General Mills’ plan to revitalise this category in the US, the current largest breakfast cereal market . The article started off with a summary of key takeaways and the first was:

‘U.S. cereal sales have gone stale in recent years as consumer tastes change.’

Sales volume was in decline for the at-home breakfast cereal sector when the pandemic hit. But then, people started working from home, children started schooling from home and breakfast at home became a regular routine. With professionals still working (albeit from home; so, no time for a hot breakfast!), cafes still under lockdowns and takeaway breakfast joints competing for who has the longest queue, breakfast cereals saved the day for all the moms, dads and working professionals out there.

So the pandemic saved the breakfast cereal industry. It was almost as if the pandemic compelled this industry to listen to what their consumers were asking for (clue: no more flavour variations!) This last year saw an almost unprecedented pace of innovation in this sector. Instead of offering a plethora of yet more flavours, brands instead focussed on creating options along the ‘health spectrum’ spanning from indulgent to healthy.

While the new normal may see a drop in at home cereal consumption compared to that in 2020/early ’21, with kids going back to school, the drop may not be as steep as working from home is here to stay… and breakfast cereal also makes a great snack!

So what prompted this blog today? Weetabix just announced indulgent variants of their fibre rich cereal with Chocolate Melts Duo.