Amul Research

Marketing Channels of Amul Milk in Lucknow: Factors Affecting Channel Efficiency
Introduction

In India, dairy plants have different systems of milk marketing, namely non-cooperative (or private) and cooperative. The overall dairy industry is classified in two sectors: organized and un-organized. And, the marketing of milk and milk products in India is dominated by the unorganized sector, which handles about 86% of total milk production, while the organized sector handles only about 14 % of the total (GoI, 2004). The dairy cooperatives are considered a vital channel for the improvement of production and the reduction of the cost of procurement, processing, and marketing of dairy products through the economy of scale approach, together with the provision of quality milk to the consumer at the lowest cost. Amul is the brand name that is maintained by Gujarat Cooperative Milk Marketing Federation (GCMMF), India’s largest food product marketing organisation. Amul entrenched and positioned itself as a unique product in the Indian market with its customary way of operation in rural market. Amul had spurred the “White Revolution” in India and transformed India as the largest producer of dairy products in the world. Amul innovated itself in terms of variety, quality, technology in business; established itself over last 67 years and proved as one of the most successful co-operative organizations in the world. As per the official figures, Amul’s annual turnover was INR 13.735 billion during the last financial year, 2012-13 i.e. about 13% of the Indian milk market of over INR 100 billion. It handles a milk capacity of 16.80 million litres per day. Much of the success of the firm can be ascribed to its efficient supply and wider distribution networks. The phenomenal success of this largest food brand of India propelled us to have an insight in the key aspects contributing to its success. To focus on in depth detail and market statistics, we have limited our study and research by focusing on Lucknow and its suburbs (Delhi Zone as per Amul).
Some guiding points which encapsulates objective of our project study:
a. To identify major factors affecting the demand of milk in our study area
b. To identify the present marketing channel system adopted by Amul to distribute milk
c. To identify the role of marketing agents in such distribution of milk
d. To understand the major costs associated with marketing of such milk products
e. To identify key distribution constraints in the channel management in our area of study
f. To identify the adjustments made in the distribution channel on an increase in demand of milk

Literature Review
There have been several studies of the marketing of liquid milk in both cooperative and private dairy plants of India. Most of these studies have classified the Indian dairy industry in two sectors: organized and unorganized. For illustration, as per the findings of Rajendran and Mohanty (2004), about 80 per cent of the milk produced by the rural producer is handled by an unorganised sector and the balance 20 percent is handled by the organised sector. It also supported the vital role played by the dairy co-operatives in alleviating the rural poverty by augmenting rural milk production and marketing. The study concluded that milk quality, product development, infrastructure support development and global marketing are found to be future challenges of India 's like marketing. However, there are a few studies that attempted to compare the efficiencies of the co-operative and private dairy plants in specific regions/states. For instance, Rangasamy and Dhaka (2008) has tried to compare efficiencies of co-operative and private in the state of Tamil Nadu. They found that the marketing cost for toned milk is same in both the dairy plants vis-à-vis co-operative and private, whereas it is higher for standardized milk, full cream milk and flavoured milk in the co-operative dairy plant. All the dairy products earn more marketing margins in the private than co-operative dairy plant, except for toned milk. The study has further suggested the development of co-operative dairy industry in a sustainable manner. A similar study was conducted by Saxena and Mahto (2007) for the Uttaranchal Cooperative dairy Federation Limited (UCDFL). Their study found that UCDFL was focused mainly on liquid milk marketing and has not adopted product diversification, which is the need of the day. It was also found that due to insufficient margins, the number of agents working for other private dairies has increased. They suggested that local sale of milk at the society level should be encouraged to increase the popularity of their brand. A recent study by Sarker and Ghosh (2010) for the co-operative and non-cooperative milk marketing in the state of West Bengal attempted to empirically investigate the price spread, marketing costs, marketing margins, marketing efficiency, and profit efficiency among market middlemen under cooperative and non-cooperative marketing channels in the domestic trade market of liquid milk. An important finding of this study is that, although the inter-market (and intra-market) price variation for liquid milk under the cooperative marketing agency in not far from uniformity, and all marketing agencies under cooperative channels receive much lower abnormal profit per unit of milk as compared with non-cooperative channels, the former fails to provide much economic benefit, either to the producer or to the consumer, because of the burden of much higher fixed cost per unit of liquid milk. The existing literatures suggest that most of the studies for liquid milk has been done in regional (or state level) context. Carrying forward the existing trend, this study would attempt to understand the Marketing channels and its efficiencies for Amul in the local context of Lucknow.
Methodology
This study will be conducted in following steps. First, identification of the participants in the marketing channels of Amul milk will be done. For example, retailers such as local convenience store, mini road milk sellers and other bigger stores and other intermediaries (distributors and wholesalers) will be identified in the locality of Lucknow. Second, information related to the cost, margin, stock quantity maintained, reorder level, minimum perishable time and the strategy adopted to minimize costs will be collected from participants at each level. Information related to other supply and distribution constraints will also be collected. Primary data will be collected from around 15 participants at each level (i.e. retailers, wholesalers/distributors). Also, data related to purchase decision of milk will also be collected from 15-20 households. Third, collected data will be analyzed to understand and identify the factors affecting channel efficiency. The study will also attempt to identify the most efficient channel for Amul Milk in locality of Lucknow.
Timelines

References
Rajendran K. & Mohanty, S. (2004). Dairy Cooperatives and Milk Marketing in India: Constraints and Opportunities. Journal of Food Distribution Research, 35(2), pp. 34-41.
Rangasamy, N. & Dhaka, J.P. (2008). Marketing Efficiency of Dairy Products for Co-operative and Private Dairy Plants in Tamil Nadu –A Comparative Analysis. Agricultural Economics ResearchReview, 21, pp. 235-242.
Sharma, M.L., Saxena, R. Mahato, T. & Das, D. (2007). Potential and Prospects of Dairy Business in Uttarakhand: A Case Study of Uttaranchal Cooperative dairy Federation Limited. Agricultural Economics Research Review, 20, pp. 489-502.
Sarker, D, and Ghosh B. K. (2010). Milk Marketing under Cooperative and Non-Cooperative Marketing Channels: Evidence from West Bengal. Economic Annals, 187.

References: Rajendran K. & Mohanty, S. (2004). Dairy Cooperatives and Milk Marketing in India: Constraints and Opportunities. Journal of Food Distribution Research, 35(2), pp. 34-41. Rangasamy, N. & Dhaka, J.P. (2008). Marketing Efficiency of Dairy Products for Co-operative and Private Dairy Plants in Tamil Nadu –A Comparative Analysis. Agricultural Economics ResearchReview, 21, pp. 235-242. Sharma, M.L., Saxena, R. Mahato, T. & Das, D. (2007). Potential and Prospects of Dairy Business in Uttarakhand: A Case Study of Uttaranchal Cooperative dairy Federation Limited. Agricultural Economics Research Review, 20, pp. 489-502. Sarker, D, and Ghosh B. K. (2010). Milk Marketing under Cooperative and Non-Cooperative Marketing Channels: Evidence from West Bengal. Economic Annals, 187.