- Their cash management must be amazing. They manage to pay all 2.6 million farmers for their milk within 12hrs, which must be involving an immense logistics operation. In fact, once the smart cards/no frills account is universalized, Amul's work would be much simpler-just credit the amount into the farmer's bank account and let them withdraw when they wish
- Their single minded focus on the milk producer is commendable. Despite the management fads of diversification, focus again diversification, Amul has applied a single benchmark to address strategic issues-will this make more money for the milk producer? When asked by a student about why Amul had entered an impulse category like chocolates, Mr Sodhi claimed that this was because farmers had surplus cocoa beans to sell in an year, and then the whole idea had started.
- Turning conventional theory on its head, he said that the textbook following MNCs were easiest to beat because Amul could anticipate their strategies and plan. But against Indian competitors who know the ground realities, marketing battles are harder.
- Explaining Amul's pricing strategy, he said that unlike MNCs, Amul did not need to pay 19% costs(3% R&D, 5% brand royalty, 5% extra distributor margins and 6% advertising costs). This is over and above raw material procurement efficiencies. That allows realistic pricing which ensures volumes that lubricate the supply chain
- Elaborating on their distribution strategy, he said that Amul is present across all 4 channels( Frozen, Chilled, Ambient and Fresh). Comparing the channel to a highway, he said that MNCs can pay and 'buy' the highway. But to keep it maintained('channel loyalty'), they need volumes which Amul's pricing does not allow them to take market share/volumes
- Explaining Amul's single minded dairy focus, he said that Amul processes merely 3% of India's milk and that they have a long way to go before even thinking of entering unrelated segments.
- He also explained how the brand had been built-the famous Amul moffet, brand extensions etc
- Contrary to my perceptions about public sector presentations, the PPT was exceptional, with good graphics, up to date data and logical flow.
- Explaining the reasons for high milk prices, he detailed the economics of the marginal dairy farmer(Rs 100 expenses/cow versus Rs 125(25Rs/litre*5 Litres)) who gets around Rs 25/day for 3-4hrs work. Contrast that to NREGA wages and you see why enhancing milk supply may be a problem.
Friday, March 11, 2011
From Cow to Consumer-insights from the Amul CEOs talk at IIM-A
Attending a mandatory guest lecture on a Friday afternoon is not everyone's cup of tea, especially when you would rather be asleep/mugging. But I somehow attended Mr RS Sodhi's guest lecture at IIM-A, and was glad I did. The talk started with their corporate presentation and some commercials. At the end, he answered some(actually many!) questions. Some takeaways I got from the talk were