Post on 14-Apr-2017
PRESENTED BY GROUP 7 SDM 1RAJAT GARG AJIT KUMAR
DIBYASOBHAN ROY NIVEDITA RAJUTRIPTI JANGPANGI AVANTIKA TIKMANY
OSHIN GOEL NITIKA
THE SALES AND DISTRIBUTION
STORY OF AMUL
EVOLUTION OF MILK INDUSTRY IN INDIA
Source: CRISIL Research
1960sPoor growth
of dairy industry
Production and
Availability of milk and milk
products: LOW
1970-1981: Operation Flood
Phase I13000 dairy cooperatives established
18 lakh farmers became members of 39 milk sheds34 lakh litres/day
procurement28 lakh litres/day
marketing
1981-1985: Operation Flood
Phase II34500 village level
cooperatives36 lakh farmers
became members of 136 milk sheds
79 lakh litres/day procurement
Marketing of 50 lakh litres/day
1985-1994: Operation Flood
Phase III70000 dairy cooperatives
93.14 lakh farmers became members of
170 milk sheds115 lakh litres/day
procurementMarketing of 100
lakh litres/day26000 tonnes of balanced feed,
24000 tonnes of bypass protein feed
sold through cooperatives
1996-2006: Operation Flood
Phase IVFocus on
infrastructure development and
creating democratic values
Strengthening cooperatives by
providing funds on 50:50 bases from centre and state
Education, Personal Training, Marketing
Support, Product Development and
Improving Standards
• India accounts for 17% of the worlds milk production• India is also the highest
consumer of milk (118-120 billion litres)
The per capita milk consumption in rural households registered an increase of 28%
The per capita milk consumption in urban households registered an increase of 25%
MILK PRODUCTION & CONSUMPTION PATTERNS
Production of milk in
India has a CAGR of
4.2% 1987-88 1993-94 1999-00 2004-05 2009-100.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Kgs/
Year
Consumption of fluid milk
in India has a CAGR of 5%
7 Indian States contribute 65% of all the milk produced
in the country
Milk and Milk Products Segment is expected to record 12-13% CAGR
between 2015-18
BUSINESS MODELS IN THE DAIRY INDUSTRY
Dairy farmers get milk to the VCC where milk is cooled using chillers
Chilled milk is transported from the VCC to the ditrict union where the milk is pasteurized
Pasteurized milk is transported to the regional milk federation factories where dairy products are manufactured and branded
Products are transported to the various wholesale and retail stores
Private player procures milk from sources other than
the dairy farmer
Milk is processed into various value added products
Packs, brands and sells it various
distributors and wholesalers
Wholesalers and retailers sell to end
consumers
CO-OPERATIVE MODEL FORWARD INTEGRATED PVT. COMPANYFirst tranche: Based on quality & quantity of milk, payment within 15 days of procuring milk
Second tranche: Based on the sale of various value-added products manufactured during the year, profits are paid back to farmers on the basis of their shareholding in the cooperative.
Eg: Amul, Mother Dairy
The company does not deal directly with the dairy farmers and procures milk (processed/ unprocessed) through other routes such as village collection centres, franchisee chilling centres, bulk private coolers, district union factories and regional cooperative federation factories.Eg: DudhSagar, Schreiber Dynamic Dairy
FULLY INTEGRATED PVT. COMPANY• The farmer is paid only once, as against dual payments made in
the cooperative model. • More commission is paid to the farmers as the initial payment,
to incentivise farmers to supply milk.
CLASSIFICATION OF INDIAN DAIRY AND MILK INDUSTRY
Dairy Industry in India
Processed Milk Milk Products
Curd and Yogurt/Buttermilk and
Lassi
Butter/Ghee/Ice Cream/ Frozen Desert Cheese/Paneer/Khoa Milk Powder
57%
19%
12%6%
2%1%1%1% 1%
Market Share (%) Liquid MilkGheePaneer/KhoaCurd/YogurtButtermilk/LassiIce CreamButterCheeseMilk Powder
Liquid milk has the highest market share
Cheese and ice cream have the highest
growth rate
OPERATING MARGINS AND ROCE
OPERATING MARGINS TO IMPROVE
Ice Cream
Cheese
Paneer
Curd/Yogurt
Butter
Ghee
Processed Milk
0 2 4 6 8 10 12 14
13
12
8
8
7
6
4
Operating Margin (%)
Operating margins and
ROCE depend on the extent of
value addition
HIGH Value Addition
HIGH EBITDALOW ROCE
High margins for value addition
PRICES AND RATINGS
NEW TREND
Future outlook of milk and dairy companies in India is going to be mostly stable as the demand and consumption of milk and milk products grows in the years to come.
GROWTH DRIVERS/RISKS OF MILK INDUSTRY
Government Incentives
Favourable Demographic
Trends
Improvements in Supply Chain Infrastructure
Technological Innovations for Better Quality
GROWTH DRIVERS
Rise in MSP of Cattle Fodder Crops
Dominance of Co-operatives limits Pricing Power of
Private Companies
Geographic Concentration of
Production
Volatility in Milk Prices
KEY RISKS
Growth is fuelled by various
external dynamics
Risks have increased due to lack of dispersion
Other Factors• Rising share of high margin milk products• Priority lending status via National Dairy Plan• Changing lifestyle of consumers• Rising need for convenience• Better health awareness among consumers• Overall growth in food services industry
Other Factors• Quality of milking animal difficult to judge• Milk handling practices to prevent microbial
contamination• Free rider problems due to mixing different milk
quantities in one storage facility• Small probability of transportation failure
INDUSTRY ANALYSIS- PORTER’S 5 FORCES
Competitive RivalryHIGH
Bargaining Power of Suppliers
LOW
Threat of New
EntrantsHIGH
Bargaining Power of
ConsumersLOW
Threat of Substitutes
LOW
Competitive Rivalry - HIGH• New brands are coming up each day and the
major factor on which they play in this industry is prices
Threat of Substitutes - LOW• Essential item for beverages
like tea, coffee• Traditional consumption habits
make milk a favorite • There is no other offering that
can substitute milk.
Threat of New Entrants - HIGH
• Not many entry barriers • Many local players have
come up with their own local brands
• New company just has to follow the defined standards and it can come up with its offerings in this sector
Bargaining Power of Consumers - LOW• The prices of packaged and branded milk
and milk products is fixed • Bargain with the local milk vendors in
unorganized sector and local shops selling milk products
Bargaining Power of Suppliers - LOW• Farmers, rural households and
small cooperatives sell at the going market rate.
• The big giants and the government control the sector and regulate prices
AMUL- THE TASTE OF INDIAMILK
MILK POWDER
GHEE
BUTTER
CHEEESE
CURD
CHOCOLATE
ICE CREAM
SHRIKHAND
PANEER
GULAB JAMUN
BASUNDI
NUTRAMUL
AMUL DISTRIBUTION SYSTEM STRUCTURE
Village Cooperative
Societies with Chilling Units
Village Cooperative
Societies without
Chilling Units
Local Restaurants and Other
Milk related Businesses
Milk sold to village and
local restaurants
Farmers
Chilling PlantsNetwork Services
• Veterinary Services
• Animal Husbandry
• Animal Feed Factory
• Milk Can Producers
• Agriculture University
• Rural Management Institute
• Trucking Facilities
Milk Processing Union & Warehouses
GCMMF Warehouses
Wholesalers/ C&S
Retailers Home Delivery Contractors
Consumers
AMUL products are available in over
500,000 retail outlets across India through its network of over 3,500
distributors.
Three-tier Cooperative Structure
• Dairy cooperative societies at village level
• Milk Union at district level
• Milk Federation at state level
AMUL MODEL
ANAND PATTERN
SALES & MANAGEMENT AT AMULYear of Establishment 1973
Members 17 District Cooperative Milk Producers' Unions
No. of Producer Members 3.37 Million
No. of Village Societies 18,536
Total Milk handling capacity per day 24 Million litres per day
Milk Collection (Total - 2014-15) 5.42 billion litres
Milk collection (Daily Average 2014-15) 14.85 million litres
Cattlefeed manufacturing Capacity 6340 Mts. per day
Sales Turnover -(2014-15) Rs. 20733 Crores (US $ 3.4 Billion)
21% 5-yr CAGR
INR 20733 crores in sales
230 lakh litres per day
Distributors have sales persons who collect orders almost weekly from retailers and mass merchandisers. The order is forwarded to the
warehouse.
Upto 10 days of credit period received by the distributor is passed on to the retailers. This
kind of a benefit further helps in boosting sales.
The retailers are helped by the distributors in enhancing sale by on time delivery.
GCMMF Overview
Sales Management Process
AMUL SUPPLY CHAIN AT DISTRIBUTOR LEVEL
Company GCMMF
Wholesaler (Dewas Naka)
Small Retailers
Sri Patodia Sales
(Retailer/ Customer)
Customers
Amul’s Supply Chain at Distributor – Sri Patodia Sales
Distribution Management:
7 to 8 people are employed who work under the distributor.
Orders are collected from the retailers via phone or visits by the labour employed by the distributor.
Transportation cost is borne by Amul Orders received are placed online with
GCMMF (Dewas Naka). Robust IT Mechanism helps to collect
orders and places them quickly from the company.
It takes maximum 1-2 days to get materials from Warehouse to the distributor.
As there is a large demand for goods, frequents checks need to be performed regarding the stocks in the shop which is done using calculation on basis of sales.
Sometimes clashes with other distributors occur for territory. If products get expired then claims are refunded within fifteen days.
However, this may sometimes take a bit longer time also. Sales Figures:10 -12 lakhs per month
Category ProductDairy (Buttermilk,
Ghee Butter) 2.75-3.5%
Fresh (Milk, Curd) 3%-4%Frozen (Ice cream,
Chocolates) 9%-10%
Category-wiseMargin Structure
SALES MANAGEMENT PROCESS BY DISTRIBUTOR
Distribution function
• The distributors have an area assigned to them which is done by the company itself and they use area mapping system depending on the population and distance from the warehouse.
• The distributor not only sells to retailers but also sells to large mass merchandiser and other outlets who order in large quantities.
Credit and Sales
• Distributor gets the material from Amul on a credit period of 15 days. And he gives a credit period of 10 days to the retailer.
• Each distributor has a sales force of 7 to 8 people who are responsible for collecting order from various retailers on phone or physically go and collect orders.
Territories
• The distributor has the DMS (Distributor Management System) facilitated by the company which is installed in his computer. This system helps the company to keep a track of the amount of products a particular distributor is selling over the year and this helps in distribution of incentives and benefits to the distributors at the end of year.
• Each territory has 10-15 APO (Amul Preferred Outlets) i.e. exclusive retailers for Amul which are managed by the distributors.
Gujarat Headquarter
s
Amul Warehouse
Distributor
Sale
s Man
agem
ent S
truc
ture
ANALYSIS AT RETAILER LEVEL – Tirupati Enterprises
Dist
ributi
on S
yste
m-Distributor sends material when ordered over telephone.-Lead time is 2 to 3 hours only since the distributor is located in close vicinity. -Orders are send either on pickups or 2 wheeler also depending on the quantity ordered. The costs are borne by the distributor.-Lead time for delivery of goods is 2 hours.
Mar
gins
-Sales amount ranges from Rs. 30,000-35000 a month.-3% extra margin which available on goods that have invoices are transferred to the retailers by the distributors.-17% margin for all products.-More margin on frozen segment than dairy and fresh segment.
Prob
lem
s-Poor service levels have made Amul less competitive.-Old and expired Products are not exchanged and repeated reminders also fail to wake the distributors.-No incentives are provided if extra products are sold or if extra orders are made.-All advertisement costs are paid by the retail store.
The functioning of the distribution network was also analysed from the perspective of the retailers. One such retailer that we visited and surveyed is Tirupati Enterprises.
ANALYSIS AT HYPERMARKET LEVEL – MOREThe functioning of the distribution network was also analysed from the perspective of the hyper-retailers. One such
hyper-market that we visited and surveyed is MORE.
More Retail Outlets Places Orders
Orders placed to Mumbai office
Order is placed with GCMMMF
Orders shipped to More by GCMMF
CENTRALISED ORDER MECHANISM FOR MORE OUTLETS ACROSS THE COUNTRY TO TAKE ADVANTAGE OF ECONOMIES OF SCALE
They have a warehouse to stock their goods that they receive and have refrigerators to keep the SKU’s.
Transportation and shipping charges are paid by AMUL
Margins of 3-4% on AMUL
213 SKU’s available out of which 144 have very less probability of a stock-out
In case of expiry, MORE has to destroy the product since AMUL does not have a return or refund policy
Cash rewards and related benefits are awarded to outlets based on the EBITDA values.
480 stores and 18 hyper markets are used for the calculation of EBITDA.
EXISTING SALES MANAGEMENT AT AMUL
The Sales Management System
RetailerDistributorGCMMF Warehouse
State Co-operative
Milk Marketing
Federation
District Dairy Cooperatives
Farmers & Milk
Producers
Distribution chain: The flow from farmers to final retailers
AMUL is also part of Global Dairy Trade (GDT) platform, where only the top 6 dairy players of the world sell their products.
GCMMF operates through 56 Sales Offices, has a dealer network of 10000 dealers and 10 lakh retailers. It has one of the largest such networks in India.
SALES & MANAGEMENT AT AMULAmul has a very wide range
of products available for distribution. More has as
many as 213 SKUs.
Thus, sales are higher as the retailers have a variety of
products that they can offer to the customers.
It is necessary for the distributors to be sure of which products to be pushed forward
and which are the most profitable along with the speed
with which they sell.
Inventory management throughout the distribution
system is quite well maintained.
The larger distributors and stores like more, with higher inventory being carried, have
electronic systems for tracking the inventory.
Thereby cost is minimized, problems of excessive carrying
costs or that of stock outs is also easily taken care of.
Inventory management and product portfolio at Amul retail stores
SALES MANAGEMENT FRAMEWORK
COMPARISON: AMUL v/s SANCHISANCHI AMUL
Management
Dairy co-operative under the Madhya Pradesh State Cooperative Dairy Federation Limited (MPSCDF), largely based out of Bhopal and Indore.
Formed in 1946 in Anand, Gujarat. It is managed by the Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF).
Organization Structure
Three-tier structure with MPSCDF at the State-level Federation, followed by Regional Level Milk Unions and then Village Level Dairy Cooperative Societies.
Amul's structure has the National, State, District and Village levels, with GCMMF coming under the National Cooperative Dairy Federation of India.
No of SKUs sold in Indore 10-12
In general 144 but nationally it is more than 400
Most preferred SKU Liquid Milk Butter
Product Categories Less diversified Too much diversified portfolio of products.
Highest selling product in terms of packaging
500 ml pouch milk 1 Litre pouch milk
Sales
A total of 450 litres of Sanchi milk is sold in Indore in a day.
A total of 450-500 litres of milk is sold per day(rough estimates)
COMPARISON: AMUL v/s SANCHI (contd.)SANCHI AMUL
Distribution MarginsDistribution margin is Rs. 1.42
on a litre, irrespective of the SKU size.
Distribution margin is Rs. 1.30 on a litre, and it varies depending
on the SKU size.
Shelf life Lower i.e. 50-60 days higher, 180 days from MFD date
No. of Distributors in Indore
7 10-12
Inventory management No godowns. Direct shippingStocks are kept in a godown (only one in entire M.P ) in
Indore
Incentives structureTo Retailers
Rs 1000 worth products free for the first 5 months Not much incentives provided
Pricing Sanchi Milk is priced at Rs.38 for the 1-litre Gold pack.
After the recent price hike, Amul Gold costs Rs. 48 for the 1 litre
SKU.
RECOMMENDATIONS1
• There is a huge demand for Amul Products in Madhya Pradesh and it becomes very difficult to operate from a single point of sale i.e. warehouse only in Indore. Amul could look to increase the number of Warehouses and Distributors so that it can have greater ease of operation and at the same time increase its customer base.
2• Goods incentives based on sales target are being currently being stopped by Amul which is de-motivating the Amul retailers. Needs
to offer a better Incentive than Amul Yatra which is currently offered.
3• Investment from company’s side is decreasing down the chain. So the company must focus on various aspects of Promotion,
Advertisements, and Providing incentives to retailers.
4• The current demand forecasting system needs to be better managed and needs to be redesigned as retailer and distributors are
always in a fear of Stock out.
5• It is unaware of the competition it is facing from local dairies. They have similar product lines with no preservatives in their
products. They can become a major competitor in the future. Need to focus on them also.
6• Use of IT systems should be made mandatory at both retailer and distributor level
RECOMMENDATIONS (contd.)
7• Amul can also go for better deals with the supermarket chains and the unreached hypermarts which
will help them to capture a larger consumer base.
8• Claims related to refund and return policies of the retailers and distributors needs to be looked at
because if the promises made by the company are not fulfilled it creates a lack of trust for them.
9• The company can focus on their entire system to help them grow in Indore and
make an impact on ‘Make in India’ initiative
10• Amul could also build a perception in the mind of consumer and project itself as a more health-
focussed brand as consumers are increasingly becoming health conscious and looking for sources of nutrition
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ticleshow/47284976.cms http://www.amul.com/m/organisation http://www.business-standard.com/article/companies/amul-turnover-grows-14-to-cross-rs-20k-cr-in-fy15-1150514008
58_1.html http://www.iimahd.ernet.in/publications/data/2002-05-06PankajChandra.pdf https://www.facebook.com/sanchimilk http://mpcdf.nic.in/ http://www.amul.com/ industryhttps://www.facebook.com/amul.coop/?fref=ts http://timesofindia.indiatimes.com/ http://zeenews.india.com/ http://www.amul.com/m/faqs-on-amul http://timesofindia.indiatimes.com/city/vadodara/Amul-Dairy-inaugurates-modernized-semen-station/articleshow/
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