Jan 13, 2021
Driven by a surge in demand, dairy major Amul expects to see an 8% growth in revenues in this financial year. R. S. Sodhi, MD, Gujarat Cooperative Milk Marketing Federation, which owns the Amul brand, said that their turnover in consumer products has increased 15-20% because people have consumed more of branded products.
The growth would have been higher but the commodity market saw a sharp fall because of the pandemic. Amul has set a target of doubling turnover to Rs. 1 lakh crore by 2024 from Rs. 52,000 crore at present by procuring more, processing more and marketing more.
This year the giant dairy company will be investing Rs. 1,000 crore and around Rs. 5,000 crore in the next five years in expanding milk processing infrastructure.
In Maharashtra, where Amul used to collect 10 to 11 lakh litres of milk a day, on the request of the state government during lockdown, the company doubled the collection to 22 lakh litres.
At the moment Amul is not worried about the commodity stock as it would be taken care of during summer. A drop was seen in the ice cream and fresh cream business that catered to the hotels, restaurants and catering segment. Ice cream sales had gone down 85% but have made some recovery and are now down 50%.
Anyways, Amul has compensated for this drop in commodities with growth in the consumer business with maximum growth coming from Tier II and III markets.
Covid-19 has had a positive impact on organized packed food brand business. The positive impact will come in the next one or two years because of the shift to the organised branded and packed food.
Sodhi said the market was there for the taking with only one-third of the milk market sector organised, and to increase this they would have to procure more, process more, market more and add more distribution points.
The dairy industry is at `8 lakh crore at present, of which the organised is only Rs 2.5 lakh crore and Amul is only at `52,000 crore.
According to Sodhi, Amul used the lockdown period to build the brand, reassure consumers and continue communicating with them, while others withdrew from the market.
Amul is expanding facilities in Gujarat and beyond Gujarat. According to Sodhi, they are investing more in milk procurement infrastructure within Gujarat and outside Gujarat and expanding distribution points across the country. This is a game of supply chain efficiency. After Gujarat, it was in Maharashtra that they are making the highest procurement with daily collection at 21 to 22 lakh litres milk. Amul has four plants in Maharashtra at Pune, Nagpur and we are investing in two more plants in Maharashtra.
Amul has now become the largest organised milk procurement agency in Maharashtra. They are also investing in Punjab. According to Sodhi, Amul entered Punjab around five years ago and at present it is collecting three lakh litres of milk per day from 50,000 farmers in Punjab.
We are paying them the same price that a Gujarat farmer is getting. With our entry, other players such as Nestle have to pay a higher price. Besides that Amul has got three hired out private plants. One is near Chandigarh, one at Bhatala, and one in Bhatinda. We are investing a lot in Punjab. The first investment will be in milk, pasteurized milk and then other products — paneer, curd and buttermilk with maximum realization coming from pasteurized milk.
Sodhi suggested farmers organize themselves into co-operatives if they want to grow bigger and build brands. Farmer producer organisations are good for small scale and small geography, but if they want to grow bigger — with checks and balances — then co-operatives are the best model for farmers, he said.