Special Product Group Project

On
BRAND LOYALTY IN RELATION TO DAIRY PRODUCTS







Submitted by
JISHITHA.M
PRIYANKA RAJANALA






Under the supervision of
Ms.Harleen Sahni






Department of Fashion Management Studies (FMS)
National Institute of Fashion Technology (NIFT)
Ministry of Textiles, Govt. of India
GH-0 Road, Behind Infocity
Gandhinagar382007. Gujarat
www.nift.ac.in
October 2014


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DECLARATION




We declare that we have completed the Special Product Group project on the topic Brand
loyalty in relation to Dairy products. We also declare that all the taken data has been
acknowledged by us. We have put in efforts to complete this Special Product Group project
successfully.

..




JISHITHA.M
PRIYANKA RAJANALA
MFM-III
2013-15






























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ACKNOWLEDGEMENT




We, Jishitha Mohan and Priyanka Rajanala, take this opportunity to thank our mentor
Ms.Harleen Sahni for providing us with an interesting project and guiding us throughout the
project and also for helping us to explore new things. We thank NIFT for adding this module
in our curriculum and providing us an opportunity to get hands- on experience of Dairy
products. We would also like to thank our other faculty members for their encouragement and
support for guiding us in documenting our work and knowledge gained through this module.





































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Table of Contents

INTERVIEWEE ................................................................................................................................... 5
OBJECTIVES ....................................................................................................................................... 6
INTERVIEWS................................................................................................................................... 7
Mrs. Moitreyee Dutta Marketing and Brand Manager at AMUL ................................................ 7
Mr. Himanshu Bhatt Sales and Distribution Manager at AMUL ................................................ 9
Mr. Ravinath Singh - Hypercity Food and Grocery Department .................................................. 10
LITERATURE REVIEW .............................................................................................................. 11
AMUL AS A BRAND NAME ........................................................................................................ 12
COMPANY INFORMATION ...................................................................................................... 12
BUSINESS MISSION ...................................................................................................................... 13
AMUL THE TASTE OF INDIA................................................................................................. 14
AMUL BRAND BASKET .......................................................................................................... 14
EMERGING SITUATION IN DAIRY ............................................................................................ 17
FACTORS AFFECTING THE COMPETITIVENESS OF THE DAIRY SECTOR ....................... 18
Demand conditions ....................................................................................................................... 18
Market structure ............................................................................................................................ 19
PRODUCTION: ................................................................................................................................ 21
PRODUCTION POLICY ................................................................................................................. 22
REGULATION OF MILK AND MILK PRODUCTS IN INDIA ................................................... 24
Processing ..................................................................................................................................... 25
TRADE: ............................................................................................................................................ 26
Export ............................................................................................................................................ 26
Import ............................................................................................................................................ 26
POLICY: ........................................................................................................................................... 26
OVERVIEW OF DAIRY MARKETING CHANNELS IN INDIA ................................................. 27
IDENTIFYING CRITICAL ISSUES IN THE DAIRY CHAIN ...................................................... 28
SURVEY AND ANALYSIS ............................................................................................................ 30
Methodology ................................................................................................................................. 30
Research Design ............................................................................................................................ 30
Sources of data collection ............................................................................................................. 30
Questionnaire along with statistical analysis ................................................................................ 31
REFERENCES ............................................................................................................................. 33


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INTERVIEWEE

Name Designation Mode of
interview
Industry Contact No

Mrs. Moitreyee
Dutta

Marketing and
Brand Manager at
AMUL

Telephonic

FMCG

+91-9375031418

Mr. Himanshu
Bhatt

Sales and
Distribution
Manager at
AMUL

Telephonic

FMCG

+91-9574714445

Mr. Ravinath
Singh -

Hypercity Food
and Grocery
Department

Telephonic

FMCG

+91-9714568777
Mr.Sunil
George
Brand Manager
Reliance
Communication
Telephonic Telecommunications

+91-
9819232281
















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OBJECTIVES

I. To understand the formation and strengthening of brand loyalty
II. Study of supply chain
III. Understanding the various marketing strategies


























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INTERVIEWS

Mrs. Moitreyee Dutta Marketing and Brand Manager at AMUL

Questions
1. Since how long have you been working with AMUL.
More than 15 years
2. At what position? Job Description.
I am the manager
3. Bifurcation of products and is it only a specific group of products you handle
I am handling brand management and marketing activities regarding all products
4. Organisation Structure.

5. All managers are based in Anand or PAN India?
Managing
director
General
Manager(Sales
and Distribution)
Deputy General
Manager
Asst.General
Manager
Manager
Brand
Amul Milk
Amul cheese
Amul butter
Amul (.........)
General Manager
(Planning and
marketing)
General
Manager(......)
Chief General
Manager
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Marketing office and officers are based in Anand. Chief Officers are all over India. Sales and
Distribution are all over India
6. The advertisement hoardings with cartoons and sketches, why have you been doing it for
so long?
They are outdoor hoarding campaign. These are there for almost 50 years now.
It all began in 1966 when Sylvester daCunha, then the managing director of the advertising
agency, ASP, clinched the account for Amulbutter.The Mumbai-based daCunha
Communications came up with the branding. Rahul daCunha,currently creative head of ad-
agency daCunha Communications, copy writer Manish Jhaveri and JayantRane, the artist
who has been sketching Amul cartoons for a quarter-century.
7. How many Hoardings do you have of these sketches across India? (Approx.)
120-150 all over India
7. How frequently do you change them and who decides when to change them as they are
always related to current affairs?
Typically once in a week, If its special for eg: India wins world cup then in between also they
change.
Other topics they run through include something to celebrate the winners of the U.S. Open
tennis tournament, a piece to riff on the controversy surrounding Indias independent auditor,
and another to lampoon striking taxi and auto-rickshaw drivers.
8. Who decides the hoardings?
Rahul daCunha
9. The television commercials we come across for AMUL are irregular, why is that?
What you mean by irregular?Foreg : Amul Kool is a seasonal product which is mainly for
summer. In winter people would not prefer to have Amul Kool.There is a peak period for
every product.
10. AMUL has been sponsoring TV shows who decides those things?
They do sponsor for TV shows.They have media agency who does Media Buying,Media
sourcing and Media Planning .Final approval from Managing Director
11. How much does the company spend on advertisements and related activities in a given
year?
0.5-1% of the turnover is spend for advertisements and related expenses.
12. What is the feedback you generally get from customers regarding your advertisements?
Nowadays we are active in online (FB)also.
13. Have you seen hoardings in other cities?
Mainly in Anand and Ahmedabad.
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14. Why according to you AMUL is strong in the market with a loyal customer base?
Amul is not only a brand like Pepsi or any other.Amul is a mission behind empowerment of
women. Whiterevolution, The revolution started as an awareness among the farmers that
grew and matured into a protest movement and the determination to liberate themselves.
Quality,Kind of trust people have on amul is more important.As you know in Amul one rupee
we spend 80Ps goes back to farmers who are the real owners. It is a cooperative society
where farmers are owners and we are employees.
For advertising we have umbrella branding policy.

Mr. Himanshu Bhatt Sales and Distribution Manager at AMUL

Questions
1. Since how long have you been working with AMUL
Has been working in Production department for the past 15 year
2. At what position? Job Description.
Currently Logistics Manager at AMUL
3. Bifurcation of products and is it only a specific group of products you handle
He handles the logistics of all the products of AMUL in Gujarat
4. Organisation Structure. PAN India.
Senior General Manager -> General Manager -> Logistics Team -> HCA Store
5. How do you manage the distribution channels?
Salesmen are allocated for each area by the brand manager of the products. The allocation of
products to various company warehouses is provided by the brand manager. Using this the
dispatch plan is created by the logistics team. It is restricted to the product availability.
They dont deal directly with retailers. The products are sent to company offices across the
country and from there it is sent to wholesalers and further down the line to retailers.
7. How many farmers supply you with the products and where are they located?
There are around 30 Lakh farmers across Gujarat who provide them with the raw materials
for their products.
There are 40 production plants across Gujarat
8. What mode of transportation is used?
Road Transportation is used and the trucks are owned by third party and not by the company.
9. How do you ensure the quality of the product remains good?
Quality Control Officers are located in every area who check the products on their arrival and
in case of some problem, the goods are returned to the area office.
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10. Why according to you is AMUL strong in the market?
Amul is strong because the products are value for money with really good quality and the
brand Amul is well known.

Mr. Ravinath Singh - Hypercity Food and Grocery Department

Questions
1. Since how long have you been working with Hypercity
Has been working for 10 years in the Retail Industry with 4 years experience in Hypercity
Dairy Department
2. Hypercity and Dairy Industry
Hypercity has one of the best Dairy Department in India. There are more than 50 types of
Cheese available from both India and across the world. The food and Grocery is the highest
earning department of Hypercity with Dairy Department comprising of subsequent
percentage. Just last week the department surpassed the set target for the week once again.
3. What is the most selling dairy brand in Hypercity
That will be AMUL. That is the most selling brand in the store followed by Britannia.
4. Are there any promotional activities that are used for these products
Monday mandi (encourage bulk purchases for the week) - offers on fruits, vegetables, frozen
and ready to eat items.
Win Win Wednesday (OFFERS ON FOOD) offers on fruits, vegetables, frozen and ready
to eat items.
5. Why do you think AMUL is so strong in the market
Quality

ANALYSIS OF THE INTERVIEWS
AMUL being the leader of Dairy Industry in India we found it apt to interview people from
the company. Hypercity is one of the leading retailers in India.
AMUL maintains their brand quality with proper Quality Control at every stage. It is a co-
operative which is owned by the farmers. It is supporting more than 30 lakh farmers across
India. AMUL brought the milk revolution in India when Milk products were imported
frequently. These things do create a positive image of the brand in the mind of the consumer.
The Wide reach of the brand with many regional offices gives the product easy availability. A
consumer never needs to return from the store because the product is not available. Compared
to different brands in the market, AMUL is the most preferred brand.
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LITERATURE REVIEW

Milk is one of the most nutritionally complete foods available on the food market to date. It is
naturally a good provider of a whole range of nutrients essential to growth, development and
maintenance of the human body. Relatively small quantities of milk can provide a significant
proportion of daily nutrient requirements for all age groups making it nutrient rich relative to
its energy content. In addition to its contribution to nutrient intake, increased milk
consumption has also been linked to reducing the risk of numerous health problems such as
osteoporosis, cancer, cardiovascular disease, type 2 diabetes and obesity to name but a few.
Dairy is the term used to describe milk-based or milk-related products.
Milk was always manufactured and consumed in bulk in India. But with the rise in disposable
incomes the demand for milk and related items are on a continuous rise. Milk is said to be
among the most important part of the diets of Indian after wheat and rice.
Milk production in India ranges from rural areas to the highly urbanized ones. In the rural
areas every farmer having one or two cows or buffaloes yields around -3 litres of milk per
animal. India is highly acclaimed for its high contribution of buffalo milk because of factors
like high fat content and a host of other nutrients.
India happens to be the highest producer of milk in the world. India contributes almost 65%
of the total world buffalo milk. With the advent of modern technology India has risen from an
insignificant amount of 200,000 litres per day (lpd) of milk in 1951, to 20 million litres per
day in 2010. The country is home to almost 400 dairy plants.
The milk market in India does not have many active brands. The one major brand that has
been dominating the dairy industry in India since quite a few decades is Amul. Since Indians
are very peculiar and choosy about the milk that they consume they do not like to try out
other brands. They like sticking to trusted brands and the brand that has definitely occupied a
major mind share of the Indian population as far as milk is concerned is Amul. It can easily
be called the top milk brand in India.
The undisputed Top Milk Brand in India is Amul. Established in 1946, the company deserves
maximum credit for making India the world's largest milk and milk products producer.
Evolved over the years as the most preferable liquid milk brand in the Indian subcontinent
Amul churns out a turnover of almost ` 8,000 crores annually. According to industry experts
the production forecast for the next year happens to be even better with an estimate turnover
of ` 10,000 crore. The best thing about the brand is that it has not only penetrated the
urbanized areas but the rural market as well. Amul apart from milk is the manufacturers of a
host of allied products like Ghee, butter, cheese, powder milk, flavored milk, curd, cold
coffee, Lassi etc.





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Top Milk Brands in India:

1. Amul
2. Nestle
3. Mother Dairy
4. Hatsun
5. Milma
6. Aavin
7. Nandhini
8. Paras
9. Saras
10. Verka Sweet
11. Sudha
12. Gokul
13. Govardhan
14. Vijaya

AMUL AS A BRAND NAME

COMPANY INFORMATION

Amul as a brand name is familiar to almost every individual in India, Amul is known for its
quality products purity and hygiene. For over more than the past 50 years Amul has been
serving the consumers of India with a variety of quality products. Amul follows a business
model to provide products to customers which provides 'value for money' to the consumer.
Amul has enjoyed its status of market leader in products like butter, cheese and dry milk, by
providing customers with quality products at competitive prices. It is one of the largest food
products manufacturing organisation of India. It is a Dairy Cooperative of Gujarat, also
known as The Gujarat Cooperative milk marketing federation Ltd. Gujarat as a state of India
is a leader in organizing dairy cooperatives and its success is not only limited in India but acts
as a model for rest of the World. Over the last fifty odd years, Dairy Cooperatives in Gujarat
have created an economic network that connects more than 2.8 million village milk producers
with million of consumers in India and abroad through a cooperative system. These
cooperatives collect on an average 7.5 million litres of milk per day from the producers.
Amul has brought a significant change in social and economic situation of our rural people.
The Dairy Cooperatives have helped to bring an end to the exploitation of farmers and has
increased the level of benefits to our rural producers of milk.
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The turnover of Amul during 2008-09 was Rs. 67.11 billion. Amul currently markets the
products which are produced by the district milk unions in 30 dairy plants which work under
the renowned brand name Amul. The total production capacity of these plants is 11.6 million
litres per day, four of the dairy plants mentioned are having processing capacity of more than
1 million Litres per day. The Gujarat Cooperative milk marketing federation Ltd.(Amul's)
Total Quality Management ensures that the quality of products meets its standards right from
the starting place of milk producer through the value chain until it reaches the consumer thus
Amul is trying to provide value to its customers which not only satisfies the customer needs
but delights the customer.
Amul cannot be considered as business enterprise which works primarily for the generation
of profits. It is an institution created by the milk producers to primarily safeguard their
economic and social interest. Business houses generate profits in order to distribute profit to
shareholders in shape of dividend, whereas in case of Amul the surplus is ploughed back and
distributed back to farmers through village societies.
Amul has time and again came up with innovative advertising which has helped Amul to
develop itself as a brand which appeals people with assurance of its quality. The creative
advertisement of Amul has created a position of its products which is generating higher sales
for Amul. For 30 odd years Amul's Utterly Butterly girl has managed to keep her fan
following intact, the advertisements are now ready to enter the Guinness Book of World
Records for being the longest running campaign ever.
BUSINESS MISSION

As we take strides towards our future, we need a mission which create an objective for our
organization so that we can direct our efforts in order to achieve organizational growth, this
mission must be backed up by a set of action plans which may help us in achieving our
objectives in a best possible manner Amul has prepared a comprehensive roadmap in order to
guide that the dairy cooperatives of Gujarat to have a group turnover of Rs. 27000 crores by
the year 2020. The company is planning on its expansion and through expansion the company
will create fresh avenues for growth by catering to the rising demand for new products, this
would include increasing the capacity for major product categories including milk powders,
Ice-cream, paneer, cheese, curd, ghee and other dairy products. Milk drying capacity will also
be enhanced. in order to to strengthen the presence of company in the large market, for liquid
milk Special emphasis will be given to metropolitan cities.The company is planning to double
its processing capacity of its plants to 20.7 million kg per day.The basic raw material of Amul
products is milk and for increasing milk production nutritious feed should be provided to
animals. For this very purpose the company is planning to expand its cattlefeed
manufacturing capacity by 2020. Amul's achievement of its mission will not only be
beneficial for the organization but it will be helpful for the development of economy as a
whole.
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AMUL THE TASTE OF INDIA
Derived from Sansrit word mulya, Amul has been an iconic brand in India with superior
product quality, supply chain infrastructure and distribution.
AMUL BRAND BASKET

Market Share

The brand positions itself as a brand of both masses and classes, unlike competitors like
Nestle. Gujarat Co-operative Milk Marketing Federation (GCMMF), owners of Amul brand
of milk and dairy products, posted sales of Rs 11,670 crore for the year ended March 2012,
almost 55% more than Nestle Indias Rs 7,541-crore sales.
Amul owns 85 percent share in butter market and 75 percent in cheese share market. It may
be mentioned here that Amul is the market leader in Rs 600 crore cheese market in India with
65-66% share. It also has 88% market share in butter, 63% share in infant milk and 45%
market share in dairy whitener. Amul also enjoys a 26% share in the 25,000-crore packaged
milk market.
With expected growth rate of 20 percent, 12% growth rate can be attributed to price rise and
another 8 percent to rise in demand for dairy products.
Amul Production Facilities

One of the best known examples of policy success in India has been the successful
implementation of white revolution and equally celebrated is the role of the brand in making
this event a big success.
From two diary cooperatives and 250 litres of milk per day to a network of 31 lakh dairy
farmers, who are members of more than 15,000 village co-operatives. (Source:
http://www.firstpost.com/election/farmer-empowerment-is-amul-model-better-than-retail-fdi-
551382.html)
Milk producers sell their produce to village co-operatives, which is affiliated to district milk
co-operative union and then in turn to the state level milk marketing federation. A network of
8000 distributers makes Amul products available at over 4 lakh retail outlets in India.
GCMMF is expanding its production capacity by 25% to meet the growing consumer
demands and plans to invest in INR 3000 crores in 9 new milk plants in India in next 4-5
years.
Amul Marketing Strategy

In order to maintain costs at lower levels, Amul India has never spent more than 1% of its
budget on advertising. However it has still been successful in creating the same impact, it
created 60 years ago through its simple yet appealing ad campaigns.
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Talk about universally recognizable Brands grown in India, and one prominent contendor is
the Amul mascot, a cute and chubby girl usually dressed in a polka dot. Over 45 years of
existence, the brand has always given a fresh flavour to Amul Mascot.

Amul Ad - Shilakimakhani
The Amul Girls and its new Witty avatar was the brain child of Sylvester da Cunha, the
managing director of the advertising agency AS. The ads were designed as a series of
hoardings with designs relating to day-to-day issues.
Amul Dairy Cooperatives, on the occasion of completing its 50 years of advertising, launched
a book called Amul India.

Amul Celebrating 50 years of Advertising

Following the idea of thoughtful advertising , 35 years ago the brand created magic with its
Mero gaam Katha parey the title song of national award winning film Manthan, which
told the story of Amul model of co-operatives.
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Amul Co-operative Model
The Manthan music video has an unique emotional appeal. To recreate the magic, in 2012
brand came up with a fresh commercial with the lines like khushrahetera beta beti in the
new music video. It shows how the efforts of a rural milk producer takes care of nutritional
requirements of a child of a urban mother.

Amul Ad KhushRaheTera Beta Beti
Amul Products Packaging

Amuls marketing strategy has always been consumer centric. Thus it is kept in mind that the
packaging of all Amul products appeals to the emotional side of the consumer.
Use of Expression
For example the human facial expression of delight on the cheese variant packing reveal the
pleasure people derive from consuming cheese and cheese products.

Use of expression in Packaging
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Information

Also the need to highlight the nutrient value and best possible use of the product is an
important feature of all Amul products packaging.

Use of Information in Amuls packaging
Protection

Recently Amul has focused largely upon capturing the branded tetra pack market with,
variants that would last for over 2 weeks to three months even without refrigeration.
For example AmulMoti, a new variant of toned milk is priced a little higher than the fresh
milk pouch. The UHT treated milk is then packaged in five-layered special pouch to increase
its self life to 90 days.

EMERGING SITUATION IN DAIRY
Dairy is currently the top-ranking commodity in India,Despite the importance of the dairy
sector in overall GDP, it receives less government budgeting than the agriculture sector.
Further, there has been no concentrated investment in the development of value-added or
innovative products, nor any serious effort to support and modernize the informal sector.
In light of the increasing demand driven by the growing population, higher incomes and more
health consciousness, the slowdown in dairy industry growth is severely worrisome. Based on
estimates by the National Dairy Development Board (NDDB), the demand for milk is likely
to reach 180 million tonnes by 2022. To supply the market, an average incremental increase
of 5 million tonnes per annum over the next 15 years is required a doubling of the average
incremental rate achieved over the past 15 years. In the absence of sufficient increased
production, India will need to rely on the world market for imports. And because of the huge
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volume required, it will affect global milk prices. Thus, focusing on areas for local dairy
development is critical.
Traditionally, the policy environment has favoured the expansion of cooperatives, which
ultimately crowded out the private sector. However, liberalization of the sector in recent
years has encouraged private investment in dairying. In 2002, the Milk and Milk Products
Order (MMPO) ushered in major policy changes friendly to the private sector and a
momentum of activity that is likely to increase dramatically in the coming years. Large
Indian and multinational corporations, such as Reliance, Pepsi and Coca-Cola, are planning
significant investments.
Nowadays, both the private sector and the cooperatives drive the value chains. Because of the
many unsuccessful cooperatives in the country, other models of dairy farmer organizations
are being explored, such as mutually aided cooperative societies (MACS) and producer
companies.
Millions of small and marginal farmers in dairying who own two to three animals and
produce an average of 5 litres comprise a critical portion of Indias dairy industry. Livestock
development in general and dairy development activities in particular are key components of
pro-poor development strategies because livestock distribution is much more equitable than
land distribution. Thus, changes in the dairying environment have important implications for
the smallholder farmers and for poverty reduction.
The following characterizes Indias dairy farming and its relevance to inclusive growth:
Small and marginal farmers own 33 percent of land and about 60 percent of female
cattle and buffaloes.
Some 75 percent of rural households own, on average, two to four animals.
Dairying is a part of the farming system, not a separate enterprise. Feed is mostly
residual from crops, whereas cow dung is important for manure.
Dairying provides a source of regular income, whereas income from agriculture is
seasonal. This regular source of income has a huge impact on minimizing risks to
income. There is some indication that areas where dairy is well developed have less
incidence of farmer suicide.
About a third of rural incomes are dependent upon dairying.
Livestock is a security asset to be sold in times of crisis.
FACTORS AFFECTING THE COMPETITIVENESS OF THE DAIRY SECTOR
To assess the dairy sectors competiveness, a performance analysis looked at five factors:
demand conditions, market structure, factor conditions, related supporting industries, and
government and the enabling environment.
Demand conditions
Demand for dairy products in India is likely to grow significantly in the coming years, driven
by more consumers, higher incomes and greater interest in nutrition. Consumption of
processed and packaged dairy products is increasing in urban areas. Because of the increasing
competition from the private sector, several national and international brands have entered
the market and expanded consumers expectation of quality although only among a small
proportion of the population. In many parts of the country, people still prefer unpacked and
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unprocessed milk delivered by a local milkman because of its taste and the perception of
freshness. The price elasticity for milk is high, thus demand for milk is very sensitive to price
changes.

Market structure
Until 2002, cooperatives traditionally were the dominant players in the formal sector. With
liberalization of the dairy industry, private investment has increased quite significantly. However, the
organized sectors share in milk procurement is very low because a large proportion of the milk and
milk products are sold through the informal channel (Table 3). The informal demand absorbs
approximately 41 percent of the milk and milk products produced in the country, accounting for about
75 percent of the marketable surplus of milk. The formal channel, with its packaged milk and dairy
products, accounts for only about 25 percent of the marketable surplus, which is about 15 percent of
production.

The informal sector consists of the village milk vendors who procure loose milk from farmers and sell
it in urban and peri-urban areas directly to consumers, small private processors or hotels. The milk
vendors also may sell processed products, such as paneer or separated cream. The quality of the
vendors milk and milk products is not guaranteed. Largely sold in loose form, it is often adulterated
with several additives to control spoilage.

Cooperatives are the central players in the formal dairy sector. The cooperatives have a three-tier
structure i) primary societies at the village level, ii) unions at the district level and iii) federations at
the state level. Currently, there are 14 federations in India.

The success of the Gujarat Cooperative Milk Marketing Federation (GCMMF), known for its Amul
brand and its Amul model of cooperative, is acclaimed. However, there is a perception that
cooperative organizations generally have failed in other parts of the country. A less recognized fact is
that the cooperatives in other states are organized differently than the GCMMF cooperatives. The
GCMMF cooperatives operate as a true representative of farmers and are run by professionally
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qualified managers. In most other states, the cooperatives are managed by civil servants, function
more as government bodies and are weak representatives of farmers.

Of the 14 major state cooperatives in the country, 10 have state government equity, of which 6 have
government equity in excess of 51 percent. Twelve of the 14 cooperatives have government officers
as managing directors who are appointed by the state government. It is not uncommon for these
officials to change up to three times a year. Because of such governance, cooperatives are mere
parastatals and do not work in the true spirit of cooperatives with elected farmer representatives and
professionals who run the organization. This governance structure influences the functioning of the
entire chain, from the state federation to the village societies and thus significantly impacts farmers
involvement in the chain.

The primary differences between the GCMMF cooperatives and other state cooperatives are price and
services. In Gujarat, the price paid to farmers is based on fat content; there is regular testing of milk
each farmer supplies. In most of the other states, there is hardly any testing of milk. In other state
cooperatives, the village society president wields a lot of power and typically decides the prices paid
to farmers. Reportedly, farmers with some degree of influence receive higher prices while those
without receive lower remuneration. Being the lead organizations, the cooperatives also set a
benchmark for prices paid by other buyers, such as local vendors and private dairies, who tend to pay
50 paise or 1 rupee ($ .02) more than that paid by the cooperatives. Thus, if the farmgate price paid by
the cooperative is low, other players also pay a low price.

For most of the private dairies, agents procure the milk from farmers. Some private dairies
have established village societies for milk collection that follow the cooperative model.
However, this model requires much larger investment and is not economically feasible,
considering that cooperatives receive considerable development support from the government
(such as feed subsidies). It is not uncommon for private dairies to make loans to farmers,
which is a key reason for the somewhat large share of milk directed to this channel.
Factor conditions

Factor conditions for dairying entail the quality of animals, human resources and technical
skills, land availability, capital, credit, infrastructure and other inputs relevant to the value
chain, as the following explains.

The quality of animals is critical in determining its milk productivity and hence overall
production. Currently, low productivity per animal hinders development of the dairy sector.
Despite being the worlds largest milk producer, Indias productivity per animal is very low,
at 987 kg per lactation, compared with the global average of 2 038 kg per lactation.

The low productivity is a result of ineffective cattle and buffalo breeding programmes,
limited extension and management on dairy enterprise development, traditional feeding
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practices that are not based on scientific feeding methods, and limited availability and
affordability of quality feed and fodder. In addition, the limited supply of quality animals is
exacerbated by policies limiting interstate movement of animals. Indigenous cattle and
buffalo make up 45 percent of the countrys total milch population, in contrast to the cross-
bred cows at 10 percent.

Animal health and breeding services provision, veterinary infrastructure development and
vaccinations are the responsibility of the state government. These services have traditionally
been provided for free or at a very subsidized rate. In the past few years, there has been
increasing awareness that the state pays heavily to offer these services, which are easily
available to farmers (Ahuja et al.). Consequently, many states have instituted partial or full-
cost recovery fees for providing the services.
PRODUCTION:
Post forecasts calendar year (CY) 2014 fluid milk production at a record 140.6 million tons,
approximately 4.5 percent more than CY 2013 on the assumptions of a normal monsoon,
increased demand for milk and dairy products and rising consumer income. CY 2013 fluid
milk production has been marginally decreased and estimated at 134.5 million tons.
As a result of strong prices and increased export demand, Post forecasts CY 2014 Non Fat
Dry Milk (NFDM) production to increase by 19,000 metric tons to 489,000 metric tons. CY
2013 production estimate for NFDM is revised higher at 470,000 metric tons. While most
NFDM producers faced difficulties throughout 2012, market for NFDM has picked up in
2013 due to strong prices and export ban lifted in June 2012. Increased demand for
reconstituted milk during the lean season (April-August) and consistent exports of NFDM are
also the major drivers supporting increased production. The NFDM market is used as a way
to establish a procurement system and maintain cash flow while slowly developing a
marketing network for high-value perishable goods.
Following Indias rising production trend, Post forecasts CY 2014 production of combined
butter and ghee (clarified butter) to increase approximately by 3 percent over CY 2013 to
4.88 million metric tons as a result of increase in income of an average Indian consumer
leading to increased domestic demand. However, CY 2013 production estimates are
marginally revised down to 4.74 million metric tons in order to match with the current market
situation. (Note: Post Production, supply and demand (PSD) estimates for fluid milk, NFDM
and butter have been revised to reflect the calendar year in lieu of the April/March marketing
year)
India ranks first in the world in milk production and it has gone up from 53.9 million tons in
1990-91 to 127 million tons in 2011-12. The country accounts for around 17 percent of
worlds total dairy production. As per Economic Survey Statistics, 2012-13, the per capita
availability of milk has increased from 176 grams per day in 1990-91 to 290 grams per day in
2011-12 and this is comparable with the world per capita availability of milk at 289 grams
per day for 2011. Strong farmgate prices supported by growth of the Indian economy and the
rising domestic demand for value-added dairy products are factors contributing to increased
production. Growing private investment in dairy processing facilities is also expected to
provide further impetus to Indias milk production over the coming years. Farmers working
22 | P a g e

directly with formal sector buyers have access to modern extension services, thus improving
the herd size, management, feeding, fertility and veterinary care. Many of these extension
service providers offer artificial inseminations further improving milk yields with new dairy
cattle genetics. Artificial insemination services are expected to grow in the future, as the
government of India continues to develop protocols for imported genetics products as well as
encourage the growth of genetics services throughout the country.
PRODUCTION POLICY
The Indian Government is promoting milk production through the launch of intensive dairy
development programs and strengthening of infrastructure for quality and clean milk
production. It has devised a plethora of schemes for assistance to cooperatives and has also
instituted a dairy entrepreneurship development scheme among other targeted programs for
sustained progress of the dairy sector.
The National Dairy Plan was approved in February 2012 with a financial outlay of 416
million dollars (more than 20 billion rupees), and implementation period of six years from
2011-17 to meet the projected national demand of 150 million tons of milk from domestic
production. The first phase of the plan is focused on 14 major milk producing states: Andhra
Pradesh, Bihar, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha,
Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal. In India, these states account
for over 90 percent of total milk production, 87 percent of the total buffalo population, and 98
percent of total forage production.
Three different entities implement the NDP: (a) The National Steering Committee provides
policy and strategic support; (b) The Project Steering Committee approves plans and
monitors progress; and (c) The Project Management Unit manages project implementation.
In 2012, the first phase of the NDP began with a set of initiatives that would be implemented
over the next six years. These initiatives include:
a. Increasing productivity through scientific breeding and nutrition
b. Strengthening village-based milk procurement systems
c. Project management and learning
In addition to NDP, the Department of Animal Husbandry, Dairying and Fisheries (DAHD),
Ministry of Agriculture, approved for the continuation of the following four schemes in
financial year 2013-14 (April-March) during the 12th Five Year Plan:
1. Intensive Dairy Development Program (IDDP): This program is being implemented by the
state dairy federations/district milk unions and has the following six objectives:
Development of dairy cattle;
Increase milk production by providing technical inputs services;
Procurement, processing and marketing of milk in a cost effective manner;
Ensure remunerative prices to milk producers;
Generate additional employment opportunities; and
23 | P a g e

Improve the social, nutritional and economic status of residents of comparatively more
disadvantaged areas.
2. Strengthening infrastructure for quality & clean milk production : This program is being
implemented through the state government by district cooperative milk unions/state level
milk federations. The objectives of the program are:
Build infrastructure to ensure milk quality from producer to consumer;
Improve milking practices at the farmer level; and
Build awareness on the importance of clean milk production amongst producers.
3. Assistance to Cooperatives: The GOI seeks to revitalize underperforming dairy cooperative
unions at the district level and cooperative federations at the State level. The program is being
implemented by the concerned district cooperative milk unions/state dairy federations.
4. Dairy Entrepreneurship Development Scheme: This program is being implemented
through the National Bank for Agriculture and Rural Development (NABARD), and has the
following objectives:
Creation of modern dairy farms for the production of clean milk;
Encourage heifer calf rearing for conservation and development of good breeding stock;
Create structural changes in the unorganized sector to promote initial milk processing at the
village level; and
Upgrade technology to handle milk on a commercial scale.
From 2000-10, the GOI implemented a major program entitled National Project for Cattle
and Buffalo Breeding (NPCBB) to improve local genetics. In order to complete spillover
activities from this project, the NPCBB was allowed to continue activities under a new
scheme called the National Project on Bovine Breeding and Dairy. This new scheme will
be implemented through IFY 2014, and would supplement NDP activities. The goals include:
a. Improve cattle genetics by servicing 80% of adult females through an organized genetics
management program (could utilize artificial insemination (AI) or natural insemination).
b. More privately self-employed AI practitioners.
c. Replace 20 million low producing nondescript cattle and buffaloes with genetically
superior animals.
d. Increase rural self-employment opportunities and farm income.
e. Develop a modern AI network and AI delivery services that are easily accessible by
farmers.
f. Establish an authority that can certify the authenticity of semen, semen stations, and AI
bulls.
g. Conservation and genetic development of several indigenous cattle and buffalo breeds.
24 | P a g e

While breeding stock development continues to take place through the Ministry of
Agricultures research programs, the GOI has also taken steps to allow the importation of
high quality genetics. Currently, India allows imports of bovine semen subject to strict
quality standards.
The GOI is also seeking to improve feeding practices and develop quality feeds and fodders
in order to improve livestock productivity in India. Animal feeding in India typically relies on
agricultural byproducts rather than grain-based feeds or specialized fodder. Use of capital-
intensive feeds is growing in India, but still represents a small share of total feeding.
The National Mission for Protein Supplements was launched by GOI in Indian Financial
Year 2011-12 with an allocation of more than USD 65 million. This mission undertakes
activities to promote animal based protein production through livestock development, dairy
farming, piggeries, goat rearing and fisheries in selected areas of the country. With the
announcement of the NDP, the mission was strengthened and continued in Indian Financial
Year 2013-14.
The National Dairy Development Board has very recently approved INR 300 million (USD
4.9 million) for rearing of improved sires in the state of Haryana.
The private sector also provides extension services including artificial insemination,
veterinary care, and livestock management training. As genetic improvements become more
available, it is expected that Indian producers will continue to use higher yielding foreign
cattle/local breed hybrid crosses, often provided through their milk procurement companys
own extension services.
REGULATION OF MILK AND MILK PRODUCTS IN INDIA
The Food Safety and Standards Authority of India (FSSAI) regulates food safety in India.
Dairy products are regulated under the Food Safety and Standards Regulations (FSSR),
which replaced the Milk and Milk Products Order, 1992 on August 5, 2011. The FSSR
applies equally to domestic and imported food, and requires that food business operators
(including food processors, manufacturers, exporters, or importers) hold a license to carry out
business in India. Individuals are not allowed to start or carry out any food business without a
license from the FSSAI. The FSSR also prohibits the use of animal-derived rennet in cheeses.
While the FSSAI sets standards for the safety of domestically produced and imported milk
and milk products into India, the Ministry of Agricultures DAHD is responsible for issuing
sanitary permits for milk and milk product imports into India.
Consumption:
CY 2014 fluid milk consumption is set to match 2014 fluid milk production. Indian
consumption of NFDM for CY 2014 is forecast at 425,000 metric tons, assuming increased
exports and little imports from CY 2013. Due to an increased demand for reconstituted milk
during the lean season (April-August) and consistent exports of NFDM, CY 2013
consumption estimates are revised lower at 420,000 metric tons. Butter consumption is
forecast to match domestic production in 2014.
India is not only a leading milk producer but is also the largest consumer of milk in the
world. According to industry estimates, the Indian dairy consumption market has grown at an
annual rate of 6.8% over the last decade. The major factors driving growth in milk
25 | P a g e

consumption are increased demand due to population growth, greater affordability due to
increased disposable incomes, increasing awareness and availability of dairy through retail
and foodservice segments and increased consumer interest in high protein diets. As per the
National Sample Survey 66th Round, July 2009-June 2010 on the Nutritional Intake in
India and Household Consumption of Various Goods and Services in India, the
contribution of milk and milk products to protein intake has risen from 3 percent in the lowest
decile class to 15 percent in the highest in the rural sector and from 5 percent to 18 percent in
the urban sector. The share of milk and milk products is 7.6 percent of consumer expenditure
in rural areas as compared to 6.9 percent for urban areas.
Of the milk produced, 40 percent is used or consumed on-farm, and 60% is sold. Industry
sources report that of milk sold 70% goes through the unorganized sector, and only 30%
through the organized sector (16 percent by cooperatives and 14 percent by large private
processors). According to a Rabobank report, Indias formal dairy market size is USD 10
billion and it is expected to grow at a CAGR of 13-15 percent. The formal market comprises
cooperatives and private players who control the supply chain linkages. Little research is
carried out on Indias vast informal dairy sector. The informal dairy market is largely
fragmented and is a challenging environment due to its high-volume and low-margin business
of indigenous products, the supply-constrained value-chain for quality products and
insignificant trade opportunities due to ever-changing trade regulations. While market players
indicate that the informal sector is slowly being overtaken by the formal sector, there are no
hard data to verify in what proportions Indias dairy market is divided between the formal
and informal sectors. Within the formal sector, private dairy players are investing in
formalizing milk procurement and focusing on marketing value-added products. Some of the
private dairy processing players in India have now become strong regional players and are
aiming to become national players in the next few years.
Given strong prices, increasing production, growing urban population and consumer
preferences and trust for branded milk products, it is possible that the unorganized sectors
market share is slowly decreasing.
Processing
The change in work culture (a growing number of women in the workforce) and
demographics (smaller families and cosmopolitan culture) in the urban areas are driving the
growth of many processed dairy products like milk powder, processed cheese, table butter,
yogurts, flavored milk, ice-creams, cottage cheese (paneer), dairy whitener, probiotic drinks,
ethnic dairy desserts, etc. According to Rabobank estimates, with the expansion of organized
retail acting as a platform for driving value-added sales, the market share of value-added
products will increase from 21 percent to 31 percent by 2019-20.
Cheese production in India is estimated to be growing at the rate of 10-12 percent in terms of
volume and 16-17 percent in terms of value per year. Given this scenario, the processed dairy
sector is poised for growth, although this will depend greatly on the stability of dairy supply
as well as expansion of necessary infrastructure and the cold chain system. Cottage cheese
(paneer) is considered a delicacy among the majority of Indian consumers. However, this is
largely manufactured by the unorganized sector and many households also produce fresh
cottage cheese for their own consumption.
26 | P a g e

The ice-cream industry in India is witnessing a booming growth rate of 12-15 percent
annually. Per capita consumption of ice-cream is around 250 ml. Around 60 percent of
Indias ice- cream market is accounted for by branded players. This presents a huge
opportunity for organized players in the ice-cream industry. Several international players are
entering into the market while the domestic players are trying to expand their operations.
Another segment where the countrys dairy sector is likely to witness growth is ultra high
temperature (UHT) milk. The demand for UHT milk is growing though it has not been able
to break the strong preference for daily consumption of fresh milk. UHT milk is an
aspirational category of dairy product for many Indian consumers who do not want to
compromise on quality and nutrition, and is likely to grow with the increase in the household
income.
TRADE:
Export
India consumes almost all of its domestic dairy production. India exports milk powders
(casein), and occasionally ships smaller volumes of butter and other products to neighboring
countries if favorable prices and demand occur. As the export bans have been lifted since
June 2012, NFDM exports have increased and cleared the stocks out of 2012. A confidence
has been built up in the minds of producers that the market will be well placed in the near
future. The NFDM exports are mainly to the milk-deficient countries such as Bangladesh,
Egypt, Algeria, Sri Lanka and Pakistan.
Given the above factors, Post forecasts CY 2014 NFDM exports at 60,000 metric tons and
revises CY 2013 export estimates at 90,000 metric tons, reflecting increased demand and
strong prices. Based on trade data, CY 2012 NFDM figures are revised to 37,000 metric tons.
CY 2014 exports of butter are forecast at 5000 metric tons reflecting sustained domestic
production. CY 2013 export figures are revised to 5000 metric tons to match the current
visible trend in the market. CY 2012 export figures are revised to match the trade data.
Import
Post forecasts zero imports of NFDM and butter in CY 2014 due to strong domestic
production. Based on the current stocks available in CY 2013, the butter import figure is
brought down to zero. CY 2012 import figures for NFDM and butter are revised to 14,000
and 8,000 metric tons respectively to match the trade data.
Historically, India has only imported milk powder and butter in limited quantities when it
was believed that domestic production was insufficient or to help control inflation. As
incomes and population grow, and consequently consumption, India may require additional
supplies and imports of butter and NFDM, absent significant domestic production growth.
POLICY:
Trade Policy
India allows imports of milk and milk products without quantitative limitations, although
tariff rate quotas apply and an import permit is required. NFDM imported above the TRQ
attracts a 60 percent basic duty and above quota butter oil imports are charged a 30 percent
basic duty.
27 | P a g e

Although India allows milk and milk product imports, in most cases both import permits and
sanitary certificates are required. For the import of livestock products (including milk and
milk products), an applicant has to apply at least 30 days in advance with form A/B
(Department of Animal Husbandry and Dairying). Exports of U.S. dairy products to India are
effectively prohibited under Indias current dairy sanitary import protocol. Imported dairy
products, like domestic dairy products, must adhere to all relevant food safety laws and
quality standards. These include the quality standards set by the Bureau of Indian Standards
(BIS) as well as the food safety standards covered in the Food Safety and Standards
Regulation, 2011.
On November 21, 2012, India revised its tariff rate quota (TRQ) on dairy products falling
under harmonized system (HS) code 040210 and 04022100 (SMP). Under the notified TRQ,
India will permit imports up to 10,000 metric tons (MT) of SMP per fiscal year at a tariff rate
of 15 percent. Quantities above 10,000 MT will incur a 60 percent tariff.
On November 22, 2012, the Government of India (GOI) lifted its ban on the export of dairy
products falling under HS code 0402. This includes milk and cream, concentrated and/or
sweetened milk and cream, whole milk powder, dairy whitener and infant milk foods.
Industry sources state that this action will have little consequence on trade, as the majority of
Indias dairy product exports are skim milk powder (SMP) and casein, both of which were
permitted for export on June 8, 2012.
In March, 2013, the Department of Animal Husbandry, Dairying and Fisheries (DADF) of
the Ministry of Agriculture, Government of India (GOI) posted revised guidelines on its
website for the import and export of bovine genetics to India.
On June 11, 2013, the Food Safety and Standards Authority of India extended the import
prohibition on milk and milk products from China for an additional year until June 22, 2014.
The ban includes milk, milk products, chocolates and chocolate products, candies,
confectionary, and food preparations made with milk or milk solids originating in China.
On June 11, the Government of India, Ministry of Commerce and Industry amended the
Directorate General of Foreign Trades (DGFT) Import Policy 2012 and broadened the
number of HTS chapters for which a certificate complying with the Ministry of Agricultures
livestock import requirements will be required. The chapters now include dairy and other
livestock products covered in chapters 2, 3, 4, 5, 16, and 21. The new policy condition
specified in the amended notification requires that import of all livestock products shall be
subject to a sanitary import permit issued by the Department of Animal Husbandry, Dairying
and Fisheries, Government of India. The chapters including lactose (chapter 17) and some
proteins (chapter 35) are however, not included in the amendment
OVERVIEW OF DAIRY MARKETING CHANNELS IN INDIA
28 | P a g e


IDENTIFYING CRITICAL ISSUES IN THE DAIRY CHAIN

Stage Priority Agent Issues
Policy environment Developing livestock
policy
Breed development

Dept. of Animal
Husbandry, Dairying
and Fisheries

Lack of a coherent
livestock development
policy
Ineffective implementation
of policy and projects due
to lack of clarity in roles of
different agencies
Lack of resources
Lack of clarity between
roles of different
departments
Lack of regulation for
quality of feed and
medicines

Services

Disease control/
health/breeding/extension
services
Support to dairy farmer
organizations/womens
self-help groups

Dept. of Animal
Husbandry, Dairying
and Fisheries
Cooperatives
NGOs
Private dairies

Inadequate coverage of
veterinarian and breeding
services
Non-existent extension
services
Scope to enhance activities
of NGOs in these areas
Lack of private sector
29 | P a g e

involvement in dairy
development services and
activities

Inputs

Feed supply
Fodder
Medicines/vaccine supply

Cooperative
Feed companies
Medicine companies
Medicine store

Cooperative
Feed companies
Medicine companies
Medicine store

Formal credit for animal
purchase

Banks/financial
institution
Cooperatives
Self-help group

Very poor access to formal
credit at the farm level

Informal loans for animal
purchase or other dairy
needs

Trader
Private company
agent

Very high rate of interest;
farmer has to sell milk at
low price to the trader if
he/she has borrowed money
from the trader

Production

Dairy farming
Selling milk
cooperatives/traders/private
dairy agents

Farmer

Poor management and
feeding practices because
of lack of information in
the absence of extension
activities.
Low productivity because
of poor genetic potential,
poor feeding and
management practices,
poor access to health and
breeding services, lack of
good-quality animals
Availability of milk per
household very low
Low profitability from
dairy enterprise

Marketing/
processing

Collection of milk from
farmers through village
society, processing and
marketing of milk in cities
and urban areas

Cooperative society

Lack of coverage of
villages
Lack of transparency in
milk testing and pricing
Lack of democracy in
village societies
Marketing only in peri-
urban/urban areas
Maintaining quality of
milk/infrastructure
Milk prices declared by
cooperatives kept low and
30 | P a g e

used as a benchmark price
by other players

Purchase milk from
farmers and selling milk
and processed products to
consumers

Trader

No transparency in milk
pricing
Adulteration and quality of
milk and milk products
Unhygienic conditions for
milk processing

Purchase of milk from
farmers through village
agents, processing and
selling milk

Private dairy

No transparency in pricing
of milk
Quality of milk

Retailing

Selling of milk and milk
products processed by
cooperatives and private
dairies

Retailers



SURVEY AND ANALYSIS

Methodology
The research includes both secondary and primary research. The primary research has been done
internally with the help of branding and other involved department. The research has been conducted
within a period of 2 months.
Research Design
The data has been collected using both secondary and primary data collection methods.
Both quantitative data (numbers and statistics) & qualitative data (usually words or text) has
been collected to complete the study.
The research methodology is exploratory in nature
Sources of data collection
Secondary Data Research- Secondary data has been collected to find out the best practices
of the industry and other companies. Secondary Research includes projects that have been
done in the past, newspapers, magazines, companys official websites and other websites, etc.
Primary Data Research-For the research to be completed successfully secondary research
was not enough so to analyse the actual problem, primary data was also collected. Primary
research was mainly collected by consumer survey and observations

Scope of the research
31 | P a g e

Since, the research was limited to milk and related products only; therefore there is a scope to
cover other products also which fall under the special category group of food and grocery and
especially dairy.
The survey has been conducted by Shashank Gupta and Aviral Mishra. The data has been used with
the knowledge of the owners.
Questionnaire along with statistical analysis
1. Age



2. Income



3. Frequency of purchase
52%
30%
18%
10 - 25 26 - 50 50 Above
37%
33%
11%
19%
10,000 - 15,000 20,000 - 25,000
30,000 - 40,000 50,000 Above
32 | P a g e


4. Quantity of purchase


5. Brand Preference

6. Reason of purchase
10%
90%
No Yes
35%
15%
40%
10%
1 ltr. to 2 ltr. 2 ltr. to 4 ltr. Less then 1 ltr. More than 4 ltr.
56%
44%
Amul Mother Dairy
33 | P a g e



7. Satisfaction with the quality of the product


REFERENCES

Varghese Kurian brand loyal,brand equity
http://www.india-seminar.com/2001/498/498%20verghese%20kurien.htm
http://www.fao.org/docrep/011/i0588e/I0588E05.htm
http://articles.economictimes.indiatimes.com/keyword/dairy
http://agropedia.iitk.ac.in/content/opportunities-and-challenges-indian-dairy-industry
http://www.agrochart.com/en/news/news/101113/india-dairy-and-products-annual-oct-2013/
http://extension.psu.edu/animals/dairy/marketing-outlook
Video
https://www.youtube.com/watch?v=GhGhKVuqdew
20%
14%
40%
26%
Brand Image Price Quality Taste
14%
2%
38%
46%
Can't Say Extremely Disatisfied
Extremely Satisfied Satisfied