A CASE ON Pradesh Milk Federation

Adil Pasha Roll No. 1 Section- A

Gist of the case

Pradesh Milk Federation (PMF) was set up in the year 1985 in Raajput, the capital city of the Pradesh state. A co-operative apex body of 5000 village level dairy co-operative societies (DCS) organized into 10 district level milk unions in the state of pradesh. Mr. Mohan Kumar, the newly appointed MD of Pradesh state Co-operative Milk Producer Federation limited is having a meeting with his managers who are briefing him about the PMF. He had no prior experience in dairy industry but

About PMF
3tier system. Village level -> district level milk union -> board of the milk federation-PMF. It provides the farmer a remunerative price and an assured outlet for his or her entire milk production throughout the year.

Mr. Mohan Kumar is having a meeting with his managers who are briefing him about the PMF.
Mr. Ethiraj Kasturi - Procurement manager Mr. Ashwin Prasad - Production manager Mr. Subhash Mathur Marketing manager Mr. Saliesh Suman - Accounts manager Mr. Murlidhar Mathur - Sales & Distribution manager

Problems
Dairy extension:
Milk production cost for farmers is high (net profit is less than Rs 1000 with 2 mil5ch animals.) Village cooperative wants PMF to increase procurement price.

Milk Procurement:
Small private dairies being set up within the state. In winter pvt companies pay Rs 9.50 and in summer Rs 11 to12/litre. Villagers sell milk to pvt to get higher price and in winter the milk refused by pvt was sold to PMF.

Milk Processing:
Liquid milk consumption was steady throughout the year. Excess milk(in winter) is turned to different products or is sent to other cities. In summer when they lack milk, they mix butter oil with skim milk powder and blend it with fresh milk and sell. All these led to unavoidable cost of Rs3-4 per litre.

Liquid milk sales:

People are reluctant to buy whole milk from PMF because of the perception that its not fresh as local dairies. Higher processing cost, packaging cost, retailer margin increase the cost to Rs12 for 500 ml for TFA packs. Net profit on the product was thin(Rs.2/500ml). Sales was less because it was expensive. Retailers were not interested to sell (blocking funds). Competitive brands were selling 1000 ml with Rs 26 in TBA packs that keeps milk perfect for

Milk product sales:

Profitable in the liquid milk section of the market as distribution and processing costs are low compared to conversion of milk to products. PMF could sell limited quantities of Raaj brand dairy whitener (skim milk powder) and remaining whitener

was sold in unbranded wholesale market in Kolkata city. Losses on sale of skim milk powder. Most of PMFs losses could be attributed to losses on sales of skim milk powder.

Environmental change:
Dairy companies in New Zealand were planning to sell milk powder and butter in India. Indian customers have a liking for foreign brands. Reduction of market share may take place due to the entry of foreign competitors.

SOLUTIONS:
Proper market research of the customer requirements. As mentioned in the case study that Raajpur is quality conscious and not that price sensitive. Quality conscious people ready to pay higher for better quality. Offering diversified products which will give an edge over the competitors.

 Making a proper distribution channel so as to create arrangements with the supermarkets and restaurants for year long supply. Can have line extensions like, sweets, icecreams, flavoured milk etc. Proper promotion and positioning of the products. Making strategies to increase profits by proper monitoring the procurements.