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PEST AnaLysis Of the FMCG Sector

Political

Tax Structure

: Complicated tax structure, high indirect tax, lack of uniformity,high octroi& entry tax and

changing tax policies.

Infrastructure Issues:

Performance of FMCG is very much depended on governmentspending on Agricultural

Infrastructure, Power, and Transportation Infrastructure.

Regulatory Constraints:

Requirement for multiplicity of permits and licenses forvarious states, prevailing outdated labor

laws, Cumbersome and lengthy exportprocedures, confusing and time consuming subsidy

availing procedures

Policy framework:

Approval related to investment of FDI into Retail sector (single-brand retail &multi-brand retail,

License rules in setting up of Industry, Changes inStatutory Minimum Price (SMP) of

commodities and Priority sector classification ofIndustries.

Economical

GDP Growth:

Growth of the industry is consistent with the Indian economy

Inflation:

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Inflationary pressures alter the purchasing power of money. This has adirect impact on consumer

spending and business investment

Consumer Income:

Increase in incomes is largely an outcome of economic growthacross sectors. Over the past few

years, India has seen increased economic growth,with a continuing and substantial impact on

consumer disposable incomes enablinggood growth for the FMCG sector.

Private Consumption:

The Indian economy, unlike other economies, has a veryhigh rate of private consumption (61%)

Urbanization:

India has 70% of its population living in rural areas. With risingurbanization, more people will

have exposure to modern products and brands andthus shift to branded and packaged goods and

products.

Social

Change in consumer Profile:

Rapid urbanization, increased literacy and rising percapita income, have all caused rapid growth

and change in demand patterns,leading to an explosion of new opportunities. Around 45 per cent

of the populationin India is below 20 years of age and the young population is set to rise further.

Change in Lifestyle:

Changing Lifestyle of Indian consumers has led to focus onpremium products among IndianFMCG players.

Rural focus:

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As market is getting saturated, companies are focusing on rural areafor penetration, by providing

consumers with bite-sized or single-use packs

.

Technology

Adoption of ERP, Supply Chain Optimization tools and Business Intelligence Toolswill help

FMCG companies to integrate business processes across the enterprise,suppliers and customers.

With the level of competition and sluggish growth mostFMCG corporates are looking at IT to

reduce costs in the supply chain, and flattenthe bottom lineMarketing and advertising through

mobile and social media platform

COMPANY OVERVIEW

INTRODUCTION

Amul is an Indian dairy cooperative, based at Anand in the state of Gujarat, India. The

word Amul is derived from the Sanskrit word Amulya meaning invaluable. The co-operative is

also sometimes referred to as Anand Milk Union Limited .

Formed in 1946, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk

Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3 million milk producers

in Gujarat.

Amul spurred India's White Revolution, which made the country the world's largest producer of

milk and milk products. In the process Amul became the largest food brand in India and has also

ventured into markets overseas.

Dr Verghese Kurien, founder-chairman of the GCMMF for more than 30 years (1973 – 2006), is

credited with the success of Amul.

http://en.wikipedia.org/wiki/Dr_Verghese_Kurien

http://en.wikipedia.org/wiki/Dr_Verghese_Kurien

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HISTORY

The Birth of Amul

It all began when milk became a symbol of protest

Founded in 1946 to stop the exploitation by middlemen

Inspired by the freedom movement

The seeds of this unusual saga were sown more than 65 years back in Anand, a small town in the

state of Gujarat in western India. The exploitative trade practices followed by the local trade

cartel triggered off the cooperative movement. Angered by unfair and manipulative practices

followed by the trade, the farmers of the district approached the great Indian patriot Sardar

Vallabhbhai Patel for a solution. He advised them to get rid of middlemen and form their ownco-operative, which would have procurement, processing and marketing under their control.

In 1946, the farmers of this area went on a milk strike refusing to be cowed down by the cartel.

Under the inspiration of Sardar Patel, and the guidance of leaders like Morarji Desai and

Tribhuvandas Patel, they formed their own cooperative in 1946.

This co-operative, the Kaira District Co-operative Milk Producers Union Ltd. began with just

two village dairy co-operative societies and 247 litres of milk and is today better known as Amul

Dairy. Amul grew from strength to strength thanks to the inspired leadership of Tribhuvandas

Patel, the founder Chairman and the committed professionalism of Dr Verghese Kurien,who was

entrusted the task of running the dairy from 1950.

The then Prime Minister of India, Lal Bahadur Shastri decided that the same approach should

become the basis of a National Dairy Development policy. He understood that the success of

Amul could be attributed to four important factors. The farmers owned the dairy, their electedrepresentatives managed the village societies and the district union,Â they employed

professionals to operate the dairy and manage its business. Most importantly, the co-operatives

were sensitive to the needs of farmers and responsive to their demands.

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At his instance in 1965 the National Dairy Development Board was set up with the basic

objective of replicating the Amul model. Dr. Kurien was chosen to head the institution as its

Chairman and asked to replicate this model throughout the country.

THE ORGANIZATION

Gujarat Cooperative Milk Marketing Federation

GCMMF: An Overview

Gujarat Cooperative Milk Marketing Federation (GCMMF) is India's largest food products

marketing organisation. It is a state level apex body of milk cooperatives in Gujarat which aims

to provide remunerative returns to the farmers and also serve the interest of consumers by

providing quality products which are good value for money.

CRISIL, India's leading Ratings, Research, Risk and Policy Advisory company, has assigned itshighest ratings of "AAA/Stable/P1+" to the various bank facilities of GCMMF.

Members: 13 District Cooperative Milk Producers'

Unions

http://toi.amul.com/photogal/pg260608.html




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No. of Producer Members: 3.03 million

No. of Village Societies: 15,712

Total Milk handling capacity: 13.67 million litres per day

Milk collection (Total - 2010-11): 3.45 billion litres

Milk collection (Daily Average

2010-11):

9.2 million litres

Milk Drying Capacity: 647 Mts. per day

Cattlefeed manufacturing Capacity: 3690 Mts per day

Sales Turnover (2010-11) Rs. 9774 Crores (US $ 2.2 billion)

Amul Ice Cream

AMUL ICE CREAM is made from Milk and Milk products, Sugar, Stabilizers &

Emulsifiers. It composes of milk fat, total solids, sugar,

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acidity, protein etc. Calories present are per 100 ml -196.7 kcal Various verities of Ice Cream can

be made from the basic mix by addition of required amount of permissible colors and flavour.

Dry fruits and nuts would be used for making premium varieties of Ice Cream. Various flavors of

Amul ice-cream are as follows:-

Vanila, Strawberry, Pineapple, Orange, Rose, Mango, Chocolate, Honey-Dew-Melon, Tutti

Frutti, Litchi, Kesar Pista, Kaju Draksh, Butterscotch, Chocochips, Rajbhog and Cashew Break.

Introduction

GCMMF is presently the market leader in almost all dairy product category i.e. Butter, Milk

Powders, Infant Milk food, Cheese, Cheese Spreads, Milk, Paneer, Dahi etc. We, at Amul,

promise to our highly esteemed consumer, an association in an unwritten contract to satisfy his

taste and nutritional requirements by offering them VFM (Value for Money) products whose

quality is hard to match. The core of the Amul Brand is something that is genetically implanted

in the very fabric of its construction. We endeavour to delight our customers without fleecing

them. For us there is no difference between the terrific rich and the woebegone.

Amul Ice Cream: Present Status:

AMUL Ice cream is among the Asia’a top 10 Ice cream brands.

In a short span of 6 years, Amul Ice Cream has become No.1 Ice Cream brand in the

country. Amul ice cream is now the only national brand and other Ice Cream brands are

regional.

Our position in the market: Amul No.1 brand in India: Amul has achieved a market

share of 38% (4.5 times larger than nearest competitor).

Amul Ice-cream : "Real Milk Real Ice-cream"

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The punch line for Amul Ice Cream is “Real Milk Real Ice Cream” as we offer the best quality

product made of real milk and milk fats and not vegetable oil (frozen dessert). Recipe used for

Amul Ice Cream is on the line of Super Premium Ice Cream i.e. 35% creamier and tastier than

any other ice cream available in India.

Process

The Amul Model of dairy development is a three-tiered structure with the dairy cooperative societies at the village level federated under a milk union at the district level and a federation of

member unions at the state level.

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Establishment of a direct linkage

between milk producers and

consumers by eliminating

middlemen

Milk Producers (farmers) control

procurement, processing and

marketing

Professional management

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Success factor of AMUL ice cream

• Price differential

• Quality of products

• Taste

• Brand name

Vision & Mission statement of AMUL

VISION:

Ami l ’ s v i s i on i s t o p r ov i de mor e and mor e s a t i s f ac t i on t o t he f a r me

rs , t he i r c us t o me rs , employees and distributers

MISSION:

we the motivated and dedicated workforce at amul are committed to produce wholesome

ands a f e f oods o f exce l l en t qua l i t y t o r ema i n mar ke t l eade r t h r ough development of qualitymanagement system, state of art technology, innovation and

eco-friendly operations to achievedelightment of customers and milk producers

Environmental analysis

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SWOT ANALYSIS

SWOT Analysis

Strength

1. Good product range include various flavors, party packs, sticks,

cones etc

2. Good quality and packaging, and good advertising

3. Amul is one of the most respected top-of-the-mind brands

4. Also launched probiotic and sugarfree icecreams

5. Offers over 200 products across India

Weakness

1. Growing competition form international and other brands means

limited market share

2. Limited international presence as compared to leading global brands

Opportunity

1. High End ice-cream to tap the higher income group also

2. Tie-up with food chains, restaurants

3. Mobile vans for better visibility

Threats

1. Kulfi in rural markets

2. Local ice creams and sweet dishes

3. Health conscious people refraining from sweets

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Customer profile:

Targeted customers of amul icecream are as follows:

Kids

Womens

Youth

Calorie consciousHealth conscious

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Supplier of Amul Ice cream

Global Environment:-

GCMMF has signed an agrement with Wal-Mart to stock its shelves with

products under its amul brand name. Amul processed cheese, pure ghee,

shrikhand, Nutramul, Amul’s Mithaee Gulab Jamuns are few of the products

marketed in US markets.

50% of Americans being medically obese & if Amul is really looking to

capture the hearts of the 2nd and 3rd of Indians, offering low-fat versions of its

brands, would make a lot of commercial sense. Hence targeting the large

Indian community in the US markets with its niche products like Mithai,

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Packaged ready to eat foots product, it can definitely expand its market to a

large extent.

Overseas markets – Mauritius, UAE, Bangladesh, Australia, Chinas,

Singapore, Hong Kong & Few South African Countries,

Fresh plans of flooding the markets of Japan & Srilanka,

Tie up with Glaxo to sell baby food

Strategic decisions taken to build the brand

The strategic decisions that developed Amul as a brand can be classified in the following broad

categories:

1. Technology

2. Pricing

3. Quality

4. Product Portfolio

5. Distribution Network

1. Technology Strategy:The technology, packaging and Amul’s approach to marketing is based on the changing taste

buds of the consumers. The technology strategy is characterized by four distinct components:

new products process technology complementary assets to enhance milk production e-

commerce .Few dairies of the world have the wide variety of products produced by the Gujarat

Cooperative Milk and Marketing Federation (GCMMF) network. Village societies are

encouraged through subsidies to install chilling units.

Automation in processing and packaging areas is common, as is Hazard Analysis Critical

Control Point (HACCP) certification. Amul actively pursues developments in embryo transfer

and cattle breeding in order to improve cattle quality and increase in milk yields. GCMMF was

one of the first FMCG (fast-moving consumer goods) firms in India to employ Internet

technologies to implement business to consumer (B2C) commerce. Today customers can order a

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variety of products through the Internet and be assured of timely delivery with cash payment

upon

Receipt.Another e-initiative underway is to provide farmers access to information relating to

markets, technology and best practices in the dairy industry through net enabled kiosks in the

villages. GCMMF has also implemented a Geographical Information System (GIS) at both ends

of the supply chain, i.e. milk collection as well as the marketing process. Farmers now has better

access to information on the output as well as support services while providing a better planning

tool to marketing personnel.

2. Pricing Strategy

At the time Amul was formed, consumers had limited purchasing power, and modest

consumption levels of milk and other dairy products. Thus Amul adopted a low-cost price

strategy to make its products affordable and attractive to consumers by guaranteeing them valuefor money.

3. Quality

Amul has not changed its core values – give the best quality product to the customer. A key

source of competitive advantage has been the enterprise's ability to continuously implement best

practices across all elements of the network: the federation, the unions, the village societies and

the distribution channel (TQM activities). A regular Friday meeting is conducted that has its pre-

set format in terms of Purpose, Agenda and Limit (PAL) with a process check at the end to

record how the meeting was conducted. Similar processes are in place at the village

Societies, the unions and even at the wholesaler and C&F agent levels as well. Examples of

benefits from recent initiatives include - o reduction in transportation time from the depots to the

wholesale dealers, o improvement in ROI of wholesale dealers, implementation of Zero Stock

Out through improved availability of products at depots and implementation of Just-in-Time in

finance to reduce the float Kaizen at the unions have helped improve the quality of milk in terms

of acidity and sour milk. (Undertaken by multi-disciplined teams, Kaizen are highly focused

projects, reliant on a structured approach based on data gathering and analysis.) For example,

Sabar Union's records show a reduction from 2.0% to 0.5% in the amount of sour milk/curd

received at the union.

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4. Enhance Product Portfolio

Amul’s strategy of umbrella branding has also helped establish its brand firmly in people’s

minds. The network follows an umbrella branding strategy. Amul is the common brand for most

product categories produced by various unions: liquid milk, milk powders, butter, ghee, cheese,

cocoa products, sweets, ice-cream and condensed milk.

5. Distribution Network

Amul products are available in over 500,000 retail outlets across India through its network of

over 3,500 distributors. There are 47 depots with dry and cold warehouses to buffer inventory of

the entire range of products. GCMMF transacts on an advance demand draft basis from its

wholesale dealers instead of the cheque system adopted by other major FMCG companies. This

practice is consistent with GCMMF's philosophy of maintaining cash transactions throughout thesupply chain and it also minimizes dumping.

Wholesale dealers carry inventory that is just adequate to take care of the transit time from the

branch warehouse to their premises. This just-in-time inventory strategy improves dealers' return

on investment (ROI). All GCMMF branches engage in route scheduling and have dedicated

vehicle operations.

Ice Cream Industry in India. The ice cream market in India has witnessed a steady growth over the last few decades. The

growth in the Ice cream industry has been primarily due to a strong distribution network and a

good cold chain infrastructure. The ice cream market in India is divided into the branded market

and the grey market or the unbranded market. The branded market is currently 100 million liters

per annum valued at ` 800 crores. The grey market consists of small local players and cottage

industry players.' Currently the ice cream industry in India is worth ` 2,000 crores. The per capita

consumption of ice cream in India is about 300 ml, as compared to the world average of 2.3 liters

perannum.

Statistics for the market share held by the top ice cream brands in India for the year 2008-09 are

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as follows; Amul topped the list, with a market share or 38%, followed by Kwality Walls at 14%,

Vadilal at 12% and Mother Diary at 8%. Below is a graphical representation of the market share

held by the top ice cream brands in India for the year 2008-09.

- See more at: http://business.mapsofindia.com/top-brands-india/top-ice-cream-brands-in-

india.html#sthash.kqQn7OwA.dpuf

7.1 Marketing Strategies

Following are some of the marketing strategies which can be adopted by Amul to gain grasp a

lions’ share in retail segment:

1) Amul can make its hold in the market more strongly if it provides deep freezer on

installment basis or give the freezer on credit basis.

2) The Company needs to improve their packaging material quality. Packaging is one of the

main areas of disagreement with the ice cream distributors because the packaging of the

ice cream creates problem with caring and forwarding. Consumers have suggested that

plastic containers can be easily handled.

3) Incentive based trading with retailers should be initialized upon.

4) Amul needs to strengthen its supply chain management so that there is no problem in the

distribution network of Amul.

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5) Sales promotional activities like game shows, contests, in shop promotions in malls

should be increased and publicized properly. Amul also needs to have tie ups with

various branded stores like Reliance fresh, More, Food marts etc.

6) Amul should focus on having tie ups with malls, different catering institutions, hotels,single screen theatres etc

7) Brand upliftment of Amul ice creams is the need of the day. For this Company should use

Brand ambassador which attracts each age segment as also Amul should publicize itself

through better TV Ads and advertising through electronic media like Internet, Mobile,

FM channels etc

8) Amul must introduce tricycles at strategic traffic points and at public places. This will not

only increase sales but also increase Amul’s Visibility.

9) Amul should make some immediate changes in its policies regarding the damage and

replacement of the ice creams.

Recent Articles in Newspaper

Amul adopts green tech for its chocolate plant

TNN Aug 21, 2013, 04.11AM IST

VADODARA/ANAND: Amul chocolates will be manufactured with green technology. The

Kaira District Co-operative Milk Producers Union Limited (KDCMPUL) popularly known as

Amul Dairy has adopted low carbon technology at the Amul chocolate plant at Mogar in Anand

district.

The technology commissioned by the dairy co-operative is first of its kind in Gujarat. The district

dairy union's initiative comes after its green initiatives involving lakhs of farmers to plant over

312 lakh saplings to make Green Gujarat and its green project at Virar in Maharashtra - the first

of its kind in country's dairy sector.

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Amul to spread bakery business; new plant for cookies on menu

Madhvi Sally, ET Bureau Aug 8, 2013, 04.47AM IST

(Amul plans to expand its…)

NEW DELHI: Amul, the country's biggest dairy brand, plans to expand its fledgling bakery

products business and will soon build a plant that can produce 20 tonnes of cookies a day, a top

official said.

"We are looking at a 40% annual growth for cookies, buns and bread that accounted for over 20

crore," Rahul Kumar, MD of the 2,800-crore Amul Dairy, told ET. "Unlike other brands which

use butter flavour we are using 26% Amul butter in our cookies which consumers will like," he

added.

Learning

Current scenario in FMCG sector Of India.

The Industry overview of the Amul.

The Diversified products offered by the Amul

Distributing Network of Amul Dairy products

http://economictimes.indiatimes.com/photo/21693741.cms



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The strategy adopt based on the market customer and vendor.

The main factors that hamper the growth of this industry include the lack of cold storage chains, irregular

supply of electricity, and poor infrastructure for storage and transportation. Another major challenge that

manufacturers face is the fact that ice cream is perceived as a luxury food product by the Indian governmentand taxed accordingly, whereas many countries do not even have a tax on ice cream and consider it as a

normal food item. State governments have imposed a high VAT (Value-Added Tax) on ice creams,

additionally; a one% excise duty was also added in the last Union Budget; which makes it extremely difficult

for an industry that survives on wafer thin margins. The Indian cold storage logistics chain is very poor,

which is an issue since ice cream is a highly perishable product. Erratic and poor electricity supply in most

regions of India poses a threat too.

Another issue that manufacturers have to deal with is the large number of unorganised players who offer

cheaper products of very low quality. The rising price of milk and allied products is a hindrance as

manufacturers need to constantly raise their prices to combat this. Vadilal, in the past year, has increased

prices twice; there is a probability of another increase in the next few months.

Conclusion:

Amul means different things to different people .

To a milk producer – A life enriching experienceTo a consumer – Assurance of havingwholesome milk To a mother – A reliable source of nourishment for her child To the

country– Rural development and self reliance

threats of New Entrants

Economies of Scale: GCMMF enjoys economies of scale, which isdifficult to match by any other competitor. It is because of this reason thatno regional competitor has grown to a national level.

Cost and Resource advantages: Amul dairy is co-operative society.That means “cooperation among competitive” is the fundamentalprinciple.Amul dairy is managed under the norms of GCMMF and market theproducts under thebrand name „Amul‟, which has a very good reputationat domestic and international level. Here, the rawmaterial procurement isvery difficult for the new entrants. Consequently Capital requirement isalsohigh. Still new entrants are emerging such as domestic andinternational players. So the threats of newentrants are moderate.

bargaining power of buyers

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Cost of switching to competitor brands: The switching of brands isseen very much in products such as ice cream, curd, milk powders,milkadditives etc. but it can be seen comparatively less in liquid milk category.Even if the buyers shift tothe other brands of milk, the value that they getis less than they would get from consuming Amul.

Large no. of buyers: Milk is a necessity product and hence is a massproduct. It has a considerable share of the rupee spentby any Indian.Moreover the buyers are spread evenly over the country and do not haveany bargainingpower.

Rivalry among competitors

Demand for the product: The demand of the products of GCMMF isincreasing at a very healthy rate. To stand against therivalry GCMMF iscoming with a wide range of products.

Nature of Competitors: In different business category GCMMF facescompetition from different players. In the Milk powder category it facescompetition from Cadbury & Nestle, in the chocolate category also I facescompetitionfrom Cadbury & Nestle. While in the ice cream market it facescompetition from Kwality Walls Max andHavmor. In butter and chesses it faces competition from Britannia. Moreover in almost all categoriesthereis presence of local retailers and processors and milk vendors. Rivalryintensifies as each of the

competitors has different lines and this would inturn depend on the importance the line holds for thecompetitor

Threats Of Substitute

Availability of attractive priced substitutes: Different substitutes areavailable for different category of products. There is ample availability of lowpriced substitutes from local vendors and retailers. This is a frontwhere GCMMF is still finding hard tocombat

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