I finished reading autobiography of Dr. Varghese Kurien recently. This was penned in 2004 & hence it does not cover developments for last 14 years. Yet, it provides history of how dairy sector evolved in India post-independence. Following are some interesting notes -
BRAND AMUL
AMUL also stands as a short form for Anand Milk Union Limited. Anand is the birthplace of co-operative dairies in India. One of the first things that striked me that, marketing & brand creation was always important for Dr. Kurien, who worked as chairman of GCMMF for over 4 decades. Amul hired advertising & brand agencies way back in the 1960s. Amul Girl is one of the longest running & most humorous ad campaign.
Amul is such an entrenched brand in (at least in butter segment) & it helps me to put in perspective/judge brand building efforts of the some of newer players. e.g. in my mind, effort of the management of the 1) Heritage to change the identity of brand Heritage or Alpen Vie ice cream or 2) Brand Avvatar or Brand Go from Parag etc. are at such a nascent stage that you can almost discount them when studying business quality.
Creating brand & sustaining it takes years of effort, the brand has to be simple & somehow shall be able to connect with the masses. If someone knows books/studies on brand evolution/development process, I would be very happy to get the recommendations.
COOPERATIVES - PAST & FUTURE
The “Anand Pattern” of dairy co-operatives entailed 3 or 4 things - farmers milk is never refused despite flush/lean season, 70-80% of price paid by consumers went as cash to farmers, farmers owned the procurement, processing, plants/technology & most importantly distribution/marketing. This model of no middlemen, ability to set prices in end consumer market & hiring of professional managers & latest technology is what made “Anand Pattern” co-operatives click.
The relationship between co-operatives, politicians, government & bureaucracy is complicated to say the least. Having strong headed & professional management is so important so that farmers really benefit. Bureaucracy sees co-operatives as a threat to their jobs & usually oppose the proposals by them. But co-operatives also have an enormous access to the state/central governments & professional manager can really use them to their advantage.
Dr. Kurien was such very shrewd professional manager for Amul who knew how to use his clout. His ability to keep meddling by politicians & bureaucrats out earned him the nickname “crocodile who swims in the milk”.
Dr. Kurien also led Amul to create skimmed milk powder (SMP) from buffalo milk instead of conventional cow milk, a first in the world.
The co-operative movement did not pick up in Sri Lanka & Pakistan - despite their invitation to & involvement of Dr. Kurien & team. This tells me that it needed Dr. Kurien to make Amul what it is.
I have not looked at some of the state co-operatives but my guess would be things will be messy & this provides opportunity for stronger private players like Hatsun to gain market share. Heritage captured the milk supply chain once Chittoor District Cooperative Milk Producers Union collapsed in then united Andhra Pradesh. Having an end to end chain in terms procurement/processing/distribution/marketing is important to take advantage of any crisis in co-operatives due to operational efficiency, ability to set prices & ability to pay more to farmers i.e. the business has to become “private co-operative”.
The book claims that major milk producers of the world - New Zealand/Denmark/Holland have 100% of the dairies as co-operative. The ratio is at 85% for the US & 95% for the Germany. It would be interesting to learn about present status & the factors that created these co-operatives.
NDDB & OPERATION FLOOD
National Dairy Development Board (NDDB) was formed by former PM Lal Bahadur Shastri to take “Anand Pattern” of the co-operatives pan India & Dr. Kurien was made chairman of it.
Operation flood was launched in 1970 under the chairmanship of Dr. Kurien by NDDB. It transformed India from milk deficient nation to a world’s largest milk producer. It took over 3 decades to achieve these objectives over 3 phases of operation.
What Dr. Kurien did in the first phase was very smart. Many developed nations (esp. NZ & Europe) were willing to provide SMP to India as there was a supply glut in global markets & wanted to sell this at a discount in the market. The hidden motto behind this was two fold - reducing the supply/demand mismatch in the world market to boost the prices, gaining market share in Indian market due to cheaper pricing & selling subsequent SMP at above market prices, thereby creating perennial import dependency for India.
Dr. Kurien saw through this & made an passionate speech at world food program for selling these products at par prices in India. He sold these products at market prices in four metros of India & gained market share from middlemen & traders as they were not capable of supplying to entire cities. As farmers got more & more money, they were incentivised to produce more there by increasing milk production & making India self-sufficient.
Another smart thing Dr. Kurien did was he worked so that NDDB was appointed as a single import agency that dealt with all this food aid. This gave him a lot of bargaining power which he used to bring down prices & get some extra freebies. This can be easily contrasted with Pakistan where most of SMP was imported & was sold at 2x prices of India due to vested interests.
Dr. Kurien was also asked to co-operatise oil & oil seed market. Brand Dhara is an outcome of his effort. He took on powerful oil lobby in doing so.
Dr. Amrita Patel succeeded Dr. Kurien as chairman of NDDB at his recommendation & they developed serious differences over the years. Dr. Kurien always insisted that end to end chain from production till marketing shall be owned by farmers, that last part was important as it gives ability to set prices. Dr. Amrita Patel’s NDDB took a different route where marketing is handled by Mother Dairy Private Limited. Mother Diary was also in direct competition with state co-operatives & they do not accept full milk from farmers at all times.