Leadership: RS Sodhi On How Amul Stays Young

How does a 75-year-old enterprise stay young? Strike that.How does a 75-year-old, cooperative enterprise remain India's largest food product marketing company with towering market leadership in branded milk, butter and cheese.As you'd expect, there's no one answer. RS Sodhi, managing director of GCMMF that markets the Amul brand, has a dozen different stories to tell—of taking on big competition but also of coopetition, of being rooted yet not trapped, of innovating daily but under the umbrella of a brand icon that never changes, even her dress.Join the dots..Sodhi joined Gujarat Cooperative Milk Marketing Federation in 1982 when the cooperative did Rs 121 crore in sales. When he was appointed MD in 2010, sales had crossed Rs 8,000 crore. In FY21, Amul did just over Rs 39,000 crore in sales. The overall Amul brand turnover is Rs 53,000 crore, reaching for Rs 1 lakh crore in the next five years.While overall milk and milk product consumption is set to rise at 5% per annum, Amul expects to grow faster, in double digits, as consumer preferences shift from unbranded to branded dairy products. Varying estimates put the size of India's dairy market at Rs 8-11 lakh crore. The branded segment is barely a third of that, Sodhi says..Sodhi describes Amul as a commercial organisation with a social objective. "Value for many and value for money"..An Amul IPO? Never, Says RS Sodhi Of GCMMF.Edited excerpts from the interview with RS Sodhi..The Ice Cream WarIn the mid-90s, Hindustan Unilever Ltd. had acquired more or less all the ice cream brands that time. First, they acquired Cadbury Dollops, then Gaylord, then Kwality. I remember, during that time we had given this one market research project to a marketing agency and we asked one question—what are the other products or fields where Amul should enter? Somebody responded that, we are surprised that when India's soap manufacturing company can enter into ice cream, why can’t India's dairy company enter into ice cream? That was a turning point. We decided that we had to enter, and the rest is history. Within five years we became the number one brand in ice cream and today, we are selling more ice cream than Kwality Wall's. .Cooperative Vs. CooperativeThe second turning point was in the 90s when we launched our Amul Milk in Delhi, Mother Dairy being the brand leader (there). We just started with a small plant of 1 lakh litre daily and we thought we’d be a small player. But the strategy which we played that time was finding out gaps in the distribution, gaps in the products and gaps in the product perception. In our language, we call them ‘khaddas’ (holes). Hence, what were the gaps in the products? For example, Mother Dairy was selling milk reconstituted from milk powder during summer. There were gaps in the distribution—the dairy was expanding but they weren’t adding new distributor points in the outer periphery of Delhi. So, we launched our milk from the outer periphery of Delhi and within six years of the launch of Amul milk in Delhi we became the number one brand, crossing the volume of Mother Diary which was already established in Delhi for the last 40 years. .But, Coopetition Is Good TooAs such in dairy or milk products, Amul is number one nationally. But when you go state-wise, number one are the local cooperatives. You go to Karnataka Nandini is number one, you go to Bihar Sudha is number one, you go to Rajasthan Saras is number one— but they are all are our brothers and sisters, they have all come from the home of Amul. So, we are not competing, we are complementing, and we are sharing our knowledge. We are associating with them whenever they need our help, or we need their help. Let me tell you, when we entered Rajasthan or Punjab, they were afraid that Amul is so big they will swallow us. But, with our going, because at the top level our objectives were the same but at the ground level we competed with each other, it brought efficiency and nobody has degrown. It improved their milk procurement, it improved their milk marketing and who was impacted? The small, private players. Because you see complacency had come in that we are the leaders. Competition is essential. Competition between brothers is good because you can ward off the third fellow.Why are multinationals not able to succeed in Indian food even if all over the world they are number one? It is because of the cooperatives, they're helping each other, complementing each other and sharing knowledge with each other. When we have got extra milk, we give it to them if some cooperative needs it. And when they have extra milk we buy from them. Some of our Amul products are manufactured and packed with Nandini or others. Pondicherry cooperative packs our ice cream. Jammu and Kashmir milk cooperative packs our milk and paneer. There is nothing wrong. This is also an example of the highest sacrifice that you will not find anywhere..Small people are able to make more sacrifices, they believe more in sharing wealth than the big people..Not Just GujaratIn 2010, when I took over as the managing director, we realised that the demand is growing—we added milk in Mumbai, Delhi, Kolkata. So was the demand of other products like butter and cheese (growing). The supply of milk from the farmers of Gujarat was not able to meet the requirements. So, then we followed the strategy of three Es—expansion, expansion and expansion. Expansion of milk procurement. We entered new areas outside Gujarat. 15 new states added. Now 17% of our milk is coming from outside Gujarat. Expansion of processing capacities outside Gujarat in Delhi, Mumbai, Kolkata, Kanpur, Lucknow and Pune, etc.And the expansion of our distribution network—where we added around 40 new warehousing or distribution hubs right from Leh to Jodhpur to the other parts of the south. So, these are I think the points which really improved our presence and market share all over India..Retail IndependenceI remember in 2003, I was attending a conference in Goa where this one gentleman from KSA Technopak presented some graph and a figure of what the future of modern format stores in India would be and how they are going to contend for a 30-40% market share in the FMCG segment and that they had already done more than that in developed countries. That made us worry, simply because we are owned by our farmers and we realised that if these modern format store people succeed in India, it will be at the cost of our farmers. Because in their country, farmers get only one-third of what the consumer pays. In India, farmers get 70-75% and in the case of Amul, more than 80%. From that day we realised, if we had to compete with these modern stores we had to get into retailing. So, we started our own retail chain. Today, we own more than 9,000 of our own Amul parlours across India and now whenever we negotiate with India's so-called biggest modern trade for supply, we negotiate on our terms, not their terms. We give them the same terms what we give to the general trade, they have to buy it at the same price, they have to buy it at the same discount, they have to pay cash or an advance and the benefit has gone to the farmers..We are small and small—small suppliers, small consumers..Keep InnovatingI think in Amul, fortunately we are in such a category that we do not have to look around or do lot of R&D or new product development. We do not have a new product development division. Anybody gives us any idea we use it, because an idea can come from anybody. Most of the time it is not from a leader like me, it is from the people. You have to pick the idea up, say okay, this rabadi is a good product, why don’t I tell three or four of my production units to make this product? One of them would make it, then the people down the line, the production line and the quality control people test it and once they're satisfied, everyday, at 6.30 a.m., we have a tasting session for our new products or our existing products or competitor products. So, there we test and if any improvement is needed, we give it back and say okay improve sugar, improve flavour or remove this. Dr. Kurien used to tell us why do you need a lot of product testing in the market? You give it to your wife, I'll give it to my wife and once they approve, you launch the product. That is why every month, we are able to launch two new products or variants..Keep TryingNo doubt, today our tetra pak milk is the number one brand. But, let me tell you, we entered that category in the late 80s with the triangular pack. We used to call it a 'samosa pack'. And, we were marketing in Bombay in plastic crates. We were selling reasonably okay but then some quality problems came in and we had to stop the production after four or five years. Then, again we entered that category with tetra pak bricks about 20 years after that, but with better quality, better technology and a better distribution network.Also, very few people will be knowing—Amul Kool flavoured milk is the number one brand today, but we had entered into Amul flavoured milk or Amul shakes in 1985-86 and we had a big failure. Godrej launched Godrej soya shakes so we lost with Amul shakes. After one and a half or two years, again we faced a quality problem because of aseptic packaging. We got a lot of curdling problem in the market and we had to stop it. Then again, after 20 years we launched the product but with better technology..Ageless Brand Icon, ProductsIf you want to be relevant to today's consumer, you have to be very young. Today's millennials should find that all Amul products are for me. So, the first thing is your product. You have to see that your products are relevant to today's youngsters or the millennials. Milk is one segment which generally youngsters never used to like. So, we have tried to position milk as “Doodh Peeta Hai India’ or “Eats Milk With Every Meal” for youngsters. Then lassi or butter milk or the flavoured milk—we have tried to position it for the youngsters. Or garlic butter, so innovation, giving new products for today's society.Then the positioning of our product. You see the Amul topical campaign, which is more than 56 years old—of a young girl, five-six years with the polka dotted frock. She's always young and she's always a kid because she's commenting on anything and everything, every happening in this society be it Bollywood or Hollywood or politics or sports.The consistency in communication is where we are able to maintain the market view. Whatever campaign, whatever positioning...it's all under the umbrella brand of Amul. All Rs 53,000 crore under one brand of Amul. Amul’s topical ‘Utterly, Butterly Delicious’, we started that 56 years back and we have not changed it. ‘Amul - Taste of India’, that we started 26 years back and we have not changed it. ‘Amul Doodh Peeta Hai India’, that was 18 years back, we have not changed it either. So, why I'm saying consistent communication, because otherwise you have to spend a lot of money in brand building. We spend less than 1% of our sales turnover on brand building or advertising vis-à-vis 8-10% on other food brands..Butter Cookies, Frozen Potatoes And Soon Amul Fruits And Vegetables

Leadership: RS Sodhi On How Amul Stays Young

Sodhi describes Amul as a commercial organisation with a social objective. "Value for many and value for money".

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