In a power talk with the students of UPES School of Business, Dr. Rupinder Singh Sodhi, Managing Director of Amul, spoke about the business model of the cooperative, why consistency is key, and what it takes to become a home-grown dairy giant

A 75-year-old dairy cooperative in India owned by 36 million milk producers clocked in a massive turnover of INR 53,000 crore in 2020. This figure was far greater compared to any of the country’s multinational corporations in the fast-moving consumer goods (FMCG) sector. Despite the adverse market condition, Anand Milk Union Limited ‘Amul’ managed to maintain its rising streak.

So, what is the secret behind this solid success?

“If I had to explain in one word, it is consistency,” said Dr. Rupinder Singh Sodhi, Managing Director of India’s largest dairy brand. He was speaking at a Pre-Semester Learning session organised by UPES School of Business.

“Consistency in four key areas: business structure and philosophy, product recipes and quality, communication, and human resource practices,” he emphasised.

Amul’s one-of-a-kind business structure

Amul, based at Anand in Gujarat, is managed by the Gujarat Co-operative Milk Marketing Federation (GCMMF). Its establishment in 1946 spurred the White Revolution in India and played a pivotal role in turning the country from milk-deficient to the largest milk producer in the world.

Amul’s business structure is unlike any other brand. “In each village, there are around 200 milk producers, mainly women, who come together to form a village dairy cooperative society. The district milk unions procure it from the society, check its quality and quantity, and make payment accordingly through an electronic system. These district unions then transport the milk to the nearest dairy plant. The state’s milk federation then takes charge,” Sodhi explained.

Providing a stable price to millions of milk producers forms the core of Amul’s business philosophy. “We ensure that day-after-day, our farmers get the best price for their produce. Simultaneously, we provide nutritious dairy products made from the best ingredients at an affordable price to the consumers across India,” he said.

“The mandate given by my board is to buy the product at a price as high as possible and add value to all the raw materials at such a price that I am not leftover with any unsold stocks,” Sodhi revealed. Buying at maximum and selling at a reasonable cost by keeping minimum gross profit might not seem like an aggressive strategy, but it seems to have worked well for Amul in the competitive FMCG sector.

“Ultimately, the reason for Amul’s success is taking care of all the stakeholders of the supply chain. You work for the well-being of the supplier and the consumers, and you will earn more,” Sodhi said.

He added, “My board does not ask about the profits made; it asks about the price given to the farmers and the quality of the product. We are producer and consumer-friendly, which helps us compete with the best of the brands.”

An ‘Utterly Butterly Delicious’ recipe

Another area where the cooperative has been consistent is in the recipe of the product. “The butter you eat today has had the same recipe it had in the 60s. When a food brand gets a majority market share and becomes the market leader, some manufacturers try to increase their profits and reduce the cost of production. The cost of production can be mainly reduced by replacing expensive, authentic ingredients with cheap, synthetic ones. In the case of dairy, it is very simple. You replace dairy fat with vegetable oil, and you make a profit. Amul has never changed simply to save the cost. We may have slightly altered the recipe based on the consumer taste, say, for example, reduce the amount of sugar, or increase another element, but fundamentally the ingredients remain the same. That is why, consumers have blind faith in our products,” Sodhi said.

The umbrella marketing strategy

Dr. Verghese Kurien, founder-chairman of the GCMMF started the branding of Amul in the mid-50s. “At that time, not many would think about branding and advertising, but he invested in it and followed umbrella branding. Amul milk, cheese, ice cream, ghee – all under one brand. We do not have sub-brands like major multinational corporates mainly because of our ambitions. We believe it is better to nurture one brand. Our ‘Utterly Butterly Delicious’ campaign is over 56 years old. When we launched our butter, we did not have much money. So, we decided to have an inexpensive, yet, top of the market campaign,” he said.

Usually, the name of a company brings to mind the image of the product. Amul, however, is equally famous for its product as well as its brand campaign.

The reason? “This is the longest-running campaign. And we have spent peanuts on it. The advertising agency is given a brief, they make the creative, and put it out there. We see it when you see it. They do not need approval for any creative,” Sodhi explained.

For the first 30-40 years, the marketing was primarily on billboards. Amul has never used a celebrity for their brand endorsement. When the brand does involve the name of a public figure in their campaign, they feel grateful, Sodhi said. “We get ‘thank you’ messages. Instead of charging us, they feel obliged.”

Amul has spent only 0.8% of its turnover on advertising in the last few years, mainly because of its umbrella branding strategy. Their product positioning, too, has not changed much. “We have been seeing ‘Utterly Butterly Delicious’ since 1976. In 1994, ‘The Taste of India’ tagline came; we see it like our surname. In 2000, we came up with ‘Amul doodh peeta hai India’,” he said.

There is also consistency in bringing the brand closer to the consumer. Amul is India’s largest single brand retailer with 9000 exclusive franchise stores.

The people behind Amul

The fourth aspect is the people, who carry forward the legacy of the organisation. “For most of my senior colleagues, this was their first job. I have been in the company for the last 40 years now. I joined Amul immediately after college. We do not hire laterally; we only hire through campus from the best of the colleges,” Sodhi remarked. 

He credits the success of the organisation on their core value system, given by the founders – Mr. Tribhuvandas Patel and Dr. Verghese Kurien.

“Consistency, however, does not mean that you will not move with time. We do a lot of innovations to make our product contemporary. We have fully computerised systems in our cooperatives; digital payment of around INR 150 crore are made each day. Every farmer can see their transaction, veterinary services, and other benefits on the mobile app. Every month, we come out with new products. Our supply chain is efficient, fast, and reliable,” he said.

Leadership lessons from Amul

According to Sodhi, “We have always had a dedicated, selfless, and visionary leadership. In the face of adversity, we have shown courage. A passion for the highest standards of excellence and innovation, commitment to farmers and consumers, supply chain efficiency, and a culture of innovation, keeps us ahead.”