amul+case+study

8/3/2019 Amul+Case+Study

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Why should the Amul moppet be scared of a little calf called Gowardhan? Because

the little brand now has Amul's erstwhile CEO on its side

Dibeyendu Ganguly

Everybody seemed to desert BM Vyas once he put in his resignation as managing directorof the Gujarat Cooperative Milk Marketing Federation (GCMMF), owner of the Amul brand.Chairman Parthi Bhatol, with whom Vyas had been at loggerheads for years, accepted theresignation right away. Then the other Board members, all chairmen of Gujarat‟s variousdistrict milk co-operatives, failed to weigh in on his side, as Vyas had hoped. Even VergheseKurien, the 90 year old doyen of India‟s dairy industry, who Vyas went to see, could donothing to help his one time protégé.In the end, the former MD would find his office sealed when he arrived to collect his things,leading him to kick the door in frustration, shattering a glass panel. An inglorious exit for aman who had spent 40 years with the organisation, 17 of which were as managing director.The Amul moppet was surely accumulating some bad karma. Nine months later, Vyas isback in a new avatar, as a director of Parag Milk Foods, owner of the Gowardhan and Go

brands. At 750 crore, the company is less than one-fourth the size of Amul, but it‟s a risingstar. Is Vyas preparing the young David to fell the Amul Goliath? “Organizations are not

felled by their competitors. They are destroyed by their internal problems”, he says

ominously.Gowardhan is, in many ways, very similar to Amul, which is probably why Vyas is so

comfortable there. Both organisations are firmly rooted in the villages and their biggeststrength is their system for procuring milk from the rural hinterlands. While Amul isheadquartered in Anand, near Vadodara, Gowardhan is located in the little town of Manchar,near Pune. Both offer up the full range of dairy products, from liquid milk, butter and gheeto curd and cheese. The notable difference is that Gowardhan milk comes from cows andAmul‟s, mostly from buffalos. And, of course, Amul is a cooperative while Gowardhan isowned by a Gujarati Jain family that has been engaged in the cattle-feed business inMaharshtra‟s cow belt for generations.

Gowardhan‟s chairman Devendra Shah is the one who moved the family into the dairyindustry when it was liberalised in the early-90s. Now he‟s pulled off quite a coup by ropingin one of the industry‟s top professionals into what has hitherto been a family-runorganisation. How did he do it? “I didn‟t know Mr Vyas earlier, but I saw an opportunity

when I heard he was leaving Amul. I met him in Mumbai and we got along very well. Hesaid yes to my proposal right away”, says Shah.

Amul has built a reputation for being a rough competitor — especially under Vyas‟s reign

— and Gowardhan has received its share of grief from the giant‟s hands. Shah shakes hishead in some distress at the memory of the many marketing wars he‟s waged with Amul,but doesn‟t want to get into the details. Instead, he looks forward to what Vyas can now dofor him. “His mandate is to develop our distribution system. We have recently commissioned

a dairy in Palamaner in Andhra Pradesh and we specially need to expand our distribution in

the South. We are also launching several new products, for which we need newdistributors.”

Should Amul be worried about Gowardhan luring away distributors? RS Sodhi, GCMMF‟snew managing director, is a 30-year Amul veteran who has spent most of his careerworking under Vyas. He‟s not prepared to talk about his ex-boss‟ controversial exit but he‟s

blunt on the poaching issue. “Only fools would leave Amul to join Go. We are a 60 year old

brand. The brand is much larger than an individual”, he says. Shah, for his part, declaresthat Amul isn‟ t even competition anymore. Two years ago, when he moved bag andbaggage from Manchar to Mumbai, he took the marketing department with him. Since then,



he has launched a series of value-added products, ranging from flavoured yogurts tochocolate flavoured cheese in tubes and more are in the pipeline. “My real competition is

Kraft and Danone. That is the space Go has occupied”, he says.Despite being rooted in Maharashtra‟s cow belt, the Shahs certainly have no pretensions

of being simple rural folk. For example, Devendrabhai has always boasted the best car intown, whether it was an Audi100 in the 80s or the Audi A6 luxury sedan he now drives. This

natural elitism is now propelling many of the group‟s new initiatives, such as a specialisedbottling plant that will package fresh milk for Mumbai‟s super-rich. Priced at around 70 alitre, the milk will be distributed only in South Mumbai, under the brand name „Pride Of Cows‟. Parag Shah, the middle brother after whom the parent company is named, is in

charge of Bhagyalaxmi Dairy Farms, the group‟s ultra-modern cow farm, next to which thenew bottling plant is located. “This product will go straight from the farm to the customer‟s

door. Only the upper crust will be able to afford it”, he says happily.

Products such as these will raise Gowardhan‟s profile, but they will not propel it into the

4,000 crore-plus big league that the Shahs aspire to be in by 2015. For that, the companywill need to expand distribution, which has long remained its Achilles Heel. When thecompany got into cheese production 12 years ago, the move was propelled by institutionalsales. Located in a region that grows potatoes for McDonald‟s, Gowardhan has emerged as a

major producer of mozzarella cheese for the burger and pizza chains. It also produces

cheese for Britannia.With annual sales of 150 crore, cheese is now the third largest product in Gowardhan‟s

portfolio, after milk ( 220 crore) and ghee ( 200 crore). The company has now set up abrand new plant at Manchar, to produce cheese in every shape and form — wedges, slices,shreds, powder, sauce, spread — all marketed under the „Go‟ brand name. In a market

that‟s growing at 30% annually, Go wants to be the leader. “Indians love cheese”, says

Pritam Shah, the youngest brother, who looks after operations at Manchar. “We put cheeseon dhokla, khaman, dosa. If people don‟t consume cheese, it‟s only because they can‟tafford it right now.” The range of spiced-up cheeses (pepper, tomato, chili) that Go makesis quite a change from the standard cheddar Amul has been selling for decades now. Unlikebutter and like wine, it is a category with limitless possibilities for variation and Vyas iscertain Go‟s gamble on cheese will pay off. “It‟s not that much of a gamble, given that there

are only two domestic players in this segment”, he says.Sitting in Manchar with his new partners, the ever-resilient Vyas is ready to put the eventsat Amul behind him. He still lives in Anand, travelling to Mumbai and Manchar at least oncea week. When we met him at Manchar, he is there to address a conference for Gowardhan‟s

sales force. The young sales executives hang on his every word. “These are great times forthe dairy industry”, he says. “The Indian market is already huge and growing. There‟senough f or Amul, Go and all the others.”

That would be a nice, conciliatory note to end on, but as Vyas knows, things don‟t always

end on a nice note in the real world. So we‟ll end with RS Sodhi stressing how Amul‟sperformance has actually improved since Vyas's left and he took charge. “The latest ACNielsen figures speak for themselves. Our market share in cheese has increased from 72%to 84% in the two year period from Jan-2009 till Dec-2010. Britannia‟s market share hasfallen from 16% to 8% and Go-Gowardhan has increased from only 1% to 3%. Where‟s the

big threat?”, he says.Belittling the competition is de rigueur in the dairy sector. The rivalry here has always beenupclose and personal, fuelled by ideological divides over the merits of cooperatives versusprivate companies and domestic brands versus multinationals. The Amul-Go battle is but thelatest in an ever-sifting war that includes famed marketing warriors like Unilever, MotherDairy, Nestle. Nobody can afford to rest on their laurels here.



R S Sodhi GCMMF

B M Vyas Parag Milk Foods



Pritam Shah Parag Milk Foods

Devendra Shah Parag Milk Foods

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