In this paper we describe a case study of a dairy cooperative, AMUL, in western India that has developed a successful model for doing business in large emerging economy. It has been primarily responsible, through its innovative practices, for India to become world’s largest producer of milk. A subset of strategies followed by AMUL would still be very useful. Thus, firms that are contemplating addressing large undeveloped markets or have an intention of taking advantage of extensive but marginal supplier base would still benefit.
The Kaira District Cooperative Milk Producers’ Union Limited was established on December 14, 1946 as a response to exploitation of marginal milk producers in the city of Anand (in Kaira district of the western state of Gujarat in India) by traders or agents of existing dairies. Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in Anand – often milk went sour, especially in the summer season, as producers had to physically carry milk in individual containers. These agents decided the prices and the off-take from the farmers by the season. Milk is a commodity that has to be collected twice a day from each cow/buffalo. In winter, the producer was either left with surplus unsold milk or had to sell it at very low prices. Moreover, the government at that time had given monopoly rights to Polson Dairy (around that time Polson was the most well known butter brand in the country) to collect milk from Anand and supply to Bombay city in turn (about 400 kilometers away). India ranked nowhere amongst milk producing countries in the world in 1946. The producers of Kaira district took advice of the nationalist leaders, Sardar Vallabhbhai Patel (who later became the first Home Minister of free India) and Morarji Desai (who later become the Prime Minister of India). They advised the farmers to form a cooperative and supply directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same but gave low prices to the producers). Thus the Kaira District Cooperative was established to collect and process milk in the district of Kaira. Milk collection was also decentralized, as most producers were marginal farmers who would deliver 1-2 litres of milk per day. Village level cooperatives were established to organize the marginal milk producers in each of these villages. The first modern dairy of the Kaira Union was established at Anand (which popularly came to be known as AMUL dairy after its brand name). The new plant had the capacity to pasteurise 300,000 pounds of milk per day, manufacture 10,000 pounds of butter per day, 12,500 pounds of milk powder per day and 1,200 pounds of casein per day. Indigenous R&D and technology development at the Cooperative had led to the successful production of skimmed milk powder from buffalo milk – the first time on a commercial scale anywhere in the world. The foundations of a modern dairy industry in India had just been laid as India had one of the largest buffalo populations in the world. We move to year 2000. The dairy industry in India and particularly in the State of Gujarat looks very different. India has emerged as the largest milk producing country in the world. Gujarat emerges as the most successful State in terms of milk and milk product production through its cooperative dairy movement. The Kaira District Cooperative Milk Producers’ Union Limited, Anand becomes the focal point of dairy development in the entire region and AMUL emerges as one of the most recognized brands in India, ahead of many international brands. Starting with a single shared plant at Anand and two village cooperative societies for milk procurement, the dairy cooperative movement in the State of Gujarat had evolved into a network of 2.12 million milk producers (called farmers) who are organized in 10,411 milk collection independent cooperatives (called Village Societies). These Village Societies (VS)...
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