•What are the salient changes in the external environment of GCMMF? Are they posing constraints to GCMMF? What are they? •Evaluate GCMMF.s response to these changes in terms of (i) the resource requirements of the proposed food products business and (ii) resources and capabilities available at GCMMF. •Is GCMMF taking what it may think is the easy way out? Can it stay in its core business and make a difference to the milk sector in India (and yet be successful commercially)?
GCMMF was established in the year 1973 with a view to streamline the milk production and supply process in Gujrat. Its main aim was not to maximize profits but to give the dairy farmers a fair deal, who until then were being exploited by the private milk contractors. GCMMF was a great success since its inception. By providing on-time payments to the dairy farmers, veterinary services, cattle feed of good quality, education on better feeding of cattle and facilities for artificial insemination of cattle at cost or below cost gave dairy farmers an incentive to be a member of the cooperative. In addition to producing and supplying milk of three varieties and dairy products from the surplus milk supply, GCMMF had diversified its business to related areas like edible oils-Dhara and fruit & vegetable based foods-Safal. In the year 2000, GCMMF was faced with a dilemma of whether to stick to its existing product line or to venture into the processed foods market with jams, sauces and fruit juices.
What are the salient changes in the external environment of GCMMF? Are they posing constraints to GCMMF? What are they?
The below, are the changes in the external environment of GCMMF:
GCMMF faced a number of competitors in each of the segments they operated in. Some of these were local player whereas other international competitors had better resources to penetrate the market.
Milk and dairy products business: In this segment, the other state owned cooperatives marketed their products under different brand names and led to healthy competition. Competition was growing in the dairy products market with big corporate houses like HLL and Britannia entering the dairy products market in India backed by big investments in advertising
Ice cream business: There were other brands from private players like Vadilal and Quality-Walls who had more resources to spend than GCMMF in advertising.
Edible oils business: There was again competition from private brands.
Processed foods business: There were major players like Britannia-Maggie and Heinz.
The market was getting saturated from the supply side. The rate of growth of milk production was around 6 percent per annum. The demand, however, could be expected to grow at 8 to 10 percent per annum, according to industry experts. With having constraints on the supply side GCMMF was faced with the challenge of meeting the increasing demand.
Even though GCMMF had the ability to process more, the supply of its raw materials was limited. Milk supply was getting saturated from its supply side.
In the processed food sector, there was immense scope for improvement. Indian produce was 30 percent lesser than other countries even though arable land was 40 percent more than the others. Subsistence farmers did not have an incentive to produce fruits and vegetable. With the lack of proper storage and transportation facilities, 35 percent of the produce was wasted.
Middle men and costs;
In the processed foods sector, the presence of about seven layers of middlemen, each with incremental commission charges and en route wastage of produce led to the consumers paying six to seven times of the price received by farmers. There were opportunities to cut the middlemen and improve the supply chain.
Fragmentation and Taxes:
The food processing...