Special Product Group Project

On

BRAND LOYALTY IN RELATION TO DAIRY PRODUCTS

Submitted by

JISHITHA.M

PRIYANKA RAJANALA

Under the supervision of

Ms.Harleen Sahni

Department of Fashion Management Studies (FMS)National Institute of Fashion Technology (NIFT)

Ministry of Textiles, Govt. of IndiaGH-0 Road, Behind InfocityGandhinagar382007. Gujarat

www.nift.ac.inOctober 2014

DECLARATION

We declare that we have completed the Special Product Group project on the topic “Brand loyalty in relation to Dairy products”. We also declare that all the taken data has been acknowledged by us. We have put in efforts to complete this Special Product Group project successfully.

………………………………………………………..

JISHITHA.MPRIYANKA RAJANALAMFM-III2013-15

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ACKNOWLEDGEMENT

We, Jishitha Mohan and Priyanka Rajanala, take this opportunity to thank our mentor Ms.Harleen Sahni for providing us with an interesting project and guiding us throughout the project and also for helping us to explore new things. We thank NIFT for adding this module in our curriculum and providing us an opportunity to get hands- on experience of Dairy products. We would also like to thank our other faculty members for their encouragement and support for guiding us in documenting our work and knowledge gained through this module.

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Table of Contents

INTERVIEWEE..................................................................................................................................5

OBJECTIVES......................................................................................................................................6

INTERVIEWS.................................................................................................................................7

Mrs. Moitreyee Dutta – Marketing and Brand Manager at AMUL................................................7

Mr. Himanshu Bhatt – Sales and Distribution Manager at AMUL................................................9

Mr. Ravinath Singh - Hypercity Food and Grocery Department.................................................10

LITERATURE REVIEW.............................................................................................................11

AMUL AS A BRAND NAME.......................................................................................................12

COMPANY INFORMATION.....................................................................................................12

BUSINESS MISSION.....................................................................................................................13

AMUL – THE TASTE OF INDIA................................................................................................14

AMUL BRAND BASKET.........................................................................................................14

EMERGING SITUATION IN DAIRY...........................................................................................17

FACTORS AFFECTING THE COMPETITIVENESS OF THE DAIRY SECTOR.......................18

Demand conditions......................................................................................................................18

Market structure...........................................................................................................................19

PRODUCTION:..............................................................................................................................21

PRODUCTION POLICY................................................................................................................22

REGULATION OF MILK AND MILK PRODUCTS IN INDIA...................................................24

Processing....................................................................................................................................25

TRADE:..........................................................................................................................................26

Export..........................................................................................................................................26

Import..........................................................................................................................................26

POLICY:.........................................................................................................................................26

OVERVIEW OF DAIRY MARKETING CHANNELS IN INDIA.................................................27

IDENTIFYING CRITICAL ISSUES IN THE DAIRY CHAIN......................................................28

SURVEY AND ANALYSIS...........................................................................................................30

Methodology...............................................................................................................................30

Research Design..........................................................................................................................30

Sources of data collection............................................................................................................30

Questionnaire along with statistical analysis...............................................................................31

REFERENCES............................................................................................................................33

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INTERVIEWEE

Name Designation Mode of interview

Industry Contact No

Mrs. Moitreyee Dutta

Marketing and Brand Manager at AMUL

Telephonic FMCG +91-9375031418

Mr. Himanshu Bhatt

Sales and Distribution Manager at AMUL

Telephonic FMCG +91-9574714445

Mr. Ravinath Singh -

Hypercity Food and Grocery Department

Telephonic FMCG +91-9714568777

Mr.Sunil George

Brand Manager Reliance Communication

Telephonic Telecommunications +91-9819232281

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OBJECTIVES

I. To understand the formation and strengthening of brand loyalty

II. Study of supply chain

III. Understanding the various marketing strategies

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INTERVIEWS

Mrs. Moitreyee Dutta – Marketing and Brand Manager at AMUL

Questions1. Since how long have you been working with AMUL.

More than 15 years

2. At what position? Job Description.

I am the manager

3. Bifurcation of products and is it only a specific group of products you handle

I am handling brand management and marketing activities regarding all products

4. Organisation Structure.

5. All managers are based in Anand or PAN India?

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Managing director

General Manager(Sales

and Distribution)

Deputy General Manager

Asst.General Manager

Manager

Brand

Amul Milk

Amul cheese

Amul butter

Amul (.........)

General Manager (Planning and

marketing)

General Manager(......)

Chief General Manager

Marketing office and officers are based in Anand. Chief Officers are all over India. Sales and Distribution are all over India

6. The advertisement hoardings with cartoons and sketches, why have you been doing it for so long?

They are outdoor hoarding campaign. These are there for almost 50 years now.

It all began in 1966 when Sylvester daCunha, then the managing director of the advertising agency, ASP, clinched the account for Amulbutter.The Mumbai-based daCunha Communications came up with the branding. Rahul daCunha,currently creative head of ad-agency daCunha Communications, copy writer Manish Jhaveri and JayantRane, the artist who has been sketching Amul cartoons for a quarter-century.

7. How many Hoardings do you have of these sketches across India? (Approx.)

120-150 all over India

7. How frequently do you change them and who decides when to change them as they are always related to current affairs?

Typically once in a week, If its special for eg: India wins world cup then in between also they change.

Other topics they run through include something to celebrate the winners of the U.S. Open tennis tournament, a piece to riff on the controversy surrounding India’s independent auditor, and another to lampoon striking taxi and auto-rickshaw drivers.

8. Who decides the hoardings?

Rahul daCunha

9. The television commercials we come across for AMUL are irregular, why is that?

What you mean by irregular?Foreg : Amul Kool is a seasonal product which is mainly for summer. In winter people would not prefer to have Amul Kool.There is a peak period for every product.

10. AMUL has been sponsoring TV shows who decides those things?

They do sponsor for TV shows.They have media agency who does Media Buying,Media sourcing and Media Planning .Final approval from Managing Director

11. How much does the company spend on advertisements and related activities in a given year?

0.5-1% of the turnover is spend for advertisements and related expenses.

12. What is the feedback you generally get from customers regarding your advertisements?

Nowadays we are active in online (FB)also.

13. Have you seen hoardings in other cities?

Mainly in Anand and Ahmedabad.

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14. Why according to you AMUL is strong in the market with a loyal customer base?

Amul is not only a brand like Pepsi or any other.Amul is a mission behind empowerment of women. Whiterevolution, The revolution started as an awareness among the farmers that grew and matured into a protest movement and the determination to liberate themselves.

Quality,Kind of trust people have on amul is more important.As you know in Amul one rupee we spend 80Ps goes back to farmers who are the real owners. It is a cooperative society where farmers are owners and we are employees.

For advertising we have umbrella branding policy.

Mr. Himanshu Bhatt – Sales and Distribution Manager at AMUL

Questions1. Since how long have you been working with AMUL

Has been working in Production department for the past 15 year

2. At what position? Job Description.

Currently Logistics Manager at AMUL

3. Bifurcation of products and is it only a specific group of products you handle

He handles the logistics of all the products of AMUL in Gujarat

4. Organisation Structure. PAN India.

Senior General Manager -> General Manager -> Logistics Team -> HCA Store

5. How do you manage the distribution channels?

Salesmen are allocated for each area by the brand manager of the products. The allocation of products to various company warehouses is provided by the brand manager. Using this the dispatch plan is created by the logistics team. It is restricted to the product availability.

They don’t deal directly with retailers. The products are sent to company offices across the country and from there it is sent to wholesalers and further down the line to retailers.

7. How many farmers supply you with the products and where are they located?

There are around 30 Lakh farmers across Gujarat who provide them with the raw materials for their products.

There are 40 production plants across Gujarat

8. What mode of transportation is used?

Road Transportation is used and the trucks are owned by third party and not by the company.

9. How do you ensure the quality of the product remains good?

Quality Control Officers are located in every area who check the products on their arrival and in case of some problem, the goods are returned to the area office.

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10. Why according to you is AMUL strong in the market?

Amul is strong because the products are value for money with really good quality and the brand Amul is well known.

Mr. Ravinath Singh - Hypercity Food and Grocery Department

Questions

1. Since how long have you been working with Hypercity

Has been working for 10 years in the Retail Industry with 4 years’ experience in Hypercity Dairy Department

2. Hypercity and Dairy Industry

Hypercity has one of the best Dairy Department in India. There are more than 50 types of Cheese available from both India and across the world. The food and Grocery is the highest earning department of Hypercity with Dairy Department comprising of subsequent percentage. Just last week the department surpassed the set target for the week once again.

3. What is the most selling dairy brand in Hypercity

That will be AMUL. That is the most selling brand in the store followed by Britannia.

4. Are there any promotional activities that are used for these products

Monday mandi (encourage bulk purchases for the week) - offers on fruits, vegetables, frozen and ready to eat items.

Win Win Wednesday (OFFERS ON FOOD) – offers on fruits, vegetables, frozen and ready to eat items.

5. Why do you think AMUL is so strong in the market

Quality

ANALYSIS OF THE INTERVIEWS

AMUL being the leader of Dairy Industry in India we found it apt to interview people from the company. Hypercity is one of the leading retailers in India.

AMUL maintains their brand quality with proper Quality Control at every stage. It is a co-operative which is owned by the farmers. It is supporting more than 30 lakh farmers across India. AMUL brought the milk revolution in India when Milk products were imported frequently. These things do create a positive image of the brand in the mind of the consumer.

The Wide reach of the brand with many regional offices gives the product easy availability. A consumer never needs to return from the store because the product is not available. Compared to different brands in the market, AMUL is the most preferred brand.

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LITERATURE REVIEW

Milk is one of the most nutritionally complete foods available on the food market to date. It is naturally a good provider of a whole range of nutrients essential to growth, development and maintenance of the human body. Relatively small quantities of milk can provide a significant proportion of daily nutrient requirements for all age groups making it nutrient rich relative to its energy content. In addition to its contribution to nutrient intake, increased milk consumption has also been linked to reducing the risk of numerous health problems such as osteoporosis, cancer, cardiovascular disease, type 2 diabetes and obesity to name but a few. Dairy is the term used to describe milk-based or milk-related products.

Milk was always manufactured and consumed in bulk in India. But with the rise in disposable incomes the demand for milk and related items are on a continuous rise. Milk is said to be among the most important part of the diets of Indian after wheat and rice.

Milk production in India ranges from rural areas to the highly urbanized ones. In the rural areas every farmer having one or two cows or buffaloes yields around -3 litres of milk per animal. India is highly acclaimed for its high contribution of buffalo milk because of factors like high fat content and a host of other nutrients.

India happens to be the highest producer of milk in the world. India contributes almost 65% of the total world buffalo milk. With the advent of modern technology India has risen from an insignificant amount of 200,000 litres per day (lpd) of milk in 1951, to 20 million litres per day in 2010. The country is home to almost 400 dairy plants.

The milk market in India does not have many active brands. The one major brand that has been dominating the dairy industry in India since quite a few decades is Amul. Since Indians are very peculiar and choosy about the milk that they consume they do not like to try out other brands. They like sticking to trusted brands and the brand that has definitely occupied a major mind share of the Indian population as far as milk is concerned is Amul. It can easily be called the top milk brand in India.

The undisputed Top Milk Brand in India is Amul. Established in 1946, the company deserves maximum credit for making India the world's largest milk and milk products producer. Evolved over the years as the most preferable liquid milk brand in the Indian subcontinent Amul churns out a turnover of almost ` 8,000 crores annually. According to industry experts the production forecast for the next year happens to be even better with an estimate turnover of ` 10,000 crore. The best thing about the brand is that it has not only penetrated the urbanized areas but the rural market as well. Amul apart from milk is the manufacturers of a host of allied products like Ghee, butter, cheese, powder milk, flavored milk, curd, cold coffee, Lassi etc.

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Top Milk Brands in India:

1. Amul

2. Nestle

3. Mother Dairy

4. Hatsun

5. Milma

6. Aavin

7. Nandhini

8. Paras

9. Saras

10. Verka Sweet

11. Sudha

12. Gokul

13. Govardhan

14. Vijaya

AMUL AS A BRAND NAME

COMPANY INFORMATION

Amul as a brand name is familiar to almost every individual in India, Amul is known for its quality products purity and hygiene. For over more than the past 50 years Amul has been serving the consumers of India with a variety of quality products. Amul follows a business model to provide products to customers which provides 'value for money' to the consumer. Amul has enjoyed its status of market leader in products like butter, cheese and dry milk, by providing customers with quality products at competitive prices. It is one of the largest food products manufacturing organisation of India. It is a Dairy Cooperative of Gujarat, also known as The Gujarat Cooperative milk marketing federation Ltd. Gujarat as a state of India is a leader in organizing dairy cooperatives and its success is not only limited in India but acts as a model for rest of the World. Over the last fifty odd years, Dairy Cooperatives in Gujarat have created an economic network that connects more than 2.8 million village milk producers with million of consumers in India and abroad through a cooperative system. These cooperatives collect on an average 7.5 million litres of milk per day from the producers.

Amul has brought a significant change in social and economic situation of our rural people. The Dairy Cooperatives have helped to bring an end to the exploitation of farmers and has increased the level of benefits to our rural producers of milk.

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The turnover of Amul during 2008-09 was Rs. 67.11 billion. Amul currently markets the products which are produced by the district milk unions in 30 dairy plants which work under the renowned brand name Amul. The total production capacity of these plants is 11.6 million litres per day, four of the dairy plants mentioned are having processing capacity of more than 1 million Litres per day. The Gujarat Cooperative milk marketing federation Ltd.(Amul's) Total Quality Management ensures that the quality of products meets its standards right from the starting place of milk producer through the value chain until it reaches the consumer thus Amul is trying to provide value to its customers which not only satisfies the customer needs but delights the customer.

Amul cannot be considered as business enterprise which works primarily for the generation of profits. It is an institution created by the milk producers to primarily safeguard their economic and social interest. Business houses generate profits in order to distribute profit to shareholders in shape of dividend, whereas in case of Amul the surplus is ploughed back and distributed back to farmers through village societies.

Amul has time and again came up with innovative advertising which has helped Amul to develop itself as a brand which appeals people with assurance of its quality. The creative advertisement of Amul has created a position of its products which is generating higher sales for Amul. For 30 odd years Amul's Utterly Butterly girl has managed to keep her fan following intact, the advertisements are now ready to enter the Guinness Book of World Records for being the longest running campaign ever.

BUSINESS MISSION

As we take strides towards our future, we need a mission which create an objective for our organization so that we can direct our efforts in order to achieve organizational growth, this mission must be backed up by a set of action plans which may help us in achieving our objectives in a best possible manner Amul has prepared a comprehensive roadmap in order to guide that the dairy cooperatives of Gujarat to have a group turnover of Rs. 27000 crores by the year 2020. The company is planning on its expansion and through expansion the company will create fresh avenues for growth by catering to the rising demand for new products, this would include increasing the capacity for major product categories including milk powders, Ice-cream, paneer, cheese, curd, ghee and other dairy products. Milk drying capacity will also be enhanced. in order to to strengthen the presence of company in the large market, for liquid milk Special emphasis will be given to metropolitan cities.The company is planning to double its processing capacity of its plants to 20.7 million kg per day.The basic raw material of Amul products is milk and for increasing milk production nutritious feed should be provided to animals. For this very purpose the company is planning to expand its cattlefeed manufacturing capacity by 2020. Amul's achievement of its mission will not only be beneficial for the organization but it will be helpful for the development of economy as a whole.

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AMUL – THE TASTE OF INDIADerived from Sansrit word “Ämulya”, Amul has been an iconic brand in India with superior product quality, supply chain infrastructure and distribution.

AMUL BRAND BASKET

Market Share

The brand positions itself as a brand of both masses and classes, unlike competitors like Nestle. Gujarat Co-operative Milk Marketing Federation (GCMMF), owners of Amul brand of milk and dairy products, posted sales of Rs 11,670 crore for the year ended March 2012, almost 55% more than Nestle India’s Rs 7,541-crore sales.

Amul owns 85 percent share in butter market and 75 percent in cheese share market. It may be mentioned here that Amul is the market leader in Rs 600 crore cheese market in India with 65-66% share. It also has 88% market share in butter, 63% share in infant milk and 45% market share in dairy whitener. Amul also enjoys a 26% share in the 25,000-crore packaged milk market.

With expected growth rate of 20 percent, 12% growth rate can be attributed to price rise and another 8 percent to rise in demand for dairy products.

Amul Production Facilities

One of the best known examples of policy success in India has been the “successful implementation of white revolution” and equally celebrated is the role of the brand in making this event a big success.

From two diary cooperatives and 250 litres of milk per day to a network of 31 lakh dairy farmers, who are members of more than 15,000 village co-operatives. (Source: http://www.firstpost.com/election/farmer-empowerment-is-amul-model-better-than-retail-fdi-551382.html)

Milk producers sell their produce to village co-operatives, which is affiliated to district milk co-operative union and then in turn to the state level milk marketing federation. A network of 8000 distributers makes Amul products available at over 4 lakh retail outlets in India.

GCMMF is expanding its production capacity by 25% to meet the growing consumer demands and plans to invest in INR 3000 crores in 9 new milk plants in India in next 4-5 years.

Amul Marketing Strategy

In order to maintain costs at lower levels, Amul India has never spent more than 1% of its budget on advertising. However it has still been successful in creating the same impact, it created 60 years ago through its simple yet appealing ad campaigns.

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Talk about universally recognizable Brands grown in India, and one prominent contendor is the Amul mascot, a cute and chubby girl usually dressed in a polka dot. Over 45 years of existence, the brand has always given a fresh flavour to Amul Mascot.

Amul Ad - Shilakimakhani

The Amul Girls and its new Witty avatar was the brain child of Sylvester da Cunha, the managing director of the advertising agency AS. The ads were designed as a series of hoardings with designs relating to day-to-day issues.

Amul Dairy Cooperatives, on the occasion of completing its 50 years of advertising, launched a book called ‘Amul India’.

Amul Celebrating 50 years of Advertising

Following the idea of thoughtful advertising , 35 years ago the brand created magic with its ‘Mero gaam Katha parey…’ the title song of national award winning film ‘Manthan’, which told the story of Amul model of co-operatives.

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Amul Co-operative Model

The Manthan music video has an unique emotional appeal. To recreate the magic, in 2012 brand came up with a fresh commercial with the lines like ‘khushrahetera beta beti’ in the new music video. It shows how the efforts of a rural milk producer takes care of nutritional requirements of a child of a urban mother.

Amul Ad – KhushRaheTera Beta Beti

Amul Products Packaging

Amul’s marketing strategy has always been consumer centric. Thus it is kept in mind that the packaging of all Amul products appeals to the emotional side of the consumer.

Use of Expression

For example the human facial expression of delight on the cheese variant packing reveal the pleasure people derive from consuming cheese and cheese products.

Use of expression in Packaging

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Information

Also the need to highlight the nutrient value and best possible use of the product is an important feature of all Amul products packaging.

Use of Information in Amul’s packaging

Protection

Recently Amul has focused largely upon capturing the branded tetra pack market with, variants that would last for over 2 weeks to three months even without refrigeration.

For example AmulMoti, a new variant of toned milk is priced a little higher than the fresh milk pouch. The UHT treated milk is then packaged in five-layered special pouch to increase its self life to 90 days.

EMERGING SITUATION IN DAIRY Dairy is currently the top-ranking commodity in India,Despite the importance of the dairy sector in overall GDP, it receives less government budgeting than the agriculture sector. Further, there has been no concentrated investment in the development of value-added or innovative products, nor any serious effort to support and modernize the informal sector.

In light of the increasing demand driven by the growing population, higher incomes and more health consciousness, the slowdown in dairy industry growth is severely worrisome. Based on estimates by the National Dairy Development Board (NDDB), the demand for milk is likely to reach 180 million tonnes by 2022. To supply the market, an average incremental increase of 5 million tonnes per annum over the next 15 years is required – a doubling of the average incremental rate achieved over the past 15 years. In the absence of sufficient increased production, India will need to rely on the world market for imports. And because of the huge

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volume required, it will affect global milk prices. Thus, focusing on areas for local dairy development is critical.

Traditionally, the policy environment has favoured the expansion of cooperatives, which ultimately crowded out the private sector. However, liberalization of the sector in recent years has encouraged private investment in dairying. In 2002, the Milk and Milk Products Order (MMPO) ushered in major policy changes friendly to the private sector and a momentum of activity that is likely to increase dramatically in the coming years. Large Indian and multinational corporations, such as Reliance, Pepsi and Coca-Cola, are planning significant investments.

Nowadays, both the private sector and the cooperatives drive the value chains. Because of the many unsuccessful cooperatives in the country, other models of dairy farmer organizations are being explored, such as mutually aided cooperative societies (MACS) and producer companies.

Millions of small and marginal farmers in dairying who own two to three animals and produce an average of 5 litres comprise a critical portion of India’s dairy industry. Livestock development in general and dairy development activities in particular are key components of pro-poor development strategies because livestock distribution is much more equitable than land distribution. Thus, changes in the dairying environment have important implications for the smallholder farmers and for poverty reduction.

The following characterizes India’s dairy farming and its relevance to inclusive growth:

Small and marginal farmers own 33 percent of land and about 60 percent of female cattle and buffaloes.

Some 75 percent of rural households own, on average, two to four animals. Dairying is a part of the farming system, not a separate enterprise. Feed is mostly

residual from crops, whereas cow dung is important for manure. Dairying provides a source of regular income, whereas income from agriculture is

seasonal. This regular source of income has a huge impact on minimizing risks to income. There is some indication that areas where dairy is well developed have less incidence of farmer suicide.

About a third of rural incomes are dependent upon dairying. Livestock is a security asset to be sold in times of crisis.

FACTORS AFFECTING THE COMPETITIVENESS OF THE DAIRY SECTORTo assess the dairy sector’s competiveness, a performance analysis looked at five factors: demand conditions, market structure, factor conditions, related supporting industries, and government and the enabling environment.

Demand conditionsDemand for dairy products in India is likely to grow significantly in the coming years, driven by more consumers, higher incomes and greater interest in nutrition. Consumption of processed and packaged dairy products is increasing in urban areas. Because of the increasing competition from the private sector, several national and international brands have entered the market and expanded consumers’ expectation of quality – although only among a small proportion of the population. In many parts of the country, people still prefer unpacked and unprocessed milk delivered by a local milkman because of its taste and the perception of

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freshness. The price elasticity for milk is high, thus demand for milk is very sensitive to price changes.

Market structureUntil 2002, cooperatives traditionally were the dominant players in the formal sector. With liberalization of the dairy industry, private investment has increased quite significantly. However, the organized sector’s share in milk procurement is very low because a large proportion of the milk and milk products are sold through the informal channel (Table 3). The informal demand absorbs approximately 41 percent of the milk and milk products produced in the country, accounting for about 75 percent of the marketable surplus of milk. The formal channel, with its packaged milk and dairy products, accounts for only about 25 percent of the marketable surplus, which is about 15 percent of production.

The informal sector consists of the village milk vendors who procure loose milk from farmers and sell it in urban and peri-urban areas directly to consumers, small private processors or hotels. The milk vendors also may sell processed products, such as paneer or separated cream. The quality of the vendors’ milk and milk products is not guaranteed. Largely sold in loose form, it is often adulterated with several additives to control spoilage.

Cooperatives are the central players in the formal dairy sector. The cooperatives have a three-tier structure – i) primary societies at the village level, ii) unions at the district level and iii) federations at the state level. Currently, there are 14 federations in India.

The success of the Gujarat Cooperative Milk Marketing Federation (GCMMF), known for its Amul brand and its Amul model of cooperative, is acclaimed. However, there is a perception that cooperative organizations generally have failed in other parts of the country. A less recognized fact is that the cooperatives in other states are organized differently than the GCMMF cooperatives. The GCMMF cooperatives operate as a true representative of farmers and are run by professionally qualified managers. In most other states, the cooperatives are managed by civil servants, function more as government bodies and are weak representatives of farmers.

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Of the 14 major state cooperatives in the country, 10 have state government equity, of which 6 have government equity in excess of 51 percent. Twelve of the 14 cooperatives have government officers as managing directors who are appointed by the state government. It is not uncommon for these officials to change up to three times a year. Because of such governance, cooperatives are mere parastatals and do not work in the true spirit of cooperatives – with elected farmer representatives and professionals who run the organization. This governance structure influences the functioning of the entire chain, from the state federation to the village societies and thus significantly impacts farmers’ involvement in the chain.

The primary differences between the GCMMF cooperatives and other state cooperatives are price and services. In Gujarat, the price paid to farmers is based on fat content; there is regular testing of milk each farmer supplies. In most of the other states, there is hardly any testing of milk. In other state cooperatives, the village society president wields a lot of power and typically decides the prices paid to farmers. Reportedly, farmers with some degree of influence receive higher prices while those without receive lower remuneration. Being the lead organizations, the cooperatives also set a benchmark for prices paid by other buyers, such as local vendors and private dairies, who tend to pay 50 paise or 1 rupee ($ .02) more than that paid by the cooperatives. Thus, if the farmgate price paid by the cooperative is low, other players also pay a low price.

For most of the private dairies, agents procure the milk from farmers. Some private dairies have established village societies for milk collection that follow the cooperative model. However, this model requires much larger investment and is not economically feasible, considering that cooperatives receive considerable development support from the government (such as feed subsidies). It is not uncommon for private dairies to make loans to farmers, which is a key reason for the somewhat large share of milk directed to this channel.

Factor conditions

Factor conditions for dairying entail the quality of animals, human resources and technical skills, land availability, capital, credit, infrastructure and other inputs relevant to the value chain, as the following explains.

The quality of animals is critical in determining its milk productivity and hence overall production. Currently, low productivity per animal hinders development of the dairy sector. Despite being the world’s largest milk producer, India’s productivity per animal is very low, at 987 kg per lactation, compared with the global average of 2 038 kg per lactation.

The low productivity is a result of ineffective cattle and buffalo breeding programmes, limited extension and management on dairy enterprise development, traditional feeding practices that are not based on scientific feeding methods, and limited availability and affordability of quality feed and fodder. In addition, the limited supply of quality animals is exacerbated by policies limiting interstate movement of animals. Indigenous cattle and

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buffalo make up 45 percent of the country’s total milch population, in contrast to the cross-bred cows at 10 percent.

Animal health and breeding services provision, veterinary infrastructure development and vaccinations are the responsibility of the state government. These services have traditionally been provided for free or at a very subsidized rate. In the past few years, there has been increasing awareness that the state pays heavily to offer these services, which are easily available to farmers (Ahuja et al.). Consequently, many states have instituted partial or full-cost recovery fees for providing the services.

PRODUCTION: Post forecasts calendar year (CY) 2014 fluid milk production at a record 140.6 million tons, approximately 4.5 percent more than CY 2013 on the assumptions of a normal monsoon, increased demand for milk and dairy products and rising consumer income. CY 2013 fluid milk production has been marginally decreased and estimated at 134.5 million tons.

As a result of strong prices and increased export demand, Post forecasts CY 2014 Non Fat Dry Milk (NFDM) production to increase by 19,000 metric tons to 489,000 metric tons. CY 2013 production estimate for NFDM is revised higher at 470,000 metric tons. While most NFDM producers faced difficulties throughout 2012, market for NFDM has picked up in 2013 due to strong prices and export ban lifted in June 2012. Increased demand for reconstituted milk during the lean season (April-August) and consistent exports of NFDM are also the major drivers supporting increased production. The NFDM market is used as a way to establish a procurement system and maintain cash flow while slowly developing a marketing network for high-value perishable goods.

Following India’s rising production trend, Post forecasts CY 2014 production of combined butter and ghee (clarified butter) to increase approximately by 3 percent over CY 2013 to 4.88 million metric tons as a result of increase in income of an average Indian consumer leading to increased domestic demand. However, CY 2013 production estimates are marginally revised down to 4.74 million metric tons in order to match with the current market situation. (Note: Post Production, supply and demand (PSD) estimates for fluid milk, NFDM and butter have been revised to reflect the calendar year in lieu of the April/March marketing year)

India ranks first in the world in milk production and it has gone up from 53.9 million tons in 1990-91 to 127 million tons in 2011-12. The country accounts for around 17 percent of world’s total dairy production. As per Economic Survey Statistics, 2012-13, the per capita availability of milk has increased from 176 grams per day in 1990-91 to 290 grams per day in 2011-12 and this is comparable with the world per capita availability of milk at 289 grams per day for 2011. Strong farmgate prices supported by growth of the Indian economy and the rising domestic demand for value-added dairy products are factors contributing to increased production. Growing private investment in dairy processing facilities is also expected to provide further impetus to India’s milk production over the coming years. Farmers working directly with formal sector buyers have access to modern extension services, thus improving the herd size, management, feeding, fertility and veterinary care. Many of these extension service providers offer artificial inseminations further improving milk yields with new dairy

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cattle genetics. Artificial insemination services are expected to grow in the future, as the government of India continues to develop protocols for imported genetics products as well as encourage the growth of genetics services throughout the country.

PRODUCTION POLICYThe Indian Government is promoting milk production through the launch of intensive dairy development programs and strengthening of infrastructure for quality and clean milk production. It has devised a plethora of schemes for assistance to cooperatives and has also instituted a dairy entrepreneurship development scheme among other targeted programs for sustained progress of the dairy sector.

The National Dairy Plan was approved in February 2012 with a financial outlay of 416 million dollars (more than 20 billion rupees), and implementation period of six years from 2011-17 to meet the projected national demand of 150 million tons of milk from domestic production. The first phase of the plan is focused on 14 major milk producing states: Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh and West Bengal. In India, these states account for over 90 percent of total milk production, 87 percent of the total buffalo population, and 98 percent of total forage production.

Three different entities implement the NDP: (a) The National Steering Committee provides policy and strategic support; (b) The Project Steering Committee approves plans and monitors progress; and (c) The Project Management Unit manages project implementation.

In 2012, the first phase of the NDP began with a set of initiatives that would be implemented over the next six years. These initiatives include:

a. Increasing productivity through scientific breeding and nutrition

b. Strengthening village-based milk procurement systems

c. Project management and learning

In addition to NDP, the Department of Animal Husbandry, Dairying and Fisheries (DAHD), Ministry of Agriculture, approved for the continuation of the following four schemes in financial year 2013-14 (April-March) during the 12th Five Year Plan:

1. Intensive Dairy Development Program (IDDP): This program is being implemented by the state dairy federations/district milk unions and has the following six objectives:

• Development of dairy cattle;

• Increase milk production by providing technical inputs services;

• Procurement, processing and marketing of milk in a cost effective manner;

• Ensure remunerative prices to milk producers;

• Generate additional employment opportunities; and

• Improve the social, nutritional and economic status of residents of comparatively more disadvantaged areas.

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2. Strengthening infrastructure for quality & clean milk production : This program is being implemented through the state government by district cooperative milk unions/state level milk federations. The objectives of the program are:

• Build infrastructure to ensure milk quality from producer to consumer;

• Improve milking practices at the farmer level; and

• Build awareness on the importance of clean milk production amongst producers.

3. Assistance to Cooperatives: The GOI seeks to revitalize underperforming dairy cooperative unions at the district level and cooperative federations at the State level. The program is being implemented by the concerned district cooperative milk unions/state dairy federations.

4. Dairy Entrepreneurship Development Scheme: This program is being implemented through the National Bank for Agriculture and Rural Development (NABARD), and has the following objectives:

• Creation of modern dairy farms for the production of clean milk;

• Encourage heifer calf rearing for conservation and development of good breeding stock;

• Create structural changes in the unorganized sector to promote initial milk processing at the village level; and

• Upgrade technology to handle milk on a commercial scale.

From 2000-10, the GOI implemented a major program entitled “National Project for Cattle and Buffalo Breeding” (NPCBB) to improve local genetics. In order to complete spillover activities from this project, the NPCBB was allowed to continue activities under a new scheme called the “National Project on Bovine Breeding and Dairy.” This new scheme will be implemented through IFY 2014, and would supplement NDP activities. The goals include:

a. Improve cattle genetics by servicing 80% of adult females through an organized genetics management program (could utilize artificial insemination (AI) or natural insemination).

b. More privately self-employed AI practitioners.

c. Replace 20 million low producing nondescript cattle and buffaloes with genetically superior animals.

d. Increase rural self-employment opportunities and farm income.

e. Develop a modern AI network and AI delivery services that are easily accessible by farmers.

f. Establish an authority that can certify the authenticity of semen, semen stations, and AI bulls.

g. Conservation and genetic development of several indigenous cattle and buffalo breeds.

While breeding stock development continues to take place through the Ministry of Agriculture’s research programs, the GOI has also taken steps to allow the importation of high quality genetics. Currently, India allows imports of bovine semen subject to strict quality standards.

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The GOI is also seeking to improve feeding practices and develop quality feeds and fodders in order to improve livestock productivity in India. Animal feeding in India typically relies on agricultural byproducts rather than grain-based feeds or specialized fodder. Use of capital-intensive feeds is growing in India, but still represents a small share of total feeding.

The National Mission for Protein Supplements was launched by GOI in Indian Financial Year 2011-12 with an allocation of more than USD 65 million. This mission undertakes activities to promote animal based protein production through livestock development, dairy farming, piggeries, goat rearing and fisheries in selected areas of the country. With the announcement of the NDP, the mission was strengthened and continued in Indian Financial Year 2013-14.

The National Dairy Development Board has very recently approved INR 300 million (USD 4.9 million) for rearing of improved sires in the state of Haryana.

The private sector also provides extension services including artificial insemination, veterinary care, and livestock management training. As genetic improvements become more available, it is expected that Indian producers will continue to use higher yielding foreign cattle/local breed hybrid crosses, often provided through their milk procurement company’s own extension services.

REGULATION OF MILK AND MILK PRODUCTS IN INDIA The Food Safety and Standards Authority of India (FSSAI) regulates food safety in India. Dairy products are regulated under the Food Safety and Standards Regulations (FSSR), which replaced the Milk and Milk Products Order, 1992 on August 5, 2011. The FSSR applies equally to domestic and imported food, and requires that food business operators (including food processors, manufacturers, exporters, or importers) hold a license to carry out business in India. Individuals are not allowed to start or carry out any food business without a license from the FSSAI. The FSSR also prohibits the use of animal-derived rennet in cheeses.

While the FSSAI sets standards for the safety of domestically produced and imported milk and milk products into India, the Ministry of Agriculture’s DAHD is responsible for issuing sanitary permits for milk and milk product imports into India.

Consumption:

CY 2014 fluid milk consumption is set to match 2014 fluid milk production. Indian consumption of NFDM for CY 2014 is forecast at 425,000 metric tons, assuming increased exports and little imports from CY 2013. Due to an increased demand for reconstituted milk during the lean season (April-August) and consistent exports of NFDM, CY 2013 consumption estimates are revised lower at 420,000 metric tons. Butter consumption is forecast to match domestic production in 2014.

India is not only a leading milk producer but is also the largest consumer of milk in the world. According to industry estimates, the Indian dairy consumption market has grown at an annual rate of 6.8% over the last decade. The major factors driving growth in milk consumption are increased demand due to population growth, greater affordability due to increased disposable incomes, increasing awareness and availability of dairy through retail and foodservice segments and increased consumer interest in high protein diets. As per the National Sample Survey 66th Round, July 2009-June 2010 on the ‘Nutritional Intake in

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India’ and ‘Household Consumption of Various Goods and Services in India’, the contribution of milk and milk products to protein intake has risen from 3 percent in the lowest decile class to 15 percent in the highest in the rural sector and from 5 percent to 18 percent in the urban sector. The share of milk and milk products is 7.6 percent of consumer expenditure in rural areas as compared to 6.9 percent for urban areas.

Of the milk produced, 40 percent is used or consumed on-farm, and 60% is sold. Industry sources report that of milk sold 70% goes through the unorganized sector, and only 30% through the organized sector (16 percent by cooperatives and 14 percent by large private processors). According to a Rabobank report, India’s formal dairy market size is USD 10 billion and it is expected to grow at a CAGR of 13-15 percent. The formal market comprises cooperatives and private players who control the supply chain linkages. Little research is carried out on India’s vast informal dairy sector. The informal dairy market is largely fragmented and is a challenging environment due to its high-volume and low-margin business of indigenous products, the supply-constrained value-chain for quality products and insignificant trade opportunities due to ever-changing trade regulations. While market players indicate that the informal sector is slowly being overtaken by the formal sector, there are no hard data to verify in what proportions India’s dairy market is divided between the formal and informal sectors. Within the formal sector, private dairy players are investing in formalizing milk procurement and focusing on marketing value-added products. Some of the private dairy processing players in India have now become strong regional players and are aiming to become national players in the next few years.

Given strong prices, increasing production, growing urban population and consumer preferences and trust for branded milk products, it is possible that the unorganized sector’s market share is slowly decreasing.

Processing The change in work culture (a growing number of women in the workforce) and demographics (smaller families and cosmopolitan culture) in the urban areas are driving the growth of many processed dairy products like milk powder, processed cheese, table butter, yogurts, flavored milk, ice-creams, cottage cheese (paneer), dairy whitener, probiotic drinks, ethnic dairy desserts, etc. According to Rabobank estimates, with the expansion of organized retail acting as a platform for driving value-added sales, the market share of value-added products will increase from 21 percent to 31 percent by 2019-20.

Cheese production in India is estimated to be growing at the rate of 10-12 percent in terms of volume and 16-17 percent in terms of value per year. Given this scenario, the processed dairy sector is poised for growth, although this will depend greatly on the stability of dairy supply as well as expansion of necessary infrastructure and the cold chain system. Cottage cheese (paneer) is considered a delicacy among the majority of Indian consumers. However, this is largely manufactured by the unorganized sector and many households also produce fresh cottage cheese for their own consumption.

The ice-cream industry in India is witnessing a booming growth rate of 12-15 percent annually. Per capita consumption of ice-cream is around 250 ml. Around 60 percent of India’s ice- cream market is accounted for by branded players. This presents a huge opportunity for organized players in the ice-cream industry. Several international players are entering into the market while the domestic players are trying to expand their operations.

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Another segment where the country’s dairy sector is likely to witness growth is ultra high temperature (UHT) milk. The demand for UHT milk is growing though it has not been able to break the strong preference for daily consumption of fresh milk. UHT milk is an aspirational category of dairy product for many Indian consumers who do not want to compromise on quality and nutrition, and is likely to grow with the increase in the household income.

TRADE:Export India consumes almost all of its domestic dairy production. India exports milk powders (casein), and occasionally ships smaller volumes of butter and other products to neighboring countries if favorable prices and demand occur. As the export bans have been lifted since June 2012, NFDM exports have increased and cleared the stocks out of 2012. A confidence has been built up in the minds of producers that the market will be well placed in the near future. The NFDM exports are mainly to the milk-deficient countries such as Bangladesh, Egypt, Algeria, Sri Lanka and Pakistan.

Given the above factors, Post forecasts CY 2014 NFDM exports at 60,000 metric tons and revises CY 2013 export estimates at 90,000 metric tons, reflecting increased demand and strong prices. Based on trade data, CY 2012 NFDM figures are revised to 37,000 metric tons. CY 2014 exports of butter are forecast at 5000 metric tons reflecting sustained domestic production. CY 2013 export figures are revised to 5000 metric tons to match the current visible trend in the market. CY 2012 export figures are revised to match the trade data.

Import Post forecasts zero imports of NFDM and butter in CY 2014 due to strong domestic production. Based on the current stocks available in CY 2013, the butter import figure is brought down to zero. CY 2012 import figures for NFDM and butter are revised to 14,000 and 8,000 metric tons respectively to match the trade data.

Historically, India has only imported milk powder and butter in limited quantities when it was believed that domestic production was insufficient or to help control inflation. As incomes and population grow, and consequently consumption, India may require additional supplies and imports of butter and NFDM, absent significant domestic production growth.

POLICY: Trade Policy

India allows imports of milk and milk products without quantitative limitations, although tariff rate quotas apply and an import permit is required. NFDM imported above the TRQ attracts a 60 percent basic duty and above quota butter oil imports are charged a 30 percent basic duty.

Although India allows milk and milk product imports, in most cases both import permits and sanitary certificates are required. For the import of livestock products (including milk and milk products), an applicant has to apply at least 30 days in advance with form A/B (Department of Animal Husbandry and Dairying). Exports of U.S. dairy products to India are effectively prohibited under India’s current dairy sanitary import protocol. Imported dairy products, like domestic dairy products, must adhere to all relevant food safety laws and

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quality standards. These include the quality standards set by the Bureau of Indian Standards (BIS) as well as the food safety standards covered in the Food Safety and Standards Regulation, 2011.

On November 21, 2012, India revised its tariff rate quota (TRQ) on dairy products falling under harmonized system (HS) code 040210 and 04022100 (SMP). Under the notified TRQ, India will permit imports up to 10,000 metric tons (MT) of SMP per fiscal year at a tariff rate of 15 percent. Quantities above 10,000 MT will incur a 60 percent tariff.

On November 22, 2012, the Government of India (GOI) lifted its ban on the export of dairy products falling under HS code 0402. This includes milk and cream, concentrated and/or sweetened milk and cream, whole milk powder, dairy whitener and infant milk foods. Industry sources state that this action will have little consequence on trade, as the majority of India’s dairy product exports are skim milk powder (SMP) and casein, both of which were permitted for export on June 8, 2012.

In March, 2013, the Department of Animal Husbandry, Dairying and Fisheries (DADF) of the Ministry of Agriculture, Government of India (GOI) posted revised guidelines on its website for the import and export of bovine genetics to India.

On June 11, 2013, the Food Safety and Standards Authority of India extended the import prohibition on milk and milk products from China for an additional year until June 22, 2014. The ban includes milk, milk products, chocolates and chocolate products, candies, confectionary, and food preparations made with milk or milk solids originating in China.

On June 11, the Government of India, Ministry of Commerce and Industry amended the Directorate General of Foreign Trade’s (DGFT) Import Policy 2012 and broadened the number of HTS chapters for which a certificate complying with the Ministry of Agriculture’s livestock import requirements will be required. The chapters now include dairy and other livestock products covered in chapters 2, 3, 4, 5, 16, and 21. The new policy condition specified in the amended notification requires that import of all livestock products shall be subject to a sanitary import permit issued by the Department of Animal Husbandry, Dairying and Fisheries, Government of India. The chapters including lactose (chapter 17) and some proteins (chapter 35) are however, not included in the amendment

OVERVIEW OF DAIRY MARKETING CHANNELS IN INDIA

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IDENTIFYING CRITICAL ISSUES IN THE DAIRY CHAIN

Stage Priority Agent IssuesPolicy environment Developing livestock

policyBreed development

Dept. of Animal Husbandry, Dairying and Fisheries

Lack of a coherent livestock development policyIneffective implementation of policy and projects due to lack of clarity in roles of different agenciesLack of resourcesLack of clarity between roles of different departmentsLack of regulation for quality of feed and medicines

Services Disease control/ health/breeding/extension servicesSupport to dairy farmer organizations/women’s self-help groups

Dept. of Animal Husbandry, Dairying and FisheriesCooperativesNGOsPrivate dairies

Inadequate coverage of veterinarian and breeding servicesNon-existent extension servicesScope to enhance activities of NGOs in these areasLack of private sector

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involvement in dairy development services and activities

Inputs Feed supplyFodderMedicines/vaccine supply

CooperativeFeed companiesMedicine companiesMedicine store

CooperativeFeed companiesMedicine companiesMedicine store

Formal credit for animal purchase

Banks/financial institutionCooperativesSelf-help group

Very poor access to formal credit at the farm level

Informal loans for animal purchase or other dairy needs

TraderPrivate company agent

Very high rate of interest; farmer has to sell milk at low price to the trader if he/she has borrowed money from the trader

Production Dairy farmingSelling milk cooperatives/traders/private dairy agents

Farmer Poor management and feeding practices because of lack of information in the absence of extension activities.Low productivity because of poor genetic potential, poor feeding and management practices, poor access to health and breeding services, lack of good-quality animalsAvailability of milk per household very lowLow profitability from dairy enterprise

Marketing/processing

Collection of milk from farmers through village society, processing and marketing of milk in cities and urban areas

Cooperative society Lack of coverage of villagesLack of transparency in milk testing and pricingLack of democracy in village societiesMarketing only in peri-urban/urban areasMaintaining quality of milk/infrastructureMilk prices declared by cooperatives kept low and

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used as a benchmark price by other players

Purchase milk from farmers and selling milk and processed products to consumers

Trader No transparency in milk pricingAdulteration and quality of milk and milk productsUnhygienic conditions for milk processing

Purchase of milk from farmers through village agents, processing and selling milk

Private dairy No transparency in pricing of milkQuality of milk

Retailing Selling of milk and milk products processed by cooperatives and private dairies

Retailers

SURVEY AND ANALYSIS

MethodologyThe research includes both secondary and primary research. The primary research has been done internally with the help of branding and other involved department. The research has been conducted within a period of 2 months.

Research Design

The data has been collected using both secondary and primary data collection methods. Both quantitative data (numbers and statistics) & qualitative data (usually words or text) has

been collected to complete the study. The research methodology is exploratory in nature

Sources of data collection

Secondary Data Research- Secondary data has been collected to find out the best practices of the industry and other companies. Secondary Research includes projects that have been done in the past, newspapers, magazines, company’s official websites and other websites, etc.

Primary Data Research-For the research to be completed successfully secondary research was not enough so to analyse the actual problem, primary data was also collected. Primary research was mainly collected by consumer survey and observations

Scope of the research

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Since, the research was limited to milk and related products only; therefore there is a scope to cover other products also which fall under the special category group of food and grocery and especially dairy.

The survey has been conducted by Shashank Gupta and Aviral Mishra. The data has been used with the knowledge of the owners.

Questionnaire along with statistical analysis 1. Age

52%

30%

18%

10 - 25 26 - 50 50 Above

2. Income

37%

33%

11%

20%

10,000 - 15,000 20,000 - 25,00030,000 - 40,000 50,000 Above

3. Frequency of purchase

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10%

90%

No Yes

4. Quantity of purchase

35%

15%

40%

10%

1 ltr. to 2 ltr. 2 ltr. to 4 ltr. Less then 1 ltr. More than 4 ltr.

5. Brand Preference

56%

44%

Amul Mother Dairy

6. Reason of purchase

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20%

14%

40%

26%

Brand Image Price Quality Taste

7. Satisfaction with the quality of the product

14%2%

38%

46%

Can't Say Extremely DisatisfiedExtremely Satisfied Satisfied

REFERENCES

Varghese Kurian – brand loyal,brand equity

http://www.india-seminar.com/2001/498/498%20verghese%20kurien.htm

http://www.fao.org/docrep/011/i0588e/I0588E05.htm

http://articles.economictimes.indiatimes.com/keyword/dairy

http://agropedia.iitk.ac.in/content/opportunities-and-challenges-indian-dairy-industry

http://www.agrochart.com/en/news/news/101113/india-dairy-and-products-annual-oct-2013/

http://extension.psu.edu/animals/dairy/marketing-outlook

Video

https://www.youtube.com/watch?v=GhGhKVuqdew

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