Amul Success Story: Best Dairy Brand of India

This Blog explores the fascinating story of Amul, India's largest dairy brand, and how it transformed the milk industry through a cooperative model led by Sardar Patel and Dr. Verghese Kurien. Learn how Amul overcame challenges and built a global empire by making the problem its weapon.

The Milk Crisis in Kheda District- Beginning of Amul Company

The story of Amul begins in 1942 in the Kheda district of Gujarat. During this time, the milk production sector was plagued by rampant corruption.

Understanding the Milk Supply Chain

To grasp the extent of the corruption, one must understand the supply chain of milk. The supply chain consisted of three main components:

· Milk Producers

· Agents or Dealers

· Customers

The Role of Agents and Dealers

Agents and dealers were the middlemen who determined the price of milk. They set arbitrary prices based on their whims, exploiting the farmers who depended on them for their livelihood.

These middlemen crushed the farmers' means of sustenance, leading to widespread dissatisfaction among the milk producers.

Government Monopoly and Its Impact

The government granted monopoly rights to Polson Dairy, allowing it to collect milk from Kheda district farmers and supply it to Bombay. This decision further aggravated the farmers' plight.

Polson Dairy took advantage of its monopoly, purchasing milk at unfair prices. The farmers' anger, suppressed for three years, finally erupted in 1945.

Farmers' Frustration

The farmers were fed up with the corruption and exploitation. They sought a solution to eliminate the middlemen who were taking advantage of their hard work.

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Sardar Patel's Solution: The Cooperative Model

Realizing the severity of the situation, the farmers approached Sardar Vallabhbhai Patel for assistance. He proposed a revolutionary solution: the cooperative model.

Eliminating the Middlemen

Sardar Patel advised the farmers to eliminate the middlemen by marketing their milk through their own cooperative societies. This would allow them to supply milk directly to Bombay, bypassing Polson Dairy.

Challenges in Direct Supply

While the idea of direct milk supply was appealing, it posed significant challenges. Bombay was over 400 kilometers away from Kheda, and transporting milk without it spoiling was a major concern.

Farmers lacked the means to pasteurize the milk, making it difficult to ensure its quality during the long journey. This was why they had been dependent on Polson Dairy despite the exploitation.

The Need for a Swadeshi Dairy

Sardar Patel emphasized the need for an indigenous dairy that would treat farmers fairly. He put forth a condition: all farmers must demand that the government allow them to sell milk through their cooperatives instead of Polson Dairy.

If the government refused, the farmers should threaten to stop supplying milk to Polson Dairy, even if it meant incurring short-term losses. This collective action would force the government to heed their demands.

Farmers' Determination

The farmers agreed to Sardar Patel's proposal, ready to endure temporary losses for long-term relief. Sardar Patel then sent Morarji Desai to negotiate with the government on behalf of the farmers.

The Government's Response

In a crucial meeting, it was decided that cooperatives would be established in every village, and the government would procure milk directly from these cooperatives. If the government failed to comply, the farmers would stop supplying milk to Bombay.

The government initially rejected the proposal, leading the farmers to initiate a milk strike. For 15 days, not a single drop of milk from Kheda district reached Bombay, causing the Bombay Milk Scheme to collapse.

The Government's Concession

Faced with mounting pressure and the collapse of the milk supply in Bombay, the government had to reconsider its stance. The farmers' unity and determination had brought the issue to a critical point.

Ultimately, the government conceded to the farmers' demands, paving the way for the establishment of cooperative societies. This marked the beginning of a new era in India's milk industry, laying the foundation for what would become Amul.

The Establishment of Kheda District Cooperative Milk Producers' Union

In 1946, the Kheda District Cooperative Milk Producers' Union Limited was established, marking a significant milestone in the journey of Amul.

Formation and Initial Challenges

The union started with just two village farmers and produced only 250 liters of milk per day. The initial production was low because farmers were not receiving the value they deserved.

The Role of Leadership

The establishment of the union underscored the importance of having a strong leader. Dr. Verghese Kurien, an engineer educated in the USA, played a pivotal role along with his co-founder, H.M. Dalaya.

A Vision for the Future

Dr. Kurien and Dalaya introduced the vision of "Value for Many and Value for Money." This meant ensuring fair value for farmers and satisfactory value for customers.

Growth and Expansion

Under this vision, the cooperative grew rapidly. By 1948, the cooperative began the process of milk pasteurization, which allowed milk to be supplied to Bombay without spoiling.

Daily milk production reached approximately 5,000 liters, showing significant growth and the success of the cooperative model.

Overcoming Challenges for Amul: Milk Pasteurization and Expansion

The cooperative faced numerous challenges, but innovative solutions helped them overcome these obstacles and expand further.

Introduction of Milk Pasteurization

In 1948, the cooperative started milk pasteurization. This process extended the shelf life of milk, making it possible to supply fresh milk to Bombay.

Addressing Seasonal Variations

By 1953, milk production increased significantly, especially during the winter when milk spoils less quickly. However, consumption rates did not match production levels.

This imbalance forced farmers to sell surplus milk to middlemen at low prices, undermining the cooperative's goals.

Innovating Milk Products

To address the surplus, the cooperative needed technology to convert milk into non-perishable products like butter and milk powder. This would prevent spoilage and provide additional revenue streams.

Government and International Support

By this time, India had gained independence, and the government recognized the logic behind processing milk into various products. The Government of India sought financial assistance from UNICEF and technical help from New Zealand.

Setting Up Processing Facilities

With the support received, a factory costing 5 million rupees was established. This facility enabled the production of milk powder and butter, revolutionizing the milk industry by 1950.

A Revolution in the Milk Industry

The introduction of milk processing techniques marked a revolution in India's milk industry. The cooperative model, combined with technological innovations, laid the foundation for Amul's future success.

The Birth of the Amul Brand

The formation of the Kheda District Cooperative Milk Producers' Union laid the foundation for what would become Amul.

Branding and Naming

The union branded its product as Amul, which stands for Anand Milk Union Limited. The name Amul is inspired by the Sanskrit word "Amulya," meaning priceless.

Product Portfolio

Amul expanded its business by diversifying its product portfolio. The array of products includes butter, cheese, milk, ice cream, and more.

This product diversification has been instrumental in reaching a revenue of over 55,000 crores.

Amul's Successful Business Model and Growth

Amul's exponential growth can be attributed to its efficient business model and strategic decisions.

Efficient Supply Chain of Amul

One of the key reasons for Amul's success is its efficient supply chain. A strong supply chain is crucial for any business to thrive.

Three-Tier Cooperative Structure of Amul

Amul operates on a three-tier cooperative structure:

· Village Level: Milk collection by cooperatives

· District Level: Milk processing

· State Level: Marketing and distribution

Parent Brand Promotion

Amul promotes its parent brand rather than individual products. This strategy ensures that all products benefit from collective marketing efforts.

This approach reduces marketing costs, allowing Amul to sell its products at affordable prices.

Iconic Marketing Strategy of Amul

Amul's marketing strategies have been iconic. The tagline "Amul Doodh Peeta Hai India" is ingrained in Indian culture.

This tagline has been a part of Indian television for decades, making Amul a household name.

Building Trust for Amul

Amul has not just sold products; it has built trust. The brand's reliability has made it a trusted name in Indian households.

Amul's commitment to quality and affordability has won the trust of millions.

Key Takeaway From Amul CaseStudy:

The story of Amul, India's largest dairy brand, is a testament to the power of cooperative models in transforming industries. Led by Sardar Patel and Dr. Verghese Kurien, Amul overcame rampant corruption and exploitation in the milk sector by empowering farmers through cooperative societies. This initiative not only eliminated exploitative middlemen but also introduced technological innovations like milk pasteurization and diversified product offerings. Amul's efficient supply chain, strategic branding, and iconic marketing have built a trusted global empire, demonstrating how collective action and visionary leadership can drive significant socio-economic change.