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How Verghese Kurien laid the foundation for Amul's Success
Thu Jul 1, 2021
From just 200 liters of milk procurement in a day in 1948 to now 215 lakh liters a day, how did Amul become the Amul that it is today? Amul’s revenue as of 2019–2020 is 5.4 Billion dollars. How did they end up becoming not just India but Asia’s largest dairy industry?
Amul's Story dates back to pre-independence in 1943. The milk market was entirely monopolized by a Parsi brand named Polson. Around 1942–43, a large number of Britishers stationed in Bombay fell sick. After an intensive investigation, the authorities identified the root of the problem as the milk they were drinking. A sample of this milk was sent for testing to a laboratory in London since the British would not trust any Indian laboratory. There was a one-line response from London. It said quite simply: ‘The milk of Bombay is more polluted than the gutter water of London.’ Thus, when milk in Bombay was found unfit for consumption, the British government felt compelled to create the post of a milk commissioner. A milk department was established to work out a scheme to improve the quality of milk coming into Bombay. The first thing they did was to look for a nearby source of adequate milk supply and it was inevitable that they stumbled upon Kaira district, a district that went onto make history later was famous even during that time.
Polson was creating a market for the milk from the Kaira district. As always happens when a market is created, the producers react. In this case, the farmers of the Kaira district responded and milk production increased. In Kaira district, therefore, before there was even any mention of a milk cooperative, the farmers had increased their production to such an extent that the district had already become the largest and best-known milk pocket in the entire region. Zeroing in on Kaira, the British government of the Bombay state then asked the owner of Polson dairy whether it was possible for him to send milk from Anand to Bombay city — some 350 km away. Never before had liquid milk
traveled such long distances in a hot country like ours. But Pestonjee was not
one to throw up his hands in despair. He experimented. He pasteurized milk in his cream pasteurizer and transported it to Bombay in milk cans wrapped in gunny bags with chilled water poured on the cans. He found that it reached Bombay in fairly good condition. This was the beginning of the government’s Bombay Milk Scheme — probably the first milk scheme to supply liquid milk to any distant city in India. Bombay thus became a market not just for milk products but also for liquid milk. It was an additional market for the Kaira district and an incentive for its dairy farmers. This further increased the production of milk in the Kaira district. These were all undeniably vital pioneering efforts in the district’s milk industry. Pestonjee — or Polson — found this arrangement with the British government quite satisfactory. He demanded a processing charge from the government,
which the government agreed to give. He demanded additional equipment as a grant and that, too, was provided. Then Polson made one more demand. He told the government that for him to do his job more efficiently and supply Bombay with more milk, they should pass legislation whereby in all the villages around Anand no one besides him could collect milk. This, too, was done, which meant that contractors appointed by Polson monopolized milk procurement. Polson was happy, the Milk Commissioner of Bombay was satisfied and,
Above all, the milk contractors and merchants were ecstatic. The dairy farmers, on the other hand, were dejected and miserable. The farmers very soon realized that the increased price, which Polson obtained from the government, went into the pockets of Polson dairy and worse, much of it went into the grasping hands of the milk contractors. Only a minuscule amount of the increase in price reached them. This was the time when India was struggling for its freedom from British rule.
Kaira’s farmers complained about their exploitation to Sardar Vallabhbhai Patel, a prominent leader of the freedom movement and Deputy Prime Minister of India at that time. He came from Karamsad village just a few kilometers from Anand. He firmly believed that a revolution in marketing the farmers’ produce — which would be beneficial to the farmers — was necessary. Sardar Patel was convinced that in order to save themselves, the farmers needed to control the procuring, processing, and marketing of milk.
Sardar Vallabhbhai Patel knew that independence was more than a political task. He knew that rural people could never become really free until they were liberated from the exploitation of moneylenders, from the social ills and burdens of caste and class. Sardar Patel believed that the way to address these problems was to build rural institutions, and institutions of research and teaching, that would serve the farmers’ economic interests; institutions that would cater to the needs of the rural people. Sardar Patel urged the dairy farmers to organize milk cooperatives, which would give them control over the resources they generated. He assigned Morarji Desai, his deputy, to coordinate this effort. As the cooperatives were formed, Polson knew this would entirely break their business, so he tried his best to destroy these cooperatives. It was then that the farmers and their leader, Tribhuvandas Patel, again went to meet Sardar Patel, who gave them only one bit of pithy advice. ‘Remove Polson,’ he said. It sounded a simple enough directive but it was not so easy to accomplish. He also told them that if they wanted maximum benefit from the Bombay market, they had no other option but to co-operatize with the dairy movement in their district and, above all, to have their own dairy. As the farmers were fed up with being exploited they readily agreed.
Once the farmers decided that they would fight the government, Sardar Patel
sent Morarji Desai to carry the struggle forward. In January 1946 Morarji Desai,
who was then the Secretary of the Gujarat Provincial Congress Committee, came
to Kaira district and held the first meeting some ten kilometers from Anand. At the meeting, only two resolutions were passed. The first said that no milk would be sold to Polson dairy and the second said: ‘We propose to have a cooperative in each of our villages in Kaira district and a union of these village cooperatives at Anand will handle the processing of milk. This will enable the farmers to gain control over the procurement, processing, and marketing of our milk.’It was Morarji Desai who led this initial farmers’ movement against the Bombay Milk Scheme (BMS). He demanded that the BMS accept milk from the farmers’ cooperative directly and not merely the milk supplied to it by Polson dairy. As was expected, the demand was rejected and so he declared that the farmers would go on strike against the government’s Bombay Milk Scheme. This was the famous fifteen-day milk strike of Kaira district, during which all the milk that was collected by the farmers was poured on the streets but not a drop was given to Polson. Polson’s milk collection came to a grinding halt and the BMS collapsedFortunately, India won independence soon after and Sardar Patel became the Deputy Prime Minister of a free India. Tribhuvandas Patel went to Delhi to meet Sardar Patel to inform him of the persisting difficult situation in Anand.
He also mentioned that the farmers felt an acute need to have their own dairy. There already existed in Anand, a very old government research creamery, which had been built in 1914 and had fallen into disuse. This was the same dairy that had once been used to make cheese for the British troops in Mesopotamia (near Iraq) during World War I and which the National Dairy Research Institute (NDRI) had acquired from the Government of India on lease. Sardar Patel told Tribhuvandas to meet the then Minister for Agriculture –
Rajendra Prasad — and asked him to give the dairy to the farmers’ cooperative. However, his bureaucracy opposed it, saying that government property could not be simply given to anyone. Therefore, on the sage advice of bureaucrats, a part of this dairy along with some of the machines, was given to the Kaira Cooperative Union on a rent of Rs 9,000 per year. The rest of the dairy remained with the NDRI, which used it for its own research.
This was a World War I vintage dairy and, understandably, in an awful state. All very impractical, antiquated stuff.
Now entered Verghese Kurien in the year 1950- He worked as a researcher for the government in Anand. He was researching how Buffalo milk can also create milk powder and not just cow milk. He was quite intrigued by the band of tenacious dairy farmers and their leader, Tribhuvandas Patel, at the Kaira Cooperative Union next door to his research creamery. In his free time, he began helping this unique group of people next door. Under the leadership of Tribhuvandas Patel, the Kiara District Cooperative Milk Producers Union Limited (KDCMPUL) began operating from the dismal half of the government creamery, they had rented. They labored painfully to get the rusty World War I equipment to function. However, the machines would break down at regular intervals. Verghese Kurien told Tribhuvandas to scrap this dairy, asked him to borrow some money and buy modern dairy-plant equipment.
That is how Verghese Kurien began to become an important part of the most legendary dairy in the making. Verghese Kurien helped them solve problems that none of them could solve. From setting up the creamery with new equipment to making the whole process smooth. All the while, keeping Sardar Patel’s vision in mind, Verghese Kurien gave farmers their own dairy. Even in 2020, if a dairy farmer associates themselves with Amul, they could earn up to 40,000 per month. It’s the farmers that deliver us milk, Amul is just a cooperative union even decades later.
Amul’s marketing strategy now talking about Amul’s legendary marketing, it’s amazing how Verghese Kurien realized in 1957 how important advertising and marketing are.
He gave very serious thought to the finer points of marketing Kaira Cooperative’s products. He was asked to think about details such as branding, distribution, and the need to retain an advertising agency and an appropriate brand name. During an intense brainstorming session, a chemist in their laboratory suggested, ‘Why not “Amul”?’ for Anand Milk Union Limited — certainly easier on the tongue than Kaira District Cooperative Milk Producers’ Union Limited. It met with complete approval and ‘Amul’ came to stay.
In 1957 Kaira Cooperative registered the brand ‘Amul’ — a word that would soon become a household name. The union then invested 2 lakh rupees and to remind you again, this was 1957 but Verghese Kurien knew the importance of advertising back then and asked an Indian ad agency to start an ad campaign for Amul Butter. This is how the Amul girl came into the picture and has stayed relevant to date after almost a decade as well. It is said to be the longest-running ad campaign in history. India hadn’t opened its economy till the 1990s but Amul proved that like capitalist countries like the US 85 percent of the dairy industry was cooperative. In New Zealand, Denmark, and Holland, 100 percent and in West Germany 95 percent of the dairy industry was cooperative. And Amul too proved the point that it was applicable in India too.
Amul’s pricing strategy, today GCMMF is India’s largest exporter of Dairy Products. It has been known as a “Trading House” status. GCMMF has received the APEDA Award from the Government of India for Excellence in Dairy Product Exports continuously for the last 9 years.
When Amul was formed, consumers were having very limited purchasing power and reserved consumption levels of milk and other dairy products too. Thus Amul followed a low-cost price strategy to make its products affordable to the masses and attractive to consumers by assuring them value for money. Despite high competition in the dairy product segment from firms such as Hindustan Lever, Nestle, and Britannia, GCMMF guarantees that the product mix and the series in which Amul launch its products is reliable with the core values of delivering butter at a basic, reasonable price to plea the common masses. This price strategy initially helped AMUL BUTTER to create its brand image in the domestic sector of society.
In over 500,000 retail outlets Amul products are available across India throughout and network of over 3,500 distributors. There are 47 warehouses with dry and cold storehouses to buffer stock of the complete range of products.
GCMMF manages on a progress demand draft center from its wholesale seller instead of the cheque method implemented by other major FMCG corporations. This practice is reliable with GCMMF’s attitude of upholding cash dealings during the supply chain and it also diminishes dumping.
Wholesale dealers carry record that is just sufficient to take care of the transfer time from the branch storehouse to their building. This is a just-in-time (JIT) inventory strategy that improves wholesalers' return on investment (ROI). All GCMMF branches employ in route setting up and have devoted vehicle operations.
Amul's system succeeded mainly because it provides an assured market at remunerative prices for producers’ milk besides acting as a channel to market the production enhancement package. What’s more, it does not disturb the agro-system of the farmers. It also enables the consumer access to high-quality milk and milk products. Contrary to the traditional system, when the profit of the business was cornered by the middlemen, the system ensured that the profit goes to the participants for their socio-economic upliftment and the common good. Looking back on the path traversed by Amul, the following features make it a pattern and model for emulation elsewhere. Amul has been able to: produce an appropriate blend of the policymakers farmers board of management and the professionals: each group appreciating its roles and limitations bring at the command of the rural milk producers the best of the technology and harness its fruit for betterment Provide a support system to the milk producers without disturbing their agro-economic systems Plough back the profits, by prudent use of men, material, and machines, in the rural sector for the common good and betterment of the member producers and Even though, growing with time and on the scale, it has remained with the smallest producer members. In that sense, Amul is an example par excellence, of intervention for rural change.
The Union looks after policy formulation, processing, and marketing of milk, provision of technical inputs to enhance milk yield of animals, the artificial insemination service, veterinary care, better feeds, and the like — all through the village societies.
The village society also facilitates the implementation of various production enhancement and member education programs undertaken by the Union. The staff of the village societies has been trained to undertake the veterinary first-aid and the artificial insemination activities on their own.
Amul’s system has succeeded mainly because of the involvement of people on such a large scale, providing assured market at remunerated prices for milk producers, enables the 55 consumers to access high-quality milk and milk products, plowing back the profit to the members, part of the profit is used by the society for the common good and community development. Amul has established itself as a uniquely appropriate model for rural development. Amul has spurred the white revolution of India, which has made India the largest producer of milk and milk products in the world. Amul products have been in use in millions of homes since 1946. Today Amul is a symbol of many things like high-quality products sold at reasonable prices & the genesis of a vast cooperative network. Its supply chain is easily one of the most complicated in the world. The supply chain links farmer-suppliers of milk with millions of consumers. Amul encourages women and farmers to collect milk from their cows and pass it on to them for a price directly eliminating the cost of middlemen. The introduction of a just-in-time inventory strategy improves dealers’ return on investment (ROI). Amul was one of the first FMCG firms in India to employ Internet technologies to implement B2C commerce. Today customers can order a variety of products through the Internet and be assured of timely delivery with cash payment upon receipt. It has also implemented a Geographical Information System (GIS) at both ends of the supply chain, i.e. milk collection as well as the marketing process.
This is how Amul is what it is, did you like the story?
The School we deserved but never had