Interview – Amul grew bigger during lockdown, but there are challenges ahead for industry, says Sodhi

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Many large companies struggled with severe supply chain bottlenecks during the Covid-triggered lockdowns in India, but Amul – one of the biggest brand — only got bigger, gaining more market share as household demand for milk and milk products rose with people stuck at home, R.S. Sodhi, Managing Director of the Gujarat Co-operative Milk Marketing Federation, tells indoasiancommodities.com in an interview.

What has Amul’s experience been with the lockdown to combat Covid-19?

We saw an increase in the requirement of milk and milk products during the lockdown. And we could cater to the increased demand as our supply chain of milk procurement and milk marketing and distribution was not disrupted at all. Fortunately, milk falls in the essential food category, so we were allowed to operate.

During the lockdown, we upped our procurement of milk by nearly 15 to 17 percent from 3.6 million milk farmers as small dairies, vendors and ice cream manufacturers stopped collecting milk. We started converting extra milk into commodities like milk powder and white butter. We paid nearly Rs 120 crore cash to the farmers. In the 130 days lockdown, we must have paid about Rs 16,000 crore in cash to the farmers for milk.

As far as distribution is concerned, Amul milk is the number one brand in Mumbai, Delhi, Kolkata, Pune among others, and we could distribute without any disruption as we got tremendous help from the local people.

Though the hotel and restaurant segment were hit badly, the household consumption increased. The demand for paneer, cheese, ghee all increased as people were cooking at home and wanted to use the best available products.

Since we bought 15 percent to 17 percent more milk which we converted into commodities like milk powder, white butter, etc for which there was not as much demand so that stock has piled up. But we are not worried. Our milk production has not increased and in time everything will get back to normal and milk consumption in segments like hotels, restaurants, and mithai shops, which have decreased, will pick up.

R.S. Sodhi, Managing Director of the Gujarat Co-operative Milk Marketing Federation

Amul has introduced some immunity-boosting milk options, how has that been received?  

For combatting the Covid-19 virus there have been talks about boosting immunity. We already launched ‘haldi milk’ and ‘adrak milk’ (turmeric and ginger milk). These are flavoured milk products. I believe that our safe and affordable products have been appreciated greatly by people. In fact, recently we even introduced haldi ice cream with honey, dates, and cashew. Every month we introduce two to three products.  

How has Amul fared vis-a-vis competition? 

We have gained more market share as Amul was the only company operating with an intact supply chain. If you only take the organised dairy sector in India, we have a 30 percent share in the milk market. Last year our Amul brand turnover was Rs 52,000 crore. Though our market share is different in different categories, however in all segments like cheese, dairy whitener, ice cream, curd, and ghee we are the market leaders.

What are Amul’s plans for the future?

We are looking at continued growth. Every year we keep investing Rs 600 crore to Rs 800 crore for adding new processing facilities within Gujarat and outside the state. In different regions, we add new products, new plants and therefore expansion is a continuous exercise for us.

Our capacity for milk processing is 36,000,000 litres a day which will be increased to 44,000,000 a day in the next two to three years. It is important for us to have multi-site production capacity, multi-product portfolio and service multiple segments and a multi-channel operation across general trade, e-commerce, and others.

What are the challenges that milk producers in the country face?

There are a lot of challenges, but I will just talk about the four big ones.

Productivity is an issue as our animals are raised on low input and, therefore, have low output. We feed animals with what is left after human consumption. We have to work big time on feeding and breeding. Given our limited resources we need to do whatever best we can to get the best from the animal and that means giving better feed and improving the breeding.

Secondly, for the next generation of educated farmers who do not want to continue dairy farming or staying in villages, we need to promote dairy as a commercial, modern, cool, contemporary business proposition to attract farmers to continue to stay on in the villages.

Also Read | Pandemic triggers demand for immunity-boosting food, tipping market dynamics

Further, India is the largest market for milk and milk products, and it is also the fastest-growing market. For Europe, the USA, New Zealand, Australia their markets have stopped growing.  And the danger for us is that these countries want to negotiate with the Indian government to include their dairy products in the Regional Comprehensive Economic Partnership (RCEP) free trade agreement. We are wary of the cheaper imports, which can threaten the livelihood of our 100 million milk producers.

Also, increasingly companies are using cheaper substitutes for milk products like vegetable fat, palm oil, etc. To avoid this, food authorities need to keep a check in order to clearly differentiate between dairy and non-dairy products.

Also Read | Covid 19 not to impact milk supply: Amul MD

What growth do you see for the dairy industry in the coming years?

Dairy, among all sectors, has maximum productivity. It is a Rs 8 lakh crore industry, but the organised sector is only Rs. 2.2 lakh crore. Every year the organised sector is seeing a double-digit growth tapping into the huge potential of the sector.

The dairy industry alone provides maximum livelihood opportunities in rural areas. Our expansion is not just in plant capacity but expansion in the procurement of milk from rural areas. I estimate that in 10 years, dairy will provide a livelihood to nearly 1.2 crore households. 

Shampa Bahadur has been a business journalist for more than two decades. She has written for Business India, PTI Media TransAsia and India Infrastructure Publication Ltd among others. She has also written coffee table books. She can be reached at shampa@indoasiancommodities.in

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