Can Amul go IPO? MSP is bad? Amul’s secret e-commerce plans decoded with Head of Amul?| IBP Ep 20

milk is considered to be white gold from when you joined till now amul has gone from 800 crores to [Music] 80,000 amul has mastered the art of optimizing for both profits and people sir how would you go about solving this problem of MSP there are two Dimensions to it my question is how does supply chain of amul work to make sure that a razor thin margin product which is highly perishable like milk can go from the farmers to the customers and that too with very high profitability in India when you pay 100 rupees for amul

products 85% goes back to the farm and we sell uh close to 200 lakh L of milk every day amul is one of the first Brands to launch high protein lassy high protein buttermilk high protein milk and so many other things so my question is why didn't any of the brand do this before the value of output of milk which is about say 12 lakh crores is more than the value of output of wheat py oil seeds put most of the proteins in the market are absolute crap and they don't meet the standards since you

have now entered into this space especially to solve this trust deficit what exactly is wrong with the protein Market of [Music] India this is a side of amul that perhaps nobody knows in fact in fact I don't think this is out there on the internet there is a case with a company and I don't want to name it here in public they blocked our product 15 days before the big season do you think it is healthy for our economy to have MSP as a legal [Music] right before we move on let me thank our partners

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of money with ODU all businesses across India from small stores to large warehouses all of them can save time reduce errors and improve customer service the best part is that ODU gives you lifetime free access for your first app with hosting and support included so if you want to manage your inventory effortlessly click the link in the description to learn how Odo can simplify your business today sir it is a pleasure to have you here because today it is a matter of Pride to have you over here and you are perhaps the biggest business guest

we've had yet so thank you so much for taking our time to spend two hours here with us doing this podcast sir thank you so much the pleasure is also mine and the work you doing so it's a joy to be here and we'll be happy to discuss thank you sir thank you sir everybody knows the story of amul right from the starting but today what I want to decode is the story of the modern amul and you've been with amul for about 30 years now and I was just reading some stat and it told

me that from when you joined till now amul has gone from 800 crores to 80,000 crores so from 0 to 800 you were in there but you were a part part of amul's growth story from 800 to 80,000 crores which is absolutely incredible today even though amul has been in the market for decades nobody sees amul as an old brand they see amul as a Cool brand today and that is because of your marketing your advertisement the way you communicate with your customers your packaging and every single product that you launch has this unique perspective

it has this unique blend of what is required in the market and what is cool in the market which is what I find very fascinating in fact shat is not over here and I just told you before the shoot itself that and most of the times he finds that the product is out of stock there is so much demand for your protein products and what I can sense is that amul doesn't just operate like a food company it operates like a tech company so today I just want to decod the journey of amul the behind

the scenes of this tech company that nobody knows about and to try and understand what exactly is amul's growth story and more importantly we also want to understand what are the lessons that today's entrepreneurs can apply with the story of am because that is what we intend to cover in this podcast sir shall we get started sure thank you so much so the first question that I have is about amul's business model India is going from socialism to capitalism today and there is a problem with both socialism as well as capitalism capitalism we will optimize

for profits and in the race of optimizing for profits they end up compromising on the people and the product whereas when it comes to socialism socialism doesn't optimize for profits it optimizes for people but in the race of optimizing for people it ends up compromising on the profits as a result it results into an unsustainable business model but when it comes to the amul model The Cooperative model it is so special that it lies perfectly between capitalism and socialism and I was just watching your interview wherein you said that if 100 rupees is spent by

the customer of amul 85 rupees goes to the rural India the farmers of India and the rest 15% is what comes to amul and even then today you're doing a revenue of more than 80,000 crores and you're generating thousands of crores in profits so what is so special about the amul model well uh you answered a lot of questions while asking it and that actually is the beauty of this model so as you know the story of amul started way back in 1946 it started where the farmers were being exploited by the middleman and somebody

who had access to the market of Bombay as we are today currently is where uh they were not getting the right price of milk so these Farmers went to meet sadar wabh Patel India was in the middle of its freedom fight and and SAR Patel inspired these farmers of K District to come together and form a Cooperative so this is where the Genesis of amul where amul started the Genesis of amul and the Cooperative model started and we started with just two Village societies and 247 L of milk to three model Village Society District milk

processing Union and the state marketing Federation Village Society yeah at the Village level where all the farmers are the members and the owners The Village Society is own the district milk processing Union okay and the district milk processing unions of Gujarat own the state marketing Federation which is the Gujarat Cooperative milk marketing Federation okay okay so today we handle more than 310 lakh liters of milk every day we have 107 Dairy plants and I'm also happy to say that as per independent surveys and researches done amul has been ranked as the strongest food brand in

the world and also the strongest Dairy brand in the the world amul is known as a value for money brand because we have a mandate to grow the market we have a mandate to give the best quality products to the consumers so we don't necessarily charge the highest price for the products though we have a very very strong market share in every category you operate but the objective is not profiteering the objective is to grow the market make the products available affordable to grow the market and so we don't sell it the highest possible price

so you're buying it at the highest possible price not selling the finished product the highest possible ible price and work with very low margins very low cost very low overheads and that's how you keep both the ends of the spectrum happy producer on one side and consumer other side sir you talk like a capitalist and you act like a socialist which is very very interesting sir you spoke about the Cooperative model whereby you buy at the highest price and you sell to the customers at the lowest price whereas when it comes to the private companies

they do the complete opposite they buy at the lowest price and they sell at the highest price sir on paper had amul not existed this model doesn't make any sense at all because if a capitalist hears that an 80,000 CR company could be built by buying a product at the highest price and selling it at the lowest price it doesn't make any sense and more importantly it doesn't make any sense for a product like milk which anyways has a razor thin margin of anywhere between 3 to 5% on top of that it is extremely perishable

and within 4 days 4 hours within 4 hours milk will get spoiled yes so sir my question is when you're operating with such a situation with razor thin margin with a product that is so easily perishable you are obviously operating at the height of efficiency my question is how does a supply chain of amul work to make sure that a razor thin margin product which is highly perishable like milk can go from the farmers to the customers and that too with very high profitability The Profit let me address the first things first the profit is

actually in form of a prize you pay to the producer and that you to keep him compensated or her compensated to stay interested in this business okay so this is the core of any Cooperative any business and that's where the main essence of the business lies you should be in a position to pay the right price so can you please explain this okay so the farmers need to get the right price of milk to be paid because a farmer has to look after the cow feed the cow also look after his family because I mentioned

they're not just in business of daing they're in also we are in business of livelihood and development of the people so we have to continuously improve the social economic status of our members okay then we now look at how do we do it because that's again very very important as you rightly mentioned milk is very perishable and it can go bad within few hours of its collection if it's not chilled and processed in time now Gujarat is 18,000 villages we are in every single Village so from 18,600 Villages and practically 3 million we have 3.6

million Farmers but assume 3 million farmers are active every day the cow gives milk twice a day that's what you to the farmer brings in morning and evening so the collection happens twice a day across 18,600 Villages 3.6 million Farmers each time okay that comes to 31 million lers of milk or an average of 310 million L of milk 310 lakh liters of milk it can go up to 3 70 lakh liters of milk in the winter season come down slightly in the summer season that's how the milk production is cycle happens because of the

uh lactation cycle and the how the cows Cales get delivered depending on the time of the year now when you collect such a large volume of milk it has to be chilled also so and you to pay the farmer also based on the quality of the milk that you collect so every village Cooperative Society there is an electronic fat testing machine the farmer gets paid on the price of fat as far as the Buffalo milk is concerned you look at both fat and solids not fat for the cow milk so there's a mixed milk pricing

there's a fat-based pricing for the Buffalo milk there's an electronic weighing scale and a bulk milk cooler which Shields milk immediately to 4° cenra the moment it is collected bulk milk coolers yeah so there's a large steel tanks capacity of 2,000 to 5,000 L And depending upon the size of the society and the volume of milk they have milk is instantly cooled so you taken care of the first part which is Cooling most importantly weighing of the milk and the quality of the milk and that and and that decides the price which is to be

paid to the farmer which is transferred to the farmer's bank account depend on the cycle of payment which every milk society and the union has which is typically three times in a month on the 11th 21st and the last day of the month or something like that but coming to the supply chain part and that's where handling of such a large volume of milk 310 lakh liters of milk from such a large number of people people using the same technology platform so every single transaction that we do and I again repeat 3.6 million transactions twice

a day for the 31 million liters of milk is on a common software common software yeah so the fat data SF data is collected on the common software the price paid is on a common software each of the farmer gets an SMS every day every time which means twice a day you can see the same data on an app which is with the farmers and that app is a super app in which you can buy and sell cattle also to call a Veterinary doctor and register the treatment you can buy cattle feed and have a

transaction of your own so the apps that we use for banks our app for the farm is also similar so all the transactions are recorded they get an SMS which means there's a lot of trust and transparency in the system so to every day assume you come to supply milk and one day if you're not in town and if the small child comes and delivers the milk still the same transparency same Trust in the system is there because they are owning this Village Cooperative Society the farmers are not suppliers in our case the farmers are

the owners and that's how we created the structure to build in trust and transparency on a very very large scale got it then they are supplied across the country in the nature of the product it is so what we call is a distribution Highway milk butter milk the all are fresh products with a shelf life of 2 to 7 days so they move directly from the plant to the Distributors so 100 plants which pack milk and milk milk and Fresh Products will supply to the distributors in vicinity of 250 kilm of each of these plants

and we build that market and the distributor and supply chain is exclusive for Fresh Products then is the ambient distribution Highway which is basically all the products which are stocked and supplied at the room temperature so which is ghee which is milk powders which is Tetra pack milk which is beverages all sold in ambient through the warehouses 87 warehouses that we have and uh 15,000 distribut ERS and they sold to the million retail outlets same is chilled products at 0 to 4° Centigrade so we need to have refrigerated Vans cold storages and Distributors also need

to have cold storages and is supplied again to the same set of million outlets and then is the Frozen product Highway for ice creams at minus 20° C so you have ice cream plants which are more than 25 across the country you have a set of products and when we call a distribution Highway which means on a highway the highway is viable if the traffic is more so when we launch ice creams then we launch Frozen paneer then we launch the rice cheeses then we have the frozen pizzas then we have the french fries and

then we have the potato based snacks and the Alo patas and the samosas and so on which will and pizzas and all which will drive more traffic on the highway makes things viable for the distributor because the cost of transaction and the supply chain becomes very very low the Investments with the Distributors and that we make in the setting up def freezer cold storages at the cold stores at the distribution level at the retail level all the cost is divided across a large number of products and portfolio that we have the business becomes viable at

lower margins as compared to competitors and that this is a very very unique supply chain model with no other company anywhere in the country or globally operates at such a large scale such a large efficiency Bringing Down the cost of transactions increasing the value through put maximizing the returns not just for the brand but also the supply chain Partners got it so so there is fresh distribution Highway there is ambient distribution Highway and there is frozen product distribution Highway and chilled the fourth one is chilled at 0 to four the fourth one is chilled yeah

Frozen is minus 20 minus 20° so you mentioned highway highway highway and I understand that this is a term which represents something more than what it just says what exactly is this highway system that you consistently talk about what is the amul highway supply chain distribution system so this is what I mentioned that when you have to deliver more than 50 products across Ross different temperature sensitivity of handling like Fresh Products you cannot have a warehouse to stock it so milk has to move directly from the moment it is packed to the market twice a

day we have daily morning delivery supplies evening supplies also so that you are servicing the market continuously and fresh products are available to every customer in the vcinity of where the plants where we are marketing it then you make large number of products which are butter like cheese at chilled at 0 to 4° centigrade uh which have a shelf life of more than one year similarly milk powders and all which have again a shelf life of one year so there you need a very structured distribution so this is typical fmcg distribution that you can see

I mean you can compare it with others but here we are we have to be continuously supplying Fresh Products to Market in the sense everybody looks at the date of manufacturing of even a pack of soap you buy so obviously when you eat buy edible products you very conscious about it you to also have an ability to sell the entire range so of the 00 skus that we have or the packings that we have there are more than 650 which are in dry and shilled there are more than 250 which are in Frozen there are

more than 150 which are in fresh so you have to see that from Shri nagar in north or Le in the north to kanyakumari in the south from kach in the East to arunachal Pradesh in the East you need to have the entire range of amul or the maximum range of amul available again that to service to a large number of Distributors through these multiple branches but each of them not getting old in terms of age of stock and the freshness and the freshest a stock available to this so today we have this capability that

when we launch a new product within 15 days it would be available at each of the 87 branches and within 3 weeks it would be built to half more than half of the Distributors of the country so this is a very agile supply chain and that is what uh it gives in lot of strength to the brand and the ability to reach out in the what you call the freshest form across the country and the third of fourth of course is the Frozen Highway at minus 20° C and when we launch ice creams about 25

years back we created this highway from the scratch and today we are in the largest brand of ice cream selling three times the more volume than the number two brand which incidentally is being sold out now sir how is it that your system is so efficient because there are a lot of cooperatives which operate but because of inefficiency they shut down there are a lot of businesses that operate especially in the d2z space they go out of business simply because they they they're not able to get the margins that they thought they would get so

if you if I were to compare amul with the number two number three in the market what exactly are the supply chain strategies that amul deploy specifically to be able to deliver milk in such high quantities with such a fast speed the key to that a apart from the sourcing thing which I mentioned and the efficiency in sourcing by paying the highest price of the raw material is managing the product mix managing the product Mi product mix so a lot of effort goes into planning the production of the skus that we have okay and this

is a continuous interaction which the marketing Federation has with all the 18 District unions and the 100 plants which they operate and simultaneously in the market with the thousands of Distributors and the sales team that we have and the branch Network that we has so each one of them do the main job of planning of what is my sales plan which is converted into to the production plan and the Fresh Products are to be done on a very continuous and iterative basis okay because milk demand changes by the time of the day milk demand changes

by day of the week milk demand goes up dramatically During certain festivals and goes down also at times during Vacations so this is where you need to be continuously monitoring having a clue of what's happening again and you're not operating in isolation there are competition there are Market forces seasonality unpredictable weather changes uh for instance we constantly keep an eye on what's going to temperature tomorrow what's the weather going to be tomorrow next day 3 days because we know if there is a heat wave which is going to happen 2 3 days down the line

you need to ramp up the production of CD and buttermilk now the is D you can pack yesterday and immediately Supply in the market but for the buttermilk ice creams there is a lead time which is required okay so and but suddenly if there is a spike in demand if the brand is not there you lose out that opportunity so it's it's very very critical to be there and that's why production planning becomes very important sales planning becomes very important factoring in the factors of what leads to changes in demand and which product will spike

in demand correct which variant will spike in demand so which considers multiple factors like weather the festive season um the demand from the previous years and then based on that you decide okay now we're going to sell x l of milk because the demand predictability says so we're going to sell x l of Buttermilk for example if there is the temperature spikes automatically the demand for buttermilk increases so according to that you manage your stock in such a way that you forecast the demand and then you regulate your supply which helps you maximize your margins

absolutely right okay so a large chunk of everything that you say is on the basis of the fact that milk is considered to be white gold because milk gives you a treasure Trove of products sir can you please help me understand value addition because we studied value addition when we made a case study on a brand called milky mist and then we understood that milk is such a magical product and as you keep adding value to milk the cross margins keep on increasing so any entrepreneur wants to enter the space to build a product Out

of Milk needs to understand this value addition concept properly so sir can you please help me understand how do we go from milk to let's say ice cream or even further and how do the gross margins keep on increasing with each product let's start with milk okay uh I'll be disappointing to a few of them who are thinking that uh uh you can take only one component and make money out of milk okay milk is a very composite product let me start very simple way uh what is milk so if you look at a glass

of milk it's 85% is water of the balance this about say if you say average blend of cow and buffalo milk you can say assume there's a 6% fat and 9% which is solid not fat comprising of calcium vitamins minerals lactose and protein got it so any company which wants to get in has has to have a clue of it will handle this perishable product selling it as milk in a package form to my mind and as per our economics is the best thing to do selling a packet of milk is the best thing to

do yes because this is the single largest value you can add to milk because when you acquire a customer of milk it's very difficult to acquire and let me tell you to convert a person from lose to package and branded is very very difficult why sir that's the mindset very true every housewife every consumer is very logical and also right so it's very difficult to change anybody's habit and that to for a very basic but most important product like milk everybody drinks milk people know the go of milk and we swear by it so the

first challenge of a marketing comes in I mean it is easy to sell anyone a pack of ice cream let me tell you it's EAS to sell anybody buy a pack of butter or a cheese so to say it's not so easy but still it's easier than selling a milk because you are converting and challenging the basic Assumption of every housewife or every consumer okay which is true also because that's how the India's milk industry has been built and on trust and on lot of factors few things happened which is actually helping the conversion from

blose to package and branded one big differentiator happened during covid where people started realizing what you eat is very important in terms of quality of food in terms of consistency in terms of his taste and the physical parameters and the chemical parameters safety aspect become very important and of course availability and affordability is also there so this is where led to an IND induced a shift in the mindset of consumers in everything at least people said lose risk okay pane another category same in case of D same in case of char edil shift was happening

so this this is actually Tailwind for the sector because in India I'm I gave out numbers of largest prod producer of milk in the world amul the largest brand and so on but still in India organized sector is only 1/4 of the total production of milk which means 75% is unorganized so at India produces close to 232 million metric of milk in a year L handles lit so it is just 5% of the total milk my God okay and 1/4 of the total organized sector milk so which then obviously size and scale comes AB look

at the opportunity for the brand [Music] po% Shi actually my so liquid fat or s in case milk powder milk powder solids not fat which is basically milk SNF so you sell one3 profitably what happens to the remaining two HS so that is again a challenge so this is where people get trapped okay okay to9 or protein company now come back to the entrepreneur model massive is and half% otherwise is not tasty correct 200 g 20 G protein which is 10% protein milk which is super milk protein level of value addition because of Technology useand

protein concentrate so we got into this space also but which is lactose free we protein concentrate that we launch so 32 G which then wech protein D we launch high protein paneer high protein milkshakes and we have a portfolio of a good Brandy product but the success is that we are the largest manufacturer of cheese in the country largest manufacturer of paneer in the country to H consumer point of view so you I have extracted the best value out of milk which is why milk is called the white gold correct and we have to sensitize

and educate our customers and India is now a nation which is affluent which is growing awareness levels are pretty increasing audience audience each one of us require to consume 1 gram of protein per kg of body weight to you have to each one of us has to do the maths you have to do assume your weight is 60 National Institute of nutrition different stat we are deficient in our protein consumption we are not getting 1 gr is a I'm talking of this n says it is 83 but 1 gram is good enough so we are

deficient as a nation but again another research says that 70% of protein sold in India does not meet the standards correct quity doubtful so that's where amul comes in to fill up this trust deficiency quality gap price efficiency and a product range which is compatible to what we eat with our regular meal and and and this is what will give us a big strength because sourcing is inherent procurer available all was needed is the getting the right technology to process it and pack it liquid to liquid which means you're bringing down the cost improving the

efficiency improving The Taste improving the biod digestibility and making it acceptable so people are used to buy it uh in bulk and I'm serving it in bulk but with portion packs of 200 mL pack or 32 gam sessions and so on and a d2c approach helps because you know you start knowing who your customer is amul is a very big brand everybody in India knows amul but amul doesn't know every single customer so if be disadvantage be so if we develop our d2c competence then at least we'll know every single customer D we will also

avoid a Dison in the mind of the customer not consumer went to buy a protein lassy and he buys that lassy and tries it The Taste is obviously difference because it's so high in protein as compared to others and he will feel but the same par buys it online and keeps it with him and consumes one okay but at least matching the customer requirement preference so knowing every single customer to me marketing my next product will be very easy because all I need to send him a WhatsApp I know him his address and contact details

so I need to just inform me about new launch and see that we set up a delivery distribution system which is efficient because end of the day all the Ecom companies are basically good in career service so that is what do it now we have an advantage as I mentioned 87 Branch offices 13 zonal offices 87 plus 13 it's 100 ambient warehouses 100 Shield warehouses 100 Frozen warehouses 100 Dairy plants so technically I'll be able to service every single pin code every single customer closest to it at a very low cost using the technology which

is available and creating a portfolio and on my shop. amul I don't just sell protein all my new products I have more than 100 skus of Organics to Honey to peanut butter so many things which are not available in every single outlet can be sold through my shop. amul portal which is d2c next level we can play is direct to retailer so the technology part which I was telling is every single distributor sells every single amul product on a common software so sitting here right now I know exactly how many outlets yesterday bought 100 g

pack of amul but because it's all on the common software the same retailer has been given an app which is called amul card where retailer can directly place an order we can also go direct to retailer Warehouse is Ecom enabled delivery supply chain supply chain partner I can do d2r also correct and then comes the next level which is amul parlor and direct to Consumer so I have 20,000 Distributors I have 10,000 amul parlers okay so these are my points which have my maximum assortment of sqs s fresh product ice cream dairy products available so

all you need to do is again Ecom enabled today you are sitting here and you place an order on my app I can show you which of the outlets within 10 km vicinity of wherever we are we have which amul product now all the insta 5 minute 10 minute 15 minute delivery companies in India have maximum 600 700 what they call dark stores I have got 20,000 plus 10,000 visible stores or light bright stores or eliminated stores whatever you name want to give but these are all businesses in progress all need is an Ecom enab

now being online and Ecom is not new to us let me tell you we were among the first ones in India to set up a what we used to call cyber store9 forget mobile very interesting sir can we list down each of the most popular milk products and see what their gross margins look like so that if at all somebody is trying to find an opportunity they should know that this is the portfolio and if they have to pursue this portfolio they need to know what are the margins like so sir can we list down

from milk to D to butter to buttermilk okay because C of L of margin powder cheese yogurt ice cream compy successful so portfolio approach is very very important and we also don't get carried away by exceptional margin in any of the products got it because end of the day what the farmer looks at is the price of milk what the consumer looks at is the quality of the product and Brands like us we don't leverage our monopolistic position 80% market share still my price of butter is very very economical for a simple reason opport there

is a segment which has to buy and we are the largest brand of but future becomes very in got it so sir if I have to build a milk brand I have to start with a portfolio of products by default because if I do not start with the portfolio of products then there are three disadvantages that will have number one is the scale because if I'm shipping a packet of milk I will only ship packet of milk but if I'm doing a portfolio of products then I can ship milk butter ghee all of it in

the same truck eventually giving me decreased shipping cost number two is that if I only do milk and somebody else does milk ghee butter and every other thing they'll have extended margins as compared to me and thirdly the control over raw material goes down drastically if I do only cheese or butter and I do not do milk and like you said that's a huge opportunity for milk so saying that immediately start with milk and the moment you start with milk also pursue a portfolio of products sir amul is now entering two revolutions together one is

a protein Revolution and the other is d2z Revolution and like you mentioned you don't sell your protein products on Amazon you sell them exclusively in your own website through your own portal and the second is the protein Revolution and amul is also entering this Market especially when there is a trust deficit in the protein Market especially because of the recent report which mentioned that most of the proteins in the market are absolute crap and they don't meet the standards and let alone being good for the health of the consumer it is actually bad for the

consumer so sir firstly since you have now entered into this space especially to solve this trust deficit what exactly is wrong with the protein Market of India let's first look at the opportunity uh which this Market offers to us and people have started looking at the macros very clearly okay you look at fat you look at protein you look at cabs and you look at what's good for you and as I mentioned earlier each one of us needs to consume 1 gram of protein per kage of body weight every day it is not just for

the gym goers it is for everyone from a child to an adolescent to A working woman or a teenager to a senior citizen we all need it because protein is the ultimate building block yeah okay and this is where we need to consume good quality protein now protein comes in multiple forms what is also now being recognized that the BCAA what is the biological availability of amino acids in protein in dairy or milk protein or V protein is the highest okay so you look at credible source of a good quality way protein and this would

make a part of your daily habits to make up the protein Gap that you have it's not necessarily I mean you get protein in many of the foods that we eat including the milk that we drink so rest of the thing is a question of calibrating what you require and how you're going to get it most of the way protein in India today is imported and it is not imported as it is in form of the consumer pack it is imported in bulk and there are companies who do the job of mixing it with multiple

ingredients and uh delivering it to the customers in the best possible form it's good that somebody did the effort of creating a market for protein in India and we give credit to all these Brands but simultaneously uh and and what you ask what one should look at so if a brand is promising something which is mentioned on the pack declaration which is again registered under the food safety standards every it's every Brand's responsibility to give what it is promising to the customers and and that's a very simple way and ethical way of doing business but

research and Reports say that it's not true usually and there is a rampant case of uh substandard material available Market we'll not say what is the different levels of this because there is not a platform to do so but at times consumers would have felt short Change they did not get what they paid for there's also a market of spous products and that is an Easy Market because protein is a very expensive product good quality protein again has a thing if a redimed consumer pack is available sealed in their plant at a factory somewhere you

would at least know how that happened and who is responsible for it but if somebody's repacking it and sometimes not an official product also that means our customers are taken for a ride and that's where causes the trust deficit but once we realize that protein is good for us we need to find a way to do it now as I mentioned we realize that this is an opportunity for amul not just for the market side of it but also the sourcing side of it and as the largest manufacturer of cheese and paneer in the country

you get lot of way and that way if you are able to use technology to extract the protein and do it multiple times or five times 10 times 15 times what I just mentioned then you have a winner on hands a you have the best quality raw material you have the best processing technology you have a production and a product capability where you can sell a protein high protein ice cream two a high protein shake two a high protein milk two a high protein D to a high protein paner to even high protein paner parathas

a day will come when we will have protas yes a day will come we are working on such kind of products high protein kulchas high protein parathas so that and high protein uh even paneer Pui for that matter so what you do is a and the lasses and the buttermilks are also there so and chocolates and cookies are obviously logical extension so basically you don't need to have an additional supplement or in protein in for form of an extra supplement it is protein in form of food which makes everybody do the maths very easy and

again tasty way affordable quality affordable protein but of the highest quality so this is what the promise the brand wants to bring in on the table resource is not a constraint technology is not a constraint product mix is not a constraint Market KY as I mentioned direct to Consumer is currently the way forward which we are seeing because we have the entire control on the supply chain we have a warehouse and distribution Network across the country knowing a customer is always better because you are able to handle uh the consumer his requirements listen to his

voice monitor the entire supply chain ensure freshness in the entire supply chain and also at MRP sell the product and my mrps are much much lesser than the normal protein available market so this is where it helps and you are not Mercy at the third par it's not that uh we don't have working relationship with all the qcom and Ecom in the country amul is the largest selling brand for each one of them and we do enjoy a very good relationship with them but as we ramp up our supply chain understand the customers add more

products and try out more products to the customer we will soon go mainstream as in amul retail outlets will start stocking pan protein products very soon modern trade will start stocking paneer very soon you will also get it on qcom Ecom sites but at the moment we want to leverage our own strength of direct to Consumer Builder shop. amu.com Channel and for the d2c part for the d2r part and um qcom part also sooner or later to U be a brand which is in direct touch with its consumers got it amul is one of the

first Brands to Launch high protein lussy high protein buttermilk high protein milk and so many other things so my question is why didn't any other brand do this before because like you mentioned if protein is consumed in the form of the foods that we anyways consume it is pretty easy and the market doesn't have to be created it is already existing it's just that now instead of buying a pack of D people will buy a pack of high protein like it's so intuitive but am but why sir it's difficult for me to comment on any

other brand strategy but I mentioned this entire Genesis of how we walked in uh thought about this how we how much time it took for us to execute it to crack the right process of converting the raw material that we have and let's face it not many of we we don't have many large brands of the cheese and paneer in the country many of them are there but they all small and Scattered okay and then it requires lot of vision and also the techn competence to handle this liquid way and convert into variety of product

so now amul is also getting into organic farming before that sir I just want to cover one more aspect you also mentioned amul parlos and I want to understand the economics behind buying an amul franchise sir if I have to buy an amul franchisee how much do I have to invest in how much return can I expect out of it this is a very good question because most companies charge their franchises for the turnover they do for the brand m we do exactly the opposite okay we will pay you extra margins at the end of

every month for the business that you do with us can you explain this with an example sir yes so the brand deposit we take is say 25 30,000 rupees that's it that's it and if you have a shop you can be an amul franchise franchisee tomorrow morning tomorrow morning yes and the brand deposit we take is not taken for the sake of it it's a refundable deposit but we would invest into giving the signage and rest of the things we will tie you up with the vendors who will give you the uh say de freezers

and vzy coolers and the rest of the stuff at a very uh low cost as compared to the market we will help you do the shop launch the shop and provide you range of 300 400 500 skus of amul products milk supplied every day twice a day two butter cheese supplied two to three times a week to ice cream Supply two to three times a week and on top of it whatever Revenue you generate and whatever business transaction we do with us end of every month one 1 and a half 2% 3% will be credited

to your bank account directly so I don't need to have any working capital no it's your money which you rotate you will the Distributors of amul will supply to you and let me tell you another fun fact the listed retailer in the country the largest one does a business of roughly 30,000 rupees per square feet of the area they operate in they have 250 300 stores very large listed company is it dmart sir yeah okay we have stores which do a business of more than three lakh rupees per square feet what yeah so if you

do a turnover of 30 40,000 rupees a day which my average paror would do in an area of 150 to 200 square ft you can do the maths and you can do multiple times business in a small Shop with a very high rotation and a velocity because starting from milk at 6:00 in the morning to ice cream till midnight you will have a steady footfall of customers and a product portfolio which is pretty big new products continuously coming in parlor being treated as launchpads the reason is very simple I will have to compete with multiple

brands of products when I'm talking to a general trade or a retailer or modern trade these are all dedicated parlor and obviously without competition I'm able to launch new products consumers also come with a predefined mindset parlor Gets Ready business and all the servicing is done and on top of it you get extra margin and the day extra margin sir extra margin we have to pay for your loyalty okay as a shopkeeper you have decided to not handle any other product you're loyal to me as an amul franchise you have the amul brand and you

are involved into my business and and for me the cost of doing business with you is slightly less than rest of the stuff we compensate our parlers with extra margin and that is credited to your bank account interesting so a assured business 365 days be it covid be it flood be it Cyclone amul supply chain will work uninterrupted amul parlor will be allowed to be open irrespective of there is a riot in the country or that area or there is a covid lockdown so the assured business is there assured supply chain is there and of

course consumer loyalty is also there got it so that's how we have 10,000 amul parlers the family is growing we have a wide range of product categories also parlor specific to certain products also like ice cream parlor of 200000 are dedicated ice cream parlors which are again high value high margin items where you sell an assortment of ice creams and Shakes and different kind of stuff to a premium ice Lounge also where we sell the best flavor of every country of the world and multiple locations you have Railway stations you have bus stops you have

high streets you have regular markets uh you have complexes Multiplex Mand Temple complexes uh office complexes infos City types of uh areas and complexes so whever you have a space you will have a market so sir do you help the franchise in scouting for a good location to set up the franchise both ways both franchise also comes with a location we also have a requirement okay so every local team is in constant touch with all the people who are interested in that kind of business many times we reach out with mean reach out to the

market showing our expression of interest for amul parlor in different places uh where we know the market is under serviced and we need to strengthen our presence so it's a two-way street okay so is it done through your website your website social media also print ads also multiple forms got it so if I have to apply for an amul franchise I can just go to just go to am.com and in The Parlor uh section you just log in your inquiry we have a dedicated call Center for getting such inquiries and somebody will reach out to

you and close the business and as I can say instantly I mean it takes very little time to get on board with amul perfect so I'll just ask you a few numbers and this could be completely subjective based on the location so if I have to open up a 150 to 200 sare ft amul franchise what is the investment approximate investment that I would require maximum lak rup maximum lak rup this is exclusive off the rent uh rent of the shop okay and you to do spend little bit on Interiors okay uh basically uh the

signage will be done by us you have to do the racking systems because you have to keep 200 300 EXC you have to buy a VZ cooler you have to buy a de freezer so depending on this Market opportunity will tell you whether you one milk cooler is okay or bottle cooler is okay one visic cooler is okay or two you requireed to one def freeer is okay to require but one one and a half lakh rupees investment you do require so one one and a half lakh rupes includes all the coolers and everything yes

yes yes okay and then apart from that I have to also spend on the interior what is the approximate cost for a 150 200t and we have made templates available to do this and again we you and if you have a shop it's all the more good otherwise you to find a place which is rental is reasonable but the returns are definitely there and that's why we have such a large number of franchise Partners working with us and uh growing their business got it so the next question question that I have is about the supply

chain of the franchise so I was just speaking to WAN Modi who's the son of the founder of mana and he told me something very interesting manver has only 3% dead stock only 3% goes to waste and the reason why the wastage is so less is because they're able to predict the demand of a CA pin code by pin code even before the ca gets sold so they know exactly which size to send which design to send which color to send and when to send it even before the the store understands that the sales could

Spike that way they avoid two things one is they avoid human errors and number two is they also avoid lack of availability simply because it is dependent on the store manager so the store manager doesn't have to keep track of supply and demand they can just do it simply through their data analytic software so just like this when it comes to my products because milk is such a vast portfolio when it comes to ordering milk products do I have to predict the demand as a store owner or will amul tell me by default that these

are the skus that you need to have and in such quantities or how does it work sir uh it is two ways because uh as I mentioned demand keeps changing depending upon different factors which we just discussed but typically a show shop owner with I mean the first initial handh holding has to be done by us for next one to two months we'll have to tell and see the momentum and then based on that keep ordering okay it's not that milk is ever going to get out of stock so big guy extra and similarly the

distributor is half a Kil 1 kilm 2 kally happens during times you will run short but then there's always supply chain which is backing up 10 minute delivery to the retail to the retail because that's how Distributors typically operate in our country okay so the risk of supply is taken care of so it's not a issue now and you are continuously linked with three of my Distributors ice cream distributor the dairy product distributor and the milk distributor just a second sir ice cream distributor Dairy distributor and the fresh product distributor the milk distributor okay got

it okay so that that part is taken care of and that's and again so manys I mean every Branch as I mentioned we have say 650 dry and ambient skus every Branch will typically have 400 of that distributor have more than 300 of that and a good shop and I can show you shops in Delhi which have 300 to 350 amul SKS in an area of 200 S ft in an area of 200 ft yes yes yes that is incredible sir yes yes that exactly because that's how we've been able to uh see that the

pipeline and of the highways eventually leading to funneling to a parlor are able to be created normal shopkeeper 50 60 80 out is the best way to go so what is the difference between an amul store and amul Par amul paror normal shopkeeper I'm comparing the both okay of any I'm talking of say Ram kirana store which is right below you to an amul paror which is say close to you this is 50 200 50 skus this is 300 skus got it and then obviously it's an amul brand signage identity and a customer for amul

will'll say this is my first destination to go got it got so this is this is the moment and pop business in India the general trade is never going to go out of fashion irrespective whatever people say because you need to be shopping in the vincinity of where you are companies are tuned to supply to like I said 1 million Outlets directly serviced across the country such a large number of Distributors working at very thin margins but very high efficiencies m shopkeepers getting the facility of delivery of stocks right at their doorstep order taking by

the salesmen of the multiple companies at their doorstep multiple options available for them to order also so and and again we have large number of people depending upon retailing for the livelihood and companies like us and a million Outlets across the country would be a very very uh thing I will also tell a fun fact here that when FDI in India FDI in retail was to come in India amul was the only organization which said very clearly we don't need FDI and Retail because it's not good okay for the farmers it's not good also for

the consumers okay so the one3 share of the two3 share of the consumers rupe logic and 13 in globally was presented in the parliament by the current ruling party was in opposition in 2012 13 and there was a big debate in the parliament the stats which I just mentioned were quoted there then the government had to rethink and we said that there is enough of capital in India to set up modern retail and you don't need the foreign capital and foreign Brands to come in because end of the day what they do is create their

own store brands H sir can you just give me an example understand so that's why we in anticipation of that threat we actually got into this parlor space Oh there was no reason for doing that example I understood what you just told me so so you are a foreign brand of a ret okay you can call it Metro Cash and Carry you can call it but assume these are Big Box foreign retailers okay they set up shops and you know how they work they would dominate the entire Market know every single customer they can undercut

do deep discounting and build a market for themselves now if I go to sell to them as amul they will currently buy but then they will dictate trade terms as I mentioned one of the things we do is we don't sell on credit Cash and Carry they will say no no we have never so bought on cash anywhere in the world you will have to sell or on credit sir small Nuance credit versus it's logical because cow has to be fed first before you get milk out having said that okay which means you are not

in you are always in business of selling and never wasting time on getting your dues back got it but these stores will have a dicted willing I mean today if you have a carfor India which is say 3,000 stores they will say then I go to them to sell they will say no I'll give you order for 30,000 boxes of butter but you give me 30 days Credit Now the order size is tempting but s payment recovery window is longer correct so that's where you get squeezed in your margins get squeezed in and tomorrow one

fine day they can say okay then they know this much butter is selling they will do a contract packing have the brand of butter in the market they will launch their own their own brand of butter so we will be left high and dry okay what happens in the process the farmer owned organization which is Our People Like Us will get squeezed and practically thrown out of business because this is how big box retailers and you can name the Walmarts and I can say them because they also not very big now in India this is

how they have exploited all the manufacturers got it they have volumes but then they have the ability to squeeze also so we 20 years back we got into this parlor model I said then we said that it's okay if these guys come in also I mean you can't stop anybody from entering our country and investing into it and do what he wants but we should have a fallback mechanism of our own parlor where we can say okay Mr XYZ store if you don't want to buy our products it's fine with you thank you so much

good to know you we will have amul paress and customers can come and buy the amul products then we'll be atbar in retailing so is that also the reason why you don't sell on Amazon as much as you sell from your own website we we have been selling on Amazon my chocolates dark chocolates in the 99 dark person dark chocolates ever since launch have been on the bestseller category but whether we like or not these guys can squeeze you H there is a case with a company and I don't want to name it here in

public they blocked our product 15 days before the big season okay they said there is one complaint with your product not telling us what the complaint is who the customer is or this but because of that we are stopping and blocking your thing now it's amul and for us selling chocolate on that platform is not life and death situation but imagine if you prepared kept your inent entry ready for the peak season and that company closes your channel 15 days before it yes and we had to fight for a month to understand then they said

no no it's nothing like that it was not a big thing let's get onto our business so did they launch their own product no they have not launched because not too difficult it's too difficult to launch a product at my price my quality and my standards and my supply chain as well but but this is what is a reality and and I am on record I can tell with confidence that these are all glorified Korean companies glorified glorified courier companies cier companies okay they know customers they have an insight into it they're very sharp in

mining it okay but end of the day it is to their benefit and never at the benefit of the seller got it and the seller is always at the risk of their own brand coming into it it's okay am is on this side so it's okay to withstand as I mentioned we have to be in atar in retail atar in direct to Consumer space but we we we should know what good things they bring on the table we should also know what are the pitfalls and this is what every entrepreneur also should be very clear

that what looks Rosy and tempting can also be uh a thing which will danger hurt understood sir sir now I want to go back to the franchise thing that you just mentioned within amul store the franchise owner could expect a turnover of 30,000 rupees per day which accounts to 9 lakh rupees per month so sir out of this 9 lakh rupees what are the margins that the franchise owner can expect it's it is in proportion of the products that you sell assume 50% Fresh Products so it's a safe mix of at least average of 10%

margin uh that you can get okay and after taking care of the cost of basically the rentals and then you get extra also uh as as a form of uh the extra margin we pay as a part of the Loyalty Association that we have uh you can make a decent sum of 50 70,000 rupees got it with an investment of just 1.5 L rupees you can expect to make 50 to 70,000 rupees per month this is incredible sir and this also will have extra margins as you do more Revenue got it understood sir sir um

I want to come back to this uh capitalism versus coroporate Revolution so you mentioned that when it comes to Big retailers if foreign retailers come to India they have the power to give you great scale at the same time once you achieve that great scale and they have the data that you can sell let's say 50,000 boxes of butter they can launch their own butter product and they can just cut you off and you just mentioned an example of an e-commerce player just cutting you off 15 days before the big season sir and this is

what brings me to another ideology that amul stands by I think you said this on record that amul will never go IPO why is that sir it's basically contradictory to our business model can you explain how sir uh what do you look at in a when you are investing somewhere the stocks prices to goow prices what are the prices dependent on profits okay so there's a multiplier effect into profit and that's what you calculate the multipul and based on that the stock Mark the market gives a value to the stock Market thinks is a good

price for this category comparing with benchmarks peers and so and so forth and arrives at a price okay how do we can measure our performance our performance is measured on the price we pay to the farmer as I mentioned so you to pay the highest price for to them and they measure you based on the value you add and the returns you give to them simple market for instance as an investor either raw material because our what we do is not what any business school teaches you to do so it's always an inherently contradictory logic

and for a brand as I mentioned impossible and then that's not a game you want to play because end of the day what is your objective is to serve the country and for the benefit of large number of people India lar retail company as per the public data known I mean individual retail investors are lakh okay so largest listed company in India 31 lakh individual investors retail investors I have got 36 lakh farmers who have invested into 10 rupe share of amul and they are owners of the amul to we have to worry about the

larger Mass because for them it's livelihood it and as a model also we don't need to I mean why do we want to go in the market we have theability to P there are several funds and schemes available also which support infrastructure development in the country okay uh if you want to fund into ice creams all this and we there's a pla scheme of the government also not just for amul but for every single uh business in the country so that is where we don't need so to say capital for growth but let me tell

you also we this India we are the largest last year and fmcg companies investment pledge to Total 33,000 CR investment pledge last year amul committed and signed M worth 11,500 cror so onethird of the total investment in food in India is done by single largest brand so that we ready as I mention to grow the market so that way I mean we don't need money from outside what we need is the trust of the consumer what we need is a trust of the producer and we've said this earlier also that our currenc is not milk

our currency is trust and Trust of the producer Trust of the consumer if we have this both important things with us then the brand has can grow to any size and scale so you're saying that you're cash Rich your investors are not investors they actually farmers and you believe in Farmer value and not investor value which means sometimes you might have to squeeze into your profits just to give more value to the farmers which goes completely opposite to what a typical public listed company would do understood sir sir I also found another interesting stat which

says that Au invests about 10% of its Revenue into marketing and you invest not five not three but 1% of your Revenue into marketing actually less than 1 person sir how is this even possible that you're spending so less and yet you're growing so fast so uh we have two inherent advantages a single brand common brand amul B a legacy and certain consistency in communication that we have built in is helping us leverage and get more with very less bands got it sir I understood both one brand and Legacy can you please help me understand

what is so special about amul's communication strategy yeah so Communications is way to connect with the consumer in the right context with consistency and as low a cost as possible context consistency cost cost okay now these are The Sweet Spot in between is very difficult to get consistency topic advertising Campa girl 1965 2025 you can calculate the age but don't mention it three to four words one simple line in a very humorous tongue and cheeky style and if I ask you number of billboards or Holdings where the campaign started is actually holding campaign world's longest

running campaign on Holdings guess India 100 yes so so what do you mean 100 sir there are only 100 and the correct number if my team can tell me and correct me we say 98 Billboards across India which carry the amul topical every week just 98 yes sir then how do you end up creating such a big buzz so this is the power of consistency in communication this it's not just the Billboards now because we got into the space of social media got it so it is there so moment it's released it's on Twitter it's

on Instagram in Facebook so the each you can say multiplies several times we we also take it in 30 35 newspapers every week and these newspapers have a very good combined circulation go it so that way the topical is visible to large number of people your memory is that whenever you're reading it in a newspaper or seeing it on your feed or seeing it on the holding the feeling is that you watch an amul topical and it is larger than life than the 8 square cm it appears and people often look for the amul topical

feeling because the topical creative has not changed the style of messaging has not changed and in if I may quote Mr amitab batan he says that amul topical was equivalent to trending before Twitter was invented absolutely so if a man of his wisdom can understand and appreciate it this so this is what is a very small piece of creative for anybody and again that the agency can relase a creative without approval of the client which is another unique part of it okay any incident happening the agency makes a point of view and the butter talks

about it as a mood of the nation it is without the client's approval so this is this is where we and in earlier days there will be one hoding a month two hings a month now it's every alternate day there is one creative which largely goes in social media but it's an amul commentary on it and then the way it goes viral people share with it and all that the reach is immense conversations are immense so you are a part of the conversation yes and you have one brand so when amul brand gets marketed it's

every product in your portfolio that get that gets benefited it is topical which is why it has very high virality and it is because it's topical and it is amul the brand which is doing it which is completely unrelated to what could be happening that is the reason why you often stay top of the mind which again creates conversations as a result people just tend to exaggerate the presence of Amo across the country even though you just have 98 Billboards yes that is that is incredible so the secret to amul's marketing lies in the butter

girl campaign it is one of the major pillars of that communication second we don't change our communication lines what do you mean by that s utterly butterly delicious has been there since 60s we not it may be grammatically wrong so we've not corrected it we've not improved it we've not changed it amul The Taste of India we coined this in 1994 is going on amul real milk real ice cream the slogan stays with us since we launched the brand in 96 since 2000 amul P India so we keep nourishing the creative refreshing the creative but

not changing the lines got it so this is where the message for the communicators is that times may change so you upgrade refresh but you don't need to change it or reinvent it because otherwise every brandas would like to leave his mark on the the brand got it okay but here we are very very clear that consistency in communication is very important okay you keep changing and upgrading the creatives in changing consumer changing product mix Changing Times changing Market changing media it's all the fine but you should always stick to the basics because you have

to be in lives of the consumer without being intrusive consumer has to be receptive of it and be feeling to talk about it share it without even thinking that this is a brand plug they're doing and which brand in the world would have every single president of every single country every prime minister of the country every celebrity appearing on not appearing in not on it free of cost this is the power of a car because you you are a National Asset correct no topical also gives a lot of visibility to everything very interesting so one

thing that I'm deeply curious about is where did the amul butal campaign come from from how was the idea born so this was a typical challenge they faced our agency and amul team faced way back in 1960s 1960s 1960s yes uh budgets were very scarce and again how do you advertise a brand of a butter which is Indian butter Indian name amul 1960s obiously I remember having seen an ad in our Guard book 1958 campign and ask for amul by name today amul is synonymous to butter but print creative ask for by name we were

urging the customers so there was and print see media was not there in the country there was no television print was there but few and far between very limited and here the brand had to create a mark For Itself by being there but not talking about itself okay because consumers were not receptive to it okay so consumers were not interested in amul the salesman am the salesman and am the product so to say but we had to still be there because Market create so that's where the agency and Mr Sylvester came up with this concept

of a mopet talking about an event and easiest and the cheapest medium available was a holding or a billboard okay so hand painting till '90s early 2000 hand painting cre you can't have 200 colors or 26 color palette as we know simple colors use Simple lines simple sketch or it should not take one month to paint a Hing which is Chang in one month so interesting lines then they started expanding the geography and and sending out the material idy painters or ERS hours so this CCC or the Central and again this girl talks about the

mood of the nation she is happy at times she's angry at times she's sad at times but she is never malicious agency is full freedom to design what topic what to pick up and how to go about doing understood so amul single brand Legacy and communication that is the Core Essence of your marketing that's perhaps the secret source of your marketing strategy which helps you spend 10 times lesser as compared to competing Brands and yet achieve more Buzz than what they do very interesting sir so the one question that I had and you are the

epitome of sustainable income for farmers and U the prime ministers often insisted that he wants to double the income of farmers and that will only happen when Farmers deploy revolutionary techniques they increase their efficiency and more importantly they should be aware of what's happening in the market and when entities like yourself exist in this market now you've just entered organic space and you've also started procuring pulses and other plant products it's only when entities like yourself exist in the market that farmers can actually make more money at the same time the consumers will not have

to pay a lot and here's where the government is actually battling with the MSP debate whereby the government says that providing MSP is absolutely unviable because if we do that then either we'll have to procure a lot of our crops which will result into wastage because we don't have warehouses number two is if we provide a fixed price then there could be a demand Supply mismatch because the farmers could just produce unlimited number of crops which we will have to procure because they'll be entitled to it and thirdly once this happens then the prices will

automatically drop down because the Traders will have a lot of supply and no demand at all so eventually either the Garment gets crushed in between or the food gets wasted or because of over Supply eventually in the long run the farmers get harmed due to the economics of the entire market so sir how do you think we should tackle this problem and maintain a fine balance like I just mentioned there is capitalism and there is socialism and you fall exactly in between and amul has mastered the art of optimizing for both profits and people sir

how would you go about solving this problem of MSP there are two Dimensions to it uh and I I'm saying it with that conviction that milk being the largest agricultural crop has demonstrated that you can increase product production and still keep paying a good price of milk okay so India's milk production was per capita only 100 G per person at the time of Independence today it is close to 500 G per person and in the matter of last 70 years the population also gone up 2 and a half to three times so production has increased

population has increased per capita incomes has increased and prices of other Co Commodities when they in when the production increases at a rapid Pace the price will drop okay okay so you have seen that happening multiple times milk is one product because of the intervention of the cooperatives and the so organized sector through the cooperatives The Producers don't suffer too much of price dropping by 50% in one year and shooting up by 50% in one year and same is the case of consumer you draw the line of inflation of the country and the food prices

and the daily prices you will see that there is a very very good balance of both the things which means you've been able to keep cons cons on your side you've also been able to keep producers on your side and there is a consistency in the pattern and a predictability in the pattern of milk prices and demand and Supply in the country and you never ever run short of milk and you take last 20 30 years there's never been a situation where we've been dying milk demand double production which you have seen in many of

the agriculture crops and particularly cash crops so this is this is where milk and the organized sector of a most perishable Agricultural Product to the most the largest Agricultural Product okay okay so that is one part second because of this increase or decrease in prices of it and excessive dependence on MSP and actually uh shift in consumer habits see when you give products like rice or wheat or these are basically the Staples which car you are doing a contradiction to this entire thing and then that will end up in stock piles which will rot which

will further doriate the financial position of the government at the cost of giving higher incomes to the farmer so this is where you need to make a shift towards understanding the shift in consumer Behavior inducing a shift in the production of crops aligning your production and the supplies perhaps with the global demand and opportunity also okay so you need to create an I I'll talk about the things which are currently uh not many people know about it but we as cooperatives are involved into it okay okay okay and how do you create a market for

a product or an Agricultural Product which is required globally but not produced locally or produced locally but only sold locally and if you have create a market globally okay very difficult to say but again I'm telling you with conviction that amul today is here because we got Market access to the city of Bombay this is why the farmers went on strike in uh uh Gujarat in Anand to get access to the market of Bombay and that's how today amul is a national brand and eventually soon trying to be a global brand but benefit or agriculture

products okay branded obviously all the benefits come to the farmer because you consumers are on this side producers on this side okay Market means you have an assurance and visibility okay agriculture farmers at the mercy of the government agencies who buy it they will supply it wherever it's required but again you work season to season price to pricee and you no idea of doing and there is no data collection data is there because data of what is produced in what land which part is all there and what is purchased also data is there payment is

not processed no sir no it's not processed so it's agriculture Commodities we are talking about dealing it okay but you have to come out of this then there we see two problems or eventually opportunities consum because that's what otherwise creates inflation headline so tomato on potatoes are top of the minds which are basically cash crops and vegetables and then you have the long other products also AB once the government realized that there are several problems of the country which private sector cannot solve or the government cannot solve they set up a new Ministry of cooperation

at the central level okay Ministry of cooperation our Union minister of Home Amit Shah who is also a man of cooperatives understood how cooperatives work but because from Gujarat experience and prime minister himself is very keen on seeing that the problems of the farmers should be solved on a scale at long term so having said that Cooperative though is a State subject a central Ministry of cooperation tried to put things together for cooperatives across the country and with an aim and ambition to see that every farmer or every farmer group should be a member of

a cooperative and how do we then solve many of the problems which you just mentioned okay problem Market access ncdc National Consumers Cooperative Federation or between five of us seven of us we have incubated three new multi cooperatives first I'll give you the names and then I'll talk about the role one is National Cooperative exports limited one is National Cooperative Organics limited Ander or ncdc so just like you Market milk yes all yes all agricultural products of all cooperatives across the country we need to find a market so now I draw a parallel amul with

just two Villages Market access to Bombay becomes 80,000 CR here we are talking of all India thousands of lacks of farmers thousands of cooperatives already coopertive so you're creating a market at scale within organizations whose core job is to export agriculture products okay which is two-way street let me compare so which means you are a rationalizing the production of what is Surplus into what is required demanded and drawing this balance and then eventually giving the right of Market access to a farmer Centric organization owned by these farmers and he also passing on a share of

surplus of what you make just price difference and you won is the main promoter of that export Cooperative in less than one year we have exported more than 15 lakh Tons of various Commodities be it rice be it wheat sugar onions to more than 25 countries and a turnover of more than 5,000 CR rupees yeah and the order book is also of another 5,000 CR Rupees to imagine up understanding say let's take this with an example amul will soon enough in fact amul has already started procuring products like rice and wheat and amul has started

Distributing this across the world wherever there is very high demand by doing heavy duty research and just like that tomorrow if there is a demand for a particular type of Dal AMU will come back to India tell its Farmers that see there is going to be very high demand for Dal you grow Dal and we will sell it for you just like you sell milk across the country so just like you build an 80,000 CR Empire by selling milk and milk products you've already built a 5,000 CR Empire by selling 15 lakh Tons of goods

across 25 countries by following the Cooperative model just like you did for milk correct is that correct correct so amul is not the right word for this business because it's the national Cooperative export ncel is the right word one amul is one of the five promoters of it but Chief promoter so we've been so far and doing that responsibility but team of these five cooperatives amul IFCO Krypto ncdc nafed they are on the board and that NCL is doing this job sir from what I've understood what this essentially means is that um turning something into

a legal right especially for something as good as something so critical as MSP makes sense in theory because it will immediately help the farmers but you're saying that we have to build a more sustainable pricing model so that we can marry demand and Supply in a very sustainable manner so that we can we can turn farming into a sustainable profession for the farmers at the same time not overflow the market with too many crops and look for a demand internationally or domestically so that we cannot just procure these crops and waste them using lack of

Warehouse facilities we should procure these crops and we should Supply them to those areas where the demand is high where they can get the right price this could be areas like Middle East and domestically also so that they can generate a sustainable model so that the government doesn't have to intervene they don't have to put in their cash and cooperatives like amul can actually help them build the supply chain which you said is already in progress does that some of the answer sir absolutely sir thank you so much for your time it's been two and

a half hours since we've been talking and I just have acquired a wealth of wisdom from you and this is a side of amul that perhaps nobody knows in fact I don't think this is out there on the internet but I've had the privilege to understand this side of the legendary amul brand thank you so much sir this means a lot I'll quickly summarize everything that you've mentioned and if there's anything that I'm saying wrong or if I'm leaving something incomplete you can just add to it what I've understood is that amul is based on

a three stage model one is the village Society District processing unit and the state union all of them actually form the foundation of amul's supply chain you procure about um 310 lakh L of milk and um you have 107 Dairy plants with 20,000 Distributors and this number is so high that uh no e-commerce player or quick Commerce player has as many warehouses as you do which is which essentially means that you're building your own worldclass supply chain and you have an Amazon within amul itself and then it also says that your Mo lies in the

fact that you able to procure raw material at the highest cost and you're able to sell your finished goods at the lowest cost which is completely the opposite of what the private play do because of it which you end up passing on maximum benefit to the farmers at the same time you end up giving the products to your customers at the lowest cost which essentially dictates the price in the entire Indian market and all of this is formed on the basis of efficiency which is where your supply chain comes into play and then you spoke

about your supply chain whereby you procure milk from 18,600 Villages and 3 million Farmers you do this two times a day morning and evening and you procure both Buffalo milk as well as cow milk and the entire standardization is done through an electronic system whereby you look for the percentage of fat which is the quality metric for Buffalo milk and then you look for SNF which is solids not fat and the fat percentage for cow milk which eventually helps you determine the quality of the milk so your raw material is high quality on the basis

of the quality and quantity that you procure from the farmers you pay the farmers and this payment is done immediately so you don't operate on credit you operate on cash and carry because this payment happens on 11th 21st and the end of the month three times a month which essentially gives Farmers enough cash flow to be able to sustain their livelihood and this is again completely opposite of what the big Giants do in foreign countries whereby they extract maximum margins out of the farmers they keep the capital with themselves which eventually creates a cash crunch

for the farmers and you do this not because it makes business sense but because you are in the business of livelihood and not in the business of milk now if I were to throw light on your supply chain from the farmers after the quality check is done it goes to the bulk milk Chiller and all of these data points are registered on your app because of which amul is able to clearly understand how much milk is being procured and then it goes onto the dairy plant and then fresh milk actually forms 50% of your business

the rest of it is other products and then I saw that you have got four highways of supply chain one is the ambient High way then you have fresh distribution Highway then you've got frozen and then you've got chilled and Frozen is- 20° chilled is 0 to 4° Fresh is your milk and then when it comes to ambient it is nothing but products that can be preserved in warehouses and can be sold then we have the efficiency the foundation of your efficiency it primarily depends on your predictability of demand and you mentioned a few examples

where you said that if the temperature goes up the demand for thei and buttermilk go goes up so amul has a data analytic system which is so strong that by looking at the weather and several other factors like festive season like the month like the date and the previous data You can predict the demand for each one of your 50 to 100 odd products in such a way that you can decide what needs to be done with the milk whether the milk needs to be given out in the market in the form of milk or

it needs to be turned into ice cream or butter or any of the 50 products that you have which eventually helps you maintain a very large sqo of products at the same time it helps you maintain profitability at the same time it helps you sustain the livelihood of the farmers then you also gave us some wisdom bits on how an entrepreneur is supposed to enter the milk industry and what you told me is that it would be very stupid to enter into to just enter with just one product in the market you have to enter

with a portfolio of products because milk is 85% water 6% is fat and 9% is SNF which forms protein lactose your calcium minerals and everything else which is why it is important that you use your ra material to process it into multiple products such that you have very strong control over raw material number two once you achieve economies of scale merely because of the diversity in your portfolio you'll be able to decrease of shipping cost which will help you get more margins and most importantly when when you have multiple products in your portfolio you're not

dependent or over dependent on just one product and if the demand Falls it's not like you're going out of business and then you mentioned that there is a very huge opportun in the milk business primarily because today milk business is a 60,000 CR Market is that correct sir 60 CR liters per 60 CR liter market and we are adding 5% every year which essentially comes down to 3 CR liters per year per day per day which is essentially the capacity of amul so a amul the milk Market is huge and there is a very big

opportunity and here you mentioned a slight nuance and there's a tectonic shift in the market in terms of how we going from unorganized milk to organized milk preo and postco preo this growth was 1 to 2% but now it has doubled to 4 to 5% which means if you can convince a customer to go from his uh local dudwala to packed milk you're essentially creating you're essentially tapping onto a huge Market opportunity which is being created as we speak then we spoke about what EX ly is the entrepreneur supposed to do before they even start

selling products and here you mentioned that it's not just the pro material that you're procuring from The Producers which are your Farmers you also have to take care of other requirements that they might have whereby you will have to provide them access to Veterinary Services you will have to give them access to cattle feed you will have to then Market the products along with providing these things so that you can maintain a consistent demand as well as secure your supply and here's where the farmer requirement comes in comes in as a very important factor and

while doing so you will also have to decide which Highway do you want to take do you want to take the frozen food Highway the chilled food Highway the fresh food highway or the ambient food Highway and over here you mentioned that there are four primary stakeholders which are essentially embedded into the logo of amul which are farmers e experts or processors then you have your supply chain managers and then you have your consumers you have to cater to all these four stakeholders which amul mentioned way back in its logo even before any business school

could put it into words only then you'll be able to survive in this market if you don't then it's a then it's a trap then we spoke about protein sir and you mentioned that the primary Gap in the market or the primary the primary mistake that most protein Brands make is that they don't manufacture their own product they wh label products by importing products from abroad which essentially means that they're not taking accountability of the product that they manufacture because of which there are certain ingredients in the protein products that we have in the market

which eventually causes problems to the customers which is what came out in the media then we spoke about your marketing budget like I mentioned amul spends 1% whereas H spends 10% of its Revenue into marketing and you mentioned that the reason why amul is able to do this is because everything comes under one brand which is amul you have a very strong Legacy which is a nation Builder Legacy and then the communication is both consistent it is cost-efficient and more importantly the context is very well set one example of that is your butter girl campaign

whereby you have a central continuity character which is the girl herself and then you have topical advertising and because of topical advertising you're able to stay on top of the mind of all the consumers and because you have a single brand whenever they look at the billboard the amul brand comes up and more importantly it gives you free virality which eventually turns into earned media marketing rather than paid media marketing because of which you spend very less into marketing and yet you stay on top of the mind of every consumer possible and then we spoke

about MSP and what we understood is that the government is primarily facing a problem not with giving the right price to the farmers but primarily with demand prediction which eventually translates into supply problem you mentioned that while the government currently is capable of procuring the crops there is a d need to be able to predict the demand both domestically as well as in abroad and that's not the job of the government which is where your ministry of cooperation comes into play which has formed this body whereby there are five cooperatives five cooperatives five cooperatives with

amul being one of the primary stakeholders and you are now predicting Global demand and domestic demand acting as an intermediator you're helping the farmers and you're paying them the highest amount possible just like your amul philosophy and then you're selling these products both domestically as well as internationally because you have the intelligence of being able to predict demand and being able to understand demand both domestically as well as internationally and here's why you're also mentioning into organic farming which is something that is very new to mul and very few people come to know about it

and you've also mentioned that this is not something that is just on paper you've already executed it whereby in the last one year you have exported 15 lakh Tons of goods to 25 countries with a turnover of 5,000 crores and you also intend to tap into the existing markets and the growing markets abroad especially the Middle East Market as you mentioned that just for fresh vegetables the the market is as big as 30,000 crores and if we start tapping into that we will be able to Sixx the output that you have right now which is

of 5,000 crores and you said that there is a primary requirement of a Cooperative model over here and not a private model because both these philosophies are completely opposite of each other whereby our IPO question came into play you mentioned that if a company goes IPO they primarily require money which amul already has they optimize on profits which amul doesn't you are in the business of livelihood and not milk and most importantly the moment investors come in their expectation will be the complete opposite of what amul intends to do which is not optimize on profits

and optimize for the people the stakeholders the four stakeholders that we mentioned and once this entity Falls at the center of both farmers and Global and domestic demand we will be able to build a sustainable model whereby the government doesn't need to exist in the supply chain MSP will not even be a question you will by default Pro provide the best price to the farmers at the same time best price for the consumers because that's primarily what you've been doing for a very long time and then we also had this discussion about amul's franchise model

and you mentioned that you just take a brand deposit of just 25 to 30k which is refundable if a shop wants to become an amul franchise today by tomorrow morning it can be turned into an amul franchise and you have about 300 to 500 sqs which the shop can keep which ensures that because you have such a large portfolio the footfall will happen regardless of what time of the day all throughout the day your sqs will keep on going out because of which the shop will have consistent demand as a result the viability for the

store is more likely to happen as compared to other brands and then you mentioned the economics of the store whereby a retailer as big as Dart doeses 30,000 rupees in Revenue per square feet whereas some amul stores do 3 lakh rupees per square feet which is 10 X as that of Dart which is absolutely incredible and this is not a large store this is a store which is as small as 150 to 200 ft you mention that the revenue of an amul store the turnover of the amul store per day comes out to be around

30,000 rupees per day for the month it is about 9 lakh rupees out of which you can expect a 10% net margin and there's a split it's not a straightforward math 50% comes from Fresh Products 20 to 25% comes from your value added products if I'm not wrong sir ambient products and then 15 to 20% comes from the ice cream products is that correct sir frozen foods and the margins go like 5 to 8% for milk then you have ambient products where you where the margins are around 8 to 10% and for Frozen it's about

15 to 20% okay there are multiple types of safety that you address to and these are primarily based on the risk that the franchises might face number one is the risk of not having enough products and you have 300 to 500 skus so that's not a problem number two is the delivery of the products not happening on time while the stocks are going out because you're in the fmcg space it is important to keep every store of yours stocked up and for that you've already built the d2r supply chain which is direct to retailer and

that's primarily because of the inherent nature of the supply chain that you have whereby if I have to order a product just like it comes from a dark store if the retailer orders the product it will come from a nearby Warehouse which is not more than 10 kmers away from any retailer as a result there is no supply chain problem and all these stocks are fresh because again of the inherent nature of the business by itself whereby if you can deliver milk freshly which gets spoiled within 4 hours from the farmer to the consumer you

can obviously deliver ice creams while they are fresh so the wastage is very less the supply is very consistent and the product for portfolio is vast enough to maintain a consistent Revenue yeah sir I think uh this is all does that sum up our conversation sir fantastic thank you so much thank you so much sir it's been a pleasure sumarized it so well I'm very impressed huh good thank you thank you thank you so much [Music] [Music]