Amul plans southern push2 min read . Updated: 15 Sep 2020, 07:04 AM IST
- Amul plans to sell up to 4 mn litres of milk across the region
- Amul’s entry into the south could see a collision between a giant cooperative and numerous regional players
For decades, legacy dairy cooperatives have dominated the southern states and made a tidy profit selling milk. Now, India’s largest dairy brand, Amul, is making a push to expand in the south, which could shake up the milk industry in the five states of the region.
Amul, the force behind the white revolution that makes India the largest milk producer, has been selling other dairy products such as cheese and butter in South India. Its plan now is to sell 3-4 million litres of milk across the region, with Andhra Pradesh as hub.
“We started with the west, then went to the north, and east... Somehow we had not gone to the south," said R.S. Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation, which sells its products under the Amul brand, in an interview.
“We realized in the past 10 years that a lot of private players have come, and some of them are not giving good prices to the market. So we thought this is the best opportunity. Now if we don’t enter the south, we will be losing, and we will be giving a cakewalk to other players."
Sodhi said the aim is to take the business to around ₹10,000 crore. The company will make an investment of about ₹200-300 crore over the next two years, he added.
Amul has an annual sales of ₹52,000 crore. Its entry into the south could see a collision between a giant cooperative and numerous regional players.
Ironically, popular dairy brands in the South—Karnataka’s Nandini, Kerala’s Milma and Tamil Nadu’s Aavin, among others—were all once formed as farmers’ cooperatives, emulating the roaring success of Amul.
Regional dairy cooperatives are, however, not sitting idle.
“Since we came to know that Amul is doing surveys in southern towns recently, we have been creating our own plans," said Rajesh Nair, marketing manager at Milma, owned by Kerala Cooperative Milk Marketing Federation. Brands such as Milma think the trick lies in the right kind of marketing as there is no clear way to distinguish oneself in the milk business.
“It has forced us to do bigger and newer ways to market ourselves. From spending ₹1-3 crore, we are now spending ₹10-15 crore on advertising. We are also empanelling a national agency for advertising," he said.
The entry also foreshadows a political fight. The Andhra Pradesh government led by chief minister Jagan Mohan Reddy recently signed an agreement with Amul, extending support to start its milk business. The state’s dominant dairy company, Heritage Foods Ltd, is run by the family of N. Chandrababu Naidu, Reddy’s main political rival and predecessor.
Andhra Pradesh is already one of India’s largest milk-producing states, churning out an estimated 40 million litres every day.
Amul’s entry could also lead to ice creams wars: the company’s surveys show good demand for milk-based products such as ice cream, Sodhi said.
“Geographically, Andhra Pradesh is a large market, which is connected to various good markets like Chennai, Hyderabad, Vizag. So, we thought we can make Andhra a hub and enter fresh markets of the south," said Sodhi.
Nandini, owned by Karnataka Cooperative Milk Federation, has been aggressively increasing its presence. “It is now setting up more cafes that serve coffee or tea or sweets or snacks made of milk products to attract youngsters and highway riders," said a person associated with the brand, requesting not to be named.
Sodhi disagreed that the local cooperatives will suffer from the entry. “Wherever we have gone, we have seen that with our entry, local cooperatives have also flourished," said Sodhi.