Trusted and affordable products will see a surge in demand: R.S. Sodhi3 min read . Updated: 03 Jun 2020, 01:23 AM IST
No food category will decline. There may be changes in pack sizes or brands, but with or without covid-19, food will be consumed, R.S. Sodhi, MD, Gujarat Co-operative Milk Marketing Federation
NEW DELHI : Gujarat Co-operative Milk Marketing Federation (GCMMF), the maker of the Amul brand of milk and dairy products, does not feel that it will have to pivot too much in what people are calling the new normal. Managing director R.S. Sodhi said Amul had the advantage of being a multi-product company with a multi-channel strategy. In an interview, he said despite challenges, the co-operative will meet its growth targets. Edited excerpts:
What are your immediate challenges?
Fortunately, milk falls in the essential foods category, so we were allowed to operate. And although we have worked through other curfews, floods and earthquakes, this is a pan-India disruption. So naturally, we were not fully prepared but we knew what happens in such eventualities. Even before the lockdown, we had started taking steps at the village level, explaining safety precautions to the farmers. We collect milk from 36 lakh farmers twice a day through 18,700 societies and 5,000 tankers. Initially, there were some problems in the movement of trucks and our packaging material factories were not allowed to open. But we talked to the authorities to sort it out.
Did you procure more milk after the lockdown?
We started getting 15% more milk because small dairies, vendors and ice cream manufacturers stopped collecting milk. We started converting extra milk into commodities like milk powder and white butter.
If you talk of milk, then initially, there was a demand contraction of 15% as hotels and restaurants were closed. But gradually, household consumption increased. What we lost in hotels, we made up for in home consumption. Demand for other dairy products—ghee, cheese, butter, paneer—increased by 30-40% compared to the same period last year because everybody is cooking at home. In fact, the maximum demand for cheese, butter and even milk came from posh areas like South Bombay.
But the demand for ice creams plunged by 95% as it does not fall under essentials and distribution was not allowed. We made use of ice cream infrastructure—transporters, distributors and manpower—for other products. As things have opened up, demand has increased but it is only 50% of what it was last year.
Will you meet your growth targets?
Yes. We have been growing at 15-17% every year. This year also, our branded consumer products will grow at 17-18%. The only decline has come in the commodity market. But we will catch up as soon as things normalize. Business-wise, we do not foresee any decline. In fact, no food category will decline. There may be changes in brand preference or pack sizes, but with or without covid, food will be consumed. Surely, demand for branded products and those that are widely available will go up. Loose products will sell less.
Going forward, will your product mix change?
Growth-wise, during the lockdown, our best-selling products were cheese, Tetra Pak milk and ghee. But I do not see our product mix changing. People’s choice for pack sizes may change but there won’t be major change in food. Of course, consumers will go for healthier options.
Are you launching any immunity-building products?
We already launched ‘haldi milk’ and ‘adrak milk’ (turmeric and ginger milk) three weeks ago. These are flavoured milk products. I believe that packed, safe, trusted and affordable products will see surge in demand.
Have you managed to keep costs under control?
It was the other way. Since all our supply chain partners, drivers, cleaners, loaders and factory workers were taking a risk, we had to pay them more—between 20% and 50%. We did not want disruption, so started paying more to people on the ground.
How are you dealing with the labour shortage?
Plants are running at full capacity as production is automated. We need people on packaging lines. Since we had to keep social distance, we slowed down the lines and ran three shifts. We faced some problems in Delhi and Mumbai, but not in Gujarat where labour comes from nearby villages.
Will you further use technology to replace people?
Our whole cow-to-consumer chain is tech-integrated. We know which farmer supplies how much milk or which truck was stopped where. The only automation that can be done is in loading and unloading. Automation is a long-term thing.
What are the lessons learned from this crisis?
That it is important to have a multi-site production (plants all over India), a multi-product base (milk, dahi, cheese etc) servicing multi segments (hotels, restaurants and households) and a multi-channel (general trade, modern trade and e-commerce) strategy.
The other lesson was building relationships—with supply chain partners, transporters, farmers, dealers and consumers. In the hour of crisis, we advertised more. It was the right time to build the brand.