Product Price

AMUL BUTTER’S Competitive Advantage

By Constant Innovation of the 4P’s

Place Promotion

By-

Krishnakant Jonnalgadda- 60

Neelotpal Shukla- 52

Charu Bhatia- 6

Animesh Gupta- 54

Sohrab Singh Chauhan- 57

Preeti Mathews- 28

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TABLE OF CONTENTS-

1) Introduction and Company Profile 03

2) Implementation of the 4P’s 03

3) Analysis of Consumer Behavior 08

4) SWOT Analysis 13

5) Conclusion 13

6) Appendix 14

7) References and Bibliography 15

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Introduction and Company Profile-

“Utterly Butterly Delicious”, “The Taste Of India”- these two captions speak volumes about the power of AMUL and its flagship product- Amul Butter. Founded in 1946, this Cooperative is a live case study of efficient management and powerful marketing. They did what was considered unthinkable back then- to bring thousands of farmers together under a Cooperative and run a business venture. The flagbearers of our White Revolution, AMUL has always set milestones for others to learn and emulate. Gujarat Cooperative Milk Marketing Foundation Ltd. is the cooperative that runs the operations and takes care of the entire marketing.

They are the market leaders in the butter segment with more than 80% market share. This can be attributed to their solid implementation of the marketing principle of the 4P’s.

AMUL butter’s implementation of the 4P’s-

AMUL butter enjoys a market share of more than 80% which is a result of its constant strategizing of the 4P’s- Product, Price, Place and Promotion. They’ve formulized a very strong base in all these four parameters which has given it a Competitive Advantage over all its competitors.

Product- AMUL butter’s core competency lies in the product that they offer- they follow world standard methods like Total Quality Management in their operations. Right from the supply side where they adopt practices like Kaizen to ensure the quality of the milk in terms of acidity and its sourness. The processing meets the AGMARK standard and BIS Specifications No. IS: 13690:1992 which gives a testimony to their quality measures. All these proactive initiatives gives them a firm foundation to build over in order to pursue their marketing policies.

AMUL Butter’s product advantage is not only restricted to the superior quality that it has, but also the constant innovation that they undergo in their packaging. Right now under their product basket, AMUL butter is available in the following sizes-

500 grams 100 grams 50 grams 20 grams 8 grams

This diverse package basket clearly reflects how AMUL has been successful in segmentation of its target group. Mr. Anil Mehta 1, Amul Distributor of Andheri Region, says-“ Amul’s target group ranges from 1 Mr Amit Mehta owns Amritlal & Bros. Consumer Division. They are the distributors of AMUL products in the Andheri west region. They’ve been distributing AMUL products in this region

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slums to Sun-N-Sand”( both order the 8 grams butter packs- slum dwellers due to affordability and big hotels as a butter supplement to specific dishes).

AMUL has kept the provision of purchasing Institutional Packs for High Consumption Groups like restaurants and caterers who usually place their order in cases(one case has 30 packs of 500 grams). This Institutional Packs are not meant for retail selling and are without the outer packaging that one finds on the retail stores. This cuts down the cost for the High Consumption group as they are priced much less than the retail packs.

Thus, AMUL has constantly taken the right steps to ensure a high quality product that gets prodigious customer satisfaction.

Since health consciousness is gaining momentum in our country as well ,Amul reacted to it with the introduction of new products in its line- Amul Lite which offers a low fat butter and Delicious which is a no cholesterol table margarine( a substitute for butter). This gives them a wider reach to the new found segment of health aware target group.

Price - The next important aspect that provides a Competitive Advantage to AMUL butter over its competitors is its price. AMUL butter spends less than 1% of its revenues into advertising which is much less than the industry average of 8-9%. Add to this, they’ve a highly efficient distribution channel which facilitates effective pricing.

The Cooperative network of the Milk Union eradicates the scope of the middle man on the supply side ensuring fair pricing and the strong marketing channel of GCMMF2 carries forth the trend, which gives them a strong pricing advantage. So on one hand its closest competitor, Britannia charges Rs.27 for a 100 gram packet, Amul charges Rs.25.

As discussed earlier, AMUL’s Institutional Packs have an attractive pricing of Rs 110 compared to retail packs priced at Rs.122 for a 500 gram pack. The range of product packages Amul offers(8 grams being the minimum) makes it easier for lower income groups to afford it. Thus, over a period of time they’ve expanded on their target group with effective packaging and pricing.

Place- The biggest strength of Amul is its very strong marketing channel spread across the length and breadth of the country. Under their umbrella, they’ve more than 2.8 million farmers supplying them milk and the GCMMF has a network of more than 3500 distributors and more than 5 lakh retail outlets. This makes availability a very strong factor contributing to AMUL butter’s success.

for the past 45 years.

2 GCMMF is the Cooperative under whom more than 2.8 million farmers of 12 districts are operational. They look after the marketing, distribution and the entire management of AMUL brand name.

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The flow in the above figure gives a broad picture of how the distribution channel functions. The Gujarat Cooperative Milk Marketing Foundation Ltd. forms the backbone of the organization which is responsible for managing the entire cooperative under the umbrella brand of AMUL. They’ve implemented technology on the supply side through initiatives like ACMUS and their supply chain management from farmers to GCMMF is Just in Time also satisfying conditions of six sigma.

From GCMMF to consumer, there are two ways in which the distribution channels function. One is shown above where from Centralized GCMMF, they subsequently decentralize the operations to 47 depots which then deal with more than 3500 distributors and eventually AMUL butter is available in more than 5 lakh retail outlets.

The other way is the inception of AMUL Parlour, where they’ve been able to create a direct B2C model. “Amul has a vision to have a parlour across the country at a distance range of every 3-4 kilometers” informs Mr. Amit Mehta. This shows their intent to frame a parallel strong distribution channel which would give their products unparalleled availability compared to the competitors.

Retail Visibility- This was a field research that our group undertook the retail visibility of AMUL butter

(Even though stacked behind due to consumption of stock, customers searched for it and took AMUL butter even though other alternatives were clearly available at convenience)

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(Photos taken at Food Bazaar, Infiniti Mall, Versova (W), Mumbai)

The overall impression we got was although AMUL didn’t have an entry point advantage at the store, but its stacking in the 500 gram segment provides extensive visibility compared to other competitors. The group found out that customers instantly searched for AMUL butter on entry and made a quick exit from the segment and didn’t try to look at other alternatives.

The department manager confirmed that sales volumes of AMUL butter are much higher, although Nutralite does much better in the health segment compared to AMUL Lite and Delicious.

Promotion- GCMMF spends less than 1% of its revenue on advertising. The major form of advertising is the AMUL topical- the social observer created by Da Cunha Communications. The cute AMUL moppet girl wearing a polka dress has gained high recognition ubiquitously and is in the race for Guinness Book

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of World Records for the highest running campaign in the world. This has given the brand a high recall value as well at a relatively smaller expenditure.

(Source: The pictures have been taken from Official Amul Website- www.amul.com)

Apart from this, AMUL butter advertises sporadically on television but they are far and few in between. Our research showed that AMUL doesn’t even indulge too much into sales promotion activities like discounts to surge the sales. “There is only one time that I can recollect AMUL butter giving a discount of Rs. 5, there isn’t much sales promotion activity on their side as word of mouth and the already established brand works effectively for them” elaborates Mr. Amit Mehta.

The major promotional aspects of AMUL are for the umbrella brand and not butter. They try different ways for that like sponsorships( Amul Star Voice of India, Amul Cricket Ratings, Amul Chef of the Year, Amul Maharani Contest and so on).

They are trying to make headway into social media effectively as well through Facebook, twitter, Orkut and their own blogs apart from the website. They are also present on the virtual world- Second Life. But our research shows that not many consumers are aware of their presence which is a matter of concern for them.

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Consumer Behavior- The following market survey was conducted to understand the butter consuming patterns in India and the perception of AMUL butter. The following are the trends that we came across-

Butter forms a regular purchase item on our grocery list

Family's usual monthly consumption is

Analysis- The above two graphs clearly portray rising consumption of butter in Indian families.

Favorite brand of butter is

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The aspect that sets apart my favorite butter from its competitors is

With the word butter, the brand which comes to my mind first is

Analysis- The above three graphs portray AMUL butter clearly emerging out as a favorite because of its better taste and enjoys top of the mind recall as well.

Before purchasing, we look at the available alternatives

I experiment with a new brand if something is seen on the shelves

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Analysis- The above two graphs show that consumers are still not very open to experimentation and are loyal to the existing brands.

If I could change anything in Amul Butter, it'd be

*Attributes are- Cutting Down on calories, Pricing, Addition of new flavors, packets of more sizes, more offers and discounts.

Analysis- People want AMUL to introduce new flavors and cutting down on price further (doesn’t seem rational) if any change has to be made.

My consumption of butter has come down over time due to its high calories

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Analysis- This shows a 50-50% division which does indicate that health awareness is burgeoning.

I think AMUL butter should be advertised across other mediums as well

I'm aware of the AMUL cyber store which can be used to order my stock

I'm aware of AMUL butter's presence on Social Networking Sites

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Analysis- The four graphs tell that although AMUL is prevalent across social media, people aren’t much aware or responsive to it. Thus, AMUL should come up with better strategies to cater to this problem.

On a scale of 1-10, I'd rate AMUL butter on the whole as

SWOT Analysis of AMUL Butter-

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Conclusion- There is no doubt that AMUL is a market leader ahead by miles, but the market dynamics are changing and in times when consumer memory is influenced by bombardment of novel items, there is a challenge in front of AMUL to ensure that in the butter segment it uses Above the Line advertising more effectively- especially for the new entrants AMUL Lite and Delicious. Our research shows 95% people don’t know Delicious is from the house of AMUL.Thus the market leader certainly has to take some corrective measures to maintain the hegemony.

APPENDIX-

Excerpts of interview of Mr. Amit Mehta, Distributor AMUL products, Andheri Region.

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• According to Mr. Amit Mehta, Advertising and Promotion’s paucity is the biggest weakness of Amul, which has not effected their product butter yet, but is clearly reflected in ‘AMUL Lite’ and ‘Delicious’ brands of butter.

• The usual delivery pattern is thrice a week to him and the depot in the Kalaghoda region of Mumbai decides the minimum stock of each product that has to be ordered mandatorily.

• The hawkers who do roaring business are also his clients. The usual trend is that distributors sell to only those who order more than five packets of 500 grams per day.

• There have been sporadic complaints about Institutional Pack’s quality compared to the retail pack. Papylon, a famous restaurant in Vile Parle(W) cancelled its order of Institutional Packs and prefers to purchase Retail Pack even though it means Rs.12 more per pack.

• Nutralite is gaining momentum because of higher awareness in people about it compared to AMUL Lite or Delicious.

• The transportation cost till the distributors is taken care by GCMMF, from his place to the retailers, he has to incur the cost.

• Inventory Management is a very important aspect that they take good care of. There have been rare occasions of Under Stocking due to sudden rise in demand.

• They work on really low margins of around 2.75%. So selling AMUL products becomes a viable proposition only when high volume sales take place.

• Retail Visibility is a collaborative decision of the company and the retail store. AMUL less proactive in this regard compared to Britannia.

His final words for the company• “AMUL provides the one of the best quality products in the industry. But they are a very

traditional enterprise. If they create better communication strategies, they can see better avenues for higher sales and accessibility to the customers.”

Bibliography and References-

1) Mr. Amit Mehta, Owner, Amrit & Brothers Consumer Division- AMUL Products Distributor in Andheri region.

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2) Reshma- Floor Manager of Foods Segment at Food Bazaar, Infiniti Mall, Versova (W), Mumbai3) Amul’s official website- www.amul.com4) Marketing management- A South Asian Perspective 13th Edition by Philip Kotler, Kevin Lane Keller, Abraham Koshi, Mithileshwar Jha.5) Marheting Management by Dr. Rajan Saxena6) www.wikipedia.com7) The Amul India Story By Ruth Heredia- Google books Page 227-228.

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