Amul's Diversification Strategy



Themes: Brand Management
Period : 1996-2001
Organization : Gujarat Cooperative Milk Marketing Federation
Pub Date : 2001
Countries : India
Industry : Food, Beverages & Tobacco

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Case Code : MKTG014
Case Length : 7 Pages
Price: Rs. 200;

Amul's Diversification Strategy | Case Study

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A Pizza for Rs 20! Contd...

Analysts felt that the supply of cheese products by GCMMF at a cheaper price would enable the retailers to price pizzas lower than that of the competitors. R S Khanna, General Manager-North zone, said that GCMMF intended to do to pizza what it had already done to ice cream. He said, "We want pizzas to become a mass consumption item. And as in the case of ice cream, we will force pizza manufacturers to slash prices. Eventually, this would expand the market for cheese."


In 1996, B M Vyas, Managing Director, GCMMF, commissioned the Indian Market Research Bureau (IMRB) to conduct a consumer survey to identify the products consumers wanted from Amul. Based on the findings, Amul entered into the following areas: ice cream, curd, paneer3, cheese, and condensed milk. (Refer Exhibit II for Amul's product portfolio). In 1997, Amul launched ice creams after Hindustan Lever acquired Kwality, Milkfood and Dollops4. Positioned as the 'Real Ice-cream,' Amul Ice cream was one of the few milk-based ice creams in the market.

With GCMMF gradually expanding its distribution reach, Amul was all set to strengthen its share in the ice cream segment. (Refer Exhibit III for market share). In August 1999, Amul launched branded yoghurt in India for the first time, when it test marketed "Masti Dahi" in Ahmedabad first and then introduced it all over the country. "Masti Dahi" was plain yoghurt sold in plastic cups. Each 400 gm cup was priced at Rs 12.

In January 2000, Amul re-entered5 the carton milk market6 with the launch of "Amul Taaza" in Mumbai. Amul Taaza was non-sweetened, plain, low fat milk. The product was positioned as a lifestyle as well as functional product. It was targeted at the upper middle class housewife who could use it for different occasions. Amul was targeting sales of about 0.1 mn litres per day. In November 2000, Amul decided to promote mozzarella cheese, which was used in pizza.

The growing demand for mozzarella cheese from pizza making companies like Pizza Hut and Domino's Pizza was expected to give Amul's cheese sale an additional push. In July 2001, Amul planned to enter the instant coffee market through a tie-up with Tata Coffee. GCMMF had a strong national distribution network while Tata Coffee had expertise in manufacturing and marketing coffee. As a part of the tie-up, Amul was to source the instant coffee from Tata Coffee and distribute it.

The domestic coffee market was estimated at Rs.11bn, with the instant coffee segment being around Rs.4.5bn. In August 2001, Amul decided to enter the ready-to-eat stuffed paratha,7 cheeseburger, cheese and paneer pakoda8, and cheese sandwich segments. The products were to be marketed under the SnowCap brand. The SnowCap brand would also include tomato sauce and ketchup.

Amul was also restructuring its chocolates business9. Seven of its brands that were withdrawn from the market were to be relaunched soon. Amul tied up with Campco, the cocoa and arecanuts farmers' cooperative in Karnataka and Kerala, for the supply of cocoa beans.10 Amul marketed Milklairs, which was manufactured by Campco. This tie-up was expected to help Amul in the expansion of its chocolate business.

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3] Paneer or cottage fresh cheese is made from low fat milk, without involving long, complicated procedures. It is rich in proteins.
4] In 1993, HLL acquired Dollops Icecream from Cadbury's India. In 1994, BBLIL launched the Wall's range of frozen desserts. By the end of the year, HLL entered into a strategic alliance with the Kwality group. In 1995, the Milkfood icecream marketing and distribution rights were acquired by HLL.
5] In 1983, Amul had introduced branded milk in 500-ml tetrahedron-shaped packs priced at Rs.4.50 and one litre rectangular packs at Rs.9. Amul felt that the tetrahedron pack was well ahead of its time, which was why it was not accepted in 1983. Moreover, the packaging was not convenient and it was difficult to store.
6] The three main players in the Rs.360 bn packaged milk market are Amul, Nestle and Vijaya. The market is important to all three. Nestle is looking at a Rs.1.50 bn business from milk alone by 2004. Amul Taaza is expected to be a Rs.1 bn brand by 2001, and Vijaya could achieve Rs.1.2 bn sales from packaged milk. Amul is investing Rs.300 mn in two new factories in Andhra Pradesh and Maharashtra. Nestle is targeting the south as a potential big milk market. Nestle is setting up two more plants (amount invested yet to be revealed) in the southern region and is aggressive on the price front, pegging its Pure Milk brand at Rs 20 a litre against Amul Taaza's Rs.22.
7] A flat unleavened bread made from flour, water and clarified butter.
8] A deep-fried fritter made by dipping pieces of vegetable, meat or shellfish in chickpea flour batter and generally eaten as a snack.
9] Amul's chocolate portfolio includes brands like Amul Bitter, Amul Premium, Amul Crisp, Amul Fruit & Nut, Amul Badam Bar, Amul Milk and Amul Crunch.
10] Amul followed a strategy of roping in cooperatives to aid growth around the country. Amul ice cream is now manufactured in seven locations across the country. Pune Milk Cooperative and Akluj Dairy (near Baramati in Maharashtra) have been roped in to sell 0.2 mn litres of milk per day under the Amul brand name in Mumbai. In TamilNadu, Salem Dairy has signed up to produce milk and ghee under the Amul brand name.