On April 5, Gujarat Cooperative Milk Marketing Federation (GCMMF) – the parent company of Amul based in Gujarat – announced its entry in Karnataka. In a series of tweets, the brand said, “The #Amul family is bringing in some Taaza into #Bengaluru city.”. This tweet was followed by two more tweets saying, “A new wave of freshness with milk and curd is coming to Bengaluru” and “Available on quick commerce platforms, they can be ordered to your doorstep.
This announcement proved to be the ‘ghee’ in the fire for the simmering tension in Karnataka, which is headed to state elections on May 10, 2023.
Amul’s announcement saw a strong reaction from the Opposition parties as well as pro-Kannada organisations, who believe that Karnataka’s homegrown brand Nandini under the Karnataka Milk Federation (KMF) would be “destroyed”.
The bone of contention was that it was an attempt by the central government to start the process of forming a multi-state cooperative society by merging Amul and five other cooperative societies. Simply put, the fear was that dairy farmers would be hurt as the procurement of fresh milk from them would be impacted.
It is to be noted that brand Amul has been available in the Karnataka market since 2015 and Amul has also been selling pouch milk and curd in the Northern districts of Dharwad and Belagavi. Even, in Bengaluru Amul's long-life dairy products have been marketed for decades.
GCMMF officials have stated that they have been getting a lot of online searches for Amul milk and curds on e-commerce platforms from Bengaluru and the surrounding areas, and this propelled the brand to enter the market. However, Amul’s milk and curd will not be available at Amul parlours and general trade.
We asked brand experts for their take on this controversy.
Brand Amul versus Brand Nandini
According to Avik Chattopadhyay, co-founder of brand strategy firm Expereal, “It is a downright silly and sad thing to happen. One can understand and accept business rivalry but this is being given angles of politics and regionalism, which needs to be completely condemned.”
As for Lloyd Mathias, Business Strategist & Angel Investor, “This seems to me to be a manufactured controversy. What Amul has done recently in Karnataka is launched Amul Taaza and Amul Masti and not launched fresh milk which is where Nandini dominates the market. Nandini is a very strong, established local player in Karnataka and their price points are much, much lower.”
Looking at the price points, Nandini’s toned milk containing 3% fat and 8.5% SNF (solids-not-fat) retails at Rs 39/litre compared with Amul which retails for Rs 54 per litre in Delhi and Rs 52 per litre in Gujarat. For the full-cream milk having 6% fat and 9% SNF, Amul retails for Rs 66/ litre in Delhi and Rs 64/litre in Gujarat. Similarly, Amul sells its pouched curd for Rs 66 a kg, whereas Nandini sells it for just Rs 48. Given the price difference with which Nandini sells its milk and curd, brand experts say that the competition for Amul is very tough.
Sharing his take on the controversy, Sanjay Tripathy, Strategy & Brand Consultant says, “Compared to Nandini’s, Amul's sale volume is negligible. While Amul sells around 6,000 to 8,000 litres of milk per day in these two districts, Nandini’s sales are around 1.35 lakh litres per day. The two federations have been cooperating and co-existing for a long time.”
“Nandini, with its large network of procurement and supply chain, has an edge over not just Amul but other private players. In Karnataka, the government provides incentives to them. They have very little flexibility over end-product pricing realistically, Amul cannot eat into Nandini's market share. They are looking at only the e-commerce platforms where the sales of all milk brands are less than 5% of the total market.”
A clear message from brand experts is that both Brand Amul and Brand Nandini can co-exist.
Will Brand Amul be impacted?
The question that does arise with this controversy is - will it impact Brand Amul? Says Tripathy, “Amul as a brand has a rich legacy that has been built over multiple decades. Sometimes, controversy like this increases awareness and they might see good traction in their e-commerce sales. If nothing else, there is now increased awareness.”
Chattopadhyay concurs, “I do not think the Amul brand will be affected by the controversy. Also, given its decision to hold back its launch till after the elections will help diffuse the situation. This is also being done by a handful of people with vested interests while the general consumer is actually quite unmoved by this. Amul is a terrific national brand and it enjoys a following in all parts of the country. In fact, there will be many people in Karnataka eagerly waiting for the brand to be available.” Mathias says, “This controversy should not have any long-term impact on Amul. This is good for consumers and specifically in the context of Karnataka, it has no impact whatsoever on Nandini and I believe there be no impact even on the dairy co-operatives operating in the other states. The locally built brands are strong and capable of standing up to Amul.”
Mathias adds, “Amul doesn't necessarily have the infrastructure in Karnataka to that the state co-operative has to procure fresh milk. Fresh milk has a short shelf life and regional cooperatives have an advantage in this space. Nandini is a strong and established player in the fresh milk category.However, when it comes to processed dairy products such as butter, cheese, Amul can provide competition ”
Game plan for Amul
In FY2022-23, GCMMF recorded a turnover of Rs 55,055 crore up 18.5% up from the previous year. For 2023-24 the company is looking at a growth of 20%, which will see revenues touch Rs 66,000 crore on the back of a strong product portfolio. While GCMMF reported a 21% growth in fresh products, which contributes 50% to its turnover, the ice-cream range grew by 41% and the other products like butter, ghee, ice cream, UHT milk, flavoured milk, paneer and fresh cream have also shown double-digit growth.
What has set Amul apart from the other dairy state co-operatives is that Amul has always positioned itself as a national brand with a strong focus to go beyond fresh milk to value-added products – such as ice-cream, paneer etc. On the other hand, many of the other state cooperatives have not been able to take their brand beyond their states/surrounding areas due to a lack of resources. However, despite the product portfolio expansion, the South has traditionally been seen as a challenge for Amul and the brand has an interest in strengthening its market share south of the Vindhyas.
While Amul can't compete on price with Nandini, says Tripathy, they really need to back themselves on other parameters to gain market share. “Their consistent marketing spend and brand-building efforts will help them grow market share in the brand-conscious and not price-conscious segments. But it will take them a long time to grow their market share unless they become competitive in pricing or Karnataka Govt stops subsidies to the dairy cooperatives. That's the primary reason why they are going through the e-commerce route to address the needs of convenience, accessibility and brand-focused segments.”
On his part, Chattopadhyay says, “As a nation, we cannot be touting the benefits of an open market economy on one hand and demand protectionism on the other. In any mature market, national and regional brands co-exist. The fight in the marketplace needs to be hectic yet healthy. And the end consumer should be given the right to choose the brand one wants. Also, today e-commerce allows one to order any brand of any region to any part of the country, so there are actually no market barriers.”
