RS Sodhi talks about the operation of the brand with one of the largest supply chains, the bottlenecks of operations and Omni-channel approach for this business where there is no holiday and life span of products is utmost priority.
How are you integrating your recently introduced bakery products with retailers other than Amul outlets?
Our most products are mainly sold through traditional outlets and the share of Amul parlours is quite small. We have got 4 types of distribution channels – one is where the products will be moving from manufacturing units to the retailers through warehouses and transporters where we maintain room temperature. The products in this category are milk powder, ghee, cool beverages etc. The 2nd distribution is of chilled products, where products need to be stored in refrigerator between 0 to 4 degrees Celsius. Next is the distribution of frozen food i.e. ice-creams. Fourth is the distribution of fresh products like milk, curd, butter milk etc. which is quite difficult. In this, the products need to be sold within hours, hence is directly sent to the markets.
Our distribution network is very simple which is from factory to the depots, then to distributors and finally to retail outlets. Only in case of fresh products, we directly dispatch to retail outlets.
Out of total retail, only 6-7 per cent is modern retail, and major operations take place through traditional retail points only. This market share is mostly stagnant these days.
What has been your experience while integrating biz with different format?
Modern format is also good as they are growing but a number of modern retail shops are closing as well. They are also struggling. But it has not been able to impact traditional format the way people are anticipating. In some cities, modern retail has captured a share of 20-25 per cent.
What plans do you have to go Omni-channel and what would be the mechanism?
For food products, where you need to consider perishability, you ought to depend more on traditional channel. One can use mobile technology, but that will enable him to contact the nearest outlet.
Is an E-store under planning?
We have it since the last 10 years, where one can order and get supplies from the nearest retailer or distributor. We are not encouraging that trend where one goes to e-store to buy a litre of milk, but are getting great responses in cities by the eCommerce sites like local grocers in Mumbai, Delhi, Bengaluru etc. A number of local grocers are booking online and supply in local areas.
How does this mechanism work for Amul?
We supply to them through our nearest distributor directly or as a retailer. The USP is that be it any format of retail modern, traditional, the prices remain same and so are the discounts. Giving more discounts to new channels is very short term view and destroys the distribution system and the brand. Each channel has to compete in its own sense regardless of discounts etc.
What has been the consumption pattern?
In case of dairy products, consumption is growing significantly and I can see double digit volume growth mainly because of prosperity, change in lifestyle and exposure to the media and education. So people are buying more branded products and growth is coming.
In food biz, the first thing any consumer won’t compromise on is taste. After taste, one can talk about healthy food etc. So first, the product has to meet taste expectation of the consumer, and then he thinks about sugar content etc which is not so often.
Starting from procuring milk from a villager to selling at a right time to the end consumers-what is the path like and how do you manage warehouse and supply chain?
We are in the biz which we call C2C and what differentiates us from rest is the supply chain which is owned by 3.5 million farmers. They are not only producing milk in villages, but know how to process it and merchant it to millions of shops in India. We collect milk from 3.5 million farmers twice a day making it to 7 million. Milk is collected at 17K village cooperative factories and then transported to more than 70 milk plants or chilling stations. From there it is send to 60 depots all across India and then products go to 10K distributors pan India and hence 1 million outlets.
What are the bottlenecks that prevail in this complete process of getting the products delivered to the consumers?
First is that the supply chain is 24*7 and there are no holidays. At our headquarters, the processing and storage capacity is for a day only. Until you move finished products out of the unit every hour, you can’t have more milk.
In this 24*7 process of distribution, the logistics need to be very accurate. Secondly when you are dealing in with milk producer and consumer, your supply chain has to be very efficient. Power and cold storage are also major concerns. Conditions of roads are also improving.
Do you imply any technology for improving warehouse or supply chain management?
We have well integrated IT system right from the start where milk is taken from village cooperatives to the end when a pack is sold to a retailer. It is all IT integrated centralised database, where data is consolidated.
As per the company website, you run 6,000 Amul outlets in 1,400 towns. What is the updated number now? And how many are franchised outlets?
Now it is around 7,800 and we have presence all over India. We even have a good base in North-east. Out of these outlets, only around hundred are with us, remaining all are franchised.
You recently have launched different variants of Amul Ice Creams. What are the new products you are planning to launch in near future and by these are you trying to rebrand the Amul brand?
Last year we launched 27 new products or variants. Recently we launched ice-cream magnum and half of it is already sold out. We are much focused and the bakery products are being tried only in markets of Gujarat. Our prime focus is on milk and milk products and we do not want to diversify it. Amul is our brand and we don’t want any sub-brands
Among the various product categories, which are the most profitable one till now?
Amul is not operated for profit but to maximise returns to producers. Whatever milk is available, the farmers want to sell it. Our margin on different products is more or less the same.
Interview by: Gargi Bhardwaj & Sharmila Das