Dairy Industry In India Marketing Essay

Dairy Industry In India Marketing Essay In India the dairy industry is of crucial importance. The country is the worlds largest milk producer and accounts for more than 13% of worlds total milk production. India consumes almost 100 % of its own milk production and is stated to be the worlds largest consumer of dairy products. Dairy products constitute as a major source of cheap and nutritious food to millions of people in India and the only acceptable form of animal protein for large vegetarian segments of the Indian population. (Karmakar, 2006) Top Dairy companies in India: Amul is one of the topmost companies in the dairy industry, which recorded a sales turnover of 67113 million Rs in 2008-09 (Amul, 2009). Followed by Nestle India Pvt Ltd. with a turnover of 51672 million Rs (Nestle, 2009) and Britannia Pvt Ltd whose turnover were 34523 (Britannia, 2009) In this report I have chosen Amul Pvt Ltd, as it is the largest milk production company in Asia. 1.2 History of the Company: Amul Pvt Ltd. is the company that is renowned for initiating the phenomena of The White Revolution in India; making the country the largest manufacturer of milk and its by products in the world. Amul was established on December 14th, 1946. Dr Verghese Kurien also referred to, as the Father of the White Revolution is the man behind the success of the company. AMUL is an acronym for Anand Milk Producers Union India Limited. Amul was setup as a model for development in rural areas. Amul is located in the state of Gujarat, in a small town called Anand. (Business maps of India, 2010) Amul was taken over by the Gujarat Cooperative Milk Marketing Federation [GCMMF] in 1973.Gujarat Cooperative Milk Marketing Federation is one of Indias largest food products marketing organization. Its main aim is to provide to the farmers remunerative returns and for the benefit of the consumers provide them with quality products which are value for money. (Amul, 2010) 1.3 Company Statistics: Members: 13 district cooperative milk producers Union No. Of Producer Members: 2.9 million No. Of Village Societies: 15,322 Total Milk handling capacity: 13.07 million litres per day Milk Collection (Total: 2009-2010) 3.32 billion litres Milk Collection (Average: 2009-2010) 9.10 million litres Milk Drying Capacity: 647 Mts. Per day Cattle feed manufacturing Capacity: 3740 Mts. Per day (Amul, 2010) 1.4 Company Financials: [4] Sales Turnover Rs (million) US $ (in million) 2000-01 22588 500 2001-02 23365 500 2002-03 27457 575 2003-04 28941 616 2004-05 29225 672 2005-06 37736 850 2006-07 42778 1050 2007-08 52554 1325 2008-09 67113 1504 2009-10 80053 1700 (Amul, 2010) 1.4.1 Amuls Sales turnover [4] *Graph based on the figures from the table above (Turnover is in Million US $) The company recorded a growth of 28.8 % despite the global economic downturn. From a turnover of 1325 million dollars in 2007-08 the milk giant jumped to 1504 million dollars in 2008-09, resulting in a double-digit turnover 3 years in a row 1.4.2 Exports *Graph based on the figures from the tables above (Turnover in Crore Rs) The company witnessed a growth in spite of the global economic meltdown. The companys exports reached 133 crore Rs in 2008-09 in comparison to the 125 crores in 2007-08. Amul products are exported to a number of countries namely Australia, Bangladesh, China, Hong Kong, Mauritius, Singapore, UAE and USA 1.5 Product Range: Amul is recognized as the biggest brand in the pouched mile sector of the world and stated to be Indias largest food brand. Amul has a varied range of products, which include: Milk Milk Powders Ghee (Saturated Butter) Butter Cheese Paneer (Cottage Cheese) Yogurt Chocolate and confectionaries Ice-Cream Infant Milk Range The products under these categories are available under a brand umbrella with over 60 different product names. Amul has been very famous for Milk, butter and cheese. Amul milk is sold under brand names such as Taaza, Gold and Shakti. Amul butter is available under names such as Amul butter and Lite. Cheese is available under brand names of Processed cheese spreads, godiva and Emmental (Amul, 2010) 1.6 Consumers Relationships with Amul Products: For consumers, dairy product are an integral part of their lifestyle irrespective of the fact to which strata of the society they belong to. Thus the relationship created between them is Interdependence, the products form a part of the consumers daily routine. Amuls Marketing Mix: Product The Products form a part of the FMCG industry. The products are essential commodities bought on a regular basis. Price Amul products are priced at relatively affordable prices for all the segments of the market, however certain products are priced comparatively higher and are bought by a segment of the market with higher purchasing power. Place Locations of the stores play the most significant role in higher sales of the product. As stated earlier their distribution network consists of over 2 million retail outlets. Promotion Amul launched one of the most successful campaigns with the utterly Butterly Girl character which resulted as an entry into Guinness book of world records for the longest running campaign. The mascot has played an imperative role in increasing the brand recall value. 2 Analysis and Data Interpretation: According to Mr. P.G. Bhatol, the companys chairman, he said in the 35th annual report of the company 2008-09 that The Company registered a growth of 28% against the backdrop of the global recession. (Bhatol, 2009) This statement by the chairman reveals the fact that in spite of the economic downturn, the buying decision making process of the consumer remained unchanged during the changing financial situations. 2.1 Buying Decision-Making Process The Model (i) (Adapted from Cox, R and Brittain, P (2000), Retail Management, 4th Edition, Pitman Publishing) The growth of the company can be attributed to the consumers buying decision-making process. The Buying Decision-Making process as seen in the diagram above begins with the a simple need, in context with buying any amul product the process can be explained as: It all begins with the Need. The consumers require these dairy products on a daily basis as this product falls within the essential commodity category. Although these products are required on a regular basis, consumers recognize the need to buy these commodities either on a certain occasion when they run out of it or they feel need to buy and store it for future consumption. Since dairy products are a customary purchase, the involvement is low in comparison to buying a product such as a Television. This decision of buying the product is taken by a single person with little time consumption in making the final decision. Since this product is a low involvement purchase, there is only a limited amount of information search carried out. In some cases there is no conscious effort made by the customer to get the information regarding the product but is got when watching television or flipping through pages of the magazines. Amul being a very well established and old brand is probably only one of the reasons why consumers choose it. Amul has always focused a lot on advertising and their mascot is always used to portray the current situations When consumers look for information regarding any dairy products Amul would always be the first choice however a consumer will always look for alternatives, where they could find better quality products at better prices. Amul products are very reasonably priced in comparison to its competitors. The decision is obvious, as Amul is priced very reasonably in comparison to its competitor Mother dairy. Purchase of Amul products is made convenient through their strong distribution network. Distribution Network (2008) Number of Outlets Distribution for fresh milk 1800 Distribution for value added milk products 3500 (Amul, 2009) The consumer is already happy with the fact the product is available at every corner, and feels a sense of tremendous satisfaction with the high quality of the product bought at reasonable prices. 2.1.1 Habitual Decision-making: Habitual decision-making can be defined as choices that are made with little or at time without any conscious effort. The Constant increase in the sales turnover from 1050 million $ in 2006-07 to 1325 in 2007-08 and to 1504 million dollars during the recession hit period of 2008-09 could be attributed to the fact that these purchases are made because of habitual decision making behaviour of the consumer. The trend in which the profit increases year after year has a direct connect to the trend in which the consumer makes his purchase decision. Since dairy products are consumed on a daily basis their purchase can be termed as a habitual purchase, This process of habitual decision-making by the consumer is one of the foremost reasons of the companys success. Consumers of Amul products make this decision of buying the product with little or sometimes without any conscious effort. Thus the entire concept of habitual decision making by the consumer results in constant purchase of the same brand irrespective of the fact whether they can afford it at that point of time which increased sales of the company despite the recession and resulted with a 179 million $ profit. Apart from the fact that consumers made these purchases decisions out of habit they were also habituated to looking at the Amul Mascot i.e. the Uttlery Butterly Girl 50 years after it was first launched, Amuls sale figures have jumped from 1000 tonnes a year in 1966 to over 25,000 tonnes a year in 1997. No other brand comes even close to it. (Amul, 2010) amul30.jpg (Amul Hits, 2008) The topical ad released during the economic downturn in 2008 This ad campaign has been successful right from the start and all through out the economic depression. The ad above was made to address the economic downturn in 2008. This ad campaign to a great extent had a certain amount of influence on the consumer. Not only did the ad bring a little humor to the serious part of the recession but was somewhere etched in the back of the consumers mind. In terms of consumer behavior concepts, the entire ad campaign comes in play when a consumer has to make a choice between alternatives. The ad campaigns have a great impact on the consumer thus influences the consumers decisions while selecting the product from other competitor products. 2.1.2 The Alternatives: A detailed analysis of this reveals that alternatives are influenced by ad campaigns in the following ways (Solomon et all, 2010,334) It is a known fact that however loyal customers may be to a certain brand of products; at times they may tend to consider looking at other attractive alternatives. Through the ad campaign Amul, as brand has been lucky enough to create a niche in the minds of their consumers, to be more precise in the evoked set of their consumers. This evoked set is defined as the set of alternatives that the consumer already knows about and is aware of. This set consists of those products, which are already in memory i.e. the retrieval set. (Sololmon et all, 2010) If analyzed in context with the ad above, such an ad leaves an impact on the consumer. This ad was used to create a definite place for that product not only in the minds of the consumer but also establish a prominent place in the environment. It increases the brand recall value thus making the product (amul) seem the best choice from the rest. The ad campaigns to a large extent encourage the need of buying a product. 2.2 Needs and Behavior: According to Mr. P.G. Bhatol, the companys chairman, he said in the 35th annual report of the company 2008-09 that Since Milk and Milk products are basic staples for every Indian household, their demand is not likely to be affected by transient economic slumps (Bhatol, 2009) This statement when analyzed conveys the message that irrespective of the recession and the effect of it on the consumers, certain products, in this case being milk and its by products cannot be compromised on. The level of consumption by different consumers of these products may decrease but will certainly not be stopped. Sales figures of the company show an increase in these products during the year 2008-2009: Product Sales Growth (%) Amul Milk 44 % Amul Cheese 26% Amul Butter 17% Amul Ice-cream 16% Dairy Whitener 12% (Amul, 2009) A reason for this increase in sales during the recession can be linked directly to the concept of Maslows hierarchy. As these products fall under Physiological needs, these needs are inevitable, and they are essential for survival. These needs form the largest and most important part in Maslows hierarchy: (Solomon et all, 2010, 186) As Maslows hierarchy implies, the basic needs have to be fulfilled before climbing up the ladder. A consumer will for certain satisfy these basic lower level needs. Milk is just a part of the physiological needs however once that need is satisfied it gives rise to other needs and a consumer then satisfies all these needs together. This contributed to the increase in sales of the by products of milk. Related to Maslows hierarchy we could also explain a consumers behavior on the basis of Motives in particular. Looking at this motive classification we could understand the consumers behavior from a different perspective: (Blythe, pp 32-33) If we relate the concept of Maslows hierarchy with the different motives, the most predominant motive that influences the consumer when buying an Amul dairy product would be a dormant motive. These motives exist in the minds of the consumer but they are not aware of it. Consumers in their subconscious mind hold these dormant motives, which result in buying the same brand products over and over again without much effort. Dormant motives are connected to secondary motives. Secondary motives are the reasons why consumers buy a particular brand. This is probably the reason why they choose Amul over the other brands. A deeper analysis in to the statement reveals that the demand remained unaffected could be explained through the primary concept of needs and behaviour. It is a known fact that, if a need does not exist then there isnt any motivation to achieve the goal of satisfying the need. As stated by the chairman of the company Milk and milk products are staple for the people of India. Analysis of this statement leads to the fact that these needs are Biogenic needs, which are required to maintain life. The argument here could be further related to: Needs If milk is a staple then the need for it is essential. In this case the need is very high. Consumers needs for dairy products are constant with very little change. These needs have to be fulfilled almost instantly. This probably was a factor that resulted in the 44% growth of milk in 2008 Motivation A sense of tension is created when this need is left unfulfilled which will drive them to take some action and fulfill this need. Here in this case the consumer will find the need to buy the product, which will motivate him/her to go out to the closest store and buy it thus fulfilling its need. Wants It is possible that sometimes what we want may not be a need. A want is defined as the consumption behavior that satisfies the unfulfilled need. A want is not necessarily a need and a need is not necessarily a want. However in this case the need is more dominant then the want for it. Goals The basic need of dairy products leads to buying the product and achieving the goal of satisfying it by purchasing value products. When talking about value products, consumer satisfaction is a feeling directly related to it. Based on a recent consumer report by consumer daddy ® Amul scored a Customer satisfaction level of 5.003, which is considered as a good average score. nescsl.jpg (Consumer daddy ®, 2010) The above graph shows a constant trend in the level of satisfaction newcs1.jpg (Consumer daddy ®, 2010) For Amuls consumer the brand value and values for money are important aspects along with hygiene, reliability and safety of the product. This level of satisfaction a consumer wants from any product is related to the stages of the means end chain. From the above statistics it can be derived that for Amul consumers just the product wasnt the main goal but also the level of satisfaction achieved after the purchase. 2.3 The Means-End Chain: The chain is explained with the example of milk: (Tao, 2010) In the context of the consumer satisfaction report mentioned above, Consumer looks for maximum satisfaction in terms of the quality value over price. Price is incidental in this case while the company brand value and product value is predominant. Here when explaining the chain through milk, the attributes consumer gets are fresh and natural product, the consequence being the consumer gets a balanced diet which in the end results in a healthy life which is the Life goal of any consumer. 3. Conclusion: Amul will always be the first choice for consumers as it is a well-established brand and also provides good quality products, thus creating a niche in the minds of the consumers. Also amul has expanded extensively all over the country thus enabling the consumers to have easy access to the products at any given point of time. From the above analysis and data interpretation carried out, one can conclude that reason for the companys success [Amul] was purely based on the fact that these products were primary commodities and for consumers Amul was always their first choice based on the fact that is a very well established brand and is known for quality products. The Brand has created a niche in the minds of the consumers thus encouraging and gaining more customer loyalty. During the times of depression, Amul success could me based on the fact that there was a constant demand for essential commodities.