Amul's Diversification Strategy

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Case Details:

Case Code : MKTG014
Case Length : 7 Pages
Period : 1996-2001
Pub Date : 2001
Teaching Note : Available
Organization : Gujarat Cooperative Milk Marketing Federation
Industry : Food, Beverages & Tobacco
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"You've got to think big."

- Verghese Kurien, Chairman, GCMMF, Commenting on Amul's diversification, 2001.

"This dairy, non-dairy thing is a producer's distinction."

- B M Vyas, Managing Director, GCMMF, 2001.

A Pizza For Rs 20!

In early 2001, Gujarat Cooperative Milk Marketing Federation (GCMMF)1 planned to leverage its brand equity and distribution network to turn Amul2 into India's biggest food brand.Verghese Kurien, Chairman of GCMMF, set a sales target of Rs.10 bn by 2006 as against sales of Rs 2.3 bn in 2001.

In 2001, GCMMF entered the fast food market in India with the launch of vegetable pizzas under the brand name SnowCap in Ahmedabad, Gujarat. GCMMF was also planning to launch its pizzas in other western Indian cities like Mumbai, Surat, and Baroda. Depending on the response in these cities, GCMMF would decide to introduce its pizzas in other cities in India.

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The pizzas were offered in four flavours: plain tomato-onion-capsicum, fruit pizza (pineapple-topped), mushroom and 'Jain pizzas'(pizzas without onion or garlic). GCMMF launched the pizzas in the Rs.20-25 price range. The existing players in the pizza market, like Domino's, Pizza Hut and Nirula's offered pizzas at nothing less than Rs.39. (Refer Exhibit I).

Analysts felt that GCMMF's move would force the existing players to reduce their prices in the long run. GCMMF planned to open 3,000 pizza retail franchise outlets all over the country by 2005. The pizzas would be made at the retail outlets. The technical training and the recipe for the pizza would be provided by GCMMF.

It would also negotiate with bulk suppliers of vegetables to get these at wholesale rates. These would be provided to the retailers. The main cost component of the pizza is the mozarella cheese. GCMMF would offer the cheese at a bulk rate of Rs.140 per kg, compared to the market price of Rs 146 per kg, thus saving the retailers Rs.6 per kg...

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1] GCMMF was India's largest food products marketing organisation based at Anand, Gujarat. GCMMF had annual sales of more than Rs 22 bn in 2000-01. It is a state level apex body of milk cooperatives in Gujarat. GCMMF has 14 affiliated dairy plants with a total milk handling capacity of 6 mn litres per day and milk drying capacity of 450 Mt per day. With 12 milk processing units, each located at the district level, GCMMF has a membership of 2 mn farmers who belong to 10, 000 village dairy co-operative societies.

2] Amul is the mother brand of GCMMF.


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