Amul's Diversification Strategy

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 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 Seven of its brands that were withdrawn from the market were to be relaunched soon.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.