Butter Cookies, Frozen Potatoes And Soon Amul Fruits And Vegetables

In five years, Amul brand's sales will cross $11-12 billion from the current $7.3 billion, RS Sodhi estimates.

<div class="paragraphs"><p>Vegetable vendors at a market during a lockdown imposed due to the coronavirus in Mumbai, on April 5, 2020. (Photographer: Dhiraj Singh/Bloomberg)</p></div>
Vegetable vendors at a market during a lockdown imposed due to the coronavirus in Mumbai, on April 5, 2020. (Photographer: Dhiraj Singh/Bloomberg)

"Dairy, dairy, dairy," RS Sodhi emphasises will be the focus of Amul in the foreseeable future. Gujarat Cooperative Milk Marketing Federation owns the Amul brand that did $7.3 billion in sales in 2020-21 and is India's largest food marketing organisation. Its managing director says there's still a large opportunity in dairy.

At $30 billion, branded dairy products are still less than a third of the total $110-billion sector.

"The market is growing at 5% but the organised sector is growing at double-digits—both because of consumption and shift from unorganised and non-branded. So, why should we look into other areas, when growth opportunities are here?

And yet, Amul has over recent years dabbled in several non-dairy products too. Why does the brand that retails milk, butter, paneer, ice-cream, chocolates also sell butter cookies and frozen potatoes?

Well, the former was downstream integration, Sodhi says in an interview on BQ's Leadership series.

"India’s biggest butter cookie brands used to buy 300 to 400 metric tonnes of butter from us. We realised that their purchase from us is reducing whereas their sale in the market is increasing. So, we tasted the product. Initially, they were writing 20 to 22% butter, which was reduced to 1 to 2% butter and the remaining was palmolein oil with butter flavour, but they used to write butter cookies. We thought why don't we launch butter cookies with pure 25% butter?"

<div class="paragraphs"><p>Amul frozen potato products. (Image: Amul website)</p></div>

Amul frozen potato products. (Image: Amul website)

As for frozen potatoes?

"In the north of Gujarat there is a district called Banaskantha, the largest producing district for potatoes in India. The world’s best frozen potato people put up a project there and they were buying from the farmers and naturally any private company will buy at a minimum price. So, we thought why not buy potatoes from these farmers directly, add value and already we have a distribution network of frozen chains. Amul has got the largest, most penetrated frozen distribution chain because of our ice-cream.

So, for two years we tried. We purchased potatoes, hired a third party and started to launch a product equal to McCain. We got a very good response, in the domestic and export markets. We have put up a plant of Rs 120 crore and now we'll be adding more products and plants. So, milk is one product but who owns us? The farmers. Whether potato or honey or tomorrow we may be getting into fruits and vegetables with Gujarat farmers."

Yes, you heard that right — Amul fruits and vegetables.

"First, we are going to focus only on Gujarat. The order will be the same. There will be a village-level collection by the village society who will collect whatever fruit or vegetable is good—for example, in the north potato or pomegranate, or in Kutch we’ve got khajoor (dates), we’ve got mango in south Gujarat, then in Anand nagar there’s bananas.

So, we are going to collect it, segregate it and in Ahmedabad we are planning to start seven to eight hubs where all the segregated fruits and vegetables after sorting will come and whatever comes from the other states. We don't want to get into 100% retailing ourselves because we know that the present vegetable vendor or the fruit vendor is a small fellow. We’ll add more parlours for fruits and vegetables. That also will be run by some fruits and vegetable vendors only."

"Our objective is to form a cooperative from both sides. So, we can form a cooperative of vegetable growers and we can form a cooperative of vegetable vendors and in between we can provide the technology, we can provide the infrastructure linking it. That is the model we are thinking of."

To be sure, this isn't the first time the brand has sought to enter this category. In 2017, Sodhi spoke of a fruits and vegetables retailing venture on the lines of Safal, the retail chain run by Amul's north-based competitor Mother Dairy. Safal retails fresh and frozen fruits and vegetables through 400 retail outlets across the national capital region and 23 in Bengaluru.

Now, Sodhi's working on a different plan.

"We do not want to follow that model, 100% retailing, by ourselves. We want to go through the existing chain, but where small vendors are involved we want to keep them intact, but with a better product, better packaging and automatically better hygiene, pricing and margins also."

He expects a rollout in Ahmedabad in mid-2022. It will be a big project, he says.

It is a big project. I can give you an example, like in Ahmedabad itself daily around Rs 25 crore fruits and vegetables are being sold. So, in Ahmedabad only, a Rs 10,000-crore business is there. So, if we get 25% market share, Rs 2,500 crore business we can do in Ahmedabad alone.

As for Amul, in five years the brand's sales will cross $11-12 billion from the current $7.3 billion, Sodhi estimates.

Dairy, dairy, dairy, will be 85% of sales over time, with some butter cookies, French fries and fresh vegetables on the side.

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