Business Case Study: Amul's Strategy during the Pandemic
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Business Case Study: Amul's Strategy during the Pandemic
Amul - How Amul beat its competition & made Rs.39,200 CR during the 2020 pandemic
24th March 2020, on this day PM Modi declared a nationwide lockdown because of pandemics. In addition to that, a nightmare came with it, for which our nation was not prepared. Millions of people, especially laborers and daily wage workers lost their jobs. The lockdown costed the Indian economy more than 10 lakh crores. Many billion-dollar industries came into a dilemma. One such industry was the dairy industry. The impact was so heavy that it costed the milk producers of India more than 112.3 crores of rupees every day.
But one legendary company, which every Indian child knows was so strategically able to navigate the situation. They did not only minimize their losses but they even increased their revenue by almost 700 crores. the brand we are talking about here is none other than Anand Milk Union Limited, which we also know as AMUL.
Anand Milk Union Limited, popularly known as Amul is a cooperative society based in Anand, Gujarat in India. The company was started with the motive of providing welfare to the farmers and in the process, it went on to establish itself as one of the most successful brands in India. Dr Verghese Kurein, who is known as the “Milkman of India”, was responsible for turning India from a milk deficient country to the largest producer of milk in the world today in which Amul has played a key role.
We all know that it has been in the market for so long now, and it also has acclaimed itself a position in the market. But we need to take a look at its magnificent business strategies. One such example can be seen from how Amul reacted to nationwide lockdown and COVID-19. It has done an astounding job during Covid-19. While in 2020, where the rest of the companies were fighting to keep their supply chain going, AMUL launched 33 new products in the market and got hold of additional 35 lakh liters of milk every day. And even paid Rs.800 crores extra to rural milk produces of India.
Now the question arises, what were the business strategies that made AMUL manage to achieve such an incredible height in business in difficult times? What are the business strategies lessons that we need to learn from them?
And the answer lies within the extraordinary supply chain management of AMUL. So, when the lockdown was announced, the dairy industry was allowed to operate with certain restrictions because milk is also an essential food. But as soon as the lockdown was declared, several businesses either cut down or shut their businesses. This resulted in the loss of demand in the dairy industry.
Because 20% of the revenue of the dairy industry came from hotels, catering businesses, and restaurants for the organized dairy sector. As a consequence, of this, AMUL also saw a drop of almost 12% in its demand. When the dairy company saw this massive fall in demand, they quickly pulled down the milk procurement, decreased their logistics, and slowed down their production up to a large extent. As an outcome of this, many farmers were left in a helpless state. Many workers such as truck drivers and factory workers lost their daily bread because less milk meant less operation of factories which means less transportation of milk. But when most of the dairy industry was preparing for a loss in demand, AMUL on the contrary prepared for a surge in demand.
Change in Consumer Behavior
Now the question arises again when it was clearly visible that there was a major decline in demand from the restaurant and the hotels that account for 20% of the revenue. Why was AMUL preparing for a surge in demand, isn’t it like taking a risk of 1000 crores?
Well, AMUL intelligently played, there was one important factor that many few people took in notice, which is a change in consumer’s behavior. Although there was no demand from restaurants and hotels, but the consumption of milk products in houses took a massive shoot up as more and more people began to stay at home. And this also gave rise to the homemade food trend. The demand for both groceries and milk products skyrocketed.
Secondly, because of the pandemic, people became more health-conscious and moved on from buying loose milk to packaged milk. While other companies misjudged consumer demand and started decreasing their supplies, Mr. R. S. Sodhi, Managing Director of AMUL insisted that they should keep the supply chain running at full capacity.
Despite the closures of restaurants, as of May 2020, during the peak of lockdown times, the demand for milk-based products took a massive shoot up. Milk products like cheese increased by almost 80%, demand for cottage cheese increased by 40%, and demand for condensed milk almost doubled. Despite running at its full capacity of 115%, the demands were so massive that they had to hire other plants from other companies that were lying vacant. Except for ice creams, all their plants were running at full capacity throughout the lockdown. They also realized that moving of trucks through the country would be very difficult because of the shortage of labor and the lockdown restrictions. They started using railways for the transportation of products quickly throughout the country.
Strategic Partnerships
Now, considering the vast supply chain of AMUL, i.e., 18,700 societies, 5000 milk tankers which go up to 200 chilling stations, 10,000 distributors, 1 million retailers, and most importantly more than 3.6 million farmers. The question arises that how did they manage to coordinate with their huge supply chain and manage their resources properly?
Well, the answer lies in a strategic partnership that was established between AMUL and IBM in 2009 wherein AMUL invested a hefty amount of 80 crores transforming the information technology landscape of the company. Now what they meant is that IBM would develop a full-fledged digital system and it would track every small detail of operation that is being carried out in the supply chain of AMUL. And just like Amazon, IBM could tell you how many plants are working at full capacity, how many trucks are engaged, and in which areas. Most importantly, it also tells you when and how many trucks or plants are at idle capacity so that they can divert the workload to them to make optimum utilization of every element of the supply chain.
This system turned out to be a game-changer for AMUL during the lockdown. Because on the one side, the supply chain of milk was overloaded, ice cream and frozen foods of the business were shut down. Therefore, labors, storage, trucks were lying at idle capacity at the end of the frozen industry. But due to the IBM system, the AMUL team was able to accurately oversee the entire operation of the supply chain. And this end-to-end digitalization gave them so much clarity about their operations that AMUL was even able to provide incentives to the ground staff. The casual workers were given 100-125 rupees incentives. And for the workers, food and stay arrangement were made, so that they don’t get sick and affected by covid.
When they realized that the cattle feed was not sufficient to meet the needs. AMUL even made extra arrangements for cattle feeds for farmers. All of this made the supply chain so effective that, while the rest of the dairy industry was completely shut down, AMUL procured 3.5 million liters of milk every day and even paid 800 crores of rupees extra to rural milk producers of India.
AMUL even used third part e-commerce sites like Flipkart, Big Basket, Dunzo and even started prompting deals with Swiggy and Zomato to sell butter, milkshake, and paneer. According to Mr. R. S. Sodhi, managing director of AMUL, they got more than 60,000 orders through Zomato and they sold AMUL products of almost 3 crores in more than 200 cities.
Marketing
Now moving on to the last part of Amul's strategy, i.e., the huge investment of AMUL into marketing. Now when other brands were decreasing down their advertisements, AMUL on the contrary increased its advertisements volumes by 316% compared to 2019. Their ads were so aggressive that they were viewed 10 times more than the IPL itself. Yes, you read right, the Amul ads were so popular that they crossed all the barricades of TRP.
When Door darshan started broadcasting the epic Ramayana and Mahabharata during the lockdown. AMUL started running their old ads to resonate with the nostalgic moods of the audience creating an even better impact on the audience’s mind. Then even made immunity-boosting products they never went overboard with any kind of ridiculous covid claims.
This is how using an extraordinary foresight of consumer behavior through an agile supply chain management system. So, using digital transformation, third party collaboration, incentivizing of labor, and through strategic marketing initiatives. Anand Milk Union Limited, i.e., AMUL established a benchmark for crisis management for dairy companies from all across the world to follow.
Important Business Lessons
This brings us to the most important part of this case study, i.e., what are the lessons that we need to learn in order become an extraordinary business leader,
While good leaders prepare to face risk, great leaders prepare to embrace them with open arms.
No matter how big your organization is, resourcefulness is one attribute that will always save you during crisis.
The only question is how to build such an agile system, in this case, it was Amul's futuristic investment of Rs. 80 crores into the IBM system that helped them operate such a huge supply chain in such an optimized manner.
Always remember during such a crisis, either choose to see it as an obstacle or you can see it as a golden opportunity to get ahead of your competitors.
This is how AMUL became an opportunist during times of crisis and established a benchmark from brands, all across the world to learn from.
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