Amul
Amul is an Indian dairy product brand owned and operated by the Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which is owned and operated by 3.6 million milk producers in Gujarat, India. The company was founded in 1946 and has since grown to become one of India’s largest food brands. Milk, butter, cheese, ice cream, and a variety of other dairy-based products are available from Amul.
Amul is also well-known in India for its milk powder, baby food, chocolate, and pizza. In addition, the company has expanded into international markets, with a presence in over 60 countries.
Amul’s success is attributed to the “Anand pattern” of co-operative management, which involves farmer participation in decision-making and profit sharing among them. This approach has helped to improve the livelihoods of small and marginal farmers in Gujarat and has been adopted as a successful model of rural development by other co-operatives in India and abroad.
Industries are privately held businesses that exist primarily to maximise their return on capital. This is reflected in the value of their shares, regardless of whether they are traded on an exchange. Eventually, the investor-owner seeks capital appreciation and the highest possible price for the shares he may wish to sell or pledge in order to raise additional funds.
Communes, on the other hand, are businesses that are owned by members who can be either producers or consumers. These members may own shares, but they primarily value the cooperative for the services it provides. If it is a producer-owned cooperative, such services would include purchasing, processing, and marketing their produce, as well as supplying them with inputs used in production. The procurement price of produce and the timeliness of payment or the provision of quality cattle feed, farm extension and animal healthcare support, fertilisers, and credit at the lowest cost are the success metrics in this case, not earnings per share or dividend payout ratios.
Companies and cooperatives, on the other hand, are both business enterprises whose raison d’être is — or should be to provide value to their owners. Take, for example, the Gujarat Cooperative Milk Marketing Federation (GCMMF). It is the apex organisation of Gujarat’s dairy cooperatives, and it is ultimately owned by 36.4 lakh farmers who pour milk to 18,154 village-level societies across the state.
Is GCMMF providing value to its “shareholders”? According to all indicators, it has. GCMMF’s sales turnover increased from Rs 2,336 crore to Rs 46,481 crore between 2001-02 and 2021-22, and average daily milk procurement increased from 47.32 lakh litres to 263.66 lakh litres, including 42.68 lakh litres from outside Gujarat.
The price paid for her milk is important to the farmer-owner, just as the share price of a company is to the investor-owner. The average procurement price paid to producers by GCMMF’s district milk unions has increased from Rs 184 to Rs 820 per kg of fat over the last 20 years. Amul full-cream milk with 6% fat is currently available in Delhi for Rs 63 per litre. At Rs 820/kg fat and 1.03 kg per litre, the producer’s share comes to around Rs 50.7, or more than 80%. In other words, GCMMF not only helps farmers process and market their milk, but it also ensures that they receive the greatest possible share of the consumer rupee.
What made this possible? Professional management is the simple answer. From Verghese Kurien to B M Vyas and R S Sodhi, the Amul organisational model has been based on an elected board of directors working through a chief executive and his team of marketing and finance professionals, project engineers, veterinarians, agronomists, and nutritionists.
One such framework distinguishes GCMMF from other state dairy cooperative federations, whose managing directors are typically Indian Administrative Service officers reporting to animal husbandry and dairying secretaries. It’s not surprising that neither their boards nor their managers are accountable to farmers; these are ostensibly milk producers’ cooperatives.
Sodhi’s recent departure as MD of GCMMF raises troubling questions in this context. These are not about party politics, which is nothing new. The Congress had traditionally controlled Gujarat’s milk unions, which have now effectively passed to the ruling Bharatiya Janata Party. However, a golden rule established by Amul’s founder Tribhuvandas Patel, who also happened to be a Congressman, was not to allow political calculations to intrude into cooperative business operations, let alone affect the interests of their farmer-members. There was a lakshman rekha that protected the professional manager, giving him the confidence to do his occupation.
Sodhi was no ordinary boss. During his 12 years as CEO, GCMMF’s revenue nearly doubled (from Rs 8,005 crore in 2009-10) and milk procurement nearly tripled (from 93.02 lakh litres per day). Under his leadership, the federation began purchasing from farmers in other states, and Amul became the liquid milk market leader even in Delhi-NCR (where it now sells approximately 40 lakh litres per day, compared to Mother Dairy’s 30 lakh litres).
It’s unclear if Sodhi resigned or was asked to leave. The letter he received on January 9 from GCMMF’s chairman and vice chairman — “your services as MD are being terminated with immediate effect…it is ordered that you relinquish charge immediately and hand over the same to the COO (chief operating officer)” appears to imply the latter. Sodhi, without a doubt, was already on a two-year extension, and his departure should not have come as a surprise. However, the tone of the letter suggests a far from dignified departure for someone who has given the organisation 40 years and delivered a compound annual revenue growth of 15.8 percent during his tenure as MD.
There are rumours of the decision to relieve Sodhi being taken at a political level and apparently “to safeguard the Amul brand”. If true, the first part reduces GCMMF to a government departmental endeavour with a board that is neither independent nor accountable to its ultimate farmer-shareholders. This completely contradicts the concept and principles of cooperation that Tribhuvandas Patel and Kurien stood for. When it comes to the Amul brand, there is nothing more ridiculous than imagining threats from someone who has taken its equity and positioning to an entirely new level.
The Amul model has emphasised both farmer empowerment and the importance of professional management in organisations controlled and run by producers. The National Dairy Development Board, which spearheaded India’s White Revolution, has probably faded into insignificance. It currently lacks a full-time chairman.