Chairman's Speech: 32nd Annual General Body Meeting
32nd Annual General Body Meeting on 10th June, 2006
I feel privileged to welcome you to the 32nd Annual General Body Meeting of our Federation.
Continuity is another facet of change, because no change can succeed in itself unless it acknowledges the past and takes into account the lessons taught by it. At the very outset, I would like to acknowledge the contribution made by Dr. Verghese Kurien – our outgoing Chairman – to the development of dairy sector in India in general and to the rise of the GCMMF Ltd. as the irrefutable leader in this sector in particular. Dr. Kurien’s illustrious career was dedicated to the socio-economic upliftment of millions of marginalized dairy farmers of the country. Today we cannot but gaze with wonder at the marvel he has created in the form of a novel system of collection of milk, addition of value to it and marketing it through a professionally managed marketing organization. The beauty of the system is that the farmer remains in full ownership of it at every step of the value chain.
Like every good thing, every human career ends. But the value of a career may be judged by the lasting value it has created. Dr. Kurien has made his mark and contribution by instituting a system that is robust enough to sustain itself after the passing on of his actively guiding presence. We will always remember him as one of the foundations of our cooperative movement. We will continue to be guided by his values of total commitment to the cooperative movement and excellence in our practice of taking it forward.
The Hong Kong round of WTO Ministerial Conference (December 2005) has thrown up both possibilities as well as challenges. We have noted with satisfaction the reiteration of intent towards removal of all export subsidies by 2013. However, we need to derive the best possible leverage from the provision of the five years grace period for developing nations. Our government must ensure that the interests of the farmers and the developmental needs of the country are safeguarded. The issue of removal of agricultural tariffs needs to be approached cautiously. Developed nations have so far been able to enjoy an unfair advantage – being able to dump products in developing markets at will. Under the four band system of tariff cuts to be finalised under the WTO, developing countries will be allowed higher threshold levels for tariff cuts vis-à-vis developed countries. Our government needs to ensure that we negotiate the best deal keeping in view the interests of our farmers. Overall, the international trading scenario in dairy products is getting rosier. As subsidies are reduced in the developed world, international prices of dairy commodities will approach realistic levels. This in turn will help our domestic producers compete on more even terms in the market. However, we must gear up our value chain for taking maximum advantage of the opening windows.
Apart from global changes in the market environment under the aegis of WTO, there are some significant changes taking place at home that we can ignore only at our own risk. The retail sector has been experiencing a sea change that needs to be noted and acted upon. Large format stores are taking an increasing share of the retail business pie. According to some estimates, modern and large format retailing already commands three percent of the retail business in India. Its share is expected to go up to 9-10% by 2010. Going by the current levels of investments and impending go ahead for FDI into the sector, this estimated share looks conservative at best. The growing power of the organised retailer entails higher demands on our limited ability for earmarking a larger share of our value added to the retailer – rather than to the farmer. In the face of this environment, our strategy needs to be two-pronged. On one hand, we cannot simply ignore the organised retailer. This is because our mission is to satisfy the taste and nutritional requirements of the consumers, and increasing numbers of these consumers today are to be found only at the large format stores. Hence, in order to reach these consumers, we need to form equitable alliances with organised retail chains wherever possible. However, organised Modern Format retail chains need to be careful in their approach towards agricultural products – including dairy. Experience in Europe show that supermarket chains like Tesco, Sainsbury, Asda etc. have been adopting pricing and supplier strategies that are ultimately creating a loose-loose situation for dairy farmers, processors and retailers. For example, where a litre of milk retails for about 55 pence in the UK today, only about 18 pence of this goes back to the farmer. This has ensured that dairying in UK is on the decline with small farmers being pushed out of business. Resultant need for milk imports will naturally aggravate the cost structure and growth prospects of the overall dairy economy. French dairy farmers actually saw a fall in procurement prices for milk during the year. Both the countries have been experiencing farmer unrest that can easily spiral out of control. Modern Format Store chains in India need to learn from the situation in these countries and be on their guard against the short-term appeal of such policies. They need to ensure that their margins are competitive enough to sustain fair returns to the farmer. In view of the socio-economic implications of the issue, our Government needs to play an active role in the unfolding of this chapter in India’s retailing history.
On the other hand, we need to strengthen and extend our own distribution reach. Amul Preferred Outlets are going to be a crucial instrument in our hands both to counter the onslaught of the organised retail wagon, as well as to deliver the total brand experience of Amul to the consumers under conditions controlled by ourselves.
Growing consumer expectations have led to increasing demands upon our ability to deliver the Amul experience. We firmly believe that they are right in their demands since over the years, Amul as a brand has come to stand for an invaluable experience in food for the consumer – to be delivered when, where and as she requires it. Increasing levels of education and incomes along with the reach of media have ensured that the consumer today is more perceptive, more expectant of being delighted (than being merely satisfied) and delivered cutting edge value then her predecessor. To live up to these expectations, we have to re-commit ourselves to the principle of Total Quality Management. Unless we excel in the way we procure, process, add value and market milk, we cannot hope to meet the consumers’ expectations. To this end, each one of us has to ask oneself as to what is the best way in which individual contribution towards our goal of continuous improvement may be made. Thereafter, these ways have to be adopted and self- assessment done at every step.
In sync with evolving customer requirements, we must continue with our movement away from dependence upon bulk commodities towards value added products. It is in value added products that we realise our potential for excellence in value addition and marketing. Focus on the household consumer also creates loyalty for the brand that is an invaluable asset to any organisation.
I am now pleased to present to you your Federation’s Annual Report and Audited Accounts for the year 2005-2006.
Total milk procurement by our Member Unions during the year 2005-06 averaged 64.38 lakh kilograms (6.4 million kg) per day, representing a growth of 9.3 percent over 58.89 lakh kilograms (5.9 million kg) per day achieved during 2004-05. The highest procurement as usual was recorded during January 2006 at 81.20 lakh kilograms (8.1 million kg) per day. We look forward to an even better procurement during the current year owing to the expected ingress of Narmada waters along with normal monsoons. In this context, I take pleasure in announcing the successful commissioning of a new powder plant at Mother Dairy, Gandhinagar on March 26, 2006. This 100 metric tonne per day plant is equipped with world-class technology and will be helpful in processing surplus milk from our unions.
During the year, sales of our Federation registered a growth of 29 percent to reach Rs. 3773.55 crores (Rs.37.74 billion) including consignment sales of Rs.39.42 crores (Rs.0.39 billion). This is a very robust growth rate shown by our Federation vis-à-vis the industry average. I am also pleased to note that our Federation has done remarkably well in most of the value added consumer packs. Sales of Amul Milk in pouches increased by 31 percent. UHT Milk has grown in value terms by 12 percent with a 60 percent market share. Amul Ice cream achieved a sales value growth of 18 percent, and has strengthened its position as the undisputed market leader with 35 percent market share. Sales of Masti Dahi grew by 25 percent. The sales of the Amul Cheese range increased by 18 percent. Products like Amul Masti Spiced Buttermilk, Flavoured Milk, Amul Fresh Cream, Paneer and Mithaimate demonstrated their potential to become dominant brands in the coming few years. New products like Amul Basundi, Stamina, Yogi Flavoured Yoghurt, Kool Café etc. launched during the year are expected to do well in the current year while diversifying our portfolio of offerings to the consumer further.
Distribution expansion in emerging markets of Small Towns continued to be a major initiative of our Federation during this year. Almost 500 new Distributors were inducted as Channel partners – mostly in Small Towns. At the same time, to cope up with the fast emergence of Organised Retail in India, suitable Distribution model was developed during the year for servicing Modern Format Stores. Along with the changes in ‘consumption occasions’, distribution was expanded to Highways, Railways, Airports, Bus stations, Schools, Colleges, Industrial Canteens etc.
Our Amul Yatra Program ensures that our Distributors visit Anand, thereby, imbibing an appreciation of cooperative philosophy and culture as well as operational systems and processes. Top Retailers of the Country also participate in Amul Yatra. So far, 2779 Distributors, 1654 Distributors’ salesmen and 1490 top Retailers have participated in Amul Yatra. During this year 80 Key decision makers of top Modern Format Stores from various Metros have also participated.
During the last six years, our Member Unions have been implementing Internal Consultant Development (ICD) intervention for developing self-leadership among member producers – thereby enabling them to manage their dairy business efficiently leading to their overall development.
During the year, Member Unions continued to implement the module on Vision Mission Strategy (VMS) for primary milk producer members & Village Dairy Cooperatives. Facilitated by specially trained consultants, 1081 Village Dairy Cooperative Societies (VDCS) have already conducted their Vision Mission Strategy Workshops, prepared their Mission Statements & Business Plans for next five years. Member unions review this business plan every year under VMS annual revisit programme and facilitate VDCS to prepare action plan for next year to propel the momentum gained through VMS.
The VMS module has prompted milk producers to initiate activities at villages such as Water management, Planned Animal Breeding, Animal Feed management, Improved member services management, Information Technology Integration and Networking, which have very far-reaching and long-term effects on the milk business. This planned management of milk production at milk producers’ level and planned VDCS management will not only help producer members to increase economic returns from their milk business but also help VDCS management to face competition.
Continuing the Cleanliness drive at village level, Member Unions have identified & imparted training to 8505 Core groups comprised of milk producers and Management of the VDCS till March 2006. To enhance the level of Cleanliness this year 5803 VDCS celebrated Red Tag Day on the 2nd of October and the Unions also awarded the best performing VDCS.
As a part of the Breeding Services Improvement Programme, Member Unions have continued implementation of the module of Improvement in Artificial Insemination (AI) Services and imparted training to 198 Core groups at village level and have decided to cover all the VDCS under Breeding Services with this module over the next year. To boost this movement, Member Unions are also conducting Mass De-worming campaign. Further, Member Unions implemented the AI Audit Competition during the year and in the process, identified & awarded the best performing VDCS and AI Workers.
In order to increase awareness about dairy industry scenario and impart leadership skills to the Chairmen & Secretaries of the Village Dairy Cooperatives, Member Unions are conducting Chairmen & Secretaries’ Orientation Programme at Mother Dairy, Gandhinagar in collaboration with our Federation. During the year 826 Village Dairy Cooperative Societies have been covered involving 1596 Chairmen & Secretaries of the Village Dairy Cooperatives.
During the year, our Member Unions continued to encourage increased participation of women milk producers in the Dairy Cooperative Societies. To develop their skills and leadership qualities, Member Unions organised two Self Managing Leadership (SML) Programme at Prajapita Brahmakumaris, Mount Abu. 2071 women resource persons along with Chairmen and Secretaries of 524 VDCS were involved.
In order to strengthen knowledge and skill base of young girls and women of the villages about milk production management and to motivate them to implement scientific milch animal breeding, feeding and management methods for their animals, our Federation, with technical collaboration and resources of Anand Agriculture University, has initiated “Mahila Pashupalan Talim Karyakram” for women resource persons of the member unions.
I am pleased to inform you that our exports have grown at over 13 percent during the year. The year ended with an export turnover of Rs 134.23 crores which is the highest ever by any Indian dairy products exporter. Consumer products as well as bulk powders have contributed equally to the growth. Lower subsidies in EU have helped our powders compete better in the international market. This has shown that our future in International market shall be brighter as subsidies are reducing slowly.
Amul pouch milk continued to be the largest contributor to our turnover with annual sales of about Rs. 900.00 crores (Rs. 9.00 billion) during 2005-06 as against Rs. 626.00 crores (6.26 billion) during previous year implying a growth of about 31 percent.
During the year 2005-06, we have introduced pouch milk in Kanpur, Lucknow and Bhopal markets and the response received from consumers is overwhelming. We are also planning to focus on distribution expansion and consumer awareness in the existing metro markets of Kolkata, Delhi and Mumbai. Our objective in launching milk in pouches in these and other markets across the country is two-fold. Firstly, Amul as a brand has a very strong association with liquid milk in the consumers’ mind. Thus, launch of liquid milk always prepares the ground for penetration of other dairy products in these markets. This leads to market expansion. Secondly, it has been empirically proved that all cooperative milk brands gain from this market expansion. No cooperative has lost sales consequent to launch of Amul Milk in its market. Thus, our objective in launching milk across India is also to strengthen the cooperative movement while precluding market takeovers by Multi National Corporations. It is also of significance that we have been following the practice of local procurement of milk in all markets. Needless to say, it leads to higher demand and better returns for the produce of local dairy farmers – leading to overall development of regional economies.
INFORMATION TECHNOLOGY INTEGRATION
GCMMF has further advanced its Information Technology solutions by enhancing its customised ERP System (EIAS & Web EIAS) to smoothen its supply chain management and to improve operational efficiencies.
It has also successfully deployed process driven Enterprise Resource Planning (ERP) software system at its own unit, Mother Dairy, Gandhinagar in order to bring efficiency in manufacturing processes.
Our Federation has also launched a new website www.Amul.tv for streaming its feature films, television shows, advertisements, etc to the Internet community. At present this page contains feature films like Manthan – The Churning and MAmuli Ram, Information clips like Amul India Story and Amul Product TV Commercials, and entertainment series like Amul Surabhi episodes. The idea of this site is to have a continuous play of the above as per the programme schedule, which will be online within a short period of time.
CONTESTS AND AWARDS
While it is important to excel in our processes of milk collection, processing and distribution, a long-term relationship with the channel partners and end consumers is indispensable for our long-term success. In order to generate excitement among consumers and retailers while reminding them of the significance of Amul culture, we have instituted a number of innovative events.
Amul Shakti Vidyashree Award was instituted during the year to honour toppers of selected schools in SSC Board examinations. We expect this award to initiate a long-term association of the involved children with the Amul brand and culture. The Amul Maharani Contest entered a successful second year with the objectives of making women aware of the entire range of our products. Amul Chef of the Year Contest was instituted during the year with the objective of making hotel chefs our brand ambassadors for institutions. With the objective of increasing the visibility of our products at retail outlets, our successfully continued the Taste of India Display Contest scheme during the year. This event has generated a lot of excitement and involvement among retailers across India.
CARRYING THE COOPERATIVE MOVEMENT FORWARD
Since its inception in 1946, the movement called Amul has represented and championed the interests and aspirations of millions of voiceless farmers. It has brought stability to their household incomes with something to fall back upon when income from cultivation and other sources fail to meet expectations. It has given economic independence to rural women – thus empowering them to feed and educate her children, including the girl child. Further, all these have been done at a minimal level of investment. The difference that two milch buffaloes or cows can bring to the livelihoods of an impoverished rural household – given an assured market and fair returns for the produce – is probably more significant than any other rural employment programme. Amul has been able to achieve this. Amul also provides wholesome nutrition at value for money prices to urban consumers who would otherwise only know either unscrupulous purveyors of cheap products of suspect quality or avaricious multinationals hell bent upon extracting every possible rupee of rent from the food economy of the country.
We must realise that today, we are the flag bearers of a uniquely successful experiment – of a movement that not only provides stability to marginal farm incomes, but also nurtures and lends security to the socio-economic future of the nation. In this light, it becomes our sacred duty to nurture and take forward this movement. This can be achieved only when we display unbroken solidarity and cooperate among ourselves to further this noble cause. We must never forget that we have actively taken this onerous responsibility upon our shoulders. It is not something that has been thrust upon us. This makes it all the more important for us to show that together, we can do justice to this great movement inspired by Sardar Vallabhbhai Patel and shaped by Sri. Tribhuvandas Patel and Dr. Verghese Kurien. However, we must be on constant guard against parochial interests that may try to pull us down. Our efforts in this regard will be surely rewarded if we remember that the cause we are serving is much loftier than any short-term interest that a feeble mind may conjure up. Cooperation is our domain, and we must take it – as poet Rabindranath Tagore would have put it,
‘Where the world has not been broken up into fragments
By narrow domestic walls
Where words come out from the depth of truth
Where tireless striving stretches its arms towards perfection
Where the clear stream of reason has not lost its way
Into the dreary desert sand of dead habit
Where the mind is led forward by thee
Into ever-widening thought and action’
I feel confident that the movement that was built upon untold dedication, sacrifices, vision and perseverance cannot but continue upon its brilliant path of success. Today, Amul has become a by-word for a successful cooperative movement the world over. Our member farmers have reposed their faith in us. We owe it to them to justify their faith.
Before closing, I would like to thank all those who have helped to make your Federation's operations successful.
The National Cooperative Dairy Federation of India had been providing us with invaluable support in coordination with other agencies and organisations. The National Dairy Development Board had played an important role in our growth and development.
The Institute of Rural Management, Anand, as always, has contributed to the perspective building and professionalisation of the management of the co-operative sector. We express deep gratitude for its support.
Our advertising agencies, bankers, insurers, management consultants, suppliers and transport contractors have been of great help to us in managing our growth and are partners in our success. We acknowledge their contributions and commit ourselves to continue and strengthen this fruitful alliance in the times to come. We depend on the efficiency of our distributors, retailers and most important of all, the patronage of our consumers, who have come to regard our brands as synonymous with quality and value. While thanking them for their support, we assure them that we shall strive endlessly to delight them.
Our Member Unions are our strength. We thank them for their guidance, support and co-operation without which we would not exist. The Government of India and the Government of Gujarat have continued to offer support and encouragement, for which we are grateful. Lastly, we thank the officers and staff of your Federation for their continued perseverance, loyalty and unflinching efforts devoted to our cause.
For and on Behalf of Board of Directors
P G Bhatol