Professional Documents
Culture Documents
The case explains the organization structure of the Gujarat Cooperative Milk
Marketing Federation (GCMMF) which marketed its products under the brand name
„AMUL.‟ Also known as Anand Pattern, the cooperative structure had three-tiers
including Village Cooperative Society, District Dairy Union and State Federation.
The case also examines the formation of National Dairy Development Board (NDDB)
in 1965, with an aim to establish a network of multi-tier cooperative societies and
highlights its achievements over the decades. By early 2000, a tussle emerged
between GCMMF and NDDB challenging each other in several markets in India. The
case examines the implications of this tussle and how it may affect the dairy
cooperative movement in India.
GCMMF’s Cooperative Structure
“In reality, though, Anand remained an isolated example of one man‟s tenacity and
resourcefulness. Most other federations were stuck with bureaucratic red tape and
mismanagement. Politicians saw them as useful vote banks and bureaucrats
invariably cornered the chairman‟s post, nudging aside other genuine producers.”1
– Businessworld, in 2003.
“I am anguished and pained by the recent move of the GCMMF board against me.
Having served the cooperative dairy sector for over five decades, do I deserve this
treatment from the board members? Such acts pain me and raise concerns in my mind
about where the movement that all of us built so assiduously is headed.”2
– Verghese Kurien, Ex-Chairman, Gujarat Cooperative Milk Marketing
Federation, in 2006.
End of an Era
In March 2006, Verghese Kurien (Kurien), popularly known as the „Father of the
White Revolution‟ in India, announced his resignation from Gujarat Cooperative Milk
Marketing Federation (GCMMF) which marketed its products under the brand name
„AMUL‟. Kurien had been the Chairman of the federation since its inception in 1973.
Kurien resigned after learning that the board members of GCMMF were planning to
oust him. Kurien said, “The board has only become a pawn in the bigger game plan of
some vested interests bent upon capturing the co-operative body. My worry is that the
federation, which has emerged as the symbol of co-operative success should not
succumb to such designs and in the process harm the interests of farmers.” 3
Another factor that influenced Kurien‟s decision to quit was the petition filed in the
High Court of Gujarat, stating that co-opted members could not be a part of the
executive committee of cooperatives in Gujarat.4 The Financial Express5 commented,
“Dr Kurien‟s exit from GCMMF marks the end of an era in the dairy movement in
India. Analysts of the sector the world over recognize him as a one-person army who
took on the might, both the bureaucracy and vested private interests.” 6
For several years, Kurien had been in a tussle with National Dairy Development
Board (NDDB), protesting against its moves to corporatize the cooperatives. NDDB
had registered the cooperatives under The Companies Act and wanted to handle the
marketing activities of state federations. Kurien alleged that NDDB was drifting away from the
objective of protecting the interest of the farmers and was building its own empire.
1
Supriya Kurane, “Locking Horns,” Businessworld, February 17, 2003.
2
Sandeep Bamzai, “Maybe, I Still Have Several Aces Up My Sleeve,” Hindustan Times, March 20,
2006.
3
“„India‟s Milkman‟ Kurien Quits Amul,” The Economic Times, March 21, 2006.
4
On March 20, 2006, the Gujarat High Court disposed of a petition challenging Kurien‟s continuance
as the President and Director of GCMMF on the grounds that he was co-opted and was not an elected
director. The petition had been filed by Mohan Bharwad, the Chairman of Ahmedabad District Milk
Producers Union, and sought Kurien‟s ouster. According to the petition, as per an amendment in the
Cooperative Society Act, a director of the cooperative has to be elected and not co-opted. Kurien‟s
continuance in the post since his co-option in 1973 was being challenged. The petition was rendered
infructuous after Kurien announced his resignation from the post.
5
The Financial Express is a leading financial daily in India and is a part of the Indian Express group.
6
Ashok B Sharma, “Painful Parting of India‟s White Revolutionary,” The Financial Express, March 21,
2006.
223
Enterprise Performance Management
GCMMF gave utmost importance to the interests of dairy farmers and they formed the
key unit of its Anand model. Milk production was under the control of the dairy
farmers. Processing was handled by district unions and marketing by the state
federation. Both the district union and federation were controlled by the farmers and
managed by professionals. The farmers chose their representatives, who represented
them in the union at district level, and in the federation at the state level. The dairy
cooperative movement made farmers independent and enabled them to manage their
affairs without any interference from the government or bureaucracy. The Anand
Pattern was replicated in several federations across India, helping India become the
largest milk producer in the world (Refer Exhibit I for Anand Pattern). Kurien
explained the phenomenon, “You must understand the importance of what we have
been able to achieve. We are the world‟s largest producer of milk. With the help of
lakhs of farmers, we created a global enterprise.” 7
Exhibit I
The Anand Pattern
Gujarat Cooperative
Milk Marketing
Federation (GCMMF)
Village Co-operative
Societies
(11,615)
Milk Producers
(2.41 Million)
Source: www.amul.com.
Background Note
In the 1940s, farmers in Gujarat had few options – they had to sell their milk either to
private milk contractors or to the single private dairy - Polson‟s Dairy. Polson‟s used
to collect, chill and supply milk to the Bombay Milk Scheme, which supplied milk in
Bombay (Mumbai) and some cities in Gujarat. Polson‟s Dairy used its position to
determine the quality and quantity of milk the farmers supplied and paid them very
low prices.
7
Sandeep Bamzai, “Maybe, I Still Have Several Aces Up My Sleeve,” Hindustan Times, March 20,
2006.
224
GCMMF’s Cooperative Structure
8
Sardar Vallabhbhai Patel, a political and social leader was the first Home Minister and Deputy Prime
Minister of India.
9
Pasteurization, named after its inventor, French scientist Louis Pasteur, is the process of heating food
to high temperatures so as to kill harmful organisms such as bacteria, viruses, protozoa, molds and
yeast. After pasteurization, the milk is kept in refrigerators to prevent growth of bacteria.
225
Enterprise Performance Management
Exhibit II
Cooperative Milk Producers’ Organization on Anand Pattern
Milk Producer
Insemination
Twice A Day
Veterinary
Cattlefeed
Balanced
Artificial
First Aid
Services
Payment
Box Primary Milk
Producers‟ Society
Insemination
Cattlefeed
Balanced
Artificial
Services
Weighing, Grading
Cover
and Collection
Fodder etc.
Days
Cattlefeed
Balanced
Plant
Transportation
Station
Sperm
District Co-
Operative Milk
Producers‟ Union
Dairy Plant
Milk Products
Processing,
Packaging &
Transportation
States Level-
Federation
Marketing and
Distribution
Payment
Consumer
Source: NDDB.
226
GCMMF’s Cooperative Structure
227
Enterprise Performance Management
The district union framed policies for managing the centralized facilities of the union.
These included facilities for milk collection, processing and support services, apart
from technical inputs. The district dairy union was responsible for processing the milk
into various milk products and for transporting milk from villages to processing
plants. The district union owned milk processing plants where excess supplies of milk
were converted into milk powder and other products. The milk collected at the VCS
was sent to district unions, where nearly half of the milk was marketed as liquid milk
and the remaining was made into products with a longer shelf life. The district union
decided on the price to be paid to VCSs and the price paid to all the VCSs in a district
union was uniform.
In Gujarat, District Milk Producers‟ Unions were located at Mehsana, Kaira,
Banaskantha, Sabarkantha, Surat, Baroda, Panchmahal, Valsad, Ahmedabad, Gandhi
Nagar, Rajkot and Bharuch. For example, Banaskantha District Milk Producers‟
Union Ltd. (BDMPUL) was located in Banaskantha district of Gujarat. Under this
union were more than 1193 VCSs, covering 180,000 households.
The management of BDMPUL was under Board of Directors consisting of Chairman,
Managing Director, a representative of GCMMF, representative from NDDB and 14
elected members from the VCSs. The managing director was supported by other
professional staff.
State Federation
With several district unions working simultaneously, it became necessary to organize
a federal body, to coordinate activities of all these unions. Another reason for which a
federation was necessary was to avoid competition among different unions and to
implement strict quality standards. With the establishment of GCMMF, the products
from dairy cooperatives in Gujarat could be marketed outside the state under a single
brand. GCMMF adopted umbrella branding for all its products. Milk and milk
products produced by different district union were sold under the brand „AMUL‟. The
state federation was to act as a link between district unions and the National Milk
Grid10, which coordinated the supply of milk across the country.
In 1973, GCMMF was established with the aim of providing milk producers in
Gujarat with their own marketing and distribution network. The main objective of
GCMMF was “carrying out of activities for the economic development of
agriculturists by efficiently organizing marketing of milk and dairy produce,
veterinary medicines, vaccines and other animal health products, agricultural produce
in raw and/or processed form and other allied produce.” 11 (Refer Exhibit III for
Mission and Values of GCMMF)
GCMMF marketed dairy and agricultural products from the district unions through
common branding, centralized efforts in marketing, quality control, purchases and
efficient pooling of milk. The other functions of the federation were coordinating the
network within the state and coordinating procurement requirements with federations
in the other states, etc.
At the top of the structure was the state level federation with members from district
unions. The Board of Directors of GCMMF was formed by the chairpersons of all the
district unions. The Managing Director of the federation, who was a professional,
reported to the Board of Directors of the federation. The federation provided dairy
10
The National Milk Grid was established to coordinate supply of milk from surplus producing areas to
urban markets that were facing scarcity. The grid was established between 1981 and 1985 with the
aim of linking 136 rural milk sheds with urban milk centers across all the states and union territories
in the country.
11
BM Vyas, “Institutional Structure to Sustain Smallholder Dairy Marketing – The AMUL Model,”
Proceedings of a South–South Workshop Held at National Dairy Development Board (NDDB),
Anand, India, March 13 – 16, 2001.
228
GCMMF’s Cooperative Structure
unions, technical support, management and advisory services. The main objective of
the federation was to ensure that all milk that farmers produced was sold in the market
and ensure the availability of milk at an affordable price to large sections of society.
Exhibit III
GCMMF – Mission and Values
Mission
We at GCMMF endeavor to satisfy the taste & nutritional requirements of the
customers of the world, through excellence in marketing by our committed team.
Through co-operative networking, we are committed to offering quality products
that provide best value for money.
Values
1. Customer Orientation 2. Commitment to Producers 3. Integrity
4. Co-operation 5. Excellence 6. Leadership
7. Quality 8. Innovation 9. Growth
orientation – new
products
10. Belongingness 11. Pride in organization 12. Employee
satisfaction.
Source: www.amul.com.
The marketing activities of federation included market development, customer
management and physical delivery and distribution of milk from district unions to
customers. GCMMF ensured that the new products and markets were in coordination
with its growth strategy and milk supply. Another task was to develop markets for
high value products and at the same time fulfill the needs of the low value segment.
The federation also undertook the responsibility of developing a distribution and
supply chain network.
The decision on the products to be manufactured for the next year was made by
Programming Committee, in which the Managing Director of GCMMF, Managing
Directors of District Unions, and Heads of Quality Control and Finance of GCMMF
were a part. After the plans were finalized, monthly allocations of milk quotas to be
supplied were made to each union. Some of the district unions like the Vadodara
Union specialized in producing sweets and ice-creams.
According to CK Prahalad12 and Stuart L Hart,13 “The uniqueness of AMUL
Cooperative is in the blending of decentralized organization with the efficiencies of
modern processing and distribution infrastructure. As a result villagers are able to earn
a steady income. The milk cooperative has changed their lives; it has transformed
marginal farmers into active market participants.” 14
GCMMF set up a cold chain facility costing Rs.1 billion. This consisted of 100
refrigerated vans which were used to transport products like butter, chocolate and
cheese. The chain also consisted of over 39 C&F 15 agents and 1700 distributors.
(Refer Exhibit IV for the function of VCS, district unions and the state federation).
12
CK Prahalad is Harvey C. Fruehauf Professor of Corporate Strategy and International Business, The
University of Michigan Business School.
13
Stuart L. Hart is the SC Johnson Chair of Sustainable Global Enterprise and professor of management
at Cornell University‟s Johnson School of Management.
14
CK Prahalad, Stuart L Hart, “Strategies for the Bottom of the Pyramid: Creating Sustainable
Development,” 1999.
15
Clearing & Forwarding agents are appointed by manufacturers or wholesale distributors to store and
dispatch their goods.
229
Enterprise Performance Management
Exhibit IV
Functions of Village Cooperative Societies,
District Union and State Federation
District Unions
Own and operate dairy plant, chilling centers, animal feed plant etc.
Arrange transport to procure milk from VCS.
Organize and supervise VCS.
Provide guidelines and support to VCS.
Process milk, manufacture milk based products as decided by the federation.
Operate cattle dairy feed plant.
Veterinary services.
State Federation
230
GCMMF’s Cooperative Structure
GCMMF coordinated with different unions to decide on its product mix. It was
responsible for marketing products and for brand development. Other activities like
logistics of milk collection, distribution of finished products, sale of products through
dealers and retail stores were done by third party service providers. The distribution
was carried out through third party distribution depots managed by distributors
exclusive to GCMMF (Refer Exhibit V for Organization Structure of GCMMF).
Exhibit V
Organization Structure of GCMMF
Managing
Director
Product
Manager
Sales Officer
Field Sales
Personnel
Adapted from Prof. S. Manikutty, Gujarat Co-operative Milk Marketing Federation Ltd, Asian
Case Research Journal, 2002
Forming a part of the GCMMF value chain were around 2.4 million farmers. These
farmers formed around 11,600 VCSs, whose main activity was milk collection. These
VCSs were a part of 12 district unions which processed the milk. The district unions
collectively employed around 1,000 people. The district unions formed the federation
employing around 700 people. (Refer Table I for an overview on GCMMF).
The NDDB-GCMMF Tussle
While GCMMF laid the foundation for the development of dairy industry in India, the
Indian Government on its part made efforts to support the dairy industry in the
country by encouraging the establishment of dairy cooperative societies. The
government came up with the Delhi Milk Scheme 16 in 1959 and several state
governments also introduced similar schemes during the 1960s. Most of these
schemes were not successful because of the middlemen and contractors, who
exploited the Government-run plants owing to the perishable nature of milk. When the
milk supply was insufficient, the Government purchased imported milk powder which
made things worse for dairy farmers. As milk supplies to urban areas could not be
maintained in the summer months, state governments started rationing the sale of
milk.
16
To cater to the milk requirements of Delhi, this scheme was launched. Under the scheme, the
government collected milk through middlemen and pasteurized and marketed it through specially set
up milk booths.
231
Enterprise Performance Management
232
GCMMF’s Cooperative Structure
17
Anupama Katakam, “Dairy War,” Frontline, March 15, 2003.
18
Nandini Lakshman, “Duel in Dairyland,” Business Standard, January 23, 2003.
233
Enterprise Performance Management
But we all know that it is in marketing and brand creation that the real cream lies.
Britannia, after all, does not manufacture the dairy products that it markets in its brand
name.”19
According to Amrita Patel, Chief of NDDB, the state federations would be benefited
by the 51:49 joint venture between Mother Dairy Foods and Vegetables Limited, a
wholly owned subsidiary of NDDB and the state federations. She said, “Their
marketing is in a huge mess. All we are doing is partnering them to see that they do
well.”20 She opined that if the state federations did not receive help on time, they
would not be able to compete with multinationals entering the country.
The spat between NDDB and GCMMF intensified further when NDDB stopped
buying milk and skimmed milk powder from GCMMF in December 2002. The result
was a milk crisis in Delhi. In January 2003, Mother Dairy stopped buying AMUL
products and selling AMUL milk. GCMMF had been the sole selling agency for
NDDB‟s vegetable oil Dhara since its inception in 1989. In May 2003, this agreement
was terminated.
Meanwhile, in early 2003, the Government of India amended the Companies Act,
1956. According to the amendment in the Act, cooperatives would come under the
purview of the Registrar of Companies instead of the Registrar of Cooperatives, and
would be called cooperative companies. After the amendment in the Act was passed,
several changes were brought in and instead of each member of the cooperative
getting one vote, the number of votes depended on the member's contribution to the
cooperative.
In mid-2003, Mother Dairy launched its butter in AMUL‟s markets and followed it up
with cheese, lassi21 and flavored milk. In response, GCMMF started selling milk in
Delhi in November 2003, competing against NDDB‟s Mother Dairy. AMUL milk
found immediate acceptance and it entered into alliances with other dairies located
near Delhi in order to meet the demand.
In June 2004, GCMMF claimed that it had paid off all the loans taken from NDDB
and sought withdrawal of the NDDB nominee from the GCMMF board. GCMMF
said, “We don‟t want the NDDB to have its nominee on our board, as it is our
competitor now and should not be privy to our internal business decisions.” 22
By December 2004, Mother Dairy entered Mumbai, and started selling its products at
a lower price than AMUL‟s. In response, in the same month, AMUL launched its milk
in Kolkata, West Bengal, which was hitherto under Mother Dairy and Metro Dairy.
Mother Dairy immediately launched several products like curds, dairy whitener, butter
and ice cream in Kolkata to compete with AMUL.
The tussle took the shape of a personal rivalry between Kurien and Amrita Patel.
Kurien claimed that he had made a mistake in choosing her as his successor. “To me,
a cooperative is a result of faith. Faith is a result of belief without reason. I don‟t think
Amrita had that kind of belief, or even a similar kind of belief I chose to build my life
around, I should have been more careful in choosing my successor.” 23 He expressed
the view that bureaucracy and multinationals were trying to weaken the dairy
cooperative movement.
19
Harish Damodaran, “Amul – Mother Dairy Tussle Set to Intensify,” The Hindu Business Line,
December 27, 2002.
20
Anupama Katakam, “Dairy Wars,” Frontline, March 15, 2003.
21
Lassi is a traditional Indian beverage that is obtained by blending yogurt with water with sugar and
spices.
22
Harish Damodaran, “Amul Wants NDDB Nominee on Board Out – Cites „Conflict of Business
Interest,‟” The Hindu Business Line, June 29, 2004.
23
“Milk-Mad Vs Milk Maiden,” The Telegraph, February 18, 2006.
234
GCMMF’s Cooperative Structure
Several sections of the media and the analysts opined that GCMMF had been unfair
with Kurien. They said that Kurien‟s fears of NDDB taking the cooperatives away
from the farmers appeared to be coming true. Kurien feared that Mother Dairy might
take undue advantage of the cooperative retail chain to push its interests forward. He
felt that sooner or later the government would divest its stake in the joint ventures, and
the dairy farmer would be the ultimate loser. According to Kurien, “There is an
inherent contradiction that the government-owned NDDB, through its subsidiaries, is
getting into fresh business activities at a time when the Centre is considering further
divestment in all existing areas including those in the dairy sector such as the Delhi
Milk Scheme.”26
On the contrary, some analysts were of the view that Kurien opposed the joint venture
between NDDB and state federations as he feared that stronger regional brands would
make the market highly competitive for AMUL. They were of the opinion that
GCMMF was losing heavily due to Kurien‟s stand and his tussle with Amrita Patel.
With Kurien‟s departure, the relationship between GCMMF and NDDB was likely to
improve and they would be in a better position to tackle the onslaught of multinational
players. GCMMF was even considering including Amrita Patel as a co-opted member.
According to Ramsingh Parmar, one of the directors of GCMMF, “Now the
relationship between the NDDB and GCMMF will improve and better understanding
will take place between the two.”27
There were opinions from some quarters that Kurien had overstayed his tenure and
should have exited gracefully instead of being pushed out of GCMMF. Kurien was
reputed to be quite an aggressive manager. Some insiders felt that Kurien was
autocratic and ran GCMMF like a joint stock company, but always maintained high
quality and performance levels.
The fall-out of the tussle was that competition between different state federations,
which had hitherto functioned in their own territories, was now direct and growing.
Analysts said multinationals would now be in a position to take advantage of the
24
Mitul Thakkar, “Father of White Revolution, Kurien Fights Last Ditch Battle,” DNA India, March 19,
2006.
25
“Amul‟s Father Kurien Quits,” Mid Day, March 20, 2006.
26
Gayatri Ramanathan, “Newsmaker: Verghese Kurien,” Business Standard, March 24, 2006.
27
“Parmar May Head GCMMF,” Business Standard, April 01, 2006.
235
Enterprise Performance Management
situation to ease their way into the Indian dairy products market. The events were
coming full circle with the poor farmer likely to be vulnerable to multinationals once
again.
Internal conflicts between district unions also came to the forefront after Kurien left
GCMMF. The strained relations between the Ahmedabad and Mehasana district
unions were evident, with the Ahmedabad union accusing Kurien of favoring the
Mehasana and Kaira unions and neglecting the Saurastra region of Gujarat. In order to
increase milk procurement, the Ahmedabad district union announced that it would pay
Rs. 225 for one kilo of fat instead of the prevailing Rs. 180 per kilo. This move was
expected to set off rivalry between different unions and affect consumers in the long
run. According to Bharwad who had initiated this move, “Due to the rules and
regulations of GCMMF in Kurien‟s reign, we were tied up. Now after paying more to
the milk producers, we will get more milk and would able to compete with the local
private dairies.”28
With Kurien leaving GCMMF, the only federation in India which was reportedly free
from the hold of politicians may become vulnerable and bureaucracy and corruption
may become more prevalent in GCMMF too. The politicians who were kept at bay by
Kurien were making inroads into GCMMF by taking an active interest in its activities.
It was widely believed that two prominent political parties were looking for ways to
take control of the cash-rich federation. According to The Economic Times, “The
overpowering fear now is that the massive dairy co-operative movement may go
through a power-shift quite like the cooperative bank movement, which the BJP29 took
control of, till its collapse. The tug-of-war to take control of the federation is now
between the BJP and the Congress30 and who can win over the 13 dairy directors
under GCMMF.”31
Kurien had created a powerful brand with a national presence, and which was a
market leader in several categories, and according to Abraham Koshy, Professor at
Indian Institute of Management, Ahmedabad, “AMUL brand has grown to such a
mega size that some individuals cannot harm it.”32 However, the threat from
multinationals could not be ruled out completely.
Kurien had certainly made a lasting contribution to the cooperative dairy movement in
India and to India‟s self sufficiency in milk production. But he was always very clear
that cooperatives should be run by farmers and the government should not interfere in
its activities. He firmly believed that Indian companies could be on par or even better
than multinationals. According to Business Standard, “... the country should be
grateful to Kurien for what he has done to benefit millions of dairy farmers and the
many more millions of consumers of milk and milk products.” 33
28
“Chaos Reigns at Amul after Kurien Steps Down,” Business Standard, March 23, 2006.
29
The Bharatiya Janata Party (BJP) is one of the major national political parties in India.
30
Indian National Congress also known as the Congress Party or Congress (I) is a major political party
in India.
31
“Kurien Heir: BJP, Cong in Milk War,” The Economic Times, March 22, 2006.
32
Swati Bharadwaj, “Will Brand Amul Withstand Loss of Founding Father,” The Economic Times,
March 22, 2006.
33
“The Milkman Goes,” Business Standard, March 22, 2006.
236
GCMMF’s Cooperative Structure
237