Amul to pay farmers 20% more to earn more

The 'Taste of India' remains unsatiated. One would think that Gujarat Co-operative Milk Marketing Federation, which on Friday said it had become the country's first billion dollar co-operative by clocking Rs 4,277.84 crore in revenues for the last financial year, would be tempted to rest on its oars for a bit. After all, it took 60 years to get here.

On the contrary, it has just embarked on a mission to increase its revenues to $2.5 billion "" Rs 10,150 crore at the current exchange rate "" in just three years. That will require a compounded annual growth rate of over 35 per cent at a time when the industry is growing at 25 per cent a year.

The executives of Anand, Gujarat-based Amul, the country's largest dairy products maker, said that there is enough untapped market to make it a mission possible. As part of the plan, the co-operative will increase its sourcing of milk, pay farmers more, improve its supply chain and sell more through organised retail.

Amul plans to sell more through large retail chains such as Reliance, Aditya Birla group, Subhiksha and Spencer's. At present, organised retail makes up 4-5 per cent of the company's turnover, which it hopes to increase to 10-12 per cent by 2010.

Its general manager, R S Sodhi, said the size of the organised market for milk and milk products is currently estimated at Rs 50,000 crore while the total market including the unorganised players is worth about Rs 1,50,000 crore.

"We will pay farmers 20 per cent more," said Sodhi. Amul, he said, is looking to increase its sourcing from states other than Gujarat. In the last three years, the co-operative has increased its sourcing of milk from Maharashtra, West Bengal and Orissa.

A significant part of the market "" in excess of 90 per cent according to some "" is still in liquid milk. "Amul should tap a large client base to migrate them from buying milk from the unorganised sector to the organised set-up," said an industry veteran.

By getting closer to the market, Amul can increase the efficiency of its supply chain, which, even competitors concede, is a crucial advantage.

"The biggest challenge is to plan the logistics well. Amul could gain significantly with a co-packer agreement. Most of India is a fresh dairy market. Even if there is a 15-day shelf life for the product, most consumers do not touch the product on the 14th day," said a rival to Amul. The maximum turnaround time is 10-12 days for value added products like paneer.