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9 - 5 16 - 11 6 REV: JUNE 16, 2017 ROHIT DESHPANDE TARUN KHANNA NAMRATA ARORA TANYA BIJLANI India’s Amul: Keeping Up with the Times I was convinced that the biggest power in India is the power of its people—the power of millions of farmers and their families. What if we mobilized them, if we combine...

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9 - 5 16 - 11 6 REV: JUNE 16, 2017

ROHIT DESHPANDE TARUN KHANNA NAMRATA ARORA TANYA BIJLANI

India’s Amul: Keeping Up with the Times I was convinced that the biggest power in India is the power of its people—the power of millions of farmers and their families. What if we mobilized them, if we combined this farmer power with professional management? What could they not achieve? What could India not become?1 — Dr. Verghese Kurien, former Chairman and Managing Director, Gujarat Cooperative Milk Marketing Federation On a sunny morning in March 2013, R. S. Sodhi, Managing Director of Gujarat Cooperative Milk Marketing Federation (GCMMF), commonly known as Amul after the brand name for milk products it had popularized, sat in his office gazing at Verghese Kurien’s wall portrait. Kurien, who led the company for 50 years, had died a year earlier, but his legacy hung over Sodhi’s office and the 3.2 million farmers who were the backbone of Amul. Amul was founded in 1946, eight months before India’s independence from Great Britain. By 2013, Amul was producing 46 types of dairy-based foods—including cheese, butter, ice cream, and pouched milk—and was India’s largest food product marketing organization, with sales of $2.5 billion.a Amul controlled a large portion of the dairy value chain from milk production to processing, packaging, and branding. Its iconic butter advertising campaign, launched in the 1960s, spoofed popular current events and was believed to be the world’s longest-running outdoor advertising campaign.2 It had resulted in Amul becoming one of India’s most recognizable brands. Sodhi was torn by a desire to maintain the course set by Kurien and the need to keep up with the times, as economic and social transitions were changing India steadily. India’s millennials, constituting 60% of the population (roughly 700 million people),3 straddled the line between modernity and tradition. Sodhi had to navigate the changing aspirations of Amul’s consumers and the talent that Amul sought to attract, while dealing with the local and global competitors nipping at Amul’s heels. Sodhi wondered to what extent, and in what direction, he should alter Amul’s growth trajectory. He could not help but look to Kurien’s portrait for inspiration and answers. a Converted using an exchange rate of 54.29 Indian rupees (INR) for1 USD as on March 31, 2013.

Professors Rohit Deshpande and Tarun Khanna and Research Associate Tanya Bijlani prepared the original version of this case, “India’s Amul: Keeping up with the Times,” HBS No. 514-067, which is being replaced by this version prepared by Professors Rohit Deshpande and Tarun Khanna and Associate Director Namrata Arora and Research Associate Tanya Bijlani (both of the India Research Center). HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2016, 2017 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

This document is authorized for use only in Dr. Amit Bhadra Prof. Hari Iyer Dr. Hufrish Majra Prof. Arun Sharma Dr. Hitesh Kalro's .Marketing Management course at NMIMS, from June 2017 to December 2017.

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The Indian Dairy Industry In 2013, India was the world’s largest milk-producing and milk-consuming nation, with approximately 90 million families and 400 million individuals involved in dairy farming.4 These farmers came from a rural population of 830 million people living in over 600,000 villages.b Cultivation was the primary agricultural activity in the country, with farmers using by-products to sustain their cattle. Dairy farming provided a secondary source of income and was often managed by the women of the household. Whereas in Western countries milk production featured large mechanized farms of 2,000–5,000 cattle, in India milk was produced mainly by small farmers owning an average of 2 cows. In 2011, 138 million individual landholdings in India spanned 159 million hectares—roughly 82% of farms were smaller than 2 hectares. Farmland was customarily inherited and divided from one generation to the next, further shrinking the size of the average landholding of an Indian farmer. Approximately 50% of milk produced in India was retained for self-consumption, while 40% was distributed by unorganized milkmen who sold it to local consumers.5 The remaining 10% formed the organized sector, of which large private players and local cooperative organizations accounted for 55% and 45%, respectively.6 India had 177 milk producers’ unions, which collected milk from 133,000 village-level cooperative societies and 14 million farmers.7 The products from these collectives were distributed under brands like Gujarat’s “Amul,” Karnataka’s “Nandini,” and Punjab’s “Verka.”8 While cooperative organizations had traditionally focused on liquid milk—46% of India’s milk was consumed in liquid form—private companies focused on higher-margin value-added products like cheese, ice cream, paneer, and ghee.9,c (See Exhibit 1 for India’s dairy market by product category.) A unique aspect of the Indian dairy sector was the inclusion of buffalo milk with traditional cow milk. Often the two types of milk were mixed together at production and collection points. Buffalo milk—more fatty and long-lasting than cow’s milk—was ideal for making products such as yogurt, paneer, and ghee. Cow’s milk contained less fat, spoiled faster, and was better suited for making cheese and Indian desserts.10 Crossbred cattle—a mix of indigenous cows with exotic dairy breeds, including Holstein and Jersey cows—were another source of milk production. In 2010, the average annual yield for a cow was 1,350 liters of milk, a buffalo 1,800 liters, and a crossbred cow 2,600 liters.11 Although crossbreeds had helped in increasing milk production, the cost of cultivating these breeds was high, as they were more sensitive to disease, heat, and diet than indigenous cows were. In 2013, India’s entire organized and unorganized dairy market was estimated at $47.6 billion.12 The sector had grown by 7.5% annually in recent years, outpacing the country’s average GDP growth of about 6%.13 Growth in demand was expected to continue. With India’s large vegetarian population, dairy products comprised 18%–20% of the average household’s food bill.14 While the country was largely able to meet its demand for milk and dairy products, rising per capita incomes and a growing population were pushing demand. While dairy cooperatives and foreign multinational dairies largely dominated the market, new dairy entrepreneurs were entering the fray.15 Often these smaller outfits focused on higher-end valueadded and premium products. For instance, companies in Mumbai and New Delhi had begun to offer farm-to-home milk services for clients desiring locally sourced and organic products. Other premium products included probiotic Greek yogurt, whey protein, and on-the-go products. b As per the Census 2011. c Paneer is a cottage cheese, and ghee is a type of clarified butter, both commonly used in South Asian cooking.

2 This document is authorized for use only in Dr. Amit Bhadra Prof. Hari Iyer Dr. Hufrish Majra Prof. Arun Sharma Dr. Hitesh Kalro's .Marketing Management course at NMIMS, from June 2017 to December 2017.

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Amul’s Early Years In the 1930s, Polson Dairy began manufacturing its own brand of butter in Anand, a town in the state of Gujarat. In 1943, Polson began to pasteurize and supply milk to the Bombay Milk Scheme (BMS), organized by the British colonial government to procure milk for India’s largest city, Mumbai, further increasing milk production in the district. Since Polson was granted monopoly status, farmers in the surrounding Kaira district were forced to sell their milk at unreasonably low prices. Seeing those low prices as another example of economic exploitation by the colonial government, Kaira farmers went on strike with Sardar Patel, a famed freedom fighter from a nearby village. In 1946, the government relented, giving farmers permission to form their own cooperative. In June 1948, the Kaira Union began pasteurizing milk; by the end of the year, it was processing 5,000 liters of milk a day. Not a farmer by trade, Dr. Verghese Kurien joined the Kaira Union in 1951 as its General Manager. In 1946, with a scholarship from the British colonial government, Kurien had enrolled at Michigan State University to qualify as a dairy engineer. Despite the specifics of his scholarship, he had returned to India in 1948 with a master’s degree in metallurgy and nuclear physics and no interest in dairy. However, the government gave him a stark choice: accept a post at the Government Research Creamery in Anand or return the amount of his scholarship. In 1949, Kurien arrived in Anand, a sleepy town of just 10,000 people, missing the opportunity he had left behind in the U.S.16 Despite initial frustrations, Kurien dived into his assignment and spent his spare time helping the Kaira Union farmers fix the secondhand machines they used to pasteurize milk. In working directly with the farmers, Kurien became sympathetic to their challenges—the economic consequences of fragmented landholdings that limited development of arable land and weakened bargaining power—and interested in helping them operate their dairy plant. By 1953, the Kaira Union was collecting over 20,000 liters of milk daily, exceeding the demand of the BMS. Between 1955 and 1960, the union expanded its facilities and began producing milk powder, butter, ghee, sweetened condensed milk, baby food, and cheese. Improvements in distribution and refrigerated transportation allowed the expanded product portfolio to reach new markets. During this time, the union also began marketing its products under the brand name “Amul.” A similar emphasis on technology and training also helped Amul increase the yield of its farmers’ cattle. It began providing artificial insemination services, increasing the frequency of calving and milk productivity; it also offered mobile veterinary services, established a plant to manufacture cattle feed, and trained its farmers on animal husbandry. Most significantly, Amul proved Western dairy experts wrong by manufacturing products like milk powder and cheese using buffalo milk. Amul’s success was celebrated in the critically acclaimed Bollywood production Manthan. The fictionalized film closely followed the events of Amul’s development, including the leadership of a well-educated outsider, the travails of local farmers, the societal and economic challenges the cooperative faced, and the importance of collective benefit over individual pursuits. Winning India’s Best Hindi Film award in 1977 and submitted as India’s 1976 Best Foreign Language Film to the American Academy Awards, the well-received film publicized Amul and celebrated its contribution to India’s rural development.

3 This document is authorized for use only in Dr. Amit Bhadra Prof. Hari Iyer Dr. Hufrish Majra Prof. Arun Sharma Dr. Hitesh Kalro's .Marketing Management course at NMIMS, from June 2017 to December 2017.

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Operation Flood Amul’s success was recognized in 1964, when Indian Prime Minister Lal Bahadur Shastri asked Kurien to set up the National Dairy Development Board (NDDB) with the task of replicating Amul’s success throughout India. In 1965, the newly minted NDDB launched “Operation Flood” to create milk cooperatives across several Indian states that would connect rural dairy farmers with urban consumers in Delhi, Kolkata, Mumbai, and Chennai. The NDDB sold milk powder and butter oil, gifted by the European Economic Community, in targeted urban areas to generate demand. Once established, the demand was filled by locally procured milk products and not imported milk powder. The initial demand also created brand recognition, developed a market for milk products, and created an ecosystem in which farmers felt comfortable investing time and money. The NDDB set up over 70,000 village cooperative societies across 170 dairy shedsd with district-level dairy cooperatives and processing plants. India’s per capita availability of milk, which had previously been declining, grew from 0.13 liters per day in 1950–1951 to 0.3 liters per day in 2012–2013.17 Operation Flood was lauded as an economic, agricultural, and social success. In constant (1995) dollars, the annual payment by the cooperative system to dairy farmers had risen from $60.1 million in 1972 to $973.7 million in 1995.18,e The increased income benefited almost 100 million Indian families, the majority of whom were impoverished small farmers, women, or landless laborers.19 The phenomenon became known as the “white revolution,” and the benefiting villages were said to have added “milk roads”—areas where the streets were cleaner, kids better fed, and houses better built. Kurien was proud that a common commitment to the cooperative often transcended religious, ethnic, caste, and gender tensions. He elaborated: In many ways, the milk collection at the village societies transformed the very social fabric of communities. Take for example the farmer and his wife. . . . With the dairy business picking up, her income through milk soon became equal to her husband’s income through farming and that led to more equality between them. There were other implications too. From the very beginning the village cooperative societies insisted that the queues for milk collection would be formed not on the basis of caste but strictly on a first come first serve basis. . . . What the process certainly did was to begin chipping away at such [societal] biases.20 In 1979, the white revolution prompted the establishment of the Institute of Rural Management Anand (IRMA), a training institute for leaders and innovators in rural society.21 Over the years, numerous members of Amul’s senior managers, including R. S. Sodhi, who was a member of the first graduating class, were drawn from IRMA’s ranks. Amul hired 10–15 graduates a year, and others often took positions in agricultural finance, with NGOs, or with food companies such as Hindustan Unilever. Sodhi explained, “IRMA provided a sound and reputable technical education in rural management, and in an agrarian society like ours, that seems like a smart career choice.”

d A dairy shed is a region producing milk for a particular city or community. e Converted using 1995’s exchange rate of INR 34.92 for 1 USD.

4 This document is authorized for use only in Dr. Amit Bhadra Prof. Hari Iyer Dr. Hufrish Majra Prof. Arun Sharma Dr. Hitesh Kalro's .Marketing Management course at NMIMS, from June 2017 to December 2017.

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The Three-Tier Cooperative Structure Cooperative societies first emerged in the late nineteenth century, well after investor-owned business corporations were established as a form of organizing firms.22 Cooperatives varied greatly in their mission, structure, and size across the world. In the United States, they were commonly seen in industries like agricultural supplies, electricity generation and distribution, housing, banking, and insurance; in India, farmer cooperatives in the sugar and dairy industries were common, as were cooperative banks. As the number of dairy cooperatives in the Kaira district grew, they evolved into a three-tier model. At the village level was a society that residents owning cows or buffalo could join by purchasing a share and committing all surplus milk beyond their household consumption. In the mornings and evenings, farmers brought their milk to the collection center, where employees paid them in cash according to the milk’s weight and fat content, precisely and transparently. Farmers were also able to purchase affordable cattle feed and other services at the society. (See Exhibits 2 and 3 for pictures of an Amul dairy farm and dairy cooperative society.) At the district level was a union owned by its contributing dairy cooperative societies. Unions purchased milk from each society and transported it via tanker or truck once or twice daily to their dairy plants, where they processed and packaged value-added products. The finished goods were sold within the district. Unions also manufactured cattle feed, provided societies with cattle-support services such as veterinary care and artificial insemination, and trained farmers in animal husbandry and dairying. (See Exhibit 4 for an Amul district union plant.) By the late 1960s, each of the six district unions in Gujarat marketed its products under separate brand names. Concerned about competition among them, Kurien and his team formed the Gujarat GCMMF in 1973, an apex body owned by the district unions to market their products under a common brand. The GCMMF’s board of directors consisted of an elected member from each cooperative represented in the district union. The GCMMF also established a common distribution network for the unions, planned individual product mixes and capacity requirements, jointly procured raw materials (with the exception of raw milk), provided technical and management support, arranged for financing, and resolved conflicts when necessary. Societies, unions, and the GCMMF were registered under the state’s Cooperative Societies Act. They retained part of their earnings to meet expenses and shared profits with their farmer members according to the quantity of milk each supplied. The cooperative contributed to community development by investing in activities such as the construction of educational institutions, roads, and wells. (See Exhibit 5 for the 2013 financials of a dairy cooperative society.) Farmers also controlled the cooperative’s functions through a system of elections. (See Exhibit 6 for Amul’s election structure.)

Building a Brand Although it had a captive customer for milk in the BMS, the Kaira Union found it difficult to compete against established brands like Polson’s butter. In 1957, Kurien and his team were brainstorming ideas for a brand name that would help the union market its products, when a chemist in its laboratory suggested the name “Amul.” Kurien elaborated: It seemed to be just what we were looking for in terms of portraying the image and the ideals behind our cooperative venture. The name Amul came from the Sanskrit word amulya, which means “priceless” and denoted and symbolized the pride of swadeshi 5 This document is authorized for use only in Dr. Amit Bhadra Prof. Hari Iyer Dr. Hufrish Majra Prof. Arun Sharma Dr. Hitesh Kalro's .Marketing Management course at NMIMS, from June 2017 to December 2017.

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(indigenous production). It was also short, catchy, and it could, rather effectively, be used as an acronym for Anand Milk Union Limited.23 The Kaira Union registered the Amul brand, and the advertising agency Press Syndicate gave Amul butter the tagline “purely the best,” positioning it as a high-quality, trustworthy, value-formoney product. In 1966, Kurien’s team gave its butter account to the Indian advertising agency Advertising and Sales Promotion (ASP) with the directive to dislodge Polson as the leading butter brand in Bombay. Sylvester DaCunha, who headed the Amul campaign for ASP, elaborated: A new slogan dropped out of the sky when I told my wife Nisha about our new ad assignment. She spontaneously remarked, “Why don’t you say ‘Utterly Amul.’” To which I added, “Hey, what about ‘Utter...