How Amul Made Profit Even During Pandemic

Amul's performance during the Pandemic

The Seekers

20 days ago|8 min read

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On the 24th of March 2020, our Prime Minister announced a nationwide lockdown because of the pandemic, and what followed next was a nightmare that our nation was not prepared for Millions of people, especially laborers, lost their jobs. Several billion-dollar industries came to a standstill and it cost the Indian economy, more than 10 lakh crores. One such industry that was heavily impacted due to the pandemic, was the dairy industry and it cost Milk producers in India more than 112.3 crores every single day. But you know what guys There was one legendary company that was so strategically able to navigate through this situation that they did not just minimize their losses, but even went one step further to increase their Revenue by 698 crores. This brand, that I’m talking about is none other than Anand Milk Union Limited, which we all so dearly know as Amul.

1.     Amul Earned Profits during Covid Lockdown

Now everybody knows the story and history of Amul and how it has been there for decades. But very few people know how incredible this company’s business strategies are. And one such mind-blowing example of the same is how Amul reacted to COVID-19. You know what Amul has done such an extraordinary job during the COVID times that in 2020 itself, while the rest of the companies were struggling to even keep their supply chain going, Amul went on to produce 33 new products in the market procured an additional 35 lakh liters Of milk every single day and even paid 800 crores extra to the rural milk producers of India.

The question is-. How did Amul manage to achieve such an incredible feat and, most importantly, what are the business strategy lessons that you and I need to learn from this case study to become extraordinary business leaders? The answer to this question lies in the extraordinary supply chain management of Amul.

2.     Amul too saw a Decline in Revenues at First

When the lockdown was announced in March, the dairy industry was allowed to operate with certain restrictions, because milk came under the essential goods category. But as soon as the announcement of the lockdown was done, several businesses either cut down or closed their businesses, and this resulted in the loss in demand for the dairy industry because these industries also included the restaurants, the catering, and the hotel businesses. And these businesses accounted for 20 % of the revenue for the organized dairy sector. As a result, Amul’s sales also saw a decline of 10-12 %, And when the dairy companies saw this massive fall in demand, they quickly cut down the milk procurement, decreased their logistics, and decreased their production by a large extent.

This left many farmers in a helpless state, because milk procurement was very less many laborers, such as truck drivers and factory workers, lost their livelihood because less milk meant fewer trucks and less operation of factories. But you know what guys, While the entire dairy industry was preparing for a loss in demand, Amul did the complete opposite and started preparing for a surge in demand. Now the question is when it’s being seen that there is a major decline in demand from the restaurants and the hotels that account for 20 % of the revenue. Why would anyone prepare for a surge in demand? Isn’T that, like a 1000 crore gamble? Well guess what There was one very important variable that very few people took into consideration, and that was the change in consumer behavior.

3.     Household Consumption of Milk Increased as an Immunity Product

The household consumption of milk products skyrocketed as more and more people began to stay at home. And this, in turn, gave rise to the homemade food trend because of which the demand for both groceries and milk products skyrocketed. And secondly, because of the pandemic. People became extremely health, conscious, and millions of people shifted from buying loose milk to buying packaged milk. And, while other brands underestimated this consumer demand and started decreasing their supplies. The managing director of Amul Mr.

Rupinder Singh Sodhi insisted that they keep the supply chain functioning at full capacity. And guess what, Despite the closure of the restaurants as of May 2020 during the peak of the lockdown times, the demand for milk-based products skyrocketed.

The demand for cheese increased by 80 %, demand for cottage cheese, increased by 40 %, and the demand for condensed milk increased by 100 % And a result Well Amul plans for operating at 115 % capacity. The demand for Amul products was so high that they had to hire other plants from other companies that were lying vacant except for ice creams. All their plants were operating at full capacity throughout the lockdown. And on top of that, they also realized that moving trucks through the country will be very difficult because of the shortage of labor and the lockdown restrictions.

4.     Supply Chain Management of Amul

So they started using the railways to transport products quickly throughout the countries. Now, this begs the question: considering the vast supply chain of Amul, I mean we are talking about 18,700 societies, 5000 milk tankers going to 200 chilling stations, 10,000 distributors, 1 million retailers, and, most importantly, more than 3.6 million farmers. The question is: how did they manage to coordinate such a huge supply chain and manage their resources properly? The answer to this question lies in a strategic partnership that was established between Amul and IBM in 2009, wherein Amul invested a hefty 80 crores into transforming the information technology landscape of the company. Now what this meant is that IBM would develop a full-fledged digital system to track every small detail of operation that is being carried out in the supply chain of Amul. And just like, we get an update about our Amazon order through IBM’s system. The management team of Amul could exactly tell you how many plants were working at full capacity, how many trucks are engaged and in which areas, and, most importantly, it could also tell you when and how many trucks or plants are at idle capacity so that you can Direct the workload to them to make optimum utilization of every element of the supply chain.

And this system turned out to be a game-changer for Amul during the lockdown, because, while on one side, the supply chain of milk was overloaded, the ice-cream and frozen foods vertical Of the business was almost shut down. Therefore, the labor, storage, and trucks were lying at idle capacity from the end of ice cream and frozen foods. But thanks to IBM’s system, Sodhi, and the team were able to accurately oversee the entire operation of the supply chain. And they very conveniently diverted all the idle resources from the ice cream and frozen foods vertical to the milk supply Chain.

5.     Innovative ways of selling Amul Products

And all of this process is said to have happened, overnight. And this end-to-end digitalization made the process so efficient and gave them so much clarity about their operations. That Amul was even able to provide incentives for the ground staff. The casual workers were given 100-125 rupees cash incentives and for the workers, even food and stay arrangements were made so that they don’t get sick and they don’t get affected by COVID. And when they realized that the cattle feed was not sufficient. Amul even made extra arrangements for cattle feed for farmers.

And all of this made the supply chain of Amul so efficient and effective that, while the rest of the dairy industry was completely shut down, Amul tapped onto their market share and procured 3.5 million liters of extra Milk every single day and paid 800 crores extra to the rural milk producers of India. A fun fact over here is that Amul even used 3rd party e-commerce sites like Bigbasket, Dunzo, and Flipkart and even landed exclusive deals with Swiggy and Zomato to sell butter, milkshake, and paneer. And, according to Sodhi, in May itself, they got more than 60,000 Delivery orders through Zomato and they sold 3 crores worth of Amul products in more than 200 cities. This was the second pillar of their historic success. That is the end-to-end digitalization of the entire supply chain and the incentivizing of the labor forces. With that, we move on to the last part, which is something that you all must have already observed, and that is the humungous investment of Amul into marketing. Now, people, during the months of COVID, when other brands were cutting down on their advertisement, Amul increased its ad volumes by 316 % compared to 2019. And they were so aggressive with their campaign that the Amul Kool ad was viewed 10 times more than the Indian Premier League ( IPL, ) itself. And when Doordarshan started re-broadcasting, the epic shows like Ramayan and Mahabharat during lockdown Amul, started running their old ads to resonate with the nostalgic mood of the audience, creating an even better impact.

6.     Amul Remained Ethical throughout during Covid

Now the highlight over here is that although Amul was very keen on tapping into the marketing opportunities and even made immunity-boosting products, they never went overboard with any kind of ridiculous COVID claims, unlike some other brands in our country. This is how using an extraordinary foresight of consumer behavior through agile supply chain management, system. using digital transformation. Third-party collaboration, incentivizing of labor, and strategic marketing initiatives. Anand Milk Union Limited established a benchmark for crisis management for dairy companies from all across the world to follow. What are the lessons that we need to learn to become extraordinary Business leaders? While good leaders prepare to face risk, great leaders prepare to embrace risk with open arms. In this case, most companies are prepared to prevent their losses. Sodhi prepared Amul to operate at full capacity even during the pandemic, And one of the reasons was such a bold decision was the fact that he had already seen how his senior leaders kept the company going, despite the floods, the curfew, and even during the war.

7.     Amul Became a Saviour for Farmers and Rural Households

No matter how big your organization is Resourcefulness is one attribute that will always save you during a crisis. The only question is: how are you going to build such an agile system? In this case, it was Amul’s, futuristic investment of 80 crores into IBM’s systems that helped them operate, such a huge supply chain in such an optimized manner. And last and most importantly, every time there is a crisis of any kind. It could be a pandemic. It could be a crisis specific to your industry, always remember during such a time that you can either choose to see it as an obstacle or you can choose to see it as a golden opportunity to get ahead of your competitors. In this case, Sodhi was so sharp that he realized that COVID-19 was the perfect opportunity for him to capitalize on the market on every single front. So, firstly, he increased his market share and got the customers who were transitioning from loose milk to packaged milk. Secondly, all the farmers who were denied procurement from restaurants and other companies. They rushed to Amul, giving Amul 3.5 million liters of extra milk every single day.

Hence Amul was able to establish itself as a savior for farmers. And, most importantly, the industry was ruthless in cutting down its frontline workers. Amul provided the same workers with added incentives, therefore building a very strong relationship with its frontline workers. This is how Amul became an opportunist during times of crisis and established a benchmark for brands all across the world to learn from.

 

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