Our Motive is to Buy as Costly as Possible and Sell as Cheap as Possible : R. S. Sodhi

We are living through an unprecedented crisis. How difficult has it been for you and Amul?
The lockdown was not 100% unprecedented for us as an organization. Not many would remember, during the late 1980s and the early 1990s, there were curfews for months in Ahmedabad as it was witnessing many riots. Lockdowns were frequent. People were afraid to come out of their houses. Even at that time, we worked without disruption. This time the quantum and intensity were different. Then the lockdown was only in parts of Ahmedabad and we had no technology, phone or internet.

Were you prepared for a lockdown?
The lockdown did not come all of a sudden. It was expected. We knew what was happening in China. In fact, we started preparing almost 10 days before the lockdown. We are in critical business. Besides being an essential product, milk is also a very dependable source of livelihood for over 100 million people. They are mostly marginal farmers and poor women. And unlike, say, wheat, it is a daily crop that needs to be harvested twice daily.

I remember, on March 17, we looked at different aspects of our operations like precautions, social distancing, sanitisation, invoicing and warehousing and figured how to have a robust IT backbone to carry out our operations smoothly. Anticipating disruption, we started stocking up products in our 77 warehouses, transporting much more than what we normally would. At the head office, we split the team into two, working in two sets.

On March 24, when the PM announced a lockdown, panic spread. I was able to pick up only 200 gm of butter and milk. I realised that if I am panicking then everyone else would be too. The first thing I did was communicate to the consumer and the farmer. My two-minute video, recorded on my handset, was basically to reassure them. Communication with all our major stakeholders – farmers, transporters, dealers, retailers, consumers, employees – was very critical. Even as we did face-to-face video calls with all our staff to align everyone, we also announced a hike in incentives for everyone – up to 40-50% of salaries. We also increased our margin distribution. We doubled our communication with consumers, ramping up our advertisements.

What has this pandemic taught you?
That food is the most important thing. That there are advantages of being a multi-product, multi-location, multi-channel company. With 84 plants, when things were difficult in Mumbai where our four-five plants got affected, other plants worked overtime. Being a multi-product company, while ice cream as a product was almost finished, paneer consumption went up. Presence in multiple channels, too, had its advantages. While the commercial and modern format segments were down, other segments like residential went up sharply. While out-of-home consumption was hit, home consumption rose.

Pandemic has hit many businesses. How has Amul fared?
There are many things we realised during the pandemic. That people will buy more and more branded products. We also realised the importance of relationships with our customers. Our bonding strengthened.

During Covid, food consumption hasn’t gone down. In fact, it has increased. While it was challenging, we made sure we faced no disruption in production, supply and transport. In Gujarat, we started getting 17-18% more milk during lockdown. Overall, we would have got 40-50 lakh litre more milk during the period. In 100-120 days we have given Rs 18,000 crore extra cash to our farmers for extra milk we procured.

How differently does a cooperative operate from a private firm?
As a cooperative, small people like farmers have come together to pool their resources, do processing and marketing. The big difference here is that our suppliers are also our owners. For any private company the motive is to buy as cheap as possible and sell as expensive.

Our motive is just the opposite – buy as costly as possible and sell as cheap. 

We develop our market based on the quantum of raw material we get. We have to sell the product at such a price that all products get sold and at the end of the day there is a minimum difference between buying and selling price. Private companies will always want to maximise that difference. So as a philosophy, our mission is to have minimum EBIDTA and keep all stakeholders happy. Give more to earn more. Over the years, we have worked hard to establish that equilibrium and earn our customers’ faith. And we will never short-change our customers.

How has Amul thrived amid so much competition, including from MNCs?
We are India’s largest FMCG company with Rs 52,000 crore in revenues. We are targeting Rs 1 lakh crore by 2024-25. Over the years, technology has changed, competitors have changed. What hasn’t changed is our DNA, our culture and our objectives. That is our religion; that won’t change. We are a very successful, contemporary and relevant Indian brand. India will always remain the main focus market for us. India is today the world’s largest and fastest-growing market for milk and the largest milk-producing market. So why focus on any other market?

We have been growing at a stable 15% annually. We have recently begun to look at the edible oil business. One Gujarat cooperative was shutting down and the state government wanted us to help restart the plant. That belt is rich in groundnut and sunflower. We are learning the oil business. It’s a learning phase. We have also set up three-four bakery plants. But our business focus will always be dairy.

How do you calibrate your product portfolio and what role do margins play in shaping your thrust on segments?
You can’t change your product portfolio simply because of margins. We can’t focus more on cheese because it has better margins. Our priority is to first provide fresh milk. Also, remember, that in cheese while margins are more, expenses also are higher. In milk, the scope for scale is more.

The Amul girl has endured for decades. She has often taken on controversial topics too.
For the campaign, we just sign the bill. That is the only role we play. For the last 40-50 years it has been around, we have given full creative freedom to the agency. She is someone who does not spare anyone or fear anyone.

Actually, our advertising spend is small — just 0.8% of our revenues. The Amul girl campaign could be just 4-5% of our total ad spend. But its unique creative gives us a lot of visibility. Many times, PR agencies told us to get celebrities etc. But for us this is working. She (Amul girl) represents the mood of the nation. What is the nation thinking? Over so many years, she has always spoken the truth.

We are a long-term brand. You can’t measure performance on a quarter-on-quarter basis and have knee-jerk reactions. As an organisation, we have consistency in everything, including manpower. For many of our employees, some here for 20-30 years, this is their first job.

Source: The article is extracted from Economic Times, August 16, 2020.