Dairy: A unique FMCG category
It’s rare to see the govt. competing with private players in FMCG. The Dairy Industry though is a unique exception.
Amul doesn’t just compete, it’s the market leader.
Why do you think that is?
-The marketing and the great contextual ads?
Not really. Let me give you another hint. The Top 5 players in the dairy industry are all co-operative federations.
The Govt. backed Co-operative federations are not in the business of selling milk. They’re in the business of benefiting the dairy farmers. Hence, co-operative federations pay the highest price possible to the farmer. Most private players do not operate with that objective. As a result the farmers supply to the private players, only what’s left over, after supplying to the co-operative federation.
You might have also noticed something common to all dairy industry players-Almost all of them tend to operate across all product categories in the dairy industry. The size of operations in each of those categories doesn’t really matter. Why do players not specialize in a particular product category and become a market leader in that category? The answer is Mass balancing. Refer image below
To put it in simple terms the input mass of products into a system must be equal to the output. Let me elaborate. All the milk procured is not the same in fat, protein or water content. Hence, milk needs to be standardized. Let’s say you standardize milk to remove excess fat from it, what do you do with the fat? Throw it away!? Well the prudent thing would be to convert the fat into Ghee or Butter. Similarly if you want to make Ghee what do you do with what’s left of the milk? Butter milk of course. Notice how each product in the industry is linked to another product.
Now let me throw in the marketing challenge in the dairy industry. Typically a marketing plan, a sales plan and a manufacturing plan operate in tandem. The challenge with the dairy industry is that you can’t make your marketing plan for a particular category well ahead in time. Imagine this, the milk procured has relatively lower fat and as a marketer you’ve decided to run a TV campaign promoting your Ghee. There is no point to advertising if your product isn’t available on the shelf for consumers to purchase. How do marketers overcome this challenge? Marketers in the dairy industry typically follow a, House as lead, Brand Architecture model. The brand architecture ensures that no matter what category they advertise, the mother brand grows stronger.
