How Amul beat its competition & made 39,200 Cr during Lockdown? : Business case study

Summary

The video script narrates how Anand Milk Union Limited (Amul), a leading dairy company in India, successfully navigated the COVID-19 crisis. Despite nationwide lockdowns and industry-wide challenges, Amul increased revenue by 698 crores, launched 33 new products, and procured an additional 35 lakh litres of milk daily. The company's strategic supply chain management, digital transformation with IBM, and aggressive marketing during the pandemic are highlighted as key factors in its extraordinary business performance and resilience.

Takeaways

• 🔒 The Indian nationwide lockdown in response to the COVID-19 pandemic had a devastating impact on the economy and industries, with the dairy industry losing over 112.3 crores daily.
• 🚀 Amul, the Anand Milk Union Limited, not only survived but thrived during the crisis, increasing its revenue by 698 crores through strategic business maneuvers.
• 🆕 Amul launched 33 new products in 2020, increased milk procurement, and paid an additional 800 crores to rural milk producers, showcasing resilience and innovation.
• 🛒 Consumer behavior shifted dramatically during the pandemic, with a surge in household consumption and a preference for packaged milk over loose milk, which Amul capitalized on.
• 📈 Despite a 10-12% drop in sales, Amul anticipated and prepared for a surge in demand, defying industry trends of cutting down operations.
• 💡 Amul's foresight was rooted in recognizing the change in consumer behavior towards health consciousness and the rise of homemade food trends.
• 🔄 The company's supply chain management was pivotal, utilizing IBM's technology to track operations and optimize resource allocation during the crisis.
• 🚂 Amul adapted its logistics by using railways for product transportation when labor shortages and lockdown restrictions hindered road transport.
• 💰 The company's strategic partnership with IBM since 2009 and investment in digital systems allowed for efficient supply chain management and quick response to changing demands.
• 📢 Amul increased its marketing efforts during the pandemic, with a 316% increase in ad volumes, and cleverly used nostalgia during the re-broadcast of epic shows on Doordarshan.
• 🛍️ Amul leveraged third-party e-commerce platforms and exclusive deals with food delivery services to expand its market reach and sales channels.

Q & A

What was the main reason for the nationwide lockdown announced by India's Prime Minister on 24th March 2020?

The main reason for the nationwide lockdown was the COVID-19 pandemic, which necessitated strict measures to curb the spread of the virus.

How did the lockdown impact the Indian economy and the dairy industry specifically?

The lockdown had a severe impact on the Indian economy, costing it more than 10 lakh crores. The dairy industry was particularly hard hit, with milk producers in India losing more than 112.3 crores daily.

What was the strategy of Anand Milk Union Limited (Amul) during the COVID-19 crisis that allowed them to increase their revenue?

Amul managed to increase their revenue by launching 33 new products, procuring an additional 35 lakh litres of milk daily, and paying 800 crores extra to rural milk producers. Their strategy involved anticipating a surge in demand due to changes in consumer behavior and maintaining full capacity in their supply chain.

How did Amul's sales initially react to the lockdown?

Amul's sales initially saw a decline of 10-12% due to the closure of restaurants, catering, and hotel businesses, which accounted for 20% of the revenue for the organized dairy sector.

What was the key variable that Amul considered while other companies were cutting down on milk procurement?

Amul considered the change in consumer behavior during the pandemic. They anticipated an increase in household consumption of milk products as people stayed at home and became more health conscious, shifting from buying loose milk to packaged milk.

How did Amul manage to increase their production capacity and meet the surge in demand during the lockdown?

Amul operated at 115% capacity and hired other plants that were lying vacant. They also used the railways to transport products quickly throughout the country due to labor shortages and lockdown restrictions.

What strategic partnership did Amul establish to transform its information technology landscape?

Amul established a strategic partnership with IBM in 2009, investing 80 crores to develop a full-fledged digital system to track every detail of their supply chain operations.

How did the digital system developed by IBM help Amul during the lockdown?

The digital system allowed Amul's management team to oversee the entire operation of the supply chain, enabling them to divert idle resources from the ice-cream and frozen foods vertical to the milk supply chain and optimize the utilization of every element of the supply chain.

What measures did Amul take to support its labor force and farmers during the crisis?

Amul provided cash incentives to casual workers, arranged food and stay for workers to prevent them from getting sick, and made extra arrangements for cattle feed for farmers.

How did Amul's marketing strategy differ from other brands during the COVID-19 pandemic?

While other brands cut down on advertisement, Amul increased its ad volumes by 316% compared to 2019. They ran aggressive campaigns and old ads during re-broadcasted epic shows to resonate with the audience's nostalgic mood, without making any exaggerated COVID claims.

What are the key lessons for business leaders from Amul's crisis management during the pandemic?

The key lessons are to embrace risk, be resourceful by building agile systems, and view crises as opportunities to get ahead of competitors. Amul's foresight, digital transformation, third-party collaboration, labor incentivizing, and strategic marketing initiatives set a benchmark for crisis management.

Outlines

00:00

📉 Impact of Pandemic on Indian Economy and Dairy Industry

The script begins by highlighting the nationwide lockdown announced by India's Prime Minister on March 24, 2020, due to the COVID-19 pandemic. It describes the severe economic impact, with millions of job losses, halted industries, and a staggering loss of over 10 lakh crores to the Indian economy. The dairy industry was particularly affected, with milk producers suffering a daily loss of 112.3 crores. However, Amul, an iconic dairy brand, managed not only to minimize losses but also to increase its revenue by 698 crores through strategic business maneuvers during this crisis.

05:01

🚀 Amul's Extraordinary Response to COVID-19

This paragraph delves into Amul's remarkable business strategies during the pandemic. While other companies struggled to maintain their supply chains, Amul launched 33 new products, increased milk procurement by 35 lakh liters daily, and paid an additional 800 crores to rural milk producers. The company's supply chain management is highlighted as a key factor in its success. Despite a 10-12% decline in sales due to reduced demand from the hospitality sector, Amul anticipated and prepared for a surge in demand driven by changes in consumer behavior, such as increased household consumption and a shift towards packaged milk products. The managing director's decision to keep the supply chain functioning at full capacity paid off, as demand for milk-based products skyrocketed.

10:03

🛠️ Amul's Agile Supply Chain and Digital Transformation

The script explains how Amul managed its vast supply chain, which includes numerous societies, milk tankers, chilling stations, distributors, retailers, and farmers, by leveraging a strategic partnership with IBM. This partnership, established in 2009, involved an investment of 80 crores to develop a digital system for tracking operations within Amul's supply chain. This system allowed for real-time updates on plant capacities, truck engagements, and idle resources, enabling Amul to efficiently divert resources from its ice-cream and frozen foods vertical to the milk supply chain during the lockdown. The digitalization also facilitated incentives for ground staff and arrangements for cattle feed, contributing to Amul's efficient and effective supply chain management.

📈 Amul's Marketing Strategy and Crisis Leadership Lessons

The final paragraph discusses Amul's marketing strategy during the pandemic, which included a significant increase in ad volumes and strategic campaigns that resonated with the audience's nostalgic mood. The company's approach to marketing was aggressive yet responsible, avoiding exaggerated COVID claims. The script concludes with lessons for business leaders, emphasizing the importance of embracing risk, resourcefulness, and viewing crises as opportunities. Amul's success is attributed to its foresight, agile supply chain management, digital transformation, labor incentives, and strategic marketing, setting a benchmark for crisis management in the dairy industry.

Keywords

💡Nationwide lockdown

A nationwide lockdown refers to a government-mandated restriction on movement and activities across an entire country to control the spread of a disease or crisis. In the video's context, it is the measure taken by the Indian government in response to the COVID-19 pandemic, leading to widespread economic and social impacts, including job losses and industry standstills.

💡Pandemic

A pandemic is an outbreak of a disease that occurs over a wide geographic area and affects an exceptionally high proportion of the population. The COVID-19 pandemic has been the central crisis in the video, affecting various sectors, including the economy and the dairy industry, and prompting the nationwide lockdown.

💡Dairy industry

The dairy industry involves the production and processing of milk and milk products for human consumption. In the video, the dairy industry is highlighted as one of the sectors heavily impacted by the pandemic, with a significant drop in demand due to the closure of restaurants and hotels.

💡Amul

Amul, short for Anand Milk Union Limited, is an Indian dairy cooperative that has been highlighted in the video for its exceptional business strategies during the pandemic. Despite the crisis, Amul managed to increase its revenue and support milk producers by launching new products and maintaining its supply chain.

💡Supply chain management

Supply chain management is the coordination and management of activities involved in the production and delivery of a product or service. The video emphasizes Amul's extraordinary supply chain management during the pandemic, which allowed the company to adapt to changing consumer behavior and maintain operations effectively.

💡Consumer behavior

Consumer behavior refers to the actions and patterns of consumers in response to marketing, economic, and social factors. The video discusses how the pandemic led to a shift in consumer behavior, with increased demand for milk products at home and a preference for packaged milk over loose milk.

💡Digital transformation

Digital transformation involves the integration of digital technology into all areas of a business, fundamentally changing how an organization operates and delivers value to customers. The video mentions Amul's strategic partnership with IBM for digital transformation, which played a crucial role in managing their supply chain during the lockdown.

💡Resourcefulness

Resourcefulness is the ability to find quick and clever ways to overcome difficulties. In the context of the video, Amul's resourcefulness is highlighted as a key attribute that helped the company to optimize its supply chain and adapt to the crisis, showcasing the importance of agility in business operations.

💡Crisis management

Crisis management is the process by which an organization deals with a sudden event that threatens to harm its operations, reputation, or finances. The video presents Amul's approach to the COVID-19 pandemic as a benchmark for crisis management, emphasizing the company's ability to turn a crisis into an opportunity for growth.

💡Marketing initiatives

Marketing initiatives are strategies and campaigns undertaken by a company to promote its products or services. The video discusses how Amul increased its marketing efforts during the pandemic, including a significant increase in ad volumes and strategic campaigns that resonated with the audience's mood.

💡Incentivising

Incentivising refers to the act of providing rewards or benefits to encourage certain behaviors or actions. In the video, Amul's incentivising of its labor force during the pandemic is mentioned as a strategic move to maintain operations and build strong relationships with workers, which was crucial for the company's success.

Highlights

On 24th of March 2020, India's nationwide lockdown was announced due to the pandemic, causing massive economic and employment impacts.

The dairy industry, including milk producers, faced significant losses, costing over 112.3 crores daily.

Amul demonstrated strategic agility, increasing revenue by 698 crores despite the crisis.

Amul launched 33 new products and procured an additional 35 lakh litres of milk daily during the lockdown.

Amul paid 800 crores extra to rural milk producers, supporting the agricultural community during a challenging time.

Amul's supply chain management played a crucial role in their pandemic response strategy.

Amul anticipated and prepared for a surge in demand for milk-based products as consumer behavior changed.

Household consumption of milk products increased dramatically as people stayed home, leading to a rise in demand for groceries and milk products.

Amul's managing director, Mr. Rupinder Singh Sodhi, insisted on maintaining full supply chain capacity despite restaurant closures.

Amul's demand for milk-based products surged, with cheese demand increasing by 80%, cottage cheese by 40%, and condensed milk by 100%.

Amul utilized digital systems developed by IBM to track and optimize supply chain operations.

Amul's digital transformation allowed for efficient resource management and coordination across a vast supply chain.

Amul provided incentives and support to its labor force, ensuring their well-being and productivity during the crisis.

Amul expanded its market reach through third-party e-commerce platforms and exclusive deals with food delivery services.

Amul increased its advertising efforts during the pandemic, with a 316% increase in ad volumes compared to 2019.

Amul's strategic marketing initiatives resonated with consumers, without making unrealistic COVID-related claims.

Lessons from Amul's crisis management include embracing risk, resourcefulness, and viewing crises as opportunities for growth.

Transcripts

On 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 the labourers lost their jobs

several billion dollar industries came to a standstill and it costed 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 costed the milk producers of 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 juts minimise 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.

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.

People, you know what? Amul has done such an extraordinary job during the COVID times

that in 2020 itself while 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 litres 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 in order to become extraordinary business leaders.

The answer to this question lies in the extraordinary supply chain management of Amul.

When the lockdown was announced in the month of 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 lockdown was done

several businesses either cut down or closed their businesses

and this resulted into 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 organised 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 labourers such as truck drivers and factory workers lost their livelihood because

less milk meant less 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 clearly 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 behaviour.

Now, if you remember from what we've learnt from the Airbnb case study

every time there is a crisis of any kind, there is a

paradigm shift in consumer behaviour.

In this case

Although there was no demand from the restaurants

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

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 the result?

Well, Amul plans for operating at 115% capacity.

In fact, the demand for Amul products was so high

that they had to hire other plants from other companies that were lying vacant

and except for ice creams all their plants were operating at full capacity throughout the lockdown.

And on top of that

they also realised that moving trucks through the country

will be very difficult because of shortage of labour and the lockdown restrictions.

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 utilisation 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 onse side the supply chain of milk was overloaded

the ice-cream and frozen foods vertical of the business was almost shut down.

Therefore, the labours, storage, and trucks were lying at idle capacity

from the end of ice-cream and frozen foods.

But thanks to IBM's system,

Sodhi Sir and 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.

And all of this process is said to have happened overnight.

And this end to end digitalisation made the process so efficient

and gave them so much clarity about their operations

that Amul was even able to provide incentives or 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 realised 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 litres 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, Flipkart

and even landed exclusive deals with Swiggy and Zomato

to sell butter, milkshake and paneer.

And according to Sodhi Sir

in the month of 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 digitalisation of the entire supply chain

and the incentivising of the labour forces.

With that we move onto 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 Premiere 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 even better impact.

Now, the highlight over here is that

although Amul was very keeen on tapping onto 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 behaviour

through agile supply chain management system.

using digital transformation, third party collaboration, incentivising of labour

and through strategic marketing initiatives

Anand Milk Union Limited established a benchmark for crisis management

for dairy companies from all across the world to follow.

And this brings me to the most important part of the video and that is

what are the lessons that we need to learn in order to become extraordinary business leaders

Lesson number one,

while good leaders prepare to face risk

great leaders prepare to embrace risk with open arms.

In this case

while most companies prepared to prevent their losses

Sodhi Sir 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

inspite of the floods, inspite of the curfew and even during war situation.

Lesson number two, no matter how big your organsation is

resourcefulness is one attribute that will always save you during 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 optimised 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 Sir was so sharp that he realised

that COVID-19 was the perfect opportunity for him to capitalise on the market in 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 litres of extra milk every single day.

Hence, Amul was able to establish itself as a saviour for farmers.

And most importantly

while 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 the times of crisis and established a benchmark for brands

all across the world to learn from.

And I couldn't be more grateful to have the privilege to present this case study to you.

That's all from my side for today guys. If you learnt something valuable

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Bye-Bye.