Gujarat is a land of food brands. When I see Parag Desai from Wagh Bakri, Firoz Khambhata from Rasna, other brands like Balaji and Vadilal — which are national brands — I can say with confidence that people here know the pulse of consumers and this land has the ability to give best of the brands to India. I think Amul is one of them.
I would take milk — the most commonly used product in any household as an example, when talking about branding in the food industry. Around 20-30% is spent on milk; as income level reduces, the percentage spent on milk increases: rural is 30%, urban is 20% and higher income brackets are only 10-20%. India has various industries — capital goods, power, infrastructure etc., but the one industry that has a maximum potentiality is food since there are 1.3 billion stomachs that need to be filled in our country.
The food consumption is growing, because the prosperity level in India is growing. Secondly, there is a shift from unbranded to branded products. For example, in India, dairy consumption is growing by 4.5-5% per annum, which is the highest growth rate in the world. Already India is the world’s largest market and also largest production country. For any country, especially food, if you are self-sufficient you are secure. So, in dairy, if consumption is growing at 5%, branded food is growing at more than 10-12%. This is because rest of the growth is due to the increase in consumption, and the remaining half comes from the shift to unbranded food. The same goes for any other food category where the growth level maybe 20-30%, whether you take branded rice, dal, sugar, mixes or any other category. They say by 2025 we will be crossing China in terms of population and by 2050 our population will be 1.7 billion. Today 70% of 1.25-3 billion people are in rural India and 30% is in urban India. There is limited opportunity in rural India and today’s youth is attracted towards the urban lifestyle. It is expected that by 2050, 50% people will be staying in villages and the rest in urban India. So how will this impact the food industry?
Food is grown in villages, by rural India and consumed by not only rural but also the urban areas. So by 2050, comparatively we will have more mouths to feed and less hands to produce. But how do we ensure that people or the farmers continue to grow food? They will not continue to grow just because they are in the profession — they will continue to grow only if they find that it is remunerative. And it will be remunerative only if urban consumers are ready to pay a stable price to the farmers. Here is where the role of an entrepreneur or industry comes — how to reduce the price gap between the consumer and the producer? So, people who are in the food industry have a bright future, not for only this generation but for next the next four generations. We have to ensure that Indian farmers produce food. Otherwise we will depend on other countries and reduce the role of the Indian manufacturer in the food industry. We have to continue managing our whole supply chain, right from the production to consumption, efficiently.
Coming to the branding in food, we feel that branding is a very new phenomena but it started almost 80 years ago. There are a lot of adminstrators and marketers sitting here and we feel that Kotler started branding in India. But if you look back, I don’t think branding or marketing is a new phenomenon. Can you tell me which are the most prominent brands in India that have been there for the last 100 or 1,000 years, have a logo, a jingle and a target group? We are all aware about these brands like Om, Cross, Red Cross, etc. These are brands in which people have faith, trust and loyalty. Why? Probably because these brands have delivered value and so it exists. I am a Sikh. Why did our 10th Guru Gobind Singh ask each Sikh to not cut his hair and wear a turban? He wanted to create a brand identity, so it can stand out from thousands of people. This is the best example of creating a brand identity. So, if you want to create a brand and be very well recognised, don’t look only at books. Look at yourself and the people around and then create a brand. No doubt, theory is required to help you compartmentalise and co-relate. But branding and marketing can be done by anybody.
Now, since I am from Amul, so naturally I have to talk more about our experiences, how we’ve built it as a brand and what are the lessons we have learnt. I would like to talk to you about the things a new entrepreneur has to look for if he wants to start a brand in today’s competitive world. I was very fortunate to have worked for Amul’s founder and chairman, Dr Varghese Kurien for 30 years as I learnt a lot of things on branding and marketing. In the ‘50s, when no Indian brand would think about branding and advertising, I learnt from him that branding is the key to establishing loyalty, trust and faith. Loyalty can be for any known brand. You may travel by IndiGo, travel by SpiceJet, but you know they are all equal. But if you want to travel tonight and there is a rush, the same IndiGo which is charging Rs.2,000 or Rs.3,000 for the regular fare, may charge you Rs.20,000 from Ahmedabad to Delhi. So, will you have blind faith in this brand? No. Dr Kurien used to tell us that blind faith is like faith in your religion. You have to create such faith for your brand, where they do not question the brand, they do not look anywhere else, they feel that this brand is never going to cheat, that the brand is their own brand and that it will deliver more than the customer expects. The most important thing that we’ve learnt is that the customer is always smarter than you and always think before you decide your strategy — price, packaging, margins, schemes etc. Automatically you will come up with a very rational marketing strategy.
Amul, now 70-years-old, is the number one food brand in India. Last year, our turnover was Rs.38,000 crore. Meanwhile, the turnover for the company — Gujarat Co-operative Marketing was Rs.27,000 crore. So, how was this brand created? In one word I have to say that the reason for success is the consistency in our business and branding philosophy. We have two faces to the Amul brand, one side is 3.6 million farmers, who are the owners of this organisation and for them this brand gives different deliverables while the other side has millions of consumers, who consider the Amul brand differently. So what is the branding strategy? That was value for many — it means, giving 3.6 million farmers stable and remunerative prices day after day. You name any other agricultural produce, farmers are not assured stable and remunerative price. We know what is happening with pulses, last year it was Rs.200, today nobody wants to buy them at Rs.40. So this brand has delivered value for many by giving them very stable remunerative prices. The farmers are assured that if I produce milk today I am going to get X+ price and not X- price. So they blindly follow this brand. The other side of Amul brand is value for money. What is the reason for that? Value for money means providing best quality product by using the best and natural ingredients, the latest technology, very contemporary packaging and selling it at such a price that masses can afford. If you want to succeed in the food industry, it has to be by targeting the masses, only then you can get volume. This strategy of 'value for many' and 'value for money' is diagonally opposite to other corporate objectives.
This is the first of a two-part series. Read part two here.