The background score is a screeching one, increasing in pitch, and the door of your kitchen cupboard creaks as you open it. You stagger back in disbelief. There is no milk, for your morning cup of tea (or coffee). It is the nightmare that haunted everyone when the unprecedented three-week lock-down (till April 15) was announced. So imagine the relief when the government clarified that essentials, including milk and milk products would continue to remain available. (Insert GIF of Nirupa Roy crying tears of joy.)
But to make this possible is easier said than done. Milk producers and distributors have to ensure complete sanitisation during the milk procurement, even while tackling inter-state distribution challenges. As dairy players pullout all stops, Outlook Business caught up with India’s largest dairy player, Gujarat Co-Operative Milk Marketing Federation’s (which owns the brand Amul) MD, RS Sodhi, to understand how they are tackling supply challenges and meeting fluctuating demand including panic-buying.
Is Amul equipped to sail through the crisis?
We are in firefighting mode currently! We procure milk from 3.6 million farmers every day. Our work starts from the production stage. Then, the milk is transported to the nearest chilling station or dairy for processing, which is later shipped across India. It is an efficient supply chain. As and when problems crop up, we iron them out.
What are the issues you have been facing?
After the government announced the lockdown, there was some confusion over what qualifies as essential services and what doesn’t. They are allowing movement of trucks with goods. But what about an empty truck that has delivered the goods and is returning? The authorities are not letting them through yet. Packaging is a bigger problem. They have allowed food and manufacturing plants to function, but food packaging plants also must be operational. We will exhaust our packaging stock in the next seven to 10 days.
How are you ensuring uninterrupted supply amid these lockdowns?
There is confusion at the local level (about essentials-supply delivery) so we have been talking to chief secretaries. They are also doing their part proactively. The chief secretary of Gujarat and a few of other states called me up to check if we were facing any problem. Everybody wants to help and are sorting out issues. I am not saying the problem isn’t there, but we expect them to get sorted in the next two to three days.
Have you had to make any changes to your supply chain process?
The challenge right now is working with a limited number of employees since many are staying home. We are working with a rotational workforce, which comes on alternate days. But we need at least 15-20% of the staff for invoicing, logistics, loading and unloading. Also, some of the smaller private milk co-operatives have stopped collecting milk. So we are procuring milk from those dairy farmers as well, translating to 8-10% more milk from earlier.
Is there any change in the logistics network?
The 26 million litres milk procured daily is distributed across the country (except South) with each truck carrying about 8,000-10,000 litres (in about 2,600 trucks). This network has remained unchanged. In the initial few days, we had some trouble with the movement of trucks. So, we had to talk to the authorities. People are not fully aware about the government’s instructions about the uninterrupted distribution of food and milk. But I am receiving reports that these stores are being allowed to stay open. Thus, our retail presence also should not face any problem. Things are slowly falling into place.
Have you experienced any change in demand over the past few days?
We are selling around 15 million litres per day. Earlier, we used to supply twice a day. Now, the frequency has increased to four to five times for the big cities in the country. But a person buying extra milk today might skip buying the following day. At the same time, tea stalls have stopped buying milk. So, that consumption has reduced. But net sales have gone up by about 10-15% over the past three to four days.
What about the long queues forming at the milk collection centres/cooperatives? Have you taken any steps to ensure that does not happen?
We ensure that the dairy farmers queueing up to deposit their milk are maintaining a safe distance of one metre from each other. At the village cooperative societies, we have implemented other precautionary measures. Whoever comes to deliver has been asked to wash their hands with soap and wear a mask. We have also posted several hoardings that indicate precautionary steps that everyone must follow. Besides providing farmers with masks and sanitisers, our field employees are also educating them and spreading awareness.
Over the years, what are some of the hygiene checks that Amul has put in place, which makes it routine even during times of crisis?
Amul’s procurement process for milk — from collecting it at cooperative societies, transporting it to processing units to finally packaging and delivering it to our partners — ensures that no one is touching the milk with hands at any point. This is something we have been doing for many years. So, there is no contamination of milk at any stage. Right now, our focus is to ensure that the member who comes to deliver the milk should not be exposed to the virus.
What kind of impact do you anticipate on value added products?
There has been a substantial reduction in demand for value added products. Ice-cream demand is down by 25-30%. Beverages, cream and other HoReCa (hotel/restaurant/catering) based products such as cheese have also seen a similar trend. But this does not worry us. We continue to procure milk, process it and dispose it in various forms. Demand for milk, buttermilk, dahi, ghee, butter and milk powder has increased by 10-15%.
How are you managing production volumes then?
The amount of milk we procure remains the same. So, what we are doing is redirecting milk to product categories that are seeing higher demand. Dairies are well-equipped to handle these demand fluctuations.
What kind of financial impact will dairy farmers experience?
Everybody is talking about compensation or financial aid for entrepreneurs and urban wage earners. But what about rural wage earners? 70% people are in villages and 50% of GDP is from rural India. The government is giving each farmer #6,000 (under the Pradhan Mantri Kisan Samman Nidhi). They should increase it to #24,000 immediately and transfer it to their account. In Gujarat, we are procuring milk, but the troubles in other states remain. In certain areas, farmers are now selling milk at throw-away prices. So, whatever economic subsidies we are considering, we should consider it for the rural populace as well.
What should the government focus on after the three-week lockdown is over?
After the lockdown, the government must focus on how the economy can be fast-tracked to ‘growth mode’. The disrupted supply chain has to be fixed urgently. That is very important. However, we are not as affected as the other sectors. I am sure the dairy and food sector is well-quipped to bounce back after we swim through this tough period. Khana-peena toh chalta rahega ji!