Amul is an Indian dairy cooperative based in Anand, which is in Gujarat. The word ‘Amul’ is derived from the Sanskrit word ‘Amulya’ which means priceless or precious.
Let us look into the Overview of Amul and then we can move on to the PESTEL Analysis of Amul.
Overview of Amul
Amul (The Kaira District Co-operative Milk Producers’ Union) is an Indian dairy cooperative based in Anand in the Indian state of Gujarat. It was established in 1946 and is a cooperative brand owned by a cooperative society, Gujarat Co-operative Milk Marketing Federation Ltd. (GCMMF), which is now jointly owned by 3.6 million (3.6 million) milk producers in Gujarat, and the apex body of 13 District Milk Unions spread across 13,000 villages in Gujarat. Amul has kick-started India’s White Revolution, which has made the country the world’s largest producer of milk and dairy products.
Kaira Union introduced the brand “Amul” to market its range of products. The word ‘Amul’ is derived from the Sanskrit word ‘Amulya’ which means ‘priceless’ or precious (a name suggested by the then Principal of Agriculture College, Dr Maganbhai Patel) and was established in 1946 through the efforts of Tribhuvanda’s Kishibhai Patel. The establishment of Amul made an important contribution to the white revolution in India.
Kurien, who was the founding chairman of GCMMF for more than 30 years (1973-2006), is credited for the success of Amul’s marketing. Amul has ventured into overseas markets.
Also, Read Amul SWOT Analysis in a Simplified Way.
PESTEL Analysis of Amul
PESTEL Analysis of Amul analyses the brand for its business tactics. The PESTEL analysis of Amul examines the various external factors such as political, economic, social and technological, environmental and legal factors that affect the business. The PESTEL analysis of Amul highlights the various extrinsic scenarios that affect the brand’s business.
PESTEL analysis is a framework that is essential for companies like Amul as it helps to understand the market dynamics and continuously improve its business. PESTEL analysis is also known as PESTEL analysis.
“ These factors determine the extent to which government and government policies can affect an organisation or a particular industry. They include political policies and stability as well as trade, taxation and fiscal policies “
Due to favourable political factors, Amul company achieved a growth of 11.35% in its operating units in Kolkata, Pune and Mumbai. The company is focusing on developing long-term relationships with its milk producers by ensuring that they pay higher prices. The company has organized its milk procurement in West Bengal on the ‘Amul pattern’. This has led to significant progress in the socio-economic conditions of the producer group members.
In Maharashtra, Punjab and Gujarat, the company has established and maintained new milk societies. The union has set up milk societies outside Gujarat on the ‘Anand pattern’. They provide quality fodder and veterinary services to the cattle owned by the milk producers of these societies.
The last few years have been quite difficult for the international dairy industry due to import and export hurdles in Russia. Lower demand for dairy products in the Chinese market, other upheavals in European countries, and product regulations leading to lower demand in Germany have proven to be obstacles to the company’s growth. If the Amul company is properly supported by both the state and the Union, it could achieve one of the highest procurement rates by adopting the latest technologies and raise the company’s name to a successful level.
“ An economic factor directly affects the economy and its performance, which in turn directly affects the business and its profitability. These factors include interest rates, employment or unemployment rates, commodity costs and exchange rates “
In many countries, Amul has received significant benefits in the form of lower milk procurement prices of nearly 30% to 60%.
The company has also benefited from this by reducing the prices of its products like milk powder and butter by 30%. The price of milk powder in India has increased from Rs.130 to Rs.150, which has affected the milk procurement prices by Rs.4 to Rs.5 per litre. Both domestic and international markets are in a recessionary phase.
An increase in transportation costs can significantly impact the Company’s ability to deliver its products to the end consumer. In 2019, an 11.24% increase in milk procurement costs and a 14% increase in diesel costs led to an increase in Amul’s milk transportation costs. In the same year, there was an increase in interest and bank commission of about 10%.
” The focus here is on the social environment and identifying emerging trends. This helps a marketer to better understand the needs and wants of consumers in a social environment. Factors include changing family demographics, education levels, cultural trends, changing attitudes, and changing lifestyles “
The individual purchase decision is mainly the result of social factors such as culture and society. Friends, peers, families, reference groups can have a great influence on the consumer’s consumption and purchasing behaviour. Amul has taken advantage of these factors and successfully targeted women and children. The company has created a strong and vital presence in the dairy segment.
A large number of consumers are increasingly opting for a vegan lifestyle. The increase in the number of vegans would have a negative impact on the dairy industry as this lifestyle does not allow the consumption of dairy products derived from animals. The overall picture for the company looks positive as Indian households have become more accustomed to morning tea and people, in general, are more accustomed to milk and dairy products. Also, the culture of fast food encourages a certain lifestyle that increases the consumption of ice cream.
“ Technological factors consider the pace of technological innovation and development that could affect a market or industry. These factors include changes in digital or mobile technology, automation, research and development. There is often a tendency to focus only on developments in digital technology, but new methods of distribution, manufacturing and logistics must also be considered “
As a global brand, Amul understands the need to invest in various technologies and also upgrade the current technology to attract and retain the current customers. The brand has invested Rs 600-800 crore in setting up new milk processing plants in the current financial year.
The company has also invested to expand the capacity of the existing plants. The entire industry is gearing up with a host of the latest technologies that will help in monitoring the productivity of dairy animals and dairy farmers. It is all about identifying faulty practices and taking corrective measures to meet the market demand.
The latest technologies are equipped with smart French fries with unique identifiers that help companies record the productivity and health status of individual animals
“ Environmental factors are factors that are influenced by the environment and the impact of ecological issues. With the increasing importance of CSR (Corporate Sustainability Responsibility) and sustainability, this element is becoming more of a focus when it comes to how companies need to run their business. Factors include climate, recycling practices, carbon footprint, waste management and sustainability “
Due to the impact of global warming that everyone is aware of, the company is aware that it is its moral responsibility to protect the environment. The introduction of automation and the increasing use of modern technology in the day to day processing of water, fuel, gas and electricity has resulted in a significant reduction in the consumption of national resources. This has also led to savings in electricity and fuel. On December 14, 2018, the Company was awarded the National Energy Saving Award by the Government of India for ranking first in the food processing sector in energy conservation.
The award received 300 entries from across India, out of which Amul Dairy was declared the winner of the award. Amul vowed in 2007 to plant a sample and ensure that this sample grows into a tree. The company encouraged farmers to set up nurseries where samples would be planted. To date, the company has been able to establish 45 such nurseries.
“ A business needs to know what is legal and permitted in the areas in which they operate. They also need to be aware of any changes in legislation and how it affects business operations. These factors include employment law, consumer law, health and safety, international and trade regulations and restrictions “
The company faced many problems due to the violations of the local market players. In 1998, Amul found that Naroda based Shri Shakti Dairy was manufacturing milk pouches under similar names as Amul brands. This was a worrying situation for the company as the names were very similar to its own brand names “Amul Shakti” and “Amul Taaza”. The brands were advertised by a company.
The private dairy company was using similar packaging and brand names of Amul and selling them in the rural markets, causing confusion among the customers. The company fought a 20-year battle against the defaulters and finally won the case against the private dairy. Such factors can disrupt the market for the company’s products by exploiting the untapped potential and selling fraudulent products to these customers.