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

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0:01On 24th of March, 2020, our Prime
0:03Minister announced a nationwide lockdown
0:05because of the pandemic. And what
0:07followed next was a nightmare that our
0:09nation was not prepared for. Millions of
0:12people, especially the laborers, lost
0:14their jobs. Several billion-dollar
0:16industries came to a standstill and it
0:18costed the Indian economy more than 10
0:20lakh crores.
0:22One such industry that was heavily
0:24impacted due to the pandemic was the
0:26dairy industry and it costed the milk
0:28producers of India more than 112.3
0:31crores [music] every single day. But,
0:34you know what, guys? There was one
0:36legendary company that was so
0:37strategically able to navigate through
0:39the situation that they did not just
0:41minimize their losses, but even went one
0:44step further to increase their revenue
0:46by 698 crores.
0:49This brand that I'm talking about is
0:50none other than Anand Milk Union
0:53Limited, which we all so dearly know as
0:56Amul. Now, everybody knows the story and
0:59the history of Amul and how it has been
1:01there for decades. But, very few people
1:03know how incredible this company's
1:05business strategies are.
1:07And one such mind-blowing example of the
1:09same is how Amul reacted to COVID-19.
1:13People, you know what? Amul has done
1:15such an extraordinary job during the
1:16COVID times that in 2020 itself, while
1:19the rest of the companies were
1:20struggling to even keep their supply
1:22chain going, Amul went on to introduce
1:2433 new products in the market, procured
1:27an additional 35 lakh units of milk
1:30every single day, and [music] even paid
1:33800 crores extra to the rural milk
1:36producers of India.
1:37The question is, how did Amul manage to
1:40achieve such an incredible feat? And
1:42most importantly, what are the business
1:44strategy lessons that you and I need to
1:46learn from this case study in order to
1:48become extraordinary business leaders?
1:50The answer to this question lies in the
1:52extraordinary supply chain management of
1:54Amul. When the lockdown was announced in
1:56the month of March, the dairy industry
1:58was allowed to operate with certain
1:59restrictions because milk came under the
2:02essential food category.
2:04But, as soon as the announcement of
2:06lockdown was done, several businesses
2:08either cut down or closed their
2:10businesses, and this resulted into a
2:12loss in demand for the dairy industry.
2:15Because these industries also included
2:18the restaurants, the catering, and the
2:20hotel businesses.
2:21[music]
2:21And these businesses accounted for 20%
2:24of the revenue for the organized dairy
2:26sector.
2:27As a result, Amul's sales also saw a
2:30decline of 10 to 15%.
2:33And when the dairy companies saw this
2:35massive fall in demand, they quickly cut
2:37down the milk procurement, decreased
2:39their logistics, [music] and decreased
2:41their production by a large extent. This
2:44left many farmers in a helpless state
2:45because milk procurement was very less.
2:48Many laborers, such as truck drivers and
2:50factory workers, lost their livelihood
2:52because less milk meant less trucks and
2:54less operation of factories.
2:57But, you know what, guys? While the
2:59entire dairy industry was preparing for
3:02a loss in demand, Amul did the complete
3:04opposite and started preparing for a
3:07surge in demand. Now, the question is,
3:10when it is clearly being seen that there
3:12is a major decline in demand from the
3:14restaurants and the hotels that account
3:16for 20% of the revenue, why would
3:19anybody prepare for a surge in demand?
3:21Isn't that like a thousand crore gamble?
3:24Well, guess what?
3:25[music]
3:25There was one very, very important
3:27variable that very few people took into
3:29consideration, and that was the change
3:32in consumer behavior. Now, if you
3:35remember from what we learned from the
3:37Airbnb case study, every time there's a
3:39crisis of any kind, there is a paradigm
3:42shift in consumer behavior. In this
3:45case, although there was no demand from
3:47the restaurants, the household
3:48consumption of milk products skyrocketed
3:50as more and more people began to stay at
3:53home. And this in turn gave rise to the
3:55homemade food trend, because of which
3:58the demand for both groceries and milk
4:01products skyrocketed. And secondly,
4:04because of the pandemic, people became
4:06extremely health-conscious and millions
4:08of people shifted from buying loose milk
4:11to buying packaged milk.
4:13And while other brands underestimated
4:15this consumer demand and started
4:17decreasing their supplies, the managing
4:19director of Amul, Mr. Rupinder Singh
4:21Sodhi, insisted that they keep the
4:24supply chain functioning at full
4:26capacity.
4:28And guess what?
4:29Despite the closure of the restaurants,
4:32as of May 2020, during the peak of the
4:34lockdown times, the demand for
4:37milk-based products [music] skyrocketed.
4:40The demand for products like cheese
4:41increased by 80%, demand for cottage
4:44cheese increased by 40%, and the demand
4:47for the condensed milk increased by
4:49100%.
4:51And the result? Well, Amul plants were
4:53operating at 115%
4:56capacity. In fact, [music]
4:58the demand for Amul products was so high
5:00that they had to hire other plants from
5:02other companies that were lying vacant.
5:05And except for ice creams, all their
5:07plants were operating at full capacity
5:10throughout the lockdown.
5:12And on top of that, they also realized
5:14that moving trucks through the country
5:16will be very difficult because of
5:18shortage of labor and the lockdown
5:20restrictions. So, they started using
5:22railways to transport products quickly
5:24throughout the country. Now, this begs
5:27the question, considering the vast
5:28supply chain of Amul, I mean, we're
5:30talking about 18,700 societies, 5,000
5:34milk tankers going to 200 chilling
5:36stations, 10,000 distributors, 1 million
5:39retailers, and most importantly, more
5:42than 3.6 million farmers.
5:45The question is, how did they manage to
5:47coordinate such a huge supply chain and
5:49manage their resources properly? The
5:51answer to this question lies in a
5:53strategic partnership that was
5:54established between Amul and IBM in 2009
5:57wherein Amul invested a hefty 80 crores
6:00into transforming the information
6:02technology landscape of the company.
6:04Now, what this meant is that IBM would
6:07develop a full-fledged digital system to
6:09track every small detail of operation
6:11that is being carried out in the supply
6:13chain of Amul. And just like we get an
6:16update about our Amazon order through
6:18IBM's system, the management team of
6:20Amul could exactly tell you how many
6:22plants were working at full capacity,
6:24how many trucks are engaged and in which
6:26areas, and most importantly, it could
6:29also tell you when and how many trucks
6:31or plants are at idle capacity so that
6:35you can divert the workload to them to
6:37make optimum utilization of every
6:40element of the supply chain.
6:42And this system turned out to be a
6:44game-changer for Amul during the
6:45lockdown because while on one side the
6:48supply chain of milk was overloaded, the
6:50ice cream and frozen foods vertical of
6:53the business was almost shut down.
6:55Therefore, the labors, storage, and
6:58trucks were lying at idle capacity from
7:00the end of ice cream and frozen foods.
7:03But thanks to IBM's system, Sodhi sir
7:05and team were able to accurately oversee
7:08the entire operation of the supply
7:09chain, and they very conveniently
7:11diverted all the idle resources from the
7:14ice cream and frozen foods vertical to
7:16the milk supply chain. And all of this
7:19process is said to have happened
7:21overnight.
7:23And this end-to-end digitalization made
7:26the process so efficient and gave them
7:28so much clarity about their operations
7:30that Amul was even able to provide
7:32incentives to the ground staff.
7:34[music]
7:34The casual workers were given 100 to 125
7:37rupees cash incentives, and for the
7:39workers, even food and stay arrangements
7:42were made so that they don't get sick
7:44and they don't get affected by COVID.
7:47And when they realized that the cattle
7:48feed was not sufficient, Amul even made
7:51extra arrangement for cattle feed for
7:53farmers. [music]
7:55And all of this made the supply chain of
7:57Amul so efficient and effective that
7:59while the rest of the dairy industry was
8:01completely shut down, Amul tapped onto
8:04their market share and procured 3.5
8:07million liters of extra milk every
8:09single day and paid 800 crores extra to
8:12the rural milk producers of India. A fun
8:15fact over here is that Amul even used
8:18third-party e-commerce sites like Big
8:20Basket, Dunzo, Flipkart, and even landed
8:23exclusive deals with Swiggy and Zomato
8:25to sell butter, milkshake, and paneer.
8:28And according to Sodhi sir, in the month
8:30of May itself, they got more than 60,000
8:34delivery orders through Zomato and they
8:36sold three crores worth of Amul products
8:39in more than 200 cities.
8:42This was the second pillar of their
8:44historic success. That is, the
8:46end-to-end digitalization of their
8:48entire supply chain and the
8:50incentivizing of the labor forces. With
8:53that, we move on to the last part, which
8:54is something that you all must have
8:56already observed and that is the
8:58humongous investment of Amul into
9:00marketing.
9:01Now, people, during the months of COVID
9:03while other brands were cutting down on
9:04their advertisement, Amul increased its
9:07ad volumes by 316%
9:10compared to 2019. And they were so
9:12aggressive with their campaign that the
9:14Amul Cool ad was viewed 10 times more
9:17than the Indian Premier League itself.
9:20[music]
9:20And when Doordarshan started
9:21rebroadcasting the epic shows like
9:23Ramayan and Mahabharat during the
9:24lockdown, Amul started running their old
9:27ads to resonate with the nostalgic mood
9:29of the audience, creating even better
9:32impact. Now, the highlight over here is
9:34that although Amul was very keen on
9:37tapping out of the marketing
9:37opportunities and even made immunity
9:40boosting products, they never went
9:42overboard with any kind of ridiculous
9:44COVID claims, unlike some other brands
9:47in our country.
9:48This is how, using an extraordinary
9:50foresight of consumer behavior, through
9:52a giant supply chain management system,
9:55using digital transformation,
9:57third-party collaboration, incentivizing
9:59of labor, and through strategic
10:01marketing initiatives, Anand Milk Union
10:05Limited established a benchmark for
10:07crisis management
10:08[music]
10:08for dairy companies from all across the
10:10world to follow. And this brings me to
10:13the most important part of the video,
10:14and that is what are the lessons that we
10:17need to learn in order to become
10:18extraordinary business leaders.
10:20Lesson number one, while good leaders
10:23prepare to face risk, great leaders
10:26prepare to embrace risk with open arms.
10:29In this case, while most companies
10:31prepared to prevent their losses, Sodhi
10:34sir prepared Amul to operate at full
10:36capacity even during the pandemic. And
10:39one of the reasons for such a bold
10:40decision was the fact that he had
10:42already seen how his senior leaders kept
10:45the company going in spite of the
10:47floods, in spite of the curfew, and even
10:49during war situation. Lesson number two,
10:52no matter how big your organization is,
10:54resourcefulness is one attribute that
10:56will always save you during crisis. The
10:59only question is, how are you going to
11:01build such an agile system? In this
11:03case, it was Amul's futuristic
11:06investment of 80 crores into IBM's
11:08systems that helped them operate such a
11:10huge supply chain in such an optimized
11:13manner. And last and most importantly,
11:16every time there's a crisis of any kind,
11:18it could be a pandemic, it could be a
11:19crisis specific to your industry, always
11:22remember during such a time that you can
11:24either choose to see it as an obstacle
11:26or you can choose to see it as a golden
11:29opportunity to get ahead of your
11:30competitors. In this case, Sodhi sir was
11:33so sharp that he realized that COVID-19
11:36was the perfect opportunity for him to
11:37capitalize in the market in every single
11:40front. So, firstly, he increased his
11:42market share and got the customers who
11:44were transitioning from loose milk to
11:46packaged milk. Secondly, all the farmers
11:49who were denied procurement from the
11:50restaurants and other companies, they
11:52rushed to Amul giving Amul 3.5 million
11:56liters of extra milk every single day.
11:59Hence, Amul was able to establish itself
12:01as the savior for the farmers. And most
12:04importantly, while the industry was
12:06ruthless in cutting down its frontline
12:08workers, Amul provided the same workers
12:11with added incentives, therefore
12:13building a very strong relationship with
12:15its frontline workers.
12:18This is how Amul became an opportunist
12:20during the times of crisis and
12:22established a benchmark for brands all
12:24across the world to learn from. And I
12:27couldn't be more grateful to have the
12:29privilege to present this case study to
12:31you. That's all from my side for today,
12:33guys. If you learned something valuable,
12:34please make sure to hit the like button
12:36in order to make YouTube ever happy. And
12:38for more such insightful business and
12:39political case studies, please subscribe
12:41to our channel. Thank you so much for
12:43watching. I will see you in the next
12:45one. Bye-bye.
12:46Amul
12:48[music]
12:54[music]

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