45th Annual General Body Meeting on 28th May, 2019

45^th Annual General Body Meeting on 28^th May 2019

Madam and Gentlemen,

Almost a century ago, Mahatma Gandhi said, “The soul of India lives in its villages”. More than 70 years later, with 70% of our citizens residing in rural India, this statement still stands true and agriculture remains the backbone of the Indian economy. Currently, our national GDP is surging ahead at the rate of 7.0-7.5% p.a. and the economy is pegged at the USD 2.9 lakh crore (USD 2.9 trillion) mark.

The Indian economy has been developing continuously over the past seven decades and has achieved an extremely positive and vibrant growth in agriculture, manufacturing and the services sector. Our policy makers understood the importance of the contribution of agriculture to nation building and were thus able to design a trajectory for the advancement of the nation through successful planning. Effective planning and execution successfully scripted for India and its people a growth story with important turning points in the course of the narrative.

The Green Revolution ensured food security for the increasing population of a developing nation; and ensured self-sufficiency for coming decades. Similarly, in the same period of the Operation Flood programme led to the White Revolution, which generated, at that time, a subsidiary income source for rural farmers. This enabled our country to be self-sufficient in milk production, while other Asian countries are still dependent on import of milk products. All such policies acted as a catalyst in strengthening the agriculture sector leading to India becoming one of the fastest growing large economies of the world. At present, India ranks sixth in terms of nominal GDP and is poised to become the third largest economy by the year 2050-51.

At the time of Independence, India had a GDP of about USD 2,000 crore (USD 20 billion) and a population of around 36 crores (360 million). Of these, 75% depended on agriculture for their livelihood. Agriculture accounted for about 70% of the GDP; while cultivable land available then, was around 17 crores (170 million) hectares. In 2018, the figures were: a GDP of USD 2.9 lakh crores (USD 2.9 trillion); a population of 135 crores (1.35 billion); with about 58% of the population dependent on agriculture for their livelihood. The population depending on agriculture has a per capita income of INR 35,000 (USD 500) as opposed to INR 2.1 lakh (USD 3,000) per capita income of those not dependent on agriculture (1:6); whereas immediately post-independence, it was at a near parity (1:1) level. In spite of the increasing income disparity over the years, however, Indian farmers still work hard to contribute to the nation’s self-sufficiency in agricultural produce. As a result, we are the number one producer of milk, banana, mango; and number two in wheat and rice production. But there is a need to generate a positive interest as well as create a transformational impact for the vast majority of our rural citizens to keep this growth momentum going in the years to come. Out of an agricultural economy worth around INR 28 lakh crores (USD 400 billion), around 28% i.e. INR 7.7 lakh crores (USD 110 billion) is contributed by dairy and animal husbandry activities.

After Operation Flood, the Indian dairy and animal husbandry sector which currently contributes to around 4.2% of National GDP, emerged as a primary source of income for about 70 million rural households—most of them are either landless, small or marginal farmers. India has been the largest milk producer country of the world for the last 21 years. Current milk production of India stands at around 176 million metric tonnes per year which is around 20% of world milk production. Milk production in India has been growing at a Compounded Annual Growth Rate (CAGR) of 4.5% over the ast 20 years, compared to less than 2% CAGR of the world. Total value of milk production in India is around INR 7 lakh crores (USD 100 billion) which is more than the total value of all pulses and grain put together. India is not only the largest milk producer of the world but also the largest consumer of milk globally. It is also one of the fastest growing markets for branded dairy products. India’s per capita milk availability is around 370 gm/day/person which is higher than the world average of less than 300 gm/ day/person.

However, the dairy scenario of India was not an attractive one during the early 70’s. Farmers in most parts of the country were not receiving the remunerative returns due to the long chain of middlemen and almost no market access. The scenario changed after implementation of Operation Flood I, II and III and replication of the “Amul Model” of cooperatives across the country under the guidance and leadership of Dr. Verghese Kurien—the Father of the White Revolution of India.

In Gujarat, the dairy cooperative movement started before Independence with the objective of eliminating unfair trade practices and providing the farmers with remunerative rates. Today, Amul has built a network of 3.6 million farmers and this great movement encouraged people from all walks of life to go beyond the barriers of caste, creed and gender, and to come together to achieve these objectives. Thus fulfilling the vision of Sardar Vallabhbhai Patel, “Iron Man of India”, to remove distinctions of high and low, rich and poor, caste and creed. A dairy farmer does not only supply milk but also contributes in improving the quality of life of the people he serves. Hence, the White Revolution has also helped in the development of the village community in the form of health care, education, community development and women’s empowerment.

Going forward, to align with the goal of our Hon. Prime Minister to double farmers’ income by the year 2022-23 over the base year 2015-16, the annual growth rate required is 10.4% in farmers’ income over this period. Currently, the 14.3% growth rate in income from livestock shows a high promise of attaining this goal. The backbone of the successful Amul Cooperative Movement has been the involvement of the dairy farmers and the supply chain innovation with the use of technology across the entire value chain. The dairy farmers own this movement entirely and their round-the-year involvement is the key to sustainable development of the dairy sector. The investment in technology, on the other hand, has aided in enhancing milk production and milk productivity. The setting up of technologically advanced processing centres of milk and milk products has improved product availability; and designing of SAP-backed systems for the distribution throughout the country has helped Amul reach a billion consumers. This ‘cow-to-consumer’ IT-backed value chain has empowered all members with information and technology. All of these factors have enabled us to increase the milk procurement price of our dairy farmers by 105%; and to increase milk procurement by 153% in just nine years. As a result, dairy farmers are encouraged to invest in their dairy business through increasing herd size as well as milk productivity.

The demand of milk and milk products in India is increasing very rapidly because of urbanisation, convenience demanded by customers and shifting of consumers from loose to packaged dairy products.

We are the largest dairy organisation in India—out of the 27% of total marketable surplus handled by the organised sector, we handle 25%. The organised dairy sector is currently growing at around 10-12% per year. As the leader of the Indian dairy industry, it is our responsibility to drive expansion of the organised sector and increase its share from 27% to 40% in the next decade. Currently, only 35% of Indian villages are covered under the dairy cooperative network; therefore, promoting Dairy Cooperatives should be the key to our strategy to enhance farmers’ income and driving growth in the organised sector. It is estimated that in the next 40 years, India’s population will increase to 1.7 billion from the current 1.35 billion and around 50% of the Indian population will reside in urban areas, from current level of around 32%. Based on urbanisation and population growth estimates, it is envisaged that India needs around 600 million metric tonnes of milk per year to fulfill the demand for milk and milk products. This means that India’s milk production needs to grow at around 3.2% CAGR for the next 40 years. This can be possible only when dairy farmers are given stable remuneration prices through proper market linkage. In order to achieve this estimated growth in demand, the time is ripe for the Second White Revolution in India. India will then have the competence to export surplus milk to milk deficient neighbouring countries like China, Sri Lanka, Bangladesh, Nepal and Bhutan, thus becoming the “Dairy to the World”. Continuous and consistent growth of milk production leads to higher investment in dairy and animal husbandry. It is estimated that if milk producer members produce 1 lakh litres of milk per day and supply the same through organised players to consumers then approximately 6,000 people can get employment throughout the year. In the next 10 years, India’s milk production in the organised sector is estimated to increase from current 9 crore litres per day (33 million metric tonne per year) to 30 crore litres per day (110 million metric tonnes per year) which will result in an increase of employment by 1.2 crores (120 million) jobs. It is not just the absolute employment numbers, but also the potential for growing employment opportunities in rural India, that is heartening. The dairy sector is the only such activity where milk producer members, particularly the women, earn their livelihood with dignity. Rural milk producers would therefore not feel the need to migrate to urban areas to seek employment in order to improve their social status. A burgeoning market, however, poses some threats as well. Domestic private players have increased the availability of cheaper dairy substitutes, thus depriving the Indian consumer the benefits of milk. On the other hand, developed dairy nations continuously try to do dump milk products in the Indian market through the Free Trade Agreement (FTA) thus potentially affecting the income of the Indian dairy farmers. However, Indian dairy farmers can look forward to golden days ahead with dairy commodity prices firming up over the last four months. For comparison, the farm gate prices for milk producer members of New Zealand increased by 4% in the last 10 years. On the other hand, the prices to the milk producer members of Gujarat increased by 132% in the same period because of focus on brand building and consumer marketing. This was possible because of the support from the Government of India and the Government of Gujarat. Last year, with the timely help from the Government of Gujarat and MEIS support by the Government of India, Amul exported more than 29,200 metric tonnes of milk powder. This resulted in the increase in price of Skimmed Milk Powder in the domestic market and an increase in milk procurement prices. To put it in perspective, around INR 15,000 crore (USD 2.2 billion) was the benefit earned by the milk producer members of India in the year 2018-19. Dairying is not only a major economic activity but also an integral part of our social and cultural heritage. Its uniqueness lies in its unifying power, in the fact that no other industry touches the lives of millions of farmers. “Man power without unity is not a strength unless it is harmonised and united properly—then it becomes spiritual power.” said Sardar Vallabhbhai Patel. I now present to you, our Federation’s Annual Report and the Audited Accounts for the Financial Year 2018-2019.

REVIEW OF OPERATIONS

Milk Procurement

The total milk procurement by our member unions during the year FY 2018-19 averaged 230.08 lakh kilograms (23 million kg) per day, representing a growth of 9.3% over 210.42 lakh kilograms (21.04 million kg) per day achieved during 2017-18. The highest procurement was recorded during February 2018 at 268 lakh kilograms (26.8 million kg) per day. Over the last nine years our milk procurement has witnessed a phenomenal increase of 153%. This enormous growth was a result of the high milk procurement price paid to our farmer-members which has increased by 105% in this period. The highly remunerative price has helped us retain the farmers’ interest in milk production; and better returns from dairying have motivated them to enhance their investments in increasing milk production. Our initiative in promoting the concept of commercial, scientific, cooperative dairy farming is also helping to attract the next generation of dairy farmers to remain in the business.

Sales

During the financial year 2018-19, your Federation registered a turnover of INR 32,960 crore, translating to a nearly four-fold expansion, during the last nine years, with 17% CAGR in this period. In spite of facing competition our Federation has achieved 12% volume growth in consumer products during FY 2018-19. We took giant leaps forward in our journey of product innovation—as many as 101 new products from Amul’s portfolio were launched in the last four years.

We strongly believe that product innovation is essential in order to cater to the emerging needs of our society and also to create a vibrant portfolio for the future. I am pleased to note that our Federation has done remarkably well in almost all value-added consumer packs.

Our superlative performances for the year 2018-19 were led by fresh product categories. Amul Masti Dahi posted 33% volume growth, leveraging on rapid expansion in our fresh products distribution. Similarly, Amul Buttermilk registered 27% volume growth, while Amul Milk in pouches, which is the largest category in our overall business, grew confidently by 5% in absolute terms and maintained market leadership in all major markets.

The expansion of production capacity in the cheese category helped us achieve huge success in this highly competitive segment, with Amul Cheese registering a 17% value growth in 2018-19.

Similarly, our trendy milk-based beverages have gained immensely in popularity, especially amongst the youth, helping us achieve double-digit value growth. Amul Cream is rapidly becoming an essential ‘must-have’ ingredient in most Indian kitchens and is also very popular with caterers and restaurants. Its popularity helped the product achieve a 34% value growth. Similarly, the Paneer range has witnessed 23% value growth in its category.

In the Chocolate segment, we have achieved an impressive volume growth of 69%. I am pleased to inform you that “Amul” is the Number 1 company in the dark chocolate category in India. Our flagship brand Amul Butter achieved 14% growth taking advantage of expansion in packaging capacity of key variants and launch of innovations such as Garlic Butter, Chocolate Buttery Spread and unsalted Lactic Butter. Amul Ice Cream, the leader in the Indian ice cream market, had another immensely successful year with a 10% volume growth.

Distribution Network

We have been successfully traversing the path of expansion by widening our reach across geographical areas, consumer segments and consumer age groups by ensuring product availability to the market. By doing so we intend to further strengthen our existing very unique and robust distribution model which serves consumers through four distribution highways—fresh, ambient, refrigerated, and frozen.

In order to critically monitor and improve focus on the progress of our expansion drive, we have opened our eighth zonal sales office at Bengaluru and also opened four new branches—at Gorakhpur, Bathinda, Mysuru and Nashik—taking the overall branch strength to 62. We have plans to add two more sales zones and 10 branches in the coming year.

In keeping with the new tax regime, we have realigned the territories of the branches purely based on logistical reasoning. Working ahead on our aim of being closer to the consumers and also to encash upon the added infrastructure availability, GCMMF has added 1,574 more Wholesale Dealers (WDs) and Area Delivery Agents (ADAs) in the current year—a growth of 15% over last year.

To increase our reach in smaller markets (any town up to 10,000 population), we have been very aggressively pushing for direct reach in such markets by appointing direct WDs. We have appointed more than 750 distributors through whom we plan to enhance our range availability in such interior markets. In the current year, we continued to bring new distributors to the Distribution Management System (DMS) fold, thereby enabling our Sales team to track market gaps and ensure these are covered. By the end of the financial year, we had implemented the DMS at locations across India covering 94% of our business territory. The robust system is bringing in the much-needed last mile information on a continuous basis, further assisting us to gain complete control on our markets. We are perhaps the only FMCG which has geo-tagged more than five lakh outlets across the country on our proprietary software “Amul Tracks”.

Information Technology Integration

We are happy to inform you that your Federation has successfully completed eight years of operations on SAP ERP. Besides AmulFed Dairy, Vidya Dairy and your Federation, a total of 17 member unions are deriving benefits of using SAP for business transactions. Your Federation has also made commendable progress on the implementation of the Amul Automatic Milk Collection System (AMCS) application at Village Dairy Cooperative Societies. A total of 11,000 village societies are covered in the project thus far. The application has helped integrate the Cow-to-Consumer (C2C) IT Value Chain. On a daily basis, more than 11 lakh messages (SMS) are being sent to milk producers sharing information on the quality and quantity of milk poured. The mobile applications are deployed for milk producer members, society management and the supervisory team to access AMCS data at their convenience.

Exports

It is my immense pleasure to inform you that we have fared extremely well on the exports front this year with tremendous growth in both consumer packs as well as commodity exports. Our consumer exports grew by 25% and bulk pack exports tripled, thus helping us earn foreign exchange for our huge inventory and improve the domestic market situation which has resulted in tremendous benefit for all Indian dairy producers. Our exports have achieved a turnover of INR 819 crore during 2018-19 which is 174% higher than the previous year. I am positive that this upbeat momentum will continue in the coming years with our focus on exports of consumer products and on increasing our competitiveness in bulk commodity markets.

Cooperative Development Programmes

During the year, we have provided technical, managerial and marketing support to the Jamnagar milk union for the establishment of the dairy cooperative structure in their district. We have continued to provide support to milk unions of Saurashtra and Kutch region to organise farmers to build and develop cooperatives and increase milk production and procurement. We have also developed a dedicated initiative to improve animal health services by conducting health camps and veterinary routes in these two regions. In the last 19 years, our member unions have been implementing the Internal Consultant Development (ICD)programme for promoting leadership among member producers. Till date, 11,292 Village Dairy Cooperative Societies (VDCS) have prepared their Mission Statement and Business Plan under the Vision Mission Strategy (VMS). During the year, 538 Dudh Utpadak Mandali Sanklit Vikas Ayojan Karyakram (DIVA) programmes have been conducted and 36,263 milk producers have drawn up their action plan. Every year, on Independence Day, the milk producers of Gujarat Dairy Cooperatives conduct a mass tree plantation drive. In the last 12 years they have planted more than 688 lakh trees.

Strategic Calf Rearing Programme:

To create awareness among Milk Producer Members to adopt scientific Calf Rearing Practices and also to create good replacement stock and high productivity animals, we have initiated the Strategic Calf Rearing Programme. During the year, the programme was successfully implemented at the milk union and field levels, benefitting the milk producers by reducing the calf mortality rate, reducing the age at first calving in animals, and by getting more lactation and increased milk production as compared to conventional calf rearing.

Strategic Productivity Enhancement:

To improve the progeny of the upcoming generation of dairy cattle, the Strategic Productivity Enhancement Programme (PEP) has been initiated in 2,986 villages, covering 28.7 lakh animals. FIP-XI, the Fertility Improvement Programme (FIP), is being successfully implemented in 3,460 selected villages covering 3.41 lakh animals. Activities of Strategic PEP and FIP are being monitored through a dedicated system on www.amul.org.in.

Entrepreneurship Development Programme:

Young and educated milk producers are trained in commercial dairy farming and management under the Entrepreneurship Development Programme (EDP). We have conducted 39 sessions and trained 2,587 milk producers during the year.

Ethnoveterinary Preparations Programme:

Our member unions have planned to implement the Ethnoveterinary Preparations (EVP) programme as an alternative medicine; taking into consideration its cost, availability of ingredients at farm level and effectiveness in treatment of various diseases/conditions at the field.

Skill Enhancement Programme for Dairy Cooperative Services Consultants (SEPDCSC):

Consultant staff of Milk Unions acts as a vital link between Milk Unions and Village Dairy Cooperative Societies to ensure Standard Operating Procedure for milk procurement. Hence we have initiated the SEPDCSC programme with the focused objective of strengthening and upgradation of existing knowledge and skill of consultant staff of our milk unions. We have conducted eight programmes and trained 197 consultant staff members of milk unions during the year.

Doodh Sanjeevani Yojana:

In FY 2018-19, the Government of Gujarat has entrusted GCMMF and its member unions with coordinating and facilitating the distribution of Double Tonned Pasteurized Homogenized Fortified Flavoured Milk to children of anganwadis and schools, and also to pregnant and lactating women of Gujarat. Under Doodh Sanjeevani Yojana (DSY), GCMMF and member unions have implemented distribution of milk in 81 talukas of 20 districts in Gujarat and have covered around 23.80 lakh school children.

Take Home Ration:

The Government of India provides ‘Ready to Cook’ Take Home Ration (THR) to young children, adolescent girls, and pregnant and lactating mothers, through its Integrated Child Development Scheme (ICDS). GCMMF has taken up the opportunity for the production and supply of THR to these beneficiaries and has entered into a tripartite agreement with the Government of Gujarat and the three member unions— Kaira, Banas, and Surat—each of which established plants of 200 MT/day. GCMMF has started the supply of THR from these plants to anganwadis of Gujarat.

The Road Ahead

During the last nine years, your Federation’s turnover has increased nearly four times, at a CAGR of 17%. With a group brand turnover of INR 45,000 crore, which represents the unduplicated value of products sold under brand Amul by the Federation and its constituent member unions, we are already the largest food and FMCG organisation in India. While we have surely made huge progress and come a long way, this is just the beginning of what promises to be an exciting and meaningful onward journey. With the rapid increase in milk procurement, we have already upped our total milk processing capacity to 360 lakh litres per day and planned for a 400 lakh litres per day expansion within the next two years. In Gandhinagar, Gujarat, AmulFed Dairy’s capacity expansion from 35 lakh litres per day to 50 lakh litres per day further underlines its status as the largest dairy in India. Several brand new dairy plants have already been commissioned in different parts of India in the last couple capacity at Himmatnagar. Our new chocolate factory has boosted our production capacity to 1,300 MTs per month,enabling us to launch several new and unique flavoured chocolates which have been attracting huge interest from chocolate lovers and being received favourably by consumers. Innovation is in our DNA. In tune with our culture of continuous transformation, we have unveiled as many as 101 new products in the last four years, with 48 products being revealed in just the last two years, exceeding our target of launching two new products every month. Many of these new innovations such as single origin chocolates, dark chocolates, a range of kulfis, Cake Magic Ice Cream, etc. have already created ripples in the market. Rapidly evolving consumer behaviour and preference are also leading to swift transformation of retail channels, from the traditional retailers to organised modern retail chains; and, now, to online e-commerce. While we are aware that only the most customer-centric and most cost-effective way of of years. These include, two eight lakh litres per day capacity plants—one at Taloja, Navi Mumbai; and the other at Navapura near Ahmedabad—and another two lakh litres per day capacity plants in Junagadh and Porbandar. We are also expanding our milk powder manufacturing servicing market demand will thrive, eventually, we are also aligning our business processes to ensure maximum reach with a presence in all channels.

We have taken concrete steps to plan for the next wave of growth, which we feel will come from ‘out of home’ consumption. With evolving lifestyles and changing family structures, the culture of ‘eating out’ is leading to rapid and aggressive growth in the food services segment which caters to restaurants, fast food joints and chains, hotels, cafes, caterers and institutional canteens. Another important thrust area is to expand our footprint in the international market, taking our value-added consumer products not only to the Indian diaspora spread across the globe but also to consumers of other nationalities as well. With the warm wishes, love, blessings, and support of consumers, farmers, and fellow citizens from every walk of life, we hope to take the ‘Taste of India’ to the entire world,in the near future.

Acknowledgements

Before closing, I would like to thank all those who have helped to make our Federation’s operations successful. We are extremely grateful to the Hon’ble Prime Minister of India and Hon’ble Chief Minister of Gujarat for their constant support and guidance. We would also like to thank the Government of India for the immense support received from various departments, specifically from the Department of Animal Husbandry and Dairy Development. We convey our special thanks to NCDC (National Cooperative Dairy Corporation) for providing valuable support to our village cooperative dairy societies. We are thankful too, to the Government of Gujarat, especially the Department of Animal Husbandry and Cooperation, for their very supportive and facilitating role. The National Dairy Development Board (NDDB) has played a role in our growth and development. We are extremely grateful to the Chairman, NDDB, for his continuous support to our organisation.

The National Cooperative Dairy Federation of India has been providing us with invaluable support in coordination with other agencies and organisations. We are much obliged to them. The Institute of Rural Management, Anand (IRMA), as always, has contributed to the perspective building and professionalisation of the management of the cooperative sector. We express deep gratitude for their support. We are indebted to Vidya Dairy for having organised training programmes on dairy technology for our employees. We are also much obliged to Anand Agriculture University and SMC College of Dairy Science, Anand, for strengthening the dairy cooperative sector by providing technically-skilled manpower.

We also express our sincere thanks to the College of Veterinary Science and Animal Husbandry, Anand. Our advertising agencies, bankers, insurers, management consultants, suppliers, and transport contractors have been of great help to us in managing our growth and are our partners in success.

We acknowledge their contributions and commit ourselves to continue and strengthen this fruitful alliance in all times to come. The Indian Railways has played a crucial role in the growth of our dairy cooperatives since inception. We thank them for their continuous support. We depend on the efficiency of our WC&F agents, distributors, retailers, and most important of all, the patronage of our consumers, who have come to regard our brands as synonymous with quality and value. While thanking them for their support, we assure them that we shall strive endlessly to delight them. Our Member Unions are our strength.

We are grateful to them for their guidance, support and cooperation without which we would not exist. Lastly, we thank the officers and staff of our Federation for their continued perseverance, loyalty and unflinching efforts devoted to our cause.

Thank you.

For and on behalf of the Board of Directors,

Ramsinhbhai P. Parmar

Chairman

Click below for the other speeches:

• 44th Annual General Body Meeting held on 23rd June 2018
• 43rd Annual General Body Meeting held on 15th June, 2017
• 42nd Annual General Body Meeting held on 17th June, 2016
• 41st Annual General Body Meeting held on 14th May, 2015
• 40th Annual General Body Meeting held on 15th May, 2014
• Speech of Chairman, Vipulbhai M. Chaudhary: 39th Annual Report 2012-2013
• Speech of Chairman, P. G. Bhatol: 38th Annual Report 2011-2012
• Speech of Chairman, P. G. Bhatol: 37th Annual Report 2010-2011
• Speech of Chairman, P. G. Bhatol: 36th Annual Report 2009-2010
• Speech of Chairman, P. G. Bhatol: 35th Annual Report 2008-2009
• Speech of Chairman, P. G. Bhatol: 34th Annual Report 2007-2008
• Speech of Chairman, P. G. Bhatol: 33rd Annual Report 2006-2007
• Speech of Chairman, P. G. Bhatol: 32nd Annual Report 2005-2006
• Speech of Chairman, Dr V Kurien: 31st Annual Report 2004-2005
• Speech of Chairman, Dr V Kurien: 30th Annual Report 2003-2004
• Speech of Chairman, Dr V Kurien: 29th Annual Report 2002-2003
• Speech of Chairman, Dr V Kurien: 28th Annual Report 2001-2002
• Speech of Chairman, Dr V Kurien: 27th Annual Report 2000-2001
• Speech of Chairman, Dr V Kurien: 26th Annual Report 1999-2000
• Speech of Chairman, Dr V Kurien: 25th Annual Report 1998-1999