The Day After The Cheese-Off

She is all of 58, has been associated with the dairy industry for more than three decades and is one of the most respected names in the industry. He is 82; in fact, he's her mentor and acknowledged as the father of the Indian cooperative movement. But now Amrita Patel and Verghese Kurien are embroiled in a war that has turned so ugly that the duo don't even shy away from making personal comments against each other. And the two great brands they created, Amul and Mother Dairy, are fighting each other for market share.

The two companies had an understanding that each will not invade the other's market. This is why Amul ice-cream, a popular brand in western India, was not marketed in Delhi where Mother Dairy was the market leader. Amul also did not market liquid milk in the capital while it had a considerable presence in Gujarat and Mumbai. When Amul expanded its liquid milk market, it looked at Rajasthan, Madhya Pradesh and Maharashtra and not Delhi where again Mother Dairy was the leader. Mother Dairy, in turn, did not take its ice-cream to Amul's markets. That apart, Amul got a ready network to market many of its products—butter, cheese, ghee, gulab jamun, paneer and milk through Mother Dairy's milk and Safal's fruit and vegetable outlets in Delhi.

Today, Mother Dairy booths do not store Amul products although they still sell products from other cooperatives. Mother Dairy has also launched its own butter brand in Delhi and plans to take it to other cities. Amul is the country's leading butter brand. Mother Dairy aims to garner a 20 per cent market share in the next two years. In Delhi, the two brands now compete in butter, ice-cream, flavoured milk and curd.

At stake is nothing less than the future of the Indian cooperative movement. Patel, chairman, National Dairy Development Board (NDDB), plans to set up a new cooperative model by entering into joint ventures with state cooperative federations, which, according to her, are languishing under the control of the state governments and are largely in a marketing mess. But Kurien is fiercely opposing this.

Says Patel: "Milk procurement has been growing at 9 per cent while marketing has grown by just 4 per cent. We want to increase this to give the farmers their due." According to her plan, NDDB will enter into joint ventures with state-level cooperative federations through its subsidiary Mother Dairy Foods, which will provide them with marketing expertise and promote their brands within and outside their states. The passing of the Cooperative Companies Act late last year that enables the cooperatives to become professional companies in all aspects has given them operational freedom to make this happen.

As of now, two states, Kerala and Andhra Pradesh, which own regional dairy brands like Milma and Vijaya, have signed up with NDDB, while talks are on with several other state federations, in Rajasthan, Punjab, Tamil Nadu, Haryana and Bihar.

So, what is it that Kurien, currently chairman of the Gujarat Cooperative Milk Marketing Federation (GCMMF), which owns Amul, fears?

He says that since NDDB is a body set up by the government, there is a strong chance that the government could, at some stage, influence the board into selling its stake in the new joint ventures to the private sector, even MNC competitors. If this happens, the cooperatives will not only lose their brands but also their identities and their independent existence in the market. Kurien's ire is also over the structure of the joint ventures, where the NDDB subsidiary owns the majority 51 per cent stake.

Patel's premise is clear: a majority of the state dairy cooperatives are languishing and do not have the brand strength, resources and marketing wherewithal to stand up against MNCs.Says she: "The joint ventures have to be looked at in the context of what dairying means to India. It is the only means of livelihood for millions of farmers. The joint ventures will ensure that the fires keep burning in their homes."

Amul had the time to do it as India was still a protected economy where the demands were much greater than production, Patel points out. The situation is totally different today and state cooperatives have to survive in a dog-eat-dog market; MNCs have cemented their position in India's dairy sector in the past few years. So, Patel believes it is imperative to free the cooperatives from the clutches of state governments.

She feels that under the current cooperative laws and structures, none of them can become independent or have operational freedom, especially when most people running the cooperatives are political appointees. Says she: "Gujarat is the only state where the board (of cooperatives) is elected by farmers and the ceo is elected by the board. Beyond this, the chairman is either a minister or an ias officer. So, there is no stability and things don't always happen in the interest of the farmers."

Then what kind of people should the cooperatives have? Patel feels that to ensure the integrity of the cooperatives and to make them stronger, the membership and involvement of women need to be increased as they have lesser political aspirations.

To boost the cooperatives' marketing efforts, NDDB has employed marketing professionals, some of whom have reportedly come from, you guessed it, Hindustan Lever. Says Patel: "It is time to recognise that marketing of the produce will need professionals and we also need stability in the boards as the professionals will not be comfortable if the board gets elected every year."

But Kurien's fears may have less to do with the joint ventures and more with the fast-changing market dynamics which have eroded Amul's market leadership as well as its value proposition as the most authentic source of dairy products in India. Over the past five years, Amul's leadership in liquid milk has been challenged in several places by MNCs as well as local players, while its flagship product, butter, has found competition from Britannia and Nestle.

In ice-cream too, Amul fights a neck-to-neck battle with Lever's Kwality Walls while in chocolates, it is now a distant third behind Cadbury's and Nestle. The last thing Amul wanted was competition from within the cooperative sector.

Yet, it was Amul which fired the first salvo. Last summer, it launched its ice-cream in Delhi, where Mother Dairy was the market leader. Till then, a significant part of Amul's ice-cream supplies for northern India was, in fact, manufactured at Mother Dairy's Delhi facilities. Despite advice and protests from friends and admirers, Kurien trampled the understanding between the two dairy giants. Since then, it's been a free-for-all.

The battlelines are now clearly drawn. The two will fight it out in the market and each one is preparing its war chest. The NDDB plans to market a range of products under the Mother Dairy brand name nationally. The first of these, butter, was launched in Delhi last month. More will follow, including varieties of cheese, flavoured milk, lassi and regional products like sambhaaram and buttermilk, even rasgullas. Says N.A. Shaikh, managing director, Mother Dairy: "We are looking beyond the main cities at a national branding exercise with butter and ice-cream to begin with." The brand itself is in for a makeover, for which the budget has been upped three to five times the earlier Rs 3 crore.

Amul is hardly sitting still either. It launched its flavoured milk in Delhi recently and is looking at Delhi's liquid milk market where Mother Dairy is the leader by a long stretch.Says Dr R.S. Khanna, general manager, North, GCMMF: "Our focus for the coming year will be liquid milk and we will increase our presence in the north including Delhi."

So, what will the outcome be? Perhaps, in the end, this Kurien-Patel war may even end up making the cooperative movement stronger. After all, if two giant entities focus on making their own brands as powerful as possible instead of keeping out of each other's territory in a gentleman's agreement, the market can only expand. Which is good news for both the Indian farmer and consumer.