Amul: Doughnut Design Case Study

01 | Brief Summary and Key Facts

AMUL is an acronym for Gujarat Milk Marketing Federation - an Indian multinational cooperative society based in Anand, Gujarat. It is under the ownership of Gujarat Cooperative Milk Marketing Federation Limited, Department of Cooperation, Government of Gujarat. It is one of the household names when it comes to milk and milk products in India. 

• Location: Headquartered in Anand, Gujarat (India)
• Founded: 19 December 1946
• Size: US$ 6.2 Billion (2022)
• Sector: FMCG
• Legal Form: Cooperative
• Website: https://amul.com/
• Main Product/Services: Milk and Milk Products including Butter, Spreads, Cheese, Dahi, Beverages, Ice Cream, Ghee, Milk Powder, Chocolates etc.

Highlight of their unique approach

AMUL takes a farmers-first approach: it supports farmers by returning 85% of every rupee earned on a product back to them. This rate is higher than the global average of 33%. It also procures milk from local producers at a rate that is 15% - 20% higher than other private dairies and 5% - 7% higher than other cooperatives. Beyond paying premiums, AMUL supports local communities through initiatives like providing veterinary services, offering cattle feed at cost-price, and enhancing digital tools, such as the AMUL Farmer app and the AMUL Dairy Trade platform, for efficient supply chain management.

Highlight of their unique design

AMUL's structure is built on collective ownership, allowing profits to be distributed among its 3.6 million farmer-members. The cooperative's democratic governance ensures that farmers' interests are prioritized; board members are elected from among the farmer-members to directly represent their voices. The election process follows a distinct pattern. The heads of each district's milk union — who are themselves elected by the farmer-members of their respective cooperatives — elect the Chairman and Vice-Chairman of Gujarat Cooperative Milk Marketing Federation Limited (GCMMF), the central unit for marketing AMUL products. These elections are held every two and a half years to ensure continuous representation of the farmers' voices in decision-making processes.

The uniqueness of AMUL's model hinges more on its ability to offer higher prices to milk producers for their products on procurement side while keeping the product prices’ reasonable. A part of the profit is also invested into farmer support initiatives. This financial model, characterized with lower margins at the end of retailers and distributors, has been possible owing to the years of brand building and supply chain efficiencies witnessed by AMUL. It provides a lesson for other cooperatives who may be struggling to balance income enhancement of artisans/farmer members with business sustainability. 

02 | Founding Story

Problem Statement | Need for a cooperative like AMUL

After several British officials in Bombay fell ill due to the concerning quality of milk, Polson Dairy in Anand was given monopoly rights to source milk from local farmers and supply it to the city. Farmers in Khaira (now Kheda, Gujarat) faced long journeys to deliver milk, risking spoilage in the summer and unsold surplus in winter. The prices set by the collecting agents of Polson were set unfairly. They also took a commission, leaving farmers with minimal earnings.

Intervention | Foundation of AMUL

The Kaira District Cooperative Milk Producers’ Union Limited was established on December 14, 1946, with the guidance of nationalist leaders like Sardar Vallabhbhai Patel and Morarji Desai. It aimed to enable farmers to collect, process, and supply milk directly to Bombay, bypassing Polson Dairy. Initially comprising five village cooperatives, the Union grew to handle 5,000 liters of milk daily by 1948, with 432 farmers participating. In 1955, the brand name "AMUL" was chosen. To accommodate small-scale producers, milk collection was decentralized with village cooperatives.The first modern dairy of Khaira Union was established in Anand. In 1973, the Gujarat Cooperative Milk Marketing Federation Limited (GCMMF) was set up as a central unit for marketing all AMUL products while preventing competition among the Unions. The brand name AMUL, which was with the Union since 1955, was then transferred to GCMMF.

Result | Influence on cooperative and milk production systems in India

AMUL's cooperative model, known as the Anand Pattern, played a key role in inspiring the "White Revolution" and shaping India's cooperative movement. Established in 1965, the National Dairy Development Board (NDDB) launched Operation Flood in 1970 to revolutionize dairy production and make India self-sufficient in milk. By 2000, AMUL became India's most recognized dairy brand, and Gujarat one of the largest milk producers. Today, GCMMF, AMUL's marketing arm, connects 18 district unions, 18,000 cooperative societies, and 3.6 million farmers, with a turnover exceeding ₹72,000 crore, making it the world's largest dairy cooperative.

The AMUL model

AMUL follows a three-tier structure comprising of the Village Dairy Cooperative Societies’ (DCS) – grassroot units organized of local milk producers whose primary role is to procure milk from farmers, ensure quality control, and provide services such as veterinary care and feed supply; the Dairy Cooperative Unions – processing units at a district level who collect milk from DCS, process it into dairy products, ensure it meets the quality standards and provide technical support and training to the DCS; and the State Cooperative Federations – who handle the marketing and distribution of dairy products, represent the interests of Unions at a state level, and manage brand development, pricing strategies, and market expansion. These roles and responsibilities at each tier, along with their inter-institutional linkages of ensuring a steady supply of milk with proper logistics and marketing, ensure the model’s smooth operation. The Kaira District Milk Cooperative Union is referred to as AMUL Dairy and GCMMF is referred to as AMUL Federation.

Currently, there are 18,600 Societies organized under 18 Unions within the State of Gujarat. This accounts for about 84% of the total milk procured and processed by AMUL. The rest is sourced from the other States like Karnataka where AMUL has set up its plants or has ties with local milk cooperatives. AMUL adheres to consistent practices, across the States. 

This de-risks the business and ensures a steady supply that meets  consumer demand for processed milk and milk products. For distribution purposes, AMUL has links to 48 depots situated in five zones. 

03 | Regenerative & Distributive Strategies and Actions

AMUL’s model follows a farmer and customer first approach. Its business strategy revolves around the twin objectives of 1) ensuring long term and sustainable growth to its member farmers and 2) providing value to a large customer base by providing milk and other dairy products at a low price. Some ways in which this has been ensured are: 

• Procurement: AMUL procures milk from local producers at a rate that is 15 - 20% higher than other private dairies and 5% - 7% higher than other cooperatives. At the same time, AMUL sells processed milk and dairy products at lower prices by maintaining distributor and retailer margins 30 - 50% lower than other brands. This efficiency comes from AMUL's large  scale which benefits from its network of 18,600 societies and 18 unions. Efficient supply chain management, including 48 depots and advanced logistics, helps lower costs, while the cooperative model enhances operational efficiency by integrating farmers into the supply chain and reducing transaction costs. Investments in infrastructure, such as processing plants and digital tools like the AMUL Farmer app, further optimize operations. AMUL’s governance structure, rooted in a cooperative model, reinvests profits into the system, focusing on long-term sustainability and efficiency rather than distributing profits to shareholders.

• Profit Distribution: Farmers associated with AMUL are provided a bonus from the profit of the organization at the end of the year. This is in addition to the price of the milk. These distributions are made proportionate to the volume of business contributed by each farmer. This has enabled AMUL to retain their engagement with farmers while promoting farmers to contribute increasing volumes of milk to the federation.
• Contribution to Local Economy and Society:  The cooperative model adopted by AMUL fosters a participatory approach where stakeholders, including milk producers, are actively involved in decision-making processes. This model allows input from members, influencing where and how investments are made. Some examples of the programmes and initiatives include:
  • AMUL conducts comprehensive education and awareness programs for farmers, focusing on improving their knowledge and practices in dairy farming. Additionally, farmers receive essential products like cattle feeds and mineral mixture powders, along with veterinary services to enhance cattle health and milk quality. Further, AMUL’s Entrepreneurship Development Programmes train youth and educated milk producers in commercial dairy farming and management., So far, around 268 programs have been conducted and 17,499 milk producers have been trained. Decisions on investment in training and support are data-driven, informed by feedback from the field, ensuring resources are effectively allocated to meet farmers' needs and enhance productivity. Regular feedback mechanisms help AMUL refine and adapt its programs, reflecting a commitment to inclusive and participatory approaches that align with the needs and priorities of its cooperative members.
  • The Village Societies maintain a fund from the profits, which they use to uplift their  village with projects such as opening a school, building a hospital, etc. Local committees, composed of elected or appointed community members, oversee the management of funds. The decision-making process is participatory, with community members actively involved in discussing and voting on proposed projects. Transparency and accountability are maintained through regular financial reporting, community updates, and periodic audits. This governance model ensures that funds are used effectively to address community needs and fosters trust through clear and open management practices.

AMUL has also started focusing on green procurement and processing in the past few years. This includes installing gobar gas plants at the farmers’ doorsteps, engaging in participatory stewardship for sustainable consumption, and governance of water resources, and generally minimising  the carbon footprint of its processes.

04 | How the Deep Design Enables Strategy and Action

AMUL’s business design differs from the other cooperatives in India in several key ways. 

• Ownership: Unlike any other cooperative, the Managing Director of all AMUL units is appointed by the Board of Directors, which comprises farmer members elected from the respective societies. Additionally, at AMUL, all employees are hired by their own Human Resource Section whereas at the other milk cooperatives, the recruitment system is dependent on the state government. This prevented corruption within the federation and enabled it to take decisions free from any political will. The federation has also been able to invest a share of profits back for the welfare of farmers freely.
• Operational Independence: By managing appointments and recruitment internally, AMUL decreased the risk of political inference and corruption. This operational independence allows for decisions that are focused on the welfare of its members and the efficiency of its operations.
• Investment in Welfare: The federation’s ability to reinvest a portion of its profits back into the welfare of farmers helps to improve their livelihood and enhance the overall impact of the cooperative. 
• Focus on Networks and Partnerships: AMUL deliberately avoided  the “doing it all” approach. It focuses on core dairy activities and has established a network of partners (institutions, cooperatives in other States, individual professionals and experts) to provide supplementary services like education and awareness generation, veterinary services, R&D etc. It also has ties with the Institute of Rural Management Anand (IRMA) that provides managerial support.
• Trading Relationships: AMUL’s trading relationships with farmers involve a streamlined process where farmers supply milk to collection centres, where it is tested for quality and then transported to processing facilities. The cooperative ensures timely payments to farmers based on the quality and quantity of milk supplied. Additionally, AMUL’s profit-sharing model reinvests profits into the cooperative for the welfare of farmers, aligning the cooperative’s financial success with the well-being of its members.

05 | Reflections and Lessons for other Businesses

AMUL is an important example of how businesses can grow by putting  social justice and environmental care at the forefront. By returning 85% of its earnings to farmers, offering higher procurement rates, and a transparent governance structure, AMUL guarantees fair compensation and equitable wealth distribution. Its democratic structure, where farmers elect board members, mirrors the Doughnut model's emphasis on inclusive governance, fostering transparent and resilient decision-making that benefits all stakeholders. AMUL proves that through collective ownership, and community investment, business success can go in tandem with social and environmental well-being.

This case study was written by Saundharaya Khanna, Drishika Sharma and Chirantan Prahlad Hedge of Society for Technology & Action for Rural Advancement (TARA) in collaboration with DEAL.