Amul vs Nandini, two leading dairy brands’ traditional rivalry has become a political issue in Karnataka election. The Kannadiga pride and the rural economy dependent on the home-grown brand are at the heart of a seemingly corporate war, writes Rajat K Baisya.
India is the world’s largest milk producer, with 222 million tonnes of milk in 2021-22. But in recent times, the production declined, which is attributed to some skin diseases of the cattle. However, the production grew by about 6% year-on-year in the preceding five years. As per the current indication, milk production will be stagnant in 2022-23.
About 50% of the milk produced in the country is locally consumed where it is produced. The remaining is supplied to the urban areas where consumption is growing. In India, the largest percentage of milk is consumed as fluid milk, and only a small percentage is processed for value-added products like SMP, Butter, Ghee, and other value-added milk products like ice cream etc. However, export performance is not encouraging compared to that of other leading milk-producing countries in the world. India exported about 109 lacs MT of dairy products worth about Rs 3000 crores (392 million USD) during the year 2021-22. Our cost of production is higher, and we are not as such globally competitive despite being the world’s largest producer.
Amul vs Nandini
The two largest dairy cooperatives in India are Amul of Gujarat Cooperative Milk Marketing Federation (GCMMF) and Nandini of Karnataka Milk Marketing Federation (KMF). Both are large and successful, but Amul is bigger than Nandini.
Gujarat and Karnataka’s rural economy depends on these two dairy cooperatives. KMF was controlled by Janata Dal (S) for long years, and only in 2019 did the BJP get control of this Federation by getting its own MLA elected as Chairman. Former Prime Minister H D Deve Gowda’s elder son H D Revanna of the JD(S), was the KMF chairman for nine years. In 2019, the saffron party broke the 19 years of Janata Parivar’s domination in the cooperative milk sector.
About 40% of the fluid milk market is controlled by these two large dairy cooperatives, along with other leading private players. And this is growing and is projected to be 55% in the next three years. In that, Amul will have a varying market share ranging from 45 to 75% in different markets.
As the Amul vs Nandini battle heats up in poll-bound Karnataka, the Kannadiga pride and the rural economy dependent on the home-grown brand are at the heart of a seemingly corporate war. It all started when Amul announced at online social media for online deliveries of milk and curd in Bengaluru. It was followed by Home Minister Amit Shah, also the Cooperative Minister of Govt of India, making a statement in December last year that cooperation between KMF and GCMMF can do wonders, which was interpreted as the ruling party’s plan to merge KMF with GCMMF. The opposition parties raised the issue in public to resist any such move. And that subsequently became an election issue as well in Karnataka, and overnight milk dairy cooperatives have become a political agenda now in the forthcoming Karnataka state election.
In December last year, Amit Shah, during the inauguration of KMF’s mega dairy project in Mandya, said the “cooperation between Amul and Nandini can do wonders in the dairy sector”. The opposition smelled a conspiracy and called it a plan to merge Nandini with Gujarat, which the ruling BJP in Karnataka rubbished and denied.
In the last week of March this year, the Food Safety and Standards Authority of India (FSSAI) directed to write “Dahi” in Hindi on curd packets apart from the local nomenclature, which the opposition parties called an imposition of the language.
The opposition Congress and the JD(S) have trained their guns at the ruling Bharatiya Janata Party in the state when the assembly elections are just round the corner, expressing fears that Nandini, the ₹21,000 crore brand, from the Karnataka Milk Federation (KMF), could be merged with the Gujarat-based Amul.
The opposition parties charge that the government will create scarcity of Nandini products, making it less competitive to Amul and forcing people to buy Amul products once its milk and curd are allowed to be sold in Karnataka.
Amul had been selling its butter, Ghee, yogurt, and ice cream in the state for a long time. KMF also sells in other Southern states. In 2020-21 interstate sales accounted for 15% of the revenue for KMF. Nandini products are sold in Andhra Pradesh, Tamil Nadu, Telangana, and Maharashtra as well. Some of its products are exported too.
The people of the Karnataka state have an emotional connection with the Nandini. The opposition alleges that the BJP wants to merge the 49-year-old KMF’s Nandini with its much elder Anand Milk Union Limited (AMUL) so that there could be “One nation, one Amul” in the country, the policy PM often emphasizes. However, BJP has emphatically rejected the charge.
AICC general secretary and Karnataka party in-charge Randeep Surjewala alleged that the BJP was trying to “sell off” Nandini. Former chief minister HD Kumaraswamy also flayed the state government on this issue. The opposition said that the BJP-led central government’s official policy is “One Nation, One Amul, One Milk, and One Gujarat,” he said. This, however, Chief Minister Bommai has also denied.
Nandini has a cost advantage over Amul which can help them to grow faster. An Aliter of Nandini’s toned milk costs Rs 39, and the same quantity of Amul is priced at Rs 52. In terms of milk processing capacity, Amul is much bigger. And therefore, Amul has a capacity advantage. Amul produces 1.8 crores liters of milk every day, while KMF produces over 1.0 crore liters of milk a day. In summer months, however, milk production reduces. For example, the production of Bangalore Milk Union Limited (BAMUL), part of KMF, has now declined due to summer from 90 lakh liters a day to 75 lakh liters a day.
Nandini’s quality is comparable, although Nandini claims it to be better than Amul and has a good network of milk producers and milk unions, and is an undisputed leader in dairy products in Karnataka. When Amul entered, it dominated the market, and that is the fear Nandini has. Maharashtra State Cooperative Milk Federation Limited, also known as Mahananda Dairy, has not been doing good business since Amul entered the market. Similarly, the cooperative milk federations did not pick up much in Telangana and Andhra Pradesh.
The rural economy is dependent on KMF, and the emotions of Kannadigas are deeply attached to the Nandini brand. The issue escalated so much that some of the large bulk sellers and wholesalers in Bangalore declared a real war, saying that they would not stock Amul and would only sell Nandini.
Dairy is often the primary source of income in rural households and landless farmers, including marginal farmers. So, it is in their best interest if successful brands like Amul and Nandini procure milk and sells it across the country, competing with each other. If one is allowed to have a monopoly, farmers are likely to get exploited. Dual brands’ healthy competition would possibly be a better strategy in terms of the interests of the various stakeholders.
However, to be more competitive, both Nandini and Amul can cooperate and collaborate at various levels to benefit from their synergy of operations without resorting to a merger, as feared by the opposition politicians. But politicians are seeing this as an opportunity to mobilize public sentiments to improve their winning prospects in coming state election.
The author is the chairman of Strategic Consulting Group and served as Professor and Head of the Department of Management Studies, IIT Delhi.