R S Sodhi, MD, Amul, turned 59 in December 2018. As he nears his retirement, the visionary head honcho of the Rs 41,000 crore dairy company, handpicked by none other than Varghese Kurien, says that Amul has a strong pipeline of leaders who will continue the growth story of the dairy major. In conversation with Ajita Shashidhar, Sodhi talks about company's non-dairy ventures through which it seeks to strike a chord with the younger consumers.
Business Today: You have recently forayed into dark chocolates. You have also rolled out bakery products and frozen snacks in and around your headquarters at Anand. Is the ambition to be a larger food company with interests beyond dairy?
R.S. Sodhi: Our main focus is dairy and will continue to be dairy, but the objective is to get into other newer categories where dairy is involved, like chocolates. We started chocolates in mid seventies, when we bought cocoa primarily to help the farmers of Kerala. Within two years, cocoa prices shot up by two-three times, but our focus continued to be more on milk. However, a year-and-half ago, we started experimenting with chocolates yet again. In India, chocolates are all about high sugar content. Our research told us that consumers want lesser sugar and more of kick, so we came out with an entire range of pure cocoa chocolates. We looked at chocolates as we realised that was the category where bulk of the indulgence was happening, and it was the same old chocolates and there was nothing new happening.
We also launched frozen potato products. We even had ready-to-eat snacks in the seventies like cheese and paneer-based products like patties, parathas and samosas, but we didn't really push those products too much. We are now aggressively pushing frozen products because we have frozen distribution available. In fact, we are the only company that has frozen distribution available pan-India. We also found that ice-cream is seasonal , mostly summers, and frozen snacks do well in winters, so it will enable our distributors to take care of some overheads during winter also.
We are also expanding into bakery. We were selling butter cookies, bread, and cakes. We realised that the butter cookies available in the market has only 2 per cent butter and 5 per cent dairy fat. Our butter cookies have 100 per cent butter fat, there is no vegetable fat. We got very good response from Anand, then we started distributing to the rest of Gujarat. All our bakery products will only use butter fat and that is where our product differentiation will come from. Our new products, especially dark chocolates, have got very good response, beyond our imagination.
BT: Through dairy, you are touching the lives of 3.6 million farmers in India, are your newer businesses also being built with the intent to give back to the society?
Sodhi: Yes, of course. We are sourcing potatoes from our dairy farmers who are in the North of Gujarat. They were not getting good prices and they were in need of money. So, to help them we are buying directly from them, hence, we are getting good prices.
Secondly, the thought behind getting into categories such as bakery is how to give more price for the milk. The money that we get from the bakery business we invest in the milk business. The money goes back to the owners, who are the milk farmers. The milk prices have dipped and in the last year-and-half there hasn't been much improvement in the prices. We are looking at how to increase the prices; whether by earning through other food product categories or by using the Amul brand name and distribution.
BT: While your intent to give back to your farmers through your newer categories is clear, from a business point of view, how important is it for Amul to look beyond dairy?
Sodhi : 98 per cent of Amul's revenue still comes from dairy, and in the coming years, I don't see our newer business contributing more than 10 per cent to our revenue. However, getting into these categories was important in order to be able to connect with the younger consumers. The kind of response that our dark chocolates have got from Twitter and Instagram is amazing. This is the audience, which doesn't watch TV, doesn't listen to radio and it is difficult to reach out to them through traditional mass media; their choices are different and unexpected.
BT: So, was brand Amul beginning to lose its sheen?
Sodhi: Brand Amul was not losing its sheen, but we were being looked upon as a conservative butter, milk, and cheese company. Chocolates have given brand Amul a new picture. When income level and prosperity increases you may want to eat the same kind of food, be it chocolates or cheese, but in a very contemporary and modern way. It could be different flavours, presentations, and packaging. We are launching ice-cream cakes, and fully automatic cakes. We want to make brand Amul look modern and contemporary. We want to catch the youth. It is the biggest consumer segment.
Our objective is not a huge topline, but through these small changes or new initiatives, be it chocolates or bakery, we have started to get a lot of traction from the younger consumers. These businesses will give Amul top-of-the-mind recall, even if they may not be huge revenue generators. The newer categories will also give a huge push to our main categories like butter or cheese.
BT: Can you throw some light on your upcoming investments?
Sodhi: In the last two years, we have added 65 lakh litres. In 2016-17, our milk procurement was 175, 00,000 litres, today it is 240,00,000 litres. Around 15 per cent milk comes from outside of Gujarat, but we have restricted ourselves. We are not expanding outside Gujarat anymore, because we are getting 14 -15 per cent more milk in Gujarat. Farmers of Gujarat are finding investment in animal husbandry or dairy more remunerative than investing in any other areas of agriculture.
We have invested Rs 3,000 crore in the last two years in dairy; in chocolates we have invested Rs 250 crore.
BT: You are in the twilight of your career and the industry wonders if your organisation has yet another leader who is a visionary like you. Don't you think a professional should succeed you?
Sodhi: Amul is in safe hands. We groom our own talent and that is paying us dividends. We do not want migratory talent from other companies.