Tuesday, September 7, 2010

Amul Slows Down On Its Franchise Expansion Of Retail Outlets Over Last Fiscal

Utterly Butterly Slowly

The Amul girl seems to have slowed down. The aggressive retail expansion drive launched by the Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets the Amul and Sagar brand of milk and milk products, has lost momentum.

Amul could add only 700-800 retail parlours in fiscal 2009-10, which was a marked slowdown from the previous year’s addition of 2,000 outlets. As a result, the total number of operational Amul Preferred Outlets (APO) is only 5,000, which is exactly half the original target of having 10,000 retail outlets.

The target was set by GCMMF Chairman Parthi Bhatol while addressing Amul’s 35th annual general meeting. "Taking a cue from the success of our parlours, we plan to add 6,000 more such outlets by the end of 2009-10, taking the total tally to 10,000", Bhatol had said. What Amul finally achieved in the financial year was a shade over 10 per cent of that target.

The ambitious expansion plan was triggered by the rapid addition of 2,000 retail outlets in FY 2008-09. Amul had a total of 4,300 operational retail parlours in 2008-09.

"The retail expansion has slowed down," says a GCMMF board member, who did not want to be quoted.

An email sent to GCMMF seeking reasons for the slowing down of retail expansion remained unanswered, but an executive says the expansion was hampered by the general economic downturn in 2009-10.

Though it has missed its original target by a long shot, Amul seems to be satisfied with the progress. "It is not just a number game. Setting up a network of 10,000 outlets is a mammoth task. Amul added two outlets every day across the country, while others were closing down their retail stores in 2009-10 in the wake of the recession," the official says.

The parlours are run on franchise-based model and GCMMF says the recessionary phase in 2009-10 led to a decline in the investment appetite of its franchise partners.

In order to rapidly increase the number of its retail outlets, Amul had identified locations such as railways, airports and posh areas in major cities. "Rolling out retail parlours at railway stations requires specific approvals and sometimes the launch gets affected due to delays in receiving approvals," Bhatol says. Amul currently has around 150 retail stalls at various railway stations across the country and had planned to add 300 more in 2009-10.

Amul officials also maintain that setting up scooping parlours, which sell Amul ice-cream, in posh areas of Mumbai, Delhi and other metros is time-consuming as it is difficult to find suitable locations at affordable prices in these cities. GCMMF at present operates 400 such parlours across India.

The slow pace of expansion, however, has not affected the performance of the company. Revenue from retail operations surged to Rs 300 crore in 2009-10 from Rs 200 crore and Rs 107 crore in 2008-09 and 2007-08 respectively.

Amul, say officials, is back into the growth mode this year and would have 10,000 outlets by the end of fiscal 2010-11. "So far, we have approved 6,381 retail outlets, of which 5,000 are operational and the rest will soon start working," the official says.

What may help is the fact that the long uncertainty following the battle for power at GCMMF has finally ended, as the move to replace Bhatol as chairman was defeated late last month. A board meeting, called to decide on a no-confidence motion against Bhatol, was cancelled after all the 13 board members except Bhatol stayed away. Ten board members had issued the motion, claiming they had lost faith in Bhatol’s leadership, but did not vote against him when the time came.

The Rs 8,000 crore cooperative has at least three million members from 12,000 villages across the state. Bhatol became its chairman in 2006 after then board members, including him, passed a no-confidence motion against founder-chairman Verghese Kurien

Tags:Amul Franchise, Sagar Franchise, Amul Preferred Outlets,(APO), Parthi Bhatol, GCMMF, franchise-based model, railway station franchise, Amul Ice Cream Franchise,Verghese Kurien, Dairy Franchise,

Source: Sify Finance, Kalpesh Damor ,2010-09-06 00:50:00

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