AMUL: A LOGISTICS SUCCESS STORY

Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), is India's largest food
product marketing organisation with annual turnover (2012-13) US$ 2.54 billion. Its daily
milk procurement is approx 13 million lit per day from 16914 village milk cooperative
societies, 17 member unions covering 24 districts, and 3.18 million milk producer members.
GCMMF is India's largest exporter of Dairy Products. It has been accorded a "Trading
House" status. Many of THE products are available in USA, Gulf Countries, Singapore, The
Philippines, Japan, China and Australia. GCMMF has received the APEDA Award from
Government of India for Excellence in Dairy Product Exports for the last 13 years. For the
year 2009-10, GCMMF has been awarded "Golden Trophy" for its outstanding export
performance and contribution in dairy products sector by APEDA.
1. BACKGROUND
The Kaira District Cooperative Milk Producers Union Limited was established on December
14, 1946 as a response to exploitation of marginal milk producers in the city of Anand (in
Kaira district of the western state of Gujarat in India) by traders or agents of existing dairies.
Producers had to travel long distances to deliver milk to the only dairy, the Polson Dairy in
Anand often milk went sour, especially in the summer season, as producers had to
physically carry in individual containers.
These agents decided the prices and the off-take from the farmers by the season. Milk is a
commodity that has to be collected twice a day from each cow/buffalo. In winter, the
producer was either left with surplus unsold milk or had to sell it at very low prices.
Moreover, the government at that time had given monopoly rights to Polson Dairy (around
that time Polson was the most well-known butter brand in the country) to collect milk from
Anand and supply to Bombay city in turn (about 400 kilometres away). India ranked nowhere
amongst milk producing countries in the world in 1946.
The producers of Kaira district took advice of the nationalist leaders, Sardar Vallabhbhai
Patel (who later became the first Home Minister of free India) and Morarji Desai (who later
become the Prime Minister of India). They advised the farmers to form a Cooperative and
supply directly to the Bombay Milk Scheme instead of selling it to Polson (who did the same
but gave low prices to the producers). Thus the Kaira District Cooperative was established to

collect and process milk in the district of Kaira. Milk collection was also decentralized as
most producers were marginal farmers who would deliver 1-2 litres of milk per day. Village
level cooperatives were established to organize the marginal milk producers in each of these
villages. The first modern dairy of the Kaira Union was established at Anand (which
popularly came to be known as AMUL dairy after its brand name). The new plant had the
capacity to pasteurize 300,000 pounds of milk per day, manufacture 10,000 pounds of butter
per day, 12,500 pounds of milk powder per day and 1,200 pounds of Casein per day.
Indigenous R&D and technology development at the Cooperative had led to the successful
production of skimmed milk powder from buffalo milk the first time on a commercial scale
anywhere in the world. The foundations of a modern dairy industry in India had just been laid
as India had one of the largest buffalo populations in the world.

Some statistics about the company:The Turnover of Amul was Rs. 52.55 billion in 2007-08.

Members:

13 district cooperative milk producers'

Union
2.7 million

No. of Producer Members:

No. of Village Societies:

13,141

Total Milk handling capacity:

10.21 million liters per day

Milk collection (Total - 2007-08):

2.69 billion liters

Milk

collection

(Daily Average 7.4 million liters

2007-08):
Milk Drying Capacity:
Cattle

feed

626 Mts. per day

manufacturing 3090 Mts per day

Capacity:

2. PRESENT SCENARIO

We move to year 2010. The dairy industry in India and particularly in the State of Gujarat
looks very different. India for one has emerged as the largest milk producing country in the
world (see Table 1). Gujarat emerges as the most successful State in terms of milk and milk
product production through its cooperative dairy movement. The Kaira District Cooperative
Milk Producers Union Limited, Anand becomes the focal point of dairy development in the
entire region and AMUL emerges as one of the most recognized brands in India, ahead of
many international brands.

TABLE 1: World milk production

Source: nddb.org

The sales turnover of the GCMMF from 1994-2013 is been represented below in chart 1
which helps to get a clear view of the earnings of the company, GCMMF is today nation's
largest food company with an annual turnover exceeding Rs. 13735 Crores

Turnover (Rs. million)

160000
140000
120000
100000
80000
60000
40000
20000
0

Chart 1: Annual Turnover of AMUL

Source: AMUL.com

3. THE AMUL MODEL

The AMUL Model of dairy development is a three-tiered structure with the dairy
cooperative societies at the village level federated under a milk union at the district level
and a federation of member unions at the state level. Starting with a single shared plant at
Anand and two village cooperative societies for milk procurement, the dairy cooperative
movement in State of Gujarat had evolved into a network of 3.18 million milk producers
(called farmers) who are organized in 16,914 milk collection independent cooperatives
(called Village Societies). These Village Societies (VS) supply milk to seventeen
independent dairy cooperatives (called Unions). AMUL is one such Union. Milk and milk
products from these Unions are marketed by a common marketing organization (called
Federation). Figure 1 and 2 together show the structure and the range of activities in this
extensive network.

Figure 1,2: Milk supply chain and benefits distribution (Source: AMUL.com)

The

AMUL model has helped India to emerge as the largest milk producer in the world. More
than 15 million milk producers pour their milk in 1, 44,246 dairy cooperative societies across
the country. Their milk is processed in 177 District Co-operative Unions and marketed by 22
State Marketing Federations, ensuring a better life for millions.
FUNCTIONS OF VARIOUS TIERS IN THE AMUL MODEL
A. Village Dairy Cooperative Society (VDCS)
a. Collection of surplus milk & payment based on quality & quantity.
b. Providing support services to the members.
c. Selling liquid milk for local consumers of the village.
d. Supplying milk to the District Milk Union
B. District Cooperative Milk Producers Union (Milk Union)
a. Procurement of milk from the Village Dairy Societies of the District.

b. Arranging transportation of raw milk from the VDCS to the Milk Union.
c. Providing input services to the producers.
d. Conducting training on Cooperative development
e. Providing management support & regular supervision to the VDCS.
f. Establish Chilling Centers & Dairy Plants for processing the milk.
g. Selling liquid milk & milk products within the District.
h. Process milk into various milk & milk products.
i. Decide on the prices of milk to be paid to milk producers.
C. State Cooperative Milk Federation (Federation)
a. Marketing of milk & milk products
b. Establish distribution network
c. Arranging transportation from the Milk Unions to the market.
d. Creating & maintaining a brand
e. Providing Technical Inputs, management support & advisory services.
f. Decide on the products to be manufactured at various Milk Unions (productmix)
g. Conduct long-term Milk Production, Procurement, Processing & Marketing
Planning

ACHIEVEMENTS
Amul : Asias largest dairy co-operative was created way back in1946 to make the milk
producer self-reliant and conduct milk- business with pride. Amul has always been the trend
setter in bringing and adapting the most modern technology to door steps to rural farmers.
Amul created history in following areas:
a) First self motivated and autonomous farmers organization comprising of more than
5000000 marginal milk producers of Kaira District.
b) Created Dairy co-operatives at village level functioning with milk collection centres
owned by them.
c) Computerized milk collection system with electronic scale and computerized
accounting system.
d) The first and only organization in world to get ISO 9000 standard for its farmers cooperatives.
e) First to produce milk from powder from surplus milk.
Amul is the live example of how co-operation amongst the poor marginal farmers can
provide means for the socio-economic development of the under privileged marginal farmers.

AWARDS
Amul a co-operative society and its co-operation has led many different awards in its
favour. Magsaysay award for community leadership presented in manila, Philippines to Shri
Tribhuvandas Patel, Shri D N Khurody and Shri V. Kurien.
1964: Padmabhusan award given to Shri T.K. Patel
1965: Padmashri awarded was given to V. Kurien, general manager, by the president of India
1987: Best Productivity awarded by national productivity council for the year 1985-86
awarded to Amul dairy.
1988: Best Productivity awarded for the second successive year 1986-87 by the president of
India, Mr. R. Venkatrao to kaira union.
1993: ICA Memento towards genuine and self-sustaining co-operative worldwide ICA
regional office for Asia and pacific, New Delhi, 1996.
1999: G.B.Birla award.
Moreover the Amul union has achieved the prestigious ISO 9001-2000 and HACCP
Certificate and effects are got to obtain ISO 14000.

AMUL IN ABOARD
Amul is going places, literally. After having established its presence in China,
Mauritius and Hong Kong, Gujarat Cooperative Milk Marketing Federation (GCMMF), Indias
largest milk cooperative, is waiting to flood the Japanese market.
Then, GCMMF is also looking at Sri Lanka as one of its next export destinations.
Amul products are already available on shelves across several countries, including the US,
China, Australia, West Asian countries and Africa.
GCMMF recorded a turnover of Rs.2,922crore last fiscal. Its products include pouch
milk, ultra heat treated (UHT) milk, ice-cream, butter, cheese and buttermilk.

Key information related to Amuls Products :

Butter
Launched in 1955, butter was one of the first milk products offered by Amul. It was also the
first time Amul successfully challenged the hegemony of an established brand. Amul's
earliest competitor, Polson had been the monopoly milk supplier to the Bombay Milk
Scheme. Amul displaced Polson to emerge as the undisputed leader in the butter market...
Cheese
GCMMF launched processed cheese in 1959 followed by cheese powder in the early 1970s.
In the 1980s the popularity of cheese increased

Ghee,Skimmed milk powder and Baby food

Amul launched ghee (clarified butter) and skimmed milk powder in 1955. Amul Ghee was an
instant success...

Milk and UHT Milk

Amul was the market leader in the Gujarat whole milk market with a 90% market share in
2002. Apart from supplying milk to parts of Maharashtra and Rajasthan, GCMMF also sold
milk to the NDDB owned Mother Dairy in Delhi...

As we can see from the products shown above there is :

There is product consistency in the product line of Amul as all its products are milk
based.

Amul deals only in consumer goods and not in industrial goods or any other sector.

In 2001, GCMMF entered the fast food market in India with the launch of vegetable
pizzas under the brand name SnowCap in Ahmedabad, Gujarat. GCMMF was also
planning to launch its pizzas in other western Indian cities like Mumbai, Surat, and

Baroda. Depending on the response in these cities, GCMMF would decide to

introduce its pizzas in other cities in India.Amul also decided to bring into market low
cost pizzas, The pizzas were offered in four flavours: plain tomato-onion-capsicum,
fruit pizza (pineapple-topped), mushroom and Jain pizzas'(pizzas without onion or
garlic). It entered the Pizza business, where the base and the recipes were made
available to restaurant owners who could price it as low as 30 rupees per pizza when
the other players were charging upwards of 100 rupee.supplying jain pizzas shows
that it was catering to needs of the masses as in India most of the people are
vegetarian.

SOUPS
Amul introduced ready-to-use (just pour and heat) soups branded Masti in tetra
packs of one liter. To begin with they were introduced in two flavors - Hot n Sour
and Tomato. Said Sodhi, It was a test marketing drive in Gujarat and in a month or
two it would be introduced all over India. And there wasnt much competition for
there were not many companies in India that sold ready-to-use soups.
Sodhi added, Soup is a milk product and thats a secret. You will come to know only
when you consume it. Keeping the ingredients a closely guarded secret, the company
stated that one of the reasons to launch soups was to utilize the already installed
equipment for tetra packaging

Amul also brought its range of ice creams into the market . the lucrativeness of this
sector was very good and Amul beniffited a lot by entering into ice cream sector.

Amul is planning to enter into the sector of bottled water.

Operational costing
Operations management is a multi-disciplinary field that focuses on managing all aspects of
an organization's operations. "The typical organization consists of the integration of many
different functions, " wrote Howard J. Weiss and Mark E. Gershon in Production and
Operations Management. "The two most obvious functions are to provide the product or
service and to sell the product or service. Operations management focuses on the function of
providing the product or service. It is concerned with the planning and controlling of all
activities necessary for the provision of the firm's product or service." Aspects of operations
management, then, include products or services to emphasize; facility size and location with
respect to customers and suppliers; marketing strategies to attract clients/custmers; techniques
and equipment to use to make the goods or to provide the services; work force management
and training; and measurements of quality assurance. Operations managers apply ideas and
technologies to increase productivity and reduce costs, improve flexibility to meet rapidly
changing customer needs, enhance product quality, and improve customer service.

KEY ISSUES IN OPERATIONS

As an organization develops plans and strategies to deal with the opportunities and challenges
that arise in its particular operating environment, it should design a system that is capable of
producing quality services and goods in demanded quantities in acceptable time frames.
DESIGNING THE SYSTEM Designing the system begins with product development.
Product development involves determining the characteristics and features of the good (or

service if engaged in a service-oriented industry) to be sold. It should begin with an

assessment of customer needs and eventually grow into a detailed product design. The
facilities and equipment that will produce the product, as well as the information systems
needed to monitor and control performance, are part of this system design process. In fact,
manufacturing process decisions are integral to a system's ultimate success or failure. "Of all
the structural decisions that the operations manager faces, the one with the greatest impact on
the manufacturing operation's success is the process/technology choice, " said Thomas S.
Bateman and Carl P. Zeithaml in Management: Function and Strategy. "This decision
addresses the question 'How will the product be made?' " Product development should be a
cross-functional decisionmaking process that relies on teamwork and communication to
install the marketing, financial, and operating plans needed to successfully launch a product.
Product design is a critical task because it determines the characteristics and features of the
product, as well as how the product functions. Product design determines a product's cost and
quality, as well as its features and performance. These are important factors on which
customers make purchasing decisions. In recent years, new design models such as Design for
Manufacturing and Assembly (DFMA) have been implemented to improve product quality
and lower costs.
DFMA focuses on operating issues during product design. This can be critical even though
design costs are a small part of the total cost of a product, because, procedures that waste raw
materials or duplicate effort can have a substantial negative impact on a business's operating
profitability. Another innovation similar to DFMA in its emphasis on design is Quality
Functional Deployment (QFD). QFD is a set of planning and communication routines that are
used to improve product design by focusing design efforts on customer needs.
Process design describes how the product will be made. The process design decision has two
major components: a technical (or engineering) component and a scale economy (or business)
component. The technical component includes selecting equipment and selecting
a sequence for various phases of operational production.
The scale economy or business component involves applying the proper amount of
mechanization (tools and equipment) to make the organization's work force more productive.
This includes determining: 1) If the demand for a product is large enough to justify mass
production; 2) If there is sufficient variety in customer demand so that flexible

production systems are required; and 3) If demand for a product is so small or seasonal that it
cannot support a dedicated production facility.
Facility design involves determining the capacity, location, and layout for the production
acility. Capacity is a measure of an organization's ability to provide the demanded services or
goods in the quantity requested by the customer in a timely manner. Capacity
planning involves estimating demand, determining the capacity of facilities, and deciding
how to change the organization's capacity to respond to demand.
Facility location is the placement of a facility with respect to its customers and suppliers.
Facility location is a strategic decision because it is a long-term commitment of resources that
cannot easily or inexpensively be changed. When evaluating a location, management should
consider customer convenience, initial investment necessary to secure land and facilities,
government incentives, and operating transportation costs. In addition, qualitative factors
such as quality of life for employees, transportation infrastructure, and labor environment
should also be taken under consideration.
Facility layout is the arrangement of the work space within a facility. It considers which
departments or work areas should be adjacent to one another so that the flow of product,
information, and people can move quickly and efficiently through the production system.
PLANNING THE SYSTEM Planning the system describes how management expects to
utilize the existing resource base created as a result of the production system design. One of
the outcomes of this planning process may be to change the system design to cope with
environmental changes. For example, management may decide to increase or decrease
capacity to cope with changing demand, or rearrange layout to enhance efficiency.
Decisions made by production planners depend on the time horizon. Long-range decisions
could include the number of facilities required to meet customer needs or studying how
technological change might affect the methods used to produce services and goods. The time
horizon for long-term planning varies with the industry and is dependent on both complexity
and size of proposed changes. Typically, however, long-term planning may involve
determining work force size, developing training programs, working with suppliers to
improve product quality and improve delivery systems, and determining the amount of
material to order on an aggregate basis. Short-term scheduling, on the other hand, is

concerned with production planning for specific job orders (who will do the work, what
equipment will be used, which materials will be consumed, when the work will begin and
end, and what mode of transportation will be used to deliver the product when the order is
completed).
MANAGING THE SYSTEM Managing the system involves working with people to
encourage participation and improve organizational performance. Participative management
and teamwork are an essential part of successful operations, as are leadership, training, and
culture. In addition, material management and quality are two key areas of concern.
Material management includes decisions regarding the procurement, control, handling,
storage, and distribution of materials. Material management is becoming more important
because, in many organizations, the costs of purchased materials comprise more than 50
percent of the total production cost. Questions regarding quantities and timing of material
orders need to be addressed here as well when companies weigh the qualities of various
suppliers.
BUILDING SUCCESS WITH OPERATIONS
To understand operations and how they contribute to the success of an organization, it is
important to understand the strategic nature of operations, the value-added nature of
operations, the impact technology can have on performance, and the globally competitive
marketplace.
Efficient organization operations are a vital tool in achieving competitive advantage in the
daily contest for customers/clients. What factors influence buying decisions for these entities?
For most services and goods, price, quality, product performance and features, product
variety, and availability of the product are critical. All these factors are substantially
influenced by actions taken in operations. For example, when productivity increases, product
costs decline and product price can be reduced. Similarly, as better production methods are
developed, quality and variety may increase.
By linking operations and operating strategies with the overall strategy of the organization
(including engineering, financial, marketing, and information system strategy) synergy can
result. Operations become a positive factor when facilities, equipment, and employee training

are viewed as a means to achieve organizational objectives, rather than as narrowly focused
departmental objectives. In recognition of this evolving viewpoint, the criteria for judging
operations is changing from cost control (a narrowly defined operating objective) to global
performance measurements in such areas as product performance and variety, product quality,
delivery time, customer service, and operational flexibility.
In today's business environment, a key component of operational flexibility in many
industries is technological knowledge. Advances in technology make it possible to build
better products using fewer resources. As technology fundamentally changes a product, its
performance and quality often increases dramatically, making it a more highly
valued commodity in the marketplace. But the growth in high-tech business applications has
created new competitiors as well, making it important for businesses to try to register
advantages in any and all areas of operations management.
Over time, operations management has grown in scope and increased in importance. Today, it
has elements that are strategic, it relies on behavioral and engineering concepts, and it utilizes
management science/operations research tools and techniques for systematic decisionmaking
and problem-solving. As operations management continues to develop, it will increasingly
interact with other functional areas within the organization to develop integrated answers to
complex interdisciplinary problems. Indeed, such interaction is widely regarded as essential
to long-term business success for small business establishments and multinational
corporations alike.

Financial Performance Analysis can be carried out by using various analytical tools like trend
analysis, horizontal analysis, cash flow statement analysis, & various important ratios. Ratios
have evolved substantially over a period of time. I have studied the effect of different variable
of liquidity & profitability of AMUL for last 10 years from 2001-02 to 2010-11 by using
Pearsons correlation for analysis. The result shows that there is moderate negative
correlation between liquidity & profitability. The purpose of this study is to familiarize the
readers with various analytical tools and their usefulness in the financial analysis of an
organization. The idea of this project is to know the short term as well as long term financial
position of AMUL.

AMUL is Asias no. 1 and worlds second number co-operative dairy. It has large market and
dairy network in every state of India and across the India, like central Asian countries,
Bangladesh, Thailand, Indonesia, Malaysia, Singapore, etc. It was started with 250 liters of
milk and 2 societies and now, it produces 10 lakhs litters milk per day and has 1113 societies
and more than 6 lakes farmer members. It produces milk and milk products. The main motto
of AMUL is to help farmers. Farmers were the foundation stone of AMUL. The system works
only for farmers and for consumers, not for profit. The main aim of AMUL is to provide
quality products to the consumers at minimum cost. The goal of AMUL is to provide
maximum profit in terms of money to the farmers. Vision of AMUL is to provide and vanish
the problems of farmers (milk producers). The AMUL apparition was to run the organization
with the co-operation of four main parties, the farmers, the representatives, the marketers, and
the consumers.
Year

Milk procured (in kgs)

Sales turnover (Rs. In lack)

2000-01

277840861

50919

2001-02

258692443

46878

2002-03

257957726

48834

2003-04

255856435

54593

2004-05

276150374

60047

2005-06

297436246

70922

2006-07

324410536

81632

2007-08

401718616

107712

2008-09

468587136

137807

2009-10

498033310

169989

2010-11

515900000

211140

OBJECTIVE OF THE STUDY:

The objective of financial statement is to know information about the financial

position, performance & cash flows of an enterprise with the help of analytical tools.

To know the Market Position AMUL by taking Market Value Ratios

To know the tradeoff between Liquidity & Profitability.

DEVELOPMENT OF HYPOTHESIS:
H0: There is no positive relationship between the Liquidity & Profitability of AMUL.
H1: There is positive relationship between the Liquidity & Profitability of AMUL.
TESTING OF HYPOTHESIS:
STEP 1:
Financial Performance on the basis of Profitability & Liquidity Analysis
Relationship Between Current Ratio & Operating Profit Ratio
Years

CR

OPR

2001-02

2.702

88.380

2002-03

3.240

89.342

2003-04

2.376

90.460

2004-05

2.344

90.199

2005-06

2.136

91.035

2006-07

1.738

90.957

2007-08

2.136

92.178

2008-09

1.652

91.873

2009-10

1.394

92.580

2010-11

1.431

947.906

-0.415

Relationship Between Current Ratio & Net Profit Ratio

Years

CR

NPR

2001-02

2.702

0.314

2002-03

3.240

0.405

2003-04

2.376

0.467

2004-05

2.344

0.523

2005-06

2.136

0.461

2006-07

1.738

0.504

2007-08

2.136

0.421

2008-09

1.652

0.419

2009-10

1.394

0.436

2010-11

1.431

0.440

-0.323

STEP 2: FIVE DIFFERENT CORRELATIONS

1) Strong Negative Correlation (r=-0.933)
2) Moderate Negative Correlation (r=-0.674)
3) Moderate Positive Correlation (r=0.514)
4) Strong Positive Correlation (r=0.909)
5) Virtually No Correlation (r=-0.004)
STEP 3: INTERPRETATION
1) Correlation Result between the Operating Profit & Current Ratio shows a Moderate
Negative Correlation between them, & that if the current ratio increases it will have a
negative impact on profitability & it will decreases because there is a correlation r=-0.41472.
Here AMULs current ratio is more than standard of 2:1, this indicate negative reflection
towards current assets
2) Correlation Result between the Net Profit & Current Ratio shows a Moderate Negative
Correlation between them, & that if the current ratio increases it will have a negative impact
on profitability & it will decreases because there is a correlation r=-0.32255. This indicates

that if CR is increased by 1 Rs on liquidity basis, it reduces NPR by 0.32255 paisa on

profitability.
3) Correlation result between Liquidity & Profitability have Moderate Negative Correlation
ANALYSIS & DISCUSSION:
Financial analysis is the starting point for the making plans, before using any sophisticated
forecasting & planning procedures. A number of tools are available in the tool kit of the
analyst for the purpose certain tools are:
1.

Trend analysis

2.

Horizontal analysis

3.

Cash flow statement analysis

4.

Ratio analysis
1) TREND ANALYSIS:

INTERPRETATION:
1.

Consistent rise in sales that shows overall growth in sales of their products in
dairy consumption.

2.

Consistent rise in production throughout the year. Consistent rise in sales

throughout the year, but production is more than the sales.

3.

Growth in gross block & sales neck to neck that shows high fixed assets
efficiency & its utilization of uses are more. Growth in net worth is neck to neck that
shows high leverage & high dividend distribution around 75% to their consistent
farmers
2) HORIZONTAL ANALYSIS:
Gross Profit

16342.74

14314.02

2028.72

14.173

PBDIT

4327.00

3350.05

976.95

29.162

less: Depreciation

1614.63

1121.41

493.22

43.982

EBIT

2712.37

2228.64

483.73

21.705

less: Interest

1569.38

1252.58

316.8

25.292

EBT

1142.99

976.06

166.93

17.102

less: Tax Provision

212.78

255.00

-42.22

-16.557

PAT

930.21

721.06

209.15

29.006

Net Profit

926.67

735.75

190.92

25.949

Shareholders' Funds:

6826.57

5756.61

1069.96

18.587

Loan Funds:

21227.56

19111.57

2115.99

11.072

FIXED ASSETS (Net Block)

15270.87

14046.24

1224.63

8.719

Investments

1040.58

515.33

525.25

101.925

Current Assets, Loan & Advances:

37290.61

40524.27

-3233.66

-7.980

Current Liabilities & Provisions

27362.69

30422.64

-3059.95

-10.058

Net Current Assets

9927.92

10101.63

-173.71

-1.720

INTERPRETATION:
1.

The results: through profit at every stage that is PBDIT, PBIT, PBT is higher in
absolute terms, it has not been able to maintain growth equal to sales. PBT has grown
by just 17.10%

2.

Tax provision is lower by 16.56% thus improving PAT growth to 29.01% as

against PBT growth. In comparison to sales growth however PAT growth in very
positive due to maintaining material cost, manufacturing cost. It shows increment in net
profit.

3.

Net worth (shareholders fund) up by 18.59% as against lower growth in loan

funds by 11.07%. it shows very strong financial position. Net fixed assets higher by only
8.72% where as net sales grew by 24.69%. it shows very efficient fixed assets utilization.

4.

Investment grew by 101.92%. Investment in absolute terms very high. It is much

more than net worth (18.59%). So it shows a very unique feature.

3) DUPONT ANALYSIS:

OR
3) DU PONT ANALYSIS
RATIO

NET PROFIT MARGIN * NET WORTH TURNOVER = RONW

FORMULAE PAT/Net Sales*100

* Net Sales/Net Worth

= PAT/Net Worth*100

2001-02

0.31

* 37.09

= 11.65

2002-03

0.41

* 30.13

= 12.20

2003-04

0.47

* 16.89

= 7.89

2004-05

0.52

* 17.22

= 9.01

2005-06

0.46

* 19.06

= 8.79

2006-07

0.50

* 19.72

= 9.94

2007-08

0.42

* 23.89

= 10.06

2008-09

0.42

* 29.67

= 12.43

2009-10

0.44

* 34.48

= 15.03

2010-11

0.44

* 36.49

= 16.06

INTERPRETATION:
1) Increase in ROA contributed by improvement in both the net profit margin as well as net
assets turnover.
2) This finding indicates that an ideal situation for the AMUL.
OVERALL CONCLUSION:
Financial statement summarizes an AMULs financial position at a given moment in time as
well as over longer period. They should reflect any variance between the actual operating
result & the budgeted goals that were previously approved by the company.

cost sheet analysis

Direct Cost :
1) Direct materials
To manufacture one ice cream cup below are the components or raw materials required with their
unit cost :
Dry Fruits 3 %
Milk 70%
Flavours 5 %
Other ingredients 4 %
Sugar 16 %
Cup 2 %
2) Direct Labour :

There are 17 workers employed in the production of the ice cream and each worker is paid
Rs 2000 per month .
3) Direct Costs or expenses :
The direct cost includes costs incurred in bringing the raw materials into the factory ie.
Carriage inward. The raw materials are purchased every month and costs involved for
carriage are Rs 1840.

Indirect Costs:

1) Factory Overheads:
The Factory Overheads includes the indirect labour, factory rent, insurance and
depreciation on machinery, power, factory supervisors salary ,packing material, ware
house expenses and other factory expenses.

Indirect labour : This includes 3 sweepers whose average salaries are Rs. 1000 each.

Insurance: The total insurance amount is Rs 15000.

Break up of the total insurance amount for Machinery - 1200000

Land - 500000(1000 sq. ft. * Rs. 500 per sq. ft.)

Depreciation on machinery : There are 6 machines in the factory ,one machine is used
for making ice creams which is Boiler and other are Refrigerators . The cost of Boiler
is Rs 300000 and Refrigerators are worth of Rs. 900000. The depreciation method
followed is SLM @ 7%.

Power & Fuel: The monthly average cost of power consumption of the factory is Rs
42375.

Supervisors salary : The factory has 2 supervisors and salary of each supervisor is Rs
2500.

Cost of maintenance : oiling and cleaning of machinery and other miscellaneous

expences for maintainance.

2) Office and administration overheads:Office and administration overheads include office rent, salary to staff, office and general
expenses, printing and stationary, telephone expenses, electricity and lightings

Office rent: The per sq.ft rate of the Office is Rs 18.The area of the factory is 300
sq.ft.

Salary to staff : the office staff has three employees. A peon, clerk and an Accountant
and the salaries are Rs 800, Rs 2200 and Rs 4000 respectively.

Office and general expenses: This comprise refreshments(tea and snacks).

Telephone Expenses:- Calls made by the staff members.

Electricity and lightings:- It consists of office lighting and air conditioning expenses.

3) Sales and distribution overheads:

Sales Commission : As a part of encouragement for sales people ,they are given
commission of 2.5 % of the total sales done by them.

Discount allowed : To attract retailer to buy the product they are offered a discount
of 5% on the selling price.

Salary of salesmen : The company has 5 sales persons and they are paid a salary of Rs
3500 each per month.

Carriage outward: To carry the finished goods to the whole sellers , the transportations
charge per unit/product is set as Re 1.24.

Assumptions :

The company produces only one product

All raw materials consumed in production of ice cream

The production and sales units are same.

In Valuation of plant, the rate per square feet has been assumed at Rs. 500.

We gave a discount to retailer on 450000 units on bulk purchase.

SWOT ANALYSIS

STRENGTHS:
The amul ice-creams brand is one of the the top 3 brands .As its an Indian brand its popular
as a family brand. Its available in all metropolitan cities and is in the reach of middleclass
&above middleclass .Its available in many flavours and most of these are Indian flavours
liked by Indians. They are available in various sizes. They are available in reasonable
prices.They have launched brands such as sugar free probiotic ice-creams. There are many
premium varieties. Its got good food energy value i.e calories per 100ml-196.7.

WEAKNESS:

The durability of amul ice-creams is not really good, it melts very soon. It does not have
many outlet centers.Not a famous brand among youngsters who are the main customers of
ice-cream.

OPPORTUNITIES:
They can come up with new flavours which would be able to attract the youth .They should
not restrict themselves to departmental stores infact come with new luxury brands which can
be available in hotels and they should come up with their own ice-cream parlours. They
should focus more on their advertising and marketing strategies. They should use a strategy
similar to what they used in case of butter (Utly butterly girl ).They should come up with
offers for purchase of ice-cream in whole market . Offers should run all throughout the year;
not only in winters. There should emphasis for special occasions.

THREATS :
The biggest threat for amul ice-cream industry would be its competitors. Its ranked 3 rd in
the Indian market . It faces tough competition from the unorganized sector as well. A slight
change in the price of the ice-cream would shift its customers to another brand. Foreign
players like Baskin- Robbins entering Indian market with new premium brands at feasible
prices.

It is a family brand.
Available in many favors and sizes.
They have sugar free probiotioc icecreams.
Low calorie ice-cream.
Available in reasonable prices.

STRENGTHS

WEAKNESS

Does not have many outlet

centers.
Poor Packaging .
Durability (melts very fast).

SWOT
ANALYSIS
OPPORTUNITIES
Come up with more fruit favors.
Having more number of amul
outlets.
Better advertising.
Changing the target audience
(focusing more on youth and
children).

THREATS

Competition from existing players

Branded and Unbranded
(mewad).
Foreign players entering the
market (Geleto , Baskin Robbins).

Cost Sheet of Amul Ice Cream

Particulars

Cost per

Amount

unit

opening stock

10.00

Raw materials

3.00

1,000,000.00

300,000.00

Dry fruits

2.50

250,000.00

Milk

3.00

300,000.00

Flavors

3.50

350,000.00

Other ingredients

2.00

200,000.00

Sugar

2.50

250,000.00

Cup

1.50

150,000.00

Cutlery

1.00

100,000.00

Seasonal fruits

0.50

50,000.00

Waffle

1.00

100,000.00

Cocoa

1.50

150,000.00

8.00

3,200,000.00

1.85

184,500.00

Carriage inward
Raw

materials

Consumed

33.85

Direct expenses

2.20

220,000.00

Direct labour

5.30

530,000.00

Prime cost

3,384,500.00

750,000.00

40.05
Factory overheads
Fixed

Depreciation

2.50

250,000.00

Rent

1.00

100,000.00

Power

1.75

175,000.00

Insurance

1.50

150,000.00

Supervisor's

0.60

60,000.00

salary

0.70

70,000.00

Variable:

1.00

100,000.00

Electricity

9.05

905,000.00

Running exp of machine

work cost

50.40

5,039,500.00

10.00

1,000,000.00

Office over head

Employee cost
Other expenditure

computer

1.20

120,000.00

Telephone

0.10

10,000.00

Taxes

40,000.00

0.40

Carriage outward

0.20

cost of production

62.30

Opening stock

2.00

Closing stock

64.30

20,000.00

6,229,500.00

200,000.00

6,429,500.00

Cost of goods sold

Selling and distribution
expenses

4.00

400,000.00

Advertisement

3.50

350,000.00

Delivery Vehicles

1.75

175,000.00

Petrol

0.51

50,500.00

Packaging

74.05

7,405,000.00

Profit

18.50

1,851,250.00

Sales

92.56

9,256,250.00

Cost of sales

Marginal Cost Sheet

Particulars

Amount

9,256,250.0
Sales

Variable Cost
3,200,000.0
Purchases
Raw

0
material

consumed

3,384,500.0
0
2,671,750.0

Contribution

Fixed cost
Factory cost

905,000.00
1,000,000.0

Employee cost

Deprecation

100,000.00

Other expenditure

190,000.00

Profit

476,750.00

Marginal costing is an accounting technique. Marginal costing is not a system of costing such
as process or job costing. As marginal costing is a technique, it may be used in conjunction with any
costing method. Marginal costing as a technique helps the management to measure the
profitability of an undertaking by considering the underlying cost behavior. Marginal costing
is an impotent technique, which guides the management theory. Marginal costing is also
known as direct costing or variable costing or differential costing or incremental costing
or comparative costing.
Marginal costing is a very useful tool for management because of its following applications and merits

Cost control:

Marginal costing divides the total cost into fixed and variable cost can be controlled by the
top management and that to limited extent. Variable costs can be controlled by the lower level
of management. Marginal cost by concentrating all
Efforts on the variable costs can control and thus provides a tool to the management for control
of total cost. In marginal costing fixed costs are not eliminated at all. These are shown separately
as a deduction from the contribution instead of merging with cost of sales and inventories. This helps the
management to have a control on fixed costs.

Profit planning

Marginal costing helps the profit planning, that is planning for future operations in such a
way s to maximize the profits to maintain a specified level of profit. Profits are increased or
decreased as a consequence of fluctuations in selling prices, variable costs, and sales
quantities in case there is fixed capacity to produce and sell.

Evaluation of performance
Evaluation of performance is the different products, departments markets and sales divisions
have different profit earning potentialities. Marginal cost analysis is very useful for
evaluating the performance of each sector of a concern. Performance evaluation is better done
if distinction is made between fixed and variable expenses.

Decision making:
The information provided by the total cost method is not sufficient in solving the
management problems. Material costing techniques is used in providing assistance to the

management in vital decision making, especially in declaring with the problems requiring
short-term.
Introduction of a new product or line:
A business concern producing only one type of article or multi product concern may add another product
either to make use of the available felicities which are otherwise idle or to capture new
market.

These are also use of the marginal costing:

Fixation of selling price

Key or limiting factors.

Make or by decisions4.

Selection of a suitable product mix.

Effect of change in price.

Maintaining a desired level of profit.

Alternative methods of products.

Diversification of products.

Closing down or suspending activities.

Alternative course of action

Cost sheet
Particulars
material Consumed
Direct wages

Amount
708000.00
371000.00

Prime Cost

1,079,000.00

Production Over head (20% On Prime Cost)

(1079000/100*20%)

215,800.00

Less -Closing working in Progress

material

17000.00

Wages

8000.00

Work over head

5000.00

Work Cost

(30,000.00)
1,264,800.00

Add Administration Over head @3 Pre finished

unit
(30000+100)*3

93,000.00

Cost of goods produced

1,357,800.00

Less -Closing of finished goods (1000 Units)

1357800/31000*100

(43,800.00)
Cost of

goods sold

1,314,000.00

Add Selles And distribution overheads

(30000*4)
Cost of Sales
Add Profit for year

120,000.00
1,434,000.00
66,000.00

Sales

1,500,000.00

Particular

Details

Profit and loss a/c as per cost a/c

Add Production over head (over absorbed)

Amount(Rs)
66,000.00

(215800-213000)

2,800.00

Salary and distribution over head (over absorbed)

(120000-113500)

6,500.00 9,300.00

Less Administration over head (under absorbed)

(95000-93500)

2,500.00

Over head of closing stock

(43800-40000)

3,800.00 6,300.00

Profit as per financial account

69000

Cost Sheet
Particulars

Amount

Total Am

(Rs)

(Rs)

(A
)

Standing charges
70,00
Depreciation (WN-2)

0.00
14,00

Interest on capital @4% (WN-3)

0.00
12,00

Office establishment @ Rs.1000 per month (WN 4)

licenses

0.00

and taxes @ Rs.1000 every six

months(WN-5)

2,00
0.00
3,60

Rent of six garages @ Rs.50 each month (WN -6)

0.00
4,80

Directors fees @ Rs.400 per month (WN -7)

0.00
106,400.

(A)Total

00

(B) Repair Chargers

Repair And maintenance

56,00

0.00
(6,400
Realization by sales of old tyres and tubes (WN -8)

.00)
49,600.

(B)Total

00

Running charges
Wages of 10 drivers @ Rs.100 each per month (WN
-9)

12,00
0.00

wages of Rs.20 cleaners @ Rs. 50 each per

month(WN-10)

12,00
0.00
24,00

Total

0.00
180,0

Total (A+B+C)

00.00

passengers

900

kms during

1600

Passengers Kms Total (WN -11)

1440000

Cost Per Passenger (WN -12)

0.125

Working Note
1. 5 passenger buses costing -50000.00+120000+45000+55000+80000=350000
2. Yearly depreciation of vehicles 20% of the cost - 350000/100*20=70000
3. Yearly rate of interest @ 4%on capital -350000/100*4=14000
4. Office establishment @ Rs.1000 per month -1000*12=12000
5. Licenses and taxes @ Rs.1000 every six months -1000*2=2000
6. Rent of six garages @ Rs.50 each month -6*50=300*12=3600
7. Directors fees @ Rs.400 per month 400*12 =4800
8. Wages of 10 drivers @ Rs.100 each per month -10*100=1000*12=12000
9. wages of Rs.20 cleaners @ Rs. 50 each per month 20*50=1000*12=1200
10. realization by sales of old tyres and tubes @ Rs.3200 every six month
3200*2=6400
11. Total passenger km = Total Passenger *Total kms

= Total Passengers Kms

=900*1600=1440000
12. Cost Per Passenger = Total Expanses /Total passengers kms
= 180000/1440000 =0.125

Conclusion

Ice Cream market will expand with increase in number of malls.

Also companies like

- HLL has been increasing their ice cream outlets - Swirl. Few years ago consumers use to go
out for walk after dinner and use to buy ice creams from hawkers. But now consumer who
often visit malls for entertainment prefers to buy ice creams during different times of the day
as it is visible upfront and feel like spending Rs. 50 for that tasty chocolate swirl with cake
and nuts.

As marketers are understanding the different needs of consumers, be it

health conscious people- (Amul sugar free and pro-life ice-cream) , kids, youngsters, etc,
and are coming up with products specific for them., with portfolio of flavors, consumer today
has plethora of options at hand to choose from and therefore high probability of buying one
more scoop of ice cream. Also with increasing wallet size and innovative modern retail
formats, it has definitely given a Philip to the ice cream industry in India.

The factors considered by the customer before purchasing milk are

freshness, taste, thickness and availability.

Finally I conclude that, majority of the customers are satisfied with the
Amul milk and Milk products because of its good quality, reputation, easy
availabilities. Some customers are not satisfied with the Amul Milk because of
high price, lack of dealer services, spoilage and low shelf life etc. therefore, if
slight modification in the marketing programme such as dealers and outlets,
promotion programmers, product lines etc., definitely company can be as a
monopoly and strong market leader.

Amul has also to take care of its competitors into consideration and more
importantly its customers before making any move.