Mehsana Dairy to break away from Amul after 46 years, slicing 10% of GCMMF revenue

India's biggest and most prominent milk cooperative Gujarat Co-operative Milk Marketing Federation (GCMMF), owner of the Amul brand, is breaking up for the first time in over four decades. The movement that created India's White Revolution has been snared by politics as GCMMF's fourth largest member Mehsana Dairy, which accounts for over 10 per cent of its revenue, has decided to break away and chart its own path nationally with 'Dudhsagar' brand. Mehsana was one of the founder members of GCMMF in 1973 and until a decade ago procured the maximum quantity of milk for the cooperative. However, over the years Mehsana's milk procurement has stagnated at 18 lakh litres a day, while Banaskantha has become the most productive with a procurement of 50 lakh litres per day.

Mehsana Dairy has been at loggerheads with GCMMF ever since its former Chairman, Vipul Choudhury, was removed as Chairman of GCMMF after the BJP came to power at the Centre in 2014. More recently, the dairy has been struggling under a debt of about Rs 1,500 crore because of stagnant milk procurement as well as excess capacity. It procures 1.8 million litres per day while it has a capacity of 7.3 million litres per day. On Monday, Mehsana Dairy, which is the fourth largest dairy union of GCMMF, announced that it would break away and register itself as a multi-state cooperative (which will enable it to procure and sell across the country).

The debt ridden dairy announced that it was taking this step as it was not getting adequate support from GCMMF. It is also known to have given cattle feed worth Rs 22 crore to a dairy cooperative in Maharashtra, which was not approved by the GCMMF board and the Supreme Court also gave a ruling in favour of GCMMF saying that the amount had to be recovered from the Chairman of Mehsana Dairy.

Amul, the dairy brand of GCMMF, is an outcome of coming together of 17 dairy unions in Gujarat, from where the cooperative sources 24 million litres of milk every day. It is well known that all the dairy unions of GCMMF have strong political linkages and political bickering has often impacted the growth of brand Amul.

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Though Amul MD, R.S. Sodhi, said that the exit of Mehsana Dairy would not impact Amul and could actually give other dairy unions an opportunity to be part of GCMMF, a senior dairy industry expert considers the breaking away of Mehsana as ominous for Amul. "Earlier, most of the dairy unions were backed by Congress and and when BJP came to power, they were forced to switch allegiance to BJP. The Mehsana episode is triggered by political parties (particularly the Congress) so that there is confusion during election time. I wont be surprised if other dairy unions also revolt (most dairy unions of GCMMF have traditionally been backed by Congress). This certainly wont be good news for brand, Amul."

Once Mehsana is registered as a multi state cooperative, it will sell its products under its brand, Dudhsagar. Breaking away from Amul will certainly not be easy, as dairy is a difficult business and most of the newer dairy companies haven't been too successful. And, for a milk union whose focus has largely been on milk procurement and processing, thinking about branding will surely be a challenge.

Amul itself is entangled in the cooperative web. Thanks to constant political interference brand-building has always suffered. While Sodhi has a clear vision for the brand, experts believe that not many in the GCMMF board even understand his vision. "The cooperative's focus has largely been milk procurement. They are happy if their procurement goes up by 15%-20% as their turnover increases. The brand is secondary for them," explains the dairy expert. The Amul case study is globally acclaimed, however, it's time that the cooperative rises over petty politics and focuses on growing the business, else the dairy major's brand equity could take a major hit.

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