In the history of the real world economics as it plays out, the consumers rarely get to raise a toast to their own success. The history of business is all about mostly exploitation of consumers, in one way or the other. Which is why, I was intrigued to read the story in Times of India the other day about the ongoing milk wars in Hyderabad. The paper noted that price wars are escalating in Hyderabad because all the entrants that matter in Dairy Milk are now available as choices for Hyderabadi households. For starters, you have Vijaya Dairy, Heritage, Maskati, Mustafa, Jersey, Tirumala. All of them were ruling the roost and dividing the cake with reasonably good margins until India's best-known and the only one to make it as one of the world's top 100 brands announced its ambitions to sizzle up the Hyderabad market - AMUL Dairy. "Asia's largest milk brand is now in Hyderabad" screamed the banner ads in January as I noticed after landing in Hyderabad from a holiday. Did it change Hyderabad forever? We will come back to it later. But more about more options as per the ToI article. Mother Dairy and Nandini Milk - the biggest brands in the West and Karnataka have also entered the fray in the heat of summer. The story talks about only price wars but they missed a unique angle which should have got highlighted - the disruption of the market by Amul and the brands it displaced from near monopoly - Jersey, Heritage and Maskati in different pockets. And the story of how the consumers of the twin cities have asked for better choices despite monopolistic practices by the producers and the distributors. That is something that should be celebrated and reported widely.
Here's how: It all started In January. Amul Milk enters Hyderabad. Releases ads across the media. Giving rich milk at Rs.38 per litre. This forced market leaders like Heritage and Jersey to drop prices to Rs.40 and Rs.38 respectively. Then followed a massive protest by distributors to block Amul milk. I remember we took an instant decision after I spotted the announcement to try Amul Milk, we were using Jersey Milk until then and many years before, Heritage milk. We had two toddlers at home and generally consume milk at an industrial level - with plenty of curds and buttermilk and byeproducts. The risk was on us but we wanted the switch to Amul and told our milkman. He refused first - then we threatened we will switch the agent. He relented. We got Amul Milk the very next day. And we observed the taste - it was distinctly yummy. The babies loved the change in taste, we noticed the thickness in curds and the quality of milk in beverages. And we never regretted the decision. Earlier, the milk from Jersey or Heritage used to deteriorate occasionally so we had to import set curds for curdling. I have tried all the good brands -Maskati curd is my favorite followed by Jersey, Heritage and Tirumala. All of them are quite yummy but you can't keep buying ready-made curds - Amul milk had that extra thickness to curdle faster. Besides, what if the set curd cups of the brands had used harmful substances like MSG, and all that. I told my brother and friends and many took to it but some of my friends faced huge blockade by the vested dealers who got incentivised to maintain the status quo. Folks in Banjara Hills were not getting Amul Milk but those in Tarnaka were getting it on demand. It was very apparent that the dealers were cartelising the business and preventing a good brand from getting experienced by the consumer first-hand.
But as more consumers got drunk in the goodness of Amul, the agents started running for cover and switched to Amul to hang on to their household consumers. Those who didn't lost out more - Amul announced a distinctly new bandwagon of distributors and outlets who sprang up in every pin code in Hyderabad. If you have not noticed an Amul outlet, chances are you are still held in ransom by your distributor/home delivery boy. Of course, there is always an option of buying buffalo milk directly from your farmer friend but those options are not entirely fool-proof. In case of Amul, I read somwhere that they do an annual survey if the health and the trustworthiness of the brand is intact - year after year. The entire ecosystem of the farmers has been benefiting in a win-win way for decades since Dr Verghese Kurien shaped the best practices of Amul until his last breath. One of the story goes that at a collection centre not far from Anand, Gujarat, where the farmers assemble at 6 am to give their milk to organisers, an Amul truck lands promptly and puts a fat-measuring device in front of the farmer and the money is given at the end of the transaction. The model is also that Amul will buy all the milk from the farmers who come for the day - a practice that has been going on for decades before it gets collected and goes through more stages of milk processing and packaging. The most happening brand in Hyderabad has got the pull with consumers because of these best practices winning the support of a community of over 35 lakh farmers spread over 17000 village dairy cooperative societies - collated and processed closer to the final distribution point. Whereas in most other brands of milk, you do not know whether the milk is coming from buffaloes in Guntur, assembled in Suryapet and sold in Hyderabad. Plus the inconsistent quality checks. Otherwise, why would you notice Mother Dairy brand of milk which entered Hyderabad recently awash in controversies over Detergents mixed with milk? (Incidentally, this rumor from another family feeding milk to toddlers motivated me to write this piece, otherwise I am not getting paid to write for Amul, infact I pay Amul for buying my milk every day).
The lessons from Amul's entry into Hyderabad proves many things:
One, you cannot prevent a strong brand from flying off the shelves just because you offer counter-incentives and commissions. You may not offer toxic products but whether it is milk or a mutual fund, if the consumer demands, you cannot deny it as a distributor without risking your own existence.
Two, the only way a brand can grow is to deliver the best quality, every time. Even a six-sigma error is going to cast its shadows. If you had to drop prices or raise commissions, maybe your product is an inferior choice. Conversely, if your brand is trustworthy, you may drop prices to capture mindshare but you have the pricing power to raise the prices as the customer gets used to your quality.
Three, a strong brand can get on first instance, predictable marketing and distribution responses but eventually, the bigger takeaway is the imitation game in upping the ante in quality. Either way, the consumer again wins.
Four, the consumer is always the king or queen, on paper. It can really happen if the consumer demands good quality and punishes the bad quality producers. For years, Hyderabadis thought quality is what is offered to you, with blips here and there overlooked and under-scowled. It took a superior brand like Amul to disrupt the forces of competition and elevate the consumer to the status of calling the shots.
Lastly, economics is not a dry and dismal science found in textbooks. Look around you, it is at play all the time. You may not get the jargon right all the time, like a monopoly, producer's cartel, price discrimination etc. but with alertness and observation, you can grasp the essence of its principles. Here, milk consumption has been effectively controlled for decades at prices dictated by a cartel of producers which includes a government player. But an emboldened consumer, thanks to a strong-recall brand took the first call of disrupting the existing order creating unintended consequences for all other market players who took the consumer for granted. That is a news, utterly butterly delicious, in a dairy market that sees a daily consumption of 23 lakh litres.
Disclaimer: I consume Amul Milk but I am not incentivised by Amul or its agencies or distributors for its advocacy. This is only written in public interest of all consumers, especially of parents, with toddlers like me.
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#ConsumerTheKing #ConsumerIsKIng #Hyderabad
