Now, an app for your daily milk as Amul, Mother Dairy go mobile
Morning walks to the nearest milk booths may soon become a thing of the past as dairy majors like Amul plan to launch mobile applications to reach out to consumers directly. In any case, major dairy players like Amul and Mother Dairy are already selling through e-grocers like BigBasket and Grofers to woo busy urban consumers.
The move is expected to enhance consumer engagement with the brand as well as boost sales. Margins, however, will likely be a concern.
“The idea is to make the entire product range available to the consumer, which he or she does not get at the nearby store she visits. Plus, they can also order a big assortment. Margins would be thin,” an Amul official conceded. The app may be launched in around a month and a half and it would be a city-wise phased launch, starting with Ahmedabad.
R S Sodhi, managing director of Gujarat Co-operative Milk Marketing Federation (GCMMF) which owns and sells milk and dairy products under the Amul brand, said that the company was test-marketing a mobile application in the Ahmedabad market and that a launch was expected soon.
Amul has engaged Ahmedabad-based firm Infibeam to develop the application. Infibeam will also be responsible for last-mile connectivity. Sodhi said that once a customer places an order through the app, Infibeam will arrange for the product to be picked up directly from the distributor and delivered to the customer.
Amul share of online sales in its overall volume is negligible at less than one per cent of its turnover. For that matter, Amul has not tasted success with modern trade either, which contributes just about 7% of its overall sales, Sodhi said.
Senior officials in the federation pointed out that modern retail itself has seen ups and downs in recent times with several major retailers closing down outlets that were not profitable.
Amul, however, has tried its hands at different modes of reaching out to its consumer even in the Nineties.
Around 1998-99, Amul had tried to connect with the consumer directly, albeit through e-mails then. One could send an e-mail to Amul ordering products (a minimum value of Rs 200 or so), and the mails would be distributed across Amul’s branches who would then organise for delivery through the distributor. The move, definitely ahead of its time, did not see much traction then as internet penetration was low at the time.
Distributor margin is currently around 3.5- 5%. The question, however, is whether the app model will work for low margin products like liquid milk, which is the most bought item by any household. Liquid milk comprised Rs 1,100 crore of Amul’s Rs 2,300 crore turnover last month.
The success of the mobile application, however, could help Amul achieve its ambitious target of a turnover of Rs 30,000 crore by 2017-18. The dairy major clocked a turnover of Rs 23,000 crore in FY16, and the cooperative has grown by 187% in the past six years, which implies a cumulative average growth rate of 19.2% during the period.
It is definitely not a game of margins. Subhashis Basu, business head, dairy products, Mother Dairy Fruit & Vegetable said.
“We are selling through e-grocers, however, volumes are not even 0.5 per cent of our sales,” he said. “It is a growing medium, and one would dabble into it. Customers, however, would prefer to buy their needs under one umbrella application which can cater to their entire grocery need, rather than logging into different apps for different products.”
This, he reasons, is the reason why fast moving consumer goods (FMCG) players do not dabble in e-retailing themselves.
Basu adds that adding e-commerce as a channel of sales is one; and becoming an e-retailer oneself is completely another ball game, and he does not think the time is yet ripe for Mother Dairy to do so. Despite this, however, the dairy major is also working on developing a mobile application. While Basu did not share details, he claimed the app would be a gamechanger when it is launched.
Milk, especially pouched milk, which is a high volume but low margin item, is largely bought everyday by households through retail outlets, local milkmen etc. The supply chain for milk is already well established, and only large online grocers can afford to manage the cold-chain logistics involved with storage and delivery of milk efficiently, a point Sodhi too seemed to agree with. Amul has around 10,000 distributors and over one million retail outlets.
Infibeam, however, did not wish to comment on the matter citing a confidentiality agreement. It had informed BSE sometime back that the company has executed an agreement with GCMMF to provide online e-commerce and mobile platform with integrated logistics framework for on-demand customer purchase of Amul Products.
Mails sent to BigBasket on what was the demand for dairy products in their overall sales did not elicit any response.