labels: foods / beverages, industry - general
Reinventing Aavin news
Venkatachari Jagannathan
27 August 2004

Aavin - the Tamil Nadu Co-opertive Milk Producers' Federation brand - has successfully repositioned and established itself with innovative marketing steps and the customer friendly measures

It is hop, stop and jump for the Tamil Nadu Co-opertive Milk Producers' Federation, better known by its brand name Aavin.

Not long ago Aavin strove hard to satisfy Tamil Nadu's demand for milk. But today it sells milk and milk powder and other products to many dairies and institutions in the country.

Aavin supplies 30,000 litres per day (lpd) of concentrated milk, equivalent to two lakh lpd of normal milk and 6,000 tonne of milk powder to Mother Dairy, New Delhi. The other dairies that source milk powder from Aavin are Delhi Milk Scheme (DMS), Mother Dairy, Kolkata, and the milk federations of Andhra Pradesh and Kerala. Shortly, Aavin will be doubling its sales to Kerala from the present levels of one lakh lpd.

Aavin's products (milk powder, ghee, milk in tetra packs and others) go to places like Tripura, Assam, Rajasthan, Andaman and Lakshadweep. The federation is also toying with an idea of exporting milk powder to Malaysia, Singapore, Middle East, Nepal and Sri Lanka.

The Tamil Nadu government's three tiers milk business comprises the primary cooperative societies at the village level where the farmers bring in their milk in the first tier. The surplus milk, after meeting the local markets, is sent to the next tier - the district level cooperative milk producer's union.

After meeting the local demands the district unions processes the milk into value-added products and send surplus to Aavin. The apex federation also takes care of marketing the value-added products manufactured by the district unions as well as its own dairies in Chennai.

An impressive turn around
After posting losses for several years in succession, Aavin's bottomline came back to black in 2001-02 with a nominal profit of Rs33 lakh (turnover of Rs344 crore). The previous fiscal, the federation had posted a loss of Rs5.23 crore on a turnover of Rs325 crore.

In 2002-03 Aavin's profit went up to Rs1.49 crore (turnover Rs346 crore) and last fiscal came the jump to Rs17.21 crore profit on a turnover of Rs381 crore.

The only bolt from the blue for Aavin is the government's recent announcement to increase the milk procurement price by Re1 without any corresponding increase in the sale price. This in turn means a whopping daily Rs7.5 lakh additional outgo to the company.

The empowered customer
Be that as it may, Aavin's impressive turnaround from loss to profit making outfit could be attributed to two things viz, wowing the customers and empowering one customer to set things right.

Interestingly the empowered customer happens to be its chairman and managing director BK Prasad.

When Prasad took over Aavin's mantle in 2002, the organisation was not only in the red but also fast-losing share in its major milk market, Chennai. From a near monopoly, Aavin's market share came down to 40 per cent. On the other hand the bulk products were not fetching remunerative prices while the milk products too didn't contribute much to the bottomline.

Preventing the curdling of Aavin and regaining market share needed multi-pronged strategies. Prasad and his team decided to revamp production (sourcing of milk, chilling, storing, transportation, processing, packaging, etc) and marketing (rebuilding and reinforcing the brand in the consumers mind, distribution, etc).

Going to the roots
In the food processing industry the final product's quality is determined by the primary input. Prasad decided to address this issue urgently and in the process rewrote some past practices. The first step was the decision to accept all the milk that reaches its dairy gates in Chennai, provided the milk is of certain standard.

The announcement took the farmers by surprise as Aavin district unions and societies used to declare 'milk holidays' meaning, refusing to buy milk from the farmers during the flush season. This created difficulties for farmers and many of them turned away in favour of private dairies.

The move set in motion Aavin's reinvention. Moreover, the district unions were asked to upgrade their chilling, processing, storage centres and transport facilities so that the white liquid had a longer shelf life.

Soon milk procurement at the society and district unions touched record levels. Last year the average procurement per day was 17.26 lakh lpd. The milk quality too improved in terms of fat and solid non fat (SNF) content. The positive fall out is the increased yield of products like butter and milk powder.

While the milk arrivals increased, Aavin didn't hit the panic button. It shrewdly converted the surplus into bulk products - milk powder, butter, ghee, etc. Milk was even sent to dairies in Andhra Pradesh and Kerala for processing.

The strategy was to cut bulk product sales during the flush season and maximise the sale during the lean season to realise better prices.

Leap in bulk sales
While tying up the milk sourcing and quality issues, Aavin simultaneously revamped and restructured its marketing wing into three: metro liquid milk marketing, metro milk product marketing and up country marketing. The markets were further segmented to draw appropriate strategies.

A slew of contracts for bulk products were signed at attractive price points. Says a proud C Kamaraj, general manager (personnel and marketing), "Last fiscal we realised the highest price for ghee, butter and milk powder. The average realisation on bulk sales of ghee, butter and milk powder were Rs122, Rs108 and Rs83 per kg respectively."

During 2003-04 Aavin sold 9,631 tonnes of milk powder, 1,839 tonnes of butter and 6,230 tonnes of ghee as against 8,366 tonne of milk powder, 1,720 tonne butter and 6,058 tonne of ghee during 2002-03.

Apart from the dairies mentioned above, the other major institutional clients are Indian Airlines (yogurt) and ITC Ltd (milk powder).

Retail- The real hot challenge
But the real hot challenge for Prasad and his team was the retail market-milk and value added milk products like butter, ghee, flavoured milk, yogurt, sweets (milk khoa, gulab jamum, mysore pak) butter milk, curd, etc.

The immediate task was to stem the slide in the sachet milk market share. Next, he had to increase the sales of value-added milk products.

Unlike the bulk sales orders that are largely decided on the price and quality, retail market is a different cup of tea. Aavin lagged behind in the areas of branding, advertisements, and supply chain and distribution network.

For instance not many know that Aavin offers wide variety of sachet milk viz., pasteurised toned milk ( with three per cent fat, SNF 8.5 per cent), standardised milk (fat 4.5, SNF 8.5), full cream milk (fat six, SNF nine); double toned milk/diet milk (fat two, SNF 8.5) and UHT milk in tetra packs.

Even in its branding, Aavin faced some issues. Products were sold with different logos - cow and calf or a temple tower - in different markets creating confusion in the customer's minds.

In addition, competition with its aggressive promotion had captured the younger generation's imagination in Chennai. The brand recall of Aavin milk was on the decline. It was time to rejuvenate the old brand and contemporarise it before it became too late.

Aavin hired the Bangalore-based Integrated Brand-Comm Pvt Limited to suggest strategic and creative inputs to infuse life into the brand.

"But there were constraints," says Vidya S, vice presiden, Integrated Brand-Comm. "For instance designing a new brand logo and popularising the same would involve huge cost and time. It would also result in confusion in the consumer minds." Hence it was decided to play around the corporate logo without going for any new brand symbol.

Despite sufficient provocation from private players Aavin consciously decided to talk only about the milk quality and purity, in its media campaigns.

Aavin's ad showing three generations, focussed on the younger generation with the Tamil punchline `pal enrale aavin kalapadame ille' that means 'if it is milk then it is Aavin which is not adulterated'.

The ISO 9000 quality certification for its dairies was emphasised. "We now await the Hazard Analysis and Critical Control Point (HACCP) accreditation," remarks Prasad.

To take the message of purity to the consumers and also get their suggestions Aavin organised events like cookery, beauty and slogan writing contests.

The innovative marketing steps and the customer-friendly measures saw milk sales shooting up. From 6.54 lakh lpd in 2002-03 sales went up to 6.96 lakh lpd the next year.

"This fiscal we are logging 7.53 lakh lpd," remarks Kamaraj. The target is to sell around 7.70 lakh lpd - 6.13 lakh lpd of sachet milk and 0.95 lakh lpd through automatic vending machines in Chennai. Aavin is also revamping its parlours and kiosks to provide a trendy look.

Appreciating Aavin's revised strategy Hatsun Agro Products Limited's managing director R G Chandramogan says, "Aavin has done a good job with its revised branding strategy. It has established its presence in the open market and retail sales." According to him, Aavin was able to gain share from the unorganised players and not from major private organised players like Hatsun Agro or others.

Should build on the gains
However, dairy industry doyen Dr Verghese Kurien, chairman, Gujarat Co-operative Milk Marketing Federation Limited (GCMMF) is critical. "Aavin has to market aggressively its products at the retail level. It has to go a long way in that area."

What he says is true. Aavin has to plough wider and deeper to seed its milk products in the retail markets to reap real benefits. It has to revamp its supply chain to suit the demands of the retail outlets say for instance, a flexible delivery time.

Though Aavin has twelve wholesalers in Chennai only products like cooking butter, table butter, tetra pack milk, flavoured milk, milk powder are distributed through them. Products like sweets, yogurts are sold only at Aavin's parlours / kiosks where they move like hot cakes.

Says S Niranjan, Vatchala Distributors, an Aavin wholesaler, "We are allowed to distribute only those products that have longer shelf life. Hence sweets, yogurt and some other products are out of our reach." According to him Aavin's cooking butter has good demand but the same cannot be said in the case of table butter. "Lack of advertising is the main factor."

He feels that Aavin's flavoured milk is a superior product as it is made from single-toned milk whereas competing brands are made of double-toned milk.

Given the fact that its milk procurement cost has gone up without any corresponding hike in the sale price, increasing milk products sales is one way of compensating the cost increase. That would be possible if it could retune its production process so that the shelf life of its value-added products are increased.

Now that Aavin has fortified its sachet milk market in Chennai and is delighting the customers with its friendly moves, it is time for the organisation to build further on the gains.

also see : Wowing the customers

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Reinventing Aavin