Livestock, Dairy & Fisheries
The Amul Model: How Cooperatives Share the Rupee
How the three-tier cooperative structure behind Amul works, why farmers receive a high share of the consumer's rupee, and the challenges cooperatives face.
Amul is one of India’s best-known brands, selling milk, butter, cheese, ice cream and more. Behind it is a structure owned by millions of dairy farmers, known as the Anand pattern.
The three tiers
- Village dairy cooperative society: farmers in a village form a society, sell milk to it and elect its leaders.
- District milk union: collects milk from village societies, processes it in dairy plants and provides services like veterinary care and cattle feed.
- State federation: markets products under a common brand. In Gujarat, this is the Gujarat Cooperative Milk Marketing Federation, which owns the Amul brand.
Farmer ownership
Because farmers own the cooperatives:
- Profits are returned to farmers through milk prices and bonuses.
- Farmers typically receive a large share of the consumer’s rupee, often cited at around 70 to 80 percent, much higher than in many farm supply chains where intermediaries take big cuts.
Services beyond buying milk
- Veterinary care and artificial insemination.
- Cattle feed plants.
- Training in animal care.
- Transparent payments based on milk quality.
Why it succeeded
- Scale: combining small producers created bargaining power and economies of scale.
- Brand: Amul’s marketing, including its famous topical advertisements, built consumer trust.
- Professional management alongside farmer control.
Challenges
- Politics: some cooperatives in other states suffered from political interference and poor management.
- Competition from private dairies and multinational firms.
- Scale versus democracy: large cooperatives must balance efficiency with members’ control.
The model’s spread
Other states built cooperative brands, such as Nandini in Karnataka and Aavin in Tamil Nadu, with varying success.
When a customer buys a pack of butter, most of the money flows back through the federation and district union to the village societies and, finally, to the farmers who supplied the milk. The farmers are also the owners.
Well-managed cooperatives like Amul have competed successfully with private firms while returning most of the value to farmers.
- The Anand pattern has three tiers: village societies, district unions and a state federation.
- Farmers own the cooperatives and receive a large share of the consumer price.
- Cooperatives also provide veterinary care, feed and training.
- Political interference and competition challenge cooperatives elsewhere.
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