Amul vs Nandini | Udderly bitterly learnings for corporates

Irrespective of the outcome of this brand tussle, there are learnings for brand marketers in understanding the political sensitivity

Recently, the national dairy brand — Amul tweeted: The Amul family is bringing in some Taaza into Bengaluru city, announcing its brand distribution entry in Karnataka. A brand announcement has become a political roller coaster, considering that Karnataka already has its strong milk cooperative (Nandini). For a state that is getting into its electoral frenzy, this is a perfect campaign pitch.

Co-operatives have strong grassroot influence, and hence have political support as well as interests. Much of the successful farmers in India, whether they are part of any co-operative or not, are vested strongly into the local politics. While co-operatives are generally subject of individual states under the 7th Schedule of the Constitution, it is possible and practical to scale the co-operative movement and business through multi-state co-operatives. A prime example of such success and local impact is that of multi-state co-operative banks, regulated by the Reserve Bank of India (RBI).

Both Amul and Nandini are respected brands, and command strong distribution, consumer engagement, and revenue base. While Amul is a Rs 72,000 crore pan-India brand, Nandini (the second-largest dairy cooperative in India, after Amul), is focused in Karnataka and has a turnover of Rs 25,000 crore annually. They also compete in non-home state markets like Mumbai, Goa, Hyderabad, and Chennai.

Read | Amul vs Nandini debate: A look at the journey of India's dairy sector

It is important to note a political-moat that Nandini has. Its milk farmers are incentivised by the state government, while Amul does not have that arbitrage. Yet the two brands have their manufacturing collaboration too — Amul ice cream uses Nandini milk as a key raw material in Bengaluru. One should also thank late Verghese Kurian of Amul, who started work with cocoa and arecanut farmers in Kerala and Karnataka to set up co-operative societies, and in 1973, the Central Arecanut & Cocoa Marketing and Processing Co-operative Limited (CAMPCO) was born in Mangalore, Karnataka.

Amul procures its cocoa for chocolate making from them. Despite all these, and the openness of the Indian market in accepting of multiple brands, we have this controversy about Amul’s Karnataka entry, and lingering questions about political intent of such a move.

Social Licence To Operate

Irrespective of the outcome of this brand tussle, or even the political hues it will further take, there are learnings for brand marketers in understanding the political sensitivity and need for communication about their brands entering newer markets.

Irrespective of the regulatory position, any business that has work with grassroot communities, especially around their supply chain or livelihood measures, need a strong and detailed ESG strategy. While much of it is generally touted around the ‘E’ —Environment, and ‘G’ — Governance is discussed too, rarely do businesses understand the perils of not working on the ‘S’ — Social. Brands entering newer markets must build trusted engagement with their local stakeholders, especially in seeking the social licence to operate in those local markets.

Dented Credibility

Social licence simply refers to the local community accepting an organisation or brand. It is also the ability of an organisation to carry out its business, especially because of the confidence the (local) society has on the business, that it will behave well within the local traditions and cultural norms with clear accountability. All this in a socially and environmentally respectful way.

Those brands which think that they can pay for social licence, end up with their dented credibility. India has seen many companies facing the societal rejection for trying to buy such respect by transactionally offering community grants or social development funds, without actual involvement. Without social trust, emotions end up messing up all plans, despite good business rationale or economic logic.

Timing And Patience

Social insecurities, stakeholder concerns, feeling of vulnerability must be addressed directly, and quickly. Corporates looking to enter newer markets, must be conscious about how the political regime and regulatory umbrella would look at their (new) presence. This is unavoidable, and needs constant proactive communication. Otherwise even a whimsical local influencer could turn part of a corporate statement into a misplaced sloganeering around local sensibilities or even nationalist sentiment, that could prove expensive for the market entrant to overcome.

The only insulation from getting into such controversies is proactive trust-building activities, and timing the market entry correctly (and not around any major event like Amul did just before Karnataka elections). Brands which decide to enter a market cannot rush into it without understanding the local cultures, traditions, jargons, and colloquially often lingo. These need investment of time and patient strategising.

(Srinath Sridharan is an author, policy researcher & corporate adviser. Twitter: @ssmumbai.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.