“Karnataka’s Dairy Initiative Turns Stronger, Second Only To Amul”

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A cooperative movement that was initiated three decades ago in the southern part of Karnataka has today fructified into a full-fledged industry that has succeeded in endowing rural areas of the state with an umbrella of prosperity and financial security. It’s the story of Dakshina Kannada Co-operative Milk Producers’ Societies Union Ltd. (DKMUL) under Karnataka Milk Federation (KMF) that today sells products such as milk, curds, paneer and pedha under the brand name Nandini. KMF is a federation of milk producers association working on cooperative principles. Their presence in the state is almost ubiquitous with most districts having a milk producing cooperative of their own. At present, KMF enjoys the status of being the second largest milk co-operative in India after Amul. The credit for their successful endeavour goes to individual farmers who contribute to the milk collection that is subsequently processed and sold in the markets. In an interview with MSME Excellence, Dr. B.V. Satyanarayana, MD of DKMUL- one of constituent milk unions of KMF shed light on the significant aspects that contributed to their success. Excerpts from the interview are reproduced below.

Tell us how the journey into the Dairy business started and the challenges you have faced after embarking the boat?

It all began way back in 1986 for DKMUL, when people with entrepreneurial skills came forward. With support from the state government and Karnataka Milk Federation DKMUL was born with the intention of promoting and facilitating the operation of cooperative dairy development activities throughout the coastal Karnataka.

KMF played the role of an apex body for all milk production in Karnataka and this initiative was a part of the Operation Flood II program. When the cooperative movement took off, we were severely challenged on several fronts.

To start with, the productivity of local cattle was very low. We had to make efforts to upgrade the productivity.  The other hurdle was about convincing farmers about how lucrative the cooperative movement would be in contrast with their focus on commercial agricultural crops.

This required us to educate, train and motivate farmers to form milk cooperatives. In addition, the hill terrain of the farming areas with many farming households spread out widely posed logistics problems to a great extent.

How did you manage making this movement financially sustainable that faced stiff initial odds?

We initially encountered a situation that required us to be on the rescue mode as revenues accruing from the production and procurement of milk fell way short of the expenditure incurred by our milk union. To overcome the financial crunch, we opted to diversify our product portfolio in addition to supplying pasteurized milk. We also studied the consumer dynamics and accordingly added products that catered to the demand. To sum up, diversification was the key to our success as value additions yielded us better margins to create a sustainable business model.

Can you throw light on your brand building efforts after your products started selling under the umbrella of Nandini?

Brand building is a very demanding process that requires sustained rigorous efforts. We were able to achieve this by taking baby steps that finally helped us to ensure quality and competitive costing. Our brand building activities still continue on the basis of the product range we are offering. It’s a joint effort by the Milk Unions and KMF.

To sum up, diversification was the key to our success as value additions yielded us better margins to create a sustainable business model.

What expansion plans do you envisage compounding your diversification strategy?

We have currently undertaken a project to expand our dairy infrastructure facility. This will enable us to handle an increased volume of milk and milk products to match rising demand levels. Besides, we are also focusing strongly on growth in rural marketing. At present our priority product is liquid milk.

Tell us about the financial challenges you faced because of infrastructural requirements?

To achieve financial success in the dairy industry, one needs to be in command of a strong processing infrastructure. We faced a tough time when the Milk Union was operating under losses. We managed to sustain the business by acquiring funds and modernizing the infrastructure.

This effort was largely because of assistance provided by the National Dairy Development Board. It made things easy for us to tide over the high cost of transportation. We offset the costing problem by increasing our turnover.

To achieve financial success in the dairy industry, one needs to be in command of a strong processing infrastructure. We faced a tough time when the Milk Union was operating under losses. We managed to sustain the business by acquiring funds and modernizing the infrastructure.

How is the current Milk demand situation and your distribution system.

The aggregate demand in our state is approximately 70 LKPD.  Our operation areas in the state are mainly in the coastal regions of Udipi and Dakshina Kannada. We distribute our products through a strong network of 1600 dealers. The dealer network reaches consumers faster and efficient than wholesale distributor.

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