CHAPTER - II THE KERALA CO-OPERATIVE MILK MARKETING FEDERATION LTD (KCMMF) - A PROFILE INTRODUCTION Milma is carrying out its operations in Kerala with its mission of farmer s prosperity through consumer satisfaction. It could achieve remarkable progress in milk procurement and selling with the implementation of the operation flood programmes. Today it is a matter of pride that 'Milma' is a household name in Kerala. The punch line of Milma is The goodness Kerala wakes up to. Milma is one of the best brands from the state and is known for its regularity of supply and quality of milk. This chapter attempts to evaluate the performance of KCMMF Ltd (Milma). ORGANISATION The brand name Milma is so well known that the organisation is known by its brand name. KCMMF or Milma represents 26,088 functional APCOS comprising 7.33 lakh dairy farmer members. Ten dairies capable of handling 9.9 lakh litres of milk per day, 14 milk chilling plants, two cattle feed plants, a milk powder plant, a training centre, and 5,000 retail outlets. More than 30,000 people are working either directly or indirectly for Milma. The average 46
milk procured per day by all the APCOS during the year 2006 was 7.22 lakh litres. Average selling of milk per day during the period 2006 was 8.98 lakh litres. Turnover of KCMMF during the period 2004-05 was Rs.118.41 crore and its profit after tax during this period was Rs. 1.10 crore. 1 One of the major inputs provided to the dairy farmer of the state by KCMMF is balanced cattle feed that has high level of acceptability. KCMMF, operates two cattle feed plants-one at Pattanakkad with a capacity of 300 MT per day which produces mash feed and the other at Malampuzha with a capacity of 200 MT per day which produces cattle feed in mash form. Besides the supply of balanced cattle feed, the members of APCOS are provided with veterinary health cover. 2 The Central Product Dairy (CPD) is managed directly by the KCMMF. At present, it has a milk processing plant, an aseptic packaging station and a milk powder plant. CPD sells almost 56000 litres of toned milk per day. In addition, it has also introduced the jersey variety of milk with high fat and is able to sell about 2000 to 3000 litres per day. 3 PERFORMANCE EVALUATION OF KCMMF LTD Since the first part of the first secondary objective of this study was to evaluate the performance of KCMMF in general, an attempt was made to evaluate the growth pattern of KCMMF in this chapter. The seven important variables were used for this evaluation. 47
1. Growth rate of APCOS 2. Growth rate of farmer members and suppliers 3. Growth rate of procurement of milk 4. Growth rate of milk sales 5. Growth rate of milk products sales 6. Growth rate of turnover and 7. Profitability ratio Growth Rate of APCOS The annual growth rate of registered APCOS of KCMMF as on 31 st March 1991 was 13.4 percent. This increased to 14.9 percent the following year, and thereafter, it showed a mixed trend. On 31 st March, 2003, the annual growth rate was 2.3 percent. However, the average annual growth rate for the last thirteen years was 6.2 percent (Table 2.1). Table 2.1: Annual Growth Rate of Registered APCOS of KCMMF (31 st March 1990 to 31 st March 2003) Date Total % of increase over the previous year 31-Mar-90 1151-31-Mar-91 1305 13.4 31-Mar-92 1500 14.9 31-Mar-93 1595 6.3 31-Mar-94 1712 7.3 48
Date Total % of increase over the previous year 31-Mar-95 1823 6.5 31-Mar-96 1930 5.9 31-Mar-97 1983 2.7 31-Mar-98 2149 8.4 31-Mar-99 2235 4.0 31-Mar-00 2267 1.4 31-Mar-01 2315 2.1 31-Mar-02 2429 4.9 31-Mar-03 2484 2.3 Average 1920 6.2 The annual growth rate of functional APCOS of KCMMF as on 31 st March 1991 was 20.1 percent. This decreased to 14.7 percent the next year, and then it started showing a mixed trend. On 31 st March 2003, the annual growth rate was 1.8 percent. The average annual growth rate for the last thirteen years was 6.1 percent (Table 2.2). 49
Table 2.2: Annual Growth Rate of Functional APCOS of KCMMF (31 st March 1990 to 31 st March 2003) Total % of increase over the previous year 31-Mar-90 1068-31-Mar-91 1283 20.1 31-Mar-92 1471 14.7 31-Mar-93 1523 3.5 31-Mar-94 1621 6.4 31-Mar-95 1722 6.2 31-Mar-96 1784 3.6 31-Mar-97 1826 2.4 31-Mar-98 1985 8.7 31-Mar-99 2040 2.8 31-Mar-00 2070 1.5 31-Mar-01 2124 2.6 31-Mar-02 2217 4.4 31-Mar-03 2258 1.8 Average 1785 6.1 The total number of defunct APCOS of KCMMF as on 31 st March 1990 was 83. This indicated an increasing trend from 31 st March 1991.Again this increased to 226 on 31 st March 2003. On an average, for the last thirteen years, 50
93.0 percent of the registered APCOS were functional and 7.0 percent of them were ion-functional (Appendix 2.1). Growth Rate of Farmer Members and Suppliers The annual growth rate of farmer members of KCMMF as on 31 st March 1991 was 18.2 percent. The highest growth was recorded in the year ended on 31 st March 1994 (19.0 percent). The annual growth rate of farmer members showed a mixed trend and this was 3.3 percent on 31 st March 2003. The average growth rate during the last thirteen years was 8.0 percent (Table 2.3). Table 2.3: Annual Growth Rate of Farmer Members of KCMMF (31 st March 1990 to 31 st March 2003) Total % of increase over the previous year 31-Mar-90 254183-31-Mar-91 300433 18.2 31-Mar-92 351883 17.1 31-Mar-93 368988 4.9 31-Mar-94 438952 19.0 31-Mar-95 481793 9.8 31-Mar-96 511542 6.2 31-Mar-97 527211 3.1 51
Total % of increase over the previous year 31-Mar-98 571887 8.5 31-Mar-99 599497 4.8 31-Mar-00 606367 1.1 31-Mar-01 637478 5.1 31-Mar-02 659624 3.5 31-Mar-03 681165 3.3 Average 499357 8.0 The annual growth rate of suppliers of milk of KCMMF as on 31 st March 1991 stood at 4.4 percent. The supplier base grew sharply (a jump of 37.5 percent) in 1991-92. Thereafter, annual growth rate showed a mixed trend. On 31 st March 1997, 2002 and 2003, it showed a negative trend. It meant that the number of suppliers of milk decreased in comparison to the previous year s figures. On an average, for the last thirteen years, the annual growth rate was 6.0 percent (Table 2.4). 52
Table 2.4: Annual Growth Rate of Suppliers of Milk of KCMMF (31 st March 1990 to 31 st March 2003) Average of 3 unions % of increase over the previous year 31-Mar-90 23744-31-Mar-91 24778 4.4 31-Mar-92 34076 37.5 31-Mar-93 35619 4.5 31-Mar-94 38286 7.5 31-Mar-95 41853 9.3 31-Mar-96 42746 2.1 31-Mar-97 40899-4.3 31-Mar-98 47275 15.6 31-Mar-99 48446 2.5 31-Mar-00 48802 0.7 31-Mar-01 50681 3.9 31-Mar-02 48893-3.5 31-Mar-03 48137-1.5 Average 41016 6.0 All the members of KCMMF did not supply milk to KCMMF. As per Table 2.5, only 28% of the total members supplied milk in the financial year 53
ending on 31 st March 1990. Till the 31 st of March 1996, it varied from 25 percent to 29 percent. But from 31 st March 1999 it decreased. The percentage share of suppliers of milk to total members as on 31 st March 2003 was 21.1 percent. This meant that the proportion of suppliers of milk to the total members decreased from 28.0 percent in the year 1990 to 21.1 percent in the year 2003. On an average, 25.0 percent of the members supplied milk to KCMMF. The overcrowding of members in a society influenced the administration of APCOS, Union and Federation. Table 2.5: Number and Percentage of Members who Supplied Milk KCMMF (31 st March 1990 to 31 st March 2003) Total no. of farmer members (in thousands) Total no. of suppliers (in Thousands) Share of suppliers in total members (in percent) 31 st March 90 254 71 28.0 31 st March 91 300 74 24.7 31 st March 92 352 102 29.0 31 st March 93 369 107 29.0 31 st March 94 439 115 26.2 31 st March 95 482 126 26.1 31 st March 96 512 128 25.0 31 st March 97 527 123 23.3 31 st March 98 572 142 24.8 31 st March 99 599 145 24.2 31 st March 00 606 146 24.1 54
Total no. of farmer members (in thousands) Total no. of suppliers (in Thousands) Share of suppliers in total members (in percent) 31 st March 01 637 152 23.9 31 st March 02 660 147 22.3 31 st March 03 681 144 21.1 Average 499 123 25.1 Growth in Procurement of Milk Procurement of milk is a critical activity for KCMMF. The annual growth rate of milk procurement by KCMMF was 9.9 percent in the year 1994 and it registered the highest growth of 14.2 percent in the year 2000, whereas the growth was negative in the years 2002 and 2003. In 2003, it registered the biggest decline of 9.9 percent over that of the previous year. On an average, for the last 10 years, the growth rate of milk procurement was 5.3 percent (Table 2.6). The decrease in the number of suppliers and the fall in the rate of procurement of milk were rather of serious dimensions in the last two years. Table 2.6: Annual Growth Rate of Average Procurement of Milk per Day of KCMMF (1993 to 2000) Total of 3 unions (in litres) Annual growth (in %) 1993 363153-1994 399015 9.9 1995 438084 9.8 55
Total of 3 unions (in litres) Annual growth (in %) 1996 449504 2.6 1997 464998 3.4 1998 476739 2.5 1999 536410 12.5 2000 612573 14.2 2001 679399 10.9 2002 660531-2.8 2003 595184-9.9 Average 515963 5.3 Milk Sales The annual growth rate of milk sales by KCMMF was 10.8 percent in the year 1993 and it showed the highest growth rate 12.3 percent in the year 1996. The annual growth rate of milk sales showed a mixed trend and it was 5.5 percent in 2003. On an average, for the last 10 years the annual growth rate was 7.2 percent (Table 2.7). 56
Table 2.7: Annual Growth in Milk Sales Per Day of KCMMF (1993 to 2003) Total of 3 unions (in litre) Annual growth (in %) 1993 368842-1994 408787 10.8 1995 458346 12.1 1996 514807 12.3 1997 529907 2.9 1998 568290 7.2 1999 610787 7.5 2000 628790 2.9 2001 659049 4.8 2002 698984 6.1 2003 737395 5.5 Average 562180 7.2 Procurement and Sales of Milk While evaluating the average daily procurement and selling of milk by KCMMF from the period 1993 to 2003, the results showed a deficit of milk, except in the year 2001. The average deficit of milk per day during the period 1993 was three thousand litres per day and the deficit showed a steady rise till the year 1998. From the period 1999, the deficit of milk started its decline and in the year 2001, there was a surplus of twenty thousand litres per day. However, from the year 2002, the figures again showed a deficit of thirty eight 57
thousand litres per day and in 2003 the deficit was one hundred and forty two thousand litres per day. On an average, for the last 11 years, the deficit of milk was about forty six thousand litres per day (Table 2.8). Moreover the average growth rate in procurement and selling of milk per day by KCMMF for last 11 years was 5.3 percent and 7.2 percent respectively. It required the cross analysis of procurement and selling of milk by the three Unions of KCMMF. Variations in procurement and sale of milk of the three Unions and variations in procurement of milk in flush and lean seasons had to be studied separately to unearth the true results. Table 2.8: Average Daily Procurement and Sale of Milk by KCMMF (1993 to 2003) Procurement (in thousand litres) Sales (in thousand litres) Surplus/deficit (in thousand litres) 1993 363 369-3 1994 399 409-10 1995 438 458-20 1996 450 515-65 1997 465 530-65 1998 477 568-91 1999 536 611-75 2000 613 629-16 2001 679 659 +20 2002 661 699-38 2003 595 737-142 Average 516 562-46 58
Annual Growth Rate of Selling of Milk and the other Value Added Products In addition to milk, the major value added products such as ghee, curd, sambharam, ice cream and peda contributed their share towards the turnover of KCMMF. As the data about the milk products were available from 1997-98, the annual growth rate of selling of milk and milk products was ascertained from the year 1997-98 to evaluate the performance of KCMMF. Annual Growth in Milk Sales As shown in Table 2.9 the annual growth rate of milk sales of KCMMF during the period 1998-99 was 17.6 percent and it declined to -3.6 percent in the next year. In the year 2000-01, the annual growth rate was 8.3 percent and in the latest two years, it was 0.8 percent and 10.6 percent respectively. The average annual growth rate of milk sales for the last six years was 6.7 percent. Table 2.9: Annual Growth Rate of Milk Sales of KCMMF (1997-98 to 2002-03) Milk (in lakh litres) % change over previous year 1997-98 1947-1998-99 2289 17.6 1999-00 2206-3.6 2000-01 2389 8.3 2001-02 2408 0.8 2002-03 2663 10.6 Average 2317 6.7 59
Annual Growth in Sales of Milk Products In the case of the sale of ghee, KCMMF made an annual growth rate of 33.5 percent during the period 1998-99. It decreased to -4.2 percent in the following year. In 2000-01 it increased to 1.0 percent and in the year 2001-02, it was about 14.9 percent growth rate. In the last year, it started declining and it stood at 8.6 percent. The average annual growth rate for the last six years was 11.9 percent (Table 2.10). Table 2.10: Annual Growth in Ghee Sales of KCMMF (1997 98 to 2002 03) Ghee MT % change over the previous year 1997-98 1185-1998-99 1650 39.2 1999-00 1580-4.2 2000-01 1596 1.0 2001-02 1834 14.9 2002-03 1992 8.6 Average 1640 11.9 The annual growth rate of curd sales of KCMMF during the period 1998-99 stood at 35.7 percent. From the period 1999-2000 it improved its position and showed a mixed trend. The average annual growth rate was 23.6 percent (Table 2.11). 60
The annual growth rate of sambharam sales during the period 1998-99 was 6.03 percent. From the period 1999-2000 onwards, it showed a negative trend. In the last four years, the annual growth rate was -4.5 percent, -7.5 percent, -7.0 percent and -2.5 percent respectively. On an average, the annual growth rate was -3.1 percent (Table 2.11). Table 2.11: Annual Growth in Curd & Sambharam Sales of KCMMF (1997-98 to 2002-03) Curd (in lakh litres) % change over previous year Sambharam (in lakh litres) % change over previous year 1997-98 36.40-12.60-1998-99 49.41 35.7 18.63 6.0 1999-00 57.11 15.6 17.79-4.5 2000-01 73.76 29.1 16.46-7.5 2001-02 85.38 15.8 15.31-7.0 2002-03 103.99 21.8 14.92-2.5 Average 67.70 23.6 16.00-3.1 In the case of ice cream sales, KCMMF achieved an annual growth rate of 33.5 percent during the period 1998-99, and then it dropped to 4.7 percent in the next year. In the year 2000-01 it recorded highest growth rate with 48.3 percent, and in the last two years, its growth rates were 38.6 percent and 35.4 percent respectively. The average annual growth rate of ice cream sales for the last six years was 32.1 percent (Table 2.12). 61
Though the annual growth rate of peda sales of KCMMF showed a negative trend in the initial year, it started to rise. In the year 1999-2000, its growth rate was 34.6 percent and as high as 54.7 percent in the next year. The annual growth rates for the last two years were 12.3 percent and 27.0 percent respectively. The average annual growth rate was 25 percent (Table 2.12). Table 2.12: Annual Growth in Ice cream & Peda of KCMMF (1997-98 to 2002-03) Ice cream (in 000 ltrs) % change over the previous year Peda (in 000 Kgs.) % change over the previous year 1997-98 79.8-27.6-1998-99 106.5 33.5 26.6-3.6 1999-00 111.5 4.7 35.8 34.6 2000-01 165.4 48.3 55.4 54.7 2001-02 229.2 38.6 62.2 12.3 2002-03 310.4 35.4 79.0 27.0 Average 167.1 32.1 47.8 25.0 One interesting factor was that in the year 1999-2000, both milk and milk products except peda recorded a big decline in sales. It also required a cross analysis of the selling of milk and milk products of the three Unions to bring out exact results. 62
As discussed above, the average annual growth rate of selling of milk and milk products, of KCMMF for the last six years could be given in descending order (Table 2.13). Table 2.13: Average Annual Growth Rate of Selling of Milk and Milk Products of KCMMF 1 Ice cream 32% 2 Peda 25% 3 Curd 24% 4 Ghee 12% 5 Milk 7% 6 Sambharam -3% Source: Compiled from Annual Reports of KCMMF Here, ice cream ranked first with regard to the average annual growth rate and peda ranked second. Curd and ghee ranked third and fourth, while milk ranked fifth. Sambharam came last in terms of sales growth annually. Profitability of KCMMF The turnover of KCMMF included revenue from the sale of milk and milk products of the three Unions and that from cattle feed plants and CPD. The performance of a concern can be evaluated with the help of ratios relating to turnover and profit. As per Table 2.14, the annual growth in turnover of Unions during the period 1998-99 was 12.6 percent, KCMMF alone had 38.4 63
percent and the overall annual growth rate of turnover was 16.4 percent during this period. The following year, it recorded an increase of 15.8 percent, 55.3 percent and 23.2 percent respectively. The next three year s sales data showed mixed results. The average annual growth rate of the turnover of Unions for the last six years was 8.9 percent. But in the case of KCMMF it stood at 18.7 percent. On an average, the overall growth rate of turnover was 10.4 percent. Table 2.14: Annual Growth in Turnover of KCMMF Ltd (1997-98 to 2002-03) Unions (in percent) KCMMF (in percent) 1997-98 - - - Total (in percent) 1998-99 12.6 38.4 16.4 1999-00 15.8 55.3 23.2 2000-01 3.0 5.2 3.5 2001-02 3.7-2.8 2.1 2002-03 9.3-2.6 6.6 Average 8.9 18.7 10.4 While considering the net profit on turnover, the net profit ratio of Unions showed a negative growth in the years 1998-99, 1999-2000 and 2000-01. But the net profit ratio of KCMMF was positive in the first four years and then it turned negative. The overall net profit ratio showed a negative sign except in the year 1997-98 and 01-02. The average net profit ratios of Unions 64
and KCMMF were 0.2 percent and 0.4 percent respectively. On an average, the overall net profit ratio was 0.4 percent (Table 2.15). SUMMARY Table 2.15: Net Profit Ratio of KCMMF - 1997-98 to 2002-03 (in Percent) Unions KCMMF Total 1997-98 0.5 3.3 0.9 1998-99 -0.5 1.8-0.1 1999-00 -0.6 0.5-0.3 2000-01 -0.3 0.4-0.1 2001-02 0.3-0.2 0.2 2002-03 1.6-3.6-0.5 Average 0.2 0.4 0.4 In this chapter, the mission of Milma, its area of operation, activities and other programmes were mentioned first. As the first part of the first secondary objective is to evaluate the performance of KCMMF Ltd in general, seven variables such as growth of APCOS, growth in farmer members and suppliers, growth in procurement of milk, growth in milk sales, growth in milk products sales, growth in turnover and profitability of KCMMF are analysed and interpreted in this chapter. For this, secondary data from the annual records of KCMMF Ltd for the period 1990 to 2003 were used. 65
The main findings are that about 93.0 percent of the registered APSOS were functioning, the annual growth rate of farmer members and suppliers of milk showed a mixed trend, the percentage share of suppliers of milk in total farmer members showed a decreasing trend, the average annual growth rate of procurement of milk was 5.3 percent and the growth rate of procurement of milk showed a negative trend in certain years, the annual growth rate of selling of milk showed a mixed trend and its average growth rate was 7.2 percent. Further, the average annual growth rate of selling of milk and milk products in descending order is that ice cream 32.0 percent, peda 25.0 percent, curd 24.0 percent, ghee 12.0 percent, milk 7.0 percent, and sambharam -3.0 percent. On an average, the annual growth of overall turnover of KCMMF was 10.4 percent and the average net profit ratio of KCMMF was 0.4 percent. The next part of the first secondary objective of this study is to evaluate the performance of MRCMPU Ltd in particular; hence the next chapter discusses the performance evaluation of MRCMPU Ltd in detail. 66
REFERENCES 67
1 ( ) ( ). www.milma.com/functions. 2 ( ) (2003). Annual Report of KCMMF, p. 10. 3 Ibid., p. 11.