How Amul became an advertising ICON despite spending only 1% of sales on ads

Firstly, a brief history of Amul

The origins of Amul date back to the 1940s. Back then, Polson, a dairy company, dominated the business of milk & milk products around the area of Mumbai (Bombay).

Polson exploited the farmers, buying milk from them at lower rates and selling it to consumers at much higher prices. The milk was also adulterated with water to get higher margins.

Sardar Vallabhai Patel, India’s first home minister, became aware of this situation and wanted to rectify it. He urged the farmers to form their own organization to supply milk to Mumbai directly.

This would serve two purposes:

Consumers would get quality milk & milk products at reasonable prices
Farmers would also get a fair price for their products

And thus, Amul or Anand Milk Union Limited was born.

Originally, this was a tiny cooperative consisting of just the farmers from Anand, a small town in Gujarat. But in 1970, Dr. Varghese Kurien, the pioneer of Amul, was tasked with replicating the Anand model across India.

This phase popularly known as the “white revolution” put India on the global dairy map.

Today, Amul is the largest milk cooperative in the world, owned by ~4 million milk farmers!^[3]

The beginnings of Amul’s iconic advertising

Right from the start, Dr. Varghese Kurien was particular about creating a strong & unique brand identity for Amul. He wasn’t a marketing expert himself, but he knew the importance of branding in building a successful FMCG organization.

So, in 1966, he handed over the advertising to Sylvester da Cunha and his ad agency. Cunha & his team conceptualized the iconic Amul girl and the tagline, “Utterly butterly delicious” for Amul butter.

Now, the Amul girl was actually created in response to the mascot of its competitor, Polson!

Polson butter at the time was very popular and its mascot was a refined, soft girl. So Cunha & his team conceived the Amul butter girl to be the exact opposite — a mischievous little girl who took a dig at the current events in the country.

There were two key aspects to all the Amul girl ads:

1. The ads were timely and connected to the current situation in the country (eg. covering a current event in cricket or politics)
2. There was always a tongue-in-cheek humor involved in the ads

These ads became wildly popular and the Amul girl has stayed relevant for more than five decades now!

So, what is Amul’s SECRET sauce for great advertising?

Now, Amul’s success in business & advertising with less than 1% of revenue spend, is almost unreal. In fact, Amul’s 5-year average ad spend is just 0.8% of the revenue!

So, how has Amul managed to achieve this feat?

Amul’s secret: Family branding!

Amul does not spend separately to create a brand out of each of its products. Rather, it focuses to buildd an umbrella brand for the company itself i.e. Amul. In advertising, this approach is called umbrella branding or family branding.

So, Amul as a brand is synonymous with “Taste of India” and consumers identify every product as coming from Amul.

Of course, a clear advantage of umbrella branding is that you don’t have to allocate a separate budget for each product in the portfolio. Naturally, your marketing expenses go down.

But, the approach of umbrella branding works well only when your products are related and you identify the same principles across all products.

Amul’s core principle is quality at a reasonable price, which is maintained in all of its products. So, umbrella branding makes sense for Amul.

Does anyone else use umbrella branding?

Amul is not the only company to make use of umbrella branding. There are many more examples in the FMCG industry itself.

1. Dettol is an umbrella brand by the company, Reckitt Benckiser. The Dettol family consists of soap, handwash, antiseptic, sanitizer etc.

2. Nivea is an umbrella brand by the company, Beiersdorf. The Nivea family has all sorts of beauty, skincare & fragrance products.

Of course, Amul has been way more successful in generating revenue as a single umbrella brand compared to all these companies.

But, how effective is Amul’s family branding approach?

Let’s look at some numbers to understand how effective Amul’s advertising is! We will take the example of Amul Butter, one of Amul’s oldest and popular products.

Advertising spend of Amul butter

1. Amul Butter is the market leader and has more than 85% share of the butter segment in India!^[4]
2. The butter market size in India is ~INR 5400 crores.^[5] So, the revenue of Amul Butter would be INR 5400 x 85% = INR 4590 crores.
3. Amul’s total revenue is INR 61,000 crores. So, % revenue of Amul Butter = 4590 / 61,000 x 100 = ~8%.
4. Amul spends ~1% of revenue on advertising. So, Amul’s advertising spend = INR 61,000 crores x 1% = INR 610 crores.
5. Given Amul Butter gets 8% of revenue for Amul, we will assume the advertising spend for Amul Butter is also 8% of the total.

So, Amul Butter’s advertising spend = INR 610 crores x 8% = INR 48.8 crores.

Advertising spend by Amul butter for every household OR Customer acquisition cost (CAC)

First, let’s find out how many households Amul Butter is able to reach with an advertising spend of INR 48.8 crores.

1. Let’s say each household uses four 100 gram packs of Amul Butter in a month. In a year, they will use 12 x 4 = 48 packs.
2. So, yearly spend of a household on Amul Butter is 48 packs x INR 50 = INR 2400.
3. Then, the number of households who buy Amul Butter

   = Revenue for Amul Butter / Average spend of every household on Amul Butter
   = INR 4590 crores / INR 2400 = ~2 crore households

4. Finally, the amount spent on advertising by Amul Butter for every household OR customer acquisition cost (CAC)

   = Advertising spend / Number of households who buy Amul butter
   = INR 48.8 crores / 2 crore households = ~INR 24

Now, INR 24 seems like a great number for customer acquisition. More so because Amul employs the umbrella branding strategy and if people buy Amul butter, they are likely to trust & buy Amul’s other products as well.

Closing thoughts

Amul has clearly aced advertising through the years and has become an iconic brand. You’ll hardly find anyone in India who hasn’t seen the ‘Amul girl’ campaigns.

The brand is synonymous with quality & purity, and has established an emotional connect with Indian consumers. It’ll be really hard for any organization to beat that!

Other references ⇒ 6, 7