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ASSIGNMENT

ON

DISTRIBUTION CHANNEL FOR MILK AND FLOWER

Submitted by:

Distribution Channel for Milk

Milk-Marketing System

Eighty percent of milk is marketed through the highly fragmented unorganized sector, which includes local milk vendors, wholesalers, retailers, and producers themselves. On the other hand, the organized dairy industry, which accounts for about 20 percent of total milk production, comprises two sectors: government and co-operatives. Even though co-operatives provide a remunerative price to the producer, the unorganized sector plays a major role in milk marketing because of three factors. The first factor is the pricing policy of the co-operatives: their purchase price is based on the fat content of the milk, whereas the private sector pays a flat rate per liter of milk. The second factor, which motivates the milk producers to sell milk to private vendors, involves the type of milk animals reared by the producer. Crossbred cows yield more milk with a lower fat than do buffalo. The crossbred cow population has increased over years because of artificial insemination and improvements in management practices. The third factor is payment policy. The private sector can pay their producers every day, whereas the co-operatives pay weekly or fortnightly. Producers sometimes have to fight with the co-operatives to get their payments.

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Within the organized sector, the co-operative sector is by far the largest in terms of volumes of milk handled, installed processing capacities, and marketing infrastructure. The eighty-two thousand Dairy Co-operative Societies (DCSs) across the country have a strong membership of nearly 10 million landless, marginal, and smallholder milk producer families. Although the organized sector handles less than 20 percent of the production, it has an installed capacity to process about 33 percent of India’s total milk production. The co-operative and private sectors have more or less equal capacities. Much of the processing capacity created by the private sector in the wake of the liberalization of the Indian economy in 1991 remains idle; only about 60 percent of the installed capacity of the private sector is operated on a day-to-day basis.

In the government sector, too, most of the primary processing facilities installed in rural areas (mainly milk-chilling centers) are not functional and dairy plants in the smaller towns and cities are grossly under-utilized. In the co-operative sector, all plants are used to their full capacity and remain under-utilized only during the lean production season. The Roles of Co-operatives in Milk Marketing Operation Flood, launched in 1970, introduced cooperatives into the dairy sector with the objectives of increasing milk production, augmenting rural income, and providing fair prices for consumers.

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The three phases of Operation Flood succeeded in fulfilling a major part of their objectives. During its first phase, Operation Flood linked 18 of India’s premier milk sheds with consumers in India’s four major metropolitan cities: Delhi, Mumbai, Calcutta, and Chennai.

Operation Flood’s Phase II (1981–1985) increased the milk sheds (collection centers) from 18 to 136; 290 urban markets expanded the outlets for milk. By the end of 1985 there was a self-sustaining system of 43,000 village co-operatives covering 4.25 million milk producers. Domestic milk-powder production increased from 22,000 tons in the pre-project year to 140,000 tons by 1985, all of the increase coming from dairies set up under Operation Flood. Producers’ co-operatives increased direct marketing of milk by several million liters a day.

Phase III (1985–1996) enabled dairy co-operatives to expand and strengthen the infrastructure required to procure and market increasing volumes of milk. Veterinary health-care services, feed, and artificial-insemination services for cooperative members were extended, and member education intensified. Phase III consolidated India’s dairy cooperative movement, adding 30,000 new dairy co-operatives to the 42,000 existing societies organized during Phase II. Milk sheds peaked to 173 in 1988-89 with the numbers of women members and Women’s Dairy Cooperative Societies increasing significantly. Today there are 22 state federations in India, with 170 district-level unions, more than 76,000 village-level cooperative societies, and 11 million milk-producer members in the different states. These co-operatives collect an average of 15 million liters of milk each day. Fresh liquid milk, packed and branded, is marketed in over 1000 cities and towns in India by these co-operatives; annual sales turnover exceeds 80 billion Indian rupees (Rs) (US$1 = Rs45.5).

Most of the dairy co-operatives in India are based on the principle of maximization of farmer profit and productivity through cooperative effort. This pattern, known as the Anand Pattern, is an integrated cooperative structure that procures, processes, and markets produce. Supported by professional management, producers decide their own business policies, adopt modern production and marketing techniques, and receive services that individually they can neither afford nor manage. The Anand Pattern succeeds because it involves people in their own development through co-operatives where professionals are accountable to leaders elected by producers. The institutional infrastructure—village co-operatives, dairy and cattle feed plants, and state and national marketing—is owned and controlled by farmers. The Anand model co-operatives have progressively eliminated middlemen, bringing the producers in direct contact with consumers.

Distribution Channel for Flowers

The Indian floriculture industry comprises the florist trade, nursery plants, potted plants, bulb and seed production, micro propagation material and extraction of essential oils from flowers. Karnataka, Tamil Nadu, Andhra Pradesh, West Bengal, Maharashtra, Uttarakhand, Uttar Pradesh, Delhi, Haryana, Kerala, Himachal Pradesh and North Eastern states are the major flower growing states in India.
Tamil Nadu is the largest loose flower producing state, while West Bengal is the leading cut flower producing state in India. Rose is the principal cut flower grown all over the country. Other most important cut flower crops in the country are Gladiolus, Tuberose, Asters, Gerbera, Carnation, Anthurium, Lilium, and Orchid.

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Traditionally, flowers had been marketed by the grower to a flower wholesaler, a retail florist, or directly to the public by a street vendor or at a farmers’ market. Wholesalers in this marketing structure consolidate products from various growers and sell to smaller units and to retail outlets. The wholesaler’s product was often on consignment from the grower. However, in the recent years, the market channels for cut flowers, especially, under commercial floriculture have become increasingly complex, since a large part of the production has shifted from traditional growing regions to new growing regions. The market structure in floriculture trade, which for a long time involved auctioning at flower auctions in the major consuming countries, has been gradually undergoing change towards direct sales with more and more products being sold directly to supermarkets and specialized wholesalers. Depending on the market focus and the desired image, the product specifications on quantity, diversity and quality assurances schemes are met. The trend currently, is towards supermarkets, garden centers and warehouses wanting to be assured that the products are produced in a sustainable way, thus, referring it to a triple P-concept; a way of producing combining Profit; care for the environment (Planet) referring to conservation of soil, water and air, and the effects of the use of fertilizer, chemicals for pest control, use of energy, and the amount of waste; and a social responsible way (People) referring to concerns on human rights, poverty, and workers’ rights on wages, health and security.