India's Suguna Poultry FarmLtd.: Can it Go Pan- India with its Current Business Model?

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Instead of trying to recover the money that the farmers owed them, they provided feed and medicines to them in exchange for the end product - eggs and/or broilers. Soundararajan, managing director of Suguna, said, "Suddenly, we thought why not invest working capital and manage these farms? Farmers also wanted stability. We supplied the inputs and they (farmers) became converters."14 Farmers readily agreed to this as they were running short of feed and medicines in spite of having the necessary infrastructure. The success of this practice gave birth to the businessmodel of Suguna, wherein farmers owned the infrastructure and reared the birds for a fee. Inputs like DOCs, feed and medicines are provided to the farmers.Apart from providing all technical services, their field staffs checks the condition (health, growth and mortality levels) of the birds at each farm through daily visits. During 1990-1995, the company grew steadily and tried perfecting its business model. But two critical situations threatened the company’s existence. In 1992, perturbed by the rapid rise of the company, their regular supplier stopped delivering DOCs. G.B. Sundararajan, joint managing director of Suguna Poultry, said, "It was a major problem for us.

Without chicks, our growth would end. So, we decided to set up a hatchery to supply day-old chicks to our network of contract farmers. This taught us an important lesson-we had to integrate backward if we had to grow and make it big in the business."¹⁵ To overcome this problem, the company set up a hatchery. In 1993, the company extended its backward integration by establishing a parent farm in which parent breeds are reared (DOCs are hatched by these birds and are sent to contract farmers).

In the late 1990s, the company faced yet another challenge. It had heavily invested in a single market - Tamil Nadu. Due to excess production, it had to sell its products at a low price. This had a major impact on the company's margins. As a course of correction, it diversified and entered into neighbouring states namely Karnataka, Andhra Pradesh and Maharashtra.

Reaching Rural India - 'Building ordinary people to perform extraordinarily.

Through the Suguna model, on an average a farmer earned up to INR 15,000 per month.¹⁶ Moreover, they were protected from price fluctuations. It was a win-win strategy where both Suguna and the farmers benefited. With the help of Suguna, farmers became free from the burdens of production, marketing, etc., of poultry products. Palanisamy M., a former textile company worker and one of the contract farmers engaged by Suguna since 1994, said, "There is no risk for us as we do not own the chicks. We also don't have to worry about the prices of feedstock, the logistics of arranging for veterinary guidance and the selling price of chicken. Suguna takes care of all that. We just need to ensure that the birds are well looked after as they grow."¹⁷ Suguna also educates and provides training to the farmers on new technologies and concepts.

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14]"He Counts His Eggs Before They Hatch", http://chennaistartup.wordpress.com/, July 26th 2008
15]"Radically Different", op.cit.
16]"He Counts His Eggs Before They Hatch", op.cit.
17]"Radically Different", op.cit.