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


Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Retailing

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Case Code : BSM0051
Case Length : 16 Pages
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India's Suguna Poultry FarmLtd.: Can it Go Pan- India with its Current Business Model?

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

The Indian poultry industry plays a prominent role in the agriculture sector contributing 2.5%to the country's GDP. In just a few decades, the industry has transformed from a backyard activity to a highly technology-driven industry. This rapid growth was aided by the development of the contract farming model. Adopting this model, the Coimbatorebased Suguna Poultry Farm Ltd. (Suguna) stumbled upon its unique business model while trying to find a solution to the problems it faced in the course of its operations. It has successfully established itself in the Indian poultry industry and is currently the world's fourth largest player in the broiler segment. Its operations are, however, centred in the southern part of India. In 2008, Suguna announced its plans to expand across India along with its efforts to strengthen its backward and forward integration processes. With competition getting intensified, will the company be able to sustain its current rate of growth if it expands across the country? What possible challenges could the company face?

Indian Poultry Sector: Structure and Performance

India has a cultivable land of 184 million hectares, which helps in producing various items. Despite the boom in the service sectors (software and IT), agriculture is still considered as the backbone of the Indian economy with more than half of the population associated with it. The percentage share of agriculture in GDP was 18.5% in 2006-2007. Out of the agriculture sub sectors, livestock is one of the major contributors. The contribution of livestock sector to agricultural GDP grew from 22.51% in 1999-2000 to 24.72% in 2004–2005. The contribution of livestock output to the country's GDP was 6% in 2003-2004.

The share of poultry in the livestock sector is significant compared to other sub-sectors like buffalo, goat and sheep. Out of the total meat production in the country, poultry meat comprises of 25%. By 2004, the annual growth rate of poultry was moving at 15%per annum whereas growth rates of other meats were advancing at only 5%per annum. The poultry industry contributed 2.5% to the country's GDP, which amounted to INR 29,000 crore in 2004.1

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1] Sharma Pradeep, "Poultry belt losses cross Rs100 crore",, February 11th 2004