India's Suguna Poultry FarmLtd.: Can it Go Pan- India with its Current Business Model?
Details
Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Retailing
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Case Code : BSM0051
Case Length : 16 Pages
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Challenges
Suguna, however, faces a few challenges in fulfilling its expansion plans. Firstly, Suguna is relatively new to the
market when compared to its competitors. It has only 18%market share in broiler segment and holds a small share of
6.6%in the layer segment, which it entered in 2007.37 Its biggest competitor, Venkateshwara Hatcheries Group on the
other hand, has a market share of 85% in layer segment and its other unit Vencobb has 65% of the market share in
broiler segment.38 Godrej Agrovet, another fully integrated poultry company holds a market share of 16%in the broiler
segment.39 It is more into retailing of processed meat under the brand name 'Godrej Real Good Chicken'. The other
competitors like Pioneer Poultry Group, Sky Lark Group, and Jaffa also pose a challenge to Suguna, as they are
capable of taking away market share due to the highly fragmented nature of the industry.
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To expand in this region, the company has to incur additional expenditure in educating the farmers, providing training and building infrastructure. In addition, its expansion into the retail sector could also be an uphill task. Offering a branded product will add up 40%to selling price on account of additional costs like packaging, taxation and advertisements. By branding its products, the company can sell its products at its high-end retail stores and command premiumprices for them. But this would eliminate a large percentage of consumers who would not be willing to spend so much on something they get at a cheaper rate. Although the consumer preferences are changing with regard to consumption of chicken, people still prefer to purchase it from street corner shops rather than high-end retail stores.
Regardless of all these challenges, Suguna's founders are confident that it can achieve the plans it has set for itself. Soundararajan, said, "We are going to focus on expanding the poultry farming for the domestic market till 2010 by replicating our existing business model of contract farming across the country. Our bid to enter into international markets will be only beyond 2010."40 In this scenario, it remains to be seen if Suguna will be able to give a tough competition to the players in poultry sector and whether it will be able to survive and achieve success in the global market with its unique business model.
37]"He Counts His Eggs Before They Hatch", op.cit.
38]"Venky's (India) Ltd", Pratibhuti Research, January 5th 2004
39]"Godrej Agrovet, Tyson Foods form JV for poultry", http://www.business-standard.com/india/storypage.php?autono=327492, July 1st 2008
40]G. Gurumurthy, "Suguna Poultry to invest Rs 600 cr in expansion", http://www.thehindubusinessline.com/2007/02/27/stories/2007022700971200.htm, February 27th 2007