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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Moreover, although India is the world's third largest in egg production and sixth largest in chicken meat production
according to the International Livestock and Dairy Expo 2008,8 it is marked by irregular growth trends. In addition,
north-eastern and eastern regions are still in the primitive stages due to the absence of organised marketing and
training programmes. Other problems are shortage of feedstuff, unorganised farming and infrastructural facilities. The
supply of maize is very limited and a slight change in its price, may considerably affect the production cost of poultry
farms as feed accounts for 70%-75%of the production cost. The logistics costs involved for poultry stuff is very high.
With the entry of integrators (poultry companies), poultry farming has been modernised to some extent but unorganised
sector continues to be the same. Indigenous (local) farmers, having a major share in rural environment, do not follow
quality standards and as such attain low productivity. Infrastructural facilities like cold storage, distribution, testing
systems, etc., play a key role in the poultry industry. Due to lack of cold chain facilities and poor food processing, about
20%(INR 500 billion) of all foods produced in the country is being wasted.9 However, industry experts opine that India
can improve its exports if it upgrades its system infrastructure.
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Indian poultry industry's another major drawback is that it is predominantly a wet market (market of live birds). Approximately, 95% of poultry is traded through wet market.10 Indian consumers have the perception that live bird is fresh and processed meat is old. Poultry companies, therefore, did not have much incentive to explore processing. Global markets, however, prefer processed meat. With the demand for wet markets reducing due to the outbreak of Avian Influenza, people have started shifting to processed meats. Government also banned the sale of live birds and setting up slaughterhouses was made mandatory. This has opened up avenues for integrators to move into retailing of processed meat, thus altering the supply chain of the poultry industry. By entering into retail marketing, integrators would influence the wholesale-retail profits and gain cost efficiency. It is also being forecasted that the industry would consolidate in the future with a few players dominating the market.
In spite of these inadequacies, several private companies have established themselves by overcoming these challenges through sophisticated technology, alternative sourcing of feedstuff and installing adequate infrastructure. Among them, Suguna has achieved a competitive edge in the poultry market through its unique business model.
8]"International Livestock and Dairy Expo 2008", http://www.4to40.com/fairs_and_exhibitions/print.asp?fairid=353, August 22nd-24th 20081
9]N. Viswanadham, "Can India be the food basket for the world?", http://www.isb.edu/faculty/Working_Papers_pdfs/Can_India_be_the_Food_Basket_for_the_World.pdf
10]"Indian poultry industry: Challenges and opportunities", op.cit.