India's Suguna Poultry FarmLtd.: Can it Go Pan- India with its Current Business Model?
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Themes: Strategy
Pub Date : 2009
Countries : India
Industry : Retailing
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Case Code : BSM0051
Case Length : 16 Pages
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The flat management structure of the company permits it to grow swiftly. The company, whose operations are divided into 13 regions, authorises regional managers to take decisions on the issues relating to their regions. It recruits experienced staff from well-established players like Venkateshwara Hatcheries to increase its management width. Its strategies have helped the company grow at over 30%year-on-year. It is making arrangements to double its current chicken production of 15 lakh per week by the end of 2010. It is also planning to increase its average size of contract farm from 5,000 to 10,000 bird farms. Increasing contract farm capacity two-fold will increase current average income of farmers from INR 15,000 to INR 30,000 a month.31Suguna is planning to expand across the country as it sees several opportunities in the Indian poultry industry. Suguna Poultry Going Pan India: Will it Succeed? |
Expansion Plans
When compared with other nations across the world, poultry consumption in India is significantly low.
In the year 2007, the per capita consumption of poultry meat in India was 2.04 Kg compared with global average of
11.40 Kg. On an average, Indians consume 42 eggs per annum compared to 128 eggs globally.32 There is a huge gap
between consumption of poultry products in India and world over. This huge gap provides opportunities for Suguna to
expand and establish itself firmly in the poultry industry.
Suguna's operations are mainly centered in southern and western parts of India with a small existence in eastern
parts as well. The company is attempting to spread its operations throughout the country in the near future. Sundararajan
expresses, "We want to be an INR 13000 crore company by 2013. By then, we should have a network of 60000
contract farmers across India."33 As Suguna has little presence in northern regions, it is planning to enter the northern
market with an investment of INR 120 crore over the coming years. It wants to spend another INR 15 crore towards
marketing strategies, out of which it is planning to spend INR 6 crore-INR 7 crore in the north. It is also planning to set
two processing units in Karnataka and Maharashtra at a cost of INR 20 crore each.34 These units will produce 3,000
birds per hour and will look after the export market. It is also preparing to set up processing units with retail stores in
each of the 10 states it is operating in.
Plans are also been drawn to increase the capacity of its breeders, hatcheries and feedmills. Soundararajan, said, "Our broiler capacity will increase to 100 lakh birds a week from the present 45 lakh birds a week. The company has invested about INR 45 crore to set up hatcheries in Chittoor and Hyderabad in Andhra Pradesh and Nashik in Maharashtra. New hatcheries will also be set up in Karnataka, Tamil Nadu and West Bengal. The company also depends on small poultry farms for its processing units. Suguna will invest about INR 40 crore in new feed-mill projects in Maharshatra, Karnataka and Andhra Pradesh. Most of the expansion will cater to the domestic market."35Presently, the company has 38 feed mills in operation across the country. It is setting up four additional mills, two in Andhra Pradesh and one each in Karnataka andMaharashtra. The feed mill in Bangalore (capital city of Indian state Karnataka), would be Asia's largest feed mill. It is also planning to invest INR 400 crore (entirely funded by debt) to establish a vaccine manufacturing plant near Hyderabad.36
It not only wants to concentrate on surviving and expanding in the domestic poultrymarket but also to make amark in the global scenario. It has already penetrated into global poultry market through partnership deals with poultry firms. It successfully established its operations in the Middle East through a joint venture with Supreme Foods Co. Ltd., Saudi Arabia called 'Supreme Suguna Foods'. Japan, which is very stringent in following quality standards, has also opened its doors for trade with the company. Suguna will be exporting valued-added processed chicken by the end of 2008. Deals are taking place with European countries for exports of Suguna products as well. It has already established itself as a supplier to brands like McDonald's and KFC. By successfully strengthening its backward and forward integration systems, the company has achieved a state of self-sufficiency in its business operations
31]"Suguna Poultry, SBI in pact for contract farming", http://www.thehindubusinessline.com/2006/12/19/stories/2006121904421200.htm, December 19th 2006
32]"Radically Different", op.cit.
33]Ibid.
34]"Suguna Poultry to invest Rs.120 cr in N. India", http://www.thehindubusinessline.com/2006/08/30/stories/2006083003090800.htm, August 30th 2006
35]"Suguna Poultry Farm to get fund from International Finance Corpn", http://news.jimtrade.com/200608/2267.htm, May 5th 2006
36]Ibid.