Thursday, September 27, 2012

First its Egg or Chick! Soundarajan knows it better

B. Soundarajan, Chairman of Suguna Poultry is really a genius who converted a small poultry in to a 4200 crore entreprise in 25 years. He revolutionised the poultry farming in India by contract farming model helping the farmers of India to enjoy the fruit of development of Indian economy. Today, he has 18,000 farmers all around India as contract farmers of his firm.

After his schooling in 1984, Soundarajan (SR) decided to own a poultry farm joining hands with his brother Sundarajan with the help of his parents. He started the first farm with Rs.5000 in Udumalapet, near Coimbatore. But the budding era of his business was not filled with success.  But his success started from the failure in his poultry business. As luck would have it, the chicken industry hit a crisis and the prices crashed. They had about six months of feed stock and had given about Rs.700,000 to Rs.800,000 worth of credit to the market. The creditors were their own close circle of people who had themselves lost money from the crash. SR decided to throw more money after this phase of crisis. The creditors were basically small farmers or traders and SR offered to supply them chicks which they had to grow with a buy-back arrangement. They were offered a growing charge along with feed and medicines for maintaining the chickens. Thus was born the concept of contract growth in chickens which at that point had not taken the shape of a practice or an industry. It was just an arrangement with the primary purpose of helping himself and others who were in financial distress.

The basic business model was in place but the challenge was in simultaneously scaling up both the production
capacity of chickens and the marketing network. Chickens even today are grown in the backyards and sold in the neighbourhood markets. For bulk marketing, they had to go to bigger cities. The brothers used to take the chickens in a van to Coimbatore for selling to a few shop owners and would wait till the evening to collect cash. This was not the market which could handle scale. The concept of contract farming took a couple of years to shape up. The arrangements got formalized when they acquired more growers and the roles of respective par-ties became clear. 

Suguna supplied chicks, feed, and medicines and provided supervisory, extension, and veterinary services. It streamlined processes for timely collections and prompt payments. The farmers contributed land and built a shed according to Suguna specifications. These were built to accommodate about 5,000 chicks. Suguna picked up the chickens around the 42nd day and the farmers got their payment in terms of per kg of live  chicken. The number of contract farmers (CF) slowly increased from 3 to 15 during 1991-93. Suguna arrived in the industry by 1997 when it reached a turnover of Rs.70 million which by the industry standard was a huge turnover. The period of scaling up of operations was 1997 to 2000.  They set up their own extruder plant and feed unit. They tied up with Aviagen of UK for Ross Brand Breeders of UK for the supply of grand parent breeds. Suguna also tied up with LOHMANN of Germany for layer breed. It has 25,000 channel partners and provides indirect employment to about 500,000 people.

Their business is worth Rs. 4,200 crore today. And, thousands of farmers are smiling. “Business runs independently. We just sit back and relax now,” SR joked in an interview with The Hindu. He added "farmers are always dependent on brokers, retailers etc., but now through this contract farming they become independent and they are well paid".
The poultry market in India is growing very fast thanks to social entreprenuers like SR which 3rd position in the world in the production.
The Poultry Market in India

• Population: 1.15 billion (2030 estimate: 1.53 billion)
• Commercial layers: 175 million, with 8 percent annual growth
• World’s third biggest producer of table eggs (expected to be in second place by 2020).
• Production costs for eggs and broilers are among the lowest in the world.
• Per capita consumption: 1,890 g broiler meat and 42 eggs (expected to be 60 eggs in 2013)
• Purchasing power and changing lifestyles provide numerous opportunities for expansion in the poultry sector; a 38 % increase in urbanisation by 2013 is a key factor.
• Increasing health awareness, eggs are highly attractive and acceptable to vegetarians.
• The Indian government is promoting eggs as a free addition to school dinners.

SR is happy that from being a backyard farm, Poultry has become a corporate set up. “Chicken is no longer a festive special, people have it more often now. About 80 per cent of poultry produce comes through contract farming and this has ensured affordability, quality and availability. We are not technocrats or management graduates, but we worked on the business model and it clicked,” he says with pride.

“My father used to cycle around the farms. We drive around in cars now,” says S. Kandasamy, a CF of Suguna Poultry“Poultry is our main source of income now. We are not able to depend on agriculture as water is scarce. Rains are no longer seasonal. Ground water has hit an all-time low. You need two or three bore wells to maintain a one-acre farm.” is the opinion of M. Neelavathy from Udumalpet.

India need more social entrpreneurship those who help the common people around following the CSR values. Suguna Poultry along with their support to India's economy, they make the lives of a number of farmers bright through the introduction of contract farming concept eliminating the brokers in between.

The biggest bet for SR now is ‘Suguna Daily Fresh’, the processed meat retail venture. The company would open 100-150 stores in Tamil Nadu and Kerala to make the best use of the fast changing lifestyle. Its time to change the food habits and enjoy good quality meat and readily available for consumption saving the valuable time.  


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