Suguna Aims to Double Revenue by 2018

INDIA - The country's top broiler producer aims to increase revenue at around 15 to 17 per cent annually, continuing its focus on retail sales and on the domestic market, according to the company's chairman.
calendar icon 23 August 2011
clock icon 4 minute read

Coimbatore-based Suguna Poultry Farm expects to touch the 50-billion-rupee (INR) revenue mark for the first time this fiscal, a good 26 years since inception, reports DNA India.

But going by G. Soundararajan, its chairman, the company hopes to double this in just five to seven years time.

Started in the 1980s with just 200 birds in Udumalpet, about 65km from Coimbatore, by Mr Soundararajan and his brother, G.B. Sundararajan, Suguna is now India's largest broiler chicken producer with about seven million birds and claims to be the world's 10th biggest.

The country's total weekly chicken production, excluding those grown in the backyards in villages, is about 50 million, with Venky’s India and Thailand's Charoen Pokhphand group among the other major players.

Suguna reported revenues of INR37 billion during the last fiscal year.

Mr Soundararajan told DNA in an interview in Coimbatore last week: "The first INR5,000 crore [INR50 billion] (of revenues) took such a long time because we were in the initial stages of our business. Now that we have scale, we should reach the 10,000-crore [100-billion] mark in five to seven years."

The key to realising that goal is strengthening Suguna's mainstay of selling live birds to butcher shops.

"About 97 per cent of our revenues come from that" said Mr Soundararajan. The rest comes from processed chicken, which includes both the ready-to-cook variety and ready-to-eat value-added products.

Suguna competes with Godrej Agrovet, which owns the Real Good brand through a joint venture with US firm Tyson Foods, and Venky's in both the segments.

Venky's, the only listed entity of the Venkateshwara Hatcheries group, had sales of INR8.4 billion in the last fiscal year. Agrovet turned over INR19 billion, over 70 per cent of which came from animal feed.

Suguna produces about 1,000 tonne of processed chicken a month.

"We sell processed chicken primarily to KFC, McDonald's and top-tier hotels," said Mr Soundararajan.

As for the retail segment, Suguna has 60 to 70 exclusive outlets in Tamil Nadu and Kerala to cater to this demand.

Mr Soundararajan believes retail demand for processed meat in India is not yet great.

However, Balram Yadav, managing director, Godrej Agrovet, is more optimistic.

He said: "The size of the Indian poultry industry is about INR250 billion and processed chicken is just INR10 billion so there is a lot of scope."

Venky's was not available for comment.

Per capita chicken consumption in the country is about 3.5kg, said Mr Soundararajan.

He added: "In cities like Mumbai, Bangalore and Chennai, it's more than 15kg, in small towns it could be 3-4kg and in villages it's about 1kg."

Suguna operates in 14 states and works with 17,000 farmers, whom it supplies with chicks, chicken feed and nutrients. It buys back the birds when they are ready for slaughter. They are shipped to butcher shops by an intermediary and killed by the age of 37 to 40 days.

Mr Soundararajan told DNA the company's idea is to outgrow the industry, which has averaged 12 to 13 per cent growth over the last five years. "We want to grow at 15 to 18 per cent," he said.

And does the company plan to grow public?

"No, we want it to keep it a closely held private company. We use our internal accruals and loans to meet our capex requirement," said Mr Soundararajan. Suguna sets aside about INR2 to INR5 billion every year for capex.

Mr Soundararajan concurs with Yadav that poultry is a low-margin business as companies work with poor farmers.

He explained: "Our average operating profit margin over five years is about seven to eight per cent and net profit margin is around four per cent."

This is also a reason Suguna is not planning to increase exports from the current level of 10,000 tonnes of processed chicken a year.

"We export for just three months of the year. We can't be competitive because of Brazil where raw materials (for animal feed) are cheap," Mr Soundararajan told DNA.

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