The Great Indian Chicken Run

Two brothers in Coimbatore integrate thousands of small farmers into one of the world’s biggest poultry producing firms, reports ALOKE PANDEY

ENTREPRENUERS, BY definition, are most often located in urban conglomerations — that’s often where new ventures find relevant niches for their ideas to come to fruition. Defying that logic, however, are two brothers from the tiny agrarian town of Udumalpet in Tamil Nadu. B Soundarajan and GB Sundararajan — one a high school dropout and the other merely a Class 12 graduate — saw the potential of rural spaces for a unique business plan.

Even more unusual, the idea was born out of an adverse economic situation. The brothers had set up a poultry farm in 1986 with 200 layer birds in Udumalpet. But in 1989-90, overproduction in the poultry market led to a glut in the chicken market and prices plummeted.

Most entrepreneurs would have been burnt by a crash in their first venture. But in this price free-fall, the two Suguna brothers saw a business opportunity beckon. They began to supply feed and medicines to indebted farmers — in return for eggs. And then, they formed a business model around this plan: they integrated the farmers into groups who were to be supplied with day old chicks (DOCs), feed and medicines, and from whom the brothers would collect full grown birds ready for the table. All for a growing fee, of course. “It’s a win-win model, for the farmer and for the company,” say the brothers, in explanation of how their current business plan works.

Work it certainly does. Suguna Poultry is today a business with a Rs 2,000 crore plus turnover. It is also a ISO 9001 business, with operations in 11 states. Headquartered in Coimbatore in Tamil Nadu, its main theatre of operation is in the south (Kerala is the exception), though it has gained space in markets in Maharatshtra, West Bengal, Orissa, Uttar Pradesh, Punjab, Haryana and Rajasthan.

The scale of Suguna’s operation is indeed large: the company has 15,000 farmers in 8,000 villages across the country, and they supply it with broiler chickens. Suguna is the 10th largest broiler chicken producer in the world and the largest in India.

The Suguna brothers call their successful business model ‘contract broiler farming’, a franchsise farming system they introduced in 1991. Farmers who own land and have access to resources such as water, electricity and labour, can become breeders of Suguna’s Ross breed of chicks. All the required inputs — DOCs, feed, medicines and expertise — are all provided free by Suguna. But the process for growing the chicks is standardised and must conform to exacting standards laid down by Suguna: quality control checks are carried out by company staff to ensure the norms are being met. The broilers, as long as they comply with established quality norms, are picked up by Suguna and the farmer is paid a ‘growing’ commission. On average, a typical farmer franchisee can earn Rs 10,000 monthly for breeding broiler chickens in their farmlands.

The brothers feel their success lies in their ability to contact farmers at the grassroots level: it helps them relate directly to farmers, understand their problems and help resolve them. It’s a natural extension of their motto: breeding trust and growing together.

It’s true that if a farmer does not comply with procedures, as laid down in the breeding manual, or sells chickens to another party, it is considered a breach of trust and the contract is unlikely to be renewed. But Suguna also provides farmer franchisees with a safety net: not only does the company bear production and market risks, it also shoulders any damage from a change in the market environment. For instance, the recent rise in food prices have not affected the contract farmers because they are supplied with feed directly by Suguna. And, when there was an attack of bird flu recently, Suguna bore the loss to farmers.

OF COURSE, location is an advantage for Suguna: the poultry belt of India lies in Tamil Nadu, Karnataka and Maharashtra; 25 percent of broiler chicken sales come from Tamil Nadu alone. Deputy General Manager, marketing, Priyamvatha Kamineni, says Suguna’s presence in north India has helped link farmers in a market in which 80 percent of poultry farming until recently has been in the non-organised sector. It’s also led to an organised method of producing, procuring and sale of broiler chickens.

Certainly not ones to rest on their laurels, the brothers are now eyeing retail as the future of brand Suguna: the company has entered the value-added market, by launching stores in Coimbatore called Suguna Daily Fressh. With eight varieties of portioned chicken products, four varieties of eggs (including enriched nutrition eggs, hatched by feeding hens natural feed), as well as frozen fish, prawns, chicken sausages and salami, the stores aim to offer high quality meat products. Cleaned and cut mutton, fish and other seafood are also sold in these outlets.

Frozen chicken is already exported by the company to the Middle East, under the brand Suggies. And the company plans to open more stores across Kerala and Tamil Nadu. With the chicken and meat industry growing well, Suguna hopes to supply more tables with both chicken and egg for years to come.