Billion dollar poultry firm Suguna wants to hatch a double

Coimbatore-based Suguna Poultry Farm expects to touch the Rs5,000 crore revenue mark for the first time this fiscal, a good 26 years since inception.

But going by G Soundararajan, its chairman, the company hopes to double this in just 5-7 years more.

Started in the eighties with just 200 birds in Udumalpet, about 65 km from Coimbatore, by Soundararajan and his brother GB Sundararajan, Suguna is now India’s largest broiler chicken producer with about 70 lakh 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 5 crore, with Venky’s India and Thailand’s Chareon Pohphand group among the other major players.

Suguna reported revenues of Rs3,700 crore last fiscal.
“The first Rs5,000 crore (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 mark in 5—7 years,” Soundararajan told DNA in an interview in Coimbatore last week.

The key to realising that goal is strengthening Suguna’s mainstay of selling live birds to butcher shops. “About 97% of our revenues come from that,” said 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 Vekateshwara Hatcheries group, had sales of Rs850 crore last fiscal. Agrovet turned over Rs1,900 crore, over 70% 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 Soundararajan.

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

Soundararajan believes retail demand for processed meat in India isn’t great yet.

However, Balram Yadav, managing director, Godrej Agrovet, is more optimistic. “The size of the Indian poultry industry is about Rs25,000 crore and processed chicken is just Rs1,000 crore so there is a lot of scope.”

Venky’s was not available for comment.

Per capita chicken consumption in the country is about 3.5 kg, said Soundararajan. “In cities like Mumbai, Bangalore and Chennai, it’s more than 15 kg, in small towns it could be 3-4 kg and in villages it’s about 1 kg.”

Suguna operates in 14 states and works with 17,000 farmers, who it supplies 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—40 days.

Soundararajan said the company’s idea is to outgrow the industry which has averaged 12—13% growth over the last five years. “We want to grow at 15—18%.”

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 Soundararajan. Suguna sets aside about Rs200—250 crore every year for capex.

Soundararajan concurs with Yadav that poultry is a low-margin business as companies work with poor farmers. “Our average operating profit margin over five years is about 7—8% and net profit margin is around 4%,” he said.

This is also a reason Suguna is not very keen on increasing exports from the current level of 10,000 tonne 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,” said Soundararajan.