The chicken and egg story

B.Soundarajan’s contract farming model in poultry has turned Suguna Holdings Pvt Ltd into a Rs 4,200 crore enterprise. At the same time, it has provided an assured livelihood to hundreds of farmers across India. K. Jeshi reports

Fresh out of school, B. Soundarajan, along with his brother B. Sundarajan, set up a poultry farm in 1984 at Ganapathypalayam in Udumalpet, about 70 km away Coimbatore. “My father, a school teacher, pushed me into it. After my schooling he wanted me to opt for business. We had a vast expanse of agricultural land, so we started a poultry farm,” he says.

Six years on, he introduced contract farming, redrafted the business model, and changed the face of the industry. From three farmers in Udumalpet, the business now has a whopping 18,000 farmers across the country. “We cover 8,000 villages in 13 states,” says Soundarajan, the managing director of Suguna Holdings Pvt Ltd. Their business is worth Rs. 4,200 crore. And, hundreds of farmers are smiling. “Business runs independently. We just sit back and relax now,” he jokes as we settle down for a chat at his tastefully done-up residence. Recalling the beginning of his journey he says, “Every one knew about country chicken; the concept of broiler chicken was new.”

The farmer was dependant on 14 cost centres — from retail distributors, brokers and chicken feed suppliers to medicine suppliers and veterinary service providers. “The farmer is always dependant on many hands for his survival. This happens even now,” he says.

But with ‘forward-backward integration', Soundarajan reduced the cost centres from 14 to three. Suguna now supplies day-old-chicks to the farmers along with feed and medicines. The farmers raise the chicks for 45 days and return them to Suguna. “We take the responsibility of marketing. The farmer becomes the producer with no investment or working capital. Bank loans are arranged to help them erect a shelter and maintain the poultry. Our hatcheries and breeding farms supply the chicks. We provide the feed (made from soya and maize), medicines and vaccines. This arrangement gives farmers a regular, assured income and a consistency never seen in agriculture, thus empowering them.”

From Sankaran Koil and Tenkasi to Rajapalayam, Madurai, Theni, Oddanchatram, Palani, Dindigul, Kudiyaatham, Vellore and Puducherry, you find a Suguna Poultry every 40 km or so. Their business model turned around the poultry industry. “Initially, there was scepticism about the scalability of the model. But we won over the farmers. They trusted us and we have grown together,” he says.

Reaching out

A farmer himself, Soundarajan says it has been an enriching journey. In 2000, the business scaled up to Rs. 100 crore and reached 4,000 farmers. The success story in Tamil Nadu prompted them to look beyond cultural and language barriers. The model is now replicated in 15 States. “A farmer is a farmer — he may live in Tamil Nadu, West Bengal, Punjab, U.P or Rajasthan, but his approach to life is the same. He needs a helping hand.”

In 2010, Suguna entered Bangladesh and Sri Lanka. It is now looking at South East Asia and Africa. A dedicated team of 5,500 employees is the company's backbone. The 250-odd offices across India are technology-enabled and connected to the central office in Coimbatore. Suguna Daily Fresh outlets (about 100 shops) promote a hygienic model of processed meat consumption. Soundarajan says more corporates should connect with farmers through a business plan that doesn't exploit them. “A farmer is confined to his land. To grow bigger, he needs help. The Government should protect his interests with a contract farming law. ”

The poultry industry, including eggs, stands at 40,000 crore and is growing at 15 per cent every year. Suguna commands 18 per cent of the market share, and expects growth from newer markets such as Bihar, Madhya Pradesh and Jharkhand. “India is an emerging market. The per capita meat consumption in Europe, West Asia and the U.S. is 65 kg. In India, it is three. We have to grow four times more to achieve the world average of 12 kg.”

What an idea!

He 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.

Soundarajan is proud about Coimbatore. “People in the western part of Tamil Nadu are calm and ethical. I like this conservative approach. And we have such pleasant weather here,” he smiles. When he is not working, Soundarajan treks in the forests near Siruvani, Parambikulam and the Velliangiri Hills. Or blazes the track on his Kawasaki. s“I always tell management students to start early, even when they are 21 years old. They are free to think independently, and can afford to take risks. Failure rates are high and not all of them succeed. But, it is still worth trying. Businesses are created through ideas and not money. Suguna was one such successful idea.”

Other projects

Under Suguna Holdings, the 50-crore Globion India Private Limited in Hyderabad manufactures poultry vaccines

Suguna Foundation Trust has planted 30 lakh saplings across India through its network of 18,000 farmers

Suguna Institute of Poultry in Udumalpet will offer diploma courses in poultry from August

Suguna Foods will extend its services to cattle, fish and pet food

The company also plans to enter the dairy segment

Farmer's Speak

S. Kanadasamy, SKS Farm, Pulankinaru, Udumalpet

“My father used to cycle around the farms. We drive around in cars now,” says S. Kandasamy. A regular income through contract farming has brought about noticeable changes in the lifestyle of farmers like him. “Contract farming has boosted rural economy in a big way. An assured income once in 45 days drew many agriculturists in Udumalpet to full-time poultry. And the results have been rewarding.”

The farmer who has been with Suguna since 1987 has branched into ‘parent bird breeding' (thaai kozhi valarpu) too, a 70-week cycle. “In parent integration, we maintain the chicks over 25 weeks, prepare them for egg-laying and supply the eggs to Suguna. Established farms go in for this parental integration as it extends over a longer period.” He maintains one lakh birds through parental integration.

His wife K. Sudha is also an entrepreneur. She and her team run Sudha Poultry Farm at Malaiyandipattanam in Pollachi. “We become the owners and there is zero risk.”

They add that corporates and the government should support such endeavours. “Government should offer loans for agriculture-based sectors at a nominal rates of interest.”

M. Neelavathy, Neelavathy Farm, Udumalpet

She started with 1,000 birds in contract farming on 3,000 sq.ft area. Now, she has over 10,000 sq.ft. “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.”