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Indian poultry farmers turn a backyard business into a billion dollar industry

October 14, 2020
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Home Development news

Indian poultry farmers turn a backyard business into a billion dollar industry

The Indian poultry industry is a global powerhouse worth USD 18 billion and set to touch USD 27 billion by 2025

Editor by Editor
October 14, 2020
in Development news, India, Recommend
Reading Time: 6min read
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By Zahrah Imtiaz/Asian Poultry Magazine

The Indian poultry industry is a global powerhouse worth USD 18 billion and is projected to grow to USD 27 billion by 2025. Over 40 years ago, Dr. B.V. Rao, with pioneers in the industry in India, set the stage to take it is today. But with this came bigger challenges such as environmental issues, introduction of technology, changing consumer behavior and an evolving regulatory environment.

The new and younger generation of Indian poultry farmers are open to these challenges and are steering their companies into an environment that is both modern and promising in terms of retail and offerings.

With a standing population of 760 million broiler and 306.4 million layers, and per capita consumption at 4 kg of meat and 65-72 eggs, there is room for growth.

Dr. Ravinder Reddy, who operates RR Foods and Feed, a broiler breeder farm in Hyderabad, started his career with Venkateshwara Hatcheries. He opines that India has the best layer and broiler breeds, technical know-how and most importantly, good entrepreneurship skills.

Despite this we see three major challenges that plague the Indian industry today. Firstly, the need to increase consumption. Secondly, the need to cut out the middleman. And finally, moving away from a commodity-based business to one with added value.

Dr. Ravinder Reddy and Ms Manasvi Surasani

Getting More To Eat Chicken

Dr. Reddy feels that the issue of consumption is twofold. One is the lack of standardization of meat quality and the other is the absence of information which promotes chicken and egg consumption.

He set up RR Labs which tests poultry feed ingredients, feed and undertakes contract research. His daughter, Manasvi Surasani says the future lies in standardizing the quality of the meat produced.

Going further, Dr. Reddy has been carrying out campaigns to increase awareness and consumption of chicken and eggs. Conducting programs in schools and among the public, Dr. Reddy launched ‘Dr. Chicken’ in 2019, a program to educate the public on the nutritional value of poultry products.

“My mission is to improve per capita consumption to 11 kg of chicken and 180 of eggs,” Dr. Reddy.

His thinking is not new. In the 1980s, the National Egg Coordination Committee launched a successful ad campaign to convince people that eating an egg a day would help improve health and nutrition levels. The campaign helped increase per capita consumption.

A similar initiative has been taken by Ms. Nagalatha Mandava and Mr. Ashok Mandava in Hyderabad, through their ‘Just Laid’ eggs. This is a brand of brown, antibiotic free eggs that are delivered to stores within 24-48 hours of being laid. They have also been successful in removing the ‘fishy odor’ in eggs to entice consumers.

According to Mr. Mandava, the industry needs a new campaign to raise consumption. “We need to start promoting eggs and chicken again, if we don’t, who will?” he asked.

Nagalatha and Ashok Mandava_Just Laid_India

Unlike others, he made the decision to allocate 10% of their production costs to marketing and educating the public on ‘consuming quality eggs’.

In Just Laid’s experience the customer is willing to pay 20-20% more for quality, said Mr. Mandava.

Similarly in Mangalore, the ‘Ideal Chicken’ brand run by Mr. Vincent Cutinha and his family too are changing consumer behavior with a ‘good product’. Having started his business Anupama Feeds and Farms in 2005, the company is now a leading integrator in the area.

Mangalore, unlike other areas in India, today has a 40% processed meat market. “When we started, it was mostly a live bird market, but we have been able to slowly convert it by concentrating on meat quality,” said Mr. Cutinha.

His daughter, Shirly Cutinha in the meantime, has been concentrating on the second most important problem – the middleman.

Technology Bridges Gap

In a country as vast as India, it is not easy to cut out the middleman and his distribution network. Larger companies, however, are turning to technology to reduce some of these costs.

In 2018, Anupama Feeds introduced the concept of ‘home-delivery’ of their ‘fresh’ and ‘chilled’ chicken products. “Customers can pay online and don’t need to visit our stores. They can also order for delivery to someone else’s address,” explained Ms. Cutinha.

She noted that the urban lifestyle is an advantage to the processed meat sector. Once customers experience hygienic and high quality chicken, very few revert to chicken from wet markets.

Vincent and Shirly Cutinha

Her foray into the online space has been supported by India’s 460 million online community. Mangalore, however, is a smaller market compared to the bigger cities and logistic costs have been less than what it would be in a larger city. Thus what to bigger companies in larger cities do? They have turned to new entrants like FreshToHome and Licious in the online meat retail space. These companies have helped poultry companies deliver hygienically processed meat direct to customers. This however has been both a positive as well as negative experience for those in the industry.

Raghu Kishore, who heads his father’s poultry business JRB Breeders Pvt Ltd in Hyderabad, said online platforms are problematic. “Many are disrupters and they are burning a lot of money to secure customers,” he said.

He believed that they ultimately undersell their product. “We too developed an app but didn’t take it live because I thought, I would be undercutting my product,” he said.

On the other hand, companies like Sneha Farms Pvt Ltd, have been walking a tight rope between building partnerships with these companies as well as going on their own.  Hyderabad based Sneha Farms Pvt Ltd., Group CEO, Varun Reddy entered his family business in 2012. In 2016, the company set up a processing plant to process 6000 birds per hour. In 2020, they expect to increase production to 12,000 birds per hour.

Mr. Reddy is banking on the changing dynamics of the processed meat market in India to drive growth. “We have been able to produce a consistent and high quality product and this is possible with automation,” he said.

The processed meat sector has brought them close to USD 34 million in sales between 2017-2019. As this space is growing, Sneha Farms is also partnering with food delivery platforms like Amazon and Swiggy to deliver chicken directly to customers.

Raghu Kishore of JRB Breeders

Leaving distribution to online platforms, producers are focusing on their immediate geography to build a stronger brand name.

“Our strategy is not to grow in 15 states. We want to grow as an extension of our existing geography,” said Mr Reddy.

Similarly, Just Laid’s success is attributed to them being able to deliver fresh eggs as promised, “If we expand our reach further, we will not be able to deliver on time given the distances,” said Mr. Mandava.

Cutting Out Middleman

Unlike in the meat business, the layer industry has fewer integrators and many depend on the middleman to sell their eggs. In 2011, Mr. Samara Simha Reddy had to take over his father’s layer business, Sri Venkateshwara Poultry Farms when he passed away. Coming from an advertising background, he learnt from scratch while spearheading expansion plans.

“Business was very profitable when I came in. But we have been having a tough time since 2012 with short reprieves. Feed costs have been rising since then but we have not been able to increase egg prices given the market.” he said.

In recent years, he has been focusing on his dependency on the middleman. On this he said: “I have a daily production of 100,000 eggs but the middleman says he will take it when he finds a suitable market. I can’t wait.”

Mr. Reddy today has opened his own wholesale outlet in Hyderabad and sells eggs directly to retailers. He feels that in a complex market like India, the government should help farmers by ensuring a maximum retail price for eggs. With poultry hubs like Telangana and Tamil Nadu facing tough competition from Northern states, a call for price uniformity has risen.

He said producers would need to focus on value addition to enjoy better returns.

Varun Reddy_Sneha Farms

Adding Value

A company that has focused on doing this has been the Al-Arif Poultry Company in Mangalore which is today, one of the largest processed meat suppliers in the area.

Run by eight brothers, the company’s Managing Director, Mohamed Mustaque, is driving expansion through RTE meals, “Over the last two to three years, we have been testing and developing recipes and importing machinery for it,” Mr. Mustaque said.

He believes that the future of the Indian poultry industry lies in value addition and its ability to help the producers survive seasonal shocks. “Our third generation will mostly focus on value addition and marketing. We can initiate our own brand and go directly to the consumer,” said Mr. Mustaque who is also looking at export markets. Value addition, apart from better returns, would also reduce price fluctuation and volatility. The Al Arif group is not alone and many producers like Sneha Farms are now shifting to further processing and value addition.

Changes in the economy, demographics, consumer behavior, environment, technology and farming are factors the second generation have to contend. According to Mr. Kishore close to 50% of all poultry farmers in Telangana are between the ages of 25 and 40 years. This generation would shape the industry over the next decade.

(The photo at the top shows the Al Arif brothers)

(Source: Asian Poultry Magazine, https://www.asian-agribiz.com/magazines/asian-poultry-magazine/)

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