Business

Unforgotten Brands: Suguna

GB Sundararajan and B Soundararajan never received any formal college education. They were born in Udumalpet village, about 70 kilometres from Coimbatore, Tamil Nadu.

This quiet village, characterized by its dark black soil and extensive cotton plantations, was home to approximately 2,000 residents who predominantly worked on farms or in textile mills. The brothers’ parents, although landowners, worked as teachers at a government school, setting a foundation of discipline and hard work.

Early Struggles and Entrepreneurial Spirit

Soundararajan’s journey into entrepreneurship began early. After finishing high school, he expressed his desire to pursue further education to his father, Bangarusamy. However, his father challenged him to consider starting something on his own instead of seeking a job, which he believed would eventually become monotonous.

Taking this advice to heart, 17-year-old Soundararajan decided to venture into vegetable farming on the family’s 20 acres of ancestral agricultural land, aiming to deviate from the prevalent cotton farming in the area. Unfortunately, the land was unsuitable for vegetables, leading to significant debt and mental stress for the young entrepreneur.

Four years later, he handed over the management of the farm to his brother and sought a new direction. His uncle, who ran a small agricultural water pump company, suggested that Soundararajan join the business and set up a branch in Hyderabad. Despite his efforts, this venture too faced challenges, exacerbated by labour strikes in Coimbatore that disrupted the supply chain from his uncle’s firm.

Discovering Poultry Farming

During the early 1980s, while Soundararajan was struggling in Hyderabad, commercial chicken farming was emerging as a lucrative revenue source for Indian farmers. B.V. Rao, founder of the VH Group, the parent company of Venky’s chicken, had established India’s first broiler farm in the 1970s, revolutionizing poultry farming by introducing broilers—chickens raised in sheds, fed a high-protein diet, vaccinated against infections, and sold within 50 days.

Rao also pioneered contract farming, supplying freshly hatched chicks, feed, and medicines to farmers, who then raised the chickens until maturity. Rao would then buy the mature birds, paying a fixed price per batch. Although Soundararajan was initially unaware of Rao or the concept of contract farming, his brother Sundararajan, upon visiting a cousin’s broiler farm, was inspired to start their own poultry business.

Establishing Suguna Foods

In 1984, Soundararajan quit his job in Hyderabad and joined his brother in this new venture. Initially, they faced challenges with only one shop in the Coimbatore area purchasing their chicken. This monopoly often led to delays in picking up the chickens, forcing farmers into desperate situations.

However, a twist of fate came when the butcher was imprisoned, halting chicken sales. The brothers seized this opportunity to start buying chicken from local farmers and selling chicken feed and medicines to them.

In 1986, they founded Suguna Foods Private Limited in Coimbatore. The company began as a small poultry trading business, supplying equipment, healthcare products, feed, and chicks to other poultry companies. They became one of many vendors in the poultry supply chain, where each specific requirement—be it rice husk, medicines, or feed—had its vendor, leading to high costs for farmers who struggled to pay on time.

Innovating with Contract Farming

Three years into their trading business, the brothers realized that many farmers were abandoning poultry farming due to a significant credit gap in the market. The lack of structured loans from banks forced farmers to rely on private lenders, resulting in unstable incomes. This realization led the brothers to adopt the contract farming model, like the VH Group’s approach but independently conceptualized.

In 1990, with just three farms, Suguna Foods started contract poultry farming. They provided farmers with everything needed to grow chicks, from feed to medicines. In return, the farmers supplied the poultry grown in Suguna Foods. Although initially met with scepticism, the model proved successful. By 1997, Suguna Chicken had become the largest player in Tamil Nadu, with 70-80 farmers on its rolls and a turnover of ₹7 crore. Farmers who adopted this model could pay off their outstanding debts within three years.

Expansion and Challenges

Recognizing the need for growth, the brothers enrolled in short business courses at B-schools in Coimbatore and Hyderabad. They overhauled their working processes, setting up separate departments for sales, HR, IT, and manufacturing, slowly building the company’s blueprint as it operates today.

In the 2000s, Suguna Foods expanded across India, often collaborating with state governments. In 2008, Soundararajan started Suguna Holdings, diversifying into sectors like poultry in Bangladesh and Kenya, mining in Madagascar, and animal healthcare in Sri Lanka.

By 2010, the Suguna group’s annual revenue had soared to ₹3,000 crore. However, this rapid growth also brought challenges. Consolidating processes through contract farming disrupted traditional middlemen, leading to attacks on their offices in Maharashtra, Punjab, and Andhra Pradesh. Despite these setbacks, the brothers persevered, reopening and rebuilding their offices each time.

Overcoming Health Crises

Beyond economic and political challenges, Suguna Foods faced numerous outbreaks of bird flu, a significant threat to the poultry industry. Through rigorous health and safety measures, they managed to tackle these crises, ensuring the stability and growth of their business.

Today, Suguna Foods stands as a testament to innovation and resilience in the Indian poultry sector. With close to 80 percent of poultry in India grown using the contract farming model, Suguna Foods provides a stable income to over 40,000 farmers, contributing significantly to the country’s agricultural economy.