External Analysis of

Venkateshwara Hatcheries Private Limited

Submitted By : Arjun Pradeepan

Batch: MBA(B)

Roll No: B1711

 Venkateshwara Hatcheries Private Limited

The VH group was established in the year1971 by late Dr. B.V.Rao , in memory
of his wife Late Smt. Uttaradevi Rao. Mr Rao is popularly known as The Father
of the Indian Poultry Industry, for his contribution to the development of Indian
poultry industry. Today the group is well known throughout the world over as
Venkys .Company has been diversifying its business in to different sectors such
as feed supply, poultry vaccines etc. The principle success of the group is its
commitment towerds its goal of providing high quality poultry product to the
masses. Company has been a pioneer in the Indian poultry industry and is also
spreading its wings across the world. Indian government recognized our works by
giving several recognitions and awards. Our founder Dr B V Rao was given
padmasee for his contribution towards Indian poultry industry and its growth.
Questions that has to be answered while going for an external analysis of a
company.

Question 1: What are the Industrys Dominant Economic Traits?

Question 2: What Kinds of Competitive Forces Are Industry Members

Facing?

Question 3: What Factors Are Driving Industry Change and What

Impacts Will They Have?

Question 4: What Market Positions Do Rivals Occupy?

Question 5: What Strategic Moves Are Rivals Likely to Make Next?

Question 6: What Are the Key Factors for Competitive Success?

Question 1: What are the Industrys Dominant Economic Traits?

Size of the industry- There are around 15 million people working in the poultry
industry and is contributing around 30,000 crore annually to the Indian GDP and is
growing at around 15 to 20 % annually. Major players in the sector are Venkys,
Suguna. Pioneer and Godrej agrovet. With more people shifting from rural to urban
the demand for the products are increasing rapidly. Although product
differentiation is difficult companies are increasingly concentrating on bringing
superior quality meat products in the market so that they have a distinctive per
capital egg consumption in rural area is 8 eggs while in urban areas is 18 annually
while meat consumption is 0.30 in rural while in urban area it is 1.10 kg annually
the datas are far lesser in comparison to the global average. In US an per capital
consumption is around 245 eggs per year and meat of around 80 kg.

Indian Poultry Industry is about 5,000 years old; recently it began to show growth
from backyard to poultry industry. Almost 70 per cent of the total output of
poultry production is contributed by organized sector and remaining 30 per cent is
by unorganized sector. There are now about 1000 hatcheries operating in the
country. Indias poultry business represents a major success story, growing at
around 20 per cent annually and domestic poultry market is estimated to be about
Rs 49,000 crore, with 2012 production ha already reaching a record of 3.2 million
tons of broiler meat along with about 2.86 million tonnes of eggs. Layer
production of meat is estimated at to be 6 per cent per annum. Indian processed
poultry production is not mounting with the rate of the live-bird market due to low
cold chain capacity issues and meat supply constraints. Processed poultry market
is mainly concentrating in premium hotel, restaurant and institutional consumers.
Indian non vegetarian consumption continues to grow up and is expected to
double by 2020. While agro production was rising at the rate around 3 per cent per
annum over past two to three decades, whereas poultry production has been
increasing at the rate of around 8 per cent per annum, with an annual turnover of
US$ 7500 million. Livestock population of India is the highest in the world, it
contributes approximately 4 % to GDP and 27 % agricultural GDP. Poultry
Industry is providing tonutritional security to the poor and also offering
employment for millions of people in rural and urban areas. The future of Indian
poultry Industry appears to be very promising. A conservative estimates predict up
to a two- to three-fold increase in poultry production over next ten or fifteen
years.

Question 2: What Kinds of Competitive Forces Are Industry Members

Facing?
Poultry industry is one of the fastest growing area of the agricultural sector in India
today. Along with it, there are problems being faced by the poultry industry some
of them are:-

1. Regional changes in poultry products

Production is the country is not evenly distributed More than 60% of broiler
chicken are are produced in 5 states Andhra Pradesh, Maharashtra, Punjab,
Karnataka and West Bengal while more than 60% of all eggs are produced in 5
states Andhra Pradesh, Maharashtra, Punjab, Haryana and Tamil Nadu. This
creates logistic issues related to transport of produced meet products and hence the
quality is compromised. There exist unequal demand of poultry meat and egg
which has resulted in unequal growth of the poultry industry.

2. Lack of education and access to latest technology

Most of the poultry farms use open buildings, which means no control of climate
and which create high risks related to potential poor biosecurity.

3.Ricing raw material prices

The rate at which the prices of most raw materials are increasing is worrying
farmers and companies like venkys . Fluctuation in feeds such as soya bean and
maize force companies to charge more which is affecting demand.

4. No cold storage facilities are lacking ,

Industy is facing problems due to lack of cold storage facilities. As most of the
production takes place in down south it is very important to have these facilities to
keep the poultry un damaged.
5. Lack skilled human resources

High skilled poultry engineers are needed to maintain the quality of poultry
products.

6 Spread of poultry diseases

Diseases like bird flu creates big loss and panic among people leading to lesser
demand as well as large scale slaughter of affected birds leading to huge economic
losses. Adding to the problem , increase in temperature which affects their health
of the birds..

Question 3: What Factors Are Driving Industry Change and What

Impacts Will They Have?
The poultry sector in India has undergone a shift in structure and operation. A
significant feature about Indias poultry industry has been its transformation from
just backyard activity into a major commercial activity in just about four decades.
This transformation involved sizeable investments in breeding, hatching, rearing
and processing. Indian farmers have moved from rearing non-descript birds to
today rearing hybrids such as Hyaline, lt Shaver, ll and in Babcock, lt which
ensure faster growth, good live ability, excellent an high quality feed conversion
and high profits to the rearers and companies . The industry has grown largely
because of the initiative of private enterprise, minimal government intervention,
considerable indigenous poultry genetics capabilities, and considerable support
from the complementary to veterinary health, poultry feed, poultry equipment, and
processing sectors. India is one among the few countries in the world that has put
into place a sustained Specific Pathogen Free egg production project.

The output of eggs is increasing at the rate of 6-10 % and broiler at 8-10 % per
annum. The per capita consumption is 36 eggs only and poultry meat is 850 gm
against recommended consumption of 180 eggs and 10.8 poultry meat per person
per annum as by the Nutritional Advisory Committee. More than 100 million
people are employed in this industry. It accounts about 4 % of the total GNP and 10
% of the total GNP attributed for livestock products. Sector is growing rapidly at
the rate of 15 to 20 % and it is about Rs 70 billion-mega industry. It accounts a
turnover of more than Rs 95 billon at the retail sales alone But one of the very dark
part of this industry is that it is dependent on imported pure-line and grandparents.
The parents and commercial birds of these imported lines are multiplied with in
commercially run hatcheries. This is a threat for future growth.

Designer eggs: One among the ways to market a new product is

to change old product. The contents of the chicken egg will be
changed in such ways as to be more healthy and appealing to a
segment of consumers who are willing to pay more for those
changes in the egg. "Designer eggs" are those which the content
has been modified from a standard egg. There are various types
of Designer eggs which are of very popular in western countries
and certain cities in India like Banglore

Omega-3 eggs: The types of fat acids found in the yolk of eggs
are directly related to the types of fat fed to the chicken. Thus
adding products high in omega-3 fatty acids, such as flaxseed,
marine algae, fish and fish oil, to chicken can increase the omega-
3 fatty acid content in the egg yolk. Omega-3 fatty acids are very
important for optimal development of infant's brain and eyes.
These fats also have many important benefits which includes
helping reduce one's risk of arteriosclerosis and stroke. Omega-3
fatty acid enriched eggs usually taste and cook like other eggs,
but typically have a darker yolk color

Eggs with lower saturated fat and cholesterol: Some designer of the egg
manufacturers have focused on lowering the cholesterol and ratio of saturated and
unsaturated fat in their eggs. This is generally done by giving the chickens an all-
vegetarian diet with high canola oil. To market a product by being lower in
cholesterol or saturated fat, the productis to have 25 percent less of the nutrient in
question than the standard product. A large egg contains an approximately 200-210
milligrams of cholesterol.

Cage-free or free-roaming eggs: The majority of the commercial egg-laying

chickens around the world are housed in cages. Caging hens reduces spread of
disease by separating birds from their feces, reduces that amount of the dust and
ammonia present in the hen houses and reduces the amount of human labor
required to manage chickens and collect the eggs. However this system can be
viewed by most as being less humane to the chicken; therefore there is niche
market for eggs produced by chickens raised in a cage-free or freeroaming system.
Usualy birds raised in a cage-free or freeroaming system are kept within and are
maintained on the floor of the poultry house. Only if the label says free-range can
you expect that chickens were allowed to graze or roam outdoors. India can trap
this market since most of the poultry with in India are free roaming birds.

Organic eggs: To be label as an organically produced eggs, the eggs must be

produced from hens that have been fed from certified organic feed produced
without synthetic pesticides or herbicides, antibiotics or genetically-modified
crops. In addition to synthetic pesticides cannot be used to control parasites that
can affect the chicken. Typically organic eggs also are produced from those hens in
cage-free systems .This market can be tapped by Indian farmers. The cost incurred
will be for labor and cost of labeling in India labor is cheap and Labeling can be
done at a price of 6% of the total output by the company.

Computing the poultry ration on day to day basis: The feed cost constitutes about
85% of the total cost of production. Prices of feed have increased 30 % whereas
the price of produce has increased only by 3-4 %. So in order to lower the price
there is a unique method developed by Namakkal Hatcheries in Tamil Nadu .They
compute the poultry feed by calculating DCP and TDN using the most cheaply
available feed ingredients on day by day basis. So the cost of feed can be reduced
significantly. For example if the relative price of maize has increased compared to
yesterday they will replace maize with a comparatively cheaper feeds, but the final
protein (DCP) and total nutrients (TDN)will be of same.
Question 4: What Market Positions Do Rivals Occupy?

Leading competitors for VH Group

Suguna Poultry Farms

Pioneer Poultry Group

Godrej Agrovet

Sky Lark Group

Jafa Com Feeds

Venkidashwar hatcheries of popularly known as Venkys occupies nearly 50% of

the organized poultry business in India remaining is shared among the rest of the
competitors.
Question 5: What Strategic Moves Are Rivals Likely to Make Next?

Competitors are likely to bring internationally trending changes in Indian market

also such as,

Designer eggs:

One among the ways to market a new product is to change old

product. The contents of the chicken egg will be changed in such
ways as to be more healthy and appealing to a segment of
consumers who are willing to pay more for those changes in the
egg. "Designer eggs" are those which the content has been
modified from a standard egg. There are various types of
Designer eggs which are of very popular in western countries and
certain cities in India like Banglore

Omega-3 eggs:

The types of fat acids found in the yolk of eggs are directly related
to the types of fat fed to the chicken. Thus adding products high
in omega-3 fatty acids, such as flaxseed, marine algae, fish and
fish oil, to chicken can increase the omega-3 fatty acid content in
the egg yolk. Omega-3 fatty acids are very important for optimal
development of infant's brain and eyes. These fats also have
many important benefits which includes helping reduce one's risk
of arteriosclerosis and stroke. Omega-3 fatty acid enriched eggs
usually taste and cook like other eggs, but typically have a darker
yolk color
Eggs with lower saturated fat and cholesterol:

Some designer of the egg manufacturers have focused on lowering the cholesterol
and ratio of saturated and unsaturated fat in their eggs. This is generally done by
giving the chickens an all-vegetarian diet with high canola oil. To market a product
by being lower in cholesterol or saturated fat, the product is to have 25 percent less
of the nutrient in question than the standard product. A large egg contains an
approximately 200-210 milligrams of cholesterol.

Cage-free or free-roaming eggs:

The majority of the commercial egg-laying chickens around the world are housed
in cages. Caging hens reduces spread of disease by separating birds from their
feces, reduces that amount of the dust and ammonia present in the hen houses and
reduces the amount of human labor required to manage chickens and collect the
eggs. However this system can be viewed by most as being less humane to the
chicken; therefore there is niche market for eggs produced by chickens raised in a
cage-free or free roaming system. Usually birds raised in a cage-free or free
roaming system are kept within and are maintained on the floor of the poultry
house. Only if the label says free-range can you expect that chickens were allowed
to graze or roam outdoors. India can trap this market since most of the poultry with
in India are free roaming birds.

Organic eggs:
To be label as organically produced eggs, the eggs must be produced from hens
that have been fed from certified organic feed produced without synthetic
pesticides or herbicides, antibiotics or genetically-modified crops. In addition to
synthetic pesticides cannot be used to control parasites that can affect the chicken.
Typically organic eggs also are produced from those hens in cage-free systems
.This market can be tapped by Indian farmers. The cost incurred will be for labor
and cost of labeling in India labor is cheap and Labeling can be done at a price of
6% of the total output by the company.
Question 6: What are the Key Factors for Competitive Success?

Venkys has diversified its business significantly that you can see them in every part
of the supply chain such. There activities are.

AHP (Animal Health Care Products)

Bio Security Products

Biotech

Aqua

Human Health Care Products

Pet Food & Health Care

Egg Powder

FMCG

VH Breed

Vaccines

Equipment

The above transformation has helped the company to sell there products at a higher
margin compared to the competitors and still sell the products at cheaper price.
Lately company has been increasingly focusing on contract farming where all the
technology and feed supply everything will be supplied by the company. Only
farmer has to do is make the initial investment. This strategy has helped company
in spreading there business to a larger extent at a faster rate and thereby avoiding
huge initial investments in establishing hatcheries.
 SWAT Analysis of Indian Poultry industry.

STRENGTHS

1. Fresh and chilled chicken availability in whole, cutups, de-boned, formed or in

processed, further processed, ready to cook ready to eat form. Product sales also
will expand but it is unlikely that frozen segment will see expansion. Contribute
to the promotion of consumption. This will widen the end product markets as
well it take new concepts to existing consumption centers and lower consumer
price.

2. Increasing use of enzymes formulations, pro-biotic, higher off take and lower
margins in vitamin formulations for feed use are very likely.

3. Costs will mean that user prices will not be lower, perhaps marginally higher.

4. We will be seeing surprisingly more successes than failures in end product

distribution.

5. Rationalized pricing of the breeder and commercial stock

6. From now and through years up to 2020, India will be seeing major changes in
the way chicken is sold. Live chicken sales at retail level will continue to grow,
but the entry of bigger players in this industry will give it a big lift. Cleaner
outlets, with emphasis on sanitation and hygiene, reduced contamination, more
use of small feathering plucking machines, accurate weighing machines will
help to cut out the image of chicken shops as dangerously dirty places to buy
food. As more outlets of this type open, the existing retailers will see sense and
improve conditions of their own outlets.
7. Improved FCRs due to quality controls upgraded and more efficient feed
production by feed commoners. New feed milling technologies and modern
equipment, bigger capacity mills (500 tones/day) and many more small feed
mills (200 tones/day) will become industry norms

8. Manufacturers in a single area may initially have to operate at below capacity,

but then in a short term there will be able to gain business strengths and become
viable. In the 5 years from 2016, the feed manufacturing units will handle
bigger than current volumes

9. Purchase terms on feed raw materials will ease and supply of better quality
materials will be easier.

10.Better breeding stock and performance, improvements triggered by

competition.

11.Broilers will reach newer and better consumption centers, either through food
stores in chilled form or through superior, cleaner and hygienically-maintained
live bird outlets. Such developments will enable reduce pressure on existing
markets in the metros and improve trade relations.

12.Important for the layer segment also would be emergence of competition in the
breeder and commercial layer markets.

13.Stabilization and reemergence of the fledgling egg processing and production

industry and resumption of egg product exports.

14.Feed units will open in areas where there are no population, in existing poultry
production regions and in upcoming ones. This will mean total feed output
souble in the near future this will reduce the price.
15.Pelleted feed will increase its marketshare.

16.Restricted credit and better screening of the feed distributors customers' credit
worthiness will improve collection for feed sold and recovery of outstanding.

17.The feed additives and poultry health products business will register a steady
growth. Lower tariffs will benefit importers but higher marketing increasing use
of enzymes and probiotics, higher off take and lower margins in vitamin
formulations for feed use are very likely for manufacturers and replacers.

18.Marketing of branded eggs in consumer packs would bring value addition and
also promote consumption.

19.Fewer players in the pharmacyvet products and feed additives business will
come with "me-too" products.

20.More utilization of eggs and chicken by the catering establishments and by

those manufacturing convenience foods.

21.Industry's ability to operate on even lower margins, bigger volumes, will also
narrowing the farmer-to-consumer price gap.

22.Widening reach of wholesale egg trade and distribution network of retail sales.

23.Positive role of integrators and corporate in promoting live and fresh chilled
chicken sales at the retail and institutional levels will give more strength to the
industry.

WEAKNESSES
1. Lower feeding stuffs the prices and improved availability consequent to higher
domestic production, falling exports and imports of raw materials

2. Lower bad debts and write-offs will offset higher energy and labor costs which
will affect the day to day operation.

3. Positive and negative impact of fewer but bigger operators at breeder and
commercial levels

OPPORTUNITIES OF GROWTH

The first opportunity that was created in 2014 when devaluation of the rupee and
subsequently full conversion of rupee was done, which put India on a relatively
competitive front.

1. 70% of Indian population is non-vegetarian as per a survey by Anthropology

Survey of India. Moreover poultry business has no religious sentiments.

2. Government policies are relating to investments in poultry and ancillary

industries, taxation, import duties, excise levies are positive

3. Increase in income generation purchasing power in the rural poor and

marginal farmers. Thus increase of demand in the domestic market and also
due to conversion from vegetarianism.

4. Consumer awareness, perception and acceptability of the eggs and chicken

as healthy food is increasing

5. As per experts the value added poultry products will have high the demand
and also increase consumer acceptance in coming days.
6. The National Egg Coordination Committee has plans to raise the per capita
consumption of eggs in India to210 by 2020.

7. The country has developed a strong research and development network to

provide necessary support. The Indian Council of Agricultural Research is
the nodal organization for the agricultural research in the country is playing
vital role. It undertakes research in its own institutes Central Avian Research
Institute, Izatnagar and Project Directorate on Poultry Hyderabad and also in
state agricultural universities through All India Coordinated Research
Projects and Cess Fund Projects.

8. Many countries, which are non-traditional poultry growers and, are giving
incentives to their poultry industry thus the global demand is increasing.

9. Concept of organic chicken as in India chicken is traditionally raised in the

backyards and is called free range birds.

10.We export about 24 million tons of soybean cake to Europe. So instead of

exporting cake we can export eggs to there market and earn valuable foreign
income..

11.Indian eggs are the cheapest in the world market 50cents a Kg.

12.India is blessed with natural sunshine, cultivable land and sufficient rains.
Even by providing water to the land we can source feed for the whole
world..

13.A study on Indian Food Industry done by the Confederation of Indian

Industry and McKinsey predicted that Indian poultry sector has growth
potential of 20% per annum.
14.The potential is so big that if the per capita consumption is increased by one
egg or about 50 gm of poultry meat can create employment for about 25000
people.

15.The poultry business gives quick turnover and the growth cycle is very fast
only 45 days. It generates fast cash. So more farmers can take interest in the
business.

16.The cost of production of poultry and related items in India is less than the
international prices. Thus it can get the chance of establishing itself in the
world market.

17.The productivity is also as per USA (305 eggs per bird per year). In
Namakkal region of Tamil Nadu it is 300per bird per year hence there is no
issue in the quality of production process..

18.The pesticide and antibiotic residues in poultry products are 0.15 ppm while
the Global acceptance is only 0.3 ppm.

19.Although different global players are trying to import their possition in India
they are not able to because, Indians prefer fresh poultry products than
imported frozen and chilled products. So imported products will find few
takers.

20.Eggs and chicken meat are the cheapest of all sources of animal protein as
compared to any other source.

21.General economic conditions are improving and available disposable

incomes are on the rise.
 22.Demand generated in the 12 to 24 age group has significently increased.

23.Competition following the lifting of import trade controls and import duties
under WTO obligations, arrival of bigger quantities of imported chicken and
table eggs in the Indian market.

THREATS

1. Poor infrastructure for export is standing on the way of export of poultry

products.

2. Competition from the international players on opening up duty-free imports,

lifting of trade barriers.

3. Lack of FDI in India in poultry sector and very less number of state of art
processing plants and post harvest technology not available.

4. Increasing propaganda and demonstrations by right wing organizations on

promoting vegetarianism and Animal rights.

5. Presence of Salmonella and Cholesterol in poultry meat.

6. Many countries are dumping their poultry products in to other countries just
to clear the excess stock.

7. Many western countries are protecting their domestic poultry industry from
foreign competition by protective measures like restricting imports, keeping
egg prices at very low level etc.
8. Unavailability of quality breed, lack of integration, no link between
consumer demand need and leakage value are some limiting to factors of
poultry industry today.

9. Stiff competition from Sri Lanka, Pakistan, Brazil and France china to
capture the world market.
 PEST Analysis

Political Factors

India has large number of people who are vegetarians and company is not able to
meet there requirements through its current product line.

Government introducing junk food tax is a big blow to the poultry business as
more and more people will shift their preference from fried chicken and non- veg
items to healthy alternatives.

Economic Factors

Economic Growth/Drop

Economic rate is very important in doing business. As per the latest GDP rate india
stands at number one in terms GDP growth in the world. In the last quarter growth
toped to 7.3%.Which is the highest among large economies. If there is positive
growth in economic, that means businesses are doing great in the market.
Venkys may enjoy a short period of high profit due to increasing economic
growth but they also have to prepare in case economic rate of India falls.

Demonetization
Demonetization undertaken by the government has created an uncertainty for the
company in short run but in long run as it is good for the economy it can also
benefit the firm in long run.

Social

Because of rapid urbanization and change in food habits there have been increase
in the number of non veg customers across the country. Big metros like Delhi,
Mumbai, Bangalore, Chennai etc are witnessing huge demand for poultry products
and this has created lot of room for growth. As Venkys has larger market share and
a greater supply chain it always has the potential to become a big player not only in
India but also in the world.

Technological

VH Group is always number on in adopting with the latest technologys and

changes happening in the market. They where the front runner in implementing
mechanized farms across south india so that better and high quality poultry items
are ensured to its customers. Extensive research in pharmaceutical products for
poultry has helped company in having competitive advantage.
 SWOT ANALYSIS OF VH GROUP

STRENGTH

Strong financial and technological skills developed over a period of time .
Control over quality and reliability of the chicken supply, with the help of
the state of art machineries and control mechanisms..
Large scale manufacturing of feeds for paulterys.
Exclusive contracts with multinational QSRs such as MacDonalds, KFC,
Burger King etc.

WEAKNESS

Challenges faced by the QSR are affecting business..

Centralized decision making authority and it is affecting its global expansion
plans.

Limited product line is creating problem for the country as the company is
heavily dependent on its business from chicken meat processing.

OPPORTUNITY

Aggressive marketing has to be done in order to capture the attention of
 target market which is the middle class and lower middle class.

Diversify to a greater worldwide market there by more profit and more
market share.

Introducing own brands in the market will help the company to attain higher
margin on the product sold.

THREAT

Threat from Western large-scale players who are eager to enter Indian
market because of the huge opportunity exist and saturation of their
domestic markets.
Customers shifting from fast food to more healthy and low calorie foods.
Overcapacity of chicken has reduced the price and is affecting profit of the
company.