Business: Manufacturing, exporting egg powder

Based: Erode, Tamil Nadu

Year of inception :1995

Clients: Food companies in Japan, Europe

Big break: Being accepted by Japanese customers at a time when indian agri -products were shunned due to the pesticide problem.

Revenues: About Rs 100 cr (2007-08)

Profitability indicator: Net profit of Rs 10 cr

Employees: 140 regular (plus 100 contracted)

Plans :Triple revenues by 2011-12, start selling branded eggs

Conventional wisdom need not always work. At a factory at Cholangapalayam village, 20 km from Erode, Tamil Nadu, SKM Egg Products has all its eggs in one basket, in a manner of speaking. The firm produces 1.1 million eggs daily at the Erode unit. It doesn’t stop there—the eggs are then broken. After removing the eggshells, SKM workers, using machines, ensure that the mixture is processed and undergoes treatment from a high-pressure spray before making its way out as egg powder, ready to be exported to 24 countries.

Customers, a proud CEO SKM Shree Shivkumar says, include Kraft, Heinz and an arm of Unilever. The multinationals use egg powder as an ingredient in their food products. Shivkumar’s father SKM Mailenandhan started SKM, the group that runs SKM Egg Products. Mailenandhan started his career as a general store merchant. In time, he became a poultry feed dealer, and then, a manufacturer too. His modus operandi was to not only sell feed to farmers, but also collect eggs from them for further trade. By 1993, when Shivkumar joined his father’s business, SKM was making money in the feed business, but losing it in egg trading. That was despite SKM being a major player, with daily volumes of 1.5 million eggs. "I got involved to set the business right," recalls Shivkumar. "Some improvements happened, nothing dramatic. The fact is, we were competing with small companies."

The shift

That was when a new window of opportunity opened up for SKM. The Tamil Nadu Industrial Development Corporation (Tidco) sought a co-promoter for a venture thatwould export eggs in processed form. SKM applied, and was chosen. SKM Egg Products was set up in 1995 in technical collaboration with Belgium’s Belovo. Tidco took an 11% stake (currently 7.6%). The plant at Cholangapalayam was set up in 1997, with a breaking capacity of 1 million eggs a day, capable of processing 3,500 tonnes of egg powder a year. This has since been upgraded to 4,600 tonnes.

The egg-powder exports segment is indeed a niche. Three players—SKM, Venkateshwara Hatcheries and Ovobel—constitute a market worth about Rs 230 crore. Venkateshwara has a capacity similar to SKM’s; it can process about a million eggs every day.

The ease with which SKM Egg moved into the processing space couldn’t, however, be sustained when the business was up and running. Trouble hit almost immediately. The problem was pesticide residue. It was an issue that shook the whole Indian agri-products industry, and SKM took time to beat the negative perception about the country’s products. After over three years, things started looking good.

Shivkumar attributes the turnaround to a seminar that SKM conducted for potential suppliers and distributors from across the globe ("there were guests from 27 countries") in December 1999. "Seeing is believing," says Shivkumar, "and all of them could see our processes for themselves." In 2001, when SKM Egg broke even, all the high-interest debt had been done away with.

The breakthrough had come from Japanese customers. It didn’t take long for others to sign on. About 40% of the company’s Rs 100 crore revenues (for the year ended March 2008) came from Japan, another 40% came from Europe and the rest from other countries. SKM hasn’t tried the US market despite it being a big egg-powder user. That’s because, Shivkumar points out, the cost of hosting full-time US inspectors at its factory, as also incurring the duties, is not something SKM is keen on now.

At the other end of the business process are suppliers. They form the most important part of the SKM business. That’s because one of the parameters that the company prides itself on is quality. And, in an egg powder business, quality hinges mostly on the input supplier. SKM has tie-ups with farmers across 16 farms who, together, supply 1.1 million eggs daily. To ensure product quality, SKM has its own supervisors and veterinary professionals at the venues.

SKM is now tweaking the model a bit by investing in its own farm. The target is to produce 600,000 eggs daily. Simultaneously, the company will set up a feed mill and also increase its egg-powder processing capacity to 6,000 tonnes a year. All this would entail an investment of Rs 58 crore (the outlay for this year). About 1.5 million eggs a day would be needed to make those 6,000 tonnes of egg powder a year. That leaves 200,000 eggs in its bag. And that’s the starting point for SKM Egg’s debut in the domestic market.

Branding eggs

The plan is to float branded eggs in India. Market research done, the idea will enter its test-marketing phase by October 2008. It might not be easy for SKM to taste immediate success in branded eggs, a nascent market where the likes of Suguna Poultry already have a presence. But SKM could take heart from the fact that egg

SKM Shree Shivkumar, CEO, SKM Egg Products

consumption is often propped up by strong economic growth, and a branded egg typically fetches at least a 50% premium over a normal one. Shivkumar says: "Five years back, the per capita consumption of eggs in the country was 38 per year. Now, it’s over 50." SKM could also have numerous variants in this business, including protein-enriched ones. Of course, a product targeted at the domestic market has another use: it won’t be hurt by currency fluctuations.

The plan, then, is to hard-sell branded eggs in India and consolidate the egg-powder business overseas. India, Shivkumar says, isn’t a market for egg powder. There would be an opportunity only when bakeries gain in size, or institutional users are mandated by law to use pasteurised eggs. Increasingly, SKM is looking to market value-added products, like mayonnaise mixes, overseas. This strategy is expected to up SKM’s net margin to 15% (from 10% currently). The company is targeting revenues of Rs 300 crore by 2011-12. One-third of that could be from branded eggs.

There could be better opportunities if the world market is opened up, says Shivkumar. For instance, egg-powder makers have for years been lobbying with the government to make Russia open up, but in vain, he says. The threats are from diseases like bird flu, which could hit its eggs business. But, Shivkumar believes SKM’s accent on quality could help tide over such crises. For the time being though, SKM is happy breaking eggs. And lots of them!

V.G. SIDDHARTHA,
49, COFFEE RETAILER
CHAIRMAN,AMALGAMATED BEAN COFFEE TRADING COMPANY
TURN OVER: IN 1993 Rs 10 crore
CURRENT TURNOVER: Rs 700 crore
SUCCESS MANTRA:Have the willpower to persist and simply refuse to give up.
OBJECT OF ADMIRATION:Infosys and its team’s success which achieved its target of $1 billion sales.
BIGGEST OBSTACLE:Spiralling real estate prices which have made it difficult to get retail locations.

EARLY LIFE:
The interesting twist to the Coffee Day story is that it almost didn’t happen. V.G. Siddhartha, the man behind the chain, comes from a family that has a 135-year history of growing coffee. Despite this, he was a reluctant entrant into this industry, Siddhartha started out in life as a research analyst at JM Financial, a financial services group, back in 1983 now J M Morgan Stanley -- in Bombay after completing his Master’s degree in Economics from Mangalore University .


At that time, all he dreamt of was earning Rs 2.5 lakh a year. While researching stocks, he discovered that Indian farmers used to get 35 cents for 1 kg of coffee, while their overseas counterparts were getting $1.27. Seeing an opportunity, even though coffee trading was a government monopoly in those days, Siddhartha started buying coffee plantations with the money he had earned in the stock market in the hope that one day the market would be liberalised. After a two-year stint with J M Financial Services, when Siddhartha returned to Bangalore, his father gave him a good amount of money to start any business of his choice. Siddhartha promptly bought a stock market card for Rs 30,000 with it, along with a company called Sivan, as well as a site in the city, in 1984 and turned it into a highly successful investment banking and stock broking company. Thus began Sivan Securities, which is now a major player in the South Indian capital market, which is now featured among the top 12 investment brokers in the country."I was a very smart trader," says Siddhartha with an endearing kind of self pride. "I made money almost every day on the stock market. And with whatever money I made, I kept buying coffee plantations in Chikmagalur. My family background was such that I had a mindset that the new economy might not be the greatest, and that solid, tangible, physical assets like land were the best to own." By 1985, he was a full-time proprietary investor in the stock market and owner of 10,000 acre of coffee farms.

POLITICAL CONNECTION:
A family connection that seems to embarrass Siddhartha a little bit now is that he is the son-in-law of S M Krishna, the Chief Minister of Karnataka. The media never fails to focus attention on this when writing about his business interests. Thus, Siddhartha often prefers to avoid contact with the media. He prefers so much to remain just a low-profile businessman, that he refuses to even pose for photographs. Vernacular media even wrote that Siddhartha made his money with the help of political favours. "I had already bought most of my coffee plantations before my marriage, which took place in 1989," says Siddhartha, debunking all speculation right away.

"Krishna became a minister only in 1992. What major favours could he have done for me to help me buy my plantations before that? Actually, it works the other way around. Businessmen all over the country fund both political parties and individual politicians. This happens in other countries too, but there its all legal, above board and organised, that's the only difference."

ABCTL:
When the coffee business was opened up due to liberalisation in 1993, and government restrictions compelling planters to hand over most of their produce to the Coffee Board were eliminated, Siddhartha was one of the earliest beneficiaries. He admits to having actually facilitated the process by lobbying actively for this removal of restrictions. He started his coffee trading company ABCTCL in 1993, with a Rs 60 million turnover. His company grew gradually. He bought a sick coffee curing unit in Hassan for Rs 40 million and turned it around.He says, “When coffee trading was liberalised in the ’90s, I doubled the money I had invested in the plantations within a year.” Thus, was born ABCTCL in 1993, a company focused on coffee exports. While his plantations produced 3,000 tonnes of coffee, ABCTCL would trade 20,000 tonnes. In two years, the company became the second largest exporter from India. ABCTL is now India's largest exporter of green coffee.

ABC is privately held, and as such does not disclose its financial results. Competitors estimate the company's revenues last year to be around Rs 600 crore ($140 million), of which half, they say, came from a café business that they believe turned profitable a few years ago. The rest of ABC's revenues come from its other business groups, all of which operate under the Coffee Day brand.

CAFE COFFEE DAY:
In 1996, the first CCD store opened on Bangalore’s crowded Brigade Road, where a coffee and an hour of Internet surfing cost Rs 100. When Siddhartha opened the first Café Coffee Day outlet in Bangalore, India's silicon capital, it was positioned more as an Internet café. This was the very early days of the Internet in India, and customers trooped in to Coffee Day to experience the Internet. Coffee was just an extra.In doing this, Siddhartha and his team went against the better judgement of his MBA friends. The café was a runaway success. By 2000, there were 14 Coffee Day stores across southern India. While Coffee Day was taking its time in expansion, other rival chains came along and took the concept national.GTV LTD:
He also founded Global Technology Ventures Ltd. in may 2000, a company that identifies, invests and mentors Indian companies engaged in cutting edge technologies, along with its promoting company Sivan Securities, already has stakes in 24 young companies, including high profile start-ups like Sabeer Bhatia's Arzoo!.com, Ashok Soota's MindTree Consulting, Ramana Gogula's Liqwid Krystal and B V Jagadeesh's NetMagic.

Siddhartha's company Sivan holds 80 per cent in GTV, while Bank of America Equity Partners (BAEP), which provides private equity capital to the Bank of America Corp, has the remaining 20 per cent. GTV has now set up a global technology village on a 59-acre technology incubator park in Bangalore, which will provide its companies office space, communication links, recreational facilities and even a commercial centre. GTV has been valued by BankAm at $100 million last year, and is expected to have doubled its valuation this year. It is poised to grow on the lines of Softbank of Japan.

OTHER BUISNESS GROUPS:
ABC's revenues come from its other business groups, all of which operate under the Coffee Day brand. These include
Coffee Day Exports
ABC has invested well into a Research and development on coffee quality that supports our domestic promotion of various blends of coffee and augments our export activities.

Coffee Day Xpress (fast food and beverage outlets that are much smaller than the cafés and are franchised)
Coffee Day Xpress is a unique concept of convenient cafe, an idea that feeds a world that's continuously in transit.

The Coffee Day Xpress kiosk is a sanctuary where the harried urbanite can pause for refreshment before getting on with life. Retail custom-made for the 21st century. Catering to a world that needs coffee on the go! At high-traffic locations. With hot and cold beverages and a variety of ready-to-eat snacks.

Coffee Day Take Away (coffee vending machines)

The Coffee Day Take Away initiative is a virtual revolution in dispensing coffee. For the first time, it makes freshness a part of the vending machine proposition. Only the freshest ingredients are used and strict control is maintained to ensure that every cup delivers the satisfaction of a freshly brewed cup of coffee. The vending machines also dispenses Tea Day tea.

Coffee Day Fresh 'n Ground (ground coffee retail outlets)
Fresh 'n Ground started in 1996. has a chain of over 400 exclusive outlets in the States of Karnataka, Tamil Nadu, Andhra Pradesh and Kerala. Presently Fresh 'n Ground has over 22 exquisite blends of coffee on offer across all Fresh 'n Ground outlets, and is one of the fastest growing filter coffee brands in India. these outlets have been converted into one stop shop for Tea and Coffee beverage, varieties of coffee and Tea powder, Speciality Coffee, accessories like coffee filters, mugs, etc.

Coffee Day FMCG (packaged filter coffee powder)
This FMCG aims to enter the mass in home consumption segment where filter coffee is consumed everyday.its sheer convenience & avalability in every possible retail outlet ensures reaching out to more and more consumers everyday.


In 2001, recalls Siddhartha, “We decided we could not be number two in our business so we began expanding.” In its new strategy, CCD would open its store right next to its rival, Barista. The cafe in Vienna is 300 m away from Starbucks. Its aggressive pricing and youthful ambience attracts youngsters by the droves. However, a modest Siddhartha attributes it to being in the right place at the right time. Says he, “If you had asked me in 1997, how many CCDs would a city like Bangalore take, I’d have said three but now we have 135 cafes.”
The advantage that Coffee Day has over its rivals in India and overseas is that the company can cut costs significantly compared to its rivals. In Europe for instance, while CCD’s rivals have to spend 12 euros (Rs 768) for 1 kg of coffee, Coffee Day sources it from its plantations for two euros (Rs 128). Siddhartha explains: “From farm to the cup, there are no middlemen.” Having captured a loyal base, the company is now looking at multiple formats.
NOW:
It has 775 Xpress outlets, 7,000 vending machines in diverse locations such as railway stations, hospitals, gas stations and office campuses, and 400 Fresh 'n Ground outlets. Operating across this spectrum has allowed Siddhartha to expand his brand presence rapidly.Currently he also holds Board Seats in Mindtree, Liqwid Krystal, Way2Wealth and Ittiam.

Amalgamated Bean Coffee Trading Company Ltd. today is the largest exporter of green coffee from India and perhaps one of the two fully integrated coffee companies of Asia, involved in all sectors of Coffee from plantations to retailing to exports. ‘Coffee Day Group’ today is the only fully integrated and largest coffee conglomerate in India and is attributed with creating the ‘coffee revolution’ in India - acknowledged by the Coffee Board of India Amalgamated Bean Coffee Trading Company Ltd. – (ABCTCL) is India’s largest coffee conglomerate and coffee exporter, pioneering India’s first concept café’s ‘Café Coffee Day’, a chain of youth hangout coffee parlors. From a handful of cafés in six cites in the first 5 years, ‘Café Coffee Day’ has today become India’s largest and premier retail chain of cafes with 700 cafes in 105 cities around the country.enthused by the success in india coffee day spread its wings to Austria(three in Vienna) and two in Pakistan(both in karachi)

FUTURE:
For the coffee connoisseur, soon there will be single estate coffees available at Coffee Day Squares, while the Coffee Day Lounges will focus on providing a relaxed atmosphere to its consumers at airports and highways. Siddhartha wants to see Coffee Day among the world’s top three coffee chains in the next 10 years. he plans to have 1000 cafes by 2010. He’s not unduly concerned about the downturn because he’s in the market to buy an international coffee chain. That’s called brewing success.

BANGARUSWAMI SOUNDARAJAN
44,POULTRY FARMER,
MD,SUGUNA  POULTRY.
TURNOVER: IN1997 Rs 7 crore.
CURRENT TURNOVER: Rs 3,000 crore.

SUCCESS MANTRA: Fairness, transparency and an ethical working style is the key to making it.
BIGGEST ACHIEVEMENT: Suguna is a leading integrator of poultry products in India today.
GROWTH PATH: Suguna has a presence in 12 states with a network of 15,000 farmers.

Year	Achievement
1986	Suguna Group Was Founded by M/s.B.Soundararajan and G.B.Sundararajan. The Company Began Trading Layer Eggs.
1991	Introduced New Concept of Franchise Farming in India
1992	First Hatchery Was Started
1993	First Breeder Operation
1995	Hatchery and Breeder Operations Expansion
1998	Extruder Plant to Produce Full Fat Soya
1998	Semi Automatic Meat Processing Unit with Cold Storage
1999	Fully Automatic, Micro Processor Controlled Feed Mill
2000	Inclusion of Grand Parents
2001	Expansion of Operations into other States
2004	Soya Unit Operation in Nagpur
2006	Foundation for Asia's Biggest Feed mill Laid at Hoskote, Karnataka
2006	Successful implementation of Oracle ERP
2007	Layer Launch

Suguna, two decade old Poultry integrators, Currently operating in 11 states with the business value of 20,180 millions INR. It touches base with more than 15,000 farmers. The success of Suguna Poultry lies on its strategic move of contract farming.
Suguna Poultry Farm Limited is the brain child of the two innovative entrepreneurs and visionaries in the field of Poultry Industry, managing director B.Soundarajan and joint  managing director G.B.soundarajan.
 Without any backup force the self propelled Dynamic Duo foresaw the possible growth in Poultry Industry in India. The Balls were rolled back decades ago in the form of Integration or otherwise known as Contract Farming.
The target community is from Rural India. Presently covered in 8000 villages of 11 Indian states embracing more than 15,000 farmers and the effort is relentless. No place in India is considered to be unfit for Poultry activity. Mostly by invitation from each state Government Suguna makes its expansion. The model has attracted the people from across the border also to visit Suguna facility and observe the activities, only to be adopted in their place.For B.Soundarajan , son of schoolteacher parents, it’s almost blasphemy to undermine the value of education and attribute his success to attitude. But then, Bangaruswami Soundarajan, the managing director of the Rs 3,000-crore Suguna Poultry Farm, has always taken the road less travelled. Born in a village near Udumalpet, 130 km from Coimbatore, Soundarajan decided to do business immediately after completing school.
In 1990, with an initial investment of Rs 5,000, he followed his dream by setting up a poultry farm. What started as a small-scale venture today has grown to become a leading integrator of poultry products in the country with an increasing global presence. For Soundarajan, his biggest achievement has been the acceptance and appreciation of his management skills by people outside his state. “On realising that poultry can give regular incomes to farmers, even in droughts, N. Chandrababu Naidu and Buddhadeb Bhattacharya invited me to invest in Andhra Pradesh and West Bengal respectively,” says Soundarajan.
The turning point came in 1997, when Soundarajan decided to introduce innovative contract farming for the first time in the country and within a year, the company managed to record a turnover of Rs 7 crore. Suguna invests by helping farmers in the daily management of the chicks. Its employees closely monitor the growth of the birds and provide farmers with feed and free medicines.
Today, his poultry business has a presence in 11 states and provides assistance to around 15,000 farmers nationwide. For Soundarajan, management has been the key to success. In 2000, he introduced professional management in the company to augment growth. Recently, Suguna implemented a Rs 9-crore Enterprise Resource Planning solution supported by Oracle. “This will help us in setting up a robust information system to support our current growth,” says Soundarajan. Indeed, for the 44-year-old managing director, the dream has hatched. The two brothers hailing from a village and born in a teachers family have reached the business zenith with the zeal to excel.