Ups and Downs Of Indian Brand Venky's
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Ups and Downs Of Indian Brand Venky’s

VENKYS INDIA
Saurav Bhagat
Written by Saurav Bhagat
[email protected] | Delhi | Published on: May-06-2019 01:59 PM

The VH group was established in 1971 when motivated by his wife Late Smt. Uttaradevi Rao, our founder Chairman Late Padmashree Dr. B.V.Rao, fondly referred to as “The Father of the Indian Poultry Industry”, established Venkateshwara Hatcheries Pvt. Ltd. in Pune (India). Today the group is popularly known the world over as “Venky’s”. With a unique combination of expertise and experience and supported by strategic collaborations, the company diversified its activities to include SPF eggs, chicken and eggs processing, broiler and layer breeding, genetic research and Poultry diseases diagnostic, Poultry vaccines and feed supplements, vaccine production, bio-security products, Poultry feed & equipments, nutritional health products, soya bean extract and many more. Today the group is the largest fully integrated poultry group in Asia. The VH group today plays proud parent to a number of reputed organizations under its wide umbrella and successfully caters to poultry and its allied sectors. The pioneering efforts of the VH Group have been well rewarded with several national and international awards.

source: Venky’s

The Venkateshwara Hatcheries group has one listed company Venky’s, which supplies chicken to groups like KFC, Pizza Hut, Domino’s, etc. It also has set up its small chain of quick-service restaurants called Venky’s XPRS in the South and West India. The company’s revenues in 2014/15, at Rs 1,730.81 crore, was stagnant compared to 2013/14, and profits dipped to Rs 18.7 crore from Rs 34 crore in a calendar year.

Image courtesy: theguardian.com

Initial setbacks:

Venkateshwara Hatcheries gathered fame – or infamy, depending on how you look at it – in November 2010, when it bought English Premier League football team Blackburn Rovers. One of only the five teams to have ever won the most prestigious Premier League, Blackburn was quickly relegated from the League after the deal following its poor performance. Manager after the manager was sacked, and Venky’s got a reputation of being poor managers with an abysmal understanding of football (and chicken).

People behind the success:

While that might or might not be off the mark, what is certain is that the Venkateshwara Hatcheries sure understands its core business – poultry and all else associated with it along. And much of the credit would go to the group’s Chairperson, Ms. Anuradha Desai.

ANURADHA DESAI

Image courtesy: businesstoday.in

Desai, who is a lawyer by education, took over the empire that was started by her father, late B.V. Rao, after his death in 1996. “There are some business leaders out there who keep doing their work without coming too much into the limelight,” says Sachin Tayal, MD at Protiviti Consulting. “Desai is truly one of them,” Tayal says the group has done both the backward and the forward integration, making it an integrated poultry company on the global level. “That is why it has achieved the success.” Over the years, she has added several other related activities – such as eggs, egg powder, poultry feed, animal feed, and vaccines to name a few.

In her address to shareholders in the company’s annual report, Desai said Venky’s completed capacity expansion of poultry and poultry products segment and set up a soya seeds processing plant during 2014/15. V.B. Pvt Ltd, Venky’s (India) Ltd, Venco Research & Breeding Farm Pvt Ltd, Uttara Foods & Feeds Pvt Ltd, Eastern Hatcheries Pvt Ltd, Bala Industries & Entertainment Pvt Ltd – revenues grew 15.8 percent to Rs 6,573.67 crore in 2013/14, according to data from Registrar of Companies. Total profit was Rs 202.87 crore.

The growing popularity of the fast foods chains bodes well for the business

Indian Poultry Equipment Manufacturers’ Association anticipates 7-8 percent increase in broiler production to 4.9 million tonnes during 2018. Demand for processed chicken meat is projected to outpace production with a growth rate in excess of 15 percent.

Image courtesy: thesportsdaily.com

“Influenced by religion and other factors, India has largely been dominated by vegetarians. However, this scenario is fast changing as the young population in India is abandoning its vegetarian diet due to changing lifestyles. With the consumption preferences increasingly tilting towards snacking and convenience, the growing acceptance of eating out and food delivery is further aiding demand for the sector.”

Big quick-service restaurants such as the Burger King India, Kentucky Fried Chicken, and McDonald’s have been riding this trend through aggressive store expansion across the globe. Burger King India, which had started its first store in India in 2014, is nearing its 150th store in the country and aims to nearly triple its store count to over 500 in the next 4-5 years. Similarly, Westlife Development, the franchisee of McDonald’s in western and southern regions, seeks to double the number of restaurants to 450-500 by 2022. Order flows for these restaurants have increased with the emergence of food delivery start-ups: Zomato and Swiggy. Venky’s being a primary supplier to the majority of these food chains stands to benefit from overall growth in the sector.

Business risks to monitor

Given the commoditized nature of Venky’s business, realizations are guided by the demand-supply dynamics of the poultry market. Any poultry-related disease outbreak (bird flu) could have a significant impact on volumes as well as prices. Besides, the margin is also dependent on key input costs — soybean and maize, the prices of which are dependent on agricultural and climatic conditions as well as international market.

Image courtesy: GOOGLE

The Food Safety and Standards Authority of India (FSSAI) has launched a hygienic and cleanliness drive to improve the health and safety measures of meat processing units. Also, there is an increased focus on using medically important antibiotics (for farm and meat animals) as distributors as well as consumers are laying emphasis on health and hygiene.

In a recent development, the government is also contemplating a ban on the usage of colistin: an antibiotic used to fatten chicken. The company needs to remain compliant with the changing industry requirements and environmental norms to ensure the smooth running of the business. Developments regarding the proposed ban on cage farming of poultry and meat animals also need to be monitored closely and effectively.

Consumption story available at reasonable valuations

Backed by favorable socio-economic factors, the domestic poultry industry is expected to grow at a steady pace over the medium to long term. Venky’s remains well positioned to capture the market demand as it enjoys market leadership in the sector and controls the majority of supply in its key operating markets.

Image courtesy: elephantdesign.com

Despite a disappointing performance in Q2 FY19, increase in volumes was heartening and indicates a positive trend for non-veg consumption. For FY19, the management expects to clock a volume growth of 10-12 percent and seems on track to achieve a top line of Rs 3,000 crore.

Venky’s has been selling colistin to farmers in India as a growth promoter in production. It comes in bags with pictures of happy-looking chickens on the packets. Instructions on the product say “improves weight gain” and 50 grams should be added to each ton of chicken feed. The Bureau bought 200g of Venky’s-branded colistin – Colts V – over the counter from a poultry feed and medicines shop in Bangalore without a prescription. In Europe, colistin is only available to farmers if prescribed by a vet for the treatment of their sick animals.

Venky’s is not breaking any laws in India by selling colistin and it said it will comply with any future regulatory changes. The company told the Bureau: “Our antibiotic products are for therapeutic use – although some of these in mild doses can be used as a preventive level, which in turn may act as growth promoters. We do not encourage indiscriminate use of antibiotics.”

Venky’s also reportedly exported colistin to Nepal and Yemen last year, customs data show. Other poultry companies are selling colistin products or importing it for use on the farms, according to the data. Venky’s also exported the product to Nepal and Yemen last year, customs data show.

Venky’s also tolD that on their own farms and those of their contractors “antibiotics are used only for therapeutic purpose”.

McDonald’s, KFC, Pizza Hut and Dominos said the chicken they sourced from Venky’s is not raised on growth-promoting antibiotics and their suppliers follow their policies controlling their use of antibiotics.

VENKYS

Image courtesy: happyimage.xyz

“When you are adding new products and expanding your core business and seeing the realization improving on different tactics and technologically also, the shareholders should be more and more confident about the quality and services. The future is looking bright but it totally depends on how they are going to expand,” says B Venkatesh Rao, MD, Uttara Foods & Feeds Private Limited (Venky’s India).

About the author

Saurav Bhagat

Saurav Bhagat

Saurav is inclined towards brands and brand story-telling from the past half a decade. His interest in startups has made him an immense member of the NBB Family from its very early days.
Saurav loves Chai and writes his day to day experiences on Quora too.
He believes in the power of storytelling for a Brand and also in general.
He often says- "Stories are powerful enough to build and erase empires and generations!"

09654178839 | A-73, Hackerspace, Noida sector- 2 Noida UP 201301

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