July 23, 2007

Eggsploiting the bottom-of-the-pyramid opportunity

The Outlook Business dated 20th July '07 features(not available online)Vinod Kapur, the Chairman of the KeggFarms group. The company has bred a poultry variety, the Kuroiler, that is at par with modern industrial hens in terms of growth and egg laying, but as hardy as the desi chicken and survives on scavenging. It is remarkable to note how it helped tap in on the bottom of the pyramid opportunity, besides providing rural households an income generation opportunity.

More than the fawning and backslapping, it was the sudden turn in perceptions that surprised Kapur. His bankers, who derided him, now bend over backwards to lend. The quaint company that talked about empowering rural women is now a star bank account and some even want to feature him in their annual reports.

KeggFarms' base of the economic pyramid (BOP) business model, that helps pull households out of the spiral of poverty, by supplementing their income from village poultry, took years of tweaking. It has now come into its own. The company started making money just about three years ago.

The BOP market is estimated at four billion people, with purchasing power of $5 trillion. The largets chunk is in Asia: 2.86 billion people.

...Kuroiler was finally commercialised in 1999. KeggFarms' coloured bird has the attributes of a desi chicken - it is hardy and survives on scavenging. But it grows and lays eggs on par with the modern industrial hen (around 180 to 200 eggs in a cycle against 40 eggs by a desi bird.) The breed also attains a market-ready weight, of around 1.5 Kg, in 90 days.

Kapur knew, as reforms progressed, he would have to face intense competition from giants in poultry, within and without. ......
.... However, it also struck him that industrial poultry had done little for the rural Indian Hinterland - an absolutely sterile, but a large potential market. It wouldn't be of much interest to the big poultry players. .... "It was sheer survival instincts at play. I was forced to look at alternatives." he confides.

The transition from industrial to rural poultry was, therefore, ordained. The figures were also in his favour. .... The challenge now was to develop a unique bird that would fit the harsh rural environs and also foster a robust supply chain to deliver chicks to the very last person - the village household, strewn across remote areas.

....A below the poverty line family can earn around Rs. 300 to Rs. 500 a month from the sale of two or three birds (chicks bought for Rs. 21) of over two kgs each, which is a good income in resouce poor rural settings.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the Private Equity and Venture Capital ecosystem in India. View sample issues of Venture Intelligence India newsletters and reports.