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TREND AND CHALLENGES IN
INDIAN POULTRY INDUSTRY
19th June, 2015
1 I Godrej Agrovet
ANIMAL AGRICULTURE AT A GLANCE
ANIMAL AGRICULTURE HOLDS TREMENDOUS PROMISE
FOR THE FUTURE…
Thousands
Agriculture vs Animal Agriculture Value Output (INR ‘000 Crores)
CAGR: 4.8%
1,200
1,143
CAGR: 4.0%
1,000
871
800
639
600
363
400
262
180
200
If Animal
Agriculture
continues to grow
at historical rates,
its size in 2020
would be ~363,000
crores (USD 60
bn)
2004-05
Agriculture: Value Output
Animal Agriculture
Value Output as a %
of Agriculture Value
Output
28%
2012-13
2019-20
Animal Agriculture: Value Output
30%
32%
Historically, Animal Agriculture has grown at a faster rate than Overall
Agriculture. This trend is expected to continue resulting in faster
growth of Animal Agriculture
Source: National Account Statistics
Figures at 2004-05 constant prices
USD/INR assumed at 61
3 I Godrej Agrovet
AND …LIVESTOCK WILL ACCOUNT FOR 50% OF THE
TOTAL AGRICULTURE OUTPUT BY 2030
GVO at constant prices in Rs. ‘ 000 crore
FY 2007
FY 2011
29%
28%
50%
Crops
4 I Godrej Agrovet
50%
71%
72%
Source: Ministry of Agriculture, CSO, GAVL analysis
Figures at 2004-05 constant prices
FY 2030
Livestock
ANIMAL AGRICULTURE COULD BE A GAME CHANGER
FOR INDIAN FARMERS
Profit per Ha per year through Agricultural Crops
Particulars (per Ha)
Total Profit / Ha / Year (INR)
Rice
Wheat
Sugarcane
60 to 70 K
70 – 80 K
1.0 – 1.2 Lakh
Profit per year through Animal Farming
Profit per Ha / Year
In INR
Requirement for a profit of 1 Lakh / Year
Cattle Farming (10)
1.5 – 2.0 Lakh
6 cows
Broiler Farming (10,000)
2.5 – 3.0 Lakh
3,650 broilers
Layer Farming (10,000)
3.0 – 3.5 Lakh
3,100 layers
Shrimps Farming (acre)
5.0 – 6.0 Lakh
0.2 acres of land
Indian farmer can make significantly more money in animal agriculture compared to
agriculture. Moreover, even non-agricultural land can be used for animal farming
making full utilization of land resources
Note: In animal farming, there are other source of income like cow dung, broiler/layer litter etc.
Income of farmers varies depending upon milk, broiler, egg and shrimp prices in the market
5 I Godrej Agrovet
MID DAY MEAL SCHEME OFFERS A WIN-WIN SITUATION
FOR CHILDREN AND POULTRY INDUSTRY
 Over 11 crore children are enrolled for the mid-day meal programme
across India
Facts
 13 states have so far agreed to incorporate egg as a part of mid-day
meal
 5.4 crore (<50%) children are given atleast one egg a week as a
part of the meal
1 Egg
/Week
2 Eggs
/Week
3 Eggs
/Week
4 Eggs
/Week
5 Eggs
/Week
Additional Number of Eggs
required/annum (Bn)
2.3
4.6
7.0
9.3
11.6
Additional Number of Eggs
as a % of Current Layer
Industry Size
3.1%
6.1%
9.3%
12.4%
15.5%
0.3
0.6
1.0
1.3
1.6
Particulars
What would it
mean for
Poultry
Industry?
Additional Layer Feed
required (Mn MT)
Increasing Egg consumption in mid-day meal scheme across India can
expand the layer egg industry size by about 10-15%
Source: MHRD and GAVL Analysis
6 I Godrej Agrovet
CHICKEN CONSUMPTION HAS BEEN GROWING DUE TO
CHANGING CONSUMER PREFERENCES
Gross Consumption (Mn MT)
4.5
CAGR:
4.0
6.4%
3.5
3.0
4.0
3.2
2.7
4.2
3.7
3.4
Per Capita Annual Chicken
Consumption (Kg)
3.4
2.9
2.5
3.5
3.0
3.0
2.5
2.7
2.3
2.7
3.2
3.3
2.7
2.4
2.0
2.0
1.5
1.5
1.0
1.0
2007 2008 2009 2010 2011 2012 2013 2014
2007 2008 2009 2010 2011 2012 2013 2014
On a pan-India basis, Chicken is the most preferred non-vegetarian diet due to
its availability and taste. QSR and Food Service businesses are expected to
drive growth in Consumption of Chicken in the future
Source: OECD and FAO; GAVL Analysis
Note: Chicken consumption includes meat from Broiler, Layer and Breeder birds
7 I Godrej Agrovet
GROWTH IN POULTRY INDUSTRY WILL BE DRIVEN BY
INCREASE IN PERCAPITA CONSUMPTION
Layer Egg Industry
Poultry Meat Industry
75 Billion Eggs in
2014
4.2 Mn MT in 2014
Layer: Percapita Annual
Consumption of Eggs
CAGR: 5.5%
76
Broiler: Percapita Annual
Consumption (Kg)
CAGR: 8.0%
4.5
55
2.9
2013-14
2019-20
2013-14
Source: MEPDA,, News Articles, GAVL Analysis
Note: For Broiler and Layer, grown in India’s population will also drive the growth in aggregate consumption
8 I Godrej Agrovet
2019-20
FUTURE OF POULTRY INDUSTRY LOOKS SECURE AS
GROWTH WILL BE DRIVEN BY RISE IN PERCAPITA INCOMES
51
Per Capita Poultry
Meat Consumption
one of the Lowest
47.0
44.0
41
KG/Annum
31
21
13.5
11
13.0
10.0
7.5
3.0
1
Brazil
USA
Japan Thailand China Vietnam India
Significantly
high
consumption in
developed
countries
Per Capita Poultry
Meat Consumption vs.
Per Capita GDP
Low per capita in India
is holding back poultry
meat consumption
9 I Godrej Agrovet
Source: Rabo Bank; figures as of 2012
KEY CHALLENGES
1 VOLATILITY IN BROILER PRICES IS HERE TO STAY
Live Prices (INR) for West Region
90
80
70
60
50
57
57
40
30
20
10
0
Live Price
Live Prices have been highly volatile and remained almost flat on yearly basis
Volatility in prices results in Yo-Yo profits for integrators
Source: poultrybazaar.net
11 I Godrej Agrovet
INCREASING FEED COSTS PUTTING PRESSURE ON
FARMERS
2
Trend in Raw Material Prices (INR) for West Region
50
45
40
35
30
25
20
15
10
5
0
38
17
14
11
Maize Price/MT
Trend
Source: agriwatch.com, poultrybazaar.net
12 I Godrej Agrovet
20%
Soya Price / MT
124%
3
POOR DISEASE MANAGEMENT IN FARMS ADDS TO
THE VOLATILITY
No. of birds culled in major bird flu
outbreaks[Lakhs]
Death rate of Avian influenza [bird flu]
72.46
61.62
100%
100%
73%
10.44
2006
2008
2015
2011
2012
2013
YEAR 2014 HAS ACCOUNTED FOR MORE LOSS THAN EVER
•
Farmers: Revenue loss resulting in lower
profits
•
Feed Players: Decrease in cash with farmer
resulting in decline in sales
86.94
•
Food Processing: Lower utilization of plants
during culling
57.0
•
End Consumers: Wide swings in prices during
outbreak of diseases
LOSS [NO.OF
BIRDS IN
LAKHS]
LOSS OF
OUTPUT VALUE
[Rs crores]
BIRD FLU
72.46
HEAT WAVE
50.0
INCIDENT
13 I Godrej Agrovet
Source: Economic times, animal husbandry statistics 2014, GOI
4
OUR ABILITY TO LOBBY AS A GROUP LIMITED
Chicken Legs Avg Price comparison
(Rs/kg)
170
•
WTO has ruled in favour of USA forcing India to
allow imports of chicken legs from USA
•
Currently, fresh chicken in retail was selling for
Rs 180 a kg and chicken legs for Rs 240 a kg.
•
On the other hand, chicken drumsticks from US
come in at around Rs 50-60 a kg.
Chicken leg price (Rs/kg)
45
0
50
India
100
150
200
USA
OTHER COUNTRIES THAT RESTRICT USA CHICKEN
IMPORTS
India has challenged
the verdict, Are we
doing enough as a
group
14 I Godrej Agrovet
COUNTRY
REASON FOR BAN
China
Avian Flu
European Union
Chlorine treatment of
chicken
South Africa
Chicken fed with GM feed
Source: Economic times, various news articles
5
WE ARE NOT THE PREFERRED EMPLOYERS FOR
THE TALENT OF THE COUNTRY
Hardly any Organization features in the “ Best Employer” Surveys
Best Companies
to Work For,
India 2013
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No poultry business
companies
Critical to manage talent in the business
Attracting Talent
15 I Godrej Agrovet
Retaining Talent
Nurturing Talent
FUTURE TRENDS
INCREASE IN INTEGRATION AUGURS WELL FOR THE
FUTURE OF POULTRY INDUSTRY ONLY IF BACKED BY
VALUE ADDITION
FY 2011
FY 2013
FY 2015
25%
40%
32%
Integration
60%
Open
Market
68%
75%
Source: Extent of integration in Poultry Industry; GAVL Analysis
17 I Godrej Agrovet
PICK UP IN GROWTH OF QSR AND FOOD SERVICES
INDUSTRIES WOULD IMPROVE PROCESSING LEVELS
Processing Levels of Key Categories (2014)
40%
35.0%
30%
21.0%
20%
8.0%
10%
7.8%
2.2%
0%
Dairy
Meat
Marine
Chicken
Fruits & Vegetables
Ballooning effect of Improving Economy on Poultry Processing Industry
Growth
in GDP
18 I Godrej Agrovet
Impact on
QSR and
Food
Services
Industry
Impact on
Poultry
Processing
Industry
PROCESSING INDUSTRY HAS SHOWN IMPRESSIVE
GROWTH AND WILL CONTINUE TO DO SO
India is Expected to Show Strong Recovery in the Economy
USD Tn
2.5
6.6%
2.0
4.7%
5.0%
5.6%
6.4%
7.3%
6.8%
6%
1.5
1.0
0.5
1.2
1.3
1.5
1.7
8%
2.0
2.3
2.2
4%
2%
0.0
0%
FY11
100%
FY12
FY13
FY14
FY15P
FY16E
FY17E
Chicken: Processed market is growing at a very high rate and has
increased its share in the overall market
5.7%
6.6%
7.8%
CAGR
90%
80%
94.3%
93.4%
92.3%
70%
2011-12
2012-13
Processed Market
24.0%
Wet Market
5.2%
2013-14
Processing Industry grew at > 4x the GDP growth rate during the last 3 years. With
improving macro economy, outperformance of processing industry will continue
Source: IMF and HSBC
19 I Godrej Agrovet GDP figures are calculated with the base year as 2004-05
THOUGH RAW MATERIAL REQUIREMENT FOR FEED
PRODUCTION IS EXPECTED TO SIGNIFICANTLY GO UP…
Requirement by 2020
1.0 Mn MT
Maize
Cattle Feed
DORB
3.9 Mn MT
(9.8 Mn MT)
16.9 Mn MT
Poultry Feed
(33.8 Mn MT)
6.8 Mn MT
Maize
Soymeal
1.0 Mn MT
Fish Feed
(2.1 Mn MT)
Source: GAVL Analysis (2014)
20 I Godrej Agrovet
DORB
INDIA WILL BE ABLE TO MEET ALL RAW MATERIAL
REQUIREMENT BY LOCAL SOURCING ITSELF
Feed Raw
Material
Actual Raw
Material
Requirement of
Actual Raw
Material for 2014
Production for 2013
Requirement of
Actual Raw
Material by 2020
Production for 2019
(CAGR of 3%)
Maize
Maize
10.8 Mn MT
23 Mn MT
17.9 Mn MT
27.5 Mn MT
Soymeal
(73.8% of
Soya
Bean)
Soya Bean
(1.36x of
Soymeal)
5.6 Mn MT
12.5 Mn MT
9.2 Mn MT
14.9 Mn MT
DORB
(5.3% of
Paddy)
Paddy (19x
of DORB)
47.6 Mn MT
155 Mn MT
94.2 Mn MT
185.1 Mn MT
All the raw material requirements for Animal Feed can be satisfactorily met
by 2020
Source: Directorate of Economics and Statistics, Department of Agriculture and Cooperation, Ministry of Agriculture GAVL Analysis
Note: Soya Bean to Soymeal Conversion Formula: 10% goes towards seed & human consumption and from the rest 18% oil is extracted
21 I Godrej Agrovet
GST WILL BOOST THE FOOD PROCESSING INDUSTRY –
INCLUDING PROCESSED POULTRY
Complex tax structure currently across states in Processed Poultry
TAX
RATE
NON-VEG
COLD
CUTS
NON-VEG
BREADED
FRESH
FROZEN
RGC
FROZEN
RGC
FRESH
SEALED
RGC FRESH
UNSEALED
Max
17.5%
17.5%
17.5%
17.5%
14.5%
14.5%
(U.P.)
(U.P.)
(U.P.)
(U.P.)
(Kerala)
(Kerala)
Min
5%
5%
5%
5%
5%
Nil
(15 states)
(15 states)
(16 states)
(10 states)
(3 states)
(4 states)
…
Post GST if the rates follow the developed country model , it will give a significant
boost the Processed poultry business
COUNTRY
OVERALL GST RATE
PROCESSED FOOD GST
RATE
Australia
10%
0%
Canada
5%
0%
Singapore
7%
3%
Japan
8%
3%
United Kingdom
20%
0%
22 I Godrej Agrovet
Source: GAVL analysis, PHD chamber of Commerce & industry, news articles
IN SUMMARY – FUTURE FOR THE VALUE CHAIN
HATCHERIES
FEED
PHARMA
INTEGRATORS
FOOD
PROCESSING
??
+ VE
+ VE
Neutral
+ VE
- VE
+ VE
Neutral
•
Integrators who will leverage the valued addition in the product will be the major
beneficiaries of the growth in poultry industry.
•
Value Addition and Branding by the Food Processing industry will help counter
cyclicality and minimize the inherent risk of the poultry industry
23 I Godrej Agrovet
THANK YOU FOR YOUR TIME AND CONSIDERATION
24 I Godrej Agrovet