1 I Godrej Agrovet

INDIAN POULTRY INDUSTRY - POTENTIAL, CHALLENGES & WAY FORWARDNovember, 2015

POTENTIAL

3 I Godrej Agrovet

INDIAN POULTRY INDUSTRY IS WORTH ABOUT INR 1,00,000 CRORE

Source: News articles and GAVL analysis

Urban; 80%Rural; 20%

Poultry Demand (2014)

Poultry Industry contributes 0.9% to India’s GDP

Layer Egg Industry

75 Billion Eggs in 2014

Poultry Meat Industry

4.2 Mn MT in 2014

INR 1 Lakh Crore

Growing at 8-10%

Primarily driven by

Urban India

4 I Godrej Agrovet

FUTURE GROWTH IN POULTRY MEAT WOULD BE ROBUST COMPARED TO HISTORICAL GROWTH RATES

2007 2011 2014 2015-19 20201.02.03.04.05.06.07.08.0

2.73.4

4.2

6.9

Poultry Meat Gross Consumption (Mn MT)

CAGR:6.4%

2007 2011 2014 2015-19 20201.01.52.02.53.03.54.04.55.05.5

2.32.7

3.3

5.0

Per Capita Annual Chicken Consumption (Kg)

CAGR:8.5%

CAGR:7.2%

Source: GAVL analysis

5 I Godrej Agrovet

…LAYER EGGS WOULD ALSO EXHIBIT BETTERGROWTH IN THE FUTURE

2009 2014 2015-19 20200

20406080

100120

60.375.0

111.6Layer Egg Production (Bn Eggs)

CAGR:4.5%

2009 2014 2015-19 20200

1020304050607080

5055

76

Per Capita Annual Egg Consumption (No. of Eggs)

CAGR:6.9%

CAGR:5.5%

Source: GAVL analysis

6 I Godrej Agrovet

KEY DEMOGRAPHICS LIKE POPULATION GROWTH ANDURBANIZATION WILL DRIVE DEMAND FOR FINER FOODS

6

FY10 FY11 FY12 FY13 FY14116118120122124126128

0.0%1800.0%3600.0%5400.0%7200.0%9000.0%10800.0%12600.0%

120.6122.1

123.7125.2

126.7India’s Population (Cr)

Population

FY10 FY11 FY12 FY13 FY1425%26%27%28%29%30%31%32%33%

30.5% 31.0% 31.5% 32.0% 32.5%

Urbanization

Source: World Bank, Ministry of Statistics & Programme Implementation; Items include Eggs, Meat, Fish, Milk & Pulses.

Increasing population especially in urban areas is expected to drive demand

for poultry products

0-14 15-24 25-54 55-64 >650%5%

10%15%20%25%30%35%40%45%

28.5%

18.1%

40.6%

7.0% 5.8%

Predominantly Young Population

7 I Godrej Agrovet

INCREASING PERCAPITA INCOMES AND CHANGINGLIFESTYLE WILL ALSO AID GROWTH IN POULTRY INDUSTRY

FY10 FY11 FY12 FY13 FY143,500

4,000

4,500

5,000

5,500

4,5894,841

4,9915,179 5,250

India Per Capita Annual Income (PPP ) (USD)

Source: World Bank, Ministry of Statistics & Programme Implementation

Increasing Number of Women in Workforce

Penetration of Organized Food ChainsProliferation of Eating Out Culture

8 I Godrej Agrovet

FUTURE OF POULTRY INDUSTRY LOOKS SECURE AS INDIATRIES TO RISE ABOVE THE TAG OF A DEVELOPING COUNTRY

Per Capita Poultry Meat Consumption one of the Lowest

Brazil USA Japan Thailand China Vietnam India1

11

21

31

41

51 47.0 44.0

13.5 13.0 10.0 7.53.3

KG/Annum

Per Capita Poultry Meat Consumption vs.

Per Capita GDP

Low per capita in India is holding back poultry meat consumption

Significantly high consumption in developed countries

Source: Rabo Bank; figures as of 2012

KEY CHALLENGES

10 I Godrej Agrovet

VOLATILITY IN BROILER PRICES IS HERE TO STAY

Mar-12

May-12

Jul-1

2

Sep-12

Nov-12

Jan-1

3

Mar-13

May-13

Jul-1

3

Sep-13

Nov-13

Jan-1

4

Mar-14

May-14

Jul-1

4

Sep-14

Nov-14

Jan-1

5

Mar-15

May-15

Jul-1

50

102030405060708090

100

57

Live Prices (INR)

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

30%Trend 51%

Source: agriwatch.com, poultrybazaar.net

Mar-12

May-12

Jul-1

2

Sep-12

Nov-12

Jan-1

3

Mar-13

May-13

Jul-1

3

Sep-13

Nov-13

Jan-1

4

Mar-14

May-14

Jul-1

4

Sep-14

Nov-14

Jan-1

5

Mar-15

May-15

Jul-1

50

10000

20000

30000

40000

50000

11,872

15,45220,702

31,177

Trend in Key Raw Material Prices (INR/MT)

Maize Price/MT Soya Price / MT

12 I Godrej Agrovet

PROFITABILITY GETS SIGNIFICANTLY IMPACTEDWHEN COMMODITY PRICES GO UP

Output Input

~17% ~73% ~10%

Mar-12

May-12

Jul-1

2

Sep-12

Nov-12

Jan-1

3

Mar-13

May-13

Jul-1

3

Sep-13

Nov-13

Jan-1

4

Mar-14

May-14

Jul-1

4

Sep-14

Nov-14

Jan-1

5

Mar-15

May-15

Jul-1

50

20

40

60

80

100

57

Live Prices vs. Commodity Prices in INR/Kg

Live Price Maize Price Soya PriceSource: GAVL analysis

WAY FORWARD

14 I Godrej Agrovet

INNOVATE CONTONOUSLY TO BRING DOWN THE COST OF REARING THE BIRD

One of its kind private sector investment in Animal husbandry R&D

Focused on improving the Compound feed productivity in Cattle and Poultry

Nadir Godrej Center for Animal Research & Development

15 I Godrej Agrovet

COMMUNICATE THE VALUE PROPISITION At current prices poultry is a cheaper source of protein than pulses !

* Egg price at INR 50 per dozen; weight of egg at 50 grams; Chicken prices taken at dressing chicken prices;

Current Price Rs/ Kg

% Digestible Protein

Rs/ Gm of Digestible protein

180

160*

84*

14.8%

21%

11.2%

1.21

0.75

0.75

Tur Dal

16 I Godrej Agrovet

BRANDS CAN SIGNIFICANTLY INCREASEREALIZATIONS AND PROFITABILITY

Standardization

Quality/Safety Assurance

Trust

Emotional Attachment

Branded

Unbranded

Additional Realization because of

Value Addition and Branding

Even when the prices of unbranded products become volatile, realizations don’t drop significantly in branded products because of value addition and branding

17 I Godrej Agrovet

OUR BRANDS, REAL GOOD CHICKEN AND YUMMIEZHAVE HELPED THE COMPANY LEAPFROG TO NEXT LEVEL

Improved pricing power Prices more or less stable through out the year

Reduced Exposure to Cyclicality1

Brand pull has resulted in guaranteed sale every month Diversification of customer segments has improved

sustainability of revenue

Sustainability2

Branding has resulted in significant increase in margins Despite volatile prices, margins weren’t affected

adversely

Improved Profitability3

Enabled us to respond quickly to market disruptions Improved control over pricing

Agility in Responding to

Market Dynamics4

18 I Godrej Agrovet

GODREJ’S JOURNEY OF BRANDING IN POULTRY

Innovation in product varieties Innovation in affordability of the product to expand

the customer base

Constant Product Innovation

Pre Cut Portions Curry Cut (Fat Trim)

Rs 48/ 400gm Lollipop Malai

Tikka

Western Range

Indian Range Kid Focus Indian

Center PlateAffordable

Range

19 I Godrej Agrovet

THANK YOU FOR YOUR TIME AND CONSIDERATION