The strategy: identify pockets in the country where farmers can be converted to using compound feed. For starters, Operation Conversion will run fullstream over a period of two years during which the company plans to pick five pockets each in three states--Maharashtra, Punjab and Tamil Nadu. Says Godrej Agrovet chief executive officer SL Anaokar: ``Implementing this strategy is a time consuming exercise but the company is willing to wait. We will not pick more states till we achieve nearly full conversion in the first three states.''

This strategic decision stems from a series of cost reduction and business process reengineeringinitiatives which Andersen Consulting has implemented at Agrovet for the past one year. To be sure, Operation Conversion was preceded by converting Agrovet's existing business processes into a more cohesive and more efficient set of operations.

The cost reduction exercise was kicked off by the company on the recommendations of Andersen Consulting last year which are now being implemented. Agrovet should save at least Rs 5-7 crore through these initiatives this year-which can then bankroll Anaokar's marketing plans. The company sells its animal feed under the Godrej brand, which also has sub-brands like `Milk More'.

The stakes are certainly high: compound feed accounts for less than 10 per cent of the total feed consumption. The total compound feed production for animal feed (cattle feed plus poultry) is around 2.78 million tonne per annum. Within this, cattle compound feed is 1.8 million tonnes, while poultry feed makes up the balance.

Andersen's diagnostic study suggests that the total gross potentialfor the business is around 36 million tonnes per annum, leaving a huge scope for conversion. Agrovet has a market share of 11 per cent in animal feed in India. HLL is its closest private competitor with almost the same share. Other major players are cooperatives like Amul in Mehsana, Gujarat.

As the only organised player in the animal feed segment, according to Khanna, if Agrovet converts the market, it can own it. Agrees Anaokar, ``The only way to increase consumption of compound feed and increase the rate of conversion is to educate farmers to shift to compound feed.''

Pitching the feed

As a first step Agrovet will try to change the perceptions of farmers about the cost-benefits of compound feed. By using compound feed, which is actually at a price discount of 10-15 per cent to traditional feed, Agrovet reckons farmers stand to gain from the cost advantage. Then there are benefits like better milking, health, and calfing of livestock.

The company, has therefore, begun running educationaldrives through physical demonstrations and trials, which have a gestation period of at least two years--with the help of the department of agriculture and nutritionists and other relevant local authorities.

While such exercises are undertaken by Agrovet's competitors also, Godrej is planning to step up the frequency and focus of educational drives and make it a major operation to convert certain regions to using compound feed. Says Anaokar, ``Compound feed being cheaper than traditional feed, farmers get an impression that this would be of lower quality. However, the fact is that compound feed are of a higher standard as compared to traditional feed and yield better results.''

Market research shows that a farmer generally sets aside a budget of Rs 20-25 per day on animal feed. The feed is prepared by using a mixture of both compound and traditional feed which he feels is best for the animal. Most of Godrej's competitors, including cooperatives like Amul, buy milk as one of the incentives to farmers forbuy their compounds. According to Anaokar, Agrovet may also look at this alternative in the future if it dovetails with Agrovet's diversification plans.

Internal initiatives

Agrovet's project with Andersen Consulting can be split into five key processes: