karuturi global sucess story

8/6/2019 Karuturi Global sucess story

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Meet the world's largest exporter of roses

Image: Sai Ramakrishna Karuturi indeed has a rosy future.

Shobha Warrier

He is the world's largest exporter of roses. His company has leased 3,000 sq km of land (thatis five times bigger than Mumbai, which is 603.4 sq km in size!) in Ethiopia. Here is hisamazing story...

After completing his engineering and MBA, it was but natural for Sai Ramakrishna Karuturi to joinhis family business. A three-year stint and he realised that he wanted to explore new pastures and notstick to his father's business.

After toying with various options he finally settled for floriculture -- he decided to cultivate and exportroses.

But cultivating flowers in India is an expensive affair. After a chance meeting with a former colleaguehe moved to Africa, where the seeds of his fortune were sown.

With 15 per cent of the global market in his grasp, Karuturi, today, is the world's largest exporter of roses.

Three years ago, he added agriculture to his bandwagon. Today, his company Karuturi Global Ltd has3,000 sq km of agricultural land in Ethiopia (that is 5 times the size of Mumbai!) and 239 hectares of land for rose cultivation.

The company's turnover in 2009 was Rs 650 crore (Rs 6.5 billion).Here's his story in his own words:



The beginning

Since I come from a business family, entrepreneurship was the only option open to me. My father,though he is 76 years old, still runs many businesses, including power transmission. It was like I wasin a business school from age three!

After I completed engineering, I went on to do MBA in the United States. While my father taught methe essence of business, the management degree added a structured dimension to the existingknowledge and taught us all about supply chain and marketing.

I came back and joined the family business and worked with my father from 1990 to 1993.

Image: The Ethiopia unit.

Starting own enterprise- the flower business

In 1994, I zeroed in on the flower business. I was immensely influenced by management guruMichael Porter's theory of 'Sustainable Competitive Advantage'. I was looking at any business thathas sustainable competitive advantage from India into the global market.

I never looked at a business that supplied into India or into a particular region. I wanted to start anenterprise that would sustain itself globally. I was looking at a variety of businesses and the flower business appealed to me the most.

When I visited Israel, I perceived the enormity of the flower businesses, and it left a mark on me. I fellin love with this business, and my passion for it has not dimmed in all these years.

I started with a shoe-string budget of Rs 133,000 which was what I had in my bank account then.Bank loans were easy to get for this sector and many others were also getting into the business withcrores of rupees. Then, my father gave me a seed capital of Rs 50 lakh (Rs 5 million). I approachedIDBI and they sanctioned Rs 5 crore (Rs 50 million).

I completed the project by 1996. I bought around 28 acres of land in Doddabellapur, 40 km fromBengaluru, and built a couple of green houses.

Mind you, I did not import them. I got my green houses built on the footpaths of Bengaluru, literally.They were designed by the Indian Institute of Science. I bought steel from the market and got itfabricated at a roadside workshop. We made it at a third of the cost at which our competitors wereimporting it.

When our competitors were importing rose shrubs at Rs 80 per plant, I got them from the localnurseries. They wanted me to import the basic bud wood so that they could make the varieties here inBengaluru itself. I got them imported from Germany and Holland and it cost me only Rs 5 a plant.



The building block of our success started with frugality and the Indian way of stretching the rupee thin.Our capital and revenue costs were kept very low.

I built this business on very strong foundations of keeping costs low and that has helped us reachwhere we are today!

Image: Roses from Bangalore unit.

Roses to the global market

When I started the business, I never thought of looking at the Indian market as the consumption

pattern here did not favour this kind of product. But, now, I stand significantly corrected.Today, the Indian market is very, very important to us. As a matter of fact, the flowers that we grow inBengaluru are hardly exported and sold mostly within the country.

We have our own retail chain, the Flower Express, and franchisees in all the major cities like Chennai,Bengaluru, Delhi, Hyderabad, and Mumbai. And they are all doing very well.

The Indian consumer has evolved into a consumerist model and they don't flinch at the idea of spending on flowers.

When we started, people preferred buying a stainless steel tiffin case worth Rs 50 rather than buyinga bouquet, as a gift. But things have changed and flowers have become a serious gifting option.However, it is still an urban upper middle class phenomenon.

Our first overseas destination was Holland, as it was 'the' market at that time. The first export was notentirely disappointing and it was not exhilarating either. It was a mixed bag. Initially the profits werelow and the first one or two years went by in establishing our credibility and exploring the rightmarkets.

Soon, we were exporting to Japan, Taiwan, Hong Kong, Germany, Singapore, Canada, the US,Malaysia, Italy, the United Kingdom, the Netherlands, Australia, Brunei, and the Middle East. Itravelled a lot to get connected to all these markets. Australia was a big challenge but it proved to bea very lucrative market.

During the European summer, when the prices are weak, Australia helps us. Singapore is anadvantage because of the proximity and the lower cost of freight. For a long time, the Singaporemarket sustained our business. We don't supply to Singapore any more because it's too small amarket for us now.



Image: Roses are ready for export to Holland. Units in Ethiopia and Kenya

I decided to set up a unit in Ethiopia in 2004. The Ethiopian ecosystem was quite welcoming. It waseasier buying land there than in India. I started with Rs 18 lakh (Rs 1.8 million) and it was like testingthe waters. By the end of the first year, we had invested Rs 7 crore (Rs 70 million). Over the years wewent on investing in land and today, we have close to $170 million invested there.

We are now the world's largest rose company. We produce one-and-a-half million stems of rosesevery day in Ethiopia and Kenya together. We employ about 9,000 people there and 1,000 here inIndia.

In Africa, we run our own hospitals, schools and football clubs. We employ only the locals. We takegood care of them and they take good care of our business.

Today, we have a 9 per cent market share in Europe and we are heading for a 15 per cent marketshare as we are doing a lot of expansion.

Today, we produce 650 million roses a year, which is about 2 million roses a day. We are looking for a billion rose stem capacity! Every day, we send one charter flight from Africa to Europe.

The Indian production goes mainly to the Indian market. We don't export from India any more. Today,95 per cent of our production is in Africa. So, I spend 15 days a month in Africa.

We harvest roses five times a day and process them the same day. They are despatched early nextmorning, and they reach the destination by the end of the day. They are sold on the third day.



Image: Karuturi in his maize farm in Ethiopia. Moving to agriculture

Three years ago in 2007, we decided to buy land in Ethiopia for agriculture. Today, we have 3,000 sqkm of land which is 5 times the size of Mumbai, and it makes us one of the world's largest landlords! Inever thought of becoming a landlord, much less one of the world's largest. That was not a goal at all.

We harvest rice, maize, vegetables, palm oil, and sugarcane. We produce about 5 million tonnes of rice which we export to many countries. That is about one per cent of the world's rice production and20 per cent of the traded volume in the global market.

We also hope to be a significant player in the maize, sesame, soya and sorghum markets. Palm oil

also will be produced in around 100,000 hectares and we will be one of the top five palm oil producingcompanies.

We have already been rated by UNCTAD (United Nations Conference on Trade and Development) asa member of the 25 largest transnational corporations in agriculture. I want to be ranked among thetop 5 and make every Indian proud that one of their own has reached the heights, not in IT but inagriculture.

Image: Roses from the Ethiopia unit.



Future plans

Though horticulture is the main driver of our business, in the next 24 months, agriculture will be twiceas big as horticulture.

We expect incremental revenues from agriculture to go past $600-700 million and I don't seehorticulture revenues going past $200 million (it is currently $150 million).

My target is to take this company to the billion-dollar club by 2015. So, the next five years' journey isgoing to be very enjoyable and fulfilling.

Advice to entrepreneurs

My advice to young entrepreneurs is that there is no substitute for hard work and passion. If you arepassionate about your work, you can excel in it. You cannot just be passionate and not be hardworking; they go hand in hand.

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