A quick glance at the company

• Incorporated in 1994-95

• Promoted by Mr Ramakrishna Karuturi

• Engaged in three businesses

– Floriculture
– Processing foods
– Information technology.
Floriculture

• Initially set up as Karuturi Floritech in Doddaballapur, near

Bangalore

• Wholly owned subsidiary in Ethiopia, Africa – Ethiopian

Meadows Plc - to produce roses with a special focus on HT
roses.

• Today - with the combined production capacities of India

and Ethiopia, Karuturi ranks amongst one the largest cut
rose producers in the world with a strong global
presence.

• Customers across over 15 countries including Holland,

Germany, United Kingdom, Italy, Singapore, Taiwan,
Bahrain, Muscat, Dubai, Australia, Japan, New Zealand,
Brunei and across North America.
 Floriculture
• Total acreage under cultivation: 60
hectares ( 50 hectares under implementation in
Ethiopia and 10 hectares in India).
• Roses per annum: 65 mn (15 mn from India
and 50 mn from Ethiopia)
• Cost of production Rs 1.25 per stem
• Realisation per stem: Rs 10 per stem
• Export presence: 80 per cent from Ethiopia
and 50 per cent from India.
Sourcing of rose plants Cultivation in greenhouses Harvesting

Storage and refrigeration Processing and packing

Transportation to marketplace Auctions and bouquet

manufacturers

Green House

Cut rose

supply
Grading Cold Storage
 Information technology

• Has also diversified into IT and network solutions

• Provider of broadband connectivity to connect the

customers seamlessly to the Internet.

• Specializes in offering customized solutions in the

fields of e-commerce, workflow automation and
telecommunication.

• It provides services, such as hosting services, e-

infrastructure and e-business consultancy.
• PAT figures in crs

MARCH MARCH MARCH MARCH MARCH

2006 2005 2004 2003 2002

11.52 5.96 0.74 0.23 -0.47

DEC 2006 DEC 2005

3.55 2.84
 Sales ( Rs in Crs )

March March March March March

2006 2005 2004 2003 2002
29.16 14.88 3.59 5.12 8.94
 Sales in Floriculture ( Rs in Crs )
March March March March March
2006 2005 2004 2003 2002
24.67 12.87 1.22 2.20 6.50

% to March March March March March

Total 2006 2005 2004 2003 2002
Sales
85 86 34 43 73
 Sales in Floriculture and IT

30

25

20
Rupees in
15 Red –
crs
Floriculture
10
Yellow - IT
5

0
2002 2003 2004 2005 2006

Year
 Reasons for losses
• Retrograde GOVT policies
• High cost of freight
• Unreliable flight connections
• Punitive import duties
• General depression in the product cycle
• Competition
• Limited market in India
• Low prices being fetched by flowers overseas
 Turnaround

Reasons
for decline

external

internal

internal external

Reasons for turnaround

 Change

Turnaround

Change

Growth
 Turnaround building blocks
• Product market refocus

– Concentrated on IT business
– Cut down on exports
– Planted new variety flowers

• Tighter control

• Operating excellence
Items 2002- 2001-2002 Management Action Bldg. Blocks Savings
2003

Purchases of 8009705 65262168Cut down on exports Product market 14136247

horticulture refocus

Freight, 288677 906546 230718

Forwarding &
Clearing

Amounts written 0 8949443 8949443

off

Greenhouse 4620046 0Quality improvement Operating -4620046

Modernization Excellence

Legal & 196200 377439Measures to cut costs Tighter Controls 181239

Professional
Charges

Office Expenses 65451 208469 143018

CHANGE
Mr. Ramakrishna MD ,Karuturi Networks
Limited - “We introspected on who the real
competition was. It was not my neighbor but
growers in Africa. We studied their business
model to beat them. When we realized we
cannot beat them at their game. We joined them,
by putting up a production facility in Africa. “

2004: Conceptualized the Ethiopian initiative

and set up a wholly owned subsidiary in
Ethiopia, Africa, called Ethiopian Meadows Plc
to produce cut roses.
Why Ethiopia ?
Mr. Manoj Agarwal – Manager Operations :

•“Wholly owned subsidiary on the outskirts of

Addis Ababa in Ethiopia has helped gain faster and
cost effective access to the European and American
countries.

•High altitude, close to Equator – similar flowers to

world’s best, Ecuador.

•Helps us address the high margin HT (latest

variety) - premium segment rose variety (Ethiopia is
best suited for HT roses due to the high altitude and
colder climate).
• Abundant cheap labor

• Flood-safe geography

• Low freight cost as compared to India

• No EEC duty from Ethiopia to European Union

• US markets opened up as Ethiopia has duty free

access “
Top down change – strong CEO ,i.e.,
Mr.Ramkrishna – MD Karuturi Networks
Limited , takes charge of strategy process &
moves quickly to implement changes

Roles in change
Sponsor - Mr.Ramkrishna – MD Karuturi
Networks Limited
Change Agents –
• Mr T.Anil – Director – Based in Ethiopia
•Mr Manoj Agarwal – Manager Operations

Convergence – compatible with existing

structure
 Type of Change

Scope

Transformation Realignment

N
Evolution Adaptation
A Incremental
T
U
R Revolution Reconstruction
Big Bang
E
Implementation of change - Ethiopia Project

• Set up 50-hectare project

• Capital Investment - $ 6 million
• Mainly HTs, latest varieties
• Target markets – Europe, Russia, M.East
• Intends to scale up its operations in Ethiopia to 100 hectares by
2007-08
• By 2007 end - produce 100 mn stems per year and by end 2010,
total production is estimated to touch 300 mn per year.
 Kotter’s 8 Step Model
• Establish a sense of urgency
• Form a powerful guiding
• Create a vision
– “ to emerge as a integrated service provider with a
comprehensive presence in floriculture, agro-based
products and food processing”
• Communicate the vision
• Empower others to act on the vision
• Plan for and create short term
• Consolidate improvements and produce more changes
• Institutionalize new approaches
Bullock and Button Model

4-stage process consider how the organisation may go about

implementing this change in its business practice :

1. Exploration Phase : becoming aware for the need for change

2. Planning Phase : collecting information to ensure correct

‘diagnosis’ of needs; establish change goals and actions to
achieve goals; get ‘decision makers’ support

3. Action Phase : implementation of changes

4. Integration Phase : consolidating and stabilising changes so they

become part of the organisation’s normal activities
 GROWTH

Reasons for growth

Floriculture –
Scope for growth in India - Indian government has accorded
sunrise industry status to floriculture and offering export-
oriented units several tax benefits
•income tax holidays and exemptions from certain import duties
•subsidies for establishing cold storage
•pre cooling units
•refrigerated vans and green houses, and

•air freight subsidy.

Ethiopian project

Mr. Ramakrishna : “With our knowledge of the

business learned without the buffers of profit we
beat them on cost quality and service like never
before. Voila we had a winner on our hands.”
How did they do it?

•Ten years experience in producing and marketing cut

roses

Low cost production

•Indigenously built greenhouses (as against importing from

Holland)
•Indigenous sourcing of flowers (savings of Rs 40 per
plant).
•Rainwater harvesting.
•In-house power generation through bio-gas.
•Broad product range: cut roses, rose plants, coco peat, and
coco cups.
•Complete technology available – greenhouse, irrigation,
planting material, agronomy, pest management, post
harvest, marketing, experienced personnel
Information technology –

•Fiber bandwidth coming into the country

What did they do it ?
Partnership with Technology Partners to buy bandwidth from
them for their network and also resell their IPLC’s to their
customers
•150% growth in ISP business
Reasons
Added high value customers from software industries like
Bharti Infotel Ltd,BSNL,Tata Teleservices etc
Future
Floriculture –
•Karuturi intends to scale up its operations in Ethiopia to 100
hectares by 2007-08

•By 2007 end, Karuturi, with its ramped up capacities, will

be well placed to produce 100 mn stems per year and by end
2010, total production is estimated to touch 300 mn per year.

•To further ramp up floriculture business and reach its

ultimate goal - of becoming the largest rose producer in the
world – the company is actively looking at acquiring one of
the largest floriculture companies based out of Africa.
Inorganic growth route

•To expedite the cultivation process and further prune costs,

Karuturi has acquired over 25 hectares of greenhouses (from
Greengold in Pune, Camson Biotechnologies Ltd. in
Bangalore and Crystal Agritech, TransIndia Floritech Ltd.,
Asian Flora) and successfully relocated them to Ethiopia.

•These above acquisitions will help Karuturi cut down on

costs of setting up a full-fledged greenhouse and
simultaneously help crunch project implementation time.
Dubai as redistribution hub

Mr Manoj Agarwal “Redistribution hubs like the Dubai

Flower Centre will help expand trade opportunities for
flower producers in developing economies, particularly
Africa and Asia.”

Advantage of Dubai as a redistribution hub:

•Location
•Historical trading ties,
•Increasing global connectivity available at the Dubai
International Airport, makes it a perfect 21st century hub
for perishables trade between Africa, Asia and the rest of
the world.
Advantages for Karuturi

•Will offer high-quality transit point with a rapid turn around.

•With our proposed value-added services like packaging for the end
market, Dubai will offer an even more cost-effective access to the
western markets and throw open new sales channels.
Information technology

•Looking to develop plug and play Broad band service

product which will lead to a significant increase in revenue
flows.

•Looking at acquiring smaller ISPs in South India.

•Leveraging the ISP business, - also studying the Data Center

business and understanding the opportunities available and
may look at getting into the same.
Food processing

•Company is entering into other synergistic and attractive

segments within the agro-based, horticulture and food
processing industry out of India. Processing of Gherkins
emerged as attractive option.

•The company’s decade plus experience in floriculture has

helped it understand the intricacies of contract farming and
cold chain logistics, two factors which are critical for
succeeding in the gherkins business.
 Seven Growth Options
(McKINSKEY model)

• Maximization of sales to current customers

• Attracting new customers
• Innovation in products / services
• Innovation in distribution methods – Dubai
• Acquisition
• Expand to new geographical markets
• Diversify towards new field of business
Ansoff Model
 Three horizons of Growth
Approach
ti f or P

Time (Years)
Horizon 1 – extend and defend core
business – new variety of plants

Horizon 2 – build emerging business –

Ethiopian Project

Horizon 3 – create viable options (future

opportunities ) – food processing