Business Model: Packaged Idli Batter

BY: SUSANTA KUMAR SW

Backdrop of the Proposed Business Venture:

Product:
The business offers high-quality packaged idli batter as a convenient and ready-to-make
solution for breakfast/tiffin. The idli batter is prepared using a traditional recipe that ensures
authentic taste and texture. It's carefully manufactured and packaged to maintain freshness and
taste, providing customers with a hassle-free cooking experience.
Place of Operation:
The manufacturing facility is located in a centralized area with good transportation access. This
allows for efficient distribution to both urban and suburban areas. The facility is equipped with
state-of-the-art machinery to ensure consistent quality and production capacity.
Target Consumers:
The target audience includes busy professionals, working families, students, and anyone
seeking a quick, nutritious, and delicious breakfast option. By catering to the convenience-
seeking modern lifestyle, the product aims to make traditional South Indian cuisine more
accessible to a broader audience.
Distribution/Service Delivery:
The packaged idli batter will be distributed through a mix of channels, including supermarkets,
grocery stores, online platforms, and tie-ups with local breakfast eateries. The online platform
will offer direct-to-home delivery, enhancing convenience for customers.
Unique Selling Proposition (USP):
1. Authentic Taste: The idli batter is prepared using a traditional recipe, ensuring an authentic
South Indian taste.
2. Convenience: Ready-to-make batter saves time and effort, making it an ideal choice for busy
individuals.
3. Quality Assurance: Stringent quality control measures are in place to maintain consistent
taste and texture.
4. Freshness: Special packaging techniques preserve the freshness and flavor of the batter.
5. Wide Availability: The product is available both offline and online, ensuring accessibility for
a diverse customer base.
Analytics Supporting the Business Model:
Market research indicates a growing demand for convenient, ready-to-cook food options due
to changing lifestyles and urbanization. The popularity of South Indian cuisine and the need
for healthier breakfast alternatives contribute to the market potential.
Cost Components and Overheads:
Cost Components:
1. Raw Materials: Rice, lentils, water, spices.
2. Packaging Materials: Plastic pouches, labels.
3. Labor: Production staff.
4. Utilities: Electricity, water, gas.
5. Equipment Maintenance: Maintenance and repair of machinery.
Overheads to be Allocated:
1. Rent and Depreciation: Allocated portion of facility rent and equipment depreciation.
2. Marketing and Promotion: Advertising, branding, and promotional expenses.
3. Administrative Costs: Salaries of administrative staff, office expenses.
COST SHEET

Cost Component Cost (per unit in INR)

Raw Materials 10.00

Packaging Materials 2.50

Labor 5.00

Utilities 1.50

Equipment Maintenance 2.00

Rent and Depreciation 4.00

Marketing and Promo 3.00

Administrative Costs 2.50

Total Cost per Unit 30.50

Break-even Analysis:
Total Fixed Costs = Sum of Rent, Depreciation, Marketing, and Administrative Costs.
Variable Cost per Unit = Sum of Raw Materials, Packaging, Labor, Utilities, and Equipment
Maintenance.
Break-even Volume: Total Fixed Costs / Contribution Margin (Selling Price - Variable Cost per
Unit)
Break-even Sales: Break-even Volume * Selling Price
Break-even Analysis:
Assuming:
- Selling Price per Unit: 40.00 INR
- Total Fixed Costs: 15,000 INR (Sum of Rent, Depreciation, Marketing, and Administrative
Costs)
- Contribution Margin (Selling Price - Variable Cost per Unit): 40.00 - 30.50 = 9.50 INR
Break-even Volume: 15,000 INR / 9.50 INR = 1,578.95 units (round up to 1,579 units)
Break-even Sales: 1,579 units * 40.00 INR = 63,160 INR

Impact of Decrease in Sales Price:

Let's assume a 10% decrease in the selling price (from 40.00 INR to 36.00 INR). Recalculate
the Break-even Volume using the new Contribution Margin (36.00 - 30.50 = 5.50 INR).
New Break-even Volume: 15,000 INR / 5.50 INR = 2,727.27 units (round up to 2,728 units)
New Break-even Sales: 2,728 units * 36.00 INR = 98,208 INR
Impact of Promotion and Marketing Campaign:
Assuming additional expenses of 5,000 INR for a promotion and marketing campaign.
Calculate the new Total Fixed Costs.
New Total Fixed Costs: 15,000 INR + 5,000 INR = 20,000 INR
Recalculate the Break-even Volume using the new Total Fixed Costs and the original
Contribution Margin (9.50 INR).
New Break-even Volume: 20,000 INR / 9.50 INR = 2,105.26 units (round up to 2,106 units)
New Break-even Sales: 2,106 units * 40.00 INR = 84,240 INR
Conclusion:
- The original break-even point was 1,579 units, requiring sales of 63,160 INR to cover fixed
costs.
- A decrease in the selling price to 36.00 INR would increase the break-even point to 2,728
units, requiring sales of 98,208 INR.
- Investing in a promotion and marketing campaign with additional expenses of 5,000 INR
would increase the break-even point to 2,106 units, requiring sales of 84,240 INR.
Options to Increase Sales:
1. Decrease in Sales Price: Analyze how reducing the selling price affects the break-even point
and profit margin. Consider potential volume increase due to the lower price.
2. Promotion and Marketing Campaign: Estimate the impact of additional expenses for a
marketing campaign on sales volume and overall profitability.
Certainly, let's perform a Cost-Volume-Profit (CVP) analysis for the packaged idli batter
business using the provided figures:

- Selling Price per Unit: 40.00 INR

- Total Fixed Costs: 15,000 INR (Sum of Rent, Depreciation, Marketing, and Administrative
Costs)
- Variable Cost per Unit: 30.50 INR (Sum of Raw Materials, Packaging, Labor, Utilities, and
Equipment Maintenance)
Contribution Margin: Selling Price per Unit - Variable Cost per Unit = 40.00 INR - 30.50 INR
= 9.50 INR
Break-even Volume: Total Fixed Costs / Contribution Margin = 15,000 INR / 9.50 INR ≈
1,578.95 units (round up to 1,579 units)
Break-even Sales: Break-even Volume * Selling Price per Unit = 1,579 units * 40.00 INR =
63,160 INR
Profit Calculation:
- Let's calculate profit for different sales levels (in units) and associated sales values (in INR):

Total
Sales Volume Sales Value Total Variable Total Contribution Total Fixed Profit
(Units) (INR) Costs (INR) Margin (INR) Costs (INR) (INR)

0 0 0 0 15,000 -15,000
 Total
Sales Volume Sales Value Total Variable Total Contribution Total Fixed Profit
(Units) (INR) Costs (INR) Margin (INR) Costs (INR) (INR)

500 20,000 15,250 4,750 15,000 -10,250

1,000 40,000 30,500 9,500 15,000 -5,500

1,579 (Break-
even) 63,160 48,119.50 15,040.50 15,000 40.50

2,000 80,000 61,000 19,000 15,000 4,000

2,728 (Option
1) 109,120 83,308 25,812 15,000 10,812

2,106 (Option
2) 84,240 64,132 20,108 20,000 208

Key Insights:
1. The original break-even point is approximately 1,579 units, and at this point, the business
starts making a modest profit.
2. Reducing the selling price (Option 1) increases the break-even point, but higher sales volume
is required to maintain profitability.
3. Investing in a promotion and marketing campaign (Option 2) also increases the break-even
point, but the higher selling price helps offset the increased costs and still maintains a small
profit.
A Cost-Volume-Profit analysis helps in understanding the relationship between costs, sales
volume, and profits. It's essential to consider different scenarios and strategies to ensure the
business remains profitable and sustainable.

Conclusion:
The packaged idli batter business leverages convenience, authenticity, and quality to tap into
the growing demand for ready-to-cook food options. Through effective cost management,
strategic pricing, and innovative marketing, the business aims to achieve a sustainable and
profitable presence in the market.