Business plan

On

PACKED CHILLI POWDER

“RED HOT”

-The mistress of spices-

SUBMITTED BY

MIDHUN K.S (2007-31-112)

MITHUN RAVEENDRAN (2007-31-114)

DRISYA M.R(2007-31-118)

ARUN V.M(2007-31-125)

SNEHA K.P(2007-31-110)

STUDENTS KERALA AGRICULTURE UNIVERSITY

VELLANIKARA, THRISSUR

BUSINESS PLAN

RED HOT

“The Mistress of Spices”

Introduction

Spices are an integral part of the Indian diet since centuries and they

are used in vegetarian and non-vegetarian food and snack

preparations. They help enhance the taste of food. Some speciality

spices are grown at specific locations but turmeric, chilly etc. are

grown in many parts of the country and their consumption is also very

high as compared to some other spices. Thus, they are fast moving

items, consumed in all households and therefore the market is very

scattered.

Products & Services

We will be manufacturing and marketing packed chillipowder . The products will be

manufactured using the state- of- the- art of processing and packaging technology. Our

products will be matching with the Indian quality and safety standards. It will be our

endeavor to ensure quality from the stage of raw material, till the point of sales by strict

quality control mechanism. To ensure the quality of the product, we will be collecting

good quality chilli from market. The manufacturing, packaging and distribution process

will be following the good management practices set by the industry.

Management Team

Red Hot will be a registered private limited company called ‘Red Hot Pvt. Ltd.’ with its

registered office at Pattikkad in Trissur district. The company will have five promoter

members who will be contributing Rs 60,350 each to the share capital of the company.

The company will be managed by a team of five consisting of four MBAs [Agri business]

and one food technologist with M.Tech in food technology . The Chief Executive Officer

of the company, the managing director, will be assisted by four directors who are in

charge of production, finance, marketing and human resources functions. The production

and operations of the plant will be managed by the food technologist. The organizational

structure of the company is shown in the following chart.

Organizational Chart

Board of Directors

Managing Director

DirectorProduction& Operations

Director Marketing

Director Finance

AccountantDriver cum Sales man(2)

Supervisor

DirectorHRM

UnskilledWorker

SkilledWorkers(5)

MANUFACTURING PROCESS

To start with, unground spices are cleaned manually to remove impurities and then

washed. After drying them, they are pulverised in a grinder to convert them in powder

form.. Then spices in powder form are passed through sieves to obtain uniform mesh

size. Finally, packing is done in polythene bags and bags are sealed. Process loss is in the

range of 5% to 7%. The ProcessFlow Chart is as under:

MARKETING PLAN

Target Market

Our target market will be mainly households. As we have already calculated the demand

in the market. We will be mainly targeting house wives who are considered to be decision

makers about the purchase of food items to a home

Pricing Strategies

Our product is priced at 14 Rs per pack. The consumers will not be feeling the price

high because of the high quality and less wastage ability product .The attractive and

SIEVING

DRYING ANG GRINDING

CLEANING AND WASING

PACKING

scientific packaging will give the consumers and feel of pride .Price has been fixed taking

into consideration the competitors price also.

Channels of Distribution

Our products will be available in almost all Retail shops, Hotels and hypermarket

and super market .We will be exhibiting point of purchase advertisement materials and

we will secure prime stocking place .Initially we will be marketing the products in

identified target markets in Kerala . Our products will be distributed to dealers through

our own delivery van in 3 days to provide factory fresh products to our

consumers .Though the shelf life of the pack is 6 months.

Promotion

We will be roping in an advertising agency to design our advertisement to prepare

the advertisement copy and decidicing the advertisement media . Advertisement will

feature the hygienic way in which we manufacture the product in our factory, advantages

of our product and naturality of our product when compared to competitors. The

advertisement will also highlight the fact there is no harmful chemicals used in

processing and its of good quality than other available chilli powder..

Competition:

Presently there are multinational as well as local players in the spice market.

The presence of multinationals is a way of concern. We will be using best available

strategies to face the competition.

PRODUCTION AND OPERATIONS PLAN

Our factory will be located at Pattikkad in Trissur District since the target market

and raw material procurement market is near by. Our plant will be working 300 days in a

year. In order to ensure regular supply we need 130 kg of Red chilli per day for getting

93 kg Chillipowder . From 930 packs containing 100 gm of chilli powder can be

manufactured.

Working hours

The plant will be operating for 25 days in a month. Initially, the plant will be functioning

only one shift of eight hours. The plant capacity will be expanded once our brand is

established in the market.

Human Resourse Plan

All together their will be 14 persons in the organization. In which 5skilled workers will

be involved in the Preparation of the products and packaging. In addition, there shall be a

stock- keeper and an accountant in the factory. Office administration will be entrusted

with an administrative officer. 3 director heads for each department. 3 unskilled workers

and drivers and sales man comprising of 2 persons.

REQUIREMENTS OF PLANT AND MACHINERY

Sl. No. Particulars Amount

1 Base value 2,00,000

2 Foundation 3,000

3 Erection Charges 20,000

4 Labour Charges 500

5 Taxes 16,000

6 Insurance 2,000

7 Transportation 1000

8 Contingency (10% Base value) 20,000

TOTAL 2,62,500

PRELIMINARY & PRE-OPERATIVE EXPENSES

Sl. No. Particulars Amount

1 Legal expenses 4,500

2 Training & travel 8,000

3 Trial production 3,000

4 Inauguration 4,500

Total 20,000

WORKING CAPITAL

1 Raw Materials:

a) Stock of Red chillies

1) 400x Rs. 50 =20,000 – 5000(reduction) =15,000 [ 3 day]

2) 15000 x 100 =Rs.15,00,000 [ 1year]

2 Finished Goods

2800 packs x 14Rs = Rs 39,200

3. Work in progress

39,200/ 3 = Rs13,070

4 . Sundry debtors:

2800 packs x 14Rs = Rs 39,200

5. salary = Rs 4,000

6. contingencies = 14,647

 

TOTAL WORKING CAPITAL Rs.1,46,470

Cost of the project

The total cost of the project includes fixed capital, working capital and pre-operative

expenses. Table shows the break-up of total project cost.

Total project cost

Sl. No. Particulars Amount

1 Fixed Capital 12,62,500

2 Working Capital 1,61,120

3 Preliminary & Preoperative expenses 20,000

4 Deposits 65,000

Total 15,08,620

Financing of the project

The project will be financed by means of both debt and equity. The five promoters

will be contributing Rs. 3,01,724 (Rs.60,350 each) to the cost of the project. The project

is eligible for an investment subsidy of Rs. 2,52,500. The enterprise will be meeting the

balance of the project cost by raising term loan; working capital loan and a seed capital

loan from banks. The detailed financing plan is found in below given table.

Financial plan

Sl No Particulars Amount[ Rs]

1 Term Loan [ Rounded] 6,28,103

2 Equity 3,01,724

3 Subsidy 2,52,500

4 Seed capital 2,26,293

5 Working capital loan 1,00,000

TOTAL 15,08,620

Income from the project

Sl No Product Quantity/ day(ltrs)

Price / pack 100 gms[Rs.]

Daily revenueRs.

Quantity[Annual]300 daysLtrs

Revenue [Annual]Rs.

1 Red Hot 93 kg 14 13066 2,80,000 39,20,000

PROJECTED PROFITABILITY

The projected profitability of the enterprise for a full year [ 12 months period] is shown in the following statement.  A) Sales Revenue : 39,20,000 Interest on deposits : 11,700 Total 39,31,700

B) Expenses:

1, Rawmaterial : 15,00,0002, Utility : 1,68,0003, Salary : 3,60,0004, Administration Expenses : 78,4005, Interest on term loan

@ 12% p.a : 75,3726, Interest on Working capital loan

@ 10% p.a : 10,0007, Depreciation

@ 10% p.a : 1,26,2508, Repair and maintenance

@ 3% p.a : 37,8759, Selling and Distribution

@ 2.5% p.a : 196,00010, Packaging :4,48,00011, Fuel expense[ Delivery van] :5,00,000

12 Rent :30,000  

TOTAL : 35,29,897 C) Net Profit [A-B] = : 4,01,803

 Cash inflow[Cash Profit]

[ Net Profit + Depreciation] : 5,28,053

Break- even Analysis:

Break-even analysis is given in the following statement:

Break-even analysis:

A) Sales revenue : 39,20,000

B) Variable cost: 1. Raw material :15,00,000 2. Utility : 1,68,000 4. Selling and distribution expencses : 1,96,000 5. Packaging : 4,48,000 6. Fuel expense : 5,00,000 7 Interest on working capital loan : 10,000 TOTAL 28,22,000

C) Fixed cost: 1. Salary : 3,60,000 2. Administration : 78,400 3. Interest on term loan : 75,372 4. Rent : 30,000 4. Depreciation : 1,26,250 5. Repair and maintance : 37,875TOTAL : 7,07,897 D) Contribution= (A-B) = 10,98,000

1) Break-even capacity

C X Capacity utilization D

Fixed cost [ C] X Capacity utilizationContribution [D]

Break-even capacity = 7,07,897 X 100 = 64.47 %

10,98,000

2) Break-even sales

Fixed cost PV ratio

ContributionPV = X 100 Sales revenue

10,98,000 PV = X 100 = 28.01%

39,20,000 7,07,897Break even sales = X 100 = Rs. 25,27,300

28.01

Return On Investment [ROI]

[ A + B + C ]ROI = X 100

D

Where, A = Profit B = Depreciation C = Interest on loan D = Cost of the project

[4,01, 803+1,26,250+85,372]

ROI = X 100 = 40.66 % 15,08,620

Pay back Period of the project

Total Project Cost 15,08,620 = = 2.85 yrs

Average Cash Flow 5,28,053