Surya Food Products (SFP) Limited is a firm dealing with food, food processing and grain trade. SFP decided to set-up a roller flour mill with the intention of selling branded whole wheat flour. I (Mr. Vinod Jain) was specifically recruited in November, 1994 to prepare a comprehensive plan for marketing Surya Atta to be launched on first week of February 1995. SFP total investment on assets was about Rs.69.00 lakhs, financed on 1:2 debt-equity ratio. Further, I was given with the following objectives. To achieve monthly sales of 720 MT during 1995-96, monthly sales of 1800 MT by end of 1996 and establish ‘Surya Atta’ a valuable product I was also requested to identify markets, promotion, packaging and final pricing for the product.
I choose Madhya Pradesh to be the first target market. Market share of two national brands Captain Cook and Trupti is negligible in this state when compared to other states like Uttar Pradesh, Rajasthan and Maharashtra. Hence, our product can reach to wider audience in this state including the higher income group. Further, Surya Food Products have already established its brand in Madhya Pradesh from grain business which is growing at a rate of 10%. Since we already have a market here, I recommend establishing our base before entering other markets. From the available data there would be approximately 132 lakhs households in Madhya Pradesh and the target audience will be around 50 lakhs households by excluding the lower income class with less than Rs.2000 per month.
I suggest highlighting the nutrition value and the value for money for our product. In order to educate the customer about the benefits of Whole Wheat Atta I recommend creating a comparison chart depicting the key nutrients along with the health benefits and printing the same on the package.
Initial launch of this product will be in the ratio of 2:1:1 for 1kg, 2kg and 5kg packets respectively. Since the average consumption of a household is around 5 kg it will cover most of the large segment. Further, people from the hotels and restaurants will tend to buy the larger package. Based on the demand the ratio can be modified in near future.
Based on the existing analysis the plant can produce at a capacity of 45 MT of wheat per day working for about 25 days a week and expected to operate at 80% of the capacity. It can produce a maximum of 765 MT of whole wheat per month along with 135 MT of bran. Based on the break-even analysis the production cost cannot be less than Rs. 8/kg excluding the bran value. At the same time the final list price must not exceed Rs. 11/kg as it will not create the value proposition in comparison with national brands. After assuming the figures the production cost will be fixed at Rs. 7.9/kg. So the total estimated annual revenue if the rate of production is 765 MT per month would be Rs.726 lakhs per year. Further the sale of bran per annum at the rate of 135 MT per month will fetch revenue of approximately Rs.24 lakhs per year. So the total revenue will be approximately Rs.750 lakhs which is more than the estimated profit. So, the label price for this product will be fixed at Rs. 10/kg.
The Place (Distribution):
The distribution margin will be fixed at Rs.0.6/kg and the retail margin will be fixed at Rs.1.5/kg. I have decided to appoint one distributor each at district level. Further we can encourage the distributers and retailers to promote our product among the customers.
Since the advertisement budget is restricted to Rs.50,000 per month we cannot run aggressive campaigning through television and print advertising. As Surya brand was already established in Madhya Pradesh, We can place attractive point of purchase displays at the retail outlets to attract customers. Apart from that we can distribute coupon for the larger 5 kg packets with Rs.2 discount offer on the next purchase of 5 kg packets.
The Marketing Organization:
I would suggest that 1 supervisor and 2 salesmen from SFP would be sufficient during the initial phase as we already have a market in Madhya Pradesh and the numbers can be increased when we expand to the new markets.
Based on the above analysis and considerations I would strongly recommend launching “Surya Whole Wheat Atta” in Madhya Pradesh at Rs.10/kg.