RESEARCH REPORT ON
BISCUIT MANUFACTURING SETUP
Biscuit is a inseparable item of baking industry and biscuit manufacturing business is very lucrative and profitable as it can be established with low investment even from home and has high consumption all over the world, as they are not only tasty but can be preserved for a long time. If we talk about India biscuit is considered as a favorite snacks with the tea and coffee, even for children many brands are producing healthy glucose biscuits which they take with one glass milk in the morning and evening for their better health, so marketing of biscuits has been done in such a manner that seems to be a basic need of every one’s life nowadays.
By varying the ingredients and flavors it is possible to produce a variety of biscuits, about 50% of the total biscuit production in our country is of glucose variety, thin arrow roots biscuits account for 10%, salted variety around 5%, and sweet assorted variety like coconut cookies, cream biscuits, etc about 25%.
Government agencies like ITDC, Defence, Railways, Airlines, etc. are the bulk consumers of biscuits, in recent years Bangladesh made biscuits have also found ready acceptance in the export market.
Broadly, there are completely two different types of business model that you can escalate in India, one is a small-scale biscuit manufacturing unit and it only sales the biscuit in the local market, another is a medium-scale unit that sales biscuits through a wide distribution network. Both models have the own pros and cons, however the second one ensures better revenue return and has easy expansion potential.
ANALYZE THE MARKET OPPORTUNITY FOR BISCUIT MAKING
If someone wants to start Biscuit Making Business then it is very profitable and home base business, in this article we put some analysis and the business plan regarding the biscuit making unit. An individual can start this business even he is a beginner as investor.
The biscuit market is very promising and expecting a higher growth in the near future, biscuit is all about effective decision-making and strategic planning as to how to sell, what kind of packaging should be done and what will be the pricing strategy etc.
Usually the success of biscuit brands depends on several factors including innovative packaging, new flavors, tastes, shapes etc, also rising health consciousness among the consumers through the electronics media is effective in the Indian consumer market.
BUSINESS MARKET SIZE
India biscuit market stood at $ 3.9 billion in 2016, and is projected to grow at a CAGR of 11.27%, in value terms, during 2017-2022, to reach $ 7.25 billion by 2022. Rising number of health-conscious consumers, expanding working population and increasing urbanization are boosting the country’s biscuit market. Moreover, augmenting disposable income along with changing lifestyle, increasing awareness regarding healthy diet and change in food consumption pattern are some of the other factors expected to propel demand for biscuits over the course of next five years.
In 2015-2016, the cookie segment, which includes brands such as Bournvita Biscuits and Britannia Good Day, witnessed a rising number of health-conscious consumers, an expanding working population and increasing urbanisation. These are boosting the country’s biscuit market.
Moreover, augmented disposable incomes, along with changing lifestyles, increasing awareness regarding healthy diets and changes in food consumption patterns, are some of the other factors expected to propel demand for biscuits over the course of the next five years.
According to 6Wresearch, the Indian biscuit market is projected to reach $8.2 billion by 2023. The plain biscuit segment captured majority of the market share in 2016. However, cookies and sandwich biscuits are expected to exhibit a high growth rate during the forecast period.
In terms of centre-filled biscuits, the segment is majorly dominated by the urban population. Further, non-premium biscuits accounted for majority of the revenue share in 2016. Nevertheless, premium biscuits are gaining huge acceptance in Tier-I and II cities.
In 2015, the cookie category accounted for the largest market share in the country’s biscuits market, and was closely followed by plain biscuits and sandwich biscuits.The western region is the largest regional market for biscuits in India, as it is home to millions of consumers with higher personal disposable incomes than the rest of India.
Biscuit industry market, size and brands available.
LICENSE & REGISTRATION
In starting the biscuit making business, you will need to register your business first, apart from the proprietorship operation, you have to register with the state ROC as LLP or Pvt Ltd or Ltd company, and then after getting the registration you can apply for the necessary permissions and licenses.
At very first apply for the MSME Udyog Aadhar registration, it helps in getting the government subsidy and financial assistance, apply for the Trade License from the local Municipal authority and obtain GSTIN for the tax submission.
As you are going to produce the food item, the compliance with the PFA Act is mandatory, Apply for the FSSAI registration and BIS certification to use the ISI mark on your product.
the Union Budget 2000-01, the Finance Minister who had imposed a 100% increase
in the rate of Excise Duty on biscuit from 8% as a part of the rationalisation
of CENVAT and introduction of single rate of Duty did not offer any concesison
on the Budget for 2001-02. On the other hand the 50% exemption to small packs
was withdrawn. During these years and in 2002, the Federation submitted strong
representations to the Union Finance
Minister seeking relief in the Excise Duty on biscuits and the Federation submitted its Pre- Budget Memorandum for 2002 demanding at least 50% Excise Relief.It is a matter of great satisfaction that the Govt. has, after 3 years, acceded to our demand and grated reduction in Excise Duty (from 16% to 18%) in the Union Budget for 2003-2004.
INTEGRATION OF VARIOUS FOOD LAWS
The Food Processing Industry have been experiencing the adverse affect of multiplicity of various Acts/ Rules and Regulations for food standards under the Prevention of Food Adulteration Act Standards of Weights & Measures Act, Food Products Order, the Meat Products Order, the Bureau of Indian Standards & MMPO, etc. affected the Food & Food Processing Sectors. They need to be modernised & converged.
As a consequence of various representations of industry, the Govt. of India has decided to set up a Group of Ministers (GOM) to propose legislation and other changes for preparing a Modem Integrated Food Law and related regulations.
PREVENTION OF FOOD ADULTERATION RULES: The Ministry of Health & Family Welfare, Govt. of India vide its Notification No. GSR 908 (E) Dt. 20.12.2001 has provided for printing of statutory symbol on all products containing vegetarian ingredients. The notification came into effect from 20 June 2002. As members may be aware the Govt. has earlier amended PFA Rules vide notification No. 245(E) Dt.4.4.2001 provided for statutory printing of the symbols of food packages containing non vegetarian ingredients. This notification has already come into effect from 4 October 2001.
STANDARDS OF WEIGHT & MEASURES (PC) RULES 1977
The Standing Committee on Food Standards has decided that the following issues be referred to Technical Committees to look into all aspects and to make recommendations to the Standing Committee:
(i) Revision of First Schedule as regards tolerance (maximum permissible error.)
(ii) Deletion of Rule 11 (a) and the Fourth Schedule for declaration of words “when packed” with net quantity declaration on packages.
At our request the representatives of industry have been included in the Technical Committee for each zone. Members of the Technical Committees will be visiting the factories of manufacturers for ascertaining the position regarding industry’s plea for not reducing the maximum permissible error in weight.
BUREAU OF INDIAN STANDARDS
The Meeting of the Bakery Confectionery and Nutritious Supplements Sectional Committee of BIS was held on 1 March 2002. The Draft standards for biscuit were discussed. FBMI submitted its suggestions on various issues including classification of biscuits into 5 categories – sweet /semi sweet, crackers, cookies and speciality biscuits. It has also been suggested that separate standards should be evolved for wafers. FBMI has also represented that proposal for Peroxide value should not be included in the standards for biscuits and there should not be any requirement of checking biscuits for micro biological parameters. Supporting data received from members on total plate count, coliform count, E coli and stapylococcus aureus, etc., have already sent to the Bureau of Indian Standards showing that bacteria cannot remain alive at the temperature at which biscuits are baked.
SALES TAX / VAT ON BISCUITS
As members are aware, though the Empowered Committee of Finance Ministers fixed the minimum floor rate of Sales Tax on biscuits at 8%, various State Governments are levying Sales Tax on Biscuits in the range of 8% to 16%.
The Sales Tax regime is proposed to be replaced with Value Added Tax (VAT) from 1 April 2003. The Federation has already represented that biscuits being a nutritious snack food product predominantly consumed by the consumers from the lower strata of society should be included in the list of goods at the minimum level of VAT. Representations have already been sent to Chief Ministers and other officials concerned in Punjab, Haryana, UP, Karnataka MP and Kerala. Many States such as Himachal Pradesh, Delhi, Arunachal Pradesh, Kerala have however, deferred introduction of VAT. The trading communities in Delhi, Tamil Nadu, etc. have resorted to agitations against levy of VAT. As far as biscuit is concerned, it is learned that VAT @ 12.5% is proposed to be levied by many states. FBMI has therefore, urged States to fix the rate of VAT on biscuits at the minimum level of 4% meant for items of mass consumption.
TRAINING PROGRAMME IN BISCUIT MANUFACTURE
With the objective of imparting Training to the personnel in the biscuit industry as also to prospective entrepreneurs, FBMI in collaboration with its members and other organizations, conducts training programme in
Biscuit Manufacture for the last two decades. The XIII Training Programme was organized at CFTRI Mysore on 28 to 30th August 2001. The XIV Training Programme has just concluded at the Resort Country Club, Gurgaon, Haryana, from 25th to 28th March 2003. M/s Britannia Industries Ltd and Parle Products Ltd cosponsored both the Training Programmes.
FOOD REGULATORY MEASURES – AN OVERVIEW
During the period underreport, there has been various proposals for changes/amendments in the important Food Law affecting our industry, such as PFA Act/Rules, Standards of Weights & Measures (Packaging Commodities) Act/Rules, etc.
Some of the important issues in this area of Food Laws and follow up action by FBMI are given below :-
PACKAGED COMMODITIES RULES – STANDARDS OF W & M ACT
The Dept of Consumer Affairs (Director of Metrology), Govt. of India, proposed mandatory printing of 1st point price, in addition to MRP, for food products like biscuit etc. Our Federation submitted objections to the said proposals, as there has never been any grievance from consumer forums against the biscuit industry and this would on the one hand add to the cost of packaging/printing and on the other hand would only create confusion for the consumers without any benefit.
Similarly, our Federation on its own and through apex organizations, effectively pursued and objected to the proposed amendment in the Standards of Weights & Measures (PC) Rules, for making 50% reduction in the present Maximum Permissible Error in weight of biscuit (Tolerance Limit), on the ground that various factors such as atmospheric/environmental changes affect moisture, temperature, and consequently affect the weight of biscuit, at both the manufacturing, marketing/retail levels, and hence the present Tolerance Limit should be maintained. The Sub-Committee of the Committee on Food Standards, constituted sub grounds of experts in various Zones/States to review the issue with representatives of industry, to visit biscuit units and recommend their view points on Tolerance Limit, together with another proposed amendment of discontinuing with the proviso of printing “When Packed” on the packages of biscuit and other food products, which was also objected to by our Federation by representations and meetings in the Sub Committee of the CFS. Expert from our membership participated in this process through CIFTI. At the time of this Report, the issues involved are under consideration/ review by the Committee on Food Standards (CFS).
APPROVAL OF ADDITIVES
The list of various additives needed for making Biscuit is required to be approved by the Standing Committee on Weights & Measures. The Committee has held various sittings in this connection. FBMI has represented on he Committee for scrutinizing various additives for which various food processing industries have sought approval.
LICENCES & REGISTRATION
After you have decided and accumulated capital you must acquire all kind of raw materials and machines for the plant. But before that few things must be considered like did you register your company? Is your plant is legal? If not then it is important that you follow all the necessary details and patterns to acquire the ownership and register your firm accordingly with Register of Companies, you need to get a valid trading license and as it is a food item then you must also need a valid license from FSSAI to run the plant, and if it is a commercial biscuit making company so it is important that you take up an NOC from Pollution Control Board.
For setting up a biscuit manufacturing company few things must be considered as by varying the ingredients and flavours it is possible to produce a variety of biscuits, about 50% of the total biscuit production in our country is of glucose variety, thin arrow root biscuits account biscuits account for 10%, salted variety around 55 and sweet assorted variety like coconut cookies, cream biscuits etc about 25%.
The minimum economic capacity of a unit manufacturing biscuits is 525 tons per annum based on a single shift operation of 300 days working schedule in a year.
LAND & BUILDING
The unit may require about 1500 sq.m land with a covered area of about 800 sq.m for setting up this project.
The annual requirement of main raw materials for the manufacturing of 525 tonnes biscuits per annum at 100% capacity utilization is estimated as follows:
- Wheat flour – 345.00MT
- Sugar – 105.00MT
- Vegetable fat – 62.28 MT
- Liquid Glucose – 8.16 MT
- Misc items milk powder, yeast colours, flovours , fat, packaging etc
The unit may require a total connected load of about 80 KVA and a maximum demand load of about 75 KVA, its annual requirement of water is estimated at about 3000 KL.
The typical ingredient mix for plain biscuits is given below.
- Flour – 200.00
- Fats and shortening – 50.00
- Invert sugar syrup- 62.00
- Ammonium bicarbonate – 1.34
- Sodium bicarbonate – 1.80
- Non fat milk powder- 11.00
- Eggs- as required
- Salt – 2.00
- Yeast- 2.66
- Flavour – 0.44
- Edible colours- 0.22
ESTIMATED COST OF PROJECT
The cost of a 525 tonnes per annum capacity biscuits project is estimate at $136986.3 ( after considering all mentioned and non- mentioned expenses).
SUGGESTED MEANS OF FINANCING
- Long term loans from financial institutes
- State cash subsidy
- Promoters capital
Starting its operations in 1929 with just 12 People, Parle Company has come a long way in the last 8 decades. It has emerged as the largest biscuit brand globally. To reposition itself and drive a fresh campaign Parle has roped in earlier famous writer – lyricist Javed Akhtar for the campaign “Bharat ka apna Biscuit”. With this repositioning Parle is eying on increasing its market share in premium segment biscuits from current 15 % to 20 % in the year 2017-2018.
Not only that, Parle has recently come up with a campaign which wants to highlight the many different types of biscuits which Parle manufactures. The reason for this campaign was that Parle as a mother brand was getting weaker as compared to the brands of its individual products such as Krackjack, 20-20, etc. Thus, Parle has a keen sight on the goal and it can surely achieve the same because of the fantastic product portfolio that it has.
SEGMENTATION, TARGETING, POSITIONING IN THE MARKETING STRATEGY OF PARLE-G
Segmentation is the process of defining the characteristics of the subdivision of a population or the market. Parle uses psychographic and demographic segmentation strategies to understand the different set customers and their respective needs. Demographic segmentation is majorly used for standard range of biscuits which have to be distributed far and wide. Psychographic segmentation is used for premium range of biscuits such as Milano targeted towards the SEC A and SEC B classes.
It’s customer targeting process both differentiating and undifferentiated segmentation strategies depending on the kind of product. Like it has Parle –G which is a product for customers of all group and income while it has premium biscuits brand also meant for middle/upper-middle income customers.
Parle has repositioned itself as a value based brand offering biscuits which have Indian origin and is known for creating memories.
Parle G – “Bharat ka apna Biscuit”. For the main brand “Naam to suna hi hoga”.
Parle G is one of the most widely distributed biscuit brands in India and has fantastic mass appeal. Many people love to have Parle G with their evening tea or Coffee. It is found in all nooks and corners of the country and is exported to several other countries as well. The turnover of Parle G is the driving force behind all other products of Parle.
HERITAGE: Parle has a strong legacy of more than 70 years and its associations with people for such long time is helping the company in being competitively ahead of its competitors.
PRICING: Keeping price same from 1996-2006 without compromising on quality, Parle did this by adding more manufacturing locations, increasing efficiency of the factories and reducing transport cost which helped the company in emerging as the largest selling biscuits in the world by volume.
ECONOMIES OF SCALE
Parle has become such a big brand, it enjoys fantastic economies of scale. A single Parle distributor can distribute many different products of Parle. The fixed costs remain the same whereas variable cost increases which is always good for a company.
Parle produces nearly 400 million biscuits a day and makes it available to more than 5 million outlets. Parle make its products available through a variety of distribution channels. It distributes it through retail outlets, distributors, e-commerce sites, resellers etc.
The market in which Parle operates is overcrowded with a large number of companies eating up each other’s market share. Parle has 27.5% market share as of 2015 whereas in 2015, Britannia had overtaken parle with 28% market share. So you can see the neck and neck competition which is happening in the biscuit industry in India.
Prepared by : Prachi Diwedi