Cost Analysis Of Britania Bread

IES MCRC COST ANALYSIS OF BRITANNIA BREAD

Eat Healthy, Think Better

CERTIFICATE

Cost Analysis - Britannia Bread

This is to certify that the Project titled: Cost Analysis of Britannia Bread has been submitted by: • • • • • •

Atul Ratnapakhi Reshma Rasal Sheetal Rathod Sneha Patil Vikas Rathod Vineet Saraf

Towards fulfillment of the requirement of PGDM course 2008 – 2010 and has been carried out under the guidance of Prof. Jayesh Jain at the Indian Education Society’s Management College & Research Centre. The information submitted is true and original to the best of our knowledge

_____________ Guide: Place: Date:

------------------------------

Prof Jayesh Jain

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Cost Analysis - Britannia Bread

DECLARATION We hereby declare that this report submitted in partial fulfillment of the requirement of the award for the Post Graduate Diploma in Management Studies to IES Management College is our original work and not submitted for award of any titles or prizes. While the data required for analysis has been sourced from various magazines, books and portals, the analysis is original. We further certify that we have no objection and grant the rights to the IES Management College to publish any chapter/ project if they deem fit in journals/ Magazines and newspapers etc without our permission. Place

: Mumbai

Date

: 2nd September, 2008.

Name

: Sneha Patil

(76)

Reshma Rasal (82) Sheetal Rathod Vikas Rathod

(83) (84)

Atul Ratnaparkhi (85) Vineet Saraf Class

(86)

: PGDM 1st year

Division: B

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Cost Analysis - Britannia Bread

ACKNOWLEGDEMENT One is filled with great sense of pride when students are able to distinguish themselves in works, even beyond the four walls of the classroom. This work is synergistic product of our mind. We are grateful to many Tran generational source and roots of wisdom that helped us to make this project viable and also on the right time. The material and arrangement has slowly evolved and has imbued those who has deeply and sincerely immersed in it. We are very grateful to Prof. Jayesh Jain for giving us the fine opportunity by making us move out of the four walls of classroom and taking the practical look. I am indebted to IES Management College and Research Centre and University of Mumbai for this golden chance

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Cost Analysis - Britannia Bread

Index Sr.No

Topic

Page No

1

An Introduction to Food and Beverage Sector

06

2

Bakery Industry

07

3

Introduction To Britannia Industry

08

4

Britannia Daily Fresh Bread

09

5

SWOT Analysis

10

6

Cost Sheet

11

7

Cost Sheet Analysis

14

8

Conclusion

17

9

Bibliography

18

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Cost Analysis - Britannia Bread

AN INTRODUCTION TO FOOD & BEVERAGES SECTOR The multi-billion food and beverage industry comprises several markets including bakery products such as bread, biscuits etc., milk and dairy products, beverages such as tea, coffee, juices, bottled water etc., snack food, chocolates, etc. beverage, confectionery, processed foods and others. India's Food and Beverage industry is valued at Rs. 3584 billion. India produces above 600 million tonnes of food products every year and is one of the major producers of food in the world. The food and beverage industry registered a growth rate of 8.5% in 2005-06. With increase in disposable income of consumers, growing awareness among consumers about health products, rapid urbanization, and increasing popularity of convenience foods, food and beverage sector is expected to grow at a high rate. This sector holds a huge potential to grow because of the increase in advertisement spending, awareness campaign about products in urban as well as rural areas, and large scale transformation. The food and beverage industry is primarily driven by consumer health trends. Presently, the food and beverage industry is in a dynamic phase, marked by a high degree of competition. As product development within the food and beverage market moves towards a focus on health and nutrition, the growth and development of food manufacturers in the market depends on having prudent strategies in place, which can be applied globally. In effect, this has created a highly competitive market place, which fosters growth of participants with a clear vision of "growing with their customers." The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico, Conagra, Pepsi, HLL, Pillsbury, Nestlé, Amul, ITC, Dabur, Britannia, Cadbury, Smith Kline Beecham, The Surya Food and Agro Private Ltd. 6 | Page

Cost Analysis - Britannia Bread

BAKERY INDUSTRY Bakery industry in India is probably the largest among the processed food industries, production of which has been increasing steadily in the country. Bakery products once considered as sick man’s diet have now become essential food items of the vast majority of population. The two major bakery industries, viz., bread and biscuit account for about 82% of the total bakery products. The annual production of bakery products which includes bread, biscuits, pastries, cakes, buns, rusk, etc., most of which are in the unorganized sector, is estimated to be in excess of 3 million tonnes. The production of bread and biscuits in the country both in the organized and unorganized sectors is estimated to be around 1.5 million tonnes and 1.1 million tonnes respectively. Of the total production of bread and biscuits, about 35% is produced in the organized sector and the remaining is manufactured in the unorganized sector. Indian Bakery sector is indicating significant growth both in terms of volumes and customer base. The sector, which is estimated at Rs 3,500 crore, is currently registering a 40% growth according to industry sources. The production of Bakery products has increased from 5.19 lakh tonnes in 1975 to 18.95 lakh tonnes in 1990 recording four-fold increase in 15 years.

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Cost Analysis - Britannia Bread

Some of the well-known and most frequented bakeries in the country are Sweet Chariot, Modern Bakery, Daily Bread in Bangalore, Monginis, Birdie's, Croissants in the west, and in the north and eastern parts of the country, there are quite a few big players too.

BREAD Bread is the cheapest and basic instant food available for consumption. Though bread is not a staple food in the country, its consumption has increased over the years. In India it is still a secondary staple food when compared to chapatti, puri or rice. The different types of bread available are White bread, Whole meal or whole wheat bread, mixed grain bread, Kibbled wheat and cracked wheat bread, Fibre-increased white breads, Rye bread

INTRODUCTION TO BRITANNIA INDUSTRIES The story of one of India's favorite brands reads almost like a fairy tale. Once upon a time, in 1892 to be precise, a biscuit company was started in a nondescript house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The company we all know as Britannia today is one of India’s best known brands and also one of the most admired Food Brand in the country. Having succeeded in garnering the trust of almost one-third of India's one billion population and a strong management at the helm means Britannia will continue to dream big on its path of innovation and quality. And millions of consumers will savors the results, happily ever after. The company has four production 8 | Page

Cost Analysis - Britannia Bread

facilities, 4367 employees, and sells its products in over 600,000 outlets across India. The Britannia Brand is all about eating healthy for leading a better life. It is the largest company in the food processing industry whose product range also includes breads and cakes. Britannia has a basketful of goodies with biscuits like Nice Time, Tiger, Marie Gold, 50 50 Maska Chaska, Milk Bikis, Pure Magic, Time Pass Nimkee, Treat, Good Day, Little Hearts, Nutri Choice, Nutrichoice Digestive, Daily Fresh Bread and Britannia Cakes.

BRITANNIA DAILY FRESH BREAD Till 1958, there were no breads in the organized sector and bread consumption was a habit typified by the British. Then, a mechanised bread unit was set up in Delhi with the name "Delbis" which produced sliced bread and packed it under the Britannia name. Thus, Britannia was not only the pioneer, but also inculcated in the people of Delhi the habit of eating white sliced bread.

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Cost Analysis - Britannia Bread

The Mumbai unit came up in 1963, and there again Britannia was the first branded bread in the city. From a company offering 2 packs - the 400gm and the 800gm plain white sliced bread - Britannia has evolved into a company offering 22 packs, catering to a variety of taste and price segments in the bread consuming market. The last couple of years also saw the introduction of Whole Wheat Bread as a part of "Eat Healthy, Think Better" credo. Britannia Daily Fresh Bread, which finds its way to over 6 lakh households daily, is the mainstay of the company’s non-biscuit business at present. Britannia hopes to drive this emerging business through the exploding modern trade and has already gained access to Reliance Retail, Trinethra and Fabmall for its breads. Britannia is widely recognized as an innovative marketer.

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Cost Analysis - Britannia Bread

SWOT ANALYSIS OF BRITANNIA BREAD

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Cost Analysis - Britannia Bread

COST SHEET OF BRITANNIA BREAD PROFORMA OF COST SHEET

Cost sheet for every 1lac units produced and sold.

Cost Per Unit

Quantity Manufactured Quantity sold

1 1

100000 100000

CPU(Rs) DIRECT COST Raw materials consumed Opening stock of raw materials Purchases of Raw Materials (-)Closing stock of Raw Materials Materials Consumed Direct labour/wages Direct cost/expenses

0 5.805 0 5.805 0.124 0.2415

PRIME COST INDIRECT COST Factory/Works Overheads Indirect labour Depreciation on Machinery Works Overheads Cost of Maintanence Other Factory Expenses Supervisors Salary Power & Fuel

6.1705

0.122 0.675 0.05204 0.0589 0.0282 0.0385 0.5678 12 | P a g e

Cost Analysis - Britannia Bread

Total Overheads

1.54244

FACTORY COST/WORKS COST Office and Administrative Overheads Depreciation on office furniture@7% Office Rent Salary to Staff Office and General Expenses Telephone expenses Electricity and Lightings Printing and stationary Total Office and Administrative Overheads COST OF GOODS SOLD Selling and Administrative Overheads Sales Commission Salary of Salesman Carriage Outward Sales Expenses Total Selling and Administrative Overheads COST OF SALES PROFITS SALES

7.71294

0.0281 0.0585 0.089 0.0257 0.0219 0.03123 0.00294 0.25737 7.97031

0.705 0.1 0.12798 0.057 0.98998 8.96029 1.03971 10

Raw Materials Cost 13 | P a g e

Cost Analysis - Britannia Bread

Flour Water Yeast Salt Raw Materials per unit

3.756 0.892 0.6789 0.4781 5.805

NOTE The Value are determined on the basis of apportionment as the company produces more than one product (including fixed cost) Cost sheet for every 1lac units produced and sold. Some of the above Values are estimated

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Cost Analysis - Britannia Bread

COST SHEET ANALYSIS Direct Cost: Direct materials To manufacture one unit of bread the following RAW MATERIALS are required. • • • •

Flour Water Yeast Salt

Direct labor/wages: Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the PRIME COST. This percentage is low because a good amount of work is automated as a result of which Human resources are diverted to more productive areas such as SALES and MARKETING. Direct cost/expenses: 15 | P a g e

Cost Analysis - Britannia Bread Direct cost includes costs incurred in bringing the raw materials into the factory which is Carriage inward. It also includes the amount paid loading unloading charges and other petty expenses.

Indirect Costs: Factory Overheads: The Factory Overheads includes the indirect labor, Depreciation on Machinery, Works Overheads, Cost of Maintenance, Other Factory Expenses, supervisors Salary and Power & Fuel.

• •

Indirect labor: The amount of indirect labor is Rs. 0.122 per unit. This value includes sweeper charges, support staff etc. Depreciation on machinery: The depreciation is calculated on the basis of WDV calculated @ 10% p.a. This value amounts to around 43.7% of the FACTORY OVERHEADS. The percentage high because of the level automation and technology used for production.

•

Power: Per unit power and fuel consumption is Rs. 0.5678.

•

Other factory expenses: Other factory expenses include maintenance of factory and other miscellaneous expenses.

Office and Administration Overheads:Office and administration overheads include Depreciation on office furniture@7%, office rent, salary to staff, office and general expenses, Postage and Telegrams, telephone expenses, electricity and lightings •

Salary to staff: The salary paid to staff comes up to around Rs. 0.089 per unit cost.

•

Office and general expenses: This comprises of refreshments (tea and snacks), Postage and Telegrams and other petty expenses.

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Cost Analysis - Britannia Bread •

Printing and stationary: This consists of photocopy charges, printouts and other stationary items.

•

Telephone Expenses: Calls made by the staff members.

•

Electricity and lightings: It consists of office lighting and air conditioning expenses

Sales and distribution overheads:Selling and distribution cost includes Sales Commission, Discount allowed, Salary of salesmen, Carriage outward and Sales expenses •

Sales Commission : As a part of encouragement for sales people, they are given commission of 5 % of the total sales done by them.

•

Discount allowed : To attract whole sellers to buy the product they are offered a discount of 5% on the selling price.

•

Salary of salesmen : The average salary paid to the sales people is around Rs. 0.1 of the total per unit cost of the product. Carriage outward : To carry the finished goods to the whole sellers, the transportations charge per unit/product is set as RS 0.12798. Sales expenses : This includes expenses incurred on advertisements and promotional expenses such as newspaper advertisements, hoardings, TV commercials etc.

•

•

Profit:

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Cost Analysis - Britannia Bread The Profit arise out of selling per unit of the product is 11.603% of the total per unit cost price

CONCLUSION As per the study, we would like to conclude that bread not being the staple food in India, has definitely evolved as a substitute for chapattis, rotis, rice, etc. It is easily available due to its excellent distribution channels. Britannia bread has acquired almost 50% stake in daily bread market. Today a variety of breads are available, such as brown bread, whole wheat bread, chutney bread, etc.

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Cost Analysis - Britannia Bread Even after having many competitors around, Britannia bread has managed to capture a large market share not just in the urban but has also managed to penetrate the rural markets.

Bibliography Online Sources • www.britannia.co.in • www.google.com • www.wadiagroup.com • www.capitaline.com 19 | P a g e

Cost Analysis - Britannia Bread Books & Authors •

Cost & Management Accounting – Ravi Kishore

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