Take it Eezee

Submitted By : Preetha D.

Case Details
Eezee is a one-minute way to Soft Drink Targeted at lower middle class and lower class consumers MRP of Re.1

Calculations
Sales Tax : 8%
Comes out to 7.4p per pack

Retailer commission : 35%

Comes out to 24p per pack

Distributor commission : 15%

Comes out to 9p per pack

So remaining 60p (approx) goes to Ravi, of which 40p is taken up for production costs and profit of 20p per sachet

Outlets in Hyderabad
Total no. of potential outlets : 17143 Class C & D outlets : 11143 Class B outlets : 5143 Total outlets targeted : 11143 + 5143 = 16286 Total demand for product : 642780 sachets/week

Productivity and Earnings

100 cartons a day = 108000 sachets/day Assuming a 6-day working week,
Productivity = 6*108000 = 648000 sachets/week

Assuming Ravi is able to sell every sachet he produces, and taking 20p profit from each sachet sold at Re.1, earnings become 648000*0.2 = Rs. 129600/week i.e. Rs. 518400/month

Costs
Transportation costs (inside Hyderabad) = Rs.300/day for 80 kms. Per month costs work out to : Rs.7200 Salesman salary : Rs. 7000 Salesman productivity : 40outlets/day i.e. 960 outlets per month To cover all outlets in Hyderabad, no. of salesman required : 16286/960 = 17 salesman Total salesmen salary = 17*7000 = Rs.119000 per month

Costs contd.
Transportation costs outside Hyderabad :
5p per sachet Depending on the number of outlets in each of the towns, one can calculate the transportation costs After the costs are deducted from the earnings of the company, the company is still making profits. The exact calculations would need to be made to arrive at exact figures.

 Assumptions made :
Company able to sell all units produced No advertising, yet consumers know of the product and buy it Target Customers
Class B, C, D outlets have been taken into consideration for calculations. One cannot be sure if all these come under target audience

Conclusion
If Ravi is willing to take a risk for a month and try out the venture, it can be done. The venture will be profitable only when sales are as good as the assumptions. Without advertising, one cannot be sure of the reach of the product. Hence, break even time would be crucial. Once more profits start coming in, the company can invest in marketing of the product, and thereby increase sales.