AReport on

Market &FinancialFeasibility of SabarTea

in Ahmedabad

Submitted by:-Ankit PrajapatiAlpesh Parmar S

ubmitted to:-AES

PGIBM

Preface

As a student of MBA when I acquire all the theoretical knowledge, it

is both necessary and advisable to acquaint the students with the real

situation through, well-planned project in relevant fields. Using all the

theoretical knowledge and applying into the real application the student

learns to develop efficient real world application at the time of project

training. So, the project training is very important for the student for self-

development and self-confident. Also student learns organizational structure,

rules and regulations and management in a real sense, which helps student to

get discipline in life.

Acknowledgement

Study of business management is all about gaining knowledge from

the experience one gets from the corporate world. When students get into the

corporate world to gain the knowledge, he is novice. They need

opportunities and of-course help of his /her senior to explore the aspects of

business management.

I was given this opportunity to work by the leading tea brand of

Sabarkantha district. I am obliged to Sabar tea packers and process for

providing me an opportunity to undergo training in this esteemed

organization.

I wish to express my heartfelt gratitude to Mr. Moin Sabugar, assistant

sales manager of tea packers and process & Mr. Vishnu Solanki, accountant

of tea packers and process for their immense help in making my training and

project fruitful.

I would like to thank Dr. A.H. Kalro for giving us the opportunity to

acquaint ourselves with the nuances of the real corporate world & I am

thankful to all faculty members of AES PGIBM for their kind support.

Ankit PrajapatiAlpesh Parmar

Table of Content Sr. No. Particulars Page No.1 Introduction

a) About the companyb) Introduction to teac) What is tea?d) Characteristics of teae) History of teaf) Types of teag) Process

e) Tea industry2 Marketing Feasibility

a) Introductionb) Market survey

i. Consumer’s surveyii. Retailer’s survey

c) Competitors analysisd) 4P’s of Indian tea industrye) Five forces model f) Limitations of the survey

3 Financial Feasibility a) Introductionb) Cost Sheetc) Trading and Profit & loss accountd) Balance Sheete) Break even pointf) Evaluation of the project

i. Ratio analysis4 Suggestion

ConclusionBibliography

About the company

SABAR TEA PACKERS AND PROCESSDoulat vilas road, Pologround, Himmatnagar – 383 001, Sabarkantha

Philosophy: Build long lasting relationships through trust and fair play towards all

stakeholders. Be result oriented.  Contribute positively. Be progressive and lead from the front.  Change with the times. Be socially responsible.  Return to the society a share of the gains

from commercial enterprise

History:

Sabar tea packers and process started its business in tea industry in 1965 with a vision to be the leader in tea business in India by the sabar groups founder Mr. Nisarbhai Sabugar. From 1965 when Sabar group used to sell loose tea, now it sells 100 tons to tea each month.

Growth over the years:

1965 the year when Sabar tea packers and process was established, it initially used to sell loose tea.

1970, introduced branded tea in name of ‘Chand sitara’. Daily sales was 21 kgs.

1988, started using poly paper for packaging. Daily sales was 100 kgs.

1998 took registered trademark of Sabar Tea 1990, small packets of amount Rs. 2, Rs. 5 and Rs. 10 where

introduced.

1990, started door to door marketing for rural sector. 1995, introduced premium segment offering special patti, special

dana and special bhuki. 2003, started their business in Panchmahal and various other

districts of north Gujarat.

Management:

The Sabar group is led by Mr. Nisarbhai Sabugar, a highly regarded tea expert and tea taster, with rich experience in the tea business.  He plays an active role in the tea industry by being an involved member and leader of various tea associations.

Mr. Rafik Sabugar, Managing Director, a commerce graduate and also a tea taster with three decades of experience behind him, look after the Company's Finance and Taxation matters.

Mr. Moin Sabugar, Assistant sales manager, an Mba by qualification, is a widely travelled professional with rich and varied experience in the marketing and production of tea. He plays a key role in developing the Company's sales.

Introduction of tea

Tea is the most popular drink in the world, next to water. Every year,

an astronomical 7, 68,500,000,000 cups of tea are consumed around the

globe. Great Britain, famous for the custom of afternoon tea and for the

introduction of that habit to the world, holds the world record as the largest

importer of tea. It also boasts of the highest consumption of tea per capita in

the world - every British man, woman and child drinks nearly 4 cups of tea

every day!

Tea, made from the tender leaves and buds of a once wild tree has had

a strong influence for centuries on the economy of tea producing, trading

and drinking countries. For a long time, the tea trade had a major impact on

Britain’s economy. Tea is Sri Lanka’s largest foreign exchange earner. In

India, tea holds second place as an export earner and the Indian tea trade

employs more people than any other industry.

What is tea?

Tea is the most popular non-intoxicating beverage

in the world that is enjoyed by the rich and the poor alike.

Tea drinking was quite common in china as early as the

6th century B.C. over a period of time; the neighbouring

countries in south East Asia such as Japan, Malaysia, and

Thailand picked this habit. Western nations started

importing tea from china only in the 17th century.

The British developed India as a sourcing base in the 19th century to reduce

their dependence on China. During the late 19th century and early 20th

century, Tea cultivation become popular in other colonies like SriLanka,

Tanzania, Malawi, Kenya, etc…In the last decade, world production growth

decelerate from 3% per annum to 1.5% per annum.

TEA CHARACTERISTICS

Types and Quality

Tea is distinguished as green or black based on its apparent colour.

While Black Tea is manufactured by deliberate fermentation of leaf juice,

Green Tea is manufactured by preventing fermentation. Black Tea has a

stronger taste and liquor. Green Tea is light and is perceived to have

pharmaceutical properties.

Black Tea can be of two varieties: leaf and dust. Leaf Tea can also

be processes as orthodox or CTC (Crush, Tear, And Curl), CTC

production entails fermentation. CTC gives higher cup page (almost twice)

for the same quantity of Tea and has stronger liquor, while orthodox Tea

is light and retain aroma.

Tea quality is measured on the basis of liquor, aroma/flavour, and

leaf appearance. Consumers perceive quality on the attributes of taste,

pungency, strength, freshness, color, and packaging.

Value Addition

The most popular form of value addition is branded Tea. This

involves not only the packing of Tea but also blending of other varieties to

maintain consistent taste. To arrive at a blend, expert Tea tasters sample

hundreds of liquor. Convenient drinks like instant Tea (soluble tea

powder), Tea bags (bags dipped in hot water), ready-to-drink Tea (served

in cans), and flavoured Tea (with vanilla or strawberry flavour) are

becoming popular in developing countries like the US and Japan.

Productivity And Quality

The art of plucking, fine-turned over the last 200years, requires two

fresh Tealeaves and bud to be plucked manually. The productivity can be

measured as per unit of labour (man year) and per unit of land (hectare).

Mechanized plucking enhances productivity, but with compromise on

quality, as coarse leaves also gets plucked.

For increased production, some producers allow plucking of coarse

leaves with fresh ones. Ensuring premium quality requires compromise on

productivity. The productivity also depends on the age of Tea bushes,

genetic material, irrigation, fertilizer, cultivation, techniques, etc; Old bushes

are re-implanted to improve productivity.

Inconvenient but Healthy Drink

Tea is very inconvenient drink to brew. The tendency to form a

creamy layer of caffeine-tannin adds to the inconvenience. Tea, besides

having properties of fatigue amelioration, is believed to have chemicals

that help in maintaining cholesterol level and in preventing cancer.

History of tea

Tea is nearly 5,000 years old and was

discovered, as legend has it, in 2737 B.C.

by a Chinese Emperor when some

Tealeaves accidentally blew into a pot of

boiling water. In the 1600s, Tea became

popular throughout Europe and the

American colonies. Since Colonial days,

Tea has played a role in American culture and customs. Today American

school children learn about the famous Boston Tea Party protesting the

British Tea Tax -- one of the acts leading to the Revolutionary War. During

this century, two major American contributions to the tea industry occurred.

In 1904, iced tea was created at the World's Fair in St. Louis, and in 1908,

Thomas Sullivan of New York developed the concept of tea in a bag. Tea

breaks down into three basic types: Black, Green, and Oolong.

STORY OF TEA began in ancient China over 5,000 years ago. According

to legend, the Shen Nong, an early

emperor was a skilled ruler, creative

scientist, and patron of the arts. His far-

sighted edicts required, among other

things, that all drinking water be boiled

as a hygienic precaution. One summer

day while visiting a distant region of his realm, he and the court stopped to

rest. In accordance with his ruling, the servants began to boil water for the

court to drink. Dried leaves from the near by bush fell into the boiling water,

and a brown liquid was infused into the water. As a scientist, the Emperor

was interested in the new liquid, drank some, and found it very refreshing.

Therefore, according to legend, tea was created.

Tea Story in India

The credit for creating India's vast tea empire goes to the British, who

discovered Tea in India and cultivated and consumed it in enormous

quantities between the early 1800's and India's independence from Great

Britain in 1947. The Scottish adventurer, Robert Bruce, discovered Tea

plants growing in Assam in the 1820's.

At this time, no one thought that Tea existed in India; however Major

Bruce discovered the plants growing wild in the jungles controlled by the

tribal chiefs. The British East India Company's other sources to supply the

English consumers of Tea. In 1834, a Tea committee was appointed to

investigate the possibility of cultivating Tea in India. After a thorough

investigation and study of the crop, the first commercial batch of Tea ever

produced outside of China came from Assam in 1839. The first contract for

London brokers issued Indian Teas between 500 and 1,000 chests at that

time.

TYPES OF TEA

The classic definition of Tea is the brew made from the infusion of water

and the leaves of and evergreen plant of the Camellia family.

In the Tea Industry, Tea is defined as the dried processed leaves of Camellia

Sinensis or the Sinensis. Commercially, there are the 3 major varieties of

Camellia Sinensis. The China type, the India (Assam Region) type and the

hybrid type (a cross breed of the China and India types.

Tea breaks into 5 basic types.

Green Tea

White Tea

Oolong Tea

Black Tea

Scented Tea

Green Tea

Green Tea is nothing more than the leaves of the Camellia Sinensis that

have been processed a certain way. Green Teas, like white Teas, are

closer to taste like fresh leaves or grass than the Black or Oolong. They

are also lower in caffeine and have higher antioxidant properties.

White Tea

White Tea is similar to Green Tea, in that it’s undergone very little

processing and no fermentation. But there is a noticeable difference in

taste.

Oolong Tea

The best way to describe Oolong Tea is that they are somewhere in between

Green and Black Tea. This is because of they are only partially oxidized

during the processing.

Black Tea

They are highest in the Caffeine. Black Tea is the most popular Tea in

the world. It is the Tea most widely used in making Iced Tea and

English Tea.

Scented Tea

Scented or Flower Tea is either Green or White Tea that has been

infused by certain flower.

Process

Darjeeling Teas are still manufactured using old industrial techniques developed in the late 1800's. These traditional methods are collectively termed as 'Orthodox Production'. By these methods Darjeeling Teas are produced without 'cut & crush' of tender Tealeaves maintaining the inherent Darjeeling Tea aroma. Although differing leaf varieties require intricate variations in processing, the stages undergone are uniform. With the advancement in technology the Orthodox procedures are gradually being replaced by highly mechanized methods with their primary focus on yields. But in Darjeeling hills 'Quality' is the primary focus and it is never compromised with the quantity. Darjeeling Tea planter is still producing the finest Teas of the world using these Orthodox methods with utmost attention on the process. Of late, few gardens are changed to Green Tea manufacture especially during the rainy season thus producing the finest quality of

flavoured Green Teas.

WITHERING

It is the first stage of Tea manufacture. During withering harvested Tea flush is evenly spread on the withering troughs, which are normally 4 to 5 feet wide and 50 to 70 ft long. During the process hot and cold air is blown through to remove the moisture of fresh leaf to 30-40 percent, which is achieved during 16 to 18 hours of period. The prime object of withering is to make the turgid leaf flaccid and prepare the leaf for next stage to facilitate rolling.

ROLLING

The withered leaf is charged in the rollers, which vary in size. Normally they are 36" and 48" rollers capable of rolling 70 to 120 kg of withered leaf. The

pressure is exerted on the leaf in 'open and pressure' sequence. This operation lasts for 45 minutes. During this process Tea leaf is twisted as a result of repeated rolling action and simultaneously leaf tissue ruptures thus forcing out the cell-sap which spreads as a thin film on the surface of the leaf. Various enzymes and their substrates come in contact and enzymatic oxidation starts at this stage. The Green colour of leaf starts diminishing and brown coppery colour of leaf begins to appear.

FERMENTATION

Rolled leaf is put on fermentation racks specially made of tiles, cement or aluminum. Fermentation rooms are kept clean and cold. In Darjeeling fermentation is carried out at low temperature. In hot season the air is kept humid with the help of humidifiers with less than 200c hygrometric difference Optimum fermentation is adjudged by the subjective assessment of the Tea maker. Fermentation period varies from 2 to 3 hrs depending on the type of leaf, degree of wither, temperature, availability of oxygen and fermenting ability of the Tea flush. The time of fermentation is reckoned from the time at which rolling begins. Fermentation is a very sensitive process. Even 5 minutes time delay in adjusting the correct fermentation period is likely to deteriorate flavour appreciably. During fermentation the leaf changes colour and becomes dark coppery. A typical aroma develops at this stage. The term 'Fermentation' is a misnomer and, in fact, it is an oxidative process. Oxidation of catechin / Polyphenols by the enzyme Polyphenolic oxidize is the main reaction of the process that imparts 'Tea character' to the Black Tea

FIRING / DRYING:

Fermented leaf is loaded onto the dryer, which comprises perforated moving trays. The dryer inlet temperature is maintained at 200 to 2400F. Thickness of spread, speed of trays and volume of air blown through are regulated meticulously so as to achieve the correct drying. Low exhaust temperature often produces stewed Teas while high temperature in the initial stages is apt to casehardening of Teas. The whole process of drying is completed within 20 to 30 minutes. The moisture content of the final product in Darjeeling Teas is kept at 2 to 3 percent. Darjeeling Teas are normally fired at high temperature, which is considered essential for squeezing the correct balance of volatile flavoured compounds in high quality Teas. During the drying process enzymes responsible for fermentation are inactivated and even after the Tea is dry the maturation process continues and Tea attains the mellowness a desirable character of Darjeeling Teas.

SORTING & GRADING:

The bulk Tea is sorted on mechanically oscillated sieves. The sieve size decreases gradually from top to bottom. Thus the bigger size Teas are retained on the top while the broken leaves fall towards the floor.

TEA INDUSTRY

India is the country with the most tea consumption in the world - an

average of 6,75,000 metric tons per year. China is second, and consumes

about 463,000 metric tons per year. India's total tea production is about 840

million kg (mkg); about 15 mkg is imported. About 180 mkg is exported.

About 680 mkg is consumed in India. Of this, we feel 300 mkg is sold as

packet tea and the rest as loose tea.

According to the report, the tea industry in the country accounts for 31

per cent of global tea production. It is the second largest employer in the

country, giving employment to more than 1.2 million workers on a

permanent basis, in addition to one million labourers on a casual basis. An

estimated 10 million people in the country depend on the tea industry for

their livelihood and 51 per cent of the workforce comprises women. The

majority of women are employed to pluck tea - the most labour-intensive

part of tea production

Introduction

Market feasibility projects the practical viability of a venture with

respect to different factors affecting the market.

Market feasibility includes determining the proper market for the

product and the different ways for the promotion of the product, it includes

market research, market segmentation, customer relation, and all the other

factors related with the market. It also includes deciding on the mediums for

promoting the product in the market.

Market survey

We used the questionnaire method for collecting the data from

consumers and retailers. The questionnaire for consumer and that of the

retailer are as follows:

QUESTIONNAIRE FOR CONSUMERS

1. Personal Detail:a. Name: _____________________________________________b. Age: ______ c. Monthly income: _______d. Family members: _____

2. How often do you drink in a day?a. One time [ ] b. Two time [ ] c. Three or more time [ ]

3. How much tea do you purchase in a month? a. 250gms [ ] b. 500gms [ ] c. 1kg or more [ ]

4. Do you purchase same quantity of tea in all seasons? Yes [ ] No [ ]If No, please specify the reason

_____________________________________________________ _____________________________________________________

5. Which type of taste do you prefer in tea?a. Strong [ ] b. Light [ ]

6. Why do you drink tea?

a. Freshness [ ] b. Habit [ ] Other _____________________________

7. From which place do you purchase tea?

a. Retailer [ ]b. Supermarket[ ]

c. Company’s outlet[ ]d. Other [ ]

8. Do you prefer branded tea? Yes [ ] No [ ] If No, please specify the reason

_____________________________________________________ _____________________________________________________

NOTE: Proceed further only if answer of Q.8 is Yes

9. Which tea brand are you using currently?a. Waghbakri [ ] b. Tata Tea [ ]c. Brooke Bond [ ] d. Other brands [ ]

10.Since how many years are you using this brand of tea?______________________

11.Which factor inspires you to purchase this brand? Please rank in your order of preference

a. Price [ ]b. Quality [ ]c. Free gift [ ]

d. Packaging [ ]e. Advertisement [ ]f. Reference groups [ ]

12.Do you know about Sabar Tea?

a. Yes [ ] No [ ]

13.Would you desire to purchase Sabar Tea if you are provided more information about this product?

a. Yes [ ] b. No [ ]

14.Do you inspire to purchase the brand in which brand ambassador is your favorite actor or actress? a. Yes [ ] b. No [ ]

15.According to you what is the most important feature of tea? Please rank in your order of preferencea. Color [ ]b. Taste [ ]

16.Do you think those brands are very good which brand’s advertisements come in television?

Yes [ ] No [ ]

QUESTIONNAIRE FOR RETAILERS

1. Personal Detail:a. Name of the shop: _________________________________b. Location: ________________

2. Which is the segment that you prefer to sell the most?

a. Royal segment [ ] b. Premium segment [ ]c. Middle segment [ ] d. Economy segment [ ]

3. Which brand sells the most in the most preferred segment?________________________________________________________

4. Which size packet sells the most?

a. 100g. [ ]b. 250g. [ ]

c. 500g. [ ]d. 1kg. [ ]

5. According to you who can be the competitors of Sabar Tea in the most preferred segment?__________________________________________________________________

6. What is the response of customers when advertisement of new tea product comes in any media?

a. Demand for product [ ] b. Ask for suggestion [ ] c. Try to get more information [ ] d. Not ask anything [ ]

7. Do you think advertisement is important to sell any product more? If

No, then why?

a. Yes [ ] b. No [ ] IF No, then please specify the reason

________________________________________

8. What is customers’ response when you put some new product near cash counter or entrance?

a. Demand for product [ ] b. Ask for suggestion [ ] c. Try to get more information [ ]

d. Not ask anything [ ]

9. Do you think attractive packaging attracts the customer more?

a. Yes [ ] b. No [ ]

10.Do you think sometimes packaging attracts the customer but people not buy the product because of price?

a. Yes [ ]b. No [ ]

11.If company offers you attractive commission or discount will you willing to sell Sabar Tea?

a. Yes [ ]b. No [ ]

12.Would you like to give any suggestion for promotion activities of Sabar Tea?

__________________________________________________________________ _____________________________________________________________________________________________________________

Research Findings

Customer

1. How often do you consume tea per month?

One time 60%Two time 35%Three or more time 5%

2. How much tea do you purchase in a month?

1 Kg500 gm250 gm

3. Which type of taste do you prefer in tea?

4. Why do you drink tea?

5. From where do you buy tea?

Strong 70%Light 30%

Freshness 60%Habit 40%Other 0%

6. Which tea brand you are using currently?

7. Which factor inspires you to purchase a brand?

The factors are ranked in order of preference1. Quality2. Price3. Free gifts4. Advertisement5. Packing6. Reference groups

Retailer 60%Supermarket 25%Company’s outlets 15%

Waghbakri 70%Brooke Bond 10%Tata Tea 10%Other Local brands

10%

Retailer

1. Which is the segment that you prefer to sell the most?

2. Which brand sells the most in the most preferred segment?

3. Which size packet sells the most?

4. Do you think advertisement is important to sell any product more?

5. What is the response of customers when advertisement of new tea product comes in any media?

6. What is customers’ response when you put some new product near cash counter or entrance?

7. Do you think attractive packaging attracts the customer more?

8. If company offers you attractive commission or discount will you willing to sell Sabar Tea?

Competitors’ analysis

The graph above shows the preference of various brands by the

retailers. The consumer preference is also quite similar to the retailers’

preference. About 68% of the retailers prefer to sell waghbakri, 10% of them

prefer brooke bond, 10% of them prefer Tata tea, and the rest prefer other

local brands.

From the graph above it can be said that brooke bond, Tata tea & the

local brands are the competitors of Sabar Tea. The reason for that is Sabar

Tea is going to start its business in Ahmedabad and it can straight away

compete with the market leader. Waghbakri is the market leader in

Ahmedabad. Thus the competition of Sabar Tea now is with less popular

brands.

Waghbakri has a lot of loyal customers, thus it would take time to win

the Waghbakri customers.

Sabar Tea will have intense competition from brooke bond, Tata tea &

the local brands because if we remove the 68% waghbakri share, the there is

only 32% left and there are many firms who fall in this sector.

Four P’s of Indian Tea Industry

Marketing mix is the set of marketing tools that the firm uses to

pursue its marketing objectives in the target market. The four basic elements

of marketing together make up a marketing mix, these four elements are the

4 P’s. These four P’s of marketing are product, price, place, and promotion.

Marketing is likely to be a success if this four P’s are mixed properly.

MARKETING MIX ELEMENTS IN TEA INDUSTRY

A) Product

Brand loyalty in the Tea Industry is not a thing of the past, but

manufacturers can no longer depend on a large, stable base of die-hard

consumers to support their products. Consumers used to be “true to their tea

usage” no matter what. But now, because of fierce competition for market

share, the Tea Industry is over segmented, and the products differ so slightly

that consumers are confused. Now competition is not only from the coffee

industry but also from the soft drink industry. Pepsi and Lipton jointly

introduced a tea based soft drink. This situation creates enormous problems

for Tea Industry, and thus competitors in the Tea Industry continually seek

to differentiate their products. Therefore manufactures have to constantly

come with product innovation like Flavored Tea, Iced Tea, Herbal Tea and

Tea Pills.

B) Price

Price of any product affects the demand of that product, and it applies to the tea also. Price competition is now the norm in the industry, and more than 50 percent of tea purchases are made due to pricing. As the number of firms in the tea industry is increasing, the pricing policy of each firms becomes extremely crucial.

Fluctuating demand for tea in different season makes pricing even more important. During summer the tea sales is much lower compared to that in winter or rainy season. Export of Asian tea to European countries is high since decades. This contributes to reduction in supply for domestic market.

C) Place

The marketers use the distribution channels to display or deliver the

physical product or services to the buyer or user. There are physical

distribution channel and service distribution channel they include

warehouses, transportation vehicles, and various trade channels such as

distributors wholesalers and retailers. So, the following is the distribution

channel of the Tea Industry in private selling.

DISTRIBUTION CHANNEL

D) Promotion

Advertising and promotion are the most important tools used by Tea

manufacturers to distinguish their products.

Brokers

Agents

Whole-sellers

Retailers

Buyers

Sellers

The first Tea advertisement for Tea appeared in the London weekly

mercurius politicus of the September 1658. Since then advertising is one of

the must. Price competitors in the industry rely upon endorsements by

famous people and reminder advertising to create and reinforce the image

they want their products to have. Emotional appeals and identification tactics

are used to increase brand loyalty.

The promotion of Tea in India is based on two themes

- Tea is good for health

- Tea is beverage for the youth.

The Tea Board of India has been guide to realize this and has launched a

campaign “PIYO MORE CHAI” in association with the industry to

encourage the domestic consumption by focusing on its “Miraculous”

properties. It will also highlight that drinking tea keeps one healthy and

lowers the risk of heart diseases, cancer.

But since advertising costs are so high, they are monitored closely,

and promotions are encouraged and subsidized by the manufacturer.

Five Forces Model

The five forces model of competition given by Professor Michael

Porter helps to discover what the main sources of competitive pressure are

and how strong each competitive force is.

1) Threat from existing competitors

The rivalry among the competing sellers for this industry in

Ahmedabad is high. There are so many companies in this industry

including major ones like Waghbakri and Tata tea. There are many

local companies that sell unbranded tea.

The major threat to a new firm is the threat from the existing

competitors. Waghbakri holds 70% of the market share and Tata tea is

the largest tea producing company in India. Other local low prices,

unbranded tea also exists which may affect Sabar tea.

2) Threat from new entrants

Threat of new entrant applies only to the existing firms. Since

Sabar Tea is thinking to establish it in Ahmedabad, it is a new entrant.

Thus, for Sabar Tea there is no threat of new entrant. Infact Sabar Tea

is a threat to the existing players.

However, if there is much delay by Sabar Tea. Then each

company which enters the market before Sabar Tea is a threat because

it will increase the competition for Sabar Tea.

3) Threat from substitute products

The main substitute product for tea is coffee. However, cold

beverages, fruit juices and milk are also substitutes of tea. Here the

threat from such substitute products is very high for tea industry.

Coffee is the main substitute for tea, it serves the same purpose

as tea. However the price and choice of the consumer are the main

reasons for the purchase of tea or coffee.

The prices of cold beverages have fallen down and are available

at most of the stores. The promotional strategies and their impact are

also quite stronger in compare of tea.

4) Bargaining power of consumer and

supplier

Profits depend on bargaining power of suppliers and consumers. In

Ahmedabad the consumption of tea is very high and thus there is very

high demand among consumers, thus the bargaining power of

consumer is less.

Tea is produced in selected eastern states and few parts of

Karnataka. Despite of the fact that India is the second largest tea

producer after China, the bargaining power of suppliers of tea leaves

is more than that of the consumers. One reason for that is increasing

exports to European markets. Second is that production is limited.

Limitations of the survey

Out of the whole research and analysis, only few major tea brands

could be highlighted, leaving aside a medium and small scale Tea

brands.

Data is mostly primary data so some time-collected data may be

limited.

As only few hundreds of people data is to be taken the final analysis

can or cannot give satisfactory results.

The limitation in this report could be of language, because all people

are not fluent in English, so the questionnaire in English was to be

explained in Gujarati to get proper response and it can happen that the

meaning of the question may change to the responded persons so

accurate data results can’t be determined.

Introduction

Financial feasibility projects whether the project or business would be

financially viable for investment or not.

All the expenses and the revenues of the firm are estimated. And on

the basis of this estimated figures various financial statements are prepared.

And evaluation of the project is made by capital budgeting and ratio

analysis.

Profit and loss a/c

Particulars Q1 Q2 Q3 Q4

Incomes

Sales 1440000 1600000 1760000 1920000

Add:

Closing stock-opening stock 80000 160000 240000 320000

Total (A) 1520000 1760000 2000000 2240000

Expenses

Purchase 800000 880000 960000 1040000

Electric charges 8000 8000 8000 8000

Telephone charges 2000 2000 2000 2000

Stationary 2000 2000 2000 2000

Tea labour 50000 50000 50000 50000

Rent on shop 10000 10000 10000 10000

Rent on warehouse 20000 20000 20000 20000

Salary 32000 32000 32000 32000

Packaging expense 60000 60000 60000 60000

Depreciation 50000 50000 50000 50000

Advertising expense 3000 3000 3000 3000

Travelling expense 5000 5000 5000 5000

Sales tax(12%) 172800 192000 211200 230400

Total(B) 1214800 1314000 1413200 1512400

Profit (A - B) 305200 446000 586800 727600

Less: Tax @ 35% + Surcharge 2.5% + 120554 176170 231786 287402

NPAT 184646 269830 355014 440198

Balance sheet

Particulars Q 1 Q 2 Q 3 Q 4

Sources of fund

Ownweship capital 2000000 2184646 2454476 2809490

Profit and loss a/c 184646 269830 355014 440198

Total 2184646 2454476 2809490 3249688

Application of fund

Fixed assets 600000 550000 500000 450000

50000 550000 50000 500000 50000 450000 50000 400000

Current assets (A)

Cash on hand 18000 16000 14000 12000

Bank 1216646 1618476 1705490 1797688

Closing stock 80000 240000 480000 800000

Debtors 480000 320000 480000 640000

1794646 2194476 2679490 3249688Less : Current Liabilities (B)

Creditors 160000 1634646 240000 1954476 320000 2359490 400000 2849688

(A) - (B)

Total 2184646 2454476 2809490 3249688

Break even analysis

Particulars Q1 Q2 Q3 Q4

Sales 1440000 1600000 1760000 1920000

Less : Variable cost

Raw material consumed 720000 800000 880000 960000

Advertising expense 3000 3000 3000 3000

Travelling expense 5000 5000 5000 5000

Electric charges 8000 8000 8000 8000

Telephone charges 2000 2000 2000 2000

Sales tax 172800 192000 211200 230400

Tea labour 45000 50000 50000 50000

Packaging expense 54000 60000 60000 60000

Contribution 430200 480000 540800 601600

P/V ratio (%) (A) 29.875 30 30.72727 31.33333

Fixed cost

Rent on shop 10000 10000 10000 10000

Rent on warehouse 20000 20000 20000 20000

Salary 32000 32000 32000 32000

Stationary 2000 2000 2000 2000

Depreciation 50000 50000 50000 50000

Totot fixed cost (B) 114000 114000 114000 114000

Bep (Sales) (B/A) 381590 380000 371005.9 363829.8

Evaluation of project

Ratio analysis

Name of ratio Q1 Q2 Q3 Q4A. Revenue statement ratioNet profit ratio 12.82 16.86 20.17 22.92

Operating ratio 63.33 57 51.82 47.5Expense ratio 28.81 27.13 25.75 27.60Stock turnover 2.25 2 1.125

B. Balance sheet ratioCurrent ratio 11.22 9.14 8.37 8.12Liquid ratio 10.72 8.14 6.87 6.12Quick ratio 7.72 6.81 5.37 4.52Proprietary ratio 85.3 81.08 78.43 76.98

C. Composite ratiosReturn on capital employed 9.23 12.35 14.46 15.67Debtors turnover 40 24 32 40Creditors turnover 24 32 40 46Fixed asset turnover 2.62 3.2 3.91 4.8Total asset turnover 0.61 0.59 0.56 0.53

Suggestions

BY RETAILERS : Company should do advertisement and also do display as people are

attracted towards it The retailers want that the margin should be

increased as they get only 2-3 Rs. as profit which is much less than

what they get from other companies.

The price must be decreased because people may prefer other

products like Tata Tea or Wagh bakri at the same price.

The company can offer some gifts or discounts to increase awareness

and to increase sales.

Sample must be distributed free of cost to the people so that they can

taste it and than only they can know the taste of Sabar Tea.

BY CUSTOMERS: Company should do advertisement of the product in newspapers and

on television so that more and more people know about the product.

Company should give free samples to the people.

Different schemes at a regular interval must be put so that people can

be attracted towards the tea in order to avail benefit of the scheme.

People prefer home delivery service.

SUGGESTION BY US:

In the Ahmedabad market the number of loyal customers are much

more for Waghbakri and thus company should do advertisement in

such a manner that people should be made believed that Sabar Tea has

same quality as of Waghbakri.

The distribution channel must be made in such a manner that the

retailers don’t face any problems in the availability of the tea.

Different promotional activity is required to instigate sales in different

seasons.

Quality and price are the most preferred factor affecting sales in

middle segment, thus if good quality tea is provided at reasonable

price then Sabar Tea will surely get many customers.

The return on capital employed increases with increase in sales thus

prime focus should be on how to increase sales.

Conclusion

From the following report and the recommendations we can conclude that consumption of tea is very high in Ahmedabad, thus chances of a new firm’s success in tea business in Ahmedabad are very good. Thus Sabar Tea should enter the Ahmedabad market. But one of the facts is that as Sabar Tea has its establishment and business in Sabarkantha and thus no one is aware of the tea brand Sabar. This can be advantageous too. Sabar Tea can create the image as its want, it can create image of premium or middle segment. But sales are more in middle segment and competition is also high in middle segment.

Most of the customers purchase tea from the retailers, thus initially Sabar Tea have to give them good margin. One more popular avenue of retailing is through super markets. Many people now prefer to purchase tea with rest of the good together. Thus sales through supermarkets should also be taken into consideration.

Price and quality are the two factors that have a major impact on sales. Moreover if Sabar Tea is made available at the same price as Wagh bakri or Tata tea people may not prefer to choose Sabar tea. Thus Sabar tea need to be launched at a price lower than the competitors and the quality of the products also have to good.

As the ratio analysis suggests Sabar tea will be successful but a good awareness campaign is required. Advertisement and sales promotion have to be aggressive. Different promotion activities during summer will be more beneficial. Because during summer sales are lower compared to winter and monsoon.

Thus the final conclusion from us is that Sabar Tea has to advertise on a large basis to gain higher market share in the competitive Ahmedabad tea industry.

Bibliography

BOOKS

Philip Kotler, Marketing Management, 11th Edition 2003 (Tata McGraw Hill) Pp 328-336.

MAGAZINES & JOURNALS

Times Food Processing Journal, June-July 2005, pp 47-48

Contemtory Tea Time, June-August 2005, Vol xiv No. 2, pp 6-52

WEBSITE LINKS

www.teauction.com

www.thehindubusinessline.com

www.timesb2b.com

www.indiateaportal.com

www.tea.com

www.teaindustry.com

www.qualiteas.com

www.indianindustry.com/teacoffee