CASELET A – CUT ‘N’ GRATED

Sukumar, Sri Latha and Parthi hail from Trichy. After their management education, they were looking for ideas to start
their own business. By chance, Latha met a cousin who was complaining about managing multiple responsibilities at
home. Being a working professional with a demanding job, her cousin was lamenting about lack of options for buying
veggies and fruits online in Trichy, especially cut veggies that could save at least 30 minutes from cooking time. Latha
discussed with her friends and this was the genesis of Cut ‘N’ Grated (CNG). They were skeptical about the viability of
CNG in a small city like Trichy. However, they decided to evaluate the market.
Trichy is among the top five cities in Tamilnadu in terms of population and economy. The city is spread over an area of
160 sq. kms and has a population of approximately one million people with 52% male and 48% female population. The
city is known for large industries like BHEL, Dalmia Cements, TVS Tyres, Railway Central Workshop and Kothari Sugars.
Additionally, close to 4000 SMEs and MSMEs related to steel, textiles and other industries are located in and around the
city. The city is also famous for educational institutions (e.g., NIT & IIM) and industrial parks are being established to take
advantage of educated and skilled manpower.
CNG contacted M/s Mint, a local market research firm. Mint had segmented the 350,000 households (HH) in Trichy into
different categories based on average age and income of households. Three broad segments based on age were SEN,
FAM & YOU. These segments were further divided into three sub-segments based on income, which included the LIG,
MIG & HIG. Details of the segments provided below in Table 1.

TABLE – 1
SUB-SEGMENTS
SEGMENT
LOW MIDDLE
SEGMENTS SHARE OF HIGH INCOME
INCOME INCOME
Households (%) GROUP (HIG)
GROUP (LIG) GROUP (MIG)
SENIORCITIZEN
25 35% 30% 35%
(SEN)
FAMILY WITH
45 40% 30% 30%
CHILDREN (FAM)
YOUNG &
30 30% 40% 30%
WORKING (YOU)

It was a surprise for CNG, as they imagined Trichy to be a far smaller city compared to metros. They decided to give full
attention to the project and established a Private Limited Company. They decided to start an app-based ordering and
fulfilment business model, which could be scaled quickly. Each founder contributed capital worth Rs 5 lakhs. They
planned to approach investors for the balance. In order to get an idea of the market potential and investment required,
they appointed Mint to complete a mixed method market survey to understand consumer needs. Results of the research
summarized below.
QUALITATIVE RESEARCH – Mint selected members from 120 households comprising of representative sample from the
segments and sub-segments. They conducted 10 Focus Group Discussions and the same was attended by the founders.
Brief highlights of the research is summarized below:

 Cutting vegetables is a chore and availability of cut vegetables will be more convenient and would save time.
 Consumers preferred 1 kg packs, so that they could use it for two – three days. They preferred to buy only one pack
per purchase considering freshness and other factors.
 While modern retail stores sell cut vegetables, most times they are not fresh and in some cases they are stale.
 Reliable online delivery vendors not available. Working women and senior citizens prefer home delivery of veggies.
 80% of respondents wanted seasonal vegetables in cut and grated forms. 20% of respondents wanted customized
mix of vegetables including those which were not available in Trichy.
 Respondents were willing to pay up to 25% premium for cut vegetables. But, prices beyond Rs 120/kg were not
acceptable to respondents.
 Their propensity to purchase was evaluated across all the 10 panels and the results are summarized below in Table
2. The results were consistent with similar category of products.

TABLE – 2
‘WILL DEFINITELY BUY’
SEGMENT SAMPLE (nos) %
(nos)
SEN 20 4
FAM 60 6
YOU 40 6

QUANTITATIVE RESEARCH – Based on the findings from the qualitative study, Mint conducted a survey based research
among 2000 consumers representing all segments. The purpose of this research was to evaluate the benefits expected
by consumers, which could be included as part of CNG’s value proposition. Additionally, the survey also estimated the trial
and repeat rates. Findings of the research presented below.
 2

 Across all segments, majority of the LIG sub-segment expressed that they cannot afford to pay any premium and
hence this sub-segment would not trial the product.
 Respondents belonging to other two sub-segments provided different propensities to try out the product. There
were a large number of respondents who did not complete the survey due to lack of interest in the concept. This is
summarized below in Table 3

TABLE – 3
INVALID / TOTAL
SEGMENT LIG MIG HIG INCOMPLETE RESPONDENT
RESPONSE S
SEN 0 100 200 200 500
FAM 0 40 100 660 800
YOU 0 200 400 100 700
TOTAL SAMPLE SIZE 340 700 960 2000

 Mint recommended to CNG that the invalid and incomplete response could be classified as not favorable to the
concept. Hence, trial rate could be arrived at by considering no. of consumers in a specific sub-segment who are
favorable to the concept compared to total sample size (for example MIG segment’s trial rate for Segment ‘SEN’
would be 80/2000).
 Majority of respondents across MIG & HIG sub-segments of all segments expressed their interest to repurchase cut
veggies one pack (1 kg) once in a fortnight after the initial trial, if the quality, freshness and promptness of delivery
is good, , i.e., one repurchase in month 1 and two repurchases per month subsequently. Mint suggested to the
founders to assume this repeat rate for 12 months, after which a fresh survey would be taken to assess the same.

Based on the above facts, team CNG decided to evaluate the feasibility of the business. They estimated the cost of
procuring, cleaning, cutting, packing and delivering the vegetables to consumers at Rs 80 per kg. CNG decided to fix the
selling price at Rs 100/kg, which was favorable compared to consumer expectation.

They estimated an initial investment of Rs 55 lakhs including rental advance for a 5000 sq ft premise, equipment for
cleaning, cutting and packing vegetables utilizing a hygienic semi-automatic process, mobile ‘app’ development and a
rudimentary CRM system. CNG, based on the advice of Mint, decided to invest additional Rs 20 lakhs for marketing
including multi-year lease for Out Of Home advertising (OOH) comprising of billboards, bus-shelters and inflatables.
Since, the marketing efforts span beyond a year, CNG was considering this as a one-time investment instead of marketing
expense.
Based on the above facts, the team decided to evaluate the feasibility of the project. Consider yourself as part of the team
and complete the following:

CASELET B – KENT AIR PURIFIER (AURA)

M/s Kent RO Systems is a manufacturer and marketer of healthcare products and home appliances. They have recently
introduced Aura, an air purifier with HEPA dust collection technology which is expected to remove 99.9% of pollutants in a
room including particulate matter, dust, pet hair and cigarette smoke. They use a four stage purification process which
includes pre-filter, carbon filter, anti-bacterial filter, HEPA filter and finally an ionizer. Additional advantages include silent
operation, filter change indicator and pollution monitoring comparison. Kent also has a nation-wide service network, which
promises to service or repair air purifiers within 72 hours. On the whole, Aura ensures elimination of taints, stinks and
smells from your rooms. Cost of Aura is Rs 15,990/-.