See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/316285811

FEASIBILITY STUDY ON PRODUCTION OF RASAPOSHA (Cereal

Product)

Presentation · January 2015

DOI: 10.13140/RG.2.2.27698.61124

CITATIONS READS

0 11,345

3 authors, including:

Tharuka Gunathilake Senevirathne Navaratne

Deakin University University of Sri Jayewardenepura
13 PUBLICATIONS   30 CITATIONS    189 PUBLICATIONS   234 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Market Analysis for Rice Bran Milk View project

Analysis of Indian and Sri Lankan Turmeric View project

All content following this page was uploaded by Tharuka Gunathilake on 21 April 2017.

The user has requested enhancement of the downloaded file.

FEASIBILITY STUDY
ON PRODUCTION OF
RASAPOSHA

K.G.T. GUNATHILAKE
AS 2011712
FOOD SCIENCE & TECHNOLOGY
UNIVERSITY OF SRI JAYEWARDENEPURA
OVERVIEW

Introduction
Product Identification & Selection
Market Survey
Marketing Feasibility
Technical Feasibility
Production Feasibility
Financial Feasibility
Environmental feasibility
Socio- Economic Feasibility
Conclusion
 INTRODUCTION
• To lead a healthy lifestyle carbohydrates, proteins, calcium, vitamins
and minerals should be in the food in required amount.
• Most of the nutrition earned from meat, fish, milk, eggs, vegetables and
greenery can also be achieved with a daily intake of Rasaposha, which
ensures a comprehensive nutritional balance.
• Here both cereals and legumes are used to formulate this product

Type of the Product : Cereal based food

Size of the Business : Medium Scale

Target Market : Local Market

 PRODUCT IDENTIFICATION
& SELECTION
• Product Name: Rasaposha

• Major Ingredients: Maize (60%), Soy (35%),

• Minor Ingredients: Full Cream Milk Powder (3%),

Vitamin-mineral premix (0.44%)

• Packaging Material: Triple Laminated package

• Available Size: 200g.

• Shelf Life: 8 months

• Storage Conditions: Store in an air tight container.

 REASONS FOR SELECTION OF THE
PRODUCT
o High demand for ready to use products

o Immense progression in the healthy food in current situation

o To provide a supplement which contains energy, proteins and all

required micronutrients to specially children

o Utilize maize, corn, soy bean for developing value added product

o High availability of raw materials (Local) & get maximum usage

o To provide balance diet instead of high calorie instant food without food
additives

o Good Protein Source for vegetarians

o To reduce nutritional anaemia, third degree protein energy malnutrition
(PEM), underweight among children
 DAILY PROTEIN INTAKE PER CAPITA
In Sri Lanka daily per take protein in capita is 55 (Per person/per gram/
per day) is a very law value when compared to USA (106) Greece (133) like
countries.
 IRON DEFICIENCY ANEMIA (IDA) IN SRI
LANKA

Trends in the
prevalence of
Anaemia in Sri
Lanka

Source: Mudalige and Nestel,

1996, MRI-1970, 1989, 1998,
2001, 2009, 2012 & DHS 2006

Prevalence of
Anaemia in different
sectors and age
groups in Sri Lanka

(Source: Medical Research

Institute 1996, 2001, 2009)
 MARKET SURVEY
Identifying: (Through a questioner)
• Customer preference of consuming Cereals product
• Awareness of nutritional values of native tuber crops
• Consumption & purchasing patterns of cereal food
• Preferred quantity size and awareness of packaging
• Effective advertising media

Other 6.70% Current Cereal Never 7% Average

product market frequency of
KoKo Krunch 6.70% share Occasionally consumption47%
Cerelac 0%
More than 3 times a week 27%
Corn Flakes 26.70%
Once a week 7%
Nisiposha 0%
1-2 times per day 13%
Samaposha 73.30%
0% 10% 20% 30% 40% 50%
 0% 0%
Average
frequency of Not important 0%
13% purchasing Awareness of
Daily nutritional value
Twice a week
Less important 0%
20% Weelky
Once in two weeks Moderately important 7%
67% Monthly

Very important 93%

0% 20% 40% 60% 80% 100%

Purchasing places Yes No Preference of

Other 0% buying Rasaposha
of cereal products
product
Whole seller 0%
27%

Super market 26.70%

73%
Grocery 80%

0% 20% 40% 60% 80% 100%

 80g 120g 200g 250g

0% Preference of Not important 7% Awareness of

package sizes packaging
7%
Less important 33%

40% Moderately important 27%

53%

Very important 33%

0% 5% 10% 15% 20% 25% 30% 35%

Email 7%

Internet 13%

Radio 7% Preference of
advertising media
Magazines 0%

Newspapers 7%

TV 93%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
 MARKETING FEASIBILITY
MARKETING MIX
PRODUCT PRICE
• High nutritional value Strategy
• Convenient size • Internal Cost Reduction
• Precooked – Ready to use • Discounts & Allowances
• No chemical preservatives & Promotional Pricing
additives Pricing Methods
• Made from wholesome • Cost plus pricing
ingredients • Competitive Based Pricing
TARGET
MARKET
PLACE PROMOTION
Consumer
• Channels – Super markets, Advertising-TV, Internet, radio,
whole sellers, Retail Newspaper
market Event Sponsoring, Store
Promotion
• Location
Trader
• Inventory Personal Selling – [local industries]
Sales Promotions
SWOT ANALYSIS

Strengths Weaknesses
• Cereal based products – high nutritional • Not an established brand (lack of
value brand heritage)
• Value added
• Ready to use
• No added artificial preservatives / additives
• Use of local raw material & availability
• Low production cost
• High profit margin

SWOT
Opportunities Treats
• Increased awareness of consumers • Already established cereal food
on healthy foods brands
• High population of vegetarians • Oil price and electricity is high
• Changing customer attitudes
SEGMENTING, TARGET GROUPS
IDENTIFICATION AND POSITIONING

Geographic • Both Urban & Rural area

Segmentation

• Having busy lifestyle

Psychographic
• Having positive attitudes about Cereal
segmentation food

• More concern about health benefits &

Behavioural nutritional value
Segmentation • Seeking of Ready to use food

• Specially for children, [Other -

Demographic Adolescent & elders]
Segmentation • Low ,medium & high income
Target Market Segments
 Growing children above 2 years
 Children in school age
 Pregnant mothers
 Health conscious adolescent and elders
 Vegetarian consumers

Position as

 Nutrias cereal food

 Rich in protein, calcium, zinc & iron
 Ready to use
 No added preservatives & additives
 Convenient pack size
 TECHNICAL FEASIBILITY
SITE SELECTION
• Raw material Supply –Transport cost reduction of raw materials
(Maize, Soy, Fullcream milk powder )
• Types of the market which going to achieve
• Amount of Capital
• Volume of Traffic
• Population Base (Less residential)

• Work Force Availability and Cost

• Road facilities
• Water Supply and Drainage facilities
• Waste Disposal and Effluent management
• Environmental Issues

• Away from: Flooding , Disease and infectious areas

Selected Site for the Factory – Badalkumbura in
Monaragala district

Badalkumbura
Road facilities & land space
SITE MAP & BUILDING DESIGN
Factory layout is designed according to rules and specification of food
processing plant

Here consider,
o Separate warehouses for raw materials and finished products
o Flooring design
o Expanding Facilities
o Area for Loading & Unloading
o Avoid cross contamination
o On site waste treatment design
FACTORY
LAYOUT
 MACHINERY & EQUIPMENT

Gravity
Dehuller Separator Grain wash
machine

Grain dryer & cooler Mix mill-hammer Anderson extruder

mill
Food Powder
mixing machine Powder Fully Automatic
storage tank Date code
Form Fill Seal
printing
Weigh Filler
machine

Boiler Bucket elevator Belt

conveyer conveyer Falk Lift
LABORATORY EQUIPMENT

Laboratory Oven Laboratory

Incubator
 PRODUCTION FEASIBILITY
RAW MATERIAL
SUPPLY
Maize
Mostly cultivate in Anuradhapura, Moneragala & Badulla area
Purchase from farmers directly / whole grain sale market

Soybean
Mostly cultivate in Matale, Anuradhapura, Kurunegala,
NuwaraEliya, Mahaweli 'H',Monaragala, Badulla,and
Polonnaruwa disrtcts
Purchase from farmers directly / whole grain sale market

Full Cream Milk powder

Purchase from Pelwatte Dairy Industries Limited – Whole sale
supplier

Vitamin – Mineral Premix

Purchase from chemical suppliers or import
PROCESS FLOW
CHART

“Rasaposha”
processing plant
consist 3 major areas
for,

1. Cleaning &
Dehulling

2. Processing &
Milling

3. Blending &
Packaging
HUMAN RESOURCE MANAGEMENT
MANAGEMENT HIERARCHY
HUMAN RESOURCES REQUIREMENTS
Job title No. of employees
General Manager 1
Human Resources Manager 1
Sales and Marketing Manager 1
General Manager, Production Manager,
Human Resources Manager, Sales and Production Manager 1
Top Marketing Manager, Quality Assurance
Production Executive 2
manager
Quality Assurance Manager 1

Accountant, Engineers, Financial Quality Assurance Executive 1

Middle Assistant, Marketing, Financial Assistant 1
production, quality Executives
Marketing Executive 1

Sales representative, Floor level Accountant 1

Lower workers, Driver, Security man, Engineers 2
Indirect workers
Sales representatives 4
Floor level workers 15
Driver 4
Security man 4
Indirect workers 1

Total 38
FINANCIAL FEASIBILITY

LKR
Total fixed assets 27,226,675.00

Total working capital 5,731,705.00

Working capital for 3 month 4298778.75

Total Cost of project 31,525,454.00

Total depreciation cost 1,917,048.00

Total Cost of production per

70,697,508.00
annum
Price Description Cost (LKR)

estimation of
Raw material cost 9.70
Packing material cost 12.45

product – Labour cost 5.80

200g pack Utilities

Factory cost
6.60
34.55
Depreciation cost 2.11
Total production cost 36.66
Sales & Marketing overhead expenses 3.00
Financial overhead expenses 2.46
Cost of product sold 42.12
Profit margin (30%) 12.63
Price without tax 54.75
Tax (12%) 5 .00
Price to retailer 60.00
Retailer margin 5.00
Consumer price 65.00
INCOME STATEMENT PROJECTIONS

1st year 2nd year 3rd year 4th year 5th year
Revenue 80,005,283.00 81,120,000.00 82,867,200.00 84,240,000.00 85,800,000.00
Cost of sales 31,963,245.00 32,427,913.00 33,180,389.00 33,838,263.00 34,622,937.00
Gross Profit 48,042,038.00 48,692,087.00 49,686,811.00 50,401,737.00 51,177,063.00

Operating expenses
Overheads 20,421,216 20,630,216 21,421,216 21,501,216 21,861,216
Depreciation 1,917,048 1,725,343 1,552,809 1,397,528 1,257,775
Total operating 22,338,264.00 22,355,559 22,974,025 22,898,744 23,118,991
expenses

Net Profit Before tax

(35%)
25,703,774.00 26,336,528.00 26,712,786.00 27,502,993.00 28,058,072.00
Income Tax
8996321.00 9217784.8 9349475.1 9626047.55 9820325.2
Net profit after
income tax
16,707,453.00 17,118,743.20 17,363,310.90 17,876,945.45 18,237,746.80
 BREAK EVEN POINT (BEP)
Selling price / Unit Rs. 60.00
Variable cost / Unit Rs. 31.25
Fixed Cost / per year Rs. 20,421,216.00
Sales volume per 1,230,769
year

Per Unit Contribution to fixed Cost = Selling Price – Variable Cost of a

Unit
= 60.00 – 31.25 = Rs. 28.75

𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡
Break even Point in Units =
𝑃𝑒𝑟 𝑈𝑛𝑖𝑡𝑠 𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑡𝑜 𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡

20421216
= = 710303 units
28.75
 Break Even Point Analysis
90000000
Revenue,
80000000 84000000

70000000
Total cost, 64,171,216
60000000
Rupees

50000000

40000000
Break Even Point - 710303 units
30000000
Fixed cost,
20000000
20,421,216

10000000

0
0 350000 700000 1050000 1400000
Units / No of packs
PAY BACK TIME
The length of time required to recover the cost of an investment

Payback Period = Cost of Project / Annual Cash Inflows

Net Cash Flow = Average Annual Profit + Depreciation
1st year 2nd year 3rd year
Average annual 16,707,452.00 40,739,534.00 65,114,951.00
profit
Depreciation 1,917,048.00 1,725,343.00 1,552,809.00
Net cash flow 18,624,500.00 42,464,877.00 66,667,760.00
Year Net Cash Flow Cumulative Net cash
Flow
0 (31,525,454.00) (31,525,454.00)
1 18,624,501.00 (12,900,953.00)
2 18,844,086.00 5,943,133.00
3 18,916,119.00 12,972,986.00

𝑃𝑎𝑦 𝐵𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 = 1 𝑌𝑒𝑎𝑟 + (12,900,953.00/18,844,086.00) × 12

= 1 Year 8 Months
 NET PRESENT VALUE (NPV)
The difference between the present value of cash inflows and the present
value of cash outflows
∈ 𝑁𝑒𝑡 𝑐𝑎𝑐𝑕 𝑓𝑙𝑜𝑤 𝑑𝑢𝑟𝑖𝑛𝑔 𝑡𝑕𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
𝑁𝑃𝑉 = − Initial investment
1 + 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒 × 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑡𝑖𝑚𝑒 𝑝𝑒𝑟𝑖𝑜𝑑
Year Net Cash Flow DCF NPV @10%
@10%
NPV at 10% DFC 0 (31,525,454.00) 1 (31,525,454.00)
1 18,624,501.00 0.909 16929671.41
2 18,844,086 0.826 15565215.04
3 18,916,119 0.751 14206005.37
NPV at 10% 15,175,437.82

Year Net Cash Flow DCF NPV @ 20%

@20%
0 (31,525,454.00) 1 (31,525,454.00)
NPV at 20% DFC 1 18,624,501.00 0.833 15514209.33
2 18,844,086 0.694 13077795.68
3 18,916,119 0.579 10952432.9
NPV at 20% 8,018,983.92
INTERNAL RATE OF RETURN
IRR can be used to rank several prospective projects a firm is
considering.

𝑎
IRR = 𝐴 + 𝐵 − 𝐴 ( )
𝑎−𝑏

A – Cost of Capital 1 (10%)

B – Cost of Capital 2 (20%)
a – NPV1 (15,175,437.82)
b – NPV2 (8,018,983.92)
15,175,437.82
IRR = 10+ 20 − 10 ( )
15,175,437.82−8,018,983.92

= 20.2%
 KEY ASSUMPTIONS

• 20 working days per month & 12 working hours per day.

• Market return is very low and it does not affect the profit margins severely.

• Price fluctuation of the raw materials within the first year is negligible.

• Total daily production gradually increases year by year.

• Government taxes will remain constant within next 3 years.

• 1 US $ (United States Dollar) = 133.82 LKR (Sri Lankan Rupee)

• Electricity, water, fuel & telephone charges will not be changed

• Depreciation rates are constant for all 3 years

 ENVIRONMENTAL FEASIBILITY
Include effects on environmental resources due to alterations or
pollutants
Business is planned to carry out under rules and regulation
enforced by of Central Environmental Authority & municipal council.

Mainly should be consider about;

 Disposal of waste water
 Disposal of solid waste
 Conditions for releasing fumes from factory

Proper disposing system should be

conducted by the company in order
to avoid environmental issues.
 SOCIO- ECONOMIC FEASIBILITY
Consumer Environment Employee Society

• Safe & • Effective • Creating job • Involve to

nutrias waste opportunities social
product disposal • Giving activities
• Reasonable methods sufficient
price wages
• Ensure
employee
safety
• Employee
welfare
 CONCLUSION
 According to the market survey, there is potential & growing market for the
cereal based (Natural , nutrias product)

 NPV - Positive value, at each discount rate, the initial investment will be
recovered. Therefore, the project should be accepted

 IRR - 20.2%, Since IRR > cost of capital, the project should be accepted

 Payback period - 1 year & 8months

 B.E.P in terms of unit: - 710,303 units

 By considering all factors we can conclude that establishing of a

“Rasaposha” manufacturing plant is feasible & profitable.
REFERENCE
o Technology of Cereals: An Introduction for Students of Food
Science and By Norman Leslie Kent, A. D. Evers

o www.unicef.org
o businesscasestudies.co.uk
o www.stellar.net
o www.uwcc.wisc.edu
o www.investopedia.com/
View publication stats