Start a Breakfast Cereal Foods Business

   

(249). Start a Breakfast Cereal Foods Business

Cereal processing is one of the oldest and most important food processing technologies and forms a part of the food production chain. Today, the cereal processing industry is as diverse as its range of products. Practically every meal contains cereal in one form or the other.

Product and its Applications

Extrusion cooking is a novel method for manufacturing food products from snacks and breakfast cereals to baby foods. However, as a complex multivariate process it requires careful control. Extruded foods are not just for kid snacks anymore. Today's extruders have opened the door to a global array of new products . The food makers around the world are discovering new ways of shaping, forming, squeezing and puffing foods to create healthful substance. The extruders are producing crispy flat bread, baby food, pet food, high fibre products, puffed snacks, pellet snacks, ready-to-eat breakfast cereals in puffed and flaked forms, meat analogues, pasta, cheese snacks and instant drinks and soups. Extruded breakfast cereal products such as corn flakes, rice flakes, wheat flakes and other formulated breakfast cereal product are quite popular in India . Corn, rice, wheat are the major raw materials required for the production of extruded breakfast cereals. These ready – to - eat breakfast products are widely consumed in urban areas particularly by office going persons and school children.

An extruder works by taking a blend of raw ingredients in one end and subjecting it to high heat and pressure in a cylinder. As the mix passes through the extruder cooker, it is shaped and fully or partially cooked. It takes its final shape as it is forced through a die at the exit end.

Market Potential

As these extruded foods are tasty and nutritious, the consumption is increasing day by day. There is also a good export potential for these products. The product is a household breakfast item which is in great demand in retail outlets though provision stores, bulk outlets to hotels, school- or office / industrial canteens, exports to under developed countries. A large number of new manufacturing units have been established recently catering to the need of consumers.

Basis and Presumption

a) The unit will work for 300 days per annum on single shift basis.

b) The unit can achieve its full capacity utilization during the 3rd year of operation.

c) Wages for skilled workers are taken as per prevailing rates in this type of industry.

d) Interest rate for total capital investment is calculated @ 12% per annum.

e) The entrepreneur is expected to raise 20-25% of the capital as margin money.

f) The unit would construct its own building.

g) Costs of machinery are based on average prices of machinery manufacturers.

Implementation schedule

Project implementation will take a period of 12 months. Break-up of the activities and relative time for each activity is shown below:

Scheme preparation and approval	01 month
MSI provisional registration	3-4 months
Sanction of financial supports etc	4-6 months
Installation of machinery and power connection	6-12 months
Trial run and production	01 month

Technical Aspects 
 Location

The plant can be located at any suitable place keeping in view the marketing convenience, availability of power, water and skilled manpower.

 Salient Features of Process / Technology

Breakfast cereals are produced by extrusion cooking method. For this purpose single screw and twin screw extruders are available. Twin screw extrusion cooking method is used for producing high quality products with better texture and precise process control. Ingredients are mixed and conveyed to a twin screw cooker extruder which gelatinizes the starch in cereal. The cooking temperature varies from 120º to 180º C for 10-15 minutes. Flavour, colour and vitamins are added at this stage. The cooked cereal is passed into a forming extruder wherein the mass is cooled and formed into pallets. The pallets are conditioned before flaking/ shredding. The flakes are then roasted and required coating of sugar is applied along with vitamins and minerals. This product is packed and dispatched.

Product Quality Specifications: Cornflakes are prepared from dehulled, degermed and cooked corn by flaking, partially drying and roasting in the form of crisp flakes of reasonably uniform size and golden brown in colour. It should be free from dirt, insects, larvae and impurities, any other extraneous matter.  

Pollution Control

There is no major pollution problem associated with this industry except for disposal of waste which should be managed appropriately. The entrepreneurs are advised to take "No Objection Certificate" from the State Pollution Control Board.

Energy Conservation

Proper care should be taken while utilising the fuel for. There should be no leakage.

Production Capacity

Quantity	840 tpa
Installed capacity	1200 tpa
Optimum capacity utilization	70%
Working days	300
Manpower	29
Motive Power	90 kWh

 Land & Building Amount (Rs. lakh)

Particulars	Amount
Land 4,500 m 2 & land development	098
Built up area 3,000 m 2	425
Total cost of land and building	523

 Machinery and Equipment Amount (Rs. lakh)

Description	Amount
Plant, machinery consisting of Twin Screw Cooker Extruder, Forming Extruder, Pre conditioner, S.S. Mixer, Conveyer Belt Dryer, Storage Bins, Flavour Applicator, Packing Machinery, miscellaneous assets, etc.	780
Erection & electrification of machinery & equipment @10% cost	078
Office furniture & fixtures	032
Total	890

Pre-operative Expenses Amount (Rs. lakh)

Consultancy fee, project report, deposits with electricity department etc

057

Total Fixed Capital Amount (Rs. lakh)

(9.1.1+9.1.2+9.1.3)

1470

Recurring expenses per annum

Personnel Amount (Rs. lakh)

Designation	No.	Salary	Amount
Factory Manager	1	30000	03.60
Managers	2	18000	04.32
Supervisory staff	3	15000	05.40
Office Assistant	5	13000	07.80
Technician	3	12000	04.32
Skilled workers	7	5000	04.20
Unskilled workers	18	3500	07.56
			37.20
Perquisites @15 %			05.80
Total	29		43.00

Raw Material including packaging materials Amount (Rs. lakh)

Particulars	Qty (t)	Rate/t (Rs.)	Amount
Raw Material including packaging materials	LS	LS	587.00
Total			587.00

Utilities Amount (Rs. lakh)

Particulars	Amount
Power	21.70
Water	01.30
Total	23.00

Other Contingent Expenses Amount (Rs. lakh)

Particulars	Amount
Repairs and maintenance of M&E @ 3 %	25.74
Repairs and maintenance of building @ 1%	04.25
Repairs and maintenance of site development @1%	00.98
Consumables & spares, others	16.50
Transport & travel	02.50
Publicity, postage, telephone	09.00
Insurance @1%	12.03
Total	71.00

Total Recurring Expenditure Amount (Rs. lakh)

(9.2.1 + 9.2.2 + 9.2.3 + 9.2.4)

724.00

Working Capital Amount (Rs. lakh)

Recurring expenses for 3 months

180.00

Total Capital Investment Amount (Rs. lakh)

Fixed capital (Refer 9.1.4)	1470.00
Working capital (Refer 9.3)	0180.00
Total	1650.00

Financial Analysis

Cost of Production (per annum) Amount (Rs. lakh)

Recurring expenses (Refer 9.2.5)	724.00
Depreciation on building @ 3.33%	O14.15
Depreciation on machinery @10%	078.65
Depreciation on furniture @ 20%	003.20
Interest on Capital Investment @ 12%	198.00
Total	1018.00

Sale Proceeds (Turnover) per year Amount (Rs. lakh)

Item	Qty (t)	Rate/t (Rs.)	Amount
Breakfast cereals	840	1.80	1512.00

(ii) Net Profit (per year)
B.E.P.	=	Sales - Cost of production
	=	1512 – 1018
	=	Rs. 494 lakh

Net Profit Ratio

B.E.P.	=	Net profit X 100 ---------------------- Sales
	=	494 x 100 --------------- 1512
	=	32.6 %

10.5 Rate of Return on Investment

B.E.P.	=	Net profit X 100 ---------------------- Capital Investment
	=	494 x 100 --------------- 1650
	=	30%

10.6 Annual Fixed Cost Amount (Rs. lakh)

All depreciations	096.00
Interest	198.00
40% of salary, wages, utility, contingency	054.80
Insurance	012.03
Total	360.83

10.7 Break even Point

B.E.P.	=	Annual Fixed Cost x 100 ---------------------- Annual Fixed Cost + Profit
	=	360.83 x 100 --------------- 360.83 + 494
	=	42%