Introduction

The spice markets seem competitive in retail stores where various brands of spices are available. Anyone can enter in this industry by establishing small household industry. Although spice market is not very profitable because there are many establish firms and also having struggling small firms too. On other hand spice market seems monopolistic because each brand has its unique taste in its product having different composition present in different brands. Their products are similar i.e. all firms have Garam Masala, turmeric powder, sabji masala, Raita Masala etc but not identical. We visited to Ashok Griha Udyog Kendra situated at Dadanagar, which is one of the leading firm in this industry. They are running with four units in Kanpur, where we studied the Price Output Relationship of their products.

ASHOK MASALECompany Preface The corporate saga of Ashok Group is the successs story of Shri Kishori Lal Gupta.From a small business venture to a multiproduct corporate house and nine different products under its corporate umbrella. Ashok Griha Udyog Kendra was the first Indian spice company to get 'Agmark' for its entire range of spices along with numerous other national and international awards. Company started in 14 December, 1957 in Kanpur.

The secret of success of Ashok MasaleTradition has it, that Indians have always preferred purity above everything. And spices are no exception. This is the reason why they prefer grinding and preparing spices at home. To change the centuries old practice of home prepared spices Ashok Masale strategy. Ashok Masale, started procuring only garden-fresh, whole spices from the places of their origin, thus setting a benchmark in the spices industry. This
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practice of procuring whole spices from the places of their origin also ensured the purity and its top grade quality. Processing, like procuring is an equally decisive aspect. Processing,like employed highly qualified professionals to prepare immaculate blend of spices by mixing appropriate ratios of different ingredients. From mixing to moisture proof packing, Ashok Masale strictly adhered to quality control and still continues to do so. As a result it is today a name recognised and loved in millions of homes all over India and abroad. As it is said that Quality Speaks for itself, Ashok Masale was branded No.1 in Quality in a recent survey conducted by IMRB & CMIE jointly. Ashok Masale came out the winner in the ground and packed spices segment.

Range of Products
They are the leading manufacturers and suppliers of all kinds of basic and formulated spices in fancy consumer packs and pickles (Mango, Lemon, Chilli, Ginger & Mixed) for over fifty years. They use finest ingredients, the company's high quality food spices include: Turmeric, Chilli, Dry Mango, Coriander, Black & White Pepper Powders, Curry Powders including Madrasi Vegetable Masala, Chat Masala, Hawan Samagri, Heeng etc.

HIGHEST DEMAND OF SPICESSabzi Masala Garam masala Dhania masala Haldi masala Mirch masala

Market price and sole agent price of few productsProducts Sole agent price M.R.P. in U.P. (Rs. per Kg.) (Rs. Per packet) 83 319 154 200 111 197 225 7 540 13 12 18 32 19 M.R.P. in other states(Rs. Per packet) 7.5 620 15 14 22 38 21

Haldi powder(50 gm.) Garam masala(per Kg.) Chat masala(50 gm.) Kasoori methi(25 gm.) Jal Jeera(100 gm.) Pao bhaji masala(100 gm.) Meet masala(50 gm.)

Demand of haldi in market and Price variation effect

Selling/day (Kg.) 0 600 610 620 630 640 650 660 price/Kg. (Rs.) 147 146 144 142 139 136 133 TR 0 88200 89060 89280 89460 88960 88400 87780 AR 0 147 146 144 142 139 136 133 MR 147 86 22 18 -50 -56 -62

Haldi gives highest revenue for the firm. The graph shows the demand of haldi changes due to increase and decrease in price.

Pricing strategy for Garam Masala

Ashok Masale has a large range of products . we are taking Garam Masale ( 50gm.) as an example to show the price output relationship. M.R.P. of Garam Masala( 50 gm.) is Rs.27 . They distributed their price to their different chain in a following manner. To Retailer- Retailers demand for 20 to 25% margin of the M.R.P. that is Rs.6.75 for Garam Masala( 50gm.) As retailers are the important part for sales so the firm has to give a descent percentage on M.R.P. Suppose if we provide a better scheme to our retailer in comparison to our competitor e.g. Big Bazaar is a retailer of Ashok Masala and if they will provide a good scheme to them then Big Bazzar will definitely give a extra space for spices product of Ashok Masala which will increase the sale of spices in the stores. To Sole Agent- Ashok masala sell their finished product to sole agent at cost plus 25 to 30% margin. To Distributor- Distributor get about 6% of M.R.P. which is Rs.1.62
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To Whole-Seller- Whole-seller get approximately 2% that is Rs. 0.54 When they produce Garam Masala(50gm.) then approximately 55% of it which is Rs.8.91, they spend in buying raw materials used in it.

Ashok Masala gets about Rs.3.24 at each packet of 50 gm. of Garam Masala. In the same way they get profit on other products also hence they have complete control over their pricing and output this is why they are able to increase their turnover continuously.

DemandThe demand of the product is about 12 tons per day. Demand is high During marriages and in festival season the demand of spices increase so it is in high demand.

Demand is low
There is some factors that effect the demand. Some time rumour spread then demand of spices get down and in rainy season demand get down because in rainy season consumer realise that the spice has moisture and it does not have that taste. SEASONAL AFFECTIn between July to November there is a high demand of spices because Marriage season and festivals. As we got a information that if demand of garam masala increases with respect to other jalzeera and other products which has a high demand in summer season. So they usually transfer some of their departmental workers in the section where they are required. By doing this they can increase the production of the particular product which is in demand which is their way to trade-off.

PRICE

QUANTITY

DIWALI HIGH DEMAND

PRICE

QUANTITY

FESTIVE HIGH DEMAND

PRICE

QUANTITY

RUMOUR LESS DEMAND

PRICE

QUANTITY

RAINFALL LESS DEMAND

SUPPLY CHAIN From Factory Sole Agent Distributor Dealers

Share which they give to their different chainDistribution chain SOLE AGENT DISTRIBUTOR WHOLE SELLER SUPPLIERS TO Ashok Masale is a popular in the states of Punjab, Rajasthan, Bihar, J & K, Haryana, Delhi, West Bengal, Assam, Arunachal, Maharastra, Gujrat, Nepal, Leh, Ladakh, Meghalaya and Tripura apart from the tremendous support that the brand enjoys in Uttar Pradesh. LEADING COMPETITORS MDH, Everest, Goldie % from the M.R.P. 20-25 6 2

PER YEAR SALEIn 2007-08 the total sales was Rs.90crore. In the previous year the sales was Rs.78crore. In 2005-06 the sales of spices were Rs.70crore. It shows that the industry has a 10 to 12% growth per year.

10 0 9 0

8 0 7 0

6 0 2 0 -0 05 6 5 0 4 0 2 0 -0 06 7 2 0 -0 07 8

3 0 2 0

1 0 0 1

Annual Total cost, Marginal cost & Average Total cost of the firmNo. of workers 0 90 110 130 150 170 Fixed Cost(crore) 2.30 2.30 2.30 2.30 2.30 2.30 variable cost 0 11.37 13 15.4 17.06 17.9 total cost 2.30 13.67 15.30 17.70 19.36 20.20 Marginal cost 0.00812 0.0081 0.008 0.0083 0.0084

Production 0 1400 1600 1900 2100 2200

ATC(crore/ton) 0 0.0098 0.0096 0.0092 0.0093 0.0094

Total Cost (TC) 25.00 20.00 15.00 Total Cost (TC) 10.00 5.00 0.00 0 1400 1600 1900 2100 2200

ATC 0.0099 0.0098 0.0097 0.0096 0.0095 0.0094 0.0093 0.0092 0.0091 0.009 0.0089 1400 1600 1900 2100 2200 ATC

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MC 0.0085 0.0084 0.0083 0.0082 0.0081 0.008 0.0079 0.0078 1400 1600 1900 2100 2200 MC

Factors affecting the cost of product Raw MaterialCompany purchases raw material for whole year production at the time of harvesting when the raw material is available at economical rate from the mandi of A.P., M.P., Karnataka, Rajasthan, Maharashtra. They adopt the strategy that they purchase raw material in cash and in bulk amount for the whole year. By this way they get discount. There 80% of raw material reserve in cold storage and they kept 20% stock in the godown. This will help them to use stored raw material at the time of inflation. And maintain the same or little higher cost than they produce at what they produce earlier . Their annual consumption of raw material is about 5000 tons for production.

Contents of raw material-

Dhaniya, haldi, khatai, jeera, lal mircha, saunf, heeng, ect.

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 Processing of raw materialLatest machines and technologies are used for cleaning all the whole spices before feeding them to the grinding chain. Except a few like Cumin Seeds, AniSeeds, Caraway etc, which require handpicking and cleaning so as to clean them of minute impurities which machine are unable to detect. Transportation costPer truck cost of raw material is Rs 2000 to 2500, per day 20 to 25 trucks are loaded and unloaded .

Wages- Labour is cheaper here so they do not establish another unit

where raw material is produced. Here labour is available even at Rs 40 as compare to other place where labour is much more expensive.

Quality centric
Ashok Masale's strict adherence to quality brought the brand the distinction of being the first to be awarded with the AGMARK certification. Upholding India's tradition of producing and making available the world's finest spices, Ashok Griha Udyog Kendra today exports Ashok Masale to Middle East, Nepal, Bhutan and other countries around the world. Each and every lot of Agmark Ashok Masale goes through a series of tests. Test conducted in Ashok Masale's in-house laboratory, adhering to tests standardised by government approved chemists. Ashok Msala range of spices are hygienically packed only after undergoing these stringent Quality tests and checks. Proper, scientific Packaging is a vital aspect that helps in retaining the original flavors and increase shelf life of the spices. At Ashok Masale, packaging is undertaken by latest automatic FFS machines, carton filling machines and sealing machines. Automatic Coding machines print the Batch No., Date of Manufacturing, Date of Expiry, Price etc.

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Average fixed cost & average variable cost of the firmOutput in tons 1400 1600 1900 2100 2200 AFC 0.0016 0.0014 0.0012 0.001 0.001 AVC 0.0081 0.0081 0.008 0.0081 0.0082

0.009 0.008 0.007 cost crore / ton 0.006 0.005 0.004 0.003 0.002 0.001 0 0 500 1000 1500 2000 2500 production (in tones) AFC AVC

Other expenses during production Godown cost- For preventing the raw material from fungus and moisture,
Ashok masale store it in cold storages which includes cost of preservation. Each sack in cold storage costs 16 Rs. Per sack per month, and 80% of raw material is stored in cold storages.

Labour cost- For production of raw material firm has employed about 170
labours and their annual salary is about 30 Lakhs. And five supervisors are also working there, their annual salary is about 3,60,000 RS.

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Initially there polethene was not in use they use butter paper for packaging of 50gm and 100gm pouches. They have introduced first time satches in India for poors. At Ashok Masale, each and every activity-from procuring excellent whole spices to processing and packaging-everything is state of the art. few ingredients like nutmeg, mace, cloves are outsourced from the places of their origin, from around the world.say there is 1 Kg masala is to be packed in cartoon packing it costs 28- 30 Rs per Kg pack.so cost of packaging is so high because it is packed in latest machineries.

Packing cost

Advertisement cost- For promoting various products in the market a firm is

supposed to adopt different marketing techniques as advertisement, Ashok masale also spends a huge amount in advertising in print media as well as in electronic media. Last year they spend about 1.2 crore Rs in electronic media and 80 lakh Rs.in print media.

Office staff salaries- To keep production in function firm requires proper

management and well organised staff, salaries for the staff in Ashok masale is about 15 Lakh Rs annually.

Legal expenses- There are some legal affairs in Ashok masale which costs
50,000 annually. Miscellaneous expenses- Miscellaneous expenses for one year in Ashok masale is about 12 Lakh Rs.

Taxes- Tax is levied on raw material when it comes from other states such as
Mandi tax(2.5%) and VAT(4%). Applying this economics they are able to earn a higher profit and make them selves a leading player of this industry.

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