Mansukhani Institute of Management

Entrepreneurship Management
Franchise of Monginis

Submitted by : Puja Chhabria Menka Kukreja Sahil Kukreja Jeetender Tekchandani

Submitted to:

Prof. Bhavna Chandnani

Cake industry in India:

India is the second largest producer of wheat in the world. As per the figures of Agriculture Ministry Government of India, India produced about 72 million tonnes of wheat in 200304. It is 12 per cent of the world production. Most of the wheat produced in the country is suitable for production of bread and bakery products, which is soft to medium hard with medium protein content. The major wheat producing states are Punjab, Haryana, Uttar Pradesh and Rajasthan. Durhum or hard wheat with high protein content and high gluten content is typically grown in central and western India. The quantity of Durhum wheat is small and is estimated to be about 2.5million tonnes. Although acreage under wheat cultivation is steadily increasing, the productivity has been more or less stagnating at around 2.4 to 2.7 tonnes per hectare. In 2003-04 seventy two million tonnes of wheat was produced from 26.62 million hectares of the farmland giving a yield of 2.7 tonnes per hectare. In India there are about 900 Roller flour mills milling about 12.5 million tonnes of wheat utilizing less than 50 per cent of their installed capacity. As per the Union Ministry of Food Processing Industries estimate there are about 400000Chakkis milling 42.5 million tonnes of wheat. The Chakki milled wheat flour normally goes for direct household consumption and the atta (wheat flour) and maida produced in organized roller flour mills normally are supplied to the industry. Roller flourmills also produce other products including semolina (suji) and other by-products. With low capacity utilization the roller flourmills are not really doing well. Government through Public Distribution Scheme (PDS) distributes and sells wheat all over and Food Corporation of India ( FCI) provides the major storage and infrastructure facilities for this purpose. FCI storage system is age old and inadequate and many studies indicated that there is a significant loss and pilferage taking place from FCI run storage go downs. The selling price of wheat by Government through PDS is quite low to cover Above Poverty Line (APL), Below Poverty Line (BPL) and Poorest of- the Poor (POP) consumers. These prices are now fixed at INR 6100 per tonnes for APL, INR 4150 for BPL and INR 2000 per tonne for the POP consumers. Needless to say that significant quantity of the wheat grains distributed through PDS comes back to Chakki and roller flour mills through parallel market linkages established traditionally by the middlemen. The reason being the market price is much higher. Even the cost of procurement of wheat including the holding cost reported to be around INR 9250 per tonne. It is clear therefore that large part of the subsidy is wasted through this parallel channel as well through the

wastage and inefficiency of the system arising out of sub-optimal post harvest handling and storage. Although big players like Britannia produces cake but in this category most of the players are in small and medium segment. This category is small and numerous local producers have created success stories. The name that has created a name is Monginis. They have their own retail stores in all metro cities. In addition many other local cake and pastry shops created good business proposition locally. There are many bakery ingredients manufacturers who now sell even ready mixes to small bakers to help them producing good bread. These companies are also helping the small bakeries to improve the technology. In India we get bakery equipments and machineries suppliers catering to the needs of small and medium size plants. The industry is not very attractive and growth depends on price. Margin is low and large players are finding it difficult to establish new brands. The only other large player entered this category is ITC. Their brand Sun Feast Marie Light is a success. But ITC has been spending a lot to create yet another brand which others cannot repeat. As much as things have changed in the bakking industry in the past 25 years, much has stayed the same. Popular products come and go, but what remains unchanged is bakers passion for supplying the best product they can to their customers. Bakeries themselves continue to evolve as what consumers want from their bakeries changes, but the core of good product again remains the same. Take a look at what changes the last 25 years have wrought. Health products Yet another strong trend, which is making waves in the advanced market, is a growing preference for products providing health, convenience and indulgence - baked food that has witnessed significant innovations in the recent past. Most of the innovations in this category were focused upon the development of healthy or functional variants such as natural, functional, light or low carbohydrate and organic breads. Key factors contributing to the growth of processed food industry are change in socioeconomic environment, newer raw materials, additives, packaging materials, indigenous availability of plant & machinery, and import polices.

Challenges, threats The major challenges and threats faced by the organized bakery sector at present mainly pertain to low margins of profit. Further, hike in the prices of major raw materials like sugar, vegetable oil, milk, and wheat flour has been accounted for the industry's low margins of profit. Other key challenges include availability of low-cost technology and skilled manpower and fluctuations in the quality of ingredients. The governments import duty policy for bakery machineries, preservatives and raw materials is also a cause of concern. Stricter regulatory environment also means the ability to guarantee the shelf life of products. Further, more than 20 per cent of all bread/bakery products are thrown out due to shelf-life issues. This is a major problem in this era. Other issues Considering the increasingly global nature of the food industry and food safety issues it is also crucial to tackle threats from food-borne illnesses. This means investment in effective global surveillance systems, investment in new food safety technologies and detection methods, and research into microbial hazards and their control. Hence, the bakery industry has to leverage itself by offering quality bakery products at reasonable prices and upgrading in technological innovations. Low-cost recipe formulation and techniques, which can handle all the variation with the help of additives and other ingredients to delay staleness / improved shelf life / and maintain fresh-keeping qualities. Ensuring longevity A complex set of conditions determines bakery product shelf life, which complicates efforts to extend the "life" of these items. Extending their longevity relies on product developers, process technologists and packaging technologists to produce attractive and good-tasting

products that do not harbor microorganisms.

Understanding how to extend shelf life requires defining what determines loss of shelf life. Dry, stale, soggy, rancid, color deterioration and mould growth. There are two main concerns in the shelf life of bread and bakery products; mould growth and staling. In cakes, water activity and storage temperature that lead to mould growth and low shelf life. Innovations and R&D Health and wellness as a trend are seen playing out in bakery like in most categories, with players bringing out healthier product options. Britannia's Nutrichoice has introduced its range of ragi, oats and 5 grain biscuits. In breads also, the whole wheat/brown bread segment is seeing an upswing. At the other end, players are also focusing on the indulgence segment with Cadburys Oreo and Sunfeast's Dark Fantasy Chocolate filled biscuits entering the shelves, said Subramanian of Tata Strategic. Rathi of Devashree said that manufacturers nowadays were looking for development in the mechanisms for bakery products as well as good ingredients. Trends While talking about new trends in the industry, Subramanian of Tata Strategic said that the broader food trends were also playing out here which included unbranded to branded, rural adoption, premiumisation, health & wellness and convenience. These trends have manifested themselves in the various new launches/introductions that we have seen in the past few years by leading players be it Britannia's Nutrichoice range, smaller packs of Good Day, ITC dark fantasy, Parle's Happy Happy and Parle-G Gold, he said. Chef Mahajan states, Indians have always had a sweet tooth. With more travel and exposure to the worldwide market, people have now started appreciating good quality products, good quality ingredients, exquisite finishing and are willing to pay the extra buck. Growth rate of cake shops is directly related to the spending power. People are less hesitant on spending money, leading to the possibility of higher prices, leading to the possibility of

better products. According to Rathi of Devashree, convenience food is the need of the hour, as there is increase in number of middle class people and husband and wife both are working, so they opt for ready to eat food available in the market. Factors for Growth Recently, a lot of bakers have gotten into three dimensional cakes and theme cakes. Cutting off from the regularity, bakers are now looking at experimenting with many more ingredients like rice treats, and inculcating them into cake designs. Some bakers even make use of wooden planks for support. There is also something as sugar crystal sculptures, where they try and use them as per the theme of the cake, according to chef Mahajan. The biscuit category is expected to continue its growth trajectory of 15% going ahead. Growth in bread would be relatively slower, informs Subramanian of Tata Strategic. Challenges, Opportunities The challenges would be category-specific. The biscuits category has seen rapid growth in the last few years. Implementation of packaging standardization norms appears to be the big challenge. Volatility in input costs is expected to remain and this would add to the woes. In bread, profitability has remained the focal point for some time. Players have been looking to increase share of value-added products while focusing on operational efficiencies linked to daily distribution. The challenge for cakes would be to expand the consumption of packaged cakes. In fact, this challenge is also a significant opportunity for this particular segment. With the right enablers from product and supply chain, this is a category waiting to explode, adds Subramanian. Chef Mahajan feels, The cake business is not a very high revenue-generating business. With commercial property rates so high, it is very difficult to sustain and have profitable retail outlets. It is also very expensive in cities like Mumbai to expand the production unit due to the same reason. Rathi is of the opinion that quality of flour and supply chain was key challenges for the bakery industry. Bakery manufacturers have to deal with quality of flour and other

ingredients. Whereas opportunities are immense in this industry as disposable income has increased among the people.

Regulatory Aspect Speaking on regulatory aspects, Subramanian of Tata Strategic said, FSSA is an important regulation for bakery. While FSSA is a step in the right direction, greater clarity on the execution mechanism would need to be built. The implications of the packaging norms being proposed by the ministry of consumer affairs

Franchise of Monginis

Monginis at glance

Industry

Bakery, Food Processing, Packaged Foods

Founded

1958

Headquarters Mumbai, India

Area served

India and Egypt

Key people

Zoher H Khorakiwala (Chairman), Kumail H Khorakiwala M.D.

Products

Cakes, Pastry, Chocolate

Services

Monginis Cake Shop, Home delivery, Online shopping

Currently, there are 605 Monginis cake shops across 6 states Presence (Maharashtra, Goa, Gujarat, Madhya Pradesh, Monginisst Bengal and Orissa),

of which 225 are in Mumbai alone. So Monginis major market is Monginisst India, whic

About Monginis

Monginis-a premier and popular destination for lovers and connoisseurs of all varieties cakes, chocolates, pastries and cookies, with a commanding and distinguished presence in 12 cities around India and 2 in Egypt.

Core Purposes : To help people express their happiness in a memorable way. Assist customers in conveying happiness to their loved ones in memorable and personalized ways.

Core Values : All Monginis products and services shall be offered with the same love, care and affection as if, they Monginisre meant for the most beloved person. Use the best ingredients, offer fresh bakery products, customized to suit personal tastes, with excellent standards of creativity, and delivered with the highest degree of timeliness and assurance of impeccable quality. Good intentions in dealing with stakeholders like Suppliers, Employees, Franchisees, Dealers and Consumers yield good products and services. Cherish, honMonginis and respect, the goodwill and cooperation given by stakeholders like Suppliers, Employees, Franchisees, Dealers and Consumers.

Monginis uses only the finest and freshest ingredients in its products, with insistence on quality control at every stage of production, packaging and delivery.

Monginis have specialized in and gained renown for custom made personalized products, which the client can order as per individual specifications and tastes, together with unique messages, which touch the hearts of the recipients. Monginis is the Celebration King with virtually no popular or special occasion remaining outside its range. Clients have now become habituated to celebrate with Monginis whether birthdays, anniversaries, Monginisddings, engagements, Childrens Day, etc.

Monginis outlets Cake Shops, are conveniently located, with a friendly ambience and helpful staff, whose motto is the complete satisfaction of the customers sMonginiset wishes. Great ethics and services, have ensured that Monginis has spread its wings across exclusive 521 outlets, using 1,25,000 sq. ft. of retail space, 20000 non exclusive dealers selling the brand, and a daily footfall of 75000 customers, in addition to the large organized retailers like Big Bazaar, More, Spencers, Dmart, Star Bazaar, Reliance.

Monginis The name Guarantees. Clients have become accustomed to hassle free services and blemishless products, which come with a high degree of creativity and aesthetism.

The prompt and efficient delivery service has been one of Monginis fortes and hallmarks. In a market environment where emphasis by many supplier s of goods and services is only on core products and sub contracting of related ones, for Monginis, the timely and proper delivery of the clients choices in perfect condition, has always been very much a vital part of the complete process aimed at blameless customer satisfaction.

Monginis Gift Coupons and Corporate Gift initiatives have gained widespread credibility and acceptance. They are not only supremely convenient and easy to utilize, but are supported by Monginis core desire to provide creative and personalised products, ( as opposed to mass produced, assembly line manufactures) . Every gift is for a unique

individual, for no two persons are ever the same. Monginis confectioners, chefs, and artists are always on the stand by to create exclusive and artistic products, to the entire satisfaction of the client. Monginis concept of logocakes, artistic renderings of the company product or logo, have been warmly Monginislcomed in the corporate world.

Started in 1958 by the Khorakiwala family, Monginis floMonginisred under the visionary genius of Husseini Khorakiwala in the 1970s. An entrepreneur par excellence, he felt that progress ought to be a combined experience. He offered franchises to budding business persons who could operate their own enterprises, by employing the product and service range offered by the mother company, Monginis. Excellent ethical standards and products, ensured that the move flMonginisished. Today, Monginis franchisees are a happy and progressive part of the family.

In the field of electronic marketing too, Monginis has not lagged behind. Instead , its portal ,www.monginis.net is one of the leaders in on line marketing and servicing, creating a valued niche for itself. The portal gives clients a convenient and safe option of sending gifts to loved ones, or business associates, without the hassle of personal visits or payment hurdles.

Beside Cakes, Monginis also serves snacks like puffs, bread rolls, pizzas, burgers and sandwiches through its exclusive cake shops. Monginis also dynamically caters for snack packs ideal for parties and get-togethers.

Franchise What are the selection criteria for Monginis franchise partners?

Monginis select franchise partners based on their financial soundness; they need to invest Rs 1,25,000 towards deposit; Rs 50,000 as franchisee fee, and some more towards interiors and equipment as per Monginis specifications. They also need to have an initial working capital of Rs 1,00,000 to finance the stocks of around Rs 80,000 and a market credit of Rs 20,000. Besides this, they need to have a property in a high visibility area such as a railway station, a popular market place, on the citys main road, in a mall, etc. Experience in dealing with reputed retail brands would be an added qualification.

On an average an investment of Rs 6-7 lakh (excluding cost of acquiring a property on ownership basis) is required for opening a store. The franchisees earnings are directly proportional to the revenue generated by the store. Monginis do not open stores which have a revenue potential of less than Rs 3.5 lakh per month. Monginis sales vary depending on city and location from Rs 3.5 lakhs per month to Rs 15 lakhs per month.

Which are Monginis largest selling product categories? The largest selling category is celebration cakes, which contribute around 58 percent of the total sales, folloMonginisd by pastries which generate around 21 percent of the total revenue. Monginis best-selling cake flavMonginis is black forest. In fact, of the 190 sq ft area for display and storage, 81 percent of total counter space and 37 percent of total storage area is occupied by the celebration cakes and pastries. Other categories such as savMonginisies generate 8 percent of the sales, packaged cakes and trading items (namkeens, wafers, candies, etc), 4 percent each; breads contribute 2 percent; cookies, chocolates and party accessories (caps, party poppers, face masks, candles, balloons, floMonginisrs, etc) add 1 percent each.

During Xmas and the period up to New Year, Monginis witness soaring sales, and of cMonginisse occasions like Easter, Raksha Bandhan, Bhai Duj, Eid, Diwali and Valentines Day also add considerably to Monginis sales as Monginis often offer themed products during these festivals.

How the business model works? Cake shop

Place an order at the franchiser

Product Delivery

Cash Payments

Comparision with Ribbons and Ballons

Feature

Monginis

Ribbons & Balloons

Minimum Cake Size

250 gms

500 gms

Coverage

National Coverage

Regional Coverage

Order Placements

Twice in a day

Once in a day

Initial Capital

Rs.6 to 7 Lakhs

Rs.10 Lakhs