IES MCRC

COST ANALYSIS OF
BRITANNIA BREAD

Eat Healthy, Think Better

 Cost Analysis - Britannia Bread

CERTIFICATE

This is to certify that the Project titled: Cost Analysis of Britannia Bread has been
submitted by:

Atul Ratnapakhi
Reshma Rasal
Sheetal Rathod
Sneha Patil
Vikas Rathod
Vineet Saraf

Towards fulfillment of the requirement of PGDM course 2008 2010 and has been
carried out under the guidance of Prof. Jayesh Jain at the Indian Education Societys
Management College & Research Centre.

The information submitted is true and original to the best of our knowledge

_____________
Guide:
Place:
Date:

------------------------------

Prof Jayesh Jain

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 Cost Analysis - Britannia Bread

DECLARATION

We hereby declare that this report submitted in partial fulfillment of the

requirement of the award for the Post Graduate Diploma in Management Studies
to IES Management College is our original work and not submitted for award of
any titles or prizes.

While the data required for analysis has been sourced from various magazines,
books and portals, the analysis is original.

We further certify that we have no objection and grant the rights to the IES
Management College to publish any chapter/ project if they deem fit in journals/
Magazines and newspapers etc without our permission.

Place : Mumbai

Date : 2nd September, 2008.

Name : Sneha Patil (76)

Reshma Rasal (82)

Sheetal Rathod (83)

Vikas Rathod (84)

Atul Ratnaparkhi (85)

Vineet Saraf (86)

Class : PGDM 1st year

Division: B

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 Cost Analysis - Britannia Bread

ACKNOWLEGDEMENT

One is filled with great sense of pride when students are able to distinguish themselves
in works, even beyond the four walls of the classroom.

This work is synergistic product of our mind. We are grateful to many Tran generational
source and roots of wisdom that helped us to make this project viable and also on the
right time. The material and arrangement has slowly evolved and has imbued those who
has deeply and sincerely immersed in it.

We are very grateful to Prof. Jayesh Jain for giving us the fine opportunity by making
us move out of the four walls of classroom and taking the practical look.

I am indebted to IES Management College and Research Centre and University of

Mumbai for this golden chance

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 Cost Analysis - Britannia Bread

Index

Sr.No Topic Page No

1 An Introduction to Food and Beverage Sector 06
2 Bakery Industry 07
3 Introduction To Britannia Industry 08
4 Britannia Daily Fresh Bread 09
5 SWOT Analysis 10
6 Cost Sheet 11
7 Cost Sheet Analysis 14
8 Conclusion 17
9 Bibliography 18

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 Cost Analysis - Britannia Bread

AN INTRODUCTION TO FOOD & BEVERAGES SECTOR

The multi-billion food and beverage industry comprises several markets including
bakery products such as bread, biscuits etc., milk and dairy products, beverages such
as tea, coffee, juices, bottled water etc., snack food, chocolates, etc. beverage,
confectionery, processed foods and others. India's Food and Beverage industry is
valued at Rs. 3584 billion. India produces above 600 million tonnes of food products
every year and is one of the major producers of food in the world.

The food and beverage industry registered a growth rate of 8.5% in 2005-06. With
increase in disposable income of consumers, growing awareness among consumers
about health products, rapid urbanization, and increasing popularity of convenience
foods, food and beverage sector is expected to grow at a high rate. This sector holds a
huge potential to grow because of the increase in advertisement spending, awareness
campaign about products in urban as well as rural areas, and large scale
transformation.

The food and beverage industry is primarily driven by consumer health trends.
Presently, the food and beverage industry is in a dynamic phase, marked by a high
degree of competition. As product development within the food and beverage market
moves towards a focus on health and nutrition, the growth and development of food
manufacturers in the market depends on having prudent strategies in place, which can
be applied globally. In effect, this has created a highly competitive market place, which
fosters growth of participants with a clear vision of "growing with their customers."

The major players in the "Food and Beverage" Industry is: Heinz, Mars, Marico,
Conagra, Pepsi, HLL, Pillsbury, Nestl, Amul, ITC, Dabur, Britannia, Cadbury, Smith
Kline Beecham, The Surya Food and Agro Private Ltd.

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 Cost Analysis - Britannia Bread

BAKERY INDUSTRY

Bakery industry in India is probably the largest among the processed food
industries, production of which has been increasing steadily in the country.
Bakery products once considered as sick mans diet have now become essential
food items of the vast majority of population. The two major bakery industries,
viz., bread and biscuit account for about 82% of the total bakery products. The
annual production of bakery products which includes bread, biscuits, pastries,
cakes, buns, rusk, etc., most of which are in the unorganized sector, is estimated
to be in excess of 3 million tonnes. The production of bread and biscuits in the
country both in the organized and unorganized sectors is estimated to be around
1.5 million tonnes and 1.1 million tonnes respectively. Of the total production of
bread and biscuits, about 35% is produced in the organized sector and the
remaining is manufactured in the unorganized sector. Indian Bakery sector is
indicating significant growth both in terms of volumes and customer base. The
sector, which is estimated at Rs 3,500 crore, is currently registering a 40% growth
according to industry sources. The production of Bakery products has increased
from 5.19 lakh tonnes in 1975 to 18.95 lakh tonnes in 1990 recording four-fold
increase in 15 years.

Some of the well-known and most frequented bakeries in the country are Sweet
Chariot, Modern Bakery, Daily Bread in Bangalore, Monginis, Birdie's, Croissants
in the west, and in the north and eastern parts of the country, there are quite a
few big players too.

BREAD
Bread is the cheapest and basic instant food available for consumption. Though
bread is not a staple food in the country, its consumption has increased over the
years. In India it is still a secondary staple food when compared to chapatti, puri
or rice. The different types of bread available are White bread, Whole meal or
whole wheat bread, mixed grain bread, Kibbled wheat and cracked wheat bread,
Fibre-increased white breads, Rye bread
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 Cost Analysis - Britannia Bread

INTRODUCTION TO BRITANNIA INDUSTRIES

The story of one of India's favorite brands reads almost like a fairy tale. Once
upon a time, in 1892 to be precise, a biscuit company was started in a nondescript
house in Calcutta (now Kolkata) with an initial investment of Rs. 295. The
company we all know as Britannia today is one of Indias best known brands and
also one of the most admired Food Brand in the country. Having succeeded in
garnering the trust of almost one-third of India's one billion population and a
strong management at the helm means Britannia will continue to dream big on its
path of innovation and quality. And millions of consumers will savors the results,
happily ever after. The company has four production facilities, 4367 employees,
and sells its products in over 600,000 outlets across India.

The Britannia Brand is all about eating healthy for leading a better life. It is the
largest company in the food processing industry whose product range also
includes breads and cakes. Britannia has a basketful of goodies with biscuits like
Nice Time, Tiger, Marie Gold, 50 50 Maska Chaska, Milk Bikis, Pure Magic, Time
Pass Nimkee, Treat, Good Day, Little Hearts, Nutri Choice, Nutrichoice Digestive,
Daily Fresh Bread and Britannia Cakes.

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 Cost Analysis - Britannia Bread

BRITANNIA DAILY FRESH BREAD

Till 1958, there were no breads in the organized sector and bread consumption was a
habit typified by the British. Then, a mechanised bread unit was set up in Delhi with the
name "Delbis" which produced sliced bread and packed it under the Britannia name.
Thus, Britannia was not only the pioneer, but also inculcated in the people of Delhi the
habit of eating white sliced bread.

The Mumbai unit came up in 1963, and there again Britannia was the first branded
bread in the city. From a company offering 2 packs - the 400gm and the 800gm plain
white sliced bread - Britannia has evolved into a company offering 22 packs, catering to
a variety of taste and price segments in the bread consuming market. The last couple of
years also saw the introduction of Whole Wheat Bread as a part of "Eat Healthy, Think
Better" credo.

Britannia Daily Fresh Bread, which finds its way to over 6 lakh households daily, is the
mainstay of the companys non-biscuit business at present. Britannia hopes to drive this
emerging business through the exploding modern trade and has already gained access
to Reliance Retail, Trinethra and Fabmall for its breads. Britannia is widely recognized
as an innovative marketer.

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 Cost Analysis - Britannia Bread

SWOT ANALYSIS OF BRITANNIA BREAD

STRENGTHS WEAKNESS
1)Availability 1) Less durability
2) Instant food available for 2)
consumption
3) Distribution network
4) Acquired 50% stake in Daily
Bread

OPPORTUNITY THREATS

1) Bakery industry growing at 1) Unorganised Bakery firms

40% per annum
2) All major firms are now
supplying fast food at work spot
3) Bread is now becoming staple
food
operating in rural areas
2) Raw material cost increasing
due to inflation
3) Competition

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 Cost Analysis - Britannia Bread

COST SHEET OF BRITANNIA BREAD

PROFORMA OF COST SHEET

Cost sheet for every 1lac units produced and sold.

Cost Per Unit

Quantity Manufactured 1 100000
Quantity sold 1 100000

CPU(Rs)
DIRECT COST
Raw materials consumed
Opening stock of raw materials 0
Purchases of Raw Materials 5.805
(-)Closing stock of Raw Materials 0
Materials Consumed 5.805
Direct labour/wages 0.124
Direct cost/expenses 0.2415
PRIME COST 6.1705
INDIRECT COST
Factory/Works Overheads
Indirect labour 0.122
Depreciation on Machinery 0.675
Works Overheads 0.05204
Cost of Maintanence 0.0589
Other Factory Expenses 0.0282
Supervisors Salary 0.0385
Power & Fuel 0.5678
Total Overheads 1.54244

FACTORY COST/WORKS COST 7.71294

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 Cost Analysis - Britannia Bread

Office and Administrative Overheads

Depreciation on office furniture@7% 0.0281
Office Rent 0.0585
Salary to Staff 0.089
Office and General Expenses 0.0257
Telephone expenses 0.0219
Electricity and Lightings 0.03123
Printing and stationary 0.00294
Total Office and Administrative Overheads 0.25737

COST OF GOODS SOLD 7.97031

Selling and Administrative Overheads

Sales Commission 0.705
Salary of Salesman 0.1
Carriage Outward 0.12798
Sales Expenses 0.057
Total Selling and Administrative Overheads 0.98998

COST OF SALES 8.96029

PROFITS 1.03971
SALES 10

Raw Materials Cost

Flour 3.756
Water 0.892
Yeast 0.6789
Salt 0.4781
Raw Materials per unit 5.805

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 Cost Analysis - Britannia Bread

NOTE
The Value are determined on the basis of apportionment as the company
produces more than one product (including fixed cost)
Cost sheet for every 1lac units produced and sold.
Some of the above Values are estimated

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 Cost Analysis - Britannia Bread

COST SHEET ANALYSIS

Direct Cost:

Direct materials

To manufacture one unit of bread the following RAW MATERIALS are required.

Flour
Water
Yeast
Salt

Direct labor/wages:

Direct labor/Wages amounts to Rs. 0.124 per unit which is approximately 2.009% of the
PRIME COST. This percentage is low because a good amount of work is automated as
a result of which Human resources are diverted to more productive areas such as
SALES and MARKETING.

Direct cost/expenses:
Direct cost includes costs incurred in bringing the raw materials into the factory which is
Carriage inward. It also includes the amount paid loading unloading charges and other
petty expenses.

Indirect Costs:

Factory Overheads:
The Factory Overheads includes the indirect labor, Depreciation on Machinery, Works
Overheads, Cost of Maintenance, Other Factory Expenses, supervisors Salary and
Power & Fuel.

Indirect labor: The amount of indirect labor is Rs. 0.122 per unit. This value includes
sweeper charges, support staff etc.

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 Cost Analysis - Britannia Bread

Depreciation on machinery: The depreciation is calculated on the basis of WDV

calculated @ 10% p.a. This value amounts to around 43.7% of the FACTORY
OVERHEADS. The percentage high because of the level automation and technology
used for production.

Power: Per unit power and fuel consumption is Rs. 0.5678.

Other factory expenses: Other factory expenses include maintenance of factory and
other miscellaneous expenses.

Office and Administration Overheads:-

Office and administration overheads include Depreciation on office furniture@7%, office
rent, salary to staff, office and general expenses, Postage and Telegrams, telephone
expenses, electricity and lightings

Salary to staff: The salary paid to staff comes up to around Rs. 0.089 per unit cost.

Office and general expenses: This comprises of refreshments (tea and snacks),
Postage and Telegrams and other petty expenses.

Printing and stationary: This consists of photocopy charges, printouts and other
stationary items.

Telephone Expenses: Calls made by the staff members.

Electricity and lightings: It consists of office lighting and air conditioning expenses

Sales and distribution overheads:-

Selling and distribution cost includes Sales Commission, Discount allowed, Salary of
salesmen, Carriage outward and Sales expenses

Sales Commission :
As a part of encouragement for sales people, they are given commission of 5 % of the
total sales done by them.

Discount allowed :
To attract whole sellers to buy the product they are offered a discount of 5% on the
selling price.

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 Cost Analysis - Britannia Bread

Salary of salesmen :
The average salary paid to the sales people is around Rs. 0.1 of the total per unit cost
of the product.
Carriage outward :
To carry the finished goods to the whole sellers, the transportations charge per
unit/product is set as RS 0.12798.
Sales expenses :
This includes expenses incurred on advertisements and promotional expenses such as
newspaper advertisements, hoardings, TV commercials etc.

Profit:

The Profit arise out of selling per unit of the product is 11.603% of the total per unit cost
price

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 Cost Analysis - Britannia Bread

CONCLUSION

As per the study, we would like to conclude that bread not being the staple food in India,
has definitely evolved as a substitute for chapattis, rotis, rice, etc. It is easily available
due to its excellent distribution channels. Britannia bread has acquired almost 50%
stake in daily bread market.

Today a variety of breads are available, such as brown bread, whole wheat bread,
chutney bread, etc.

Even after having many competitors around, Britannia bread has managed to capture a
large market share not just in the urban but has also managed to penetrate the rural
markets.

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Bibliography

Online Sources
www.britannia.co.in
www.google.com
www.wadiagroup.com
www.capitaline.com

Books & Authors

Cost & Management Accounting Ravi Kishore

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