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Aug, 2017

Food processing sector – Low cost business ideas under 20 lakhs

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India is a vastly growing country in Asia. Indian economy is growing vastly day by day. There are many opportunities to establish a small industry anywhere in India. The labor cost in India is lower that other developed countries. Any person can start their own business from a low-cost budget with right qualification.

India is the second biggest food producer in the world and it has the potential to become the largest producer of food in the entire world. Food Industry in India includes milk and milk products, plantation, alcoholic beverages, vegetables and fruits, fisheries, poultry and meat, grain processing, chocolates, and confectionery.

According to IBEF (Indian brand Equity Foundation), the food industry, which is currently valued at US$ 39.71 billion is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11% to US$ 65.4 billion by 2018. Food and grocery account for around 31% of India’s consumption basket. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. The Indian food retail market is expected to reach INR 61 lakh crore (US$ 915 billion) by 2020.

Following are the profitable business ideas under 20 lakhs:

  1. Potato Wafers / Banana Wafers:

Potato chips manufacturing can be done at a small-scale level as well as at large scale level. Capital investment depends on the level of the business starting from 2 lakhs to 60 lakhs. It can be done from a large factory as well as your own residence. To start it at a small scale, the entrepreneur would require Potato cutting machine, peeling / drying machine, fryer and packing machine which would cost INR 6-8 lakhs. The entrepreneur would also have to invest in raw materials which would depend on the requirement and orders of the company.

It would be an ideal business for bakeries or an entrepreneur who is based in the city. They could sell it to restaurants, cafes, hotels, local shops, department stores etc. The entrepreneur would also require enough water for cleaning the potatoes.

  1. Tamarind Pulp:

Hotels, spice manufacturers, ready to eat food manufacturers, restaurants are major users of Tamarind pulp. The entrepreneur requires pulping, heating, and packaging machines to make the tamarind pulp, which will cost approx. INR 10 lakhs.

The entrepreneur must have a large storage space to store the supplies and ready Tamarind pulp. Resources required to make the tamarind pulp will be raw tamarind, salt, preservatives, oil etc. Total budget including inventory, storage space would be approx. INR 15-20 lakhs depending on the size and capacity of the plant.

  1. Aromatic Oils / Essential Oils:

Aromatic Oils / Essential Oils are fragrant oils extracted from plants chiefly through steam distillation (e.g., eucalyptus oil) or expression (grapefruit oil). However, the term is also occasionally used to describe fragrant oils extracted from plant material by any solvent extraction.

Spas, corporates and herbal product manufacturers are the major users of aromatic oils or Essential oils; hence the quality guidelines must be strictly followed. The most important part of the business is procuring raw materials like Tulsi, Rose, Eucalyptus (Nilgiri), Lavender, Peppermint (Pudina) etc.

The entrepreneur should procure the raw materials directly from the farmers. Setting up the plant at a location which is close to the farms will reduce the transport expense. It is a capital-intensive business as the raw materials for making essentials oils are costly than making cooking oil. The minimum budget requirement will be approx. INR 20 lakhs.  Oil distillation plant with a capacity of 1 ton per day would cost around INR 8-10 lakhs.

  1. Seasoning of Snacks / Burger dips:

Seasonings for snacks and burger dips are a very well demanded product by snack manufacturers and fast food chains.  The oregano spices, chili flakes, seasonings, dips, sauces available in food chains and restaurants are not made by the restaurant itself. It is bought from the companies who manufacture and pack them in small pouches for one-time use.

The entrepreneur must take into consideration the food safety guidelines, ventilation, hygienic environment before setting up the plant. They must also establish connections with local restaurants and fast food chains.

The minimum budget for setting up a manufacturing plant will be approx. INR 16-20 lakhs. The manufacturing plant will cost under INR 10 lakhs. The entrepreneur will also need to set a budget for buying raw materials and other expenses.

  1. Dehydrated vegetables & fruits:

Food drying is a method of food preservation that works by removing water from the food, which inhibits the growth of bacteria. Water is traditionally removed through evaporation (air drying, sun drying, smoking or wind drying), although today electric food dehydrators or freeze-drying can be used to speed the drying process and ensure more consistent results. Dehydrated fruits are a good and healthy option to snack on for people who lead a busy life and don’t get proper time for meals. It contains high nutrients and good calories required daily. This also increases the shelf life of the fruits and vegetables.

Dehydrated fruits & vegetables are majorly used in ready to eat foods, fruit bars, soup, etc. It can also be sold individually like raisins, dried figs (Anjeer), banana chips dried mangoes, dried oranges, dates, coconut, sun-dried tomatoes, dried potato chips etc.

The entrepreneur will be required to do proper research in the market and find suitable buyers like ready to eat food manufacturers, local shops, protein bar or fruit bar manufacturers, etc. the dried fruits can also be sold online to various E-Commerce websites like Flipkart, Amazon, Propshop24, etc. or the entrepreneur can launch its own website.

The minimum budget should be around INR 15-20 lakhs depending on the size of the plant. It includes a dehydrator, pulping machine, packaging machine, raw materials. A solar or electric dehydrator would cost approx. INR 5 lakhs.

  1. Deepam Oil (Pooja Oil):

Deepam Oil / Pooja Oil is made by mixing number of oils like sesame oil, sunflower oil, etc. The process and machinery requirement is same as extracting essential oils but mixing machine will be required to mix the oils. It can also be done manually. The entrepreneur can also only procure the extracted oils from a buyer, do the mixing and sell it under its own brand.

The minimum budget to manufacture Deepam oil will be approx. INR 10-15 lakhs.

  1. Noodle manufacturing:

Noodle or Chow Mein is one of the most popular snacks food items in India. Noodles making process is simple. And any individual can start this business with small startup capital investment and knowledge about the market.

Noodles are used in majorly used by restaurants, ready to eat food manufacturers etc. It would cost up to INR 10 lakhs to purchase a machinery with the capacity of 400-500 kg per hour. The minimum capital required would be approx. INR 15-20 lakhs depending on the size and capacity of the plant.

  1. Extruded snacks:

Extruded snacks refer to puffed snacks such as Kurkure, fryums, cheese balls, etc. They are processed from corn, wheat, or rice. There snacks are extensively demanded due to their delicious taste and nutritious value. These scrumptious snacks are flavored with cheese, onion, garlic, spices, or chilly and largely fall in the fast food group.

Creating differentiated product ad developing the distribution network is critical. The machinery capacity of 100 kg per hour would cost less than INR 10 lakhs. The minimum budget required would be approx. 20-22 lakhs including raw materials, machinery, packaging cost, etc.

  1. Peanut butter:

Peanut butter is a food paste or spread made from ground dry peanuts. It also contains salts, sweeteners, or emulsifiers to modify the taste or texture of the peanut butter. It is a very popular product in many countries like USA, who is a leading exporter of peanut butter and itself consumes $800 million worth of peanut butter annually. In recent years, the popularity of peanut butter has grown in India as well.

The entrepreneur should set up its plant in such area, where superior quality peanuts are available in plenty. The business would require a roasting machine, peeling machine, grinding machine and packaging machine which would cost for around INR 10-15 lakhs. The minimum budget would be around 20-25 lakhs approx. depending on the size of the plant.

  1. Soya-Paneer / Tofu manufacturing:

Soya-Paneer also known as Tofu is made from Soya Milk. It is a healthier option of paneer made from milk. It is highly perishable; therefore, the entrepreneur will need to find a local bulk consumer who can purchase the product. It will also help in reduce the packaging and distribution cost which comes up in selling the product in the retail market.

The machine required for manufacturing Tofu would cost for INR 5 lakhs approx. The minimum budget required would be around 10-15 lakhs depending on the size of the plant.

Licenses Required:

  1. Registration under Shop establishment act. (known as Gumatsa in Maharashtra)
  2. GST
  3. Udyog Aadhar MSME online registration. (SSI Certificate)
  4. FSSAI License.
  5. Trademark Registration. (If you want to sell the product under your own Brand)
  6. FDA license.

Investment & Funding:

The entrepreneur will be required to invest the required capital and time for the business to be successful. One can even get finance through various sources like nationalized banks, private banks and financial institutions.

You can even contact us at info@udyogcredit.com, if you require help with financing.

A snapshot of the typical formal financing terms and conditions is given below:

  Contribution by Bank Contribution by Entrepreneur
Capital Investment 75% 25%
Working Capital Gap (Raw Materials+Debtors-Creditors) 75% 25%
Tenure of Loan 5-7 years
Moratorium 6 months to 1 year
Can be funded by SCB, Co-Operative Banks
One can also enjoy the Mudra Yojana Scheme & Standup Scheme launched by the Government of India

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