Sahaja Millets: A Premium Price, a Thin Channel and a Big Television Bill
Sahaja Millets, a Mysuru startup, sells 200 g packs of ragi and jowar snacks. The pack carries an MRP of ₹40; competing brands sell similar packs at ₹25 to ₹30. The company sells to distributors at ₹33, who supply retailers at ₹37, leaving a retailer ₹3 a pack. Distributors in Bengaluru have told the founder they need a 25% margin to push the product, and retailers in two chains have begun keeping the pack behind the counter. The company's own website sells the same pack at ₹40 with free delivery. Monthly sales are ₹45 lakh, and the founder has booked ₹60 lakh a month of regional television advertising for the coming quarter, arguing that once people see the advertisement, price will not matter. Repeat purchase is high among the few who try the product, but trial is low. The company has ₹1.2 crore of investor money left and a runway of fourteen months.
1. Analyse the pricing and channel problems facing Sahaja Millets. Support your answer with the arithmetic of the trade margin.
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What the consumer pays and what the company gets: consumer ₹40; retailer buys at ₹37, so the retailer's margin is ₹3, or 7.5% of MRP; the distributor buys at ₹33 and sells at ₹37, a margin of ₹4, or 10% of MRP. The company realises ₹33, about 82.5% of MRP.
Problem 1 - the retailer is not being paid to sell. A retailer with limited shelf space compares a ₹28 pack that turns over quickly with a ₹40 pack earning him ₹3. The pack going behind the counter is the classic sign of a channel that has no incentive. Distribution is not a favour; it is a paid service, and 7.5% does not buy push for a slow-moving premium product.
Problem 2 - the company competes with its own channel. The website sells at ₹40, exactly what the shop charges. Any retailer stocking the pack invites a customer to compare and buy direct. That is channel conflict, and it grows with online volume.
The arithmetic of the distributor's demand. If distributors take 25% (₹10) and retailers are kept at 12% (₹4.80), the company's realisation falls to roughly ₹25, about 62.5% of MRP. That may be unaffordable at present costs. A 25% distributor margin cannot simply be granted; the company must raise MRP (worse for trial), cut pack cost or size, or rebuild the chain so that one distributor margin and one retailer margin add to a workable total.
On price itself: ₹40 against ₹25–₹30 is a 33% to 60% premium in a category where trial is low. A premium survives only if the difference is visible on the pack and explained at the point of sale.
2. Evaluate the ₹60 lakh monthly television plan and recommend what the company should do with its promotion and product mix given its runway.
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The arithmetic first. ₹60 lakh a month against ₹45 lakh of monthly revenue, and ₹1.2 crore left in the bank. Three months of the campaign costs ₹1.8 crore - more than the entire remaining cash. This is not a promotion plan; it is a plan to run out of money before the advertising has had time to work.
The marketing logic second. Advertising creates awareness. Awareness converts only if the product is on the shelf, correctly priced, with a retailer willing to recommend it. Here the channel is demotivated and the pack is hidden behind the counter, so the advertisement would produce interest that dies at the shop.
What to do instead:
- Fix the channel before buying reach. Publish one margin structure, stop selling single packs on the website at MRP (keep online for bundles and larger packs), and give retailers a reason to recommend the pack.
- Buy trial, not awareness. Sampling at schools, offices, apartment complexes and modern-trade endcaps puts the product in the mouth at a fraction of television cost.
- Use the product mix. A ₹10 or ₹15 trial pack breaks the ₹40 entry barrier; keep the 200 g pack as the value pack for repeat buyers.
- Spend where the buyer is. Regional digital and local cable targeted at health-conscious urban households, measured by cost per trial, not gross rating points.
- Cap the budget. Keep total marketing spend within roughly 25–30% of revenue and review it monthly against repurchase data.
The high repeat rate is the company's real asset. The task is more first trials and a channel that earns on every pack sold.