Today we will be analyzing the business of the “Idly Factory” of Sangli!
This is OM Shanti Caterers of Sangli. They manufacture idlis and vadas on a wholesale scale and sell it to street vendors.
There are videos making claims that they sell 40,000 units of a daily basis.
If we were to accept this number:
Net Profit:
40,000 x 1 Rupee Net Margin x 30 Days = 12 lakhs / month
But I know for a fact that the margin is more than 1 Rupee.
So let’s make calculations for 2 Rupees and 3 Rupees!
40,000 x 2 Rupee Net Margin x 30 Days = 24 lakhs / month.
40,000 x 3 Rupee Net Margin x 30 Days = 36 lakhs / month.
But I do not agree with the fact that they sell 40k idlis per day.
It might be true for few days but if we average it out over the year, I think the daily average is closer to 10k units.
So at 10,000 units per day:
10,000 x 3 Rupees Net Margin x 30 Days = 9 lakhs / month.
Now they even have a small retail counter where they sell their own products at very premium prices. So let’s count in another 1 lakh from there. Making it a total of 10 lakhs per month!
So let us dive deeper and understand their customer base, pricing power, competitive advantages, etc.
Customer Base:
There are street vendors who sell breakfast near the Bus Stops and Railway Stations. These are the major customers for Om Sai Caterers!
What is Om Sai Caterer’s competitive advantage?
- Scale and Efficiency.
Om Sai Caterers is run by Thimappa Shetty and his wife Mrs Shetty. They are a typical Udupi Family!
It is general knowledge among Indian business communities and restaurant owners that you can’t compete on efficiency with the Udupi hotel owners. They are the most efficient restaurant business operators.
Just like it is common knowledge throughout the US that you can’t compete with the Patel’s on efficiency in running a hotel (lodging) business.
You can’t compete with the Udupi’s on running a high volume, low margin restaurant.
That’s why even the Hanuman Executive which was earlier run by an Udupi family when taken over by Haribhau Kulkarni and Company (we will talk about them in another post, but just know that they aren’t Udupi people), they changed the business model from a high volume, low margin to a high margin, low volume business with features of fine dining.
So now we know that it’s difficult to manufacture these products at cheaper rates than them and they have already achieved scale, their customers are happy, so it’s really difficult to break into the Moat of this business!
Now we will have a little chat with the founder: