Business of Portuguese Sardines
Recently, I tasted and appreciated canned sardine, from my visit to Ukranian grocery store. I learnt how they are made from business-technical perspective!
Did you know?
A Portuguese Sardine cannery has been in existence for 100+ years, located in Matosinhos, a town nearby Porto. In Matosinhos, Pinhais cannery in Matosinhos makes Nuri.
They are producing around 30,000 cans amounting to 300 boxes per day.
From Ocean to Sardine Can: Production process
The Art of how 100+ years old Nuri Sardines are made?
Input: We’d get raw sardines from the market
- Storage & Washing
- Cooking & Cooling
- Packing & Sealing
- Inspection & Final Processing
Output: We’d be storing processed canned Sardines, ready to export to markets around the Globe
Sardine Technical Canning Process
Assume We setup cannery plant in US or Tamil Nadu, here’s the cost, operating expenses:
CapEx expenditure per year:
- Land: 10-12 crores ($1.15 million)
- Building: 8-9 crores ($1 million)
- Equipment: 10 crores ($1.15 million)
- Total approx: 40 crores, $5 million USD
OpEx expenditure per year:
- Inputs raw fish: 5 - 10 crores $1 - $1.5 million USD
- Labor: 2.5 – 9 Crores (50 -100 employees) ($550-$1.5 million)
- Energy & Maintenance: 1 crore ($115,000)
- Insurance: 1 crore ($115,000)
- Total approx: $3 million - $4 million
Production, Revenue & Profitability
- Assume 250-300 days of production with capacity of 30,000 cans per day, results to 9 million Sardine cans
- Average selling price of the Sardine Can: $4-$6 dollars
- Revenue approx: $35-$45 million (₹303 - ₹389 crores)
- Gross Profit: $8-$15 million (₹80 - ₹140 crores)
- Net profit: $5 million - $15 million (₹83 - ₹124 crores)
- Break event point: At 2 million - 3 million cans approximately
So by 1.5 years or 2 years, you’d break even!
Realistically, you’d have 20-30% Gross margin, the above estimates are uber optimistic
That is quite a lot to make a small canned sardine!
I can imagine!
The Business questions might be:
- What could they do to increase margin?
- R&D in this involves creating new product chains
- What could they do to increase skills of employees, and increase their income?
Technical questions might be:
- The equipments, processes, what other ways might be there to increase efficiency?
- Automation can enable to increase efficiency, yet what could they do to keep the demand in the market for consumption?