How Much Profit One Can Earn from a Mineral Water Plant ?

This question is often asked to us by many website visitors from time to time. And it is a very important consideration indeed as far as an investor is concerned. I will say, not just Profit Margin, but also to consider the R.O.I. (Return on Investment) . Because Profit Margin, and Profit are two different things. Profit Margin is a pre-calculated figure, based on major 2 assumptions : Direct & Indirect Costs. The Money spent towards these ( expenses ) is deducted from the Revenue ( Sales ) & the remainder is Profit. This figure is calculated as a ratio of Sales, and thus the profit margin. However, on many websites these calculations are not correctly depicted. As Profit figure might vary, from pre-calculated marginal figure.

The Downside of Profit Margin Generalisation

You will see many people declare “Cost per Bottle” with a Chart. These mainly show you the Margin with only the Direct Costs. What about the indirect expenses required to Operate the business ? And I have observed that even if there is a mention, it’s very very basic.

The basis on which the Profit Margin is calculated should be a fixed set of Product Mix which you have decided to produce and their quantities with a stipulated time period. Unlike, by just demonstrating the Direct Costs. The Direct Costs are actually the variable costs, which vary with purchase, and with SKUs as well.

For Example, let’s compare 2 entrepreneurs Ramesh & Suresh head to head,both of them produce 1 Ltr Bottle ( Case of 12 Bottles each ) as well as the 20 Ltrs Jar. Here are some other attributes :-

Ramesh

No. of 1 ltr Bottle cases sold per day = 800 ( Each case containing 12 bottles each of 1 Ltr.)
Sells @ Rs.80/ case to a distributor. Daily Sale = Rs. 800*80=Rs. 64,000
He also sells 200 nos of 20 Ltr Jars @Rs.40 to distributor. Daily Sale Rs. 8,000
His Total Daily Sale is Rs. 64000 + Rs. 8000 = Rs. 72,000.

Suresh

No. of 1 ltr Bottle cases sold per day = 500 ( Each case containing 12 bottles each of 1 Ltr.)
Sells @ Rs.90/ case to a distributor. Daily Sale = Rs. 500*90=Rs. 45,000
He also sells 500 nos of 20 Ltr Jars @Rs.30 to distributor. Daily Sale Rs. 15,000
His Total Daily Sale is Rs. 45,000 + Rs. 15,000 = Rs. 60,000.

From the details above, you will notice a few things :-

To calculate the exact margin of profit, you require further data like how much sale made direct, how much to distributor (their rates also vary)
The actual profit made by selling 1 ltr bottles by both of them is different due to different selling rates.
The Cost for Ramesh and Suresh might be totally different. So the profit as well.
The whole data, if collected should bear certain time period , say 6 months, 1 year etc.
From season to season, the rates differ. Not to the direct customer, but to the distributor. Again the profit money will vary.

(You can read an article where we have discussed whether a Mineral Water Business is really profitable.)

Mineral Water Plant Profitability Costing

Watch the Video and you will understand how we train you on calculating your detailed Plant Cost Calculations. Even existing Plant Owners also attend this Training which actually brushes up their knowledge on this aspect and helps them further on choosing right products in future as well !

5 Steps To Arrive At Profit Margin :-

1) Know Your Business Model

This is the starting point to all. Whether you are going to Produce your own brand, or just to Distribute other’s , Going for a Franchise Model or getting it done from other manufacturer ( Co-Packing ). What is your Driving Factor, will decide your Business Model.

# During our Live Training, we conduct a Session in Which We Discuss Various Models and their features in details. Good News : These are all now conducted ONLINE.

2)Decide the Market

This is also the primary consideration. Market to Market the Selling rates differ, so the Profits as well. The Costs also vary. This too affects the Profit Margin.

3)Define Your Product Mix & SKUs

This is the variants you decide to introduce into the market, with quantities defined clearly. A Financial Statement can only be drawn on exact figures. Begin with some hypothetical figures, even if you haven’t yet decided this. During our Live Training, we talk on these aspects in detail.

4)Define Your Costs

Mineral Water Plant Cost is not just the prices of machines put together. It’s normally a totally wrong consideration by entrepreneurs before they are willing to setup their plants. We have explained in details on the following 2 posts very clearly about the subject. Look at them :-

5) Create Time-Bound Financial Projections

As we have seen from the above table; you will arrive at the profit margin percentage only over a period of time. Typically 3 years. Once you are ready with the above 4 steps, you should approach a financial advisor to get the Financial Projections done in a proper way. During our Live Training, we dedicate special sessions where we discuss CAPEX & OPEX specifically.

Conclusion

The profit margin calculation is not as easy at it seems. So, do take conscious decision before setting up a mineral water plant. After understanding that almost 50% mineral water units close down every year; we have concluded that they do not close down due to competition; but due to wrong calculation basis, and taking steps in a wrong direction. If possible, attend the next Mineral Water Plant Training.

Watch the Video Below which covers a brief history of the Mineral Water Plant Trainings we have been conducting since 2015. ( Thanks to Covid, we conduct all these trainings just Online, so all can attend without leaving their towns )