How to Start Small Scale Potato Chips Manufacturing Business

Do you want to start a potato chips manufacturing business? This article includes a stepwise guide about how to start a potato chips factory on small-scale. Also, it includes the project cost manufacturing process with the flowchart, machinery, and license you need.

Basically, potato chips are ready to eat snacks item. People of all age group consume it on a regular basis. As the life becomes fast, the demand for this type of food item is growing.

According to the Departments of Horticulture & Agriculture, India has grown around 498 Lakh tonnes potato during the 2016-17 financial year. And the average production will increase this year as per the prediction of the industry experts.

In India, some of the major potato producing states are UP, West Bengal, Bihar, Gujarat, Madhya
Pradesh, Punjab, Haryana, and Assam. And farmers store the 80 to 85% of potato in the cold storage during the harvesting period.

Apart from the consumption as a vegetable, we can produce different types of value-added products from potato. These are potato chips, potato powder etc. And chips are the highest selling item currently in our country.

Broadly, you can find two different types of chips in the market. First is the branded potato chips. And the second is the non-brand companies. Some of the Indian potato chips brands are Lay’s, Pringles, Ruffles, Uncle Chips, Haldiram’s etc. Generally, non-brand companies operate in the local areas and depend on both the retail and institutional sales.

If you want to start a small-scale business in the food industry, then potato chips making is an ideal one. It requires small startup capital and a small space to operate. Additionally, it is a perfect product for retail distribution.

10 Steps Guide to Start Potato Chips Making Business

Step 1: Analyze the Market

Before starting as such any project, you must ensure that there is a regular consumption of that product. Also, you need to find out the taste and flavors people prefer. The popularity of snack foods is growing high day by day. Apart from the domestic consumption, it has a bigger market too. The tea stalls, restaurants, hotels, caterers are the frequent buyers of potato wafers in bulk quantity.

Also, the product has the good export potential. Every year, India exports potato wafers in the countries like Oman, Qatar, USA, UAE, UK, Australia and Thailand. Actually, these statistics will help you in creating your own potato chips manufacturing business model.

Step 2: Prepare the Project Report or Business Plan

Preparing the business plan is the must even if you initiate the business with your own money. Basically, a business plan is the blueprint that you need to follow in initiating and running the business smoothly. Depending on the production output, you need to craft the financial analysis. Also, mention the mission and vision of the company. Here we put a sample cost analysis of a small-scale potato chips making factory that has the production capacity of 130 MT per year.

Fixed Cost

  1. Land & Building = Rs 20 Lakh ( You can eliminate the cost by starting in a rental space)
  2. Machinery & Equipment = Rs 10.50 Lakh
  3. Pre-operative Expenses = Rs 1 Lakh

Working Cost

  1. Salary & Wages (per month) = Rs 0.6 Lakh
  2. Raw Materials = Rs 5.5 Lakh
  3. Utilities = Rs 0.5 Lakh
  4. Other Contingent Expenses = Rs 0.25 Lakh

Market Promotion plays a vital role for the generation of the potential customers. Therefore, the application of marketing strategies is recommended. The marketing plan of the proposed project may include good quality maintenance, the promotional campaign like offering special discounts, referrals, advertisement and tying up with buying houses.

Step 3: Arrange Finance

It’s better to start the business with the financial assistance of the bank. Also, you can propose to the venture capitalist for funding your project. Apart from the project finance, banks also offer machinery hypothecation or cash credit facility for the working capital assistance only. For the entire project finance, you need to furnish the machinery quotation. Bank may also ask for the owner’s contribution and the collateral security both.

Step 4: Form of Ownership

Initiating a potato chips factory requires company formation. Generally, banks prefer LLP or Pvt Ltd organizations than a sole proprietorship firm for giving loans. However, you will need to choose the right form of the organization according to the investment pattern of your company. If you start as the proprietorship, then a Trade License in enough to start operation. For LLP or Pvt. Ltd or Ltd Company, you will need to register with ROC of your state.

Step 5: Registration & Licensing

After the company formation, you will need to register MSME Udyog Aadhaar online. It helps in getting Govt. subsidies. Apply for the Trade License from the local Municipal authority. Apply for the FSSAI license. To get the ISI mark, you will need to obtain BIS registration. And in that case, you need to comply with the quality control protocols. Obtain an NOC from the state Pollution Control Board. Secure the company brand name by registering the Trademark. Finally, get the GSTIN for the regular tax payment.

Step 6: Site Selection

In starting any type of food business, you must be careful in site selection. Don’t select a site nearby harmful chemical factories. Also, you need to ensure the electricity and water supply. This type of production process requires the adequate water supply. Generally, you need 20 HP power for the machinery operation. Check the nearby transport facility. Also, you can consider having space in an industrial zone.

Step 7: Unit Establishment

After selecting the space, you will need to draw a floor plan. Ask the machinery supplier to provide the machinery installation plan. And accordingly, craft the factory plan. Determine specific place for the raw material storage, finished goods storage and space for official work.

Step 8: Machinery & Equipment

To produce 120 to 150 MT potato chips, you need a small-scale setup. And if you want a larger production line, then you can go for a fully automatic process. Here we put a list of basic machinery requirement.

  1. Potato washing and peeling machine
  2. Potato cutting machine
  3. Blanching machine
  4. De-watering machine
  5. Chips frying machine
  6. De-oiling machine
  7. Flavoring machine
  8. Vacuum packing machine

Step 9: Potato Chips Making Raw Materials

Raw materials are easily available throughout the country. Mainly, you need good quality potatoes. Try to procure potatoes with good shape. Other consumables you need are edible oil, spices, salt, flavors, and packaging consumables. Packing plays a vital role here. You will need to provide moisture free packing for the retail consumption. Also, provide cartoons for bulk supply.

Step 10: Potato Chips Manufacturing Process

First of all, procure good quality potatoes. Select the potatoes that have the minimum number of eyes to cut down the losses by trimming. The next step is washing and peeling. You can do it either manually or by using machines. Place the potatoes in the water to prevent browning.

Slice the potatoes in 0.4 to 0.5 cm. thick in a slicing machine. Again place the slices in cold water. Blanch the slices for 3 to 5 minutes in boiling water and spread on trays at the rate of 4.88 kg. to 7.30 kg. per square metre of tray surface. After the de-watering, fry them at 190°c for 3-4 minutes. Keep the fried potato wafers on the sieve to remove excess of oil. After cooling, mix the other ingredients like salts,
the spice mixture as per required taste. Finally, pack the cooled potato chips in polythene bags and sealed.