As discussed on my last article; to know the size of the market there are two different approaches
i.e. Top Down and Bottom Up Approach.
Using the Top Down approach we figure it out of a Refrigeration market size in India.
If you have not read it, please have a look here How to Calculate the Current Market Size for Your Business Part I .
Now we will be discussing about the Bottom up approach to calculate the Size of the Market. This time we will consider a retail chain food business and check its market size in India. Let’s assume you develop a food product that can compete with KFC Products in India. As you believe that your competitor will be KFC in India, then if you will calculate the Market Size of KFC in India, it will give you the fair idea estimating Size of the Market for your products.
From assessing the Market Size of KFC in India, we will utilize Bottom Up methodology. For getting the market size of KFC in India, we need the following data.
i.e. Number of Chicken pieces sold per outlet and then multiply it with the number of outlets in India and the Average cost of a Chicken Piece.
Market Size of KFC in India = No of Chicken Pieces Sold per Outlet x number of Outlets in India x Average price of a Chicken Piece
Now we need to understand, how every outlet capacities, to appraise the quantity of chicken pieces that are getting sold every day.
So, how about we divide each outlet hours into peak and non-peak hours, which will give us a reasonable idea regarding the offer that are occurring during this time period. Based upon the day by day dietary patterns of Indian individuals the peak and non-peak hours chosen. We should think about it as a normal outlet that has two counters to serve individuals and every counter satisfies the request in three minutes in peak hours and four minutes in non-peak hours for the Dine-in clients. Also, opening times would be from 8 am morning to night 11 pm. So here are the calculations;
So finally we came with the estimation that the Total Chicken Pieces Sold per Day per Outlet by Dine-In = 900 Pieces.
Let’s assume that your outlet acknowledged home deliveries for the nearby clients, who don’t invest their energy in your outlet, taking into consideration, that we should expect your outlet to get telephone call requests in every 10 minutes in peak hour, and 20 minutes in non-peak hours.
By Home Delivery method, the total estimated sell per day is equivalent to 72 Pieces.
So the Total Chicken Pieces Sold per day per Outlet = Dine-In + Home Delivery = 900 + 72 = 972 Pieces.
We accompanied the estimation and agreed that one outlet can offer around 972 Pieces of Chicken per Day. We should expect the normal cost of every Chicken is ₹ 80
Now, let’s calculate the total market size by using the below formula:
Market Size of KFC in India = No of Chicken Pieces Sold per Outlet x Number of Outlets in India x Average price of a Chicken Piece = 972 x 300 x 80 = ₹ 23 Million
Market Size of KFC in India = ₹ 23 Million x 365 Days = ₹ 8 Billion
Based on our assumption, using the Bottom Up methodology, we finally came to know about the Size of the Market. Looking at this value, you can decide if you want to get into this market.
When you calculate the size of the market, you should be guaranteed that assumption data points focused from an originated substantial source. Else it will ruin the situation for your business.
Share your thoughts on this and let me know if you have questions.
Thank you for spending your valuable time to read this article.