Grow a Siliguri tea brand beyond wholesale?
Before the decision
Wholesale buyers pay late while direct customers ask for smaller trial packs. The founder has paid to acquire gift buyers in the past and wants steadier demand. A local office distributor is offering pantry trials that could reduce the need for consumer advertising.
The problem
Should the team choose Subscription channel or Office pantry supply for the next 12 months?
Decision owner: The business unit lead.
Repeat behaviour after a gift order may differ from a household subscription.
Option economics
Scroll the table to see all figures.
| Option | Volume (orders) | ₹ per unit | Fixed cost | Net contribution |
|---|---|---|---|---|
| Subscription channel | 66,000 | 112 | ₹51 lakh | ₹22.92 lakh |
| Office pantry supply | 54,000 | 125 | ₹43 lakh | ₹24.5 lakh |
Make the call
- Calculate net contribution for Subscription channel and Office pantry supply. Which assumption makes the comparison most fragile?
- If the leading option delivers 10% fewer orders, does your recommendation change?
- What evidence would you ask for before the team makes an irreversible commitment?
Reveal the worked solution
Start by validating Office pantry supply. It contributes ₹24.5 lakh after fixed costs and leads by ₹1.58 lakh. Treat that gap as the amount of unmodelled cost or lost contribution the option can absorb before the ranking reverses.
- Frame the decision
Separate sales that are incremental from sales shifted out of an existing channel. Include the support and fulfilment needed to keep new customers.
- Calculate both options
Subscription channel: 66,000 orders × ₹112 less ₹51 lakh in fixed costs gives ₹22.92 lakh. Office pantry supply: 54,000 orders × ₹125 less ₹43 lakh in fixed costs gives ₹24.5 lakh.
- Stress-test the forecast
Office pantry supply leads by ₹1.58 lakh in the base case. If Office pantry supply delivers 10% fewer orders (48,600) at the same margin and fixed cost, it contributes ₹17.75 lakh. Holding the other option constant, the stressed result falls behind. This isolates volume risk. Check whether both options would respond to the same change in demand.
- Set a decision threshold
Holding the other option’s result fixed, Office pantry supply needs at least 52,736 orders to match or beat it under the model. Separate gifts and household orders in three-month retention.
Repeat behaviour after a gift order may differ from a household subscription. Compare the cost of a limited test with the loss the business would face if the full commitment failed. Ask the team to agree the decision criterion before collecting more evidence.
Check whether your answer names the trade-off, cites a number from the exhibit and specifies a reversal condition.
What if the whole market moves?
The worked solution tests a change to one option at a time. Here, both options gain or lose the same percentage of volume. Unit contribution and fixed costs stay constant.
| Volume scenario | Subscription channel | Office pantry supply | Higher contribution |
|---|---|---|---|
| Both lose 10% of volume | ₹15.53 lakh | ₹17.75 lakh | Office pantry supply |
| Base assumptions | ₹22.92 lakh | ₹24.5 lakh | Office pantry supply |
| Both gain 10% of volume | ₹30.31 lakh | ₹31.25 lakh | Office pantry supply |
Explain which option you would take forward. Check whether capacity, price or customer mix would also change as the market moves.
Practise this case as an interview