A premix is a mixture of components or ingredients that have been blended together and sold to people who will prepare the final product. Premixes are widely used in industry but have recently seen popularity amongst consumers as well.

This business makes and sells premix kits to either other businesses or consumers.

The problem a premix business solves
In order to make cakes, biscuits, muffins, cupcakes, bread etc. you need a list of ingredients, the more complex the recipe the more ingredients you will need. You will need a little bit of this, a little bit of that but what if you could buy all those ingredients already mixed in their correct quantities. You probably don’t know it but you might already have bought premix, those cake mix and cake in a cup and muffins that you just add milk. That is a premix.

This business saves both time and money, time by not having to source and mix different ingredients. And even though premix sells at a premium to separate ingredients people still save because they don’t have to buy ingredients they won’t use again. The convenience of premix is a major competitive advantage.

Business Model
Traditionally premix was a big B2B (business to business) business and still is very much. Many big shops bread and cakes are made using premix, even small business if you have a doughnut making machine that churns out hundreds of doughnuts a day, there is no time to mix ingredients, in fact, many doughnut shops use a ready-mix. Many other home-based small businesses are also now using premixes, a lot of people that make picture cakes use premix, most of those cakes aren’t tasty, it is the novelty of the image.

B2C (business-to-consumer)
But it is the consumer space that has heated up in recent years, and I’m not just talking about the stuff we see in retail shelves like Pillsbury cake mixes, there are now multi-million rand operations selling ready-to-bake dough, ready-to-pipe icing, and dry premixes direct to consumer.

What makes this business profitable is that the raw materials that go into making premixes are already often cheap, but are cheaper when bought in bulk. You take 10kg of flour it costs R100 retail, a few hundred grams of that flour will be the main component of something that sells for R30. Wholesale the flour will be even cheaper.

Whether you are going to sell B2B or B2C you still have to focus on a niche, starting out at least and I’m not just talking about focussing on muffins or macaroons, I mean look at targeting different diets, like vegan. The more competitive the industry, the less money you have, the narrower you sometimes have to focus.

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