How much does it cost to start a chips manufacturing business in India?

The investment required depends largely on the scale, machinery, production capacity, and level of automation. Small-scale units (basic semi-automatic machines, 800–1,000 sq ft workspace) generally require ₹10–15 lakh . This includes equipment, licensing, raw materials, initial labour, and packaging. Medium-scale units with higher capacity, better automation, and advanced packaging systems may require ₹50 lakh to ₹1 crore . These setups support large distribution networks and offer better efficiency. Additional factors like location, utilities, branding, and marketing can further influence the total cost. Overall, entrepreneurs should keep a 3–6 month working capital buffer for smooth operations.

Is an FSSAI license mandatory for chips manufacturing?

Yes. Obtaining an FSSAI registration or license is compulsory for all food processing businesses in India, including chips manufacturing. This ensures: Compliance with food safety standards Consumer trust and brand legitimacy Permission to manufacture, package, distribute, and sell food products legally Depending on your annual turnover and production scale, you may need: Basic FSSAI Registration , or State/Central FSSAI License The 14-digit FSSAI number must be printed on every product packet.

What is the best location to set up a chips factory?

The location of your chips manufacturing unit significantly affects cost-efficiency and profitability. Ideal locations include: Areas with low operational costs (Tier-2 or Tier-3 cities, industrial zones) Places with reliable water and electricity supply , essential for cleaning, slicing, frying, and packaging Regions close to raw material sources such as potato/bannana-producing states Proximity to wholesale markets, distributors, and transport hubs to reduce logistics costs Industrial estates or food processing parks are often preferred as they offer better infrastructure and access to government benefits.

How profitable is the chips manufacturing business?

Chips manufacturing is considered one of the most profitable FMCG ventures due to high consumption and low production costs. Profit margins typically range between 20–35% , depending on the quality of machinery, production efficiency, and pricing strategy. Brands offering unique flavours, regional variants, or healthier alternatives may enjoy even higher margins. Profitability also increases as you scale, because raw materials, packaging, and transport become cheaper per unit at higher volumes. Consistent demand, wide customer base, and strong distribution make it a sustainable business opportunity.

Can chips manufacturing be started from home?

Starting chips manufacturing from home is possible at a micro or cottage level , especially for small batches or local retail. However, for larger commercial operations, a dedicated manufacturing unit is recommended because: You need space for machinery, storage, and packaging. Hygiene standards and workflow become harder to maintain at home. Commercial-scale production requires proper licensing, waste disposal, and safety measures. Home-based production can be an excellent way to test flavours, build a local customer base, or create an artisanal brand , before moving to a full-scale facility.

How to Start a Chips Manufacturing In India

How to Start a Chips Manufacturing Business in India: Industry Overview

India’s snack food industry has experienced remarkable growth over the past decade, fueled by rising incomes, rapid urbanisation, evolving eating habits, and the expansion of organised retail. Among the various snack categories, potato chips and savoury snacks dominate the market, maintaining strong demand across both urban and rural regions.

Industry reports indicate that the Indian potato chips market exceeds ₹10,000 crore in value, with consistent annual growth. As consumers increasingly prefer ready-to-eat packaged foods and show strong interest in locally inspired flavours, the country offers a highly promising landscape for entrepreneurs.

If you’re exploring how to start a chips manufacturing business in India, this comprehensive guide will help you understand every phase—from planning and production to legal compliance, cost analysis, marketing strategies, and future expansion opportunities.

1. Market Overview: Why Chips Manufacturing Is a Profitable Business in India

The Indian snacks market is one of the fastest-growing FMCG segments. Some key trends driving the chips segment:

✓ Increasing Demand

Busy lifestyles, school/office snacking, and the popularity of small-size ₹5 and ₹10 packs ensure consistent year-round demand.

✓ Urban + Rural Consumption

While urban consumers prefer premium flavours, the vast rural market favours value packs—offering entrepreneurs multiple product segments.

✓ Growth of Organised Retail

Supermarkets, hypermarkets, and convenience stores have expanded across India, increasing shelf space for branded snacks.

✓ Rise of Regional Brands

Local flavour preferences (masala, chilli, tomato, pudina, tangy, etc.) have helped many regional chips brands scale rapidly.

This makes chips manufacturing one of the few FMCG categories where a small brand can quickly build a loyal local market.

2. Step-by-Step Process to Start Chips Manufacturing in India

Here is the complete workflow to set up a profitable chips manufacturing unit:

Step 1: Conduct Market Research

Study local demand:

Most popular flavours in your region
Price expectations
Competition (national + regional brands)
Preferred pack sizes (small value packs, mid-range or premium)

Define your niche—value-for-money, premium, baked chips, banana chips, or flavoured potato chips.

Step 2: Choose Location and Setup Infrastructure

For a small-scale chips unit, you may require:

800–1,000 sq ft for basic production
Access to water and electricity
Proper ventilation
Waste disposal arrangements
Separate areas for storage, production, and packing

If you aim for a medium-scale business, space may increase to 1,500–2,500 sq ft.

Step 3: Purchase Machinery and Equipment

Typical chips manufacturing machinery includes:

Potato washing and peeling machine
Slicer
Blancher (optional)
Frying machine (batch or continuous fryer)
Oil dryer/de-oiling machine
Seasoning and mixing tumbler
Nitrogen-flushing packing machine
Weighing scale & sealing equipment

A small-scale semi-automatic setup may cost anywhere between ₹2 lakh to ₹8 lakh, while fully automatic lines can run into several lakhs or even crores depending on capacity.

Step 4: Source Raw Materials

You will need:

Potatoes of suitable processing grade (low moisture, firm texture)
Edible oil (palm oil, sunflower oil, or blended oils)
Spices and flavouring powders
Packaging materials (laminated food-grade pouches)
Salt and preservatives (if required)

Consistent quality raw materials are crucial for maintaining product taste.

Step 5: Set Up Production Process

A typical chips production line follows this order:

Potato washing
Peeling
Slicing
Rinsing/blanching
Frying
De-oiling
Seasoning
Cooling
Packing
Storage & dispatch

Strict hygiene standards must be maintained throughout the production cycle

Step 6: Branding, Packaging & Product Development

Create a brand identity:

Brand name
Logo
Packaging design
Colour patterns
Flavour names

Packaging plays a major role in attracting customers, especially small ₹5/₹10 packs.

Step 7: Hire Skilled Staff

For a small unit:

2–4 machine operators
1 helper
1 supervisor
1 accountant/manager (optional)

Ensure staff are trained in handling fryers and maintaining hygiene.

Step 8: Launch Sales & Distribution

Start with:

Local kirana stores
School/college canteens
Supermarkets and mini marts
Mobile vendors
Local distributors and wholesalers

Then expand into:

Nearby cities
E-commerce
Institutional supply (hotels, cafeterias, events)

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3. Legal Requirements, Licenses & Registration in India

To operate a chips manufacturing business in India legally, you must obtain:

1. FSSAI Registration/Licence

Mandatory for all food businesses.
Print the 14-digit FSSAI number on every pack.

2. Business Registration

Choose any structure:

Sole proprietorship
Partnership
LLP
Private limited company

3. GST Registration

GST registration is required for inter-state sales or when your business turnover crosses the GST threshold limit.

4. MSME/Udyam Registration

Gives access to subsidies, loans, and government schemes.

5. Factory/Trade License

Issued by local municipal authorities.

6. Fire Safety and Pollution Control Approval

Especially for units with heavy frying operations.

7. Trademark Registration (optional)

Helpful for protecting brand identity.

4. Investment Required for Chips Manufacturing in India

Investment varies depending on scale:

Small-Scale Unit (800–1,000 sq ft)

Estimated Cost: ₹10 lakh to ₹15 lakh

Breakdown:

Machinery: ₹2–8 lakh
Setup & infrastructure: ₹2–4 lakh
Raw materials (initial stock): ₹1–2 lakh
Packaging & branding: ₹30,000–₹70,000
Licenses & registrations: ₹10,000–₹50,000

Medium-Scale Unit (1,500–2,500 sq ft)

Estimated Cost: ₹50 lakh to ₹1 crore

Includes automatic fryers, advanced packing machines, higher labour and overheads.

Working Capital

Monthly expenses include:

Raw materials
Labour
Utilities
Distribution charges
Packaging materials
Marketing and promotions

A buffer of ₹1.5–3 lakh per month is ideal for small setups.

5. Business Model & Revenue Streams

A chips manufacturing unit can generate revenue from:

✓ Retail Pack Sales

₹5, ₹10, ₹20, ₹50 and ₹100 value packs.

✓ Wholesale Distribution

Selling in bulk to distributors.

✓ Private Label Manufacturing

Producing chips for supermarkets or other brands.

✓ Institutional Sales

Supplying to canteens, cafeterias, hotels, and events.

✓ E-Commerce

Selling online for premium customers.

✓ Export (Advanced Stage)

Indian snacks are popular among NRIs worldwide.

6. Marketing Strategies (Local SEO + Digital Marketing)

Marketing is critical for competing with established brands.

Local SEO

Optimise your online presence with keywords such as:

“chips manufacturer in [city]”
“snack manufacturer near me”
“potato chips wholesale [city]”

Create:

Google My Business profile
Local business listings
Smartphone-friendly website with product catalogue

Digital Marketing

Use digital tools effectively:

Social media ads
Influencer reviews
Short video content (production process, behind-the-scenes)
WhatsApp catalogue for retailers
SEO-optimised blogs on snack trends

Offline Marketing

Distribute free samples in stores
Offer introductory discounts
Create attractive display units for retail counters
Tie up with tea stalls, canteens, and food kiosks

7. Challenges in Chips Manufacturing

Some common challenges entrepreneurs face:

• Price fluctuations in potatoes and edible oil

• Maintaining consistent taste and quality

• High competition from national and regional brands

• Achieving wide distribution coverage

• Maintaining hygiene and compliance

• Building brand recognition

8. Growth Opportunities & Future Potential

Despite competition, chips manufacturing offers significant growth opportunities:

Rising demand for healthier variants (baked, air-fried)
Scope for unique regional flavours
Fast-expanding rural FMCG consumption
Growth of modern trade and online grocery platforms
Government support for MSMEs and food processing units
Increasing popularity of small local brands

With the right pricing, quality control, and distribution strategy, even a small brand can scale rapidly.

9. Government Support for Chips Manufacturing

The Government of India supports the food processing sector through:

PM-FME Scheme (subsidies for food processing units)
MSME financial support
Subsidised loans under Mudra Yojana
Credit guarantee schemes
Technology upgradation support

These schemes help reduce capital cost and production expenses for new entrepreneurs.

Conclusion

Starting a chips manufacturing business in India is one of the most promising entrepreneurial opportunities in the FMCG sector. With growing demand, expanding retail networks, and government support, even small players can establish a strong local presence.

By understanding the market, setting up the right infrastructure, following all legal compliances, maintaining quality, and executing strong marketing strategies, you can build a profitable chips manufacturing brand in India.

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