Let me give you an example. In India, many low income people can't afford shampoo bottles. So retail companies came up with a concept of 'shampoo sachet' [http://goo.gl/GUopS] (similar to ketch up sachet) and sold it for a rupee (back in 90s when I was growing up). Without this product, I would have never used a shampoo when I was a kid. It was a HUGE seller and you could find it in remote parts of India. I think it is taught as an example in business schools in India.
As per my other post, he is selling his napkin for 12 rupees for 8 napkins. If he actually decided to manufacture them and retail them on a scale, I am sure he can still keep the same low price and achieve better distribution. His current approach of getting people to install machine and then making napkins is much harder to scale. That's my personal opinion anyway.