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College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Chad BohachewskiChad Bohachewski
Neil MacDougallNeil MacDougall
Leah WelterLeah Welter
Blake WeatheraldBlake Weatherald
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Operations planOperations plan
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Organizational StructureOrganizational Structure
CorporationCorporation 5 Board of Directors5 Board of Directors President/Plant manager President/Plant manager Vice President/Secretary treasurer Vice President/Secretary treasurer Sales ManagerSales Manager Plant LabourersPlant Labourers Run processing equipmentRun processing equipment
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Organizational ChartOrganizational Chart
Board of Directors-53 external, 2 internal
President/Plant Manager
Vice-President/Secretary
Sales Manager
Plant Workers (6)
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
ProductProduct
Cooked lentils + spices + tomato Cooked lentils + spices + tomato pastepaste
=Lentil based pasta sauce=Lentil based pasta sauce
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Sauce ProductionSauce Production
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Business CycleBusiness Cycle
Business hours- 9:00am to 5:00pmBusiness hours- 9:00am to 5:00pm eight hour work dayeight hour work day
First year projection 70,000 First year projection 70,000 units/yearunits/year
Full capacity plant produces Full capacity plant produces 130,000 units/year130,000 units/year
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Site PlanSite Plan
Building located on highway #37 Building located on highway #37 in Shaunavon, Saskatchewan in Shaunavon, Saskatchewan
Two entrances into the lotTwo entrances into the lot
Loading dock area at back of Loading dock area at back of building for shipping/receiving building for shipping/receiving
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Building and Floor PlansBuilding and Floor Plans
3500 ft3500 ft22 insulated building insulated building
2500ft2500ft22 for production line and for production line and storage storage
1000ft1000ft22 for two offices, two for two offices, two change/bathrooms for employees change/bathrooms for employees and customers and customers
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Capital BudgetCapital Budget
2007
Land $ 1.00
Building 305,000
Processing equipment 22,375
Office equipment 2,000
Total Capital Costs $ 329,376
Working Capital
Total Working Capital $ 23,702
Total Capital Required $ 305,674
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Cash Conversion CycleCash Conversion Cycle
Cash Conversion Cycle for 2007 Average days inventory 46 Average collection period 45 Average days payable 30 Total Cash Conversion Cycle 121
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Human ResourcesHuman Resources
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Direct Labour EmployeesDirect Labour Employees
Plant Manager-$50,000 + 6,400 in Plant Manager-$50,000 + 6,400 in benefitsbenefits
= $56,400= $56,400
(6) Plant Labourers-based on a wage (6) Plant Labourers-based on a wage bases of $12.50/hourbases of $12.50/hour
Total annual wages and benefits Total annual wages and benefits 172,237 + 32,036 benefits = $204,273172,237 + 32,036 benefits = $204,273
*Salaries/wage exclude benefits*Salaries/wage exclude benefits
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Administration and Administration and Marketing EmployeesMarketing Employees Secretary-$35,000 Secretary-$35,000
+3,166benefits =$38,166+3,166benefits =$38,166
Sales Manager-$50,000 + Sales Manager-$50,000 + 4,522benefits = $54,5224,522benefits = $54,522
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
MarketingMarketingMarketingMarketing
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
IntroductionIntroduction
Sobeys Sobeys Federated Co-op LimitedFederated Co-op Limited Calgary Alberta Calgary Alberta Health conscious / vegetarianHealth conscious / vegetarian
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
MARKET SIZEMARKET SIZE
4% of Canadian population 4% of Canadian population is vegetarian/roughly 1.2 is vegetarian/roughly 1.2 milliion in Canadamilliion in Canada
25% are vegetarian 25% are vegetarian inclinedinclined
$172 million spent on $172 million spent on pasta sauce annuallypasta sauce annually
4.7% of total grocery shelf 4.7% of total grocery shelf space devoted to pasta space devoted to pasta sauce- co-opsauce- co-op
Stats Canada: Stats Canada: www.statscanada.ca, 2006, 2006
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
TARGET MARKETTARGET MARKET
Vegetarian Vegetarian Active / healthyActive / healthy
Young Young Female Female Urban & Trendy Urban & Trendy
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
MARKET POTENTIALMARKET POTENTIAL
Consumers Consumers becoming more becoming more health conscioushealth conscious
Few ready made Few ready made pasta sauces pasta sauces containing lentilscontaining lentils
Daily legume Daily legume recommendationrecommendation
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
SWOTSWOT
StrengthsStrengths New product of pasta marketNew product of pasta market Few direct competitors in pulse based saucesFew direct competitors in pulse based sauces Health benefits of the lentil as a supplement Health benefits of the lentil as a supplement
WeaknessesWeaknesses Relatively new firm Relatively new firm No brand loyaltyNo brand loyalty Large initial capital investmentsLarge initial capital investments
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
SWOTSWOT
OpportunitiesOpportunities Increase in vegetarian popularityIncrease in vegetarian popularity Increasing health awarenessIncreasing health awareness Protein based pasta sauceProtein based pasta sauce
ThreatsThreats Established competitionEstablished competition Market dominated by few large firmsMarket dominated by few large firms Pulse consumption lowPulse consumption low
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
OBJECTIVES & GOALSOBJECTIVES & GOALS
Supply Sobeys and FCL Calgary in Year 1 Supply Sobeys and FCL Calgary in Year 1
To receive an “endcap” or eye catching shelf To receive an “endcap” or eye catching shelf position position
Target the major urban areas Calgary in Year 2 Target the major urban areas Calgary in Year 2 and 3 and eventually Saskatchewanand 3 and eventually Saskatchewan
Establish a firm stand in the growing health Establish a firm stand in the growing health food industry food industry
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
PRICEPRICE
25% Markup Over 25% Markup Over Main Stream Main Stream Sauce. Sauce.
$5.88 – Retail (30 $5.88 – Retail (30 % mark-up)% mark-up)
$4.12 – Wholesale $4.12 – Wholesale
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
COMPETITOR PRICINGCOMPETITOR PRICING
Product Name Package Size
(ml) Price ($)
Catelli Garden Select 700 2.27
Prego Traditional 675 2.98
Ragu 700 2.48
Rozoni Portabello Mushroom 700 3.48
Healhy Choice Traditional 700 2.98
Classico di Basilicata 700 2.98
Compliments Traditional 700 2.77
Compliments Organic 700 5.48
Primo 680 2.48
Hunt’s Thick and Rich 680 1.98
Catelli Spaghetti Sauce with meat 398 1.48
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
PROMOTIONPROMOTION
Free Press- Calgary Free Press- Calgary Vegetarian ResourceVegetarian Resource
Magazine AdsMagazine Ads
Ex: Flare, Country Ex: Flare, Country WomenWomen
In-Store In-Store – Taste Tests Taste Tests – Co-op Store Co-op Store
Flyers/Coupons. Flyers/Coupons.
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
DISTRIBUTIONDISTRIBUTION
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Financial PlanFinancial Plan
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Finance BudgetFinance Budget
Long Term Debt$115,000
Owners Equity 385,000
Total$500,000
*This will only cover construction and first year operations
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Balance SheetBalance Sheet
Assets Liabilities Current Assets Current Liabilities Cash $(101,026) Accounts Payable $33,476 Accounts receivable 35,556 Total inventories 21,621 Long Term Liabilities Total current Assets $(43,849) Long term debt 110,765 Total Liablities $144,240
Long Term Assets Buildings, Machinery & Equip. $387,875 Owner’s Equity Accumulated C.C.A. (22,358) Owner Equity $385,000 Land 1 Retained Earnings (207,571) Total Long Term Assets $365,519 Total Owner Equity $177,429
Total Assets $321,669 Total Liabilities & Equity $321,669
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Unit Cost of ProductionUnit Cost of Production
Ingredients costs $0.20 Packaging 0.99 Total materials per jar $1.19
Direct labour $1.80 Overhead cost 0.60 Total Unit Cost of Production $3.59
Marketing and Administration $1.50
Total Unit Cost per Jar $5.09
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Breakeven Analysis Breakeven Analysis Using Change in Using Change in Wholesale PriceWholesale Price
0
1
2
3
4
5
6
7
8
1 2 3 4 5 6 7 8 9 10
Year
Pri
ce p
er J
ar
cash flow break even net income break even economic break even
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Breakeven Analysis Breakeven Analysis Using Change in Yearly Using Change in Yearly ProductionProduction
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
0 2 4 6 8 10 12
year
jars
pro
du
ced
per
year
Base Production cash flow break even net income break even
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
ScenarioScenarios s
Base Case Best Case Worst Case
Wholesale price per jar 4.12$ 5.55$ 4.12$
Volume produced 70,000 106,223 50,000
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
Financial SummaryFinancial Summary
Very high equity investment Very high equity investment requiredrequired
Negative ending cash = Negative ending cash = unfeasible unfeasible
plan plan Need to investigate alternatives Need to investigate alternatives
to provide a viable planto provide a viable plan
College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495
QuestionsQuestions