Crane Bakery Ltd Business Plan Doc

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD

Business Plan Corporate Document 1

1.0 EXECUTIVE SUMMARY

1.1 Introduction

Crane Bakery Limited is a start-up bakery retail establishment that is located in the

western suburbs of Kampala at Bulenga – which is only 15 kms along the Kampala –

Mityana – Mubende – Fort Portal main road. The Crane Bakery Limited will be an

innovative retail bakery in Bulenga, Ssumbwe Parish, Wakiso Sub-County with the

mission to service Wakiso District and neighbouring Kampala District with high

quality baked goods in a modern and creative way. We will sell freshly baked breads

and desserts made from the highest grade of ingredients, filling theBulenga area‘s

need for a classic bakery.

Crane Bakery Limited expects to catch the interest of a regular loyal customer base

with its broad variety of bread, pastry and confectionery products. The company

plans to build a strong market position in the town, due to the partners' industry

experience and mild competitive climate in the area.

Crane Bakery Limited values having great customer service, keeping up-to-date

with technology to remain as competitive and customer friendly as possible, and

contributing to the local community through non-profit organizations, through

donating some of our two day-old baked goods among other things. In each of these

three categories, our bakery plans to improve upon continuously.

Crane Bakery Limited aims to offer its products at a competitive price to meet the

demand of the middle-to higher-income local market area residents and travellers

using the Kampala – Mityana – Mubende – Fort Portal highway.

Our commitment to excellence in the craft and artistry of baking will enable us to

deliver high quality products that look superb, delight the customer and make

celebrations a moment to cherish. Our product wills possess that certain something

that others do not have.

In order to attract a cross section of population, a combination of 2 outlets, one in a

low-income area and another in a posh area, is used in this study. Project Capacity

cannot be based on machinery capacity, as the same oven will be having different

capacities for different products. This business segment is labour intensive. The

proposed bakery outlet will be working from 6.00 a.m. morning to 12.00 midnight.

Number of working days has been taken as 355 with average 2 shifts per day.



1.2 The Company

Crane Bakery Limited is incorporated in the Republic of Uganda. It is equally

owned and managed by its two partners.

Mr. Ronald Byamukama has extensive experience in catering, sales, marketing, and

management, and with a first degree qualification in catering and hotel management

(Bachelor of Catering & Hotel Management). Ms. Diane Kemigisha brings

experience in the area of finance and administration, including service in various

financial administration capacities across various private sector small- and medium-

sized enterprises in Uganda over the last six years. The two partners will share equal

ownership of the company.

The company intends to hire two full-time pastry bakers and one sales executive at

the start of business (during the first year of business) to handle customer service

and day to day operations.

1.3 Products and Services

Crane Bakery Limited will provide freshly prepared bakery and pastry products at

all times during business operations. Six to eight moderate batches of bakery and

pastry products will be prepared during the day to assure fresh baked goods are

always available. The main types of baked products that will be produced by Crane

Bakery Limited include:

Biscuits/cookies

Breads (leavened and unleavened)

Cakes

Doughnuts

Pastries

Samosas

Scones

Crane Bakery Limited will bake hand-made, naturally fermented bread, and

distribute it throughout Bulenga town and next door Kampala city. Our bread will

be sold to high-end markets, restaurants, offices, schools, and directly to the

consumer. Our product will be packaged, labeled and branded consistent with the

regulatory requirements for food. Crane Bakery Limited will be engaged in its

community, and will be dedicated to educating its consumers and bakers about

every aspect of bread. Future opportunities include expansion into other towns in

Uganda.



1.4 The Market

The retail bakery industry in Uganda has recently experienced rapid growth.

Crane Bakery Limited wants to establish a large regular customer base, and will

therefore concentrate its business and marketing on local residents, which will be the

dominant target market. This will establish a healthy, consistent revenue base to

ensure stability of the business. In addition, tourist and traveller traffic is expected to

comprise approximately 35% of the revenues. High visibility and competitive

products and service are critical to capture this segment of the market.

We believe that we are coming into the retail bakery industry at an optimal time,

despite the not-so-perfect economy of today. There are no significant bakery shops

near the Bulenga area, giving us a big break into the industry. The only competition

Crane Bakery Limited bakery predicts to have is the bakery sections at the large

supermarkets – such as Nakumatt that are now baking their own products and

squeezing smaller and emerging bakeries out of business. Such supermarkets with

in-house bakery facilities will be our greatest threat. Fortunately, the economy has

not hurt bakeries – as indicated by recent positive trends in the growth of the retail

and wholesale sector‘s contribution to the Uganda GDP. We will remain successful

in our industry by keeping alert to customer trends such as health, convenience, and

pleasure.

Our target market will be the higher-end of middle class workers and above,

however effort will be made to give lower incomes opportunities to buy our

products, such as through our day-old bread section. Our prices will tend to be

higher than those of our local competitors, mainly for the reason that we strive for

higher quality in our products. We would like to see daily somewhere from 800 to

1,000 customers varying in age groups but focused on our target market.

The selection and number of outlets would totally depend upon the mix of target

population. For example if we were to start this venture in bigger towns, one might

select more sophisticated outlets with the emphasis on best decor and interior

design. But in case of smaller towns, one would prefer to go for a mix, which has

more traditional products. Any big town with a total population of over

20,000inhabitants is the ideal location for the project. Bakery and confectionery

business is emerging as one of the good business ventures in Uganda as it provides

varieties of bakery and pastry items. This phenomenon grew rapidly; and today

hundreds of bakeries exist throughout Uganda. Over the decades, the bakeries have

evolved even further.



1.5 Management Strategies and Marketing Plan

Crane Bakery Limited will maintain a focus on Quality product with bottom-line

growth through cost reduction and optimal performance. We also focus on

technology and innovation to make sure employees will have extensive training to

perform proper technique and equipment operation. Maintain 100-percent honesty

between employees, customer and management. As a team input will be collected,

analyzed and put into practice. Team meetings weekly will motivate and forecast

growth and annihilate potential difficulties.

Initial competitive advantages will include:

A unique recipe that will be highly rated in terms of consumer taste tests;

Hiring and retaining a professional baker; and

Having an experienced management team with a successful track record in

branding and marketing.

Our prime marketing strategy will be to target the Crane Bakery Limited bread and

pastry products to large formal retail supermarkets/chain stores and our own

distribution network for smaller outlets and kiosks using a 50:50 sales ratio. This

kind of balance in product distribution/sales helps in building our product brand

identity quickly through the formal retail supermarket chains (though they may take

longer to pay) while generating the much-needed cash sales from smaller retail

outlet sales.

Marketing and branding of Crane Bakery Limited bakery and confectionery

products will play a key role in the mobilization of targeted number of customers.

Major marketing options will include: newspaper advertisements, cable TV ads and

handbills among other traditional marketing channels. We also hope to contact our

customers through business cards and product brochures that provide our menu

and product selection, a window display that will be a direct aesthetic appeal.

Positioning of the product, cost of developing and manufacturing the product, cost

of competitive products and condition of the economy will determine price of the

product.

1.6 Financial Considerations

Crane Bakery Limited expects to raise over UShs 276 million of its own capital (in

form of savings and existing assets), and to borrow UShs 35 million guaranteed by

the Microfinance Support Centre as a five-year loan. This provides the bulk of the

current financing required.



Crane Bakery Limited anticipates sales of about UShs 780 million in the first year

(PY 2), UShs943.8 million in the second year (PY 3), UShs 1.142 billion in the third

year (PY 4), and UShs. 1.382 billion in the fourth year (PY 5) of the plan. Profits for

this time period are expected to be approximately UShs 162,369,000 in PY 1, UShs

217,787,000 by PY 2, UShs287, 675,000 by PY 3, and UShs375,941,000 by PY 4. The

company does not anticipate any cash flow problems.

NOTE: All currency figures in this plan are in Ug Shilling (‗000s).

Figure 1: Performance Highlights (PY2 – PY5)

We will require UShs 35 million for start-up cost, which will be placed fully on the

microfinance loan, but we predict that the debt will be paid after five years. The

medium-term loan will be used to 1) buy kitchen baking machinery &equipment;

and 2) provide working capital. In the beginning we will only need two minimum-

wage workers aside from the two of us participating in the business plan to run the

bakery but more may be added as finances allow it and demand requires it. The total

project cost is estimated at UShs 518,222,500. Projected IRR, Net Present Value

(NPV) and Payback of this project are 47.11%, UShs296.44 million (at a discount rate

of 17%) and 1.18 years respectively. While Crane Bakery Limited has the potential

for high growth, the first three years will be spent establishing company financial

stability and increasing market share. Proforma financial statements are included

with this plan.

1.7 Mission

Crane Bakery Limited aims to offer high quality and good tasting bread and pastry

products at a competitive price to meet the demand of the middle- to higher-income

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

PY 2 PY 3 PY 4 PY 5

US

hs

'00

0s

Sales Gross Margin Net Profit



local market area residents and travellers in the Kampala and Wakiso district areas,

while increasing the number of people enjoying the health benefits of a higher grain

diet.

1.8 Vision

Vision Statement: In the future we enhance our competitiveness through marketing

and technology adaptation in order to sustain our business cutting edge so as to be

as customer-friendly as possible and provide the best products in our field. We also

plan to continue to invest in our community through partnerships with other

businesses and non-profit organizations.

1.9 Core Values

Serve... Sustain... Contribute...

-Service: We work hard to provide an inviting environment for our customers and

serve them in the best and most efficient way possible.

- Sustainability: We wish to use technology to connect with the people of the

advancing times, working with our customers to produce their own inspired

creations and update as the technology around us advances.

-Community Contribution: We are committed to contributing to non-profit

organizations active in the Kampala and Wakiso district areas through our products

and funding, and increasing our involvement in other opportunities.

1.10 Keys to Success

Keys to success for Crane Bakery Limited will include:

1. Providing the highest quality bread and pastry products with personal

customer service.

2. Competitive pricing.



2.0 PROJECT PROFILE

2.1 Project Brief/Business Description

Bread is one of the oldest prepared foods, and it is eaten by almost everyone. The

proposed project presents the business planning and operational aspects of setting

up a bread & confectionery business. Major products in this case will be biscuits and

cookies, cakes, doughnuts, pastries, samosas, scones, leavened and unleavened

breads and general items. In order to attract a cross section of population, Crane

Bakery Limited will sell its bread and pastry products to the existing formal retail

supermarket chains so as to build and gain brand recognition quickly, while also

establishing its own product distribution network to supply the smaller retail outlets

and kiosks using a 50:50 product distribution ratio to generate quick cash flow. In

that case, our naturally fermented, handmade bread is sold to markets, restaurants,

and directly to the consumer.

Our team has decided that what Bulenga town in Wakiso district needs is a

―hometown‖ bakery and the exciting experience that can be gained there. We do

recognize that there is a slight risk trying to open a bakery, especially in a location

close to the city of Kampala where bakeries have tried and not been successful

before. The start up with a business such as ours is risky because it does require

certain equipment that other businesses do not. Other obstacles include the permits

and licenses that we would need to get in order to sell food but once we have passed

these beginning challenges, we believe that our business will head in a positive

direction. A luxury and high quality bakery doesn‘t seem to fit in the current

economic status, but with our target market of the middle and low-income classes

playing a pretty prominent role in the largely peri-urban Wakiso district area and

the need for a more personal bakery in Bulenga town, our business has the ability to

not only stay open, but be successful. This leads us to our biggest priority, providing

customers of the Crane Bakery Limited with quality baked products and an

experience to take away from our shop.

Crane Bakery Limited will be making food products but we don‘t want to consider

ourselves a sit and eat restaurant. We predict that this bakery will be a place where

people stop and pick up items that they may want on a whim, or where they have

come to pick items that they have specially designed or ordered. Despite the fact that

having a place to sit and eat is not our top priority we do want to offer some

convenience to our customers by making a seating area available with a few tables

and chairs. It‘s our goods we are selling, but our service that will assist with

attracting consumers.



As with many businesses there will be a fairly simple routine of things that happen

during the business week. We will make the bread during the night and early

morning in order for our products to be made fresh and ready to serve customers

throughout the day. We hope to open our doors at 6:00a.m. Monday through

Saturday, and run through a business day until we close shop at 2:00 p.m. Monday

through Thursday and 5:00 p.m. on Friday and Saturday. Throughout the day we

expect customers to swing by on their way to work, enjoy a quick bite during lunch

breaks, or place special orders either by phone, or by the in-store design area. Our

employees will be serving our customers by helping them make decisions, assisting

in the case that something is wrong with our technology, or just being present and

able to answer questions or concerns that customers may have. As the business day

comes to an end, all the baked goods that are not sold during the day that are baked

fresh on a daily basis will be moved to an area for things that are a day old to be sold

the next day for half price. If the next day our half-priced items are not sold, we plan

on giving them to local non-profit organizations that would want our products such

as the existing charity organizations and NGOs active in the Kampala and Wakiso

district areas. This routine would then be repeated during the business week.

We want to take pride in the products we make, and ultimately in the business in its

entirety. What will make the Crane Bakery Limited successful is its uniqueness,

creativity inspired focus, and our more personal level of doing business compared to

our competition with the bigger supermarkets.

2.2 Project Capacity & Rationale

Project Capacity cannot be based on machinery capacity, as the same oven will be

having different capacities for different products. This business segment is labour

intensive. The proposed bakery outlet will be working from 6.00 AM morning to

12.00 midnight. The Crane Bakery Limited bread distribution outlets will determine

the factory timing for production. It is proposed that 2 shifts are necessary for

production. The interesting fact is that these two shifts include only 3 or 4 pure

working hours. Main plant & machinery includes oven in which different items are

baked with different temperatures and different baking timings. Industrial ovens are

easily available in market. For the proposed project, a commercial oven of 7‘x7‘x10‘

feet with 8 rotating stands having 5 trays on each stand is used.

Number of working days has been taken as 355 with average 2 shifts per day.

Initial Capacity of the Bakery & Confectionery is calculated on the basis of total

expected sales of items. Maximum sales are expected during the festive season

period of March, April and December. However, in order to calculate average



monthly sales, potential revenue is estimated by using the potential demand

estimates. The estimated combination of sales is as given below:

1. 50% sales to own distribution outlets.

2. 50% sales to formal retail supermarkets.

It is expected that annual increase in sales would be 10%. Although due diligence is

carried out in estimating these numbers, the final outcome will vary depending on

the selection of location, pricing, product mix and the marketing strategies.

2.3 Project Investment

Total cost of the project worked out is in the table below:

Table 1-1: Project Costs (UShs)

Capital Investment 458,222,500

Working Capital Requirement 60,000,000

Total Investment 518,222,500

Table 1-2: Project Financing (UShs)

Debt 35,000,000

Equity 276,075,000

Other Funding Sources 207,147,500

Total Project Investment 518,222,500

Table 1-3: Viability

IRR 47.11%

NPV at 17% discount rate 296,443,000

Pay Back Period (years) 1.18

2.4 Proposed Product Mix

This Business Plan is developed for a project based on a production plant along with

a number of product distribution outlets and outside sales with a mix of city areas.

The selection and number of distribution outlets would totally depend upon the mix

of target population. For example if we start this venture in the central areas of

Kampala, one might select more sophisticated outlets with the emphasis on best

decor and interior design. But in case of the more peripheral (peri-urban) areas of

Kampala city, one would prefer to go for a mix, which has more traditional

products. It is also recommended to change the mix of both bakery and general

items according to sale trends of a particular outlet. In this study it is assumed that



30% sales will be consisting of general items but this combination would be different

in different outlets and according to consumer behaviors.

2.5 Financial Summary

Table 2: Financial Summary

Debt Equity Split 7:53

Projected Life 5 years

Repayment of medium-term loan 5 years

Grace period for medium-term loan 1 year

Mark up rate for medium-term loan 11%

2.6 Project Location

Crane Bakery Limited will set up its storefront bakery at Bulenga town – which is

located at only about 15 kms from Kampala along the Kampala – Mityana –

Mubende – Fort Portal highway. Bulenga town is conveniently located on one of the

busiest highways in Uganda. The storefront bakery is situated only 200 metres away

from the main road and has plenty of parking in addition to being easily accessible

from the main road.

Bulenga is a prime location and a growing peri-urban residential town for most of

the employees of the nearby Kampala district businesses. The bakery will sell

different varieties of Bread and other health specific breads, pastries, cakes to the

area and other surrounding communities and districts six days a week Monday

through Saturday. The close proximity of Crane Bakery Limited to Kampala city –

which is the largest commercial and industrial hub of Uganda makes it an ideal

location for a new enterprise or business.

We believe the optimum location of the Crane Bakery Limited at Bulenga town

along the Kampala – Mityana – Mubende – Fort Portal highway puts it in a prime

position where we could easily be spotted by everyday passer-bys and also

conveniently located relatively close to the middle of Kampala city. By placing

ourselves in the middle we believe we have a better chance of competing with the

wide range of other baked goods producers that have recently sprang up in

Kampala and Wakiso districts.

Marketers need to determine where the product will be sold and methods of

distribution including transportation and storage.



2.7 Opportunity Rationale

The opportunity of setting up the Crane Bakery Limited bakery & confectionery

business can be linked with the eating habits of the people. People in Uganda enjoy

the traditional food very well but recently well-known regional food chains and

supermarkets have brought cultural change to Uganda. Now people are ready to eat

junk food, while closely observing the trends, a bakery & confectionery chain can

play an important role in this new era as it is the only source which provides not

only traditional bakery items but also new lines and varieties of confectionery items.

2.8 Key Success Factors/Practical Tips for Success

Some of the Key Success factors that will determine the success of this project

include:

Products range selection and introduction of sitting areas.

Quality and Innovation in products.

Selection of location.

Pricing strategy.

Understanding of target customers, alternative availability (product

differentiation). Launching time.

Hygienic conditions.

There should be regular and sustained marketing through fliers distribution

and Cable TV/FM Radios.

The store should have an ample space for customer car parking. It is advisable

to maintain a parking space whereby around 15-20 cars can be parked

The staff hired should be well-mannered and well-trained in dealing with the

customers.

Customers free gift schemes and surprise gift, valuable customer dinner can

be additional success factors.

2.9 Strategic Recommendations

2.9.1 Marketing

Marketing and branding of bakery & confectionery products will play a key role in

the mobilization of targeted number of customers. Major marketing options include,

newspaper and site advertisement, cable TV ads and handbills among other

traditional marketing channels. Before launch of the project, it is recommended that

a research on understanding the dynamics of the targeted market should first be

carried out, to design the products as well as the promotional strategy. The basic

principle of marketing is to sell the right product, at the right price and promote it in

the right place to the right people. The job of the marketer is to control these 4Ps.



However, there are other socio-economic factors, which also affect the production,

selling and consumption of foods. The success of marketing is often determined by

the extent to which various socio-economic factors are considered. Market research

is a useful tool for assessing the attitudes and behavior of potential consumers.

2.9.2 Pricing

The following factors determine the price of the product:

Positioning of the product.

Cost of developing and manufacturing the product.

Cost of competitive products.

Condition of the economy.

2.9.3 New Products development

Food manufacturers develop new products to maintain and improve their market

position. New products can include:

New varieties and flavors - these are called ―line extensions‖ where different

varieties or flavors of the same product are produced.

Quality improvement of an existing product, either functional or nutritional.

Copying a competitor's product.

Developing a new, innovative product resulting from new ingredients, new

packaging.

2.10 SWOT Analysis

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths,

Weaknesses, Opportunities, and Threats involved in a project or business venture.

Strengths and weaknesses are internal to the company. Opportunities and threats

originate from outside the company. A SWOT analysis is usually performed early in

the project development process, and helps organizations evaluate the

environmental factors and internal situation facing a project.

2.10.1 Internal Strengths

Family business with contented workforce

Low operational costs

Strategic location

Home-made recipes

Reasonable prices

Own premises and which can easily be expanded to at least double capacity



2.10.2 External Opportunities

Easy availability of resources(manpower/salesmen)

Growing population

Expanding Kampala and peri-urban Wakiso district areas

Rising income levels, i.e. increase in purchasing power of consumers

High bakery items consumption habits of people in Uganda

Rising consumer goods spending

Desire for healthier lifestyles

Niche market in urban areas

Untapped rural market

Large target market area

To produce a wide range of products

2.10.3 Internal Weaknesses

Inexperience

Production semi-automated

Products only sold in one region of the country (Central)

Promotion tends to be word-of-mouth

No representatives

2.10.4 External Threats

Government polices

Heavy taxes in the form of sales tax and income tax on retail business

High competition

Credibility factor in the initial phase, as suppliers do not give credit to newly

entrants

Increasing costs of raw material

Large national bakeries are expanding their supplies into the area

Large supermarkets making their own products using in-house bakeries

Slowdown in rural demand

Tax and regulatory structure



3.0 DESCRIPTION OF COMPANY

Crane Bakery Limited is a bread and pastry bakery managed by two partners. These

partners represent sales/management and finance/administration areas,

respectively. The partners will provide funding from their own savings, which will

cover start-up expenses and provide a financial cushion for the first months of

operation. A five-year microfinance loan will cover the rest of the required financing.

The company plans to build a strong market position in the Kampala – Wakiso

urban area, due to the partners' industry experience and mild competitive climate in

the area.

The bakery will offer a variety of high quality, European and American style artisan

breads and pastries, baked fresh in its storefront bakery at Bulenga from which it

will also distribute and sell whole loaves of bread packaged in cellophane and

branded with the company logo to top-tier retail stores around Kampala and peri-

urban Wakiso. Crane Bakery Limited will also negotiate supply contracts with some

of the leading supermarket chains in Uganda including Game Stores, Shoprite

Checkers, Uchumi, Tuskys, Capital Shoppers, Quality Supermarkets, Checkers

Supermarkets, Kenjoy, Mega Standard Supermarkets, etc.

All regulatory requirements have been met for both baking operations and labeling.

The most valuable asset of the company is its proprietary, internally developed

recipe.

3.1 Objectives

The company's immediate goals are to achieve start up within the first six months of

project finance acquisition. It will start with the proprietor, Ronald Byamukama, as

baker and manager with the help of two part time employees. The company should

gross over UShs. 780 million in its first year. Long term goals include the addition of

several wholesale and bread and pastries retail distribution outlets in various

strategic locations around Kampala to the storefront and wholesale bread sales

within one year.

Our main objective is to establish a first class bakery and patisserie with a café in the

storefront at Bulenga. We hope to develop the strong presence in the community

needed to support our sales goals. It is our goal to develop our products by rolling

them out gradually in the first year of operation.

3.2 Company Ownership& Legal Status

Crane Bakery Limited is owned by Ronald Byamukama and Diane Kemigisha.



Crane Bakery Limited is a company incorporated at the Registrar of Companies

through the foresight and vision of Mr. Ronald Byamukama. Crane Bakery Limited

was incorporated in the Republic of Uganda on –th (Date) ------ (Month) 20—(Year).

Though relatively new, the directors realize their Company's vast potential market

and opportunity for growth given implementation of the appropriate strategies,

aided by the necessary finances.

Ronald Byamukama, the proprietor and baker, is the creator of Crane Bakery

Limited. Ronald has gained extensive experience in catering, sales, marketing and

management from the diverse range of private sector companies that he has worked

for in Uganda over the last eight years including Total Uganda Limited. Ronald

brings a sense of production realities and technical savvy to the company. Besides,

Ronald has strong passion and interest in pursuing bread and pastry baking as a

business career. He holds a Bachelor of Catering and Hotel Management from the ---

----------------------- (University).

Diane Kemigisha, Ronald's wife, also has bread baking experience and she

contributes a keen sense of the bread market. She also contributes retail sales

experience accrued through several retail jobs around Kampala.

3.3 The Shareholders

No. Shareholder Shares held [UGShs.] [%age]

1. Ronald Byamukama 8,000,000 40%

2. Diane Kemigisha 8,000,000 40%

3. ------------------------ 4,000,000 20%

4. TOTAL 20,000,000 100%

3.4 Project Costs and Financing

The total project cost for a full-scale turnkey industrial project establishment of the

proposed bakery & confectionery enterprise is estimated at UShs 518,222,500. Out of

this total amount, UShs 67,182,500will be used to purchase, install and commission

bakery plant equipment and machinery lines from regional and local machinery

plant equipment suppliers.

The project cost breakdown is given in Table 3.



Table 3:Project Cost Summary (In UShs)

Source of

Finance/Component

Share (%) Equity/Own

Capital

MF Loan

Finance

Other Funding

Total

Land 28.95% 150,000,000 0 0 150,000,000

Buildings Improvements 30.33% 100,000,000 0 57,200,000 157,200,000

Machinery & Equipment 11.79% 26,075,000 35,000,000 0 61,075,000

Erection & installation 1.18% 0 0 6,107,500 6,107,500

Bakery FFE 10.00% 0 0 51,840,000 51,840,000

Vehicles 6.17% 0 0 32,000,000 32,000,000

W/Capital 11.58% 0 0 60,000,000 60,000,000

TOTAL 100.00% 276,075,000 35,000,000 207,147,500 518,222,500

% of Total 53.27% 6.75% 39.97% 100.00%



4.0 PRODUCT DESCRIPTION

4.1 Products and Services

Baked goods include:

Cookies& Biscuits

Oatmeal, Peanut Butter, Sugar, Choc Chip, Choc Chunk, Oat Meal Raisin,

Macadamia Nut, Biscuits (various types) and Buns

Muffins (Similar to Cup Cakes)

Reduced Fat Muffin, Blue Berry, Banana, Apple and Banana Nut

Breads

Bran Bread

Enriched Home Style White Bread

Enriched Chale Bread

French Bread

Garlic Bread

Italian Bread

Enriched Egg Bread

Seedless Rye

Pumpernickel Bread

Raisin Bread

Wheat Bread

Morning Rolls

Doughnuts

Scones

Gourmet Pastries

Crisps

Croissants

Danish Twist

Pinwheel

Bow Tie

Cheese Danish

Miniature Danish

Danish Coffee Ring

Lattice Danish

Meat |Chicken|Vegetable Pies

Samosas



Cakes

Wedding Cakes, Anniversary Cakes, Birthday Cakes, Graduation Cakes, Cup Cakes,

Queen Cakes, Chocolate Cakes, Chorley Cakes, Sculptured Cakes, Lemon Cake,

Carrot Cake, Strawberry Short Cake, Pineapple Cake.

Products are made from all natural ingredients, obtained from a distributor who

specializes in natural and organic products. Ingredients are available in ample

quantity however prices fluctuate seasonally. Hedging strategies will be employed

to ensure that changes in the cost of our raw materials will not affect the prices we

charge to our customers.

4.2 Future Plans

Based on customer requests, the company plans to provide a half-kilo loaf package

in the future, which will appeal to those on a lower budget. Plans also include

adding a single serving roll to the product line for use in sandwiches and snacks.

Future plans also include adding new breads to the line, including sweet bread with

raisins and breakfast bread with nuts.

Crane Bakery Limited also plans to add a fruit juice packaging line and ice-cream

making parlour to its bread and pastry enterprise after the first three years of

business when it will have firmly established its product brand name on the market

and built up an extensive product distribution network in Kampala and other major

towns of Uganda.



5.0 SECTOR AND INDUSTRY ANALYSIS

5.1 Overview

Despite growing at a relatively sluggish pace, baked goods still continues to offer

growth opportunities for manufacturers and retailers alike in Uganda. Catering to

indulgence trend in the some of the fastest growing markets in Uganda, pastries

stand out as the biggest contributor to sector growth. Factors fuelling market

expansion include convenience, affordability and health benefits of baked goods

products. Demand for healthier fortified baked products has also driven sales.

Demand for baked and pastry goods is also being driven by changing lifestyles,

which leaves little time to prepare meals. Busy consumers are increasingly quick to

buy convenient baked snack foods such as wraps and sandwiches.

The baked goods industry, encompassing products such as bread, cereals, cakes,

biscuits, pastries and scones, is represents good market potential in Uganda as

western lifestyles and eating habits continue to be adopted.

5.2 Key Segments

The Uganda baked goods industry is expected to exceed US$ 14.96 million in 2015,

according to research from Euromonitor. This represents a near 12% increase in five

years, reports Euromonitor. Market volume is forecast to exceed 6.45 million

kilograms in 2015. Artisanal bread and rolls represent the leading market segment,

accounting for almost 52% of the overall market in terms of value.

Bread and rolls represent the leading market segment in the baked goods industry,

reports Euromonitor. Companies continue to focus on product innovation to adapt

to evolving consumer needs. Demand for both healthier options and more indulgent

products continues to rise together, with consumers opting for both healthy

products and premium-priced baked goods such as cakes, pastries, filled sweet

biscuits and luxury breakfast cereals.

5.3 Market Outlook

Demand for baked goods has been changing to reflect evolving consumer lifestyles

and eating habits. Satisfying both health concerns and indulgence, consumers are

opting for whole grain baked goods free of trans-fats with more butter, high-quality

chocolate spread and creamy icing, according to authoritative industry reports.



Demand for baked products promising functional and health benefits will continue

to climb as consumers opt for products with low-carbohydrate, organic and natural

ingredient products. Gluten-free products are one such range benefiting from rising

demand from gluten-sensitive consumers. Moving forward manufacturers will

likely adapt their products to remove trans-fats, include more natural ingredients,

and limiting the amount of additives and synthetic products used. Other innovations

keeping in line with evolving consumer preferences include changes in packaging,

with smaller size packs in particular proving popular.

The majority of growth will come from pastries

Pastries are the fastest growing category among baked goods, accounting for

almost 80% of absolute volume growth over 2008-2014. Product innovation

and increased penetration are the main drivers of this increase.

Health and wellness is key to adding value to bread, whilst indulgence and

affordability spurs growth in cakes and pastries

To boost bread sales volumes, manufacturers are looking into merging taste

and health through adding fibre and vegetable or a mix of protein and fibre.

Demand for pastries and cakes are being driven by indulgence and flavour

innovation, with affordability remaining a key concern, particularly in the

emerging world.

Traditional grocery retailers are still the most important channel but

supermarkets and discounters gain share

Although the majority of people still buy baked goods from independent

stores, the numbers are falling, mainly due to the rise of in-store bakeries

offered by supermarkets and hypermarkets. In-store bakeries are gaining

importance both due to their lower prices and the convenience of one-stop

shopping trips.

5.4 National Analysis

Bakery and confectionery business is emerging as one of the good business ventures

in Uganda as it provides varieties of bakery items.

This phenomenon grew rapidly; and today hundreds of bakeries exist in Kampala

and other major urban centres in Uganda. Over the last few years, the bakeries have

evolved even further.

Bakery stores business falls under retail sector. This sector has shown a significant

growth over the last few years. For the period 2007-2013this sector showed an



average growth of 5.4%1. This sector‘s contribution towards GDP in the year 2013 is

12.23%2. The following table shows the contribution of retail and wholesale sector

towards GDP for the period 2007-2013 at constant factor cost.

Table 4-1: Contribution of retail and whole sale sector towards GDP3

Year Share %age Growth %age

2007 13.60 13.0

2008 13.99 13.60

2009 13.51 0.60

2010 13.32 4.69

2011 12.97 3.16

2012 12.80 2.68

2013 12.23 0.07

Gross fixed capital formation (Investment in fixed assets) in this industry by private

sector has also shown a progressive trend. For the period 2007-2013 growth in gross

fixed capital formation by private sector (wholesale and retail sector) has shown an

increase of 32.30%4. The following table shows gross fixed capital formation by the

private sector for the last five years:

Table 4-2: Gross fixed capital formation by private sector in wholesale and retail

sector at constant prices (UShs in Billion)5

Year Retail and Wholesale Sector UShsBn

2007 610

2008 664

2009 675

2010 734

2011 799

2012 834

2013 807

There are thousands of bakery stores in Kampala, Wakiso, Mbarara, Kabale, Jinja,

Mbale, Gulu, Lira, and Arua and this number is increasing day by day. Although in

Uganda the retail business is not providing employment at a large scale directly, but

indirectly it is contributing in the employment growth. As more and more retail

outlets are opening and consumer buying has shifted towards packaged/branded

1Source: UBOS Statistical Abstracts 2012 - 2014 2 Source: UBOS Statistical Abstracts 2012 - 2014 3Source: UBOS Statistical Abstracts 2012 - 2014 4 Source: UBOS Statistical Abstracts 2012 - 2014 5 Source: UBOS Statistical Abstracts 2012 - 2014



products. Companies are coming up with top quality products and with the increase

in production level, the net employment effect is also growing.

5.5 The Bakery Industry in Uganda

The bakery industry is important in Uganda. Bread is a staple part of the diet for

many people, and, as living standards grow, more and more people are buying

cakes. Bakery products are usually made from imported wheat, and fluctuations in

raw material prices can be a problem. Another challenge is that the products have a

very short “shelf-life”. Bread only keeps well for a day or two, after that it goes

stale. If bakers misjudge the market and make more bread than they can sell, then

they waste money. If a small baker has regular customers it is easier to plan

production.

In recent years it has become harder for small bakers to survive. Many people in the

towns buy bread from supermarkets, who buy from factory bakeries. These large

enterprises produce huge quantities of bread every day. The cost of each loaf they

produce is low due to the economies of large-scale production. This means they can

sell at low prices, which undercuts the prices charged in small bakers‘ shops. The

problem is that one loaf of bread is very much like another, so shoppers don‘t mind

which one they buy. Although they might prefer a fresh, hot loaf from a local bakery

if they can get there at the right time.



6.0 MARKET DESCRIPTION

6.1 Overview

6.1.1 Bulenga Town

Bulenga is a small but fast-growing town in the peri-urban Wakiso area with a total

population of about 10,000. It lies along the Kampala – Mityana – Mubende – Fort

Portal highway and is at a distance of only 15 kms from Kampala city which gives

Crane Bakery Limited a distinct marketing position in terms of being quite close to

the nearby Kampala city and also being exposed to the high volume highway traffic

comprising of business travelers and tourists bound for western Uganda. Bulenga is

basically located in a farming community with about 70% of the inhabitants being

farmers, government employees 10%, and the remaining 20% mostly traders and

other such commercial activities. The community has three nearby surrounding

towns (Busega, Buloba and Kyengera) with almost the same demographic features.

Currently, there is no baking firm at Bulenga and its environs making the enterprise

a new venture with a very high potential for rapid growth and business

development. The consumer demand for bread in the area is very high as the low

income groups look out for cheap and a more affordable source of food for their

breakfast. The vast unemployed youth in the area will help reduce labour cost and

influence business profitability as the business expands.

6.1.2 Uganda Bakery Products Market Profile

Increasingly, middle and upper class families are looking for better tasting and

healthier breads than those currently available in private supermarkets such as

Nakumatt. We expect that the middle/upper class sector of Ugandan society will

continue to grow in number, and that its appetite for better tasting and more healthy

bread will continue to increase. We also see foreigners (especially the expatriates)

living in Uganda as an important market – these people tend to earn good salaries

and are used to good tasting and healthy breads from their home countries.

We estimate that the market for high-quality bread in Uganda is about 6.45 million

kilos per year; and that the market in Kampala and its environs is about 4.5 million

kilos (assuming a 70% consumption share of the estimated total national demand).

We think the market for our product in Kampala and its environs will be about 1

million kilos. We estimate that the premium market is growing at 12% per year due

to increasing incomes, more focus on taste and better awareness of eating habits and

health trends.



Consumers buy bread in a number of ways. Approximately 50% of bread sold is

through retail store operations for consumption at home. The retail market itself is

segmented into high end (10%), middle (65%) and lower end (25%). The first two

categories are where our products will be sold. These segments are growing 18% and

14% respectively.

The other 50% of bread products are sold in restaurants or other food service venues,

including catering, hospitals and schools, and other institutional settings. Of these,

only the catering market is appropriate for this product because the others depend

on government-subsidized products. The catering sector is a good way to expose the

upper end consumers to this product. These are also the consumers that are most

aware of and interested in the benefits of a healthy diet and are most likely to seek

out our product in retail stores.

Table 5: Markets for bakery products

Market type Typical outlets Examples of market segments

Domestic Supermarkets, shops, open markets,

bicycle salesmen, bus/taxi parks,

kiosks, street vendors, market

traders, straight from the bakery.

Women and children from different

types of family (urban wealthy,

rural wealthy, urban poor, etc.).

Workers or business people

working to eat at the work place.

Food service

establishments

Canteens in large factories or

offices, restaurants, coffee/snack

bars, kiosks, takeaways, bars, hotels,

bus stations, ferry terminals,

airports, entertainment venues,

sports stadiums, etc. Each can be

different types including up-market,

budget, etc.)

Professional buyers in these

establishments, although larger

hotels and restaurants may employ

in-house bakers. Consumers may be

factory or office workers, tourists or

other travelers.

Institutional Hospitals, schools, prisons, army

barracks.

In some countries, bakery products

are bought by professional buyers

in the government ministries that

run these establishments, but in

others the staff in the institution

may have this responsibility.

Consumers may be staff, patients,

children, prisoners, etc.

Wholesale Wholesale agents Professional buyers (often only for

long shelf-life products, but also for

bread in some countries).

6.2 Demand for Processed Foods in Uganda

The demand for processed foods in Uganda is very difficult to quantify, as reliable

data do not exist. Import statistics for processed food and beverages and



government production statistics are listed in categories that are too broad to be

useful. Market intelligence data do not exist to record actual demand.

From the experience of the consultants, it is helpful to categorize the market into

consumer groups:

Well-off urban population (plus the small number of wealthy rural people).

People in cities and rural towns with average incomes.

People living in rural areas with low-to-average incomes.

Tourists and expatriates.

Restaurants and snack bars.

Other food processing companies.

Some of these categories can be further sub-divided into categories based on age,

sex, foods for religious or ceremonial occasions, foods for office workers, etc.

Processed foods can similarly be grouped according to demand by each of the above

categories. This categorization of markets can help in assessing specific segments in

the market for placing a product.

In general, the demand for processed foods is low compared to industrialized

countries. Rural populations have little disposable income and mostly purchase

staples such as flour, cooking oil and sugar. However, the large numbers of rural

poor mean that even if each family only buys a small amount occasionally, the total

market is larger than would be expected from casual observation. Demand in urban

is larger, particularly in Uganda where economic activity and disposable incomes

are higher.

Bakery products

Medium-scale bakeries are rapidly getting established in the major cities in Uganda

in response to a growing demand for bread from all sections of the population in

country-wide. Their economies of scale mean that micro- and small-scale producers

find it hard to compete in terms of price, and therefore develop alternative, smaller

niche markets. These include biscuits, cakes (especially celebration cakes in Uganda),

doughnuts, and flour confectionery products. Although the demand for these is

restricted to wealthy urban populations, expatriates and tourists (including cafes

and some hotels), it is a highly profitable subsector and there is considerable

competition. Competition from imported products is found only with biscuits, as

other baked products have a short shelf-life.



6.3 Distribution Channels and Marketing

There are different types of distribution systems for processed foods, depending

largely on the scale of operation of the processor. At a large or medium scale of

operation in Uganda, brewers, distillers, millers, bakers and oil processors have their

own transport for delivery to depots in urban centres, and sell products from these

to wholesalers, retailers, market sellers and street vendors. Wholesalers distribute

the products to shops in rural areas, and market stallholders buy from these shops.

Some street vendors, market sellers and kiosk owners in urban areas purchase

products from retailers.

Small- and micro-scale urban producers may sell directly from their production unit

to consumers, market sellers or kiosk vendors, or they may arrange periodic

deliveries to a relatively small group of retailers with whom they have established

links.

In general, production activities are adjusted to the size of the local market, and

many producers are unwilling to sell to wholesalers as this would reduce their

profits. There is also a lack of knowledge and trust between producers and

wholesalers which further limits expansion. The market share of individual

producers may be falling as a result of competition from other producers, and due to

competition from imports for some products. This reduces their production and

serves as a disincentive for investment or expansion of the enterprises.

Marketing in Uganda is done mainly by newspaper advertisements and posters.

Advertising is frequently perceived negatively by some producers and consumers,

the implication being that products are of lower quality if they need to be advertised.

In Uganda there are no clear policies to promote internal trade or export of

processed foods. There is no marketing assistance or market information available to

producers.

The main constraints to improved marketing are:

Finance - poor in businesses, little disposable income to spend on advertising

(a major constraint especially for new products).

Attitude - little market orientation among entrepreneurs, who do not see the

value of active marketing, poor relationships with customers and retailers, no

feedback, demand-led distributor mentality.

Knowledge and skills - information on consumer requirements is not sought,

information is not sought from retailers, lack of specialist marketing skills to

design and organize marketing campaigns.



Infrastructure and materials - poor storage, refrigeration and distribution

systems, problems of acquiring attractive packaging.

Market trends in Uganda include increased demand for flour, bakery products, soft

drinks, dairy products, fruit juices, cooking oils, snack foods and convenience foods

(including supplies to restaurants and fast-food outlets in Kampala), and bottled

water.

6.4 Potential for Improved Product Quality and Diversification

In the case of staple foods, such as cooking oil and cereal flours, there are few

opportunities for diversification. In many other cases producers have the

opportunity for diversification that depends, to a large extent, on the existence of

well-off urban consumers and their taste for processed foods. The expanding

economy in Uganda has generated an increasingly large number of such consumers,

and there are already many examples of different types of snack foods, dairy, fruit

and bakery products. It is likely that this trend will continue.

Problems of inadequate product quality are found in all subsectors, and there is

considerable room for improvement through training and technical support in

appropriate quality assurance for small-scale processors.



7.0 MARKETING PLAN & STRATEGIES

7.1 Overview

Crane Bakery Limited is a bakery that produces and sells quality bread and other

pastries. We want to target the high-end and middle-end segments of the market

(since they have more disposable cash to purchase bakery products), maintain the

quality of our products but also keep the prices reasonable. Our strategy will

therefore focus on serving the general populace and a niche market with quality

goods. Our primary aim is to become the best bakery in Bulenga town and the

neighbouring south-western fringes of Kampala. We will strive to make our food

something that our customers enjoy, but supply an even greater experience by

incorporating technology. We are determined to become part of the community –an

establishment that becomes as much of the community as a church or local grocery

store. To achieve these goals we will provide the following:

Quality baked goods for everyone to enjoy at a fair price

Friendly, neighbourhood feel atmosphere

Special diet menus in relation to the advice of doctors and other healthcare

providers.

a. Meeting Customer Needs

Our customers require fresh quality coffee and pastry on the go. Our system for

establishing customer needs is based on the product offering of our competitors. We

will maintain honesty and request input. We will allow customers to take monthly

surveys in exchange for discounts on doughnuts and pastries. This will give insights

into what customers desire and create customer loyalty.

b. Quality vs. Quantity

Ugandans on the go tend to compromise with respect to quality unless it has to do

with top quality bread and pastry products. Hot and fresh sells. Therefore quality is

everything. Baking staff will be trained regarding quality preparation, food service,

storage and holding equipment with a view of producing a superiorly prepared

fresh product consumers will come back for time and again.

c. How We Will Sell

Word of mouth advertising via quality output will be our strongest selling point.

Advertising in local papers and glossy local magazines. Occasional community

donations and product gifts to active community figures. We will take the product to

the consumers and let them sample the product to help create brand awareness. We

will establish high visibility by means of location along with drawing local public

support via samples, mailed coupons and menu distribution.



d. Ability to Penetrate Market

Our 8 years‘ experience in baked goods preparation and quick delivery along with a

fine reputation for high quality products will answer the demand for a fast, fresh,

and tasty bread and pastry products. Our ability to deliver solutions to meet special

and unique cake design requests will enable us to penetrate new market segments

while holding niche positions.

7.2 Pricing

Our prices will be slightly higher than those of our local competitors, mainly for the

reason that we strive for quality in our products. This goes hand-in-hand with the

market that we plan to target that of the upper middle class, and our higher income

consumers. On the actually cost of the particular products, they will vary according

to each product. Overtime our prices may fluctuate along with the rises and falls of

the raw resources as well as trying to remain close with our competitors and not

allow the gap between quality and price become too large.

7.3 Sales/Sales Strategy

Crane Bakery Limited's products will be truly unique in the marketplace. The look,

feel and taste of its breads, when compared with the competition, will underscore

their quality and value. Crane Bakery Limited will also actively encourage customer

satisfaction. Our product line will react to the needs and desires of the customer,

thereby encouraging repeat and word-of-mouth sales. As a small hands-on facility

Crane Bakery Limited will have the freedom to react quickly and accurately to

changes in the market. Due to its uniqueness and convenient location, Crane Bakery

Limited will become a destination for food lovers.

As described above, it is also our plan to sell first to retail stores throughout

Kampala and the outlying peri-urban areas in Wakiso District, focusing on high and

middle portions of the market and then expand into other suburbs. Because our

product is new, consumers will have to be given an opportunity to taste the product

before they are expected to buy, especially since it will be priced approximately 15%

over store brands. We will focus first on building a distribution network comprising

of 35 select stores, providing them personal service and delivery, obtaining feedback

from store management as we go, and perhaps most importantly, doing in-store

demonstrations of our product where consumers will have an opportunity to taste it.

We will monitor the results of in-store demonstrations by measuring sales trends

between store demonstrations to know if consumers are seeking out our product

rather than just buying it when they get a taste. When turnover is adequately high



between demonstrations in the first 35 stores we will then begin to add additional

stores to the base until we reach our ultimate goal of 100 stores.

Our budget for advertising is limited but we will take advantage of low cost in-store

literature and newsletters. We will also create signage for the bread rack to draw

attention to the product and outline its benefits.

Food service business will be created by marketing direct to caterers, restaurants,

delis and others who will use our product as part of their ready-to-eat offering. This

will be done through personal marketing efforts and by appearing at special niche

trade shows where these users shop.

Our Strategy also focuses on building a loyal customer base by providing good

customer experience. With the addition of the café bar and lunch menu within the

first six months of opening the bakery, we hope to have customers make the bakery

their one stop destination for breakfast or lunch. We hope to advertise the bakery in

local newspapers and radio stations. We will also consider the distribution of

flyers/Leaflets in the neighbourhood. We will also employ sales

agents/representatives on a performance-related payment scheme to continuously

find new customers by visiting Schools, Prisons, Hotels and Restaurants to inform

them of our presence and products. Our account managers will also be responsible

for increasing sales, by reaching out to current customers, and making sure their

needs are met.

We expect to have a fully functioning web-site by 2016. At that time we will use

social media and viral marketing to get word out, hopefully with endorsements from

the medical community.

Management also intends to plough back all profits at the initial stages into the

business to help increase its capital base for a sustained growth and business

expansion.

7.4 Sales Forecast

The proposed bakery will be offering a large variety of quality products at

competitive prices. The product line will be including different types of bread,dry

cakes, dry cakes, cookies, doughnuts, buns, biscuits, rolls, etc. As the production will

depend on the sales potential, the sales are estimated depending upon the industry

norms.



As the table below shows, Crane Bakery Limited anticipates sales of about UShs780

million in the first year (PY 2), UShs944 million in the second year (PY 3),

UShs1.142 billion in the third year (PY 4), and UShs1.382 billionin the fourth year

(PY 5) of the plan.

Sales are expected to rise 10% annually during the five-year business plan. Direct

costs for the items are a low percentage of the total prices, and refer to the costs of

ingredients and packaging given to customers.

Total sales incorporated for profit estimates include 5% safety margins. The detail of

expected annual sales of different items is given in the table below:

Table 6: Annual Sales (In UShs)

Project Year PY1 PY2 PY3 PY4

Sales (UShs)

Cakes & pastries 117,000,000 141,570,000 171,299,700 207,272,637

Breads & doughnuts 624,000,000 755,040,000 913,598,400 1,105,454,064

Cookies & buns 23,400,000 28,314,000 34,259,940 41,454,527

Biscuits & flat breads 15,600,000 18,876,000 22,839,960 27,636,352

Total Sales 780,000,000 943,800,000 1,141,998,000 1,381,817,580

PY1 PY2 PY3 PY4

Direct Cost of Sales (UShs)

Cakes & pastries 36,270,000 43,886,700 53,102,907 64,254,517

Breads & doughnuts 193,440,000 234,062,400 283,215,504 342,690,760

Cookies & buns 7,254,000 8,777,340 10,620,581 12,850,903

Biscuits & flat breads 4,836,000 5,851,560 7,080,388 8,567,269

Total Direct Cost of Sales 241,800,000 292,578,000 354,019,380 428,363,450

7.5 Distribution

Crane Bakery Limited products will be distributed through markets, restaurants,

offices, small independent shops, cafes, schools and to major catering organizations

lying in our designated distribution area. Select supermarkets will be our starting

point, as they provide valuable food traffic and awareness of our product.

Restaurants and sandwich shops (take-aways) will provide additional distribution

locations, and also to increase our brand awareness. For distribution to catering

organizations, we will utilize the couriers to some extent, but will also send the

bread directly with the deliveries for Crane Bakery Limited. Our costs will be

around UShs. 600 per loaf and UShs.150 per roll.



Our second target for distribution is directly to people in their homes. By getting

people to sign up as Bread Customers, we obtain their address, as well as all

necessary contact information. By building a custom database, we will be able to

efficiently plan daily deliveries based on neighborhood.

Distribution directly to the consumer will be done daily by the couriers who will

receive their route and transportation options. We aim to have a large share of our

customers within walking distance of the bakery but have bikes available for longer

distances. In some cases, the courier may use a car, or the company delivery van.

Each courier will be able to carry up to 50 loaves per trip, and will be expected to

make three trips per day. With customers receiving an average of 1 loaf every 6 days,

we can service 900 Bread Customers per courier. The courier would be receiving

around UShs. 2,000 per loaf delivered.

Thethird distribution strategy for our products would be through our store-front

shop. Hopefully, in the future we will be able to offer catering services, but during

start up we will work out of our own facilities. Customers will be able to walk in and

buy our baked goods, as well as set and/or send orders by telephone, online, or

through a direct in-store appointment. We will set up a small sitting area to be used

by our customers who will enjoy a convenient coffee& tea drink, and the general

atmosphere of the store. Because the majority of our products will be baked fresh

daily, we will provide for the expected customer estimate of 200-500 customers per

day and specialty cakes will be made after an order is placed. At the end of the day,

we will move all of our not purchased goods into an area for ―Day Old‖ bread where

people will be able to buy the not fresh bread for half the price of what we would

normally sell it for. Customers who target this as their opportunity to purchase from

us may not be given the advantage of our variety but will receive the opportunity for

lower priced goods. By the second day if the products are still not sold we plan to

deliver them to the charity organizations, or other not-for-profit organizations that

may benefit from our products.

Deliveries will be based on our customers‘ requirements and will be tailored to suit

the size and individual requirements of the establishments concerned. Some

customers require deliveries once or twice a week, whilst larger companies will

require a daily delivery service. Time of delivery will also be an important factor for

many of our customers and we will do our utmost to accommodate their

requirements as much as we possibly can.



7.6 Promotion

We will start with excellent products at a competitive price, but then make our

service exceptional by delivering directly to our customer at no extra cost. In order

to get visibility of our offerings, we will use a variety of advertising channels and

promotions.

Printed advertisements, which will run during the opening week, will highlight

bread as an everyday product, to be purchased fresh on a weekly or daily basis.

More printed advertisements will run during the Easter and Christmas seasons.

Costs for these advertisements will be approximately UShs. 600,000 each.

Marketing Materials

Marketing materials for Crane Bakery Limited will include the following items:

Business cards geared towards customer referrals

General business cards

Tri-fold brochure/menu

Business referral program brochure

Crane Bakery Limited‟s website

Print advertisements in newspapers such as the New Vision and the Daily

Monitor

Cable TV advertisements

FM Radio station advertisements

Poster ads on mass transit

We will incorporate business cards and brochures that provide our menu and

product selection, a window display that will be a direct aesthetic appeal, and in the

beginning use advertisements in the newspaper to introduce our new business. We

hope that our idea to sell ―Day Old‖ bread for half price will promote our products,

although we want to be known as a bakery that sells our fresh baked bread and

pastries. If allowed we may also try to go to other local coffee shops and small

business to post flyers to promote the Crane Bakery Limited bakery. We also expect

that our valued community involvement will also work as a promotion by

improving the public view of our business and advertising to the individuals

involved with the organizations we work with.

In order to promote our products in the markets, we will also provide sample bread,

and offer demos to engage with customers. We will also participate in food events

throughout the city to sample bread and educate our customers.



7.7 Lead Generation Plan

Leads for Crane Bakery Limited will be generated through the following means:

Customer referrals to other customers via a business card promotion at

checkout

Business referrals from area businesses via a six month introductory

promotion marketed directly to these companies

Print advertising in the local English dailies

Alternative advertising through posters on Metro buses which serve Kampala

and up-country towns

Referrals

Customer Referrals:

Crane Bakery Limited will have business cards available at the counter which offer

a free baked good with any purchase on the back. The checkout clerk will encourage

the customer to pass this business card on to someone else so that they can redeem it

for the free baked good. Some may choose to use it for themselves, but it is hoped

that many will give it to someone else, as they will be told that is the purpose of the

card.

Business Referrals:

Crane Bakery Limited will seek referrals from the Kampala and Wakiso district area

businesses who share its environmentally-conscious mission. These include "green"

firms and environmental consultants. Crane Bakery Limited will offer a six month

promotion to individuals from these firms (when they show ID) which grants them

Crane Bakery Limited Club deals without having to sign up for the Club. We hope

that these firms will pass on the information about this deal to their employees, as it

is in keeping with their own mission and an additional perk they can offer to their

staff.

7.8 Critical Numbers

Critical numbers will be tracked by the business software, including the point-of-

sales system, which interfaces directly with a CRM system that can track loyalty club

members (as their information is entered directly into the system), testimonials, and

PR mentions (found via Google alerts and scanning newspapers). Marketing

expenses are tracked by the accounting software which interfaces with the POS

software to provide a full financial picture of the business.



7.9 Competitive Analysis/Competitive Edge

Crane Bakery Limited competes in the Food Industry which is highly saturated with

a fairly competitive landscape. In addition to competing with other bakeries, it

competes with all restaurants, delis and supermarkets for a share of its bread and

baked products.

There are no other retail bakeries in Bulenga town or the surrounding towns to be in

direct competition with our business, however baked goods items produced and

sold by the major Kampala-based bakeries [e.g. Associated Bakeries &

Confectionery, NtakeBakery, Hot Loaf Bakery, Bbrood Bakery (formerly Nandos)

and Tuwereza Bakery in Nateete] are regularly distributed and sold in this small

town. These big four will be Crane Bakery Limited‟s greatest competitors.

Fortunately, the strengths of these four bakeries are all the same, and typical of

commercial food product businesses, allowing our bakery to more easily stand out.

Companies are characterized by three major traits: price, quality, and service.

Associated Bakeries & Confectionery, Ntake Bakery, Hot Loaf Bakery, Bbrood

Bakery and Tuwereza Bakery in Nateete all focus on low prices and some service. In

contrast, our bakery would value higher quality baked goods and personal service.

Our prices may be slightly higher, but our products would be from better quality of

ingredients and would still be very reasonable priced for the industry.

The major weakness our bakery has when stacked against these four bakeries and

supermarkets is convenience. Our products would be fresher and of higher quality,

thus superior to the goods of these mass produced ‗bakeries‘, but the supermarkets

have the advantage that the shoppers will already be entering the stores for their

necessary groceries. Buying baked goods in bulk then would seem to be more

convenient than at a different location.

However, as mentioned in the industry product development, pastries are mostly

not bought in the same, regulated manner as groceries, but are bought on a whim. So

long as a customer is not already grocery shopping when he or she craves our

competing products, it would be just as convenient to enter a bakery, if not more,

than a grocery store. The possible customer would have to walk farther in a grocery

to buy baked goods than by simply stepping into our bakery.



8.0 TECHNOLOGY AND PROCESSES

The proposed project will be using a mix of imported and local machinery. Local

machinery and installations are quite competitive in price in comparison to the

foreign equipment and installations. Some of the bakery equipment that will be

imported from Kenya include: commercial oven, dough mixer, bread slicers, prover

and deep fryer.

8.1 Machinery Requirement

Table 7: Machinery Details

Sr. No. Particulars No. of

Items

Cost/Item

(UShs)

Amount

(UShs)

1 Flour Sifter Local 1 1,500,000 1,500,000

2 Spiral Dough Mixer Local 1 2,400,000 2,400,000

3 Planetary Dough Mixer Local 3 1,500,000 4,500,000

4 Commercial Oven Imported 1 5,400,000 5,400,000

5 Moulder Imported 1 3,600,000 3,600,000

6 Dyes Local 250 2,500 625,000

7 Sheeter Imported 1 10,000,000 10,000,000

8 Proofer Imported 1 3,000,000 3,000,000

9 Burner Local 2 400,000 800,000

10 Deep freezers Local 2 600,000 1,200,000

11 Deep Fryer Local 1 1,500,000 1,500,000

12 Packing machine Local 2 800,000 1,600,000

13 Cold storage equipment Local 1 8,400,000 8,400,000

14 Bread Slicer Local 1 1,500,000 1,500,000

15 Fixed/Rolling racks Local 10 300,000 3,000,000

16 Generators Local 3 6,000,000 6,000,000

17 Motors/isolators/starters Imported n/a 1,500,000 1,500,000

18 Trays Local 350 3,000 1,050,000

19

Hand tools and small items

of equipment

Local

1,500,000 1,500,000

20 Miscellaneous requirements Local n/a 2,000,000 2,000,000

21 Total 633 61,075,000

Depreciation Rate (%age) 10% 6,107,500

The depreciation is charged at 10% p.a. on written down value.



Table 8: Miscellaneous Requirements

Sr. No. Supplies Unit No. of

Items

Cost/Item

(UShs)

Amount

(UShs)

1 Paper Bags piece 4,000 150 600,000

2 Plastic Bags piece 2,000 60 120,000

3 Register Tape case 1 60,000 60,000

4 Bleach 6 3,000 18,000

5 Handsoap Cartridge 4 17,250 69,000

6 Floorsoap packet 45 1,000 45,000

7 Kitchen Soap 5-qut 4 25,000 100,000

8 Plastic Film roll 2 60,000 120,000

9 Aluminum Foil roll 1 200,000 200,000

10 Stationery case 1 150,000 150,000

11 Purchase orders case 1 60,000 60,000

12 Receipt Pads case 1 60,000 60,000

13 File Folders case 1 60,000 60,000

14 Garbage Bags piece 310 800 248,000

15 Paper Cups piece 1,000 90 90,000

16 Total 2,000,000

8.2 Repair & Maintenance

Annual Repair & Maintenance of the plant and machinery is expected to be 1 % from

Year 1 – 4 and 1.5 % from Year 5 – 10 of the total machinery cost.

8.3 Erection & Installation

Erections and installation cost is assumed to be 10% of the total cost of machinery.

8.4 Furniture & Fixtures

Following furniture and fixtures will be required for factory and sales outlets:



Table 9: Details of Furniture and Fixtures

Sr. No. Particulars No. of

Shops

No. of

Items

Cost/Item

(UShs)

Amount

(UShs)

A. Factory

1 Tables for production 4 900,000 3,600,000

2 Chairs, Tables & other

furniture

3,600,000 3,600,000

3 Air conditioners 3 1,200,000 3,600,000

4 Vertical freezer 1 2,250,000 2,250,000

5 Elect. Installations &

others

1

1,500,000 1,500,000

6 Weighing scales 2 450,000 900,000

7 Microwave oven 1 360,000 360,000

8 Computers and

accessories

2,700,000 2,700,000

Total (A) 18,510,000

B. Front Shop

1 Air conditioners 1 2 1,200,000 2,400,000

2 Cabinet chiller 1 1 3,600,000 3,600,000

3 Vertical freezer 1 1 960,000 960,000

4 Designer cost 1 1 1,500,000 1,500,000

5 Interior designing cost 1 1 13,500,000 13,500,000

6 Weighing scales 1 1 450,000 450,000

7 Cash Counter/Register 1 1 750,000 750,000

8 Coffee Maker 1 1 750,000 750,000

9 Coffee Pots 1 6 15,000 90,000

10 Bar Code Equipment 1 1 6,660,000 6,660,000

11 Microwave oven 1 1 270,000 270,000

12 Sign board 1 1 900,000 900,000

13

Elect. Installations &

others

1 1 1,500,000 1,500,000

Total (B) 33,330,000

Total (A+B) 51,840,000

8.5 Motor Vehicles

Along with the above mentioned machinery and equipment the proposed business

will also be using one pick-up and one motorcycle. Each pick-up will be costing

around UShs 30,000,000 while the motorcycle will be acquired for UShs2,000,000.



Table 10: Vehicles

Sr. No. Name of Vehicle Qty Original Value (UShs)

Present Book Value

Amount (UShs)

1 Toyota Pick-up (2nd-hand) 1 30,000,000 30,000,000 30,000,000

2 Motor cycle 1 2,000,000 2,000,000 2,000,000

TOTAL 32,000,000

8.6 Raw Materials and Production Methods

All bakery products are made from basic ingredients, which have the following

functions:

Table 11: Summary of functions of main bakery ingredients

Ingredient Function

Flour Proteins in flour combine with water to form gluten, which

contributes to the crumb structure and retains gas in raised

bakery products. Starch in flour forms a paste that is set by heat

during baking. Changes to starch contribute to staling of bakery

products.

Yeast Produces gas (carbon dioxide) to raise dough, contributes to

dough conditioning and flavour.

Salt Helps control yeast fermentation, toughens dough by

strengthening gluten, extends dough development and mixing

time.

Sugar Fermented by yeast, sweetens dough, contributes to

development of goldenbrown colour of bakery products,

tenderises crumb and extends shelf life.

Shortening (fat) Assists gas expansion during fermentation, tenderises crust,

extends shelf-life.

Milk Improves the flavour and texture of products

Egg Gives strength and flavour to products

Baking powder Produces carbon dioxide to raise dough

Pre-mixes Reduce dough preparation time; ensure even mixing of minor

ingredients and help to avoid operator errors.

These are supplemented with a wide range of other ingredients that give special

flavours, colours or textures to products.



Bread, buns, pizza bases and doughnuts are produced from hard wheat flour6 and

fermented using yeast. Biscuits, pastries, scones, cakes and flan/pie casings are

made from soft wheat flour using baking powder as a raising agent and flat breads

are made from the same flour without a raising agent. Each of these products can be

made using different ingredients, fillings, shapes, colours, flavours and sizes. The

different types of bakery products are displayed in Figure 2.

Figure 2: Types of bakery products

6Wheat flours contain a protein (gluten) that creates the characteristic texture of bakery products.

They are either ‗strong‘ flours with a higher gluten content (made from ‗hard‘ wheat) or ‗weak‘ flours with less gluten (made from ‗soft‘ wheat).

Hard wheat flour Soft wheat flour Wheat/other flours

Dough Dough Batter Dough

Fermentation

Doughnuts Pizza bases Bread and

buns

Raising agent

Biscuits Fan/Pie

casings

Pastries Scones Cakes Flat breads



9.0 FACTORY LAYOUT AND SERVICES

9.1 Land/Covered Area and Construction Cost

The proposed bread and pastry factory will be within the 1 acre plot of land whereas

the shop areas will be 900 sq. ft for each outlet. A double story building will be built

in such a plan that the bread, biscuits and dry cake rooms are proposed to be on first

floor. The details of the building and civil works are as below:

Table 12: Land & Covered Area requirement

Sr. No. Particulars Area

Sq. feet

Cost/Sq

Feet

Present

Book Value

Amount

(UShs)

Factory

1 Sweets production room 600 24,000 14,400,000 14,400,000

2 Fresh cream cake prod room 400 24,000 9,600,000 9,600,000

3 Dry cake production room 400 24,000 9,600,000 9,600,000

4 Biscuits production room 400 24,000 9,600,000 9,600,000

5 Snacks production room 600 24,000 14,400,000 14,400,000

6 Frying & Oven room 1,200 24,000 28,800,000 28,800,000

7 Dispatch & warehouse 1,200 24,000 28,800,000 28,800,000

8 Raw material/spares store 1,500 24,000 36,000,000 36,000,000

9 Administration block 200 30,000 6,000,000 6,000,000

6,500 157,200,000 157,200,000

Area required 1,500

Note: Double story building is recommended, sweets, fresh cream and dry cake

rooms are proposed to be on first floor

9.2 Factory Layout Plan

FLOW PATTERN

Depicted in Figure 3 is a suggested flow pattern ideal for the proposed bake-house.

The initial requirement is to place the equipment in such a format so that from the

inwards ingredients to the finished foods the distances between each operation are

kept to a minimum and staffs are not continually crossing the bake-house.

BAKEHOUSE PLANS

The ideal bake-house plan would encompass the following:

1. Flow pattern through the bakery.

2. Oven position



i. placed for maximum customer appeal

ii. suitable space for oven vent and extraction hood

iii. handy position for electrical supply

3. Inwards goods storage area should have good access.

4. Goods are finished handy for transfer to the display area or to the dispatch

area.

5. Wash up area – this should be placed where both hot and cold water as

well as drainage can be readily installed. We suggest that as far as

possible this area be screened from public view.

6. Weigh up area – ideally this area should be adjacent to both the

ingredients store and the wash up area.

7. Mixing area – adjacent to the weigh up area is ideal as well as remaining

handy to the wash up area. This is another area that can become very

messy during the days operations so it possible should be screened from

public view.

8. Allow some space for future business expansion.

EQUIPMENT

Before finalizing any layout plan a list of equipment required for the operation

should be drawn up. Allowance should also be made for projected equipment

purchases at a later date.

WORK BENCHES

Sufficient work bench space is essential for a good flow pattern in the bake-house.

Bench space has to be set aside as follows:

1. Weigh up area

2. Mixing area

3. Dough resting, dividing and moulding area

4. Batter scaling area

5. Removal from the oven or tipping out area

6. Finishing bench space

These benches should be positioned as conveniently as possible for each area and in

some cases can serve more than one function.

Generally preferred for both hygiene and durability are stainless steel topped

benches. The only disadvantage is that they are very cold and care must be taken

during winter that doughs resting on the bench do not become chilled.



Alternate bench tops include wood, formica or heavy duty linoleum. Wooden

benches are excellent for dividing and moulding yeast doughs and do not damage

easily with hot baking trays or steel scrapers. However they are sometimes

unacceptable because of hygiene requirements. Both formica and linoleum are

subject to damage during dough dividing with metal scrapers or hot tins and trays

placed on bench tops straight from the oven.

Under the benches is a very valuable area for storage of ingredients or finished

goods. If ingredient storage space is required shelving can be incorporated.

Alternatively heavy duty drawers can be installed for ingredient storage. Bottom

drawers with heavy duty roller castors can hold 25kg flour, hi ratio, sugar, salt, etc.

The middle and top drawers can be made smaller to hold ingredients used in smaller

quantities. Cupboard doors will keep the storage area clean. For finished goods we

suggest that racks for oven trays or cooling wires be incorporated.

Cleaning of the bake-house is facilitated if the benches are mobile on heavy duty

castors, including benches normally situated against the walls as this will made the

job so much easier.

STORAGE AREAS

Sufficient storage areas for both ingredients and finished articles are essential. The

bulk line of ingredients such as 25kg bags or 20kg cartons are generally best stored

on a pallet off the floor in the main storage area. If there is insufficient space some of

these lines can be stored on shelves under the work benches.

Smaller ingredients are more conveniently stored in cupboards or shelves above the

work or finishing benches. Finished articles can be stored in mobile tray racks in the

bake-house or in storage racks under the benches. Storage racks under the finishing

bench are particularly suitable.

9.3 Utilities Requirement

Main utilities would be gas, power and water. Distribution transformer station,

loading capacity averaging 10 KW, 3-phase industrial meter is estimated to fulfill the

requirement of power. B-1 category is advisable for electric consumption. Water

supply would be through the Kampala local NWSC network. Utility costs will be

running at approximately US$ 725 (UShs 2.175 million)/month or UShs 26

million/annum.

The layout of the proposed bakery is shown in Figure 3 below.



Figure 3: Layout of proposed bakery

Prover

Oven

Ingredient

weighing

Ingredient

store

Packaging

Retail display and

sales

Office/

Quality

testing

Toilet/

Hand-

washing

Storage racks

Cooling racks

Equipment washing

Dough

preparation

area

Flour storage

Moulder

Mixer Cash register

Sitting/café area



10.0 OPERATIONS PLAN

Crane Bakery Limited is primarily a baking company, and the crux of the operation

is production of bread. The other two critical components are sales and distribution.

To reach the scale we intend, it will become necessary to include account

management, systems development, administrative, and operational management.

10.1 Production

Production of sellable breads is projected to begin within the first six months of

project finance acquisition. Raw ingredients will be ordered for twice a month

delivery from the leading suppliers of bread and confectionery in Kampala, at which

time a two week production schedule will be drawn up by Ronald Byamukama, the

proprietor/baker. Ingredients will be stored in a dry storage area and in a walk in

cooler (already on the proposed premises).

The bakery store-front will open at 9:00 AM and close at 6:00 PM Monday through

Friday. Saturday hours will be 9:00 AM to 4:00 PM for sales only. Part time

employees will work the counter and assist with store maintenance during peak

hours while the baker is baking. A beverage cooler and coffee machine will

encourage convenience sales at the register.

Crane Bakery Limited will economize on bookkeeping costs by handling its payroll

duties in house. Year-end bookkeeping will be handled by a professional accountant.

The company will use the QuickBooks small business accounting software because

of its ease and convenience of use in keeping finances and bookkeeping all in one

place.

10.2 Inventory Procurement

In the prevailing market dynamics the individual bakery product retailers are

buying their goods from two sources, one is through the delivery vans of the bakery

product producers/distributors who visit the outlet after a certain specified time.

The other mode of purchasing is done through the traditional wholesale markets like

supermarkets and hypermarkets where the retailers purchase their depleted stocks.

It is worth mentioning that the delivery vans of the bakery product

producers/distributors do not visit the micro-level bread and pastry retailers due to

the high cost of distribution attached to the transactions.



10.3 Product Mix Offered

Managing the bakery products merchandising mix involves decision about what

products to carry, styles, models, colors, sizes, and price ranges, and how many units

of each product to have in inventory. Many customers select one store over another

because of the variety or assortments of bakery products available.

The decision about size and content of any bakery products distribution retail store

is largely determined by the space available. Adequate space to display an

assortment of bakery products is important for customers‘ comfort. Thus, an

important decision involves the range of bakery products that are essential to satisfy

the customers‘ needs. A small number of bakery products will probably account for

a large amount of sales volume. These bakery products deserve special attention and

need to be stocked. Being out of preferred and highly demanded goods creates a

negative customer impression of the retailer.

In addition to a wide assortment of bakery products on hand, retailers must also

have stock depth, that is, sufficient quantity of each bakery product on hand to

support sales.

10.4 Pricing Strategies

Pricing decisions are a major challenge for bakery product retail businesses. Price is

a major factor in dealing with competition from other bakery product retailers.

Many lines of merchandise have what is accepted as a market-level price. It is

common to find prices for normal general bakery product items to be based on a

standard markup percentage that is similar for all competitors. Supermarkets often

adhere to almost identical prices so that competitors usually do not have a price

advantage.

A bakery products retailer can adopt both a high pricing strategy or a low pricing

strategy. In some cases a bread & pastry store may offer something that permits it to

set its prices higher than its competitors do.

Pricing below market levels is used by bakery product retailers who have decided to

focus on lower expenses, less service, and less ambience. Such a bakery product

retail store attracts customers who are extremely price-conscious but tend to

purchase their entire months grocery from these types of bakery product retail

stores.



10.5 Bar Code Facility

All products can be entered into a computerized database using specific inventory

software. Bar codes will be issued at each product sku. Two bar code readers and

two computers linked together will be used. Once the data has been properly

entered into the database, then every product must carry a sticker with a barcode.

This will increase the performance of cash counter and organize the inventory in a

better and proper form.

The cost of setting up the barcode reading system is estimated at US$ 2,220 (UShs.

6,660,000). This is an additional option but carries with it great benefits. The first and

foremost benefit is that it tremendously enhances the management‘s ability to track

the depleted stocks so that purchase orders can be placed with the suppliers timely

in an effective and efficient manner. Secondly, this facility also enables the

management to trace inventory pilferages. All in all this bar code facility enables the

management to keep a complete overview of the activities of the business.

Table 13: Cost of Bar Code System

Bar Code System Cost in USD

Customized Software 500

Two Computers 450

Server Machine 470

Barcode Reader 300

Data Entry 500

Total Cost 2,220

10.6 Distributor Analysis

Distributors play a vital role in transferring the product from the manufacturer to

the retailer and finally to the end-consumer thus maintaining an integral part in the

value chain delivery.

Foreign companies considering marketing their products in Uganda may choose to

use the services of local distributors or may develop their own distribution chain.

Distributors in urban areas generally deal on an exclusive basis. Some market

consultants estimate that the services of 100-300 distributors would be required for

nationwide coverage. One very large multinational company (Coca Cola) selling

consumer products employs 500 distributors to reach a significant portion of

Uganda‘s small towns and villages.

As a matter of policy, most companies do not provide credit to distributors and

distributors in turn generally sell on a strictly cash basis to retailers. Smaller



distributors often do provide credit to retailers, but the volume of such transaction is

relatively insignificant.

It is ideal to get the required merchandise from various distributors. It is also

possible to have different payments arrangement with different distributors, such as,

strictly cash, credit, and bill-to-bill.

10.7 Record Keeping

There are four sets of records that should be kept by the owner of a small cereal

processing unit (Table 14). Keeping records is an investment of time and money and

this must be related to the scale and profitability of the business (the benefits must

outweigh the costs.

This means that the processor must understand why the information is collected and

what it can be used for. Processors should also put in place a system of checks to

ensure that one person does not have responsibility for a whole area of record

keeping. For example the person who keeps records of ingredient purchases should

be different to the person who records levels of stocks and manages the storeroom.

Table 14: Types of records for a small-scale bakery business

Type of record Information to be Recorded

Production records Recipes (bakery)

Raw materials or ingredients received and suppliers‘ details

Wastage % at different stages of the process

Stock levels for each raw material and ingredient

Production volumes and measurements

Maintenance routines, details of spare parts kept in stock

Quality assurance

records

Target amounts of ingredients and any changes made to

recipe

Measurements made at process control points

Batch numbers and product code numbers

Cleaning standards and schedules

Sales records Names of customers and amounts sold to each

Weekly and monthly sales volumes

Financial records Income from sales

Costs of all process inputs

Staff records

Cash flow

Profit/loss

Tax records

Bank statements



10.8 Productivity Improvement

Productivity can be improved by:

Improved efficiency (e.g. lowering operating costs, savings in idle machine

time and reducing waste)

Better procedures for buying materials

Improved decision making and communication

Higher performance by minimizing equipment breakdowns, reducing other

causes of lost time

Improved organization, better staff morale and co-operation.

Improved process efficiency can be achieved by increasing the output of a

processing plant without additional investment. To measure this, an entrepreneur

must calculate how much money it costs to produce one unit. If more units are

produced at the same cost or within the same time frame without affecting quality,

then productivity is increased. Productivity can also be improved by changing the

product design or layout of the production facilities, changing raw materials

suppliers or work organization.

Improving efficiency in a process involves reducing wastage of time, materials and

space, or unnecessary movement of foods, staff or equipment. Motivated staff will

go a long way to increasing efficiency by reducing wastage. The layout of a

production unit is another factor that can affect efficiency. When deciding where to

fix permanent machinery, care should be taken to plan the layout to allow for a flow

of product through the process, sufficient space to avoid congestion and to ensure

safe operations (Section 9.0, Figure 3).

Avoiding waste

Ideally all bakery products that have a short shelf-life should be sold on the day of

production when they are at their freshest. This maximizes the income and avoids

wastage which has a serious effect on profitability. However, unsold products are

still edible for a few days provided that they are stored correctly. They can be used

for a variety of other purposes to generate an income and avoid wastage.

Ideas that can both reduce energy consumption and save processors money include:

Switching off lights and electrical equipment when they are not being used

Solar water heating (e.g. for pre-heating process water or washing equipment)



Building in the flexibility to use alternative energy sources when installing

new bakery ovens so that they can use the most environmentally suitable

fuels

Use local briquette makers rather than using fuel-wood

Use local suppliers of raw materials that can be delivered by bicycle, rather

than using a vehicle to collect them. Similarly, make as few journeys as

possible to deliver products to wholesalers or retailers.

10.9 Quality Assurance, Legislation and Regulation

10.9.1 Quality Assurance

The main reason for low quality baked products are faults with the processing room,

the process, ingredients, operators or distribution methods. A Quality Assurance

(QA) programme should therefore comprise:

Ingredient inspection

Process control

Operator training

Assessing products

Cleaning schedules

Control over packaging and distribution.

Baked products are rarely involved in food poisoning incidents because the heat of

the baking process kills most micro-organisms or reduces their numbers to safe

levels. However, products containing meat, fish or vegetables have a greater risk of

food poisoning if they are not handled and stored correctly. The time that these

products spend in the temperature danger zone (10-450C) during processing must be

minimized by efficient handling and effective cooling. Refrigerators for cakes with

cream fillings and other cream goods must be properly maintained and operated at

the correct temperature. Pies and samosas must either be chilled in a refrigerator or

stored in a hot display cabinet (above 630C).

10.9.2 Legislation and Regulation

There are various laws governing the setting up, registration and operation of

bakery in Uganda. Failure to follow the law may lead to punishment by the

authorities or closure of the business. Bakers should check the local laws with the

Uganda National Bureau of Standards (UNBS). In summary the registration of a mill

or bakery involves the following:



Registration of the enterprise with the Ministry of Trade and Industry

Obtaining a Certificate of Share Capital (for limited companies), or a

Certificate of

Incorporation (for corporate companies)

Obtaining an Occupational Certificate from Local Authority, or the Planning

Authority in the Land Ministry

Obtaining a Health Permit or Licence from the Local Authority or Ministry of

Health to allow the premises to be used for food production

Obtaining a Manufacturing Licence, issued by the Local Authority or Ministry

of Health

Obtaining Medical Certificates from the Health Authority to certify that

workers are fit to handle food

Registration with the Revenue Office or Tax Office

Food Regulation and Standards

In Uganda there are both general regulations that apply to all foods and also

standards thatare specific to a particular types of food. UNBS should be consulted on

details of the general regulations concerning:

Labelling

Presentation and advertisements

Weights and measures and

Hygiene practices during processing and handling

Food Fortification Regulations and Standards

Bakers should contact the Ministry of Health or the Ministry of Agriculture, Animal

Industries and Fisheries for details of laws relating to public health, food safety and

hygiene and sanitation in their premises. Parliament is considering passage of a

Food Safety Bill or Law that will complement the Food Safety Strategic Plan and

have broad-ranging impacts on all participations in the food chain. Small-scale

operators must remain in contact with the relevant enforcement agencies to remain

in compliance with the Food Safety Bill or Law.



11.0 RISKS AND MITIGANTS

The development of our products and customer network involve several potential

risks:

1. Lack of funding. As we begin to hire more personnel, and increase our costs,

it will be very necessary to monitor funds and progress carefully. During the

first two years of operation, we plan to operate on an extremely limited

budget, and could continue to do so for the subsequent 2 – 3 years of

operation; the downfall would be that our plans would progress at a far

slower pace. We however expect to receive significant customer signup and

payments, such that approach the point of being more financially solvent.

2. Sales could grow slower than expected. The business is structured as a

variable cost business so the investment does not have to outpace the revenue

stream. A kitchen will not be built until the order rate is firmly in place and

its capacity can be guaranteed to be 65% used.

3. Increased competition: some of the large bakeries which have focused on

selling to the lower end of the market may try to enter the high-end market.

More multigrain products will certainly become available on the market but

we expect to benefit from being the first and having established a known

brand. Additionally, taste is the predominant factor in food purchases and

blind consumer taste tests which we have run have rated our product #1.

4. Ingredient costs can vary seasonally. Sources are locked in and supply

contracts have been signed which guarantee prices for a 12-month period.

5. Increase in the price of wheat. Prices have recently gone up, and may

continue to do so. At about 20% of our overall costs, an increase in this

ingredient could have significant financial repercussions. All bakers are

subject to any increases that might happen in this commodity, so if prices do

go up, it also affects all of our competitors. This means that the price of bread

may be forced to rise, which would partially decrease demand. However, the

demand for bread is fairly inelastic, so the loss would not be as drastic.

Furthermore, we always have at our potential the possibility of switching to

conventional flour if absolutely necessary. The majority of our competitors

use conventional flour, and in doing so they save almost 50% on flour. We

prefer to use organic flour, but it is not a critical element of our sales or

marketing plan, and could be changed if absolutely necessary.



6. Energy prices may fluctuate. Fuel is an important part of the cost of the

distribution system. Driving will be minimized by the fact that our customers

will be within a 120 kilometer radius of the production facility. We will also

try to avoid supplying shops in remote locations or which are particularly

difficult to get to as a result of traffic patterns. Delivery days and routes will

be carefully planned. To the extent that fuel prices rise dramatically it is

generally expected that the increase can be partially passed on to retailers,

who then pass it on to consumers.

7. Bad debts. We expect to sell only to top-tier and well established customers.

We will monitor the 30-day terms closely to make sure payments are coming

in timely, and will not allow any customer to be greater than 10% of sales.



12.0 BAKERY ORGANIZATION AND MANAGEMENT PLAN

12.1 Description of Bakery Organization

The bakery section is one of the most important units in a catering establishment.

Nowadays the people are passionate to have fast food and ready-to-eat food items in

their diet. The bakery products are one of the most soled products among them. At

the same time bakers have been convinced to maintain the quality product and to

produce new variety of consumer choice. So it requires that the bakers should have

keen interest, so involvement and have through knowledge in the bakery industry.

The organization of a bakery will vary according to the size and type of the

establishment, customer expectation as well as the variety and size of menu and the

type of service given. Often the quality and quantity of production determine the

number of persons required to run the section. In a small bakery unit, there will be a

head chief, pastry man, confectioner, baker and one or more assistant to get the job

done.

12.2 Duties and Responsibilities

In a small bakery unit the head chef carries the full responsibilities of the

department. He should have a deep knowledge in bakery products, present market

trends, consumer needs, capable to control and coordinate the staff, to plan the

menus, and controls expenditure and waste to meet the profit percentage required.

The pastry man has to prepare hot and cold products, sweet sauces, pastries,

gateaux and cakes.

The confectioner needs great skill, experience and artistry. He has to prepare

marzipan, chocolate, pastillage, sugar work, decorative and display items, patties

flours, wedding, birthday, and celebration cakes and ice-cream varieties.

The baker makes all the yeast goods such as bread, rolls and buns, fancy products,

biscuits and cookies. Besides, he has to tend the ovens.

In private sectors, the production manager carries all the production of bakery

goods, quality and quantity control, prevention of wastage of ingredients and losses

due to bakery.

The assistant manager has to assist the production manager. The supervisor has to

supervise the production at the various stage of manufacturing. And he has to



prepare the daily production report for the production manager as well as mention

any other points which require attention in or around the plant. His main

responsibility is to check the weight of each product and maintain the same quality

throughout the production.

The purchase officer will receive the instructions from the managers of various

departments and will purchase the requirement for the production and maintenance

purpose. He has to check and maintain the stock register for receiving and issuing

the ingredients.

The sales manager takes the roll to market their products and create the interest

among the people to buy the products with the help of sales man and canvassers.

The maintenance manager maintains all the major equipments as well as the

electricity, water supply, lighting and ventilation, building repairs and vehicle in

correct condition.

12.3 Management Team

We recognize the importance of a good and experienced management; we have

therefore assembled a strong management team. The team is led by Ronald

Byamukama. Ronald comes to Crane Bakery Limited with over 8 years‘ experience

in management.

Ronald has a wealth of experience as he has a Bachelor‘s Degree in catering and

hotel management. He has previously worked with the catering section of Total

Uganda Limited.

Ronald Byamukama will act as the Chief Executive Officer and will manage and

assist in the baking. Ronald is organized, confident, and persistent. He has

experience in sales and customer service from his past employment experience.

Because of his hard working and very motivated personality he strives to maintain a

solid and stable working environment for himself and the employees under him.

With his previous design experience and powerful initiative, he hopes to put the

Crane Bakery Limited out there to the public and make it the best that it can be.

Diane Kemigisha will be the Chief Marketing Officer and also act as the primary

baker and cake designer for the business. Along with her abilities in baking and

design, Ms. Diane has a strong work ethic, great social skills, and a lot of training

and experience in leadership. She will be obtaining all licensing and certification

needed for the job.



Crane Bakery Limited is an exciting opportunity that combines fresh baked goods

and healthy option products addressing the recent need for these new products.

Demand for these products is expected to grow exponentially as medical doctors

and health professionals become more and more aware of food allergies Ugandans

are afflicted with. Profitability is forecasted to occur by month 12. Through a

combination of strong management team, a solid business model, and exciting

market demanded products will allow Crane Bakery Limited to quickly gain market

penetration and cash richness.

12.4 Training of Employees

Acquiring competent productive and forward looking employees is essential to

customer satisfaction and the growth and expansion of the company. To that end

Crane Bakery Limited will provide extensive training as well as growth incentives

with a view to grooming each employee to discover and reach his or her true

potential.

12.5 Personnel Payroll Plan

Once the bakery becomes established and the cash flow is steady, we would like to

hire one person for counter help and another assistant baker.

The table below illustrates the needs of current employees within three months of

operation.

Table 15: Personnel Payroll Plan (UShs)

Year 1 Year 2 Year 3

Ronald Byamukama Director 21,600,000 24,000,000 27,000,000

Diane Kemigisha Director 14,400,000 17,400,000 19,200,000

Chief Baker 9,600,000 10,800,000 12,000,000

Assistant Baker 8,160,000 9,000,000 10,200,000

Sales Executive 6,480,000 7,080,000 7,980,000

Driver 7,440,000 8,160,000 9,360,000

Security Guard 4,992,000 5,352,000 5,952,000

General Manager 10,320,000 11,220,000 12,600,000

Total People 8 8 8

Total Payroll 82,992,000 93,012,000 104,292,000



13.0 FINANCIAL ANALYSIS

There are two major types of bakeries: in-store supermarket and small retail. With

most revenue coming from in-store bakeries, our company would draw off these

sales. We would specifically target upper middle class to high-class citizens who are

willing to pay a little more for a higher quality product with more specialization and

service than that of major supermarkets.

Crane Bakery Limited expects to raise UShs 276 million of its own capital (in form

of equity assets and savings), raise UShs 207 million from a diversity of other

funding sources, and to borrow UShs 35 million guaranteed by the Microfinance

Support Centre as a five-year loan. These figures are derived from a calculation of

expected start-up costs (see Table 16).

Shown below is a pie chart that breaks down the percentage of sales per item. Cake,

bread, and doughnuts will provide the majority of our income. Their success is vital

to the success of the business. The predicted sales are expected to give us a steady

income needed to continue doing business. These figures are promising and

indicate that the loan could be paid off with the store debt free in 2 years. This is a

very average number for a small business like the one being proposed by Crane

Bakery Limited. Even with sales slightly off pace in this scenario, the company

would be debt free in three years.

After the loan is paid off, Crane Bakery Limited will build up its bank account.

Bakery equipment will need to be replaced and updated after around five years of

use. After replacing equipment that needed to be, our next major cost would be

opening a second location. The success of the bakery would determine if a second

location could be possible. Possible locations would be other strategic locations in

Kampala and Wakiso districts.

Figure 4: Percentage Share of Product Sales

36.39%

53.91%

7.28%2.43%

%age Share of Product Unit Sales

Cakes and pastries

Breads, buns & doughnuts

Cookies

Biscuits



13.1 Key Assumptions

Key assumptions include:

Revenue growth is dependent on unit growth and price increases. We expect

unit growth to be 10% per year, with 10% per year price increases.

Ingredient costs will increase 5% per year, in line with inflation.

Working capital will grow in line with sales. We will continue with 30-day

customer payment terms but recognize that 38-day average is realistic.

We start with one van for delivery and add one per year.

We have a 5-year micro-finance loan of UShs 35 million at an interest rate of

11% p.a.

Our tax rate continues at 30% of profit.

13.2 Introduction

For the purposes of this Business Plan we have assumed a medium-term loan of

UShs 35 million is made available to the Crane Bakery Limited enterprise.

The Business Plan tests the viability/profitability of the project against an interest

rate of 11.00%. Repayments will commence after one (1) year grace period – (i.e. in

the second year of the project).

The medium-term loan will cover the cost of acquisition of the Crane Bakery

Limited enterprise plant & equipment.

An exchange rate of UShs 3,000 to US$1 has been used for purposes of this

document.



13.3 Start-up Summary

Table 16: Project Start-Up Costs

ID Description Amount (UShs)

1 Land (Existing) 150,000,000

2 Machinery & equipment 61,075,000

2 Erection & installation 6,107,500

3 Furniture & fixtures 51,840,000

4 Vehicles 32,000,000

5 Building re-development 157,200,000

6 Working capital (1 month)

a. Legal 1,000,000

b. Accounting, tax preparation 1,500,000

c. Graphics & Marketing Materials 5,000,000

d. Supplies 1,700,000

e. Cash Reserves 10,500,000

f. Raw Materials 40,300,000

Sub-Total 60,000,000

TOTAL 518,222,500

13.4 Project Costs and Financing Plan

Total project cost is estimated at UShs 518,222,800 as shown below in Table 17 in

summarized form.

Table 17: Cost of Project (In UShs)

Description Local

Currency

Foreign

Currency

Total

Land 150,000,000 0 150,000,000

Buildings 157,200,000 0 157,200,000

Plant & Equipment 41,075,000 20,000,000 61,075,000

Erect & Installation 6,107,500 0 6,107,500

Bakery FFE 51,840,000 0 51,840,000

Vehicles 32,000,000 0 32,000,000

Fixed Cost 438,222,500 20,000,000 458,222,500

Working Capital 60,000,000 0 60,000,000

TOTAL PROJECT COST 498,222,500 20,000,000 518,222,500

Loan funds will be required for the purchase of bakery processing equipment and

machinery including a commercial oven (with a capacity of 65 loaves of bread per

hour), a dough mixer, a bread slicer, a proover, a deep fryer, a moulder, a sheeter,

and a packing machine. It is expected that the Crane Bakery Limited bakery will run



for 355 days a year on a continuous basis starting off at a capacity utilization of 50%

which will be gradually expanded each subsequent year with market sales growth.

Land:

Crane Bakery Limited has its own land located at Bulenga (approx. 15 kms) along

the Kampala – Mityana – Mubende – Fort Portal highway to western Uganda. This

plot of land is only 200 metres to the south of the main road and has a permanent

house in it belonging to Mr. Ronald Byamukama. The existing land asset counts as

the largest equity capital asset of the Crane Bakery Limited enterprise with a

significant market value of UShs150 million.

Building Improvements:

The existing house structure on the land will be subject to upgrades and

modification improvements to suit a standard bakery. Improvements that will be

made on the existing house are indicated in Table 12: Land & Covered Area

requirement on page 41 of this Business Plan and are altogether estimated to cost

UShs 157,200,000.

Machinery and Equipment:

The requisite bakery plant and machinery equipment will comprise of a mix of

imported and local machinery. The most equipment under the plant and machinery

equipment list include a commercial oven (with a baking capacity 65 loaves of bread

per hour/1,000 loaves of bread per day); a dough mixer(s); bread slicers; a proover;

and a deep fryer. Details of bakery plant equipment and machinery are detailed in

Table 7: Machinery Details on page 36 of this Business Plan. Bakery plant

equipment and machinery is estimated to cost UShs 61,075,000 plus a 10% cost for

erection and installation of UShs 6,107,500.

Transportation Vehicles:

Crane Bakery Limited requires two vehicle units comprising of a second-hand

Toyota pick-up and one motor cycle unit to start the bread shuttling and distribution

runs with. The two vehicle units are estimated to cost UShs 32 million.

Furniture & Fixtures:

A standard modern bakery requires extensive additions of furniture and fixtures to

be appended to its factory and sales outlets (front shop). Table 9: Details of

Furniture and Fixtures on page 38 of this Business Plan provides a detailed listing of

the required furniture and fixture fittings of the Crane Bakery Limited bakery. The

total cost is estimated at UShs 51,840,000.



Working Capital:

Bread and pastries baking is a business in which cash flow is very high and

companies in the industry tend to generate cash surpluses on a regular basis, most of

the breads and pastries are sold on cash basis on the market. Working capital is

mostly required for paying for purchase of vital production inputs such as raw

materials, packing materials, factory repairs and maintenance, factory utilities,

graphics and marketing materials, administrative expenses, office expenses,

advertising expenses, general supplies, motor vehicle repairs and running expenses,

as well as consumables and miscellaneous expenses. The Working Capital

requirements have been estimated at UShs 60,000,000 for the first two - four weeks

of operation. Schedule 02/1: Initial Project Investment Costs on page 82 refers.

13.5 Financial Plan

The project is proposed to be financed through a combination of equity and micro-

finance funding in the ratio of 53:47 respectively. The micro-finance institutional

loan will carry a profit markup rate of 11.0 percent per annum payable over a period

of ten years.

Table 18: Financial Plan (In UShs)

Source of Finance/Component Share Local

Currency

Foreign

Currency

Total

1) Financial Assistance Medium-Term MF Loan& Other Funding

Buildings 11.04% 57,200,000 0 57,200,000

W/Capital 11.58% 60,000,000 0 60,000,000

Plant & Equipment 6.75% 15,000,000 20,000,000 35,000,000

Erect & Installation 1.18% 6,107,500 0 6,107,500

Bakery FFE 10.00% 51,840,000 0 51,840,000

Vehicles 6.17% 32,000,000 0 32,000,000

Sub Total (1) 46.73% 222,147,500 20,000,000 242,147,500

2) Equity Project Sponsors

Land 28.95% 150,000,000 0 150,000,000

Buildings 19.30% 100,000,000 0 100,000,000

Plant & Equipment 5.03% 26,075,000 0 26,075,000

Sub Total (2) 53.27% 276,075,000 0 276,075,000

TOTAL 100.00% 498,222,500 20,000,000 518,222,500

13.6 Projected Income Statement

The projected income statement for the Crane Bakery Limited is given in Table 19

below.



Table 19: Summary Profit& Loss Account for First Five Years of the Project (In UShs)

Description Year 2 Year 3 Year 4 Year 5

Sales 780,000,000 943,800,000 1,141,998,000 1,381,818,000

Less: Raw Materials 241,800,000 292,578,000 354,019,000 428,363,000

Gross Profit 538,200,000 651,222,000 787,979,000 953,455,000

Less: Operating Expenses 294,394,000 328,128,000 366,034,000 406,406

Operating Profit 243,806,000 323,094,000 421,945,000 547,049

Less: Interest service 3,850,000 2,970,000 1,980,000 990,000

Less: Loan service 8,000,000 9,000,000 9,000,000 9,000,000

Provision for Tax 69,587,000 93,337,000 123,289,000 161,118,000

Net Profit 162,369,000 217,787,000 287,675,000 375,941,000

Cum. Retained Earnings 162,369,000 380,156,000 667,831,000 1,043,772,000

Since we are a new company, it is important not to grow too fast and take on more

contracts than we can handle. The projections reflect a slow and steady growth

without sudden spikes that will create havoc with our workload.

We think we can reach break-even point before the end of year one, and begin

paying off start-up costs by the end of year two.

13.7 Rates of Return

On the basis of the projected income statements and related projections, rates of

return for the project are calculated and shown in Table 20:

Table 20: Rates of Return (In Percentages)


Gross Profit to Sales 69.0 69.0 69.0 69.0

Operating Profit to Sales 31.26 34.23 36.95 39.59

Net Profit to Sales 20.82 23.08 25.19 27.21

Net Profit to Investment 31.33 42.03 55.51 72.54

13.8 Payback Period

Payback period for the project, both in terms of owner‘s equity and total investment,

is calculated below:

MF Loan-Financed Capital Investment = UShs35,000,000

Promoter‘s Equity = UShs176,057,000

―Profits‖ = Net Profit + Interest + Depreciation



Table 21: Calculation of Payback Period for Equity and Total Investment (In UShs)

Year Amount paid back from

“Profits”

Balance of Total

Investment

Balance of Total

Equity

1 0 -35,000,000 -176,075,000

2 192,381,000 157,381,000 16,306,000

3 246,919,000 404,300,000 263,225,000

4 315,817,000 720,117,000 579,042,000

5 403,093,000 1,123,210,000 982,135,000

Payback period for Equity = 1.91 Years

Payback period for MF Loan Investment = 1.18 Years

13.9 Capital: Output Ratio

Capital output ratios, representing the production potential of the project in relation

to the investment involved in its establishment, are calculated in Table 22:

Table 22: Capital: Output Ratios (In UShs)


Total Investment 518,222,500 _ _ _

Sales (Output) 780,000,000 943,800,000 1,141,998,000 1,381,818,000

Capital: Output Ratio 1: 1.51 1: 1.82 1: 2.20 1: 2.67

13.10 Projected Balance Sheet

Projected balance sheet for the first five years of operation is shown below:



Table 23: Projected Balance Sheet (In UShs „000)

CAPITAL EMPLOYED: YR.1 YR.2 YR.3 YR.4 YR.5

Share Capital 200,000 200,000 200,000 200,000

Retained Earnings 734,251 1,618,892 2,613,314 3,741,227

Shareholder's Equity/Deficit 934,251 1,818,892 2,813,314 3,941,227

Long-Term Liabilities 35,000 27,000 18,000 9,000 373,444 583,231 861,906 1,228,847 EMPLOYMENT OF CAPITAL: `

Farm Buildings 157,200 149,340 141,480 133,620 125,760

Farm Equipment & Machinery 67,183 60,465 53,746 47,028 40,310

Office Furniture & Equipment 51,840 46,656 41,472 36,288 31,104

Vehicles 32,000 25,600 19,200 12,800 6,400

LONG-TERM ASSETS: 308,223 282,061 255,898 229,736 203,574

CURRENT ASSETS: 120,488 360,477 670,241 1,069,470

Accounts Receivable 44,683 51,726 60,004 69,564

Stock (Inventory) 132,264 152,386 176,009 202,880

Bank Balance and Cash 11,344 12,604 14,023 15,533

Other Current Assets -67,803 143,762 420,204 781,493

CURRENT

LIABILITIES/DEBT:

29,104 33,145 38,071 44,197 Accounts Payable 25,254 30,175 36,091 43,207 Current Portion of Long-term

Liabilities 3,850 2,970 1,980 990

NET CURRENT ASSETS: 91,384 327,332 632,170 1,025,273

TOTAL CAPITAL 373,444 583,231 861,906 1,228,847

13.11 Projected Cash Flow Statement

The cash flow projection shows that provisions for ongoing expenses are adequate to

meet Crane Bakery Limited's needs as the business generates cash flow sufficient to

support operations.

The projected cash flow for the first five years of the project is shown hereunder:



Table 24: Projected Cash Flows (In UShs „000)

Project Year 1 2 3 4 5 Costs (UShs)

A. Cash inflow 518,223 780,000 943,800 1,141,998 1,381,818

1. Financial resources

total 518,223 _ _ _ _

2. Sales revenue total _ 780,000 943,800 1,141,998 1,381,818

B. Cash outflow -518,223 -812,964 -761,481 -894,687 -1,050,860

1. Total assets schedule

including replacements -518,223 -188,291 -28,425 -33,321 -37,940

2. Operating Costs _ -536,194 -620,706 -720,053 -834,769

3. Debt Service

a) Interest _ -3,850 -2,970 -1,980 -990

b) Repayments _ -8,000 -9,000 -9,000 -9,000

4. Corporate tax _ -69,587 -93,337 -123,289 -161,118

5. Dividends 4% on equity _ -7,043 -7,043 -7,043 -7,043

C. Surplus / deficit 0 -32,964 182,319 247,311 330,958

D. Cumulative cash

balance 0 -32,964 149,354 396,666 727,623

13.12 Break-Even Analysis

The project‘s commercial break-even level (profitability break-even) in Project Year

5is calculated below:

Sales Value of Production = UShs 1,381,818,000

Break-even Sales = 144,125,000 = 144,125,000 = 144,125,000

1 – 717,797,000 1 –0.5195 0.4805

1,381,818,000

Break-even Sales = UShs 299,921,000

Capacity utilization required to Break-even = UShs 299,921,000 x 100 = 21.70%

UShs 1,381,818,000

Margin of Safety = 100% – 21.70% = 78.30%



Table 25: Break-Even Analysis in Project Year 5(In UShs „000)

Items Variable Cost Fixed Cost Total Cost

Raw materials 428,363,000 0 428,363,000

Salaries & wages 86,041,000 28,680,000 114,721,000

Packing material 25,909,000 8,636,000 34,545,000

Repairs & Maintenance 542,000 271,000 813,000

Fuel, Oil & Utilities 25,955,000 8,652,000 34,606,000

Marketing & Distribution Costs 112,008,000 56,004,000 168,012,000

Administration Overheads 5,182,000 1,727,000 6,909,000

Consumables & Miscellaneous 3,833,000 1,917,000 5,750,000

Office Expenses 2,130,000 1,065,000 3,194,000

Advertising Expenses 7,187,000 2,396,000 9,583,000

Insurance 2,681,000 1,340,000 4,021,000

Taxes & Licenses 5,391,000 1,797,000 7,187,000

General Supplies 4,492,000 1,497,000 5,990,000

Professional Expenses 1,775,000 887,000 2,662,000

Motor Vehicle Expenses 6,309,000 2,103,000 8,412,000

Depreciation 0 26,162,000 26,162,000

Financial Expenses 0 990,000 990,000

TOTAL 717,797,000 144,125,000 861,921,000

13.13 Value Added/Contribution to GDP

Implementation of the project is expected to have a beneficial economic impact on

regional/national economic development. The project‘s contribution towards the

country‘s Gross Domestic Product (GDP) is estimated below.

Table 26: Calculation of Value Added(In UShs „000)


Value of Production (Sales) 780,000 943,800 1,141,998 1,381,818

Less Intermediate Input:

Raw Material 241,800 292,578 354,019 428,363

Packing Material 19,500 23,595 28,550 34,545

Administration Overheads 3,900 4,719 5,710 6,909

Depreciation 26,162 26,162 26,162 26,162

Total Intermediate Inputs 291,362 347,054 414,441 495,980

Value Added 488,638 596,746 727,557 885,838

Value Added as a %age of

Output 62.65% 63.23% 63.71% 64.11%

Value Added per Worker 61,080 74,593 90,945 110,730



14.0 PROJECT IMPLEMENTATION SCHEDULE

It is expected that it will take approximately 10 months to have the Crane Bakery

Limited project put into operation from the day funds for its execution are secured.

The preparatory stage which involves the eventual approval for funding is assumed

to take 3 months from the date of its final submission to project financiers by the

project promoters. The follow-on project implementation activities are expected to

take an additional 7 months to completion – which altogether adds up to 10 months

(1 year).

The following Gantt chart presented in Figure 5 highlights the important project

implementation milestones.



Figure 5: Project Implementation Milestones

ID Task Name Duration Period (Months)

1 2 3 4 5 6 7 8 9 10 11 12

1 Seed Capital Financing 3 months

2 Site Building Re-development 4 months

3 Interior Design 2 months

4 Bakery Plant & Equipment:

Identification of Bakery

Equipment Suppliers/Opening

of LCs and Order of Equipment

1 month


Shipment & Delivery

1 month


Installation

1 month

7 Procure Project Office

Stationery and or Equipment

1 month

8 Arrangements for Bakery Input

Supplies

1 month

9 Hiring Key Executives 1 month

10 Full Staffing 1 month

11 Commissioning of Bakery 0 months

12 Commence Operations



15.0 ENVIRONMENTAL&SOCIAL GUIDELINES: BAKERY PRODUCTS

15.1 Process Description

This section covers industrial scale bakeries producing bread, cake and biscuit

products for human consumption, starting with milled flour as the basic ingredient.

Although the environmental issues associated with baking remain, in principle, the

same for small bakery operations such as individual bakery shops, in practice, the

risk level is much lower and it may not be appropriate to implement some of the

precautions and management measures mentioned here.

Figure 6: Basic Steps in Bread Making

Raw Materials

Mix

Proof

Cool

Receive & Store

Raw Materials

Shape

De-pan

Pack

Bake



The main bread making activities are shown in Figure 5 and include:

Receipt and Storage of raw materials: principally flour, water, yeast, salt,

levelling agents in biscuits (e.g. ammonia carbonate), improvers (e.g. vitamin

C) and preservatives but can include many other ingredients such as onion,

olives, herbs, cheese;

Preparation: Mixing, shaping, placing in tins, proving;

Baking: Removing from tins, cooling;

Packing: Slicing, wrapping/bagging.

15.2 Key Environmental, Health and Safety Risks/Liability Issues

Product Contamination

Bakery products can become contaminated through:

Contaminated raw materials received;

Poor hygiene standards within the processing operations, e.g. unclean

machines, unhygienic handling;

Pest infestation, e.g. rodent, insects;

Poor storage conditions e.g. raised moisture levels promoting insect, mould

and bacterial growth.

The Company's operations should be designed to internationally recognized food

safety standards consistent with the principles and practice of Hazard Analysis

Critical Control Points (HACCP)7and Codex Alimentarius8.

Emissions to Air

The major air emissions of concern from bakeries are known as volatile organic

compounds (VOCs). The primary VOC emitted from bakery operations is ethanol. It

is produced by yeast metabolism during fermentation and is emitted in large

amounts when the dough is exposed to elevated temperatures in the oven. It

combines with other VOCs in the atmosphere to form smog. A large facility may

require a permit with specific emission parameters from the regulatory authorities

may be required.

7ISO 2005 8FAO and WHO (1962 – 2005)



Energy Consumption

Processing operations consume high amounts of energy as:

Thermal energy for proving and baking the product and to produce hot water

for cleaning and sterilising;

Electricity for machinery operation, dust extraction, ventilation, lighting and

production of compressed air.

Energy usage has a direct correlation to the operating costs of the company and

energy generation and consumption may be regulated or taxes/levies applied to

reduce energy use and associated emissions of gases such as carbon dioxide.

Dust, Aerosols and Gases

Dust may arise from raw material storage, handling and drying activities; aerosols

typically result from the use of compressed air and high-pressure water for cleaning.

Workers may inhale or ingest the dust and aerosols exposing them to

biological and microbial hazards presenting a risk of occupational lung

disease or asthma. When combined with high levels of humidity dust and/or

aerosols may give rise to skin irritation or allergic reactions;

Ammonium carbonate used as a leavening agent in biscuits decomposes to

emit ammonia on contact to air. It is toxic if inhaled at high concentrations;

Some bakery additives/flour improvers contain enzymes that are an

occupational hazard to which workers may become allergic (sensitized).

Exposure to them should be limited by using improvers in liquid, paste or

dust suppressed powder form;

Dust can be a nuisance to the surrounding locality;

A dust cloud of any flammable material (such as flour) will explode if:

o The concentration of dust in air falls within the explosive limits9;

o A source of ignition is present.

Dust can be controlled by enclosing processing and transport equipment, which also

reduces product losses and by the installation of extraction (antistatic) equipment.

9HSE 1996



Storage

Bulk storage facilities will be used for the storage of raw materials, finished product,

chemicals used in the production process and for cleansing and disinfection, and

fuel oils for energy production. These storage facilities should be provided with

satisfactory containment (concrete walls/bunds, drainage gullies connected to

wastewater treatment areas) to prevent spills reaching the wider environment. The

storage facilities should be secure to prevent pest invasion, be waterproof and well

ventilated. Alarms should be fitted to detect leakages. All outdoor bulk storage of

dusty, or potentially dusty materials should be in silos and ventilation/extraction

equipment used to minimize dust generation or explosion/fire. Bulk storage

facilities should be fitted with alarms to prevent overfilling.

Solid Wastes

Wastes may arise at all stages in the production process, including spoiled raw

materials, spillages, dough, non-conforming product, packaging wastes and sludge

from wastewater treatment. Organic wastes should be segregated from non-organic

wastes to facilitate recycling/reuse and stored in adequate containers. Solid wastes

will need to be temporarily stored, collected and disposed to regularly to avoid

odour, litter, fly, rodent or hygiene problems.

Packaging

Packaging is widely used within the bakery industry to preserve the quality of the

product, for marketing and transport purposes. Smaller bakeries and in-store

bakeries may transport some unwrapped finished product in open reusable plastic

crates or baskets, but the majority of larger operations package the product in paper

(sometimes waxed), polythene, plastic or card.

Water supply

Bakeries can use a relatively large volume of water, which may require treatment

before it can be used. It is used both to make the product and for cleaning. In cities

and towns, water is supplied by the municipal water supply system. It is typical for

abstraction or water use permits to detail volumes of water abstraction allowed as

over abstraction can impact local communities.



Wastewater treatment

Wastewater arising from cleaning and spillages will contain high quantities of

organic matter and other material which if discharged without treatment will

potentially pollute watercourses.

Wastewater treatment systems for process drainage and cleaning wastewaters are

essential in order to mitigate the risk of pollution.

Instead of building their own wastewater treatment facility, some companies will

discharge to the municipal wastewater treatment plant. It is typical for authorities, in

either case, to require pre-treatment of such wastewater before it is discharged. This

will depend on the size of bakery. These requirements will be set out in an

environmental permit.

Manual Handling and Repetitive Work

Lifting, repetitive work and posture injuries occur as a result of lifting and carrying

heavy or awkward shaped items such as sacks, lifting of boxes and manoeuvring

wheeled racks within the plant. Repetitive tasks such as tin loading, lidding, cake

decorating and packing operations can lead to musculoskeletal injuries.

Collision

In a busy manufacturing environment, it is common to have injuries where people

are struck by moving or falling objects such as crates, boxes, equipment, conveyors

and forklift trucks.

15.3 Other Environmental, Health and Safety Risks/Liability Issues

Permitting

Large bakeries in Uganda producing more than 300 tonnes per day of finished

product will be subject to national regulations under the proposed Food Safety Law.

Other smaller facilities within Uganda will still be subject to national regulation but

this will generally set less stringent requirements on the environmental management

practices to be adopted.



Polychlorinated Biphenyls (PCBs) and Asbestos

PCBs are a group of substances which are good electrical insulators. Typically, PCBs

may be present in hydraulic oils or dielectric fluids in electrical switchgear and

transformers.

Asbestos has been used on a large scale for many years as a fire proofing and

insulation material and may be encountered in a wide range of forms including

asbestos cement boards, as fire retardant gaskets in pipe-work and as fire retardant

insulation around boilers and furnaces.

Though the presence of PCBs and asbestos are not likely to be a principal issue of

concern in relation to the main bakery production process, they may be present in

factories constructed prior to the 1980s and present both an environmental and

health and safety hazard.

Temperature

Employees may be exposed to high temperatures near ovens and may have to

handle hot product. This could lead to collapse through heat exhaustion and contact

burns.

Confined Spaces

Storage silos are dangerous confined spaces and entry to them must be strictly

controlled and avoided wherever possible. There is a risk from engulfment, lack of

breathable atmosphere and mechanical hazards (e.g. sweep augers).

Noise

Noise induced hearing loss can occur from working in noisy areas, e.g. mixers,

baking plant, de-panning, slicing, fruit washing.

Machinery

All equipment should have safety guarding and workers should be issued with

appropriate personal protective equipment to protect against unavoidable sharp

items and edges.



Exposure to Ammonia

Ammonia, which is commonly used as a replacement for

Chlorofluorocarbons (CFCs) in refrigeration systems, and may also be emitted

by ammonium carbonate (a leavening agent in biscuits) if exposed to air, is

toxic if inhaled at high concentrations and can cause frostbite when released

to the atmosphere. Facilities using ammonia should be aware of the potential

hazards of ammonia releases and of the steps that can be taken to prevent

such releases e.g. fitting alarms on equipment. They should be prepared to

respond appropriately if releases do occur.

Slips, Trips and Falls

Vats/vessels for mixing raw materials provide hazards in the form of

working at height which could result in falls and asphyxiation;

Slippery floors and surfaces present a high risk of slips, trips and falls where

spills have not been cleared up or effective cleaning has not taken place;

The cleaning and disinfecting of process areas and some food preservation if

inappropriately used and stored could result in chemical contact burns to

employees, inhalation of harmful/toxic fumes generated during processes or

ingestion of harmful substances.

15.4 Key Social, Labour and Community Risks/Liability Issues

Hygiene

Contamination of product could result in ill health in the general public and may

result in product recall. Hygiene standards within process areas must be maintained

to a high level to prevent product contamination and should be consistent with the

principles and practice of HACCP and Codex Alimentarius.

15.5 Other Social, Labour and Community Risks/Liability Issues

Odour

Although bakeries do release odours, these are considered by the majority of people

to be not unpleasant, but some form of abatement may be required by regulatory

authorities.



Noise

The noise generated by equipment and manoeuvring trucks can be a nuisance if the

site is located close to residential areas and other sensitive receptors.

Transport

Trucks delivering bulky raw materials may cause traffic congestion or excessive

noise potentially leading to complaints.

15.6 Improvements

Reduce dust emissions by: o Enclosing and sealing plant/facility and equipment to prevent escape and

accumulation of dust;

o Use of doors/plastic strip curtains on building access points;

o Redesigning processes to reducing free-fall distances and speed of

movement for flour and other dry products;

o Encouraging careful working to avoid spillages;

o Use of centralized piped vacuum cleaning systems or other suitable

vacuum cleaners;

o Installation of dust extractors e.g. cyclones and fabric filters;

o Improving ventilation within buildings;

o Maintaining a slight negative pressure within storage vessels such as bins

and silos;

o Install dust monitoring equipment;

o Replace dusty bakery additives and flour improvers with those in liquid,

paste or dust suppressed form;

Screen raw materials, water and finished products for contaminants;

Monitor product losses during processing operations;

Consider whether the installation or upgrade of a wastewater treatment plant

is necessary;

Insulate ovens and proving areas to reduce energy consumption and recover

heat from ovens;

Consider shutting down ovens when plant is not operating at full capacity;



Ensure organic waste is collected and stored separately from other solid waste

where to enable is reuse where feasible for composting and/or use for soil

amendment, or use in energy production;

Improve waste storage containment to prevent ingress of water, pests and

leakage;

Upgrade raw materials storage areas to allow proper containment of spills

and leakages;

Undertake regular integrity testing of underground storage tanks and bulk

storage tanks to reduce to prevent leakage and product loss;

Good housekeeping should be maintained at all times all areas. The adoption

of good cleaning and working practices as a routine will reduce dust

emissions and improve hygiene standards;

Upgrade exhaust stack heights from cooking processes to minimize air

pollution and nuisance to the local community;

Assess air emission (e.g. ethanol) and if required install equipment to reduce

emissions of volatile organic compounds.

Provision of personal protective equipment (PPE) that is fit for the task to

prevent injury and maintain hygiene standards. Staff should be trained in the

correct selection, use and maintenance of PPE;

Train workers in how dust from flour and other bakery ingredients can cause

asthma, the symptoms and how to prevent it and what to do if they

experience the symptoms;

Train workers in correct use of machinery and safety devices;

Redesign of manual processes to avoid heavy lifting/repetitive activities;

Install mechanical lifting aids where possible and rotate work tasks to reduce

repetitive activities;

Separation of people from moving equipment:

o Ensure that the process layout reduces opportunities for process activities

to cross paths;

o Installation of safeguards on peelers, moving parts of conveyor belts and

packaging machinery to reduce risk of entrapment of employees;



o Install walkways to separate people from vehicle movements to reduce

risk of collision;

Walking and working surfaces should be kept clean and dry. Restrict access

to areas being cleaned or where spillages have occurred;

To reduce the risk of noise exposure by isolating noisy equipment and rotate

tasks to minimize time spent in a noisy area and provide personal protective

equipment;

Restrict duration for people being in very hot areas;

Ensure all electrical equipment in wet areas is safe and regularly maintained;

Consider introducing pre-employment screening for past or present asthma

or chest illnesses; conduct annual screening of employees;

Introduce arrangements for redeploying employees with respiratory

sensitization away from the bakery;

Provide worker welfare areas segregated from the main production process;

Train employees in hygiene including; regular hand washing with soap and

alcohol; prohibition of smoking, eating and drinking in the workplace.



Schedule 01: KEY FINANCIAL MODELLING ASSUMPTIONS

Table 27-1: Operating Assumptions

No. of Working Days in One Year 355

No. of Working Hours in One Shift 8

Wage growth rate 10%

No. of Outlets 1

Total Working Hours per Outlet/Day 16

Table 27-2: Economy-Related Assumptions

Electricity price growth rate 10%

Diesel/petrol price growth rate 10%

Wage growth rate 5%

Table 27-3: Cash Flow Assumptions

Accounts Receivable cycle (in days) 30

Accounts Payable cycle (in days) 30

Raw material inventory (in days) 3

Equipment spare parts inventory (in days) 30

Table 27-4: Production Assumptions

Production of Bakery Products

Cake produced annually (units) 119,816

Bread produced annually (1 kilo loaves) 177,505

Cookies produced annually (units) 23,963

Biscuits produced annually (200gm packets) 7,988

Table 27-5: Revenue Assumptions

Sales of Bakery Products

Cake sold annually (units) 117,000

Bread sold annually (1 kilo loaves) 173,333

Cookies sold annually (units) 23,400

Biscuits sold annually (200g packets) 7,800

Unit Sales Prices of Bakery Products

Average cakes sales price (UShs/unit) 1,000

Average bread sales price (UShs/1 kg loaf) 3,600

Average cookies sales price (UShs/unit) 1,000

Average biscuits sales price (UShs/200 gm packets) 2,000

Sales/Production Out-turn 97.65%

Sales price growth rate 10%



Table 27-6: Operating Expense Assumptions

Office expenses per month (UShs.) 200,000

Advertising expense/month (UShs.) 600,000

Marketing & distribution costs per bread unit (UShs.) 600

Marketing & distribution costs per cakes, cookies & biscuits unit

(UShs.)

150

Machinery repairs & maintenance cost (as a %age of cost of bakery

plant equipment & machinery)

1% (Yrs 1 – 4)

1.5% (Yrs 5 – 10)

Insurance (as a %age of total capital expense) 1%

Taxes &Licences expenses per month (UShs.) 450,000

General Supplies expenses per month (UShs.) 375,000

Professional Fees per annum (UShs.) 2,000,000

Motor Vehicle repair & maintenance (as a %age of capital expense) 1%

Miscellaneous expenses per month (UShs.) 360,000

Table 27-7: Expense and Growth Rates

Sales growth rate 10%

Salaries, wages growth rates (as %age of annual Salaries and

Wages)

10%

Other Production Overheads

Repairs and Maintenance (as %age of Machinery Cost) 1.5%

Building Repair and Maintenance (as %age of Building Cost) 1.0%

Packing Material (as %age of sales) 2.5%

Administrative Expenses(as %age of sales) 0.5%

Fuel & Power

Fuel

Average annual units consumed (litres) 1,800

Rate per Unit of Petrol (UShs) 3,333.33

Annual rate Increase % 10%

Power & water consumption expense/month (UShs) 2,170,000

Table 27-8: Financial Assumptions

Project Life (Years) 5

Debt 6.75%

Equity (Own Resources) 53.27%

Other Funding Sources 39.97%

Interest rate on long-term debt 11%

Debt tenure (Years) 5

Grace Period (Years) 1

Debt payments per year 1



Table 27-9: Depreciation Rate Assumptions

Land 0%

Buildings 5%

Machinery and Equipment 10%

Office Equipment 10%

Furniture & Fixtures 10%

Vehicles 20%



Schedule 02/1: Initial Project Investment Costs (In UShs)

ID Description Share % Amount (UShs)

1 Land 28.95% 150,000,000

2 Machinery & equipment 11.79% 61,075,000

3 Erection & installation 1.18% 6,107,500

4 Bakery Furniture & Fixtures 10.00% 51,840,000

5 Vehicles 6.17% 32,000,000

6 Building Improvements 30.33% 157,200,000

7 Working Capital (1 month)

a. Legal 0.19% 1,000,000

b. Accounting, tax preparation 0.29% 1,500,000

c. Graphics & Marketing Materials 0.96% 5,000,000

d. Supplies 0.33% 1,700,000

e. Cash Reserves 2.03% 10,500,000

f. Raw Materials 7.78% 40,300,000

11.58% 60,000,000

TOTAL 100.00% 518,222,500



Schedule 02/2: Source & Structure of Project Financing (In UShs) Source of

Finance/Component

Share (%) Equity/Own

Capital

MF Loan

Finance

Other Funding

Total

Land 28.95% 150,000,000 0 0 150,000,000

Buildings Improvements 30.33% 100,000,000 0 57,200,000 157,200,000

Machinery & Equipment 11.79% 26,075,000 35,000,000 0 61,075,000

Erection & installation 1.18% 0 0 6,107,500 6,107,500

Bakery FFE 10.00% 0 0 51,840,000 51,840,000

Vehicles 6.17% 0 0 32,000,000 32,000,000

W/Capital 11.58% 0 0 60,000,000 60,000,000

TOTAL 100.00% 276,075,000 35,000,000 207,147,500 518,222,500

% of Total 53.27% 6.75% 39.97% 100.00%



Schedule03: Loan and Interest Service Schedule (In UShs) Project Year PY 1 PY 2 PY 3 PY 4 PY 5 Total

Loan Repayment 0 8,000,000 9,000,000 9,000,000 9,000,000 35,000,000

Interest 0 3,850,000 2,970,000 1,980,000 990,000 9,790,000

Total 0 11,850,000 11,970,000 10,980,000 9,990,000 44,790,000



Table 04/1: Calculation of Working Capital: I Minimum Requirements of Current

Assets and Liabilities

(a) Accounts receivable: 30 days at production costs minus depreciation

and interest

(b) Inventory:

Field Inputs: 30 days

Labour Costs: 90 days

Bakery Operations: 60 days

Machy& vehicle maintenance: 180 days

Work in progress: 9 days at bakery raw materials + packing materials

+ salaries & wages + repairs & maintenance +

utilities + insurance + general supplies + motor

vehicle repairs + depreciation + consumables &

miscellaneous expenses

Finished products: 45 days at bakery raw materials + packing

materials + salaries & wages + repairs &

maintenance + utilities + insurance + general

supplies + motor vehicle repairs + depreciation +

consumables & miscellaneous expenses

© Cash-in-hand: 15 days, see separate calculations at the bottom of

this schedule

(d) Accounts payable: 30 days of bakery plant costs and utilities.

N.B.: All the local cost price factors for the bakery plant costs/inputs, utilities and

working capital are indicated in local currency (UgShs) for the ease of computational

and financial analysis.



Table 04/2: Calculation of Working Capital: IIAnnual Production Cost – Estimate

(In UShs „000s)

ACCOUNT HEAD FINANCIAL YEAR OF OPERATION

YEAR 1 2 3 4 5

Operating Costs (UGX '000s)

Raw materials 241,800 292,578 354,019 428,363

Salaries & wages (Payroll) 82,992 93,012 104,292 114,721

Packing material 19,500 23,595 28,550 34,545

Repairs & Maintenance 611 672 739 813

Utilities 26,000 28,600 31,460 34,606

Marketing & Distribution Costs 126,230 138,853 152,738 168,012

Administrative Expenses 3,900 4,719 5,710 6,909

Consumables & Miscellaneous 4,320 4,752 5,227 5,750

Office Expenses 2,400 2,640 2,904 3,194

Advertising Expenses 7,200 7,920 8,712 9,583

Insurance 3,021 3,323 3,655 4,021

Taxes & Licenses 5,400 5,940 6,534 7,187

General Supplies 4,500 4,950 5,445 5,990

Professional Expenses 2,000 2,200 2,420 2,662

Motor Vehicle Expenses 6,320 6,952 7,647 8,412

Cost of Sales 536,194 620,706 720,053 834,769

Financial Costs (UGX '000s)

Interest on Medium Term Loans 3,850 2,970 1,980 990

Depreciation 26,162 26,162 26,162 26,162

Total Financial Costs 30,012 29,132 28,142 27,152

Total Production Costs 566,206 649,838 748,195 861,921



Schedule 04/3: Calculation of Working Capital: III Working Capital Requirements

(In UShs „000s)

X Y Requirements (UGX '000s)

Minimum

days Coefficient

of Full Capacity

Item of coverage turn-over 2 3 4 5

I. Current assets

A. Accounts receivable 30 12 44,683 51,726 60,004 69,564

B. Inventory

a) Raw Materials 30 12 20,150 24,382 29,502 35,697

b) Salaries & Wages 90 4 20,748 23,253 26,073 28,680

c) Bakery Operations 60 6 28,777 31,726 34,985 38,588

d) Maintenance & Repair 180 2 306 336 370 407

e) Work-in-Process 9 40 10,381 12,115 14,180 16,585

f) Finished Products 45 8 51,903 60,575 70,900 82,923

C. Cash-in-hand 15 24 11,344 12,604 14,023 15,533

( from V below)

D. Current assets _ _ 188,291 216,716 250,036 287,977

II. Current Liabilities

A. Accounts payable 30 12 25,254 30,175 36,091 43,207

III. Working Capital

A. Net Working Capital 213,545 246,891 286,127 331,183

B. Increase in Working Capital _ 33,346 39,237 45,056

IV. Total Production Costs _ _ 566,206 649,838 748,195 861,921

Less: Raw Materials & Inputs _ _ 241,800 292,578 354,019 428,363

Utilities _ _ 26,000 28,600 31,460 34,606

Depreciation _ _ 26,162 26,162 26,162 26,162

15 24 272,244 302,498 336,554 372,790

V. Required Cash Balance _ _ 11,344 12,604 14,023 15,533



Schedule 05: Fixed Assets and Depreciation Allowances in UShs

Project Year PY 1 PY 2 PY 3 PY 4 PY 5

Initial Dep Dep Dep Dep

Asset Value Allowance Allowance Allowance Allowance

Bakery Buildings 157,200,000 7,860,000 7,860,000 7,860,000 7,860,000

Bakery Equip & Machinery 67,182,500 6,718,250 6,718,250 6,718,250 6,718,250

Bakery Furniture &

Fixtures

51,840,000 5,184,000 5,184,000 5,184,000 5,184,000

Motor Vehicles 32,000,000 6,400,000 6,400,000 6,400,000 6,400,000

TOTALS 308,222,500 26,162,250 26,162,250 26,162,250 26,162,250



Schedule 06: Change in Total Investment Costs (In UShs „000s) Period Construction Full Production

Year 1 2 3 4 5 Total

1. Fixed Investment Costs 458,223 0 0 0 0 458,223

a) Initial fixed investment costs 458,223 0 0 0 0 458,223

b) Replacement 0 0 0 0 0 0

2. Pre-operational expenses 60,000 0 0 0 0 60,000

3. Working Capital increase 0 213,545 33,346 39,237 45,056 331,183

Total Investment Costs 518,223 213,545 33,346 39,237 45,056 849,406

Schedule 07: Change in Total Assets (In UShs „000s)

Period Construction Full Production

Year 1 2 3 4 5 Total

1. Fixed Investment Costs 458,223 0 0 0 0 458,223

a) Initial fixed investment costs 458,223 0 0 0 0 458,223

b) Replacement 0 0 0 0 0 0

2. Pre-operational expenses 60,000 0 0 0 0 60,000

3. Current Assets increase 0 188,291 28,425 33,321 37,940 287,977

Total Assets 518,223 188,291 28,425 33,321 37,940 806,200



Schedule 08: Projected Cash Flow Table (In UShs „000s)

Period Construction Full Capacity

Year 1 2 3 4 5 *Sal val Total

Costs (US Dollars)

A. Cash inflow 518,223 780,000 943,800 1,141,998 1,381,818 _ 4,765,839

1. Financial resources

total 518,223 _ _ _ _ _ 518,223

2. Sales revenue total _ 780,000 943,800 1,141,998 1,381,818 _ 4,247,616

B. Cash outflow -518,223 -812,964 -761,481 -894,687 -1,050,860 606,943 -3,431,273

1. Total assets schedule

including replacements -518,223 -188,291 -28,425 -33,321 -37,940 606,943 -199,257

2. Operating Costs (Cost of

Sales)

_ -536,194 -620,706 -720,053 -834,769 _ -2,711,723

3. Debt Service

a) Interest _ -3,850 -2,970 -1,980 -990 _ -9,790

b) Repayments _ -8,000 -9,000 -9,000 -9,000 -35,000

4. Corporate tax _ -69,587 -93,337 -123,289 -161,118 _ -447,331

5. Dividends 4% on equity _ -7,043 -7,043 -7,043 -7,043 _ -28,172

C. Surplus / deficit 0 -32,964 182,319 247,311 330,958 606,943 1,334,566

D. Cumulative cash balance 0 -32,964 149,354 396,666 727,623 606,943

*Salvage values. Land: 150,000; 4/5 of buildings: 125,760; Working Capital : 331,183



Schedule 09: Projected Cashflow Table and Calculation of Present Value (In UShs

„000s)

Year 1 2 3 4 5 *Sal val Total

Constr.

Investment Costs -518,223 _ _ _ _ _ -518,223

Net Profit after Tax _ 162,369 217,787 287,675 375,941 _ 1,043,772

Depreciation _ 26,162 26,162 26,162 26,162 _ 104,648

Interest Add back

Mid-term Loan _ 3,850 2,970 1,980 990 _ 9,790

NET CASH FLOWS -518,223 192,381 246,919 315,817 403,093 606,943 1,246,930

Discount Factors at 14% 0.8772 0.7695 0.675 0.5921 0.5194 0.2076 _

PV at 14% -454,585 148,037 166,670 186,995 209,367 126,001 382,485

NPV at 14% 382,485

Discount Factors at 17% 0.8547 0.7305 0.6244 0.5337 0.4561 0.152 _

PV at 17% -442,925 140,534 154,176 168,552 183,851 92,255 296,443

NPV at 17% 296,443

Internal Rate of Return = 47.11%

NPV at 14% = UGX 382,485,000

NPV at 17% = UGX 296,443,000



Schedule 10: Projected Income Statement (In UShs „000s)

Year 1 2 3 4 5

Sales _ 780,000 943,800 1,141,998 1,381,818

Raw Materials _ 241,800 292,578 354,019 428,363

GROSS PROFIT _ 538,200 651,222 787,979 953,455

Less: Operating Costs

(excl. Raw Materials) _ 294,394 328,128 366,034 406,406

OPERATING PROFIT _ 243,806 323,094 421,945 547,049

Less: Accrued interest on

Medium-Term Loan (@ 11% p.a.) _ 3,850 2,970 1,980 990

Less: Annual Repayments _ 8,000 9,000 9,000 9,000

NET PROFIT BEFORE TAX _ 231,956 311,124 410,965 537,059

Corporation Tax 30% _ 69,587 93,337 123,289 161,118

NET PROFIT _ 162,369 217,787 287,675 375,941

Accumulated Net Profit (Loss) _ 162,369 380,156 667,831 1,043,772

Net Profit Margin _ 0.2082 0.2308 0.252 0.272

Gross Profit Margin 0.690 0.690 0.690 0.690

Rate of Return on Investment _ 31% 42% 55.51% 73%

Operating Profit Margin _ 0.313 0.342 0.369 0.396



Schedule 11: Projected Balance Sheet (In UShs „000s)

CAPITAL EMPLOYED: YR.1 YR.2 YR.3 YR.4 YR.5

Share Capital 176,075 176,075 176,075 176,075

Retained Earnings 162,369 380,156 667,831 1,043,772

Shareholder's Equity/Deficit 338,444 556,231 843,906 1,219,847

Long-Term Liabilities 35,000 27,000 18,000 9,000

373,444 583,231 861,906 1,228,847

EMPLOYMENT OF CAPITAL: `

Bakery Buildings 157,200 149,340 141,480 133,620 125,760

Bakery Equipment & Machinery 67,183 60,465 53,746 47,028 40,310

Bakery Furniture & Equipment 51,840 46,656 41,472 36,288 31,104

Motor Vehicles 32,000 25,600 19,200 12,800 6,400

LONG-TERM ASSETS: 308,223 282,061 255,898 229,736 203,574

CURRENT ASSETS: 120,488 360,477 670,241 1,069,470

Accounts Receivable 44,683 51,726 60,004 69,564

Stock (Inventory) 132,264 152,386 176,009 202,880

Bank Balance and Cash 11,344 12,604 14,023 15,533

Other Current Assets -67,803 143,762 420,204 781,493

CURRENT LIABILITIES: 29,104 33,145 38,071 44,197

Accounts Payable 25,254 30,175 36,091 43,207

Current Portion of Long-term

Liabilities 3,850 2,970 1,980 990

NET CURRENT ASSETS: 91,384 327,332 632,170 1,025,273

TOTAL CAPITAL 373,444 583,231 861,906 1,228,847

TOTAL ASSETS A120 + A121 402,548 616,376 899,977 1,273,044



Schedule 12: Ratio Analysis (In UShs „000s)

Period Construction Full Capacity

Year 1 2 3 4 5

Sales Growth 5% 5% 5%

Percent of Total Assets

Accounts Receivable 11.10% 8.39% 6.67% 5.46%

Inventory 32.86% 24.72% 19.56% 15.94%

Other Current Assets -16.84% 23.32% 46.69% 61.39%

Total Current Assets 29.93% 58.48% 74.47% 84.01%

Long-term Assets 70.07% 41.52% 25.53% 15.99%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 7.23% 5.38% 4.23% 3.47%

Long-term liabilities 8.69% 4.38% 2.00% 0.71%

Total Liabilities 15.92% 9.76% 6.23% 4.18%

Net Worth (Total Capital) 92.77% 94.62% 95.77% 96.53%

Percent of Revenues

Revenues 100.00% 100.00% 100.00% 100.00%

Gross Margin 69.00% 69.00% 69.00% 69.00%

Management / Administration 0.50% 0.50% 0.50% 0.50%

Net Profit (after Interest &

Tax)

20.82% 23.08% 25.19% 27.21%

Main Ratios

Current 4.14 10.88 17.61 24.20

Quick -0.40 6.28 12.98 19.61

Total Debt to Total Assets 8.69% 4.38% 2.00% 0.71%

Pre-tax Return on Net Worth 62.11% 53.34% 47.68% 43.70%

Pre-tax Return on Assets 57.62% 50.48% 45.66% 42.19%

Business Vitality Profile

Revenue per Employee $97,500 $117,975 $142,750 $172,727



Schedule 12: Ratio Analysis.…… continued (In UShs „000s)

Additional Ratios

Net Profit Margin 20.82% 23.08% 25.19% 27.21%

Return on Equity 47.98% 39.15% 34.09% 30.82%

Activity Ratios

Accounts Receivable Turnover 1.75 1.82 1.90 1.99

Collection Days 30 30 30 30

Inventory Turnover 4.05 4.07 4.09 4.11

Accounts Payable Turnover 1.20 1.20 1.20 1.20

Payment Days 30 30 30 30

Total Assets Turnover 1.94 1.53 1.27 1.09

Fixed Assets Turnover 1.90 2.43 3.13 4.10

Debt Ratios

Debt to Net Worth 0.09 0.05 0.02 0.01

Current Liability to Liability 0.83 1.23 2.12 4.91

Debt-Service Coverage Ratio 16.23 20.63 28.76 40.35

Liquidity Ratios

Net Working Capital $213,545 $246,891 $286,127 $331,183

Interest Coverage [Times Inte-

rest Earned Ratio - TIE] 63.33 108.79 213.10 552.57

Additional Ratios

Assets to Revenue 0.52 0.65 0.79 0.92

Current Debt / Total Assets 0.96% 0.48% 0.22% 0.08%

Acid Test -0.40 6.28 12.98 19.61

Sales/Net Worth 2.09 1.62 1.32 1.12



Schedule 13: Projected Payback Period (In UShs „000s)

YEAR/ITEM 2 3 4 5

Net Profit 162,369 217,787 287,675 375,941

Interest 3,850 2,970 1,980 990

Depreciation 26,162 26,162 26,162 26,162

"Profit" 192,381 246,919 315,817 403,093

Year Amount paid Balance of Balance of

back from Loan Equity

"profits" Investment Investment

1 0 -35,000 -176,075

2 192,381 157,381 16,306

3 246,919 404,300 263,225

4 315,817 720,117 579,042

5 403,093 1,123,210 982,135

6 0 1,123,210 1,123,210

7 0 1,123,210 1,123,210

8 0 1,123,210 1,123,210

9 0 1,123,210 1,123,210

10 0 1,123,210 1,123,210

Pay Back Period (MF Loan) = 1.18 YEARS

Pay Back Period (Equity) = 1.91 YEARS



Schedule 14: Sensitivity Analysis (Composite Mixed Farm) (In UShs „000s)

Items PAT BEP IRR Payback

Base Case 375,941 21.70% 47.11% 1.18 Yrs

Increase in Operating Costs by 5% 361,717 23.09% 45.14% 1.19 Yrs

Selling Prices up by 25% 617,759 14.28% 75.91% 1.11 Yrs

Decrease in Raw Materials by 10% 405,926 20.39% 50.70% 1.17 Yrs

Increase in Raw Materials by 10% 345,956 23.20% 43.52% 1.20 Yrs

Key:

BEP: Break-Even Point

IRR: Internal Rate of Return

PAT: Profit after Tax



APPENDIX A: BAKING PROCESS

Creating Baked Goods

The steps involved in developing a bread product involve the following:

1. Determine type of flour to use

a. Choose from selection from miller

b. Milling the flour ourselves

i. Choose varietals of wheat

ii. Determine proper grinding fineness

iii. Determine proper sifting fineness

2. Determine which starter to use

a. Establish feeding ratio

b. Establish feeding time

c. Establish starter hydration

d. Adjust as necessary according to temperature

3. Determine formula

a. Choose ratio of starter, water, flour, and salt to use

b. Establish overall fermentation and proofing times according to

given temperatures

c. Develop mixing and dough development technique and timing

schedule

d. Establish baking temperatures, times, and processes

4. Analyze product and make adjustments

a. Analyze crust for thickness, crispiness, flakiness

b. Analyze crumb for denseness, hole structure, relative

proportion to crust

c. Taste for flavor of each part, including acidity, sweetness,

mouth feel

d. Judge overall look of bread based on colors, shape, ear marks,

and texture

To effectively sell our developed products, we will focus on the following projects:

1. Develop packaging

a. Work with designer to improve logo, seal, and bag look

b. Work with Rickshaw Bags to create delivery bags

2. Develop marketing materials

a. Create shelf talker describing our bread and company

b. Create fliers to notify people of home delivery of our products

c. Improve website to entice customers to signup

3. Develop distribution system

a. Create database to store customer addresses, contact

information, and delivery windows



b. Create simple online process to order bread, and remind

customers as needed

c. Create efficient algorithm for deliveries based on distance from

bakery, distance from other customers, and time of day

4. Refine sales process

a. Survey customers to determine most liked aspects of our

product and company

b. Develop script for initial phone call or home visit to introduce

ourselves

c. Create Price List with our different products and rate

Baking Process

The baking process has been developed over the past millennia, with several

improvements in the last few centuries. Our techniques are not new, but we have

made them fit our environment and businesses structure. The process is as follows:

1. Feed the starter based on its determined feeding schedule and ratio of flour

and water

2. Weigh the appropriate amount of starter based on its activity and the

production schedule

3. Weigh the necessary salt, water, and flour to combine with starter

4. Incorporate to reach a homogenous dough, using the appropriate technique

based on the hydration and quantity of dough

5. Give the dough a series of rests and dough developing turns, spaced out

over its fermentation period

6. Cut and scale dough pieces into their appropriate weight

7. Pre-shape the loaves, using the appropriate technique, and then let the

loaves rest

8. Shape the loaves, and place them onto a flour dusted couch, set on a

proofing board

9. Place all proofing boards into a moisture protected rack, and allow the

dough to proof for however many hours necessary

10. Unload the loaves using a flip board, and place them on a flour dusted peel

11. Score the loaves using a blade using the appropriate technique

12. Insert the loaves into the oven, followed by enough steam

13. Bake the loaves until crumb is fully set, and crust is appropriately colored

and dried

14. Remove loaves and place them on cooling racks

15. Package the loaves for distribution

Although many parts of the process can be systematized, a skilled baker is necessary

to be able to oversee and complete many of the steps, and to gauge readiness at



different stages. As systems are developed to control temperature, timing, and

dough handling techniques, many parts of the process will be able to be done by

apprentice bakers.



APPENDIX B: HAND TOOLS AND SMALL ITEMS OF EQUIPMENT USED IN

A BAKERY

Hand tools Uses

Baking trays Steel trays of various sizes for bread and flour confectionery

Biscuit cutters For cutting shapes from rolled out dough sheets

Bread tins Single tins of various sizes for different sized loaves, or ‗straps‘ of 3-

6 tins joined together. Special shaped tins for specialty breads.

Buckets/bowls Plastic, aluminium or stainless steel, for mixing ingredients

Cake hoops A range of large tins for baking cake batter

Cake tins A range of sizes for small cakes, pies or tarts, fluted or plain.

Cooling racks For temporary storage of baked products before packing. May have

wheels.

Dipping forks For decorating cakes

Dough dockers Spikes for puncturing the surface of dough or pastry

Dusting boxes For shaking a thin layer of flour onto tables for dough kneading

Flour sieve Wire or nylon mesh to remove large particles from flour

Funnels To transfer liquids into narrow-necked containers

Glaze brushes For brushing on milk or egg to give a glossy surface to products

Hard brushes To remove compacted dough from floors

Knives A set of cutting knives and a set of palette knives

Measuring jugs For measuring correct volumes of liquid or powder ingredients

Nail brushes To clean hands of operators

Oven gloves To protect hands when handling hot baked products

Oven peel A long-handled, flat shovel used to removed baked products from

the oven

Pastry cutters A fluted set and a plain set to cut shapes in pastry

Piping tubes/bags For cake decoration, for depositing batter onto trays or filling

products with cream

Pots and bowls For temporary storage of ingredients

Rolling pins For rolling out flat dough sheets

Sandwich tins A range of larger tins for sponge cakes

Scales 0-1kg for minor ingredients, 0-50kg for weighing flour

Soft brushes For clearing up flour and spilled ingredients

Spatulas For stirring or beating ingredients

Storage bins For bulk ingredients, baskets/trays for distribution of bakery

products

Table scrapers Metal scrapers for scraping mixing bowls or work surfaces

Table brushes For keeping the work area cle

Thermometer For testing dough temperature or oven temperature.

Waste bins For hygienic temporary storage of waste materials.

Whisks For beating batters.

Documents

Crane Bakery Ltd Business Plan Doc