college of agriculture and bioresouces agec 495 chad bohachewski neil macdougall leah welter blake...

College of Agriculture and Bioresouces College of Agriculture and Bioresouces AgEc 495 AgEc 495

Chad BohachewskiChad Bohachewski

Neil MacDougallNeil MacDougall

Leah WelterLeah Welter

Blake WeatheraldBlake Weatherald


Operations planOperations plan


Organizational StructureOrganizational Structure

CorporationCorporation 5 Board of Directors5 Board of Directors President/Plant manager President/Plant manager Vice President/Secretary treasurer Vice President/Secretary treasurer Sales ManagerSales Manager Plant LabourersPlant Labourers Run processing equipmentRun processing equipment


Organizational ChartOrganizational Chart

Board of Directors-53 external, 2 internal

President/Plant Manager

Vice-President/Secretary

Sales Manager

Plant Workers (6)


ProductProduct

Cooked lentils + spices + tomato Cooked lentils + spices + tomato pastepaste

=Lentil based pasta sauce=Lentil based pasta sauce


Sauce ProductionSauce Production


Business CycleBusiness Cycle

Business hours- 9:00am to 5:00pmBusiness hours- 9:00am to 5:00pm eight hour work dayeight hour work day

First year projection 70,000 First year projection 70,000 units/yearunits/year

Full capacity plant produces Full capacity plant produces 130,000 units/year130,000 units/year


Site PlanSite Plan

Building located on highway #37 Building located on highway #37 in Shaunavon, Saskatchewan in Shaunavon, Saskatchewan

Two entrances into the lotTwo entrances into the lot

Loading dock area at back of Loading dock area at back of building for shipping/receiving building for shipping/receiving


Building and Floor PlansBuilding and Floor Plans

3500 ft3500 ft22 insulated building insulated building

2500ft2500ft22 for production line and for production line and storage storage

1000ft1000ft22 for two offices, two for two offices, two change/bathrooms for employees change/bathrooms for employees and customers and customers


Capital BudgetCapital Budget

2007

Land $ 1.00

Building 305,000

Processing equipment 22,375

Office equipment 2,000

Total Capital Costs $ 329,376

Working Capital

Total Working Capital $ 23,702

Total Capital Required $ 305,674


Cash Conversion CycleCash Conversion Cycle

Cash Conversion Cycle for 2007 Average days inventory 46 Average collection period 45 Average days payable 30 Total Cash Conversion Cycle 121


Human ResourcesHuman Resources


Direct Labour EmployeesDirect Labour Employees

Plant Manager-$50,000 + 6,400 in Plant Manager-$50,000 + 6,400 in benefitsbenefits

= $56,400= $56,400

(6) Plant Labourers-based on a wage (6) Plant Labourers-based on a wage bases of $12.50/hourbases of $12.50/hour

Total annual wages and benefits Total annual wages and benefits 172,237 + 32,036 benefits = $204,273172,237 + 32,036 benefits = $204,273

*Salaries/wage exclude benefits*Salaries/wage exclude benefits


Administration and Administration and Marketing EmployeesMarketing Employees Secretary-$35,000 Secretary-$35,000

+3,166benefits =$38,166+3,166benefits =$38,166

Sales Manager-$50,000 + Sales Manager-$50,000 + 4,522benefits = $54,5224,522benefits = $54,522


MarketingMarketingMarketingMarketing


IntroductionIntroduction

Sobeys Sobeys Federated Co-op LimitedFederated Co-op Limited Calgary Alberta Calgary Alberta Health conscious / vegetarianHealth conscious / vegetarian


MARKET SIZEMARKET SIZE

4% of Canadian population 4% of Canadian population is vegetarian/roughly 1.2 is vegetarian/roughly 1.2 milliion in Canadamilliion in Canada

25% are vegetarian 25% are vegetarian inclinedinclined

$172 million spent on $172 million spent on pasta sauce annuallypasta sauce annually

4.7% of total grocery shelf 4.7% of total grocery shelf space devoted to pasta space devoted to pasta sauce- co-opsauce- co-op

Stats Canada: Stats Canada: www.statscanada.ca, 2006, 2006


TARGET MARKETTARGET MARKET

Vegetarian Vegetarian Active / healthyActive / healthy

Young Young Female Female Urban & Trendy Urban & Trendy


MARKET POTENTIALMARKET POTENTIAL

Consumers Consumers becoming more becoming more health conscioushealth conscious

Few ready made Few ready made pasta sauces pasta sauces containing lentilscontaining lentils

Daily legume Daily legume recommendationrecommendation


SWOTSWOT

StrengthsStrengths New product of pasta marketNew product of pasta market Few direct competitors in pulse based saucesFew direct competitors in pulse based sauces Health benefits of the lentil as a supplement Health benefits of the lentil as a supplement

WeaknessesWeaknesses Relatively new firm Relatively new firm No brand loyaltyNo brand loyalty Large initial capital investmentsLarge initial capital investments


SWOTSWOT

OpportunitiesOpportunities Increase in vegetarian popularityIncrease in vegetarian popularity Increasing health awarenessIncreasing health awareness Protein based pasta sauceProtein based pasta sauce

ThreatsThreats Established competitionEstablished competition Market dominated by few large firmsMarket dominated by few large firms Pulse consumption lowPulse consumption low


OBJECTIVES & GOALSOBJECTIVES & GOALS

Supply Sobeys and FCL Calgary in Year 1 Supply Sobeys and FCL Calgary in Year 1

To receive an “endcap” or eye catching shelf To receive an “endcap” or eye catching shelf position position

Target the major urban areas Calgary in Year 2 Target the major urban areas Calgary in Year 2 and 3 and eventually Saskatchewanand 3 and eventually Saskatchewan

Establish a firm stand in the growing health Establish a firm stand in the growing health food industry food industry


PRICEPRICE

25% Markup Over 25% Markup Over Main Stream Main Stream Sauce. Sauce.

$5.88 – Retail (30 $5.88 – Retail (30 % mark-up)% mark-up)

$4.12 – Wholesale $4.12 – Wholesale


COMPETITOR PRICINGCOMPETITOR PRICING

Product Name Package Size

(ml) Price ($)

Catelli Garden Select 700 2.27

Prego Traditional 675 2.98

Ragu 700 2.48

Rozoni Portabello Mushroom 700 3.48

Healhy Choice Traditional 700 2.98

Classico di Basilicata 700 2.98

Compliments Traditional 700 2.77

Compliments Organic 700 5.48

Primo 680 2.48

Hunt’s Thick and Rich 680 1.98

Catelli Spaghetti Sauce with meat 398 1.48


PROMOTIONPROMOTION

Free Press- Calgary Free Press- Calgary Vegetarian ResourceVegetarian Resource

Magazine AdsMagazine Ads

Ex: Flare, Country Ex: Flare, Country WomenWomen

In-Store In-Store – Taste Tests Taste Tests – Co-op Store Co-op Store

Flyers/Coupons. Flyers/Coupons.


DISTRIBUTIONDISTRIBUTION


Financial PlanFinancial Plan


Finance BudgetFinance Budget

Long Term Debt$115,000

Owners Equity 385,000

Total$500,000

*This will only cover construction and first year operations


Balance SheetBalance Sheet

Assets Liabilities Current Assets Current Liabilities Cash $(101,026) Accounts Payable $33,476 Accounts receivable 35,556 Total inventories 21,621 Long Term Liabilities Total current Assets $(43,849) Long term debt 110,765 Total Liablities $144,240

Long Term Assets Buildings, Machinery & Equip. $387,875 Owner’s Equity Accumulated C.C.A. (22,358) Owner Equity $385,000 Land 1 Retained Earnings (207,571) Total Long Term Assets $365,519 Total Owner Equity $177,429

Total Assets $321,669 Total Liabilities & Equity $321,669


Unit Cost of ProductionUnit Cost of Production

Ingredients costs $0.20 Packaging 0.99 Total materials per jar $1.19

Direct labour $1.80 Overhead cost 0.60 Total Unit Cost of Production $3.59

Marketing and Administration $1.50

Total Unit Cost per Jar $5.09


Breakeven Analysis Breakeven Analysis Using Change in Using Change in Wholesale PriceWholesale Price

0

1

2

3

4

5

6

7

8

1 2 3 4 5 6 7 8 9 10

Year

Pri

ce p

er J

ar

cash flow break even net income break even economic break even


Breakeven Analysis Breakeven Analysis Using Change in Yearly Using Change in Yearly ProductionProduction

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

0 2 4 6 8 10 12

year

jars

pro

du

ced

per

year

Base Production cash flow break even net income break even


ScenarioScenarios s

Base Case Best Case Worst Case

Wholesale price per jar 4.12$ 5.55$ 4.12$

Volume produced 70,000 106,223 50,000


Financial SummaryFinancial Summary

Very high equity investment Very high equity investment requiredrequired

Negative ending cash = Negative ending cash = unfeasible unfeasible

plan plan Need to investigate alternatives Need to investigate alternatives

to provide a viable planto provide a viable plan


QuestionsQuestions

college of agriculture and bioresouces agec 495 chad bohachewski neil macdougall leah welter blake...

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