eConcordiaFITTskills International Trade Management Course

International Business Plan for The UAEMaple Springs Mineral Water Company

In memory of The Sheik.

Name: Daniel J. Costello Student ID: 1811 Address: Daejin University, Department of International Trade and Management, Pocheon, Gyeonggido, 487-711, South Korea. Telephone Number: +82-(0)31-535-3554 E-mail: costello_daniel@yahoo.com

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 2II. CORPORATE PROFILE/NATURE OF BUSINESS. . .. . . . . . . . . . . 4III. MANAGEMENT AND HUMAN RESOURCES. . . . . . . . . . .. . . . . . 6IV. TARGET MARKET/ENVIRONMENTAL SCAN.......... . . . . . . . . . . 7POPULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ... . 7UAE NATIONALS..............................................................................................…...7BUSINESS ENVIRONMENT………………………………………………8ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9MINERAL WATER RETAIL SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10HOTEL/RESTAURANT/INSTITUTIONAL SECTOR . . .. . . . . . . . . .. . . 12CONSUMPTION TRENDS/CULTURAL NOTES . . . . . . . . . . . .. . . . . .... 12TARGET CUSTOMER/PROFILE…………………………………..…12-16V. MARKET ENTRY/MARKETING STRATEGY………………...17-22VI. OPERATIONS OVERVIEW……………………………………..23-24VII. FINANCIAL RISKS AND MANAGEMENT STRATEGY. . . .25-32VIII. CONCLUSIONS AND RECOMMENDATIONS……………….33IX. BIBLIOGRAPHY..……..……………………………………....….34-36APPENDICES

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I. GCC LABELING REQUIREMENTSII. UAE IMPORTERS OF MINERAL WATERIII. GOVERNMENT MINISTRIESIV. UAE IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINEV. TRADE SHOWS

I. EXECUTIVE SUMMARY

Healthy drinking water is a scarce resource in the United Arab Emirates. Conspicuous consumption however is not. With the improvement of local luxuries, sales of bottled drinking water have increased sharply, rising 10 to 14% annually since 2002. It is forecast that UAE drinking water needs will continue to grow as the population grows as much as 40% over the next five years with only inflation as a serious concern for the slowing of the local exploding economy which should little affect our chosen customers.

Urban areas are mushrooming liberally throughout the UAE as are the numbers of resident millionaires. Distribution systems are superb, and still improving. Modern retail includes supermarket, hypermarket and convenience stores. However these outlets provide poor points of sale for any new Canadian entrant saturated with a coven of Nestlé’s or DANONE’s label collecting knock-offs. Upper class consumers are ill-served with few premium genuine luxury water products. Most competitors are flogging PET bottle concoctions of questionable quality especially unknown plastic leeching chemicals, dissolved solids, etc. The five star hotel, and luxury class restaurant and institutional sectors offer a comfortable setting for expensive mineral waters seeking to replicate new wine-like market segmentations. Demand for premium bottled waters is growing, however, few new, or Canadian premium waters

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are found in the UAE market.

The UAE domestic producers dominate the mass market and bulk water distribution network. However, The UAE still imports many water products in order to meet consumer preferences for trusted global brands. Many constraints limit premium water positioning among Canadian companies. Among these shipping costs, competitor positioning, lack of global brand awareness and unfavourable distribution agreements may be observed. In addition attempting to penetrate in the mass market sector clearly overloaded, is problematic. At the same time, a low 5% import tax ensures that any premium water imported based on ex-work and shipping costs or CIF values will have a nominal impact on premium pricing profits. GCC packaging and labelling requirements appear reasonable as well several opportunities exist to network and build relationships in one of the Arab world’s most successful and moderate business-friendly environments.

Despite challenges, risks and constraints there are potential opportunities for Maple Springs Mineral Waters. This report attempts to carefully assess market access with what may be known about it in an as exhaustive study as may be borne in a sparse number of pages. Forecasts for MSMW conclude that some risks are worth taking especially with non-performing capital assets. Canada appears rife with them. It is the hope that somewhere along the line Maple Springs leadership may spring forth and take the reins and procure real profits.

II. CORPORATE PROFILE

NATURE OF BUSINESS: Maple Springs Mineral Water Company (MSMW) originated in Baxter’s Harbour, Nova Scotia in 1969 as a sole proprietorship. The company sells mineral water in the provincial domestic market of Nova Scotia and has logged steady 10-15% annual growth with a consistently profitable office water supply service primarily in the Halifax Regional Municipality with 18.9 L coolers providing 50% of business and consumer-size recyclable bottles (500 ml and 1.5 L) at convenience stores and supermarkets across the province supplying the other 50%. At present MSMW is a leader in both of these sectors in Nova Scotia. MSMW operates as a direct sales manufacturer, agency and distributor to supermarkets and convenience stores with no branches, divisions, business relationships, or joint ventures networks.

PRODUCT DESCRIPTION: MSMW provides an organic, natural mineral water with Mic Maw legends describing it as having miraculous, healing and restorative medicinal powers. The water source is completely controlled by MSMW and it delivers its products to market either in 500 ml, 1.5 L PET bottles or 18.9 L PET cooler bottles (See Appendix 1: Product Specification).

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DUBAI MARKET MODIFICATIONS: Research indicates that the UAE market is highly competitive at the retail and supermarket food services sector. Demand is high in the 5-star hotel and glass bottles packaging importers and distribution market. Delivering tetra-pak drinking boxes is considered a cost-effective and environmental alternative to PET packaging for the UAE retail market. However this would undermine premium positioning. Clay fired pottery bottles for retail sales and attractive stainless steel milk dispenser ready single use 5 gallon water bags would be attractive packaging for the premium water market. GCC market labeling requirements include production and expiry dates with ingredient labelling in Arabic all necessary as of 2008.

QUALIFICATION TO PURSUE UAE EXPORT MARKET: At this time MSMW has neither previous exporting experience nor premium market products however it seeks to expand sales potential, reduce dependence on Canadian domestic sales, improve local competitiveness through redesign of products, reorient and increase manufacturing productivity, and gain experience in developing and marketing premium water products abroad. Review of financial statements indicates retained earnings with a solid export strategy and continued domestic market growth should provide the necessary capital to expand into the UAE imported premium mineral water market sector.

III. MANAGEMENT AND HUMAN RESOURCES

MANUFACTURING: Current capacity is insufficient. Installing a new tetra-pak line in place of current PET molding facility would reduce production time by 50% and take up 50% of current factory floor space. Premium 5 gallon single use bags may be processed at local diary packing facilities on daily down-times. This would increase current inventory volume capacity by 50%. Concurrent construction of a pottery bottle based filling line would fulfill premium bottled water inventory requirements. This would eliminate need to hire more line workers. MSMW will require for proactive export strategy:

A. International Sales and Marketing Manager B. International Documentation/Contracts Specialist

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Maple Spring Mineral Water Organizational Chart: Proactive Export

Duties described below:

A. International Sales and Marketing Manager

SALES: Negotiates and secures local partnerships either through agency and/or distributorship agreements. Attends annual trade shows in Dubai such as: The Gulf Food Expo, The Middle East Natural and Organic Products Expo, The Halal Food Expo, as well as the Annual Arab Water Forum. Contact with retail operators such as: Majid Al Futtaim (MAF)/ Carrefour UAE, Emke Group/ LuLu supermarkets, Spinneys Dubai LCC, and Dubai Duty Free. Federal Foods LLC and Union Beverages Factory represent the largest food sector distributors requiring contact in the UAE market while Maritime & Mercantile International (MMI) and African & Eastern NE BVI Ltd represent the two largest alcoholics drinks distributors in the UAE requiring contact (See Appendix Two: Retailers and Distributors). Signs contracts with any of them on site visits.

MARKETING: Designs collaborative marketing, forecasting and export promotional planning services required.

ADVERTISING/SALES AND PROMOTION:

Prepares brochures, flyers and public relations materials in English and Arabic useful for all trade fairs and contract negotiations.

B. International Documentation Specialist

TRANSPORTATION: Selects and contracts shipment and freight forwarding services with UAE licensed import logistics providers at Jebel Ali.

FINANCE: Ensures all payments, L/C and non-payment insurance documentation is completed correctly.

ACCOUNTING: Ensure all invoices, deposits, and financial records for export sales are in proper order.

Executive (owner and assistant)

Domestic Sales and Marketing (5 employees)Domestic Quality Assurance (2 employees)Domestic Production (23 employees)

Domestic Logistics (12 employees)

Domestic Accounting (6 employees)Domestic Human Resources (2 employees)International Sales and Marketing Manager (1) employee

International

Documentation/Contracts Specialist (1)

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EXPORT ADMINISTRATION:

Monitors and prepares all order processing, price quotes, travel arrangements and export shipping documents.

LEGAL: Engages all necessary international legal services necessary to write export agreements and ensures patent and trademark protection in the UAE with local/foreign attorneys.

IV. TARGET MARKET: THE UAE

Zayed University (2008)

POPULATION“The UAE has one of the highest population growth rates in the world, estimated at 5.6 per cent, and 45 per cent of the UAE population is less than 15 years of age.” (Kahleej Times, 2005) Abu Dhabi projects 40% total population growth over the next five years, to 1.3 million.1 Dubai currently inhabits a population 1.6 million as of 2006 (and in 2006 a total of 292,000 people became permanent residents = 24,300 people added each

1 HC Securities, (2008) “UAE Market Brief”

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month). 2 The UAE Ministry of Economy reported a total population estimated nearing 4.48 million at the end of 2007 with projections of 6.12 per cent growth to nearly 4.76 million by the end of 2008 and 6.31 per cent growth to 5.06 million at the end of 2009.3

UAE NATIONALS

Staff Reporters (2006) “TEDAD Census 2005 Graph,” The Gulf News.

The 2005 TEDAD UAE Census reveals the small population of Emirati nationals as compared to foreigners who make up the majority of the approximately 4.5 million residents of the UAE. A large proportion of the data 38.1% consists of nationals less than 14 years old with nationals less than 20 years old at 51.1%. Emirati nationals total 824,921 or 20.1% of the total UAE population. Of these males and females are closely similar in percentages with national males of 418,057, consisting of 50.7 % population and national females representing 406,864, or 49.3 % of total Emirati population. Literacy rates exceed 91% and higher education opportunities are growing but only 11% of nationals complete a university degree. Over half of these students are female. Young men have other opportunities, in the police or armed forces revealing women may be more career-minded. At the same time there are nearly 30,000 unemployed nationals in the UAE and total nationals employed in the private sector are less than 2% of the total.4

BUSINESS ENVIRONMENT

2 Abeidan, S (2008) ”Global Development One World – One Community,” UDIA National Conference, 2008, slide 12.

3 Kawach, N. (2008) “Expat growth widens UAE demographic gap,” Emirates Business 24/7, September 25, 2008, Arab Media Group.

4 Staff Editors (2008) “Emirates: Abu Dhabi Country Profile,” Oxford Business Group 2008.

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The United Arab Emirates is comprised of seven regional emirates: Ajman, Fujairah, Ras al-Khaimah, Sharjah, Umm al-Quwain and the two largest are Abu Dhabi and Dubai. These are politically led by a generous and equitable federal government highly influenced by local tribal associations. The UAE is a Muslim nation with a moderate position for example; Christian, Catholic, Hindu and Buddhist temples are all locally permissible and are attended generally by foreign workers and residents. Shari’a and civil courts comprise the legal system and court procedures are bureaucratic in nature.

“The creation of strategic free-trade zones in recent years has further enhanced the attraction of the UAE as a sensible and reasonable legal environment in which to conduct business. I have no doubt that the UAE will continue to lead the way within the region in attracting foreign investors and providing them with a legal environment that supports and protects their investments.” (Andrew Wright, general counsel of Dubai International Capital)5

While Arabic is the official language English is widely spoken and Malayalam, Persian and Urdu are often heard due to large proportions of hired labour sourced from India, Iran and Pakistan. The communications systems courtesy of Etisalat are world-class and lead the region in reliability. Taxes are minimal to non-existent however ever-present fees for every possible local permit exist and increase in cost annually. 6 A.T. Kearney stated, “The United Arab Emirates rose to 8th position in the 2007 FDICI, up from 22nd in 2005 FDICI.” (Foreign Direct Investment Confidence Index) (AME Info, 2007)

ECONOMYRecent economic indicators:

2003 2004 2005 2006 2007(a) 2008(b)

GDP (US$bn) (current prices):

88.6 103.8 133.0 163.3 192.6 239.9

GDP PPP (US$bn) (c):

104.7 116.4 134.5 151.7 167.3 181.4

GDP per capita (US$):

24,945 27,595 32,392 38,613 42,934 50,383

GDP per capita PPP (US$) (c):

29,490 30,954 32,751 35,882 37,293 38,108

Real GDP growth (% change YOY):

11.9 9.7 8.2 9.4 7.4 6.3

Current account balance (US$m):

7,586 10,335 24,321 35,942 41,666 65,888

Current account balance (% GDP):

8.6 10.0 18.3 22.0 21.6 27.5

Goods & services exports (% GDP):

79.9 88.6 93.2 91.5 94.4 91.9

Inflation (% 3.2 5.0 6.2 9.3 11.0 9.0

5 Jafar, S. (2007) “United Arab Emirates: Reform and Growth in Parallel,” IBA Daily News (Singapore Conference), Legal Media Group, October 17, 2007, p.10.

6 The author resided, worked and studied international business at UOW Dubai while in The UAE as a civilian military officer-class employee of Abu Dhabi Naval College from 2000-2003 and feels confident his experience and expertise is sufficient to describe general business conditions there.

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change YOY): Market Information and Analysis Section, DFAT, Australia (2008) “UAE: Fact Sheet,” ABS, IMF Data.

Actual GDP growth reached 7.4 per cent in 2007. Growth in all sectors due to market liberalization policies with non-oil sector contributing 64.3 per cent of total GDP. Tourism, commerce, infrastructure, industry, finance, and banking services have contributed to consumer expenditure and external trade. A stable political system, solid infrastructure, high oil revenues, excellent geographical location and developed banking system are described as factors maintaining UAE economic growth. Inflation appears a challenge which may hinder growth. Inflation reached 11.1 per cent in 2007, a 9.3 per cent increase from 2006. The US dollar, real estate costs, fuel and building materials prices are all described as significant factors. (Emirates Business, 2007)

The UAE business environment has been making significant progress since WTO membership in 1995. Local investors still require private sector partnerships in the beverage industry inclusive of bottled mineral waters. An exponentially increasing food sector trade fairs schedule and simplification of trade license issuances is adding improved business support services as well as numerous new free zone facilities to investor opportunities. The UAE is signatory to the Paris Convention for the Protection of Industrial Property, the World Intellectual Property Organization (WIPO), and the WTO Agreement on Trade - Related Aspects of Intellectual Property (TRIPS).7 Customs clearance are some of the easiest in the world along with some of the lowest global import costs, as well as quality of infrastructure, ease of hiring foreign labour and reliability of transport services. 8

Dubai is the business capital of The United Arab Emirates. Being situated in a commercial logistics transshipment centre of the Arab Gulf and a major source of 10 % of global petroleum and natural gas supplies (mostly in Abu Dhabi) the rulers of Dubai have embarked on an aggressive campaign to attract global financial and transnational corporations to Dubai with generous real estate and flexible residence visa programs as well as several state of the art research and development, educational and leisure hubs to attract global investors. Foreign investment is encouraged however care must be taken in any local partnership arrangements as some local partners are more reliable than others. Dissolution of partnerships is common and the local legal system is not generally sympathetic to the preferences of foreign investors. Funds repatriation under dissolution of contract terms might be quite challenging.9

7 Ministry of Finance and Industry (2008) “UAE Business Environment,“ The Government of the United Arab Emirates.

8 World Economic Forum (2008) “The United Arab Emirates,” The Global Enabling Trade Report 2008.

9 Author’s reference.

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MINERAL WATER RETAIL SECTORBULK COOLER SALES: Cooler bottles represent nearly 60% of total drinking water sold in the UAE in reusable 18.9 L bottles (5 gallons) for use in coolers. An emerging trend is market leader Masafi entering the bulk purified water market with the launch of 100% fully recyclable 4-gallon bottles (single-use bottles with pick-up of empties and non-food industries recycling) in the Middle East. Oasis has also announced plans for a 4-gallon single use bottle. Oasis holds nearly 75% market share in the bulk water segment in the UAE. Therefore MSMW clients would represent those buyers who prefer imported cooler bottled water which make up a mere 4% of the total purchasing segmentation.10 What remains absent is an exclusive premium stainless steel cabinet supported sales mode for 5 gallon single use clients.

CONSUMER SIZED RETAIL BOTTLES: Supermarkets generally have two rows of over a half-dozen domestic brands, usually including a house-brand, and Evian, Volvic, Contrex, San Pellegrino, Apollinaris and Perrier. Flavoured water varieties are described as recording annual compound growth rates of 15%.Al Ain Mineral Water Company has in excess of a 23% share of the UAE bottled water market while Oasis sponsors the annual Terry Fox Run. Perrier has a 65% segment share of premium sparkling water across the region. The UAE grew by 20% last year for Perrier, to reach sales of 2.75 million bottles. Their success is described as:

A. Targeting entire food services sector (including upscale outlets like Starbucks)

B. Flexible range of product sizes (from mini-bar to airline sizing)

Water bars which provide a selection of premium bottled waters from various countries such as the Magnolia Restaurant are developing a small niche in Dubai.11 As of present no global premium water companies are delivering pottery inspired packaging or attractive stainless steel or rosewood topped rubber bung or cork stoppers.

10 Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food Program Section, Consulate of Canada, Dubai, UAE.

11 Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food Program Section, Consulate of Canada, Dubai, UAE.

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UAE Brand Sales Prices and Market Share12

Brand Format AED Shelf Price(2)

Retail Share(3)

Masafi (local) 1.5 L 1.25 37.9%Al Ain (local) 1.5 L 1.25 23.6%Aquafina (local) 1.5 L 1.50 6.6%Oasis (local) 1.5 L 1.25 6.0%Arwa (local) 1.5 L 1.25 5.4%Gulfa (local) 1.5 L 1.50Nestlé (Pure Life, local) 1.5 L 1.25Home Choice (local) 1.5 L 0.85Volvic (France) 1.5 L 4.75Evian (France) 1.5 L 6.50 15.0%San Pellegrino (Italy) 750 mL 5.50Perrier (France) 750 mL 5.75Eau de Perrier (France) 750 mL 6.25Oasis Blu (local, sparkling) 1.0 L 7.00Clearly Canadian (Canada) 414 mL 5.95

HOTEL/RESTAURANT/INSTITUTIONAL SECTORThe last decade has seen annual GDP growth rates exceeding 16.7% in Dubai making it the world’s fastest growing urban consumer market. At the same time major global and regional hotel management teams have developed an impressive array of hospitality services. At present there are more than fifty five star hotels in Dubai. The Statistics Centre of Dubai notes a total of 302 hotels with 30,648 rooms with an average overall occupancy rate of 75.5% further supplemented 111 hotel apartments totaling 8652 serviced apartments with an average occupancy rate of 71.1% as of 2006.13 Premium dining suggests service modes should exclude the average plastic water cooler in place something stainless steel would enrich the water drinking experience.

CONSUMPTION TRENDS/CULTURAL NOTESConsumer spending in Dubai is considered excessive and potentially economically dangerous according to experts. UAE private consumption by individuals and families on goods and services totaled $84 billion as of 2006. An average of $19,761 per individual for a population of 4.25 million was noted as the world’s highest by the Abu Dhabi-based

12 Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food Program Section, Consulate of Canada, Dubai, UAE.

13 Staff Editors (2008) “Analysis 2007: Dubai Hotel Establishment Statistics,” Government of Dubai, Department of Tourism and Commerce Marketing, Dubai, UAE.

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Arab Monetary Fund (AMF). This consumption pattern has highly impacted premium bottled water products in the UAE.

With the highest per capita liquid consumption in the world, the Middle East and wider region offers fantastic opportunities for companies in the drinks sector. The United Arab Emirates has reached the highest levels of per capita consumption of 635 litres a year, compared to the global average of 197 litres in 2006. Hot and dusty conditions, a fast-growing population, and increasingly sophisticated demand for “designer" drinks have all fuelled growth in the market. (Eye of Dubai, 2008)14

On June 28, 2008 the Abu Dhabi Department of Planning and Economy released a report detailing adverse effects of such consumer spending. Consumer borrowing in the UAE has doubled in the last four years with an increase of 47 percent in the last year of reporting. In addition inflation reached 11.1% in 2007 with negative real interest rates increasing demand for credit. The report describes a "hidden poverty" in the UAE, "where a certain segment of the society seeks to possess luxurious items at the expense of essential goods." It therefore may be assumed premium imported bottled water is a luxurious item.15

TARGET CUSTOMER/PROFILEMSMW’s target customers represent hoteliers, distributors, and food sector agencies available to locally market and sell imported bottled water. As it is likely that Perrier’s strategy of wide ranging market accessibility of products is necessary to capture increasing annual market share MSWM will also have to locally negotiate wide ranging and non-exclusive distributed and agency positioned bottled waters in as many potential sales locations as possible. Time contingent contracts may be an option particularly in synchronizing timing of market launch and will require significant negotiations lead time. Time is in fact a commodity MSMW can claim easily. In Arabia there is often no need to rush and in terms of business practice slow and steady wins the race. The longer MSMW takes to negotiate wide ranging and diffused market penetration patterns the better the results that may be expected and the more cumulative the purchasing points accumulated. However customers B and D represent mass market consumption which will provide lower potential sales opportunities and perhaps excessive price and positioning competition for our premium products.

CLIENT SCENARIOS CUSTOMERS SALES LOCATIONS

Customer A: Males (more likely foreigners)

5 star hoteliers Over fifty in Dubai alone

Customer B: More likely females (nationals or foreigners)

Hypermarkets/supermarkets Majid Al Futtaim (MAF)/ Carrefour UAE Emke Group/ LuLu Spinneys Dubai LCC

Customer C: Foreign males and females exclusively.

Off License Liquor Stores Dubai Duty Free African & Eastern

14 Staff Reporter (2008) “Middle East Beverage Market Offers Untapped Opportunities,” Eye of Dubai, Fourth Dimension, February 14, 2008.

15 Staff Reporter (2008) “Consumer splurge threatens UAE economy,” Reuters, June 29, 2008.

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Gray - Mackenzie Spinneys Liquor

Customer D: Males and females (nationals or foreigners)

Convenience stores, snack Bars, food marts, coffee shops

Dunkin DonutsStarbucksGas stop

Customer E: Males and females (nationals or foreigners)

Water bars, casual dining, fast food restaurants

MagnoliasTGIFChilies

Customers A, C, and E seek to purchase MSMW bottled water products to service our target clients (and their needs) for the following reasons:

A. Canada is seen as a reliable supplier of imported bottled water: Canada’s Dubai Consulate provided evidence that for example of B.C.'s premium Canaqua water (other described as the most expensive water in the world), Whistler water, and Clearly Canadian (a more generic and mass market flavoured water) are all (periodically) available. There are perhaps problems in distribution without a Perrier-like market penetration.

B. Canadian imported bottled waters are under-represented in the UAE market: Such a statement leads from A as the marketing and distribution of these bottled waters has not been wide ranging enough to capture solid market share. This is to MSMW’s possible advantage in limiting market entry to customers A, C, and E .

C. Canadian export products have a positive safe image (food safety): Canada’s global product image, if there is one, is of nature, naturalness and safety. These are all motivators of purchase intention among premium imported bottled water purchase clients.

D. Growing demand for bottled water products in the UAE: “The UAE foodservice market is larger and more important than is initially apparent and is also growing at rates not seen in any developed countries of the world. (over 10% per annum in most channels)” (Drink Expo UAE, 2008) It would appear that such growth is primarily in the mass market sector thus higher growth may be possible in the premium market segment. This mirrors Canada’s own increase in bottled water consumption trend, “Over the past few years, bottled water sales have grown at double-digit rates in both the U.S. and Canada.”16

LIMITS OF CLIENT PROFILEDubai represents 45% and Abu Dhabi represents 19% of the total client population. As the inhabitable area of the entire nation is roughly the size of Rhode Island while these two markets demographically represent the leaders the rest of the nation is still 36% of our demographic client base. The mean distances between other population centres such as the east coast or Al Ain (south east of Abu Dhabi) are not beyond distribution points in Abu Dhabi and Dubai. The proportion of national or foreigner clients purchasing

16 “TrendWatch—Consumers Quench Thirst with a Flood of Bottled Waters,” Consumer Insight, AC Nielsen, Summer 2002.

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imported water at premium prices is essential yet unknown. In particular these customers represent 3% of the total market share sales of imported water and thus extrapolating this total to the population results in potentially 135,000 individuals. It must be assumed that cost for quality is not a factor and that premium prices represent the top 20% income earning population. However if national, then it may be assumed that the majority of these customers are Emirati females who do most of the shopping (if not through the agency of their servants) and that the comparable foreign population is also representative of an over-emphasis on female purchasers both at the retail supermarket sector. Males would more likely represent customers in highly visible impulse purchase decisions sales domains such as convenience stores, hotels and/or water bars as well as liquor store outlets. Entry into this market will require highly visible advertising and marketing at all of these locations supplemented by wide ranging sales outlet suitability to affect and draw new users out of local non-loyal and loyal switching consumer purchase intentions. In addition, creating a premium bulk water supply network for the first time where there currently is none could be problematic and initially highly selective.

POTENTIAL REVENUEThe potential is to produce and sell a product which costs us virtually nothing more than the 5% tax to import in the UAE and the shipping and insurance costs to cover a single dollar of glazed pottery bottle value as well as the advertising and marketing to maintain a premium position in a market where few premium luxury imported waters exist. The potential revenue is significantly higher on a bottle of water retailing in the region of twenty to twenty-five dollars rather than a mass market product which is perhaps equal in all cost aspects in market that is seeing cumulative 14% growth annually in the bottled water sector specifically and 10% annual growth in the food sector generally.

FIT FOR PRODUCT OR SERVICE

TETRA-PAK: This mode suits domestic environmentally conscious mass market consumers and reduces unit costs and ex-factory/ex-works invoice pricing. In addition it mitigates affects of bisphenol A plastics contamination levied at PET which is a good first move mass market packaging shift which will probably become prevalent in the next few years. While it is certainly a trend in the Gulf Region it better suits a transition in our domestic sales first to give us time to build up brand recognition at the premium level where demand and entry for our product may be easier. 17

CLAY FIRED AND GLAZED POTTERY BOTTLES: A review of fine waters website illustrates that there is no preferred packaging or design mode for premium bottled waters and allows wide flexibility in the fit for product positioning. This mode suits UAE environmentally conscious premium market consumers and minimally impacts unit costs and ex-factory/ex-works invoice pricing due to local clay sourcing and production at our Baxter’s Harbour facility. In addition it also mitigates affects of bisphenol A plastics contamination levied at PET. In addition

17 Lloyd - Jones, T. (2007) “Arab beverage markets in transition,” Business Intelligence Middle East, August 17, 2007.

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PREMIUM BULK WATER DISTRIBUTION: There is no current Rolls Royce of bulk water distributors in the UAE. The market is dominated by local mass market competitors often achieving share through heavy price competition. MSMW might find topping this market to be a gamble worth taking. Especially if Maple Springs is the first to achieve it. There are plenty of people who spare no expense in Dubai. Where is the bulk water supplier to match their other consumer preferences?

PRODUCT DIFFERENTIATIONThe majority of the local imported competition is segmented and selling to customers and clients in customer B and D profiles or hyper/supermarkets and convenience stores. These segments also likely provide the largest proportion of bottled water sector gains. The following tables illustrate that the price competitiveness in these two sales segments appears fairly saturated and would not necessarily provide well differentiated positioning for our products further emphasizing that the premium bottled waters are a very small portion of a very small piece of a very big pie.

Market size and growth18

The United Arab Emirates

2006 Mnlitres

2006US$ Mn

CAGR %02-06

Share %Imports

Bottled water575.0 129.5 14.0% 3%

Compounded annual growth rates as of the four year period are described as 14.0% for mass market driven import products with which MSMW premium bottled waters would not enter into direct competition.

Market pricing domestic and imported19 The United Arab Emirates

Bottled water UAEDirham

CAD equivalent(CAD = Drh 3.13)

Local brand 1.5 l still 1.10-1.25 0.35-0.40

PERRIER 750 ml sparkling

5.00

1.60

These market prices would not sustain the impetus for MSMW exports to the UAE. Thus premium water segments and marketing strategy provide the only identifiable under-18 UK Trade and Investment for Yorkshire and Humber & Asian Trade Link in Bradford (2007) “Accessing the Gulf States: United Arab Emirates and Saudi Arabia A guide to doing business for Yorkshire and Humber food and drink companies,” Food from Britain, London, England.

19 UK Trade and Investment for Yorkshire and Humber & Asian Trade Link in Bradford (2007) “Accessing the Gulf States: United Arab Emirates and Saudi Arabia A guide to doing business for Yorkshire and Humber food and drink companies,” Food from Britain, London, England.

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resourced segments for Canadian water exports to the UAE.

MARKETING STRATEGY

Direct sales may be possible with small niche players in our chosen customer segments: 5 star hoteliers, off license liquor stores, water bars, casual dining, and fast food restaurants however it would be a “chalk and cheese” or ill-assembled piecemeal method of market penetration where we might make more impact towards segments entry attempt as many open ended, time synchronized and non-exclusive distributorship agreements as possible. Regardless of our entry method the GCC tax of 5% will be levied on any exports we make. Preparing an English and Arabic enabled sales website for wholesalers and direct purchasers is not a bad idea. However as UAE liquor stores are monopolized by two distributors, African & Eastern and Grey Mackenzie, it would appear reasonable to rely upon their distribution knowledge and experience particularly as they also supply all of the five star hotels. There are a few other major imported water distributors. It would be

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conducive to generously apply sales incentives to boost equitable distribution of profits for meeting sales growth targets which meet or exceed the imported bottled water averages for each year of distribution. In addition the larger number of contracted distributors then the more competitive their efforts may be to secure further contracts beyond an initial three year to five year period. There are no known methods of green fielding imported bottled water supplies and this in itself might defeat our efforts and the purpose of the enterprise.

DOMESTIC PRODUCT CONVERSION TO SUPPORT EXPORT EXPANSION

TETRA-PAK CONVERSION: This initial cost outlay would provide more flexible market positioning in our current domestic marketing and free up necessary production volume to double our current capacity to permit more ranging access to segmentation in Nova Scotia and support expansion to neighbouring provinces mostly through increasing brand awareness based on increased surface area of advertising on packing versus PET. This would increase our annual profits locally to provide additional export market capitalization. Our goal is to double Canadian sales volumes in three years due to tetra-pak. The flexibility in sizing meets Perrier’s variable mode strategy useful for us in Canada. “Whatever one’s reasons are for consuming bottled water, and despite the controversy that continues unabated, sales of bottled water grew 55.4% from 2006 to 2007, according to Mintel Reports.”20

PREMIUM EXPORT PRODUCT DESIGNED FOR UAE LUXURY MARKETCLAY FIRED AND GLAZED POTTERY BOTTLES: Our export earnings will be affected by our contingency and equitable profits distribution with distributors and retail outlets in the premium customer/client service modes described as customers A, C, and E. Our purpose in the first three to five years should be to gain market share and finance the exercise to the point that the UAE market itself is not costing our company any money after that point. Self financing is our initial goal thus our potential

20 Mellgren, J.(2008) “2008 Trend Report: Specialty Beverages,” The Gourmet Retailer, Nielsen Business Media, Inc. July 3, 2008.

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revenue to gain acceptance among our customers is to share a significant portion of our profit margins which should be excessively high as our cost to produce designer decorator bottles should be kept below one dollar CAD per unit. Our target range of pricing is not less than that of Canaqua to identify this particular Canadian brand as our single current major market positioned Canadian competitor. Our profit margins would thus be within a similar range. Our environmental footprint will also benefit as plastics, aluminum and glass will all continue to reflect variable pricing while our glazed pottery breathes environmental awareness and falls under our complete quality and raw materials sourcing and supply on site.

PREMIUM BULK WATER DISTRIBUTION: This would be the actual hidden target of our export market revenue plan following five years in market. Once our premium bottled water is well positioned in the UAE under terms of customers A, C, and E we could then support an association with Hubert milk dispensers of Germany to specialize their large cabinet sized products which would require little to no modifications from use with milk versus water to establish the Rolls Royce of home water distributors in the UAE market. Our cost of production on what is essentially a single use 5 gallon goat-skinned sized plastic bladder might approach 1000% cost profit margins. This would create a new customer, customer F which would represent premium sports car, yacht, golf and private clubs, show rooms, where associated excesses, luxuries, and taste for premium mineral waters is perhaps unmatched and currently un-segmented.

PRICEMSMW is able to predict that its value added (luxury premium value) price should be at the very most somewhat lower than the lowest offerings of Bling H2O (around 23 USD) and far above the 3.15 CAD charged for Canaqua at Harvey Nichols in Dubai. The pricing benefit to premium water segments is that our customers could not care less about the price. In fact the higher the price the more likely they will seek to purchase it. MSMW would prefer the moniker, “Canada’s most expensive water” minus the plastic bisphenoyl A leeching bottles, to which could also be added, “most elegant.” To repeat, our customers are not price conscious. For this reason we may follow Nestlé’s adaption or polycentric pricing policies with encouraged higher prices and list retail suggestions.

SUGGESTED LIST PRICESMSMW glazed pottery 500 ml bottle: 6.30 CAD (ex-works cost $1.25 each)(Distributor selling price $75.60 / Retail selling price $151.20/case of 24) (Gross margin: 2.10 each)

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MSMW glazed pottery 1.5 L bottle: 18.90 CAD (ex-works cost $1.63 each)(Distributor selling price $113.40/ Retail selling price $226.80 /case of 12)(Gross margin: $6.29 each)

We desire 33.33% of total gross sales to cover our fixed costs, shipping, insurance and whopping profit margins. The equitable distribution incentive ideally positions 33.33% with the distributor to include local advertising and marketing expenses as well as 33.33% for the retail customer as incentive to sell the product. In fact we will stipulate that under normal pricing conditions MSMW will not accept lower than 33.33% of these posted prices. However as our contract will only be with the distributors we will allow them to arrange the profits sharing of 66.66% as they see fit with the customers. In addition our distributors will not pay for our product until it is sold or within 90 days, whichever comes first. This will be risky but for the first three to five years we will permit a flexible approach first from open account facilities and with increasing sales volumes, then requiring partial installments in advance first in the second year, then 50% of distributor selling price in advance in the third year, etc. We feel confident that our distributors will more likely understand our payments plan in the long term perspective and gain confidence in the payments approach over time as we gain market share.

FIVE YEARS FROM NOW

MSMW single use 18.9 L Hubert Cabinet Bladder: 200.00 CAD (slight discount)(German cabinet: 1400 USD dollars ea.): This will be a highly confidential product development on successful achievement of our sales and annual growth goals in the UAE. We will not inform any distributors of this plan until we are ready to commit and implement it. Hubert will sign an exclusive water cabinet available only to us in the UAE market to direct deliver to customers and clients while our distributors take orders and limit profit sharing with our distributors to our water sales only. MSMW seeks no commissions on Hubert dispenser sales and is willing to pass on any/all commissions to distributors and/or absorption of shipping costs which ever is more cost effective in agreement with Hubert contingent that Hubert fulfill any or all warranties or after sales service of said dispensers as well as etch/emblazon the facing panel service area with MSMW logo free of cost.

Price DiscussionThese would represent standard retail prices with our ex-works prices working out to about one CAD per unit above current domestic factory ex-works which would be our quoted import valuation on replacement value and shipping which will be roughly equal in price to our ex-works cost of product. Once distributor has our products customer and client pricing will come into effect. Seasonal variations exist in water purchases which mirror the food sector in general and tend to be affected by religious holidays and fast breaking during feastings of Ramadan and Eid al Fittir and Eid al Hatta. At these times our distributors might choose to make sympathetic price discounts to encourage larger volumes of purchases to which our minimum stocking orders would rise. These seasons change annually with the holiday’s dates. Marginal cost pricing is in effect.

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PLACEShipping method will be through containerized palettes from Halterm in Nova Scotia CIF Jebel Ali. Transit points will include the port zones delivery from factory to Halifax and Jebel Ali to distributors warehouses in Dubai state mandated in the UAE, “mineral water must be transported in chilled containers with temperature not to exceed 25 C.”21 Highly specific packaging and labelling requirements exist (See Appendix: GCC PACKAGING AND LABELLING REQUIREMENTS).22 Freight forwarders, customs brokers and local trucking utilized both by MSMW in country and our distributors in the UAE. A number of possible distributors systems exist (See Appendix: UAE IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINE). Physical locations: 5 star hoteliers, off license liquor stores, water bars, casual dining, and fast food restaurants. Internet service: selected users may place orders over the system. Currently Canaqua does not permit Canadian purchases however their internet site does function as a sales outlet worldwide.

PROMOTIONDeluxe packaging mode invites consumer participation through regular seasonal design modifications and potential client design contest competitions allowing the product to be continually reintroduced as “new” to the market in a periodic advertising and marketing fanfare which would be premium bottled water’s UAE equivalent to France’s annual celebration of Beaujolais Nouveau in concert with numerous food and beverage annual expos as well as shopping festivals, water parks, water display installations and water sports events (See Appendix: TRADE SHOWS).

Media to be used: 5 star hoteliers: brochure stand alone card near or upon room/bar fridges off license liquor stores: large cardboard display at or near palette water bars, casual dining, fast food restaurants: table stand alone placards airport first class lounge and only the best/newest large mall hoardings

It would be better to estimate the costs of advertising in the terms of advertising to cost ratios as these are most evidently available for example, one may extrapolate the percentage of the Swedish bottled water market with 60% imported brands penetration as an ideal market for such low fixed costs products and a calculated advertising to cost ratio of 6.8% which is perceived as high when compared to other food sectors such as cereals which rise to 10.8%.23 Considering the small UAE 3.5% market share of all

21 Taha M. and Williams, D. (2007) “United Arab Emirates: Food and Agricultural Import Regulations and Standards, GCC Proposes Standardized Import Procedures for Food Products,” GAIN Report: Global Agriculture Information Network, USDA Foreign Agricultural Service, p. 7.

22 GSO Technical committee for sector standards of food and agricultural products GCC Standardization Organization (2008) “Bottled drinking water,” GSO5 FDS, (GSO), p.9.

23 Friberg, R and Gansland, M. (2005) “An empirical assessment of the welfare effects of reciprocal dumping,” Journal of International Economics, Volume 70, Issue 1, September 2006, Pages 1-24.

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imported bottled waters this ratio appears quite conservative and might be considerably higher however alternative data is unknown. Furthermore considering our small knowledge of local marketing costs it might be better to ask our distributors to competitively submit marketing proposals in cooperation with professional domestic agencies locally prior to contracts negotiation. Press releases would be regularly timed to coincide with promotional events with The Gulf News and The Khaleej Times as well as various other Arabic language newspapers all highly oriented to business promotional reporting generally free of charge.

CLIENTS CUSTOMERS SALES LOCATIONS

Customer A: Males (more likely foreigners)

5 star hoteliers Over fifty in Dubai alone

Customer C: Foreign males and females exclusively.

Off License Liquor Stores Dubai Duty Free African & Eastern Gray - Mackenzie Spinneys Liquor

Customer E: Males and females (nationals or foreigners)

Water bars, casual dining, fast food restaurants

MagnoliasTGIFChilies

PEOPLETo reiterate our customers know few price limitations in terms of spending and as Merrill Lynch (posthumously) relates the UAE has more than its fair share in a 17.5% increase in the number of millionaires in 2007 all spending 14% of their high net worth in luxury consumables and over 10% of their wealth on health and wellness annually.24 These are our target customers.

Purchasing criteria: (Reiterated)

A. Canada is seen as a reliable supplier of imported bottled water: Canada’s Dubai Consulate provided evidence that for example of B.C.'s premium Canaqua water (other described as the most expensive water in the world), Whistler water, and Clearly Canadian (a more generic and mass market flavoured water) are all (periodically) available. There are perhaps problems in distribution without a Perrier-like market penetration.

B. Canadian imported bottled waters are under-represented in the UAE market: Such a statement leads from A as the marketing and distribution of these bottled waters has not been wide ranging enough to capture solid market share. This is to MSMW’s possible advantage in limiting market entry to customers A, C, and E .

C. Canadian export products have a positive safe image (food safety): Canada’s global product image, if there is one, is of nature,

24 McCann, R. J. and Lavayssière, B. (2008) “World Wealth Report 2008,” Merrill Lynch & Co., Inc. and Capgemini.

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naturalness and safety. These are all motivators of purchase intention among premium imported bottled water purchase clients.

D. Growing demand for bottled water products in the UAE: “The UAE foodservice market is larger and more important than is initially apparent and is also growing at rates not seen in any developed countries of the world. (over 10% per annum in most channels)” (Drink Expo UAE, 2008) It would appear that such growth is primarily in the mass market sector thus higher growth may be possible in the premium market segment.

AFTER SALES SERVICEAn English/Arabic customer service enquiries line will be maintained locally through our distributors and will be enclosed in the terms of the distribution agreement. There will be no guarantees or warranties however customer opinions and feedback will be essential in measuring our ability to meet/shape purchase intentions.

OPERATIONS OVERVIEW

ISO 9000 is a strong recommendation for the UAE market as it has high local value as well all products which already conform to Canadian health standards bottled at source. Production requires regular routine testing of dissolved minerals and solids. “Canada bottled water is regulated under the Food and Drugs Act and Regulations as a food product.” Our fixed price costs are quite low and represent some of the lowest in the food sector industry. As our production system is automated the equipment is tailor-made and installed by industrial engineers by tri-party tender process.

International Order Flow Chart

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First of all, we have decided to upgrade our entire administrative process with DHL inspired online ordering, tracking and JIT software facilities. We may more easily monitor and adjust our forecasts as a result and streamline our necessary administrative loads so that each domestic manager will have additional time resources to devote to consultation with our international sales and marketing manager and international documentation specialist. In addition these staff will be able to respond quickly to feedback, customer requests and be available for cross-team planning and research activities led by the learning through doing principle as applied to their new status regarding MSMW’s first offshore export market. In addition their extra time will be well spent in the pleasant crafting of pottery and learning as well as operation and maintenance of the anagama kiln, earth ship and mucking about in our spring’s extensive clays and muds collecting quality packaging material. The ordering system learning will also save time and money for the company.

Export packing materials required as well as ink labelling on glazed pottery bottles to meet GCC requirements. Entire pottery production facility to be built on site to green building quality standards similar to an earth-ship or bermed tires and straw bale construction - one of the lowest square footage costs on the planet..

UAE customer orders product from UAE distributor

Minimum stocking order supplied distributor forwards order to International Sales and Marketing Manager at MSMWInternational Sales and Marketing Manager consults International Documentation Specialist who then confirms order pricing with MSMW Domestic Accounting Manager and notifies Production Manager

Domestic Production Manager confirms order delivery with Domestic Logistics Manager who notifies international freight forwarder.

International Freight Forwarder advises packing and documentation requirements receives delivery at Halterm from MSMW trucks and invoices and insures order for delivery to CIF Jebel Ali.

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FINANCIAL AND RISK MANAGEMENT STRATEGY

MSMW Case Study: Pro-forma Balance Sheet of Third Quarter, 2008

ASSETSCurrent AssetsCash at Bank: $800,000Inventory: $250,000Accounts Receivable/Debtors: $250,000Prepaid Expenses: TBA/NAOther Current Assets: TBA/NATotal Current Assets: $1,290,000

Fixed Assets (Tangible)Equipment/Machinery: $1,000,000Buildings/Land/Factory: $2,005,000Fixtures/Fittings: $100,000Other Fixed Assets: TBA/NALess: Accumulated Depreciation: $1,500,000

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Total Fixed Assets (less depreciation): $1,605,000Other Intangible Fixed Assets: TBA/NATOTAL ASSETS: $2,895,000

LIABILITIESCurrent LiabilitiesAccounts Payable/Creditors: $400,000Short-Term Loans: TBA/NAGST: TBA/NATotal Current Liabilities: $400,000Long-Term Liabilities: $0.00Long-Term Loans: $0.00Mortgage: $0.00Total Long-Term Liabilities: $0.00TOTAL LIABILITIES: $400,000

EQUITYOwner's Equity - Share Capital: $495,000Retained Earnings (Previous Year): $2,000,000Current Year Earnings: $267,200TOTAL EQUITY: $2,762,200TOTAL LIABILITIES AND EQUITY: +$2,362,200

DISCUSSION

First, I will assume that the pro-forma balance sheet of 2002 actually represents 2008 otherwise I would have calculated cumulative inflation and growth of 10-15% annually. In summary a positive balance in total liabilities and equity indicates a possible self-financing export plan which would be ideal. However, utilizing possible EDC buyer supported purchase loans would be a somewhat secure method of kick-starting international sales.

ASSETSCurrent AssetsCash at Bank: $800,000 could be exercised as performing assets either in high interest savings or as basis for capital loans extensions which might not exceed half of its net value therefore project a 400,000 loan could be available on this amount at any time.

Inventory: $250,000 appears to be almost equal to current years sales profits. While acting as inventory it is a little scary to imagine that much inventory in proportion to sales volume. I would rather see it as sold goods so the domestic operation needs to find a way to clear inventory and turn into increased sales.

Accounts Receivable/Debtors: $250,000 again appears horrendously like nearly an entire years profit is tied up in outstanding accounts. What are we paying all of these managers for if it is not to turn debits into credits? I would like to see no more 10-15% of

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accounts receivable on annual profits.

Prepaid Expenses: TBA/NAOther Current Assets: TBA/NAI suspect MSMW has not creatively explored its other current assets category if its inventory and accounts receivables are in such shape. It's time to start turning over rocks on digging up other assets. For example, what exactly are the minerals located on our site? What about possible value of those healing muds in their gross form as plain old mud?

Total Current Assets: $1,290,000

As for liquidity we only really have our cash at the bank immediately. Optimism required turning those kinds of figures in inventory and unpaid accounts as actual liquid cash at any time.

Fixed Assets (Tangible)Equipment/Machinery: $1,000,000Buildings/Land/Factory: $2,005,000Fixtures/Fittings: $100,000Other Fixed Assets: TBA/NALess: Accumulated Depreciation: $1,500,000

Total Fixed Assets (less depreciation): $1,605,000Obviously our depreciation rates should be telling us something about the perceived value of our fixed assets we are only getting about 50% of their value out of owning them. Either we find a way to distribute our depreciation expenses over future time to minimize its impact on our total fixed assets or we consider investing in new machinery especially if the part sales of half of our fixed assets add up to more than accumulated depreciation.

Other Intangible Fixed Assets: TBA/NAWe might consider quantifying our accumulated staff as intangible knowledge assets which do have a monetary value to boost our fixed assets. Not sure if I would include the inventory or accounts department staffs.

TOTAL ASSETS: $2,895,000 Only about 25% of this is actual liquid cash and the rest is going to have a severe sellers discount attached to its value if we try to liquify it.

LIABILITIESCurrent LiabilitiesAccounts Payable/Creditors: $400,000Short-Term Loans: TBA/NAGST: TBA/NATotal Current Liabilities: $400,000

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MSMW is blessed with no accounts payable/creditors or short-term loans (GST calculated in annual earnings). However this would have to be the first and perhaps only business in Eastern Canada which does not owe money to someone. It wouldn't hurt to borrow a little. Look how we are lending to our buyers and inventory departments! Let's knock on EDC's door and see what water we can squeeze out of their stones.

Long-Term Liabilities: $0.00Long-Term Loans: $0.00Mortgage: $0.00Total Long-Term Liabilities: $0.00

Again these are blessings which only a case study could bestow. Fast cash possible in all of these categories except perhaps mortgages at the current time and who wants liabilities? However the minute potential lenders see our inventory holding and accounts due as well as depreciation on assets they might just shake their heads and point the way to the door. Our company accountant has been sleeping at the wheel.

TOTAL LIABILITIES: $400,000

EQUITYOwner's Equity - Share Capital: $495,000Retained Earnings (Previous Year): $2,000,000Current Year Earnings: $267,200

Retained earnings literally sitting there doing nothing. That's two million we have to play with and should have been playing with all along. Owner's equity - a nice cherry on that thick wad of cash ready for re-investment, appears over-ripe. That's nearly a decade of current year's earnings sitting there doing nothing like a lump of clay. Who could we be even just lending it to for impressive interest? Bear-Sterns? Lehman Brothers? Fannie Mae? Freddie Mac? We might make more money lending that money than exporting with it anyway?

TOTAL EQUITY: $2,762,200TOTAL LIABILITIES AND EQUITY: +$2,362,200We are equity rich! Let's do something with all of this cash! Furthermore, a stock offering would be a pretty sure way of gathering cash for lending and boosting our confidence. With all that money lying around and a water-tight export plan we should come up with a few investors. We already have annual 10-15% growth domestically. If we need to borrow money we would be crazy on this pro forma.

CAPTIAL BUDGET

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EDI System: Estimated $100,000 outlay in full service package.

Tetrapak production line installation: Equipment/Machinery: $500,000 (estimated) as this is forecast to take up half the amount of space in our plant and half the amount of time to fill the same number of bottles per hour.

PET to Pottery bottle conversion: $100,000 (estimated) as the clay bottle is 20% heavier than the PET bottle it will require stronger line reinforcement but will remain the same sizes (500 ml and 1.4 L).

Pottery production installation: At $100 dollars per square metre a 200 square metre pottery drying facility “earth ship” would cost little more than $20,000 for the structural components. An additional $20,000 budgeted for slab concrete foundation and fittings.

Anagama wood kiln: Possibly an additional $20,000 for the construction of the wood fired kiln as seen above. This would be installed by a certified pottery technician who would oversee training of our entire staff in the rotational pottery design and production of standard sized glazed ceramic 500 ml and 1.5 L water bottles. Downtime and overtime rates would apply to permit all line employees contribute 10% of their usual working day to pottery production. The free time would be found through the process time reduction of conversion from PET bottle manufacturing to tetra-pak manufacturing which would halve the lead time and result in required inventory holdings half of the size of previous methods resulting in half again of our warehouse being made vacant and thus ample and logical placement of new tetra-pak filling facility.

TOTAL CAPTIAL PURCHASES: $760,000 Entire outlays financed by total equity of $2,362,200Equity remaining: $1,602,200 (to be deposited in high interest earnings CD accounts)

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THREE YEAR FORECASTRevenue: DOMESTIC

2009DOMESTIC

2010DOMESTIC

2011INT’L2009

INT’L2010

INT’L2011

Gross sales(33.33% projected increase annually for three years to double Canadian sales volumes with tetra-pak)

11,278,246 15,037,285 20,049,212 2,177,280 x24,354,560

Begins at 10% of domestic volume sales forecast

10% increases based on conservative sector standards

4,790,796 5,269,798

Net Sales 11,278,246 15,037,285Est.

20,049,212Est.

725,687 x21,451,374

1,596,511Est.

1,756,162Est.

Cost of goods soldBeginning inventory Jan. 1

333,250

Production Labour and Materials

8,557,860

Less ending inventory Dec 31

333,250

Cost of goods sold

8,557,860 11,410,194 15,213,212 619,776Est.

681,754Est.

749,929

Gross Profit Margin

2,720,386 3,627,090 4,836,000 831,598 914,757 1,006,233

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Product and materials costs for export 500 ml and 1.5 L in 2009 (10% of domestic)

International growth of 10% annually for the next three years.

500 ml 14,400 cases produced (cost of $30.00 /case of 24)

1.5 L 9,600 cases produced (cost of $19.56/case of 12)

Operating ExpensesGeneral administration :

173,880 Assume 5% inflation costs increased each year.

17,388 Assume 10% of all domestic costs.

18,257 19,170

Marketing: 403,200 40,320 (in addition to distributor costs) + 50,400 for new management staff

95,256 100,019

Quality Assurance:

102,900 10,290 10,805 11,345

Production 63,000 6,300 6,615 6,946Physical Plant 50,400 5,040 5,292 5,812Logistics 510,300 309,888

(estimate 50% of total production cost)

340,877 374,965

Accounting 214,200 21,420 + 50,400 for new management staff

75,411 79,182

Human Resources

113,400 11,340 11,907 12,502

Building and Property Tax

126,000 12,600 (for new additions)

13,230 13,892

Total Operating Expenses

1,757,280 1,845,144Est.

1,937,401Est.

535,386Est.

577,650Est.

623,833Est.

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Net Profit 963,106 1,284,109Est.

1,712,103Est.

296,212 337,107 382,400

Less income tax expense

105,000 525 (No domestic taxes on international profits only 5% import tax on products ex-works value)

Net income profit after tax

768,102 296,212 337,107 382,400

Revenue: DOMESTIC 2009

DOMESTIC 2010

DOMESTIC 2011

INT’L2009

INT’L2010

INT’L2011

Actual Sales Figures for Export 500 ml and 1.5 L in 2009 (10% of domestic)

Wholesale at ex-works to distributor, customer price, and suggested retail price for the next three years.

500 ml 14,400 cases (selling price $75.60 / $151.20/case of 24)

1.5 L 9,600 cases (selling price $113.40/ $226.80 /case of 12)

FIVE YEAR CASH FLOW FORECAST

YEARS 2009 2010 2011 2012 2013DOMESTIC 768,102 1,024,110 1,365,446 1,501,991 1,652,190INT’L 296,212 337,107 382,400 420,640 462,704TOTAL 1,064,314 1,361,217 1,747,846 1,922,631 2,114,894

DISCUSSION OF FORECAST: Domestic sales annual increases to meet sales growth targets of 33.33% annual increases by expanding into neighbouring provincial markets with high visibility tetra-pak advertising influencing more purchase intention fulfillments based on frequency and reach to match customer needs followed by slower annual rates of growth of 10-15% in line with current growth and also due to several competitors

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adopting our tetra-pak lead. UAE growth conservative estimates of 10% annually compounded. MSMW appears awash in positive cash flow and capital outlay pays for itself in approximately two years.

HIGH RISK VENTURE: Basically starting with open account and as distributors become more confident with the product will begin partial payments/installments plan progressively. Generally when well considered and treated with patience and generosity an Arab business partner is true to the letter and spirit of global business partnership. The risk is in moving too quickly and attempting to rush the Arab business process which may often appear and in fact may exactly often be periodic in that westerners often feel they must, “hurry up and wait.” EDC Insurance may not be applicable in open account processes however the spirit of Arabian business is often exactly that. In Arabia businesses often get the partners they deserve. With the best water product and delivery mode on the market it should be apparent that the best distributors and partnerships will be a matter of course. Our best insurance is selecting the best distributors, taking our time to ensure each of customers are aligned and satisfied with our contract provisions. Equitable three way split appears generous and generosity pervades The United Arab Emirates.

CONCLUSION AND RECOMMENDATION

Research indicates that the UAE provides the highest possible return on the lowest actual cost out-lays for a food sector product like bottled water with some of the lowest fixed costs in the market. The trend both domestically and globally away from PET bottles towards tetra-pak could prove a Canadian competitive advantage for Maple Springs Mineral Water. The capital outlays required appear modest by comparison to the potential forecasted annual growth possible with new technology, new EDI systems, new premium products for the global market and improved cash flow for re-investment either to pursue other export markets in future or to invest in lower risk cash deposit guaranteed investment plans. For all of the planning possible to mitigate and explore scenarios, risks and possible pitfalls, a few concepts remain quite clear.

Moving to a premium positioning with a packaging sourced material like glazed and fired pottery adds an intangible cultural element to the process of selling Canadian water products. Uniqueness, creativity and innovation combine to provide the key sales drivers of luxury mineral water products. In terms of value added, it is the only real next stage for Canadian water products globally. In the UAE one may find the opportunity to design, build, manage and perform on the stage of a business platform’s choosing.

While the element of risk is very real the risk appears worth taking as the gains made with cash assets otherwise underperforming must in some way attempt to recoup the losses in holding capital without any investment plan. While this may be the challenge of

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the next generation of mineral water companies in Canada it is by no means a requirement that progress be made in a foggy plastic and fixed environment of global business planning.

Even a modest product when packaged correctly may shine and redeem great profits. This is certainly the case for Maple Springs Mineral Water Company. To lead one must perhaps simply seek to achieve more. This is the spirit of the UAE market today. Without knowledge a country and a company can do nothing. In closing the chances are worth taking. In memory of The Sheik.

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Friberg, R and Gansland, M. (2005) “An empirical assessment of the welfare effects of reciprocal dumping,” Journal of International Economics, Volume 70, Issue 1, September 2006, Pages 1-24. http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6V6D-4HF5KTC-2&_user=698657&_rdoc=1&_fmt=&_orig=search&_sort=d&view=c&_version=1&_urlVersion=0&_useri

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GSO Technical committee for sector standards of food and agricultural products GCC Standardization Organization (2008) “Bottled drinking water,” GSO5 FDS, (GSO), p.9. http://members.wto.org/crnattachments/2008/sps/OMN/08_2552_00_e.pdf [Accessed: October 15, 2008]

HC Securities, (2008) “UAE Market Brief, ” HC Securities Brokerage. http://www.af-hc.com/files/UAE%20Market%20Brief%201%20July%202008.pdf [Accessed: October 12, 2008]

Jafar, S. (2007) “United Arab Emirates: Reform and Growth in Parallel,” IBA Daily News (Singapore Conference), Legal Media Group, October 17, 2007, p.10. http://www.iflr.com/pdfs/IBA07Daily17Oct.pdf [Accessed: August 6, 2008]

Jagoe, J. (2007) Export Sales and Marketing Manual: 2007 – 20 th Annual Edition , Export Institute, Minneapolis, Minnesota, USA.

Kawach, N. (2008) “Expat growth widens UAE demographic gap,” Emirates Business 24/7, September 25, 2008, Arab Media Group. http://www.business24-7.ae/articles/2008/9/pages/09252008_fd2ac698aa4a479592a2d192a1e21602.aspx [Accessed: October 12, 2008]

Lin, T.T. (2006)“Marketing Strategy: Nestlé, ” Intercollege, Larnaca. http://www.insightory.com/view/945/marketing_strategy_analysis:_nestle [Accessed: October 15, 2008]

Lloyd - Jones, T. (2007) “Arab beverage markets in transition,” Business Intelligence Middle East, August 17, 2007. http://www.bi-me.com/main.php?id=11944&t=1&c=34&cg [Accessed: August 6, 2008] Market Information and Analysis Section, DFAT, Australia (2008) “UAE: Fact Sheet,” ABS, IMF Data Compilation. http://www.dfat.gov.au/GEO/fs/uaem.pdf [Accessed: October 12, 2008]

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Mellgren, J.(2008) “2008 Trend Report: Specialty Beverages,” The Gourmet Retailer, Nielsen Business Media, Inc. July 3, 2008. http://www.gourmetretailer.com/gourmetretailer/content_display/trends/category-reports/e3ibedc3d59fdbe80e9947a3840ca183270 [Accessed: August 6, 2008]

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APPENDIX I: DETAILED PRODUCT DESCRIPTION

500 mL BottlesPacking: Cardboard trays and shrink wrap (L39.5 cm X W27.5 cm X H20.5 cm)Units/tray: 24, Tray weight: 15.69 kgSize of pallet: 101.5 cm X 121.9 cmNumber of trays/layer: 10Number of layers/pallet: 8Height of complete pallet: 180.5 cmGross weight: 1255.2 kgNumber of pallets/20’ container: 10Number of pallets/40’ container: 20

1.5 L BottlesPacking: Cardboard box (L28 cm X W37 cm X H32 cm)Units/Box: 12, Box weight: 19.92 kgSize of pallet: 101.5 cm X 121.9 cmNumber of boxes/layer: 9Number of layers/pallet: 5Height of complete pallet: 120 cmGross weight: 896.4 kgNumber of pallets/20’ container: 10Number of pallets/40’ container: 20

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APPENDIX II: GCC LABELLING REQUIREMENTS

Packaging

8.1 Without prejudice to what is stated in Gulf standard mentioned in item (2.7), bottled watershall be packed in hygienic suitable, clean and hermetically sealed containers that would prevent contamination of the water and preserve its physical and chemical properties.

8.2 Filling and sealing operations of containers shall be done in an aseptic atmosphereaccording to Gulf standard mentioned in item (2.2).

8. Labelling:

Without prejudice to what is mentioned in Gulf standard in item (2.1) the following information shall be declared on the label in case of bottled drinking water:

9.1 The name of the product shall be —bottled drinking water“. Any statement that would givewrong impression regarding the nature and properties of the product shall not be declared on the lable.

9.2 Water content of the different anions ( chloride œ sulphate œ nitrate œ carbonate œ bicarbonate œ fluoride ) and cations ( Calcium œ magnesium œ sodium œ potassium _ , total hardness and total dissolved solids expressed in ppm.

9.3 PH.

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9.4 The net volume in metric system, unit.

9.5 Packaged water containing added fluoride shall be labelled —Fluoridated water“.

9.6 Filling date and expiry date by day month and year in a non - codex manner.

9.7 The labelling information shall be written on the containers and shall not be written only on carton boxes or the like

GSO Technical committee for sector standards of food and agricultural products GCC Standardization Organization (2008) “Bottled drinking water,” GSO5 FDS, (GSO), p.9.

APPENDIX IIIUAE IMPORTERS OF MINERAL WATER PRODUCTS

Majid Al Futtaim (MAF)/ Carrefour UAE Dubai, UAE Tel: + 971 4 295 1600 Fax: + 971 4 295 1601 Website: www.carrefouruae.com

Emke Group/ LuLu supermarkets, hypermarkets Chairman: Mr. MK Abdulla Managing Director: Mr. Yousaf Ali PO Box: 4048 Abu Dhabi, UAE Tel: +971 2 642 1800 Fax: +971 2 642 1716 Website: www.emkegroup.com

Spinneys Dubai LCC CEO: Jannie C. Holtzhausen Marketing Manager: Mr. Warwick Smith PO Box: 677 Dubai, UAE Tel: +971 4 355 5250 Fax: + 971 4 351 5538 Website: www.spinneys.com

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Dubai Duty Free Managing Director: Mr. Colin McLoughlin PO Box: 831 Dubai, UAE Tel: + 971 4 216 2453 Fax: + 971 4 224 4036 Website: www.dubaidutyfree.com

Union Co-operative Society PO Box: 3861 Dubai, UAE Tel : + 971 4 3312891, 3331816Fax : + 971 4 3315150 Email: unionco@emirates.net.ae

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APPENDIX IV. GOVERNMENT MINISTRIES

Ministry of Economy & Planning PO Box: 904 Abu Dhabi, UAE Tel: + 971 2 626 5000 Fax: + 971 2 626 0000 Website: www.economy.ae

Ministry of Finance & Industry PO Box: 433 Abu Dhabi, UAE Tel: + 971 2 672 600 Fax: + 971 2 676 8414 Website: www.uae.gov.ae/mofi

Ministry of Agriculture & Fisheries The Minister : H.E. Saeed Mohammed Al Raqbani PO Box : 213 Abu Dhabi Tel : 02 4495111 Fax : 02 4495154 Website: http://www.uae.gov.ae/maf

Dubai Chamber of Commerce & Industry PO Box:1457 Dubai, UAE Tel: + 971 4 228 0000 Fax: + 971 4 221 1646 Website: www.dcci.gov.ae

Jebel Ali Free Zone Authority PO Box:17000 Dubai, UAE Tel: + 971 4 881 5000 Fax: + 971 4 881 16466093 Website: www.jafza.ae

Dubai Municipality PO Box: 67 Dubai, UAE Tel: + 971 4 2215555 Fax: + 971 4 2246666 Website: www.dm.gov.ae

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APPENDIX IV.UAE IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINE

African & Eastern (N.E) Ltd. 02-6676041 / 02-6448685

Gray Mackenzie Liquor Shop 02-6765954 / 02-6123545 Spinneys Liquor 02-6812356 / 02-6271090

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APPENDIX V. TRADE SHOWS

Dubai Drink Technology Expo 2008Date: December 14-16, 2008Venue: Dubai Convention & Exhibition Centre, in Dubai, UAE. Zabeel HallWebsite: http://www.drinkexpo.ae

Gulfood 2009Date: February 23-26, 2009Venue: Dubai International Exhibition and Convention CentreWebsite: http://www.gulfood.com/Default_en_gb.aspx

2nd Halal Expo 2008- DubaiDate: November 24-26, 2008Venue: Crowne Plaza Hotel, Dubai, UAEWebsite: http://www.worldhalalexpos.com/

Middle East Natural and Organic Products Expo 2008 Date: November 16-18 2008 Venue: Dubai International Exhibition Centre, Dubai World Trade CentreWebsite: http://www.globallinksdubai.com/

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