Business Plan for Frozen Beef Products

Premium FROZEN BEEF PRODUCTS ...Sausages, Salami, Meatballs & KebabsBUSINESS PLAN ONPremium Frozen Beef Products BASED ON A 2010 STUDY

PREPARED FOR

Mr. Saif Rahman (Sfr)

Course Instructor

MGT368.6

PREPARED BY

GROUP1

M Ashad Uz Zaman [ID: 072-160-030]

M. Kamrul Hasan (ID: 071-116-030)

Muhibul Hassan Adil [ID: 071-168-530]

Syed Isteaz Zonaide [ID: 071-180-030]

Tamjeed Rahman [ID: 063-578-030]

Tuba Khan [ID: 071-199-530]

Date of Submission:

5th April, 2010School of Business

North South UniversityTable of Contents

Executive SummaryThe OpportunityThe ProductMarket Analysis Methodology Market Size Market Players

Market Potential & Penetration

Industry Analysis PEST Analysis

Competition Analysis

Direct Competitors

Indirect Competitors

Marketing Mix

Product & Pricing

Promotion Management Team

Manufacturing & Delivery ProcessFinancial Projections Risk Analysis

Expansion PlanBibliography

Appendix

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EXECUTIVE SUMMARYThe Agro-Based Industry in Bangladesh especially the frozen food sector is currently enjoying a lucrative and exponential growth with 28% industry growth. Improved cattle breeding, growing consumer demand due to improvement in lifestyle, standard of living and increasing purchasing power has lead to a huge jump in sales in the recent years. In addition, tax exclusion and bank loan interest and principal amount payment exemption for next 8 years by the government policy makes it a prospective market and to invest.

Among its competitors, Premium Frozen Beef Products face little competition in the local scenario. Local direct competitors include only Rich (86% market share) while foreign brands are Al-Kabeer, Doux, Khaleej, Srangosun and Ayamas. Among its indirect competitors, Aftab and Sausley are dominating established brands in the market with one specializing only in chicken and the latter catering only fresh products. Survey with managers at different point-of-sales (Agora) also showed their preference to shelf local brands and enthusiasm in promoting them among consumers.Premium Frozen Beef Product range will include Sausages, Meatballs, Salami and Kebabs, the latter a completely new introduction in the market by any local firm. It is positioning as more for more, offering a value-added price to its quality conscious consumers. Its business includes both B2C and B2B customers who are willing to pay comparatively higher price for more nutrition, assurance of halal, taste and quality. The market survey shows that around 90% want the current products in the market to improve in quality and taste. Furthermore, to create product and brand awareness and establish its brand image in the minds of the consumers, Premium will include promotional tools like newspapers, leaflets, sampling, magazines and billboard with a total cost of Tk. 25,00,000 in the first year. The facility will be located in Yusufganj, Narayanganj costing Tk.30,00,000. Along the distribution channel, selective Chandpur suppliers will receive 10% share while distributors like Agora will receive additional 10% on profit.Premium will require an investment of Tk. 20,000,000 which will include equity financing of 51% and debt financing of 49%. Payback period for Premium investors will be 2.92 years from the start of business. Also Breakeven for sales will amount to Tk. 96,454,793 in 2.77 years. Exit plan in case of worse case scenario will be merger with a potential competitor. On the otherhand, a best case scenario will allow further expansion of business by going for export after the fifth year of business after sufficient increase in retained earnings.THE OPPORTUNITY

The further halal meat processing under Agro-Based industry of Bangladesh is recently experiencing a renaissance with dynamic and far-sighted entrepreneurial business creations that serves a diversified range of meat products to its local consumers as well as contributing to the countrys export earnings. Among them are poultry, shrimp and cattle.

Although, recent years have given beef a lot of bad press. Many have claimed that the consumption of red meat (especially beef) endanger ones health and lead to heart diseases and obesity. But this can be said about anything consumed in excess. Therefore it is now important to refocus on the nutritional benefits of beef in our daily diet and the vital role it plays in a well-balanced diet of children, young people and those in their middle-ages and has tagged beef as taboo. What they need to know is Beef in our diet helps to nourish and fuel our body and is the Number One source of Protein. Considered a natural multivitamin because of its excellent source of protein and vitamin B12 it keeps us energized and supports many of our bodys daily functions by helping produce hormones and enzymes.

Premium Frozen Beef Products understands it consumers health requirements and serves a range of halal, tasty, healthy and safe frozen beef products that includes sausage, salami, meatballs, and a variety of kebabs at a value-added price. It also takes into account the need for easy to prepare, hassle-free quick meals in our fast-paced and time-constraint life. Also the demand for brands like Rich and Aftab shows consumer preference for local products over foreign as there are consistently available and also have a national value. In addition, fast food shops and restaurants have a high demand for these frozen beef products to cater the never ending demand of their customers for various beef menu items like noodles, hotdogs, soup, sandwiches, kebabs etc.Other factors like improved cattle breeding, growing exporting opportunities in Middle-East, South-East Asia and even Europe in future, extensive training programs for meat processing workers by LEIC, stricter government control acts (2008) will accelerate the growing prospects of further meat processing businesses.

THE PRODUCT

Premium Frozen Beef Products plans to introduce four Premium products. The portfolio includes Premium Frozen Beef Products Sausage, Premium Frozen Beef Products Meatball, Premium Frozen Beef Products Salami and Premium Frozen Kebab (Shish, Kathi and Shami).

Product Portfolio

DescriptionIngredientsNutrition & HealthPackaging

SPICY SMOKED SAUSAGEFresh, superior quality & halal meat will be used for processing.Low cholesterolInternational standard packaging: Regular size -340g (12 pieces per pack) and breakfast size-250g (8 pc/pack).

Beef, dextrose, white pepper, smoked flavor, permitted food conditioner, sodium nitrate, monosodium glutamane (GSM).It doesnt contain additional breadcrumbs, fillers or excess fat and only trace amount of sodium saltEye-catching, air-tight & hygienic packages.

85% lean ground beef (healthy)Fat 14.4 gm, cholesterol 0.06 gm, sodium 0.53 gm, carbohydrate 66.6 gm, dietary fiber 5.55 gmExpiry period/Shelf life: 8months approximately

Contains no eggs or dairyProcessed in hygienic and strictly supervised environment

Naturally smoked

Preparation time: 2 minutes

PEPPERY SALAMIBeef, water, modified potato starch, potassium lactate, salt, spices, sodium phosphate, sugar, sodium nitrite, garlic, dextrose, sodium ascorbate, smoke flavorCholesterol 0.06 gm, sodium 0.53 gm, carbohydrate 66.6 gm, dietary fiber 5.55 gmInternational standard packaging: Breakfast size: 26 pc /200gm and Regular size: 12pc /100gm

Naturally smokedTrimmed to 0" FatExpiry Period/Shelf life: 8 months approximately

85% lean ground beef (healthy)

Preparation time: 2 minutes

FIERY MEAT BALLSBeef, salt, vegetable protein, spicesLow cholesterolWalnut size meat balls

Fresh and superior quality meat will be used for processing.International standard packaging: Regular size: 10 pc/300gm

Contains no eggs or dairyShelf Life:8 months approximately

ARABIAN DELIGHT-KATHI KEBABBeef, salt, kebab spices, sodium nitrite, garlic, dextrose, sodium ascorbateCholesterol 0.06 gm, sodium 850mg, carbohydrate 66.6 gm, dietary fiber 2 gm, Protein 2g International standard packaging: Breakfast size: 5pc/300gm & Regular: 8pc/450gm

Fresh and superior quality meat will be used for processing.Shelf Life:8 months approximately

Cook time: 15 minutes

ARABIAN DELIGHT-SHAMI KEBABBeef, salt, kebab spices, sodium nitrite, garlic, dextrose, sodium ascorbateCholesterol 0.06 gm, sodium 850mg, carbohydrate 66.6 gm, dietary fiber 2 gm, Iron 4%, Protein 2gInternational standard packaging: Breakfast size: 5pc/300gm & Regular: 8pc/450gm

Beef cut into 1"inch thick rollsShelf Life:8 months approximately

Fresh and superior quality meat will be used for processing.

Cook time: 10 minutes

ARABIAN DELIGHT-SHISH KEBABBeef, salt, kebab spices, sodium nitrite, garlic, dextrose, sodium ascorbate, lemon grind, pepperCholesterol 0.50 gm, sodium 850mg, carbohydrate 55.6 gm, dietary fiber 2 gm,Iron 4%, Protein 3g International standard packaging: Breakfast size: 5pc/300gm & Regular: 8pc/450gm

Fresh and superior quality meat will be used for processing.Shelf Life:8 months approximately

Beef cut into 1"inch cubes

MARKET ANALYSISIn order to understand the market of frozen beef products, an extensive market research was carried out. The segmentation of the target, market size, growth rate and profitability were then analyzed accordingly.METHODOLOGYIt is vital to remember that a thorough market, industry and competitor research requires a combination of both primary and secondary data. The data collection methodology is discussed below.

Primary Data:

Sample Questionnaire: In order to identify some key factors about the consumer behavior and market direction, sample questionnaires of 13 questions each (both objective and subjective) were also used.

Sample size and selection process: 30-40 respondents were randomly selected to fill up the questionnaire

Focus Group Discussion: Unstructured, free-flowing interviews with groups of people were taken in order to better understand their attitude towards product type and demand. The focus groups, consisting of 5-8 people each, helped to find out the criteria or parameters that identified the needs of our consumers and how to reach the Interview: personal interviews were taken of competitors like Sausley, Aftab and others for clearer understanding of market trend, growth or lucrativeness and sustainability. Also for market analysis, interviews with managers and staff of Agora, PQS, Nandan, Shopno, Meena Bazar were carried out.Secondary Data:

These included extensive research on:

Websites

Magazines

Newspapers for market size, growth, government policies, labor market etc.

Online journals and articles

All these collection of data were compiled together to analyze the frozen meat market of Bangladesh and see how lucrative it is for start up business in this sector. Three major factors of the market are discussed below.

MARKET SIZE

Geographic Segmentation: The market size for Frozen Beef Products will initially be confined to only Dhaka City (capital) of Bangladesh. First for Geographic Segmentation, the city can be divided according to its city districts Market survey showed 37% of the respondents live near Uttara followed by 23% living in Gulshan and 20% in Dhanmondi and only 3% from other areas like Mirpur (Appendix). The highest demand for the products is expected from Gulshan, Uttara and Dhanmondi region, while Mirpur and Mohammedpur areas are expected to show the lowest demand due to the difference in income, taste and lifestyle.

Demographic Segmentation: Random market survey at the superstores resulted in only 10% falling below 20 years (Children/Teenagers) while majority with 43% belonged to the age segment between 20-30 years. Both of these segments also showed a strong tendency to beef preference especially frozen beef products with a dominating 70% out of which 27 % belong to the age group below 30 years. Among the 17% belonging to the age segment between 31-40 years, more than half are direct consumers.The 2005 Dhaka city income distribution among the household has been used in the table below. It shows the number of household with extreme high income (Upper Upper Class), moderately high income (Lower Upper Class) and higher middle income (Higher Middle Class). In addition, the population in Dhaka Metro has also been calculated.

According to the market research, 27% of the respondents have an average monthly income of Tk. 75,000 and above and can be classified as the Upper Upper class. Similarly, 23% belongs to Lower Upper class with an average income range of Tk. 50-75,000 monthly (Appendix).Furthermore, among those belonging to the Upper Upper class, 50% spends Tk. 1000 to 3000 monthly on beef while only 20% spend less than Tk. 1000 and 30% spend more than Tk. 3000. This means that around 13.5% are ardent and regular beef consumers with 25% of the respondents spending more than 23% of their total expenditure of beef on frozen products while another 25% spends more than 1/3 of their expenditure of beef on frozen products.The Lower Upper Class and Upper Middle Class together contained 43% of the respondents. Around 15.4% spend either half or one-sixth of their total expenditure of beef on frozen beef. While around 23% respondents proportion of expenditure of frozen beef to total beef spending ranges from 50-70%. (Appendix).Other Basis of Segmentation: Lastly, psychographic and behavioral target market has been identified to narrow down the market size and tap the real consumers of the product.Market research has also shown that 46.43% professionals and about 13% of the housewives showed high preference for beef products because of urbanization, decreasing family size, the spread of education and employment among women, rising in standard of living, influenced by childrens preference, which in turn lead to a major shift in food habits in upper-middle class and above. Among students almost 97% are beef consumers and therefore our major target segment. (Appendix).

Summary:

Market research at point-of-sales have shown a weekly market demand for frozen beef products of about 2-3% of total demand of superstore products due to the market preference percentages shown above. While demand for frozen beef products in quality and upbeat fast food shops and elite hotels have shown a weekly demand of Tk. 20,000.Estimated total market worth is about Tk. 5.7 crore (Appendix)MARKET PLAYERSCurrently the major players for frozen food products in the market are (local companies) Rich Food products with 86% market share and products ranging from chicken, beef and fish and foreign brands include Al Kabeer- the leading competitor in beef products, Doux, Ayamas and Srangosun who mostly specialize in chicken products and sometimes in beef.Indirect market shareholders include Sausleys and Aftab Food products who dominating in poultry products., the former specializing in non-frozen, fresh sausage products. MARKET Potential and PENETRATION

According to the market research, 70% showed inclination towards sausage frozen food product, with meatballs holding 40% of the share and 33% for kebabs and 30% for salami. Among them, 47% of the sausage lovers, all of salami, about 33% of meatball lovers and almost 30% of the kebab enthusiasts favors beef either with or over chicken, fish and sea food (Appendix).

Major advantage of the current market scenario is lack of Beef Kebab products both local and foreign produced. This minimizes competition for Premium Frozen Beef Products to only local producers Rich, and Foreign imports like Al-Kabeer. The product line for Beef Kebab are completely new and unrivaled in the local market, therefore providing it a huge opportunity to capture the untapped market segment. Its only major competitor is Al-Kabeer, which is imported, very expensive and is not always available due to poor distribution channel. Also it suffers from constant price fluctuations but as it plays a monopoly role in the market, it enjoys an unfaltering demand. The development of customers taste, health awareness and experimenting new products are key success indicators for Premium Frozen Beef Products

Also government acts to ensure strict regulations to maintain quality of meat and increased cattle production offers the opportunity to expand through export to countries in the Middle-East, South Asia like Malaysia, Indonesia and even to Europe.

In addition, some organizations are collaborating with meat producing companies to provide standard and quality training to workers and therefore developing their skill and ensuring more quality control.

INDUSTRY ANALYSISSome of the key highlights of success are:

Bangladesh currently has a population growth rate of 1.292% (2009 est.) and a literacy rate of 47.9% and increasing standard of living. The GDP at current price is US $ 89.04 million (DSE Investors Guide). Though being a developing country, it is currently experiencing an increase in its development in skill and knowledge. People are gradually shifting to more conscious buying habits (especially for food) due to exposure to the global trends and recent events from the food court fiasco. Frozen foods is the second largest export sector of the economy with a recent average annual growth rate of 28% (Bangladesh Board of Investment) with some companies like Aftab and Rich enjoying an unbelievable 100% growth in sales in most years (Competitor interview). The massive natural resources available in Bangladesh make this sector particularly promising for investors looking to supply in international as well as in domestic markets. This provides a lucrative opportunity to understand and capture the growing demand for quality controlled and healthy food products and serve this expanding niche market. Also following a period of strong investment in technology, processes and regulation the frozen foods sector has flourished and earned itself an excellent reputation with trading partners. Also exemption from paying interest and proportion of principal amount for the next 8 years for bank loans for Agro-Based industry and tax holidays make it lucrative. Continuing investment in technology, marketing and quality remain at the forefront of the industries' strategy to meet the challenges of international trade in price, quality, time and service. Cases of Bird Flu in our country will act as a strength for the company as consumers of chicken will shift to beef products due to health issues.The PEST analysis will present a clearer picture of the industry for frozen beef products.Political

Bangladesh had over the past few years have experienced its fair share of political unrest and economic downturn. But recent years have shown the governments eagerness to develop its industrial manufacturing sector and encourage new investments both local and foreign both on large and small scale. Along with the RMG sector, the Government has developed initiatives of quality assurance for frozen foods in co-operation with exporters. This has initiated an increase in exports of frozen foods like shrimp and meat. Acts or Ordinances to ensure quality control have helped develop this industry to be more competitive and potential both at home and abroad.Economic

Economic factors like the level of disposable income, buyer's confidence to spend on luxury goods are some crucial variable related to this kind of business especially as Premium Frozen Beef Products are providing a value-added price. As discussed above the GDP growth rate is a reliable indicator that the country is experiencing a booming growth compared to most western countries. This in turn is attracting foreign investments and promoting new companies to enter the market more easily as well as ensuring their long term sustainability. Availability of capital, development of the Banking system as well as the financial institutions and the ease of loan provisions are important factors attracting small entrepreneurs to the market basket.Social

The Asian frozen food market, especially Bangladesh is experiencing an increased demand for halal frozen meat products. Four factors influencing the current consumption shift are: Increase in disposable income that led to the increase in consumers food expenditure.

Increase in awareness of frozen foods time saving benefits.

Increase in the use of refrigeration among households.

Growth in the Western style fast food industry that encourages the purchasing of frozen

Chilled food with the same taste. (Halal Food Market)

Increase in number of working parents (both father and mother) therefore need for hassle free, easy to prepare meals or snacks.

Growing trend for experimenting with different foods and trying out fusion recipes that are nutritious, tasty and especially appealing to children. Marketing programs to educate and inform consumers about the advantages of chilled and frozen foods

Promotional activities, especially media advertising and demonstrations are effective in communicating the value of chilled and frozen products, i.e. as well as fresh food, if not better, more hygienic, and tasty. Studies show that sales of chilled and frozen foods are more promotion- responsive than those of other products. According to market research majority with 63% prefers leaflets and banners for promotion while 60% associate with newspaper while another most lucrative medium of advertisement to build awareness is through word of mouth with 33% respondent preference (Appendix). Consumers prefer transparent packaging for ready-to-serve meals, so they can see the contents.

TechnologicalInvestment in the frozen food sector with new technology and equipment has vast potential for growth with incredible opportunities in Bangladesh itself as well as exporting in Middle East, EU, North America and the far eastern countries. Because of globalization the latest technologies are becoming available due to cheaper prices and quality maintenance which has made the production procedure easy, enhanced the productivity and streamlined great quality. Ease of cheaper but quality imports of Chinese machineries also help to reduce invest costs and therefore enable to produce at lower costs and so thereby reducing price but ensuring quality control. Assembly line automated production process also induce mass production, minimize human errors and tampering with food quality and maintains uniformity in taste, superiority and ingredients. Improvement in the cold-chain, i.e., better equipment, proper food handling practices, adequate transportation, and storage have encouraged higher output and minimized incidences of spoilage. Feed meals plants and processing unit for value-added products are at present the buzz words in Bangladeshi frozen meat industry. Equivalently, workers are also receiving training for skill development in operating these advanced technologies therefore complementing each others growth simultaneously.COMPETITION ANALYSIS

Market research at various point-of-sales in Dhaka gave a clear understanding of the different competing products in the market, their packaging and pricing. The table below shows its summary.DIRECT COMPETITORS OF FROZEN BEEF PRODUCTS

Product TypeCompetitor NameQuantity(g)Piece/PacPrice(Tk.)

SausageLocalRich25010110

34012140

ForeignKhaleej34012183

Al-Kabeer40010220

Doux34012157

Ayamas2508110

Srangosun34010130

SalamiLocalRich1001290

20026150

ForeignAyamas1001090

Meat BallsLocalRich30010170

ForeignAl-Kabeer3008300

Srangosan3008170

Ayamas30010170

KebabForeignAl-Kabeer4506320

Interviews with the managers and staffs of different superstores showed that different point-of-sales promotes different brands, but they all prefer to encourage and shelf local brands (Rich and Aftab) mostly due to many advantages. These include more familiar and close relationship with their dealers/distributors of the products, consistent supply of the products, and easier/quick to respond to the changes in market demand. This makes inventory management more cost-effective and efficient.

DIRECT CompetitorS:

There are several direct competitors in the frozen beef market as represented by the table above. However, our key competitors are Rich (local) and Al-Kabeer (foreign). Rich

Rich Agro Industries Ltd. is a subsidiary company of Harvest Rich Group, a pioneer in textile and agro industry in Bangladesh. 'Rich' is the market leader in Bangladesh for further processed meat products which dominates 86% of the market share.

'Rich' product portfolio has over 120 types of further processed & value added product range in Chicken, Beef, Fish, Mutton & Tube ice. They are categorized into Cold meats/cuts, Smoked & Gourmet Specialties, Sausages, Burgers and Breading line Nuggets, and Kievs. Their product range categories are been distributed to all 5 Star hotels, International restaurants, Chain Stores to the Corner shops in their own fleet of cold refer trucks.

From the consumer survey it was found that 83% of the consumers preferred Rich (33% only Rich alone). Its dominance was more evident upon asking Agora; they said that Rich is the highest selling frozen beef from their stores. Al-Kabeer

Al-Kabeers obsession with quality in procurement, manufacturing and distribution of Frozen Foods has helped establish them as a leader in the Middle East Frozen Food Industry. The Al-Kabeer catering range includes meat, poultry, seafood, vegetarian products, and ready-to-eat products. Al Kabeer has been in the business for Mutton, Chicken and Beef for over three decades now.

Brand preference for Al-Kabeer was found to be 47%, which is the second highest, despite its much higher price (around 1.75 times more) than Rich of similar packaging. Agora confirmed its preference through informing us that its the second most selling frozen beef from their stores after Rich. Al-Kabeer is our only competitor in terms of frozen beef Kebab.

Ayamas, Doux, and Srangosun

They are some of our foreign direct competitors but they do not pose much of a threat to us because of their negligible brand preference and market share. According to our survey, all of them combined took up only 6% of the brand preference. However, despite being foreign, their pricing are pretty competitive and similar to local producers like Rich. This could be the only potential threat to us.INDIRECT COMPETITORS:

There are few indirect competitors of our frozen beef products. They are mainly the local producers Aftab and Sausley. Aftab sell only frozen chicken products of more or less same categories like sausage, meatball, and salami. But their brand preference was found to be significantly high among the consumers with 30%. So if Aftab enters the market with beef, this could pose a notable threat.

Whereas Sausley do sell beef but they are not packaged in the way other brands are. They offer their products fresh and not frozen at their personal outlets and also at the local superstores in a separate counter. So customers can actually buy the amount according to their needs. Considering this scenario, Premium frozen beef products will be providing superior quality and taste than that of Rich at a higher price. This would put us into a competitive advantage because, 87% of the consumers considered quality taste as an important feature of frozen beef products and only 20% went for price. Even though brand preference for Rich was found to be 83%, 90% wanted an improvement on quality taste (Appendix). Also, the foreign brand Al-Kabeer was found to be second most preferred after Rich despite its much higher price (Appendix).. All of these facts and figures indicate that we have an immense potential to grab a good market share from the first year.

MARKETING MixProduct & PricingA successful business strategy requires considering several dimensions to establish its competitive advantage. The major success factor is heavily dependent on its product and pricing. Premium Frozen Beef Products is positioning as more for more, offering a value-added price to its quality conscious consumers. Its business includes both B2C and B2B customers who are willing to pay comparatively higher price for more nutrition, assurance of halal, taste and quality. The market survey shows that around 90% want the current products in the market to improve in quality and taste (Appendix). Also managers in point-of-sales (Agora, Desai, PQS) agreed that most consumers now a days are willing to pay more for quality products and therefore bands like Al-Kabeer are in huge demand. But the super stores fail to shelf these products at all times due to lack of supply for import discrepancies and therefore are eagerly looking for local substitutes. Most hotels, fast food shops and uptown restaurants are striving to compete in this cutthroat market by providing menus that sometimes put the taste-buds to test. Table below shows the products range and pricing structure of Premium Frozen Beef Products.

Premium Product, Packaging & Pricing

Product TypeQuantity(g)Piece/PacWholesale Price(Tk.)Retail Price(Tk.) [adding 10%]

Spicy Sausage2508118130

34012145160

Peppery Salami20026155170

10012100110

Fiery Meat Balls30010173190

Arabian Delight

-Kathi Kebab3005100110

4508163180

Arabian Delight

-Shami Kebab3005100110

4508163180

Arabian Delight

-Shish Kebab3005100110

4508163180

Promotion

The second most vital dimension of success and sustainability in a competitive market is a businesss promotional strategy as its the sole medium to reach the customers and make them aware of the product, engrave the brand image on their minds and position itself in the market. Premium Frozen Beef Products have identified the following tools for promotion and their costing.NamePlacementFrequencyCost/ 3 months (Tk.)Total Cost (Tk.)

Newspaper

Prothom AloFront Page Bottom part 6 x 183days a week. Friday, Saturday and Tuesday.

8,64,000

Discount 20%

1,72,800

The Daily StarFront Page Bottom part 6 x 183days a week. Friday, Saturday and Tuesday.

8,64,000

Discount 20%

1,72,800

JanakantaFront Page Bottom part 6 x 182days a week. Friday, Tuesday.

28,800

Discount 20%

1,15,200

4,60,800

Leaflets

3,00,000 units3 taka per leaflet9,00,000

MagazinesBack CoverWeekly1,50,000

SamplingAt point-of Sales, Schools, Universities, Fairs6,56,200

BillboardGulshan 13,30,000

Web Site3000

Source: MediaMix Ltd.25,00,000

The promotional costing initially will be high in order to intensely promote Premiums Brand image in the minds of the consumers and create awareness. Competitor interview showed that the most effective tool is sampling and leaflets and therefore consists of a major part of the total costing. Also, as it is a niche product so only selective newspapers and magazines will be used for advertisement.The total promotional costing will decrease in the following years, as Premium will gradually establish its brand and image and will continue further promotion to create a sustainable awareness among its consumers.

MANAGEMENT TEAMThe chosen form of ownership for the business is Partnership with six members, each with equal contribution to capital. The terms and conditions for the Partnership Agreement are discussed in the (Appendix).

In Bangladesh, Partnership form of business is most lucrative and easy to establish due to minimal governmental regulations, flexibility in terms and conditions and exemption from corporate taxation.

Procedure for Partnership Business set-up in the country are as follows:

Registration of Partnership on Stamp Paper for . Requirement of Trade License from City Corporation based on location of business.

Certification from BSTI as Food Manufacturing business will not be required as Premium will not be exporting to foreign countries as yet. The Business organogram shows a summary of the hierarchy structure and the different departments involved.

The resumes (Appendix) show the qualifications of the administrative or management team involved.MANUFACTURING & DELIVERY PROCESSFacility

Premium Frozen Beef Ltd will be endowed with a state of the art infrastructure. The company will include a modern and advanced warehousing facility, including deep freezers, etc. which are as per latest technology. This will enable Premium to store all the food products in fresh conditions and in bulk, thereby facilitating timely delivery at all times. An excellent network of supplier, transporters and distributor will enables it to function well and meet the specific requirements of consumers. The total cost of facility set up will be Tk.40,00,000 (Appendix). Location

After much assessment about the location of the facility, it was concluded that the most convenient, feasible and cost-effective choice will be in Yusufganj in Rupganj, Naraynganj. The reasons are: The cost of land in that region is comparatively the lowest and therefore is at present a lucrative place for setting up factories. Rich (competitor presence) itself is present in Narayanganj. Land measuring 2 bigha will cost Tk.3,00,000 (Appendix). The location is also nearer to the suppliers and resources, which are mostly located in Chandpur and its neighboring region, therefore allowing easy supply routes to and from the source to the factory. (Appendix). Narayanganj is also at close proximity to the capital (market), and so ensuring faster, less costly (transport) and easier delivery to the point-of-sales and other customers. Cheaper but more skilled labor for further meat processing are available due to the presence of Rich. (Appendix).Layout

Leading operations management have proved that key to an efficient, time and cost saving manufacturing process lies in the facility layout and the production process. Hence, Premium believes in creating a value chain with interrelated series of processes to produce its different products along different production lines. Various layout designs were formulated and the best in terms of value creation have been selected due to its feasibility, efficiency and cost-effectiveness using competitor facility analysis and computerized heuristics. (Appendix) Equipment

The facility will incorporate some of the most modern semi-automated machinery conforming to international standards for hygiene and safety, such as Sausage Linking machine (to automate the portioning and hanging process at high speed), Peeler machine, Slicer machine (high speed), Meat Ball maker, Salami Cutter, Mixer, Batter, Grinder and Vacuum Packaging Machine imported from China. The costing of these equipments were fixed with different sellers and distributors online In addition to the semi automated production line for meat processing, the production house will hold state of the art storage freezers, one with -5 o C for raw material and ingredient storage, second with -15 o to -22o C for short term storage of finished products and above -40 o C for long term storage. The accumulated cost for all of the above mentioned equipment will be around Tk.1 crore. (Appendix)

Labour

With the boom in the meat processing industry, government is currently encouraging its development through various further meat processing programs. Organizations like LEIC are also contributing to worker skill development by providing courses and technical know-how. This in turn are encouraging more people to shift to the meat processing industry that ensures job security, higher salary, health and safety in addition to other fringe benefits like paid leave, bonuses etc. Labor and Management Salary cost will be around Tk. 1,80,000 and will grow steadily (Appendix).Quality Assurance

Food products or processed food products require high quality standards in packaging, preservation, transportation, etc. Understanding the fact, due attention to food procurement, processing, packaging, handling and preservation will be paid. Every effort will be made to maintain hygienic ambiance, right from the beginning to the end of the food packaging process.The quality control team of Premium (Organogram Fig. ) will check every product line before and after processing. Licensing & CertificationPremium Frozen Beef Product Ltd. will be required to issue trademark under the company which will cost Tk. 3000 (Appendix). In addition there will be no need various certifications under BSTI (Appendix).

Value Chain Management

Supplier Chain Management

Being a Muslim oriented country, consumers prefer locally processed meat products or imports from Middle-East to ensure its halal for consumption. Therefore Premium Frozen Beef Products will source its supplies of raw beef materials locally through contract farmers will who will receive 10% share of profit as well as receive constant supervision for quality control and managing standard. In parallel, organizations like LEIC will help them with technical know-how, while government support (Bangladesh Institute of Farming) and various NGO across the countries can help them with financial support and cattle breeding knowledge. Hence, the choice of these suppliers will be selective, focusing especially on local rural women (divorced or single earner) who receive special aid from these development organizations for cattle breeding and poultry farming to encourage Women Empowerment. This in turn will help these women both financially with a consistent source of income as well as help maintain a more sustainable, committed and progressive relationship between the suppliers and Premium.The suppliers will be concentrated from Chandpur as they produce the best and quality meat in the country. Premium Frozen Beef will also have a Food inspector who will check the quality of the meat supplied by visiting these local suppliers from time to time as well as at the production point. It will therefore guarantee consistent quality and loyal chain of suppliers.

The required meat pieces (chunks) will be delivered to the facility base on a day-to-day basis by the suppliers ensure freshness and reduce transport costs to each different suppliers. Suppliers will in addition enjoy additional benefit of selling the rest of the portions of the cattle to the local market at markups.Delivery Process Management

After production and packaging, the next most vital step is creating and maintaining a quality , efficient and sustainable delivery system from the production facility warehouse freezer (short term: -15 to -22 o C and long term: above -40 o C) in Narayanganj to the various point-of-sales (Agora, Nandan etc) and restaurants, hotels and fast food shops around Dhaka City. As each of these superstores is well equipped with their own Storage Freezer (0 to -10o C) there will be no need for setting up additional warehouses in the city. The estimated cost of the freezer trucks will be Tk. 15,00,000. (Appendix).Weekly deliveries will be made to the various stores and food shops/restaurants dotted around the city according to their individual order placements, via Premium Frozen Beef Products own two Transport Freezers ( -15 o to -2 o C). This will guarantee that Premiums products will always be available at different outlets of the superstores throughout the year unlike most imported products like Al-Kabeer, Doux etc. This consistency in the self delivery process also works as an encouragement for superstores as they are relieved from one, failing to serve their customer needs and two, from having to take the hassle themselves to bring the product from the producer/distributor to their shelf (as in the case of Aftab and other imported products ( Competitor interview).In addition they will receive a 10% share of profit, i.e. the retail price of the products will have a 10% mark-up on Premiums wholesale price therefore also providing them an incentive to shelve the products and also encourage its sales. (Appendix) Timely delivery and quality products, combined with customer contentment are the goals Premium will strive for.Head officeTo ensure smooth operations of Marketing and Distribution Channel in the city, a head office will be located in Eskaton Garden measuring 2500sq ft which will cost Tk. 20,000 as rent. (Appendix).FINANCIAL PROJECTIONSPro Forma Income Statements

Sales: We have calculated the market value of frozen food which is Tk. 57,200,000 in a year, where our only domestic competitor in frozen beef RICH has 87% of the market share. We are assuming to grab 50% of the market when we will enter. Which means our 1st years sells forecast is (57,200,000*0.5) = Tk. 28,600,000

COGS: From our competitor survey we came to know that cost of goods sold is around 60% of the selling price.Distributors Margin: Our distributors (e.g. Agora) usually put 10% margin on suppliers prices. So if our product price is Tk. 100 to consumers then distributors margin would be Tk. 9.1 for that product.

Other operating Expenses: They are usually 6% of the selling price. (for our competitor) but we have assumed it to be around 8% for us.

Tax: As we are in the agro-based industry, for the first 5 years we will have a tax Holiday. So we do not need to give tax for the first 5 years. (Appendix)

Interest expenses: For agro-based industry Bangladesh Bank has a scheme where BB will fund 49% of our investment at 0% interest rate and no repayment for 8 years. (Appendix)

Pro-forma Income Statement

DescriptionYear 1Year 2

Q1Q2Q3Q4Q1Q2Q3Q4

Sales71500007418125769630579849168284350859501489173279251726

(-) Costs of goods sold42900004450875461778347909504970610515700853503965551036

Gross Profit28600002967250307852231939663313740343800535669313700691

Total operating expense19976452031340206629821025671777196181623618567401898763

EBIT862355935910.5101222410914001536545162177018019281801928

Tax and interest00000000

Net Income862355935910.5101222410914001536545162177018019281801928

Pro-forma Income Statement

DescriptionYear 3Year 4

Q1Q2Q3Q4Q1Q2Q3Q4

Total operating expenses95986669958616103320641071951711121498115385551197125012420172

EBIT57592005975170619923964317106672899692313371827507452103

Interest expense38394663983446413282642878074448599461542247885004968069

Total operating expense18061621851396189832619470162013402206581221201882176602

EBIT20333052132051223450023407912435198254961026683122791466

Tax and interest00000000

Net Income20333052132051223450023407912435198254961026683122791466

Pro Forma CashFlow StatementsWe are planning to increase our all type of fixed assets as well as current assets but neither by equity nor debt financing but from our retained earnings. As we have to buy new assets so we have cash outflow from our retained earnings for financing these new assets. As we do not have any debt or tax obligation so our cash for financing activities is zero throughout the 4 years.

Pro-forma Cash Flow Statement

Year 3Year 4

Q1Q2Q3Q4Q1Q2Q3Q4

Cash flows from operating activities:22192662310206240455625024442588133269350128028202916238

Cash flows from investment activities:415115.6415115.6415115.6415115.6536501.7536501.7536501.7536501.7

Cash flows from financing activities:00000000

NET INCREASE/DECREASE IN CASH:18041501895090198944020873292051632215699922663182379737

Pro-forma Cash Flow Statement

Year 1Year 2

Q1Q2Q3Q4Q1Q2Q3Q4

Cash flows from operating activities:12564801169161123944213123581751009182949719109281995413

Cash flows from investment activities:0000309562.5309562.5309562.5309562.5

Cash flows from financing activities:00000000

NET INCREASE/DECREASE IN CASH:12564801169161123944213123581441447151993416013651685850

Pro Forma Balance SheetsLand: We are planning to build our factory at Yusufganj in Narayanganj. There price of corporate area is Tk. 50,000 per shotansho. We are planning to buy 2 acre at (50000*60) Tk. 3,000,000.

Fridge Truck: We have met a dealer who supplies fridge trucks. They told us that price of a fridge truck is Tk. 1,500,000

Factory: We have come to know that a factory establishment cost is Tk. 4,000,000 without equipments.

Machineries: We are planning to buy machines for our production worth around Tk. 10,000,000. Prices of which we have collected from internet and attached in the Appendix.

Investment: We are investing all of the previous quarters retained earning in the next quarter for allowing the continuous growth of our company.Pro-forma Balance Sheet

Year 1Year 2Year 3Year 4

Current Asset3472070399288145918135280585

Net Fixed Asset17188500184267502008721322233219

Investment( from retained Earnings)4039811516906751176254145188

Total Asset24700381275886982979665131658992

Current Liabilities798491.6918265.410560051214406

Long Term Loan9800000980000098000009800000

Owners Equity10200000102000001020000010200000

Retained Earnings39018906670433874064610444586

Total Liabilities and Owners Equity24700381275886982979665131658992

Break-Even AnalysisWe have considered first four years time span for break even analysis. The formula we have used for this analysis is:

Break Even in sales = Fixed Cost / Contribution Margin Ratio

Fixed cost = BDT 18,765,000

Contribution Margin ratio= Total contribution (Sales Variable cost)/ Sales

= 29,757,555 / 152,958,102 = 0.1945

Break Even in sales = BDT 96,454,793. So, we will start making profit, after we have reached our sales amount of BDT 96,454,793.

And we are expecting to reach our break even in 2.77 years.

Required InvestmentWe need to invest BDT 18,765,000 in our Fixed asset at the beginning of the business at a time. As we are getting BDT 20,000,000 from equity and debt financing, so the rest BDT 1,235,000 will remain in cash in case of emergency situations.

The assets and respective amounts to invest are:

Initial investment

CategoryCost

1. LandBDT 3,000,000

2. FactoryBDT 4,000,000

3. MachinariesBDT 10,00,000

4. Fridge TruckBDT 1,500,000

5. Air ConditionerBDT 95,000

6. Office furniture and stationaryBDT 70,000

7. ComputersBDT 100,000

Total Investment RequiredBDT 18,765,000

Pay-Back PeriodAs we have an investment of BDT 20,000,000 of which equity financing 51% and debt financing is 49%. And we are expecting to pay the full amount to our equity holders as well as debt holders in 2.92 years from the day we start our business.

Sensitivity Analysis

As Frozen food has a market growth of 28% (Appendix) but for most likely situations we have used growth rate = 15%Best Case Scenario

We have assumed our industry growth rate to be 20% per year. Then we can achieve our break even sales in even 3 years. Our total sale in only 3 years is Tk. 113,807,455 and our break even sales amount is Tk. 91,585,381. And our total Net Income for these 4 years is Tk. 34,657,494. Where our initial investment is only Tk. 18,765,000. Pro-forma Income Statement (Best case)

Year 1Year 2 Year 3 Year 4

Sales3081739437458735 45,531,326 55343612

(-) Costs of goods sold1849043622475241 27,318,796 33206167

Gross profit1232695814983494 18,212,530 22137445

total operating expenses82489737581863 7,983,521 9188576

EBIT40779857581863 7,983,521 9188576

Tax or Interest expense00 - 0

Net Income407798575818637983521.079188576

In the best case where we are assuming to have 20% growth rate our net cash inflow has decreased by around Tk. 350,000 from Tk. 27,856,732 to Tk. 27,403,471 for all 4 years. This may be due to very high growth in fixed asset in our company.Pro-forma Cash Flow Statement (Best Case)

Year 1Year 2Year 3Year 4

Cash flows from operating activities:4978273790788210,504,61412944122

Cash flows from investment activities:021765002,927,1003,827,820

Cash flows from financing activities:00-0

NET INCREASE/DECREASE IN CASH:497827357313827,577,5149116302.3

Here also we have assumed our growth rate to be 20% and for that our retained earnings becomes only Tk. 12.9 million only for the last quarter of the 4th year whereas our initial investment is also around Tk. 19 million. Our inventory is Tk. 2.1 million. Pro-forma Balance Sheet (Best Case)

Year 1Year 2Year 3Year 4

Current Asset4626979555237566628497995419

Net Fixed Asset17188500193650002229210026119920

Investment( from retained Earnings)309020834361142368696147092

Total Asset24905687283534893132364534262431

Current Liabilities827701.9951857.210946361313563

Long Term Loan9800000980000098000009800000

Owners Equity10200000102000001020000010200000

Retained Earnings407798574016311022900912948868

Total Liabilities and Owners Equity24905687283534893132364534262431

Worst Case Scenario

We have used our growth rate as 10%, and found that we can achieve our break even sales at the end of the 4th year. Our total sale in all 4 years is Tk. 138,568,608 and our break even sales amount is Tk.102,333,089. And our total Net Income for these 4 years is Tk. 25,409,571 where our initial investment is Tk. 18,765,000.

Pro-forma Income Statement (Worst Case)

Year 1Year 2 Year 3 Year 4

Sales2969048732772742 36,174,975 39930404

(-) Costs of goods sold1781429219663645 21,704,985 23958242

Gross Profit1187619513109097 14,469,990 15972162

Total operating expenses81475517128123 7,067,849 7674348

EBIT37286435980973 7,402,141 8297814

Tax or Interest expense00 - 0

Net Income372864359809737402140.558297814

In the worst case where we are assuming to have 10% growth rate our net cash inflow has increased by around Tk. 460,000 from Tk. 27,856,732 to Tk. 28,310,657 for all 4 years. This may be due to less growth in fixed asset in our company.Pro-forma Cash Flow Statement (Worst Case)

Year 1Year 2Year 3Year 4

Cash flows from operating activities:497528370778728,449,2519289967

Cash flows from investment activities:0300000487,650694,065

Cash flows from financing activities:00-0

NET INCREASE/DECREASE IN CASH:497528367778727,961,6018595902

Here also we have assumed our growth rate to be 10% and for that our retained earnings becomes only Tk. 8.2 million only for the last quarter of the 4th year whereas our initial investment is also around Tk. 19 million. Our inventory is only Tk. 1.5 million. Pro-forma Balance Sheet (Worst Case)

Year 1Year 2Year 3Year 4

Current Asset731012042417064122711.0484534982

Net Fixed Asset17188500174885001797615018670215

Investment( from retained Earnings)0513624163215746212741

Total Asset244986202686644728420435.0529417938

Current Liabilities769976.8885473.31,018,294.311120124

Long Term Loan9800000980000098000009800000

Owners Equity10200000102000001020000010200000

Retained Earnings372864359809737402140.55329417938

Total Liabilities and Owners Equity244986202686644728420435.0529417938

Risk Analysis

Risk Factors

Market demand

Mad cow disease: It is not prominent in our part of the world, but we have to be prepared for such an outbreak. Besides, Bangladesh have already experienced diseases such as bird-flu and swine flu. Threat of any cattle related diseases will shift the demand of consumers to substitute products like chicken and fish. As Premiums sole product line is beef oriented, so it will strike as a huge blow to the company.

Supply

Fall in local cattle meat suppliers: If suppliers of Premium shift to rearing of other farm animals like chicken and goat due to lower rearing and managing cost and higher mark ups, Preimium will suffer from raw material shortage.Economic factors

Increase in inflation and fall in standard of living: Consumers fall in purchasing power will come as a threat as Premium is offering higher value added prices which will then become expensive for a significant segment of consumers. Potential competitors

New entrants: Current competitors who are specializing in chicken products only like Aftab may also introduce beef in their product line and thereby become a dominant competitor. Other new entrants due to potential of the industry may also come as a huge threat and loss market segment.Exit PlanAssessing all the different options and conditions available, we have decided to go for Merger as our exit plan. The competitive advantages over the existing competitors are our new product line introduction of kebabs (locally produced and marketed for the first time). In addition, the distribution channel and process are effective and structured.

Through merger the competitors would be benefitted by:

An already established and fortified distribution channel. They will be able to capture a new segment in the market.

They will gain additional production facility, storage freezers, warehouse, delivery trucks, etc. This will aid them to go for expansion, increase their marginal production and lower marginal cost.

The merger would benefit us by:

We will get an ownership share of the sustainable company.

In case of sale, buyout, or liquidation of asset we will have to immediately exit the market. But through merger we will remain in the market and operate under a more sustainable company and enjoying their profits.

These added competitive advantages will allow them to earn higher profits and increase ownership value which will also be shared by us. Even though we will not receive immediate cash but the cash inflow over the future time period will help us get our return on investment. Later by selling that ownership we will also earn higher return than other options.

Expansion PlansPremium will be able to reach break-even at the end of the third year. Therefore futire plans for expansion include export at the end of the fourth year or at the beginning of the fifth year. We have projected that at the end of the fourth year we would be able to have retained earnings of about Tk10.4 million. This would enable us to enhance our product line and certify our product officially under HACCP and ISO, BSTI . Besides, Premium will also try to establish itself as an export based company keeping in mind that it does not sacrifice the local needs. Moreover, Premiums strategy would be to think globally and act locally. The main focus for export will be in the middle-east countries since it is a huge market for frozen foods. Investment in the frozen food sector with new technology and equipment has vast potential for growth with incredible opportunities in Bangladesh itself as well as exporting in Middle East, EU, North America and the far eastern countries.Bibliography

"Aftab Farm wins Asian Livestock Industry Award." The Financial Express [Dhaka] 4 Nov. 2009, sec. Home Page: 1. The Financial Express. Web. 11 Mar. 2010. http://www.vexilbps.com/

"Aftab Group of Industries." Aftab Group of Industries. N.p., n.d. Web. 16 Mar. 2010.