BUSINESS OPPORTUNITY PROFILE Prepared for the Inward Investment Facility Linden Economic Advancement Programme

SMALL BAKERY OPERATION

TABLE OF CONTENTS INTRODUCTION REGION 10 BUSINESS ENVIRONMENT EXECUTIVE SUMMARY THE OPPORTUNITY: SMALL SCALE BAKERY OPERATIONS PRODUCTION PROCESS AND TECHNOLOGY REQUIREMENTS FOR BAKERY SETUP ANNUAL FINANCIAL PROJECTIONS FINANCING SOURCES 3 3 4 5 6 8 10 12 13 Business Opportunity Profile – Small Bakery 2 .

835sq.500sq.0001 is the Region’s main population centre and is located inland from the coast.miles). small-scale mining. estimated investment and production costs.km (55sq. potential markets. transportation industry. Rockstone. Anarika. transportation and distribution along with manufacturing and construction. tourism. whose economy had been based on the bauxite industry. the town is redefining itself as a key port of call in and out of the hinterland. agriculture. This series of Business Opportunity Profiles is intended to help investors identify viable opportunities in the various sectors.INTRODUCTION There are numerous exciting business opportunities in Region 10 for investors who wish to invest in agriculture. Spread over an area of 142sq. it is also the natural choice for Atlantic–bound South American trade. manufacturing. LEAP Inward Investment Facility (IIF) recognizes that potential investors need information on business opportunities. Ituni. it is centrally located and contiguous to most other administrative regions. Originally a mining town.miles). furniture manufacture. Selection of technology. Old England. With an area of over 16. financing plans. However they are not intended to be replacements for project feasibility studies. Aware that the time of the “Bauxite economy” is over. THE TOWN OF LINDEN Linden. or services to name a few. logging. REGION 10 Region 10 is the logical hub for Guyana’s development. logging. the main economic activities are mining. Great Falls.km (6. the town is situated on the two banks of the Demerara River. Mabura. Boasting excellent river and road transport links out to the coast. and is the natural gateway into the hinterland’s forest and mineral reserves. 107km (66miles) from the capital city Georgetown. and construction. thereby transforming the town into a centre for industrial 1 Census 2000 – Statistical Bureau Business Opportunity Profile – Small Bakery 3 . It has abundant land and natural resources. Besides the town of Linden there are significant communities in Coomacka. Aroima and Kwakwani. agro-processing. with a population of approximately 30. feasibility studies and other related issues remain the responsibility of the investor. These profiles address generic issues such as the appropriate technology involved and where possible. the population is increasingly involved in small business activities like merchandising. sawmilling. fishing. At present.

and service activities. Linden is also a supply centre for hinterland communities and itinerant miners. There is a well developed network of utility services including stable electric power. These incentives can be found in: • • • Customs (Amendment) Act No. 1 of 2004 Customs Duties (Amendment) (No. 6 of 1999. water supply and telecommunication services. Ituni and Kwakwani are: • Waiver of Customs duties and Consumption taxes on all imported items of plant. Some of its specific strengths are: • • • The size and layout of the town lends itself to easy manageability of its resources. The location of the town on both banks of the Demerara River provides for easy transportation arrangements and lends itself to development of an entrepôt facility for Atlantic-bound Brazilian goods. equipment and spare parts. The town itself possesses abundant natural potential in mineral and forest resources in its immediate environs. and land is available for potential development. Investment Act No.1) Order 2004. Linden has an essentially young population with 85% of its residents under 45 yrs. Linden-based Industries are less prone to natural disasters than those along the coastal areas. machinery. • • • BUSINESS ENVIRONMENT The Government of Guyana has approved various general and sectoral incentives as part of its comprehensive strategy aimed at reviving the economic fortunes of Region 10. • Business Opportunity Profile – Small Bakery 4 . Special Incentives for Region 10 and specifically for Linden. For manufacturing and agricultural investments. waiver of Customs duties and Consumption taxes on vehicles imported exclusively for use in the business.

bread is a staple of most diets. Ituni and Kwakwani: ■ Waiver of Customs Duty and Consumption Tax on all imported plant. and Barrow’s Bakery (BRL). machinery. A modern bakery operation is not very labour intensive.000 loaves per week will make handsome returns on investment. There is an opportunity for high quality operators to become primary suppliers for the Town and the Region. Besides these there are numerous small. DIH. Investment Act No.EXECUTIVE SUMMARY In Region 10 as elsewhere in Guyana. high quality small bakery operation. The initial set-up costs are typically recoverable within the first 5 years of the operation of a small bakery. working capital and financing requirements. the Georgetown operators are Bakewell. JAC’s Bakery. • Business Opportunity Profile – Small Bakery 5 . • • Advantages for investing in Linden/Region 10: • The Government of Guyana’s support for Region 10’s development includes a regime of investment incentives which are provided for in Customs (Amendment) Act No. producing in the vicinity of 3. there is a potential demand of more than 20.1) Order 2004. as well as to supply other areas. Advantages to investing in this industry: • Very good returns on investment in a relatively short period are possible once the operation is managed efficiently with a good product range exhibiting consistent excellence and coupled with an aggressive marketing programme.000 – 4. bottom-house operators with no significant impact on the supply side. and usually production can be increased without incurring significant additional labour costs.000 loaves per week. 6 of 1999. the demand for bread outstrips the supply by both Linden-based and external bakeries. Bread sold in Linden is supplied mainly by 3 local bakeries and the 4 main operators in Georgetown. A small bakery operation may be set up for as little as $9million. Unfortunately for residents here. A full feasibility study will be required prior to startup to determine actual startup costs. 1 of 2004 and Customs Duties (Amendment) (No. equipment and spare parts. Graham’s and Humphrey’s. Included in the legislation are Incentives for Communities of Linden. The local bakeries are Demerara Bakery (Bovell’s). A wellmanaged. Assuming a minimal level of consumption at 2 loaves per week per household in the Region. A small operation is defined as one using up to 40 bags of flour per week.

this operator still cannot supply scores of customers every day. has strong market share in Region 4 and some presence in Linden as well. being the optimal location.THE OPPORTUNITY: SMALL SCALE BAKERY OPERATIONS Bakeries. have been primary food providers for countless generations of people. there is still a frequent shortage. JAC’s Bakery and Snackette. Barrow’s Bakery (BRL). small operator who has quickly developed a reputation for good taste and quality and has a loyal clientele particularly in Mackenzie. adaptability. Business Opportunity Profile – Small Bakery 6 . 3. the dominant supplier on the coast and with penetration into Berbice and Region 10 as well. Grahams’ Bakery. Consequently there is tremendous potential for a small bakery operation marketing within and outside the region. particularly Georgetown. Humphrey’s Bakery also with a strong Georgetown reputation for excellent taste and quality has little presence in Linden because of insufficiency of supply. In terms of “imports” the greatest penetration is by the 4 major producers in Georgetown: 1. 2. a relatively new. Despite a recent increase in oven size. Linden. the main population centre. although people still seem to prefer the fresher bread of the local bakeries. Bakewell. when fresh bread is hard to locate. 3. 2. a main supplier for Wismar and Christianburg residents because of its west bank location. bread is a staple food for many people at breakfast and supper. for certainly. with strong market share in Region 4. Existing Operators The bakeries serving Region 10 are: 1. its relative durability. wherever it’s possible. convenience. and with a presence in Region 10 as well. in Mackenzie. Even with the bread coming from Georgetown. nutritive value and potentially low cost. in Wismar. in Mackenzie. the same consumption patterns exist. In Guyana generally. and in Region 10. particularly at weekends. DIH’s Golden Harvest. Linden. The rewards are likely to be significant with Linden. for the same reasons that apply anywhere else. all cultures evince a distinct preference for the production of bread and similar baked products as a major source of nutrients. The problem for Lindeners and others in the Region is that existing bakeries do not meet the local demand resulting in “importation” of bread from Georgetown. with a reputation for good taste and medal-winning quality in International competitions. Demerara Bakery (Bovell’s). Indeed. existing since the dawn of civilization in one form or the other. 4. may have a corollary truism that “man must eat bread”. and reliability. Linden. the truism that “man must eat”. a main supplier in the entire Linden area based on good quality.

approximately 40 – 50 loaves per day.000 loaves per week in the Region. sweetbreads. Specialty items like cakes and pastries may be sold to schools. Demand Based on an estimate of 10. There may be competition from other existing bakeries.Besides those listed. there are numerous “bottom house” outfits in the region with extremely small production. Business Opportunity Profile – Small Bakery 7 . Market Potential The market potential of any operation such as a small bakery will depend on classic plant location and sizing decisions with demand influenced by issues like proximity to the consumption center. The operation may eventually offer a diversified product mix of bread. Cheap electrical power supply. Selling one-third to supermarket outlets and to shops at wholesale prices. The local bakeries and the imports do not satisfy the demand for bread and pastry.000 households consuming an average of 2 loaves per week there is a potential demand for 20. Market Strategy Several strategies will need to be implemented to establish a credible presence in the market for any new outfit. pastries etc. as there should be no difficulty in disposing of bakery products. Any new operation entering this industry for the first time will have to produce at the highest level of efficiency. canteens and snackettes at wholesale prices or at the bakery at retail prices. cakes. catering to those who prefer bread of the “home-made” variety. with close attention paid to packaging and distribution. The product must be excellent in quality and marketed aggressively. Consequently there are advantages to investing in this area including: • • • • Satisfactory returns on the investment if the operation is managed at a high level of efficiency. Selling one-third to private distributors at wholesale prices. However an operation that is well organized and efficiently run with a distinct quality product can achieve comparatively high returns from this investment. These may include: • • • • Distributing one-third of the products by selling at the bakery. Increase of output does not necessarily require additional labour. Capital costs are recoverable within the first 5 years of operation.

Dough Dividers In larger bakeries where high output production is necessary. These ovens are 20% more expensive in fuel consumption and consequently not as cost effective for small operations. usually at 180° (350° F). but it is imperative if one is to compete with the products from the more established bakeries. Improved mechanical designs. This equipment may be considered optional as the process may be done manually. Shaping the mixed dough manually or with a dough moulder. C Equipment Dough Mixers These are used to combine the ingredients and come in a variety of sizes. direct fired and indirect fired. Ovens Ovens are one of two main types. Shaping contributes to smooth texture in the final product. resulting in more uniform baking temperatures and more accurate heat control. dividers cut the dough into uniform sizes after moulding.PRODUCTION PROCESS AND TECHNOLOGY In recent decades bread-making technology has gone way past the firewood outfits that were commonplace even in the 1960s. a dough moulder may be used to shape the dough before it is allowed to ferment. the process is as follows: • • • • • Weighing and combining ingredients in a dough mixer. Cutting the dough and reshaping into required sizes for baking. new materials and computer controlled systems have revolutionized the industry. In the process the dough is also homogenized and degassed. The equipment is entirely optional as the cutting process can be done manually with a dough knife but the degassing benefit is lost. In direct fired ovens the heat is inserted directly into the baking chamber. However. Business Opportunity Profile – Small Bakery 8 . at the most basic level of production. There is a wide variety of production equipment and machinery available. The most commonly used mixer that is conveniently sized for a small bakery is either a 30 quart (34litre) or 60 quart (68litre) model. Baking the dough. Allowing fermentation for approx 1½ hours. These sizes are able to mix 1 or 2 bags of flour at each mixing. In indirect fired ovens. fuel is burned in an external combustion chamber and the heat is circulated around the baking chamber by a blower system. Dough Moulders After the mixing of ingredients.

At any rate.000 loaves per week. Good used equipment is available through Internet suppliers and also from within the Caribbean region.000 to 3. These ovens are typically available in sizes from 16 to 48 pans.Ovens can be either the traditional deck type or of rotating design. The usual energy sources for modern bakery operation are either electricity or propane gas. Potential investors should note that use of combustible wood and charcoal is not recommended though present in large reserves. A 24-pan unit is adequate for an operation producing 2. Business Opportunity Profile – Small Bakery 9 . since those options cannot match the consistency of modern computer-driven operations. the easy availability of cheap electricity in Linden will offer distinct advantages to using electrical ovens here. A rotating oven with up to 4 times the capacity of the conventional deck ovens plus a better “finish” (color and texture) is the better option.

Alternatively it may be possible to buy out some location.000 depending on location and the nature of the negotiations.5. tables etc) as well as providing space for storage of supplies and finished products. At least two 1. One Mile. Business Opportunity Profile – Small Bakery 10 . 2. Building The actual building housing the bakery operations should be adequate for proper layout of equipment and furnishings (ovens. Rental costs can vary from as low as $20. skilled personnel who are available as private contractors for just such activities. 5. Property values and prices are significantly lower than in Georgetown and other urban centres on the coast. Fans (cooling and extractor) should be installed to ensure adequate air circulation within the work area. particularly in the densely populated areas like Amelia’s Ward. 4.500sq. Though stainless steel tables are more professional. wooden tables are as effective and will be cheaper to acquire.8m (6ft. Once sales are going to be conducted at the bakery outlet as suggested above. There are several suitable areas in the Region and specifically in Linden.m.m. 465sq.REQUIREMENTS FOR BAKERY SETUP Some of the critical factors to be taken into account prior to establishing a bakery are: 1.ft.) 3. it is necessary to ensure that all forms of traffic. It will be important to carry out detailed surveys in order to determine demand and preferences in given locales as well as to ascertain the level and effectiveness of competition.000 per month to $50. (2. can come and go unencumbered. Half Mile. Certified electrical contractors should be employed to inspect. . Fortunately Linden has a surfeit of qualified. Wismar Hill.) tables will be required for a small operation. Ventilation The location will need to be properly ventilated to avoid the buildup of heat during baking operations.ft. determine and where required install appropriate supply wiring based on the needs of the operation and the location. pedestrian and mechanical. Furnishings Furnishings will include heavy-duty working / mixing tables. Electrical Supply The building should be wired (or rewired) for the type of equipment used. to avoid electrical overloads and risk of electrical fire. A small operation will require between 230sq. Wisroc or Blue Berry Hill. Location It is critical to identify a building in an area that is clean and environmentally friendly.000sq.

Business Opportunity Profile – Small Bakery 11 . 7. sale or distribution activities of the business. bowl scrapers. At any rate the Municipality’s Regional Health Officers (RHOs) will periodically visit the operations to enforce health standards for operations and personnel. to prevent spoilage. 8. dough knives. metal scrapers. Waste Management Proper facilities will be required for garbage and effluent disposal. racks for cooling and scale(s) for weighing ingredients. Food Handler’s Permits The operation of the bakery will require clearance from the Municipal Public Health Department and food handler permits for anyone involved in the production. 6. spatulas.Fridge/freezer facilities will be needed to store ingredients. products stocks and raw dough. baking tins. Equipment This will include sets of heavy-duty hand tools like rolling pins.

this production level will address less than 10% of the existing market.730 1½ Months 14.300.even point Break.even point Break.000.000 loaves per week in Region 10 alone.269 loaves Business Opportunity Profile – Small Bakery 12 .289. 6-day weeks) 52 weeks Assuming a potential market of 20.500 loaves / week $150 per loaf retail 5 days (unskilled labour typically works 12 hr/day.157 26. at a typical user rate of 2 loaves per week. Investment Year 1 Revenues Expenditure Net Margin Break.270 $ 8.299.000.even point Period Percentage Sales Production $ 9.even point Break.000 $27.ANNUAL FINANCIAL PROJECTIONS Output: Selling price: Workweek: Work year: 700 loaves / day: 3.000 $19.43% $ 3.

The major capital and operational items associated with this level of operations are: Investment Items Land and building Plant and machinery Working capital for 2 months Total capital investment Receipts per annum Cost of production per annum Annual Fixed costs Profit per annum Break Even point Net Margin as a percentage Break Even point in months 3.7months Machinery & Equipment Rotating Oven 24-pan 1-Bag Dough Mixer Dough Breaker Working Tables (2 or 3) Fridge/Freezer (11cu.600. Plastic bags and labels Production Items Flour Sugar Lard Salt Dry Yeast Other ingredients Other Considerations Rent Water supply Electricity Transportation Insurance Licenses and permits Labour Manager (Owner/Manager) 1 Master baker 1 Asst Baker 4 Utility workers 3 Sales and distribution workers Business Opportunity Profile – Small Bakery 13 .250.000 14.000 7.000 5.298.270 1.000 17.40% 1.300.000 27. bowls etc.) Cash register or Point Of Sale Computer Bread Moulder (Optional) Delivery Van (second hand) Scales Bread Slicer Operational items Bread pans (approx 150) Cooling racks Hand tools and utensils: knives.000 750. ft.43% 30.000.000.400.000 9.

FINANCING SOURCES The following are some of the funding sources from which a borrower may access financing for an operation of this nature. • The Linden Economic Advancement Fund (LEAF) provides financing for Region 10 projects. either singly or in combination. Small Business Development Trust Institute of Private Enterprise Development National Bank of Industry and Commerce Citizens Bank • • • • Business Opportunity Profile – Small Bakery 14 .

7 Business Opportunity Profile – Small Bakery 15 . fuel Other expenses: Sales and Advertising expenses etc Insurance of Equipment.300.873 14.42 $0.25 $350.70 17.000 $120.000 19.730 120.30 26.316 $27.38 $0.012.000 $240.000 $600.000 $8.000 $1.086 $18.299.600.400.22 $96.000 5.000 $40.44 $16.270 $53.00 182.269 $3.000.43 30.940.000. Workers Rent or Lease of land General expenses: Office salaries Supplies Miscellaneous Totals Sales and Income data: Selling price per unit Expected unit sales Target operating income for the period Cost of Production per annum Variable & Total Results Contribution margin per unit Unit sales at break-even point Dollar sales at break-even point Dollar sales at expected level Net Annual Profit at expected level Unit sales at target operating income Dollar sales at target operating income Break Even Percentage Net Annual Margin at expected level as a Percentage Break Even Period in months Costs etc Salary Owner/ Mgr $50k/mth Skilled Wages 1x 2500/day + 1x 2000 day= $4500/day Utility Wages 7x 1000 = $7000/day Variable Costs $79.000 $30.000 $20.Small Bakery Operation Detailed Analysis Fixed Costs Production costs: Direct materials Direct labor Indirect production costs electricity.000 $0.270 $150.40 1.

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