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BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE

1.0 EXECUTIVE SUMMARY 1.1 Project Background

Background: In response to overwhelming demand for local fresh fruits and vegetables produce, AGRO-TRADING INITIATIVE PROJECThas commissioned this Business Plan to determine the market viability for an aggregation, storageand distribution, and processing and retailing Fresh Fruits &Vegetables Parlour that connects growers in Uganda to buyers around the Entebbe and Kampala urban areas. Purpose: The AGRO-TRADING INITIATIVE PROJECTBusiness Plantests the hypothesisthat agricultural production and economic activity in Uganda could befueled by the development of infrastructure to intermediate transactions betweengrowers and wholesale customers. Definition: This type of Fresh Fruits& Vegetables Parlour, is also increasingly referred to as a Food Hub. A Food Hubcentralizesthe business management structure to facilitate the aggregation, storage, processing,distribution, and/or marketing of locally/regionally produced food products. Vision: The proposed Fresh Fruits& Vegetables Parlour was envisioned as the first of a multi-phased development project. The Fresh Fruits& Vegetables Parlour would begin aggregating conventional local fruit and vegetables to establishthe supply chain, and could be followed by the introduction of on-site processing,an organic line, proteins, collocation of existing niche aggregators and eventually anintegrated Agricultural Business Centre. These supplemental projects would serve thebroader needs of the agricultural community, food entrepreneurs and customers. 1.2 Business Analysis, Recommendations

Business Model: To determine if a Fresh Fruits& Vegetables Parlour located in Entebbe Municipality can operate profitably, a financial model simulating a pro forma profit and loss statement (P&L) was developed. The financial model’s structure was based on the following operating and business model, and inputs were derived from the surveys and operating data from analogous food hubs. The proposed Fresh Fruits& Vegetables Parlour will have three core functions: packing, retailing, marketing and distribution.

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BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE
The packing operation will receive raw material from growers and packs it according to customer specifications. Depending on the grower’s on-farm post-harvest handling capabilities, the product is cooled, washed, graded, packed, palletized and placed in cold storage until it is shipped to or picked up by customers. Farms that field pack may bring pre-packed cases to the food hub for cooling and storage. On-farm pickup will be offered to growers who do not have refrigerated transport. The retailing operation will specialize in making direct OTC (Over-the-Counter) sales of fresh fruits and vegetables or derivative preparations to customers who will be placing and taking their orders in the dining lounge area, or off-the-shelf in the supermarket area. The marketing operation will consist of buyers and salespeople who will negotiate transactions with growers and customers. They may conduct pre-season crop planning with both groups to more consistently match supply and demand throughout the season. The distribution operation will handle logistics of farm and customer pickups and deliveries. This function is often outsourced and is not included as a profit centre in the business model. Revenue Model: The packing operation earns revenue by charging a flat fee for cooling and packing. The fee schedule covers direct costs which vary based on packaging and cooling required for each crop, indirect costs and a profit margin. The retailing operation will generate revenue from direct OTC sales of fresh fruits & vegetables to diners and supermarket customers.The marketing operation will handle two types of sales: consignment and direct purchase. In a consignment sale the Fresh Fruits & Vegetables Parlour facilitates the sale to a buyer on a commission basis but does not purchase the product from the grower. In a direct purchase the food hub buys the product from the grower at a set price and strives to sell it to a customer at a profit. Facility Scale: Since volume will be more constrained by supply than demand, the facility was scaled to the 700 acres likely to be supplied and the resources needed during peak season. This analysis suggests a facility of 25,500 square feet (2,369 square metres) which can accommodate 12 million pounds (5.443 million kilograms) or 470,000 cases per year. This meets approximately 40% of customer requirements, suggesting the Fresh Fruits & Vegetables Parlour can expand its existing footprint or open a second location in the future.

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400. This is sufficient margin to weather pricing and volume variances and provide a return of capital to investors. This is particularly important in the first few years of the operation.200.285. There is also the pricing risk inherent in the produce industry which may squeeze margins and make it more challenging for the food hub to record profits. At full capacity using seasonal extension strategies.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE Financial Analysis: The projected 3-Year P&L shows the net income increasing from US$ 106.500 in Year 1 to US$ 1.000 800. 3 .589 in Year 3 (Refer to Projected 3Year Cash Flow Statement in Table 4). so the greatest risk is lack of grower engagement to provide the volume needed to efficiently operate the Fresh Fruits & Vegetables Parlour.000 0 2014 2015 2016 Sales Gross Margin Net Profit Risks: National local food trends and the survey for this study clearly indicate strong demand which exceeds available supply.323 in Year 1 to US$ 147.000. Figure 1: 3-Year Projected Financial Performance Highlights 1.978 in Year 3 and cash from operations gradually increasing from US$ 952.000 600.000 400. the operating team should employ the following strategies:  Emphasize a strong relationship with growers and cultivate these to ensure ongoing trusted communication. Recommendations: To mitigate these risks. the facility can achieve over US$ 1 million in sales.Figure 1 below graphically depicts the 3-Year projected performance of the Fresh Fruits & Vegetables Parlour.000 1. and a consistent quality supply that will meet demand.000 200.000 1.

cases and PLU (Price-Look Up) codes. better taste. An experienced manager that oversees buying and selling with a deep knowledge of production. specialty health food stores and international missions/agencies operating in Uganda are the highest end customers. Public schools and broad line supermarket and foodservice distributors purchase very large quantities. This means giving growers the price they need even if it cuts into or eliminates gross margin. The company should seek customers in channels that are less pricesensitive and can purchase in large quantities. Deliver consistent quality. Make it easy for customers to do business with the Fresh Fruits & Vegetables Parlour. transportation and logistics should be outsourced until the team has perfected marketing and sales. so the sales staff must be able to effectively gauge and market quality to buyers to ensure an equitable correlation between quality and price. high-end hotels. and ensuring the enterprise is well enough capitalized to cover initial losses. Depending on the breadth of experience within the management team. Make it a win for growers even if unprofitable at first. In time. premium grocery stores. 4     . Build loyalty for the Ugandan brand and tell the local story to customers. packed the way customers demand. If it doesn’t work for the growers in Year 1 there will not be a Year 2. Growers/farmers will need assurance that they will be rewarded with a better price if they deliver a better quality product. but will be more price-sensitive. Secure a management team with experience in marketing and sales. and offer an assortment that will make them a valuable supplier to their customers. the business relationship will be based less on price and more on trust and simplicity. is nutritional and many shoppers and diners know the difference and will pay for it. There is real value-added in local produce which should command a better price: local produce has a longer shelf life. perhaps a former grower. is critical for garnering trust and confidence among growers and buyers. Convey these benefits to consumers at retail through farm identification and value added information on signage. The Fresh Fruits & Vegetables Parlourshould seek a mix of customers which emphasizes the higher end of this range.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE  Build a base of business with the highest end customers it can reach efficiently. Fine dining restaurants.

BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE  Establish a wide and cooperative network of growers. Indirect employment will also result from the enterprise. and distribution. Cultivating relationships with a broader range of growers will also increase the likelihood of filling gaps if weather or other unplanned events disrupt supply. and are a potential means for finding markets and filling orders.3 Project Impacts  There could be significant positive economic and social impacts if the proposed Fresh Fruits& Vegetables Parlour is developed in Entebbe Municipality. There should be a core group of growers that participate in pre-season crop planning. Collaborate with other intermediaries and partners to strengthen the market. these stakeholders and other intermediaries serving the same market should be open to opportunities that could build efficiencies and strengthen markets.5 billion (USD 590. the facility could create over 200 jobs in the local economy. and vice versa. However. the facility would provide a new market and new revenue stream for as many as 600 family farm businesses in communities across Central. Staffing would include positions in management. Farm Income: It is not known what crops are currently grown on the acreage that would be committed to the proposed Fresh Fruits& Vegetables Parlour or what new acreage will be put into production. Based on the scale of the facility operating at steady state. facilities. Eastern and Western Uganda. operations. At the projected UGShs 1. New Markets: According to the average acreage among survey respondents.000) capacity. 1. if just 10% of the facility’s volume at capacity 5 . warehousing. This is a highly interdependent industry. one in which cooperation with competitors can expand markets and support prices. These intermediaries could also become customers.5x) as the facility develops seasonal extension capabilities and reaches capacity. As the business and new relationships develop across the local food system. These transactional relationships can be the foundation for future partnerships as the business expands. sales. the following benefits could be realized: Jobs: In steady state the proposed Fresh Fruits & Vegetables Parlour will employ six full-time and 16 part-time employees and require up to ten (10) third party employees to handle distribution. Employment would increase up to 250% (2. production. adding value to farmland.

Vision    To be a progressive multi-million dollar organization with a pan-Uganda foot print by 2015. 1.5 billioninvestment. those that are a benchmark for quality in the industry.443 million kilograms)of produce in 400 tractor-trailer loads over an average distance of 150 miles. 6 Mission & Vision . affordable and convenient supply of ―Fresh and Healthy " food products. This could reduce carbon emissions by 2.  Maintain tight control of cost and operation during expansion.6 multiplier). Economic Multiplier: At a 2. the proposed Fresh Fruits & Vegetables Parlour will distribute annually approximately 12 million pounds (5. We are committed to enhanced prosperity and the empowerment of the farming community through our unique "Relationship Farming" Model.000 to US$1. Environmental Impact: In steady state. the proposed Fresh Fruits & Vegetables Parlour would inject an additional $60 million into the local economy ($20 million wholesale ~ $26 million retail x 85% not currently local x 2.5 Mission Bringing prosperity into rural families of Uganda through co-operative efforts and providing customers with hygienic. farm revenue could increase by US$900. 1. 1.4 million pounds per year. at capacity and on a retail sales basis.4 Objectives The objectives of the proposed Fresh Fruits & Vegetables Parlour are the following:  Create a strong customer service-oriented sales staff.  Capture 5% of the Uganda fresh and processed fruits and vegetable consumer market by Year 2 – 2015 and break-even from our initial UGShs. compared with equivalent shipments of produce from more distant locations. See page 66 of Appendix for an explanation of local procurement percentages.8 million.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE comes from acreage converted from commodity crops to fresh market fruits and vegetables. To achieve this by delighting customers with "Fresh and Healthy" food products.6x multiplier.

Distribution Channels: Our first priority is to establish the proposed Fresh Fruits & Vegetables Parlour in Entebbe is a location with the best road access and traffic conditions to be able to gain and build a strong customer base and also deliver products for corporate orders.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE  To be a preferred employer by nurturing entrepreneurship. Market Penetration: To take advantage of our first to market competitive edge. Eventually we will also franchise out to Ugandans. Our second priority. starting with the Kampala – Entebbe axis. and is a trend-setting metropolis in Uganda. and hire Ugandan managers to run the Fresh Fruits & Vegetables Parlour. as we add more Fruit Parlours to other places in Uganda. 1. is to establish locations with high visibility and consumer traffic to reach more fresh fruit and vegetable consumers and become a household name brand. we plan to brand it with a Ugandan-oriented brand name. re-design the arrangements for Ugandan customs and trends. managing career aspirations and providing innovative avenues for enhanced employee prosperity. the Kampala – Entebbe area has the highest concentration of companies and high-income shoppers.6 Keys to Success Localization: Since AGRO-TRADING INITIATIVE PROJECT is not yet known in Uganda. we will build our brand through aggressive expansion and promotion. In addition to its population of over 2 million. 7 .

7. 29. 13. 17. 2. 3. Smoothies 2. 15. 4. 15. 9. 21. retail. 12. 14. 19.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 2. 8. Fruit and Vegetable Juices 1. 16. 24. 23. Super food drinks 3. 25. 11. 18. 12. 30. 22. 17. Fruit and vegetable shakes Fruit Products 8 . 20. 13. 2. 4. 9. 10. 27. 16. 8. 11. 5. 14. 28. 2. 9. 7. 18. 1. 3. Asparagus beans Beans Fresh Beetroot Broccoli Cabbage Green Cabbage Red Carrots Cauliflower Chinese Cabbage Chinese leafy Cucumber Dodo Egg plant French beans Fresh Mushrooms Green peas Green pepper Irish potatoes Jobyo Kale Leafy salads Leeks Long beans Nakati Onions Pack choi Salads Spinach Sweet potatoes Zucchini Fruit wines Fruit salads Cap cakes Yogurt Ice cream Herbal medicines Processed fruit products Fruit beverages Dry fruits Vaseline etc. Apples Avocado Apple Bananas Cavendish Bananas Citrus Goose Berries Guavas Jack fruits Lemons Mangoes Oranges Papayas Passions fruits Pineapples Straw Berries Sweet Melons Tangerines Tomatoes Water Melons Fresh Vegetables 1. 10.0 PRODUCTS AND SERVICES The proposed Fresh Fruits & Vegetables Parlour will package. 3. 5. 7. 10. 11. 26. 6. 8. 19. 4. market and offer the following Ugandan fresh& processed fruits and vegetables:Table 1: Proposed Products Fresh Fruits 1. 6. 5. 6. process.

Table 2: Factors influencing changes in demand Income Price Urbanization      GDP Remittances AID Flows FDI Dependency ratio  Supply & demandbalance  Foreign ExchangeRate  Population densityand growth  Income density andgrowth Preferences     Emulation Education Demonstration Ethnic composition Uganda. Rapid urban population growth is also a recent feature. The past and prospective growth of these markets is easier tounderstand when placed in the context of broader economic factors. Although the FFVmarket is relatively small. but the record is a notable achievement measured against the earlierperiod. though at 15% the urbanpopulation shareis still small relative to Latin American. in recent years. and somesouthern African countries. many Asian. supported by substantial aid transfers andby 9 . According to the gross domestic product figures. realincome per capita has increased at about 7% annually since 1997. The demand for FFV isvery income sensitive. Some of the keymacro factors from the past decade or so may diminish as sources of growth goingforward.  Open-air kiosks can be found at busy intersections and busy shopping areas.0 MARKET ANALYSIS 3. 3.  Nakasero vendors now offer a broader range of products. it is important that other factors grow more rapidly if the growth in FFVdemand is to be maintained or augmented. than 5or 10 years ago. If so. Some of the important factors in this regardare summarized in Table 2 below. it has been dynamic in recent years.2 Macro Factors Supporting the Increase of Demand for FFV The demand for FFV takes place within a broad economic context. andthey are growing rapidly. has experienced moderate economic growth by developingcountry standards. with the bulk of thegrowth coming from the monetized part of the economy and aggregate expenditure hasexceeded domestic source income.1 Domestic FFV Market: Small and Dynamic There is ample evidence that the domestic Fresh Fruits and Vegetables (FFV) market is growing and it is dynamic:  More Fresh Fruits and Vegetables (FFV) sold today than five years ago.  The exotic niche serving Asians and foreigners is growing fast.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 3. from local sources.

including on fresh fruits and vegetables. and farmers—have all played a dynamicrole in the development of these markets over the past decade or so. but the price record suggests the absence of sustainedshortage.Farmers have learned to cultivate new vegetables. In the case of Uganda FFV markets these forces were supplemented bychanging food preferences based on improved health education. In the face of rising and diversified demand. As always in perishable food markets. particularly. restaurants. improved domestic security. At the same time marketing costs were high (measured as ashare of the farm level price). adjusted for generalinflation (the non-food price index). newer large supermarkets. in pursuit of economic gain. improved water managementtechniques. 3. Important studies based on the 1992/93 householdsurvey showed that price movements in the retail FFV markets were transmittedefficiently to all other levels of the market – animportant feature of an economicallyefficient market structure. retail vendors. the influence of thegrowing Asian and foreign population. market middlemen. Over the past decade or so.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE aremittance flow that exceeds even the foreign exchange value of coffee exports. Nosimilar studies have been carried out since that period. which is another dimension of economic efficiency. there hasbeen seasonal instability. The activity we observe in the FFV marketsincluding the structural changes is reflective of this consumption behaviour and urbanization. All ofthese monetary sources flow through the economy and into the pockets of high and lowincome recipients ultimately being translated into expenditure on goods and services. and some have organized marketing groups or even taken on the role ofmarket broker. Brokers. the availability of secondhandvehicles. supply and demand has balanced in the FFV markets.among other factors. per unit margins have fallen (adjusted for general inflation). reflecting the underlying high cost of marketing. havebenefited from the rapidly expanding cell phone technology. Market brokers and other middlemen haveinnovated along both extensive and intensive paths in response to profitableopportunities to bring traditional and exotic FFV to market. supplies—mainly from domesticsources—have been forthcoming. FFV vendors—the traditionalMunicipal market vendors. atprices that exhibit seasonal instability but no upward trend. Consumers haveincreased and diversified their FFV consumption choices. But given the improvements intransportation and communication infrastructure it is likely that as marketed FFVvolume has increased. and the proliferation of restaurants and hotels.3 Private Sector Response to Changed FFV Consumption The major players in the FFV markets—consumers. and a growingnumber of kiosks—have been dynamic in their response to this demand expansion. 10 . and easier access to cross-bordertransactions.

the most obvious and publicized change has been the rise of large supermarkets. The large supermarkets will probably become somewhat more 11 . But as a share of national expenditure. in a bid to replace the kiosks out front. But these stores (there are four) account for a small share of FFV marketing. including the pace of marketing innovation. But these stores. Looking into the future. including FFV consumption. Some are roadside stands. following on the social. political and economic breakdown that began in the early 1970s and ended in 1987. The smaller supermarkets may or may not begin to ―bring FFV inside‖ into a capital (and electricity) intensive cold-storage structure. something that was not a strong feature of the economic growth of the 1990s. So a continuation or augmentation of the economic growth rate will probably rely on improvements in economic productivity. But that element. Foreign assistance and remittance transfers were a rapidly growing support for general consumption expenditure. so a slowdown in growth as well as an enhancement will be reflected in FFV market activity. Uganda has experienced a successful. there have been important changes in the retail market structure for FFV. for now. sustained period of recovery growth. as well as the congestion driven shift of demand away from the large. continued population growth and urbanization will probably support further growth in both kiosk-based shopping for FFV as well as shopping at the council municipal markets. The more dynamic part of the FFV retail market is the proliferation of FFV kiosks. Considering the future of FFV market growth. reflecting the rising and diversified demand for FFV. second is the structure of retail food marketing. preferring to use their limited cold storage space for milk and poultry and their limited capital to support other aspects of store improvements. The demand for FFV is very income sensitive. The municipal markets have also experienced change. is not likely to grow. which has been an important aspect of FFV demand in Kampalaparticularly. This shift is more likely to occur in a rapidly growing income environment. these sources may not grow and might even decline. more substantial structures located outside the small supermarkets or at service stations. sell very little FFV. In some ways. Over the past decade or so.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 3. For example. Some of these kiosks are larger. There has also been a rapid replacement of the traditional dukas with smaller supermarkets. central markets toward the community based council markets. some aspects of the economic recovery are probably not sustainable. in the 1990s.4 The Future Market for FFV The future expansion path of FFV marketing depends to an extent on two strategic features: first is the growth rate and distribution of income over the next ten years or so. They source their product from the municipal wholesale markets. the return of the Asian community to Uganda as well as the influx of foreign aid workers is now reflected in the structure of Uganda’s demography.

may in the future reorient to supplying large supermarkets. involving cold space and perhaps a cold room. as large supermarkets expand. The black circles denote the relative importance of each element now in the market structure. from farms with access to cold storage. the most interesting development to watch as the FFV market develops is the role of the kiosks and small supermarkets. and from farms with a higher quality of water management. Whether or not the small supermarkets will absorb these kiosks is an open question. In other words. the market share will remain small. Such farms. direct broker supply may be an increasing trend. At the other extreme are the municipal markets and the brokers who supply them. They view the role of the FFV section. roof. but some are supplied directly by brokers. then large supermarket expansion would probably involve greater sourcing from these types of farms. not in terms of direct profits. there will be a demand for market innovations of the intensive type. For the foreseeable future small-holder producers of FFV will be the dominant suppliers to these municipal markets. particularly those located in front of small supermarkets or service stations. but if the experience from Kenya is a guide.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE competitive in the marketing of higher value FFV. It is unlikely that the number of large supermarkets will grow as rapidly as it has in Kenya. very capital intensive. Alternative expansion paths for the FFV retail structure are shown in Figure 2 in association with the growth path of extensive and intensive market innovation (the horizontal and vertical axis. Kiosks generally obtain their produce from the municipal markets. If Uganda had a bigger sector of irrigated large farms as there is for example in Kenya. In some ways. respectively). This means a greater premium on supply from farmer groups. Intensive strategies employed by both vendors and brokers for sourcing product in these markets are a dynamic feature but not likely to dominate as the market expands. plus the 12 . currently producing flowers for export. These markets currently find it cost effective to source FFV from an extensive network of small farmers extending across agro-economic zones and even borders. And for the larger kiosks. The capital and operating costs involved are high. but in the sections’ success in bringing customers into store thus increasing overall sales volumes per square foot and reducing average unit costs. since they view FFV as part of a strategy for convincing shoppers that all their food needs can be satisfied under one. The large supermarkets prefer contract relationships directly with farmers. They place a very high premium on stable and fresh supply. The concept of extensive and intensive sourcing strategies can be used once again to consider the role of small holders in the future development of FFV markets.

These stores sell a greens mix to consumers.5 Market Competition There are three different types of competitors that MWIJE HALTOW LTD. There appears to be room in the market for multiple farmers as most of the farmers sell out their products each day at the farmer markets. If small supermarkets did absorb the kiosks which are currently out front that would reinforce the trend for being supplied directly by brokers—perhaps brokers with access to wholesale cold-storage. 2. The four leading supermarkets in Kampala – Shoprite Checkers. Similar local farmers. 13 . MIXED DAIRY AND VEGETABLE PRODUCTION FARM and other similar local farmers. usually 15% more. These are very similar operations to MWIJE HALTOW LTD. Nakumatt and Tuskys Supermarket (which recently acquired two local retailers – Half Price and Good Price supermarkets) are open many hours during the day. Figure 2: Expansion Paths in FFV Retail Large Supermarkets Intensive Expansion Small Supermarkets & Large Kiosks Municipal Markets Extensive Expansion 3. MIXED DAIRY AND VEGETABLE PRODUCTION FARM. sometimes larger and sometimes smaller. The quality and variety is lower than the standards set by the offerings of MWIJE HALTOW LTD. The advantage of the supermarket is convenience. Uchumi. This in turn would probably be incentive for brokers to follow more intensive strategies for developing relationships with a network of farmers. Supermarkets. The cost is higher. Their disadvantage is price and quality. MIXED DAIRY AND VEGETABLE PRODUCTION FARM faces: 1.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE competition from high margin packaged goods for floor space is high.

brokers. at prices that exhibit seasonal instability but no upwardtrend. This pattern is similar for the individuals. The produce is not usually local.g. urban groceries and markets. Freshmark for Shoprite) are experimenting with different strategies to enhance the quantity and quality of FFVproduct sourced locally. The FFV market is small and appears to be efficient: Supply and demand hasbalanced in the FFV markets.g. 3. and is a few more days older from the field compared with the local farmers. What is meant by this is that lower-end restaurants and urban groceries (or at least restaurants that are less concerned about quality) will not bother to get greens from local farmers.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 3.g. Thepresence of experimentation by market participants—especially their investments inbuilding longer term relationships—is evidence in support of a competitive market thatis driving market participants to experiment and innovate for commercial advantage. apples from South Africa and elsewhere). and a variety of other large consumers in the market. Buying patterns are based on the customer's desires. There are some individuals that are content with the offerings from supermarkets. Large distributors. There has 14 . mangos from Kenya) and filling customer nicheswith products not grown in Uganda (e. The price is comparable and the quality can be comparable.Large supermarkets and their buying agents (e. exporters. there is no need for them to. andretailers employ problem solving behaviours—to find low cost and profitable solutions to satisfy changing demand. An example of this would be Freshmark – a wholly owned subsidiary of the Shoprite Checkers Group responsible for the procurement of FFV for the exclusive supply to Shoprite stores and the Nakasero market-based fresh fruits and vegetable distributors who buy a wide variety of products and quality of produce from rural farmers within a radius of 100 kms of Kampala City and distribute them to restaurants. Problem solving behaviours by market participants are present in Uganda’s FFVmarket: Market players at all levels of the market – farmers. The disadvantage of a food distributor is the lack of flexibility relative to a local grower when serving local customers.6 Industry Structure Summary Large supermarkets source the bulk of FFV from local farmers: Large supermarkets source the bulk of FFV from local sources with imports fillingseasonal gaps in local supply (e. but not necessarily. There are others that appreciate the difference in quality and are willing to schedule a trip to the farmers market to meet their weekly needs.

15 .transportation infrastructure and trade policy. In the face of rising and diversified demand. Thestructure of food retail will influence local sourcing in different ways: the growth ofsupermarkets.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE been no indication that other market forces—such as collusion bymarket intermediaries—explain price fluctuations. supplies— mainly from domesticsources—have been forthcoming. the growth of municipal markets and kiosks will favour indirect supply ofFFV through brokers and traders and place greater importance on communication. urbanization and the structure of retail food marketing: The factors that havedriven demand so far—the return of the Asian population and the growth in foreign aidworkers —are probably unsustainable and will have to be replaced by improvements ineconomic productivity. The price record overall suggests theabsence of sustained shortage. cold storage and improved watermanagement. will favour direct supply relationships with farmers andplace greater importance on farm organization. FFV demand is very income sensitive and so a slowdown ineconomic growth or its enhancement will be reflected in FFV market growth. Important studies based on the 1992/93 household surveyshowed that price movements in the retail FFV markets were transmitted efficiently toall other levels of the market. large and small. an important feature of an economically efficient marketstructure. Future growth in the FFV market will depend on the pace and distribution of incomegrowth.

BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 4. then UNBS-inspected and approved scales are needed to verify the weight of 16 . but also different varieties.. This is in order to create a contrast of different coloured commodities. colours types of packaging. ready-made salads. etc. for making fruit salads. mushrooms. Another method includes mixing and matching products that are often sold together such as tomato and lettuce. etc. the proportion of fruits and vegetables on offer should be more or less equal. coconut. those of a specific quality.these are mainly of tropical origin and include pineapple. For example. seasonal. a wide range of products shall be on offer at the proposed Fresh Fruits & Vegetables Parlour. or violet and white eggplants. Product choice is not only about the range of crops on offer. labeled with origin certification or regional differentiated produce. tomato. carrots. "Basic" refers to bulk produce sales and is demanded by all types of consumers. etc. aromatic herbs. "Specific" refers to those destined for certain niche markets.2 Pricing Produce at the proposed Fresh Fruits & Vegetables Parlour may be priced by weight. 4. Less common is the grouping of similar products such as tubers and roots. parsley. Within specific categories of products are exotics . If produ ce is sold by weight. radish. etc.. The most common practice is to place contrasting colours next to one another. red tomatoes next to green cucumbers. available only during certain months of the year such as peach. such as garlic. bananas with other fruits. etc. Although there are no fixed rules. The quantity and type of fruits and vegetables for sale varies in each country. etc. melons. and minor produce. nectarines. off-season crop. for salads. as a general rule. produce can be divided into two groups. There are many different ways in which produce can be displayed and some may be highly effective. potato. count or volume with competitors’ prices used as guidelines..1 Strategies for Maximizing Sales As a rule and priority. in many cases originating from other countries. Basic products can be divided into permanent . etc. mango. etc.0 MARKETING PLAN 4. lettuce. such as quality certified products. organics and fresh-cut or ready to eat products.produce that should be available on shelves all year round such as apples. However. A relatively well-supplied agri-hub facility should carry a minimum range of around 20 fruit and 30 vegetables. This is because most buying decisions take place in the store.

The volume system works well for crops that lend themselves to packaging such as small fruit and vegetables or items sold in large volume. quality produce and reasonable prices cause positive word-ofmouth advertising. Regardless of the form used. FM radio and TV ads. distribution of discount coupons at community service organization activities (i.e. the hours of business operation and the location of the proposed Fresh Fruits & Vegetables Parlour. Newspaper advertising is always a good way to reach the public. but may only be necessary when sales levels are low and more customers are needed to move produce. courteous service.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE produce sold. advertising is basically done to inform the public of certain key factors concerning the market operation. It is a good idea to price produce with UShs. are also beneficial. Direct mailings. Other advertising forms include signs.. 1. An inexpensive book for visitors to sign. Selling by weight assures consumers and producers that they receive full shilling value for the produce. it takes time to build up a satisfied clientele. Some planned community activities that can help promote the proposed Fresh Fruits & Vegetables Parlour are tours. can supply roadside marketers with a mailing list and knowledge of the customers’ interests. Display advertisements often are used to catch the customer’s attention and announce special events at the Fresh Fruits & Vegetables Parlour. volume price discounts or superior quality produce to establish goodwill. when the proposed Fresh Fruits & Vegetables Parlour opens. 4. including what produce is available. bulletins and leaflets. and this type of advertising is the most effective method of all. ice cream socials). The business operator can use friendly. However. which gives their name. The classified ads generally are less expensive and reach consumers who use produce for canning or freezing. and other forms of advertising may be required until the proposed Fresh Fruits & Vegetables Parlour has a large number of satisfied customers.000/= intervals to maintain the farm image and ease of calculation. produce or monetary donations. exhibits at craft shows and fairs and sponsorship of community events. Promotion techniques for the proposed Fresh Fruits & Vegetables Parlour can be individually or community-based planned activities. barbecues. or when new produce comes in season. such as catalogs or coupons. mail out materials and bumper stickers. courtesy.3 Advertising and Promotion Good service. 500/= and UShs. address and particular interest. 17 . newspapers. Ads can be run in the classified section or in a display format. Producers should use signs with the prices listed in units so customers are charged the same amount for their produce.

Since focus is a key success factor in entrepreneurial strategy. retailing and marketing the largest and most profitable product line. palletized and placed in cold storage until it is shipped to or picked up by customers.    The initial phase of the project assumes packing. private labeling.  The packing operation will receive raw material from growers and packs it according to customer specifications.0 BUSINESS OPERATIONS 5.marketing and distribution of Ugandan first grade produce only. The retailing operation will specialize in making direct OTC (Over-the-Counter) sales of fresh fruits and vegetables or derivative preparations to customers who will be placing and taking their orders in the dining lounge area. or off-the-shelf in the supermarket area. On-farm pickup will be offered to growers who do not have refrigerated transport. organic. the product is cooled. These future opportunities are not reflected in the business model. Farms that field pack may bring pre-packed cases to the food hub for cooling and storage. proteins.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 5.1 Operating Model The proposed Fresh Fruits & Vegetables Parlour will have four core functions: packing. This function is often outsourced and is not included as a profit centre in the business model. The marketing operation will consist of buyers and salespeople who will negotiate transactions with growers and customers. retailing. The distribution operation will handle logistics of farm and customer pickups and deliveries. seconds. packed. processing and more. marketing and distribution. Depending on the grower’s on-farm postharvest handling capabilities. 18 . retailing. graded. this limitation in scope is to allow the operator to master buying. packing. washed. They may conduct preseason crop planning with both groups to more consistently match supply and demand throughout the season. Over time the team can introduce new offerings such as leased storage.

The retailing area should comprise of a dining lounge area (with an attached kitchen). playground and a picnic area. ambient storage. The fee schedule covers direct costs which vary based on packaging and cooling required for each crop. In a consignment sale the proposed Fresh Fruits & Vegetables Parlour will facilitate the sale to a buyer on a commission basis but will not purchase the product from the grower. it may be advantageous to begin operations as a leaseholder to minimize capital expense and location risk should the core group of growers change its locus of concentration in the first few years of operation. 5. indirect costs and a profit margin. access to an abundant supply of clean water.2 Business Model The packing operation earns revenue by charging a flat fee for cooling and packing. Technical requirements include commercial or industrial zoning. The exterior will have at least two raised loading docks that tractor-trailers can easily access for shipping and receiving and a back lot or access road for truck overflow. and to boost profit margin by minimizing direct and indirect overhead costs. Some optional facilities are restrooms. This transaction can take a few weeks to settle. adequate electrical service. Growers are incented to improve quality to attract a higher price and increase percent pack-out for product graded and packed at the food hub. and ample parking space for vehicles. 19 .BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 5. a packing floor and offices. The interior will have zoned refrigeration.3 Facility The ideal facility is located close to a core group of committed grower-suppliers and near a major transportation route leading to a large customer base. If an existing structure in an ideal location with refrigeration can be leased within Entebbe Municipality. preference for natural gas and adequate weight limits on access roads. This for-profit business model incents the food hub to maximize price and volume. a supermarket display area for fresh and processed fruits and vegetables. In the first case. As a general practice. In a direct purchase the food hub will buy the product from the grower at a set price and strive to sell it to a customer at a profit. The marketing operation will handle two types of sales: consignment and direct purchase. product packed at the food hub is sold on commission and product packed by the grower is purchased directly. the grower receives the remainder of the price paid by the customer less commission and packing fees.

population density and composition. For the case of the proposed Fresh Fruits & Vegetables Parlour. zoning regulations. the most convenient place for its location is considered to be Entebbe Municipality for precisely the following reasons: Entebbe Municipality is the gateway and exit to Uganda for air-bound passengers and therefore makes a good stop-over for in-transit customers interested in fresh and processed Ugandan fruits and vegetables.5 Location The location of a foods hub can greatly influence its profitability.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 5. There will probably be very few market locations that will be ideally suited. 5. Having the facility to operate over the duration over Saturdays and Sundays is meant to cater for the peak in customer demand – when the highest customer traffic usually occurs.4 Hours of Operation The business hours that the proposed Fresh Fruits & Vegetables Parlour will be open to the public for business will be 18 hours per day from Monday to Sunday. Some variables to consider when evaluating sites are traffic count. The traffic density between Entebbe and Kampala is one of the highest in Uganda and this counts in quite a significantly way in attracting potential customers who use this route. Since the proposed Fresh Fruits & Vegetables Parlour will be a high-volume fresh and processed produce selling facility. the type of markets being targeted. it will be necessary to keep it open for such a period of time daily to cater for the expected high volume of customers shopping for fresh fruits and vegetables at any time of the day. Entebbe is not quite far off from Kampala city – which is a focal point in the supply and delivery of fresh fruits and vegetables in Uganda. The more successful foods hubs are located near customers and are easily visible from the road. distance from customers and competitors as well as the type of produce offered. The Entebbe   20 . It is also good practice to have the facility open to evening shoppers since some of them can only afford to get time for fresh and processed produce shopping after the normal daytime working hours – like most supermarkets in the Kampala area usually operate.

However. It will also eliminate confusion in the parking lot and allow for more parking spaces. There are no large supermarkets to speak of within the Entebbe Municipality area. then traffic flow directions may be needed to assist in orderly parking. Organized traffic patterns can make a big difference in the number of cars that can park at any given time. setting up one way traffic flow and marking off distinct parking spaces for cars. the location of the proposed Fresh Fruits & Vegetables Parlour will make it a sole player in this relatively virgin territory – almost devoid of competition from any other intown facilities dealing in the same product or service. Secure off-road parking is essential for the safety of customers and users of the facility. So. Following these steps will improve safety as customers enter. The competition in Entebbe Municipality area for supermarket-sized producedealing facilities is not as acute as that one in Kampala. Signs will be required to direct traffic. Three main steps that the operator of the proposed Fresh Fruits & Vegetables Parlour can take to fully use parking lot space include setting up definite entrances and exits. and materials will be needed to mark off parking spaces. Entebbe Municipality hosts a large contingent of UN troop bases that do not have quick and easy access to supplies of fresh fruits and vegetables. 21 . move through and leave the parking lot. If the proposed Fresh Fruits & Vegetables Parlour is generating a large amount of traffic as is expected. Positioning the proposed Fresh Fruits & Vegetables Parlour near these UN troop bases and other international agencies accords the facility a distinctive advantage over the other competitors in bidding for fresh produce supply tenders to them whenever the opportunity arises. The parking lot should be a well-drained grassy or graveled area. the cost of setting up traffic patterns and marking off spaces needs to be considered.    Availability of parking is another important factor that should be considered in selecting a location for the proposed Fresh Fruits & Vegetables Parlour. The location of the proposed Fresh Fruits & Vegetables Parlour in the Entebbe Municipality area makes it a convenient stop-over cold-storage fresh produce facility that out-bound fresh horticultural exporters and consumers can use to keep or source their fresh fruits and vegetables before flying out through Entebbe Airport. The Uganda cold chain network for fresh produce is poorly developed.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE location for the proposed Fresh Fruits & Vegetables Parlour will therefore give it a strong fresh produce sourcing cost advantage.

Mr. 6. operations and financial functions of the company. and provide excellent customer service. sales and customer service. 22 . The key positions at start-up include: General Manager or Chief Executive oversees the marketing. and negotiate transactions to meet sales targets. taking inventory and ordering products. packing. create thousands of jobs. raise the incomes and improve the welfare of the Ugandan farmers. Supermarket Manager whosupervises employees and store operations. He/she will also organizing merchandise. logistics and human resources management functions. Warehouse/Quality Manager who oversees receiving. As the company adds staff this individual may become less hands-on. but will continue to be involved in every aspect of the enterprise and may handle key accounts.1 Key Positions The ideal operator will have existing relationships with growers and a high level of skill and experience in marketing and sales. meet with buyers to expand the customer base. This individual hires. performing administrative and human resources work. This position will eventually split into dedicated quality management. who has vowed to leave no stone unturned in realizing his cherished dream of establishing and operating a modern and futuristic agri-hub business in Uganda that will introduce new standards in agroproduce trading. and add value to local agro-produce. order processing.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 6. Salesperson/Buyer who will visit farms to build the grower base. shipping and logistics.2 Project Promoter The man of vision and energy behind the proposed Fresh Fruits & Vegetables Parlour is Mr. communicate with employees. or engaging in safety inspections and loss prevention. Book-keeping staff will be needed fairly early on to assume time consuming office and accounting duties – it is a very paperwork-intensive industry – and in time a Controller will be needed to manage growth. Aggrey Mugabi is a 3rd Year Bachelor of Entrepreneurship student at Makerere University. Aggrey Mugabi – a self-made made entrepreneur.0 MANAGEMENT PLAN 6. trains and supervises floor labour and is responsible for food safety and quality management at the facility. This function will eventually split into buying. inspections. This individual will also actively buy and sell with growers and customers. warehouse management.

000 flyers at US$ 0. Purchase and installation of furniture.25 per copy) for the total amount of US$ 5.000. Plant Equipment for the total amount of US$ 60. Physical contingencies (5% of start-up assets) and worth US$ 27. Consultant’s fees of US$ 3. Land for construction of the proposed Fresh Fruits & Vegetables Parlour in the amount of US$ 200.500). 23 .500 and as well as flyer printing (2.000.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 7.000. Marketing promotion expenses for the grand opening of the Fresh Fruits & Vegetables Parlour in the amount of US$ 4.000 for the first two months and cash reserves for the first three months of operation (approximately US$ 15. Start-up inventory of US$ 30.500. which includes employees and owner's salaries of US$ 25. 7.000.000.000 paid to Consultant’s Firm for the help with setting up the Fresh Fruits & Vegetables Parlour.500. Construction materials worth US$ 90. Other start-up expenses including stationery (US$ 500) and phone and utility deposits (US$ 2.1 Start-up Summary The start-up expenses include:      Legal expenses for obtaining licenses and permits as well as the accounting services totaling US$ 1. Building and civil construction expenses estimated to cost US$ 60.500 include:          Operating capital in the total amount of US$ 70.000.000.000 per month). fixtures and fittings estimated to cost US$ 20.000. Insurance (general liability. The required start-up assets of US$ 577. workers' compensation and property casualty) coverage at a total premium of US$ 2.300.0 FINANCIAL PLAN The following is the Financial Plan for the proposed Fresh Fruits & Vegetables Parlour. Purchase of transportation van at a cost of US$ 20.000.

760.000 550.340.776.000 6. The project promoter – Mr.078.000 152. Fixtures & Fittings Transportation Van (1 Unit) Start-up Inventory Operating Capital Sub-Total Physical Contingencies (5%) Sub-Total TOTAL (A + B) Funding for the project will come from three major sources—owner’s/promoter’s investments.000 7.500 3.000. The remaining US$ 291.492. Table 3 below summarizes project funding sources.000 507.000 38.000within the Entebbe Peninsula area.500 14.304.347.000 2.776.694.000 30.388.466.082. angel investor financing and bank loans.164.000 10.5 – 2 Acres) Construction Materials Building & civil construction costs Labour Costs Transport Costs Technical installations + Interior design Utility connection costs COST IN USD 1.000 2.000 1.000 Plant Equipment Furniture. Stationery) Sub-Total B.817.000 177. Start-up Assets Land/Site (1.800 COST IN USHS 3.000 90.000 83.000 25.000 228.000 1.300 200.347.000 60.000 12.300 2.000 33.460.800 needed to cover the start-up expenses and the rest of the assets will be raised from angel investor sources. Start-up Expenses Legal expenses Insurance Consultant’s Fees Marketing promotion expenses Other Start-up Expenses (incl.000 5.780.000 20. 24 .000 50.000 69.000 76.000 20.157.000 70.616.000 15.000 6.396.500 591.000 1.500 577.000 36.300.328.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE Table 2: Start-up Costs Summary ITEM DESCRIPTION A.716.502.00 50. Financing for the start-up inventory and operating capital is expected to be raised through a medium-term bank loan worth US$ 100.000 5. Aggrey Mugabi is making his capital contribution to the project in form of land – valued at US$ 200.000 27.

000 100.500 277.000 2.000 0 0 0 0 0 0 0 0 0 0 0 200. Start-up Assets Land/Site (1.300 2.000 33.000 10.000 2.000 20.500 291.000 5.000 200.000 0 200.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE Table 3: Project Funding by Source ANGEL INVESTOR FUNDING (USD) MEDIUMTERM LOAN FUNDING (USD) PROMOTER’S EQUITY (USD) ITEM DESCRIPTION A.300 0 90.000 16.000 70.000 33.000 15.800 49. Start-up Expenses Legal expenses Insurance Consultant’s Fees Marketing promotion expenses Other Start-up Expenses (incl.500 3.31% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 30. Stationery) Sub-Total B.000 60.000 20. Fixtures & Fittings Transportation Van (1 Unit) Start-up Inventory Operating Capital Sub-Total Physical Contingencies (5%) Sub-Total TOTAL (A + B) Percentage of Total Funding 25 .000 100.000 0 100.000 27.79% Plant Equipment Furniture.500 14.000 0 0 250.90% 0 0 0 0 0 0 200.5 – 2 Acres) Construction Materials Building & civil construction costs Labour Costs Transport Costs Technical installations + Interior design Utility connection costs 1.

000 72.75% 384.600 0 12.567 106.400 225.600 0 12.000 9.2 Projected 3-Year Profit & Loss Account Table 4: Projected 3-Year Profit & Loss Account (Figures in USD) ITEM/YEAR Sales Direct Cost of Sales Other Production Expenses Total Cost of Sales Gross Margin Gross Margin % Expenses Payroll Sales and Marketing and other Expenses Depreciation Leased Equipment Utilities Insurance Rent Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales 2013 1.088 11.800 9.020.000 0 360.000 9.000 9.000 13.609 139.400 0 677.000 67.600 235.000 278.000 72.978 11.300.42% 2014 1.400 222.200.200 0 714.419 147.000 62.000 9.600 36.000 742.600 36.200 170.600 0 580.17% 416.800 161.59% 2015 1.000 360.000 310.323 10.000 0 310.310 45.000 0 278.200 14.703 59.000 9.000 9.000 132.38% 26 .000 74.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 7.600 212.600 36.000 132.000 890.000 72.600 0 12.203 63.000 940.000 57.31% 448.

704 1.523 397.500 0 100.000 0 0 0 1.000 0 981.946 142.954 895.000 24.000 0 0 0 1.124.996 93.971 0 0 36.000 695.000 0 1.975 276.692 448.500 952.245.163 36.357.000 36.971 325.992 0 18.000 960.000 873.151.704 0 19.000 30.143.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 7.000 36.539 0 0 36.000 30.000 511.3 Projected 3-Year Cash Flow Statement Table 5: Projected 3-Year Cash Flow Statement (Figures in USD) ITEM/YEAR CASH RECEIVED Cash from Operations Cash Sales Cash from Receivables Sub-Total Cash from Operations Additional Cash Received VAT Received New Current Borrowing New Other Liabilities (Interest-free) New Long-term Liabilities Sales of Other Current Assets Sales of Long-term Assets New Investment Received Sub-Total Cash Received EXPENDITURES Expenditures from Operations Cash Spending Bill Payments Sub-Total Spent on Operations Additional Cash Spent VAT Paid Out Principal Repayment of Current Borrowing Other Liabilities Principal Repayment Long-term Liabilities Principal Repayment Purchase Other Current Assets Purchase Long-term Assets Dividends Sub-Total Cash Spent Net Cash Flow Cash Balance 2013 2014 2015 255.000 0 1.000 637.000 36.237.053.000 24.016 120.215 27 .539 384.000 697.324 0 19.717 416.992 0 18.971 1.663 300.539 1.717 182.173.285.992 0 3.300 30.954 0 19.000 0 0 0 1.700 40.324 1.

217 74.000 21.411 618.000 726.294 80.617 219.000 313.140 51.411 147.529 36.617 276.709 75.000 278.411 57.323 52.088 358.000 33.140 506.200 820.323 139.179 72.000 546.000 106.500 33.000 225.000 31.751 80.000 29.751 108.294 58.799 59.4 Projected 3-Year Balance Sheet Table 6: Projected 3-Year Balance Sheet (Figures in USD) ITEM/YEAR ASSETS Current Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Long-term Assets Long-term Assets Accumulated Depreciation Total Long-term Assets Total Assets LIABILITIES AND CAPITAL Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Sub-Total Current Liabilities Long-term Liabilities Total Liabilities Paid-in Capital Retained Earnings Earnings Total Capital Total Liabilities and Capital Net Worth 2013 2014 2015 182.820 397.323 444.389 820.200 72.123 80.564 40.820 358.000 184.BUSINESS PLAN – PROPOSED FFV PARLOUR IN ENTEBBE 7.171 36.735 99.409 80.990 42.000 167.692 173.323 219.000 392.215 187.400 444.800 93.187 108.600 52.978 506.940 134.800 618.389 28 .000 40.020 104.700 260.000 205.530 60.000 139.717 147.