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1.

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


EXECUTIVE SUMMARY
1.1

Introduction

Crane Bakery Limited is a start-up bakery retail establishment that is located in the
western suburbs of Kampala at Bulenga which is only 15 kms along the Kampala
Mityana Mubende Fort Portal main road. The Crane Bakery Limited will be an
innovative retail bakery in Bulenga, Ssumbwe Parish, Wakiso Sub-County with the
mission to service Wakiso District and neighbouring Kampala District with high
quality baked goods in a modern and creative way. We will sell freshly baked breads
and desserts made from the highest grade of ingredients, filling theBulenga areas
need for a classic bakery.
Crane Bakery Limited expects to catch the interest of a regular loyal customer base
with its broad variety of bread, pastry and confectionery products. The company
plans to build a strong market position in the town, due to the partners' industry
experience and mild competitive climate in the area.
Crane Bakery Limited values having great customer service, keeping up-to-date
with technology to remain as competitive and customer friendly as possible, and
contributing to the local community through non-profit organizations, through
donating some of our two day-old baked goods among other things. In each of these
three categories, our bakery plans to improve upon continuously.
Crane Bakery Limited aims to offer its products at a competitive price to meet the
demand of the middle-to higher-income local market area residents and travellers
using the Kampala Mityana Mubende Fort Portal highway.
Our commitment to excellence in the craft and artistry of baking will enable us to
deliver high quality products that look superb, delight the customer and make
celebrations a moment to cherish. Our product wills possess that certain something
that others do not have.
In order to attract a cross section of population, a combination of 2 outlets, one in a
low-income area and another in a posh area, is used in this study. Project Capacity
cannot be based on machinery capacity, as the same oven will be having different
capacities for different products. This business segment is labour intensive. The
proposed bakery outlet will be working from 6.00 a.m. morning to 12.00 midnight.
Number of working days has been taken as 355 with average 2 shifts per day.

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1.2
The Company
Crane Bakery Limited is incorporated in the Republic of Uganda. It is equally
owned and managed by its two partners.
Mr. Ronald Byamukama has extensive experience in catering, sales, marketing, and
management, and with a first degree qualification in catering and hotel management
(Bachelor of Catering & Hotel Management). Ms. Diane Kemigisha brings
experience in the area of finance and administration, including service in various
financial administration capacities across various private sector small- and mediumsized enterprises in Uganda over the last six years. The two partners will share equal
ownership of the company.
The company intends to hire two full-time pastry bakers and one sales executive at
the start of business (during the first year of business) to handle customer service
and day to day operations.
1.3

Products and Services

Crane Bakery Limited will provide freshly prepared bakery and pastry products at
all times during business operations. Six to eight moderate batches of bakery and
pastry products will be prepared during the day to assure fresh baked goods are
always available. The main types of baked products that will be produced by Crane
Bakery Limited include:
Biscuits/cookies
Breads (leavened and unleavened)
Cakes
Doughnuts
Pastries
Samosas
Scones
Crane Bakery Limited will bake hand-made, naturally fermented bread, and
distribute it throughout Bulenga town and next door Kampala city. Our bread will
be sold to high-end markets, restaurants, offices, schools, and directly to the
consumer. Our product will be packaged, labeled and branded consistent with the
regulatory requirements for food. Crane Bakery Limited will be engaged in its
community, and will be dedicated to educating its consumers and bakers about
every aspect of bread. Future opportunities include expansion into other towns in
Uganda.

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1.4
The Market
The retail bakery industry in Uganda has recently experienced rapid growth.
Crane Bakery Limited wants to establish a large regular customer base, and will
therefore concentrate its business and marketing on local residents, which will be the
dominant target market. This will establish a healthy, consistent revenue base to
ensure stability of the business. In addition, tourist and traveller traffic is expected to
comprise approximately 35% of the revenues. High visibility and competitive
products and service are critical to capture this segment of the market.
We believe that we are coming into the retail bakery industry at an optimal time,
despite the not-so-perfect economy of today. There are no significant bakery shops
near the Bulenga area, giving us a big break into the industry. The only competition
Crane Bakery Limited bakery predicts to have is the bakery sections at the large
supermarkets such as Nakumatt that are now baking their own products and
squeezing smaller and emerging bakeries out of business. Such supermarkets with
in-house bakery facilities will be our greatest threat. Fortunately, the economy has
not hurt bakeries as indicated by recent positive trends in the growth of the retail
and wholesale sectors contribution to the Uganda GDP. We will remain successful
in our industry by keeping alert to customer trends such as health, convenience, and
pleasure.
Our target market will be the higher-end of middle class workers and above,
however effort will be made to give lower incomes opportunities to buy our
products, such as through our day-old bread section. Our prices will tend to be
higher than those of our local competitors, mainly for the reason that we strive for
higher quality in our products. We would like to see daily somewhere from 800 to
1,000 customers varying in age groups but focused on our target market.
The selection and number of outlets would totally depend upon the mix of target
population. For example if we were to start this venture in bigger towns, one might
select more sophisticated outlets with the emphasis on best decor and interior
design. But in case of smaller towns, one would prefer to go for a mix, which has
more traditional products. Any big town with a total population of over
20,000inhabitants is the ideal location for the project. Bakery and confectionery
business is emerging as one of the good business ventures in Uganda as it provides
varieties of bakery and pastry items. This phenomenon grew rapidly; and today
hundreds of bakeries exist throughout Uganda. Over the decades, the bakeries have
evolved even further.

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1.5
Management Strategies and Marketing Plan
Crane Bakery Limited will maintain a focus on Quality product with bottom-line
growth through cost reduction and optimal performance. We also focus on
technology and innovation to make sure employees will have extensive training to
perform proper technique and equipment operation. Maintain 100-percent honesty
between employees, customer and management. As a team input will be collected,
analyzed and put into practice. Team meetings weekly will motivate and forecast
growth and annihilate potential difficulties.
Initial competitive advantages will include:
A unique recipe that will be highly rated in terms of consumer taste tests;
Hiring and retaining a professional baker; and
Having an experienced management team with a successful track record in
branding and marketing.
Our prime marketing strategy will be to target the Crane Bakery Limited bread and
pastry products to large formal retail supermarkets/chain stores and our own
distribution network for smaller outlets and kiosks using a 50:50 sales ratio. This
kind of balance in product distribution/sales helps in building our product brand
identity quickly through the formal retail supermarket chains (though they may take
longer to pay) while generating the much-needed cash sales from smaller retail
outlet sales.
Marketing and branding of Crane Bakery Limited bakery and confectionery
products will play a key role in the mobilization of targeted number of customers.
Major marketing options will include: newspaper advertisements, cable TV ads and
handbills among other traditional marketing channels. We also hope to contact our
customers through business cards and product brochures that provide our menu
and product selection, a window display that will be a direct aesthetic appeal.
Positioning of the product, cost of developing and manufacturing the product, cost
of competitive products and condition of the economy will determine price of the
product.
1.6

Financial Considerations

Crane Bakery Limited expects to raise over UShs 276 million of its own capital (in
form of savings and existing assets), and to borrow UShs 35 million guaranteed by
the Microfinance Support Centre as a five-year loan. This provides the bulk of the
current financing required.

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Crane Bakery Limited anticipates sales of about UShs 780 million in the first year
(PY 2), UShs943.8 million in the second year (PY 3), UShs 1.142 billion in the third
year (PY 4), and UShs. 1.382 billion in the fourth year (PY 5) of the plan. Profits for
this time period are expected to be approximately UShs 162,369,000 in PY 1, UShs
217,787,000 by PY 2, UShs287, 675,000 by PY 3, and UShs375,941,000 by PY 4. The
company does not anticipate any cash flow problems.
NOTE: All currency figures in this plan are in Ug Shilling (000s).
Figure 1: Performance Highlights (PY2 PY5)
Sales

Gross Margin

Net Profit

1,400,000
1,200,000
UShs '000s

1,000,000

800,000
600,000
400,000
200,000
0
PY 2

PY 3

PY 4

PY 5

We will require UShs 35 million for start-up cost, which will be placed fully on the
microfinance loan, but we predict that the debt will be paid after five years. The
medium-term loan will be used to 1) buy kitchen baking machinery &equipment;
and 2) provide working capital. In the beginning we will only need two minimumwage workers aside from the two of us participating in the business plan to run the
bakery but more may be added as finances allow it and demand requires it. The total
project cost is estimated at UShs 518,222,500. Projected IRR, Net Present Value
(NPV) and Payback of this project are 47.11%, UShs296.44 million (at a discount rate
of 17%) and 1.18 years respectively. While Crane Bakery Limited has the potential
for high growth, the first three years will be spent establishing company financial
stability and increasing market share. Proforma financial statements are included
with this plan.
1.7

Mission

Crane Bakery Limited aims to offer high quality and good tasting bread and pastry
products at a competitive price to meet the demand of the middle- to higher-income
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local market area residents and travellers in the Kampala and Wakiso district areas,
while increasing the number of people enjoying the health benefits of a higher grain
diet.
1.8

Vision

Vision Statement: In the future we enhance our competitiveness through marketing


and technology adaptation in order to sustain our business cutting edge so as to be
as customer-friendly as possible and provide the best products in our field. We also
plan to continue to invest in our community through partnerships with other
businesses and non-profit organizations.
1.9

Core Values

Serve... Sustain... Contribute...


-Service: We work hard to provide an inviting environment for our customers and
serve them in the best and most efficient way possible.
- Sustainability: We wish to use technology to connect with the people of the
advancing times, working with our customers to produce their own inspired
creations and update as the technology around us advances.
-Community Contribution: We are committed to contributing to non-profit
organizations active in the Kampala and Wakiso district areas through our products
and funding, and increasing our involvement in other opportunities.
1.10

Keys to Success

Keys to success for Crane Bakery Limited will include:


1. Providing the highest quality bread and pastry products with personal
customer service.
2. Competitive pricing.

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2.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


PROJECT PROFILE
2.1

Project Brief/Business Description

Bread is one of the oldest prepared foods, and it is eaten by almost everyone. The
proposed project presents the business planning and operational aspects of setting
up a bread & confectionery business. Major products in this case will be biscuits and
cookies, cakes, doughnuts, pastries, samosas, scones, leavened and unleavened
breads and general items. In order to attract a cross section of population, Crane
Bakery Limited will sell its bread and pastry products to the existing formal retail
supermarket chains so as to build and gain brand recognition quickly, while also
establishing its own product distribution network to supply the smaller retail outlets
and kiosks using a 50:50 product distribution ratio to generate quick cash flow. In
that case, our naturally fermented, handmade bread is sold to markets, restaurants,
and directly to the consumer.
Our team has decided that what Bulenga town in Wakiso district needs is a
hometown bakery and the exciting experience that can be gained there. We do
recognize that there is a slight risk trying to open a bakery, especially in a location
close to the city of Kampala where bakeries have tried and not been successful
before. The start up with a business such as ours is risky because it does require
certain equipment that other businesses do not. Other obstacles include the permits
and licenses that we would need to get in order to sell food but once we have passed
these beginning challenges, we believe that our business will head in a positive
direction. A luxury and high quality bakery doesnt seem to fit in the current
economic status, but with our target market of the middle and low-income classes
playing a pretty prominent role in the largely peri-urban Wakiso district area and
the need for a more personal bakery in Bulenga town, our business has the ability to
not only stay open, but be successful. This leads us to our biggest priority, providing
customers of the Crane Bakery Limited with quality baked products and an
experience to take away from our shop.
Crane Bakery Limited will be making food products but we dont want to consider
ourselves a sit and eat restaurant. We predict that this bakery will be a place where
people stop and pick up items that they may want on a whim, or where they have
come to pick items that they have specially designed or ordered. Despite the fact that
having a place to sit and eat is not our top priority we do want to offer some
convenience to our customers by making a seating area available with a few tables
and chairs. Its our goods we are selling, but our service that will assist with
attracting consumers.

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As with many businesses there will be a fairly simple routine of things that happen
during the business week. We will make the bread during the night and early
morning in order for our products to be made fresh and ready to serve customers
throughout the day. We hope to open our doors at 6:00a.m. Monday through
Saturday, and run through a business day until we close shop at 2:00 p.m. Monday
through Thursday and 5:00 p.m. on Friday and Saturday. Throughout the day we
expect customers to swing by on their way to work, enjoy a quick bite during lunch
breaks, or place special orders either by phone, or by the in-store design area. Our
employees will be serving our customers by helping them make decisions, assisting
in the case that something is wrong with our technology, or just being present and
able to answer questions or concerns that customers may have. As the business day
comes to an end, all the baked goods that are not sold during the day that are baked
fresh on a daily basis will be moved to an area for things that are a day old to be sold
the next day for half price. If the next day our half-priced items are not sold, we plan
on giving them to local non-profit organizations that would want our products such
as the existing charity organizations and NGOs active in the Kampala and Wakiso
district areas. This routine would then be repeated during the business week.
We want to take pride in the products we make, and ultimately in the business in its
entirety. What will make the Crane Bakery Limited successful is its uniqueness,
creativity inspired focus, and our more personal level of doing business compared to
our competition with the bigger supermarkets.
2.2

Project Capacity & Rationale

Project Capacity cannot be based on machinery capacity, as the same oven will be
having different capacities for different products. This business segment is labour
intensive. The proposed bakery outlet will be working from 6.00 AM morning to
12.00 midnight. The Crane Bakery Limited bread distribution outlets will determine
the factory timing for production. It is proposed that 2 shifts are necessary for
production. The interesting fact is that these two shifts include only 3 or 4 pure
working hours. Main plant & machinery includes oven in which different items are
baked with different temperatures and different baking timings. Industrial ovens are
easily available in market. For the proposed project, a commercial oven of 7x7x10
feet with 8 rotating stands having 5 trays on each stand is used.
Number of working days has been taken as 355 with average 2 shifts per day.
Initial Capacity of the Bakery & Confectionery is calculated on the basis of total
expected sales of items. Maximum sales are expected during the festive season
period of March, April and December. However, in order to calculate average
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monthly sales, potential revenue is estimated by using the potential demand
estimates. The estimated combination of sales is as given below:
1. 50% sales to own distribution outlets.
2. 50% sales to formal retail supermarkets.
It is expected that annual increase in sales would be 10%. Although due diligence is
carried out in estimating these numbers, the final outcome will vary depending on
the selection of location, pricing, product mix and the marketing strategies.
2.3

Project Investment

Total cost of the project worked out is in the table below:


Table 1-1: Project Costs (UShs)
Capital Investment
Working Capital Requirement
Total Investment

458,222,500
60,000,000
518,222,500

Table 1-2: Project Financing (UShs)


Debt
Equity
Other Funding Sources
Total Project Investment

35,000,000
276,075,000
207,147,500
518,222,500

Table 1-3: Viability


IRR
NPV at 17% discount rate
Pay Back Period (years)

47.11%
296,443,000
1.18

2.4

Proposed Product Mix

This Business Plan is developed for a project based on a production plant along with
a number of product distribution outlets and outside sales with a mix of city areas.
The selection and number of distribution outlets would totally depend upon the mix
of target population. For example if we start this venture in the central areas of
Kampala, one might select more sophisticated outlets with the emphasis on best
decor and interior design. But in case of the more peripheral (peri-urban) areas of
Kampala city, one would prefer to go for a mix, which has more traditional
products. It is also recommended to change the mix of both bakery and general
items according to sale trends of a particular outlet. In this study it is assumed that
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30% sales will be consisting of general items but this combination would be different
in different outlets and according to consumer behaviors.
2.5

Financial Summary

Table 2: Financial Summary


Debt Equity Split
Projected Life
Repayment of medium-term loan
Grace period for medium-term loan
Mark up rate for medium-term loan
2.6

7:53
5 years
5 years
1 year
11%

Project Location

Crane Bakery Limited will set up its storefront bakery at Bulenga town which is
located at only about 15 kms from Kampala along the Kampala Mityana
Mubende Fort Portal highway. Bulenga town is conveniently located on one of the
busiest highways in Uganda. The storefront bakery is situated only 200 metres away
from the main road and has plenty of parking in addition to being easily accessible
from the main road.
Bulenga is a prime location and a growing peri-urban residential town for most of
the employees of the nearby Kampala district businesses. The bakery will sell
different varieties of Bread and other health specific breads, pastries, cakes to the
area and other surrounding communities and districts six days a week Monday
through Saturday. The close proximity of Crane Bakery Limited to Kampala city
which is the largest commercial and industrial hub of Uganda makes it an ideal
location for a new enterprise or business.
We believe the optimum location of the Crane Bakery Limited at Bulenga town
along the Kampala Mityana Mubende Fort Portal highway puts it in a prime
position where we could easily be spotted by everyday passer-bys and also
conveniently located relatively close to the middle of Kampala city. By placing
ourselves in the middle we believe we have a better chance of competing with the
wide range of other baked goods producers that have recently sprang up in
Kampala and Wakiso districts.
Marketers need to determine where the product will be sold and methods of
distribution including transportation and storage.

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2.7
Opportunity Rationale
The opportunity of setting up the Crane Bakery Limited bakery & confectionery
business can be linked with the eating habits of the people. People in Uganda enjoy
the traditional food very well but recently well-known regional food chains and
supermarkets have brought cultural change to Uganda. Now people are ready to eat
junk food, while closely observing the trends, a bakery & confectionery chain can
play an important role in this new era as it is the only source which provides not
only traditional bakery items but also new lines and varieties of confectionery items.
2.8

Key Success Factors/Practical Tips for Success

Some of the Key Success factors that will determine the success of this project
include:
Products range selection and introduction of sitting areas.
Quality and Innovation in products.
Selection of location.
Pricing strategy.
Understanding of target customers, alternative availability (product
differentiation). Launching time.
Hygienic conditions.
There should be regular and sustained marketing through fliers distribution
and Cable TV/FM Radios.
The store should have an ample space for customer car parking. It is advisable
to maintain a parking space whereby around 15-20 cars can be parked
The staff hired should be well-mannered and well-trained in dealing with the
customers.
Customers free gift schemes and surprise gift, valuable customer dinner can
be additional success factors.
2.9

Strategic Recommendations
2.9.1

Marketing

Marketing and branding of bakery & confectionery products will play a key role in
the mobilization of targeted number of customers. Major marketing options include,
newspaper and site advertisement, cable TV ads and handbills among other
traditional marketing channels. Before launch of the project, it is recommended that
a research on understanding the dynamics of the targeted market should first be
carried out, to design the products as well as the promotional strategy. The basic
principle of marketing is to sell the right product, at the right price and promote it in
the right place to the right people. The job of the marketer is to control these 4Ps.
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However, there are other socio-economic factors, which also affect the production,
selling and consumption of foods. The success of marketing is often determined by
the extent to which various socio-economic factors are considered. Market research
is a useful tool for assessing the attitudes and behavior of potential consumers.
2.9.2

Pricing

The following factors determine the price of the product:


Positioning of the product.
Cost of developing and manufacturing the product.
Cost of competitive products.
Condition of the economy.
2.9.3

New Products development

Food manufacturers develop new products to maintain and improve their market
position. New products can include:
New varieties and flavors - these are called line extensions where different
varieties or flavors of the same product are produced.
Quality improvement of an existing product, either functional or nutritional.
Copying a competitor's product.
Developing a new, innovative product resulting from new ingredients, new
packaging.
2.10

SWOT Analysis

A SWOT Analysis is a strategic planning tool used to evaluate the Strengths,


Weaknesses, Opportunities, and Threats involved in a project or business venture.
Strengths and weaknesses are internal to the company. Opportunities and threats
originate from outside the company. A SWOT analysis is usually performed early in
the project development process, and helps organizations evaluate the
environmental factors and internal situation facing a project.
2.10.1 Internal Strengths

Family business with contented workforce


Low operational costs
Strategic location
Home-made recipes
Reasonable prices
Own premises and which can easily be expanded to at least double capacity
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2.10.2 External Opportunities

Easy availability of resources(manpower/salesmen)


Growing population
Expanding Kampala and peri-urban Wakiso district areas
Rising income levels, i.e. increase in purchasing power of consumers
High bakery items consumption habits of people in Uganda
Rising consumer goods spending
Desire for healthier lifestyles
Niche market in urban areas
Untapped rural market
Large target market area
To produce a wide range of products
2.10.3 Internal Weaknesses

Inexperience
Production semi-automated
Products only sold in one region of the country (Central)
Promotion tends to be word-of-mouth
No representatives
2.10.4 External Threats

Government polices
Heavy taxes in the form of sales tax and income tax on retail business
High competition
Credibility factor in the initial phase, as suppliers do not give credit to newly
entrants
Increasing costs of raw material
Large national bakeries are expanding their supplies into the area
Large supermarkets making their own products using in-house bakeries
Slowdown in rural demand
Tax and regulatory structure

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


DESCRIPTION OF COMPANY

Crane Bakery Limited is a bread and pastry bakery managed by two partners. These
partners
represent
sales/management
and
finance/administration areas,
respectively. The partners will provide funding from their own savings, which will
cover start-up expenses and provide a financial cushion for the first months of
operation. A five-year microfinance loan will cover the rest of the required financing.
The company plans to build a strong market position in the Kampala Wakiso
urban area, due to the partners' industry experience and mild competitive climate in
the area.
The bakery will offer a variety of high quality, European and American style artisan
breads and pastries, baked fresh in its storefront bakery at Bulenga from which it
will also distribute and sell whole loaves of bread packaged in cellophane and
branded with the company logo to top-tier retail stores around Kampala and periurban Wakiso. Crane Bakery Limited will also negotiate supply contracts with some
of the leading supermarket chains in Uganda including Game Stores, Shoprite
Checkers, Uchumi, Tuskys, Capital Shoppers, Quality Supermarkets, Checkers
Supermarkets, Kenjoy, Mega Standard Supermarkets, etc.
All regulatory requirements have been met for both baking operations and labeling.
The most valuable asset of the company is its proprietary, internally developed
recipe.
3.1

Objectives

The company's immediate goals are to achieve start up within the first six months of
project finance acquisition. It will start with the proprietor, Ronald Byamukama, as
baker and manager with the help of two part time employees. The company should
gross over UShs. 780 million in its first year. Long term goals include the addition of
several wholesale and bread and pastries retail distribution outlets in various
strategic locations around Kampala to the storefront and wholesale bread sales
within one year.
Our main objective is to establish a first class bakery and patisserie with a caf in the
storefront at Bulenga. We hope to develop the strong presence in the community
needed to support our sales goals. It is our goal to develop our products by rolling
them out gradually in the first year of operation.
3.2

Company Ownership& Legal Status

Crane Bakery Limited is owned by Ronald Byamukama and Diane Kemigisha.

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Crane Bakery Limited is a company incorporated at the Registrar of Companies
through the foresight and vision of Mr. Ronald Byamukama. Crane Bakery Limited
was incorporated in the Republic of Uganda on th (Date) ------ (Month) 20(Year).
Though relatively new, the directors realize their Company's vast potential market
and opportunity for growth given implementation of the appropriate strategies,
aided by the necessary finances.
Ronald Byamukama, the proprietor and baker, is the creator of Crane Bakery
Limited. Ronald has gained extensive experience in catering, sales, marketing and
management from the diverse range of private sector companies that he has worked
for in Uganda over the last eight years including Total Uganda Limited. Ronald
brings a sense of production realities and technical savvy to the company. Besides,
Ronald has strong passion and interest in pursuing bread and pastry baking as a
business career. He holds a Bachelor of Catering and Hotel Management from the ------------------------- (University).
Diane Kemigisha, Ronald's wife, also has bread baking experience and she
contributes a keen sense of the bread market. She also contributes retail sales
experience accrued through several retail jobs around Kampala.
3.3
No.
1.
2.
3.
4.

The Shareholders

Shareholder
Ronald Byamukama
Diane Kemigisha
-----------------------TOTAL
3.4

Shares held [UGShs.]


8,000,000
8,000,000
4,000,000
20,000,000

[%age]
40%
40%
20%
100%

Project Costs and Financing

The total project cost for a full-scale turnkey industrial project establishment of the
proposed bakery & confectionery enterprise is estimated at UShs 518,222,500. Out of
this total amount, UShs 67,182,500will be used to purchase, install and commission
bakery plant equipment and machinery lines from regional and local machinery
plant equipment suppliers.
The project cost breakdown is given in Table 3.

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Table 3:Project Cost Summary (In UShs)
Source of
Finance/Component
Land

Share (%)

Equity/Own
Capital

MF Loan
Finance

Other
Funding

Total

28.95%

150,000,000

150,000,000

Buildings Improvements

30.33%

100,000,000

57,200,000

157,200,000

Machinery & Equipment

11.79%

26,075,000

35,000,000

61,075,000

Erection & installation

1.18%

6,107,500

6,107,500

Bakery FFE

10.00%

51,840,000

51,840,000

Vehicles

6.17%

32,000,000

32,000,000

W/Capital

11.58%

60,000,000

60,000,000

TOTAL
% of Total

100.00%

276,075,000
53.27%

35,000,000
6.75%

207,147,500
39.97%

518,222,500
100.00%

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


PRODUCT DESCRIPTION
4.1

Products and Services

Baked goods include:


Cookies& Biscuits
Oatmeal, Peanut Butter, Sugar, Choc Chip, Choc Chunk, Oat Meal Raisin,
Macadamia Nut, Biscuits (various types) and Buns
Muffins (Similar to Cup Cakes)
Reduced Fat Muffin, Blue Berry, Banana, Apple and Banana Nut
Breads
Bran Bread
Enriched Home Style White Bread
Enriched Chale Bread
French Bread
Garlic Bread
Italian Bread
Enriched Egg Bread
Seedless Rye
Pumpernickel Bread
Raisin Bread
Wheat Bread
Morning Rolls
Doughnuts
Scones
Gourmet Pastries
Crisps
Croissants
Danish Twist
Pinwheel
Bow Tie
Cheese Danish
Miniature Danish
Danish Coffee Ring
Lattice Danish
Meat |Chicken|Vegetable Pies
Samosas
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Cakes
Wedding Cakes, Anniversary Cakes, Birthday Cakes, Graduation Cakes, Cup Cakes,
Queen Cakes, Chocolate Cakes, Chorley Cakes, Sculptured Cakes, Lemon Cake,
Carrot Cake, Strawberry Short Cake, Pineapple Cake.
Products are made from all natural ingredients, obtained from a distributor who
specializes in natural and organic products. Ingredients are available in ample
quantity however prices fluctuate seasonally. Hedging strategies will be employed
to ensure that changes in the cost of our raw materials will not affect the prices we
charge to our customers.
4.2

Future Plans

Based on customer requests, the company plans to provide a half-kilo loaf package
in the future, which will appeal to those on a lower budget. Plans also include
adding a single serving roll to the product line for use in sandwiches and snacks.
Future plans also include adding new breads to the line, including sweet bread with
raisins and breakfast bread with nuts.
Crane Bakery Limited also plans to add a fruit juice packaging line and ice-cream
making parlour to its bread and pastry enterprise after the first three years of
business when it will have firmly established its product brand name on the market
and built up an extensive product distribution network in Kampala and other major
towns of Uganda.

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SECTOR AND INDUSTRY ANALYSIS
5.1

Overview

Despite growing at a relatively sluggish pace, baked goods still continues to offer
growth opportunities for manufacturers and retailers alike in Uganda. Catering to
indulgence trend in the some of the fastest growing markets in Uganda, pastries
stand out as the biggest contributor to sector growth. Factors fuelling market
expansion include convenience, affordability and health benefits of baked goods
products. Demand for healthier fortified baked products has also driven sales.
Demand for baked and pastry goods is also being driven by changing lifestyles,
which leaves little time to prepare meals. Busy consumers are increasingly quick to
buy convenient baked snack foods such as wraps and sandwiches.
The baked goods industry, encompassing products such as bread, cereals, cakes,
biscuits, pastries and scones, is represents good market potential in Uganda as
western lifestyles and eating habits continue to be adopted.
5.2

Key Segments

The Uganda baked goods industry is expected to exceed US$ 14.96 million in 2015,
according to research from Euromonitor. This represents a near 12% increase in five
years, reports Euromonitor. Market volume is forecast to exceed 6.45 million
kilograms in 2015. Artisanal bread and rolls represent the leading market segment,
accounting for almost 52% of the overall market in terms of value.
Bread and rolls represent the leading market segment in the baked goods industry,
reports Euromonitor. Companies continue to focus on product innovation to adapt
to evolving consumer needs. Demand for both healthier options and more indulgent
products continues to rise together, with consumers opting for both healthy
products and premium-priced baked goods such as cakes, pastries, filled sweet
biscuits and luxury breakfast cereals.
5.3

Market Outlook

Demand for baked goods has been changing to reflect evolving consumer lifestyles
and eating habits. Satisfying both health concerns and indulgence, consumers are
opting for whole grain baked goods free of trans-fats with more butter, high-quality
chocolate spread and creamy icing, according to authoritative industry reports.

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Demand for baked products promising functional and health benefits will continue
to climb as consumers opt for products with low-carbohydrate, organic and natural
ingredient products. Gluten-free products are one such range benefiting from rising
demand from gluten-sensitive consumers. Moving forward manufacturers will
likely adapt their products to remove trans-fats, include more natural ingredients,
and limiting the amount of additives and synthetic products used. Other innovations
keeping in line with evolving consumer preferences include changes in packaging,
with smaller size packs in particular proving popular.

The majority of growth will come from pastries


Pastries are the fastest growing category among baked goods, accounting for
almost 80% of absolute volume growth over 2008-2014. Product innovation
and increased penetration are the main drivers of this increase.

Health and wellness is key to adding value to bread, whilst indulgence and
affordability spurs growth in cakes and pastries
To boost bread sales volumes, manufacturers are looking into merging taste
and health through adding fibre and vegetable or a mix of protein and fibre.
Demand for pastries and cakes are being driven by indulgence and flavour
innovation, with affordability remaining a key concern, particularly in the
emerging world.

Traditional grocery retailers are still the most important channel but
supermarkets and discounters gain share
Although the majority of people still buy baked goods from independent
stores, the numbers are falling, mainly due to the rise of in-store bakeries
offered by supermarkets and hypermarkets. In-store bakeries are gaining
importance both due to their lower prices and the convenience of one-stop
shopping trips.
5.4

National Analysis

Bakery and confectionery business is emerging as one of the good business ventures
in Uganda as it provides varieties of bakery items.
This phenomenon grew rapidly; and today hundreds of bakeries exist in Kampala
and other major urban centres in Uganda. Over the last few years, the bakeries have
evolved even further.
Bakery stores business falls under retail sector. This sector has shown a significant
growth over the last few years. For the period 2007-2013this sector showed an
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average growth of 5.4%1. This sectors contribution towards GDP in the year 2013 is
12.23%2. The following table shows the contribution of retail and wholesale sector
towards GDP for the period 2007-2013 at constant factor cost.
Table 4-1: Contribution of retail and whole sale sector towards GDP3
Year
Share %age
Growth %age
2007
13.60
13.0
2008
13.99
13.60
2009
13.51
0.60
2010
13.32
4.69
2011
12.97
3.16
2012
12.80
2.68
2013
12.23
0.07
Gross fixed capital formation (Investment in fixed assets) in this industry by private
sector has also shown a progressive trend. For the period 2007-2013 growth in gross
fixed capital formation by private sector (wholesale and retail sector) has shown an
increase of 32.30%4. The following table shows gross fixed capital formation by the
private sector for the last five years:
Table 4-2: Gross fixed capital formation by private sector in wholesale and retail
sector at constant prices (UShs in Billion)5
Year
Retail and Wholesale Sector UShsBn
2007
610
2008
664
2009
675
2010
734
2011
799
2012
834
2013
807
There are thousands of bakery stores in Kampala, Wakiso, Mbarara, Kabale, Jinja,
Mbale, Gulu, Lira, and Arua and this number is increasing day by day. Although in
Uganda the retail business is not providing employment at a large scale directly, but
indirectly it is contributing in the employment growth. As more and more retail
outlets are opening and consumer buying has shifted towards packaged/branded
1Source:

UBOS Statistical Abstracts 2012 - 2014


Source: UBOS Statistical Abstracts 2012 - 2014
3Source: UBOS Statistical Abstracts 2012 - 2014
4 Source: UBOS Statistical Abstracts 2012 - 2014
5 Source: UBOS Statistical Abstracts 2012 - 2014
2

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products. Companies are coming up with top quality products and with the increase
in production level, the net employment effect is also growing.
5.5

The Bakery Industry in Uganda

The bakery industry is important in Uganda. Bread is a staple part of the diet for
many people, and, as living standards grow, more and more people are buying
cakes. Bakery products are usually made from imported wheat, and fluctuations in
raw material prices can be a problem. Another challenge is that the products have a
very short shelf-life. Bread only keeps well for a day or two, after that it goes
stale. If bakers misjudge the market and make more bread than they can sell, then
they waste money. If a small baker has regular customers it is easier to plan
production.
In recent years it has become harder for small bakers to survive. Many people in the
towns buy bread from supermarkets, who buy from factory bakeries. These large
enterprises produce huge quantities of bread every day. The cost of each loaf they
produce is low due to the economies of large-scale production. This means they can
sell at low prices, which undercuts the prices charged in small bakers shops. The
problem is that one loaf of bread is very much like another, so shoppers dont mind
which one they buy. Although they might prefer a fresh, hot loaf from a local bakery
if they can get there at the right time.

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MARKET DESCRIPTION
6.1

Overview
6.1.1

Bulenga Town

Bulenga is a small but fast-growing town in the peri-urban Wakiso area with a total
population of about 10,000. It lies along the Kampala Mityana Mubende Fort
Portal highway and is at a distance of only 15 kms from Kampala city which gives
Crane Bakery Limited a distinct marketing position in terms of being quite close to
the nearby Kampala city and also being exposed to the high volume highway traffic
comprising of business travelers and tourists bound for western Uganda. Bulenga is
basically located in a farming community with about 70% of the inhabitants being
farmers, government employees 10%, and the remaining 20% mostly traders and
other such commercial activities. The community has three nearby surrounding
towns (Busega, Buloba and Kyengera) with almost the same demographic features.
Currently, there is no baking firm at Bulenga and its environs making the enterprise
a new venture with a very high potential for rapid growth and business
development. The consumer demand for bread in the area is very high as the low
income groups look out for cheap and a more affordable source of food for their
breakfast. The vast unemployed youth in the area will help reduce labour cost and
influence business profitability as the business expands.
6.1.2

Uganda Bakery Products Market Profile

Increasingly, middle and upper class families are looking for better tasting and
healthier breads than those currently available in private supermarkets such as
Nakumatt. We expect that the middle/upper class sector of Ugandan society will
continue to grow in number, and that its appetite for better tasting and more healthy
bread will continue to increase. We also see foreigners (especially the expatriates)
living in Uganda as an important market these people tend to earn good salaries
and are used to good tasting and healthy breads from their home countries.
We estimate that the market for high-quality bread in Uganda is about 6.45 million
kilos per year; and that the market in Kampala and its environs is about 4.5 million
kilos (assuming a 70% consumption share of the estimated total national demand).
We think the market for our product in Kampala and its environs will be about 1
million kilos. We estimate that the premium market is growing at 12% per year due
to increasing incomes, more focus on taste and better awareness of eating habits and
health trends.
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Consumers buy bread in a number of ways. Approximately 50% of bread sold is
through retail store operations for consumption at home. The retail market itself is
segmented into high end (10%), middle (65%) and lower end (25%). The first two
categories are where our products will be sold. These segments are growing 18% and
14% respectively.
The other 50% of bread products are sold in restaurants or other food service venues,
including catering, hospitals and schools, and other institutional settings. Of these,
only the catering market is appropriate for this product because the others depend
on government-subsidized products. The catering sector is a good way to expose the
upper end consumers to this product. These are also the consumers that are most
aware of and interested in the benefits of a healthy diet and are most likely to seek
out our product in retail stores.
Table 5: Markets for bakery products
Market type
Domestic

Typical outlets
Supermarkets, shops, open markets,
bicycle salesmen, bus/taxi parks,
kiosks, street vendors, market
traders, straight from the bakery.

Examples of market segments


Women and children from different
types of family (urban wealthy,
rural wealthy, urban poor, etc.).
Workers
or
business
people
working to eat at the work place.

Food
service
establishments

Canteens in large factories or


offices, restaurants, coffee/snack
bars, kiosks, takeaways, bars, hotels,
bus stations, ferry terminals,
airports, entertainment venues,
sports stadiums, etc. Each can be
different types including up-market,
budget, etc.)

Professional
buyers in
these
establishments, although larger
hotels and restaurants may employ
in-house bakers. Consumers may be
factory or office workers, tourists or
other travelers.

Institutional

Hospitals, schools, prisons, army


barracks.

In some countries, bakery products


are bought by professional buyers
in the government ministries that
run these establishments, but in
others the staff in the institution
may have this responsibility.
Consumers may be staff, patients,
children, prisoners, etc.

Wholesale

Wholesale agents

Professional buyers (often only for


long shelf-life products, but also for
bread in some countries).

6.2

Demand for Processed Foods in Uganda

The demand for processed foods in Uganda is very difficult to quantify, as reliable
data do not exist. Import statistics for processed food and beverages and
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government production statistics are listed in categories that are too broad to be
useful. Market intelligence data do not exist to record actual demand.
From the experience of the consultants, it is helpful to categorize the market into
consumer groups:

Well-off urban population (plus the small number of wealthy rural people).
People in cities and rural towns with average incomes.
People living in rural areas with low-to-average incomes.
Tourists and expatriates.
Restaurants and snack bars.
Other food processing companies.

Some of these categories can be further sub-divided into categories based on age,
sex, foods for religious or ceremonial occasions, foods for office workers, etc.
Processed foods can similarly be grouped according to demand by each of the above
categories. This categorization of markets can help in assessing specific segments in
the market for placing a product.
In general, the demand for processed foods is low compared to industrialized
countries. Rural populations have little disposable income and mostly purchase
staples such as flour, cooking oil and sugar. However, the large numbers of rural
poor mean that even if each family only buys a small amount occasionally, the total
market is larger than would be expected from casual observation. Demand in urban
is larger, particularly in Uganda where economic activity and disposable incomes
are higher.
Bakery products
Medium-scale bakeries are rapidly getting established in the major cities in Uganda
in response to a growing demand for bread from all sections of the population in
country-wide. Their economies of scale mean that micro- and small-scale producers
find it hard to compete in terms of price, and therefore develop alternative, smaller
niche markets. These include biscuits, cakes (especially celebration cakes in Uganda),
doughnuts, and flour confectionery products. Although the demand for these is
restricted to wealthy urban populations, expatriates and tourists (including cafes
and some hotels), it is a highly profitable subsector and there is considerable
competition. Competition from imported products is found only with biscuits, as
other baked products have a short shelf-life.

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6.3
Distribution Channels and Marketing
There are different types of distribution systems for processed foods, depending
largely on the scale of operation of the processor. At a large or medium scale of
operation in Uganda, brewers, distillers, millers, bakers and oil processors have their
own transport for delivery to depots in urban centres, and sell products from these
to wholesalers, retailers, market sellers and street vendors. Wholesalers distribute
the products to shops in rural areas, and market stallholders buy from these shops.
Some street vendors, market sellers and kiosk owners in urban areas purchase
products from retailers.
Small- and micro-scale urban producers may sell directly from their production unit
to consumers, market sellers or kiosk vendors, or they may arrange periodic
deliveries to a relatively small group of retailers with whom they have established
links.
In general, production activities are adjusted to the size of the local market, and
many producers are unwilling to sell to wholesalers as this would reduce their
profits. There is also a lack of knowledge and trust between producers and
wholesalers which further limits expansion. The market share of individual
producers may be falling as a result of competition from other producers, and due to
competition from imports for some products. This reduces their production and
serves as a disincentive for investment or expansion of the enterprises.
Marketing in Uganda is done mainly by newspaper advertisements and posters.
Advertising is frequently perceived negatively by some producers and consumers,
the implication being that products are of lower quality if they need to be advertised.
In Uganda there are no clear policies to promote internal trade or export of
processed foods. There is no marketing assistance or market information available to
producers.
The main constraints to improved marketing are:

Finance - poor in businesses, little disposable income to spend on advertising


(a major constraint especially for new products).
Attitude - little market orientation among entrepreneurs, who do not see the
value of active marketing, poor relationships with customers and retailers, no
feedback, demand-led distributor mentality.
Knowledge and skills - information on consumer requirements is not sought,
information is not sought from retailers, lack of specialist marketing skills to
design and organize marketing campaigns.
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Infrastructure and materials - poor storage, refrigeration and distribution
systems, problems of acquiring attractive packaging.

Market trends in Uganda include increased demand for flour, bakery products, soft
drinks, dairy products, fruit juices, cooking oils, snack foods and convenience foods
(including supplies to restaurants and fast-food outlets in Kampala), and bottled
water.
6.4

Potential for Improved Product Quality and Diversification

In the case of staple foods, such as cooking oil and cereal flours, there are few
opportunities for diversification. In many other cases producers have the
opportunity for diversification that depends, to a large extent, on the existence of
well-off urban consumers and their taste for processed foods. The expanding
economy in Uganda has generated an increasingly large number of such consumers,
and there are already many examples of different types of snack foods, dairy, fruit
and bakery products. It is likely that this trend will continue.
Problems of inadequate product quality are found in all subsectors, and there is
considerable room for improvement through training and technical support in
appropriate quality assurance for small-scale processors.

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MARKETING PLAN & STRATEGIES

7.0

7.1

Overview

Crane Bakery Limited is a bakery that produces and sells quality bread and other
pastries. We want to target the high-end and middle-end segments of the market
(since they have more disposable cash to purchase bakery products), maintain the
quality of our products but also keep the prices reasonable. Our strategy will
therefore focus on serving the general populace and a niche market with quality
goods. Our primary aim is to become the best bakery in Bulenga town and the
neighbouring south-western fringes of Kampala. We will strive to make our food
something that our customers enjoy, but supply an even greater experience by
incorporating technology. We are determined to become part of the community an
establishment that becomes as much of the community as a church or local grocery
store. To achieve these goals we will provide the following:

Quality baked goods for everyone to enjoy at a fair price


Friendly, neighbourhood feel atmosphere
Special diet menus in relation to the advice of doctors and other healthcare
providers.

a. Meeting Customer Needs


Our customers require fresh quality coffee and pastry on the go. Our system for
establishing customer needs is based on the product offering of our competitors. We
will maintain honesty and request input. We will allow customers to take monthly
surveys in exchange for discounts on doughnuts and pastries. This will give insights
into what customers desire and create customer loyalty.
b. Quality vs. Quantity
Ugandans on the go tend to compromise with respect to quality unless it has to do
with top quality bread and pastry products. Hot and fresh sells. Therefore quality is
everything. Baking staff will be trained regarding quality preparation, food service,
storage and holding equipment with a view of producing a superiorly prepared
fresh product consumers will come back for time and again.
c. How We Will Sell
Word of mouth advertising via quality output will be our strongest selling point.
Advertising in local papers and glossy local magazines. Occasional community
donations and product gifts to active community figures. We will take the product to
the consumers and let them sample the product to help create brand awareness. We
will establish high visibility by means of location along with drawing local public
support via samples, mailed coupons and menu distribution.
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d. Ability to Penetrate Market
Our 8 years experience in baked goods preparation and quick delivery along with a
fine reputation for high quality products will answer the demand for a fast, fresh,
and tasty bread and pastry products. Our ability to deliver solutions to meet special
and unique cake design requests will enable us to penetrate new market segments
while holding niche positions.
7.2

Pricing

Our prices will be slightly higher than those of our local competitors, mainly for the
reason that we strive for quality in our products. This goes hand-in-hand with the
market that we plan to target that of the upper middle class, and our higher income
consumers. On the actually cost of the particular products, they will vary according
to each product. Overtime our prices may fluctuate along with the rises and falls of
the raw resources as well as trying to remain close with our competitors and not
allow the gap between quality and price become too large.
7.3

Sales/Sales Strategy

Crane Bakery Limited's products will be truly unique in the marketplace. The look,
feel and taste of its breads, when compared with the competition, will underscore
their quality and value. Crane Bakery Limited will also actively encourage customer
satisfaction. Our product line will react to the needs and desires of the customer,
thereby encouraging repeat and word-of-mouth sales. As a small hands-on facility
Crane Bakery Limited will have the freedom to react quickly and accurately to
changes in the market. Due to its uniqueness and convenient location, Crane Bakery
Limited will become a destination for food lovers.
As described above, it is also our plan to sell first to retail stores throughout
Kampala and the outlying peri-urban areas in Wakiso District, focusing on high and
middle portions of the market and then expand into other suburbs. Because our
product is new, consumers will have to be given an opportunity to taste the product
before they are expected to buy, especially since it will be priced approximately 15%
over store brands. We will focus first on building a distribution network comprising
of 35 select stores, providing them personal service and delivery, obtaining feedback
from store management as we go, and perhaps most importantly, doing in-store
demonstrations of our product where consumers will have an opportunity to taste it.
We will monitor the results of in-store demonstrations by measuring sales trends
between store demonstrations to know if consumers are seeking out our product
rather than just buying it when they get a taste. When turnover is adequately high
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between demonstrations in the first 35 stores we will then begin to add additional
stores to the base until we reach our ultimate goal of 100 stores.
Our budget for advertising is limited but we will take advantage of low cost in-store
literature and newsletters. We will also create signage for the bread rack to draw
attention to the product and outline its benefits.
Food service business will be created by marketing direct to caterers, restaurants,
delis and others who will use our product as part of their ready-to-eat offering. This
will be done through personal marketing efforts and by appearing at special niche
trade shows where these users shop.
Our Strategy also focuses on building a loyal customer base by providing good
customer experience. With the addition of the caf bar and lunch menu within the
first six months of opening the bakery, we hope to have customers make the bakery
their one stop destination for breakfast or lunch. We hope to advertise the bakery in
local newspapers and radio stations. We will also consider the distribution of
flyers/Leaflets in the neighbourhood. We will also employ sales
agents/representatives on a performance-related payment scheme to continuously
find new customers by visiting Schools, Prisons, Hotels and Restaurants to inform
them of our presence and products. Our account managers will also be responsible
for increasing sales, by reaching out to current customers, and making sure their
needs are met.
We expect to have a fully functioning web-site by 2016. At that time we will use
social media and viral marketing to get word out, hopefully with endorsements from
the medical community.
Management also intends to plough back all profits at the initial stages into the
business to help increase its capital base for a sustained growth and business
expansion.
7.4

Sales Forecast

The proposed bakery will be offering a large variety of quality products at


competitive prices. The product line will be including different types of bread,dry
cakes, dry cakes, cookies, doughnuts, buns, biscuits, rolls, etc. As the production will
depend on the sales potential, the sales are estimated depending upon the industry
norms.

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As the table below shows, Crane Bakery Limited anticipates sales of about UShs780
million in the first year (PY 2), UShs944 million in the second year (PY 3),
UShs1.142 billion in the third year (PY 4), and UShs1.382 billionin the fourth year
(PY 5) of the plan.
Sales are expected to rise 10% annually during the five-year business plan. Direct
costs for the items are a low percentage of the total prices, and refer to the costs of
ingredients and packaging given to customers.
Total sales incorporated for profit estimates include 5% safety margins. The detail of
expected annual sales of different items is given in the table below:
Table 6: Annual Sales (In UShs)
Project Year

PY1

PY2

PY3

PY4

Sales (UShs)
Cakes & pastries

117,000,000

141,570,000

171,299,700

Breads & doughnuts

624,000,000

755,040,000

913,598,400 1,105,454,064

Cookies & buns

23,400,000

28,314,000

34,259,940

41,454,527

Biscuits & flat breads

15,600,000

18,876,000

22,839,960

27,636,352

Total Sales

780,000,000

207,272,637

943,800,000 1,141,998,000 1,381,817,580

PY1

PY2

PY3

PY4

Direct Cost of Sales (UShs)


Cakes & pastries

36,270,000

43,886,700

53,102,907

64,254,517

193,440,000

234,062,400

283,215,504

342,690,760

Cookies & buns

7,254,000

8,777,340

10,620,581

12,850,903

Biscuits & flat breads

4,836,000

5,851,560

7,080,388

8,567,269

241,800,000

292,578,000

354,019,380

428,363,450

Breads & doughnuts

Total Direct Cost of Sales

7.5

Distribution

Crane Bakery Limited products will be distributed through markets, restaurants,


offices, small independent shops, cafes, schools and to major catering organizations
lying in our designated distribution area. Select supermarkets will be our starting
point, as they provide valuable food traffic and awareness of our product.
Restaurants and sandwich shops (take-aways) will provide additional distribution
locations, and also to increase our brand awareness. For distribution to catering
organizations, we will utilize the couriers to some extent, but will also send the
bread directly with the deliveries for Crane Bakery Limited. Our costs will be
around UShs. 600 per loaf and UShs.150 per roll.
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Our second target for distribution is directly to people in their homes. By getting
people to sign up as Bread Customers, we obtain their address, as well as all
necessary contact information. By building a custom database, we will be able to
efficiently plan daily deliveries based on neighborhood.
Distribution directly to the consumer will be done daily by the couriers who will
receive their route and transportation options. We aim to have a large share of our
customers within walking distance of the bakery but have bikes available for longer
distances. In some cases, the courier may use a car, or the company delivery van.
Each courier will be able to carry up to 50 loaves per trip, and will be expected to
make three trips per day. With customers receiving an average of 1 loaf every 6 days,
we can service 900 Bread Customers per courier. The courier would be receiving
around UShs. 2,000 per loaf delivered.
Thethird distribution strategy for our products would be through our store-front
shop. Hopefully, in the future we will be able to offer catering services, but during
start up we will work out of our own facilities. Customers will be able to walk in and
buy our baked goods, as well as set and/or send orders by telephone, online, or
through a direct in-store appointment. We will set up a small sitting area to be used
by our customers who will enjoy a convenient coffee& tea drink, and the general
atmosphere of the store. Because the majority of our products will be baked fresh
daily, we will provide for the expected customer estimate of 200-500 customers per
day and specialty cakes will be made after an order is placed. At the end of the day,
we will move all of our not purchased goods into an area for Day Old bread where
people will be able to buy the not fresh bread for half the price of what we would
normally sell it for. Customers who target this as their opportunity to purchase from
us may not be given the advantage of our variety but will receive the opportunity for
lower priced goods. By the second day if the products are still not sold we plan to
deliver them to the charity organizations, or other not-for-profit organizations that
may benefit from our products.
Deliveries will be based on our customers requirements and will be tailored to suit
the size and individual requirements of the establishments concerned. Some
customers require deliveries once or twice a week, whilst larger companies will
require a daily delivery service. Time of delivery will also be an important factor for
many of our customers and we will do our utmost to accommodate their
requirements as much as we possibly can.

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7.6
Promotion
We will start with excellent products at a competitive price, but then make our
service exceptional by delivering directly to our customer at no extra cost. In order
to get visibility of our offerings, we will use a variety of advertising channels and
promotions.
Printed advertisements, which will run during the opening week, will highlight
bread as an everyday product, to be purchased fresh on a weekly or daily basis.
More printed advertisements will run during the Easter and Christmas seasons.
Costs for these advertisements will be approximately UShs. 600,000 each.
Marketing Materials
Marketing materials for Crane Bakery Limited will include the following items:

Business cards geared towards customer referrals


General business cards
Tri-fold brochure/menu
Business referral program brochure
Crane Bakery Limiteds website
Print advertisements in newspapers such as the New Vision and the Daily
Monitor
Cable TV advertisements
FM Radio station advertisements
Poster ads on mass transit

We will incorporate business cards and brochures that provide our menu and
product selection, a window display that will be a direct aesthetic appeal, and in the
beginning use advertisements in the newspaper to introduce our new business. We
hope that our idea to sell Day Old bread for half price will promote our products,
although we want to be known as a bakery that sells our fresh baked bread and
pastries. If allowed we may also try to go to other local coffee shops and small
business to post flyers to promote the Crane Bakery Limited bakery. We also expect
that our valued community involvement will also work as a promotion by
improving the public view of our business and advertising to the individuals
involved with the organizations we work with.
In order to promote our products in the markets, we will also provide sample bread,
and offer demos to engage with customers. We will also participate in food events
throughout the city to sample bread and educate our customers.

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7.7
Lead Generation Plan
Leads for Crane Bakery Limited will be generated through the following means:
Customer referrals to other customers via a business card promotion at
checkout
Business referrals from area businesses via a six month introductory
promotion marketed directly to these companies
Print advertising in the local English dailies
Alternative advertising through posters on Metro buses which serve Kampala
and up-country towns
Referrals
Customer Referrals:
Crane Bakery Limited will have business cards available at the counter which offer
a free baked good with any purchase on the back. The checkout clerk will encourage
the customer to pass this business card on to someone else so that they can redeem it
for the free baked good. Some may choose to use it for themselves, but it is hoped
that many will give it to someone else, as they will be told that is the purpose of the
card.
Business Referrals:
Crane Bakery Limited will seek referrals from the Kampala and Wakiso district area
businesses who share its environmentally-conscious mission. These include "green"
firms and environmental consultants. Crane Bakery Limited will offer a six month
promotion to individuals from these firms (when they show ID) which grants them
Crane Bakery Limited Club deals without having to sign up for the Club. We hope
that these firms will pass on the information about this deal to their employees, as it
is in keeping with their own mission and an additional perk they can offer to their
staff.
7.8

Critical Numbers

Critical numbers will be tracked by the business software, including the point-ofsales system, which interfaces directly with a CRM system that can track loyalty club
members (as their information is entered directly into the system), testimonials, and
PR mentions (found via Google alerts and scanning newspapers). Marketing
expenses are tracked by the accounting software which interfaces with the POS
software to provide a full financial picture of the business.

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7.9
Competitive Analysis/Competitive Edge
Crane Bakery Limited competes in the Food Industry which is highly saturated with
a fairly competitive landscape. In addition to competing with other bakeries, it
competes with all restaurants, delis and supermarkets for a share of its bread and
baked products.
There are no other retail bakeries in Bulenga town or the surrounding towns to be in
direct competition with our business, however baked goods items produced and
sold by the major Kampala-based bakeries [e.g. Associated Bakeries &
Confectionery, NtakeBakery, Hot Loaf Bakery, Bbrood Bakery (formerly Nandos)
and Tuwereza Bakery in Nateete] are regularly distributed and sold in this small
town. These big four will be Crane Bakery Limiteds greatest competitors.
Fortunately, the strengths of these four bakeries are all the same, and typical of
commercial food product businesses, allowing our bakery to more easily stand out.
Companies are characterized by three major traits: price, quality, and service.
Associated Bakeries & Confectionery, Ntake Bakery, Hot Loaf Bakery, Bbrood
Bakery and Tuwereza Bakery in Nateete all focus on low prices and some service. In
contrast, our bakery would value higher quality baked goods and personal service.
Our prices may be slightly higher, but our products would be from better quality of
ingredients and would still be very reasonable priced for the industry.
The major weakness our bakery has when stacked against these four bakeries and
supermarkets is convenience. Our products would be fresher and of higher quality,
thus superior to the goods of these mass produced bakeries, but the supermarkets
have the advantage that the shoppers will already be entering the stores for their
necessary groceries. Buying baked goods in bulk then would seem to be more
convenient than at a different location.
However, as mentioned in the industry product development, pastries are mostly
not bought in the same, regulated manner as groceries, but are bought on a whim. So
long as a customer is not already grocery shopping when he or she craves our
competing products, it would be just as convenient to enter a bakery, if not more,
than a grocery store. The possible customer would have to walk farther in a grocery
to buy baked goods than by simply stepping into our bakery.

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8.0

TECHNOLOGY AND PROCESSES

The proposed project will be using a mix of imported and local machinery. Local
machinery and installations are quite competitive in price in comparison to the
foreign equipment and installations. Some of the bakery equipment that will be
imported from Kenya include: commercial oven, dough mixer, bread slicers, prover
and deep fryer.
8.1

Machinery Requirement

Table 7: Machinery Details


Sr. No.

Particulars

Flour Sifter

Local

No. of
Items
1

Spiral Dough Mixer

Local

2,400,000

2,400,000

Planetary Dough Mixer

Local

1,500,000

4,500,000

Commercial Oven

Imported

5,400,000

5,400,000

Moulder

Imported

3,600,000

3,600,000

Dyes

Local

2,500

625,000

Sheeter

Imported

10,000,000

10,000,000

Proofer

Imported

3,000,000

3,000,000

Burner

Local

400,000

800,000

10

Deep freezers

Local

600,000

1,200,000

11

Deep Fryer

Local

1,500,000

1,500,000

12

Packing machine

Local

800,000

1,600,000

13

Cold storage equipment

Local

8,400,000

8,400,000

14

Bread Slicer

Local

1,500,000

1,500,000

15

Fixed/Rolling racks

Local

10

300,000

3,000,000

16

Generators

Local

6,000,000

6,000,000

17

Motors/isolators/starters Imported

n/a

1,500,000

1,500,000

18

Trays

Local

350

3,000

1,050,000

19

Hand tools and small items


of equipment

Local

1,500,000

1,500,000

20

Miscellaneous requirements Local

2,000,000

2,000,000

21
Total
Depreciation Rate (%age)

Cost/Item
(UShs)
1,500,000

Amount
(UShs)
1,500,000

250

n/a
633

10%

The depreciation is charged at 10% p.a. on written down value.

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61,075,000
6,107,500

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Table 8: Miscellaneous Requirements
Sr. No.

Supplies

Unit
piece

No. of
Items
4,000

Cost/Item
(UShs)
150

Amount
(UShs)
600,000

Paper Bags

Plastic Bags

piece

2,000

60

120,000

Register Tape

case

60,000

60,000

Bleach

3,000

18,000

Handsoap

Cartridge

17,250

69,000

Floorsoap

packet

45

1,000

45,000

Kitchen Soap

5-qut

25,000

100,000

Plastic Film

roll

60,000

120,000

Aluminum Foil

roll

200,000

200,000

10

Stationery

case

150,000

150,000

11

Purchase orders

case

60,000

60,000

12

Receipt Pads

case

60,000

60,000

13

File Folders

case

60,000

60,000

14

Garbage Bags

piece

310

800

248,000

15

Paper Cups

piece

1,000

90

90,000

16

Total
8.2

2,000,000

Repair & Maintenance

Annual Repair & Maintenance of the plant and machinery is expected to be 1 % from
Year 1 4 and 1.5 % from Year 5 10 of the total machinery cost.
8.3

Erection & Installation

Erections and installation cost is assumed to be 10% of the total cost of machinery.
8.4

Furniture & Fixtures

Following furniture and fixtures will be required for factory and sales outlets:

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Table 9: Details of Furniture and Fixtures
Sr. No.

Particulars

No. of
Shops

No. of
Items

Cost/Item
(UShs)

Amount
(UShs)

A. Factory
1

Tables for production

Chairs, Tables & other


furniture

900,000

3,600,000

3,600,000

3,600,000

Air conditioners

1,200,000

3,600,000

Vertical freezer

2,250,000

2,250,000

Elect.
others

1,500,000

1,500,000

Installations

&

Weighing scales

450,000

900,000

Microwave oven

360,000

360,000

Computers
accessories

2,700,000

2,700,000

and

Total (A)

18,510,000

B. Front Shop
1

Air conditioners

1,200,000

2,400,000

Cabinet chiller

3,600,000

3,600,000

Vertical freezer

960,000

960,000

Designer cost

1,500,000

1,500,000

Interior designing cost

13,500,000

13,500,000

Weighing scales

450,000

450,000

Cash Counter/Register

750,000

750,000

Coffee Maker

750,000

750,000

Coffee Pots

15,000

90,000

10

Bar Code Equipment

6,660,000

6,660,000

11

Microwave oven

270,000

270,000

12

Sign board

900,000

900,000

13

Elect.
others

1,500,000

1,500,000

8.5

Installations

&

Total (B)

33,330,000

Total (A+B)

51,840,000

Motor Vehicles

Along with the above mentioned machinery and equipment the proposed business
will also be using one pick-up and one motorcycle. Each pick-up will be costing
around UShs 30,000,000 while the motorcycle will be acquired for UShs2,000,000.

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Table 10: Vehicles
Sr. No.

Name of Vehicle

Qty

Toyota Pick-up (2nd-hand)

Original
Value
(UShs)
30,000,000

Motor cycle

2,000,000

Present
Book Value
30,000,000

30,000,000

2,000,000

2,000,000

TOTAL

8.6

Amount
(UShs)

32,000,000

Raw Materials and Production Methods

All bakery products are made from basic ingredients, which have the following
functions:
Table 11: Summary of functions of main bakery ingredients
Ingredient
Function
Flour
Proteins in flour combine with water to form gluten, which
contributes to the crumb structure and retains gas in raised
bakery products. Starch in flour forms a paste that is set by heat
during baking. Changes to starch contribute to staling of bakery
products.
Yeast

Produces gas (carbon dioxide) to raise dough, contributes to


dough conditioning and flavour.

Salt

Helps control yeast fermentation, toughens dough by


strengthening gluten, extends dough development and mixing
time.

Sugar

Fermented by yeast, sweetens dough, contributes to


development of goldenbrown colour of bakery products,
tenderises crumb and extends shelf life.

Shortening (fat)

Assists gas expansion during fermentation, tenderises crust,


extends shelf-life.

Milk

Improves the flavour and texture of products

Egg

Gives strength and flavour to products

Baking powder

Produces carbon dioxide to raise dough

Pre-mixes

Reduce dough preparation time; ensure even mixing of minor


ingredients and help to avoid operator errors.

These are supplemented with a wide range of other ingredients that give special
flavours, colours or textures to products.

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Bread, buns, pizza bases and doughnuts are produced from hard wheat flour 6 and
fermented using yeast. Biscuits, pastries, scones, cakes and flan/pie casings are
made from soft wheat flour using baking powder as a raising agent and flat breads
are made from the same flour without a raising agent. Each of these products can be
made using different ingredients, fillings, shapes, colours, flavours and sizes. The
different types of bakery products are displayed in Figure 2.
Figure 2: Types of bakery products
Hard wheat flour

Dough

Soft wheat flour

Dough

Wheat/other flours

Batter

Dough

Fermentation

Bread and
buns

Pizza bases

Doughnuts

Raising agent

Biscuits

Fan/Pie
casings

Pastries

Scones

Cakes

6Wheat

Flat breads

flours contain a protein (gluten) that creates the characteristic texture of bakery products.
They are either strong flours with a higher gluten content (made from hard wheat) or weak flours
with less gluten (made from soft wheat).

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FACTORY LAYOUT AND SERVICES

9.0

9.1

Land/Covered Area and Construction Cost

The proposed bread and pastry factory will be within the 1 acre plot of land whereas
the shop areas will be 900 sq. ft for each outlet. A double story building will be built
in such a plan that the bread, biscuits and dry cake rooms are proposed to be on first
floor. The details of the building and civil works are as below:
Table 12: Land & Covered Area requirement
Sr. No.

Particulars

Area
Sq. feet

Cost/Sq
Feet

Present
Book Value

Amount
(UShs)

Factory
1

Sweets production room

600

24,000

14,400,000

14,400,000

Fresh cream cake prod room

400

24,000

9,600,000

9,600,000

Dry cake production room

400

24,000

9,600,000

9,600,000

Biscuits production room

400

24,000

9,600,000

9,600,000

Snacks production room

600

24,000

14,400,000

14,400,000

Frying & Oven room

1,200

24,000

28,800,000

28,800,000

Dispatch & warehouse

1,200

24,000

28,800,000

28,800,000

Raw material/spares store

1,500

24,000

36,000,000

36,000,000

Administration block

200
6,500

30,000

6,000,000
157,200,000

6,000,000
157,200,000

1,500

Area required

Note: Double story building is recommended, sweets, fresh cream and dry cake
rooms are proposed to be on first floor
9.2

Factory Layout Plan

FLOW PATTERN
Depicted in Figure 3 is a suggested flow pattern ideal for the proposed bake-house.
The initial requirement is to place the equipment in such a format so that from the
inwards ingredients to the finished foods the distances between each operation are
kept to a minimum and staffs are not continually crossing the bake-house.
BAKEHOUSE PLANS
The ideal bake-house plan would encompass the following:
1.
2.

Flow pattern through the bakery.


Oven position
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3.
4.
5.

6.
7.

8.

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


i.
placed for maximum customer appeal
ii.
suitable space for oven vent and extraction hood
iii.
handy position for electrical supply
Inwards goods storage area should have good access.
Goods are finished handy for transfer to the display area or to the dispatch
area.
Wash up area this should be placed where both hot and cold water as
well as drainage can be readily installed. We suggest that as far as
possible this area be screened from public view.
Weigh up area ideally this area should be adjacent to both the
ingredients store and the wash up area.
Mixing area adjacent to the weigh up area is ideal as well as remaining
handy to the wash up area. This is another area that can become very
messy during the days operations so it possible should be screened from
public view.
Allow some space for future business expansion.

EQUIPMENT
Before finalizing any layout plan a list of equipment required for the operation
should be drawn up. Allowance should also be made for projected equipment
purchases at a later date.
WORK BENCHES
Sufficient work bench space is essential for a good flow pattern in the bake-house.
Bench space has to be set aside as follows:
1.
2.
3.
4.
5.
6.

Weigh up area
Mixing area
Dough resting, dividing and moulding area
Batter scaling area
Removal from the oven or tipping out area
Finishing bench space

These benches should be positioned as conveniently as possible for each area and in
some cases can serve more than one function.
Generally preferred for both hygiene and durability are stainless steel topped
benches. The only disadvantage is that they are very cold and care must be taken
during winter that doughs resting on the bench do not become chilled.
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Alternate bench tops include wood, formica or heavy duty linoleum. Wooden
benches are excellent for dividing and moulding yeast doughs and do not damage
easily with hot baking trays or steel scrapers. However they are sometimes
unacceptable because of hygiene requirements. Both formica and linoleum are
subject to damage during dough dividing with metal scrapers or hot tins and trays
placed on bench tops straight from the oven.
Under the benches is a very valuable area for storage of ingredients or finished
goods. If ingredient storage space is required shelving can be incorporated.
Alternatively heavy duty drawers can be installed for ingredient storage. Bottom
drawers with heavy duty roller castors can hold 25kg flour, hi ratio, sugar, salt, etc.
The middle and top drawers can be made smaller to hold ingredients used in smaller
quantities. Cupboard doors will keep the storage area clean. For finished goods we
suggest that racks for oven trays or cooling wires be incorporated.
Cleaning of the bake-house is facilitated if the benches are mobile on heavy duty
castors, including benches normally situated against the walls as this will made the
job so much easier.
STORAGE AREAS
Sufficient storage areas for both ingredients and finished articles are essential. The
bulk line of ingredients such as 25kg bags or 20kg cartons are generally best stored
on a pallet off the floor in the main storage area. If there is insufficient space some of
these lines can be stored on shelves under the work benches.
Smaller ingredients are more conveniently stored in cupboards or shelves above the
work or finishing benches. Finished articles can be stored in mobile tray racks in the
bake-house or in storage racks under the benches. Storage racks under the finishing
bench are particularly suitable.
9.3

Utilities Requirement

Main utilities would be gas, power and water. Distribution transformer station,
loading capacity averaging 10 KW, 3-phase industrial meter is estimated to fulfill the
requirement of power. B-1 category is advisable for electric consumption. Water
supply would be through the Kampala local NWSC network. Utility costs will be
running at approximately US$ 725 (UShs 2.175 million)/month or UShs 26
million/annum.
The layout of the proposed bakery is shown in Figure 3 below.
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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Figure 3: Layout of proposed bakery
Prover

Oven

Storage racks

Office/
Quality
testing

Toilet/
Handwashing

Moulder

Dough
preparation
area

Cooling racks
Flour storage

Mixer

Cash register

Equipment washing
Retail
sales

Ingredient
weighing

Ingredient
store

Packaging

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display

and

Sitting/caf area

10.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


OPERATIONS PLAN

Crane Bakery Limited is primarily a baking company, and the crux of the operation
is production of bread. The other two critical components are sales and distribution.
To reach the scale we intend, it will become necessary to include account
management, systems development, administrative, and operational management.
10.1

Production

Production of sellable breads is projected to begin within the first six months of
project finance acquisition. Raw ingredients will be ordered for twice a month
delivery from the leading suppliers of bread and confectionery in Kampala, at which
time a two week production schedule will be drawn up by Ronald Byamukama, the
proprietor/baker. Ingredients will be stored in a dry storage area and in a walk in
cooler (already on the proposed premises).
The bakery store-front will open at 9:00 AM and close at 6:00 PM Monday through
Friday. Saturday hours will be 9:00 AM to 4:00 PM for sales only. Part time
employees will work the counter and assist with store maintenance during peak
hours while the baker is baking. A beverage cooler and coffee machine will
encourage convenience sales at the register.
Crane Bakery Limited will economize on bookkeeping costs by handling its payroll
duties in house. Year-end bookkeeping will be handled by a professional accountant.
The company will use the QuickBooks small business accounting software because
of its ease and convenience of use in keeping finances and bookkeeping all in one
place.
10.2

Inventory Procurement

In the prevailing market dynamics the individual bakery product retailers are
buying their goods from two sources, one is through the delivery vans of the bakery
product producers/distributors who visit the outlet after a certain specified time.
The other mode of purchasing is done through the traditional wholesale markets like
supermarkets and hypermarkets where the retailers purchase their depleted stocks.
It is worth mentioning that the delivery vans of the bakery product
producers/distributors do not visit the micro-level bread and pastry retailers due to
the high cost of distribution attached to the transactions.

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


10.3
Product Mix Offered
Managing the bakery products merchandising mix involves decision about what
products to carry, styles, models, colors, sizes, and price ranges, and how many units
of each product to have in inventory. Many customers select one store over another
because of the variety or assortments of bakery products available.
The decision about size and content of any bakery products distribution retail store
is largely determined by the space available. Adequate space to display an
assortment of bakery products is important for customers comfort. Thus, an
important decision involves the range of bakery products that are essential to satisfy
the customers needs. A small number of bakery products will probably account for
a large amount of sales volume. These bakery products deserve special attention and
need to be stocked. Being out of preferred and highly demanded goods creates a
negative customer impression of the retailer.
In addition to a wide assortment of bakery products on hand, retailers must also
have stock depth, that is, sufficient quantity of each bakery product on hand to
support sales.
10.4

Pricing Strategies

Pricing decisions are a major challenge for bakery product retail businesses. Price is
a major factor in dealing with competition from other bakery product retailers.
Many lines of merchandise have what is accepted as a market-level price. It is
common to find prices for normal general bakery product items to be based on a
standard markup percentage that is similar for all competitors. Supermarkets often
adhere to almost identical prices so that competitors usually do not have a price
advantage.
A bakery products retailer can adopt both a high pricing strategy or a low pricing
strategy. In some cases a bread & pastry store may offer something that permits it to
set its prices higher than its competitors do.
Pricing below market levels is used by bakery product retailers who have decided to
focus on lower expenses, less service, and less ambience. Such a bakery product
retail store attracts customers who are extremely price-conscious but tend to
purchase their entire months grocery from these types of bakery product retail
stores.

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10.5
Bar Code Facility
All products can be entered into a computerized database using specific inventory
software. Bar codes will be issued at each product sku. Two bar code readers and
two computers linked together will be used. Once the data has been properly
entered into the database, then every product must carry a sticker with a barcode.
This will increase the performance of cash counter and organize the inventory in a
better and proper form.
The cost of setting up the barcode reading system is estimated at US$ 2,220 (UShs.
6,660,000). This is an additional option but carries with it great benefits. The first and
foremost benefit is that it tremendously enhances the managements ability to track
the depleted stocks so that purchase orders can be placed with the suppliers timely
in an effective and efficient manner. Secondly, this facility also enables the
management to trace inventory pilferages. All in all this bar code facility enables the
management to keep a complete overview of the activities of the business.
Table 13: Cost of Bar Code System
Bar Code System
Customized Software

Cost in USD
500

Two Computers

450

Server Machine

470

Barcode Reader

300

Data Entry

500

Total Cost

2,220

10.6

Distributor Analysis

Distributors play a vital role in transferring the product from the manufacturer to
the retailer and finally to the end-consumer thus maintaining an integral part in the
value chain delivery.
Foreign companies considering marketing their products in Uganda may choose to
use the services of local distributors or may develop their own distribution chain.
Distributors in urban areas generally deal on an exclusive basis. Some market
consultants estimate that the services of 100-300 distributors would be required for
nationwide coverage. One very large multinational company (Coca Cola) selling
consumer products employs 500 distributors to reach a significant portion of
Ugandas small towns and villages.
As a matter of policy, most companies do not provide credit to distributors and
distributors in turn generally sell on a strictly cash basis to retailers. Smaller
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distributors often do provide credit to retailers, but the volume of such transaction is
relatively insignificant.
It is ideal to get the required merchandise from various distributors. It is also
possible to have different payments arrangement with different distributors, such as,
strictly cash, credit, and bill-to-bill.
10.7

Record Keeping

There are four sets of records that should be kept by the owner of a small cereal
processing unit (Table 14). Keeping records is an investment of time and money and
this must be related to the scale and profitability of the business (the benefits must
outweigh the costs.
This means that the processor must understand why the information is collected and
what it can be used for. Processors should also put in place a system of checks to
ensure that one person does not have responsibility for a whole area of record
keeping. For example the person who keeps records of ingredient purchases should
be different to the person who records levels of stocks and manages the storeroom.
Table 14: Types of records for a small-scale bakery business
Type of record
Information to be Recorded
Recipes (bakery)
Production records

Quality
records

Raw materials or ingredients received and suppliers details


Wastage % at different stages of the process
Stock levels for each raw material and ingredient
Production volumes and measurements
Maintenance routines, details of spare parts kept in stock

assurance Target amounts of ingredients and any changes made to

recipe
Measurements made at process control points
Batch numbers and product code numbers
Cleaning standards and schedules

Sales records

Names of customers and amounts sold to each


Weekly and monthly sales volumes

Financial records

Income from sales


Costs of all process inputs
Staff records
Cash flow
Profit/loss
Tax records
Bank statements

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10.8
Productivity Improvement
Productivity can be improved by:

Improved efficiency (e.g. lowering operating costs, savings in idle machine


time and reducing waste)
Better procedures for buying materials
Improved decision making and communication
Higher performance by minimizing equipment breakdowns, reducing other
causes of lost time
Improved organization, better staff morale and co-operation.

Improved process efficiency can be achieved by increasing the output of a


processing plant without additional investment. To measure this, an entrepreneur
must calculate how much money it costs to produce one unit. If more units are
produced at the same cost or within the same time frame without affecting quality,
then productivity is increased. Productivity can also be improved by changing the
product design or layout of the production facilities, changing raw materials
suppliers or work organization.
Improving efficiency in a process involves reducing wastage of time, materials and
space, or unnecessary movement of foods, staff or equipment. Motivated staff will
go a long way to increasing efficiency by reducing wastage. The layout of a
production unit is another factor that can affect efficiency. When deciding where to
fix permanent machinery, care should be taken to plan the layout to allow for a flow
of product through the process, sufficient space to avoid congestion and to ensure
safe operations (Section 9.0, Figure 3).
Avoiding waste
Ideally all bakery products that have a short shelf-life should be sold on the day of
production when they are at their freshest. This maximizes the income and avoids
wastage which has a serious effect on profitability. However, unsold products are
still edible for a few days provided that they are stored correctly. They can be used
for a variety of other purposes to generate an income and avoid wastage.
Ideas that can both reduce energy consumption and save processors money include:

Switching off lights and electrical equipment when they are not being used
Solar water heating (e.g. for pre-heating process water or washing equipment)

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Building in the flexibility to use alternative energy sources when installing
new bakery ovens so that they can use the most environmentally suitable
fuels
Use local briquette makers rather than using fuel-wood
Use local suppliers of raw materials that can be delivered by bicycle, rather
than using a vehicle to collect them. Similarly, make as few journeys as
possible to deliver products to wholesalers or retailers.
10.9

Quality Assurance, Legislation and Regulation


10.9.1

Quality Assurance

The main reason for low quality baked products are faults with the processing room,
the process, ingredients, operators or distribution methods. A Quality Assurance
(QA) programme should therefore comprise:

Ingredient inspection
Process control
Operator training
Assessing products
Cleaning schedules
Control over packaging and distribution.

Baked products are rarely involved in food poisoning incidents because the heat of
the baking process kills most micro-organisms or reduces their numbers to safe
levels. However, products containing meat, fish or vegetables have a greater risk of
food poisoning if they are not handled and stored correctly. The time that these
products spend in the temperature danger zone (10-450C) during processing must be
minimized by efficient handling and effective cooling. Refrigerators for cakes with
cream fillings and other cream goods must be properly maintained and operated at
the correct temperature. Pies and samosas must either be chilled in a refrigerator or
stored in a hot display cabinet (above 630C).
10.9.2

Legislation and Regulation

There are various laws governing the setting up, registration and operation of
bakery in Uganda. Failure to follow the law may lead to punishment by the
authorities or closure of the business. Bakers should check the local laws with the
Uganda National Bureau of Standards (UNBS). In summary the registration of a mill
or bakery involves the following:

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Registration of the enterprise with the Ministry of Trade and Industry
Obtaining a Certificate of Share Capital (for limited companies), or a
Certificate of
Incorporation (for corporate companies)
Obtaining an Occupational Certificate from Local Authority, or the Planning
Authority in the Land Ministry
Obtaining a Health Permit or Licence from the Local Authority or Ministry of
Health to allow the premises to be used for food production
Obtaining a Manufacturing Licence, issued by the Local Authority or Ministry
of Health
Obtaining Medical Certificates from the Health Authority to certify that
workers are fit to handle food
Registration with the Revenue Office or Tax Office

Food Regulation and Standards


In Uganda there are both general regulations that apply to all foods and also
standards thatare specific to a particular types of food. UNBS should be consulted on
details of the general regulations concerning:

Labelling
Presentation and advertisements
Weights and measures and
Hygiene practices during processing and handling
Food Fortification Regulations and Standards

Bakers should contact the Ministry of Health or the Ministry of Agriculture, Animal
Industries and Fisheries for details of laws relating to public health, food safety and
hygiene and sanitation in their premises. Parliament is considering passage of a
Food Safety Bill or Law that will complement the Food Safety Strategic Plan and
have broad-ranging impacts on all participations in the food chain. Small-scale
operators must remain in contact with the relevant enforcement agencies to remain
in compliance with the Food Safety Bill or Law.

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11.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


RISKS AND MITIGANTS

The development of our products and customer network involve several potential
risks:
1. Lack of funding. As we begin to hire more personnel, and increase our costs,
it will be very necessary to monitor funds and progress carefully. During the
first two years of operation, we plan to operate on an extremely limited
budget, and could continue to do so for the subsequent 2 3 years of
operation; the downfall would be that our plans would progress at a far
slower pace. We however expect to receive significant customer signup and
payments, such that approach the point of being more financially solvent.
2. Sales could grow slower than expected. The business is structured as a
variable cost business so the investment does not have to outpace the revenue
stream. A kitchen will not be built until the order rate is firmly in place and
its capacity can be guaranteed to be 65% used.
3. Increased competition: some of the large bakeries which have focused on
selling to the lower end of the market may try to enter the high-end market.
More multigrain products will certainly become available on the market but
we expect to benefit from being the first and having established a known
brand. Additionally, taste is the predominant factor in food purchases and
blind consumer taste tests which we have run have rated our product #1.
4. Ingredient costs can vary seasonally. Sources are locked in and supply
contracts have been signed which guarantee prices for a 12-month period.
5. Increase in the price of wheat. Prices have recently gone up, and may
continue to do so. At about 20% of our overall costs, an increase in this
ingredient could have significant financial repercussions. All bakers are
subject to any increases that might happen in this commodity, so if prices do
go up, it also affects all of our competitors. This means that the price of bread
may be forced to rise, which would partially decrease demand. However, the
demand for bread is fairly inelastic, so the loss would not be as drastic.
Furthermore, we always have at our potential the possibility of switching to
conventional flour if absolutely necessary. The majority of our competitors
use conventional flour, and in doing so they save almost 50% on flour. We
prefer to use organic flour, but it is not a critical element of our sales or
marketing plan, and could be changed if absolutely necessary.

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6. Energy prices may fluctuate. Fuel is an important part of the cost of the
distribution system. Driving will be minimized by the fact that our customers
will be within a 120 kilometer radius of the production facility. We will also
try to avoid supplying shops in remote locations or which are particularly
difficult to get to as a result of traffic patterns. Delivery days and routes will
be carefully planned. To the extent that fuel prices rise dramatically it is
generally expected that the increase can be partially passed on to retailers,
who then pass it on to consumers.
7. Bad debts. We expect to sell only to top-tier and well established customers.
We will monitor the 30-day terms closely to make sure payments are coming
in timely, and will not allow any customer to be greater than 10% of sales.

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12.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


BAKERY ORGANIZATION AND MANAGEMENT PLAN
12.1

Description of Bakery Organization

The bakery section is one of the most important units in a catering establishment.
Nowadays the people are passionate to have fast food and ready-to-eat food items in
their diet. The bakery products are one of the most soled products among them. At
the same time bakers have been convinced to maintain the quality product and to
produce new variety of consumer choice. So it requires that the bakers should have
keen interest, so involvement and have through knowledge in the bakery industry.
The organization of a bakery will vary according to the size and type of the
establishment, customer expectation as well as the variety and size of menu and the
type of service given. Often the quality and quantity of production determine the
number of persons required to run the section. In a small bakery unit, there will be a
head chief, pastry man, confectioner, baker and one or more assistant to get the job
done.
12.2

Duties and Responsibilities

In a small bakery unit the head chef carries the full responsibilities of the
department. He should have a deep knowledge in bakery products, present market
trends, consumer needs, capable to control and coordinate the staff, to plan the
menus, and controls expenditure and waste to meet the profit percentage required.
The pastry man has to prepare hot and cold products, sweet sauces, pastries,
gateaux and cakes.
The confectioner needs great skill, experience and artistry. He has to prepare
marzipan, chocolate, pastillage, sugar work, decorative and display items, patties
flours, wedding, birthday, and celebration cakes and ice-cream varieties.
The baker makes all the yeast goods such as bread, rolls and buns, fancy products,
biscuits and cookies. Besides, he has to tend the ovens.
In private sectors, the production manager carries all the production of bakery
goods, quality and quantity control, prevention of wastage of ingredients and losses
due to bakery.
The assistant manager has to assist the production manager. The supervisor has to
supervise the production at the various stage of manufacturing. And he has to
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prepare the daily production report for the production manager as well as mention
any other points which require attention in or around the plant. His main
responsibility is to check the weight of each product and maintain the same quality
throughout the production.
The purchase officer will receive the instructions from the managers of various
departments and will purchase the requirement for the production and maintenance
purpose. He has to check and maintain the stock register for receiving and issuing
the ingredients.
The sales manager takes the roll to market their products and create the interest
among the people to buy the products with the help of sales man and canvassers.
The maintenance manager maintains all the major equipments as well as the
electricity, water supply, lighting and ventilation, building repairs and vehicle in
correct condition.
12.3

Management Team

We recognize the importance of a good and experienced management; we have


therefore assembled a strong management team. The team is led by Ronald
Byamukama. Ronald comes to Crane Bakery Limited with over 8 years experience
in management.
Ronald has a wealth of experience as he has a Bachelors Degree in catering and
hotel management. He has previously worked with the catering section of Total
Uganda Limited.
Ronald Byamukama will act as the Chief Executive Officer and will manage and
assist in the baking. Ronald is organized, confident, and persistent. He has
experience in sales and customer service from his past employment experience.
Because of his hard working and very motivated personality he strives to maintain a
solid and stable working environment for himself and the employees under him.
With his previous design experience and powerful initiative, he hopes to put the
Crane Bakery Limited out there to the public and make it the best that it can be.
Diane Kemigisha will be the Chief Marketing Officer and also act as the primary
baker and cake designer for the business. Along with her abilities in baking and
design, Ms. Diane has a strong work ethic, great social skills, and a lot of training
and experience in leadership. She will be obtaining all licensing and certification
needed for the job.
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Crane Bakery Limited is an exciting opportunity that combines fresh baked goods
and healthy option products addressing the recent need for these new products.
Demand for these products is expected to grow exponentially as medical doctors
and health professionals become more and more aware of food allergies Ugandans
are afflicted with. Profitability is forecasted to occur by month 12. Through a
combination of strong management team, a solid business model, and exciting
market demanded products will allow Crane Bakery Limited to quickly gain market
penetration and cash richness.
12.4

Training of Employees

Acquiring competent productive and forward looking employees is essential to


customer satisfaction and the growth and expansion of the company. To that end
Crane Bakery Limited will provide extensive training as well as growth incentives
with a view to grooming each employee to discover and reach his or her true
potential.
12.5

Personnel Payroll Plan

Once the bakery becomes established and the cash flow is steady, we would like to
hire one person for counter help and another assistant baker.
The table below illustrates the needs of current employees within three months of
operation.
Table 15: Personnel Payroll Plan (UShs)
Year 1
Ronald Byamukama Director
21,600,000
Diane Kemigisha Director
14,400,000
Chief Baker
9,600,000
Assistant Baker
8,160,000
Sales Executive
6,480,000
Driver
7,440,000
Security Guard
4,992,000
General Manager
10,320,000
Total People
8
Total Payroll
82,992,000

Year 2
24,000,000
17,400,000
10,800,000
9,000,000
7,080,000
8,160,000
5,352,000
11,220,000
8
93,012,000

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Year 3
27,000,000
19,200,000
12,000,000
10,200,000
7,980,000
9,360,000
5,952,000
12,600,000
8
104,292,000

13.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


FINANCIAL ANALYSIS

There are two major types of bakeries: in-store supermarket and small retail. With
most revenue coming from in-store bakeries, our company would draw off these
sales. We would specifically target upper middle class to high-class citizens who are
willing to pay a little more for a higher quality product with more specialization and
service than that of major supermarkets.
Crane Bakery Limited expects to raise UShs 276 million of its own capital (in form
of equity assets and savings), raise UShs 207 million from a diversity of other
funding sources, and to borrow UShs 35 million guaranteed by the Microfinance
Support Centre as a five-year loan. These figures are derived from a calculation of
expected start-up costs (see Table 16).
Shown below is a pie chart that breaks down the percentage of sales per item. Cake,
bread, and doughnuts will provide the majority of our income. Their success is vital
to the success of the business. The predicted sales are expected to give us a steady
income needed to continue doing business. These figures are promising and
indicate that the loan could be paid off with the store debt free in 2 years. This is a
very average number for a small business like the one being proposed by Crane
Bakery Limited. Even with sales slightly off pace in this scenario, the company
would be debt free in three years.
After the loan is paid off, Crane Bakery Limited will build up its bank account.
Bakery equipment will need to be replaced and updated after around five years of
use. After replacing equipment that needed to be, our next major cost would be
opening a second location. The success of the bakery would determine if a second
location could be possible. Possible locations would be other strategic locations in
Kampala and Wakiso districts.
Figure 4: Percentage Share of Product Sales
%age Share of Product Unit Sales
Cakes and pastries

2.43%
7.28%
36.39%
53.91%

Breads, buns &


doughnuts
Cookies
Biscuits

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13.1 Key Assumptions
Key assumptions include:

Revenue growth is dependent on unit growth and price increases. We expect


unit growth to be 10% per year, with 10% per year price increases.
Ingredient costs will increase 5% per year, in line with inflation.
Working capital will grow in line with sales. We will continue with 30-day
customer payment terms but recognize that 38-day average is realistic.
We start with one van for delivery and add one per year.
We have a 5-year micro-finance loan of UShs 35 million at an interest rate of
11% p.a.
Our tax rate continues at 30% of profit.
13.2

Introduction

For the purposes of this Business Plan we have assumed a medium-term loan of
UShs 35 million is made available to the Crane Bakery Limited enterprise.
The Business Plan tests the viability/profitability of the project against an interest
rate of 11.00%. Repayments will commence after one (1) year grace period (i.e. in
the second year of the project).
The medium-term loan will cover the cost of acquisition of the Crane Bakery
Limited enterprise plant & equipment.
An exchange rate of UShs 3,000 to US$1 has been used for purposes of this
document.

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13.3 Start-up Summary
Table 16: Project Start-Up Costs
ID
Description
1
Land (Existing)
2
Machinery & equipment
2
Erection & installation
3
Furniture & fixtures
4
Vehicles
5
Building re-development
6
Working capital (1 month)
a. Legal
b. Accounting, tax preparation
c. Graphics & Marketing Materials
d. Supplies
e. Cash Reserves
f. Raw Materials
Sub-Total
TOTAL
13.4

Amount (UShs)
150,000,000
61,075,000
6,107,500
51,840,000
32,000,000
157,200,000
1,000,000
1,500,000
5,000,000
1,700,000
10,500,000
40,300,000
60,000,000
518,222,500

Project Costs and Financing Plan

Total project cost is estimated at UShs 518,222,800 as shown below in Table 17 in


summarized form.
Table 17: Cost of Project (In UShs)
Description
Land
Buildings
Plant & Equipment
Erect & Installation
Bakery FFE
Vehicles
Fixed Cost
Working Capital
TOTAL PROJECT COST

Local
Currency
150,000,000
157,200,000
41,075,000
6,107,500
51,840,000
32,000,000
438,222,500
60,000,000
498,222,500

Foreign
Currency
0
0
20,000,000
0
0
0
20,000,000
0
20,000,000

Total
150,000,000
157,200,000
61,075,000
6,107,500
51,840,000
32,000,000
458,222,500
60,000,000
518,222,500

Loan funds will be required for the purchase of bakery processing equipment and
machinery including a commercial oven (with a capacity of 65 loaves of bread per
hour), a dough mixer, a bread slicer, a proover, a deep fryer, a moulder, a sheeter,
and a packing machine. It is expected that the Crane Bakery Limited bakery will run
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for 355 days a year on a continuous basis starting off at a capacity utilization of 50%
which will be gradually expanded each subsequent year with market sales growth.
Land:
Crane Bakery Limited has its own land located at Bulenga (approx. 15 kms) along
the Kampala Mityana Mubende Fort Portal highway to western Uganda. This
plot of land is only 200 metres to the south of the main road and has a permanent
house in it belonging to Mr. Ronald Byamukama. The existing land asset counts as
the largest equity capital asset of the Crane Bakery Limited enterprise with a
significant market value of UShs150 million.
Building Improvements:
The existing house structure on the land will be subject to upgrades and
modification improvements to suit a standard bakery. Improvements that will be
made on the existing house are indicated in Table 12: Land & Covered Area
requirement on page 41 of this Business Plan and are altogether estimated to cost
UShs 157,200,000.
Machinery and Equipment:
The requisite bakery plant and machinery equipment will comprise of a mix of
imported and local machinery. The most equipment under the plant and machinery
equipment list include a commercial oven (with a baking capacity 65 loaves of bread
per hour/1,000 loaves of bread per day); a dough mixer(s); bread slicers; a proover;
and a deep fryer. Details of bakery plant equipment and machinery are detailed in
Table 7: Machinery Details on page 36 of this Business Plan. Bakery plant
equipment and machinery is estimated to cost UShs 61,075,000 plus a 10% cost for
erection and installation of UShs 6,107,500.
Transportation Vehicles:
Crane Bakery Limited requires two vehicle units comprising of a second-hand
Toyota pick-up and one motor cycle unit to start the bread shuttling and distribution
runs with. The two vehicle units are estimated to cost UShs 32 million.
Furniture & Fixtures:
A standard modern bakery requires extensive additions of furniture and fixtures to
be appended to its factory and sales outlets (front shop). Table 9: Details of
Furniture and Fixtures on page 38 of this Business Plan provides a detailed listing of
the required furniture and fixture fittings of the Crane Bakery Limited bakery. The
total cost is estimated at UShs 51,840,000.

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Working Capital:
Bread and pastries baking is a business in which cash flow is very high and
companies in the industry tend to generate cash surpluses on a regular basis, most of
the breads and pastries are sold on cash basis on the market. Working capital is
mostly required for paying for purchase of vital production inputs such as raw
materials, packing materials, factory repairs and maintenance, factory utilities,
graphics and marketing materials, administrative expenses, office expenses,
advertising expenses, general supplies, motor vehicle repairs and running expenses,
as well as consumables and miscellaneous expenses. The Working Capital
requirements have been estimated at UShs 60,000,000 for the first two - four weeks
of operation. Schedule 02/1: Initial Project Investment Costs on page 82 refers.
13.5

Financial Plan

The project is proposed to be financed through a combination of equity and microfinance funding in the ratio of 53:47 respectively. The micro-finance institutional
loan will carry a profit markup rate of 11.0 percent per annum payable over a period
of ten years.
Table 18: Financial Plan (In UShs)
Source of Finance/Component
Share

Local
Currency

Foreign
Currency

Total

1) Financial Assistance
Medium-Term MF Loan& Other Funding
Buildings
W/Capital
Plant & Equipment
Erect & Installation
Bakery FFE
Vehicles
Sub Total (1)

11.04%
11.58%
6.75%
1.18%
10.00%
6.17%
46.73%

57,200,000
60,000,000
15,000,000
6,107,500
51,840,000
32,000,000
222,147,500

0
0
20,000,000
0
0
0
20,000,000

57,200,000
60,000,000
35,000,000
6,107,500
51,840,000
32,000,000
242,147,500

28.95%
19.30%
5.03%
53.27%
100.00%

150,000,000
100,000,000
26,075,000
276,075,000
498,222,500

0
0
0
0
20,000,000

150,000,000
100,000,000
26,075,000
276,075,000
518,222,500

2) Equity
Project Sponsors
Land
Buildings
Plant & Equipment
Sub Total (2)
TOTAL

13.6

Projected Income Statement

The projected income statement for the Crane Bakery Limited is given in Table 19
below.
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Table 19: Summary Profit& Loss Account for First Five Years of the Project (In UShs)

Description
Sales

Year 2

Less: Raw Materials

Gross Profit
Less: Operating Expenses

Operating Profit
Less: Interest service
Less: Loan service
Provision for Tax
Net Profit
Cum. Retained Earnings

Year 3

Year 4

Year 5

780,000,000

943,800,000

1,141,998,000

1,381,818,000

241,800,000

292,578,000

354,019,000

428,363,000

538,200,000
294,394,000

651,222,000
328,128,000

787,979,000
366,034,000

953,455,000
406,406

243,806,000
3,850,000

323,094,000
2,970,000

421,945,000
1,980,000

547,049
990,000

8,000,000

9,000,000

9,000,000

9,000,000

69,587,000

93,337,000

123,289,000

161,118,000

162,369,000

217,787,000

287,675,000

375,941,000

162,369,000

380,156,000

667,831,000

1,043,772,000

Since we are a new company, it is important not to grow too fast and take on more
contracts than we can handle. The projections reflect a slow and steady growth
without sudden spikes that will create havoc with our workload.
We think we can reach break-even point before the end of year one, and begin
paying off start-up costs by the end of year two.
13.7

Rates of Return

On the basis of the projected income statements and related projections, rates of
return for the project are calculated and shown in Table 20:
Table 20: Rates of Return (In Percentages)
Description
Year 2
Gross Profit to Sales
69.0

Year 3
69.0

Year 4
69.0

Year 5
69.0

Operating Profit to Sales

31.26

34.23

36.95

39.59

Net Profit to Sales

20.82

23.08

25.19

27.21

Net Profit to Investment

31.33

42.03

55.51

72.54

13.8

Payback Period

Payback period for the project, both in terms of owners equity and total investment,
is calculated below:
MF Loan-Financed Capital Investment
Promoters Equity
Profits

=
=

UShs35,000,000
UShs176,057,000

Net Profit + Interest + Depreciation

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Table 21: Calculation of Payback Period for Equity and Total Investment (In UShs)

Year
1

Amount paid back from


Profits
0

Balance of Total
Investment
-35,000,000

Balance of Total
Equity
-176,075,000

192,381,000

157,381,000

16,306,000

246,919,000

404,300,000

263,225,000

315,817,000

720,117,000

579,042,000

403,093,000

1,123,210,000

982,135,000

Payback period for Equity


Payback period for MF Loan Investment
13.9

=
=

1.91 Years
1.18 Years

Capital: Output Ratio

Capital output ratios, representing the production potential of the project in relation
to the investment involved in its establishment, are calculated in Table 22:
Table 22: Capital: Output Ratios (In UShs)
Description
Year 2
518,222,500
Total Investment
Sales (Output)
Capital: Output Ratio

Year 3

Year 4

Year 5

780,000,000

943,800,000

1,141,998,000

1,381,818,000

1: 1.51

1: 1.82

1: 2.20

1: 2.67

13.10 Projected Balance Sheet


Projected balance sheet for the first five years of operation is shown below:

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Table 23: Projected Balance Sheet (In UShs 000)
CAPITAL EMPLOYED:

YR.1

Share Capital
Retained Earnings
Shareholder's Equity/Deficit

YR.2
200,000
734,251
934,251

YR.3
200,000
1,618,892
1,818,892

YR.4
200,000
2,613,314
2,813,314

YR.5
200,000
3,741,227
3,941,227

35,000
373,444

27,000
583,231

18,000
861,906

9,000
1,228,847

Long-Term Liabilities

EMPLOYMENT OF CAPITAL:

157,200

149,340

141,480

133,620

125,760

Farm Equipment & Machinery

67,183

60,465

53,746

47,028

40,310

Office Furniture & Equipment

51,840

46,656

41,472

36,288

31,104

Vehicles

32,000

25,600

19,200

12,800

6,400

308,223

Farm Buildings

282,061

255,898

229,736

203,574

CURRENT ASSETS:

120,488

360,477

670,241

1,069,470

Accounts Receivable

44,683

51,726

60,004

69,564

132,264

152,386

176,009

202,880

11,344

12,604

14,023

15,533

-67,803

143,762

420,204

781,493

29,104
25,254

33,145
30,175

38,071
36,091

44,197
43,207

3,850

2,970

1,980

990

91,384
373,444

327,332
583,231

632,170
861,906

1,025,273
1,228,847

LONG-TERM ASSETS:

Stock (Inventory)
Bank Balance and Cash
Other Current Assets
CURRENT
LIABILITIES/DEBT:
Accounts Payable
Current Portion of Long-term
Liabilities
NET CURRENT ASSETS:
TOTAL CAPITAL

13.11 Projected Cash Flow Statement


The cash flow projection shows that provisions for ongoing expenses are adequate to
meet Crane Bakery Limited's needs as the business generates cash flow sufficient to
support operations.
The projected cash flow for the first five years of the project is shown hereunder:

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Table 24: Projected Cash Flows (In UShs 000)
Project Year
1
2
3
4
Costs (UShs)
A. Cash inflow

518,223

780,000

943,800

1,141,998

5
1,381,818

1. Financial resources
total

518,223

2. Sales revenue total

780,000

943,800

1,141,998

1,381,818

-518,223

-812,964

-761,481

-894,687

-1,050,860

-518,223

-188,291

-28,425

-33,321

-37,940

-536,194

-620,706

-720,053

-834,769

a) Interest

-3,850

-2,970

-1,980

-990

b) Repayments

-8,000

-9,000

-9,000

-9,000

4. Corporate tax

-69,587

-93,337

-123,289

-161,118

5. Dividends 4% on equity

-7,043

-7,043

-7,043

-7,043

C. Surplus / deficit

-32,964

182,319

247,311

330,958

D. Cumulative cash
balance

-32,964

149,354

396,666

727,623

B. Cash outflow
1. Total assets schedule
including replacements
2. Operating Costs
3. Debt Service

13.12 Break-Even Analysis


The projects commercial break-even level (profitability break-even) in Project Year
5is calculated below:
Sales Value of Production
Break-even Sales =

= UShs 1,381,818,000

144,125,000
1 717,797,000
1,381,818,000

144,125,000
1 0.5195

144,125,000
0.4805

Break-even Sales =
UShs 299,921,000
Capacity utilization required to Break-even = UShs 299,921,000 x 100 = 21.70%
UShs 1,381,818,000
Margin of Safety = 100% 21.70% = 78.30%

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Table 25: Break-Even Analysis in Project Year 5(In UShs 000)
Items
Variable Cost
Fixed Cost
Total Cost
Raw materials

428,363,000

428,363,000

Salaries & wages

86,041,000

28,680,000

114,721,000

Packing material

25,909,000

8,636,000

34,545,000

542,000

271,000

813,000

25,955,000

8,652,000

34,606,000

112,008,000

56,004,000

168,012,000

Administration Overheads

5,182,000

1,727,000

6,909,000

Consumables & Miscellaneous

3,833,000

1,917,000

5,750,000

Office Expenses

2,130,000

1,065,000

3,194,000

Advertising Expenses

7,187,000

2,396,000

9,583,000

Insurance

2,681,000

1,340,000

4,021,000

Taxes & Licenses

5,391,000

1,797,000

7,187,000

General Supplies

4,492,000

1,497,000

5,990,000

Professional Expenses

1,775,000

887,000

2,662,000

Motor Vehicle Expenses

6,309,000

2,103,000

8,412,000

Depreciation

26,162,000

26,162,000

Financial Expenses
TOTAL

990,000

990,000

717,797,000

144,125,000

861,921,000

Repairs & Maintenance


Fuel, Oil & Utilities
Marketing & Distribution Costs

13.13 Value Added/Contribution to GDP


Implementation of the project is expected to have a beneficial economic impact on
regional/national economic development. The projects contribution towards the
countrys Gross Domestic Product (GDP) is estimated below.
Table 26: Calculation of Value Added(In UShs 000)
Description

Year 2

Value of Production (Sales)

Year 3

Year 4

Year 5

780,000

943,800

1,141,998

1,381,818

241,800

292,578

354,019

428,363

19,500

23,595

28,550

34,545

3,900

4,719

5,710

6,909

26,162

26,162

26,162

26,162

Total Intermediate Inputs

291,362

347,054

414,441

495,980

Value Added

488,638

596,746

727,557

885,838

62.65%
61,080

63.23%
74,593

63.71%
90,945

64.11%
110,730

Less Intermediate Input:


Raw Material
Packing Material
Administration Overheads
Depreciation

Value Added as a %age of


Output
Value Added per Worker

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14.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


PROJECT IMPLEMENTATION SCHEDULE

It is expected that it will take approximately 10 months to have the Crane Bakery
Limited project put into operation from the day funds for its execution are secured.
The preparatory stage which involves the eventual approval for funding is assumed
to take 3 months from the date of its final submission to project financiers by the
project promoters. The follow-on project implementation activities are expected to
take an additional 7 months to completion which altogether adds up to 10 months
(1 year).
The following Gantt chart presented in Figure 5 highlights the important project
implementation milestones.

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Figure 5: Project Implementation Milestones
ID

Task Name

Duration
1

1
2
3
4

5
6
7
8
9
10
11
12

Seed Capital Financing


Site Building Re-development
Interior Design
Bakery Plant & Equipment:
Identification
of
Bakery
Equipment Suppliers/Opening
of LCs and Order of Equipment
Bakery Plant & Equipment:
Shipment & Delivery
Bakery Plant & Equipment:
Installation
Procure
Project
Office
Stationery and or Equipment
Arrangements for Bakery Input
Supplies
Hiring Key Executives
Full Staffing
Commissioning of Bakery
Commence Operations

Period (Months)
6
7
8

3 months
4 months
2 months
1 month

1 month
1 month
1 month
1 month
1 month
1 month
0 months

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10

11

12

15.0

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


ENVIRONMENTAL&SOCIAL GUIDELINES: BAKERY PRODUCTS
15.1

Process Description

This section covers industrial scale bakeries producing bread, cake and biscuit
products for human consumption, starting with milled flour as the basic ingredient.
Although the environmental issues associated with baking remain, in principle, the
same for small bakery operations such as individual bakery shops, in practice, the
risk level is much lower and it may not be appropriate to implement some of the
precautions and management measures mentioned here.
Figure 6: Basic Steps in Bread Making

Raw Materials

Receive & Store


Raw Materials
Mix

Shape
Proof

Bake

De-pan

Cool

Pack

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The main bread making activities are shown in Figure 5 and include:

Receipt and Storage of raw materials: principally flour, water, yeast, salt,
levelling agents in biscuits (e.g. ammonia carbonate), improvers (e.g. vitamin
C) and preservatives but can include many other ingredients such as onion,
olives, herbs, cheese;

Preparation: Mixing, shaping, placing in tins, proving;

Baking: Removing from tins, cooling;

Packing: Slicing, wrapping/bagging.


15.2

Key Environmental, Health and Safety Risks/Liability Issues

Product Contamination
Bakery products can become contaminated through:

Contaminated raw materials received;


Poor hygiene standards within the processing operations, e.g. unclean
machines, unhygienic handling;
Pest infestation, e.g. rodent, insects;
Poor storage conditions e.g. raised moisture levels promoting insect, mould
and bacterial growth.

The Company's operations should be designed to internationally recognized food


safety standards consistent with the principles and practice of Hazard Analysis
Critical Control Points (HACCP)7and Codex Alimentarius8.
Emissions to Air
The major air emissions of concern from bakeries are known as volatile organic
compounds (VOCs). The primary VOC emitted from bakery operations is ethanol. It
is produced by yeast metabolism during fermentation and is emitted in large
amounts when the dough is exposed to elevated temperatures in the oven. It
combines with other VOCs in the atmosphere to form smog. A large facility may
require a permit with specific emission parameters from the regulatory authorities
may be required.
7ISO

2005
and WHO (1962 2005)

8FAO

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Energy Consumption
Processing operations consume high amounts of energy as:

Thermal energy for proving and baking the product and to produce hot water
for cleaning and sterilising;

Electricity for machinery operation, dust extraction, ventilation, lighting and


production of compressed air.

Energy usage has a direct correlation to the operating costs of the company and
energy generation and consumption may be regulated or taxes/levies applied to
reduce energy use and associated emissions of gases such as carbon dioxide.
Dust, Aerosols and Gases
Dust may arise from raw material storage, handling and drying activities; aerosols
typically result from the use of compressed air and high-pressure water for cleaning.

Workers may inhale or ingest the dust and aerosols exposing them to
biological and microbial hazards presenting a risk of occupational lung
disease or asthma. When combined with high levels of humidity dust and/or
aerosols may give rise to skin irritation or allergic reactions;

Ammonium carbonate used as a leavening agent in biscuits decomposes to


emit ammonia on contact to air. It is toxic if inhaled at high concentrations;

Some bakery additives/flour improvers contain enzymes that are an


occupational hazard to which workers may become allergic (sensitized).
Exposure to them should be limited by using improvers in liquid, paste or
dust suppressed powder form;

Dust can be a nuisance to the surrounding locality;

A dust cloud of any flammable material (such as flour) will explode if:
o The concentration of dust in air falls within the explosive limits9;
o A source of ignition is present.

Dust can be controlled by enclosing processing and transport equipment, which also
reduces product losses and by the installation of extraction (antistatic) equipment.
9HSE

1996

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Storage
Bulk storage facilities will be used for the storage of raw materials, finished product,
chemicals used in the production process and for cleansing and disinfection, and
fuel oils for energy production. These storage facilities should be provided with
satisfactory containment (concrete walls/bunds, drainage gullies connected to
wastewater treatment areas) to prevent spills reaching the wider environment. The
storage facilities should be secure to prevent pest invasion, be waterproof and well
ventilated. Alarms should be fitted to detect leakages. All outdoor bulk storage of
dusty, or potentially dusty materials should be in silos and ventilation/extraction
equipment used to minimize dust generation or explosion/fire. Bulk storage
facilities should be fitted with alarms to prevent overfilling.
Solid Wastes
Wastes may arise at all stages in the production process, including spoiled raw
materials, spillages, dough, non-conforming product, packaging wastes and sludge
from wastewater treatment. Organic wastes should be segregated from non-organic
wastes to facilitate recycling/reuse and stored in adequate containers. Solid wastes
will need to be temporarily stored, collected and disposed to regularly to avoid
odour, litter, fly, rodent or hygiene problems.
Packaging
Packaging is widely used within the bakery industry to preserve the quality of the
product, for marketing and transport purposes. Smaller bakeries and in-store
bakeries may transport some unwrapped finished product in open reusable plastic
crates or baskets, but the majority of larger operations package the product in paper
(sometimes waxed), polythene, plastic or card.
Water supply
Bakeries can use a relatively large volume of water, which may require treatment
before it can be used. It is used both to make the product and for cleaning. In cities
and towns, water is supplied by the municipal water supply system. It is typical for
abstraction or water use permits to detail volumes of water abstraction allowed as
over abstraction can impact local communities.

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Wastewater treatment
Wastewater arising from cleaning and spillages will contain high quantities of
organic matter and other material which if discharged without treatment will
potentially pollute watercourses.
Wastewater treatment systems for process drainage and cleaning wastewaters are
essential in order to mitigate the risk of pollution.
Instead of building their own wastewater treatment facility, some companies will
discharge to the municipal wastewater treatment plant. It is typical for authorities, in
either case, to require pre-treatment of such wastewater before it is discharged. This
will depend on the size of bakery. These requirements will be set out in an
environmental permit.
Manual Handling and Repetitive Work
Lifting, repetitive work and posture injuries occur as a result of lifting and carrying
heavy or awkward shaped items such as sacks, lifting of boxes and manoeuvring
wheeled racks within the plant. Repetitive tasks such as tin loading, lidding, cake
decorating and packing operations can lead to musculoskeletal injuries.
Collision
In a busy manufacturing environment, it is common to have injuries where people
are struck by moving or falling objects such as crates, boxes, equipment, conveyors
and forklift trucks.
15.3

Other Environmental, Health and Safety Risks/Liability Issues

Permitting
Large bakeries in Uganda producing more than 300 tonnes per day of finished
product will be subject to national regulations under the proposed Food Safety Law.
Other smaller facilities within Uganda will still be subject to national regulation but
this will generally set less stringent requirements on the environmental management
practices to be adopted.

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Polychlorinated Biphenyls (PCBs) and Asbestos
PCBs are a group of substances which are good electrical insulators. Typically, PCBs
may be present in hydraulic oils or dielectric fluids in electrical switchgear and
transformers.
Asbestos has been used on a large scale for many years as a fire proofing and
insulation material and may be encountered in a wide range of forms including
asbestos cement boards, as fire retardant gaskets in pipe-work and as fire retardant
insulation around boilers and furnaces.
Though the presence of PCBs and asbestos are not likely to be a principal issue of
concern in relation to the main bakery production process, they may be present in
factories constructed prior to the 1980s and present both an environmental and
health and safety hazard.
Temperature
Employees may be exposed to high temperatures near ovens and may have to
handle hot product. This could lead to collapse through heat exhaustion and contact
burns.
Confined Spaces
Storage silos are dangerous confined spaces and entry to them must be strictly
controlled and avoided wherever possible. There is a risk from engulfment, lack of
breathable atmosphere and mechanical hazards (e.g. sweep augers).
Noise
Noise induced hearing loss can occur from working in noisy areas, e.g. mixers,
baking plant, de-panning, slicing, fruit washing.
Machinery
All equipment should have safety guarding and workers should be issued with
appropriate personal protective equipment to protect against unavoidable sharp
items and edges.

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Exposure to Ammonia

Ammonia, which is commonly used as a replacement for


Chlorofluorocarbons (CFCs) in refrigeration systems, and may also be emitted
by ammonium carbonate (a leavening agent in biscuits) if exposed to air, is
toxic if inhaled at high concentrations and can cause frostbite when released
to the atmosphere. Facilities using ammonia should be aware of the potential
hazards of ammonia releases and of the steps that can be taken to prevent
such releases e.g. fitting alarms on equipment. They should be prepared to
respond appropriately if releases do occur.

Slips, Trips and Falls

Vats/vessels for mixing raw materials provide hazards in the form of


working at height which could result in falls and asphyxiation;

Slippery floors and surfaces present a high risk of slips, trips and falls where
spills have not been cleared up or effective cleaning has not taken place;

The cleaning and disinfecting of process areas and some food preservation if
inappropriately used and stored could result in chemical contact burns to
employees, inhalation of harmful/toxic fumes generated during processes or
ingestion of harmful substances.
15.4

Key Social, Labour and Community Risks/Liability Issues

Hygiene
Contamination of product could result in ill health in the general public and may
result in product recall. Hygiene standards within process areas must be maintained
to a high level to prevent product contamination and should be consistent with the
principles and practice of HACCP and Codex Alimentarius.
15.5

Other Social, Labour and Community Risks/Liability Issues

Odour
Although bakeries do release odours, these are considered by the majority of people
to be not unpleasant, but some form of abatement may be required by regulatory
authorities.

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Noise
The noise generated by equipment and manoeuvring trucks can be a nuisance if the
site is located close to residential areas and other sensitive receptors.
Transport
Trucks delivering bulky raw materials may cause traffic congestion or excessive
noise potentially leading to complaints.
15.6

Improvements

Reduce dust emissions by:


o Enclosing and sealing plant/facility and equipment to prevent escape and
accumulation of dust;
o Use of doors/plastic strip curtains on building access points;
o Redesigning processes to reducing free-fall distances and speed of
movement for flour and other dry products;
o Encouraging careful working to avoid spillages;
o Use of centralized piped vacuum cleaning systems or other suitable
vacuum cleaners;
o Installation of dust extractors e.g. cyclones and fabric filters;
o Improving ventilation within buildings;
o Maintaining a slight negative pressure within storage vessels such as bins
and silos;
o Install dust monitoring equipment;
o Replace dusty bakery additives and flour improvers with those in liquid,
paste or dust suppressed form;

Screen raw materials, water and finished products for contaminants;

Monitor product losses during processing operations;

Consider whether the installation or upgrade of a wastewater treatment plant


is necessary;

Insulate ovens and proving areas to reduce energy consumption and recover
heat from ovens;

Consider shutting down ovens when plant is not operating at full capacity;

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Ensure organic waste is collected and stored separately from other solid waste
where to enable is reuse where feasible for composting and/or use for soil
amendment, or use in energy production;
Improve waste storage containment to prevent ingress of water, pests and
leakage;
Upgrade raw materials storage areas to allow proper containment of spills
and leakages;

Undertake regular integrity testing of underground storage tanks and bulk


storage tanks to reduce to prevent leakage and product loss;

Good housekeeping should be maintained at all times all areas. The adoption
of good cleaning and working practices as a routine will reduce dust
emissions and improve hygiene standards;

Upgrade exhaust stack heights from cooking processes to minimize air


pollution and nuisance to the local community;

Assess air emission (e.g. ethanol) and if required install equipment to reduce
emissions of volatile organic compounds.
Provision of personal protective equipment (PPE) that is fit for the task to
prevent injury and maintain hygiene standards. Staff should be trained in the
correct selection, use and maintenance of PPE;

Train workers in how dust from flour and other bakery ingredients can cause
asthma, the symptoms and how to prevent it and what to do if they
experience the symptoms;

Train workers in correct use of machinery and safety devices;

Redesign of manual processes to avoid heavy lifting/repetitive activities;

Install mechanical lifting aids where possible and rotate work tasks to reduce
repetitive activities;

Separation of people from moving equipment:


o Ensure that the process layout reduces opportunities for process activities
to cross paths;
o Installation of safeguards on peelers, moving parts of conveyor belts and
packaging machinery to reduce risk of entrapment of employees;
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o Install walkways to separate people from vehicle movements to reduce
risk of collision;

Walking and working surfaces should be kept clean and dry. Restrict access
to areas being cleaned or where spillages have occurred;

To reduce the risk of noise exposure by isolating noisy equipment and rotate
tasks to minimize time spent in a noisy area and provide personal protective
equipment;

Restrict duration for people being in very hot areas;

Ensure all electrical equipment in wet areas is safe and regularly maintained;

Consider introducing pre-employment screening for past or present asthma


or chest illnesses; conduct annual screening of employees;

Introduce arrangements for redeploying employees with respiratory


sensitization away from the bakery;

Provide worker welfare areas segregated from the main production process;

Train employees in hygiene including; regular hand washing with soap and
alcohol; prohibition of smoking, eating and drinking in the workplace.

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Schedule 01: KEY FINANCIAL MODELLING ASSUMPTIONS
Table 27-1: Operating Assumptions
No. of Working Days in One Year
No. of Working Hours in One Shift
Wage growth rate
No. of Outlets
Total Working Hours per Outlet/Day

355
8
10%
1
16

Table 27-2: Economy-Related Assumptions


Electricity price growth rate
Diesel/petrol price growth rate
Wage growth rate

10%
10%
5%

Table 27-3: Cash Flow Assumptions


Accounts Receivable cycle (in days)
Accounts Payable cycle (in days)
Raw material inventory (in days)
Equipment spare parts inventory (in days)
Table 27-4: Production Assumptions
Production of Bakery Products
Cake produced annually (units)
Bread produced annually (1 kilo loaves)
Cookies produced annually (units)
Biscuits produced annually (200gm packets)
Table 27-5: Revenue Assumptions
Sales of Bakery Products
Cake sold annually (units)
Bread sold annually (1 kilo loaves)
Cookies sold annually (units)
Biscuits sold annually (200g packets)
Unit Sales Prices of Bakery Products
Average cakes sales price (UShs/unit)
Average bread sales price (UShs/1 kg loaf)
Average cookies sales price (UShs/unit)
Average biscuits sales price (UShs/200 gm packets)
Sales/Production Out-turn
Sales price growth rate
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30
30
3
30

119,816
177,505
23,963
7,988

117,000
173,333
23,400
7,800
1,000
3,600
1,000
2,000
97.65%
10%

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Table 27-6: Operating Expense Assumptions
Office expenses per month (UShs.)
200,000
Advertising expense/month (UShs.)
600,000
Marketing & distribution costs per bread unit (UShs.)
600
Marketing & distribution costs per cakes, cookies & biscuits unit
(UShs.)
150
Machinery repairs & maintenance cost (as a %age of cost of bakery
1% (Yrs 1 4)
plant equipment & machinery)
1.5% (Yrs 5 10)
Insurance (as a %age of total capital expense)
1%
Taxes &Licences expenses per month (UShs.)
450,000
General Supplies expenses per month (UShs.)
375,000
Professional Fees per annum (UShs.)
2,000,000
Motor Vehicle repair & maintenance (as a %age of capital expense)
1%
Miscellaneous expenses per month (UShs.)
360,000
Table 27-7: Expense and Growth Rates
Sales growth rate
Salaries, wages growth rates (as %age of annual Salaries and
Wages)
Other Production Overheads
Repairs and Maintenance (as %age of Machinery Cost)
Building Repair and Maintenance (as %age of Building Cost)
Packing Material (as %age of sales)
Administrative Expenses(as %age of sales)
Fuel & Power
Fuel
Average annual units consumed (litres)
Rate per Unit of Petrol (UShs)
Annual rate Increase %
Power & water consumption expense/month (UShs)
Table 27-8: Financial Assumptions
Project Life (Years)
Debt
Equity (Own Resources)
Other Funding Sources
Interest rate on long-term debt
Debt tenure (Years)
Grace Period (Years)
Debt payments per year

10%
10%

1.5%
1.0%
2.5%
0.5%

1,800
3,333.33
10%
2,170,000

5
6.75%
53.27%
39.97%
11%
5
1
1

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Table 27-9: Depreciation Rate Assumptions
Land
Buildings
Machinery and Equipment
Office Equipment
Furniture & Fixtures
Vehicles

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81

0%
5%
10%
10%
10%
20%

ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 02/1:
Initial Project Investment Costs (In UShs)
ID
1

Description

Share %
28.95%

Land

Amount (UShs)
150,000,000

Machinery & equipment

11.79%

61,075,000

Erection & installation

1.18%

6,107,500

Bakery Furniture & Fixtures

10.00%

51,840,000

Vehicles

6.17%

32,000,000

Building Improvements

30.33%

157,200,000

Working Capital (1 month)


a. Legal

0.19%

1,000,000

b. Accounting, tax preparation

0.29%

1,500,000

c. Graphics & Marketing Materials

0.96%

5,000,000

d. Supplies

0.33%

1,700,000

e. Cash Reserves

2.03%

10,500,000

f. Raw Materials

7.78%

40,300,000

TOTAL

11.58%

60,000,000

100.00%

518,222,500

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Schedule 02/2:
Source & Structure of Project Financing (In UShs)
Source of
Finance/Component
Land

Share (%)

Equity/Own
Capital

MF Loan
Finance

Other
Funding

Total

28.95%

150,000,000

150,000,000

Buildings Improvements

30.33%

100,000,000

57,200,000

157,200,000

Machinery & Equipment

11.79%

26,075,000

35,000,000

61,075,000

Erection & installation

1.18%

6,107,500

6,107,500

Bakery FFE

10.00%

51,840,000

51,840,000

Vehicles

6.17%

32,000,000

32,000,000

0
276,075,000
53.27%

0
35,000,000
6.75%

60,000,000
207,147,500
39.97%

60,000,000
518,222,500
100.00%

W/Capital
TOTAL
% of Total

11.58%
100.00%

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule03: Loan and Interest Service Schedule (In UShs)
Project Year
Loan Repayment

PY 1
0

PY 2
8,000,000

PY 3
9,000,000

PY 4
9,000,000

PY 5
9,000,000

Total
35,000,000

Interest

3,850,000

2,970,000

1,980,000

990,000

9,790,000

Total

11,850,000

11,970,000

10,980,000

9,990,000

44,790,000

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Table 04/1: Calculation of Working Capital: I Minimum Requirements of Current
Assets and Liabilities
(a) Accounts receivable:

30 days at production costs minus depreciation


and interest

(b) Inventory:
Field Inputs:
Labour Costs:
Bakery Operations:
Machy& vehicle maintenance:
Work in progress:

Finished products:

Cash-in-hand:
(d) Accounts payable:

30 days
90 days
60 days
180 days
9 days at bakery raw materials + packing materials
+ salaries & wages + repairs & maintenance +
utilities + insurance + general supplies + motor
vehicle repairs + depreciation + consumables &
miscellaneous expenses
45 days at bakery raw materials + packing
materials + salaries & wages + repairs &
maintenance + utilities + insurance + general
supplies + motor vehicle repairs + depreciation +
consumables & miscellaneous expenses
15 days, see separate calculations at the bottom of
this schedule
30 days of bakery plant costs and utilities.

N.B.: All the local cost price factors for the bakery plant costs/inputs, utilities and
working capital are indicated in local currency (UgShs) for the ease of computational
and financial analysis.

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Table 04/2: Calculation of Working Capital: IIAnnual Production Cost Estimate
(In UShs 000s)
ACCOUNT HEAD

FINANCIAL YEAR OF OPERATION

YEAR

Operating Costs (UGX '000s)


Raw materials

241,800

292,578

354,019

428,363

Salaries & wages (Payroll)

82,992

93,012

104,292

114,721

Packing material

19,500

23,595

28,550

34,545

611

672

739

813

26,000

28,600

31,460

34,606

126,230

138,853

152,738

168,012

Administrative Expenses

3,900

4,719

5,710

6,909

Consumables & Miscellaneous

4,320

4,752

5,227

5,750

Office Expenses

2,400

2,640

2,904

3,194

Advertising Expenses

7,200

7,920

8,712

9,583

Insurance

3,021

3,323

3,655

4,021

Taxes & Licenses

5,400

5,940

6,534

7,187

General Supplies

4,500

4,950

5,445

5,990

Professional Expenses

2,000

2,200

2,420

2,662

Motor Vehicle Expenses

6,320

6,952

7,647

8,412

536,194

620,706

720,053

834,769

3,850

2,970

1,980

990

Depreciation

26,162

26,162

26,162

26,162

Total Financial Costs

30,012

29,132

28,142

27,152

Total Production Costs

566,206

649,838

748,195

861,921

Repairs & Maintenance


Utilities
Marketing & Distribution Costs

Cost of Sales
Financial Costs (UGX '000s)
Interest on Medium Term Loans

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Schedule 04/3: Calculation of Working Capital: III Working Capital Requirements
(In UShs 000s)
X
Minimum
days

Y
Coefficient
of

of coverage

turn-over

I. Current assets
A. Accounts receivable

30

B. Inventory
a) Raw Materials
b) Salaries & Wages
c) Bakery Operations
d) Maintenance & Repair
e) Work-in-Process
f) Finished Products

Requirements (UGX '000s)


2

Full Capacity
3
4

12

44,683

51,726

60,004

69,564

30
90
60
180
9
45

12
4
6
2
40
8

20,150
20,748
28,777
306
10,381
51,903

24,382
23,253
31,726
336
12,115
60,575

29,502
26,073
34,985
370
14,180
70,900

35,697
28,680
38,588
407
16,585
82,923

C. Cash-in-hand
( from V below)

15

24

11,344

12,604

14,023

15,533

D. Current assets

188,291

216,716

250,036

287,977

II. Current Liabilities


A. Accounts payable

30

12

25,254

30,175

36,091

43,207

213,545
_

246,891
33,346

286,127
39,237

331,183
45,056

Item

III. Working Capital


A. Net Working Capital
B. Increase in Working Capital
IV. Total Production Costs

566,206

649,838

748,195

861,921

Less:

_
_
_
15
_

_
_
_
24
_

241,800
26,000
26,162
272,244
11,344

292,578
28,600
26,162
302,498
12,604

354,019
31,460
26,162
336,554
14,023

428,363
34,606
26,162
372,790
15,533

Raw Materials & Inputs


Utilities
Depreciation

V. Required Cash Balance

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 05: Fixed Assets and Depreciation Allowances in UShs
Project Year
Asset
Bakery Buildings

PY 1

PY 2

PY 3

PY 4

PY 5

Initial

Dep

Dep

Dep

Dep

Value

Allowance

Allowance

Allowance

Allowance

157,200,000

7,860,000

7,860,000

7,860,000

7,860,000

Bakery Equip & Machinery

67,182,500

6,718,250

6,718,250

6,718,250

6,718,250

Bakery Furniture &


Fixtures

51,840,000

5,184,000

5,184,000

5,184,000

5,184,000

Motor Vehicles

32,000,000

6,400,000

6,400,000

6,400,000

6,400,000

308,222,500

26,162,250

26,162,250

26,162,250

26,162,250

TOTALS

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 06: Change in Total Investment Costs (In UShs 000s)
Construction

Period
Year

Full Production

Total

1. Fixed Investment Costs

458,223

458,223

a) Initial fixed investment costs

458,223

458,223

2. Pre-operational expenses

60,000

60,000

3. Working Capital increase

213,545

33,346

39,237

45,056

331,183

518,223

213,545

33,346

39,237

45,056

849,406

b) Replacement

Total Investment Costs

Schedule 07: Change in Total Assets (In UShs 000s)


Construction

Period
Year

Full Production

Total

1. Fixed Investment Costs

458,223

458,223

a) Initial fixed investment costs

458,223

458,223

60,000

60,000

188,291

28,425

33,321

37,940

287,977

518,223

188,291

28,425

33,321

37,940

806,200

b) Replacement
2. Pre-operational expenses
3. Current Assets increase
Total Assets

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Schedule 08: Projected Cash Flow Table (In UShs 000s)
Period
Year

Construction

Full Capacity
2

*Sal val

Total

Costs (US Dollars)


A. Cash inflow

518,223

780,000

943,800

1,141,998

1,381,818

4,765,839

518,223

4,247,616

1. Financial resources
total
2. Sales revenue total

518,223

780,000

943,800

1,141,998

1,381,818

-518,223

-812,964

-761,481

-894,687

-1,050,860

606,943

-3,431,273

-518,223

-188,291

-28,425

-33,321

-37,940

606,943

-199,257

-536,194

-620,706

-720,053

-834,769

-2,711,723

a) Interest

-3,850

-2,970

-1,980

-990

-9,790

b) Repayments

-8,000

-9,000

-9,000

-9,000

4. Corporate tax

-69,587

-93,337

-123,289

-161,118

-447,331

5. Dividends 4% on equity

-7,043

-7,043

-7,043

-7,043

-28,172

C. Surplus / deficit

-32,964

182,319

247,311

330,958

606,943

D. Cumulative cash balance

-32,964

149,354

396,666

727,623

606,943

B. Cash outflow

1. Total assets schedule


including replacements
2. Operating Costs (Cost of
Sales)
3. Debt Service
-35,000

1,334,566

*Salvage values. Land: 150,000; 4/5 of buildings: 125,760; Working Capital : 331,183

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Schedule 09: Projected Cashflow Table and Calculation of Present Value (In UShs
000s)
Year

*Sal val

Total

-518,223

Constr.

Investment Costs

-518,223

Net Profit after Tax

162,369

217,787

287,675

375,941

1,043,772

Depreciation

26,162

26,162

26,162

26,162

104,648

3,850

2,970

1,980

990

9,790

-518,223

192,381

246,919

315,817

403,093

606,943

1,246,930

0.8772

0.7695

0.675

0.5921

0.5194

0.2076

-454,585

148,037

166,670

186,995

209,367

126,001

Interest Add back


Mid-term Loan
NET CASH FLOWS
Discount Factors at 14%
PV at 14%
NPV at 14%
Discount Factors at 17%
PV at 17%

382,485
382,485

0.8547

0.7305

0.6244

0.5337

0.4561

0.152

-442,925

140,534

154,176

168,552

183,851

92,255

NPV at 17%

_
296,443
296,443

Internal Rate of Return = 47.11%


NPV at 14% = UGX 382,485,000
NPV at 17% = UGX 296,443,000

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Schedule 10: Projected Income Statement (In UShs 000s)
Year

Sales

780,000

943,800

1,141,998

1,381,818

Raw Materials

241,800

292,578

354,019

428,363

GROSS PROFIT

538,200

651,222

787,979

953,455

(excl. Raw Materials)

294,394

328,128

366,034

406,406

OPERATING PROFIT

243,806

323,094

421,945

547,049

Medium-Term Loan (@ 11% p.a.)

3,850

2,970

1,980

990

Less: Annual Repayments

8,000

9,000

9,000

9,000

NET PROFIT BEFORE TAX

231,956

311,124

410,965

537,059

Corporation Tax 30%

69,587

93,337

123,289

161,118

NET PROFIT

162,369

217,787

287,675

375,941

Accumulated Net Profit (Loss)

162,369

380,156

667,831

1,043,772

Net Profit Margin

0.2082

0.2308

0.252

0.272

0.690

0.690

0.690

0.690

Less: Operating Costs

Less: Accrued interest on

Gross Profit Margin


Rate of Return on Investment

31%

42%

55.51%

73%

Operating Profit Margin

0.313

0.342

0.369

0.396

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Schedule 11: Projected Balance Sheet (In UShs 000s)
CAPITAL EMPLOYED:

YR.1

YR.2

YR.3

YR.4

YR.5

Share Capital

176,075

176,075

176,075

176,075

Retained Earnings

162,369

380,156

667,831

1,043,772

Shareholder's Equity/Deficit

338,444

556,231

843,906

1,219,847

35,000

27,000

18,000

9,000

373,444

583,231

861,906

1,228,847

Long-Term Liabilities

EMPLOYMENT OF CAPITAL:
Bakery Buildings

`
157,200

149,340

141,480

133,620

125,760

Bakery Equipment & Machinery

67,183

60,465

53,746

47,028

40,310

Bakery Furniture & Equipment

51,840

46,656

41,472

36,288

31,104

Motor Vehicles

32,000

25,600

19,200

12,800

6,400

308,223

282,061

255,898

229,736

203,574

CURRENT ASSETS:

120,488

360,477

670,241

1,069,470

Accounts Receivable

44,683

51,726

60,004

69,564

132,264

152,386

176,009

202,880

11,344

12,604

14,023

15,533

-67,803

143,762

420,204

781,493

CURRENT LIABILITIES:

29,104

33,145

38,071

44,197

Accounts Payable

25,254

30,175

36,091

43,207

3,850

2,970

1,980

990

91,384

327,332

632,170

1,025,273

TOTAL CAPITAL

373,444

583,231

861,906

1,228,847

TOTAL ASSETS A120 + A121

402,548

616,376

899,977

1,273,044

LONG-TERM ASSETS:

Stock (Inventory)
Bank Balance and Cash
Other Current Assets

Current Portion of Long-term


Liabilities
NET CURRENT ASSETS:

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 12: Ratio Analysis (In UShs 000s)
Construction

Period
Year

Full Capacity

Sales Growth

5%

5%

5%

Percent of Total Assets


Accounts Receivable

11.10%

8.39%

6.67%

5.46%

Inventory

32.86%

24.72%

19.56%

15.94%

Other Current Assets

-16.84%

23.32%

46.69%

61.39%

Total Current Assets

29.93%

58.48%

74.47%

84.01%

Long-term Assets

70.07%

41.52%

25.53%

15.99%

100.00%

100.00%

100.00%

100.00%

Current Liabilities

7.23%

5.38%

4.23%

3.47%

Long-term liabilities

8.69%

4.38%

2.00%

0.71%

Total Liabilities

15.92%

9.76%

6.23%

4.18%

Net Worth (Total Capital)

92.77%

94.62%

95.77%

96.53%

100.00%

100.00%

100.00%

100.00%

69.00%

69.00%

69.00%

69.00%

0.50%

0.50%

0.50%

0.50%

20.82%

23.08%

25.19%

27.21%

4.14

10.88

17.61

24.20

-0.40

6.28

12.98

19.61

8.69%

4.38%

2.00%

0.71%

Pre-tax Return on Net Worth

62.11%

53.34%

47.68%

43.70%

Pre-tax Return on Assets

57.62%

50.48%

45.66%

42.19%

$97,500

$117,975

$142,750

$172,727

Total Assets

Percent of Revenues
Revenues
Gross Margin
Management / Administration
Net Profit (after Interest &
Tax)
Main Ratios
Current
Quick
Total Debt to Total Assets

Business Vitality Profile


Revenue per Employee

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 12: Ratio Analysis. continued (In UShs 000s)
Additional Ratios
Net Profit Margin

20.82%

23.08%

25.19%

27.21%

Return on Equity

47.98%

39.15%

34.09%

30.82%

1.75

1.82

1.90

1.99

30

30

30

30

Inventory Turnover

4.05

4.07

4.09

4.11

Accounts Payable Turnover

1.20

1.20

1.20

1.20

30

30

30

30

Total Assets Turnover

1.94

1.53

1.27

1.09

Fixed Assets Turnover

1.90

2.43

3.13

4.10

Debt to Net Worth

0.09

0.05

0.02

0.01

Current Liability to Liability

0.83

1.23

2.12

4.91

Debt-Service Coverage Ratio

16.23

20.63

28.76

40.35

$213,545

$246,891

$286,127

$331,183

63.33

108.79

213.10

552.57

0.52

0.65

0.79

0.92

0.96%

0.48%

0.22%

0.08%

Acid Test

-0.40

6.28

12.98

19.61

Sales/Net Worth

2.09

1.62

1.32

1.12

Activity Ratios
Accounts Receivable Turnover
Collection Days

Payment Days

Debt Ratios

Liquidity Ratios
Net Working Capital
Interest Coverage [Times Interest Earned Ratio - TIE]
Additional Ratios
Assets to Revenue
Current Debt / Total Assets

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 13: Projected Payback Period (In UShs 000s)
YEAR/ITEM

Net Profit
Interest
Depreciation
"Profit"

Year

162,369

217,787

287,675

375,941

3,850

2,970

1,980

990

26,162

26,162

26,162

26,162

192,381

246,919

315,817

403,093

Amount paid

Balance of

Balance of

back from

Loan

Equity

"profits"

Investment

Investment

-35,000

-176,075

192,381

157,381

16,306

246,919

404,300

263,225

315,817

720,117

579,042

403,093

1,123,210

982,135

1,123,210

1,123,210

1,123,210

1,123,210

1,123,210

1,123,210

1,123,210

1,123,210

10

1,123,210

1,123,210

Pay Back Period (MF Loan) = 1.18 YEARS


Pay Back Period (Equity) = 1.91 YEARS

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


Schedule 14: Sensitivity Analysis (Composite Mixed Farm) (In UShs 000s)
Items

PAT

BEP

IRR

Payback

Base Case

375,941

21.70%

47.11%

1.18 Yrs

Increase in Operating Costs by 5%

361,717

23.09%

45.14%

1.19 Yrs

Selling Prices up by 25%

617,759

14.28%

75.91%

1.11 Yrs

Decrease in Raw Materials by 10%

405,926

20.39%

50.70%

1.17 Yrs

Increase in Raw Materials by 10%

345,956

23.20%

43.52%

1.20 Yrs

Key:
BEP:
IRR:
PAT:

Break-Even Point
Internal Rate of Return
Profit after Tax

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


APPENDIX A: BAKING PROCESS
Creating Baked Goods
The steps involved in developing a bread product involve the following:
1.
Determine type of flour to use
a.
Choose from selection from miller
b.
Milling the flour ourselves
i.
Choose varietals of wheat
ii.
Determine proper grinding fineness
iii.
Determine proper sifting fineness
2.
Determine which starter to use
a.
Establish feeding ratio
b.
Establish feeding time
c.
Establish starter hydration
d.
Adjust as necessary according to temperature
3.
Determine formula
a.
Choose ratio of starter, water, flour, and salt to use
b.
Establish overall fermentation and proofing times according to
given temperatures
c.
Develop mixing and dough development technique and timing
schedule
d.
Establish baking temperatures, times, and processes
4.
Analyze product and make adjustments
a.
Analyze crust for thickness, crispiness, flakiness
b.
Analyze crumb for denseness, hole structure, relative
proportion to crust
c.
Taste for flavor of each part, including acidity, sweetness,
mouth feel
d.
Judge overall look of bread based on colors, shape, ear marks,
and texture
To effectively sell our developed products, we will focus on the following projects:
1.
Develop packaging
a.
Work with designer to improve logo, seal, and bag look
b.
Work with Rickshaw Bags to create delivery bags
2.
Develop marketing materials
a.
Create shelf talker describing our bread and company
b.
Create fliers to notify people of home delivery of our products
c.
Improve website to entice customers to signup
3.
Develop distribution system
a.
Create database to store customer addresses, contact
information, and delivery windows
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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


b.
Create simple online process to order bread, and remind
customers as needed
c.
Create efficient algorithm for deliveries based on distance from
bakery, distance from other customers, and time of day
4.
Refine sales process
a.
Survey customers to determine most liked aspects of our
product and company
b.
Develop script for initial phone call or home visit to introduce
ourselves
c.
Create Price List with our different products and rate
Baking Process
The baking process has been developed over the past millennia, with several
improvements in the last few centuries. Our techniques are not new, but we have
made them fit our environment and businesses structure. The process is as follows:
1.
Feed the starter based on its determined feeding schedule and ratio of flour
and water
2.
Weigh the appropriate amount of starter based on its activity and the
production schedule
3.
Weigh the necessary salt, water, and flour to combine with starter
4.
Incorporate to reach a homogenous dough, using the appropriate technique
based on the hydration and quantity of dough
5.
Give the dough a series of rests and dough developing turns, spaced out
over its fermentation period
6.
Cut and scale dough pieces into their appropriate weight
7.
Pre-shape the loaves, using the appropriate technique, and then let the
loaves rest
8.
Shape the loaves, and place them onto a flour dusted couch, set on a
proofing board
9.
Place all proofing boards into a moisture protected rack, and allow the
dough to proof for however many hours necessary
10. Unload the loaves using a flip board, and place them on a flour dusted peel
11. Score the loaves using a blade using the appropriate technique
12. Insert the loaves into the oven, followed by enough steam
13. Bake the loaves until crumb is fully set, and crust is appropriately colored
and dried
14. Remove loaves and place them on cooling racks
15. Package the loaves for distribution
Although many parts of the process can be systematized, a skilled baker is necessary
to be able to oversee and complete many of the steps, and to gauge readiness at
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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


different stages. As systems are developed to control temperature, timing, and
dough handling techniques, many parts of the process will be able to be done by
apprentice bakers.

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ESTABLISHMENT & OPERATION OF A BAKERY BY CRANE BAKERY LTD


APPENDIX B: HAND TOOLS AND SMALL ITEMS OF EQUIPMENT USED IN
A BAKERY
Hand tools
Uses
Baking trays
Biscuit cutters
Bread tins
Buckets/bowls
Cake hoops
Cake tins
Cooling racks
Dipping forks
Dough dockers
Dusting boxes
Flour sieve
Funnels
Glaze brushes
Hard brushes
Knives
Measuring jugs
Nail brushes
Oven gloves
Oven peel
Pastry cutters
Piping tubes/bags
Pots and bowls
Rolling pins
Sandwich tins
Scales
Soft brushes
Spatulas
Storage bins
Table scrapers
Table brushes
Thermometer
Waste bins
Whisks

Steel trays of various sizes for bread and flour confectionery


For cutting shapes from rolled out dough sheets
Single tins of various sizes for different sized loaves, or straps of 36 tins joined together. Special shaped tins for specialty breads.
Plastic, aluminium or stainless steel, for mixing ingredients
A range of large tins for baking cake batter
A range of sizes for small cakes, pies or tarts, fluted or plain.
For temporary storage of baked products before packing. May have
wheels.
For decorating cakes
Spikes for puncturing the surface of dough or pastry
For shaking a thin layer of flour onto tables for dough kneading
Wire or nylon mesh to remove large particles from flour
To transfer liquids into narrow-necked containers
For brushing on milk or egg to give a glossy surface to products
To remove compacted dough from floors
A set of cutting knives and a set of palette knives
For measuring correct volumes of liquid or powder ingredients
To clean hands of operators
To protect hands when handling hot baked products
A long-handled, flat shovel used to removed baked products from
the oven
A fluted set and a plain set to cut shapes in pastry
For cake decoration, for depositing batter onto trays or filling
products with cream
For temporary storage of ingredients
For rolling out flat dough sheets
A range of larger tins for sponge cakes
0-1kg for minor ingredients, 0-50kg for weighing flour
For clearing up flour and spilled ingredients
For stirring or beating ingredients
For bulk ingredients, baskets/trays for distribution of bakery
products
Metal scrapers for scraping mixing bowls or work surfaces
For keeping the work area cle
For testing dough temperature or oven temperature.
For hygienic temporary storage of waste materials.
For beating batters.

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