Professional Documents
Culture Documents
Business Plan
Index
I Executive summary .....................................................................I-3
I.1 Mission ......................................................................................... I-3
I.2 Vision ........................................................................................... I-3
I.3 Objectives ..................................................................................... I-3
I.4 Resources and capacities ................................................................ I-3
I.4.A Resources: ................................................................................................. I-3
I.4.B Capacities .................................................................................................. I-4
I.5 Key to success ............................................................................... I-4
I.6 Project description ......................................................................... I-4
I.7 Technology.................................................................................... I-4
I.8 Project long term projection. ............................................................ I-8
II Market analysis .............................................................................
II.1 Market segmentation ..................................................................... II-8
II.2 Analysis of external facts ............................................................... II-9
II.3 Analysis of internal facts ............................................................. II-11
II.3.A Local market........................................................................................... II-11
II.3.B International market ............................................................................... II-12
III Market research ..................................................................... III-15
III.1 Market prospection ................................................................... III-15
III.2 Market test assess .................................................................... III-16
III.3 Conclusions ............................................................................. III-16
IV Business model ..................................................................... IV-17
IV.1 Value proposition ..................................................................... IV-17
IV.2 Competitive advantages ............................................................ IV-17
IV.3 Marketing Mix .......................................................................... IV-17
IV.3.A Product ................................................................................................IV-17
IV.3.B Promotion strategy...............................................................................IV-20
IV.3.C Pricing strategy ....................................................................................IV-20
IV.3.D Distribution strategy .............................................................................IV-22
IV.4 SWOT analysis ......................................................................... IV-23
V Operational plan ...................................................................... V-24
VI Financial plan ........................................................................ VI-26
VII Time line ............................................................................. VII-33
VIII Conclusion ........................................................................ VIII-34
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AVOMERU BUSINESS PLAN Last edition: 13/04/16
I Executive summary
I.1 Mission
I.2 Vision
I.3 Objectives
3. Export high quality oil with organic and fair trade product certifications.
I.4.A Resources:
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I.4.B Capacities
- Engaging and including the farmers in the center of the project, making
them an integral part of it and keeping them highly motivated.
Avocados are primarily grown for the fresh fruit market, either domestic or export.
There is also an industry of processed avocados such as avocado oil mainly to
different applications: food market and cosmetic industry.
There are 12 major cultivars of avocado, but the main cultivars grown globally are
‘Hass' and ‘Fuerte'. In Leguruki a more unique variety known as “Reed” grows.
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In the food industry cold-pressed avocado oil (Virgin or Extra virgin), which is
sold as culinary oil for use on salads and for cooking. Like extra virgin olive oil,
cold-pressed avocado oil is unrefined and so retains the flavour and colour
characteristics of the fruit flesh.
General Oil extracted from high- Oil extracted from sound Fruit quality not Avocado oil is
quality fruit (minimal level fruit with some rots and important. excellent for
of rots and physiological physiological disorders. Decolorized and blending and
disorders) Extraction to be carried out deodorized oil with complements extra
Extraction to be carried out using only mechanical low acidity, low virgin olive oil,
using only mechanical extraction methods colour, and bland flaxseed, and
extraction methods including presses, flavour. macadamia oils.
including presses, decanters, and screw Oil produced from The composition
decanters, and screw presses at low good quality virgin should match what
presses at low temperatures (<50ºC). avocado oil; may be it’s claimed on the
temperatures (<50ºC). Addition of water and just avocado oil or label.
Addition of water and processing aids but no infused with natural
processing aids but no chemical solvents can’t be herbs or fruit
chemical solvents can’t be used. flavours.
used.
Organoleptic characteristics
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Leguruki is a village on the northern region of Tanzania near the foot of the Mount
Kilimanjaro. Its economy is basically dependent on low value added agriculture.
A highly motivated team called AVOMERU started working closely with the
community to develop technology for processing these avocados into oil. Our
goal is to produce a high quality oil for food and cosmetics, dramatically raising
the sales price of this natural resource that currently goes to waste.
During the first stage AVOMERU team focused on developing simple prototypes
that are efficient, affordable and scalable. Currently we have already developed
and designed the appropriate technology and we are seeking for funds to scale
up all the equipment and start producing and selling large amounts of high quality
avocado oil.
AVOMERU can not only pay farmers more for their avocados, but also purchase
more of their supply that they could sale in the traditional markets.
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I.7 Technology
Delicate oils, and those with subtle flavor nuances, like Avocado oil, need to be
treated with great care in processing. Only mechanical means are used to extract
the oil, with strict temperature control maintained at all times.
The process for recovering oil from ripe avocados is a mechanical extraction,
similar to olive oil extraction, with the additional step of removing the skin and
stone (seed). After this, the flesh is ground to a paste and then malaxed for 40-
60 minutes at 45-50°C.
The slightly higher temperature aids the extraction of the oil from the oil-
containing cells and does not affect the quality of the oil.
The oil and water phases are separated from the pulp using a high-speed
decanting centrifuge, and then the oil is separated from the water in final polishing
centrifuges.
All the processing technology has been developed locally with the support
of our partners from MIT (Massachusetts Institute of Technology)
Efficiency, simplicity and functionality are the fundamentals at the time to
design the equipment.
The aim is build small scale industrial equipment capable to process larges
amounts efficiently and easily while ensuring good quality standards.
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Leguruki is to be the proof of the concept once the production is settled and
the oil finds its way on the market. AVOMERU’s next step will be replicating
the business model in other regions of Tanzania or Africa with similar
situations.
The objective is create synergies among the different processing centers by
optimizing resources and capacities while sharing the same distribution
chain and market linkages all under the same brand AVOMERU.
II Market analysis
II.1 Market segmentation
The Avocado Oil market is very wide goes from unrefined oil to premium and
extra virgin refined oil in the food market and including other highly processed
cosmetic products such as cream, soap and lotions. Refined oil fetches a
higher price in the market especially in the international market.
Market target:
In the big picture AVOMERU will target both the domestic as well as the export
markets because of the high potential in both markets for smallholder farmers.
Decisions on products to be targeted will be informed by careful market
research and gross margin analysis to ensure AVOMERU business model is
profitable and sustainable.
Customers and markets will partner with smallholder horticultural farmers from
through AVOMERU to facilitate production and marketing of high quality
products for both the domestic market and the international market. The target
market is the export market and the domestic market for high quality products.
In the medium term, AVOMERU will invest in product development to produce
finished products for the domestic, regional and international markets. Value
addition will include processing of avocado into premium-refined oil.
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Industry rivalry:
Large producers are characterized by organic cash crops, which are either
exported or processed after they leave the farm. This crops which are the most
likely to go to distributors and processors for further treatment, and resulting
products are often exported.
Small organic producers tend to not use distribution intermediaries. Instead they
focus on direct relationships with consumers through farmers' markets and on-
farm markets. They may supply some restaurants, specialty retailers, or small
grocers, but these relationships are painstakingly developed and rely on niche
marketing and personal relationships. These are the small farms most likely to
give up on organic certification due to the paperwork and expenses involved.
The edible oil industry is very wide with a fierce rivalry among low price edible oil
such as sunflower. The industry is ruled by large industrial companies benefiting
from economies of scale and competing among the rest of the players by price.
Our real industry of extra virgin high quality oils such as avocado oil is currently
insufficient to keep up with the supply due to the increasingly growth of
international demand of avocado including avocado oil. So we can clearly state
that our industry has a moderate rivalry and the major players are medium
industrial size most of them holding organic product and fair trade certifications.
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As in all agriculture business there is a trend of high bargaining power from the
buyers. Since most of the products are perishable and seasonal wholesalers or
traders have leverage to set the sale price.
However, once processed into oil, our product has a long shelf life. Additionally,
by controlling our fixed structural costs and carefully matching with the
appropriate distribution partners we could minimize that bargaining power.
Our major suppliers are the smallholder farmers who are not merely part of the
project, but the entire motivation for its existence. Purchasing of the supplies is
based on a fair trade for both sides. As AVOMERU grows and adds suppliers,
we will gain bargaining power and also create economies of scale.
Threat of substitutes:
The threat of substitutes is high for general edible oils and cosmetic since there
are plenty of alternatives (olive oil, macadamia nut oil, sunflower, or even
chemical base products)
However if we narrow the scope to organic or virgin high quality oils the risk of
substitutes is lower due to your positioning with a differentiate product.
AVOMERU will definitely mitigate the risk of substitutes by differentiation.
The risk of new entrants is low since it’s a business that requires establishing a
processing plant next to the source of avocados. The initial investment for a
small-medium industrial processing plant is not large but there are many legal
barriers such as local government permits and licenses, food and health
certifications and other certifications (organic product and fair trade).
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This analysis aims to study the market of Avocado oil, specifically the needs,
trends, growth, size, number of participants, distribution patterns, competition
patterns and finally deep analysis on the main competitors.
a Cosmetic industry
There is an existing local market for low quality product. Those products
are mostly cream made by local small entrepreneurs, sold without any
certification.
The other market is high quality products for high end markets. Arusha is
a very touristic city and it represent a great opportunity for us. Making
soap, hair oil or cream is a promising option.
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b Food industry
We size the domestic high quality edible oil market on 563,400 litters per year
according to our estimations based on TradeMap data.
Product analysis:
The range of edible oil in the market is really wide but the main ones you can find
at any main local supermarket are Sunflower oil, Corn oil, Vegetable oil, Olive Oil.
This table is a summary of relevant characteristics of the local edible oil products.
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The only sample of avocado oil was found at Village supermarket in Njiro.
a Cosmetic industry
[To be fulfilled]
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b Food industry
Due to lack of data and resources for analysing the international market we
carried out an online research among different well known avocado oil producers’
websites and other online gourmet shops.
In the following table you can see the results of the research:
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Key findings:
During several months the team focused on gathering data from different key potential
customers and partners such as:
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After completing the market prospection and developing a pilot product. Samples were
delivered to strategic potential customers or partners for testing and feedback collection.
Also a special local event was held in Arusha a great the opportunity for an official
presentation.
III.3 Conclusions
Customer had the opportunity to assess the smell and taste of it and the
results were quite promising (good impressions)
Great acceptance of the set sale price of 10USD for the pilot product (beer
bottle 300ml) seems a fair price for the costumer and we could even raise
it up to 15USD increasing our costumer willingness to pay expectations.
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IV Business model
IV.1 Value proposition
Provide and support local farmers from Leguruki with the technology to
process successfully their unique avocados into oil.
Create and design the appropriate business structure for taking the oil to
market.
a Product description:
Simplicity is best so the main concern of AVOMERU on the short term will be
offering premium tasteful avocado oil for high end costumers.
Our philosophy is manufacturing our oil as if it was for ourselves, taking
extreme care of each and every detail, promoting made in TANZANIA
products.
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Restauration 3L.
High quality refined and unrefined avocado oil will be also in our product portfolio.
The target of this product are other manufactures of by-products of avocado oil.
But also for wholesale traders from international markets were our direct sales
force is limited or inexistent.
Cosmetic 250ml
Still an embryonic plan to convert a waste into a valuable product. In that case
turning avocado seeds into fine powder used for infusions with healthy and
medicinal properties. This incorporation will be a great step toward a circle
economy model.
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While everyone is familiar with olive oil and its role in a healthy diet, not many
people are well-versed about avocado oil. Yet oil for oil, avocado has about
the same nutritional blueprint as olive, only tastier and healthier.
Externally, avocado oil is hailed as an excellent source for skin and haircare
and is already an ingredient in many products
c Packaging:
To market the first pilot product oriented to high end customers AVOMERU
has developed a really simple, polyvalent and low cost packaging but really
good looking.
On the following steps all other packaging solutions will be developed trying to
maintain the same premises.
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Find below some detailed actions AVOMERU will carry out for promotion purposes:
Attractive website
Promotional materials (samples, brochures and other merchandise)
Online advertising
Advertising on local food magazines
Attractive displays on the point of sale
Attending local fairs and exhibitions
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The following competitive positioning matrix shows in one axis the price positioning of
our company and the differentiation level. For measuring the differentiation of the
company we focused on the following indicators innovation, packaging, number and
range of different products or by-products that add value to the main product. In the long
term AVOMERU will aim to scale up on the differentiation axis without increasing their
prices by offering a more complete range of infused oil and packaging improvement such
as spray packaging’s or similar.
This chart shows the market price for the retail small packaging (approx. 250ml.) of the
main competitors of the industry.
Clearspring $ 20.51
Olivado $ 11.99
Grove $ 11.49
Choosen foods $ 10.95
Avomeru $ 10.00
Tourangelle $ 7.00
Chilean San Pietro $ 5.00
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As a starting point, AVOMERU will establish commercial linkages with all the
different channels through which the product will be sold.
1. Wholesales trader
2. Retailer
3. Supermarkets and Cosmetic enterprises
4. Hotels and restaurants
5. Others (special event, fairs, exhibitions, households…)
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Strengths Weakness
- Motivated and committed project leading - Complicated organization of all the people
team where the project manager is originally involved in the project.
from the Leguruki village.
- First production stage really disseminated
- Financial and technical support from our were having a direct control is complicated.
MIT partners.
- Lack of initiative and vision from the local
- Capacity to minimize fixed costs. community.
Opportunities Threats
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V Operational plan
Below there is a chart map of the whole production value chain. On the left side in yellow
we find those activities necessary for the process but not developed by AVOMERU on
the right side in green those activities where AVOMERU is direct responsible.
AVOMERU will also provide technical and financial support to smallholder farmer in form
of trainings and interest free loans to purchase necessary equipment.
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V.2.A Management
V.2.B Administration
Internal administration duties will be carried out by locals from the village
and a front office in Arusha town will be available for customer reception
V.2.C Logistics
The risk is a common element present in any business venture. AVOMERU aims to
minimize the risk of failure by strict control of fixed expenses and weighed growth
and expansion plan.
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VI Financial plan
ABSTRACT:
This document intends to outline the investments required and product cost break down
as well to break sale figures into components, by sales channel or target market
segment, and provide realistic estimates for sales and revenue. It's not exact data,
because we're still guessing the future but it’s an accurate projection.
Find below the estimated detailed investments in capital expenditures required to start
the project for the next 3 years, such as new equipment, installation, warehouse
building, etc.
INVESTMENT 2016
Concept qty Cost (usd) Total Cost (usd)
Mixing equipment 1.00 $800.00 $800.00
Hydraulic press with 2 barrels 1.00 $2,800.00 $2,800.00
Boiler tank + 3 socket pasteurizing tank 1.00 $1,000.00 $1,000.00
Pasteurizing stainless steel tank (50l.) 4.00 $100.00 $400.00
Filtering equipment 1.00 $400.00 $400.00
Pulleys mechanism for attaching engine 1.00 $175.00 $175.00
Other equipment 1.00 $1,000.00 $1,000.00
Warehouse and logistic infrastructure $500.00
TOTAL $7,075.00
INVESTMENT 2017
Concept qty Cost (usd) Total Cost (usd)
Mixing equipment V.2 1.00 $2,000.00 $2,000.00
Hydraulic press with 2 barrels V.2 1.00 $3,200.00 $3,200.00
Boiler tank + 4 socket pasteurizing tank 1.00 $1,600.00 $1,600.00
Pasteurizing stainless steel tank (50l.) 5.00 $100.00 $500.00
Filtering equipment V.2 1.00 $2,000.00 $2,000.00
Other equipment 1.00 $2,500.00 $2,500.00
Warehouse and logistic infrastructure $8,000.00
TOTAL $19,800.00
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INVESTMENT 2018
Concept qty Cost (usd) Total Cost (usd)
Pasteurizing equipment 1.00 $2,500.00 $2,500.00
Filtering equipment 1.00 $1,800.00 $1,800.00
Other equipment 1.00 $400.00 $400.00
Motorbike vehicle 1.00 $1,800.00
Car vehicle 1.00 $6,000.00
Warehouse and logistic infrastructure $12,000.00
TOTAL $24,500.00
Next chart incorporates to the capital expenditures detailed above plus all the operational
expenses and product supplies inventory required for the commencing of the activity for
each year.
We understand as operational expenses all the expenses related to the activity such as
wages, non-product related supplies, marketing, communication and sales expenses,
rent, etc.
For product supplies we estimated a provision of 20% of the total annual direct product
cost (raw and packaging material) as working capital or stock inventory.
As a result of this calculations find above the estimated working capital required for each
year:
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Wholesale litter of
$16.00 1,000 $16,000.00 3,000 $48,000.00 5,000 $80,000.00
refined Oil
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Profit Before Interest and Taxes -$9,265.05 -23% $31,606.50 22% $97,168.85 33%
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Avomeru
Balance Sheet
[December 31, 2016]
Assets
Current Assets:
Cash $2,000
Accounts Receivable $3,429
Less: Reserve for Bad Debts 0 $3,429
Supply Inventory $4,634
Total Current Assets $10,063
Fixed Assets:
Equipment 6,575
Less: Accumulated Depreciation 658 $5,918
Buildings 500
Less: Accumulated Depreciation 50 $450
Current Liabilities:
Accounts Payable $2,667
Sales Taxes Payable $1,955
Payroll Taxes Payable $1,200
Short-Term Bank Loan Payable 0
Total Current Liabilities $5,821
Long-Term Liabilities:
Long-Term Loan Payable $4,000
Total Long-Term Liabilities $4,000
Capital:
Equity 15,874
Net Profit -9,265
Total Capital 6,609
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The following chart calculates the UCM (Unit Contribution Margin) which is the revenues
per unit less unit variable costs.
The first chart shows the UCM for each product as well as a weighted average for each
year. With that information we can foresee how many products we need to sell in order
to cover the fixed costs know as break-even point.
On this second chart below you can see the UCM obtained per litre of oil during the 3
years projection.
The break-even analysis in that case shows the amount of litters needed to cover the
fixed expenses for each year. The results show a completely feasible scenario since
the fixed cost are not significant according to the small structure intended.
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Find below the analyse of a couple of indicators which measure how profitability is
AVOMERU relative to its total Assets, shareholder Equity or Investment required.
As you can see the Return on Asset is considerably high since the investment and total
assets needed are not significant. During the first year the result is negative due to initial
loses. But from 2017 on the rate experiences a progressive increment up to 64% due to
low capital expenditure investment and high revenues.
The Return on Investment experiences lower figures than Return on Assets ratio which
indicates that operational expenditures are higher than capital expenditures or assets.
Still a really positive figure since the profitability still higher than what average
shareholder expects to obtain (around 20%)
With the Return on Equity we find out how much net profit AVOMERU creates with the
shareholders’ investment (equity). To calculate this ratio we include as well the cost of
equity as a 20% of the invested capital equity.
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Sept 2016 Apply for business license and other legal registrations
Nov 2016 Start standardized trainings for each and every AVOMERU
processor
Jan 2017 Clear all the business license and other legal registrations
July 2017 Get the distinguishing certifications such as fair trade and
organic product.
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VIII Conclusion
AVOMERU team is convinced that by implementing properly this plan will meet our
financial goals in within 3 years. Following projections AVOMERU will achieve a
production equivalent to 2% of the total domestic avocado production (25.000mt).
The results show a completely feasible scenario since the fixed cost are not significant
compared with the expected revenues as we demonstrated with the return on asset ratio.
The investment required and expected net profits for the next years:
Take this exciting opportunity to get in on the ground floor of an ambitious company
with unlimited growth potential. “BE PART OF AVOMERU’S REVOLUTION”
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