FISH SMOKING, PROCESSING AND MARKETING

PROJECT

JOSFIN’S SMOKED PRODUCTS LTD.

The development of fisheries infrastructure and use of modern technology has made it
possible to now consider secondary processing as a viable business opportunity. Given
the significant increases in fish landings and increase in storage capacity, the new smoke
fish processing entity, “Josfin‟s Smoked Products Ltd.” seek to produce and market
premium quality products locally.

PRODUCT
The product is safe and reliable premium quality smoked sea-foods
Indigenous fish species such as kingfish, dolphin fillet, trigger fish and marlin etc.

THE MARKET
The business focuses primarily on the tourism market in the first instance. Hotels,
restaurants, supermarkets and other retailers
Secondly on the export market.
By Products and value added products will later be made available for the local market

FINANCING
A loan of US$50,000 to purchase equipment, supplies, transport and cover initial
operating costs will be required initially.
Year 2, a follow-up loan of US$150,000 will be required for redemption of initial loan,
purchase of added equipment, purchase of land and construction of plant.
The revenue generated over the first five years shall be for consolidation used and
expansion.
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PROCESSING
The plant will produce hot smoked fish using ovens with the capacity that will allow the
processing of (on a 250 days per year basis) an average of 198 lbs of fresh fish per day in
the first year and 409 lbs per day by year two, on a one or two batchs per day basis. With
the incorporation of another smoker in the third year, we expect to be processing 485 lbs,
559 lbs and 559 lbs of fresh fish per day for years three, four and five respectively. This
will result in a corresponding production of 114 lbs, 245 lbs, 291 lbs, 335 lbs and 335 lbs
of smoked fish for respective years.

MARKETING STRATEGY
The marketing strategy allows for positioning which will sell differentiated, smoked fish
of the best quality at competitive prices. Entry into the market would be achieved
through direct selling, in the case of the hotels and restaurants, in other to allow greater
control over the marketing function and earn higher profits. Indirect selling through
supermarkets and rural outlets is to be pursued cautiously to allow for close monitoring of
the growth of local market share.

The conservative financial projections presented, demonstrates the possibility of

generating reasonable income, while meeting all obligations. We expect to generate
revenues as follows:

YEAR REVENUE US$

1 220902
2 444661
3 516986
4 585446
5 585446

Cash flow projections clearly shows the company‟s expected ability to cover all its
obligations during those years.
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Finally, of critical importance for sustainable development, will be our ability to scan the
external and adapt our internal environment to take advantage of the unlimited
opportunities to be expected in a consistent manner. This project is in fact designed to
allow for such flexibility.

CONCLUSION

As a new venture, this project seeks to rapidly develop a brand, focused primarily at the
tourist market. This project demonstrates its capacity to generate meaningful income
during the first five years for at least 15 people. It is to be attained through effective and
efficient production of smoked fish using indigenous species mainly, and an aggressive
promotion with the essential focus at quality, customer (internal and external) satisfaction
and the establishment of alliances.
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THE PROJECT

St. Lucia today has been able to develop its fisheries infrastructure through the
construction of fishery complexes located in the north and south of the island, with
smaller facilities located at the east and west of the country. Together these facilities
have a storage capacity of more than 616 tons and with the completion of new small
facilities in Choiseul and Soufriere this is expected to increase further. The introduction
of larger fishing vessels and use of modern technology by fishermen has resulted in
significant increases in catch over the past years. It is important to note that there has
been a continuous increase in the contribution of the fishing sector to the GDP; the
industry is now able to supply fish year round to consumers and is presently
contemplating export. However, as is the case with most of our agriculture, we remain
primary producers and processors of fish, at a time when we should maximize the
marketability of local products, through product differentiation and secondary processing.

Trade liberalization and globalization, presents its challenges and opportunities for
developing countries like St Lucia. While fish and fish products has not been included on
the WTO‟s list on the Agreement on Agriculture, we intend to first take advantage of
niche markets existent locally, and subsequently extend regionally and eventually to
developed markets. Indirect access to such targeted market segments through tourism, is
the initial focus for our business, but we intend to develop the potentially large local
consumer base.

BACKGROUND

From 1998 to 2002 St. Lucia imported an annual average of 846,562 lbs of smoked/
salted fish at a landed cost of EC$ 4,270,516.00 (see appendix 1). A significant amount
of this is consumed fundamentally by the hospitality Industry. Based on sample testing
carried out during exhibitions and food fairs over a five-year period, it is well known that
besides the tourist market, a local demand for a new and differentiated could be
established.
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This project presents a production and market entry plan of a new business venture, based
in St Lucia. We will provide a premier quality smoked fish and differentiated line of fish
products initially and other smoked meats eventually. During the period 1991 to 1995 a
number of smoked fish sample prepared by me, were presented to the general public for
tasting. Feedback from all persons that I contacted had been remarkably positive. In 2002
another tasting exercise was carried out at the Derick Walcott Square during a national
food festival. The demand by persons, including a hotel chief was again exceptional. I
recently conducted a preliminary survey, aimed at determination of the interest of chiefs
from some hotels and restaurants in locally produced smoked fish. Again there continue
to be an expression of great interest. In all instances, I was told that sample testing would
be necessary for further discussions as it relates to request for supplies and pricing
arrangements; the first phase of this exercise has been completed with excellent results.

THE COMPANY AND BUSINESS DESCRIPTION

OWNERSHIP
The entity is being incorporated using the name “JOSFIN‟S QUALITY SMOKED
PRODUCTS LTD.” Ownership is shared primarily among core family members and
necessary equity partners.

VISION
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The company intends to become the major reliable supplier of the best quality smoked
sea-foods, to be sold directly to hotels, restaurants, supermarkets and other retailers
throughout the country.

MISSION

To develop an entity focused at the processing and direct marketing of fresh, safe, quality
smoked seafood. This will be achieved through the establishment of a modern processing
and marketing facility in St Lucia.

STRATEGIC FRAMEWORK OF OPERATIONS

The business is being developed using a three-phase approach, the first of which is
nearing completion. The preparatory, market penetration and expansion phases,
represents the process of initiation to complete establishment of our business:-

BUSINESS CREATION:

The Preparatory Phase

Technical preparation of principal owner/manager:
This has been achieved, through her extensive training in Fish Technology,
HACCP, Business Management and Marketing; an understanding of the market
situation, the accumulation of relevant experiences in processing, quality
assurance and marketing, along with training and management of persons
involved in inventory, processing and sales in the British Virgin Islands and ST.
Lucia.
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Other preliminary activities are at various stages of completion:

Construction of Startup & Product Development Facility and importation of
necessary equipment and supplies near completion.
Market exploration through market surveys, product development and sample
testing. Sample testing has been completed with the determination of initial
quantities, quality expectation, product characteristics and price range for
commercial production established.
Identification of location, equipment and supplies has also been completed
pending final selection and procurement.
A potential site for the next phase has been identified at Odsan; initial preparation
for acquisition of land and construction of processing facility is being considered.
Completion of Business Plan.

The Market Penetration Phase

This current phase involves the process of setting up the business:
Negotiation for funding is in progress.
Registration of the Company has also been completed.
Government support: We have received approval of concessions from Cabinet for
100% waiver of Consumption Tax and Import Duty on equipment, machinery and
accessories, along with 50% waiver of Excise Tax and Import Duty on a vehicle
for transportation of fish and fish products.
The process of identification and recruitment of workers has began.
Initiation of commercial processing and marketing of smoked fish, through a loan
and equity financing arrangement of a small business.

The Expansion Phase

The consolidation of our business will be achieved by increasing market share through
product differentiation and product quality improvement and promotion. In response to
direct customer demand, we intend to increase production capacity and efficiency to
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guarantee consistent supplies of the required products, volume, quality and price
competitiveness.

BUSINESS FUNCTION:

We shall acquire our raw material primarily from fishermen, through contractual
arrangements, in other to provide the best quality final product to our customers. The Fish
Marketing Corporation will become a secondary local source of raw material. Contacts
for importation are being established for the purchase of species unavailable in the
required quantities and desirable quality from suppliers in St. Vincent and the Grenadines
and Guyana, particularly during the off season and generally as market demand dictates.

The processing, packaging, storage and marketing of our products, will be carried out
adhering to the highest quality standards possible. Initially the Entity shall promote the
sale of smoked fillet and sausages of indigenous species such as Kingfish, Dolphin,
Trigger fish and Tuna. Our products will therefore be marketed as premium quality,
fresh-smoked seafood products. Tilapia and shrimp production will be considered in the
medium term to facilitate optimal utilization of process waste and raw material cost
reduction.

Based on market research, we will be required to provide weekly supplies to major hotels
and restaurants. Once established, we will quickly and aggressively explore the
possibility of supplying to Cruise Ships visiting our shores. Our local market substitution
focus, directed towards the provision of alternative superior quality smoke fish products
to local consumers, mainly through supermarkets and similar outlets is also expected to
be a major revenue generator in the medium and long term. It is projected that we will be
marketing approximately 3%, 7%, 8%, 10% and 10% of imported volumes of smoked,
smoked/salted fish during year one, two, three, four and five respectively.

MARKETING STRATEGY
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Target Market
The demand for a premier quality smoked fish has strongly been expressed by a number
of hotels and restaurant chefs. There is limited consumption of imported cold-smoked
salmon, smoked herring and more recently, smoked tuna. The high cost of imported
smoked salmon (between EC$35.00 and EC$55.00 per pound) and the excessively high
salt/smoked content of herrings, significantly limits the frequency of preparation and
serving of these products. Our product has consequently been developed to provide a
superior quality, better tasting, price-competitive alternative to the Hospitality Industry
(our primary focus) and domestic consumers with disposable income generally. We
expect to sell 28,570 lbs, 61,300 lbs, 72,800 lbs, 83,800 lbs and 83,800 lbs of smoked fish
during year one, two, three, four and five, respectively.

The numerous product sample-tasting exercises clearly demonstrated the tremendous

local market potential. We will therefore gradually target local consumers primarily
through supermarkets, restaurants, rural outlets, food fairs and cultural events, using
sample testing, sales of smoked fish dishes and promotion of recipes and consumer
testimonials at special events and at schools. In the case of our local consumers, we have
decided on very conservative projections; we intend to do sample testing in year one and
market 8,800 lbs in year two, 13,800 lbs in year three, 18,800 lbs in year four and 18,800
lbs in year five of operations.

Market Positioning

Our positioning strategy will be to sell differentiated smoked fish products, of the best
quality, at competitive prices. Health conscious fish consumers are expected to perceive
our products as very safe, with a special flavor and different taste.

Marketing Mix
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The elements of product, price, place and promotion are coordinated to facilitate
effective market penetration and customer satisfaction:

Products and related services are to be provided based on differentiation and delivery of
a consistently higher quality. It is intended that fish will be processed in direct response
to demands by the hotels and restaurants. The unique smell, taste/flavor and texture
represent its distinctive characteristic. However, as has been demonstrated in the sample
testing exercise with the hotels, we will provide a product that meets the desired
characteristics of each Chef in terms of smoke flavor, moisture and salt content, fish
species and product type; we seek to meet and exceed customer service and quality
expectations.

Our pricing strategy will allow for effective market penetration, initially using a price
structure below that of comparable products. We envisage our penetration selling price to
be EC$21.00/lb on average for the „A‟ classed premium products and EC$12.00 on
average for the „B‟ classed premium products. Such classification is not to be based on
degree of safety and/or quality of product, but fundamentally on type and value of fish
used.

Based on preliminary arrangements, we will begin marketing to the hotels and high end
restaurants; supermarkets and other outlet will be targeted subsequently. These are
considered initial places with the highest demand for smoked fish. Promotion is
expected to be a critical component of our marketing strategy. We shall pursue joint
advertising with our retailers, particularly the restaurants, hotels and supermarkets where
possible. This will include radio and television advertising, brochure/ recipe distribution,
and sampling. Our characteristic method will be recipe formulation and consumer sample
testimonials.

Mode of Entry
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The initial establishment of linkages with hotel and restaurant chefs, to inform the
development of product characteristics have began and is to be consolidated as a part of
the business operations. Our product development program is to be directly impacted
upon by such linkages and other market research findings.

Entry into the market would be achieved through direct selling, in the case of the hotels
and restaurants, in other to allow greater control over the marketing function and earn
higher profits. Indirect selling through supermarkets and rural outlets is to be pursued
cautiously to allow for close monitoring of the growth of local market share.

Distribution

We shall process, package and send weekly supplies directly to our major customers as
per request. We shall provide limited sales service at the Processing Plant.

COMPETITOR ANALYSIS

Presently our competitors are the importers of smoked fish products, who sell smoked
fish at a price much higher than our penetrating price, as is the case with cold smoked
salmon. A few hotels do importation of limited quantities, some purchase from importers
such as the Fisheries Marketing Company and Admac; the latter sells smoked fish
ranging from EC$20.00 (Tuna) to EC$55.00 (Marlin) per pound. A cheaper, poorer
quality substitute, as in the case of highly smoked/salted herrings is also being imported.
While it is considered a substitute product, it is clearly differentiated from hot smoked
fish that presents characteristics such as: reduced salt content, less dehydration and
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smoke flavor, more succulent with higher biological value (more nutritive). Attempts at
introducing local hot smoked fish has been made with little apparent success by the
Fisheries Complex. The inferior quality, taste and presentation of such products, reflects
inadequate knowledge base and skill of those who tried, and also the use of inappropriate
technology. The unique taste, consistency, superior quality/ safety and price
competitiveness, that will characterize our differentiated products, provide us with a
distinct market penetration opportunity; our capacity to adjust or customize quality
characteristics provides a distinct advantage.

Information generated from our market research, confirms that the Hospitality Industry is
very interested in such a product. All of the seven hotels targeted (30% sample size)
classified our product as good to excellent and expressed interest in purchasing regularly.
We intend to lock-in the hotels and restaurants by using competitive pricing, product
safety and providing consistent supply of volumes and product quality / characteristics
demanded. The challenges associated with local market penetration will gradually be
addressed as mentioned previously. We intent to further differentiate by developing
smoked fish sausages for example, during the first year of operations.

MANAGEMENT AND OPERATIONS

As previously indicated, the Manager and principal owner has acquired extensive training
in Fish Technology, HACCP, Business Management and Marketing. Her accumulated
relevant experiences in processing, quality assurance and marketing, places her in an
ideal position as manager of this project. The business will also benefit directly from the
knowledge and experience of the key shareholder, who is highly qualified, having being
trained in Veterinary Medicine (DVM) and Business Management (EMBA). Staff will all
receive in-house training in relevant aspects of processing, good manufacturing
practices/quality control, financial management, customer relations and marketing.
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Initially the Entity will comprise of the following structure, which is expected to change
as we increase market share and adopt to market demands:

BOARD OF DIRECTORS

MANAGER
Mm

Processing Plant Security Accountant

Supervisor Guard (Outsourced)

Plant Processors (3) 2 Other processors Account / Clerical

Assistant
Driver (1) (Part time/full time)

The Manager oversees the function of the entire organization, and focuses most of her
attention on strategies for expansion, market penetration, product development and
quality control, internal and external customer satisfaction and finance. The marketing
and procurement functions, is also expected to be the responsibility of the Manager. She
is to be assisted by the plant supervisor as it becomes necessary.

The Plant Supervisor is responsible for processing, packaging and storage. The
Processors and the Driver will assist is that regard. The two part time processors shall be
initially employed, when the demand for products at any given time goes beyond the
capacity of regular staff; they will be incorporated as full time employees to the extent
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that market demand dictates. The plant supervisor and processors are to be directly
involved in the cleaning, filleting, brining, smoking and packaging processes.

While the services of a professional Accountant is to be outsourced, we will maintain an

in-housed Account/Clerical Assistant, to be responsible fundamentally for receipt of
orders from customers and documentation of all transactions. The orders received are
communicated to the Plant Supervisor for preparation. A Security Guard is to be
outsourced for guarding the business during the night.

The decision to produce hot smoked fish as against cold smoked, allows us to optimise
the use of our equipment. The commercial smoker identified has an average capacity of
300 lbs. On a 250 days per year basis, we will be processing an average of 198 lbs of
fresh fish per day in the first year and 409 lbs in year two, on a one or two batch per day
basis. With the incorporation of another smoker in the third year, we expect to be
processing 485 lbs, 559 lbs and 559 lbs of fresh fish per day for years three, four and five
respectively. Given a 40% weight reduction resulting from processing, this translates to
114 lbs, 245 lbs, 291 lbs, 335 lbs and 335 lbs per day, of hot smoked fish produced per
day for the first five years respectively. Our quality control function will involve the
Hazard Analysis Critical Control Point (HACCP) methodology, a focus at total quality
management (TQM) and eventual international certification (1S0 9000) in the long-term.
This would involve an aggressive focus at customer satisfaction, process quality control,
and continuous improvement of workers. The relationship with the Fisheries Complex,
the fishermen (major), and external sources is to be consolidated as raw material
suppliers. One must note that the business intends to store optimal quantities of raw
material. This cost cutting measure depends on intimate linkages with suppliers and
customers who we must depend on for a sustainable market and expansion. Careful
management of raw material storage will be necessary given the coincidence of seasonal
character of both the fresh fish availability and tourism. However, the continuous local
demand we intend to create, along with the extended occupancy of the All-Inclusive
Hotels dictates the need for reliable storage; as such we have decided to acquire a walk-in
freezer with a capacity of 4,500 lbs initially and a small standby generator to avoid any
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spoilage during outages. Freezer space will be rented as it becomes necessary,

particularly prior to acquisition of our Walk-in Freezer, during the first year of
operations.

FINANCIAL PLAN

The outsourcing of a professional accountant is of absolute importance to supervise

recording of transactions and reporting of financial performance. In the initial years,
management shall carryout this responsibility, but guided by a professional. During the
implementation of the business plan, adjustments to our projections will be made in
accordance with business reality.

ASSUMPTIONS TO FINANCIAL PLAN:

Financial projections are made for a period of five years: 2005 – 2010; a conservative
approach has generally been applied.
A loan of EC$ 103,423 will be negotiated for the procurement of equipment,
materials, transport and to cover operating cost for the initial period. An additional
loan of EC$408,548 will be taken to redeem the initial one, acquire lands and
construct the Plant.
All current liabilities will be paid by the end of each financial year.
Depreciation is calculated on a straight-line basis over a 20-year period. In the case
of the equipment and vehicle, it will be calculated over a 10 year and 5 year period
respectively.
30 % average tax deduction is assumed; however one is optimistic that the outcome
of the request for a 10-year tax holiday to be made to Cabinet would be positive.
Profits generated during the first five years will be used fundamentally for
consolidation and expansion of the business; dividends will be paid subsequently.
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NOTES TO FINANCIAL PLAN:

Annual Salaries/ Wages and Benefits (EC$

2004 2005 2006 2007 2008
Manager 24,000 36,000 36,000 36,000 36,000

Accountant 18,000 18,000 18,000

Plant Supervisor 20,400 20,400 20,400 20,400
Clerical Assistant 18,000 18,000 18,000
Driver 14,400 14,400 14,400 14,400
Processors (2-5) for years 30,000 36,000 48,000 60,000 60,000
Security Guard 12,000 12,000 12,000 12,000
Sub totals 54,000 118,800 166,800 178,800 178,800
Allowances and benefits 5,400 11,880 16,680 17,880 17,880
Totals 59,400 130,680 183,480 196,680 196,680

Inventory of Raw Materials ($)

EC$ 2004 2005 2006 2007 2008
Purchased 360,507 715,167 849,331 977,669 977,669
Carried Over 00 14,000 14,000 14,000 14,000
Available 360,507 729,169 863,331 991,669 991,669
Used 346,507 715,167 849,331 977,669 977,669
Unused 14,000 14,000 14,000 14,000 14,000

Sources of funds:
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- Loan of $113,423 for the purchase of transport, Equipment, other supplies and
start-up capital in year one.
- Loan of $408,548 for the purchase of land, construction of Plant, equipment and
redemption of initial loan.
- Owner‟s Equity: $87,000
- Bank‟s Equity: $58,00
- Revenue generated from sales of smoked fish

FINANCIAL ANALYSIS:

The financial viability of this business venture is being demonstrated when one considers
the financial projections as reflected in appendices 1, 2 and 3. Sales revenue for the first,
second, third, forth and fifth year, are projected to be EC $599,970, EC$ 1,208,100,
EC$1,1404,600, EC$1,590,600 and EC $1,590,600 respectively. Net profit contemplated
as a result is expected to be EC $44,556, EC $119,422, EC $133,486, EC $160,212 and
EC $146,548 respectively. It must be noted that the penetrating average price of
EC$12.00 per pound for local sales has been maintained throughout the projected years.
However, an increase in price is anticipated by year two or three, but has not been
reflected as such in the projections. Cash flow as reflected in appendix 2 would be
EC$159,733, EC $273,067, EC $371,315, EC $519,376 and EC $613,584 for years one,
two, three, four and five respectively. This will readily facilitate payment of all
obligations and other operating expenses throughout the years.

Loan Proposal and Repayment Schedule:

As can be appreciated, we intend to meet all our debt obligations by year eleven of the
project (Interest Rate 11%).
Initial Loan: Principal (year one) $ 103,423.00
Projected accumulated payment (year one) $ 21, 948.00
Projected initial loan payment (year two) $166,640.00
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Repayment start time 6 months (grace) after project begins

Repayment completion time 18 months from startup

Follow-up Loan amount: Principal (year two) $408,548.00

Projected accumulated interest $255,512.00
Total $664,060.00
Annual loan payment $ 73,788.00
Repayment start time Year two
Repayment completion time Year eleven of project

STRATEGIC ACTION PLAN

Implementation Schedule:

During the latter months of 2004 and 2005, it is expected that:

The company will be incorporated with its board of directors and management
functional; refresher training by Manager in Small Business management to be
completed.
Startup processing facility for product development and initial function will be
completed and operational.
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A loan of EC $103,423 will be acquired for purchase of a vehicle, supplies,

equipment and initiation of operations.
Market research and product development will continue and arrangements for
supplying customers with products requested finalized.
We shall employ two to three processors to be trained and employed during 2005.
Contractual arrangement with fishermen for supplies will be completed.
Process control and sample analysis will be carried out to ascertain the product
quality desired, with sample testing as a key promotion strategy continuing.

The year 2005/06 represent the first year of operation and will be characterized by:

Aggressive market penetration and promotion of product.

Acquisition of transport, equipment and necessary supplies
Proactive function of management and acute alertness to address any challenges that
may arise.
Consolidation of quality and food safety procedures such as Good Manufacturing
Practices and HACCP.
Standardization of our processes, distribution systems, and revenue collection
mechanism. The Hotels are known to apply a delayed payment (60 - 90 days)
approach. We intend to market to all hotels and upstream restaurants within the
quickest possible time, thereby spreading our revenue sources and varying our supply
frequency in a manner that will buffer the effect of individual delays. We shall seek to
formalize contractual agreements where possible, to help with systematic revenue
collections.
The needed adjustments to the product development /startup facility will be carried
out to accommodate the required demand response.

By the year 2006/07, we will be focused at:

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Construction of the plant and installation of equipment is expected to be completed as

soon as possible to consolidate commercial operations. While a few Hotels have
placed immediate request, the quality standards necessary dictates that we initiate
marketing as soon as possible, but cautiously.
Consolidation of our production and marketing activities.
Procurement of a second smoke oven.
Employment and training of two other processors.
Continuation of our aggressive promotion and market expansion.

The year 2007 to 2010 will mark the stabilization of the entity:

The critical evaluation of the business and implementation of necessary adjustments.

Consolidation of alliances with the suppliers and customers.

Continued aggressive promotion, product differentiation and market expansion.

Initiate discussions on dividend payment, employee motivation, continued

improvement and business expansion.

CRITICAL SUCCESS FACTORS

Sustained development of the business must of necessity be based on its ability to

maintain price competitiveness, product differentiation, product quality and safety. This
will be achieved by constantly monitoring the external environment for market
opportunities, competitor strategies, and technological advancement; and the internal
environment with the objective of continuous improvement. Information generated will
consequently translate to internal transformation that will guarantee constant
improvement in all aspects of the business, as it maintains a steadfast focus on customer
satisfaction.
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CONCLUSION

As a new venture, this project seeks to rapidly develop a brand, focused primarily at the
tourist market. This project demonstrates its capacity to generate meaningful income
during the first five years. It is to be attained through effective and efficient production
of smoked fish using indigenous species mainly, and an aggressive promotion with the
essential focus at quality, customer (internal and external) satisfaction and the
establishment of alliances.