Chad Bohachewski
Neil MacDougall
Leah Welter
Blake Weatherald
College of Agriculture and Bioresouces
AgEc 495
Operations plan
College of Agriculture and Bioresouces
AgEc 495
Organizational Structure

Corporation
5 Board of Directors
President/Plant manager
Vice President/Secretary treasurer
Sales Manager
Plant Labourers

Run processing equipment





College of Agriculture and Bioresouces
AgEc 495
Organizational Chart
Board of Directors-5
3 external, 2 internal
President/Plant Manager
Vice-President/Secretary
Sales Manager
Plant Workers (6)
College of Agriculture and Bioresouces
AgEc 495
Product

Cooked lentils + spices + tomato
paste
=Lentil based pasta sauce
College of Agriculture and Bioresouces
AgEc 495
Sauce Production
College of Agriculture and Bioresouces
AgEc 495
Business Cycle




Business hours- 9:00am to 5:00pm
eight hour work day
First year projection 70,000 units/year
Full capacity plant produces 130,000
units/year
College of Agriculture and Bioresouces
AgEc 495
Site Plan



Building located on highway #37 in
Shaunavon, Saskatchewan
Two entrances into the lot
Loading dock area at back of building
for shipping/receiving
College of Agriculture and Bioresouces
AgEc 495
College of Agriculture and Bioresouces
AgEc 495
Building and Floor Plans

3500 ft2 insulated building

2500ft2 for production line and storage

1000ft2 for two offices, two
change/bathrooms for employees and
customers
College of Agriculture and Bioresouces
AgEc 495
College of Agriculture and Bioresouces
AgEc 495
Capital Budget
2007
Land
$
1.00
Building
305,000
Processing equipment
22,375
Office equipment
2,000
Total Capital Costs
$
329,376
Total Working Capital
$
23,702
Total Capital Required
$
305,674
Working Capital
College of Agriculture and Bioresouces
AgEc 495
Cash Conversion Cycle
Cash Conversion Cycle for 2007
Average days inventory
Average collection period
Average days payable
Total Cash Conversion Cycle
College of Agriculture and Bioresouces
AgEc 495
46
45
30
121
Human Resources
College of Agriculture and Bioresouces
AgEc 495
Direct Labour Employees
Plant Manager-$50,000 + 6,400 in benefits
= $56,400



(6) Plant Labourers-based on a wage bases
of $12.50/hour
Total annual wages and benefits
172,237 + 32,036 benefits = $204,273
*Salaries/wage exclude benefits
College of Agriculture and Bioresouces
AgEc 495
Administration and
Marketing Employees


Secretary-$35,000 +3,166benefits
=$38,166
Sales Manager-$50,000 +
4,522benefits = $54,522
College of Agriculture and Bioresouces
AgEc 495
Marketing
College of Agriculture and Bioresouces
AgEc 495
Introduction




Sobeys
Federated Co-op Limited
Calgary Alberta
Health conscious / vegetarian
College of Agriculture and Bioresouces
AgEc 495
MARKET SIZE




4% of Canadian population is
vegetarian/roughly 1.2 milliion
in Canada
25% are vegetarian inclined
$172 million spent on pasta
sauce annually
4.7% of total grocery shelf
space devoted to pasta sauceco-op
Stats Canada: www.statscanada.ca, 2006
College of Agriculture and Bioresouces
AgEc 495
TARGET MARKET





Vegetarian
Active / healthy
Young
Female
Urban & Trendy
College of Agriculture and Bioresouces
AgEc 495
MARKET POTENTIAL



Consumers becoming
more health conscious
Few ready made
pasta sauces
containing lentils
Daily legume
recommendation
College of Agriculture and Bioresouces
AgEc 495
SWOT
Strengths



New product of pasta market
Few direct competitors in pulse based sauces
Health benefits of the lentil as a supplement
Weaknesses



Relatively new firm
No brand loyalty
Large initial capital investments
College of Agriculture and Bioresouces
AgEc 495
SWOT
Opportunities



Increase in vegetarian popularity
Increasing health awareness
Protein based pasta sauce
Threats



Established competition
Market dominated by few large firms
Pulse consumption low
College of Agriculture and Bioresouces
AgEc 495
OBJECTIVES & GOALS

Supply Sobeys and FCL Calgary in Year 1

To receive an “endcap” or eye catching shelf position


Target the major urban areas Calgary in Year 2 and 3
and eventually Saskatchewan
Establish a firm stand in the growing health food
industry
College of Agriculture and Bioresouces
AgEc 495
PRICE



25% Markup Over
Main Stream Sauce.
$5.88 – Retail (30 %
mark-up)
$4.12 – Wholesale
College of Agriculture and Bioresouces
AgEc 495
COMPETITOR PRICING
Package Size
(ml)
Price ($)
Catelli Garden Select
700
2.27
Prego Traditional
675
2.98
Ragu
700
2.48
Rozoni Portabello Mushroom
700
3.48
Healhy Choice Traditional
700
2.98
Classico di Basilicata
700
2.98
Compliments Traditional
700
2.77
Compliments Organic
700
5.48
Primo
680
2.48
Hunt’s Thick and Rich
680
1.98
Catelli Spaghetti Sauce with meat
398
1.48
Product Name
College of Agriculture and Bioresouces
AgEc 495
PROMOTION



Free Press- Calgary
Vegetarian Resource
Magazine Ads
Ex: Flare, Country Women
In-Store
– Taste Tests
– Co-op Store
Flyers/Coupons.
College of Agriculture and Bioresouces
AgEc 495
DISTRIBUTION
College of Agriculture and Bioresouces
AgEc 495
Financial Plan
College of Agriculture and Bioresouces
AgEc 495
Finance Budget
Long Term Debt
Owners Equity
Total
$115,000
385,000
$500,000
*This will only cover construction and first year operations
College of Agriculture and Bioresouces
AgEc 495
Balance Sheet
Assets
Current Assets
Cash
Accounts receivable
Total inventories
Total current Assets
$(101,026)
35,556
21,621
$(43,849)
Long Term Assets
Buildings, Machinery & Equip. $387,875
Accumulated C.C.A.
(22,358)
Land
1
Total Long Term Assets
$365,519
Total Assets
$321,669
Liabilities
Current Liabilities
Accounts Payable
$33,476
Long Term Liabilities
Long term debt
Total Liablities
110,765
$144,240
Owner’s Equity
Owner Equity
Retained Earnings
Total Owner Equity
$385,000
(207,571)
$177,429
Total Liabilities & Equity
$321,669
College of Agriculture and Bioresouces
AgEc 495
Unit Cost of Production
Ingredients costs
Packaging
Total materials per jar
$0.20
0.99
$1.19
Direct labour
Overhead cost
Total Unit Cost of Production
$1.80
0.60
$3.59
Marketing and Administration
$1.50
Total Unit Cost per Jar
$5.09
College of Agriculture and Bioresouces
AgEc 495
Breakeven Analysis Using
Change in Wholesale Price
8
7
Price per Jar
6
5
4
3
2
1
0
1
2
3
4
5
6
7
8
9
10
Year
cash flow break even
net income break even
College of Agriculture and Bioresouces
AgEc 495
economic break even
Breakeven Analysis Using
Change in Yearly Production
180000
jars produced per year
160000
140000
120000
100000
80000
60000
40000
20000
0
0
4
2
6
8
10
year
Base Production
cash flow break even
College of Agriculture and Bioresouces
AgEc 495
net income break even
12
Scenarios
Base Case Best Case Worst Case
Wholesale price per jar
Volume produced
$
4.12
70,000
$
5.55
106,223
College of Agriculture and Bioresouces
AgEc 495
$
4.12
50,000
Financial Summary



Very high equity investment required
Negative ending cash = unfeasible
plan
Need to investigate alternatives to
provide a viable plan
College of Agriculture and Bioresouces
AgEc 495
Questions
College of Agriculture and Bioresouces
AgEc 495