El Mercado
Authentically Mexican
Business Plan
Executive Summary
Outline
Our start-up corporation’s main mission is to facilitate the distribution of genuine array of
Mexican brand food products to U.S. retailers in targeted regions where the Mexican-American
population is continuously experiencing exponential growth. Although great amount of food
manufacturers in Mexico possess a notable brand image, they do not possess the essential means
to penetrate the U.S. market due to the lack of sales and distribution channels. Past several years,
food retail companies in the United States have been introducing authentic Mexican food
products to their product line; however, executives and staffs in these companies do not have
sufficient knowledge about these Mexican manufactured products to target certain customer
base. Since the Mexican-American population is the fastest growing demographic segment in the
United States, these retailers must recognize the importance of increasing their Mexican product
line to fulfill the need of their Mexican-American consumers.
This is when our corporation, El Mercado, comes to play an important role. Our corporation will
be designed towards helping manufacturers in Mexico to enter the U.S. market by providing vital
distribution and marketing services. Additionally, our firm will have another function, helping
retailers with making educated decision regarding the stocking of Mexican products with highest
return on asset.
A Flourishing Population and Undeserved Population
According to a research conducted by the U.S. Census Bureau in 2010, “308.7 million people
resided in the United States on April 1, 2010, of which 50.5 million (or 16 percent) were of
Hispanic or Latino origin”(Ennis, Vargas, and Albert 2). Among this date presented above, the
Mexican-American accounted for the largest growth in the Hispanic population, “growing from
20.6 million in 2000 to 31.8 million in 2010” (Ennis, Vargas, and Albert 2).
Due to cultural importance, Hispanic-Americans prepare their meals at home to eat with their
family. The Food and Marketing Institute pointed out those Hispanic origin civilians “are huge
grocery shoppers spending $128.50 per week versus the traditional shopper who spends
approximately $91.00 per week, a 41% greater expenditure” (Taylor 106). From this statistics,
we inferred that Mexican consumers attend grocery stores more often than non-Mexican
consumers, so food retailers have to offer products with certain qualities, authenticity and
freshness. In a sampling of our initial target regions (Texas and California), states with “Hispanic
population of over one million” (Brown and Lopez 1), Mexican-American consumers are not
able to find authentic Mexican foods in major food retailer stores, such as Target and Wal-Mart.
El Mercado’s Solution
El Mercado will offer a service that will aid Mexican food manufacturers to connect with U.S.
food retail stores. Helping Mexican food manufacturers establish a contract with U.S.
supermarkets will allow these supermarkets to fulfill the demand of the Mexican consumers.
Firstly, we will try to receive distribution rights from Mexican manufacturers to export their
products to our targeted regions (California and Texas). In return, this will give opportunity for
the Mexican manufacturers to build equity in the U.S. market. After our company signed a
written agreement, we will first distribute the products to small local Mexican grocery stores.
After enhancing our company’s supply chain, we will start offering these products to
supermarkets with extensive market share in the retail sector.
Product and Service
El Mercado will distribute Mexican food products to retailers, located in Texas and California.
Initially, we will start distributing two product classes: canned vegetables and meats, and
Mexican candies (composed of ingredients almonds and dry-fruits). After the initial stage, we are
working towards adding diversity to our product offerings. We are going to offer Mexican offer
perishable food products and hygienic products like specialty soaps and shampoos. In order to
accomplish this goal, our company will establish distribution network by creating a network of
logistical service providers. These service providers will serve as the means to transport the
manufactured food products from Mexico to mercados and supermarkets in Texas and
California. Primarily, these supply chain functions will be outsourced. The only function will be
insourced is the distribution to grocery markets. Our supply chain will be based off this structure
as shown in the figure below:
Mexican Food
Manufacturers
Importers/Customs
Shipping from
the Border
Warehouse
Supermarkets/
Groceries
Sales/Marketing Services
Besides the distribution of food products from our Mexican based manufacturing partners, our
company will serve as a representative to these partners. Similarly, El Mercado will offer an
essential service, concentrating on category management, as a support tool to supermarkets. This
service will help the supermarkets develop a greater degree of comprehension towards the
demand of Mexican consumers. Simply, El Mercado will provide the resources to advice the
supermarkets and grocery stores on stocking authentic Mexican food products that will attract a
growing population and increase profits in long-term. In order to complete our part of the deal
with full integrity and due to diligence, we will implement these services through: continuously
offering versatile of products to our vendors (supermarkets/groceries), performing on-going
market research in our targeted regions, and using the market knowledge of our manufacturing
partners in Mexico.
Organizational Structure
El Mercado is founded by Ali Kocan, Belinda Huynh, Bashir Khader, and Jacob Ponce.
In order to establish a stable environment and explicit internal regulations, the company’s
organizational design is going to be consisted of centralization with tall hierarchy levels. In
compliance with our company’s culture, several layers of management will ensure internal
control and allow managers to closely keep track of employee activities and productivity. As the
figure listed below, the organization is going to be comprised of functional divisions. This will
maintain diversity among employees. Since these employees are coming from different
backgrounds and technical career fields, it will facilitate the decision making process.
Marketing Plan
Target Market Strategy
We will start off by offering authentic Mexican candies, canned goods and juice concentrates.
What makes El Mercado different from others is this market is simple, we will be providing a
reliable and consistent supply chain for authentic Mexican food products. Instead of replacing
their existing manufacturers and/or distributors, we will be providing them with more option of
authentic product and giving consistent product offering. El Mercado will always be maintaining
a close relationship with these customers and will be keeping the delivery of the authentic
products in-house.
After establishing a profitable track record of sales with the grocery stores, we will begin
entering our way to supermarkets. Our researches on buyers from supermarkets show that there
should be a proven sales record in order to enter their channel. The grocery store owners are easy
entry points and are willing to bring on new products proved that it is a minimum volume,
supermarkets, on the other hand, are much more structured in their selection, and that’s why we
must be able to prove that our authentic products will be selling better than the ones that are
already in their supermarket’s shelves. Our main goal is to enter supermarkets as soon as
possible; our main advantage is the fact that supermarkets are placing high priority on attracting
Mexican customers to their stores.
After establishing a footprint with both grocery markets and supermarkets, we will start
supplying additional products that allow both of the markets to serve their customers better. We
will also use surveys’ to determine which authentic Mexican food Mexican-American population
wants in the grocery stores they go to.
Product Positioning
El Mercado is a specialty food distributor that delivers unique, authentic Mexican food products
to rapidly growing Mexican-American population. El Mercado differentiates itself from other
distributors by focusing on the authentic Mexican food market, rather than distributing multiple
food categories.
Sales Strategy
El Mercado will be using a direct sales strategy approach when reaching our channels. Basically
we will be directly contacting and developing relationships with the founders and owners of the
markets.
Pricing Strategy
Our pricing strategy will increase our gross profit margins and the margins for our channel
customers. Instead of using the standard markup of 30%, we will charge 35% markup due to it
being authentic Mexican products.
SWOT and Cage Distance Framework
Above is the SWOT analysis identifying our strengths, weaknesses, opportunities, and
threats depicted in developing our business plan. Our strengths consist of having a huge
advantage to the U.S. market as we share a common border with Mexico. Distribution will also
be easily accessible due to the North American Free Trade Agreement (NAFTA), which removes
most barriers to trade between the United States and Mexico. Opportunities include the growing
the demand for Mexican food. As mentioned earlier, consumers from the United States desire
fresh and authentic Mexican food that can be difficult to find in most supermarkets. Progressing
with our plan correspondingly gives a chance for local producers to expand their business in
Mexico. However, there are weaknesses—as the agricultural sector remains underdeveloped, it
can influence increased price sensitivity in our market. The rise in drug-related violence in
Mexico can too cause a threat to our business.
Our CAGE framework demonstrates the attributes creating “distance” between Mexico
and the United States. Comparatively, though Mexico speaks mostly Spanish, Spanish is the
second most spoken language in the United States. Again, this is because of the rapid growth in
the Hispanic population. Catholicism is the most followed religion in Mexico amounting in
82.7% of the total population (down from 96% in 1970), while in the United States Roman
Catholics is only 23.9%. In area relation, Mexico is “slightly less than three times the size of
Texas” (CIA, 2013).
Yet Mexico being adjacent to the United States, there is an enormous economic distance
in gross domestic product per capita. There is also “distance” between the two countries in the
type of industries. The United States industries are “highly diversified, world leading, hightechnology innovator, [and is] the second largest industrial output in the world” (CIA, 2013).
Mexico concentrates mainly on food and beverages, tobacco, chemicals, and so on.
Financial Rational
Financing El Mercado will be done in three time period rounds. Our first funds of financing will
be dedicated to salaries, operating expenses, and inventory. El Mercado will conduct business
with small, local grocers at first to set a solid base for shipment, delivery expectations, and
generate cash flow within the first time period. The second round of financing will be dedicated
to the entrance of local supermarkets. The money from this time segment will fund inventory,
salaries, new hires, and capital expenditures. The final round will fund our projected sales and
growth with the local grocers. By this stage, El Mercado will be financially able to maintain any
growth by our own generated funds. These generated funds from larger supermarkets will be
greater than when we first started with conducting sales with only small local grocers.
Average warehouse and office rent costs, utilities, and communications costs are used in
the costs. Ali and Bashir have experience with financial reporting, coming from years of working
for large accounting firms. El Mercado will take the skills of these efficiently educated men for
the accounting.
Technology costs are derived from the maintenance and keeping of computer systems up to date.
El Mercado will continuously modify and update our technology to minimize any chance of
bullwhip effect. Main office computers will be provided, however, the staff will provide and
work with their own tablets and laptops in order to bring work home and cut technology
expenses.
Profit and Loss From Operations
Item
2014
2015
2016
2017
2018
Rent
11000
11000
11000
11000
11000
Utility Bills
2600
2600
2600
2600
2600
Communications Costs
1200
500
500
500
500
5000
500
500
500
500
100000
100000
100000
500
500
500
122314
117115
117116
117117 117118
Accounting/ Finance
Technology
Salaries
Insurance and Licensing
Fees
Total Fixed Costs
100000 100000
500
500
Variable Costs
COGS
Direct Labor Costs
Total Variable Costs
Total Costs
50000
12000
62000
184314
50000
12000
62000
179115
50000
12000
62000
179116
50000
12000
62000
179117
50000
12000
62000
179118
Direct Sales
Distributer Sales
Services/ Maintenance
Total Revenue
100000
75000
3500
178500
175000
100000
4000
279000
200000
125000
6500
331500
250000
150000
7000
407000
275000
200000
8000
483000
-5814
99885
152384
227883
303882
Total Profit
Revenue Forecast
Item
Direct Sales
Distributer Sales
Services/Maintenance
Total Revenue
Units/Users
ASP
2014
100000
75000
3500
178500
10
10000
2015
175000
100000
4000
279000
500
350
2016
200000
125000
6500
331500
800
250
2017
2018
250000
275000
150000
200000
7000
8000
407000
483000
1000
1500
250 183.3333
CASH FLOW FORCAST
Net Income
Plus Depreciation
Cash flow from Operations
2014
-5814
250
-6064
2015
99885
700
99185
2016
152384
850
151534
2017
227883
1000
226883
2018
303882
1100
302782
Less Equipment
Plus/Less Change in Working
Capital
Less Purchased IP
Plus/ Less Other Cash Items
Total Cash Used
-250
-250
-400
-600
-900
-100
-880
150
-1080
-100
-950
150
-1150
-100
-200
-300
150
-350
150
-650
150
-1050
Total Cash Required or
Generated
-7144
98035
151184
226233
301732
1500
800
2000
1000
500
500
5800
0
5800
0
5800
Plus Financing
Source 1
ETF
Source 2
Total Financing
Cum. Financing Required
2300
2300
3000
5300
HEADCOUNT AND SALARY FORECAST
Item
2014
Existing Headcount
Manufacturing
4
8
Research
4
4
Product
Development
4
4
Sales
4
2
Marketing
4
5
G&A
4
5
Total Head
Count
24
28
2015
15
4
2016
15
4
2017
18
6
2018
20
6
4
4
5
6
5
6
7
7
7
6
8
7
7
6
9
8
38
44
52
56
Sources
http://country-facts.findthedata.org/compare/1-2/United-States-vs-Mexico
https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
http://www.fas.usda.gov/itp/Mexico/030607StrengtheningNAFTA.pdf
http://www.census.gov/prod/cen2010/briefs/c2010br-04.pdf
http://www.thercas.org/proceedings/07/Growing%20Hispanic%20Population.pdf
http://www.pewhispanic.org/2013/08/29/ii-ranking-latino-populations-in-the-states/