Beruflich Dokumente
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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.
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.
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.
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
Business Plan Corporate Document
5
Vision
Core Values
Keys to Success
2.0
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.
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
Business Plan Corporate Document
8
Project Investment
458,222,500
60,000,000
518,222,500
35,000,000
276,075,000
207,147,500
518,222,500
47.11%
296,443,000
1.18
2.4
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
Business Plan Corporate Document
9
Financial Summary
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.
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.
Business Plan Corporate Document
11
Pricing
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
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
3.0
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
The Shareholders
Shareholder
Ronald Byamukama
Diane Kemigisha
-----------------------TOTAL
3.4
[%age]
40%
40%
20%
100%
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.
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
11.79%
26,075,000
35,000,000
61,075,000
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%
4.0
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.
5.0
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.
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
Business Plan Corporate Document
20
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.
6.0
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
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.
Business Plan Corporate Document
23
Typical outlets
Supermarkets, shops, open markets,
bicycle salesmen, bus/taxi parks,
kiosks, street vendors, market
traders, straight from the bakery.
Food
service
establishments
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
Wholesale
Wholesale agents
6.2
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
Business Plan Corporate Document
24
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.
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
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.
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:
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
Business Plan Corporate Document
29
Sales Forecast
PY1
PY2
PY3
PY4
Sales (UShs)
Cakes & pastries
117,000,000
141,570,000
171,299,700
624,000,000
755,040,000
913,598,400 1,105,454,064
23,400,000
28,314,000
34,259,940
41,454,527
15,600,000
18,876,000
22,839,960
27,636,352
Total Sales
780,000,000
207,272,637
PY1
PY2
PY3
PY4
36,270,000
43,886,700
53,102,907
64,254,517
193,440,000
234,062,400
283,215,504
342,690,760
7,254,000
8,777,340
10,620,581
12,850,903
4,836,000
5,851,560
7,080,388
8,567,269
241,800,000
292,578,000
354,019,380
428,363,450
7.5
Distribution
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.
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.
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
Particulars
Flour Sifter
Local
No. of
Items
1
Local
2,400,000
2,400,000
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
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
Local
1,500,000
1,500,000
20
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%
61,075,000
6,107,500
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
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
Erections and installation cost is assumed to be 10% of the total cost of machinery.
8.4
Following furniture and fixtures will be required for factory and sales outlets:
Particulars
No. of
Shops
No. of
Items
Cost/Item
(UShs)
Amount
(UShs)
A. Factory
1
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
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
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.
Name of Vehicle
Qty
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
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
Salt
Sugar
Shortening (fat)
Milk
Egg
Baking powder
Pre-mixes
These are supplemented with a wide range of other ingredients that give special
flavours, colours or textures to products.
Dough
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).
9.0
9.1
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
600
24,000
14,400,000
14,400,000
400
24,000
9,600,000
9,600,000
400
24,000
9,600,000
9,600,000
400
24,000
9,600,000
9,600,000
600
24,000
14,400,000
14,400,000
1,200
24,000
28,800,000
28,800,000
1,200
24,000
28,800,000
28,800,000
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
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.
3.
4.
5.
6.
7.
8.
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.
Business Plan Corporate Document
42
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.
Business Plan Corporate Document
43
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
display
and
Sitting/caf area
10.0
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.
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.
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
Business Plan Corporate Document
47
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
recipe
Measurements made at process control points
Batch numbers and product code numbers
Cleaning standards and schedules
Sales records
Financial records
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)
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
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:
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.
11.0
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.
12.0
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
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
Business Plan Corporate Document
54
Management Team
Training of Employees
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
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
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%
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.
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
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
Business Plan Corporate Document
59
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
The projected income statement for the Crane Bakery Limited is given in Table 19
below.
Business Plan Corporate Document
61
Description
Sales
Year 2
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
31.26
34.23
36.95
39.59
20.82
23.08
25.19
27.21
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
Year
1
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
=
=
1.91 Years
1.18 Years
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
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
67,183
60,465
53,746
47,028
40,310
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
518,223
780,000
943,800
1,141,998
5
1,381,818
1. Financial resources
total
518,223
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
= 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%
428,363,000
428,363,000
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
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
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
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
Year 2
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
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
14.0
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.
Task Name
Duration
1
1
2
3
4
5
6
7
8
9
10
11
12
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
10
11
12
15.0
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
Shape
Proof
Bake
De-pan
Cool
Pack
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;
Product Contamination
Bakery products can become contaminated through:
2005
and WHO (1962 2005)
8FAO
Thermal energy for proving and baking the product and to produce hot water
for cleaning and sterilising;
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;
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
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.
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
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
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.
Improvements
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;
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;
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;
Install mechanical lifting aids where possible and rotate work tasks to reduce
repetitive activities;
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;
Ensure all electrical equipment in wet areas is safe and regularly maintained;
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.
355
8
10%
1
16
10%
10%
5%
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%
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
0%
5%
10%
10%
10%
20%
Description
Share %
28.95%
Land
Amount (UShs)
150,000,000
11.79%
61,075,000
1.18%
6,107,500
10.00%
51,840,000
Vehicles
6.17%
32,000,000
Building Improvements
30.33%
157,200,000
0.19%
1,000,000
0.29%
1,500,000
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
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
11.79%
26,075,000
35,000,000
61,075,000
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%
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
(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.
YEAR
241,800
292,578
354,019
428,363
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
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
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
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
30,012
29,132
28,142
27,152
566,206
649,838
748,195
861,921
Cost of Sales
Financial Costs (UGX '000s)
Interest on Medium Term Loans
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
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
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
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
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
67,182,500
6,718,250
6,718,250
6,718,250
6,718,250
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
Period
Year
Full Production
Total
458,223
458,223
458,223
458,223
2. Pre-operational expenses
60,000
60,000
213,545
33,346
39,237
45,056
331,183
518,223
213,545
33,346
39,237
45,056
849,406
b) Replacement
Period
Year
Full Production
Total
458,223
458,223
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
Construction
Full Capacity
2
*Sal val
Total
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
-32,964
149,354
396,666
727,623
606,943
B. Cash outflow
1,334,566
*Salvage values. Land: 150,000; 4/5 of buildings: 125,760; Working Capital : 331,183
*Sal val
Total
-518,223
Constr.
Investment Costs
-518,223
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
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
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
294,394
328,128
366,034
406,406
OPERATING PROFIT
243,806
323,094
421,945
547,049
3,850
2,970
1,980
990
8,000
9,000
9,000
9,000
231,956
311,124
410,965
537,059
69,587
93,337
123,289
161,118
NET PROFIT
162,369
217,787
287,675
375,941
162,369
380,156
667,831
1,043,772
0.2082
0.2308
0.252
0.272
0.690
0.690
0.690
0.690
31%
42%
55.51%
73%
0.313
0.342
0.369
0.396
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
67,183
60,465
53,746
47,028
40,310
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
402,548
616,376
899,977
1,273,044
LONG-TERM ASSETS:
Stock (Inventory)
Bank Balance and Cash
Other Current Assets
Period
Year
Full Capacity
Sales Growth
5%
5%
5%
11.10%
8.39%
6.67%
5.46%
Inventory
32.86%
24.72%
19.56%
15.94%
-16.84%
23.32%
46.69%
61.39%
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%
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%
62.11%
53.34%
47.68%
43.70%
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
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
1.20
1.20
1.20
1.20
30
30
30
30
1.94
1.53
1.27
1.09
1.90
2.43
3.13
4.10
0.09
0.05
0.02
0.01
0.83
1.23
2.12
4.91
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
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
PAT
BEP
IRR
Payback
Base Case
375,941
21.70%
47.11%
1.18 Yrs
361,717
23.09%
45.14%
1.19 Yrs
617,759
14.28%
75.91%
1.11 Yrs
405,926
20.39%
50.70%
1.17 Yrs
345,956
23.20%
43.52%
1.20 Yrs
Key:
BEP:
IRR:
PAT:
Break-Even Point
Internal Rate of Return
Profit after Tax