PustiBlock

Table of Contents
Executive Summary ................................................................................................................................................ 2 Environmental Analysis: The Dairy Sector ............................................................................................................... 3 Description of Our Product: CowShar ..................................................................................................................... 4 Production Plan...................................................................................................................................................... 5 Operations Plan ..................................................................................................................................................... 6 Marketing Plan....................................................................................................................................................... 7 Segmentation Based on the Characteristics ........................................................................................................ 7 Geographic .................................................................................................................................................... 7 Demographic ................................................................................................................................................. 7 10 Cow Farm (BD-10) ..................................................................................................................................... 8 Behavioral ..................................................................................................................................................... 8 Target Customer ................................................................................................................................................ 8 Positioning ......................................................................................................................................................... 9 Marketing Mix ................................................................................................................................................... 9 Product.......................................................................................................................................................... 9 Price .............................................................................................................................................................. 9 Place.............................................................................................................................................................. 9 Promotion ..................................................................................................................................................... 9 Analysis of Strength, Weakness, Opportunities and Threats of CowShar ........................................................... 10 Strengths ..................................................................................................................................................... 10 Weakness .................................................................................................................................................... 10 Opportunity ................................................................................................................................................. 10 Threat .............................................................................................................................................................. 10 Competitive strategy........................................................................................................................................ 11 Capturing the largest potential market......................................................................................................... 11 Expanding the total market .......................................................................................................................... 11 Position defense .......................................................................................................................................... 12 Preemptive defense ..................................................................................................................................... 12 Organizational Plan .............................................................................................................................................. 12 Nature of the Partnership ................................................................................................................................ 12 Brief Job Descriptions and Industry Experiences of the Management Team ...................................................... 12 Board of Directors ............................................................................................................................................ 13 Assessment of Risk ............................................................................................................................................... 13 Financial Plan ....................................................................................................................................................... 13 Appendix.............................................................................................................................................................. 14

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Executive Summary
Bangladesh is the 12th largest livestock rearing nation in the world with the highest density of cattle population in south and south-east Asia. This sub-sector is also the fastest growing part of GDP with an increase of 7.23% per year (as of 2004-05). Despite this tremendous growth the milk yield per cow is less than half compared to that of neighboring India and Pakistan. Also due to the low quality of cattle feed, cows here suffers from poor health condition which results in more infertility, less meat yield and decreased draft power. On the other hand, recent studies show that cows contribute to more 20% of the world s methane gas emission. They do it mainly in the form of burping, belching and excreting. This percentage is higher than the contribution of the transportation sector, combined. Although antibiotics such as Monensin and Mootral provide a slow-release formula which reduces methane emission by cows, they prove to be too expensive for widespread use. Our product, CowShar, attempts to address these problems. CowShar is a Urea-Molasses Mineral Blocks composite which increases milk yield by 21%, increases weight gain by more than 1.5 times for heifer, increases fertility rate and decreases methane gas emission by 50%. Our market is divided into segments in two stages. First, we break the segments down geographically and then through the size and purpose of farmers. The most attractive segment is the medium and large scale cattle farmers who have ten or more cattle. Our promotion and awareness building campaign include feature in agriculture documentary programs, TVCs, banners and hosting events at the grassroots level. These help us to gain most attention from our target audience. Being the first player in this market, we will adopt the competitive strategies adopted by the market leader. After analyzing the market with Porters five forces our strategies are to expand the whole market and keep the most market share. In addition, as our product is targeted at the mass market, we are operating in a low margin market. The only way to take market share away from us would be by selling the product at a lower price than us. But this would lead to huge losses in the short-run and probably bankruptcy in the long run. So the room for multiple firms operating in this market is low. A 50 kg sack of CowShar will cost Tk. 600 to the farmer. This gives us a profit margin of Tk. 95.08 per sack. This gives us a breakeven volume of 22087 bags. This is achieved in the first year of output. At our targeted volume we make a profit of Tk. 166,592,362.

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Environmental Analysis: The Dairy Sector

In Bangladesh, around 8% of total protein for human consumption comes from livestock. This is a very low amount considering the fact that the daily minimum requirement for milk, as recommended by WHO, is 250 mililitre (ml) whereas Bangladesh's people consume on an average 42 ml only. The crisis emerged from the slow growth of the dairy sector and the resulting increase in milk prices. Milk yields, in Bangladesh, are extremely low: 200-250 liter during a 10-month lactation period in contrast to 800 litre for Pakistan, 500 liter for India, and 700 liter for all Asia. (6) Surprisingly, Bangladesh has one of the highest cattle densities: 145 large ruminants/km2 compared with 90 for India, 30 for Ethiopia, and 20 for Brazil. (3) The two major reasons behind this problem of low milk yield are poor breed and feed management. The most common local cow in Bangladesh, Bos Indicus, has very low productivity- on average 206kgs/head/year of milk compared to almost 800kgs for India and 7000 kgs for the US. This low productivity of cattle heads in turn has also prevented dairy farmers from investing more in feed. Although some dairy farmers grow high yielding varieties of grass and supplement it with oilseed meals, broken rice and other by-products, most cows are still fed with crop residues and cereal byproducts. In most cases a proper scientific approach to feed management is missing. The costs of production of 22 US$ per 100 kg milk in Bangladesh can be classified as intermediate within the costs levels estimated by the International Farm Comparison Network (IFCN) for the year 2002. Costs in Bangladesh are about 20 percent below the cost of production in the EU (28 US$ per 100 kg) but 40 to 50 percent above the levels in other countries in the Southern Hemisphere. The large farms in India and Pakistan can achieve production costs below 15 US$ per 100 kg. All types of firms will have difficulties to compete with imports of dairy products as long as the world market prices for milk range between 15 and 18 US$ per 100 kg milk. Moreover, milk producers in Bangladesh will have difficulties in competing with producers from other countries in the region such as India and Pakistan. (5) Despite these shortcomings, In FY 2009-10 the estimated share of the livestock sub-sector in GDP at constant prices was 3.46 percent.(bd eco rev 2009) Furthermore, it provides full and part time employment to about 20% of the country s rural population and accounts for 18% of agricultural export earnings. Several initiatives have been taken to facilitate the growth of the dairy sector in accordance with the government s aim to achieve self sufficiency in milk, chicken and livestock production with a view to meet the protein demand of the nation. Most of these initiatives are mainly focused on improving the breed quality. One among such initiatives, worth mentioning is the Artificial Insemination Extension Programme which uses both diluted and frozen semen for improved variety. However, broadly speaking, the feed management system has remained untouched; which can be a potential market for new businesses.

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Description of Our Product: CowShar

Our product, CowShar is a urea-molasses-mineral blocks composite which will make dairy farms more efficient. CowShar can: 1. 2. 3. 4. 5. 6. Increase palatability and thus enhance intake of feeds. Improve body weight gain, draught power and milk yield of cattle, buffaloes, sheep and goat. Increase digestibility and absorbability of course roughages (straw). Increase the nutritive value of hard feed. Reduce calving interval of cow. Increase chances of strong and healthy calves birth if supplied to the pregnant animals.(2)

The composite has been extensively tested in the Philippines, Turkey and Bhutan and all of the benefits have been proved at the consumer level. (1) The blocks can be made from a variety of components depending on their local availability, nutritive value, price, existing facilities for their use and their influence on the quality of blocks. They can also include specific components. The composition of the UMB block we would be selling is included in the production plan section. The components would be fortified in the form of blocks. The farmer needs to use about 500gm per cow per day. Hence we would produce them in 500 gm blocks. These blocks can easily be broken down by hand and added to straw, grass or water that the cattle is having. Even though the mixture can easily be whipped up using simple production techniques, a critical mass needs to be achieved to feasibly create an effective mixture. E.g. Trace minerals are required in small amounts for the production of each kg of the product. Therefore, a farmer who has 10 cows would require only about 75 gm for the entire month s feed. These minerals are not sold in such small quantities and availability for everyone is not easy. Without these minerals, the additive also loses most of its effectiveness, hence the need for a full scale production facility.

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Production Plan
Since the typical diet of our bovines differ according to seasons (dry and wet seasons) and availability of water and grass the components of the blocks of our product also have to be different. The raw material compositions for the two different productions for 100 kilogram mixture are given below:

As we can see from above, the principal ingredients are rice bran and molasses. In general, rice bran is the major component of the block is available in almost all parts of the country throughout the year. Molasses, a by-product from sugar factory is also available in all regions even if it is far away from the factory. Other ingredients like urea, salt, cement and minerals are commercially available. Since Sirajganj district is the most densely populated area of bovine animals and is in close proximity to the different required raw material producing area, therefore it will be the ideal location for the establishment of our manufacturing plant. Rice bran will be collected from local nearby markets and the molasses from the sugar factory which are placed at close proximity. After the collection, the ingredients (except water) will be put into mixing vat/containers having 500 kilogram capacity each. They will be then mixed thoroughly so that each ingredient is evenly distributed throughout the mixture. Then water will be added and mixed well, and the mixture thus prepared will be transferred into a casting/molding vat, and dried. Once dried, it is ready to be fed to the cattle. The whole process is shown below: Page

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Collection of Raw Materials Rice Bran - Local Market Molasses Sugar Factory Other IngridientsCommercial Market

Mixing Container All ingredients are mixed evenly at the recommended ratio. Water is added and Mixed

Casting\Molding Vat Mixed ingredients are placed here. Then the mix is dried.

The whole production plant will be approximately 43,000 sq. feet (1 acre).

Operations Plan
The PustiBlock is fortified into 500gm blocks using a compressing machine. The blocks formed from this process are then packaged in 50kg bags which are stored at our premises. Since the product is in blocks and the packaging is air and waterproof, the product has a long shelf life. These packages will await delivery at our facility. All the requests for products would be addressed to the marketing manager who would then forward it to the production manager and accounts officer. The production manager would send the order of either reducing inventory or increase production to the production supervisor. The supervisor would execute the order from the production manager, either by loading delivery trucks (leased from the district truck owners union) or consign resources into production, informing the manager of the inventory levels. It is up to the production manager to identify the reorder point for raw materials and to indentify an optimal inventory management strategy. On dispatch of delivery vans from the plant, the payment will be collected from the buyer and forwarded to the accounts officer. The accounts officer will send monthly commission packages to the retailers based on the sales and invoice figures. As the entire milk-producing belt is in proximity of the factory, fast dispatch of orders is possible. It therefore makes sense to bring the raw materials towards this hub rather than produce closer to the source of the raw materials. The resultant reduction in costs not only provides a source of cost saving for the manufacturer, but also helps cutting down of lead times which provides us greater flexibility to

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PustiBlock market indicators. In addition, greater control over market prices is gained from a low distance to the target market since hoarding of products (a common phenomenon in the agricultural inputs market) would be difficult.

Marketing Plan
Segmentation Based on the Characteristics Our market has been divided in three criteria which include geographic, demographic and behavioral aspects of the cattle farmers. Each of them is broadly described below:
Geographic

Baghabari area in present day Sirajganj district was a traditional milk producing area. A large community of Ghoshs collected the milk and supplied chaana, ghee, curds and sweets to sweet sellers across the country. In 1965, the then East Pakistan government created the Eastern Milk Producers Co-operative Union Limited (EMPCUL). This was renamed to Bangladesh Milk Producers Cooperative Union Limited (BMPCUL). BMPCUL is popularly known as Milk Vita, the brand name of its product. Milk Vita organized farmers in the Baghabari area into cooperatives and started collecting milk in the area. It set up a pasteurization plant. Among its other products are butter and ghee. Milk Vita achieved significant success in increasing the milk production in Baghabari area by providing training and extension services. However its impact and success outside the area has been limited. In other areas farmers still operate on an individual basis selling milk mostly to sweet manufacturers.
Demographic

Traditionally the industry has been dominated by the Ghosh community who collected milk from farms and processed them into ghee, curds, sweets and other products. Liquid milk only had informal supply structure and in fact constituted a small portion of the total market. However with the development of the collective model of BMPCUL, the market for milk began to expand and surplus milk made its way to the cities as a processed package product. There are three types of production system which has been identified by IFCN in the cattle raising industry. In the following segments each type of farm is briefly described.
2 Cow Farm (BD-02)

Location: A family farm with .4 hector (ha) of irrigated land located in the rural upland. Activities: the farm keeps two indigenous cows. Its feeding system consists of three to four hours per day of grazing on communal land and stall feeding with some concentrates. About 63 percent of milk

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PustiBlock produced is sold to the local milkmen. The farm raises its own heifers as replacement. Off-farm income is minimal (6 percent of total household income).
10 Cow Farm (BD-10)

Location: A farm with 1.5 hectors of irrigated land (no land rented). Activities: the farm keeps two indigenous and two cross-breed cows. It delivers 90 percent of the milk produced in the nearest collection point. The feed basis is provided by crop residues and fodder, both grown on farm. Lactating cows are supplemented with cotton seed cake, molasses and urea. The firm raises it own replacement heifers. No off-farm income is earned by any of the family members.
25 Cow Farm (BD-25)

Location: A farm in the rural area with 1.8 hectors of irrigated land. Activities: the farm 25 cross-bred cows. Over 97 percent of its milk is sold at the nearest milk collection point. The feed ration consists of cereal straw, green fodder, concentrated by-product such as oil seeds wheat bran, molasses and urea. The farm raises about 15 p0ercent of its own heifers and purchases cows early in their location or near calving.
Behavioral

The average Bangladeshi dairy farm has 3.5 heads of cattle. Dairy is still considered a secondary profession even for farmers with 5-10 heads of cattle. Part of the reason may be that most dairy farmers also have another source of income. Another reason for this may be that milking and tending the cows has traditionally been the women s job and is therefore given less importance than farming the fields even in households whose major source of income is dairy.5

Target Customer As our target we have chosen the dairy farmers whose personalities are the following: y Belong to the Sirajganj district or the greater Rajshahi division. This is because these areas contain the highest concentration of dairy farmers who rear bovine animals to sell the produced milk. It also makes sense to make the dairy farmers of greater Rajshahi area our primary audience, since our production facility will be initially built there. Demographic Characteristics: Are the owners of BD-10 or BD-25 farms. The micro producers generally procure their feed mainly from their own fields. Since they do not come into contact with the cattle feed market frequently, it would be difficult to change their habits and make them purchase feed. Also they rear cattle for their milk consumption. Since their utility of increasing milk production diminishes, they would probably not be very interested in our product.
Geographic Characteristics:

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PustiBlock Consider cattle rearing as one of his primary profession. Many of the owners do not consider dairy farms as their primary source of income and they will not be interested in something that will increase the production capability of their cows because it will require additional effort from their part, which they are unable to afford.
Behavioral Characteristics:

Positioning We want to position ourselves as the pioneer in the cattle feed additives market. Our product is to be viewed as a feed cost reducing agent, while increasing milk production and improving the health of cattle as well. As such, we must become a trusty name in the feed market. Marketing Mix
Product

Our product is a food supplement that reduces the feeding cost for cattle farmers. It does this by reducing the action of bacteria in the cattle s digestive system which result in lesser emission of gases through flatulence and belching. As a result, more of the food is converted to milk production and keeps the cows healthy too. The farmer adds the mix, available in the form of blocks, to the hay or grass. About 500gm per day per cow is required, this being the size of each block. The product would be available in 50kg packs, as it is the accepted standard in the agricultural products market. The block also survives better in storage compared to other forms of packaging.
Price

Since our selling point is to reduce food costs, we have to keep the price at a level which is less than the cost savings. As a result, a price of Tk. 750 per 50 kg pack or about Tk. 7.50 per serving per cow is set as the optimum point this gives us a markup of about 28% while saving the farmer Tk. 2.50 per cow per day.
Place

Since we are located in Sirajgonj which is in close proximity to the mik-producing belt, we can assure rapid order fulfillment. Customers can avail our product at cattle feed outlets. These are located within proximity of farms and hence the carriage costs to customers would be low and carriage convenient. Of course, the retailers would require a certain commission to carry our product. The pricing of the product will include the commission of the retailer. This is set at Tk. 25 per 50 kg package of PustiBlock. In addition, we would supply larger volumes to big producers premises.
Promotion

To pursue our objective of attaining name recognition in farming communities, we will follow a multistage awareness program that reaches a mass audience. Hence, we must create a promotional package that appeals to our target segment. In the first stage, we would feature our product in agricultural shows aired on national television. These shows include Mati o Manush on Bangladesh Television and Hridoy e Mati o Manush on Channel i. These programs are specifically selected because they feature innovations and innovative products that are a part of rural Bangladesh. They have a large regular audience in rural areas of our country. This medium will help us spread the message to our target audience effectively and efficiently.

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PustiBlock The second stage in our awareness campaign is television advertising during airings of Bengali movies in the various television channels. As audience for these movies are based mainly in villages, this would also be quite well targeted. The third stage of creating awareness is through retailers of feed and other agricultural products. These retailers are generally located at the central market in each village community. We can make banners which portray the availability of our product. As we will give the retailers an attractive commission, they would be able to provide information to customers about the benefits of our product to prospective customers. Finally, we would attempt to reach our audience through participation in events which are central to life in rural Bangladesh. Some of these include stick fighting, bull fights and horse races, which are very popular. As the prizes for winners in these events are reasonably cheap, we can gain cost effective awareness building among potential customers. This would be helpful in word-of-mouth publicity generation. Analysis of Strength, Weakness, Opportunities and Threats of CowShar
Strengths

1. 2. 3. 4.
5.

First mover s advantage due to the absence of any similar product. Relatively uncomplicated manufacturing technique which leads to a low startup cost. Economies of scale in ordering and production. Reduced transportation costs due to the close proximity of the target audience from the production center. Availability and low cost of raw materials.

Weakness

1. The production technique is pretty simple the product is quite easy to replicate. 2. The profit margin of the product is quite low. 3. Lack of a famous brand name like ACI, Square, Aarong as our competitor in the agricultural sector.
Opportunity

1. 2. 3. 4. 5.

An open growing market due to initiatives taken to increase milk production Relatively low raw material cost Many sources of raw materials, and so low bargaining power of suppliers Being an agricultural product manufacturer, we have a tax holiday till 2013. Low bargaining power of supplier

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Threat 1. Bigger manufacturers bringing in better technology. 2. More control over the distribution network by established players. 3. Low acceptance of newer production techniques by the farming community.

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Competitive strategy We identify the competitive forces according to the Porters Five Force model: 1. Threat of intense segment rivalry: a segment s attractiveness decreases with the increase of the number of competitors in that segment. There is no other company that offers the same product as ours. So there is practically no threat of rivalry in our target market segment. Thus the attractiveness of our target market is very high regarding this particular aspect. 2. Threat of new entrants: The production process of CowShar is quite simple. That offers a low entry barrier for other companies to enter the market. The exit barrier for the market is also low since there is no need for a large investment in machinery and other such manufacturing units. So the attractiveness of the market is low considering this particular force. 3. Threat of substitute products: As of now there is no perfect substitute for CowShar. The only product currently existing in the market that can be considered as a substitute is urea. But urea only stimulates growth of cows and thus only benefits farmers rearing cows for the meat market. Our main target is farmers rearing cows for milk. Considering this force the attractiveness of the market is quite high. 4. Bargaining power of buyers: Bargaining power of buyers increase as they become more concentrated or organized. Our target market is not much concentrated since we are supplying to individual customers. So bargaining power of buyers is low and the attractiveness is high. 5. Bargaining power of suppliers: Our raw material involves different types of unrelated products. So we will not be dependent upon any particular group of suppliers. Moreover our suppliers are not concentrated or organized for that matter. So their bargaining power is likely to be low, therefore increasing the market attractiveness. Our product is going to be the first of its kind in the Bangladesh market. That makes us the pioneer in this product category. As the first mover we are going to adopt the following competitive strategies:
Capturing the largest potential market

After launching the product we are going to exert extensive promotional efforts to create maximum awareness in our target market and capture as much market share as possible.
Expanding the total market

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After the initial launching of CowShar we will put in continuous effort to expand our market. Our first area of operation will be the North Bengal but we will gradually expand the market to cover the whole country. We will also be able to export our product to countries such as India and Pakistan. There are no similar products in these countries as of yet.

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Position defense

Our positioning is going to be based on a strong value that is to substantially increase the milk production of cows for an affordable price.
Preemptive defense

Our market has a low entry barrier. So it will attract a large number of competitors. Our low price will act as a preemptive defense strategy against this host of competitors. This low price won t allow them to make significant price cuts. If they want to offer their product at a significantly lower price than us they will suffer heavy losses.

Organizational Plan
The ownership of the company will be on the basis of partnership. Nature of the Partnership All the partners of the company will be general partners. No limited liability partners will be allowed in the first five years. They will have equal capital contribution and liability of the company. A partnership agreement will be drawn between the partners explaining all the responsibilities, rights and duties of the different partners involved. If any of the general partners wishes to buyout from the company he may do so only by selling his share to another general member. This will ensure the complete control of the initial members as this is required for the firm to fulfill its target for its initial years of operations. For any additional loan that is collected from the bank, the partnership agreement will be changed accordingly. Brief Job Descriptions and Industry Experiences of the Management Team The key management positions of the company are the marketing manager, the production manager, and the production supervisor. Their job descriptions and industry experiences are explained in brief in. Table 1: Brief Job Descriptions and Industry Experiences of the Management Team Designations Marketing Manager Brief Job Description Plan, coordinate and control the 4P approach to marketing of the product Maintain ties with large buyers Designate employees to jobs that they are best suited for Monitor product quality and efficiency of production Commission and acquire the required raw materials based on demand Industry Experience 5 years in agricultural inputs industry 3 years in manufacturing industry

Production Manager

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PustiBlock Production Supervisor Guide workers on the work floor Provide information to the Production Manager about stock levels and timing of raw materials purchases Promote products to customers in a way that is easy for them to understand Keep records of all financial transactions Prepare financial statements for internal decision-making The Marketing Manager, the Production Manager and the Accounts Officer would be responsible directly to the partners of the firm. Board of Directors In order to guide the partnership towards a desired trajectory, a Board of Directors would be formed. The Board of Directors will be composed of the partners of the company as well as some respected industry specialists. These include experts from the agricultural sector. Probable candidates would either have extensive field experience or be agro scientists. In addition, to help proper financial governance of the organization, we would require an expert from the financial sector. A probable candidate would have at least 20 years experience either in a banking institution or in auditing. In addition, a third member would be needed to guide the management on legal issues concerning the operations of the firm. A quarterly general meeting of the Board would be held at the convenience of the Members. In addition, meetings following extraordinary events would also be called where the presence of the entire Board would not be deemed mandatory. Not needed

Accounts Officer

3 years

Assessment of Risk

Financial Plan

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Appendix
1. Production and utilisation of urea-molasses mineral block in the philippines, hemando f. Avilla 2. Samad khan, m.a. and siddiki, s.r. (2004). Preparation of urea molasses block (umb) and it's use in livestock. Forage production and umb technology project (nri/dfid). Bangladesh agricultural university, mymensingh 3. Beef cattle production in bangladesh- a review, m.a. baset , m.m. rahman , m.s. islam , a. Ara and a.s.m. kabir 4. National livestock development policy 2007- ministry of fisheries and livestock, government of bangladesh 5. A review of milk production in bangladesh with particular emphasis on small-scale producers, t. Hemme, o. Garcia and a. R. Khan, pro-poor livestock policy initiative. Http://www.fao.org/ag/againfo/projects/en/pplpi/docarc/wp7.pdf 6. Dairy policy impacts on bangladesh & eu 15 dairy farmers`livelihoods: dairy case study, dr. Torsten hemme, uddin mohammad mohi, ifcn dairy research center 7. Report on the development of dairy industry in bangladesh- pran-rfl group, december,2007

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