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The premium quality, flavor, and smell of homemade artisan bread without the hassle of
mixing, kneading and forming the dough.
Premium quality bread dough sold in the freezer section.
At home, the consume thaws, rises, and bakes.
Product will be made of natural or organic ingredients
Manufacturing will use “old dough” techniques for premium flavor
May offer unusual, specialty or holiday selections such as panettone, stollen, or Greek
Easter bread
May sell in an oven-safe, recyclable container for added baking convenience
2
Market Analysis – Size and Growth
Market value of all Bread and Roll retail sales in the World 1
$145.7 billion in 2004 (2.4% growth in the past five years)
Market value of all Bread and Roll retail sales in the United States 2
$13.5 billion in 2006 (1.3% growth in the past five years)
$14.1 billion projected by 2011
Downturn in 2004 due to low-carb diet trend, but market rebounding by 2005
Rhodes International reported in 2006 that “sales of Rhodes frozen white bread dough are
increasing at 8% annually.” 3
Bread market hit bottom in May 2004, demand is stronger now. Vice president of Hom’Ade
Foods agrees sales of 2005 1st quarter have increased.4
The U.S. government’s release of the revised food pyramid is reminding consumers of the
importance of whole grains in their diet. 5
Market for bread and related products has been and is expected to continue to be almost
flat for the next few years.6
$10.50 $11.10 $11.40 $11.70 $12.00 $11.40 $11.20 $11.20 $11.40 $11.50
(Difference in figures from other market size data is due to different source of data)
3
Market Analysis - Trends
4
Market Analysis - Trends
5
Market Analysis – Market Segmentation
6
Market Analysis – Demographics
7
Market Analysis – Demographics
8
Market Analysis – Threats
Little growth in the bread market: currently between -3% to 3% per year
Raw material supply
Weather issues such as a drought could cause a raw ingredient shortage.
Possible insufficient ingredient supply. The demand for organic products is increasing faster than the supply
of raw ingredients. 24
Economic downturns reduce the demand for premium products.
9
Market Analysis - Market Structure
10
Market Analysis – Opportunities & Niches
Opportunity
Market trend for premium bread needs
Huge world market for bread – export opportunity
Higher share of artisan bread in Europe and Japan (than in the US)
Ocean freight = about $0.30/loaf 25
Niches
No premium frozen bread dough in current bread market
Jason Vincent, Category Manager - Frozen Foods for Wild Oats, feels that there is a need for natural/organic
frozen bread dough and is surprised that no one has yet entered that niche. The long shelf life is a key
attractive characteristic. He feels the market is probably 2 to 3 units per week per store.
Adam Schneider, natural food broker, indicated that he could “sell the hell out of” a par-baked frozen bread
product.
Increasing market segment for premium bread.
11
Market Analysis - Conclusion
12
Competitive Analysis – Industry Structure
Carrying Capacity
The bread industry is fairly slow growth (see Market Analysis section).
Frozen food section of grocery stores is limited in size. Securing space for a new product
means that an existing product looses space (or is no longer carried).
Must have a niche product that fills a customer need.
Frozen premium bread dough could gain space by fulfilling an unmet need. 26
Degree of Stability
Fairly stable demand for bread from year to year. A staple of most people’s diets.
Seasonal variations in demand. Higher demand near holidays, such as
Thanksgiving, Christmas, Easter and Mother’s Day. 27
Diet trends, such as the Atkin’s low carb craze in the early 2000’s, can
have a serious negative effect.
Complexity
Grocery industry generally requires working with suppliers, distributors, brokers, and retailers.
For local market entry, it is sometimes possible to avoid working with distributors or brokers. 28
Selling in food service chain to restaurants would require same chain as grocery industry
unless sales market is only local.
Obtaining necessary health department and FDA approval can be complicated.
Industry Evolution
Bread industry as a whole is mature.
Organic food segment is in the later stages of the high growth phase. Retailers are starting to
see “me-too” products rather than new innovations. 29
Organic growth opportunities are tied to convenience and replication of traditional (not-so-
healthy) products.
13
Competitive Analysis – Barriers to Entry
Economies of Scale
Large manufacturers
Receive discounts for buying ingredients in large volume. Power to affect supplier costs.
Marketing budgets are larger. Profits of large volume products can help support marketing and sales of
lower volume or introductory products.
Entry level companies
Lack of volume equates to higher ingredient costs.
Marketing costs cannot be spread over product line.
Customer Loyalty
Because there is currently no retail frozen premium bread dough, customers would currently
have no brand to be loyal to. First entry advantage might deter customers from switching brands
if a new competitor entered the market.
If a known baked bread brand, such as Rudi’s, were to enter the market, customers would be
more likely to buy known over unknown.
Loyalty to baked breads brand could deter customers from switching to frozen dough option.
Proprietary
Recipes – competitors may not be able to replicate that customer-winning flavor.
14
Competitive Analysis – Barriers to Entry
Capital Requirements
Building a manufacturing facility from scratch is costly. For example, a 18’x24’x12’ freezer
space would cost about $90K for parts and installation. 30
Copackaging agreements with licensed manufacturers are a means of avoiding the necessity to
build a factory.
Unused capacity can be rented from manufacturers or restaurateurs (approximately $10 to
$14/hour).31 This is a low capital way for a small company to test the business concept without
major investment.
Cold storage facilities, such as Atlas Cold Storage, offer storage and inventory management,
thus reducing the need for on-site freezer space.
Cold storage freight services alleviate need for company purchase of refrigerated truck fleet.
Access to distribution channels
Must convince retailers and distributors to carry your product. They may not be interested in
dealing with small manufacturers.
Do not have direct access to customer if using standard distribution channels.
Government Regulation
Must follow state and local Department of Health commercial food safety requirements (can’t
start a food business in your garage).
Must register with the FDA and follow food labeling guidelines. 32
15
Competitive Analysis – Degree of Rivalry
16
Competitive Analysis – Major Competitors
There are no direct competitors in the premium frozen bread dough category, so we focus
on indirect competitors. Key indirect competitors include:
Rhodes Bake-N-Serv 33
“Enjoy hot, homemade quality white bread fresh from
your own oven. Available in three or five loaves per
package. Just thaw, let rise, & bake!”
Family owned company committed to quality
Alexia 35
“Alexia® Foods, Inc. produces a full line of 100% all
natural, trans fat free, premium frozen products for the
oven, microwave or fryer that deliver outstanding gourmet
flavor from freezer to table in just minutes.“
“Convenient and versatile, Alexia Artisan Breads bake
up beautifully and complement any dish. “
18
Competitive Analysis – Basis of Competition
19
Competitive Analysis – Control over Prices, Costs, & Channels
Prices
Consumers know what bread costs. Limited ability to charge a premium price.
Consumers are highly unlikely to buy bread that cost more than $5 a loaf, based on what is
already competitively available.
Costs
A start-up is going to have a difficult time getting price breaks from suppliers. With the relative
shortage of natural and organic ingredients, suppliers have a fair amount of power.
Conversely, some market factors have made standard ingredients more expensive, which
means there is less marginal cost to going organic. For example, due to natural disasters,
regular sugar is currently only slightly cheaper than organic sugar (40¢/lb. vs. 50¢/lb.). 36
Channels of Distribution
Large grocery chains require distributor relationships.
Introduction in local stores can provide a means for bypassing the distributor.
Internet sales could be a creative means of connecting directly to retail customers.
20
Competitive Analysis – Conclusion
Bread manufacturers are not currently addressing the market niche for premium frozen
bread dough.
Existing indirect competitors could enter this niche market fairly easily if they wanted.
Future competitors, such as food service companies, could also enter this niche.
Market size is small so there is little incentive for large companies to enter the market.
There is a market opportunity for premium frozen bread dough, and currently no direct
competition, but there is no barrier for future entry.
21
Endnotes
1 ”Global - Bread and Rolls,” Datamonitor industry market research, October 31, 2005.
2 ”Japan – Bread and Rolls,” Datamonitor industry market research, December 1, 2006.
3 D. Gail Fleenor, “Rising Sales: The Comfort and Aroma of Home-Baked Bread, Rolls, and Biscuits are Available From
a Wide Array of Tasty, Convenient Items in the Freezer Aisle,” Frozen Food Age, December 2006. Vol.55, p18.
4 Renee M Covino, “Bread is Back: Oh What a Difference a Year--and the Return to Balanced Eating--Makes on the
Frozen Bread/Dough Category,” Frozen Food Age, April 2005, Vol.53, p28.
5 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p95.
6 Market Trends: Fresh Bread and Related Products, August 2004, p2, p9
8 “Bread, Cake, and related products” Encyclopedia of American Industries. Online Edition, Thomson Gale, 2006
10 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p114
11 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p83
12 See Call Reports - Lind Iggi, Jason Vincent, and Scott Roy
14 The U.S. Market for Whole Grain and High Fiber Foods, April 2005
15 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p117
16 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p21
19 Renee M Covino, “Bread and Dough for a Crisp Fall: Get Customers Ready for the Autumn Baking Season with More
Frozen Bread, Dough and Rolls--Now Highlighted with Extra Health and Convenience,” Frozen Food Age, June
2006, Vol.54, p24
20 Market Trends: “Fresh Bread and Related Products”, August 2004, p61.
22
Endnotes
21
Simmons Market Research Bureau, “Study of Media and Markets” Fall 2004
22
”Global – Bread and Rolls,” Datamonitor industry market research, October 31,
2005
23
Market Trends: Convenience Home Baking Products, February 2004, pp84-86.
24
See Call Report - Jason Vincent
25
See Call Report - Mr. Sato
26
See Call Report - Jason Vincent
27
Frozen Dough Handbook, Volume 61, p10, Rhodes International Inc.
28
See Call Report – Scott Roy
29
See Call Report - Jason Vincent
30
See Call Report – Scott Roy
31
See Call Report – Lind Iggi
32
http://www.cfsan.fda.gov/list.html
33
http://www.rhodesbread.com/
34
http://www.rudisbakery.com/about_us/mission.jsp
35
http://www.alexiafoods.com/index.html
36
See Call Report – Scott Roy
37
Market Trends: Convenience Home Baking Products, p51, February 2004.
23
MBAX 6100
Entrepreneurship and Small Business Management
Feasibility Plan – Part III
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
$10.50 $11.10 $11.40 $11.70 $12.00 $11.40 $11.20 $11.20 $11.40 $11.50
25
Market Analysis Summary
Segmentation
• Industrial Bread (mass produced, mainly white bread)
• Artisan Bread (bakery made, premium gourmet, organic, natural, etc)
Bread penetration rate is more than 95% 6
• Typical whole grain bread consumer: 55 years or older, College graduate or higher
education, retired, no children, and homeowner
Market Threats
• Little growth in bread market.
• Raw material supply – weather issues or surge in organic ingredient demand could cause
supply shortage
• Economic downturns reduces the demand for premium products.
Market structure
• Retail route : majority of bread products
Manufacture → Wholesaler → Retailer → Consumer
• In store use :
Manufacture → Wholesaler → Restaurant/Cafe → Consumer
• Own Production : Bakery
Manufacture/Retailer → Consumer
26
Market Analysis Summary – Opportunity and Niches
Opportunity
• Increasing market trend for premium artisan bread
• Huge world market (opportunity for export)
Niches
• No premium frozen bread dough in current bread market.
New Distribution channel
• Internet e-commerce
• Other form of direct sales to consumers
• Export opportunity
27
Competitive Analysis Summary
Industry Structure
Carrying Capacity - limited space in the frozen food section, must find a niche
Degree of Stability - Fairly stable year-to-year demand. Diet trends can have a serious negative
effect
Complexity - have to work with suppliers, distributors, brokers, and retailers.
Industry Evolution
Organic food segment is in the later stages of the high growth phase. Retailers are starting to see “me-
too” products rather than new innovations. 7
Organic growth opportunities are tied to convenience and replication of traditional products.
Barriers to Entry
Economies of Scale – large manufacturers can get volume discounts
Customer loyalty to existing brands
Capital Requirements – must secure necessary product space & equipment
Distribution Access - Must convince retailers and distributors to carry your product
Government Regulation – must meet State Department of Health & FDA requirements
Degree of Rivalry
Price Point – must be competitive with other bread options
Power – big manufacturers have power to control market if desired
28
Competitive Analysis Summary – Major Competitors
Basis of Competition
Convenience vs. Quality - Shelf bread with long life vs. Fresh bakery product with better taste
but shorter life
Reputation - For big industry players, like Rudi’s or Rhodes, their reputation is a key competitive
factor. New ventures do not have brand recognition
Specialty – Offering specialty products, such as gluten free or vegetarian, is a key competitive
factor for many small bread makers.
Control over Prices, Costs, & Channels
Consumers know what bread costs. Limited ability to charge a premium price.
A start-up is going to have a difficult time getting price breaks from suppliers. With the relative
shortage of natural and organic ingredients, suppliers have a fair amount of power.
Large grocery chains require distributor relationships, but there may be creative alternatives to
the traditional channel, such as local stores or internet sales.
Market Domination
No premium frozen bread dough in U.S. retail market
Many small businesses in the natural and organic bread market
Conclusions
Bread manufacturers are not currently addressing the market niche for premium
frozen bread dough.
Existing indirect competitors could enter this niche market fairly easily if they wanted.
Future competitors, such as food service companies, could also enter this niche.
Market size is small so there is little incentive for large companies to enter the
market.
30
Venture Analysis – Opportunity and Need
Problem: Not everyone has the joy of experiencing fresh baked bread
No time to make nutritious, great tasting bread.
May not live near a bakery where premium, natural, or organic bread is made.
Not everyone has the skill or desire to make good bread from scratch
31
Venture Analysis – Opportunity and Need
Compelling Need
• Physical – we all need food to survive, and bread is a major part of the American diet.
• Physiological – Faced with increasing obesity and health concerns, Americans have a need
for healthier products
Shoppers want to see “high levels of specific nutrients and specific health claims” on Nutrition Facts
labels and “whole grain” is one of the most important claims. 12 [reaffirmed by customer survey data]
• Emotional
Want the satisfaction of feeding a nutritious product to loved ones
Fresh baked bread makes people feel warm and comfortable
Relieve the stress of needing to find time to make the product oneself
To relieve the stress of hectic lifestyle, want convenient, fast and fresh products: “As lifestyles change
and people having lesser time for baking, refrigerated and frozen categories seem to be more
convenient to bakers rather than preparing from mixes.” 13
• Social
Consumers want to join peers in showing increased concern for sustainable practices. They want
products that show their “Awareness of earth-friendly farming practices and desire to recycle and
conserve energy” 14
Want a fresh, homemade product to serve friends at dinner parties. 15
16
32
Venture Analysis - Product
Product Description
• Performance
Product will rise and bake dependably to produce a consistent taste and texture.
Ingredients will be natural or organic. Nutritious whole grain options will be offered. No
unpronounceable ingredients.
Dough is made using old-world multi-day build processes to provide optimum flavor complexity.
Packaging will protect product from freezer burn to guarantee taste and texture once baked.
Loaves will be sold in packages of 2-1 lb. loaves or 3-10 oz. loaves.
• Cost
Target retail price per package is $7.99 [for 2-1lb or 3-10 oz.].
Promotional discounts or coupons would be available (generally required by distributors and grocers).
Discount price (such as 90% retail) could be offered for direct sales (such as internet).
• Availability
Carried by natural grocers and mainstream grocers, specialty shops
On-line purchases available for local customers or those willing to pay for refrigerated/dry-ice freight.
Consumers required to make cash purchases, but Company will have to maintain credit terms with
distributors or other commercial purchasers.
• Social
Use product performance superiority to build a name that people can trust.
Fun brand that consumers of all ages can enjoy
Customer as marketer, spreading the word to family & friends
• Service
Money-back product quality guarantee
Possible organic certification
Comprehensive, easy-to-use website with long list of categorized FAQ’s
Specialized instructions to meet variety of customer cooking styles
Customer’s feedback actively solicited and acted upon. 33
Venture Analysis - Product
General Survey
• Mixed response to idea:
Many like the idea and thought it seemed simple: “Seems just like laying out meat.”
Others hated it: “I pay people to bake for me”
• Concerns - The time involved and the possibility that the bread won’t taste good in the end
• Varieties
Whole wheat was clearly the top choice.
Multigrain & Sourdough were the secondary selections
Limited interest in other varieties such as rye, bagels, white, pita, and cinnamon raisin
• Price
Standard Loaf: $2-6
Small Loaf: $1-3
• What’s Important
• Superior flavor is very important
• Natural/Organic, Whole grain, & Freshness are fairly important
• Price & Shelf Life are only somewhat important
• Most bread is purchased in the supermarket bread aisle
35
Venture Analysis – Customer Survey Summary & Conclusions
Conclusions
• There is consumer interest in the product.
• Need to investigate methods that might allow much quicker thaw/proof times – perhaps
partial proofing.
• One surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was
still good. This suggests that a partial rise might be an option.
• Really great directions and website are needed to meet different customer’s needs. Some
want detailed directions, some go by feel, etc.
36
Venture Analysis – Targeted Consumer Market
Targeted Consumer
• Demographics
Cook of the family, generally women
Parents in their late 20’s to late 30’s
College educated professionals
Baby Boomers (Early 40’s to early 60’s)
High income households ($50K+)
Semi-rural to rural consumers where bakeries are less accessible
• Psychographics
Believe in a healthy lifestyle which is supported by nutritious foods
Believe in the benefits of regularly purchasing natural/organic products because they are good for
them and good for the environment
Want to feed their family (especially children) a quality product
Want to replace traditional products with healthy alternatives
• Social status
Grew up in a lower to middle income family (more likely to have experienced fresh baked bread)
Middle class values with an upper income
Family is important, but the rest of life gets in the way
37
Venture Analysis – Targeted Consumer Market
Distribution
• Retail Route: Manufacturer → Distributor → Grocer → Consumer
• Food Service: Manufacturer → Distributor → Food service/Restaurant as Consumer
• Internet or Local Sales: Manufacturer → Consumer
Target market’s opinions on current offerings 17:
• Generally satisfied
• “Decent, but not always fresh or tasty – doesn’t last long…artisan breads… are hard to
come by”
• “There’s a lot of choice out there; but not much when it comes to baking at home”
Consumers appear willing to try the product as long as performance concerns can be
mitigated.
Buying decisions are made by the family grocery shopper. Survey results indicate
that:
• Superior flavor is very important
• Natural/Organic, Whole grain, & Freshness are fairly important
• Price & Shelf life are only somewhat important
38
Venture Analysis – Unique Benefits
Major Benefits
• Health
Nutrition - natural/organic ingredients, whole grains, lack of processed ingredients are better for the
body
Taste – like going to a French bakery, not the day-old section
• Emotional
Love – serving quality ingredients to family and friends
Achievement – for those who haven’t had success making own bread from scratch
Convenience – don’t have to make a mess mixing or forming. No flour to clean off the counter. No run
to the store for bread.
Comfort – can enjoy warm fresh bread straight from the oven
Memories - smell of fresh bread baking takes you back to Grandma’s kitchen
• Social
Sustainability – organic ingredients are good for the environment, as is recyclable pans and packaging
Personal Relationships – make friends think you slaved all day and are an amazing baker!
• Service
Helping hand – website and customer support line are like cooking with a professional chef in the
kitchen. You’ll always have answers to problems and questions.
39
Venture Analysis – Unique Benefits
Uniqueness of Benefits
• Rhodes’ frozen bread dough can also provide convenience, achievement, comfort, &
memories benefits
• Organic bread makers, such as Rudi’s, provide health, convenience, and sustainability
benefits
• Only Auntie Carla’s can provide all of these benefits through its quality manufacturing,
packaging, and excellent customer service!
40
Venture Analysis – Sustainable Competitive Advantage
Venture’s resources
• Financial
Low capital requirement to start and run the venture
Founders have personal savings to commit to starting venture
Founders can take personal loans and use credit cards to provide additional financing
Spouses to keep food (in addition to bread) on the table
• Physical assets
Low requirement for plant and equipment
No incoming ownership of physical assets
Rent kitchen space to avoid initial capital requirements
• Recipe
Ability to produce nutritious & tasty product
• Location (Boulder)
Health sensitive consumers who would buy healthy food
Healthy image of the town
Easy access to local Natural Food industry
• New idea
New frozen dough product that is easy to bake
41
Venture Analysis – Sustainable Competitive Advantage
Venture’s capabilities
• Knowledge
Management – Two CU Leeds MBAs!
Product expertise and production experience - Carla
Export experience – Masashi
• Contacts
CU Alumni network, Deming Center, entrepreneurship professors
Access to the knowledge of Boulder’s natural food experts
• Website
Family & Friends to help build a full service website that will help to draw & keep customers
Barriers to entry that venture faces
• Regulatory
Must meet state board of health regulations. This is easy if renting shared/incubator kitchen space that is
already certified.
• Proprietary
Bread is not high technology, so there are no trade copyrights or patents to battle.
• Customer Loyalty
Loyalty to baked bread brands could deter customers from switching to frozen dough option.
Getting customers to look in the frozen section for bread
• Distribution
Have to convince grocers to find room in limited freezer space to carry our product.
Have to convince distributors to carry product line.
• Competitor Response
If a known baked bread brand, such as Rudi’s, were to enter the market, customers would be more
42
likely to buy known over unknown.
Venture Analysis – Sustainable Competitive Advantage
Barriers venture can create
• New distribution and retail system
If we can create our own private distribution or/and retail channel which other manufactures can not
imitate, this would function as a barrier.
• Customer brand loyalty
Because there is currently no retail frozen premium bread dough, customers would currently have no
brand to be loyal to. First entry advantage might deter customers from switching brands if a new
competitor entered the market.
Create a taste that consumers cannot forget
Build consumer trust in the quality of ingredients
Build complete product line – one stop purchase of all frozen baked products
Create website that consumers like to visit, builds camaraderie, and answers all of their questions.
• Trade secrets
Create unique recipes and baking processes– competitors may not be able to replicate that
customer-winning flavor.
43
Venture Analysis – Risks
Marketing
• Will the consumers buy?
With current financial projection, break-even sale volume is about 250-1 lb. loaves per day. Based on
an initial sales estimate of 3 loaves/variety/store per week [based on Jason Vincent interview] and
assuming 4 initial product varieties, product would have to be in 146 stores to reach break even
volume.
If this break-even volume cannot be obtained before savings are depleted, the venture will fail.
Another low-carb diet craze could kill the venture before it gets off the ground.
• Price structure
Every dollar change in sale price has a huge impact on revenue. $1 increase in retail price reduces
break-even sales to 175 units per day. On the other hand, $1 decrease in sale price increases break-
even volume to 450 units per day.
By decreasing retailer’s or distributor’s mark up by 5% (from 35% to 30%), it will decrease break even
sales unit by 15. On the other hand, increasing 5% will increase the break even number by 20 units.
• Distribution and Grocer acceptance
Even with creative marketing strategies, venture is unlikely to achieve necessary volumes if
acceptance in traditional grocery channel cannot be quickly obtained.
Finance
• Assuming founders can finance $100,000, the venture will not last more than three years
without achieving the break even sales volume. Sales must grow above break even number
within three years or the venture needs to be re-financed.
44
Venture Analysis – Risks
Competitors
• If existing well established bakery such as Rudi’s entered the market, consumers may prefer
Rudi’s because of brand familiarity. The venture needs time to create its good brand image
before facing competition.
Economy
• Bread is a commodity product, thus less economic impact on total consumption of bread.
However...
• Consumers may shift to low priced bread in sluggish market.
• High quality, high priced bread is price sensitive.
• The venture cannot reduce price and stay profitable.
45
Venture Analysis – Financial Projections
Operating Income -$77,212 -$38,836 $18,728 General Administration (per month) sq feet price
fixed cost Lease/month $750 750 $1.00
TTL Fixed cost $96,400 $96,400 $96,400 fixed cost HR $6,000 3 $2,000
TTL Variable cost $15,000 $45,000 $90,000 TTL General Admin $6,750
Break-even Revenue $171,759 $171,759 $171,759
Investment
Dough mixer 60qrts $6,000
Freezer 8X10' Walk-in $10,000
Sink counter and other equipment $2,000
TTL Capex $18,000 0 0
Working Capital $2,342 $7,025 $14,050 25 days
Other non-recurring investment $1,000 0 0
TTL Investment $21,342 $7,025 $14,050
46
Venture Analysis - Conclusion
Compelling needs
• Physical need for food
• Physiological need for better ingredients
• Emotional need for increased convenience, connection to loved ones
• Social need for special occasions
Proof of the target market’s interest
• Survey suggests that (potential) consumers are interested.
Benefits
• Frozen bread dough has unique benefit of easy baking at home environment.
Sustainable advantages
• Almost no barrier to entry
• How to create barrier is the key question.
• Opportunity to expand.
Profitability and Investment
• Relatively low investment required
• High gross margin
• Final profitability depends on the sales volume
• Break even sales volume is about 250 loaves per day, can we achieve it?
47
Venture Analysis - Recommendations
48
Endnotes
1 ”Bread, Cake, and Related Products,” Encyclopedia of American Industries. On line Edition, Thomson Gale, 2006.
2 Market Trends: Fresh Bread and Related Products, August 2004, p7.
3 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p102.
6 Market Trend, Fresh Bread and related products, August 2004, p67.
8 ”Global – Bread and Rolls,” Datamonitor industry market research, October 31, 2005.
11 The U.S. Market for Whole Grain and High Fiber Foods, April 2005, p66.
12 ibid, p68.
14 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p89.
16 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p72.
49
Appendix – Contents
50
Appendix 1 – Financial Projection Assumptions
Revenue
• Number of units sold per day (based on what the venture needs to sell)
Year 1 = 50 units per day
Year 2 = 150 units per day
Year 3 = 300 units per day
• Price
$4.00/unit (1 lb loaf) at retail
Other baked premium organic bread = about $4.00/lb
Retailer’s mark up = 35% (see Call Report : Scott Creevy)
Distributor's mark up = 30% (see Call Report : Scott Roy)
Assumed wholesale price = $2.28/unit (1 lb loaf)
COGS - Ingredient costs for basic 1 lb. loaf of organic white or wheat bread:
• 9 oz. Organic flour @ $0.63 to $0.80/lb = $0.47 - $0.60/loaf (probably cheaper at whole sale)
Bob’s Red Mill (www.bobsredmill.com) 25lb at $15.75
Shop Natural (Guisto’s Flour) 50lb at $40.00
• 6 oz. Water @ almost nothing = $0.01
• 0.25 oz. Sea Salt @ $44/lb < $0.01
• 0.1 oz. Yeast @ $2.60/lb = $0.02
• Total material cost = $0.51 to $0.64/loaf
• Total cost (labor included) $1.00/loaf (1 lb)
51
Appendix 1 – Financial Projection Assumptions
Operating expenses
• Sales and Marketing
Sales promotion $400/month (10 free samples per day + $100 printed promotions per month)
Transportation $300/month (1800 miles per month / 15 miles per gallon / $2.5/gallon fuel cost)
Communications $300/month (2 land lines X $50 + 2 mobile phones X $50 + Internet/web $100)
Other expenses $150/month
Total $1,150/month (fixed cost at constant for all three years)
• General & Administration
Bakery space $750/month ( 750 F³ kitchen space at $1 Rent / F³ / month)
Pay check $6000/month ( 3 workers including 2 founders X $2000/month)
Total $6750/month (fixed cost at constant for all three years)
• Depreciation
$16,000 equipment / 10 years life = $1,600 per year
Investment Required
• Capital Expenditures (only required at year 1)
Dough mixer $6000 (used, capacity 60qtrs)
Freezer $10,000 (new, 8 x 10’ walk in)
Other equipment $2000 (used sink = $1000, Used counter and other = $1000)
• Working Capital
Payment to suppliers = cash on delivery ( +0 days)
Payment from retailers = cash by next month day 20th ( -1 day to -50 days )
Average negative 25 days of sales amount
• Other major expenses
Installment of equipments and other $1000
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Appendix 1 - Financial Projection Assumptions
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Appendix 1 - Cost of starting a franchise
• Initial fee
Average Initial Franchise Fee $30,000
Travel & Training Expenses $381-$12,000 average $4,488
Real Estate & Improvements$8,348-$172,022 average $70,586
Equipment $44,341-$140,727 average $78,325
• Opening Inventory
Ingredients & Supplies $2,750-$27,000 average $8,346
Signs $615-$23,793 average $5,953
Grand Opening Advertising $400-$8,689 average $3,495
• Prepaid Expenses
City, County, State, Landlord $400-$21,232 average $6,420
Organizational Costs
Legal, Utilities $425-$42,475 average $10,063
Working Capital (Cash Reserves) $5,000-$70,000 average $12,285
3 Months Rent $4,455-$18,600 average $10,383
• TOTAL ACTUAL INVESTMENT $107,608-$352,322 average $225,682
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Appendix 2 – Customer Survey
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Appendix 2 – Customer Survey
Survey of classmates given “prototype” samples of product to try “It tasted like the
• 4 Women & 1 Male best store-bought
• 3 Loaves of Rye, 2 loaves of sourdough bread or bakery
• Liked – At least 1 was ready to make purchases! bread that I have
the convenience of pan ever had. My
The appearance of the baked loaf husband would like
The flavor: “tasted great”, having hot bread to put in an order
One respondent felt more likely to purchase after trying already!”
Generally thought that a bigger loaf was probably better given thaw/proof time.
• Concerns
Bread took a long time to thaw and rise, takes a lot of planning ahead
ecological impact of disposable pan
• Use
“would purchase the bread for special occasions, like dinner parties”
Good for people who don’t know how to bake
• Suggestions
“consider making bread rings of sectioned bread to speed up the proofing”
“Really soft doughs proof much more quickly than dense wheat and rye doughs”
“to attract attention, I might put seeds on and in some of your breads “
• Conclusions
Need to investigate methods that might allow much quicker thaw/proof times – perhaps partial proofing
One surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was still good.
This suggests that a partial rise might be an option.
Really great directions and website are needed to meet different customer’s needs. Some want detailed
directions, some go by feel, etc.
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Appendix 3 – Competition Matrix
Manufacturer Product Description Quality Taste Visual Appeal Convenience Shelf Life Price Strengths Weaknesses
Frozen white or wheat Medium - simple Medium - thaw and Well known frozen dough "Tastes like
Rhodes Bake-N-Serv bread dough Traditional Low but good bake Long $3.29 for 3 1lb. Loaves brand Wonder Bread"
Medium - thaw and
American Flatbread Frozen pizza dough Natural bake Long $9.99 for 1lb
Prebaked frozen mini- Poor - squished High - bake 20 Poor appearance
Pillsbury loaves Traditional Very Low in transit minutes Long $4.19 for two loaves Household brand and taste
High - bake in 8
Alexia Prebaked frozen rolls Artisan-Natural Medium-High minutes Long $3.69 for 10.5 oz. Trusted name Roll size only
Medium - sliced Medium - must Good for consumers with Not mainstream
Nature's Path Baked, frozen, sliced Organic Vegetarian bread thaw Short $3.79 per 14 oz. loaf allergies appeal
Medium - sliced Medium - must Good for consumers with Not mainstream
Food For Life Baked, frozen, sliced Organic Specialty bread thaw Short $4.79 per loaf allergies, vegetarians appeal
Shelf entry sandwich Medium - sliced
Rudi's bread Organic High bread High - ready to eat Short $3.99 to $4.29 Quality Not fresh baked
Whole Foods Fresh baked, bakery Artisan High High - artisan High - ready to eat Very Short $2.99 to $3.99 per loaf Convenience & Taste Short shelf life
Local bakery
produced artisan
Breadworks bread Artisan High High - artisan High - ready to eat Very Short $3.00 to $5.40 per loaf Very Fresh Short shelf life
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Appendix 4 – Call Reports
Index of Reports:
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