Business plan of the coffee roasting company KrasKof

* The calculations use the average data for the World

1. SUMMARY OF THE PROJECT

The aim of the project is the organization of an enterprise for the industrial roasting of green coffee with a view to its subsequent implementation through retail chains, HoReCa networks, into mobile coffee houses, etc. The territorial location of the project is Krasnodar. The trademark of the project is KrasKof.

Recently, coffee has become an increasingly popular drink in Russia, the culture of its use is steadily increasing. In this regard, there is a need for high-quality coffee at an affordable price and with high logistic accessibility. You must also take into account the fact that roasted coffee loses its taste over time, therefore, the fresher it is, the better. In this regard, it is advisable to create a local production for roasting coffee beans.

Table 1. Integrated project performance indicators

Main factorsValue

Discount rate (r), %

five%

Discount rate (r-month), %

0.407%

Payback period (PP), months

28

Discount payback period (DPP), months

29th

Net present value (NPV), rub.

7 690 171

Return on Investment (ARR), %

5.39%

Internal rate of return (IRR), %

3.30%

Profitability Index (PI)

1.79

The analysis of integrated performance indicators, coupled with the prospect of its long-term implementation, shows a rather high investment attractiveness of the project.

2. COMPANY DESCRIPTION AND INDUSTRY

Coffee is becoming an increasingly popular drink in Russia. At the same time, the coffee market in Russia is one of the smallest in volume, but the most dynamically developing. According to Euromonitor International, an analytic company, coffee consumption in the United States in 2013 was 1323 tons, in Brazil - 1174 tons, in Germany - 568 tons, and in Russia - only 221.7 tons. In 2014, coffee consumption in Russia increased by about 6 times, reaching 68% of the total population. At the same time, from 2008 to 2013, coffee sales in Russia doubled.

Historically, instant coffee was the most popular in Russia. Until 2010, its share was up to 85% of total consumption; however, in recent years, the ratio has changed, and is expected to reach 45/55% in favor of the soluble by 2018. The market volume will be 131, 000 tons, according to forecasts by Euromonitor International.

The shift in demand towards grain coffee is due to an increase in consumption culture, as well as due to the popularization of the drink due to an increase in the number of stationary and mobile coffee houses. Partially affected is the entry into the market of large international chain stores. The number of retail outlets selling grain coffee by weight is also increasing.

Despite the relatively high cost of grain coffee, which is almost the highest in Europe, the Russians are very loyal to those brands to which they are accustomed and do not refuse them even with a further increase in price.

Analysis of the regional market (Krasnodar) shows that there are 38 specialized coffee houses and 877 establishments in the city where coffee is on the menu. Given the population of the city of 830 thousand people, the market for the product in question is quite wide.

According to RosIndex, coffee is most often consumed by people aged 35-54, people with higher education or academic degrees, and Russians with a high level of income. In addition, the popularity of drinking coffee among young people under the age of 35 is also growing. Given these data, we can say that Krasnodar is a highly adequate market for this project for a number of the following reasons. The population of the city is constantly and steadily growing, unlike most cities in Russia. According to RBC, in 2013 the city ranked first in the All-Russian rating of cities with the most growing business activity, which indicates a fairly high level of well-being of residents; Krasnodar has the lowest unemployment rate in the Southern Federal District. Krasnodar is the largest industrial and agricultural center.

All these factors make the market in question extremely attractive for the organization of the project. The essence of the project is the purchase of raw green coffee, its preparation and roasting, packaging and wholesale. Project clients include:

- HoReCa establishments - cafes (including coffee houses), restaurants, hotels;

- retail tea and coffee shops;

- mobile coffee houses;

- operators of vending coffee machines.

3. DESCRIPTION OF PRODUCTS AND SERVICES

The main product of the enterprise is roasted coffee beans. At the request of the customer, it can be ground. The company carries out packaging both in standard proprietary packages and in customer packages on request.

Table 2. Varieties of coffee "KrasKof"

No.

Name

Description

one

Bourbon

Botanical variety of arabica. It has a clean, sweet, pleasant aroma. The taste is sweet-bitter, with a slight acidity and an oily consistency

2

Mocha

A kind of arabica. Refers to the highest grades of coffee. It has a subtle aroma and fruity tint. Balanced acidity

3

Maragogype

One of the varieties of arabica. The taste is astringent and bitter, with subtle wine tones. May have pronounced fruity and floral notes.

four

Colombia

Catimor Hybrid bred in Colombia. High acidity and, at the same time, high sweetness, density and purity of the cup

five

Typica

The base grade of arabica. Differs in high quality of a cup, sweetness, purity and body

As the quality of its frying largely affects the quality of the final product, KrasKof pays special attention to the work of its frying machines (roasters), as well as the qualifications of their operators. Each of the offered varieties can be fried either according to KrasKof’s own technology or according to the customer’s recipe at the same wholesale cost of the product. In the first case, the manufacturer is fully responsible for the quality of the product. In the second, the customer bears responsibility, which is reflected in the supply contract.

The priority method of shipment of finished products is pickup. In this case, shipment can be made within 1-2 business days after receiving the order. However, if necessary, the goods can be delivered by transport of KrasKof sales representatives within 5 working days.

By default, KrasKof packs roasted coffee in bags of 5 and 10 kg capacity. At the request of the customer, coffee can also be packed in its branded containers of any volume. The service is free. Also, at the request of the customer, coffee can be ground using an industrial coffee grinder. The cost of the service is 100 rubles. for 1 kg.

Table 3. Purchase and wholesale price of goods

No.

GOODS / SERVICES

COSTS UNITS, rub.

TRADING VALUE, %

UNIT COST, rub.

one

Bourbon

480

100

960

2

Mocha

640

100

1, 280

3

Maragogype

370

100

740

four

Colombia

320

100

640

five

Typica

400

100

800

Total:

4, 420

4. SALES AND MARKETING

The main distribution channels are listed in Section 2 of this business plan. In Fig. Table 1 shows the estimated shares of each channel in the total turnover of the company.

Figure 1. Shares of distribution channels in the company's turnover

Active market processing is carried out directly by the project owner and sales representative. The owner uses his own connections and acquaintances, and also connects to negotiations with key customers. The sales representative spends up to 70% of his working time on the road, conducting initial and ongoing negotiations with customers and potential customers.

During the first year of the project, an active development of the client base takes place. In the future, the bulk of the client structure is made up of loyal customers who do not require significant attention from sales staff.

The order from the client is transferred to the sales specialist, who is located directly in the office, by written request in person, by e-mail or fax. Terms of payment are determined by the owner; for new customers it is 100% prepayment. Subsequently, discounts and deferred payment are possible.

A large-scale advertising campaign does not seem appropriate due to the characteristics of the primary target audience of the project. Information about KrasKof is available in industry catalogs.

Two competitors offering similar products and services are operating in the regional market. The intersection of the assortment by grades is not more than 50%. The pricing policy of competitors is similar, therefore, at the initial stage of the project, a moderate dumping strategy was chosen.

An important competitive advantage of KrasKof is the use of new high-quality frying equipment from the market leader. This equipment allows to achieve high quality of the finished product, as well as minimize the influence of the human factor in production. Competitors use used equipment from Russian and Chinese manufacturers.

The market has no pronounced seasonality. Coffee is consumed in any season. In the summer, however, the market shows some decline associated with the decline in the popularity of hot drinks in the hot season. Nevertheless, cold drinks are also prepared on the basis of coffee, and sales volumes of mobile coffee houses are growing significantly in the summer. A sales plan takes into account all these factors.

5. PRODUCTION PLAN

The RosKof production site is located on the territory of the industrial complex on the southern outskirts of Krasnodar. The technology assumes the use of natural gas, as a result of which the production facility is selected by the presence of a gas pipeline. The need for a production area is 30 m2, for a warehouse - 40 m2.

Manufacturer and supplier of equipment - a large German company, which is a market leader. With the relatively high cost of the roaster (frying unit), it has a number of undeniable advantages. The use of gas, rather than electricity, as in most equipment on the market, allows to achieve high quality grain roasting, uniformity and dynamics. The case of the roster is made of cast iron, which allows to achieve high thermal inertia and significant durability of the unit. Ergonomic controls allow you to adjust the temperature if necessary.

The design of the roaster involves the simultaneous frying and cooling of grains, which significantly reduces the time of the technological cycle. Its duration is 15-18 minutes. After extraction from the roaster, the finished product arrives at the packaging site, and then to the warehouse. An industrial coffee mill is also located on the packaging site.

Since the production cycle is relatively short and the estimated consignments of single shipments are relatively small, there is no need for long-term production planning. Production is carried out in accordance with orders received. A certain amount is produced at the warehouse in accordance with the general structure of sales by grades.

6. ORGANIZATIONAL PLAN

An enterprise does not imply a complex organizational structure. Leading functions are carried out directly by the project owner. The subordination of all employees also occurs to the owner.

Market processing is carried out by a sales representative with a personal car used for the purposes of the enterprise under a lease agreement. Also, if necessary, the sales representative can deliver small orders to customers in accordance with their own travel schedule. Applications from customers are accepted by a sales specialist who issues invoices, monitors their payment, and transfers applications for production.

The main qualification requirements are presented to the roster operator. Since this niche is quite narrow, the presence of experience with the roster is not critical. The experience of work in production, preferably food, as an equipment operator, the presence of a sanitary book, responsibility, and the absence of bad habits are important.

7. FINANCIAL PLAN

The financial plan is designed for five years and takes into account all possible factors of influence: seasonality, competition, sales structure, etc. All types of costs are calculated. Under variable costs (Table 3) refers to the purchase value of raw materials. All other costs relate to the fixed item. Depreciation is calculated on a straight-line basis for a period of 5 years.

Total investment costs amount to 4.3 million rubles, of which the entrepreneur’s own funds are 1.0 million rubles. The remaining amount is attracted in the form of a bank loan for a period of 36 months. The loan is repaid by annuity payments, credit holidays - three months.

Table 4. Investment costs

No.

NAME

AMOUNT, rub.

The property

one

Warehouse and office equipment

100, 000

Equipment

2

Set of equipment

2 100 000

Current assets

3

Current assets

1, 100, 000

four

Raw material purchase

1, 000, 000

Total:

4 300 000

Own funds:

1, 000, 000.00

Required borrowed funds:

3 300 000

Rate:

18.00%

Duration, months:

36

Table 5. Fixed costs

No.

NAME

AMOUNT PER MONTH., Rub .

one

Rent

60, 000

2

Advertising

35, 000

3

Communal payments

20, 000

four

Telephony and Internet

5, 000

five

Depreciation

35, 000

6

Selling expenses

20, 000

7

Management expenses

10, 000

Total:

185, 000

When calculating revenue, the seasonal factor was taken into account: in the summer, there is a slight decrease in demand. The achievement of planned targets is expected for 9 months of the project.

8. EVALUATION OF EFFICIENCY

The effectiveness of the project is evaluated based on the calculation of integral performance indicators. The change in the value of money over time is taken into account, for which a discount rate is introduced. For this project, it was chosen at the level of 5%, since the project involves the production of goods known to the market using well-known and proven technologies, implementation is carried out on the formed market, competition and risks for the project are low.

The payback period of the project is 28 months, the discounted payback period is 29 months. Net present value (NPV) - significantly exceeds the amount of investment costs; the internal rate of return (IRR) is slightly lower than the barrier rate, but the difference is not significant; profitability index (PI)> 1. Two of the three main indicators indicate project efficiency; IRR is slightly lower than the required indicator, which requires some attention from the investor when deciding on the allocation of funds. Net profit for the fifth year is 4.0 million rubles.

Based on a comparison of the effectiveness of the project in various taxation options, it was decided to use a simplified taxation system with the object “income minus expenses”.

A full overview of integral indicators is given in Table. one.

9. RISKS AND WARRANTIES

To ensure the high competitiveness of the project and guarantees of achieving its goals, it is necessary to take into account all possible risks and provide measures to prevent them. Risk factors and measures are given in Table. 6.

Table 6. Risks and measures to prevent them

Risk factor

Probability of occurrence

Severity of consequences

Prevention / Response Measures

Entering the market of a new competitor

Low

Low

Ensuring customer loyalty from the first shipments; flexible pricing

Modernization of equipment park of existing competitors

Medium

Medium

Providing additional competitive advantages due to delivery conditions, an individual approach to each client, offering additional services

Reduce coffee consumption by the population

Low

Medium

Ensuring maximum liquidity of assets, minimizing receivables

Raw material price increases

Medium

Medium

Ensuring the availability of alternative suppliers; fixing prices in a long-term supply contract

In general, the risks of the project can be assessed as low, which increases its investment attractiveness.

10. APPLICATIONS

Five-year production plan and key financial indicators of the project

Denis Miroshnichenko

(c) www.clogicsecure.com - a portal to small business business plans and guides

08/18/2019

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