Business Plan_Bangla Drinks

8/2/2019 Business Plan_Bangla Drinks

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BUSINESS PLAN

INVESTMENT OPPORTUNITY PROFILE FOR

MINERAL WATER IN

BANGLA DRINKS LTD.

February 28, 2012

SUBMITTED TO

FAROQUE AHMED KHAN FCA

CHARTERED ACCOUNTANTOCTOKHAN CHARTERED ACCOUNTANTSDhaka, Bangladesh

BY

Rashiduzzaman Khan Dipto

ACA Trainee

&

Amzad Hossain Sumon

ACA Trainee

Disclaimer

All material included in this document is based on data/information gathered from various sources and certain

assumption. Due care and diligence has been taken to compile this document. The document may contain

human, mechanical error or non accuracy of the information at the source. No liability for error, or omission or

unintentional misrepresentation will be accepted. We reserve the right to make correction and changes

wherever desired in this document or its subsequent versions.


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PROJECT EXECUTIVE SUMMARY

PROJECT BRIEF

This proposed project presents an investment opportunity for establishing a bottled

water plant along with jar water plant for providing pure drinking water. The proposed

product line will consist of bottles of 0.5 liters and jar of 18.90 liters. In the initial

phase of the project only 0.5 liters and 18.9 liters jars will be introduced in the local

market. After successful introduction of the new brand of bottled water the product

line may be extended to 1 and 2 liters bottles.

The market for mineral water has been showing a mushroom growth trend over the

last few years. The countrys market is very small on a global scale and was

estimated at 33 million liters a year by the end of 2008. The last three years have

shown more growth and the market have been estimated to grow 70 million liters and

the per capita consumption is 0.5 liter. The annual growth rate for bottled water is

40%. According to a study conducted in 2001, Bangladesh registered the highestgrowth of 140% in 2000 amongst the countries in Asia and Middle East region. The

potential markets for bottled / mineral water consist of city dwellers, MNC employees,

tourists, foreign tourists and foreigners working in Bangladesh, hotel industry,

patients (bottle water is also used to avoid the possible consumption of contaminated

water) and travelers. Moreover, the bottled / mineral water has been emerging as a

daily preference of the elite class.

The project can bottle 7,000 Gallons of water per day; the size of bottles will be 0.5 Lt

and 18.9 Lt Jar to make the water convenient and attractive to end users. The sale at

100% capacity utilization is Tk 21,534,426. The project would be set up in Ashulia

near Uttara (Dhaka) where all the required infrastructure and amenities are available.

Sales Tk 21,534,426

Gross Profit Margin 61%

Payback period 9 Years

Net Profit Margin before tax 2%

Internal Rate of Return ___ %

Foreign collaboration sought 0 Joint Venture 0 Management expertise

0 Loan 0 Technical expertise

0 Market access 0 Marketing expertise

0 Sub contracting 0 Technology transfer

0 Buy back arrangement 0 Joint R&D

0 Equipment purchase 0 Other :-

S t u d i e s A v a i l a b l e 0 Feasibility study 0 Project description

0 Other Specify

D a t e : ______________


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PROJECT RATIONALE:

Ashulia and its surrounding areas is a fertile land where ground water is hygienic and

arsenic free which is purify able, there is ample opportunity to bottle this water locally

and for export. As the awareness of water born diseases is increasing coupled with

modern trends of living the market of bottled mineral water is growing faster

than the supply. There is thus the opportunity for investment in this sector. The

market for purified bottled / mineral water is a growing market. Usually the top target

market for bottled mineral water follows the perception. The stronger the distribution

the more successful will be the new brand. The local market is huge in Bangladesh

but there is a lot of opportunity to export water. While exports are very lucrative

there will be implementation of WTO, for open and competitive commodity

pricing and tough market competition.

MARKET OPPORTUNITYThere are around 15 players in the bottled water sector and more than hundreds of

jar water plant manufacturers but very few well branded companies is in the Jar

Water Market. According to the industry sources, the number of bottlers scales up

well above 30 during summer season due to increased demand for drinking water.

Bangladeshs bottled water market comprises of two main segments i.e. retail market

and bulk market. The retail market consists of 0.5 liter, 1.5 liter, 3.1 liter and 5.0 liter

capacity PET bottles. The bulk market consists of home and office delivers in 5 gallon

jars or 18.9 liters jars.

The process of purified bottled water manufacturing consist of collecting water

from a suitable source, filtration, demineralization, blending with salts, aeration,

testing for standards conformation, bottling and packaging. But today there are more

than 15 brands of drinking water available in the market thus showing a substantial

growth by the industry.

Mineral Water Consumption in Bangladesh

Year Quantity Value (0000 Tk)


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1992-93 694,249 3,188

1993-94 814,338 5,384

1994-95 1,660,951 10,741

1995-96 2,328,460 12,856

BUSINESS PLANHigh quality goods to taste bottled water will be processed/produced for the end user.

The plant will start its operation from 80 % capacity and finally reach 100 % capacity

by the end of 5 years. There is also anticipated growth of 10 % in sale price of the

product. As the expertise is developed the product can also be exported.

PRODUCT SALES

Plant Capacity liters per day 7000 Gallons

Production per year (liters) 92,73,250Ratio of 18.9 liter Jar and 0.5 liter bottle 93:07

Production of 0.5 liter bottle 648000 bottles

Sale price of 0.5 liter bottle (Tk) Tk 8 /=

Capacity utilization in first yr 80%

Sales price growth rates 10%

Production capacity utilization growth rate 10%

Maximum Capacity utilization 97%

Sales 100% capacity Tk 2,15,34,426 /=

RAW MATERIALS

There are many sources of ground water in Ashulia, the project shall be located at site

where require water is available.

PRODUCTION PROCESS

The first step for setting up a water purification plant is the analysis of source of

water. After the chemical analysis, the specifications of the purification plant are set.

In the purification plant, source water is stored in the feed water tank, passes through

the sand filter for preliminary water filtration.

Water then passes through the dosing pump-I where chlorine is added to kill the

germs in the water. After the chlorination, water passes through carbon filter. It

helps in the maintenance of proper odor and taste of the water. It also removes

chlorine from water. Water is then passes from dosing pump-II, where Sodium Meta

Bisulphate is added. It helps in dechlorination of water.


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Water is filtered next and passes through dosing pump-III, where anti scallant is

added. It prevents scaling of membrane from calcium, magnesium and biological

growth. Water then passes through reverse osmosis module. This stage of the

process makes water clear from all the contaminations and minute particles. Water

then passes through dosing pump-IV, where minerals are added for taste

development.

After this stage, water undergoes Ultra Violet treatment to avoid any contamination

from bacteria and other micro organisms. Water then passes through automatic

washing, filling and capping plant. Here water is filled into bottles. After filling bottles

are taken into the warehouse or shipped to the retailers. The complete process flow

diagram is as under.

DISTRIBUTION CHANNELSBranding and marketing of bottled water is as essential as water for the survival of

the human body. The traditional marketing tools include site advertisement, TV and

print media advertising and brochures. This study allocates 04% of the revenue for

advertising and promotional purposes. Apart from the traditional marketing tools,

this study suggests to focus more on other marketing magnets that include

interactive marketing, interactive marketing may include educating the general public


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about the importance of water and its daily consumption requirements for human

body through the participation in seminars and in general public gatherings (e.g.

College and University gatherings). One of the marketing options is to sponsor public

events like cricket matches or hospital campaigns, distributing free brochures about

water and its daily consumption, water requirements in different age brackets. The

interactive marketing may be designed through seminars and workshops aboutthe daily human consumption requirements and diseases originating from the lack of

pure water. Overall marketing strategy may change with the change of target market.

A market research study is recommended to design the different dynamics of

marketing before launching the new brand.

Marketing expense has been included in the total project cost and it has been

estimated around Tk 4,80,000 annually. The entrepreneur may decide to increase or

decrease the amount of marketing expense depending upon this choice of promotion

activities and type of media used. Following table gives the breakup of the marketingexpense.

TV Advertisement 40%

SITE Advertisement 10%

Newspapers 38%

Magazines 4%

Point of Sales Marketing 8%

Distribution is very important for the success of the new brand. The stronger the

distribution the more successful will be the new brand. The distribution strategy

should be designed after a careful study of the market for going for regional

distribution or for nationwide distribution.


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HUMAN RESOUCE REQUIRMENT

The following requirement of staff along with their levels and monthly salary is

foreseen for this project.

Designation No. of Staff Annual Monthly

Admin and Marketing 1,809,8

40190,

820

Administration 504,

00042,

000

Manager 1 108,000 9,000

Accountant 196,0

008,00

0

Director 1120,0

0010,0

00

Other Staff 3180,0

005,0

00

Marketing 1,305,8

40108,

820

Area sales Manager 2192,0

008,00

0

Sales Supervisor 2 144,000 6,000

Sales Rep. 12717,8

404,9

85

Driver 3252,0

007,0

00Marketing and

Advertisement 480,000 40,000


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Factory salaries (Labassistant)

591,000

49,250

Specialist 1300,0

0025,0

00

Lab Manager 1123,0

0010,2

50

Lab Assistant 2168,0

007,0

00

Direct wages 2,614,2

62217,

855

Production Supervisor 1134,4

6211,2

05

Washer 9567,0

005,2

50

Loader 9604,8

005,6

00

Plant helper 6576,0

008,0

00

Filler 7462,0

005,5

00

Others 5270,0

004,5

00

PROJECT FINANCIALS

OPERATIONAL DATA

The plant will be operated in the first year at 90% capacity and as the expertise

develops the 100 % pant capacity will be attained by the end of fifth year.

FIXED COST

The fixed cost is expected to be Tk 2.78 Crore as described below.

Land 50,00,000

Building / Infrastructure 350,666

Machinery & Equipment 1,21,00,231

Vehicles 48,00,302

Marketing Equipment 31,00,012

Capping Machine 25,00,000

Total Capital Costs 2,78,51,212


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WORKING CAPITAL

The investment in the initial working capital is of Tk. 45, 36,194 /=

OVERHEAD COSTS

In the first year following overhead cost are estimated.

Rent of cover van 179840

Salary(Selling)2289840

Conveyance

286515

.2

Vehicle maintenance723331.2

Gas of vehicle118241.6

Depreciation of vehicle andmarketing equip

550016.4

Traffic

Entertain 52416

Stationary 127296

Photocopy

35642.

88Cleaning of motor 42820

Inspection of office Tips 513056

Interest on loan6752480

Plastic bottles 972000

Financial Plan

The financial plan is to borrow Tk 3 Crore now as a long-term loan from a Bank, at an

interest rate of 18% along with a capital of Tk 87 lac which is equal to the Net Worth

to buy machineries and extend building which is suitable to our needs. We will repay


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this loan within nine years from the cash flow of the business. We expect to have a

cash flow from the very 1st month of the business operation. This investment will

allow us to start our business which include producing: Jar water along with Mineral

water which will give us a further edge over the local competition and enabling us to

further expand into our target market, while increasing recognition of our name and

services.

From the very start, management will start building the business and taking it to the

highest level. There is a huge demand of drinking water in Bangladesh, and other

than that the export opportunity is huge, so it is expected that the management will

experience good time in the recent years. The management aim to be a leader in the

mineral water market.

Important Assumptions

This business plan was developed for Bangla Drink Ltd. assuming the following:

Steady growth from good management, barring any unforeseen local or

national disasters such as the economic slowdown seen by most of the country

following the September 11th, 2001 tragedies.

An adequate loan amount to allow for initial implementation of plans.

Competition and buying patterns remain similar to those used for forecasting.

Existing customer base maintained.

Market research is on target and current (received from different state

organizations).

New customers will be gained through direct sales and advertising.

Long-term interest rate will be no more than 18%.

Income tax rate is 35%.

Sales tax rate is 15%.

Projected Profit and Loss

Outlined below and in the following table and chart, are some of the intrinsic facets of

the projected profit and loss for Bangla Drinks Ltd. Cost of sales reflects our cost to

produce mineral water. Gross margin will be at an attractive position and will continue

to be stable throughout the years forecasted. Payroll expenses currently include the

salary and wages of the employees in the management, sales agents, operators and


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labourers and also directors. Further details are available in our Personnel table

(above). Advertising and marketing expenses (news ads, magazine ads, etc.) are

projected to be stable. Depreciation forecasted includes building and machineries in

the mill(details provided in appendix). Depreciation is based on reducing balancing

method at 10%. Fuel costs are projected to be stable as the capacity of the mill is

stable. But if the management again on the 2nd or 3rd year expand their capacity,then fuel along with all other costs will go up. Assuming that 100% of production will

be sold immediately and capacity being stable all other expenses are kept stable, but

with the sales percentage fluctuating and capacity increasing or utilization not being

100% of capacity, the scenario will differ. The scenario analysis is explained later on.

(Where we have seen that the company makes good profit and balance sheet is

healthy enough).

BANGLA DRINKS (PVT.) LTD.INCOME STATEMENT

FOR THE YEAR ENDED 31st DECEMBER 2012

Note Units(Jar) SPPB Amount Sales: 179,

357 45 8,071,065306,

643 27 8,279,361Pet bottle 648,

000 8 5,184,000Total sales 21,534,42

6Cost of goods sold 1 8,322,667Gross Profit 13,211,75

9Less:Expensers

Rent of cover van 2

179,840

Salary(Selling) 2 1,809,840Marketing Exp (Adv) 2

480,00

0Conveyance 2

286,51

5Vehacle maintainance 2

723,33

1Gas of vehicle 2

118,24

2Depreciation of vehicle andmarketing equip

2

550,016

Traffic 2

89,856

Entertain 3

52,416

Stationary 3

127,296


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Photocopy 3

35,643

Cleaning of motor 4

42,820

Inspection of office Tips 4

513,056

Interest on loan 7 6,752,480Plastic bottles 8

972,00

0Total Expenses 12,733,351Net profit before tax 478,40

8Tax 107,67

2Profit after tax 370,735.84

Projected Cash FlowThe cash flow projection for Bangla Drinks Ltd. shows that provisions for ongoing

expenses are adequate to meet the needs of the company, as the business generates

sufficient cash flow to support operations and future expansions. Cash flow

projections are critical to our success. The annual cash flow figures are included here

and in our Cash Flow table. Detailed monthly numbers are included in the Appendix

Cash Flow shows the purchase of long-term assets as follows:

PROJECTED CASH FLOW FOR THE YEAR ENDEDON 31 DEC 2012 2012 Particulars TakaA Cash flow from operating activities:

Net Income/(Loss)478,

407.97

Depreciation 1,443,563.57

Accounts Receiveable-

Accounts payable-

Total cash flow from operating activities1,921,

971.54


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B Cash flow from investing activities:

Land-

Building-

Machinery-

New Machine (Pet Bottle)-

Marketing Equipment-

Vehicle-

-C Cash flow from financial activities:

Bank loan(1,469,8

31.01)

Directors Loan-

Total Cash flow from financial activities:(1,469,8

31.01)

Total cash flow for the year(A+B+C)452,

140.53Add:Opening cash and bank balance on01.01.2012

4,536,194.80

Closing cash balance on 31.12.2012 4,988,335.33

PROJECTED CASH FLOW FOR INVESTMENT 01/01/2012 Particulars Taka

A Cash flow from operating activities:Net Income/(Loss)

Depreciation

Accounts Receiveable(54,5

07.83)

Accounts payable(126,4

71.76)


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Total cash flow from operating activities(180,9

79.59)

B Cash flow from investing activities:

Land-

Building-

Machinery(8,766,7

14.00)

New Machine (Pet Bottle)(2,500,0

00.00)

Marketing Equipment(1,514,0

00.00)

Vehicle(3,155,0

00.00)

(15,935,714.00)

C Cash flow from financial activities:

Bank loan26,736,4

57.41

Directors Loan(6,083,5

69.02)

Total Cash flow from financial activities:20,652,8

88.39

Total cash flow for the year(A+B+C)4,536,1

94.80Add:Opening cash and bank balance on01.01.2012 -

Closing cash balance on 31.12.20124,536,1

94.80

Projected Balance Sheet

The Balance Sheet shows healthy growth of net worth, and strong financial position.

The monthly estimates are included in the Appendix. The balance sheet for Bangla

Drinks Ltd is quite solid. We do not project any trouble meeting our debt obligations.


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Our management is strong enough and more than capable of keeping the business on

track for total repayment of any obligations (loans). Our major capital asset (the

property and affixed buildings and other mill equipments) is valued at about Tk

27,851,212.72. Our current assets include Raw Material which is to be purchased at

the beginning of business amounting to Tk 40,000 along with a provision of spending

Tk 1.5 lac per month for Electricity consumption. We will have a solid startingbalance in the company account. This will allow us to start the business with a

security nest and will allow us to grow our cash balance at a steadier pace. Our

projected balance sheet is presented in the table below.

PROFORMA BALANCESHEET

ParticularsOn

01/01/2012

(Budgeted afteracquiring) on01/01/2012

On 31/12/2012

Non current Assets11,915,498

.7227,851,2

12.7226,407,6

49.15

Land5,000,000.

005,000,00

0.005,000,00

0.00

Building350,666.

38350,66

6.38333,13

3.06

Machinery3,333,517.

3212,100,23

1.3211,374,217

.44New Machine (Pet Bottle) 2500000.00 2350000.00

Marketing Equipment1,586,012.

403,100,01

2.402,790,01

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Vehicle

1,645,302.

63

4,800,30

2.63

4,560,28

7.49

Current Assets120,00

0.004,710,7

02.635,162,8

43.16

Cash in hand -4,536,19

4.804,988,33

5.33

Accounts Receivable120,000.

00174,50

7.83174,50

7.83

Total Assets12,035,498

.7232,561,9

15.3531,570,4

92.31Capital

Authorized Share Capital30,000,000.

0030,000,00

0.0030,000,000

.00

Paid up capital(10000 Shares@100)

1,000,000.00

1,000,000.00

1,000,000.00

Profit and loss and appro. Acc.1,561,915.

351,561,91

5.352,040,32

3.33

Directors Loan6,083,569.

02 - -

Total Capital and Reserve8,645,484

.372,561,9

15.353,040,3

23.33

Non Current Liabilities3,263,542

.5930,000,0

00.0028,530,1

68.99


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Bank Loan3,263,542.

59 - -

nbl30,000,00

0.0028,530,168

.99

Current Liabilities126,47

1.76 - -

Accounts Payable 126,471.76 - -

Total Liabilities3,390,014

.3530,000,0

00.0028,530,1

68.99

Total Capital and Liabilities12,035,498

.7232,561,9

15.3531,570,4

92.31

Net Worth8,645,484

.382,561,9

15.353,040,3

23.32

Business Ratios

Bangla Drinks Ltd. projected business ratios are provided in the table below.

APPENDIX


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Business Plan_Bangla Drinks

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