Gourmet Meats

1
Gourmet Meats

• Business Plan for
• Balboa Burgers

Agribusiness Venture Management Ray Lei Biancia
Rolle Kyle Templeton Dean Serdachny
2
Client Info

• Currently producing lean hamburgers on a small
  scale (6 animals slaughtered)
• Hamburgers are incorporated with special family
  recipes developed in the summer of 2004
• Sales are driven by word of mouth and family

3
Industry Info

• Beef Consumption In Canada
• After bovine spongiform encephalopathy (BSE) was
  discovered per capita consumption in Canada
  actually increased
• Before (BSE) 13.5kg/annum per person

4
Industry Info

• After (BSE) 14.2kg/annum per person
• A significant portion of the per capita increase
  was geared to organic and natural beef products
• Few competitors in his market currently

5
Operations Plan

• Incorporation of
• Gourmet Meats

6
Work Plan and Flow of Work
Farms
Gourmet Meats
Processing Facility
Seasoning and Filler Ingredients
Freezer Storage
Bar/Pubs
Local Grocers
7
Working Capital Planning and Management
Direct Materials Cost/box 2006 Production 3100 boxes
Beef Trim 10.30 31,942.00
Ingredients 4.59 14,229.00
Processing 5.64 17,483.00
- Created Labels 0.01 310.00
Trucking - Transport (Saskatoon, SK) 0.24 750.00
Cold Storage Warehouse (Saskatoon, SK) 0.38 1,200.00
Trucking - Delivery To Retailers (Saskatoon, SK) 3.60 11,165.00
Total Materials 24.85 77,033.00
8
Working Capital Planning and Management

• Cost of Goods Sold

Overhead Cost Cost Source
Utilities- Pwr/Heat 400.00 SaskPower
Phone/Fax/Cell 1500.00 SaskTel
Incorporation Fees 1000.00 Gov Sk website
Office Supplies 600.00 Staples
Total Overhead 3,500.00  
9
Working Capital Planning and Management

• Total Cost of Goods Sold

Cost of Goods Produced in 2006 Cost of Goods Produced in 2006
Direct Labour 0.00
Direct Materials 77,033.00
Processing Overhead 3,900.00
Total Cost of Goods Produced 80,933.00
10
Working Capital Planning and Management

• Cash Management
• Minimal requirement necessary
• Initial investment of 15,000
• No large inventories
• No large capital costs

11
Inventories

• Flexible production
• More in winter, Less in summer
• 30 days in average
• Inventories replenished in 4 days

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Accounts Receivable

• Policy
• 15 days credit
• Reason
• Incurring customers
• Small company

13
Accounts Payable

• Larger purchasing options only
• Processing fees
• Trim cost from Natural Valley Farms

14
Cash Conversion Cycle

• Calculated to be 18 days
• Variable with seasonal demand
• Low turn around due to production capabilities

15
Marketing Plan

• PUSH STRATEGY
• PULL STRATEGY

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Product Overview

• The Product
• Hamburgers combined with ingredients for
  flavour
• Four different flavours
• Teriyaki
• Spice
• Honey Mustard
• Original
• Cajun Maple
• Size - 5 oz
• Natural - follows current industry regulation
  standards

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Market Objective

• Focus on pub and grill market
• Target 19-45 year old males
• Promote a differentiated product
• Push strategy
• First step of market penetration
• GOAL Product awareness
• Pull strategy for summer retail
  market
• ie) BBQ season

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Market Analysis

• Market Size
• 36 733 000 lbs of beef consumed in
  Saskatchewan
• 14 693 200 lbs of ground beef consumed in
  Saskatchewan
• 3 367 330 lbs of hamburger eaten in
  Saskatchewan

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Market Analysis

• Market Size
• 3 367 330 lbs of hamburger eaten in
  Saskatchewan
• 14 693 000, 4 oz hamburger consumed in
  Saskatchewan
• 637 500 burgers/ year sold in
  non-franchised pubs and grills throughout
  Saskatchewan

20
Market Analysis

• Market Needs
• Flavour
• Consistent taste
• Cooking characteristics
• no shrinkage

21
Customer Analysis

• Target Market
• Primarily male demographic
• Aged 19-45
• Blue collar workers
• Interested in new experiences and new tastes

22
Competitor Analysis
Companies Supplying Pubs Grills
Prairie Meats Price 0.50 for 4 oz Market Share 40 Low price Centennial Meats 0.96 for 6 oz Market Share 10 Focus primarily on fast food chains
Chef Redi Market Share 10 Local market only Poor promotion Harvest Meats Market Share 5 Concentrated in rural areas and grocery Mitchells Gourmet Foods Price 0.70 for 4 oz Market Share 10 Packaging 4.54 kg case Beef line poorly developed compared to pork products
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SWOT
Strengths Flavours and recipes Unique idea Business flexibility Weaknesses Possible crumbling problems Flat grill incompatibility Low initial capital
Opportunities 1. No other flavoured burgers 2. Joint promotion with establishments through burger nights 3. Homegrown image 4. Natural beef Threats 1. Market is very price sensitive 2. Homemade burgers in establishment 3. Loyalty to existing competition 4. Lack of product diversity
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Key Planning Assumptions

• Beef consumption will not decline dramatically
• Consumers are looking for a consistent and
  flavourful product
• Steady and dependable supply of materials
• 4. Reliability of manufacturing and distribution
  channels

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Business Proposition
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Price

• Target wholesale price
• 1.17/ burger
• final production/logistic costs
• Average wholesale cost
• 4 oz 0.50-0.70/ burger
• 5 oz 0.60-0.70/ burger
• 6 oz 0.90-1.15/ burger

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Place

• Non Franchised bar and grill establishments
• Immediate access to their entire customer base
• Increased demand for flavour
• Ribs, wings
• Reduced advertising costs
• High traffic
• Diverse Crowd

28
Place

• Local Grocery Stores and Gourmet Shops
• Sask Made Store
• Internet sales

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Promotion

• To Consumers
• Table talkers and posters in establishment
• Table talker website promotion
• Sponsor beer and burger nights
• Taste testing

30
Financials
Unit Cost Analysis ( per unit produced/case) 2006 2007 2008 2009 2010
Natural Beef Burger 5oz. 24.85 24.85 24.85 24.85 24.85
Unit Cost of Direct Labour
Natural Beef Burger 5oz. 0.00 0.00 0.00 0.00 0.00
Unit Cost of Overhead
Natural Beef Burger 5oz. 1.26 0.87 0.75 0.66 0.58
Total Unit Cost of Production for
Natural Beef Burger 5oz. 26.11 25.72 25.60 25.51 25.43
Unit Administration Marketing Cost
Natural Beef Burger 5oz. 9.16 7.90 5.81 5.13 4.67
Total Unit Cost
Natural Beef Burger 5oz. 35.27 33.61 31.41 30.64 30.10
Unit Selling Price 35.00 35.53 36.06 36.60 37.15
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Financial Performance
For the year ended Dec. 31 For the year ended Dec. 31 2006 2007 2014 2015
Sales Revenue
Total Revenue 108, 500 121,141 366,673 372,173
Cost of Goods Sold 74,189 87,131 231,873 235,163
Gross Margin 34,311 34,311 134,800 137,011
Expenses
Total Expenses 28,402 26,930 27,448 27,997
Income Before Taxes 5,909 7,079 107,352 109,014
Net Income (Loss) 5,318 6,371 96,617 98,112
Beg Retained Earnings - 5,318 145,650 184,167
Dividends - - - -
End Retained Earnings 5,318 11,690 184,167 195,013

Year-end Cash 160 5,781 142,654 153,490

NPV 104,647
IRR 70.7
ERR 48.9
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Risk Analysis
Revenue/Cost Factor Original value Results in 0 Ending Cash Difference Change
Selling Price 35 34.94 0.06 -0.17
Aero Trucking-delivery to retailers 11,165 11,333 -168.00 1.50
Cajun Maple Sale(unit) 1240 1235 5 -0.40
Natural Valley Trim 31,942 32,109 -167.00 0.52
TML Processing 17,438 17,605 -167.00 0.96
Co-Promotions Nights 8,000 8,178 -178.00 2.23
Demo Product 6,000 6,178 -178.00 2.97
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Financials

• Razor thin margins
• High risk
• Good profit potential
• IRR 70.7
• ERR 48.9
• No Dividends early on

34
QUESTIONS?

• CAN YOUR BUNS HANDLE OUR BURGERS?