1.0 Executive Summary
Starlife Healthy Beverages provide the market with specialized products for industrial, commercial, and domestic use. The products include distilled water, purified water, resin, and water filters. The company will capitalise on the market gap in the provision of niche products and customer specific commodities. The company’s marketing strategy will revolve around the provision of segregated regeneration services to the market, as well as the speedy delivery and response to clients’ requirements.
The company’s primary objectives are:
- To meet customer needs and demands in the industry.
- To establish a distribution network capable of pushing sales to achieve a finished inventory turnover of under 48 hours
Starlife’s mission is to stratify the purified water market by demand and qualities required in each field and meet the demands of all fields resulting from the stratification. The company intends to achieve this while improving the quality of products and focusing on the niche market demands.
The company will rely on the following key points to achieve its objectives:
- Excellent quality: industries demanding high purity levels in their water, such as hospitals have very low tolerance levels for even the slightest levels of impurities.
- Speedy delivery: delays in delivering the product could result in loses or extensive damages for our clients. As a result, the company has a response team that is capable of attending to three urgent calls in the shortest time possible.
- Distribution: the involvement of high profile retailers and distributors to market the products means the company is able to access the market effectively through experienced professionals in the field.
Starlife Healthy Beverages will take over small assets from a predecessor company, Sparkle WB Limited that is relocating to another state for the convenience of its owners. In doing so, Starlife avoids costs associated with the purchase and installment of new equipment as well as acquire an efficient bottling facility and convenient location for its operations. The company also takes over the company’s customer base, acquiring a ready market for its products.
Starlife Healthy Beverages will be a limited liability company and will operate under the requirements stipulated in law for such a company. It will purchase assets belonging to Sparkle limited. Starlife will be a partnership of three individuals and three businesses. The businesses expressed interest to join the founders of the company and partner in its operations. In the proposed blueprint, James Brown is the major shareholder owning six hundred shares of the company while Maria Garcia owns four hundred shares. Robert Johnson, who is the final individual shareholder, owns two hundred shares in the company. Roll It Logistics, Trotters Incorporated and Value Retailers each hold one hundred shares of Starlife Healthy Beverages. The individual shareholders bring with them vast experience to the company, each of them having been in the beverages industry for more than fifteen years. The three corporate shareholders bring with them expertise on branding, marketing and distribution in the American market.
Despite the buyout of an existing company, the venture is a start-up due to the uncertainty associated with market takeovers. Furthermore, an examination of Sparkles financial statements reveals certain misrepresentations in asset valuations and expected lifespan. However, parties representing both parties are working to resolve the standoff amicably and arrive at a reasonable price.
The company’s offices and marketing office are located along Cape Breton .NS Canada. The offices will also feature a retail shop that will enable customers enjoy speedy delivery due to the close proximity to residential areas as well as the industrial park. Bottling will take place on the rear side of the facility as it has ample space for installation of equipment and storage. Technologies involved in the process are discussed under the technologies section in chapter 3.
The subsequent section addresses product description on a detailed level. Services provided to the client include installation of the purified water storage system, delivery of product upon depletion, servicing the storage and supply system as well as amending the system to accommodate the clients changing requirements.
Section 3.4 on technology offers a detailed explanation on the purification of water through deionization.
The company will offer both segregated products and bulk products. Furthermore, the company will look to satisfy the needs of niche market customers as it seeks to position itself as a major player in the non-alcoholic beverages bottling industry in the region. Servicing will be done in four tank sizes; 4.0, 3.0, 2.0, and 1.4 cubic feet capacities. The tanks will contain with mixed resin, cat-ion regenerated, anion regenerated resin, and carbon filtered water.
The availability of portable refillable containers will be beneficial to the company and the client in many ways. The client does not incur costs in setting up an in house purification plant. Instead, the client rents the tanks from the company at a minimal fee. Setting up a deionization plants requires a lot of space while a portable tank can be installed anywhere and connections set up to the point of need. The client does not deal with chemicals and waste associated with the purification process. Finally, the client can make changes easily on the quality of water needed in case requirements change or diversify. Benefits for the company include the fact that employees to maintain and repair client in house equipment are unnecessary. Furthermore, customer relations and loyalty is enhanced is the customers rely on the company for refills. Customer retention levels should be high as the company can easily amend the storage system to accommodate changes fronted by the client depending on changing needs.
Only of big company, Waba Limited is provides large-scale production services to the local population in the metropolitan area. The rest are small-scale producers lacking firm footing in the market and adversely affected by the influence of Waba in the market. Despite these companies operating in the area for several years now, none is able to provide regenerated water to the market. They all focus on the large-scale production of distilled and deionized water ignoring needs of niche clients. As a result, niche clients such as hospitals and laboratories buy their water from companies operating outside the region.
Market prices are $32 per cubic foot and $43 for the cat-ion/anion regeneration and mixed bed products respectively. The instrumental market thrust for Starlife will be the relatively cheaper products and their superior quality. Furthermore, the lack of a segregated regeneration in the market provides a ready market for the unique product.
The vast experiences of the founding partners of the company provide an excellent platform for the identification of sources of input, hardware and other necessities. Tanks supplied to clients are readily available in most stores and large-scale purchases are heavily discounted.
Other bottling requirements are available from multiple sources at reasonable prices. However, a contract with one of the suppliers for consistent supplies is likely to provide a favourable price for Starlife.
Untreated water contains various impurities ranging from organic compounds, ions and ionic substances and sediments that make it unsuitable for many uses. The purification process is meant to achieve different levels of purity in water depending on industry requirements. Different levels of filtration remove undissolved impurities in the water while ion exchangers remove dissolved substances.
Cations are positively charged impurities commonly caused by the presence on compounds such as iron, calcium, sodium, magnesium, potassium, and manganese. Anions on the other hand are impurities caused by negatively charged compounds such as chloride, carbonate, and bicarbonate. The following is a short description on the process of removing the undesired substances from the water:
- Untreated water passes through a carbon filter to remove organic substances such as sand particles and chlorine. The carbon filter is sometimes replaced by ultra violet light and reverse osmosis process to achieve the same result.
- The filtered water now goes through a cation resin to remove cations dissolved in it. The resin is mainly small bids fitted inside a tank that contain excessive hydrogen ions. The hydrogen ions replace the positively charged ions in the water resulting in an acidic solution.
- The cation free water now passes through an anion resin to remove the unwanted negatively charged ions dissolved in it. The anion resin contains excessive negative hydroxyl ions that replace those present in the water. As a result, excess hydrogen cations from the previous process merge with the excess hydroxyl anions from this stage to form water.
- To achieve high purity levels demanded by some industries, a mixed ratio resin removes the remaining traces of the unwanted dissolved substances.
- The processes continue until the resin balls expand indicating depleted effectiveness in removing ions from the water. At this point, production ceases until regenerated resins replace the now ineffective resin.
- Regeneration of the cation resin takes place in an acidic solution. The acidic solution removes the positively charged ions acquired from the water and is then drained and flushed to remove the excess acidity. A caustic solution regenerates the anion resin by eliminating the negative ions acquired. Draining and flushing occurs to eliminate adverse effects that could result from residual caustic solution in the resin.
- Once regeneration of all resins is complete, purification can continue.
Equipment used in the regeneration process is expensive and the service will be outsourced for the time being. Upon achieving certain levels of production and revenue generation, the company will have built the capacity to perform all processes internally.
3.5 Future Products and Services
In future, the company looks to diversify the range of bottled products presented to the market. Prospective ventures are in the processing of flavoured water and carbonated drinks. Furthermore, the company aspires to venture in the supply and distribution of filters and packaging products. The company will offer service, maintenance, and repair of water treatment facilities at the client’s location. The service will be available to clients of the firm as well as independent contractors.
In addition to providing these services, the company looks to venture in the supply and installation of any water related facility. These include domestic and commercial water pumps, hot water systems, and drainage systems.
The total demand for purified water in the metropolis region is between 300,000 and 450,000 cubic ft. of resin annually. Starlife has the capacity to meet five percent of the total demand in the market.
Due to the unique nature of the products manufactured in the company, the market is rife for the penetration of starlife’s products. As a result, the company will focus on the high purity market in its quest to get a footing in the industry
Market for the products comprises different industries with a wide range of needs. Industries such as the cleaning industry only require high purity standard water for rinsing purposes only. Highly purified water reduces the ability of substances to dissolve in the water, making forming difficult thus being unfavourable for cleaning.
The market is segmented based on purity levels required with pharmaceuticals, hospitals, and laboratories demanding the purest possible quality. The demand for such high quality is because the presence of impurities and other substances in the water can alter test results and endanger people depending on the institutions effectiveness.
The following is a comprehensive list of potential customers and specific use of the product:
- Dialysis machines in major hospitals and stand-alone clinics.
- Laboratories and pharmaceutical companies
- Semiconductor manufacturers and makers of electronic components.
- Machine tools and galvanized parts for various uses.
- Car washes
- Foods and beverages industries
- Cosmetics industry
- Electroplating industries
- Ceramic and pottery industries
- The textile industries
- Railway high pressure boilers and cooling systems
Figure 4.1 Market Segmentation
4.2.1 Market Trends and Growth
Marker purified water continues to grow at an annual rate of over ten percent, and indicator of growing confidence and sustainability in the investment. Furthermore, more industries are resulting in outsourcing some of their services as training produces highly specialised staff. Demand for bottled and pure water has increased steadily from close to eight hundred thousand in 2009 to well over one million in 2013. Projections indicated the market should sustain the growth as demand continues to increase.
Figure 4.2: Market Growth
- Industry Analysis
- Competition and Buying Patterns
Most of the competition will come from Waba Limited, a company that has failed to diversify its product portfolio to accommodate varying industry demands. Other competitors include US Filters and a small manufacturing company with no firm grip of the market. The different purification processes also culminate in an industry serviced by varied products depending on brand. Buying patterns are as varied as the products themselves, resulting in a vibrant market for the products. The varied buying patterns are characteristic of an experimenting market, indicating non-satisfactory products.
Although the company’s main focus is the large consumer market, efforts to establish a regional distributorship network are underway. The distribution network will comprise of supply companies that will deliver the product to small-scale consumers and other retailers.
The company’s ability to either offer the finished product or install facilities for purification for the client will give the company a competitive edge over other industry players. Furthermore, the fast and effective response to customer queries will also work to build the company’s reputation and customer confidence. The segregation of customers resin to deliver the exact product they require will also be a major selling point for the company.
The company’s marketing strategy will encompass the range of products and quality available to the customer.
- Positioning Statements
The main positioning statement for the firm is the ability to serve a diversified client base. The ability to meet all needs and requirements when it comes to water purity will serve a great deal in enhancing this statement.
- Pricing Strategy
The company will take advantage of the lack of competition in the segregated regenerated resin in the region to charge relatively higher prices for the commodity. The mixed bed product is likely to be the highest revenue generator for the company.
Wholesalers and distributors will enjoy reduced prices with discounts of up to thirty percent on the market price. The reduced market price will be an incentive for the distributors to push for sales.
- Promotion Strategy
The prices offered to the wholesalers indicated that the primary means of promoting the products is using the well-established distribution network accessible to the distributors. Furthermore, the distributors are educated on the superiority of the product compared to other similar products in the market. Distributors trained and equipped with skills to handle the client’s needs benefit from the acquisition of essential skills in customer relation and product promotion as well as the favorable profit margins offered to them due to the incentives.
5.3 Sales Strategy
The strategy on sales is to focus on the easily acquirable clients who prefer the segmented regeneration and the portable resin market.
- Sales Forecast
Production will start at twenty percent of the production capacity and grow with demand. Using the purchased equipment, the company can produce three hundred cubic ft. per month. The plant capacity currently stands at one hundred cubic ft. per day. Sales of the segregated products are expected to reach 500 cubic ft. in six months and continue to grow steadily to a production capacity of eighty percent in a years’ time. Growth from 80% to full capacity is expected to be gradual over a period of three years.
Projected unit prices for the products are as follows:
- $65/cubic ft. of mixed bed product
- $57/cubic ft. of anion/cation
- $45/cubic ft. of bulk mixed bed product
- $35/cubic ft. of anion/cation
For customers who pick up from the company premises, the prices will be as follows:
- $42/cubic ft. of mixed bed product
- $38/cubic ft. of anion/cation
- $28/cubic ft. of bulk mixed bed product
- $22/ cubic ft. of bulk cation/anion
The service costs for the three products are $10.75, $8.75, and $10.25 per cubic ft. of anion, cation, and mixed bed products.
The financial and operational blueprint of the company makes various assumptions. If the assumptions do not deviate from the actual figures then the following financial conditions will prevail.
The company does not have any expansion plan that it cannot finance and as a result additional funding in form of loans or additional investment into the company are not required for the moment.
The business plan assumes taxes levied by both the federal and state governments will remain at their current rates for the next three years.
It is further assumed that the market and prices will not be affected by adverse events such as economic recessions, civil unrest, and strife in the labour market.
Any business that seeks to transition to profitability must be aware of its breakeven point. The calculations for the breakeven point depend on the fixed costs and the contribution per unit produced i.e.
Breakeven = Total fixed cost
Contribution per unit
= 1250 units
This means that in after six months of operations, the company will not be turning in a profit. However, by the end of the year at eighty percent capacity the company will be making a profit.
Figure 6.2 Projected Sales For One Year
Source: Author (2014)
The company is expected to make an initial profit of about $300,000 in its first year of operation. The profits are expected to increase slowly within a spam of three years. Following sustained growth over the three year period, the company will seek funding in form of a loan or additional investments from the current shareholder to expand the facility, increase capacity and generate more income.
Table 6.1 Statement of Cash Flows for the Year
|Cash flows from operating activities|
|Profit before taxation||297886|
|Working capital changes:|
|(Increase) / Decrease in trade and other receivables||-40000|
|(Increase) / (Decrease) in inventories||-25000|
|Increase / (Decrease) in trade payables||15000|
|Cash generated from operations||250386|
|Income taxes paid||113196.68|
|Net cash from operating activities||137189.32|
|Cash flows from investing activities|
|Business acquisitions, net of cash acquired||-150000|
|Purchase of property, plant and equipment||-300000|
|Net cash used in investing activities||-450000|
|Cash flows from financing activities|
|Proceeds from issue of share capital||1500000|
|Net cash used in financing activities||1500000|
|Net increase in cash and cash equivalents||1187189.32|
|Cash and cash equivalents at beginning of period||0|
|Cash and cash equivalents at end of period||1187189.32|
Souce: Author (2014)
Figure 4.1 Market Segmentation 9
Figure 4.2 Market Growth 9
Figure 6.1 Market Segmentation 14
Figure 6.2 Projected Sales For One Year 19
Table 6.1 Statement of Cash Flows for the Year 20