anti nicotine gum marketing plan
DESCRIPTION
Marketing planTRANSCRIPT
Marketing Plan of the Product
Submission Date: April 8, 2012
Institute of Business Administration
Jahangirnagar University
Quit Smoke Smartly!
Marketing Plan of the Product
Nicotino: Quit Smoke Smartly!
Course Title
Introduction to Marketing (MKT 201)
Submitted to:
Arafat Rahman
Course Instructor
Submitted by:
Group-9: Chrysanthemum
20th Batch, BBA
Date of Submission
April 8, 2012
Group Members Are
Name Roll
Patrick Kanny Sarkar 801
Ashiqur Rahman Sarker 811
Md. Nafeesur Rahman Khan 821
Md. Ashiqul Islam 1332
Kaiser Mahmud 1983
Saddam Hossain 2137
iii
Letter of Transmittal
April 4, 2012
Arafat Rahman
Assistant Professor
Institute of Business Administration,
Jahangirnagar University,
Savar, Dhaka-1342.
Subject: Submission of a report on marketing plan of the product “Nicotino: Quit Smoke
smartly!”
Sir,
We are presenting a report on the marketing plan of our product “Nicotino: Quit Smoke
Smartly!”
In this report we have explained our business idea for this product and showed the marketing
plans and strategies we may take. We have also included our estimated Balance sheet details
for the next few years. In making this report, we had to take help from the various sources of
internet, different institutes and class lectures of our course teacher. We are grateful to them
for extending generous help.
We are pleased to be granted this vital opportunity and grateful for your versatile assistance.
We hope that our work will please you. We will be available in the presentation for further
explanations.
Sincerely,
__________________
Md. Nafeesur Rahman Khan
On behalf of the Group
Chrysanthemum
20th Batch, BBA
iv
Acknowledgement
First of all, I would like to thank the almighty Allah.
I express my heartiest gratitude to our course instructor Arafat Rahman, Assistant Professor,
Batch Manager of 20th batch, Institute of Business Administration, Jahangirnagar University
for his valuable guidance, scholarly direction and unconditional support during the
preparation of this report. I have learnt a great deal from him.
I would also like to express my sense of gratitude and appreciation to Dr. Md. Baktiar Rana,
Director, Institute of Business Administration, Jahangirnagar University.
Finally I would thank my group members for their kind help and assistance in preparing this
report.
v
List of illustrations viii
Executive summary ix
1.0 Introduction 1- 2
1.1Product offerings 1
1.2 Features and unique selling proposition 2
1.3 Business model 2
2.0 Goals and objectives 3
2.1 Vision 3
2.2 Mission statement 3
2.3 Short term goals 3
2.4 Long term goals 3
2.5 Objectives 3
3.0 Competitor analysis 4- 5
3.1 Competitive force analysis 4
4.0 SWOT analysis 6- 7
5.0 Marketing strategies 8- 11
5.1 Target customer 8
5.2 Market positioning 8
5.3 Product strategy 8
5.4 Pricing strategy 8
5.5 Distribution strategy 9
5.6 Marketing communication strategy 10
6.0 Project implementation schedule and organizational structure 13- 15
Table of contents vi
6.1 Project implementation schedule 13
6.2 Organizational structure 13
7.0 Sales promotion 16-19
7.1 Distribution channels and process 16
7.2Marketing organization structure 17
7.3 Advertising and promotional campaigns 17
8.0 Financial analysis and projections 20- 25
8.1 Financial statement assumptions 20
8.2 Accounting assumptions 20
8.3 Financial assumptions 20
8.4 Initial investments 21
8.5 Projected income statement 22
8.6 Projected balance sheet 23
8.7 projected cash flow statement 24
8.8Break even analysis 25
9.0 Contingency plan 25
10.0 Appendix 26- 27
vii
List of illustrations
Illustration No. Illustration name Page No.
1 Problems to prospect 1
2 Business model 2
3 Porter’s five force analysis of Nicotino 5
4 Nicotino’s SWOT analysis 7
5 Product positioning map 8
6 Nicotino’s product offering 9
7 Wholesale and Retail price of Nicotino products 10
8 List of product distribution zones 10
9 Pull strategy of Nicotino 11
10 Project implementation schedule 12
11 Organizational structure of Nicotino 13
12 Staffing needs 14
13 Distribution Channels 15
14 Marketing organization structure 16
15 Advertising and promotional campaign schedule 17
16 Three year marketing budget 18
viii
Executive summary
The following market plan has the potential to be the basis for a new product which can help
the country to ensure a smoking free environment. This product, Nicotino, is a nicotine
chewing gum, which helps smokers give up smoking by suppressing their craving for
cigarettes with almost harmless nicotine.
Smokers take more than 3000 type of harmful chemicals in their body with each smoke puff
they inhale. Nicotine is one of them that creates craving in smokers body. When it is
swallowed as nicotine chewing gum, it goes to liver and is dissolved as harmless chemical.
Thus it enables smokers to gradually give up smoking by chewing these gums for few
months.
Nicotino will be launched in the market at the end of December 2012. It will be launched in
the market in three flavors- original, cinnamon and fresh mint. Each packet will contain 30
pieces of gum. It will operate in the Dhaka city for the first three years. The city is divided
into 8 zones covering 16 areas. The target customers are middle class and high end based on
income. Target segment is divided into two groups on age basis, 20-35 and 35-55 years.
Nicotino will use pull strategy to make people aware of its products. It will be positioned as a
product of moderate price and high quality. There will be various types of promotional
campaign to make people aware of the product brand and the health benefit it offers. The
marketing tools will include TVC, FM radio ads, newspaper ads, 24/7 help desk etc.
Nicotino’s marketing budget is estimated in affordable method which will enable it to
continue the huge sales promotion schedule.
Nicotino products are produces in its own production plant in Sirajganj because of
convenient transport and availability of raw materials. Finished product will be distributed
with help of local distributors.
The estimated project cost is BDT 8,493,500 in FY 2012-13 which is financed by 69% equity
from partners and 31% debt from lenders. This report contains projected income statement,
balance sheet, cash flow statement and break even analysis for FY 2012-13, 2013-14 and
2014-15. The projected financial statements portray liquidity and solvency of the firm.
ix
1.0 I N T R O D U C T I O N
Nicotino is the country’s first ever nicotine gum brand which will enter the market as a
Nicotine Replacement Therapy (NRT). This gum will be an alternative nicotine source for the
smokers and will also compel them to give up smoking and thus nicotine and other 3000 plus
harmful chemicals. According to Global Adult Tobacco Survey 2009, around 41.3 million
people of our country use tobacco in form of cigarette. For this around 57000 people die
every year due to smoke related diseases. Also, according to World Health Organizations
survey of 2004-2005, low income households of our country spend around 15% of their
income in tobacco products, which thus reduces private savings. Nicotino identifies these
problems as opportunity and combines two solutions into a single direction which is
producing a chewing gum that reduces the nicotine craving of the smokers by supplying very
small amount of nicotine and ultimately directing them to give up this habit.
1.1 Product offerings
Nicotino original- Original sweetened nicotine gum.
Nicotino flavored- Nicotino fresh mint (fresh mint flavored gum) and Nicotino
cinnamon (cinnamon flavored gum).
Nicotino will launch its products in 2 small packet sizes: 30 pieces and 60 pieces. These
packs will be released into market containing 2mg strength nicotine gum.
Solution to smoking problem
Solution to health hazard
Nicotin gum
Increasing rate of smokers Increasing death rate due to smoking
Unique product for Bangladeshi market
Illustration-1: Problems to prospect
Page- 1
1.2 Features and unique selling proposition
Nicotine gum is a totally new concept in Bangladesh.
Nicotine gum is a commercially and technically viable smoke quitting solution for the
smokers of our country.
Nicotine gum helps smokers quit cigarettes within maximum 6 months, generally in
2-3 months.
No artificial sweetener, color, flavor will used when producing Nicotino.
1.3 Business Model:
Nicotino’s business model is entirely production and manufacturing-based. Nicotino’s
production process transforms and adds value to the ingredients and produces non-flavored or
flavored nicotine gums. Nicotino will:
Produce gums in its own production plant using eco-friendly production process.
Sell products in 2 small packet sizes (30 and 60 pieces) containing 2mg strength
nicotine gums.
Following is the business model of how Nicotino will make money:
Gum ingredients
Nicotino firm
Nicotin gum
Valued customer
Money
Illustration-2: Business model
Page- 2
2.0 G O A L S A N D O B J E C T I V E S
2.1 Vision
Nicotino’s vision is to create a smoking free Bangladesh to create a healthy nation.
2.2 Mission statement
Nicotino wants to offer its nicotine chewing gum to help the smokers give up smoking habit
while using most efficient and state- of- the- art technology in production operation. Nicotino
aims at establishing eco-friendly work environment and providing better employee incentives
as it continues to expand its business.
2.3 Short-term goals:
To offer quality products at a fair price to capture potential market share.
To create a demand for nicotine chewing gums as a solution for tobacco use quitting
process.
To persuade the target customers regarding the benefits of using nicotine gums as a
NRT for cigarettes which will bring familiarity among customers.
2.4 Long-term goals:
To expand its operation beyond Dhaka within the year 2015 and further goes for
export.
To set up new industrial unit in the west region of Bangladesh by the year 2018.
To enlarge its product mix by adding nicotine lozenge and nicotine patch product
lines.
2.5 Objectives:
To attain 20% growth rate by the year 2014.
To attain net profit margin of 25% in year 2017.
To repay loans by the year 2020 and lever up the firm with 25% debt by the year
2025.
Page- 3
3.0 C O M P E T I T O R A N A L Y S I S
Nicotino is the first production company in this country which is going to introduce tobacco
users to Nicotine replacement therapy. That means no other company in this country offers
nicotine gums for smoking substitution. It implies that Nicotino is going to enter the market
as the only one of its kind. Thus Nicotino will have no competitors in this country until the
time when-
The existing domestic pharmaceutical companies decide to include this product line
in their product mix.
Other multinational companies such as GlaxoSmithKline, Aventis or Pfizer decide to
launch their NRT products in this country.
3.1 Competitive forces analysis:
Porter’s five forces analysis has been conducted to evaluate competitive edge of Nicotino
from its potential or existing competitors. The analysis shows:
Bargaining power of suppliers is high because there are not a lot of suppliers who can
supply necessary raw materials.
Bargaining power of buyers is low because the consumers don’t have other options,
but it is essential for Nicotino to keep a moderate price to attract new customers.
Threat of new entrants domestically is low as the raw materials are not easily
available and there hasn’t been any other company in the past whose market operation
could be monitored.
Threat of substitute is very low also.
The intra-industry rivalry is domestically very low as Nicotino is the first company to
produce this product.
Page- 4
The following illustration shows the summary result of Porter’s five forces analysis of
Nicotino:
Burgaining power of suppliers
Burgaining power of buyers
Threat of new entrants
Threat of substitute products
Intra industry rivalry
High
Low
Low
Low
Low
Illustration-3: Porter’s five force analysis of Nicotino
Page- 5
4.0 S W O T A N A L Y S I S
Strength:
Positive internal factors that Nicotino uses to accomplish its goals and objectives are
Nicotino is the first nicotine chewing gum brand of the country. That’s why it enjoys
the first mover’s advantage in the market.
The nicotine chewing gum option is commercially and technically the most viable
Nicotine Replacement Therapy for Bangladesh.
The employees are given favorable work environment and it helps to create employee
loyalty.
The management team is comprised of efficient and dynamic persons.
It will face less government regulations due to its business intention to reduce the
smoking habit in society.
Weakness:
Negative internal factors that inhibit the accomplishment of Nicotino’s goals and objectives
are
Nicotino’s product distribution is highly dependent on dealers.
Nicotine gum making process is highly dependent on other ingredients. The
disruption of those may hamper production. Also a small error can create hazardous
consequence.
Nicotino has no established brand or image. So it may need aggressive promotion to
create brand awareness among customers.
Opportunity:
Nicotino can take advantage of two major market opportunities
There are increasing rate of voice in the nation against smoking habit and its health
hazard. Recent data shows that alone in Dhaka city, 72% of the smokers are willing to
quit cigarettes but are failing to do so. They can be potential customers.
Page- 6
Government has banned smoking in public places. This regulation helps to attract
customers to our product to help them in quitting cigarettes.
Threats:
Nicotino will face three main threats as it is introduced to the market
The level of acceptance by people is not reasonably certain.
Economic recession may lessen the purchase power of potential customers.
As in this country, Nicotino is in the introduction stage of its product life cycle, the
production company may have to face losses in early stages.
Strengths
First movers advantage being unique product
Commercially and technically viable NRT
Subject to fewer government regulations
Weaknesses
Distribution highly depend on dealers Any small error in production process
can hamper production hugely Need aggressive advertisement to
create brand awareness
Opportunities
Increasing rate of smokers willing to quit cigarettes
Government regulation against smoking compelling smokers to NRTs
Threats
Uncertain acceptance level Decreasing purchase power of
potential customers due to recession Production may face losses in early
stages
Illustration-4: Nicotino’s SWOT analysis
Page- 7
5.0 M A R K E T I N G S T R A T E G I E S
Making people aware about nicotine chewing gums and its benefits.
Focusing price unique selling propositions while developing marketing campaign
Building brand proposition to different consumers according to their perception (e.g.;
Nicotino as cigarette expense saver for middle class consumers, health preserver for
high end consumers).
Creating customer loyalty and making customer delight by proper quality assurance
campaign.
5.1 Target customer:
Geographic location: Dhaka city for first 3 years
Demographic:
1. Social class—middle class and high end consumers.
2. Age— 20-35 and 35-55 are two prospective buyer segments for flavored gum
and original gum respectively.
Prospective buyers: Around 540,000 ( 30% of Dhaka city’s total cigarette smoking
population fall under Nicotino’s target customer segments)
5.2 Market positioning
Nicotino positions itself in the market on
the Basis of its moderate price and the
health benefits the target customers can
receive by consuming this product to help
them give up smoking. The product
position map here shows the unique
position Nicotino will have relative to
some cigarette brands.
Harmless to health
Hazardous to health
Low price
NicotinoMarlboro
High price
Gold leaf
DunhillB&H
Page- 8
5.3 Product Strategy
Nicotino offers two basic types of products: original and flavored. The pack sizes of
Nicotino Original is 30 and 60 piece gums per packet. Nicotino Flavored offers 2 flavors
(fresh mint and cinnamon) with pack size of 30 and 60 piece gums per packet. All these gum
are offered in 2mg strength nicotine gum. Nicotino uses state-of-the-art technology for
packing its offers. The following table illustrates Nicotino’s total product offering-
Nicotino Original Nicotino Fresh mint Nicotino Cinnamon
Gum strength 2mg 2mg 2mg
Piece per pack 30 60 30 60 30 60
The shelf life of Nicotino is 30 months for both original and flavored gum. If the nicotine
gum becomes popular among the target customers, then Nicotino may decide to launch two
more product lines that include nicotine patch and nicotine lozenges.
5.4 Pricing strategy
As Nicotino is a unique as well as a new product in the country’s market, we have decided to
use the market-skimming pricing strategy for the product. The reasons behind using this
strategy are:
68.6% of current smokers, aged 35-55, are looking for means to give up smoking.
Thus there are enough buyers who will pay high price for the product.
As the product is totally new for Bangladesh market, competitors are unlikely to
emerge in the market easily and undercut the high price.
Illustration-5: Product positioning map
Illustration-6: Nicotino’s product offering
Page- 9
Nicotino will be introduced to market at Tk.195 wholesale / Tk. 240 retail price for 30 pieces
gum packet. For 60 pieces gum packet, the price is estimated Tk.390 wholesale/ Tk. 480
retail price.
The following price list shows the wholesale and retail prices of Nicotino products:
Nicotino Original Nicotino Fresh mint Nicotino Cinnamon
Piece per pack 30 60 30 60 30 60
Wholesale price (BDT) 195 390 195 390 195 390
Retail price (BDT) 240 480 240 480 240 480
5.5 Distribution strategy
The production of Nicotino will be done in the own operational plant in Sirajganj because the
availability of raw-materials as well as the convenient transport and communication.
Nicotino uses a simple distribution channel with zone-wise distributors. The Dhaka city has
divided into 8 different zones covering 16 areas. Their list is given below:
Illustration-8: List of product distribution zones
Illustration-7: Wholesale and retail price of Nicotino products
Page- 10
Zone Covering areas
Zone-1 Mirpur, Pallabi
Zone-2 Cantonment, Kafrul,
Zone-3 Mohammadpur, Dhanmondi
Zone-4 Ramna, Tejgaon
Zone-5 Gulshan, Uttara
Zone-6 Lalbag, Kotwali
Zone-7 Demra, Sutrapur
Zone-8 Sabujbag, Motijheel
Finished Nicotino products come directly to a Dhaka city warehouse from the plant. Sales
team will use firm’s covered vans to distribute the product to the dealers. It will use different
specific day for specific zone. Then the secondary distribution channel led by the dealers
distributes the product by using their own resources. Nicotino will also make strategic
alliance with super stores and educational institutes’ canteens to sell its products.
5.6 Marketing communications strategy
Nicotino uses pull strategy as its promotion mix strategy which is spending a lot on
advertising and consumer promotion to build up consumer demand. It makes the promotion
mix efficient enough to activate customers to ask the retailers for the product. Here is a
graphical view of the pull strategy:
Nicotino’s marketing communication mix or promotion mix includes all the typical elements
like advertising, sales promotion, public relation, personal selling and direct marketing.
Here’s the detail:
Advertising:
Electronic media advertisements, such as television commercials, FM radio
commercials.
Print media advertisements, such as newspaper ads, posters and leaflets.
Point of purchase advertisements, Shelf space advertisements.
Sales promotion:
SMS contest
Price discount at special occasion
Nicotino Distributors and retailers
Customers
Illustration-9: Pull strategy of Nicotino
Order Demand
Marketing activities
Page- 11
Public relation:
“Buzz marketing”—by using opinion leaders (doctors).
Written articles about awareness of nicotine gum and its benefits.
Written features in lifestyle pages of newspapers.
Sending press release about products.
Arranging seminars under “Anti- tobacco awareness campaign.”
Personal selling:
Temporary selling booth at super stores, hospitals and campus.
“Nicotino quality assurance campaign”— a tour to production plant to know about the
eco-friendly production process.
Direct marketing:
E-mail marketing, web marketing
Page- 12
6.0 P R O J E C T I M P L E M E N T A T I O N S C H E D U L E
A N D O R G A N I Z A T I O N A L S T R U C T U R E
6.1 Project implementation schedule
The project starts at April 2012 and the commercial launch is on January 2013. The 6-month
project implementation schedule is as follows
July’12 Aug’12 Sept’12 Oct’12 Nov’12 Dec’12 Jan’13
License and approval
Product development
Land, building
Machine purchase
Installation
Premise beautification
Pilot Production
Quality testing
Commercial operation
6.2 Organizational structure
Illustration-10: Project implementation schedule
Page- 13
At the initial phase, the operation of Nicotino is monitored by six department heads
categorized as finance, human resource, manufacturing, marketing, research and
development, procurement and storage. The head of the departments are taken from the
partners and requirement for labors, supervisors and managers are fulfilled from outsource.
Following is the organizational chart of Nicotino:
At the initial phase, the operation of Nicotino is monitored by six department heads. The
needs of staffs can be illustrated below based on the organizational structure:
2012-13 2013-14 2014-15
Finance unit
Head 1 1 1
Manager 1 1 1
Staff 3 3 3
NICOTINO
Head of human
resource
Head of Finance
Head of marketing
Head of Procurement
Manufacturing manager
Head of manufacturin
g
Staff
Marketing manager
HR managerFinance manager
Head of R&D
Storage manager
R&D manager
StaffStaff Supervisor Supervisor Supervisor Staff
Staff
Illustration-11: Organizational structure of Nicotino
Staff
Page- 14
Human resource unit
Head 1 1 1
Manager 1 1 1
Staff 3 3 3
Marketing unit
Head 1 1 1
Manager 3 3 3
Supervisor 4 4 4
Staff 16 17 17
Manufacturing unit
Head 1 1 1
Manager 1 1 1
Supervisor 3 3 3
Staff 12 13 13
R&D unit
Head 1 1 1
Manager 1 1 1
Staff 6 7 7
Storage unit
Head 1 1 1
Manager 1 1 1
Supervisor 1 1 1
Staff 5 6 6
All the staffs are permanent and recruit by giving monthly wages
The production unit needs extra staffs each years due to process more raw-materials
The staffs are giving all privileges stated in “Bangladesh Labor Code 2006.”
Illustration-12: Staffing needs
Page- 15
7.0 S A L E S P R O M O T I O N
7.1 Distribution channels and process
The distribution channel of the Nicotino can be easily shown in the following figure:
As it is shown in the graph, the retail distributors and dealers can place order by using order
form or through internet. The customers can place orders only through the website . The
distribution process goes as the following:
Finished Nicotino products are transported from the Sirajganj plant to a warehouse
that is situated in Dhaka.
Nicotino uses intensive distribution strategy, which means that this product will be
available in all the outlets on basis of demand by dealers and consumers.
Our product representatives will deliver the finished products to super stores, drug
stores and departmental stores. They may use the firm’s covered vans to do this.
Specific day for specific zone are to be assigned, so the distribution operation may
continue systematically.
Retailers will then sell the products to the valued customers.
We will provide a 24/7 call center. Also retailer survey will be conducted quarterly by
the marketing team to know the first hand information of the customers.
Nicotino
RetailerNicotino
Consumer
Consumer
Website
Website
Order form
Illustration-13: Distribution channels
Page- 16
7.2 Marketing organization structure
Nicotino’s head of the marketing department, chief marketing officer holds overall
responsibility for all of the company’s marketing activity. The following figure shows the
structure of eight personnel marketing organization-
7.3 Advertising and promotional campaigns
Nicotino’s nicotine gum will be first launched in the market in January 2013. Following is
the summary of the advertising and promotional campaign during the first year of Nicotino’s
product:
In January, we will start advertising for our product with the help of newspaper ads
and creating Buzz by providing samples to selected product reviewers, opinion
Chief Marketing
Officer
Advertising Manager
Promotion Manager
Sales Manager
Advertising Analyst
Regional Sales
Promotion Analyst
Regional Sales
Illustration-14: Marketing organization structure
Page- 17
leaders, and in its case, the renowned doctors of our country. Newspaper ads will
continue whole year. Also our marketing staff will use direct marketing by working
with retailers to explain nicotine gum’s health benefit and advantage.
There will be television commercials which we will launch at the month of March.
These commercials will create brand awareness among people faster. This will
continue throughout the whole year.
In May we will arrange SMS contest. We will also distribute new point of purchase
and shelf space ads. There will be also FM radio advertising.
In July we will hold internal contest among sales persons and the retailers offering
prizes and discount to those who will be able to sell most products in their zone
during the four week period.
We will launch create our own website and start online ads this in August.
In October, there will be a discount offer for the four week period.
In December we plan to roll out a massive advertising campaign. We will use
celebrity voices telling how Nicotino helped them stop their smoking habit.
The following schedule shows one year plan of our advertising and promotional campaign:
Jan ‘13
Feb’13
Mar’13
Apr’13
May’13
Jun’13
July’13
Aug’13
Sep’13
Oct’13
Nov’13
Dec’13
News paper ads
Direct marketing
Television ads
SMS contest
FM radio ads
Point of purchase ads
Contest among retailers
Website and online ads
Discount offer
Advertising using celebrities
Page- 18
Following is the three year allocation of our marketing budget at affordable method:
2012-13 2013-14 2014-15
Advertising 2,983200 5,146,400 5,146,400
Sales promotion 150,000 200,000 200,000
PR and personal selling 1,146,600 933,600 1,233,600
Direct marketing 20,000 20,000 20,000
Total 4,300,000 6,300,000 6,600,000
Illustration-15: Advertising and promotional campaign schedule
Illustration-16: Three year marketing budget
Page- 19
8.0 F I N A N C I A L A N A L Y S I S A N D
P R O J E C T I O N S
8.1 Financial statement assumptions
Total original and flavored nicotine gum production proportion is 50:50.
The wages of production staff increased by BDT 300 yearly started from BDT 4200.
Wholesale price of both original gum and flavored gum is BDT 6.5/ piece.
Salaries of employees increased by BDT 1000 yearly.
Marketing and promotion expense is the highest indirect expense and the marketing
budget is calculated using affordable method.
Office rent includes the rent of Dhaka office and warehouse.
Accounts receivable is 10% of sales revenue each year.
Accounts payable is 35% of the raw materials cost.
8.2 Accounting assumptions
Depreciation policy is straight line method.
Depreciation rate is 5% for long term assets.
Inventory valuation is done by FIFO method.
Tax rate is assumed to be 40% on net income before tax which is payable annually.
8.3 Financial assumptions
The firm’s initial investment is BDT 8,493,500 which is financed by 69% equity and
31% debt.
The cost of capital or discount rate is assumed to be 20%.
Interest for loans is 15% per annum repayable annually.
Page- 20
8.4 Initial investments
Loan repayment schedule
Page- 21
Amounts in BDT
Startup Expenses:
License and approval 52,000
Patent and trademarks 25,000
Product development cost 64,000
Infrastructure development 327,500
Others 45,000
Total startup expenses 513500
Startup Assets:
Land and registration 722,500
Building 600,000
Machinery and equipment 4,302,600
Vehicle 606,300
Cash requirement 1,698,600
Other short-term assets 50,000
Total startup assets 7,980,000
Total Requirement 8,493,500
Means of finance Amount in BDT % of Total
Equity 5,870,775 69%
Debt 2,662,725 31%
Loan taken ( in BDT) 2,622,725
Date of loan taken July 1, 2012
Repayment years 10
No. of installation per year 1
Interest rate 15%
Periodic loan repayment 522,583
Period Beginning Balance Loan Repayment Interest Principal Ending Balance
1 2,622,725 522,583 393,409 129,174 2,493,551
2 2,493,551 522,583 374,033 148,550 2,345,000
3 2,345,000 522,583 351,750 170,833 2,174,167
4 2,174,167 522,583 326,125 196,458 1,977,710
5 1,977,710 522,583 296,656 225,927 1,751,783
8.5 Projected Income Statement
2012-13 2013-14 2014-15
Operating revenue
Sales revenue 15,200,000 41,800,000 51,300,000
Less: Cost of goods sold 8,232,000 20,739,500 24,166,100
Gross Margin 6,968,000 21,060,500 27,133,900
Less: Operating expenses
Salaries 825,000 1,782,000 1,914,000
Marketing expenses 4,300,000 6,300,000 6,600,000
Office rent and utilities 210,000 420,000 480,000
Depreciation 275,445 275,445 275,445
Insurance and others 210,000 220,000 225,000
Total operating expenses 5,820,445 8,997,445 9,494,445
Income from operations 1,147,555 12,063,055 17,639,455
Less: interest expense@ 15% 393,409 374,033 351,750
Net income before tax 754,146 11,689,022 17,287,705
Less: income tax @ 40% 301,659 4,675,609 6,915,082
Net income after tax 452,488 7,013,413 10,372,623
Estimation of cost of goods sold
Page- 22
Page- 23
2012-13 2013-14 2014-15
Purchase of ingredients 4,390,000 10,820,000 12,070,000
Transportation cost 550,000 1,100,000 1,400,000
Packaging cost 1,520,000 4,180,000 5,130,000
wages 756,000 1,782,000 2,073,600
utility 960,000 2,700,000 3,300,000
Other direct expenses 56,000 157,000 192,500
Cost of goods sold 8,232,000 20,739,500 24,166,100
8.6 Projected Balance Sheet
2012-13 2013-14 2014-15
Cash 2,082,550 4,668,825 9,664,310
Accounts receivable 1,520,000 4,180,000 5,130,000
Inventory 3,800,000 9,500,000 10,450,000
Other current assets 64,229 3,266,461 8,767,107
Total current assets 7,470,779 21,615,287 34,011,418
Long term assets 6,231,400 6,231,400 6,231,400
Accumulated depreciation 275,445 550,890 826,335
Total long term assets 5,955,955 5,680,510 5,405,065
Total assets 13,426,734 27,295,797 39,416,483
Accounts payable 2,881,200 7,258,825 8,458,135
Other current liabilities 1,728,720 4,355,295 5,074,881
Total current liabilities 4,609,920 11,614,120 13,533,016
Long term liabilities 2,493,551 2,345,000 2,174,167
Total liabilities 7,103,471 13,959,120 15,707,183
Paid up capital 5,870,775 5,870,775 5,870,775
Retained earnings 452,488 7,465,901 17,838,524
Total equity 6,323,263 13,336,676 23,709,299
Total liability and equity 13,426,734 27,295,797 39,416,483
8.7 Projected Cash flow Statement
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2012-13 2013-14 2014-15
Cash flow from operating activities
Cash received from buyers 13,680,000 37,620,000 46,170,000
Cash paid for cost of sales (8,232,000) (20,739,500) (24,166,100)
Cash paid to employees (825,000) (1,782,000) (1,914,000)
Cash paid for promotion (4,300,000) (6,300,000) (6,600,000)
Cash paid for rent and utilities (210,000) (420,000) (480,000)
Cash paid for other purposes (210,000) (220,000) (225,000)
Cash paid for interest (393,409) (374,033) (351,750)
Cash paid for income tax (301,659) (4,675,609) (6,915,082)
Net cash provided by operating activities (792,067) 3,108,858 5,518,068
Cash flow from investing activities
Cash paid for startup assets (6,281,400) 0 0
Cash paid for startup assets expenses (513,500) 0 0
Net cash provided by investing activities (6,794,900) 0 0
Cash flow from financing activities
Cash received from loan term loan 2,622,725 0 0
Cash received from paid up capital 5,870,775 0 0
Cash paid for loan payment (522,583) (522,583) (522,583)
Net cash provided by financing activities 7,970,917 (522,583) (522,583)
Net increase in cash 383,950 2,586,275 4,995,485
Cash balance at the beginning of the year 1,698,600 2,082,550 4,668,825
Cash balance at the end of the year 2,082,550 4,668,825 9,664,310
8.8 Break even analysis
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2012-13 2013-14 2014-15
Total costs 14,445,854 30,110,978 34,012,295
Per unit selling price (BDT) 6.50 6.50 6.50
Break even selling unit 2,222,439 4,632,458 5,232,660
30 piece /packet 74,081 154,416 174,422
9.0 C O N T I N G E N C Y P L A N
Nicotino will use tight control measures to closely monitor Quality and consumer
satisfaction. It will enable us to react quickly in correcting problems that may occur. If there
comes any crisis that pushes Nicotino to exit the market, then we have the following
strategies to lessen the risk-
Firm’s primary exit strategy is converted into private limited company from
partnership firm to reduce capital problem (if occurs) and skill managing.
Firm’s secondary exit strategy will be to convert the product from nicotine chewing
gum to a usual chewing gum. This will lessen the risk of being dissolute.
10.0 A P P E N D I X
Page- 26
Nicotino’s product offerings
Nicotino Drug facts
Quit Smoke Smartly!
Page- 27
Ingredients Purpose source
Nicotine Polacrilex Stop smoking aid Nicotine compound, solid,
n.o.s. UN1655
Chewing gum base,
containing butylated hydroxy
toluene (E321)
Carrier of ingredients and
mouth freshener
Produced from chicle or
rubber
Sorbitol Sweetener Obtained by reduction of
glucose
Sodium carbonate, anhydrous Reduces acidic taste Produced from soda ash
Sodium bicarbonate Works as mouthwash Produced from soda ash,
dissolved in water treated
with carbon dioxide
Flavor for smoker Flavor Vegetable based
(cinnamon, mint)
Haverstroo flavor Flavor Produced from Haverstroo
compound ZD 4932
Glycerol Sweetener and mouth
bacteria cleaner
By product of biodiesel
Talcum Creates gum substance Produced from talc carbonate
Calcium carbonate Works as gastric antacid Retrieved from calcium
carbonate compound