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Serial No. Particulars Page No.

1.0 Executive Summary 1

2.0 Business Idea 2

3.0 Goals and Objectives 3

4.0 Market Potential 3

5.0 Competitor Analysis 4

6.0 Marketing Plan 5

7.0 Operation 6

8.0 Implementation Plan 7

9.0 Resource Requirement 7

10.0 Ownership Form and Management Team 8

11.0 Risk Assessment 8

12.0 SWOT Analysis 8

13.0 Exit Strategy (Contingency Plan) 9

14.0 Financial Plan 9-10

15.0 Social Cost-Benefit Analysis 10

-- Appendix i-xx


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1 .0 EX E C U T I V E SU M M A R Y

Are you sure that the last drop of milk your loving child drinks is safe? Do you know what compels you

to feed your baby melamine and other contaminated milk? The huge demand-supply gap makes the milk

price high and that creates the chance for low price contaminated milk to enter into Bangladesh market.

Another recent agro-problem Bangladesh has faced is huge potato spoilage after having bumper

production each year and potato farmers incur huge loss. Poto (countrys first non-dairy milk brand)

identifies these top problems as opportunity and combines two solutions into one direction which is

producing milk by adding value to the local quality potatoes to introduce non-dairy milk in Bangladesh

market as a new offering.

Potos product line comprises two basic category of milk which is original & flavoured in three tetra

pack size of 250ml, 500ml and 1litre. A new generation of non-dairy beverages has dawned withPoto, a

delicious-tasting, fat free, cholesterol free, that can be used just like milk. Potato based Poto is an

excellent source of bio available calcium and least allergic of all non-dairy beverages available on today's

world.

The total demand of milk is 6,570,000 tonnes (per head 120 ml) and supply is 3,326,000 tonnes including

the imported milk(The Independent, 25 December, 2008). Among the milk producers Milk Vita is thebiggest by holding 20% of demand so it grabs almost 40% of total supply. Brac Dairy, Pran, Akij are

holding sizeable portion of the market. Poto uses cost leadership and differentiation strategies to gain

competitive edge over its competitors. It gets the first mover advantage over all potential non-dairy milk

brands.

Poto is not only an entrepreneurship venture but also an ecopreneurship endeavor. The production

process is eco-friendly because there are no chemical or harmful particles used in the production and the

disposal system is safe. The company also emphasizes safety and hygiene issue of the human resources.

The firm has a marketing strategy of positioning its product on the basis of low price and quality. The

objective of its marketing campaign is to make people aware about non-dairy milk concept and itsbenefits over ordinary milks. To reach the segmented portion of buyers in Dhaka Poto uses all the four

means of marketing mix and marketing tools like TVC, FM radio ads, newspaper ads, campus campaign,

assurance program and 24/7 help desk.

The production ofPoto is done in the own operational plant in Sirajganj because the availability of raw-

materials as well as the convenient transport and communication. The operation ofPoto consists of three

phases procurement and storage, production and packaging phase. The finished products are

distributed by the help of local distributor.

The project is associated with risks like demand risk, supply risk, economic risk, political risk etc. which

is reflected in the discount rate (20%). The estimated project cost is BDT 8,493,500 in FY 2009-10 which

is financed by 69% equity from partners and 31% debt from lenders. The ratio analysis shows net profit

margin of 3%, 16.8%, 20.2%, 20.8% and 21.2% in FY 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14

respectively. The projected financial statements also portray liquidity and solvency of the firm. The NPV

of the project from 5-year financial projection is positive by BDT 13,979,595. The IRR of the project is

52%. The payback period is 2.10 years and discounted payback period is 2.54 years. The stress testing

shows positive NPV in all the three cases base (BDT 13,979,595), best (BDT 20,053,800) and worst

(BDT 4,275,886). The social cost-benefit analysis also reveals positive social NPV of BDT 23,024,450

at 25% discount rate and the social IRR of the project is 56%.


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2 .0 B U S I N E S S I D E APoto is the countrys first non-dairy milk brand which produces milk from local quality potatoes. Non-

dairy milk is a new option for the milk consumers of Bangladesh and it is also an innovative value added

product of potato. The milk industry of Bangladesh has encountered problem with contamination of

melamine and emulsion due to huge shortage of supply. Also the potato producers of Bangladesh are

facing spoilage problem after having bumper potato production each year and thus incur huge loss (see

Appendix A1). Poto identifies these top problems as opportunity and combines two solutions into onedirection which is producing milk from potatoes to introduce non-dairy milk in Bangladesh market as a

new offering.

2.1 Product offerings

Poto original Original non-dairy milk-white.

Poto flavored Poto choco milk (Chocolate flavored milk), Poto milk berry (Strawberry

flavored milk) and Poto Vanilla (Vanilla flavored milk).

Poto markets its products in 3 tetra pack sizes: 250ml, 500ml and 1 Litre. (see Appendix A3)

2.2 Features and unique selling proposition

Potato milk is worlds new non-dairy milk innovation.

Potato milk is commercially and technically viable non-dairy milk option for Bangladesh which

is best taste comparing to soy-milk and rice-milk. (see Appendix A4)

Cholesterol and lactose free milk which is helpful for lactose intolerant people and also free from

dairy allergy

No artificial sweetener, color and flavor and no animal ingredients, preservative used in Poto.

Poto is vegan friendly and Non-GMO (Genetically Modified Organism) product. (see Appendix

A2)

2.3 Business model:

Potos business model is entirely production or manufacturing-based. Potos production process

transforms and adds value to the quality potatoes and produces non-dairy milk of various flavors. Poto

will:

Produce milk in its own operational plant using eco-friendly production process.Sell milk in 3 tetra pack size in the local market.

How Poto makes money is shown in the following business model:


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3 .0 GO A L S A N D O B J E C T I V E S3.1 Vision:Potos vision is to make a safe milk consumption platform to create a healthy nation.

3.2 Mission statement:Poto wants to offer non-dairy milk to reduce the demand-supply gap and assists

potato producers who have incurred huge loss due to potato deterioration, while it uses the most efficient,

state-of-the-art technology in operation. Poto aims at establishing eco-friendly work environment and

providing better employee incentives as it continues to expand its business.

3.3 Short-term goals:

To offer quality products at a competitively lower price to capture market share.

To create a demand for non-dairy milk as a best taste option.

To persuade the target customers regarding the benefits of non-dairy milk that will bring

familiarity among customers.

3.4 Long-term goals:

To expand its operation beyond Dhaka in 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 ensure sustainable development of the nation by creating newer utility of quality potatoes.

3.5 Objectives:

To attain 20% growth rate by the year 2014.

To attain net profit margin of 25% in year 2017.

To achieve BDT 20,000,000 free cash flow by the year 2015 to setup another operational plant by

the year 2018.

To utilize 1200 tonnes of potatoes by the year 2018.

To repay loans by the year 2020 and lever up the firm with 25% debt by the year 2025.

4 .0 M A R K E T P O T E N T I A L

As there is 49% gap between the demand and supply of milk in Bangladesh this sector needs more supplyof milk. The total demand of milk is 6,570,000 tonnes (per head 120 ml) and supply is 3,326,000 tonnes

including the imported milk(The Independent, 25 December, 2008). Whereas the present and projected

scenario of Dhaka Metropolitan City estimated byPoto is:

2008 2009 2010 2011

Milk Demand (tonnes) 302,728 307,572 312,493 317,493

Milk Supply (tonnes) 148,337 150,710 153,122 155,572

Demand-Supply Gap (tonnes) 154,391 156,862 159,371 161,921

Source: Data used from Statistical Pocket Book of Year 2007.

Due to milk shortage melamine, emulsion and other contaminated milk are entering into market to fulfill

the demand supply gap quickly and people get less option without purchasing those milk. Increasing

dairy milk production is not an overnight task because of shortage of livestock and grazing field. So the

demand for non-dairy milk will be created in Bangladesh.

4.1 Non-dairy milk emergence factors: Non-dairy milk

can be introduced to fulfill the demand-supply gap

is more affordable for greater range of consumers

can also serve the heart, diabetics and dairy allergic patients which is big portion in the demand

but vulnerable to dairy milk


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with different flavors is cheap and better quality than available flavored milk

4.2 Growth prospect:

The milk market growth rate is 20% according to industry analysis (source: The Daily Star;

Published On: 8/4/2008).

"We are happy that private companies are coming up with big plans in this sector. There is still a

huge scope for growth for every player as together we are only catering to one-fifth of the

market," according to Ms Ferdousi Ali, chairman of Milk Vita.

Milk industry is going to be a thrust sector (The Independent, 25 December, 2008).

The government is encouraging agro-processed business.

According to FAO all over the world value added potato products consumption is increasing. The year

2008 was World Potato Year. The government observed this year by launching a huge potato

campaign. The people have become more interested to consume value added potato products. So, it is

obvious that there is an ample growth prospect of the business.

5 .0CO M P E T I T O R A N A L Y S I SPoto offers non-dairy milk in Bangladesh market in first phase. The domestic market of non-dairy milk is

less competitive but the firm faces huge competition from the existing dairy milk brands which are

offering the substitute product.

Milk Vita is the largest liquid milk processor of Bangladesh. The daily demand of milk is 37.5

million and the company can meet only 20% of it. So it grabs about 40% of total supply. But the

milk collection has fallen some 35% to 55.23 million litres in FY 2007-08. (source: The Financial

Express, Publish date: January 26, 2009)

Brac Dairy is the second largest liquid milk plant in Bangladesh. The market share of Brac Dairy

had increased to 35% from 20% by year 2006 to 2007. (www.ssireview.org/

articles/entry/in_the_black_with_brac/)

Pran-RFL is the third largest liquid milk producer in Bangladesh has a daily processing capacity

of 1 lakh litres of milk although it only processes 40,000 litres daily due to milk shortage (source:

The Daily Star ; Published On: April 4, 2008).

Milk price of these competitors lie between BDT 14 to 20 for 250 ml, BDT 26 to 28 for 500 ml

and BDT 50 for 1 litre. (see Appendix A6)

Brac Dairy, Pran-RFL, Akij Foods and Beverage Ltd. use tetra pack for packaging a portion of

supplied milk. Pran-RFL and Akij use tetra pack for normal milk and Brac Dairy uses tetra pack

for flavored milk.

5.1 Competitive forces analysis: Porters five forces analysis has been conducted to evaluate

competitive edge ofPoto from its existing and potential competitors (see Appendix A12). The analysis

shows:

Bargaining power of suppliers (potatoes and other ingredients) is low.

Bargaining power of buyers is high because the consumers get several options.Threat of new entrants domestically is high as the market is quite lucrative and milk demand

supply gap is huge.

Threat of substitute although very high.

The intra-industry rivalry is domestically low because the demand is quite high than the supply.

5.2 Assessment: Among the competitors Milk Vita is the biggest by holding 20% of demand so it grabs

almost 40% of total supply. Brac Dairy, Pran, Akij are holding sizeable portion of the market. Poto has

competitive edge in price and taste. It gets the first mover advantage over all potential non-dairy milk

brands. Besides, competitive analysis reveals the market is lucrative in all terms of forces that indicate


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opportunity, profitability and sustainability. The competition among competitors is fair because all

operate to make Bangladesh milk industry a self sufficient one which is still a gigantic task.

6 . 0 M A R K E T I N G P L A N6.1 Marketing goals and objectives:

To meet the growing needs of the target market and to evaluate the competitive environment and

continue to establish a differential advantage.

To establish an effective and profitable marketing mix of product, place, price and promotion.

To establish a customer base of 5% of the defined target market within 2015

To exceed break-even selling point of 381 tonnes at FY 2009-10

6.2 Marketing strategies:

Making people aware about non-dairy milk, its nutritious value, taste and benefits.

Focusing price, taste and unique selling propositions while developing marketing campaign

Building brand proposition to different consumers according to their perception (e.g.; smartness

for youth, taste and nutrient for children and family consumers).

Creating customer loyalty and making customer delight by proper quality assurance campaign

6.3 Target customer:

Geographic location: Dhaka city for first 5 years (see Appendix A5)

Demographic: 1. Social classmiddle class and high end consumer

2. Age 10-24 and 25-55 are two prospective buyer segments for flavored milk

and original milk respectively

Prospective buyers: Around 2,500,000 (35% of total Dhaka city population fall under Potos

target customer segments)

6.4 Market positioning: Poto positions

itself in the market on the basis of low priceand tasty-nutrient non-dairy milk benefits.

The product positioning map shows the

unique positioning of Poto relative to its

competitors.

6.5 Marketing mix: Potos combination of

product, price, promotion and distribution

and other marketing activities needed to

meet the marketing objectives is:

Product Poto offers two basic types of product line: original and flavored. The pack sizes of

Poto Original are 500 ml and 1litre. Poto Flavoredoffers 3 flavors (chocolate, strawberry and vanilla)

with pack size 250 ml and 1litre. Poto uses state-of-the-art tetra pack technology for packing its offers.

The shelf life ofPoto is 4 months for original and 6 months for flavored.

Price The following price list shows the wholesale and retail price of product lines:

Poto Original Poto Flavored

500 ml 1 litre 250 ml 1 litre

Wholesale price (BDT) 18 36 10 40

Listed price (BDT) 20 40 12 48

Poto


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Distribution Channels Poto uses a simple distribution channel with zone-wise distributors. The Dhaka

city has divided into 9 different zones covering 19 areas (see Appendix A5). Finished Poto products

come directly to a Dhaka city warehouse from the plant. Sales team uses firms covered van to distribute

the product to the dealers. It uses different specific day for specific zone. Then the secondary distribution

channel leads by the dealers distribute the product by using their own resources.Poto also make strategic

alliance with super stores and educational institutes canteens to sellPoto.

Integrated marketing communication Potos marketing communication mix or promotion mix

includes all the typical elements like advertising, sales promotion, public relations, personal selling and

direct marketing to activate pull strategy (see Appendix A7). Some of the tools are

TVC, FM radio ads, Newspaper ads

Buzz Marketing (opinion leaders: Doctors)

Poto goes to school campaign

Potos quality assurance campaign

SMS contest

Point of purchase ads

6.6 Marketing budget: The five year allocation of marketing budget at affordable method shown below:

2009-10 2010-11 2011-12 2012-13 2013-14

Advertising 2,983,200 5,146,400 5,146,400 5,146,400 5,146,400

Sales promotion 150,000 200,000 200,000 200,000 200,000

PR and personal selling 1,146,800 933,600 1,233,600 1,333,600 1,533,600

Direct marketing 20,000 20,000 20,000 20,000 20,000

Total 4,300,000 6,300,000 6,600,000 6,700,000 6,900,000

6.7 Customer service and control: 24/7 call center always and retailer survey quarterly conducted by

the marketing team to know the first hand information of the consumers. The total marketing plan is

flexible and open for any required contingencies.

7 .0 OP E R A T I O N7.1 Production: The production ofPoto is done in the own operational plant (see Appendix A8) in

Sirajganj because the availability of raw-materials as well as the convenient transport and

communication. The operation ofPoto would consist of three phases procurement and storage,

production and packaging phase.

Procurement and storage The pre-production is run by the procurement and storage unit. The

procurement unit is responsible for purchasing 200 tonnes of potatoes and other ingredients in FY 2009-

10, 500 tonnes of potatoes and other ingredients in FY 2010-11 and adds 50 tonnes each succeeding

years. The storage unit stores the raw-materials in own 500-ton capacity cold storage.

Production phase The production phase transforms the potatoes into milk which is the finished

product. The production unit produces 500 tonnes milk in FY 2009-10.

Packaging In this phase produced milk is packed in tetra packs of 250 ml, 500 ml and 1 litre.

7.2 Placement of order: The distributors and dealers can place orders by using order form or through

internet. The customers can place orders only through the website.

7.3 Delivery: Milk is delivered in 1 dozen retail pack or 50 pcs wholesale pack. The local dealers are

responsible for home delivery with extra commission.

7.4 Billing: Milk distributors are required to make payment within 45 days. Accounts payable would be

paid within next year.


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7.5 Quality control: Internal quality control is closely monitored by the production manager and

supervisors and low quality outputs are disposed. The weight of each pack is automatically checked.

8 . 0 I M P L E M E N T A T I O N P L A N8.1 Project implementation schedule: The project starts at July 2009 and the commercial launch is on

January 2010. The 6-month project implementation schedule is as follows:

8.2 Resource ramp-up: With a view to implement the project, resource ramp-up is very vital. Thefinancial resources (equity and debt) and human resources are the key elements. Financial resources are

vital for uplifting capital investments and working capital. Human resources are significant throughout

the entire business process.

8.3 Product roll-out plan:

9 . 0 RE S O U R C E R E Q U I R E M E N T9.1 Capital investments:

The starts up expenses are projected to be BDT 513,500.

Initial capital expenditures for starts up assets are projected to be BDT 7,980,000.

The firms project cost is BDT 8,493,500.

The project cost is financed by 69% equity provided equally by the partners and 31% debt provided by

financial institution.9.2 Personnel requirements:

Staffing needs at the initial phase, the operation ofPoto is monitored by three department heads

categorized as procurement and storage, production and sales and administration.

Employee needs the head of the departments are taken from the partners and requirement for

labors, supervisors and managers are fulfilled from outsource. (see Appendix A10 & A11)

9.3 External resources:

Suppliers, distributors, superstores and lenders.


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10 .0 OW N E R S H I P F O R M A N D M A N A G E M E N T T E A MPoto firm is a partnership of three capital provider.

Potos organization structure is top-down hierarchical structure with same authority among peers

(see Appendix A9).

Potos management team consists of 14 executives (see Appendix A10):

Position No. of managers

Department Head 3Manager 5

Supervisor 6

11 .0 R I S K AS S E S S M E N T11.1 General risks: The project is associated with following general risks:

Demand risk the price of substitute and other options production cost lowering may shiver

the demand of potato milk.

Supply risk the main raw material of potato milk is abundant in Bangladesh but the other

ingredients supply may impede the production.

Regulatory risk the standard testing of the product and business approval is highly regulatedby our government but the sector is going to be the thrust sector so regulatory risks are going to

be lessened.

11.2 Risk from PEST analysis: The project is associated with following risks analyzed from PEST

analysis:

Political risks the political variables hamper are strikes, terrorism, instability etc.

Economic risks the project is affected by economic parameters such as inflation rate, consumer

price index, recession etc.

Socio-psychological risks non-dairy milk is a new product in peoples lifestyle so it may has

setback regarding peoples acceptance.

Technological risks technological changes, invention of new alternative milk may cause problem

12 .0 S W O T A N A L Y S I S

S e e A p p e n d i x A 1 3 & A 1 4

SSttrreennggtthh

1. First non-dairy milk brand

2. Low cost milk option

3. Commercially and technically the

most viable non-dairy milk

4. Strong management team

WWeeaakknneessss

1. High dependency on dealers

2. High dependency on other

ingredients

3. Interruption of any sub-system

may cause disruption of totalroduction rocess

OOppppoorrttuunniittyy

1. Market growth rate 20%2. Going to be the thrust sector

3. Governments and customers

encouragement

TThhrreeaatt

1. Level of acceptance by people isnot reasonably certain

2. Threat from popular substitute

3. Potential competition from othernon-dairy milk option


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13 .0 E X I T S T R A T E G Y (Cont ingency P lan)In the exporting phase the firm may apply for government assistance and tax benefits as an

exporting agro-processor.

Firms primary exit strategy is converted into private limited company from partnership firm to

reduce capital problem (if occurs) and skill managing.

Firms secondary exit strategy will be merged with another milk company to lessen the risk of

being dissolute.

14 .0 F I N A N C I A L P L A N14.1 Project Evaluation

Initial Investment BDT 8,493,500

Net Present Value (NPV) at 20% discount rate BDT 13,979,595

Internal Rate of Return (IRR) 52%

Pay Back Period (PB) 2.10 years

Discounted Pay Back Period 2.54 years

14.2 Income Statement (Summarized)

2009-10 2010-11 2011-12 2012-13 2013-14

Sales revenue 15,200,000 41,800,000 51,300,000 57,525,000 64,000,000

Less: Cost of goods sold 8,232,000 20,739,500 24,166,100 27,527,800 31,034,600

Gross Margin 6,968,000 21,060,500 27,133,900 29,997,200 32,965,400

Less: Total operating expenses 5,820,445 8,997,445 9,494,445 9,718,245 10,068,445

Income From Operations 1,147,555 12,063,055 17,639,455 20,278,955 22,896,955

Less: Interest expense @ 15% 393,409 374,033 351,750 326,125 296,656

Net Income Before Tax 754,146 11,689,022 17,287,705 19,952,830 22,600,299

Less: Income tax @ 40% 301,659 4,675,609 6,915,082 7,981,132 9,040,119

Net Income After Tax 452,488 7,013,413 10,372,623 11,971,698 13,560,179

14.3 Balance Sheet (Summarized)

2009-10 2010-11 2011-12 2012-13 2013-14

Total current assets 7,470,779 21,615,287 34,011,418 47,944,655 63,518,160

Total long term assets 5,955,955 5,680,510 5,405,065 5,129,620 4,854,175

Total assets 13,426,734 27,295,797 39,416,483 53,074,275 68,372,335

Total current liabilities 4,609,920 11,614,120 13,533,016 15,415,568 17,379,376

Long term liabilities 2,493,551 2,345,000 2,174,167 1,977,710 1,751,783

Total equity 6,323,263 13,336,676 23,709,299 35,680,997 49,241,176

Total liability and equity 13,426,734 27,295,797 39,416,483 53,074,275 68,372,335

14.4 Statement of Cash Flows (Summarized)

2009-10 2010-11 2011-12 2012-13 2013-14

Net cash provided by operating activities (792,067) 3,108,858 5,518,068 6,494,643 7,435,624

Net cash provided by investing activities (6,794,900) 0 0 0 0

Net cash provided by financing activities 7,970,917 (522,583) (522,583) (522,583) (522,583)

Net increase in cash 383,950 2,586,275 4,995,485 5,972,060 6,913,041

Cash balance at the beginning of year 1,698,600 2,082,550 4,668,825 9,664,310 15,636,370

Cash balance at the end of the year 2,082,550 4,668,825 9,664,310 15,636,370 22,549,411


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14.5 Initial investment

Particulars Amounts in Taka

Total startup expenses 513,500

Total startup assets 7,980,000

Total Requirement 8,493,500

14.5 Ratio Analysis

2009-10 2010-11 2011-12 2012-13 2013-14

Current ratio 1.62 1.86 2.51 3.11 3.65

Quick ratio 0.80 1.04 1.74 2.37 2.94

Net working capital (Tk.) 2,860,859 10,001,167 20,478,402 32,529,087 46,138,784

Total asset turnover ratio 1.13 1.53 1.30 1.08 0.94

Debt-equity ratio 0.39 0.18 0.09 0.06 0.04

Debt-total asset ratio 0.19 0.09 0.06 0.04 0.03

Interest burden 0.34 0.03 0.02 0.02 0.01

Gross margin 45.8% 50.4% 52.9% 52.1% 51.5%

Net profit margin 3.0% 16.8% 20.2% 20.8% 21.2%

Return on asset 3.4% 25.7% 26.3% 22.6% 19.8%

Return on equity 7.2% 52.6% 43.7% 33.6% 27.5%

14.6 Break Even Analysis

2009-10 2010-11 2011-12 2012-13 2013-14

Total costs (BDT) 14,445,854 30,110,978 34,012,295 37,572,170 41,399,701

Selling price/litre (BDT) 38 38 38 38 38

Break even selling unit (in litre) 380,154 792,394 895,060 988,741 1,089,466

14.7 Stress Testing

0 1 2 3 4 5 NPV

Base case (8,493,500) 377,073 4,870,426 6,002,675 5,773,388 5,449,532 13,979,595

Best case (8,493,500) 377,073 3,381,597 5,612,017 7,671,861 11,504,752 20,053,800

Worst case (8,493,500) 377,073 1,529,412 2,435,555 3,542,028 4,885,318 4,275,886

Notes: Base case values represent the values of 5 year projection. Best cases sales growth is 25% and costgrowth is 5%. Worst cases sales growth is 15% and cost growth is 10%.

15 .0 S O C I A L CO S T -B E N E F I T A N A L Y S I S2009-10 2010-11 2011-12 2012-13 2013-14

Total social benefits 17,204,200 46,508,200 56,732,200 63,525,450 70,573,200

Less: Total social cost 14,747,512 34,786,587 40,927,377 45,553,302 50,439,821

Social profit 2,456,688 11,721,613 15,804,823 17,972,148 20,133,379

Social discount rate 25%

Discounted social profit 1,965,350 7,501,833 8,092,069 7,361,392 6,597,306

Social PV 31,517,950

Less: Opportunity cost (8,493,500)

Social NPV 23,024,450

Social IRR 56%


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A1. P O T A T O S P O I L A G E SC E N A R I OPotato spoilage scenario in FY 2007-08 and FY 2008-09 is:

2007-08

Production of potatoes (in tonnes) 1 crore

Potatoes went rotten (in tonnes) 10 lakh

Rotten proportion with production 10%

Monetary loss due to deterioration Tk. 800 crore

Source: Bangladesh: Low demand frustrates potato growers, thedailystar.net Publication date:11/6/2008 (Data shown in tabular form)

The plant location is in northern district of Sirajganj and The Department of Agricultural Extension(DAE), Rajshahi has set a target of producing 58,99,250 metric tons of potato from 3,37,100 hectares of

land in 16 districts of Rajshahi division during the current harvesting season of FY 2008-09. The cold

storage capacity of Rajshahi division is shown in the following table:

(Capacity and potato storage in metric tonnes)

2007 2008

District Number Capacity Potato storage Number Capacity Potato storage

Rajshahi 23 190500 14135 23 210500 192156

Bogra 24 168790 127800 25 182360 172446

Pabna 3 9000 3200 5 9700 6420Dinajpur 6 40500 20277 6 44800 44800

Rangpur 22 140690 117139 23 183460 176348

Source: 5.23 Cold storage location and capacity, p-211, Statistical Pocket Book 2008.

A2. NU T R I T I O N F A C T S O F P O T OPoto contains no artificial preservatives or sweeteners and is formulated with ingredients that have been

originally sourced in nature. The following table shows the list of ingredients, their purpose and source:

Ingredients Purpose SourceFiltered water A carrier of all ingredients used in

Poto beverages

Fresh water filtered for purity

Maltodextrin From potatoes, to provide energy inthe form of carbohydrates

NON GMO (Genetically ModifiedOrganism) potatoes

Soy Protein Isolate Source of vegetable protein isolate Non GMO soy beans

Fructose A sweetener, provides immediate fuel

for the body

Corn

Potato Starch Provides energy in the form of

complex carbohydrates

Non GMO Potatoes

Natural Flavors Flavor Vegetable based

Natural Color Opacity Inert, mineral (processed and purified)for food products

Calcium Carbonate Fortification From special limestones prepared in asimple process using heat and water

Carrageenan Provides suspension aids to allingredients, and adds thickness

From seaweeds

Sea Salts Flavoring only Evaporated solar salt in the form of

brine

Tricalcium Phosphate A nutritional supplement / Form ofcalcium source to fortify the beverage

Food grade, natural material derivedfrom phosphate

Potassium Citrate Provides stability Processed from citric acid in the form of

potassium salt instead of sodium

Citric Acid Acts as acidulant to provide stabilityand flavoring to the finished product

Fermentation by-product of glucose asthe carbohydrate source


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A3. P R O D U C T L I N E

Poto Original

(Fresh Non-dairy milk)

Poto Choco

(Chocolate milk)

Poto Milk Berry

(Strawberry milk)

Poto Vanilla

(Vanilla milk)


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A4. P R O D U C T CO M P A R I S O NServing size 1 cup 250 ml Poto

**2% Milk Soy-milk Rice-milk

Lactose free Yes No Yes Yes

Gluten free Yes No Yes No

Casein free Yes No Yes Yes

Folic Acid Yes No Yes No

Vitamin B6, B12, Zinc Yes No Yes No

Fortified with Vitamin A, D, Calcium Yes Yes Yes YesCalories 100 125 125 125

Calories from fat 0 45 36 27

Cholesterol mg 0 20 0 0

Saturated fat g 0 3 1 0

Total fat gms 0 5 4 2

Calcium % (high in) 35 30 27 30

Carbohydrate g 21 13 9 25

Sugar g 3 12 6 12

Protein g 3 8 6 1

Sodium mg 130 120 130 90**Poto Original

A5. GE O G R A P H I C A L P O S I T I O N OF T A R G E T M A R K E T


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Potos target market is Dhaka City Corporation area for the first 5 years. The firm uses a simple

distribution channel with zone-wise dealers. The Dhaka city has divided into 9 different zones covering

19 areas. The following table shows the 9 zones and areas under each zone:

Name Covering Areas

Zone-1 Mirpur, Pallabi

Zone-2 Cantonment, Kafrul

Zone-3 Mohammadpur, DhanmondiZone-4 Ramna, Tejgaon

Zone-5 Hazaribag, Lalbag, Kamrangirchor

Zone-6 Kotowali, Shutrapur

Zone-7 Shyampur, Demra

Zone-8 Motijheel, Sabujbag

Zone-9 Khilgaon, Badda

A6. P R I C E CO M P E T I T I O NOriginal Milk

Size Price Milk Vita Aarong Pran Firm Fresh Poto

250 ml Wholesale 12.85 12.65 -- -- --Retail 14.00 14.00 -- -- --

500 ml Wholesale 24.30 25.75 27.00 24.00 18.00Retail 26.00 26.00 28.00 25.00 20.00

1 litre Wholesale 47.60 47.55 -- -- 36.00

Retail 50.00 50.00 -- -- 40.00

Flavored Milk

Size Price Milk Vita Aarong Pran Poto

200 ml Wholesale 12.85 11.00 11.00 --Retail 14.00 12.00 12.00 --

250 ml Wholesale -- 16.00 -- 10.00

Retail -- 20.00 -- 12.001 litre Wholesale -- -- -- 40.00

Retail -- -- -- 48.00

A7. I N T R E G R A T E D M A R K E T I N G C O M M U N I C A T I O NPoto 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:

Potos marketing communication mix or promotion mix includes all the typical elements like

advertising, sales promotion, public relation, personal selling and direct marketing. Heres the detail:

POTO Distributorsand Retailers

Customers

Marketing activities

DemandOrder


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Advertising:

Electronic and print media ads

Theme 1: Smartness Target customer: Youth

Type Television commercials Radio commercials NewspaperAdvertisement

Media Private TV channels FM radio channels National Dailies

Specification Musical and sports shows Musical program andyouth talk show Sports, lifestyle andentertainment page

Theme 2: Taste and nutrition Target customer: Children and parents

Type Television commercials Radio commercials Newspaper

Advertisement

Media Private TV channels FM radio channels National Dailies

Specification News break and cartoons News break Children and fun

page

Theme 3: Awareness and benefits Target customer: Mid age people

Type Television commercials Radio commercials Newspaper

Advertisement

Media Private TV channels FM radio channels National DailiesSpecification News break News break News and health

page

Others advertisements

Point of purchase ads Shelf space ads

Posters and leaflets School notice board ads

Sales promotion:

SMS contest

Price discount at special occasion

Special day offers (e.g.; buy a pair take a thank you gift)

Public relation:

Buzz marketingby using opinion leaders (doctors)

Write articles about awareness of non-dairy milk and its benefits

Write features in lifestyle pages of newspapers

Sending press release about products

Arrange seminars under Non-dairy milk awareness campaign.

Attending science and other fairs of educational institutes.

Sponsoring school annual sports.

Personal selling:

Poto goes to schoolspecial school campaign designed for students

Temporary selling booth at super stores, hospitals and campusPoto assurance campaign a tour to production plant to know about the eco-friendly

production process

Direct marketing:

E-mail marketing, web marketing


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NNeewwssppaappeerr AAddss

In children and fun page

In health page

In entertainment and youth page


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A8. P R O D U C T I O N S I T E L A Y O U T

OFFICE

BUILDING

FIELD

POND

CANTEEN

COLD STORAGE

INGREDIENT

STORAGE

FINISHED

PRODUCT

STORAGE

PRODUCTION PLANT

RESIDENCE

AREA

PACKAGING UNIT

TESTING

LAB

SECURITY POST

SECURITY POST

GENERATOR


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A9. OR G A N I Z A T I O N A L S T R U C T U R E

A10. S T A F F I N G N E E D SAt the initial phase, the operation of Poto is monitored by three department heads. One is head of

procurement and storage, another is head of production and the other is head of sales and

administration. The needs of staffs can be illustrated below based on the organizational structure:

2009-10 2010-11 2011-12 2012-13 2013-14

Procurement and storage unit

Head 1 1 1 1 1

Manager 1 1 1 1 1

Supervisor 2 2 2 2 2

Staff 7 8 8 8 8Production unit

Head 1 1 1 1 1

Manager 1 1 1 1 1

Supervisor 4 4 4 4 4

Staff 17 19 21 24 28

Sales and administration unit

Head 1 1 1 1 1

Manager 3 3 3 3 3

Assistant 6 6 7 7 7

A11. S T A F F I N G B A S I SThe staffing assumptions have been estimated using the following requirements:

2009-10 2010-11 2011-12 2012-13 2013-14

Cold storage staff 2 3 3 3 3

Material clerk 1 1 1 1 1

Premise maintainer 3 3 3 3 3

Security staff 4 4 4 4 4

Grinding staff 4 5 6 7 8

Starcher staff 3 3 3 4 4

Mixing staff 3 4 5 6 7

PotoFirm

Head ofProcurement &

storage

Manager

Supervisor

Staff

Head of

production

Manager

Supervisor

Staff

Head of slaes and

administration

Sales Manager

Assistant

MarketingManager

Assistant

Finance Manager

Assistant


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Packing staff 4 4 4 4 5

Office staff 3 3 3 3 3

Customer service 3 3 4 4 4

Total staff requirement 30 33 36 39 42

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.

A12. P O R T E R S F I V E F O R C E S A N A L Y S I SPorters five forces analysis has been conducted to evaluate competitive edge ofPoto from its existing

and potential competitors. The analysis shows:

Rivalry among competing firms:

Rivalry among competing firms is moderate as they are operating in dairy milk sector that is our

substitute product.

There is no existing competition from direct non-dairy substitute because still there is no non-

dairy milk company in Bangladesh.

Comment:

The intra-industry rivalry is domestically low because the demand is quite high than the supply.

Potential entry of new competitors:

Due to availability of raw-materials and the high profitability of this sector any firm can easily

enter into this sector.

As there is huge supply-demand gap of milk in Bangladesh so it attracts any firm highly to enter

in this sector.

As non-dairy milk is becoming more and more popular so this sector becomes lucrative.

Comment:

Threat of new entrants domestically is high as the market is quite lucrative and milk demandsupply

gap is huge.

Potential development of substitute products:

As several companies dairy milk products are available in market and people are habituate to

consume those so its a threat forPoto.

Milk market may encourage soy-milk, rice milk, corn milk etc non-dairy milk as a potential

substitute ofPotos offerings.

Comment:

Threat of substitute although very high

Bargaining power of suppliers:

The bargaining power of suppliers is very low because of abundant potato production and other

raw materials.

The price provided by Poto to its suppliers of potato is quite high and increase of that price

yearly so the raw material producers are loyal to make supply uninterrupted.


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Comment:

Bargaining power of suppliers (potatoes and other ingredients) is low.

Bargaining power of customers:

Bargaining power of customers is very high as they have several options to choose.

Relatively low price may attract the customers and lessen the risk of switching from Potos

product.

Comment:

Bargaining power of customers is high because the consumers get several options.

The following illustration shows the summary result of Porters five forces analysis ofPoto:

A13. SWOT AN A L Y S I S

Strength:

Positive internal factors thatPoto uses to accomplish its goals and objectives are

1. Poto is the first non-dairy milk brand of the country thats why it enjoys the first movers

advantage in the market.2. Potos main raw material is abundant in the local market at a cheap price and it stores the raw-

material in own cold storage to reduce costs and uninterrupted production.

3. The price ofPotos offerings is relatively low because of cost-effective conversion process of

potatoes to non-dairy milk.

4. The potato milk option is commercially and technically the most viable non-dairy milk option

for Bangladesh.

5. The employees are given favorable work environment and it helps to create employee loyalty.

6. The management team is comprised of efficient and dynamic persons.

Weakness:

Negative internal factors that inhibit the accomplishment ofPotos goals and objectives are

1. Potos product distribution is highly dependent on dealers.

2. Milk conversion process is highly other ingredient dependant. The disruption of those may

hamper production.

3. The interruption of any sub-system causes disturbance of whole production system.

4. Marketing budget is highest in the indirect expenses but it is comparatively low relative to the

competitors.

Intra-industr rivalr

Threat of new entrant

Threat of substitute roducts

Bar ainin ower of su liers

Bar ainin ower of customers

Low

Hi h

Hi h

Low

Hi h


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5. Return on assets and return on equity show increasing in assets and equity is proportionally

higher than increasing in net profit.

Opportunity:

Positive external factors thatPoto uses to accomplish its goals and objectives are

1. Consumer more drink and beverage product by the youth can be signified as current youth trend

andPotos opportunity.2. The milk sector is going to be a thrust sector of Bangladesh.

3. Market growth rate is 20%.

4. Raw material production is increasing yearly.

5. Government encourages agro-processed industries.

6. The value added potato products demand is increasing all over the world.

Threat:

Negative external factors that inhibit the accomplishment ofPotos goals and objectives are

1. The level of acceptance by people is not reasonably certain.

2. Threat from popular substitute that is dairy milk.

3. Potential competition from others non-dairy milk such as soy-milk, rice milk, corn milk, almondmilk etc.

4. Economic recession may lessen the purchase power of potential customers.

A14. SWOT ST R A T E G I E SThe SWOT strategies matrix forPoto is as follows

Strength Weakness

Opportunity

S2, O3, O4To increase storage capacity, try to reachmore customers

S3.O3To attract customers by focusing on priceto increase market share

S2, O6To create foreign market by using natural

advantage

W4, O1To spend marketing budget efficiently toattract segmented customers

W2, O5To utilize government encouragement foruninterrupted other ingredients supply

Threat

S2, S3, T1, T2To use low price strategy for protecting

from substitute and acceptability threats

S1, S2, S4, T3To get an edge over potential non-dairycompetitors, utilize first mover, low costand viability strength

W4, T1, T2To spend marketing budget efficiently to

aware customer and compete with

substitutes

W5,T4To provide low price milk for greaterrange of customers because with low price

still the firm produce sizable net profit


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A15. F I N A N C I A L ST A T E M E N T A S S U M P T I O N S

1. Procurement and storage unit:

The procurement unit purchases 200 tonnes of potatoes in FY 2009-10 at BDT 8000/ton.

The procurement unit purchases 500 tonnes of potatoes in FY 2010-11 at BDT 9000/ton.

From FY 2011-12 to 2013-14 potato purchase increased by 50 tonnes and price increase by

BDT 1000/ton.Purchase cost of other ingredients is 70% to 85% on raw material cost.

Direct utility includes the utility of the cold storage.

2. Production unit:

The plant factor is 75%.

Production of milk is 2.5 litre/kg potatoes.

Direct expenses include raw material costs, conversion costs and packaging costs.

Total original and flavored milk production proportion is 50:50.

The wages of staff increased by BDT 300 yearly started from BDT 4200.

Packaging cost is BDT 4/pack.

3. Sales and administration unit:

Wholesale price of original milk is BDT 36 and flavored milk is BDT 40.

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.

A16. A C C O U N T I N G AS S U M P T I O N S1. Depreciation policy:

Straight-line method.

Depreciation rate is 5% for long term assets.

2. Inventory valuation

FIFO method.

Inventory holding time is maximum 4 month for original milk and 6 month for flavored

milk.

3. Tax rate

Assumed to be 40% on net income before tax which is payable annually.

A17. F I N A N C I A L AS S U M P T I O N SThe firms 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.


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A18. F I N A N C I A L P R O J E C T I O NINCOME STATEMENT

2009-10 2010-11 2011-12 2012-13 2013-14

Operating Revenues:

Sales revenue 15,200,000 41,800,000 51,300,000 57,525,000 64,000,000

Less: Cost of goods sold 8,232,000 20,739,500 24,166,100 27,527,800 31,034,600

GROSS MARGIN 6,968,000 21,060,500 27,133,900 29,997,200 32,965,400

Less: Operating expenses:

Salaries 825,000 1,782,000 1,914,000 2,032,800 2,178,000

Marketing expenses 4,300,000 6,300,000 6,600,000 6,700,000 6,900,000

Office rent & utilities 210,000 420,000 480,000 480,000 480,000

Depreciation 275,445 275,445 275,445 275,445 275,445

Insurance & others 210,000 220,000 225,000 230,000 235,000

Total operating expenses 5,820,445 8,997,445 9,494,445 9,718,245 10,068,445

INCOME FROM OPERATIONS 1,147,555 12,063,055 17,639,455 20,278,955 22,896,955

Less: Interest expense @ 15% 393,409 374,033 351,750 326,125 296,656

NET INCOME BEFORE TAX 754,146 11,689,022 17,287,705 19,952,830 22,600,299Less: Income tax @ 40% 301,659 4,675,609 6,915,082 7,981,132 9,040,119

NET INCOME AFTER TAX 452,488 7,013,413 10,372,623 11,971,698 13,560,179

Estimation of sales revenue

2009-10 2010-11 2011-12 2012-13 2013-14

Poto Original:

Beginning inventory (In Ltr.) 0 50,000 125,000 137,500 150,000

Add: Finished product (In Ltr.) 250,000 625,000 687,500 750,000 812,500

Less: Ending inventory (20% of finishedpro.) 50,000 125,000 137,500 150,000 162,500

No. of unit available for sales 200,000 550,000 675,000 737,500 800,000

Unit price/Ltr. 36 36 36 37 38

Sales revenue from original poto 7,200,000 19,800,000 24,300,000 27,287,500 30,400,000

Poto Flavoured:

Beginning inventory (In Ltr.) 0 50,000 125,000 137,500 150,000

Add: Finished product (In Ltr.) 250,000 625,000 687,500 750,000 812,500

Less: Ending inventory (20% of finished

pro.) 50,000 125,000 137,500 150,000 162,500

No. of unit available for sales 200,000 550,000 675,000 737,500 800,000

Unit price/Ltr. 40 40 40 41 42

Sales revenue from flavoured poto 8,000,000 22,000,000 27,000,000 30,237,500 33,600,000

Total Sales revenue of the year 15,200,000 41,800,000 51,300,000 57,525,000 64,000,000

Estimation of cost of goods sold

2009-10 2010-11 2011-12 2012-13 2013-14

Purchase of potato 1,600,000 4,500,000 5,500,000 6,600,000 7,800,000

Purchase of other ingredients 1,360,000 3,600,000 4,400,000 4,950,000 5,460,000

Transportation cost 1,500,000 3,000,000 3,200,000 3,400,000 3,600,000


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Packaging cost 2,000,000 5,000,000 5,500,000 6,000,000 6,500,000

Wages 756,000 1,782,000 2,073,600 2,386,800 2,721,600

Utility 960,000 2,700,000 3,300,000 3,960,000 4,680,000

Others direct expenses 56,000 157,500 192,500 231,000 273,000

Cost of goods sold 8,232,000 20,739,500 24,166,100 27,527,800 31,034,600

BALANCE SHEET2009-10 2010-11 2011-12 2012-13 2013-14

Cash 2,082,550 4,668,825 9,664,310 15,636,370 22,549,411

Accounts receivable 1,520,000 4,180,000 5,130,000 5,752,500 6,400,000

Inventory 3,800,000 9,500,000 10,450,000 11,400,000 12,350,000

Other current assets 68,229 3,266,461 8,767,107 15,155,785 22,218,749

Total current assets 7,470,779 21,615,287 34,011,418 47,944,655 63,518,160

Long term assets 6,231,400 6,231,400 6,231,400 6,231,400 6,231,400

Accumulated depreciation 275,445 550,890 826,335 1,101,780 1,377,225

Total long term assets 5,955,955 5,680,510 5,405,065 5,129,620 4,854,175

Total assets 13,426,734 27,295,797 39,416,483 53,074,275 68,372,335Accounts payable 2,881,200 7,258,825 8,458,135 9,634,730 10,862,110

Other current liabilities 1,728,720 4,355,295 5,074,881 5,780,838 6,517,266

Total current liabilities 4,609,920 11,614,120 13,533,016 15,415,568 17,379,376

Long term liabilities 2,493,551 2,345,000 2,174,167 1,977,710 1,751,783

Total liabilities 7,103,471 13,959,120 15,707,183 17,393,278 19,131,159

Paid-up capital 5,870,775 5,870,775 5,870,775 5,870,775 5,870,775

Retained earnings 452,488 7,465,901 17,838,524 29,810,222 43,370,401

Total equity 6,323,263 13,336,676 23,709,299 35,680,997 49,241,176

Total liability and equity 13,426,734 27,295,797 39,416,483 53,074,275 68,372,335

STATEMENT OF CASH FLOWS

2009-10 2010-11 2011-12 2012-13 2013-14

Cash flow from operating activities

Cash received from buyers 13,680,000 37,620,000 46,170,000 51,772,500 57,600,000

Cash paid for cost of sales (8,232,000) (20,739,500) (24,166,100) (27,527,800) (31,034,600)

Cash paid to employees (825,000) (1,782,000) (1,914,000) (2,032,800) (2,178,000)

Cash paid for promotion (4,300,000) (6,300,000) (6,600,000) (6,700,000) (6,900,000)

Cash paid for rent and utilities (210,000) (420,000) (480,000) (480,000) (480,000)

Cash paid for other purposes (210,000) (220,000) (225,000) (230,000) (235,000)

Cash paid for interest (393,409) (374,033) (351,750) (326,125) (296,656)

Cash paid for income tax (301,659) (4,675,609) (6,915,082) (7,981,132) (9,040,119)

Net cash provided by operating activities (792,067) 3,108,858 5,518,068 6,494,643 7,435,624

Cash flow from investing activities

Cash paid for start-up assets (6,281,400) 0 0 0 0

Cash paid for start-up assets expenses (513,500) 0 0 0 0

Net cash provided by investing activities (6,794,900) 0 0 0 0

Cash flow from financing activities

Cash received from long term loan 2,622,725 0 0 0 0


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Cash received from paid-up capital 5,870,775 0 0 0 0

Cash paid for loan repayment (522,583) (522,583) (522,583) (522,583) (522,583)

Net cash provided by financing activities 7,970,917 (522,583) (522,583) (522,583) (522,583)

Net increase in cash 383,950 2,586,275 4,995,485 5,972,060 6,913,041

Cash balance at the beginning of year 1,698,600 2,082,550 4,668,825 9,664,310 15,636,370

Cash balance at the end of the ear 2,082,550 4,668,825 9,664,310 15,636,370 22,549,411

3-MONTH CASH FLOW STATEMENT OF FY 2009-10

Jul-Sep Oct-Dec Jan-Mar Apr-Jun

Cash flow from operating activities

Cash received from buyers 0 0 6,840,000 6,840,000

Cash paid for cost of sales 0 0 (4,116,000) (4,116,000)

Cash paid to employees 0 0 (412,500) (412,500)

Cash paid for promotion 0 (1,000,000) (1,800,000) (1,500,000)

Cash paid for rent and utilities 0 0 (105,000) (105,000)

Cash paid for other purposes (2,000) (3,000) (204,000) (1,000)

Cash paid for interest 0 0 0 (393,409)

Cash paid for income tax 0 0 0 (301,659)

Net cash provided by operating activities (2,000) (1,003,000) 202,500 10,433

Cash flow from investing activities

Cash paid for start-up assets (2,078,800) (4,202,600) 0 0

Cash paid for start-up assets expenses (368,500) (145,000) 0 0

Net cash provided b investing activities (2,447,300) (4,347,600) 0 0

Cash flow from financing activities

Cash received from long term loan 2,622,725 0 0 0

Cash received from paid-up capital 5,870,775 0 0 0

Cash paid for loan repayment 0 0 0 (522,583)Net cash provided by financing activities 8,493,500 0 0 (522,583)

Net increase in cash 6,044,200 (5,350,600) 202,500 (512,150)

Cash balance at the beginning of period 1,698,600 7,742,800 2,392,200 2,594,700

Cash balance at the end of the period 7,742,800 2,392,200 2,594,700 2,082,550

INITIAL INVESTMENTS

Amounts in BDT

Startup Expenses:

License & approval 52,000Patent & trademarks 25,000

Product development cost 64,000

Infrastructure development 327,500

Others 45,000

Total startup expenses 513,500

Startup Assets:

Land & registration 722,500


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Building 600,000

Machinery & 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 Re uirement 8,493,500

REQIUREMENT DISTRIBUTION

Means of finance Amount in BDT % of Total

Equity 5,870,775 69%

Debt 2,622,725 31%

LOAN REPAYMENT SCHEDULE

Loan taken (Million Tk.) 2,622,725

Date of loan taken July 1,2009

Repayment years 10No. of installment 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

NET PRESENT VALUE CALCULATION

Year Net Income After Tax Present Value Factor of 20% Present Value

1 452,488 0.8333 377,073

2 7,013,413 0.6944 4,870,426

3 10,372,623 0.5787 6,002,675

4 11,971,698 0.4823 5,773,388

5 13,560,179 0.4019 5,449,532

Present Value of Net cash inflow 22,473,095

Present Value of cash outlay 8,493,500

Net Present Value 13,979,595

INTERNAL RATE OF RETURN CALCULATION

Year Investment Cash Inflow Net

0 8,493,500 0 (8,493,500)

1 0 452,488 452,488

2 0 7,013,413 7,013,413

3 0 10,372,623 10,372,623


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4 0 11,971,698 11,971,698

5 0 13,620,179 13,620,179

Internal Rate of Return (IRR) = 52%

PAYBACK PERIOD

Year Investment Cash Flow After Tax Cumulative CFAT Remaining Amount

0 8,493,500 - 0 8,493,5001 8,493,500 452,488 452,488 8,041,012

2 8,493,500 7,013,413 7,465,901 1,027,599

3 8,493,500 10,372,623 17,838,524

4 8,493,500 11,971,698 29,810,222

5 8,493,500 13,620,179 43,430,401

Payback Period = 2.10 years

DISCOUNTED PAYBACK PERIOD

Year Investment Discounted CFAT Cumulative CFAT Remaining Amount

0 8,493,500 - 0 8,493,5001 8,493,500 377,073 377,073 8,116,427

2 8,493,500 4,870,426 5,247,499 3,246,001

3 8,493,500 6,002,675 11,250,174

4 8,493,500 5,773,388 17,023,563

5 8,493,500 5,473,645 22,497,207

Discounted Payback Period = 2.54 years

BREAK EVEN ANALYSIS

2009-10 2010-11 2011-12 2012-13 2013-14

Total costs 14,445,854 30,110,978 34,012,295 37,572,170 41,399,701

Per unit selling price (Tk.) 38 38 38 38 38

Break even selling unit 380154 792394 895060 988741 1089466

RATIO ANALYSIS

2009-10 2010-11 2011-12 2012-13 2013-14

Current ratio 1.62 1.86 2.51 3.11 3.65

Quick ratio 0.80 1.04 1.74 2.37 2.94

Net working capital (Tk.) 2,860,859 10,001,167 20,478,402 32,529,087 46,138,784

Total asset turnover ratio 1.13 1.53 1.30 1.08 0.94

Debt-equity ratio 0.39 0.18 0.09 0.06 0.04

Debt-total asset ratio 0.19 0.09 0.06 0.04 0.03

Interest burden 0.34 0.03 0.02 0.02 0.01

Gross margin 45.8% 50.4% 52.9% 52.1% 51.5%

Net profit margin 3.0% 16.8% 20.2% 20.8% 21.2%

Return on asset 3.4% 25.7% 26.3% 22.6% 19.8%

Return on equity 7.2% 52.6% 43.7% 33.6% 27.5%


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STRESS TESTING (BASE CASE)

2009-10 2010-11 2011-12 2012-13 2013-14

Sales revenue 15,200,000 41,800,000 51,300,000 57,525,000 64,000,000

Cost (14,052,445) (29,736,945) (33,660,545) (37,246,045) (41,103,045)

Profit before interest & tax 1,147,555 12,063,055 17,639,455 20,278,955 22,896,955

Interest (393,409) (374,033) (351,750) (326,125) (296,656)

Profit before tax 754,146 11,689,022 17,287,705 19,952,830 22,600,299Income tax @ 40% (301,659) (4,675,609) (6,915,082) (7,981,132) (9,040,119)

Net income after tax 452,488 7,013,413 10,372,623 11,971,698 13,560,179

Discount rate 20% 20% 20% 20% 20%

Present value 377,073 4,870,426 6,002,675 5,773,388 5,449,532

STRESS TESTING (BEST CASE)

2009-10 2010-11 2011-12 2012-13 2013-14

Sales revenue (25% growth) 15,200,000 38,000,000 47,500,000 59,375,000 74,218,750

Cost (5% growth) (14,052,445) (29,510,135) (30,985,641) (32,534,923) (34,161,669)


Interest (393,409) (374,033) (351,750) (326,125) (296,656)

Profit before tax 754,146 8,115,833 16,162,609 26,513,952 39,760,424

Income tax @ 40% (301,659) (3,246,333) (6,465,043) (10,605,581) (15,904,170)


Discount rate 20% 20% 20% 20% 20%

Present value 377,073 3,381,597 5,612,017 7,671,861 11,504,752

STRESS TESTING (WORST CASE)

2009-10 2010-11 2011-12 2012-13 2013-14

Sales revenue (15% growth) 15,200,000 34,960,000 40,204,000 46,234,600 53,169,790

Cost (10% growth) (14,052,445) (30,915,379) (34,006,917) (37,407,609) (41,148,369)


Interest (393,409) (374,033) (351,750) (326,125) (296,656)

Profit before tax 754,146 3,670,588 5,845,333 8,500,866 11,724,764

Income tax @ 40% (301,659) (1,468,235) (2,338,133) (3,400,347) (4,689,906)


Discount rate 20% 20% 20% 20% 20%

Present value 377,073 1,529,412 2,435,555 3,542,028 4,885,318

TESTING SCENARIO

0 1 2 3 4 5 NPV

Base case (8,493,500) 377,073 4,870,426 6,002,675 5,773,388 5,449,532 13,979,595

Best case (8,493,500) 377,073 3,381,597 5,612,017 7,671,861 11,504,752 20,053,800

Worst case (8,493,500) 377,073 1,529,412 2,435,555 3,542,028 4,885,318 4,275,886


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A19. S O C I A L C O S T - B E N E F I T A N A L Y S I S AS S U M P T I O N SPotato utilization benefit is BDT 200/ton and potato storage benefit is BDT 2500/ton.

Reducing dairy allergy and malnutrition is BDT 500/ton of milk.

Aesthetic beauty is BDT 10/person visit.

Oxygen supply and CO2 absorption is by 100 trees in premise.

Employment benefit is BDT 2000/family person of 41 employees assuming 4 persons in a

family.Total social cost includes social cost of goods sold, social operating cost, interest expense

and tax.

Social discount rate is assumed to be 25% including 5% social risk on normal discount rate

of 20%.

SOCIAL COST-BENEFIT ANALYSIS

2009-10 2010-11 2011-12 2012-13 2013-14

Social revenue 15,960,000 43,890,000 53,865,000 60,401,250 67,200,000

Other social benefits 1,244,200 2,618,200 2,867,200 3,124,200 3,373,200


Less: Total social cost 14,747,512 34,786,587 40,927,377 45,553,302 50,439,821

Social profit 2,456,688 11,721,613 15,804,823 17,972,148 20,133,379

Social discount rate 25%

Discounted social profit 1,965,350 7,501,833 8,092,069 7,361,392 6,597,306

Social PV 31,517,950

Less: Opportunity cost (8,493,500)

Social NPV 23,024,450

Social IRR 56%

CALCULATION OF SOCIAL BENEFITS

2009-10 2010-11 2011-12 2012-13 2013-14

Potato utilization benefits 150,000 375,000 412,500 450,000 487,500

Potato storage benefit 500,000 1,250,000 1,375,000 1,500,000 1,625,000

Protecting dairy allergy 100,000 250,000 275,000 300,000 325,000

Reducing malnutrition 150,000 375,000 412,500 450,000 487,500

Aesthetic beauty 15,000 15,000 15,000 15,000 15,000

Oxygen supply 200 200 200 200 200

Carbon absorption 1,000 1,000 1,000 1,000 1,000

Employment benefits 328,000 352,000 376,000 408,000 432,000


CALCULATION OF SOCIAL COSTS

2009-10 2010-11 2011-12 2012-13 2013-14

Social cost of goods sold 8,232,000 20,739,500 24,166,100 27,527,800 31,034,600

Social operating costs 5,820,445 8,997,445 9,494,445 9,718,245 10,068,445

Interest 393,409 374,033 351,750 326,125 296,656

Income tax 301,659 4,675,609 6,915,082 7,981,132 9,040,119

Total social cost 14,747,512 34,786,587 40,927,377 45,553,302 50,439,821


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A20. S U R V E Y QU E S T I O N N A I R E

Name: ..

Occupation:

Date:

1. How frequently usually do you buy milk?

Daily twice a week weekly others (please specify).

2. What size of milk pack do you buy?

250 ml 500 ml 1 litre

3. Currently which brands milk you prefer?

Aarong Starship Milk Vita Ammo milk Others (please specify)

4. Do you satisfy with this current milk?

yes No

If yes, whats the reason behind your satisfaction

Taste packing availability others (please specify).

If no, whats the cause of dissatisfaction

Taste supply problem smell nutrient facts packing price

5. Do you familiar with the idea Non-dairy Milk (e.g.; soymilk, rice milk)?

yes No

6. If a milk;

Is made from quality potatoes

Gives high energy and kilocalories

In lower price

In variety of flavors (choco,

strawberry, vanilla)

And served in smart pack

You would

definitely buy probably buy Not sure probably not buy

7. Is there any member in your family with heart diseases, diabetes or allergy?

yes No

If yes, will you buy non-dairy milk for them which is free from those diseases side effects

definitely buy probably buy Not sure (please specify).

8. As a brand name how you rank Poto: smart taste, drink best?

Excellent very good good fair average

9. Drinks and beverage (e.g.; soft drinks, flavored milk and juice) are inextricably blended with

youth life style. Are you

strongly agree agree neither agree or disagree disagree strongly disagree

THANK YOU FOR YOUR COOPERATION


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