smeda bakery & confectionery

Pre-Feasibility Study

BAKERY AND CONFECTIONERY

Small and Medium Enterprises Development Authority

Government of Pakistan www.smeda.org.pk

HEAD OFFICE 6P

thP Floor LDA Plaza Egerton Road, Lahore

Tel (042)111 111 456, Fax: 36304926-7

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE KHYBER PAKTUNKHWA

REGIONAL OFFICE BALOCHISTAN

8 P

thP Floor LDA Plaza, Egerton Road,

Lahore. Tel: (042) 111 111 456,

Fax: (042) 36370474 [email protected]

5TH Floor, Bahria Complex II,

M.T. Khan Road, Karachi.

Tel: (021) 111-111-456 Fax: (021) 5610572

[email protected]

Ground Floor

State Life Building The Mall, Peshawar.

Tel: (091)111 111 456, 9213046-7 Fax: (091) 286908

[email protected]

Bungalow No. 15-A Chamn

Housing Scheme Airport Road, Quetta.

Tel: (081) 2831623, 2831702 Fax: (081) 2831922

[email protected]

May, 2011

Pre-Feasibility Study Bakery & Confectionery

PREF-77/May, 2011/Rev 3 1

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject matter and

provide a general idea and information on the said area. All the material included in this document

is based on data/information gathered from various sources and is based on certain assumptions.

Although, due care and diligence has been taken to compile this document, the contained

information may vary due to any change in any of the concerned factors, and the actual results may

differ substantially from the presented information. SMEDA does not assume any liability for any

financial or other loss resulting from this memorandum in consequence of undertaking this

activity. The prospective user of this memorandum is encouraged to carry out additional diligence

and gather any information he/she feels necessary for making an informed decision.

For more information on services offered by SMEDA, please contact our website: HTUwww.smeda.org.pk UTH

DOCUMENT CONTROL

Document No. PREF-77

Revision 3

Prepared by SMEDA-Punjab

Issue Date June, 2004

Revision Date May, 2011

Issued by Library Officer


PREF-77/May, 2011/Rev3 2

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY................................................................................................................................... 1 2 PROJECT PROFILE ........................................................................................................................................... 2

2.1 PROJECT BRIEF............................................................................................................................................... 2 2.2 PROJECT CAPACITY AND RATIONALE............................................................................................................. 2 2.3 PROJECT INVESTMENT.................................................................................................................................... 2 2.4 PROPOSED PRODUCT MIX............................................................................................................................... 3 2.5 PROPOSED BUSINESS LEGAL STATUS ............................................................................................................. 3 2.6 FINANCIAL SUMMARY.................................................................................................................................... 3 2.7 PROPOSED LOCATION..................................................................................................................................... 4 2.8 OPPORTUNITY RATIONALE............................................................................................................................. 4 2.9 MARKET ENTRY TIMING ................................................................................................................................ 4 2.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ................................................................................ 4 2.11 STRATEGIC RECOMMENDATIONS ................................................................................................................... 5

2.11.1 Marketing............................................................................................................................................. 5 2.11.2 Pricing ................................................................................................................................................. 5 2.11.3 New Products development .................................................................................................................. 5

2.12 SWOT ANALYSIS........................................................................................................................................... 5 2.12.1 Strengths and opportunities ................................................................................................................. 6 2.12.2 Weaknesses and threats ....................................................................................................................... 6

3 SECTOR AND INDUSTRY ANALYSIS............................................................................................................ 6 3.1 NATIONAL ANALYSIS..................................................................................................................................... 6

4 PRODUCT............................................................................................................................................................. 7 4.1 RAW MATERIAL ........................................................................................................................................... 10

5 TECHNOLOGY AND PROCESSES................................................................................................................ 14 5.1 RESOURCE MERCHANDISE ........................................................................................................................... 15 5.2 MACHINERY REQUIREMENT......................................................................................................................... 15 5.3 REPAIR & MAINTENANCE ............................................................................................................................ 16 5.4 ERECTION & INSTALLATION......................................................................................................................... 16 5.5 FURNITURE AND FIXTURES........................................................................................................................... 16 5.6 MOTOR VEHICLES ........................................................................................................................................ 17

6 LAND AND BUILDING REQUIREMENT ..................................................................................................... 17 6.1 LAND / COVERED AREA AND CONSTRUCTION COST....................................................................................... 17 6.2 RECOMMENDED MODE OF LAND ACQUISITION............................................................................................ 18 6.3 UTILITIES REQUIREMENT ............................................................................................................................. 18

7 HUMAN RESOURCE REQUIREMENT......................................................................................................... 18 8 FINANCIAL ANALYSIS................................................................................................................................... 20

8.1 PROJECT COSTS............................................................................................................................................ 20 8.2 PROJECTED INCOME STATEMENT ................................................................................................................. 21 8.3 PROJECTED BALANCE SHEET ....................................................................................................................... 22 8.4 PROJECTED CASH FLOW STATEMENT........................................................................................................... 23

9 KEY ASSUMPTIONS ........................................................................................................................................ 24


PREF-77/May, 2011/Rev 3 1

11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY This particular pre-feasibility is regarding “Bakery & Confectionery”. Major products in this case would be cakes, snacks, sweets, nimko, biscuits, bread and general items. In order to attract a cross section of population, a combination of 2 outlets, one in a low-income area and another in a posh area, is used in this study along with 25% sales to other bakeries at trade discount of 10 %. Project Capacity cannot be based on machinery capacity, as the same oven will be having different capacities for different products. This business segment is labor intensive. The proposed bakery outlet will be working from 6.00 am morning to 12.00 midnight. Number of working days has been taken as 355 with average 2 shifts per day.

Selection and number of outlets would totally depend upon the mix of target population. For example if we start this venture in bigger cities, one might select more sophisticated outlets with the emphasis on best decor and interior design. But in case of smaller cities, one would prefer to go for a mix, which has more traditional products. Any big city with a total population of over 1 million is the ideal location for the project. Ultimately it has to be observed that how to compete and build the name of the Bakery & Confectionery. Areas like Defense, Gulberg, Model Town need heavy investment and areas like Saman Abad, Allama Iqbal Town, Johar Town and Old City needs more traditional varieties of foodstuff. Bakery and confectionery business is emerging as one of the good business ventures in Pakistan as it provides varieties of bakery items. This phenomenon grew rapidly; and today thousands of bakeries exist in the big cities. Over the decades, the bakeries have evolved even further. Now, one sees that offer larger varieties of mock tails and cocktails, sweets and nimko and much more. Marketing and branding of Bakery & Confectionery will play a key role in the mobilization of targeted number of customers. Major marketing options include, site advertisement, cable ads and handbills among other traditional marketing channels. Positioning of the product, cost of developing and manufacturing the product, cost of competitive products and condition of the economy will determine price of the product. A Bakery and Confectionery needs a capital investment estimated at Rs. 18.845 million for construction and purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 1.108 million is required as working capital. The total project cost is estimated at Rs. 19.953 million. Projected IRR, Net Present Value (NPV) and Payback of this project are 29%, Rs. 15.694 million and 3.44 years respectively.



22 PPRROOJJEECCTT PPRROOFFIILLEE 22..11 PPrroojjeecctt BBrriieeff The proposed project presents an investment opportunity in setting up a Bakery & Confectionery. Major products in this case would be cakes, snacks, sweets, nimko, biscuits, bread and general items. In order to attract a cross section of population, a combination of 2 outlets, one in a low-income area and another in a posh area, is used in this study along with 25% sales to other bakeries at trade discount of 10 %. This combination can however, vary according to the final site selection and amount of investment being incurred by individual investor. Although for this particular project study only Bakery & Confectionery items along with general items are included.

22..22 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee Project Capacity cannot be based on machinery capacity, as the same oven will be having different capacities for different products. This business segment is labor intensive. The proposed bakery outlet will be working from 6.00 am morning to 12.00 midnight. These outlets determine the factory timing for production. It is proposed that 2 shifts are necessary for production. The interesting fact is that these two shifts include only 3 or 4 pure working hours. Main plant & machinery includes oven in which different items are baked with different temperatures and different baking timings. Industrial ovens are easily available in market. For the proposed project, oven of 7x7x10 feet with 8 rotating stands having 5 trays on each stand is used. So the oven capacity will be:

60-kg biscuits in 30 baking minutes at a temperature of 150 degree centigrade.

120 pieces of large Pizza in 20-25 minutes at a temperature of 150 -180 degree centigrade.

Number of working days has been taken as 355 with average 2 shifts per day.

Initial Capacity of the Bakery & Confectionery is calculated on the basis of total expected sales of items. Maximum sales are expected in festival months and in winter or spring season. However, in order to calculate average monthly sales, potential revenue is estimated by using the potential demand estimates. The estimated combination of sales is as given below: 1. 75% sales to own outlets. 2. 25% sales to other bakeries

It is expected that annual increase in sales would be 5%. Although due diligence is carried out in estimating these numbers, the final outcome will vary depending on the selection of location, pricing, product mix and the marketing strategies.

22..33 PPrroojjeecctt IInnvveessttmmeenntt

Total cost of the project worked out is in the table below:

TTaabbllee 22--11:: PPrroojjeecctt CCoossttss

Capital Investment Rs. 18,844,744Working Capital Requirement Rs. 1,108,113Total Investment Rs. 19,952,857



The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity (including land). However this composition of debt and equity can be changed as per the requirement of the investor.

TTaabbllee 22--22:: Project FFiinnaanncciinngg

Debt 50% Rs. 9,976,429Equity 50% Rs. 9,976,429Total Project Investment Rs. 19,952,857

TTaabbllee 22--33:: VViiaabbiilliittyy IRR 29%NPV Rs. 15,693,517Pay Back Period (years.) 3.44

22..44 PPrrooppoosseedd PPrroodduucctt MMiixx This pre-feasibility is developed for a project based on a production plant along with 2 outlets and outside sales with a mix of city areas. Selection and number of outlets would totally depend upon the mix of target population. For example if we start this venture in bigger cities, one might select more sophisticated outlets with the emphasis on best decor and interior design. But in case of smaller cities, one would prefer to go for a mix, which has more traditional products. It is also recommended to change the mix of both bakery and general items according to sale trends of a particular outlet. In this study it is assumed that 30% sales will be consisting of general items but this combination would be different in different outlets and according to consumer behaviors.

22..55 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss A bakery business can be started as a sole proprietorship or a partnership and even it can be registered under company law with Securities and Exchange Commission of Pakistan. Although selection totally depends upon the choice of the entrepreneur but this feasibility is based on a Sole ProprietorshipTP

1PT.

22..66 FFiinnaanncciiaall SSuummmmaarryy The financial cost of the project can be surmised as under:

TTaabbllee 22--44:: FFiinnaanncciiaall SSuummmmaarryy Debt Equity Split 50:50Projected Life 10 yearsRepayment of long term loan 5 yearsGrace period for long term loan 1 yearMark up rate for long term loan 16%

TP

1PT For getting information on the formation of type of firm/company, please visit the Website:

HTUwww.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.htmlUTH. HTUhttp://www.secp.gov.pk/Guides/PromotersGuide.pdfUTH



22..77 PPrrooppoosseedd LLooccaattiioonn Any big city with a total population of over 1 million is the ideal location for the project. Ultimately it has to be observed that how to compete and build the name of the Bakery & Confectionery. Areas like Defense, Gulberg, Model Town need heavy investment and areas like Saman Abad, Allama Iqbal Town, Johar Town and Old City needs more traditional varieties of foodstuff.

The outlets should be centrally and conveniently located within a developing or a newly developed residential town in any of the big cities like Lahore, Islamabad/Rawalpindi, Faisalabad, Sargodha etc. For a heavy competition and proper positioning of the brand name, one has to open outlets in the vicinity of competitors (Gourmet, Shezan Bakers, Rahat Bakers, United Bakery, Cakes & Bakes etc.). This will be a direct marketing of the brand name for the best quality and the best competitive price. Marketers need to determine where the product will be sold and methods of distribution including transportation and storage. Also for taste/enjoyment consumers are demanding a higher standard of food quality. Value for money and choice and exposure to new foods both have resulted in demand for diversity in terms of food varieties and uses. Food safety is a major issue around the world and consumers are looking for fresh and hygienic foods and which are made from natural products (i.e. free of preservatives).

22..88 OOppppoorrttuunniittyy RRaattiioonnaallee The opportunity of setting up the Bakery & Confectionery can be linked with the eating habits of the people. People in Pakistan enjoy the traditional food very well but recently world known food chains have brought cultural change in Pakistan. Now people are ready to eat junk food, while closely observing the trends, Bakery & Confectionery chain can play an important role in this new era as it is the only source which provides not only traditional bakery items but also new lines and varieties of confectionery items. 22..99 MMaarrkkeett EEnnttrryy TTiimmiinngg As the main decisive factors in this case are events and season, the investor will have to match the timings with these two limitations. Especially to open a bakery chain before Eid is advisable. The peaks can be classified as winter/ spring and Off Peaks as summer. 22..1100 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss Some of the Key Success factors that will determine the success of this project include: Products range selection and introduction of sitting areas. Quality and Innovation in products. Selection of location. Pricing strategy. Understanding of target customers, alternative availability (product differentiation). Launching time. Hygienic conditions. There should be regular and sustained marketing through fliers distribution and Cable TV.



The store should have an ample space for customer car parking. It is advisable to maintain a parking space whereby around 15-20 cars can be parked

The staff hired should be well mannered and well trained in dealing with the customers. Customers free gift schemes and surprise gift, valuable customer dinner can be additional

success factors. 22..1111 SSttrraatteeggiicc RReeccoommmmeennddaattiioonnss

22..1111..11 MMaarrkkeettiinngg

Marketing and branding of Bakery & Confectionery will play a key role in the mobilization of targeted number of customers. Major marketing options include, site advertisement, cable ads and handbills among other traditional marketing channels. Before launch of the project, it is recommended that a research for understanding the dynamics of the targeted market should also be carried out, to design the products as well as the promotional strategy. The basic principle of marketing is to sell the right product, at the right price and promote it in the right place to the right people. The job of the marketer is to control these 4Ps. However, there are other socioeconomic factors, which also affect the production, selling and consumption of foods. The success of marketing is often determined by the extent to which various socio-economic factors are considered. Market research is a useful tool for assessing the attitudes and behavior of potential consumers.

22..1111..22 PPrriicciinngg

The following factors determine the price of the product: Positioning of the product Cost of developing and manufacturing the product. Cost of competitive products. Condition of the economy.

22..1111..33 NNeeww PPrroodduuccttss ddeevveellooppmmeenntt Food manufacturers develop new products to maintain and improve their market position. New products can include: New varieties and flavors - these are called “line extensions” where different varieties or

flavors of the same product are produced.

Quality improvement of an existing product, either functional or nutritional.

Copying a competitor's product.

Developing a new, innovative product resulting from new ingredients, new packaging.

22..1122 SSWWOOTT AAnnaallyyssiiss A TSWOT AnalysisT is a strategic planning tool used to evaluate the TStrengths T, TWeaknesses T, TOpportunities T, and TThreatsT involved in a project or business venture. Strengths and weaknesses are internal to the company. Opportunities and threats originate from outside the company. A SWOT analysis is usually performed early in the project development process, and helps organizations evaluate the environmental factors and internal situation facing a project.



22..1122..11 SSttrreennggtthhss aanndd ooppppoorrttuunniittiieess

• Easy availability of resources(manpower/salesmen) • Growing population • Expanding cities • High bakery items consumption habits of people in Pakistan

22..1122..22 WWeeaakknneesssseess aanndd tthhrreeaattss

• Government polices • Heavy taxes in the form of sales tax and income tax on retail business • High competition • Credibility factor in the initial phase, as suppliers do not give credit to newly entrants 33 SSEECCTTOORR AANNDD IINNDDUUSSTTRRYY AANNAALLYYSSIISS 33..11 NNaattiioonnaall AAnnaallyyssiiss Bakery and confectionery business is emerging as one of the good business ventures in Pakistan as it provides varieties of bakery items. This phenomenon grew rapidly; and today thousands of bakeries exist in the big cities. Over the decades, the bakeries have evolved even further. Now, one sees that offer larger varieties of mock tails and cocktails, sweets and nimko and much more. Bakery stores business falls under retail sector. This sector has shown a significant growth over the last few years. In 20010-11 this sector showed a growth of 3.9%.TP

2PT This sector’s contribution

towards GDP in the year 20010-11 is 17.2% TP

3PT. The following table shows the contribution of retail

and wholesale sector towards GDP for the last 6 years at constant factor cost.

TTaabbllee 33--11:: CCoonnttrriibbuuttiioonn ooff rreettaaiill aanndd wwhhoollee ssaallee sseeccttoorr ttoowwaarrddss GGDDPP TP

44PT

Year Share %age

Growth %age

2004-2005 18.7 12.0 2005-2006 17.2 -2.4 2006-2007 17.1 5.8 2007-2008 17.3 5.3 2008-2009 17.5 3.1 2009-2010 17.0 4.6 2010-2011 17.2 3.9 Gross fixed capital formation (Investment in fixed assets) in this industry by private sector has also shown a progressive trend. In year 2005-2006 growth in gross fixed capital formation by private

TP

2 Source: Economic Survey of Pakistan 2009-10

P


P




sector has shown an increase of 17.2%TP

5PT. The following table shows gross fixed capital formation

by the private sector for the last five years:

TTaabbllee 33--22:: GGrroossss ffiixxeedd ccaappiittaall ffoorrmmaattiioonn bbyy pprriivvaattee sseeccttoorr iinn wwhhoolleessaallee aanndd rreettaaiill sseeccttoorr aatt ccoonnssttaanntt pprriicceess ((RRuuppeeeess iinn MMiilllliioonn)) TP

PTTP

66PT

Year Retail and wholesale sector Rs. M 2004-2005 15,165 2005-2006 18,123 2006-2007 22,578 2007-2008 23,816 2008-2009 23,059 2009-2010 23,968

There are thousands of bakery stores in Islamabad, Lahore, Rawalpindi, Faisalbad, Multan, Gujranwala and this number is increasing day by day. Although in Pakistan the retail business is not providing employment at a large scale directly, but indirectly it is contributing in the employment growth. As more and more retail outlets are opening and consumer buying has shifted towards packaged/branded products. Companies are coming with top quality products and with the increase in production level the employment also increases. 44 PPRROODDUUCCTT The proposed bakery will be offering a large variety of quality products at competitive prices. The product line will be including different types of fresh cream cakes, dry cakes, snacks, sweets, nimko, biscuits, etc. As the production will depend on the sales potential, the sales are estimated depending upon the industry norms. The project will be having two sales outlets of its own and the rest of the production will be sold to other bakeries. It is hereby assumed that sales to other bakeries will at a trade discount of 10%. Out of the total sales 25% will be sold to other bakeries while 75% of the total sales will be sold on bakery’s own outlets. Proposed sales for the first year are as under:

TTaabbllee 44--11:: EEssttiimmaatteedd SSaalleess

Percentage SalesSales on outlets 75%Sales to other bakeries 25%Total Estimated Sales 100%

Total sales incorporated for profit estimates include 5% safety margins. The detail of expected annual sales of different items is given in the table below:

P


P




TTaabbllee 44--22:: AAnnnnuuaall SSaalleess

Items Quantity to be sold

Outlets Other Bakeries

Total Quantity

Sales Price per

Unit in Rs.

Fresh Cream Cakes

Fresh cream (lbs.) 14,200 3,550 17,750 160

Fresh fruit (lbs.) 14,200 3,550 17,750 160

Chocolate Cakes (lbs.) 15,620 3,905 19,525 160

Butter cream cakes (lbs.) 8,520 2,130 10,650 160

Special ice cream cake (lbs.) 7,100 1,775 8,875 180

Fresh Pastries

Fresh & Chocolate pastries (Pcs.) 22,720 11,360 56,800 20

Donut (Pcs.) 22,720 11,360 56,800 20

Cream puff (Pcs.) 22,720 11,360 56,800 20

Cream roll (Pcs.) 22,720 11,360 56,800 20

Bread (Outsourced)TP

7PT

Bread, Bun, Rusk Etc.

Dry cakes

Dry cakes (lbs.) 28,400 7,100 35,500 152

Fruit cakes (lbs.) 14,200 3,550 17,750 128

Plain cakes (lbs.) 14,200 3,550 17,750 120

Snacks

Chicken pizza large (Pcs.) 5,680 1,420 7,100 280

Chicken pizza medium (Pcs.) 10,650 2,663 13,313 140

Chicken pizza small (Pcs.) 14,200 3,550 17,750 70

Chicken bread (Pcs.) 5,680 1,420 7,100 304

Chicken drum stick (Pcs.) 24,850 6,213 31,063 40

P

7 It is assumed that bread items worth Rs. 1,002,400 per year will be sold.P



Chicken leg piece (Pcs.) 24,850 6,213 31,063 72

Chicken shami (Pcs.) 14,200 3,550 17,750 18

Chicken sandwitch (Pcs.) 7,100 1,775 8,875 36

Chicken patties (Pcs.) 28,400 7,100 35,500 22

Chicken bread roll (Pcs.) 8,520 2,130 10,650 24

Sweets & Nimko

Nimko (Kg.) 710 1,065 1,775 296

Jaman (Kg.) 1,065 1,598 2,663 296

Chum Chum (Kg.) 1,065 1,598 2,663 296

Kalakand (Kg.) 1,065 1,598 2,663 296

Burfi(Kg.) 1,065 1,598 2,663 296

Moti Choor (Kg.) 1,065 1,598 2,663 296

Piteesa (Kg.) 1,065 1,598 2,663 296

Biscuits

Cake Rusk (Kg.) 2,840 4,260 7,100 224

White Biscuits (Kg.) 533 799 1,332 224

Coconut Biscuits (Kg.) 533 799 1,332 224

Macaroon Coconut (Kg.) 533 799 1,332 224

Almond Macaroon (Kg.) 533 799 1,332 224

Cheese Finger (Kg.) 533 799 1,332 224

Salty Zeera Plus (Kg.) 533 799 1,332 224

Plain Khatai (Kg.) 533 799 1,332 224

Baker Khani (Kg.) 533 799 1,332 224

Finger (Kg.) 533 799 1,332 224

Jam Wafer (Kg.) 533 799 1,332 224

Special Biscuit (Kg.) 533 799 1,332 224

Chocolate Biscuits (Kg.) 533 799 1,332 224

Round Almond Biscuit (Kg.) 533 799 1,332 224



44..11 RRaaww MMaatteerriiaall As the proposed bakery is going to offer a variety of products, a number of ingredients will be used for manufacturing bakery items. Some ingredients for basic items are listed below:

TTaabbllee 44--33:: PPllaaiinn CCaakkeess

Ingredients Unit of Measure

%age Ingredients

Cost in Rs. Quantity Total Cost

in Rs.

Butter Kg 21.73% 240 1,750 419,982

Sugar Kg 3.86% 70 311 21,777

Maida Kg 28.97% 39 2,333 90,996

Baking powder Kg 0.97% 60 78 4,666

Eggs Pcs 34.77% 7 72,482 507,373

Flavour Ltr. 0.05% 450 4 1,750

Cream+Honey Kg 9.66% 280 778 217,768

Total 100.00% 1,046,544

TTaabbllee 44--44:: Plain Fruit Cakes


%age Ingredients


in Rs.

Butter Kg 24.50% 240 1,973 473,505

Sugar Kg 3.92% 70 316 22,097

Maida Kg 24.50% 39 1,973 76,945


Fruit Chuncks Kg 29.40% 43 2,368 101,804

Sougi Kg 4.90% 98 395 38,670

Eggs Pcs 11.76% 7 24,161 169,124

Flavour Ltr. 0.05% 450 4 1,776

Total 100.00% 888,655



TTaabbllee 44--55:: DDrryy CCaakkeess


%age Ingredients


in Rs.

Butter Kg 22.17% 240 3,571 856,928

Sugar Kg 3.94% 70 635 44,433

Maida Kg 27.09% 39 4,364 170,195

Backing powder Kg 0.99% 60 159 9,521

Eggs Pcs 35.47% 7 144,964 1,014,746

Flavour Ltr. 0.49% 450 79 35,705

Cream + Honey Kg 9.85% 280 1,587 444,333

Total 100.00% 2,131,530

TTaabbllee 44--66:: NNiimmkkoo


%age Ingredients


in Rs.

Baison Kg 68.29% 78 1,212 94,551

Dry Fruit Kg 19.51% 128 346 44,332

Channey Kg 9.76% 98 173 16,971

Nimko masala Kg 2.44% 123 43 5,325

Total 100.00% 161,179

TTaabbllee 44--77:: SSwweeeettss


%age Ingredients


in Rs.

Khoya Kg 33.82% 190 5,402 1,026,413

Maida Kg 21.74% 39 3,473 135,440

Eggs Kg 15.46% 7 10,650 74,550

Ghee Kg 14.49% 160 2,315 370,435

Sugar syrup or Sugar Kg 14.49% 780 2,315 1,805,870

Total 100.00% 3,412,708



TTaabbllee 44--88:: CChhiicckkeenn BBrreeaadd


%age Ingredients


in Rs.

Maida Kg 14.65% 39 1,040 40,562

Oil Ltr 1.95% 128 139 17,750

Yeast Kg 0.20% 180 14 2,496

Sugar Kg 2.44% 70 173 12,134

Salt Kg 0.20% 8 14 111

Chicken Kg 34.18% 300 2,427 728,027

Onion Kg 12.21% 40 867 34,668

Masala Kg 4.88% 84 347 29,121

Cheese Kg 9.77% 800 693 554,688

Mayonnaise & Ketchup Kg 4.88% 90 347 31,201

Mix Vegitable Kg 14.65% 80 1,040 83,203

Total 100.00% 1,533,961

TTaabbllee 44--99:: FFrreesshh CCrreeaamm CCaakkeess


%age Ingredients


in Rs.

Butter Kg 12.21% 280 4,129 1,156,123

Sugar Kg 9.77% 85 3,303 280,773

Maida Kg 12.21% 39 4,129 161,031


Eggs Pcs 15.63% 7 135,299 947,096

Flavour Ltr. 0.20% 495 66 32,702

Fresh Cream Kg 49.80% 220 16,846 3,706,201

Total 100.00% 6,287,890

Assume 20% extra cost for this type of Cakes 7,545,468



TTaabbllee 44--1100:: PPaassttrriieess && PPuuffff eettcc


%age Ingredients


in Rs.

Butter Kg 12.21% 280 1,573 440,428

Sugar Kg 9.77% 85 1,258 106,961

Maida Kg 12.21% 39 1,573 61,345


Eggs Pcs 15.63% 7 51,543 360,799

Flavour Ltr. 0.20% 495 25 12,458

Fresh Cream Kg 49.80% 220 6,418 1,411,886

Total 100.00% 2,395,387

TTaabbllee 44--1111:: CChhiicckkeenn PPiizzzzaass


%age Ingredients


in Rs.

Maida Kg 19.42% 39 3,533 137,778

Oil Ltr 1.46% 128 265 33,915

Yeast Kg 0.10% 180 18 3,179

Sugar Kg 1.94% 70 353 24,729

Salt Kg 0.39% 8 71 565

Chicken Kg 29.13% 300 5,299 1,589,745

Onion Kg 19.42% 40 3,533 141,311

Masala Kg 3.88% 84 707 59,350

Cheese Kg 9.71% 800 1,766 1,413,107

Mayonnaise & Ketchup Kg 4.85% 90 883 79,487

Mix Vegitable Kg 9.71% 80 1,766 141,311

Total 100.00% 3,624,478



TTaabbllee 44--1122:: BBiissccuuiittss eettcc


%age Ingredients


in Rs.

Butter Kg 16.39% 280 4,001 1,120,287

Sugar Kg 14.46% 85 3,530 300,077

Maida Kg 33.75% 39 8,237 321,259


Eggs Pcs 34.72% 7 219,656 1,537,594

Flavour Ltr. 0.19% 495 47 23,300

Total 100.00% 3,309,577

TTaabbllee 44--1133:: CChhiicckkeenn DDrruumm SSttiicckk,, CChhiicckkeenn LLeegg PPiieeccee,, CChhiicckkeenn SShhaammii,, CChhiicckkeenn SSaannddwwiicchh,, CChhiicckkeenn PPaattttiieess,, CChhiicckkeenn BBrreeaadd RRoollll,,

Product Unit of Measure

Cost per Unit in

Rs TP

8PT

Chicken Drum Stick Pcs 33.6

Chicken Leg Piece Pcs 50.4

Chicken Shami Pcs 12.32

Chicken Sandwich Pcs 25.2

Chicken Patties Pcs 15.68

Chicken Bread Roll Pcs 16.8

55 TTEECCHHNNOOLLOOGGYY AANNDD PPRROOCCEESSSSEESS The proposed project will be using local machinery or 2P

ndP hand imported machinery available

locally. Local machinery and installations are quite competitive in price in comparison to the foreign equipment and installations. Additionally, it is linked with the viability of the project as the foreign new machinery and installation would not be feasible due to the high costs involved. Major suppliers of Local and used imported machinery are:

P

8P It is assumed that 70% of the Product Sales price is taken as its Raw Material Cost.



Bakexcel Associates, Karachi Saeed Fabrication Works, Lahore

55..11 RReessoouurrccee MMeerrcchhaannddiissee Pakistan is one of those countries where abundance of merchandise is available in wholesale markets of every city. Suppliers normally hesitate to supply goods on credit to new stores but after confidence building process a reasonable credit period of 15 days to one month is available to purchasers. The major wholesale markets in Lahore and Rawalpindi are:

• Shahalam Market/Rang Mahal • Akbari Mandi • Metro • Macro • Cosmo Cash and Carry • Hall Road • Urdu Bazar • Abid Market Temple Road • Moochi Gate • Anwari Gate Rawalpindi • Matro Islamabad • Cosmo Cash and Carry Rawalpindi • CSD Rawalpindi • Raja Bazaar, Rawalpindi • Nankari Bazar, Rawalpindi

55..22 MMaacchhiinneerryy RReeqquuiirreemmeenntt Plant and Machinery for the proposed project are stated below. The required machinery is easily available in the market. Used and new machinery can be purchased from different markets in Lahore and Gujranwala.

TTaabbllee 55--11:: MMaacchhiinneerryy DDeettaaiillss

Sr. No PARTICULARS No. of items

Cost per item

Original Value

Amount (Rs. 000)

1 Flour Safeter Local 1 100,000 100,000 100.002 Spiral Mixer Local 1 230,000 230,000 230.003 Planetary Mixer Local 3 100,000 300,000 300.004 Oven Local 1 350,000 350,000 350.005 Dyes Local 250 85 21,250 21.256 Sheeter Imported 1 650,000 650,000 650.007 Burner Local 2 20,000 40,000 40.008 Deep freezers Local 2 36,000 72,000 72.009 Frier Local 1 100,000 100,000 100.0010 Packing machine Local 2 50,000 100,000 100.00



12 Cold storage equipment Local 1 550,000 550,000 550.0013 Fixed/Rolling racks Local 10 15,000 150,000 150.0014 Generators Local 3 175,000 525,000 525.0015 Trays Local 350 120 42,000 42.00

16 Tools & equipments knives others Local 50,000 50,000 50.00

Depreciation Rate (%age) 10% 628 3,280,250 3,280.25

TThhee ddeepprreecciiaattiioonn iiss cchhaarrggeedd aatt 1100%% pp..aa.. oonn wwrriitttteenn ddoowwnn vvaalluuee..

55..33 RReeppaaiirr && MMaaiinntteennaannccee Annual Repair & Maintenance of the plant and machinery is expected to be 1 % from Year 1 – 4 and 1.5 % from Year 5 – 10 of the total machinery cost. 55..44 EErreeccttiioonn && IInnssttaallllaattiioonn Erections and installation cost is assumed to be 10% of the total cost of machinery. 55..55 FFuurrnniittuurree aanndd FFiixxttuurreess Following furniture and fixtures will be required for factory and sales outlets:

TTaabbllee 55--22:: DDeettaaiillss ooff FFuurrnniittuurree aanndd FFiixxttuurreess

Sr. No

PARTICULARS No. of Shops

No. of Items

Cost per item

Original Value

Amount (Rs 000)

Factory 1 Tables for production 4 30,000 120,000 1202 Chairs tables & other furniture 120,000 120,000 1203 Air conditioners 3 40,000 120,000 1204 Vertical freezer 1 75,000 75,000 755 Electric installations & other

utilities 1 50,000 50,000 50

6 Weighing scales 2 15,000 30,000 307 Micro wave oven 1 12,000 12,000 128 Computers & accessories 90,000 90,000 90

TOTAL (A) 617 Shops

1 Air conditioners 2 2 40,000 160,000 1602 Cabinet chiller 2 1 120,000 240,000 2403 Vertical freezer 2 1 32,000 64,000 644 Designer cost 2 1 50,000 100,000 1005 Interior designing cost 2 1 450,000 900,000 900



6 Weighing scales 2 1 15,000 30,000 307 Cash Counter 2 1 25,000 50,000 508 Microwave oven 2 1 9,000 18,000 189 Sign board 2 1 30,000 60,000 6010 Electric installations & other

utilities 2 1 50,000 100,000 100

TOTAL (B) 1,722 TOTAL (A+B) 2,339

55..66 MMoottoorr VVeehhiicclleess Along with the above mentioned machinery and equipment the proposed business will also be using two pick ups and one motorcycle. Each pick up will be costing around Rs. 900,000 while the motorcycle will be acquired for Rs. 68,000.

TTaabbllee 55--33:: VVeehhiiccllee

Sr. No NAME OF VEHICLE Quantity Original Value

Present Book Value

Amount (Rs. 000)

1 Shahzore Pickup (second hand) 2 900,000 1,800,000 1,8002 Motor cycle 1 68,000 68,000 68

TOTAL 1,868

66 LLAANNDD AANNDD BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT 66..11 LLaanndd // ccoovveerreedd aarreeaa aanndd ccoonnssttrruuccttiioonn ccoosstt The proposed factory will be consisting of 23 Marlas of land whereas the shop areas will be 900 sq. ft for each outlet. The rate of land is taken as Rs. 200,000 per marla The development charges are taken to be 10% of the land cost. Double story building is recommended, sweets, fresh cream and dry cake rooms are proposed to be on first floor. The details of the building and civil works is as below:

TTaabbllee 66--11:: LLaanndd && CCoovveerreedd AArreeaa rreeqquuiirreemmeenntt

Sr. No. PARTICULARS Area Sq

feet

Cost per Sq

Feet

Present Book Value

AMOUNT (Rs. 000)

Factory 1 Sweets production room 600 800 480,000 480 2 Fresh cream cake production room 400 800 320,000 320 3 Dry cake production room 400 800 320,000 320 4 Biscuits production room 400 800 320,000 320 5 Snacks production room 600 800 480,000 480



6 Frying & Oven room 1,200 800 960,000 960 7 Dispatch & ware house 1,200 800 960,000 960 8 Raw material / store spares store 1,500 800 1,200,000 1,200 9 Admin block 200 1,000 200,000 200 6,500 5,240,000 5,240

Area required 5,100 Note: Double story building is recommended, sweets, fresh cream and dry cake rooms are proposed to be on first floor

66..22 RReeccoommmmeennddeedd MMooddee ooff LLaanndd AAccqquuiissiittiioonn It is recommended to purchase land & building for the factory. The total cost of acquisition of land has been included in fixed assets. Where as the land for outlets will be acquired on rent. Approximately 900 square feet area is desirable for the outlet, which is easily available at about Rs.30, 000 to Rs 40,000 per month. In this feasibility study we have taken Rs. 40, 000 per month as shop rent.

66..33 UUttiilliittiieess RReeqquuiirreemmeenntt Main utilities would be gas, power and water. Distribution transformer station, loading capacity averaging 10 KW, 3-phase industrial meter is estimated to fulfill the requirement of power. B-1 category is advisable for electric consumption. Monthly gas consumption is estimated at 46 HM3 on average for the project. Water supply would be through local municipality.

77 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT For the bakery business, following direct labor will be required for the factory.

TTaabbllee 77--11:: FFaaccttoorryy wwaaggeess aanndd ssaallaarriieess

Sr. No DESIGNATION No. of Employees Monthly Sal. Annual Sal.

Rs. 000 1 Production Manager 1 25,000 300 2 Production supervisor 1 18,000 216 3 Main Chefs 3 15,000 540 4 Helpers 6 7,000 504 5 Dispatchers 2 7,000 168 6 Electrician 1 8,000 96 8 Drivers 2 10,000 240 10 Security guards 2 7,500 180 2,028



Administrative staff for the feasibility is listed in the table below:

TTaabbllee 77--22:: AAddmmiinniissttrraattiivvee aanndd SSeelllliinngg SSttaaffff

Sr. No. Designation of Employee No. of Employees

Monthly Salary

Annual Sal. Rs.000

1 Marketing & Sales Manager 1 25,000 300 2 Admin officer 1 12,000 144 3 Accountant 1 18,000 216 4 Asst. Accountant 1 10,000 120 780

There will be two sales outlets. Details of the shop staff are given in the following table:

TTaabbllee 77--33:: SShhoopp SSttaaffff

Sr. No. Designation Shops No. of Employees Monthly Salary Annual Sal.

Rs. 000 1 Cashier 2 2 8,000 384 2 Supervisor 2 1 10,000 240 3 Sales man 2 5 8,000 960 4 Sweeper 2 1 7,000 168 5 Security guard 2 2 7,500 360 2,112


PREF-77/May, 2011/Rev 3 20

88 FFIINNAANNCCIIAALL AANNAALLYYSSIISS 88..11 PPrroojjeecctt CCoossttss

PROJECT COSTSRs. (000)

% age TotalLand 5,060 Building and Civil Works 5,240 Plant and Machinery 3,280 Erection, installation & commissioning charges and duties 328 Furniture, fixture and office equipment 2,339 Motor vehicles 1,868 Total Fixed Cost 18,115 Preliminary & preproduction expenses 451 Contingencies* 278 Total Capital Cost 18,845 Net initial working capital 1,108 Total Investment Required 19,953 Debt Equity Ratio

Debt 50% 9,976 Equity 50% 9,976

19,953 Project Returns

IRR % 29%Pay Back Period Yrs 3.44 NPV Rs. 15,694

* Contingencies are taken as 1.5% of the total Fixed cost and preliminary expenses



88..22 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Projected Income StatementRs. in Thosands

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Net Sales 54,730 63,548 64,123 64,699 65,274 66,195 67,116 68,036 68,957 69,878

Cost of salesSalaries, wages and benefits 2,028 2,129 2,236 2,348 2,465 2,588 2,718 2,854 2,996 3,146 Raw material purchases 35,923 38,808 38,808 38,808 38,808 38,808 38,808 38,808 38,808 38,808 Other production overheads 1,170 1,403 1,403 1,403 1,462 1,462 1,462 1,462 1,462 1,462 Fuel and power 1,527 1,662 1,810 1,972 2,148 2,342 2,553 2,785 3,038 3,316 Depreciation 947 852 767 690 621 559 503 453 407 367

41,594 44,854 45,023 45,220 45,504 45,758 46,043 46,360 46,711 47,098

Gross Profit 13,136 18,694 19,100 19,479 19,771 20,437 21,072 21,676 22,246 22,780 Administrative & Selling Expenses

Salaries, wages and benefits 2,892 3,037 3,188 3,348 3,515 3,691 3,876 4,069 4,273 4,486 Other Admin expenses 274 318 321 323 326 331 336 340 345 349 Amortization 90 90 90 90 90 - - - - - Selling & related expenses 3,940 4,198 4,432 4,683 4,951 5,904 6,225 6,569 6,937 7,332 Depreciation 546 454 379 317 266 364 301 250 208 174

7,741 8,096 8,410 8,761 9,149 10,290 10,738 11,229 11,763 12,342

Operating Profit 5,395 10,598 10,691 10,718 10,622 10,147 10,334 10,447 10,482 10,438 Non-Operating Expenses/Income

Financial expenses 1,596 1,277 958 638 319 - - - - - Other Income - - - - - - - - - -

1,596 1,277 958 638 319 - - - - -

Profit Before Tax 3,798 9,321 9,733 10,080 10,302 10,147 10,334 10,447 10,482 10,438

Tax @ average 950 2,330 2,433 2,520 2,576 2,537 2,584 2,612 2,621 2,609

Profit After Tax 2,849 6,991 7,300 7,560 7,727 7,610 7,751 7,835 7,862 7,828



88..33 PPrroojjeecctteedd BBaallaannccee SShheeeett

Projected Balance SheetRs. in Thosands

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Fixed assetsNet book value 18,115 16,623 15,317 14,172 13,165 12,278 12,055 11,251 10,548 9,932 9,391 Preliminary & preproduction 451 361 271 180 90 - - - - - - Current assetsRaw Material - 1,476 1,595 1,595 1,595 1,595 1,595 1,595 1,595 1,595 1,595 Packing Material - 46 53 53 53 53 53 53 53 53 53 Stores and Spares - 2 2 2 2 3 3 3 3 3 3 Finished goods - 450 522 527 532 537 544 552 559 567 574 Trade Debtors- outside sales - 215 250 252 255 257 261 264 268 271 275 Advances to suppliers - 492 532 532 532 532 532 532 532 532 532 Cash & Bank 1,387 4,053 11,706 18,369 25,138 31,926 39,768 48,394 56,987 65,502 73,892

1,387 6,735 14,661 21,330 28,106 34,902 42,756 51,393 59,997 68,524 76,924 Total Assets 19,953 23,718 30,248 35,682 41,362 47,180 54,811 62,644 70,545 78,455 86,315 Financed by :Share capital 9,976 9,976 9,976 9,976 9,976 9,976 9,976 9,976 9,976 9,976 9,976 Retained earnings - 2,849 9,839 17,139 24,699 32,426 40,036 47,787 55,622 63,484 71,312

9,976 12,825 19,816 27,116 34,675 42,402 50,012 57,763 65,598 73,460 81,288 Long term loans 9,976 7,981 5,986 3,991 1,995 - - - - - - Current liabilities Trade Creditors

Raw Material - 1,476 1,595 1,595 1,595 1,595 1,595 1,595 1,595 1,595 1,595 Packing Material - 46 53 53 53 53 53 53 53 53 53 Stores and Spares - 2 2 2 2 3 3 3 3 3 3 Accrued & others - 438 466 493 521 551 611 646 683 723 766

- 1,962 2,117 2,143 2,171 2,203 2,262 2,297 2,335 2,375 2,417 Provision forTaxes - 950 2,330 2,433 2,520 2,576 2,537 2,584 2,612 2,621 2,609

Total Liabilities & Owner's Equity 19,953 23,718 30,248 35,682 41,362 47,180 54,811 62,644 70,545 78,455 86,315



88..44 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Projected Cash Flow StatementRs. in Thosands

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10CASH FLOW FROM OPERATING ACTIVITIES

Net profit - 3,798 9,321 9,733 10,080 10,302 10,147 10,334 10,447 10,482 10,438 Amortization - 90 90 90 90 90 - - - - - Depreciation - 1,492 1,306 1,145 1,007 887 923 804 703 616 541 Current Assets movementRaw Material - (1,476) (119) - - - - - - - - Packing Material - (46) (7) - - - - - - - - Stores and Spares - (2) - - - (1) - - - - - Finished goods - (450) (72) (5) (5) (5) (8) (8) (8) (8) (8) Trade Debtors- outside sales - (215) (35) (2) (2) (2) (4) (4) (4) (4) (4) Advances to suppliers - (492) (40) - - - - - - - - Current Liabilities movementRaw Material - 1,476 119 - - - - - - - - Packing Material - 46 7 - - - - - - - - Stores and Spares - 2 - - - 1 - - - - - Accrued & others - 438 28 26 28 30 60 35 37 40 43 Other adjustmentsTax paid - - (950) (2,330) (2,433) (2,520) (2,576) (2,537) (2,584) (2,612) (2,621)

- 4,662 9,649 8,658 8,765 8,783 8,542 8,626 8,593 8,515 8,390 CASH FLOW FROM INVESTING ACTIVITIES

Additions in fixed assets (18,115) - - - - - (700) - - - - Preliminary & preproduction (451) - - - - - - - - - -

(18,566) - - - - - (700) - - - - CASH FLOW FROM FINANCING ACTIVITIESRepayment

Long term loan 9,976 (1,995) (1,995) (1,995) (1,995) (1,995) - - - - - TOTAL INFLOW / (OUTFLOW) OF FUNDS

(8,590) 2,666 7,653 6,662 6,769 6,788 7,842 8,626 8,593 8,515 8,390 Opening Cash 9,976 1,387 4,053 11,706 18,369 25,138 31,926 39,768 48,394 56,987 65,502 Closing Cash 1,387 4,053 11,706 18,369 25,138 31,926 39,768 48,394 56,987 65,502 73,892


PREF-77/May, 2011/Rev3

24

99 KKEEYY AASSSSUUMMPPTTIIOONNSS TTaabbllee 99--11:: OOppeerraattiinngg AAssssuummppttiioonnss No of Working Days in One Year 355No. of Working Hours in One Day 8No. of Shifts 2No. of Outlets 2Working Hours of Outlets 16

TTaabbllee 99--22:: RReevveennuuee AAssssuummppttiioonnss

Outlet Sales 75% of the total production Bakery Sales 70% of shop sales General Items Sales 30% of shop salesOutside Sales 25% of the total Production

TTaabbllee 99--33:: EExxppeennssee aanndd GGrroowwtthh RRaatteess

Sales growth rate 10%Salaries, wages growth rates (as %age of annual Salaries and Wages) 5%Other Production Overheads Repairs and Maintenance (as %age of Machinery Cost) 1.5% Building Repair and Maintenance (as %age of Building Cost) 1.0% Packing Material (as %age of sales) 2.5%Fuel & Power Gas Avg. annual units consumed 549 Rate per Unit Rs. 645 Annual rate Increase % 5% Power & water Avg. annual units consumed (aprox) 240,000 Rate per Unit Rs. 15 Annual rate of Increase % 5%Shop Rent per month Rs. (000) 40 Shop rent growth rate 10%


PREF-77/May, 2011/Rev3

25

TTaabbllee 99--44:: CCaasshh FFllooww AAssssuummppttiioonnss

STOCK LEVELS Raw Material Inventory 15 daysPacking Material Inventory 15 daysStores and Spares Inventory 15 daysFinished goods inventory 3 daysAccounts Payable 15 daysAccounts Receivable and Advances Accounts Receivable 7 daysAdvances to suppliers 5 days

TTaabbllee 99--55:: OOtthheerr EExxppeennssee AAssssuummppttiioonnss Administrative Expenses(as %age of sales) 0.50%Selling and Related Expenses Annual rent of 2 shops Rs.960,000 Others (as %age of sales) 3%Amortization in Years 5Other Income(as %age of sales) 2%

smeda bakery & confectionery

Documents