Presentation on theme: "Entrepreneurship and Small Business Management"— Presentation transcript:
1 Entrepreneurship and Small Business Management MBAX 6100Entrepreneurship and Small Business ManagementFeasibility Plan – Parts I & IIAuntie Carla’s Frozen Bread DoughMarch 20, 2007Carla Ooyen & Masashi Tsuchiya
2 Product Concept Frozen Premium Bread Dough The premium quality, flavor, and smell of homemade artisan bread without the hassle of mixing, kneading and forming the dough.Premium quality bread dough sold in the freezer section.At home, the consume thaws, rises, and bakes.Product will be made of natural or organic ingredientsManufacturing will use “old dough” techniques for premium flavorMay offer unusual, specialty or holiday selections such as panettone, stollen, or Greek Easter breadMay sell in an oven-safe, recyclable container for added baking convenience
3 Market Analysis – Size and Growth Market value of all Bread and Roll retail sales in the World1$145.7 billion in 2004 (2.4% growth in the past five years)Market value of all Bread and Roll retail sales in the United States2$13.5 billion in 2006 (1.3% growth in the past five years)$14.1 billion projected by 2011Downturn in 2004 due to low-carb diet trend, but market rebounding by 2005Rhodes International reported in 2006 that “sales of Rhodes frozen white bread dough are increasing at 8% annually.” 3Bread market hit bottom in May 2004, demand is stronger now. Vice president of Hom’Ade Foods agrees sales of st quarter have increased.4The U.S. government’s release of the revised food pyramid is reminding consumers of the importance of whole grains in their diet.5Market for bread and related products has been and is expected to continue to be almost flat for the next few years.6(Difference in figures from other market size data is due to different source of data)Market value projections in billions of $1999200020012002200320042005200620072008$10.50$11.10$11.40$11.70$12.00$11.20$11.50
4 Market Analysis - Trends Increasing gourmet “premium” marketAccording to Fortune magazine 7, a gourmet bakery in Paris, Poilane, sells about $18 million annually, to 50 different countries, to celebrities like Robert De Niro and Steven Spielberg, and to three star French chef Alaim Ducasse, who buys 5000 metric tons per year. Long distance distribution is done within 24 to 48 hours by FedEx, with price ranging from $10 in Paris to $47 in the U.S.Artisan bread market is increasing“By 2003 sales of premium breads totaled $933 million, or 16 percent of all bread sales, and were continuing to climb” 8Artisan and specialty bread sales have increased 23% from 1998 to“Specialty breads add cachet. People are looking for more sophisticated flavors” 10Increasing need for convenienceExperts interviewed all agreed that consumers of natural & organic products were looking for more convenienceRhodes advertises convenience: “They are both freezer-to-oven rolls that come in a re-sealable laminate bag. They thaw, rise and bake in 30 minutes” 11
5 Market Analysis - Trends Increasing market for healthy foodsOrganic food is increasingly popular.“(Bread) is not surging quite as aggressively as other organic segments, it’s showing respectable growth.” 12The consensus of the experts interviewed was that the Organic market is continuing to grow.13Anti-allergy food (non sugar, gluten free, etc) is increasingly popular.Gluten free, sugar free, allergy free bread will sell.14Whole grain bread is increasingly popular.Whole grain bread market was slow in 2000 to 2003, however in 2004 sales increased 3.3% from previous year’s sales.15In 2005, 73 new products were introduced with specialty grains such as spelt, buckwheat, kamut, quinoa, and pearl barley.16“In 2006, wellness will again be one of the industry’s top influences; the relationship between health and food has become big business….the comeback of carbs will add fuel to the growing interest in breads” 17Young mothers want to feed their babies better food.18People are looking for natural version of everyday products.19
6 Market Analysis – Market Segmentation Industrial Bread and Artisan breadIndustrial breadMass produced breadMainly white breadFrozen dough availableArtisan BreadBakery made rather than mass productionPremium gourmet breadOrganic, Sugar free, Gluten free, Allergy freeNo frozen dough availableWorld Bread and Roll market inEurope: $95.3 billion with artisan bread having a 60% shareThe U.S: $13.1 billion with artisan bread having a 12% shareAsia-Pacific: $12.8 billion with artisan bread having a 30.5% shareJapan: $5.6 billion in 2006, which is about 48% of Asia-Pacific market, with artisan bread having a 20% shareIndia: $1.5 billion in 2006China: $1.1 billion in 2006Market Value of the U.S. Bread, Roll and Bun dough retail sales (Excluding in-store use such as restaurant) 21Refrigerated market = $252.4 million in 2003Frozen market = $443.0 Million in 2003
7 Market Analysis – Demographics Demographic 1: Bread consumer consumption of bread inPenetration rate is more than 95% across all following segmentsNumber of loaves consumed weekly45% of buyers purchase 1 loaf per week31% of buyers purchase 2 loaves per week12% of buyers purchase 3 loaves per weekPercentage of users by age group:21% are 35 to 4419% are 45 to 5419% are 25 to 3413% are 18 to 2412% are 55 to 64Bread consumers by gender:52% of buyers are Female48% of buyers are MalePercentage of users by race/ethnic origin:72% are White/non Hispanic12% are Black12% are Hispanic4% are AsianBread consumption by region:36% live in the South23% live in the Midwest22% live in the West19% live in the Northeast
8 Market Analysis – Demographics Demographics 2: White bread and Whole Grain bread 23White bread buyers tend to be:Spanish, HispanicYoung 18 to 34 years oldHigh school graduatesWith childrenLive in a rented propertyWhole grain bread buyers tend to be:55 years or olderCollege or Graduate school graduatesRetiredNo childrenLive in own home
9 Market Analysis – Threats Little growth in the bread market: currently between -3% to 3% per yearRaw material supplyWeather issues such as a drought could cause a raw ingredient shortage.Possible insufficient ingredient supply. The demand for organic products is increasing faster than the supply of raw ingredients. 24Economic downturns reduce the demand for premium products.
10 Market Analysis - Market Structure Retail route (major route)Manufacturer (finished bread or dough)WholesalerRetailer (sometimes bake from dough)ConsumerIn-store useRestaurant, Café, Sandwich shop, etc.(sometimes bake from dough)Own-production (Bakery)Manufacturer = Retailer (all process by retailer)
11 Market Analysis – Opportunities & Niches OpportunityMarket trend for premium bread needsHuge world market for bread – export opportunityHigher share of artisan bread in Europe and Japan (than in the US)Ocean freight = about $0.30/loaf 25NichesNo premium frozen bread dough in current bread marketJason Vincent, Category Manager - Frozen Foods for Wild Oats, feels that there is a need for natural/organic frozen bread dough and is surprised that no one has yet entered that niche. The long shelf life is a key attractive characteristic. He feels the market is probably 2 to 3 units per week per store.Adam Schneider, natural food broker, indicated that he could “sell the hell out of” a par-baked frozen bread product.Increasing market segment for premium bread.Internet e-commerceOther form of direct sales to consumersExport opportunityMarket Analysis – New Distribution Channels
12 Market Analysis - Conclusion Feasible, there is a niche!No direct competitors – no premium frozen bread dough manufactures exist currently.Consumer interest is favorable - Increasing demand for healthy foods such as organic. Consumers are looking for natural substitutes for everyday products.Growth opportunity - The U.S. share for artisan bread is lower than most other developed countries. As people get more health conscious and taste sensitive, the market will grow.Export opportunity - Europe accounts for about 64% of world bread market. Japan accounts for about 48% of Asia-Pacific bread market. Both countries with higher artisan bread share than U.S.
13 Competitive Analysis – Industry Structure Carrying CapacityThe bread industry is fairly slow growth (see Market Analysis section).Frozen food section of grocery stores is limited in size. Securing space for a new product means that an existing product looses space (or is no longer carried).Must have a niche product that fills a customer need.Frozen premium bread dough could gain space by fulfilling an unmet need.26Degree of StabilityFairly stable demand for bread from year to year. A staple of most people’s diets.Seasonal variations in demand. Higher demand near holidays, such as Thanksgiving, Christmas, Easter and Mother’s Day.27Diet trends, such as the Atkin’s low carb craze in the early 2000’s, can have a serious negative effect.ComplexityGrocery industry generally requires working with suppliers, distributors, brokers, and retailers.For local market entry, it is sometimes possible to avoid working with distributors or brokers.28Selling in food service chain to restaurants would require same chain as grocery industry unless sales market is only local.Obtaining necessary health department and FDA approval can be complicated.Industry EvolutionBread industry as a whole is mature.Organic food segment is in the later stages of the high growth phase. Retailers are starting to see “me-too” products rather than new innovations.29Organic growth opportunities are tied to convenience and replication of traditional (not-so-healthy) products.
14 Competitive Analysis – Barriers to Entry Economies of ScaleLarge manufacturersReceive discounts for buying ingredients in large volume. Power to affect supplier costs.Marketing budgets are larger. Profits of large volume products can help support marketing and sales of lower volume or introductory products.Entry level companiesLack of volume equates to higher ingredient costs.Marketing costs cannot be spread over product line.Customer LoyaltyBecause there is currently no retail frozen premium bread dough, customers would currently have no brand to be loyal to. First entry advantage might deter customers from switching brands if a new competitor entered the market.If a known baked bread brand, such as Rudi’s, were to enter the market, customers would be more likely to buy known over unknown.Loyalty to baked breads brand could deter customers from switching to frozen dough option.ProprietaryRecipes – competitors may not be able to replicate that customer-winning flavor.
15 Competitive Analysis – Barriers to Entry Capital RequirementsBuilding a manufacturing facility from scratch is costly. For example, a 18’x24’x12’ freezer space would cost about $90K for parts and installation.30Copackaging agreements with licensed manufacturers are a means of avoiding the necessity to build a factory.Unused capacity can be rented from manufacturers or restaurateurs (approximately $10 to $14/hour).31 This is a low capital way for a small company to test the business concept without major investment.Cold storage facilities, such as Atlas Cold Storage, offer storage and inventory management, thus reducing the need for on-site freezer space.Cold storage freight services alleviate need for company purchase of refrigerated truck fleet.Access to distribution channelsMust convince retailers and distributors to carry your product. They may not be interested in dealing with small manufacturers.Do not have direct access to customer if using standard distribution channels.Government RegulationMust follow state and local Department of Health commercial food safety requirements (can’t start a food business in your garage).Must register with the FDA and follow food labeling guidelines.32
16 Competitive Analysis – Degree of Rivalry Price point issuesVariety of entrants in bread market means that price comparison is inevitable.Premium, natural, and organic breads generally sell in the range of $3-$5 for a 1 pound loaf of bread.If frozen bread dough is priced significantly above baked options, consumers will substitute.Rivalry is somewhat “friendly”. Competitors provide coupons and promotions to encourage consumers to purchase their produce, but price wars are not an issue.Big manufacturers, such as Pillsbury or Wonder, that have the power to squish competition wouldn’t be interested in a small niche market like frozen premium bread dough.
17 Competitive Analysis – Major Competitors There are no direct competitors in the premium frozen bread dough category, so we focus on indirect competitors. Key indirect competitors include:Frozen traditional bread doughRhodes International - frozen loaves in white or wheat. The white bread compares to a traditional sandwich loaf – little flavor, soft texture.Frozen pre-baked traditionalPillsbury “Oven Baked Crusty French Mini Loaves” – a household brand name producing an extremely average convenience bread product.Frozen pre-baked natural or organicAlexia - frozen baked artisan bread rolls. Known for producing a quality product.Fresh natural or organicRudi’s Organic Bakery – produces a wide array of certified organic breads, primarily sandwich style.Grocery bakeriesGrocery bakeries produce a large variety of fresh baked breads of varying qualities. Natural food grocers generally produce a higher quality product.See the Competition Matrix in Appendix 2 for a detailed comparison of competitors.Possible Future Competitors:Current baked bread manufacturers could easily produce a frozen dough product. It’s really just a matter of making slight modifications to production and packaging.Food service companies, such as Bridgford, Ralcorp Frozen Bakery Products, and Rich’s, produce frozen dough or par-baked bread and could fairly easily offer a retail product.
18 Competitive Analysis - Competitor Self Perception Rhodes Bake-N-Serv 33“Enjoy hot, homemade quality white bread fresh from your own oven. Available in three or five loaves per package. Just thaw, let rise, & bake!”Family owned company committed to qualityRudi’s Organic Bakery 34“Our Mission is to be the leading manufacturer and supplier of branded certified organic breads. We are dedicated to the highest standards of quality, taste, packaging and communications. We are committed to the families we serve and look to bring warmth, sincerity, joy and a higher quality of life to our people, our customers and the world.”Alexia 35“Alexia® Foods, Inc. produces a full line of 100% all natural, trans fat free, premium frozen products for the oven, microwave or fryer that deliver outstanding gourmet flavor from freezer to table in just minutes.““Convenient and versatile, Alexia Artisan Breads bake up beautifully and complement any dish. “
19 Competitive Analysis – Basis of Competition Convenience vs. QualityShelf bread is part of a weekly shopping trip. Sacrifice freshness and quality for a product that will easily last a week.Frozen (pre or par baked) bread products offer the convenience of “fresh baked” bread without an immediate trip to the store. Sacrifice immediate use, and sometimes flavor, for a product with a longer life.Fresh bakery products come in 2 categories:Cheap and not so tasty. Good if you are already making a quick trip to the store.Higher quality products may have a very good artisan flavor, but freshness deteriorates quickly and an on-demand trip to the store is required.Frozen bread dough requires some planning, but allows one to make fresh bread without the hassle of mixing, kneading, or forming, and no on-demand store trip is required.Premium frozen bread dough offers high quality ingredients and flavor and medium convenience.The level of convenience is tied closely to one’s proximity to a store (rural populations).Reputation – For big industry players, like Rudi’s or Rhodes, their reputation is a key competitive factor.Consumers will try product based on name alone.New ventures do not have brand recognitionSpecialty – Offering specialty products, such as gluten free or vegetarian, is a key competitive factor for many small bread makers.
20 Competitive Analysis – Control over Prices, Costs, & Channels Consumers know what bread costs. Limited ability to charge a premium price.Consumers are highly unlikely to buy bread that cost more than $5 a loaf, based on what is already competitively available.CostsA start-up is going to have a difficult time getting price breaks from suppliers. With the relative shortage of natural and organic ingredients, suppliers have a fair amount of power.Conversely, some market factors have made standard ingredients more expensive, which means there is less marginal cost to going organic. For example, due to natural disasters, regular sugar is currently only slightly cheaper than organic sugar (40¢/lb. vs. 50¢/lb.).36Channels of DistributionLarge grocery chains require distributor relationships.Introduction in local stores can provide a means for bypassing the distributor.Internet sales could be a creative means of connecting directly to retail customers.Competitive Analysis – Market DominationNo direct competitorMany small businesses in the natural and organic bread marketIn the Frozen Bread/Rolls/Pastry Dough category, Rhodes International has 40% market share, Hom’ade Foods Inc. has 44% and General Mills (including Pillsbury) has 10%.37
21 Competitive Analysis – Conclusion Bread manufacturers are not currently addressing the market niche for premium frozen bread dough.Existing indirect competitors could enter this niche market fairly easily if they wanted.Future competitors, such as food service companies, could also enter this niche.Market size is small so there is little incentive for large companies to enter the market.There is a market opportunity for premium frozen bread dough, and currently no direct competition, but there is no barrier for future entry.
22 Endnotes1 ”Global - Bread and Rolls,” Datamonitor industry market research, October 31, 2005.2 ”Japan – Bread and Rolls,” Datamonitor industry market research, December 1, 2006.3 D. Gail Fleenor, “Rising Sales: The Comfort and Aroma of Home-Baked Bread, Rolls, and Biscuits are Available From a Wide Array of Tasty, Convenient Items in the Freezer Aisle,” Frozen Food Age, December Vol.55, p18.4 Renee M Covino, “Bread is Back: Oh What a Difference a Year--and the Return to Balanced Eating--Makes on the Frozen Bread/Dough Category,” Frozen Food Age, April 2005, Vol.53, p28.5 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p95.6 Market Trends: Fresh Bread and Related Products, August 2004, p2, p97 Tom Sancton, Fortune magazine, Jun 22, 2007, Vol.115, p1578 “Bread, Cake, and related products” Encyclopedia of American Industries. Online Edition, Thomson Gale, 20069 Market Trends: Fresh Bread and Related Products, August 2004, p710 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p11411 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p8312 See Call Reports - Lind Iggi, Jason Vincent, and Scott Roy13 See Call Report - Tom, Vitamin Cottage14 The U.S. Market for Whole Grain and High Fiber Foods, April 200515 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p11716 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p2117 See Call Report - Adam Schneider18 See Call Reports - Adam Schneider, Jason Vincent19 Renee M Covino, “Bread and Dough for a Crisp Fall: Get Customers Ready for the Autumn Baking Season with More Frozen Bread, Dough and Rolls--Now Highlighted with Extra Health and Convenience,” Frozen Food Age, June 2006, Vol.54, p2420 Market Trends: “Fresh Bread and Related Products”, August 2004, p61.
23 Endnotes21 Simmons Market Research Bureau, “Study of Media and Markets” Fall 200422 ”Global – Bread and Rolls,” Datamonitor industry market research, October 31, 200523 Market Trends: Convenience Home Baking Products, February 2004, pp84-86.24 See Call Report - Jason Vincent25 See Call Report - Mr. Sato26 See Call Report - Jason Vincent27 Frozen Dough Handbook, Volume 61, p10, Rhodes International Inc.28 See Call Report – Scott Roy29 See Call Report - Jason Vincent30 See Call Report – Scott Roy31 See Call Report – Lind Iggi3233343536 See Call Report – Scott Roy37 Market Trends: Convenience Home Baking Products, p51, February 2004.
24 Entrepreneurship and Small Business Management MBAX 6100Entrepreneurship and Small Business ManagementFeasibility Plan – Part IIIAuntie Carla’s Frozen Bread DoughApril 24, 2007Carla Ooyen & Masashi Tsuchiya
25 Market Analysis Summary – Market Trends Size and GrowthMarket size of all Bread and Roll in the United States is more than $10 billion. Low future growth rate. Details as follows;Increasing gourmet “premium” marketArtisan bread market is increasingBy 2003 sales of premium breads in the United States are about 16 percent of all bread sales, and continue to increase. 1Artisan and specialty bread sales have increased 23% from 1998 to“Specialty breads add cachet” People are looking for more sophisticated flavors 3Increasing market for healthy foodsOrganic food is increasingly popular.Anti-allergy food (non sugar, gluten free, etc) is increasingly popular.Whole grain bread is increasingly popular.Young mothers want to feed their babies better food. 4People are looking for natural version of everyday products. 5Market value projections in billions of $(source: Market Trend, Fresh Bread and related products, August 2004, p2 and 9)1999200020012002200320042005200620072008$10.50$11.10$11.40$11.70$12.00$11.20$11.50
26 Market Analysis Summary SegmentationIndustrial Bread (mass produced, mainly white bread)Artisan Bread (bakery made, premium gourmet, organic, natural, etc)Bread penetration rate is more than 95% 6Typical whole grain bread consumer: 55 years or older, College graduate or higher education, retired, no children, and homeownerMarket ThreatsLittle growth in bread market.Raw material supply – weather issues or surge in organic ingredient demand could cause supply shortageEconomic downturns reduces the demand for premium products.Market structureRetail route : majority of bread productsManufacture → Wholesaler → Retailer → ConsumerIn store use :Manufacture → Wholesaler → Restaurant/Cafe → ConsumerOwn Production : BakeryManufacture/Retailer → Consumer
27 Market Analysis Summary – Opportunity and Niches Increasing market trend for premium artisan breadHuge world market (opportunity for export)NichesNo premium frozen bread dough in current bread market.New Distribution channelInternet e-commerceOther form of direct sales to consumersExport opportunity
28 Competitive Analysis Summary Industry StructureCarrying Capacity - limited space in the frozen food section, must find a nicheDegree of Stability - Fairly stable year-to-year demand. Diet trends can have a serious negative effectComplexity - have to work with suppliers, distributors, brokers, and retailers.Industry EvolutionOrganic food segment is in the later stages of the high growth phase. Retailers are starting to see “me-too” products rather than new innovations.7Organic growth opportunities are tied to convenience and replication of traditional products.Barriers to EntryEconomies of Scale – large manufacturers can get volume discountsCustomer loyalty to existing brandsCapital Requirements – must secure necessary product space & equipmentDistribution Access - Must convince retailers and distributors to carry your productGovernment Regulation – must meet State Department of Health & FDA requirementsDegree of RivalryPrice Point – must be competitive with other bread optionsPower – big manufacturers have power to control market if desired
29 Competitive Analysis Summary – Major Competitors Key competitors in the bread industry include:Frozen traditional bread doughRhodes International - frozen loaves in white or wheat. The white bread compares to a traditional sandwich loaf – little flavor, soft texture.Frozen pre-baked traditionalPillsbury “Oven Baked Crusty French Mini Loaves” – a household brand name producing an extremely average convenience bread product.Frozen pre-baked natural or organicAlexia - frozen baked artisan bread rolls. Known for producing a quality product.Fresh natural or organicRudi’s Organic Bakery – produces a wide array of certified organic breads, primarily sandwich style.Grocery bakeriesGrocery bakeries produce a large variety of fresh baked breads of varying qualities. Natural food grocers generally produce a higher quality product.See the Competition Matrix in Appendix 3 for a detailed comparison of competitors.Possible Future Competitors:Current baked bread manufacturers could easily produce a frozen dough product. It’s really just a matter of making slight modifications to production and packaging.Food service companies, such as Bridgford, Ralcorp Frozen Bakery Products, and Rich’s, produce frozen dough or par-baked bread and could fairly easily offer a retail product.
30 Competitive Analysis Summary Basis of CompetitionConvenience vs. Quality - Shelf bread with long life vs. Fresh bakery product with better taste but shorter lifeReputation - For big industry players, like Rudi’s or Rhodes, their reputation is a key competitive factor. New ventures do not have brand recognitionSpecialty – Offering specialty products, such as gluten free or vegetarian, is a key competitive factor for many small bread makers.Control over Prices, Costs, & ChannelsConsumers know what bread costs. Limited ability to charge a premium price.A start-up is going to have a difficult time getting price breaks from suppliers. With the relative shortage of natural and organic ingredients, suppliers have a fair amount of power.Large grocery chains require distributor relationships, but there may be creative alternatives to the traditional channel, such as local stores or internet sales.Market DominationNo premium frozen bread dough in U.S. retail marketMany small businesses in the natural and organic bread marketConclusionsBread manufacturers are not currently addressing the market niche for premium frozen bread dough.Existing indirect competitors could enter this niche market fairly easily if they wanted.Future competitors, such as food service companies, could also enter this niche.Market size is small so there is little incentive for large companies to enter the market.
31 Venture Analysis – Opportunity and Need Opportunity for Frozen Bread DoughMarket trend for premium bread needsHuge world market for bread – export opportunity. Higher share of artisan bread in Europe and Japan (than in the US)8No premium frozen bread dough in current retail bread market.Jason Vincent, Category Manager - Frozen Foods for Wild Oats, feels that there is a need for natural/organic frozen bread dough and is surprised that no one has yet entered that niche. The long shelf life is a key attractive characteristic. He feels the market is probably 2 to 3 units per week per store. 9Adam Schneider, natural food broker, indicated that he could “sell the hell out of” a par-baked frozen bread product. 10In 2004, the natural foods “bread and baked goods” category grew 14.1%. 11Problem: Not everyone has the joy of experiencing fresh baked breadNo time to make nutritious, great tasting bread.May not live near a bakery where premium, natural, or organic bread is made.Not everyone has the skill or desire to make good bread from scratch
32 Venture Analysis – Opportunity and Need Compelling NeedPhysical – we all need food to survive, and bread is a major part of the American diet.Physiological – Faced with increasing obesity and health concerns, Americans have a need for healthier productsShoppers want to see “high levels of specific nutrients and specific health claims” on Nutrition Facts labels and “whole grain” is one of the most important claims. 12 [reaffirmed by customer survey data]EmotionalWant the satisfaction of feeding a nutritious product to loved onesFresh baked bread makes people feel warm and comfortableRelieve the stress of needing to find time to make the product oneselfTo relieve the stress of hectic lifestyle, want convenient, fast and fresh products: “As lifestyles change and people having lesser time for baking, refrigerated and frozen categories seem to be more convenient to bakers rather than preparing from mixes.” 13SocialConsumers want to join peers in showing increased concern for sustainable practices. They want products that show their “Awareness of earth-friendly farming practices and desire to recycle and conserve energy” 14Want a fresh, homemade product to serve friends at dinner parties.1516
33 Venture Analysis - Product Product DescriptionPerformanceProduct will rise and bake dependably to produce a consistent taste and texture.Ingredients will be natural or organic. Nutritious whole grain options will be offered. No unpronounceable ingredients.Dough is made using old-world multi-day build processes to provide optimum flavor complexity.Packaging will protect product from freezer burn to guarantee taste and texture once baked.Loaves will be sold in packages of 2-1 lb. loaves or 3-10 oz. loaves.CostTarget retail price per package is $7.99 [for 2-1lb or 3-10 oz.].Promotional discounts or coupons would be available (generally required by distributors and grocers).Discount price (such as 90% retail) could be offered for direct sales (such as internet).AvailabilityCarried by natural grocers and mainstream grocers, specialty shopsOn-line purchases available for local customers or those willing to pay for refrigerated/dry-ice freight.Consumers required to make cash purchases, but Company will have to maintain credit terms with distributors or other commercial purchasers.SocialUse product performance superiority to build a name that people can trust.Fun brand that consumers of all ages can enjoyCustomer as marketer, spreading the word to family & friendsServiceMoney-back product quality guaranteePossible organic certificationComprehensive, easy-to-use website with long list of categorized FAQ’sSpecialized instructions to meet variety of customer cooking stylesCustomer’s feedback actively solicited and acted upon.
34 Venture Analysis - Product Product Range (based on consumer survey results)FlavorsStage 1: Whole wheat, multigrain, sourdoughStage 2: Rye, bagels, specialty such as cinnamon raisinSizesStage 1: Package of 2-1 lb. loavesStage 2: Package of 3-10 oz. loavesShapesTraditional loaf shapeConsumer option to cook without pan for an artisanal, free-form shape.Stage 1: First stage of introduction Stage 2: Product expansion phaseMeeting Customer NeedsProduct targets need for healthier, convenient products. [See Opportunity/Need and Unique Benefits sections for more details]Production & DeliveryRented bakery & warehouse space, used bakery equipment (if not pre-equipped space)Contract refrigerated freight services for transportation.Internet sales will require overnight shipping w/special packaging (customer pays shipping premium)Product Design RefinementInvestigation of freezing techniques, such as flash freezing, to optimize stability of product quality.Investigation of partial proofing before freezing to speed thaw times.
35 Venture Analysis – Customer Survey Summary & Conclusions General SurveyMixed response to idea:Many like the idea and thought it seemed simple: “Seems just like laying out meat.”Others hated it: “I pay people to bake for me”Concerns - The time involved and the possibility that the bread won’t taste good in the endVarietiesWhole wheat was clearly the top choice.Multigrain & Sourdough were the secondary selectionsLimited interest in other varieties such as rye, bagels, white, pita, and cinnamon raisinPriceStandard Loaf: $2-6Small Loaf: $1-3What’s ImportantSuperior flavor is very importantNatural/Organic, Whole grain, & Freshness are fairly importantPrice & Shelf Life are only somewhat importantMost bread is purchased in the supermarket bread aisle
36 Venture Analysis – Customer Survey Summary & Conclusions “Prototype” samples surveyLiked the appearance, taste of the loafOne respondent felt more likely to purchase after trying.Felt that a bigger loaf was probably better given thaw/proof time.Including pan added to convenienceConcerned about the bread taking a long time to thaw and rise“Would purchase the bread for special occasions, like dinner parties.”Good for people who don’t know how to bake.Suggestions“Consider making bread rings of sectioned bread to speed up the proofing.”“Really soft doughs proof much more quickly than dense wheat and rye doughs.”“To attract attention, I might put seeds on and in some of your breads “ConclusionsThere is consumer interest in the product.Need to investigate methods that might allow much quicker thaw/proof times – perhaps partial proofing.One surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was still good. This suggests that a partial rise might be an option.Really great directions and website are needed to meet different customer’s needs. Some want detailed directions, some go by feel, etc.“It tasted like the best store-bought bread or bakery bread that I have ever had. My husband would like to put in an order already!”
37 Venture Analysis – Targeted Consumer Market DemographicsCook of the family, generally womenParents in their late 20’s to late 30’sCollege educated professionalsBaby Boomers (Early 40’s to early 60’s)High income households ($50K+)Semi-rural to rural consumers where bakeries are less accessiblePsychographicsBelieve in a healthy lifestyle which is supported by nutritious foodsBelieve in the benefits of regularly purchasing natural/organic products because they are good for them and good for the environmentWant to feed their family (especially children) a quality productWant to replace traditional products with healthy alternativesSocial statusGrew up in a lower to middle income family (more likely to have experienced fresh baked bread)Middle class values with an upper incomeFamily is important, but the rest of life gets in the way
38 Venture Analysis – Targeted Consumer Market DistributionRetail Route: Manufacturer → Distributor → Grocer → ConsumerFood Service: Manufacturer → Distributor → Food service/Restaurant as ConsumerInternet or Local Sales: Manufacturer → ConsumerTarget market’s opinions on current offerings17:Generally satisfied“Decent, but not always fresh or tasty – doesn’t last long…artisan breads… are hard to come by”“There’s a lot of choice out there; but not much when it comes to baking at home”Consumers appear willing to try the product as long as performance concerns can be mitigated.Buying decisions are made by the family grocery shopper. Survey results indicate that:Superior flavor is very importantNatural/Organic, Whole grain, & Freshness are fairly importantPrice & Shelf life are only somewhat important
39 Venture Analysis – Unique Benefits Major BenefitsHealthNutrition - natural/organic ingredients, whole grains, lack of processed ingredients are better for the bodyTaste – like going to a French bakery, not the day-old sectionEmotionalLove – serving quality ingredients to family and friendsAchievement – for those who haven’t had success making own bread from scratchConvenience – don’t have to make a mess mixing or forming. No flour to clean off the counter. No run to the store for bread.Comfort – can enjoy warm fresh bread straight from the ovenMemories - smell of fresh bread baking takes you back to Grandma’s kitchenSocialSustainability – organic ingredients are good for the environment, as is recyclable pans and packagingPersonal Relationships – make friends think you slaved all day and are an amazing baker!ServiceHelping hand – website and customer support line are like cooking with a professional chef in the kitchen. You’ll always have answers to problems and questions.
40 Venture Analysis – Unique Benefits Uniqueness of BenefitsRhodes’ frozen bread dough can also provide convenience, achievement, comfort, & memories benefitsOrganic bread makers, such as Rudi’s, provide health, convenience, and sustainability benefitsOnly Auntie Carla’s can provide all of these benefits through its quality manufacturing, packaging, and excellent customer service!Educating the MarketTeaching them that bread can be in the frozen aisleIn-store demonstrationsWebsite informationSampling product to prove that it’s dependable, easy, and tasty
41 Venture Analysis – Sustainable Competitive Advantage Venture’s resourcesFinancialLow capital requirement to start and run the ventureFounders have personal savings to commit to starting ventureFounders can take personal loans and use credit cards to provide additional financingSpouses to keep food (in addition to bread) on the tablePhysical assetsLow requirement for plant and equipmentNo incoming ownership of physical assetsRent kitchen space to avoid initial capital requirementsRecipeAbility to produce nutritious & tasty productLocation (Boulder)Health sensitive consumers who would buy healthy foodHealthy image of the townEasy access to local Natural Food industryNew ideaNew frozen dough product that is easy to bake
42 Venture Analysis – Sustainable Competitive Advantage Venture’s capabilitiesKnowledgeManagement – Two CU Leeds MBAs!Product expertise and production experience - CarlaExport experience – MasashiContactsCU Alumni network, Deming Center, entrepreneurship professorsAccess to the knowledge of Boulder’s natural food expertsWebsiteFamily & Friends to help build a full service website that will help to draw & keep customersBarriers to entry that venture facesRegulatoryMust meet state board of health regulations. This is easy if renting shared/incubator kitchen space that is already certified.ProprietaryBread is not high technology, so there are no trade copyrights or patents to battle.Customer LoyaltyLoyalty to baked bread brands could deter customers from switching to frozen dough option.Getting customers to look in the frozen section for breadDistributionHave to convince grocers to find room in limited freezer space to carry our product.Have to convince distributors to carry product line.Competitor ResponseIf a known baked bread brand, such as Rudi’s, were to enter the market, customers would be more likely to buy known over unknown.
43 Venture Analysis – Sustainable Competitive Advantage Barriers venture can createNew distribution and retail systemIf we can create our own private distribution or/and retail channel which other manufactures can not imitate, this would function as a barrier.Customer brand loyaltyBecause there is currently no retail frozen premium bread dough, customers would currently have no brand to be loyal to. First entry advantage might deter customers from switching brands if a new competitor entered the market.Create a taste that consumers cannot forgetBuild consumer trust in the quality of ingredientsBuild complete product line – one stop purchase of all frozen baked productsCreate website that consumers like to visit, builds camaraderie, and answers all of their questions.Trade secretsCreate unique recipes and baking processes– competitors may not be able to replicate that customer-winning flavor.
44 Venture Analysis – Risks MarketingWill the consumers buy?With current financial projection, break-even sale volume is about lb. loaves per day. Based on an initial sales estimate of 3 loaves/variety/store per week [based on Jason Vincent interview] and assuming 4 initial product varieties, product would have to be in 146 stores to reach break even volume.If this break-even volume cannot be obtained before savings are depleted, the venture will fail.Another low-carb diet craze could kill the venture before it gets off the ground.Price structureEvery dollar change in sale price has a huge impact on revenue. $1 increase in retail price reduces break-even sales to 175 units per day. On the other hand, $1 decrease in sale price increases break- even volume to 450 units per day.By decreasing retailer’s or distributor’s mark up by 5% (from 35% to 30%), it will decrease break even sales unit by 15. On the other hand, increasing 5% will increase the break even number by 20 units.Distribution and Grocer acceptanceEven with creative marketing strategies, venture is unlikely to achieve necessary volumes if acceptance in traditional grocery channel cannot be quickly obtained.FinanceAssuming founders can finance $100,000, the venture will not last more than three years without achieving the break even sales volume. Sales must grow above break even number within three years or the venture needs to be re-financed.
45 Venture Analysis – Risks CompetitorsIf existing well established bakery such as Rudi’s entered the market, consumers may prefer Rudi’s because of brand familiarity. The venture needs time to create its good brand image before facing competition.EconomyBread is a commodity product, thus less economic impact on total consumption of bread. However...Consumers may shift to low priced bread in sluggish market.High quality, high priced bread is price sensitive.The venture cannot reduce price and stay profitable.
46 Venture Analysis – Financial Projections See Appendix 1 for Financial Projection Assumptions
47 Venture Analysis - Conclusion Compelling needsPhysical need for foodPhysiological need for better ingredientsEmotional need for increased convenience, connection to loved onesSocial need for special occasionsProof of the target market’s interestSurvey suggests that (potential) consumers are interested.BenefitsFrozen bread dough has unique benefit of easy baking at home environment.Sustainable advantagesAlmost no barrier to entryHow to create barrier is the key question.Opportunity to expand.Profitability and InvestmentRelatively low investment requiredHigh gross marginFinal profitability depends on the sales volumeBreak even sales volume is about 250 loaves per day, can we achieve it?
48 Venture Analysis - Recommendations Recommended further researchPossible barrier to entry that can be createdDistribution channelRetail channelRecipeRegulationFDA Organic requirementInternational Organic requirementOpportunity of salesPossible sales volumeOpportunity for expansionExport market researchOther (similar) products such as cookies, cakes, pet treats, religious needs (Jewish people bake religious bread every week)Sale to business customers such as restaurant, cafe, or even local bakeryPrepare prototypePrepare a unforgettably delicious organic bread dough.Investigate freezing/thaw procedures that are more convenient.Prepare business planPrepare a business planTake MBAX 6170
49 Endnotes1 ”Bread, Cake, and Related Products,” Encyclopedia of American Industries. On line Edition, Thomson Gale, 2006.2 Market Trends: Fresh Bread and Related Products, August 2004, p7.3 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p102.4 See Call Report- Adam Schneider5 See Call Report- Adam Schneider6 Market Trend, Fresh Bread and related products, August 2004, p67.7 See Call Report - Jason Vincent8 ”Global – Bread and Rolls,” Datamonitor industry market research, October 31, 2005.9 See Call Report - Jason Vincent10 See Call Report- Adam Schneider11 The U.S. Market for Whole Grain and High Fiber Foods, April 2005, p66.12 ibid, p68.13 Market Trends: Convenience Home Baking Products, February 2004, p58.14 “Baby Boomers and the U.S. Food and Beverage Industry”, December 2005, p89.15 See customer survey results16 Market Trends: Food Flavors and Ingredients Outlook, February 2006, p72.17 See customer survey results18 Panera Bread Corporate web site,19 “National Average of Baking Industry”,20 Great Harvest Corporate web site,
50 Appendix – ContentsAppendix 1: Financial Projection Assumptions………………………………….. 29Appendix 2: Customer Survey…………………………………………………….. 33Appendix 3: Competition Matrix…………………………………………………….36Appendix 4: Call Reports……………………………………………………………37Appendix 5: Feasibility Plan Parts I & II……………………………………………70
51 Appendix 1 – Financial Projection Assumptions RevenueNumber of units sold per day (based on what the venture needs to sell)Year 1 = 50 units per dayYear 2 = 150 units per dayYear 3 = 300 units per dayPrice$4.00/unit (1 lb loaf) at retailOther baked premium organic bread = about $4.00/lbRetailer’s mark up = 35% (see Call Report : Scott Creevy)Distributor's mark up = 30% (see Call Report : Scott Roy)Assumed wholesale price = $2.28/unit (1 lb loaf)COGS - Ingredient costs for basic 1 lb. loaf of organic white or wheat bread:9 oz. Organic $0.63 to $0.80/lb = $ $0.60/loaf (probably cheaper at whole sale)Bob’s Red Mill ( 25lb at $15.75Shop Natural (Guisto’s Flour) 50lb at $40.006 oz. almost nothing = $0.010.25 oz. Sea $44/lb < $0.010.1 oz. $2.60/lb = $0.02Total material cost = $0.51 to $0.64/loafTotal cost (labor included) $1.00/loaf (1 lb)
52 Appendix 1 – Financial Projection Assumptions Operating expensesSales and MarketingSales promotion $400/month (10 free samples per day + $100 printed promotions per month)Transportation $300/month (1800 miles per month / 15 miles per gallon / $2.5/gallon fuel cost)Communications $300/month (2 land lines X $ mobile phones X $50 + Internet/web $100)Other expenses $150/monthTotal $1,150/month (fixed cost at constant for all three years)General & AdministrationBakery space $750/month ( 750 F³ kitchen space at $1 Rent / F³ / month)Pay check $6000/month ( 3 workers including 2 founders X $2000/month)Total $6750/month (fixed cost at constant for all three years)Depreciation$16,000 equipment / 10 years life = $1,600 per yearInvestment RequiredCapital Expenditures (only required at year 1)Dough mixer $6000 (used, capacity 60qtrs)Freezer $10,000 (new, 8 x 10’ walk in)Other equipment $2000 (used sink = $1000, Used counter and other = $1000)Working CapitalPayment to suppliers = cash on delivery ( +0 days)Payment from retailers = cash by next month day 20th ( -1 day to -50 days )Average negative 25 days of sales amountOther major expensesInstallment of equipments and other $10002 founders! Sorry Jeff!!
53 Appendix 1 - Financial Projection Assumptions Comparable’s Financial informationMost small bakeries are privately owned. No financial information except larger public companies.Panera Bread (only company owned bakery and cafe section) 18COGS = about 30% of sales amountLabor = about 30% of sales amountNational average of baking industry 19Out of 5,354 companiesAverage COGS = 56% of sales amount
54 Appendix 1 - Cost of starting a franchise Great Harvest (Franchise Retail Bakery) 20Initial feeAverage Initial Franchise Fee $30,000Travel & Training Expenses $381-$12,000 average $4,488Real Estate & Improvements$8,348-$172,022 average $70,586Equipment $44,341-$140,727 average $78,325Opening InventoryIngredients & Supplies $2,750-$27,000 average $8,346Signs $615-$23,793 average $5,953Grand Opening Advertising $400-$8,689 average $3,495Prepaid ExpensesCity, County, State, Landlord $400-$21,232 average $6,420Organizational CostsLegal, Utilities $425-$42,475 average $10,063Working Capital (Cash Reserves) $5,000-$70,000 average $12,2853 Months Rent $4,455-$18,600 average $10,383TOTAL ACTUAL INVESTMENT $107,608-$352,322 average $225,682
55 Appendix 2 – Customer Survey Survey of Monday night MBAX 6100 classResponse to Idea:Yes: 17 Maybe: 2 No: 9“Seems just like laying out meat”“I pay people to bake for me”“Already have a breadmaker. Hobbyist breadmaking need already filled”“Offer companion product like dip”“Is frozen less healthy?”Like frozen Jewish breads, would like more optionsConcernsWorried that making bread is tough. Is there room for baking error?Time involved – maybe a weekend activity, want instantHaving to remember to thaw ahead of time/ planningWill it taste as good as bakery products?Over/under bakingHigh Altitude bakingVarieties – RankThe overwhelming choice: Whole WheatNext: Multigrain & SourdoughSome interest: Rye & BagelsLimited Interest: White & PitaSpecial Interest: Cinnamon RaisinPriceStandard Loaf: $2-6(10)Small Loaf: $1-3(5)What’s ImportantSuperior flavor is very importantNatural/Organic, Whole grain, & Freshness are fairly importantPrice & Shelf life are only somewhat importantWhat’s missing: “good baguettes”DemographicsMale: 25 Female: 3Household Size:6(1) 10(2) 2(3) (4+)4Age Group: 3 (18-25) 10 (26-30) 8 (31-37) 1 (38-50)Primary Shopper? Yes: 13 No: 7How much do you buy per week:2(0) 6(1) 6(2) 6(3+)Where do you buy: (No/Maybe/Yes)Supermarket bread aisle: 8 / 2 / 8Supermarket bakery: 2 / 1 / 6Supermarket frozen section: 1 / 0 / 3Bake at home from scratch: 1 / 0 / 1Bake at home using mixes: 1 / 0 / 1
56 Appendix 2 – Customer Survey Survey of Professors/Administrative StaffThought product seemed like a good ideaConcernsThawing long enough/sufficient riseUnder/overcookingFreezer burn/FreshnessHigh altitude bakingWill it taste like homemade?Expected priceComparable to fresh-baked prices$1.50 to $3 for large loaf$0.80 to $2 for small loafMulti-grain & Whole Wheat top variety choices4 Females/1 Male1 (31-37) 1 (38-50) 3 (50+)
57 Appendix 2 – Customer Survey Survey of classmates given “prototype” samples of product to try4 Women & 1 Male3 Loaves of Rye, 2 loaves of sourdoughLiked – At least 1 was ready to make purchases!the convenience of panThe appearance of the baked loafThe flavor: “tasted great”, having hot breadOne respondent felt more likely to purchase after tryingGenerally thought that a bigger loaf was probably better given thaw/proof time.ConcernsBread took a long time to thaw and rise, takes a lot of planning aheadecological impact of disposable panUse“would purchase the bread for special occasions, like dinner parties”Good for people who don’t know how to bakeSuggestions“consider making bread rings of sectioned bread to speed up the proofing”“Really soft doughs proof much more quickly than dense wheat and rye doughs”“to attract attention, I might put seeds on and in some of your breads “ConclusionsNeed to investigate methods that might allow much quicker thaw/proof times – perhaps partial proofingOne surveyor left the bread in backpack overnight, refroze, and then tried again. Flavor was still good. This suggests that a partial rise might be an option.Really great directions and website are needed to meet different customer’s needs. Some want detailed directions, some go by feel, etc.“It tasted like the best store-bought bread or bakery bread that I have ever had. My husband would like to put in an order already!”
59 Appendix 4 – Call Reports Index of Reports:. Beth Swanson, Rudi’s Organic Bakery. Kyla Duffy, former owner Nutballz. Scott Roy, President, Boulder Ice Cream. Adam Schneider, Owner, United Sales & Service. Jason Vincent, Category Manager, Frozen Foods, Wild Oats Corporate. Linda Iggi, Owner, Amazing Grains. Scott Creevey, Owner, Great Harvest Bread. Soichiro Sato, Manager, Clear freight. Tom, Store Supervisor, Vitamin Cottage0. Name Unknown, Bread Sales Supervisor, Whole Foods