Montana Dog Food Company - UM College of Business€¦ · · 2017-04-05Marketing Plan ... Montana...

1

Montana Dog Food Company Nourishing Our Own Companions

Business Plan

Contact:

Alyssa Komac

1818 Highland Helena, MT 59601

[email protected]

Written by Alyssa Komac

April 25, 2012

The components of this business plan have been submitted on a confidential basis. It cannot be

reproduced, stored, or copied in any form. By accepting delivery of this plan, the recipient agrees to

return this copy of the plan. Do not copy, fax, reproduce, or distribute without permission.

Montana Dog Food Company

2

Table of Contents

Executive Summary……………………………………………………………………………………………………………….….3

The Company………………………………………………………………………………………………………………………….…4

Market Analysis………………………………………………………………………………………………………………………...5

The Competition…………………………………………………………………………………………………………………….….7

Marketing Plan…………………………………………………………………………………………………………………..………8

Operations Plan…………………………………………………………………………………………………………………..…..14

Development Plan………………………………………………………………………………………………………………..….16

Team………………………………………………………………………………………………………………………………………..17

Critical Risks…………………………………………………………………………………………………………………………….18

The Offering…………………………………………………………………………………………………………………………....18

The Financial Plan……………………………………………………………………………………………………………….…..19

Appendix………………………………………………………………………………………………………………………...……...22


3

Executive Summary

The Montana Dog Food Company (MDFC) is a local producer and supplier of quality dry dog

food. The initial phase of the company limits the production to a highly-athletic canine formula

that will be targeted at sled dogs, hunting and cattle dogs and other high-energy use working

dogs.

The initial business strategy will be based upon differentiation from other premium brands as

MDFC will utilize quality ingredients that are sourced as locally as possible. This strategy will be

supplemented by future intentions of exposed production within the far-too-concealed

industry that currently exists.

MDFC will work closely with Alaska Icefield Expeditions Inc., a large sled-dog tourism company,

to formulate a quality and affordable performance dry dog food. AIE’s role and guidance in this

process will allow for a superior product to be developed. This relationship will also secure a

large initial market for MDFC’s product, thus limiting the initial risk of production.

The Offering

The Montana Dog Food Company is seeking a $30,000 investment. This investment is

necessary for MDFC to match the $50,000 Montana Growth through Agriculture Grant to be

used for equipment purchases, advertising/promotion or consulting services such as

formulation costs and legal services. This grant has the ability to be coupled with a $100,000

loan through the program as well.

In year 5, MDFC will reach $1,637,213 in revenues and have a net profit after taxes of $444,609.


4

The Company

The Montana Dog Food Company will be based out of Helena, Montana and will be formed as a

Limited Liability Company (LLC).

Through the use of social media and public relations, MDFC will create a community of dog

enthusiasts that are seeking a better understanding of, as well as greater engagement with,

their dog’s nutritional needs.

MDFC will initially focus on reaching the niche market of highly-active canines.

Vision, Mission & Philosophy

Vision Statement

We envision a future in which MDFC is a regional leader in premium dry dog kibble, fueling

canines with various nutritional needs.

Mission Statement

It is the mission of the Montana Dog Food Company to provide a superior yet convenient

source of dog food to canines throughout the Northwest region of the United States. MDFC is

unique in that it strives to provide a local and high-quality source of nutrition for dogs, all while

striving to maintain transparency to the public.

Values & Philosophies

MDFC is an advocate of canine nutrition, industry transparency, community support and

environmental consciousness. We believe strongly in creating quality value-added Montana

products for canines.

The Product

Performance Formula: Highly Athletic All-Natural Dry Dog Kibble

This premium, all-natural kibble will initially be available in 40 pound bags. It will be formulated

based upon the needs of high-energy canines at roughly 35% protein and 23% fat. The kibble

will have no known potential canine allergens (corn, wheat and soy), by-products or

preservatives. The kibble will meet/exceed AAFCO (Association of American Feed Control

Officials) minimum nutritional requirements.


5

Product Benefits

Premium Nutrition

Canines will benefit from high-quality nutrition that meet/exceeds their high-activity needs.

Known potential canine allergens such as corn, wheat and soy will not be utilized.

Locally Sourced

Sourcing ingredients locally will allow for a Montana value-added product. Consumers will seek

this attribute, knowing they are supporting Montana’s economy and assisting in Montana job

creation. Furthermore, sourcing locally will reduce transportation costs as well as designate the

product as environmentally-friendly.

Education & Industry Transparency

MDFC’s packaging and website will provide people with the opportunity to become more

engaged and informed consumers. The website will provide verified sourcing of materials used

within the product while the packaging will highlight one such Montana source. The website

will also inform consumers of production practices. This will be utilized to gain consumer trust

within the far-too-concealed pet food industry that currently exists.

Entry and Growth Strategy

MDFC will launch its website in January 2013. We will enter the market following the first

production run of the performance formula in March 2013. We expect to produce 50.8 tons of

dry dog kibble within the first year of operation, which equates to a roughly 5-ton production

run per month in the first year. Five tons consists of 250 40-pound bags of dog food.

Market Analysis

Industry

Market Size

In 2010, there were 78.2 million dogs among 46.3 million households in the United States1. In

that same year, over $8 billion was spent on dry dog food in the U.S.2

Applying national dog-ownership trends to Montana, we see that there are over 260,000 dogs

in our state.3

1 American Veterinary Medical Association: Market Research Statistics, 2010

2 Pet Food Institute: U.S. Pet Food Sales, 2010


6

Market Trends

Montana Dog Food Company will capitalize on many current market trends within the dog food

industry. The following trends have been identified as supporting the mission of MDFC.

Private label petfood remains of strong interest to retailers. In 2010 there were a record

number of new private-label dog products, suggesting that pet-owners are becoming more

comfortable with private label.4 Furthermore, “be local, buy local, save the local jobs will

become a powerful grass root level movement” in petfood retail, thereby supporting private-

label manufacturers.5

Humanization of petfood continues to be a market trend. Consumers are now focusing more

on natural formulations, the communication of specific and understandable ingredients and

products that balance the concept of human-grade foods and what is most important for pets

to consume.6

Sales of natural petfoods in natural supermarkets rose 3.5% to $54.2 million in 2010. US

natural petfood sales are expected to reach $2.5 billion by 2014, representing a 11% compound

annual growth. Compared to the 4% annual growth for petfood overall, ‘natural’ claims are

becoming increasingly popular.7 ‘Natural’ topped marketing claims in 2010 for the third year in

a row, far outpacing the next most used claim.8 Furthermore, allergen-free petfoods have

supplemented this nutrition trend.9

Sustainability is another driving trend within the petfood industry. 62% of petfood company

respondents cited consumer demand as the primary reason their companies are adopting

“green” practices.10 These practices involve natural ingredients, recyclable packaging and

manufacturing practices.

Premium petfoods, defined here as those priced at least 10% above the category average,

accounted for 40% of petfood sales in 2010, followed by regular and value petfoods at 27% and

14%, respectively.11

3 American Veterinary Medical Association: Market Research Statistics, 2010

4 Petfood Industry: US Petowner Buying Trends, November 2011

5 Petfood Industry: Research – What’s In Store for Pet Retail, May 2010

6 Petfood Industry: New Petfood Products: What comes after humanization?, October 2011

7 Petfood Industry: Natural petfood market follows human market growth, September 2011

8 Petfood Industry: Natural petfood market follows human market growth, September 2011

9 Petfood Industry: Nutrition Trends - Allergen-free petfoods, October 2011

10 Petfood Industry: Survey - Consumers drive sustainability in petfood, July 2010

11 Petfood Industry: Market update – Superpremium petfood post-recession, August 2011


7

Consumers are now more than ever seeking out information related to their pet’s health. Tools

such as books, blogs and social media are enabling this trend. “The combined forces of the

largest petfood manufacturers are no longer controlling the information flow.”12

Market Growth

US dog food sales are projected to grow by 4% in value and 1% in volume in the next year. 13

Pet ownership will once again begin to increase, thereby increasing the demand for dog food.

Furthermore, humanization trends, as identified above, will likely drive the premium end of the

category. These projections account for value sales outpacing growth in volume sales.

The Customer

End-users of MDFC’s product will be informed middle-class dog owners who support locally-

produced goods. The initial niche customers MDFC will target are those owners of highly

athletic dogs, such as mushers, ranchers, agility trainers and hunters.

Channels

MDFC will make its product offerings available both online and through various retail outlets

within Montana and the Northwest. MDFC will aim to target retail channels that parallel our

mission and views and are appropriate venues for dry dog food.

The Competition

Highly Athletic Formulations

Figure 1 compares MDFC’s performance dog food with that of other top performance dog foods

currently on the market. As the table illustrates, MDFC’s performance formula will be

comparable in terms of both quality and price to others currently on the market.

Differentiation of MDFC’s product will lie in its local and transparent production characteristics

as outlined in the product strategy portion.

12

Petfood Industry: Market report – Pet Owners Seek New information sources, August 2010 13

Euromonitor: Dog food in the US, July 2011


8

Figure 1: Performance Dog Food Comparison

Company Red Paw Caribou Creek

Dr. Tim’s MDFC National Annamaet Eagle Pack

Product PowerEdge

32k Gold Momentum Sport

Competition X-tra

Ultra Endure

Largest Bag Size Offered

(lbs) 40 40 35 40 38 40 40

Protein %:Fat %

38:25 37:25 35:25 35:25 34:20 32:20 30:20

Price ($/lb) 1.38 1.40 1.23 1.25 1.20 1.63 1.25

Distribution Retail, Online

Retail Retail, Online

Retail, Online

Retail Retail, Online

Retail, Online

Marketing Plan

Target Market Strategy

MDFC will target owners of highly-active dogs who support local/regional products. Our

product will have both a cognitive and emotional appeal to the consumer as they make the

connection between neighbor and product.

Product Strategy

Each bag of dog food will inform the consumer of the product they are purchasing. The product

will be used as a tool to entice the customer to learn more about MDFC and dog food nutrition

and production, in general. Packaging will be utilized to highlight locally sourced ingredients,

with different production runs showcasing a different supplier.

Pricing Strategy

At $1.25 per pound, MDFC’s performance dry kibble will be priced comparably to other popular

high-quality performance dog foods. A 40-pound bag will cost $50.00 at retail.

Distribution Strategy

MDFC will target pet specialty stores throughout Montana and the Northwest, as well as

alternative retailers, and direct and online purchasers.


9

Alaska Icefield Expeditions

MDFC will be working very closely with Alaska Icefield Expeditions Inc. (AIE) to produce our first

dry dog food formula for active canines. Through this relationship, MDFC anticipates fulfilling

the sled-dog tourism company’s dry dog food needs, which equate to roughly 600 pounds of

dog food daily. This relationship will provide a discounted cost of quality food for AIE as well as

a large initial market for MDFC. MDFC anticipates working with other large direct purchasers in

the future as well. See Appendix for letter of interest from AIE owner Chris Turner.

Pet Specialty Retailers

Pet specialty retailers include smaller stores that are locally owned and operated and focus

primarily on pet care and nutrition. Figure 2 lists potential pet specialty retailers of MDFC’s

product within five Montana cities.

Alternative Retailers

Alternative retailers include outlets that have a primary focus other than pet nutrition, yet have

missions or values within the realm of MDFC’s. Alternative retailers include veterinary offices,

natural and local grocers and home supply retailers.

A primary alternative retailer MDFC will target is Murdoch’s Ranch and Home Supply.

Murdoch’s has a total of 22 stores in Montana, Colorado, Wyoming and Nebraska. The eight

stores in Montana are located in Missoula, Helena, Dillon, Bozeman, Butte, Hamilton, Kalispell

and Miles City. The Missoula store’s dog food purchaser felt that MDFC’s dog food would be a

great fit as Murdoch’s is trying to incorporate more local product offerings.

Other alternative retailers MDFC would consider approaching include Ace Hardware’s across

the Montana as well as local veterinary offices and natural/local food retailers. Figure 2 lists

potential alternative retailers of MDFC’s product within five Montana cities.


10

Figure 2: Montana Retailer Examples

Location Pet Specialty Alternative

Missoula GoFetch!

Neff’s Animal Specialty Pet Nebula

Murdoch’s Good Food Store

Orange Street Food Farm

Helena Pet Town Murdoch’s

Real Food Store Alpine Animal Clinic

Bozeman Dee-O-Gee

Barkenhowell’s Bridger Feeds

Murdoch’s Montana Harvest Natural Food Store

Billings Equus & Paws

Loveable Pets Bakery & Boutique Mary’s Health Foods

Whitefish The General (Pet) Store Third Street Market

Mountain Valley Foods

Online/Drop-Ship

MDFC will have a strong web presence in which consumers may order the product directly

online. A negotiated number of bags will be stored at the manufacturer’s warehouse and will

be mailed upon each online order placed. This distribution method will equate with a higher

gross profit per bag sold as it will eliminate the retailer’s margin; however, a portion of that

money will be allocated for the manufacturer as compensation.

Regional Events

MDFC will have a strong presence at various regional events related to dogs and local goods.

This will include dog-centered events, such as Five Valley Kennel Club’s Agility Trials and Dog

Shows, Montana’s Race to the Sky and Helena’s “Don’t Fence Me In” Dog Trail Run, as well as

farmers’ markets and trade shows. MDFC will sell product at these events when allowed,

however, we do not anticipate this outlet method being a prominent distribution strategy.

Regional events will serve the greater purpose of engaging with Montana communities and

educating the consumer.


11

Advertising & Promotion

Brand

MDFC will rely heavily on product branding to differentiate our product from others offered.

We will focus primarily on our “Made in Montana” status. This will include registering through

the “Made in Montana” program and utilizing the logo as well as incorporating local

information relating to our product on our packaging and website and in all advertising

campaigns. Such information would include locations of sourced ingredients, often highlighting

the ranch or farm that supplied the product, as well as identifying local supporters of our

product.

Another tangent of the Montana-related branding of our product will be creating an advertising

campaign that focuses on what it means to be a “Montana Dog.” This campaign will highlight

the incredible tasks and activities many dogs in Montana regularly partake in, including hunting,

mushing, agility trials and herding. MDFC will brand our product so that the consumer

associates our dog food with owning a “Montana Dog” and thereby creating pride in purchasing

our product for their loyal companion.

Also critical to MDFC branding is our ability to engage and inform the public. MDFC will be

transparent from day one. This aspect of our business will be important to communicate to the

public so that it may be embraced by consumers.

Positioning

MDFC will position our product as a high quality, affordable dry dog food. MDFC will educate

the consumer and become a thought leader within the dog food industry.

Advertising

Figure 3 outlines MDFC’s forecasted marketing budget along with the anticipated advertising

campaigns to be conducted.


12

Figure 3: MDFC Forecasted Marketing Budget

Year Advertising Campaigns Annual Budget

1

Retail Advertising Word-of-Mouth

Social Media/Web Site Free Local Media Opportunities

Regional Events

$1,651

2 Add Montana Print Advertising $6,035

3 Add Montana Television Commercials $14,840

4 Add Regional Print Advertising $26,640

5 Maintain Media Mix $32,744

Social Media

MDFC will interact heavily with potential consumers. This will be done primarily through a

Facebook page and MDFC’s website forum. Interactions will include answering questions,

informing consumers of production practices and sharing relevant industry information.

Public Relations

MDFC will capitalize on various public relations opportunities, including interviews and

community donations.

Sales Strategy

MDFC’s sale strategy will rely upon wholesale to retailers and large, direct purchasers and

direct to consumer sales via MDFC’s website.

Wholesale

Pet specialty and alternative retailers, as outlined earlier, will be the primary sales method.

Large, direct purchasers such as AIE will make up the remainder of MDFC’s wholesale segment.


13

Direct to Consumer

Consumers wishing to order dog food online may do so via MDFC’s website. A drop-ship

agreement will be arranged with the manufacturer to allow for this sales strategy.

Sales Forecast

Wholesale Analysis

Figure 4: Number of 40 lb. Bags of Dog Food Sold

AIE Pet Specialty Alternative Drop-Ship

Year Annual Monthly Annual Monthly Annual Monthly Annual Annual

Total

1 500 168 2,016 0 0 2 24 2,540

2 2,025 360 4,320 112 1,344 4 48 7,737

3 2,025 900 10800 450 5,400 8 96 18,321

4 2,025 1,540 18,480 1,000 12,000 32 384 32,889

5 2,025 1,800 21,600 1,350 16,200 50 600 40,425


14

Operations Plan

Business Model

What is key to note concerning MDFC’s business model is the lack of distributor between

packaging and retail. A distributor will not be utilized until after year 2 to trim costs and

increase margins for both MDFC and retailers. An increased profit margin for MDFC in the first

few years will help ensure adequate cash flow. Increased retail margins for the first few years

will encourage the sale of our product by retailers. Distribution of our product will be

bootstrapped for the first two years by simply delivering the product to retailers with my own

truck and trailer. After which, MDFC will contract with a distributor.

Figure 5: Business Model Years 1 & 2


15

Formulation

Tom Willard and Greg Aldrich of Pet Food Ingredient and Technology, Inc. will be hired to assist

in formulating MDFC’s performance dry dog food kibble. Their consulting fee is $200 per hour,

with an expected time contribution of 40 hours. Formulation costs are therefore $8,000.

Nutritional analysis of MDFC’s product will be done at Montana State University through Dr.

Jane Boles. Also, MDFC will utilize Dr. Brent Ruby at the University of Montana to supplement

the nutritional analysis component of our product.

Suppliers

Trim from cattle and other carcasses such as lamb and buffalo would be the primary protein

source for MDFC dog food and therefore would be the ingredient of the greatest quantity

utilized in production. Ranchland Packing, a meat processor in Butte, MT, has been identified

as a primary source for these ingredients. Any meat needs not met by Ranchland Packing could

be addressed through purchasing cattle directly from Public Auction Yards in Billings, MT after

which Ranchland Packing would do the processing.

Agricultural products from within Montana will be utilized heavily. Once the formulation has

been created, MDFC will contract with agricultural cooperatives, such as Big Sky Local Food,

Western Montana Grower’s Cooperative and Mission Mountain Food Enterprise Center, to

source local agricultural ingredients. Those ingredients that are not able to be sourced locally,

whether due to lack of availability or financial limitations, would be sourced out of state

through traditional petfood industry outlets.

It is MDFC’s objective for at least 55% of the ingredients used in production to be sourced from

Montana.

Production

MDFC will utilize the services of Montana Food Products for FDA approved food manufacturing

and packaging capabilities. They specialize in source-verified meat products, thus making them

a natural fit for MDFC. Their facility is located in Laurel, MT and is currently at less than half

capacity. MDFC will contract with them to establish in-state production initially.

Dry dog food manufacturing utilizes some equipment most human-food processors don’t have.

It would be necessary to purchase an extruder, which pushes the mixed formula through a high-

pressure, high-heat tunnel to shape and cook the kibble. I have estimated the necessary

additional equipment purchases at $100,000. See the Appendix for information regarding the

Growth Through Agriculture Loan that would make this purchase feasible for MDFC.


16

Development Plan

Phase I: Bootstrap

Figure 6: Year 1 Timeline

Activity Months 1 &

2 Months 3 &

4 Months 5 &

6 Months 7 &

8 Months 9 &

10 Months 11

& 12

Formulate Performance

Dog Food X

Launch Website & Market Product

X

5-ton Production Run

each month X X X X X

Market Product & Deliver

X X X X

Phase 2: High Growth

Figure 7: Years 2-5 Timeline

Year 2 Year 3 Year 4 Year 5

Formulate All-Life-Stages (ALS)

Formula X

Expand Montana Retail Market

X X

Expand into Northwest Retail

Market X X

Expand Production

Facilities X

Formulate Additional

Product Lines X


17

Team

Management

Alyssa Komac

Alyssa is a Business Management major at the University of Montana with an expected

graduation date of December 2012. She has completed a minor in Environmental Studies and is

currently completing the prerequisites necessary to apply to veterinary schools. Alyssa

attended the 2011 Petfood Forum & Workshop in Schaumburg, Illinois and has been mushing

sled dogs in Alaska for the past three summers. She is passionate about Montana and animals,

making the Montana Dog Food Company a perfect fit with her interests.

Advisory Board

Dr. Timothy Hunt

Dr. Tim is a practicing veterinarian and dog musher in Marquette, Michigan. In 2005, he and his

wife Mary started producing a premium, all-natural dog food under the brand Dr. Tim’s. The

company currently produces a highly athletic canine formula, an active canine formula, an all-

life-stages canine formula and a feline formula. Dr. Tim’s industry experience and knowledge

proved invaluable to this business plan.

Don Gaumer

Don is an adjunct instructor in the Department of Management and Marketing and the

Department of Accounting and Finance at the University of Montana’s School of Business

Administration. He also works as a financial advisor at S.G. Long and Company in Missoula, MT.

Don received his MBA from the University of Montana and since then has been involved in

banking, investments, corporate finance, corporate senior management and various start-up

ventures. Don’s guidance in developing this business plan has been crucial.

Cooper Burchenal

Cooper is the founder of Omnibars, a Montana-based producer of wholesome beef energy bars.

Cooper proved instrumental in identifying various resources and points of contact within

Montana that allowed me to recognize the potential to manufacture dog food within the state.

Dan & Chris Turner

Dan and Chris are the founders of Alaska Icefield Expeditions, a glacial sled-dog tourism

company operating in Southeast Alaska. Alaska Icefield Expeditions feeds over 600 active sled


18

dogs for a four-month period each summer. The Turners’ knowledge of quality dry dog food as

well as their experiences as serial entrepreneurs has been critical to the formation of this

business plan.

Critical Risks

Unpredicted Sales Growth

A major risk for MDFC is sales growth because demand may exceed anticipated sales or just the

opposite; demand may not be as great as forecasted. To address this risk, MDFC will secure

purchasing contracts from retailers before the first production run. Furthermore, MDFC will be

working closely with AIE, Inc. to develop our product, thus ensuring a large initial market for our

product. Should demand exceed initial production capabilities, MDFC will scale back the retail

outlets until demand can be met in a timely manner. Market development will continue once

production capacity has increased.

Dramatic Increases in Ingredient Prices

Unexpected and severe increase in ingredient prices is a critical risk for MDFC. To protect

MDFC from unexpected price variation, we anticipate buying materials in bulk when possible as

well as agreeing upon prices with suppliers’ months in advance of utilizing the purchased goods.

This will allow MDFC to react accordingly should prices increase drastically.

The Offering

Figure 8: Sources and Uses of Funds

Sources of Funds Uses of Funds

Founders, Family & Friends

$20,000 Research & Development

$12,000

Investor $30,000 Equipment $100,000

Growth Through Agriculture Grant

$50,000

Professional & Legal Year 1

$5,000

COGS Year 1: Ingredients & Production

$35,983

Growth Through Agriculture Loan

$100,000

Year 1 Operating Costs

$21,167

Contingency Cash $25,850

Total $200,000 $200,000


19

The Financial Plan

Figure 9: Retail Price Break-Down Years 1 & 2 and Years 3-5


20

Figure 10: Collections Schedule

Net 30 Net 60 Net 90 Uncollectible

75% 15% 8% 2%

5 Year Balance Sheet


21

Monthly Break-Even Point: $12,624

Figure 11: Break-Even Analysis

Detailed 5 Year Income Statement and 5 Year Statement of Cash Flows can be found in the

Appendix.


22

Appendix

AIE Letter of Intent to Purchase…………………………………………………………………………………………….…23

Growth Through Agriculture Program………………………………………………………………………………………24

Detailed 5 Year Income Statements…………………………………………………………………………………………26

Detailed 5 Year Statement of Cash Flows……………………………………………………………………………..….29


23

AIE Letter of Intent to Purchase


24

Growth Through Agriculture Gant and Loan

25

Detailed Accounting Follows

Income Statements

Cash Flow Statements


26

Year 1 Income Statement


27

Years 2 & 3 Income Statement


28

Years 4 & 5 Income Statement


29

Year 1 Statement of Cash Flows


30

Years 2 & 3 Statement of Cash Flows


31

Years 4 & 5 Statement of Cash Flows

Montana Dog Food Company - UM College of Business€¦ · · 2017-04-05Marketing Plan ... Montana...

Documents

Transcript of Montana Dog Food Company - UM College of Business€¦ · · 2017-04-05Marketing Plan ... Montana...