Tea Company

Energizer Product Limited

In the Name of ALLAH, WHO is the most Beneficent and the most

Merciful.

_______________________________________________________________________The Projecticians Roll No s’: 115, 134 & 165

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PREFACE

Department of Commerce, The Islamia University of Bahawalpur has

always been admirable in its efforts to equip the future executives with

arms of creativity, flexibility and adaptability to meet the challenges

offered by fast changing business environment.

To achieve the above goals the department is providing both text and

practical knowledge to its students with its available resources. Text

knowledge is very well transferred to the students within the premises of

the department; Practical knowledge requires the kind co-operation of

various business organization of the country. Faculty members are

always trying their best to ask the students to explore the market by

assigning different field activities and to prepare a report.

This report has been written on the “Energizer Tea Company, Multan.”

We have done our best efforts to complete this report efficiently and

effectively with all abilities. We hope this report fulfills the criteria and

expectations of Department of Commerce. We have tried our best to

make it analytical as well as informative.

May Allah help us in this world


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Acknowledgement

We bow our head, before ALLAH Almighty, who blessed us with Potential

and stamina to complete our report.

First of all we would like to pay our special regards and thanks to Respected

“Mr. Javaid Iqbal” who provides us guidance at each and every step, in

completion of this report.


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Dedicated to:

Our Beloved Parents Who Pray For Our Bright Future


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Executive Summary

Prior to the detail description we are starting the summary of our report. To

review the executive summary the basic purpose is to give the clear idea

about what report actually contains and efforts made behind the completion

of report.

As it as assigned us to work at “Tea Company” we started work and gather

data. In this report first of all general overview of tea is given then major and

minor things related to tea Industry are introduced with area and other

information are discussed.

The main task, which this particular report will show, was to make project

regarding all major aspects, working area, internal as well as external

factors, that may best choose for tea Industry.

After working at this report we come to know that what is the real picture of

this huge sector of tea Industry in Pakistan. The production and export of tea

is very important and the tea Industry is very beneficial and profitable

industry.


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INTRODUCTION

Pakistanis are avid tea drinkers. In the hinterland, which still commands 70 per cent of the rural and agricultural population, a cup of tea is part of the daily routine and culture. More often than not it is cooked in milk and sugar and taken with bread — making for the cheapest form of dietary intake or food — rather than being taken purely and simply as a beverage.

The government of Pakistan treats tea as an essential commodity. Although there is no price control, tea prices are monitored very closely by the government. It is not only the most popular Beverage in the country but it is also the cheapest available.

Being a developing country with meager foreign exchange resources tea imports has been putting enormous pressure on the country’s exchequer and from time to time the government has been exhorting the people to drink less tea. Also, they have imposed duties to raise the price of tea to discourage tea consumption. However, none of these measures have worked, and tea continues to be the most popular drink among the masses.

Pakistan imports almost 170 million kilograms of tea annually. Till recently, Pakistan had been meeting its demand for tea from Bangladesh, Kenya, Sri Lanka and Nepal. Over the years, Pakistan has earned the distinction of being a country with high consumption of tea and the largest tea importing country of the world.

According to latest research, it has been stated that tea helps prevent cancer, has cardiovascular benefits like reducing blood pressure, decreasing chances of heart attacks etc., helps the immune system as


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it helps counteracting stress, poor nutrition, etc. It also helps prevent tooth decay.

On the other hand its adverse effects include addiction to it to the extent that people find it very difficult to stop its intake and if they do, it causes headaches and restlessness. The worst part is that you get addicted to it without even knowing!


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Our MissionTo develop and deliver the

most innovative tea products, manage customer experience, deliver quality service that contributes to

brand strength, establishes a competitive advantage and enhances profitability, thus

providing value to the stakeholders of the company.


Core Values

“LeadershipWe value leaders of high integrity, energy and enthusiasm who have the necessary managerial, professional and people skills to inspire a group or an organization to set high goals and achieve them willingly. We believe that leadership skills need to be strengthened at all levels within our organization and that managerial and professional competence is a necessary foundation.

“Teamwork and PartnershipWe believe that high performing teams containing appropriate diversity can achieve what individuals alone cannot. Consciously using the diversity of style, approach and skills afforded by teams is strength we must continue building into our organization.

“Quality and Continuous ImprovementsWe believe that quality and strong commitment to continuous improvements are essential to our ongoing success. To this end, we define quality as understanding the customer’s expectations, agreeing on performance and value, and providing products and services that meet expectations 100 percent of the time. Our motto is, “Quality in all we do”.

“Ethics and IntegrityWe do care how results are achieved and will demonstrate honest and ethical behavior in all our activities. Choosing the course of highest integrity is our intent and we will establish and maintain the highest


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professional and personal standards. A well-founded reputation for scrupulous dealing is itself a priceless asset.

“ Open CommunicationWe value communications that are courteous and open and that enables each of us to do our jobs more effectively by providing information that contributes to the quality of our judgment and decision making. Effective communication should provide the means for gaining understanding of the company’s overall objectives and plans and of the thinking behind them.

“InnovationSuccess requires us to continually strive to produce break through ideas that result in improved solutions and services to customers. We encourage challenges to the status quo and seek organizational environment s in which ideas are generated, nurtured and developed.

“Individual Growth and DevelopmentWe strongly believe in the dignity and value of people. We must consistently treat each other with respect and strive to create an organizational environment in which individuals are encouraged and empowered to contribute, grow and develop them and help to develop each other.

“Enjoyment and FunWe believe that excitement, satisfaction and recognition are essential elements of a healthy, creative and high performing work environment. Having fun in our work should be a normal experience for everyone


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OBJECTIVES AND KEY SUCCESS FACTORS

The main objectives of the development of project are:

Capitalize on excellent opportunity to extract maximum revenue. To launch the tea processing unit with a highly targeted publicity

campaign and in a grand opening event in the start January of 2010.

To maintain tight control of costs, operations, and cash flow through diligent management and automated computer control.

To maintain a high standard of product and service provided. Capitalize on excellent location opportunity. To be the premier company that achieves the goals of profit

maximization and value maximization for all the stakeholders of the company.

The keys to success in achieving our goals are:

Be the first in the market to provide a wide variety of innovative taste of tea that has broad appeal.

Provide an exceptional service and product that leaves an impression.

Consistent utilizing of ingredients that creates product quality. Managing our internal finances and cash flow to enable upward

capital growth. Strict control of all costs at all times, without exception. The Company will be strategically located to maximize the

revenue derived from the sales of the quality product.


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Provide exceptional product that leaves an impression with our core customers.

Consistent entertainment atmosphere and product quality. High demand of such blended tea in the locality. Accelerated sales growth experienced in the category of sachet

packs. Extensive distribution channel for the sachet packs focusing even

on small kiosks in the urban and rural areas. The product would be focusing the price conscious segment of

the market by providing similar and better quality branded product at lesser price.

Emphasizing on excellent service to the other wholesalers. Adapting to the rapid social and economic changes. Improving the packaging will increase the life of tea and hence

would secure the overall distribution and selling techniques. Regular flow of local as well as Export orders is the key success

factor for efficiently running of the project. Selection and procurement of consistent quality raw material

would be another contributing factor for carrying out successful operations of proposed project.

Competitive price of products. Abundant supply of raw material. Cost efficiency through better management. Media campaign for the awareness of the retail customers. Availability of low cost skilled labor.


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PRODUCTS OF THE COMPANY

The project involves buying loose tea and then packing and marketing the product under a brand. The branded tea will be positioned in competition with other branded and unbranded tea. The brand standardization will be done through the combination of different types of unbranded/open tea available . It is suggested that the company should initially introduce its products in the rural or small town markets where brand awareness is easy to make and heavy advertisement budget is not required.

The proposed product mix of the company is as under;

Jasmine (Black) CHAI Jasmine Green CHAI Jasmine Iced CHAI Jasmine Flavored CHAI

The brand name for the product will be “CHAI”. All the brands of the company will be marketed under the name of

Jasmine. The demand for the Black Tea is largest in the country and the company will use most of its capacity to produce the black branded tea. With the passage of time the company will enhance the depth of its brand by adding unique tastes.


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Proposed Tea Packing


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Competitors :


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PROJECT BACKGROUND

Project Brief

The project involves buying loose tea and then packing and marketing the product under a brand. The branded tea will be positioned in competition with other branded and unbranded tea. The brand standardization will be done through the combination of different types of unbranded/open tea available.. It is suggested that the company should initially introduce its products in the rural or small town markets where brand awareness is easy to make and heavy advertisement budget is not required.

Opportunity Rationale

In Pakistan, a morning and evening cup of tea is an essential part of everyday culture. This tradition has existed for many years. Every guest in a home in Pakistan is most likely to ask for a cup of tea to relax after a demanding journey. This trend has always created a strong demand for tea in Pakistan and made it the world's third largest importer of tea. In terms of tea consumption, it is the seventh largest country. Even in summer when the weather is extremely hot, tea is drunk twice a day.

During the review period, the hot drinks market grew in both volume and value terms. Tea dominated the market in both the retail and foodservice channels. Tea is a part of daily life, and rural areas generate the most sales. Rural areas drove sales growth because they consist 66% of the country's population. Consequently, companies have to focus on rural areas to maintain their market shares. Throughout the review period, sales of loose black standard tea were very dynamic as consumers in rural areas always buy loose black standard tea. Introducing affordable brand in such areas would attract sales. On the other side, in urban areas, offices prefer to use tea bags. Such a market could also be explored with low cost and high product quality.


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In rural areas and small towns new brands of tea are relatively easy to introduce. The tea sachet packets have seen high sales growth throughout the country and especially in rural areas.

Economic Rationale

Out of every five, one Pakistani starts his day with a cup of tea. One has drawn the conclusion from the data pertaining to Pakistan’s tea imports last year when the country imported tea of $220 million.

Consumption of one kilogram of tea per head and 1.8 per cent annual growth in population, Pakistan’s tea imports are constantly rising. Due to the growing demand, some 40 to 60 million-kilogram tea is also smuggled into Pakistan, largely under the guise of Afghan Transit Trade, causing considerable revenue loss to the exchequer in the shape of duties and taxes.

Pakistan averages approx. 1 Kg per person per annum. On average a tea drinking Household consumes 4.85 kg of tea/year. Nationally, 4.63 kg in urban & 5.4 kg in rural areas. This translates into a daily consumption of 2-4 cups per day.

As the world's third largest importer of tea, Pakistan has called for a single market in Asia for the optimal utilization of resources and expansion of the trade in the sub-continent. Consumption of tea is increasing at 4% p.a.

Pakistan is the second largest tea importer after Russia with consumption of 180 million kilogram a year, imports about 120 million kg annually, while rest of the 60 million is brought into the country through smuggling.

Market Entry Timing

The tea business can be started in any month of the year as it is consumed throughout the year. The demand of the tea will be raised in the country because it is the cheapest refreshing drink that the people of Pakistan used to drink and also as the population of the country raises its demand will automatically raised.


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Business Legal Status

It is recommended that this project should be started as sole proprietorship or partnership as it does not involve heavy investment. Moreover, less complications and costs are involved in forming, administering and running the sole proprietorship or partnership business.

Project Capacity and Rationale

The total capacity of the project will be 1500000 kilograms production of the branded tea. In the beginning the company will utilize its 60% of the capacity for the processing of the raw tea into the branded one, which will be 900000 kilograms of the branded tea. The company will enhance its capacity utilization by 10% annually. . The project consists of a sachet-manufacturing machine having production capacity of 3,000 sachets per hour and two box-making machine with production capacity of 2,640 boxes (60 g and 125 g packs) per hour and 1,200 boxes (250 g packs) The box packing would be in three different sizes i.e. 60g, 125g, and 250g. The project is assumed to start with 60% capacity utilization. At the 60% capacity utilization the company will produce 900000 kilograms of branded and quality tea that will be available to the consumers in the markets of rural as well as the urban areas of the country. At 60% capacity utilization, the production breakdown of the four different categories of products is shown in the table below:

Production breakdown at 60% Capacity Utilization

Sachets

60 Gms 125 Gms 250 Gms

Production %age 45% 25% 15% 15%Kilograms of Tea 405000 225000 135000 135000Total Production

900000Kilograms at 60% Capacity Utilization


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The table shows the capacity utilization of the 60% for the very first year of the operations of the company. This capacity will be utilized by producing 900000kilograms of the branded tea, which will be distributed into sachets, 60 grams, 125 grams and 250 grams packing. The production will be sold as, 45% of the production will be sold by sachets or tea bags. 25% of the production will be sold by 60 grams, 15% of the production is sold by 125 grams and remaining 15% of the production will be sold by 250 grams packing. In the coming years the company will add 500 grams and 1000 grams packing and jars into its product mix.

INDUSTRY ANALYSIS

World Scenario

Leading tea producers of the world

Kenya India, Sri Lanka, Japan China, Taiwan Indonesia and Malawi.

Large tea importers of the world

Russia … 172,145 metric tons (17.8%)

United Kingdom … 156,311 mt (16.2%)

Pakistan … 115,967 mt (12.0%)

United States of America … 99,484 mt (10.3%)

United Arab Emirates … 65,826 mt (6.8%)

Japan … 56,234 mt (5.8%)

Morocco … 45,670 mt (4.7%)

Germany … 43,409 mt (4.5%)

Poland … 32,119 mt (3.3%)

Syrian Arab Republic … 30,330 mt (3.1%)


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Netherlands … 29,155 mt (3.0%)

Canada … 18,835 mt (1.9%).$

Industry Scenario in Pakistan

Pakistan imports tea from 21 countries and the major portion is imported from Kenya.

Pakistan meets its green tea requirement from 5 countries in which China and Vietnam take lion’s share.

Pakistan is the world’s third-biggest importer of tea, consuming around 220 million dollars worth every year, while Sri Lanka is the world’s largest tea exporter, with annual exports worth $ 660 million.

Pakistan now imports just 2 percent, or 2.4 million kilograms, of its total annual consumption of tea from Sri Lanka, which lost its market in that country to Kenya six years ago.

Leading Tea Brands in Pakistan

A vast range of branded and unbranded tea is available in the market. The top leading brands having an enormous range of products are:

1. Brooke Bond Supreme

Supreme is Pakistan’s largest brand of tea, with over 30 million cups consumed daily and is made primarily from the world’s finest Kenyan tea. The success of Brooke Bond Supreme is based on this very insight, since tea is a part of the social fabric of Pakistanis. Brooke Bond Supreme was launched in Pakistan in 1984. Since then Brooke Bond Supreme has never looked back and today, is the largest selling tea brand in Pakistan.

Their products range from:


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Supreme 125g Supreme 250g 500g Supreme Supreme 60g Supreme jar Supreme sachet Supreme Triple sachet

2. Brook Bond A1 Karak Chai

A1 is the individual’s aegis. Launched in 1996 the brand has certainly come a long way to acquire national status. It has two variants catering to regional taste preferences, mixture for the South and leaf for Punjab.

A1 has a unique standing thanks to its strong blend, which translates into the strength of the common man.

Their products range from:

Leaf tea Mixture

3. Tetley Tea

Tata Tea has been ranked in the 20th position among 275 brands (195 consumer products and 80 service brands) in the Most Trusted Brands Survey conducted by The Economic Times, which makes it the only tea brand to figure in the top 50 list.

Tetley tea has introduced by Tata tea in Pakistan predicting that this new arrival is likely to give a tough competition to some of the old market players. The firm has initially introduced two tastes namely “danedar” and “mixture.” A pack of 400 grams of Tetley tea has a price tag of Rs 120 while Tapal’s 500 grams pack is available at Rs 140. The company introduced four packs of 400 grams, 200, 100 and 45 grams.


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4. Lipton

Lipton is the world's leading brand of tea by far. It's the global market leader in both leaf and ready-to-drink tea, giving a global share of all tea-based beverages that's nearly three times larger than its nearest rival.

Their product ranges from:

Caramel flavored Cookies flavored Vanilla flavored Lipton Green Tea Lipton Yellow Label tea bags Lipton Yellow Label sachet Yellow Label pack

5. Tapal Tea

Tapal chai family mixture is the pride of Tapal developed in 1947 and thus creating a new category of mixture in tea market.

It is the blend that started the Tapal success story, and now the other tea companies are following Tapal’s footsteps by entering the market with similar blends. Danedar Leaf Blend Pioneer of the Danedar category in Pakistan, Tapal’s Danedar remains a firm favorite around the country with its grape-nutty appearances, rich golden color and a strong refreshing taste. In fact its popularity is such that several multinationals have launched their own versions, but Tapal’s remains _______________________________________________________________________The Projecticians Roll No s’: 115, 134 & 165

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the original and ultimate Danedar because of its unique color and taste.

Their range of products is as follows: Family Mixture Safari Kenya Leaf Mezban Super Dust Chenak Kenya Dust Special Teabags Jasmine Green Tea Gulbahar Green Tea Tezdum Special Round Teabags Danedar Leaf Blend

COMPETITIVE ANALYSISCOMPETITIVE ANALYSIS

PORTER’S FIVE-FORCES MODELPORTER’S FIVE-FORCES MODEL


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Intra-Industry RivalryTea Products

Potential New Entrants

Bargaining Power of Buyers

Substitute Products

Bargaining Power of Suppliers


The Bargaining Power of Buyers

The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the relationship to the producing industry is near to what an economist terms a monopsony - a market in which there are many suppliers and one buyer. Under such market conditions, the buyer sets the price. In reality few pure monopsonies exist, but frequently there is some asymmetry between a producing industry and buyers.

The bargaining power of the buyers is low in the country. Because what so ever is producing by the companies it is accepted by the consumers. There is no involvement of the consumer in deciding the taste of the tea.

The Bargaining Power of Suppliers

A producing industry requires raw materials - labor, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits.

All the sellers of the raw tea are in India, China, srilanka, Japan, Taiwan, Kenya, and Malawi. If any of the suppliers raises its prices, we can shift to another supplier.

Barriers to Entry / Threat of Entry

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry also affects competition. In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal. In reality, however, industries possess characteristics that


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protect the high profit levels of firms in the market and inhibit additional rivals from entering the market. These are barriers to entry.

There are no barriers to entry in the tea processing industry, because the machinery, labor and raw material is readily and easily available in the country. The retaliation level of the companies in the industry is very low. Because the companies have generations of the loyal customers

Rivalry

The market structure of the tea industry is oligopolistic. All the companies in the industry are charging the same prices against there products. If any of the company enhanced the prices of the tea, all the companies followed the same path. There are few firms in the industry like Supreme, Lipton, Tetley, Tapal etc and all the firms are competing on the basis of the huge marketing campaigns in the media.

Threat of Substitutes

In Porter's model, substitute products refer to products in other industries. A threat of substitutes exists when a product's demand is affected by the price change of a substitute product. A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices.

The direct competitor of the tea is coffee and indirect competitors are soft drinks but it is costly in the country, so we can say that there is no threat from the substitute products.


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http://www.quickmba.com/econ/micro/elas/ped.shtml


TECHNICAL ANALYSIS

Location of the Project

Our tea company will be located in industrial zone of Multan.

The site enjoys the following advantages: -

Access to the main road, Sources of Power, water, fuel etc. Availability of transport & communication like telephone, telex,

Internet etc. Availability of skilled and Un-Skilled manpower Free from other environmental hazards like water logging, floods,

salinity etc.

Current Industry Structure


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In rural areas of Punjab and Sindh, there is relatively more trend of using loose unbranded tea by the consumers as compared to popular brands. Small local brands are also commonly sold in these areas. The mixture of different blends not only gives better taste but also better color.

There are five major categories of unbranded (loose) tea available in the market. The details are:

Black Unblended Tea

Category OriginAssam IndiaCeylon Sri LankaDarjeeling IndiaNilgiri IndiaSikkim IndiaYunnan China

Scented/Flavored Tea

Category OriginJasmine ChinaEarl Grey ChinaLapsan Souchong

China, Taiwan

Oolong Tea

Category Origin

Tie Guan Yin ChinaFormosa Oolong

Taiwan


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Pu-erh China

Green Tea

Category OriginGenmaicha JapanGyokuro JapanSpider Leg JapanMattcha JapanSencha JapanHojicha JapanGenmaicha JapanLongjing ChinaBaozhong ChinaGunpowder China

Other Popular Blends

Some of the other popular blends are:

English Breakfast Irish Breakfast Russian Caravan

Plant and Facilities

The building will be constructed for the processing of the unblended tea . The regional office of the company will be located in the same city. The head office of the company will be located in Multan and subsidiary office will be at Bahawalpur. Where the offices of the CEO and all the functional heads will be established.


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Raw Material Requirement

The raw material required for the production process is unblended and blended tea imported from areas like Kenya, Indonesia, Turkey, Russia, Africa and South America.

TEA PROCESSING DETAILS

There are mainly seven divisions in the tea-processing unit. These are;

Withering Unit Rolling and Cutting Unit Fermentation Unit Drying Unit Shorting / Grading Unit Packaging Unit Auxiliary Work Unit

Withering Unit_______________________________________________________________________The Projecticians Roll No s’: 115, 134 & 165

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It is the first stage of tea manufacture. During withering harvested tea flush is evenly spread on the withering troughs, which are normally 4 to 5 feet wide and 50 to 70 ft long. During the process hot and cold air is blown through to remove the moisture of fresh leaf to 30-40 percent, which is achieved during 16 to 18 hours of period. The prime object of withering is to make the turgid leaf flaccid and prepare the leaf for next stage to facilitate rolling.

Rolling and Cutting Unit

The withered leaf is charged in the rollers, which vary in size. Normally they are 36" and 48" rollers capable of rolling 70 to 120 kg of withered leaf. The pressure is exerted on the leaf in 'open and pressure' sequence. This operation lasts for 45 minutes. During this process tea leaf is twisted as a result of repeated rolling action and simultaneously leaf tissue rupture thus forcing out the cell-sap which spreads as a this


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film on the surface of the leaf. Various enzymes and their substrates come in contact and enzymatic oxidation starts at this stage. The green color of leaf starts diminishing and brown coppery color of leaf begins to appear.

Fermentation UnitRolled leaf is put on fermentation racks specially made of tiles, cement or aluminum. Fermentation rooms are kept clean and cold. Fermentation is carried out at low temperature. In hot season the air is kept humid with the help of humidifiers with less than 200c hygrometric difference Optimum fermentation is adjudged by the subjective assessment of the tea maker. Fermentation period varies from 2 to 3 hrs depending on the type of leaf, degree of wither, temperature, availability of oxygen and fermenting ability of the tea flush. The time of fermentation is reckon from the time at which rolling begins. Fermentation is a very sensitive process. Even 5 minutes time delay in adjusting the correct fermentation period is likely to deteriorate flavor appreciably. During fermentation the leaf changes color and becomes dark coppery. A typical aroma develops at this stage. The term 'Fermentation' is a misnomer and, in fact, it is an oxidative process. Oxidation of catechin / polyphenols by the enzyme polyphenol oxidize is the main reaction of the process that imparts 'tea character' to the black tea

Drying Unit

Fermented leaf is loaded onto the dryer, which comprises perforated moving trays. The dryer inlet temperature is maintained at 200 to 2400F. Thickness of spread, speed of trays and volume of air blown through are regulated meticulously so as to


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achieve the correct drying. Low exhaust temperature often produces stewed teas while high temperature in the initial stages is apt to casehardening of teas. The whole process of drying is completed within 20 to 30 minutes. The moisture content of the final product is kept at 2 to 3 percent. Teas are normally fired at high temperature, which is considered essential for squeezing the correct balance of volatile flavor compounds in high quality teas. During the drying process enzymes responsible for fermentation are inactivated and even after the tea is dry the maturation process continues and tea attains the mellowness a desirable character of Darjeeling teas.

Shorting / Grading Unit

For grading there is a vibrator plate, one conveyor and one motor base-vibrating device where various size sieves are assembled, through which we get different grade tea. First, the vibrator plate, which is, called pannual shifter extract the unwanted fiber particle for the final product and then the ready to use tea is carried to the sieve through a conveyor by a motor. Then the conveyor drops the tea in the vibrator mouth and finally the pinion motor give eight different grades of the tea. The bulk tea is sorted on mechanically oscillated sieves. The sieve size decreases gradually from top to bottom. Thus the bigger size teas are retained on the top while the broken leaves fall towards the floor.

Blending unitThe blending unit has the capacity to blend 4000 Kg of un blended tea. For the preparation of one fine blended product it takes 30 minutes.


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Packaging UnitNow comes to the last stage of all in our account of the tea manufactures packing. Boxes, lined with sheet lead are weighted and placed ready in the tea house; all the tea that is about to be packed is re-fired over tremendously hot dhools in order to get rid of any moisture that may be retained, then weighed, the lead lining is soldered down as rapidly as possible, the weight of the box and the net weight stamped on the outside. Lead nailed down, the gardeners private mark, together with the number of the grade put in the conspicuous plate.

P RODUCTION P ROCESS DIAGRAM

Production Process Flow


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The final product will be passed through the following steps. The company will add the value at every step and there will be no compromise on the quality from the raw stage till the consumption point

WORK BREAKDOWN STRUCTURE

The work breakdown structure (WBS) is a powerful tool for expressing the scope or extent of a project in simple graphic terms. It represents _______________________________________________________________________The Projecticians Roll No s’: 115, 134 & 165

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Sorting of Different Blends

Mixture of Blends Separated for Box

Packing

Mixture of Blends Separated for Sachet

Packing

Mixing of Different Blends

Printing and Labeling

Tea Sachet PackingTea Box Packing


the project in terms of the hierarchy of deliverables and services it will produce. The project is therefore described just as a manufacturer would document the bill of materials breakdown for a washing machine or automobile. The WBS starts with a single box at the top, which represents the whole project. The project is then partitioned into its components with lower level boxes. The Work Breakdown Structure (WBS) is used to provide the framework for organizing and managing the work.

WBS Role

The role of the WBS is to:

Partition the major project deliverables into smaller components to improve the accuracy of cost estimates

Provide a mechanism for collecting and organizing actual costs Provide a mechanism for performance measurement and control

The deliverable of the project is the tea pack for the satisfaction of the customer’s need. The deliverable cannot be provided directly rather it will be passed through certain processing and all the details of the processing are available in the work breakdown structure diagram.


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RESPONSIBILITY CHART OF THE PROJECT

Establish Project Plan 6 1 2 3 2 2 2Define WBS 1 4 2 2 2 2Manufacturing Plan 4 4 2 2 1 4Financial Plan 1 4 2 3 2 2Prepare Labor Estimate 4 2 1 2 1 2Prepare Equipment Cost Estimate 1 2 3 2 2 1

Prepare Material Costs 4 2 3 5 1 1Make Program Assignments 4 4 2 4 1 2

Establish Time Schedules 4 1 2 3 5 2Assessment of Risks 1 4 3 4 4 2Define Documentation 1 2 2 2 2 2Quality Assurance 1 4 2 2 1 4Project Audit (Internal) 1 2 2 2 4 2Market Plan 2 4 5 1 4 2Software and Computer affairs 3 2 2 4 2 2

Project Control 1 2 2 2 4 4

1 = Actually Responsible2 = May Be Consulted 3 = Provides the Market Data4 = Must Be Consulted5 = Must Be Notified6 = Final Approvals


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PROJECT R EQUIREMENTS

Machinery Requirements Details

The project will require the machinery for the processing of the raw tea in to the blended tea, following is the list of the machinery and equipment that will be require for the conversion process in the various processing units.All the machinery will be available in Pakistan ,USAMA builders Karachi.

Blending Unit

Pannual shifter Magnetic platter Motor base-rotating drum device Pinion motor

Packaging Unit

The project will purchase two sachet-manufacturing machine having production capacity of 3,000 sachets per hour, two box-making machine for 60 g and 125 g packs with production capacity of 2,640 boxes per hour, and two box-making machine for 250 g packs with production capacity of 1200 boxes per hour. These machines are locally fabricated. The machinery is available in Karachi from USAMA builders and is designed for carrying out assembly line operations. The machinery is semi-automatic. The assembly line would involve direct labor placed on either sides of the manufacturing table. Inputs would be introduced from one end of the table and would be worked upon as they pass down various manufacturing levels towards the other end of the table. The estimated cost of machinery is subject to change according to market trend.

Technology and Processes


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On the technology front, local machines have dominated the Pakistani packaging industry since long. These machines are time tested. Easy availability of machine parts and abundant technicians makes Pakistani machinery the first choice for the entrepreneurs. New Pakistani machines are easily available in the local market.

Machine Maintenance

The machinery maintenance would be an on going process whenever required. It is mentioned in the key financial assumptions the project will consume 1% of the cost of production. This is necessary for the maintenance of machinery and equipment.

Raw Material Requirements

The raw material required for the production process is unblended and blended tea imported from areas like Kenya, Indonesia, Turkey, Russia, Africa and South America.

In the rural areas of Punjab and Sindh, there is relatively more trend of using loose unbranded tea by the consumers as compared to popular brands. Small local brands are also commonly sold in these areas. The mixture of different blends not only gives better taste but also better color.

There are five major categories of unbranded (loose) tea available in the market. The details are:

Black Unblended Tea

Scented/Flavored Tea

Green Tea

Oolong Tea

Some of the other popular blends are:

English Breakfast

Irish Breakfast


31


Russian Caravan

Location of the ProjectOur tea company will be located in industrial zone of Multan.

The site enjoys the following advantages:-

Access to the main road, Sources of Power, water, fuel etc. Availability of transport & communication like telephone, telex,

Internet etc. Availability of skilled and Un-Skilled manpower Free from other environmental hazards like water logging, floods,

salinity etc.

Plant and Facilities

Building will be constructed for the processing of the unblended tea and production of the branded tea. The regional office of the company will be located in the same city. The head office of the company will be located in Multan and subsidiary office at Bahawalpur. Where the offices of the CEO and all the functional heads will be established.

Construction Company:Process Dynamic Engineering and construction company, Lahore.


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MARKETING PLAN

Steps in Developing Marketing Plan;

1. Define Business Situation

2. Defining Target Market

3. SWOT Analysis

4. Development of Goals and Objectives

5. Key Success Factors

6. Development of Marketing Strategies & Action Plan

7. Budgeting of Marketing Plan

8. Implementation of Marketing Plan

9. Monitoring

Define Business Situation

Basically while defining the business plan we actually intended to do the ‘Situation Analysis’.

The situation analysis describes past and present business achievements of new venture.The situation analysis is a review of where we have been. It responds to the first of three questions such as:


33


Who are the users, where they are located, how much do they buy, from whom do they buy, and why?

How have promotion and advertising been employed and which approach has been most effective?

What are pricing changes in the market, who has initiated theses changes, and why?

Defining Target Market

Target market is specific group of potential customers toward which venture aims its marketing plan. Target market provides a basis for determining the appropriate marketing action strategy that will effectively meet its needs. The defined target market will usually represent one or more segments of the entire market. Market segmentation is process of dividing a market into definable and measurable groups for purposes of targeting marketing strategy.

Segmenting and targeting customers by entrepreneur normally incorporate following concerns.

Decide what general market or industry you wish to pursue. Divide the market into smaller groups based on characteristics of

the customer or buying situations. Select segment or segments to target.

Market Segments

According to buying power and purchase patterns, the market for tea can be broadly classified into three major segments.

Lower Segment, which includes tea consumed in the rural areas and in the urban areas in the lower income households like office staff, labor etc. This segment accounts for almost 70% of the total market.


34


Middle Segment, which includes middle and upper income households in the urban areas. It accounts for about 20% of the total market.

Upper Segment, which includes the tea consumers in the upper income segment of the society, accounting for 10% of the total.

SWOT Analysis

STRENTHS

Following factors are the key in making the project profitable:

Regular flow of orders is the key success factor for efficiently running of the project.

Selection and procurement of consistent quality raw material would be another contributing factor for carrying out successful operations of proposed project.

Competitive price of end products. Abundant supply of raw material. Cost efficiency through better management. Media campaign for the awareness of the retail customers. Availability of low cost skilled labor.

WEAKNESSES

The major weaknesses in this field of business are:

Poor-availability of suitable processing variety of raw materials at present.

Existing technology obsolescence.


35


Poor infrastructure facilities such as irregular power supply, high inland transportation cost and lack of cold chain facilities etc.

The other major weakness in Pakistan food industry is the lack of coherence and co-operation amongst the processors and exporters due to which the problems can not be effectively addressed and tackled collectively.

Non Availability of properly quality raw material at competitive prices, which fluctuate depending upon the harvesting season crop.

THREATS

The proposed project will be facing the following threat:

Competition from the local unorganized sector Imposition of Quality and Environment standards by importing

countries Decline in the average sale price for products Influence of major local and foreign brands operating in the

market Change in Government regulations

Product Mix

Loose imported tea is a vast product group available from which countless blends can be made altering the mix of different tea leaves for color and taste. The product would be of a blend that would give a unique taste in such a way to focus the lower and middle-income groups of people. Such classes of consumers usually focus on strong taste and color. The price would be less than that offered by the brands targeting higher-end consumer classes. The box packs would


36


be in three different sizes of 60 grams, 125 grams and 250 grams. Other than this the product would also be packed in 7 grams sachets. Twenty sachets would be packed in a box for sale to the wholesalers.

The proposed product mix of the company is as under;

Joosh (Black) CHAI Joosh Green CHAI Joosh Iced CHAI Joosh Flavored CHAI

The brand name for the product will be “CHAI”. All the brands

of the company will be marketed under the name of Joosh. The demand for the Black Tea is largest in the country and the company will use most of its capacity to produce the black branded tea. With the passage of time the company will enhance the depth of its brand by adding unique tastes.

Marketing Strategy

Our marketing budget is set at 1% of our overall sales revenue. This budget will be used to reach our targeted customers through cost-effective marketing campaigns. On-going processes will be geared to promote the brand name and keep the venue at the forefront of entertainment establishments in the Bahawalpur area. Our marketing efforts will focus on the following channels for reaching new and repeat customers:

Website Print Neighborhood Marketing Radio Television Email/Newsletter Road Shows


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Website

A website is an important component of our advertising and marketing campaign, allowing us to stay in contact with our customers and provide up-to-date information regarding all of our products. We will launch a website within the first month of operations, and develop the website's content over the first six-months. The site will include product mix details, upcoming new quality tea taste, along with online registration for job opportunities.

Print Advertising

Through commercial repetition, a teaser campaign, and the use of catchy phrases, we will focus on our target market segments.

Neighborhood Marketing

We will advertise directly to local hotels and surrounding businesses in the country to attract businesses to be our customer. Through the use of fliers and table tents placed in hotel rooms, we will create visitor awareness of our location and products. Promos such as 'show your room key and get a free drink' in conjunction with the room ads would be relatively inexpensive from an advertising standpoint and requires limited ongoing maintenance and expense. Print ads will appear in the local and college newspapers serving the region.

Radio Advertising

The company will utilize the FM radio channels to create the brand awareness and loyalty in the various regions of the country.

In-Store Promotions

Shirts, cricket caps, hand bags, and bumper stickers bearing the company logo will be marketed, as well as given away as prizes to spread brand awareness.

Email/Newsletter


38


Loyal, repeat customers are critical to our success. To drive repeat business revenue, we will maintain an 'opt-in' database of customers. This valuable database will be used to distribute monthly email newsletters. The newsletter will be a vehicle to announce our upcoming programs, upcoming new games and specials. The newsletter will provide timely information regarding market share, job offerings, and special Members announcements.

Road Shows

The company will create brad awareness by conducting extensive road shows through out the country in the beginning. Here the potential customers will be made familiar with the new taste of CHAI. New recipes of making a delicious cup of CHAI will be shared with the potential customers.

Electronic Media

The company will launch an extensive media campaign to introduce its products in front of the potential consumers. Various schemes will be introduced through the electronic media to enhance the sales of the product and to make the loyal customer.

Distribution Mix

Mode of Transportation

The company will use the trucks as a mode of transportation and full truck load strategy. The reason is, that we will producing standardized tea and its demand can easily be calculated. So full truck load strategy would best strategy for that.


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Storage

The company will use distribution channel instead of warehouses for storage the inventory. It would save our cost and also helpful for the efficient movement of inventory.

Exclusive Dealership

The company will use exclusive dealership strategy. In which we will give one distribution channel in a territory.

Mode of Communication

The company will use internet and phone initially .We will receive our order both, on internet and on telephone and then response accordingly.

ORGANIZATION PLAN

Form of Business The business of “TEA Processing Unit” that we are going to start. We start it in the form of partnership format. There will be three total partners and all will be active partners and have equal responsibility of


40


profit and loss and no one is limited partner in that business. And also have equal share in the investment and profit of the business.

Organizational Structure

Management Commitment

Top management demonstrates its commitment to the development and implementation of the quality management system and continually improving its effectiveness by:


Chairman

Manager Finance

CEO

CFO

Manager HR Manager Marketing

Assistant Manger Marketing

Assistant Manager Finance

Assistant Manager HR

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Communicating the importance of meeting customer requirements as well as statutory and regulatory requirements. Establishing the quality policy.

Review and approve quality objectives.

Conducting management reviews.

Customer Focus

Top management, through its internal systems, ensures that customer requirements and needs are determined and are met with the aim of enhancing customer satisfaction.

Customers of the Company Include:

1. Clients2. Employees of the company.3. Creditor/fund-providers4. Society in terms of the community and the public affected by the organization or its service.

Quality Policy

Top management has established a quality policy and ensures that it:

Is appropriate to the purpose and scope of the company. Includes a commitment to comply with requirement and

continually improvement the effectiveness of the quality management system.

Provides a framework for establishing and reviewing quality objectives.

Is communicated and understood within the company. Is reviewed for continuing suitability.

Planning


42


Quality ObjectivesTop management establishes quality objectives at each relevant function and level, including those needed to meet service requirements. The quality objectives are measurable and consistent with the quality policy and annually reviewed by top management through the Management Review Meeting. Top Management ensured that quality objectives are specific, measurable, and realistic and measured with time.

Quality Management System PlanningTop management has identified and defined activities and resources needed to achieve quality objectives and meet customer requirements. Planning is consistent with other requirements of the quality system, and it is carried out in order to meet the quality objectives, the results are documented. The integrity of the quality management system is maintained when changes to the quality management system are planned and implemented.

Responsibility, Authority and CommunicationResponsibilities and authorities are defined within the organization charts and job descriptions. The Administration Director is responsible for preparing the organization chart which revised and approved by Chairman before communicated through the company.

Human Resource RequirementsFor the management of the proposed project we think that, a total of fifty people are required excluding the owners.

Reward System The reward system that is suitable for the project is variable plus fixed salary structure the variable salary will be dependent of the performance of the workers and fixed will be given to provide social security of the workers.

Training and DevelopmentTwo weeks Training should be given to every employee in the respective fields in the start of the business. Then time to time the performance of the employees will be monitored and if there is found any gap between the actual performance and the required performance then the training will be conducted.


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FINANCIAL PLAN

The purpose of the financial plan is to estimate start-up and ongoing costs; identify revenue streams; and forecast net cash flow and profits. The venture will be funded partners through paid-in capital provided by the owners and debt will be taken from the bank.

Important Assumptions

The financial plan depends on important assumptions. The key underlying assumptions are:

We assume that price will be a key competitive element in the first three years of operations where competitors in the business will seek to cut into our business through price cutting.

The marketing expenses will be considered to be the 1 % of total sales.

We assume continued popularity of products of the company and the growing demand for high quality and refreshing tea.

We assume that average daily consumer drinks two cups of tea. We assume that the capacity of the production will be enhanced

by 10% annually. Initially the company will utilize only 60% of the total installed

capacity in the very first year. The sales price of the product will be directly releated to the

competitors.

Some of the important assumption regarding the production, cash flow, expenses, depreciation and financing assumption are listed in the following tables.

Production Assumptions

Maximum Attainable Capacity In Percentage 100%

Capacity Utilization (1st Year) In Percentage 60%

Production Capacity In K.g (60% in first year) 900000Kilograms

Production Capacity Utilization Growth Rate 10% per year


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Cash Flow Assumptions

Raw Material Inventory Cycle (In Days) 30 DaysAccounts Receivables Cycle (In Days) 2.5% of salesAccounts Payable Cycle (In Days) 25% of purchase

Expense Assumptions

Machine Maintenance 1% of the cost Pre-Operational Expense Rs.2235000 Wages Growth Rate 10%

Deprecation Expense Assumptions

Plant & Machinery Depreciation Rate 10%Furniture & Fixtures Depreciation Rate 5%Vehicle Depreciation Rate 20%Building 5%

Financing Assumptions

Debt 60%Equity 40%Tax Rate 35% of sales


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PROJECT ECONOMICS

Energizer Tea Company Private Limited

Estimated Cost of Project (RS.0

00)COST OF THE PROJECT LOCAL TOTAL - Project Land & Its Development 17000 17000- Building & Civil Works 25800 25800- Local Machinery 2280 2280- Engineering /Technical Fees 200 200- Erection & Installation 50 50- Furniture & Fixture 500 500- Vehicles 425 425- Mark-up during Construction 2905

2905

- Pre-production Expenses 2235 2235contingencies 200 200

TOTAL FIXED COST:

51595

51595

- Initial Net Working Capital 6,047 6,047 TOATL COST OF THE PROJECT: 57643 57643


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Raw Material Requirement

For Sachets

Total sachets at 100% operating capacity.{(333 sachet*8 hours*350 days*2)100%}=1864800 sachets of 8 grams{(1864800sachets * 8 grams)/1000} = 14918.4 kg/annum.14918.4 kg*150/Kg = Rs. 2237760

For Boxes (125 grams)

Total boxes at 100% operating capacity:(233 boxes*8 hours*350days*2)100%=1304800 Boxes of 125 grams{(1304800 Boxes *125 grams)/1000} = 163100 kg/ annum.163100 kg/ annum* 180/ kg = Rs.29358000 For Boxes (250 grams)

Total boxes at 100% operating capacity:(200 boxes*8 hours*350days*2)100%=1120000Boxes of 250 grams{(1120000 Boxes *250 grams)/1000}= 280000 kg/ annum.280000 kg/ annum* 180/ kg = Rs50400000

Total annual material requirement: (Rs 000) 2238+29358+50400 =81996 Raw Material Inventory Kept:Rs.81996/350*30 days= Rs.7028

Financial Plan:(Rs.000) IDBP loan 60% Rs. 34586Equity 40% 23057Total 57643


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Estimated Cost of Land

Sr. No Description Rate per Unit Total Cost

(Rs. in, 000)1 10 cannal of Land 1500000 150002 Legal and Transfer Fee 10% of Cost 15003 Development Charges 500

Total 17000


48



Estimated Cost of Civil Works

Sr. No Item

Type of Building

Area inSq. ft.

Rate/sq. ft. (Rs.)

Total Cost(Rs 000)

1Main Factory

BuildingRCC 15000 800 12000

2 Warehouse RCC 8000 800 6400

3 Office Block RCC 4000 1,000 4000

4 Canteen RCC 3000 1,000 3000

5 Wash rooms RCC 400 1,000 400

6 Free Area 14600

Total 45000 25800


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Estimated Cost of Plant and Machinery

Sr. NoItems and

SpecificationQuantit

yCost/

Unit(000)Total Cost(Rs,

000)

1 Mixer 2 200 400

2Machine for 250g

Boxes2 205 410

3Machine for 125g

Boxes2 205 410

4Machine for Sachet

8grams2 190 380

5Machine for Labeling

and Printing2 150 300

Total 2280


Pre-production expenses: Salaries and wages 450Printing and stationary 10Wapda/KESC deposits 1500Telephone, entertainment & other expenses. 150Project examination fee. 125Total 2235

50



Estimated Cost of Net Initial Working Capital

Amount (Rs. 000)

CURRENT ASSETS (Rs. in 000 )

Cash 300

Accounts Receivable @2.5% of sales 3,223

Raw materials 7,028

Finished Goods Inventory 10% of production 5,738

Stores & Spares 1,500

Advances & deposits 250

Total 18,039

CURRENT LIABILITIES

Accounts Payable 0

Accrued Expenses 0

Bank Borrowings 75% of inventories 11,992

11,992

INITIAL NET WORKING CAPITAL 6,047

Assumptions

1. It has been assumed that Raw Material Inventory is kept for 30 days and amount. Is derived as {(Annual Requirement/350*30 days)} 2. 10% of cost of goods manufactured is kept as finished goods inventory.3. 2.5% of total sales are assumed to be on account.4. Bank will give loan of 75% of total inventory.


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Assumptions Underlying Earning Forecasts Production and Sales

The purpose unit would be equipped with four types of machines.

One for sachet packing of 8gram and other for boxes of 125 & 250 grams. The sachet machine is capable of producing 333 sachet /hour and 125 gram boxes machine is capable of making 233 boxes /hour and machine for 250 grams boxes is capable of producing 200 sachet /hour. The unit will be operated in only one shift of 8 hours and total number of working days is 350.

Annual Production at 100% Operational Capacity

For Sachet:

(333 sachet*8 hours*350 days*2) 100%=1864800

For Boxes:

(233 boxes*8 hours*350days*2)100%=1304800(200 boxes*8 hours*350days*2)100%=1120000

The above capacity is based on one shift working and 350 working days per annum at 100% capacity and the project would start commercial operations from. January 1, 2010.

Operational Efficiency

Operational efficiency of the project is assumed to be at 100% for all operating year.

Ending Inventory There will be 10% unsold inventory at end of the year.

Production Plan


52


Production plan includes three types of products and offer in the single market.Selling Price Selling price is set according to the demand and supply and due to competitiveness of market and increasing gradually due to increase in the raw material prices.


53


PRODUCTION AND SALE

Geographical limits of project are Province Punjab, Sindh . Offer three types of products.

Sachet of 8 grams. Box of 125 grams Boxes of 250 grams

No. of shift = 1 8 hours in a shift. 350 days in year.

Estimated capacity of machine per hour: 333 sachets of 8 grams per hour. 233 boxes of 125 grams per hour. 200 boxes of 250 grams per hour Operational capacity of machines is 100%.

Total Annual Capacity

For Sachet

(333 sachets*8hours*350days*2) = 1864800 Sachets

For Boxes

125 Grams(233 boxes*8hours*350days*2) = 1304800 Boxes

250 Grams(200 boxes*8hours*350days*2) = 1120000 Boxes


54


Production efficiency achievedYear 2010(60%) 2011(70%) 2012(80%)

sachet 1119000 1305000 1492000Boxes (125g) 783000 913000 1044000Boxes(250g) 672000 784000 896000

Estimation of units sold.

Operating Years : 2010 2011 2012 2013

Production Effeciency Assumed : 60% 70% 80% 90%a) Production of Sachet: 1,119 1,305 1,492 1,678Add : Begining Inventory 0 112 131 149 Available for sale 1,119 1,417 1,622 1,828Less : End. Inventory 10% 112 131 149 168

SALE 1,007 1,287 1,473 1,66060% 70% 80% 90%

b) Porduction of Boxes(125g): 783 913 1,044 1,174Add : Begining Inventory 0 78 91 104 Available for sale 783 992 1,135 1,279Less : End. Inventory 10% 78 91 104 117

SALE 705 900 1,031 1,161

60% 70% 80% 90%c) Porduction of Boxes(250g): 672 784 896 1,008Add : Begining Inventory 0 67 78 90 Available for sale 672 851 974 1,098Less : End. Inventory 10% 67 78 90 101

SALE 605 773 885 997

Calculations

It has been earlier mentioned that total production capacity of the Machine is 333 sachet /hour and box machine capacity is two hundred (200) and 233 units /hour

No. of working hour in day are eight and 350 days in a year 10 % of units produced are kept as ending inventory


55



Estimated Sales Revenue

60% 70% 80% 90%

a) Packs of sachet per pack Rs 65 65,454 83,636 95,757

107,879

b) 125g box. 30 21,138 27,009 30,924 34,838c) 250g box. 70 42,336 54,096 61,936 69,776

TOTAL 128,928

164,742 188,617

212,493

Assumptions :

1. It has assumed that one pack contains 20 sachets2. Per pack and box price is set according to demand and supply forces.


56


CALCULATION OF COST OF PRODUCTION

Raw Material Cost

For Sachets

Total sachets at 100% operating capacity.{(333 sachet*8 hours*350 days*2)100%}=1864800 sachets of 8 grams{(1864800sachets * 8 grams)/1000} = 14918.4 kg/annum.14918.4 kg*150/Kg = Rs. 2237760

For Boxes (125 grams)

Total boxes at 100% operating capacity:(233 boxes*8 hours*350days*2)100%=1304800 Boxes of 125 grams{(1304800 Boxes *125 grams)/1000} = 163100 kg/ annum.163100 kg/ annum* 180/ kg = Rs.29358000 For Boxes (250 grams)

Total boxes at 100% operating capacity:(200 boxes*8 hours*350days*2)100%=1120000Boxes of 250 grams{(1120000 Boxes *250 grams)/1000}= 280000 kg/ annum.280000 kg/ annum* 180/ kg = Rs50400000

Total annual material requirement: (Rs 000) 2238+29358+50400 =81996 Raw Material Inventory Kept:Rs.81996/350*30 days= Rs.7028


57


Direct Labor Cost

Category Nos

Salary per Annual

Month(R

s.) Cost

Labour: 0For sachet machine 5 5,000 300for boxes machine 16 5,000 960for mixer machine 2 5,500 132for blend maker 1 6,000 72supervisor 1 5,000 60

0 TOTAL 1,524Add: Fringe Benefits @ 25% 381TOTAL 1,905

Assumption:10% yearly increase in labour cost.

Factory Overhead

a) FIXED COSTS (Rs.000)

-Pwer KW 600 180 per K.W 1,296-Insurance @ 0.50% on Fixed Assets 11-Repairs &Maintenance:- Machinery @ 1.00% installed cost 25Miscellaneous 100

Total Fixed cost 1,433

b) VARIABLE COST

Power: KW 90 7.5 8 350 1,890Total 1,890


58


Assumptions1. Estimated utilization capacity is 90kw and rate is charged 7.5/kw/hour2. Insurance is .5% of machinery cost.3. Repair and Maintenance cost is 1% of machinery

THE FIXED COST HAS BEEN PROJECTED AS CONSTANT WHILE THE

VARIABLE COST HAS BEEN BUDGED AS PER OPERATIONAL LEVEL

FOR THE CORRESPONDING YEARS.

Depriciation

Assets Cost of Assets Depreciation Total Amount

(Rs. 000) (Rate) (Rs. 000)

Building 16800 5% 840Plant and Machinery 2280 10% 228Furniture and Fixture 500 5% 225Vehicle 3000 20% 600Total 1693


59


OPERATING EXPENSES

Administrations Expenses

Salary Annual per Month Cost

a) Administrative Salaries Nos (Rs.) (000)

Chairman 1 40,000 480Chief Executive 1 35,000 420

Financial Controller 1 20,000 240Purchase Manager 1 20,000 240Personal Manager 1 10,000 120Assistants 5 4,000 240Clerks and Typists 8 2,500 240Driver and Peons 5 2,000 120Sweepers 4 1,000 48

TOTAL 2,148Add: Fringe Benefits @ 50% 1,074

TOTAL 3,222


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General Expensesb) General Expenses

Traveling & Conveyance 400Telephone, Telex, Postage 300 Rates and Taxes 100Entertainment 100Miscellaneous 50

TOTAL 950

Total Administrative & General Expenses (a+b) 4,172

FURTHER, THESE EXPENSES ARE ASSUMEDAT 10% PER ANNUM.

Selling Expenses

Selling expenses are 1% of sales Revenue.Energizer Tea Company Private Limited

Total Cost of Production

2010(60%)

2011(70%)

2012(80%)

2013(90%)

Raw material 51,211 59,747 68,282 76,817

Depreciation 1,693 1,693 1,693 1,693

cost of labour 1,905 2,096 2,305 2,536

F.O.H 2,567 2,756 2,945 3,134

total 57,376 66,291 75,225 84,179



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Financial Plan

Source RatioAmount (Rs. 000)

Bank (@16%) 60% 34586

Equity 40% 23057

Total 100% 57643

All amounts are in the Local Currency (In Rupees).


Estimated Income Statement

For the year ending Sept. 30, 2010 2011 2012 2013Efficiency Assumed : 60% 70% 80% 90%

SALES 128,928 164,742 188,617212,49

3COST OF GOODS SOLD :- Raw Materials 51,211 59,747 68,282 76,817- Labour 1,905 2,096 2,305 2,536- Manufacturing Expenses 2,567 2,756 2,945 3,134- Excise Duty \ Sales tax -Royalty fee- Depreciation 1,693 1,693 1,693 1,693 Cost of Goods 57,376 66,291 75,225 84,17_______________________________________________________________________The Projecticians Roll No s’: 115, 134 & 165

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Manufactured 9Add: Beginning Inventory 0 5,738 6,629 7,522Less: Ending Inv. 10% 5,738 6,629 7,522 8,418

Cost of Goods Sold : 51,639 65,399 74,33183,28

4

G R O S S P R O F I T 77,290 99,342114,28

6129,2

09OPERATING EXPENSES- Admin & General Expenses 4,172 5183 5702 6272- Selling Expenses 1,289 1,647 1,886 2,125 Total Operating Expenses 6001 6831 7588 8397

OPERATING PROFIT 71,288 92512 10669812081

2OTHER INCOME NON OPERATING EXPENSES- Financial Expenses 5534 4,204 3320 2213Bank borrowing@ 10%. 672 806 918 1,030amortization of preliminary exp. at 5 years 447 447 447 447 Sub-Total 6,653 5680 4,685 3,690P R E - T A X P R O F I T 64636 86832 102,013

117,122

Provision for Taxes 40% 22622 30391 35705 40993

N E T P R O F I T 87258 117223 66309 76129

Dividend 0 0 0 0RETAINED EARNINGS 87258 117223 66309 76129

R A T I O S- Gross Margin (%) 59.9% 60.3% 60.6% 60.8%- Operating Margin (%) 55.3% 56.2% 56.6% 57.9%- Net Margin (%) 67.7% 71.2% 35.2% 35.8%- Interest Coverage (Times) 12.88 20.90 32.14 57.58


63


Energizer Tea Company Private LimitedEstimated Balance Sheet

Construction. I II III IV

ASSETS

Cash 6,037 81,790 142985 21131728865

9Accounts Receivables 3,223 3,223 4,119 4,715 5,312Inventory:Finished Goods Inventory 0 5,738 6,629 7,522 8,418


64


Raw Material Inventory 7,028 7,028 7,028 7,028 7,028Stores & Spares 1,500 1,594 1,700 1,800 1,900Advances & Deposits 250 500 1,000 2,000 4,000

Total Current Assets 18,038 99,873

163460 234383

315317

Other assets 0 0 0 0 0Fixed Assets at cost 49360 49360 49360 49360 49360Less: Accumulated Dep. 0 1,693 3,386 5,079 6772

Net Fixed Assets: 49360 47667 45974 44281 42588

Preliminary Expenses: 2,235 2,000 1,500 1,000 447

Total Assets: 69634 14954021093

5 27966535835

3LIABILITIES & EQUITYCurrent Liabilities- Accounts Payable 0 12,803 14,937 17,070 19,204- Accrued Expenses 0 546 624 693 768- Dividends Payable 0 0 0 0 0- Taxes Payable 0 0 0 0 0- Bank Borrowings 11,992 6,721 8,061 9,178 10,298- Cur. Mat. of L T Debt 0 12451 11344 10237 9131Total Current Liabilities: 11,992 32520 34,965 37180 39400Long-term LiabilitiesIDBP loan 34586 27668 20751 13,834 6917Total Long-term Liab.: 34586 27668 20751 13,834 6917EQUITY- Paid-up Capital (Sponsors) 23057 23057 23057 23057 23057

- Un-appropriated Profit 0 87987 206012 27274534934

2

Total Equity: 23057 11104422906

9 29580237239

9

Total Liab. & Equity: 69634171,69

828478

5 34681641871

6R A T I O S: Current Ratio 3.07 4.67 6.30 8.00Debt as %-age of total capital. 20% 8% 4% 2%

Energizer Tea Company Private LimitedEstimated Cash Flow


65


For the year ending Sept. 30,Const. Yr. I II III IV

SOURCES

Operating Profit 0 71,828 93,106 107,352121,53

1Add Back: Depreciation 0 1,693 1,693 1,693 1,693 Amortization 235 500 500 553

Funds from Operations 0 73,756 95,299109,54

5123,7

77- Paid-up Capital (Sponsors) 23057 0 0 0 0IDBP loan 34586 0 0 0 0Increase in Current Liab. 0 20529 2,500 2,215 2221Increase in Bank Borrowings 11,992 6721 8,061 9,178 10,298

TOTAL SOURCES 69634 101006105,86

0120,93

813629

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APPLICATION OF FUNDSInvestment in Fixed Assets: 49360 0 0 0 0-Preliminary Exp 2,235 0 0 0 0Financial Expenses 0 5534 4,427 3,320 2213Repayment of :IDBP loan 0 6917 6,917 6,917 6917- Bank Borrowings 0 6,721 8,061 9,178 10,298Taxes 0 0 22811 30599 35933Increase in current Assets: 12,001 6,082 2,393 2,590 3,592

TOTAL 63597 25253 44609 52605 58954

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Surplus/(Deficit) 6,037 75,753 61195 68333 77341

Cash Balance - Opening 0 6,037 81,790 14298521131

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Cash Balance - Ending 6,037 81,790 142985 21131728865

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PROJECT AUDIT

The company will have its internal audit committee, which will conduct the audit of the various functions of the company as well as the environmental audit. The audit committee of the company comprises the Chairman of the company and all the functional heads of the various departments of the company.

The audit committee will be responsible for the edifice of the performance appraisal of the various functions of the company. The audit committee will check the performance of the accounts department, finance department, marketing department and also check the performance of the human resources of the company. On the basis of the performance determine by the audit committee various rewards will be announced for the employees.

The company will utilize its promotion and reward system as the motivation tool for its employees. On the basis of the performance various monetary, stocks and training and educational rewards will be announced for the employees of the company.

The company will strictly follow the ISO – 14000 standards that will give the guidelines to the company for the safe practices, so that no environmental hazards will be done. The company will get its registration with the ISO – 14000 and will use this as its promotional tool in the marketing campaign in the media. The company will regularly administer its standards and will keep its system up to date, so that there will be no cause of the environmental pollution and hazards by the operations of the company.


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STRATEGIC RECOMMENDATIONS

Initially, the product should be launched in the local market with branding concept in mind. Tea sachets have shown tremendous growth in the last few years. The company should focus to capture the sachet market first by aggressive marketing campaign. The preferred mode of distribution is going directly to the wholesalers. There is an option of having no involvement of any distributor between the manufacturer and the wholesaler in the city where manufacturing is being done.

By giving healthier profit margins to the wholesalers, the wholesalers will hence promote the product. This strategy is important to introduce such a new product and to create an extensive distribution and sales channel. The company will later expand into other cities through a distributor network.


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Exit Strategy and Risk Assessment

The owners are aware of the highly risky nature of launching a tea processing unit in the highly competitive market. If the venture fails, the owner's paid-in capital and expenses may not be recovered.

The venture's actual revenue will be tracked against projections on a month-to-month basis. If net profitability is not in-line with forecasts, management and operational adjustments will be made to address the issues. If the venture is undercapitalized and requires more working capital, the owner will consider bringing on investment partners. The owner will also review the return-on-investment for personally providing more paid-in capital.

In the event that net profitability cannot be attained, the owner will take the following sequential steps to exit the venture:

1. The owner will attempt to sell the venture outright to a suitable buyer.

2. If a buyer cannot be found, the owner will liquidate all viable assets, including the computers, play stations etc.

3. Capital raised through asset liquidation will be used to reduce possible debt. All debt will be negotiated prior to settlement.

4. If debts cannot be eliminated, the owner will discuss corporate bankruptcy options with legal counsel.


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Tea Company

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