Soft drink

Feasibility study

____________________________________ Ing. Peter Dbravk, Martina Moravcov Version 1.3 September 2012

The resume
1. Introduction......................................................................................................................................... 3 2. A brief description of the nature of the project and its phases .......................................................... 3 3. Market analysis, demand estimation, marketing strategy and marketing mix .................................. 4 4. Project Management and Human Resources Management ............................................................... 5
4.1. Pre-investment phase ................................................................................................................... 5 4.2. The investment phase ................................................................................................................... 6 4.3. Pre-operational phase...............................................................................................................................6 4.4. Operational phase ........................................................................................................................................7

5. Technical and technological project solution...................................................................................... 8 6. Impact on the environment ................................................................................................................ 8 7. Securing assets .................................................................................................................................... 9 8. Financial Plan and analysis of the Project ......................................................................................... 10 9. Risk analysis and management ......................................................................................................... 11 10. The Project schedule ....................................................................................................................... 12 11. Final evaluation of the project ........................................................................................................ 13

1. Introduction
Aim of the submitted feasibility study is the restoration of production soft drink that was interrupted 10 years ago. That soft drink has a known trade mark and position it constructed in time of preRevolutionary to the time after revolution and continued to time of interruption. To achieve this goal it is necessary to perform these steps: buy land with three springs and the land with the original bottling hall reconstruct and extend the original bottling hall purchase and install technology of bottler prepare a massive marketing campaign for the return to the market establish business relationships and contracts with retail chains

An important advantage of the project is the fact that for implementation of the project is prepared the original management, who holds the both technological and marketing know-how.

2. A brief description of the nature of the project and its phases

The purchase of land The subject of investment purchases are four grounds. On three of these wells are located and the fourth is the original manufacturing facility bottler. Price for the land will be based on expert opinion, which will be left to develop. The trade mark The trade mark owner is the current vendor of land and bottler. The sale of bottler is part of the sale of the entire package. Price of the trade mark will be based on expert opinion, which is needed to be developed. Wells On these grounds are wells, three of them are connected to the pipes leading to the bottler. In the feasibility study is calculated with using one drill hole, which was used before the interruption of production. Coverage of this well is 2 l / s there is a real possibility based on expert opinion to increase pumping at 4 l / s. The production hall The production hall bottler is currently empty. It will require a modification, extension of storage and office space construction.

The advertising campaign On prelaunch of the products into market and on reminding of the original brand there will be need for a prepare of massive advertising campaign. The cost of this initial entry will represent a significant share of the input costs. Implementation of the campaign can achieve the planned sales of the products. Contractual relationships with customers Contractual relations will be built mainly with retail chains and regional customers. This process will follow up on relationships built and functioning prior to production interruptions. This step, which is important for the growth and profitability of the company, will get attention from management attention.

3. Market analysis, demand estimation, marketing strategy and marketing mix

Sales and turnover In marketing the study may be based on sales and turnover before the interruption of production. When extrapolating these data it is required be based on the fact that the sale, which took place without any significant marketing support and advertising sales, was reached 58,223,500, - CZK. After the return to the market and after a massive advertising campaign it is expected to increase turnover to a minimum of 180 million CZK (while the break point for a profit in the current year is set at 145 million CZK). The above turnover represents 2% of the Czech market in this segment. If we take as a standard competitive Kofola or Mattoni, referred turnover represents 6% of turnover Mattoni. Marketing campaign The input marketing and advertising campaign to relaunch the products on the Czech market is unavoidable for achieving the planned sales. As an example can be re-used successful brands Kofola and Mattoni. This campaign will consist of a main part, which will be realized through the TV channels and will be supported by advertising on the radio, press and on billboards. The total cost of this input campaign is planned for 50 million CZK and will include: making of TV spot expenses for the Agency media charges production costs 4

In subsequent years will be the maintenance of an advertising campaign used for the amount of 25 million CZK. The amount of advertising costs is determined by, after consultation with a multinational advertising agency, predatory competition approach to market penetration.

4. Project Management and Human Resources Management

4.1. Pre-investment phase
Pre-investment phase is the period of the final decision of starting investment. In this period there will be prepared a detailed plan, will be examined by legal ownership relations activities and will eliminates the risk of potential litigation. There will be initial discussions with technology suppliers and negotiate for the terms of payment. We will create the initial construction and technological studies (Basic design) for the pricing of construction work. Based on these documents there will be created a detailed business plan with a complete financial analysis and expected cash-flow. Investor will finally decide, based on data and conclusions, if implement or reject the project. The costs of pre-investment phase are not involved in the return of investment and in case of refusal they are so called SUNK COSTS. The duration of the pre-investment phase is estimated at two months. Personnel needs For the pre-investment stage are planning two managers. One will work on full-time employment and the other will work on the basis of the work done. Total monthly costs, including payroll deductions are planned in the amount of 184 000, - CZK. Outsourcing In the pre-investment phase there will be in the form of outsourcing services and ordering the following experts:

4.2. The investment phase

The investment phase is focused on two major activities: purchase of land with wells and bottling hall purchase, installation and putting technology into operation

The investment phase will be managed by two managers who continually switch from preinvestment phase to the phase of investment. For the individual acts will be hired competent experts, respectively each task will be provided by personnel suppliers. Total monthly costs, including payroll deductions are planned for this phase in the amount of 220.000, - CZK.

4.3. Pre-operational phase

The focus of the pre-operational phase is the preparation of the bottler's smooth operation. It is assumed that two months before the start of the operational phase of the bottler managers will enter and they will take over maintenance of the line and they will take part in the trial run. There will be interviews with potential employees; we will prepare a health and safety training. At the same time there will be an investment manager who will manage the end of investments, securing the relationship management with suppliers, and deliver the necessary documentation and experience for the new leadership. At the same time sales team enters to be able establish business relations with strings and prepare deliveries to stores. Additional member team will be buyers who will secure supplies and raw materials in stock. One month before putting bottler into full operation there will be the following personnel lines:

4.4. The operational phase

In the operational phase there will be managers who will manage the entire company in the following report:

For devices in single-shift operation is planned with following personnel and related personnel costs:

5. Technical and technological project solution

Existing technology The input devices are wells and supply pipe to the building bottler. This part of the technology is built and will not require additional initial investment. Investment into new technologies To achieve the planned production it is required to store depleted water in storage tanks at the time of the second and third shifts, when its not bottling up. Next part will be the technological water treatment. For the production of flavoured beverages are necessary tanks in which will be stored the delivered syrups. The production process begins with blowing machine for PET bottles. Then proceed to the bottle filling machine. Followed by sealing and labelling machine. The final stage of production will be packing and palletizing machine.

6. Impact on the environment

At delivery new technology to manufacture and bottling of 1.5 litters PET bottles filled soft drink, suppliers will be required to supply such technology and production inputs, such as to reduce the carbon footprint (the specific contribution of product emissions), energy consumption and waste production compared to other manufacturers in the beverage industry to the minimum possible. This would reduce the overall impact on the environment and the product could be labelled "environmentally friendly". With this designation in Czech Republic can boast only the mineral water Mattoni which also belongs to the ecological mineral waters in Europe. This designation will be made on the basis of study "Life Cycle Assessment" (LCA). It is a method to compare the environmental impact of tangible products or services, with regard to their entire life cycle. The LCA method has a fixed structure and is carried out according to international standards of ISO 14040. The production process does not expect the generation of waste with consequent impact on the environment. Minimal waste is generated within the reclamation procedure. These wastes will be processed as secondary raw materials through recycling. The whole process of making soft drinks is highly ecological, without significant intervention into environment.

7. Securing assets
Investment property that is the subject of the entire project consists of several relatively independent parts. In the first row are four lands on which are located three springs and hall bottler. The second investment will be the purchase of trade mark that forms a significant part of the marketing policy and the overall success of the investment. The third financial item will be the repair and completion of the bottler hall on the land, including roads. The last major investment will be the purchase of a new technology. For the operation itself it will be necessary to secure a lower class cars for traders, supply vehicle for local delivery and cars for managers and forklifts. To ensure the project from financial aspects it is necessary to expect the following inputs:

Investment property and financial resources of its acquisition represent the individual items of balance sheet, which are divided into assets and liabilities. Expected development of assets and liabilities in the investment period in the first two years of production phase captures the animation of balance sheet always at the end of one of three periods:

Economic result in the years captures the profit and losses for the year 2013 and the entire year 2014 in Chapter 9.

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8. Financial Plan and analysis of the Project

For the creation basic business model there was designed, based on marketing analysis, capital inputs with corresponding amortization expense item, labour costs and the other inputs income for the period of phase investment of the first two years of production:

9. Risk analysis and management

Investment Risks 1.1 The risk of blocking sales with a goal to escalate the price of land and property by the seller side. Solution - signing the contract about the future contract with sufficiently high penalties for late sales. 1.2 The risk of a complete property failure to settle the subject purchase. Solution - despite having sufficient invest control the investment funds in corporate training in the pre-investment phase. 1.3 The risk of inadequate or incompetent building project. Solution - engage a reputable design firm with references and personal experiences. 11

1.4 The risk of failure of the technology supplier (delivery dates, quality, ...). Solution - choose a reputable supplier with a long tradition without intermediary, preferably from the Czech Republic in order to reduce transport costs, simple communication and possibility for rapid and cheap servicing. The marketing risk 2.1 The risk of bad marketing market estimates. Solution verify marketing estimates with professional agency or hire an experienced professional (or even from our competitors) 2.2 The risk that a massive marketing campaign will not reach the target customer. Solution - to choosing an advertising agency maximum attention. Require successful references in the beverage industry. 2.3 The risk of incorrect chains behaviour. Solution - eliminate by a legally verified contracts and diversification of risks outside the chain.

10. The Project schedule

Project schedule describes the activities of pre-investment and investment phase, including pilot plant to start production with an initial advertising campaign: Start 05/2012 05/2012 06/2012 07/2012 02/2013 02/2013 03/2013 04/2013 05/2013 End 05/2012 06/2012 02/2013 02/2013 04/2012 04/2013 05/2013 05/2013 07/2013 Stage of the project An investor's decision Purchase of land and halls Rebuilding and extension of the hall Delivery of technology The testing operation Gradual security of personnel Building a contractual relationship and the first deliveries Start of the stable operation, frontloading of product Advertising campaign to re-market the product

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11. Final evaluation of the project

Project to build manufacturing and commercial structures for delivery of soft drinks is based on detailed marketing and economic perspective, based on current knowledge of the market and competitive field. From the perspective of market entry is the return of a well-known brand with a long history. Its production was discontinued just 10 years ago. It is assumed that prelaunch will copy at least partially the successful return of Kofola. The third pillar of success is the fact that the return of brand on the market will participate the management, which was involved in its success before the temporary production interruptions. In terms of investment security are the main items, which will be used in the capital, land, trademark and building bottler. From the perspective of ensure investment is the elements that adequately protect and ensure investment in the eyes of the banking sector and of investment circles as such. The land and the trade mark are even expected to increase its market value with the time go on. Planned results of a simulated model after the first year introductory show, provided sufficient market stability, sustained profits. Break point for the calculation is based on turnover CZK 145 million. When we take into account the turnover CZK 60 million before the interruption of production a decade ago without any advertising campaign, increased to two and a half times with a massive advertising support is feasible. From marketing aspects in comparison with stable market players with soft drinks, does not constitute market entry to change fundamentally the situation. Compared to Carlsbad mineral waters (associated with the brand Mattoni), which achieves turnover of 3 billion CZK, it is less than 10% share of this one player. In the first stage, the overall market share will be around 2%. Therefore is not expected major attack of competitors. The product itself has a simple input-output structure: the entry of water, drink preparation, packaging, storage, distribution and sale. In this straight line are the risks and external negative influences easily identifiable and controllable. Considering the arguments and considering the fact that it is not a greenfield project, but that the production ran successfully for many years and it is a restarting production of the known brand, the project is sustainable and realizable business with profit.

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