Team Number: BA090013 Team Name: Epimetheus

Poto: Smart Taste, Drink Best

Producing non-dairy milk from potatoes to reduce milk crisis and potato spoilage problems

Team Members
Md. Nabid Alam (Team Leader)
E-mail: md.nabid.alam@gmail.com Contact No. 01673375729

Md. Masum Ikbal Patwary Md. Towhidul Islam

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Table of Contents
Serial No. 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 14.0 15.0 -Particulars Executive Summary Business Idea Goals and Objectives Market Potential Competitor Analysis Marketing Plan Operation Implementation Plan Resource Requirement Ownership Form and Management Team Risk Assessment SWOT Analysis Exit Strategy (Contingency Plan) Financial Plan Social Cost-Benefit Analysis Appendix Page No. 1 2 3 3 4 5 6 7 7 8 8 8 9 9-10 10 i-xx

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1.0 EXECUTIV E SU M M AR Y
Are you sure that the last drop of milk your loving child drinks is safe? Do you know what compels you to feed your baby melamine and other contaminated milk? The huge demand-supply gap makes the milk price high and that creates the chance for low price contaminated milk to enter into Bangladesh market. Another recent agro-problem Bangladesh has faced is huge potato spoilage after having bumper production each year and potato farmers incur huge loss. Poto (countrys first non-dairy milk brand) identifies these top problems as opportunity and combines two solutions into one direction which is producing milk by adding value to the local quality potatoes to introduce non-dairy milk in Bangladesh market as a new offering. Potos product line comprises two basic category of milk which is original & flavoured in three tetra pack size of 250ml, 500ml and 1litre. A new generation of non-dairy beverages has dawned with Poto, a delicious-tasting, fat free, cholesterol free, that can be used just like milk. Potato based Poto is an excellent source of bio available calcium and least allergic of all non-dairy beverages available on today's world. The total demand of milk is 6,570,000 tonnes (per head 120 ml) and supply is 3,326,000 tonnes including the imported milk (The Independent, 25 December, 2008). Among the milk producers Milk Vita is the biggest by holding 20% of demand so it grabs almost 40% of total supply. Brac Dairy, Pran, Akij are holding sizeable portion of the market. Poto uses cost leadership and differentiation strategies to gain competitive edge over its competitors. It gets the first mover advantage over all potential non-dairy milk brands. Poto is not only an entrepreneurship venture but also an ecopreneurship endeavor. The production process is eco-friendly because there are no chemical or harmful particles used in the production and the disposal system is safe. The company also emphasizes safety and hygiene issue of the human resources. The firm has a marketing strategy of positioning its product on the basis of low price and quality. The objective of its marketing campaign is to make people aware about non-dairy milk concept and its benefits over ordinary milks. To reach the segmented portion of buyers in Dhaka Poto uses all the four means of marketing mix and marketing tools like TVC, FM radio ads, newspaper ads, campus campaign, assurance program and 24/7 help desk. The production of Poto is done in the own operational plant in Sirajganj because the availability of rawmaterials as well as the convenient transport and communication. The operation of Poto consists of three phases procurement and storage, production and packaging phase. The finished products are distributed by the help of local distributor. The project is associated with risks like demand risk, supply risk, economic risk, political risk etc. which is reflected in the discount rate (20%). The estimated project cost is BDT 8,493,500 in FY 2009-10 which is financed by 69% equity from partners and 31% debt from lenders. The ratio analysis shows net profit margin of 3%, 16.8%, 20.2%, 20.8% and 21.2% in FY 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 respectively. The projected financial statements also portray liquidity and solvency of the firm. The NPV of the project from 5-year financial projection is positive by BDT 13,979,595. The IRR of the project is 52%. The payback period is 2.10 years and discounted payback period is 2.54 years. The stress testing shows positive NPV in all the three cases base (BDT 13,979,595), best (BDT 20,053,800) and worst (BDT 4,275,886). The social cost-benefit analysis also reveals positive social NPV of BDT 23,024,450 at 25% discount rate and the social IRR of the project is 56%.
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2.0 B USINESS IDE A

Poto is the countrys first non-dairy milk brand which produces milk from local quality potatoes. Nondairy milk is a new option for the milk consumers of Bangladesh and it is also an innovative value added product of potato. The milk industry of Bangladesh has encountered problem with contamination of melamine and emulsion due to huge shortage of supply. Also the potato producers of Bangladesh are facing spoilage problem after having bumper potato production each year and thus incur huge loss (see Appendix A1). Poto identifies these top problems as opportunity and combines two solutions into one direction which is producing milk from potatoes to introduce non-dairy milk in Bangladesh market as a new offering.

2.1 Product offerings Poto original Original non-dairy milk-white. Poto flavored Poto choco milk (Chocolate flavored milk), Poto milk berry (Strawberry flavored milk) and Poto Vanilla (Vanilla flavored milk). Poto markets its products in 3 tetra pack sizes: 250ml, 500ml and 1 Litre. (see Appendix A3) 2.2 Features and unique selling proposition Potato milk is worlds new non-dairy milk innovation. Potato milk is commercially and technically viable non-dairy milk option for Bangladesh which is best taste comparing to soy-milk and rice-milk. (see Appendix A4) Cholesterol and lactose free milk which is helpful for lactose intolerant people and also free from dairy allergy No artificial sweetener, color and flavor and no animal ingredients, preservative used in Poto. Poto is vegan friendly and Non-GMO (Genetically Modified Organism) product. (see Appendix A2) 2.3 Business model: Potos business model is entirely production or manufacturing-based. Potos production process transforms and adds value to the quality potatoes and produces non-dairy milk of various flavors. Poto will: Produce milk in its own operational plant using eco-friendly production process. Sell milk in 3 tetra pack size in the local market. How Poto makes money is shown in the following business model:

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3.0 GOALS AND O BJECTIVES 3.1 Vision: Potos vision is to make a safe milk consumption platform to create a healthy nation. 3.2 Mission statement: Poto wants to offer non-dairy milk to reduce the demand-supply gap and assists potato producers who have incurred huge loss due to potato deterioration, while it uses the most efficient, state-of-the-art technology in operation. Poto aims at establishing eco-friendly work environment and providing better employee incentives as it continues to expand its business.
3.3 Short-term goals: To offer quality products at a competitively lower price to capture market share. To create a demand for non-dairy milk as a best taste option. To persuade the target customers regarding the benefits of non-dairy milk that will bring familiarity among customers. 3.4 Long-term goals: To expand its operation beyond Dhaka in the year 2015 and further goes for export. To set up new industrial unit in the west region of Bangladesh by the year 2018. To ensure sustainable development of the nation by creating newer utility of quality potatoes. 3.5 Objectives: To attain 20% growth rate by the year 2014. To attain net profit margin of 25% in year 2017. To achieve BDT 20,000,000 free cash flow by the year 2015 to setup another operational plant by the year 2018. To utilize 1200 tonnes of potatoes by the year 2018. To repay loans by the year 2020 and lever up the firm with 25% debt by the year 2025.

4.0 MARKET POTENT IAL

As there is 49% gap between the demand and supply of milk in Bangladesh this sector needs more supply of milk. The total demand of milk is 6,570,000 tonnes (per head 120 ml) and supply is 3,326,000 tonnes including the imported milk (The Independent, 25 December, 2008). Whereas the present and projected scenario of Dhaka Metropolitan City estimated by Poto is: 2008 2009 2010 2011 Milk Demand (tonnes) 302,728 307,572 312,493 317,493 Milk Supply (tonnes) 148,337 150,710 153,122 155,572 Demand-Supply Gap (tonnes) 154,391 156,862 159,371 161,921 Source: Data used from Statistical Pocket Book of Year 2007. Due to milk shortage melamine, emulsion and other contaminated milk are entering into market to fulfill the demand supply gap quickly and people get less option without purchasing those milk. Increasing dairy milk production is not an overnight task because of shortage of livestock and grazing field. So the demand for non-dairy milk will be created in Bangladesh. 4.1 Non-dairy milk emergence factors: Non-dairy milk can be introduced to fulfill the demand-supply gap is more affordable for greater range of consumers can also serve the heart, diabetics and dairy allergic patients which is big portion in the demand but vulnerable to dairy milk
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with different flavors is cheap and better quality than available flavored milk 4.2 Growth prospect: The milk market growth rate is 20% according to industry analysis (source: The Daily Star; Published On: 8/4/2008). "We are happy that private companies are coming up with big plans in this sector. There is still a huge scope for growth for every player as together we are only catering to one-fifth of the market," according to Ms Ferdousi Ali, chairman of Milk Vita. Milk industry is going to be a thrust sector (The Independent, 25 December, 2008). The government is encouraging agro-processed business. According to FAO all over the world value added potato products consumption is increasing. The year 2008 was World Potato Year. The government observed this year by launching a huge potato campaign. The people have become more interested to consume value added potato products. So, it is obvious that there is an ample growth prospect of the business.

5.0COMPETITOR ANALYSIS
Poto offers non-dairy milk in Bangladesh market in first phase. The domestic market of non-dairy milk is less competitive but the firm faces huge competition from the existing dairy milk brands which are offering the substitute product. Milk Vita is the largest liquid milk processor of Bangladesh. The daily demand of milk is 37.5 million and the company can meet only 20% of it. So it grabs about 40% of total supply. But the milk collection has fallen some 35% to 55.23 million litres in FY 2007-08. (source: The Financial Express, Publish date: January 26, 2009) Brac Dairy is the second largest liquid milk plant in Bangladesh. The market share of Brac Dairy had increased to 35% from 20% by year 2006 to 2007. (www.ssireview.org/ articles/entry/in_the_black_with_brac/) Pran-RFL is the third largest liquid milk producer in Bangladesh has a daily processing capacity of 1 lakh litres of milk although it only processes 40,000 litres daily due to milk shortage (source: The Daily Star ; Published On: April 4, 2008). Milk price of these competitors lie between BDT 14 to 20 for 250 ml, BDT 26 to 28 for 500 ml and BDT 50 for 1 litre. (see Appendix A6) Brac Dairy, Pran-RFL, Akij Foods and Beverage Ltd. use tetra pack for packaging a portion of supplied milk. Pran-RFL and Akij use tetra pack for normal milk and Brac Dairy uses tetra pack for flavored milk. 5.1 Competitive forces analysis: Porters five forces analysis has been conducted to evaluate competitive edge of Poto from its existing and potential competitors (see Appendix A12). The analysis shows: Bargaining power of suppliers (potatoes and other ingredients) is low. Bargaining power of buyers is high because the consumers get several options. Threat of new entrants domestically is high as the market is quite lucrative and milk demand supply gap is huge. Threat of substitute although very high. The intra-industry rivalry is domestically low because the demand is quite high than the supply. 5.2 Assessment: Among the competitors Milk Vita is the biggest by holding 20% of demand so it grabs almost 40% of total supply. Brac Dairy, Pran, Akij are holding sizeable portion of the market. Poto has competitive edge in price and taste. It gets the first mover advantage over all potential non-dairy milk brands. Besides, competitive analysis reveals the market is lucrative in all terms of forces that indicate - 4-

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opportunity, profitability and sustainability. The competition among competitors is fair because all operate to make Bangladesh milk industry a self sufficient one which is still a gigantic task.

6.0MARKETING PLAN
6.1 Marketing goals and objectives: To meet the growing needs of the target market and to evaluate the competitive environment and continue to establish a differential advantage. To establish an effective and profitable marketing mix of product, place, price and promotion. To establish a customer base of 5% of the defined target market within 2015 To exceed break-even selling point of 381 tonnes at FY 2009-10 6.2 Marketing strategies: Making people aware about non-dairy milk, its nutritious value, taste and benefits. Focusing price, taste and unique selling propositions while developing marketing campaign Building brand proposition to different consumers according to their perception (e.g.; smartness for youth, taste and nutrient for children and family consumers). Creating customer loyalty and making customer delight by proper quality assurance campaign 6.3 Target customer: Geographic location: Dhaka city for first 5 years (see Appendix A5) Demographic: 1. Social classmiddle class and high end consumer 2. Age 10-24 and 25-55 are two prospective buyer segments for flavored milk and original milk respectively Prospective buyers: Around 2,500,000 (35% of total Dhaka city population fall under Potos target customer segments) 6.4 Market positioning: Poto positions itself in the market on the basis of low price and tasty-nutrient non-dairy milk benefits. The product positioning map shows the unique positioning of Poto relative to its competitors.

Poto

6.5 Marketing mix: Potos combination of product, price, promotion and distribution and other marketing activities needed to meet the marketing objectives is: Product Poto offers two basic types of product line: original and flavored. The pack sizes of Poto Original are 500 ml and 1litre. Poto Flavored offers 3 flavors (chocolate, strawberry and vanilla) with pack size 250 ml and 1litre. Poto uses state-of-the-art tetra pack technology for packing its offers. The shelf life of Poto is 4 months for original and 6 months for flavored. Price The following price list shows the wholesale and retail price of product lines: Poto Original Poto Flavored 500 ml 1 litre 250 ml 1 litre Wholesale price (BDT) 18 36 10 40 Listed price (BDT) 20 40 12 48
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Distribution Channels Poto uses a simple distribution channel with zone-wise distributors. The Dhaka city has divided into 9 different zones covering 19 areas (see Appendix A5). Finished Poto products come directly to a Dhaka city warehouse from the plant. Sales team uses firms covered van to distribute the product to the dealers. It uses different specific day for specific zone. Then the secondary distribution channel leads by the dealers distribute the product by using their own resources. Poto also make strategic alliance with super stores and educational institutes canteens to sell Poto. Integrated marketing communication Potos marketing communication mix or promotion mix includes all the typical elements like advertising, sales promotion, public relations, personal selling and direct marketing to activate pull strategy (see Appendix A7). Some of the tools are TVC, FM radio ads, Newspaper ads Buzz Marketing (opinion leaders: Doctors) Poto goes to school campaign Potos quality assurance campaign SMS contest Point of purchase ads 6.6 Marketing budget: The five year allocation of marketing budget at affordable method shown below: Advertising Sales promotion PR and personal selling Direct marketing Total 2009-10 2,983,200 150,000 1,146,800 20,000 4,300,000 2010-11 5,146,400 200,000 933,600 20,000 6,300,000 2011-12 5,146,400 200,000 1,233,600 20,000 6,600,000 2012-13 5,146,400 200,000 1,333,600 20,000 6,700,000 2013-14 5,146,400 200,000 1,533,600 20,000 6,900,000

6.7 Customer service and control: 24/7 call center always and retailer survey quarterly conducted by the marketing team to know the first hand information of the consumers. The total marketing plan is flexible and open for any required contingencies.

7.0 OPERATION
7.1 Production: The production of Poto is done in the own operational plant (see Appendix A8) in Sirajganj because the availability of raw-materials as well as the convenient transport and communication. The operation of Poto would consist of three phases procurement and storage, production and packaging phase. Procurement and storage The pre-production is run by the procurement and storage unit. The procurement unit is responsible for purchasing 200 tonnes of potatoes and other ingredients in FY 200910, 500 tonnes of potatoes and other ingredients in FY 2010-11 and adds 50 tonnes each succeeding years. The storage unit stores the raw-materials in own 500-ton capacity cold storage. Production phase The production phase transforms the potatoes into milk which is the finished product. The production unit produces 500 tonnes milk in FY 2009-10. Packaging In this phase produced milk is packed in tetra packs of 250 ml, 500 ml and 1 litre. 7.2 Placement of order: The distributors and dealers can place orders by using order form or through internet. The customers can place orders only through the website. 7.3 Delivery: Milk is delivered in 1 dozen retail pack or 50 pcs wholesale pack. The local dealers are responsible for home delivery with extra commission. 7.4 Billing: Milk distributors are required to make payment within 45 days. Accounts payable would be paid within next year.
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7.5 Quality control: Internal quality control is closely monitored by the production manager and supervisors and low quality outputs are disposed. The weight of each pack is automatically checked.

8.0 IMPLEMENTATION PLAN

8.1 Project implementation schedule: The project starts at July 2009 and the commercial launch is on January 2010. The 6-month project implementation schedule is as follows:

8.2 Resource ramp-up: With a view to implement the project, resource ramp-up is very vital. The financial resources (equity and debt) and human resources are the key elements. Financial resources are vital for uplifting capital investments and working capital. Human resources are significant throughout the entire business process. 8.3 Product roll-out plan:

9.0 RESOURCE R EQUIREMENT

9.1 Capital investments: The starts up expenses are projected to be BDT 513,500. Initial capital expenditures for starts up assets are projected to be BDT 7,980,000. The firms project cost is BDT 8,493,500. The project cost is financed by 69% equity provided equally by the partners and 31% debt provided by financial institution. 9.2 Personnel requirements: Staffing needs at the initial phase, the operation of Poto is monitored by three department heads categorized as procurement and storage, production and sales and administration. Employee needs the head of the departments are taken from the partners and requirement for labors, supervisors and managers are fulfilled from outsource. (see Appendix A10 & A11) 9.3 External resources: Suppliers, distributors, superstores and lenders.
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10 .0 OWNERSHIP FORM AND MANAGEMENT TEAM

Poto firm is a partnership of three capital provider. Potos organization structure is top-down hierarchical structure with same authority among peers (see Appendix A9). Potos management team consists of 14 executives (see Appendix A10): Position No. of managers 3 Department Head 5 Manager 6 Supervisor

11 .0 RISK ASSESSMEN T
11.1 General risks: The project is associated with following general risks: Demand risk the price of substitute and other options production cost lowering may shiver the demand of potato milk. Supply risk the main raw material of potato milk is abundant in Bangladesh but the other ingredients supply may impede the production. Regulatory risk the standard testing of the product and business approval is highly regulated by our government but the sector is going to be the thrust sector so regulatory risks are going to be lessened. 11.2 Risk from PEST analysis: The project is associated with following risks analyzed from PEST analysis: Political risks the political variables hamper are strikes, terrorism, instability etc. Economic risks the project is affected by economic parameters such as inflation rate, consumer price index, recession etc. Socio-psychological risks non-dairy milk is a new product in peoples lifestyle so it may has setback regarding peoples acceptance. Technological risks technological changes, invention of new alternative milk may cause problem

12.0 SWOT ANALYSIS

Strength
1. First non-dairy milk brand 2. Low cost milk option 3. Commercially and technically the most viable non-dairy milk 4. Strong management team

Weakness
1. High dependency on dealers 2. High dependency on other ingredients 3. Interruption of any sub-system may cause disruption of total production process

Opportunity
1. Market growth rate 20% 2. Going to be the thrust sector 3. Governments and customers encouragement

Threat
1. Level of acceptance by people is not reasonably certain 2. Threat from popular substitute 3. Potential competition from other non-dairy milk option
S ee App endi x A13 & A14

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13.0 EXIT STR AT EGY (Conting ency Plan)

In the exporting phase the firm may apply for government assistance and tax benefits as an exporting agro-processor. Firms primary exit strategy is converted into private limited company from partnership firm to reduce capital problem (if occurs) and skill managing. Firms secondary exit strategy will be merged with another milk company to lessen the risk of being dissolute.

14.0 FINANCIAL PLAN

14.1 Project Evaluation Initial Investment Net Present Value (NPV) at 20% discount rate Internal Rate of Return (IRR) Pay Back Period (PB) Discounted Pay Back Period 14.2 Income Statement (Summarized)
Sales revenue Less: Cost of goods sold Gross Margin Less: Total operating expenses Income From Operations Less: Interest expense @ 15% Net Income Before Tax Less: Income tax @ 40% Net Income After Tax 2009-10 15,200,000 8,232,000 6,968,000 5,820,445 1,147,555 393,409 754,146 301,659 452,488 2010-11 41,800,000 20,739,500 21,060,500 8,997,445 12,063,055 374,033 11,689,022 4,675,609 7,013,413 2011-12 51,300,000 24,166,100 27,133,900 9,494,445 17,639,455 351,750 17,287,705 6,915,082 10,372,623 2012-13 57,525,000 27,527,800 29,997,200 9,718,245 20,278,955 326,125 19,952,830 7,981,132 11,971,698 2013-14 64,000,000 31,034,600 32,965,400 10,068,445 22,896,955 296,656 22,600,299 9,040,119 13,560,179

BDT 8,493,500 BDT 13,979,595 52% 2.10 years 2.54 years

14.3 Balance Sheet (Summarized)

Total current assets Total long term assets Total assets Total current liabilities Long term liabilities Total equity Total liability and equity 2009-10 7,470,779 5,955,955 13,426,734 4,609,920 2,493,551 6,323,263 13,426,734 2010-11 21,615,287 5,680,510 27,295,797 11,614,120 2,345,000 13,336,676 27,295,797 2011-12 34,011,418 5,405,065 39,416,483 13,533,016 2,174,167 23,709,299 39,416,483 2012-13 47,944,655 5,129,620 53,074,275 15,415,568 1,977,710 35,680,997 53,074,275 2013-14 63,518,160 4,854,175 68,372,335 17,379,376 1,751,783 49,241,176 68,372,335

14.4 Statement of Cash Flows (Summarized)

Net cash provided by operating activities Net cash provided by investing activities Net cash provided by financing activities Net increase in cash Cash balance at the beginning of year Cash balance at the end of the year 2009-10 (792,067) (6,794,900) 7,970,917 383,950 1,698,600 2,082,550 2010-11 3,108,858 0 (522,583) 2,586,275 2,082,550 4,668,825 2011-12 5,518,068 0 (522,583) 4,995,485 4,668,825 9,664,310 2012-13 6,494,643 0 (522,583) 5,972,060 9,664,310 15,636,370 2013-14 7,435,624 0 (522,583) 6,913,041 15,636,370 22,549,411 - 9-

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14.5 Initial investment

Particulars Total startup expenses Total startup assets Total Requirement Amounts in Taka 513,500 7,980,000 8,493,500

14.5 Ratio Analysis

Current ratio Quick ratio Net working capital (Tk.) Total asset turnover ratio Debt-equity ratio Debt-total asset ratio Interest burden Gross margin Net profit margin Return on asset Return on equity 2009-10 2010-11 2011-12 1.62 1.86 2.51 0.80 1.04 1.74 2,860,859 10,001,167 20,478,402 1.13 0.39 0.19 0.34 45.8% 3.0% 3.4% 7.2% 1.53 0.18 0.09 0.03 50.4% 16.8% 25.7% 52.6% 1.30 0.09 0.06 0.02 52.9% 20.2% 26.3% 43.7% 2012-13 2013-14 3.11 3.65 2.37 2.94 32,529,087 46,138,784 1.08 0.06 0.04 0.02 52.1% 20.8% 22.6% 33.6% 0.94 0.04 0.03 0.01 51.5% 21.2% 19.8% 27.5%

14.6 Break Even Analysis Total costs (BDT) Selling price/litre (BDT) Break even selling unit (in litre) 14.7 Stress Testing Base case Best case Worst case 0 (8,493,500) (8,493,500) (8,493,500) 1 377,073 377,073 377,073 2 4,870,426 3,381,597 1,529,412 3 6,002,675 5,612,017 2,435,555 4 5 5,773,388 5,449,532 7,671,861 11,504,752 3,542,028 4,885,318 NPV 13,979,595 20,053,800 4,275,886 2009-10 2010-11 2011-12 2012-13 14,445,854 30,110,978 34,012,295 37,572,170 38 38 38 38 380,154 792,394 895,060 988,741 2013-14 41,399,701 38 1,089,466

Notes: Base case values represent the values of 5 year projection. Best cases sales growth is 25% and cost growth is 5%. Worst cases sales growth is 15% and cost growth is 10%.

15 .0 SOCIA L COST -B ENEF IT ANALYSIS

Total social benefits Less: Total social cost Social profit Social discount rate Discounted social profit Social PV Less: Opportunity cost Social NPV Social IRR 2009-10 2010-11 2011-12 2012-13 17,204,200 46,508,200 56,732,200 63,525,450 14,747,512 34,786,587 40,927,377 45,553,302 2,456,688 11,721,613 15,804,823 17,972,148 25% 1,965,350 7,501,833 8,092,069 7,361,392 31,517,950 (8,493,500) 23,024,450 56% 2013-14 70,573,200 50,439,821 20,133,379 6,597,306

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APPENDICES

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A1. POTATO SPOILAG E SCENA RIO

Potato spoilage scenario in FY 2007-08 and FY 2008-09 is:
2007-08 Production of potatoes (in tonnes) 1 crore Potatoes went rotten (in tonnes) 10 lakh Rotten proportion with production 10% Monetary loss due to deterioration Tk. 800 crore Source: Bangladesh: Low demand frustrates potato growers, thedailystar.net Publication date: 11/6/2008 (Data shown in tabular form)

The plant location is in northern district of Sirajganj and The Department of Agricultural Extension (DAE), Rajshahi has set a target of producing 58,99,250 metric tons of potato from 3,37,100 hectares of land in 16 districts of Rajshahi division during the current harvesting season of FY 2008-09. The cold storage capacity of Rajshahi division is shown in the following table: (Capacity and potato storage in metric tonnes) 2007 2008 District Number Capacity Potato storage Number Capacity Potato storage Rajshahi 23 190500 14135 23 210500 192156 Bogra 24 168790 127800 25 182360 172446 Pabna 3 9000 3200 5 9700 6420 Dinajpur 6 40500 20277 6 44800 44800 Rangpur 22 140690 117139 23 183460 176348 Source: 5.23 Cold storage location and capacity, p-211, Statistical Pocket Book 2008.

A2. NU TR ITION F ACTS OF PO TO Poto contains no artificial preservatives or sweeteners and is formulated with ingredients that have been originally sourced in nature. The following table shows the list of ingredients, their purpose and source:
Ingredients
Filtered water Maltodextrin Soy Protein Isolate Fructose Potato Starch Natural Flavors Natural Color Calcium Carbonate Carrageenan Sea Salts Tricalcium Phosphate Potassium Citrate Citric Acid

Purpose
A carrier of all ingredients used in Poto beverages From potatoes, to provide energy in the form of carbohydrates Source of vegetable protein isolate A sweetener, provides immediate fuel for the body Provides energy in the form of complex carbohydrates Flavor Opacity Fortification Provides suspension aids to all ingredients, and adds thickness Flavoring only A nutritional supplement / Form of calcium source to fortify the beverage Provides stability Acts as acidulant to provide stability and flavoring to the finished product

Source
Fresh water filtered for purity NON GMO (Genetically Modified Organism) potatoes Non GMO soy beans Corn Non GMO Potatoes Vegetable based Inert, mineral (processed and purified) for food products From special limestones prepared in a simple process using heat and water From seaweeds Evaporated solar salt in the form of brine Food grade, natural material derived from phosphate Processed from citric acid in the form of potassium salt instead of sodium Fermentation by-product of glucose as the carbohydrate source

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A3. PRODUCT LINE

Poto Original (Fresh Non-dairy milk)

Poto Choco (Chocolate milk)

Poto Milk Berry (Strawberry milk)

Poto Vanilla (Vanilla milk)

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A4. PRO DUC T COMPARISON

Serving size 1 cup 250 ml
Lactose free Gluten free Casein free Folic Acid Vitamin B6, B12, Zinc Fortified with Vitamin A, D, Calcium Calories Calories from fat Cholesterol mg Saturated fat g Total fat gms Calcium % (high in) Carbohydrate g Sugar g Protein g Sodium mg

Poto**
Yes Yes Yes Yes Yes Yes 100 0 0 0 0 35 21 3 3 130

2% Milk
No No No No No Yes 125 45 20 3 5 30 13 12 8 120

Soy-milk

Rice-milk

Yes Yes Yes No Yes Yes Yes No Yes No Yes Yes 125 125 36 27 0 0 1 0 4 2 27 30 9 25 6 12 6 1 130 90 ** Poto Original

A5. GEOGRAPHICA L POSITION OF TARGET MARKET

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Potos target market is Dhaka City Corporation area for the first 5 years. The firm uses a simple distribution channel with zone-wise dealers. The Dhaka city has divided into 9 different zones covering 19 areas. The following table shows the 9 zones and areas under each zone:
Name Zone-1 Zone-2 Zone-3 Zone-4 Zone-5 Zone-6 Zone-7 Zone-8 Zone-9 Covering Areas Mirpur, Pallabi Cantonment, Kafrul Mohammadpur, Dhanmondi Ramna, Tejgaon Hazaribag, Lalbag, Kamrangirchor Kotowali, Shutrapur Shyampur, Demra Motijheel, Sabujbag Khilgaon, Badda

A6. PRICE CO MPET ITION

Original Milk
Size 250 ml 500 ml 1 litre Price Wholesale Retail Wholesale Retail Wholesale Retail Milk Vita 12.85 14.00 24.30 26.00 47.60 50.00 Aarong 12.65 14.00 25.75 26.00 47.55 50.00 Pran --27.00 28.00 --Firm Fresh --24.00 25.00 --Poto --18.00 20.00 36.00 40.00

Flavored Milk
Size 200 ml 250 ml 1 litre Price Wholesale Retail Wholesale Retail Wholesale Retail Milk Vita 12.85 14.00 ----Aarong 11.00 12.00 16.00 20.00 --Pran 11.00 12.00 ----Poto --10.00 12.00 40.00 48.00

A7. I NTREGR ATED M ARKET ING COMMUN ICA TIO N

Poto uses pull strategy as its promotion mix strategy which is spending a lot on advertising and consumer promotion to build up consumer demand. It makes the promotion mix efficient enough to activate customers to ask the retailers for the product. Here is a graphical view of the pull strategy:

POTO

Order

Distributors and Retailers

Demand

Customers

Marketing activities
Potos marketing communication mix or promotion mix includes all the typical elements like advertising, sales promotion, public relation, personal selling and direct marketing. Heres the detail:

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Electronic and print media ads Theme 1: Smartness Type Media Specification Target customer: Youth Television commercials Private TV channels Musical and sports shows

Newspaper Advertisement FM radio channels National Dailies Musical program and Sports, lifestyle and youth talk show entertainment page

Radio commercials

Theme 2: Taste and nutrition Target customer: Children and parents Type Television commercials Radio commercials Media Specification Private TV channels News break and cartoons FM radio channels News break

Newspaper Advertisement National Dailies Children and fun page

Theme 3: Awareness and benefits Target customer: Mid age people Type Television commercials Radio commercials Media Specification Private TV channels News break FM radio channels News break

Newspaper Advertisement National Dailies News and health page

Others advertisements Point of purchase ads Shelf space ads

Posters and leaflets School notice board ads

Sales promotion: SMS contest Price discount at special occasion Special day offers (e.g.; buy a pair take a thank you gift) Public relation: Buzz marketingby using opinion leaders (doctors) Write articles about awareness of non-dairy milk and its benefits Write features in lifestyle pages of newspapers Sending press release about products Arrange seminars under Non-dairy milk awareness campaign. Attending science and other fairs of educational institutes. Sponsoring school annual sports. Personal selling: Poto goes to schoolspecial school campaign designed for students Temporary selling booth at super stores, hospitals and campus Poto assurance campaign a tour to production plant to know about the eco-friendly production process Direct marketing: E-mail marketing, web marketing

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Newspaper Ads
In children and fun page

In health page

In entertainment and youth page

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A8. PRO D UC T IO N SI T E L AYO U T

SECURITY POST

OFFICE BUILDING

COLD STORAGE

INGREDIENT STORAGE

GENERATOR

POND

FIELD
PRODUCTION PLANT

TESTING LAB

CANTEEN

RESIDENCE AREA

FINISHED PRODUCT STORAGE

PACKAGING UNIT

SECURITY POST

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A9. ORGANIZATIONAL S TRUCTURE

Poto Firm
Head of Procurement & storage Head of production Head of slaes and administration

Manager

Manager

Sales Manager

Marketing Manager

Finance Manager

Supervisor

Supervisor

Assistant

Assistant

Assistant

Staff

Staff

A10. STAFFING N EEDS

At the initial phase, the operation of Poto is monitored by three department heads. One is head of procurement and storage, another is head of production and the other is head of sales and administration. The needs of staffs can be illustrated below based on the organizational structure: 2009-10 2010-11 2011-12 2012-13 2013-14 Procurement and storage unit Head 1 1 1 1 1 Manager 1 1 1 1 1 Supervisor 2 2 2 2 2 Staff 7 8 8 8 8 Production unit Head 1 1 1 1 1 Manager 1 1 1 1 1 Supervisor 4 4 4 4 4 Staff 17 19 21 24 28 Sales and administration unit Head 1 1 1 1 1 Manager 3 3 3 3 3 Assistant 6 6 7 7 7

A11. STAFFING B ASIS

The staffing assumptions have been estimated using the following requirements: 2009-10 2010-11 2011-12 Cold storage staff 2 3 3 Material clerk 1 1 1 Premise maintainer 3 3 3 Security staff 4 4 4 Grinding staff 4 5 6 Starcher staff 3 3 3 Mixing staff 3 4 5
2012-13 3 1 3 4 7 4 6 2013-14 3 1 3 4 8 4 7

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4 3 3 30 4 3 3 33 4 3 4 36 4 3 4 39 5 3 4 42

Packing staff Office staff Customer service Total staff requirement

All the staffs are permanent and recruit by giving monthly wages The production unit needs extra staffs each years due to process more raw-materials The staffs are giving all privileges stated in Bangladesh Labor Code 2006.

A1 2. PORTERS F IVE FORCES ANALYSIS

Porters five forces analysis has been conducted to evaluate competitive edge of Poto from its existing and potential competitors. The analysis shows: Rivalry among competing firms: Rivalry among competing firms is moderate as they are operating in dairy milk sector that is our substitute product. There is no existing competition from direct non-dairy substitute because still there is no nondairy milk company in Bangladesh. Comment: The intra-industry rivalry is domestically low because the demand is quite high than the supply. Potential entry of new competitors: Due to availability of raw-materials and the high profitability of this sector any firm can easily enter into this sector. As there is huge supply-demand gap of milk in Bangladesh so it attracts any firm highly to enter in this sector. As non-dairy milk is becoming more and more popular so this sector becomes lucrative. Comment: Threat of new entrants domestically is high as the market is quite lucrative and milk demandsupply gap is huge. Potential development of substitute products: As several companies dairy milk products are available in market and people are habituate to consume those so its a threat for Poto. Milk market may encourage soy-milk, rice milk, corn milk etc non-dairy milk as a potential substitute of Potos offerings. Comment: Threat of substitute although very high Bargaining power of suppliers: The bargaining power of suppliers is very low because of abundant potato production and other raw materials. The price provided by Poto to its suppliers of potato is quite high and increase of that price yearly so the raw material producers are loyal to make supply uninterrupted.

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Comment: Bargaining power of suppliers (potatoes and other ingredients) is low. Bargaining power of customers: Bargaining power of customers is very high as they have several options to choose. Relatively low price may attract the customers and lessen the risk of switching from Potos product. Comment: Bargaining power of customers is high because the consumers get several options. The following illustration shows the summary result of Porters five forces analysis of Poto:

Intra-industry rivalry Threat of new entrant Threat of substitute products Bargaining power of suppliers Bargaining power of customers

Low High High Low High

A13. SWOT ANAL YS IS

Strength: Positive internal factors that Poto uses to accomplish its goals and objectives are 1. Poto is the first non-dairy milk brand of the country thats why it enjoys the first movers advantage in the market. 2. Potos main raw material is abundant in the local market at a cheap price and it stores the rawmaterial in own cold storage to reduce costs and uninterrupted production. 3. The price of Potos offerings is relatively low because of cost-effective conversion process of potatoes to non-dairy milk. 4. The potato milk option is commercially and technically the most viable non-dairy milk option for Bangladesh. 5. The employees are given favorable work environment and it helps to create employee loyalty. 6. The management team is comprised of efficient and dynamic persons. Weakness: Negative internal factors that inhibit the accomplishment of Potos goals and objectives are 1. Potos product distribution is highly dependent on dealers. 2. Milk conversion process is highly other ingredient dependant. The disruption of those may hamper production. 3. The interruption of any sub-system causes disturbance of whole production system. 4. Marketing budget is highest in the indirect expenses but it is comparatively low relative to the competitors.

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5. Return on assets and return on equity show increasing in assets and equity is proportionally higher than increasing in net profit.
Opportunity: Positive external factors that Poto uses to accomplish its goals and objectives are 1. Consumer more drink and beverage product by the youth can be signified as current youth trend and Potos opportunity. 2. The milk sector is going to be a thrust sector of Bangladesh. 3. Market growth rate is 20%. 4. Raw material production is increasing yearly. 5. Government encourages agro-processed industries. 6. The value added potato products demand is increasing all over the world. Threat: Negative external factors that inhibit the accomplishment of Potos goals and objectives are 1. The level of acceptance by people is not reasonably certain. 2. Threat from popular substitute that is dairy milk. 3. Potential competition from others non-dairy milk such as soy-milk, rice milk, corn milk, almond milk etc. 4. Economic recession may lessen the purchase power of potential customers.

A14. SWOT ST RATEGI ES

The SWOT strategies matrix for Poto is as follows Strength
S2, O3, O4 To increase storage capacity, try to reach more customers S3.O3 To attract customers by focusing on price to increase market share S2, O6 To create foreign market by using natural advantage Weakness W4, O1 To spend marketing budget efficiently to attract segmented customers W2, O5 To utilize government encouragement for uninterrupted other ingredients supply

Opportunity

Threat

S2, S3, T1, T2 To use low price strategy for protecting from substitute and acceptability threats S1, S2, S4, T3 To get an edge over potential non-dairy competitors, utilize first mover, low cost and viability strength

W4, T1, T2 To spend marketing budget efficiently to aware customer and compete with substitutes W5,T4 To provide low price milk for greater range of customers because with low price still the firm produce sizable net profit

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A1 5. FINANCIA L STATE ME NT ASSUMPTIONS

1. Procurement and storage unit: The procurement unit purchases 200 tonnes of potatoes in FY 2009-10 at BDT 8000/ton. The procurement unit purchases 500 tonnes of potatoes in FY 2010-11 at BDT 9000/ton. From FY 2011-12 to 2013-14 potato purchase increased by 50 tonnes and price increase by BDT 1000/ton. Purchase cost of other ingredients is 70% to 85% on raw material cost. Direct utility includes the utility of the cold storage. 2. Production unit: The plant factor is 75%. Production of milk is 2.5 litre/kg potatoes. Direct expenses include raw material costs, conversion costs and packaging costs. Total original and flavored milk production proportion is 50:50. The wages of staff increased by BDT 300 yearly started from BDT 4200. Packaging cost is BDT 4/pack. 3. Sales and administration unit: Wholesale price of original milk is BDT 36 and flavored milk is BDT 40. Salaries of employees increased by BDT 1000 yearly. Marketing and promotion expense is the highest indirect expense and the marketing budget is calculated using affordable method. Office rent includes the rent of Dhaka office and warehouse. Accounts receivable is 10% of sales revenue each year. Accounts payable is 35% of the raw materials cost.

A1 6. ACCOUNT ING ASSUMPTIONS

1. Depreciation policy: Straight-line method. Depreciation rate is 5% for long term assets. 2. Inventory valuation FIFO method. Inventory holding time is maximum 4 month for original milk and 6 month for flavored milk. 3. Tax rate Assumed to be 40% on net income before tax which is payable annually.

A1 7. FINANCIA L ASSUMPTIO NS
The firms initial investment is BDT 8,493,500 which is financed by 69% equity and 31% debt. The cost of capital or discount rate is assumed to be 20%. Interest for loans is 15% per annum repayable annually.

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A1 8. FINANCIA L P ROJEC T ION

INCOME STATEMENT
2009-10 Operating Revenues: Sales revenue Less: Cost of goods sold GROSS MARGIN Less: Operating expenses: Salaries Marketing expenses Office rent & utilities Depreciation Insurance & others Total operating expenses INCOME FROM OPERATIONS Less: Interest expense @ 15% NET INCOME BEFORE TAX Less: Income tax @ 40% NET INCOME AFTER TAX 15,200,000 8,232,000 6,968,000 825,000 4,300,000 210,000 275,445 210,000 5,820,445 1,147,555 393,409 754,146 301,659 452,488 2010-11 41,800,000 20,739,500 21,060,500 1,782,000 6,300,000 420,000 275,445 220,000 8,997,445 12,063,055 374,033 11,689,022 4,675,609 7,013,413 2011-12 51,300,000 24,166,100 27,133,900 1,914,000 6,600,000 480,000 275,445 225,000 9,494,445 17,639,455 351,750 17,287,705 6,915,082 10,372,623 2012-13 57,525,000 27,527,800 29,997,200 2,032,800 6,700,000 480,000 275,445 230,000 9,718,245 20,278,955 326,125 19,952,830 7,981,132 11,971,698 2013-14 64,000,000 31,034,600 32,965,400 2,178,000 6,900,000 480,000 275,445 235,000 10,068,445 22,896,955 296,656 22,600,299 9,040,119 13,560,179

Estimation of sales revenue

2009-10 Poto Original: Beginning inventory (In Ltr.) Add: Finished product (In Ltr.) Less: Ending inventory (20% of finished pro.) No. of unit available for sales Unit price/Ltr. Sales revenue from original poto Poto Flavoured: Beginning inventory (In Ltr.) Add: Finished product (In Ltr.) Less: Ending inventory (20% of finished pro.) No. of unit available for sales Unit price/Ltr. Sales revenue from flavoured poto Total Sales revenue of the year 0 250,000 2010-11 50,000 625,000 2011-12 125,000 687,500 2012-13 137,500 750,000 150,000 737,500 37 27,287,500 137,500 750,000 150,000 737,500 41 30,237,500 57,525,000 2013-14 150,000 812,500 162,500 800,000 38 30,400,000 150,000 812,500 162,500 800,000 42 33,600,000 64,000,000

50,000 125,000 137,500 200,000 550,000 675,000 36 36 36 7,200,000 19,800,000 24,300,000 0 250,000 50,000 625,000 125,000 687,500

50,000 125,000 137,500 200,000 550,000 675,000 40 40 40 8,000,000 22,000,000 27,000,000 15,200,000 41,800,000 51,300,000

Estimation of cost of goods sold

Purchase of potato Purchase of other ingredients Transportation cost 2009-10 1,600,000 1,360,000 1,500,000 2010-11 4,500,000 3,600,000 3,000,000 2011-12 5,500,000 4,400,000 3,200,000 2012-13 6,600,000 4,950,000 3,400,000 2013-14 7,800,000 5,460,000 3,600,000

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2,000,000 5,000,000 756,000 1,782,000 960,000 2,700,000 56,000 157,500 8,232,000 20,739,500 5,500,000 6,000,000 2,073,600 2,386,800 3,300,000 3,960,000 192,500 231,000 24,166,100 27,527,800 6,500,000 2,721,600 4,680,000 273,000 31,034,600

Packaging cost Wages Utility Others direct expenses Cost of goods sold

BALANCE SHEET
Cash Accounts receivable Inventory Other current assets Total current assets Long term assets Accumulated depreciation Total long term assets Total assets Accounts payable Other current liabilities Total current liabilities Long term liabilities Total liabilities Paid-up capital Retained earnings Total equity Total liability and equity 2009-10 2,082,550 1,520,000 3,800,000 68,229 7,470,779 6,231,400 275,445 5,955,955 13,426,734 2,881,200 1,728,720 4,609,920 2,493,551 7,103,471 5,870,775 452,488 6,323,263 13,426,734 2010-11 4,668,825 4,180,000 9,500,000 3,266,461 21,615,287 6,231,400 550,890 5,680,510 27,295,797 7,258,825 4,355,295 11,614,120 2,345,000 13,959,120 5,870,775 7,465,901 13,336,676 27,295,797 2011-12 9,664,310 5,130,000 10,450,000 8,767,107 34,011,418 6,231,400 826,335 5,405,065 39,416,483 8,458,135 5,074,881 13,533,016 2,174,167 15,707,183 5,870,775 17,838,524 23,709,299 39,416,483 2012-13 15,636,370 5,752,500 11,400,000 15,155,785 47,944,655 6,231,400 1,101,780 5,129,620 53,074,275 9,634,730 5,780,838 15,415,568 1,977,710 17,393,278 5,870,775 29,810,222 35,680,997 53,074,275 2013-14 22,549,411 6,400,000 12,350,000 22,218,749 63,518,160 6,231,400 1,377,225 4,854,175 68,372,335 10,862,110 6,517,266 17,379,376 1,751,783 19,131,159 5,870,775 43,370,401 49,241,176 68,372,335

STATEMENT OF CASH FLOWS

2009-10 Cash flow from operating activities Cash received from buyers Cash paid for cost of sales Cash paid to employees Cash paid for promotion Cash paid for rent and utilities Cash paid for other purposes Cash paid for interest Cash paid for income tax Net cash provided by operating activities Cash flow from investing activities Cash paid for start-up assets Cash paid for start-up assets expenses Net cash provided by investing activities Cash flow from financing activities Cash received from long term loan 2010-11 2011-12 2012-13 2013-14

13,680,000 37,620,000 46,170,000 51,772,500 57,600,000 (8,232,000) (20,739,500) (24,166,100) (27,527,800) (31,034,600) (825,000) (1,782,000) (1,914,000) (2,032,800) (2,178,000) (4,300,000) (6,300,000) (6,600,000) (6,700,000) (6,900,000) (210,000) (420,000) (480,000) (480,000) (480,000) (210,000) (220,000) (225,000) (230,000) (235,000) (393,409) (374,033) (351,750) (326,125) (296,656) (301,659) (4,675,609) (6,915,082) (7,981,132) (9,040,119) (792,067) 3,108,858 5,518,068 6,494,643 7,435,624 (6,281,400) (513,500) (6,794,900) 2,622,725 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

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5,870,775 (522,583) 7,970,917 383,950 1,698,600 2,082,550 0 (522,583) (522,583) 2,586,275 2,082,550 4,668,825 0 (522,583) (522,583) 4,995,485 4,668,825 9,664,310 0 (522,583) (522,583) 5,972,060 9,664,310 15,636,370 0 (522,583) (522,583) 6,913,041 15,636,370 22,549,411

Cash received from paid-up capital Cash paid for loan repayment Net cash provided by financing activities Net increase in cash Cash balance at the beginning of year Cash balance at the end of the year

3-MONTH CASH FLOW STATEMENT OF FY 2009-10

Jul-Sep Cash flow from operating activities Cash received from buyers Cash paid for cost of sales Cash paid to employees Cash paid for promotion Cash paid for rent and utilities Cash paid for other purposes Cash paid for interest Cash paid for income tax Net cash provided by operating activities Cash flow from investing activities Cash paid for start-up assets Cash paid for start-up assets expenses Net cash provided by investing activities Cash flow from financing activities Cash received from long term loan Cash received from paid-up capital Cash paid for loan repayment Net cash provided by financing activities Net increase in cash Cash balance at the beginning of period Cash balance at the end of the period 0 0 0 0 0 (2,000) 0 0 (2,000) (2,078,800) (368,500) (2,447,300) 2,622,725 5,870,775 0 8,493,500 6,044,200 1,698,600 7,742,800 Oct-Dec 0 0 0 (1,000,000) 0 (3,000) 0 0 (1,003,000) (4,202,600) (145,000) (4,347,600) 0 0 0 0 (5,350,600) 7,742,800 2,392,200 Jan-Mar 6,840,000 (4,116,000) (412,500) (1,800,000) (105,000) (204,000) 0 0 202,500 0 0 0 0 0 0 0 202,500 2,392,200 2,594,700 Apr-Jun 6,840,000 (4,116,000) (412,500) (1,500,000) (105,000) (1,000) (393,409) (301,659) 10,433 0 0 0 0 0 (522,583) (522,583) (512,150) 2,594,700 2,082,550

INITIAL INVESTMENTS
Amounts in BDT Startup Expenses: License & approval Patent & trademarks Product development cost Infrastructure development Others Total startup expenses Startup Assets: Land & registration 52,000 25,000 64,000 327,500 45,000 513,500 722,500

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600,000 4,302,600 606,300 1,698,600 50,000 7,980,000 8,493,500

Building Machinery & equipment Vehicle Cash requirement Other short-term assets Total startup assets Total Requirement

REQIUREMENT DISTRIBUTION
Means of finance Equity Debt Amount in BDT 5,870,775 2,622,725 % of Total 69% 31%

LOAN REPAYMENT SCHEDULE

Loan taken (Million Tk.) Date of loan taken Repayment years No. of installment per year Interest rate Periodic loan repayment Period 1 2 3 4 5 Beginning Balance 2,622,725 2,493,551 2,345,000 2,174,167 1,977,710 2,622,725 July 1,2009 10 1 15% 522,583 Loan Repayment Interest Principal Ending Balance 522,583 393,409 129,174 2,493,551 522,583 374,033 148,550 2,345,000 522,583 351,750 170,833 2,174,167 522,583 326,125 196,458 1,977,710 522,583 296,656 225,927 1,751,783

NET PRESENT VALUE CALCULATION

Year 1 2 3 4 5 Net Income After Tax 452,488 7,013,413 10,372,623 11,971,698 13,560,179 Present Value Factor of 20% 0.8333 0.6944 0.5787 0.4823 0.4019 Present Value of Net cash inflow Present Value of cash outlay Net Present Value Present Value 377,073 4,870,426 6,002,675 5,773,388 5,449,532 22,473,095 8,493,500 13,979,595

INTERNAL RATE OF RETURN CALCULATION

Year 0 1 2 3 Investment 8,493,500 0 0 0 Cash Inflow 0 452,488 7,013,413 10,372,623 Net (8,493,500) 452,488 7,013,413 10,372,623

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0 0 11,971,698 13,620,179 11,971,698 13,620,179

Internal Rate of Return (IRR) = 52% PAYBACK PERIOD

Year 0 1 2 3 4 5 Investment Cash Flow After Tax 8,493,500 8,493,500 452,488 8,493,500 7,013,413 8,493,500 10,372,623 8,493,500 11,971,698 8,493,500 13,620,179 Cumulative CFAT Remaining Amount 0 8,493,500 452,488 8,041,012 7,465,901 1,027,599 17,838,524 29,810,222 43,430,401

Payback Period = 2.10 years DISCOUNTED PAYBACK PERIOD

Year 0 1 2 3 4 5 Investment Discounted CFAT 8,493,500 8,493,500 377,073 8,493,500 4,870,426 8,493,500 6,002,675 8,493,500 5,773,388 8,493,500 5,473,645 Cumulative CFAT Remaining Amount 0 8,493,500 377,073 8,116,427 5,247,499 3,246,001 11,250,174 17,023,563 22,497,207

Discounted Payback Period = 2.54 years BREAK EVEN ANALYSIS

Total costs Per unit selling price (Tk.) Break even selling unit 2009-10 2010-11 2011-12 2012-13 14,445,854 30,110,978 34,012,295 37,572,170 38 38 38 38 380154 792394 895060 988741 2013-14 41,399,701 38 1089466

RATIO ANALYSIS
Current ratio Quick ratio Net working capital (Tk.) Total asset turnover ratio Debt-equity ratio Debt-total asset ratio Interest burden Gross margin Net profit margin Return on asset Return on equity 2009-10 1.62 0.80 2,860,859 1.13 0.39 0.19 0.34 45.8% 3.0% 3.4% 7.2% 2010-11 1.86 1.04 10,001,167 1.53 0.18 0.09 0.03 50.4% 16.8% 25.7% 52.6% 2011-12 2.51 1.74 20,478,402 1.30 0.09 0.06 0.02 52.9% 20.2% 26.3% 43.7% 2012-13 2013-14 3.11 3.65 2.37 2.94 32,529,087 46,138,784 1.08 0.06 0.04 0.02 52.1% 20.8% 22.6% 33.6% 0.94 0.04 0.03 0.01 51.5% 21.2% 19.8% 27.5%

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STRESS TESTING (BASE CASE)

Sales revenue Cost Profit before interest & tax Interest Profit before tax Income tax @ 40% Net income after tax Discount rate Present value 2009-10 2010-11 2011-12 15,200,000 41,800,000 51,300,000 (14,052,445) (29,736,945) (33,660,545) 1,147,555 12,063,055 17,639,455 (393,409) (374,033) (351,750) 754,146 11,689,022 17,287,705 (301,659) (4,675,609) (6,915,082) 452,488 7,013,413 10,372,623 20% 20% 20% 377,073 4,870,426 6,002,675 2012-13 2013-14 57,525,000 64,000,000 (37,246,045) (41,103,045) 20,278,955 22,896,955 (326,125) (296,656) 19,952,830 22,600,299 (7,981,132) (9,040,119) 11,971,698 13,560,179 20% 20% 5,773,388 5,449,532

STRESS TESTING (BEST CASE)

Sales revenue (25% growth) Cost (5% growth) Profit before interest & tax Interest Profit before tax Income tax @ 40% Net income after tax Discount rate Present value 2009-10 2010-11 2011-12 15,200,000 38,000,000 47,500,000 (14,052,445) (29,510,135) (30,985,641) 1,147,555 8,489,866 16,514,359 (393,409) (374,033) (351,750) 754,146 8,115,833 16,162,609 (301,659) (3,246,333) (6,465,043) 452,488 4,869,500 9,697,565 20% 20% 20% 377,073 3,381,597 5,612,017 2012-13 2013-14 59,375,000 74,218,750 (32,534,923) (34,161,669) 26,840,077 40,057,081 (326,125) (296,656) 26,513,952 39,760,424 (10,605,581) (15,904,170) 15,908,371 23,856,254 20% 20% 7,671,861 11,504,752

STRESS TESTING (WORST CASE)

Sales revenue (15% growth) Cost (10% growth) Profit before interest & tax Interest Profit before tax Income tax @ 40% Net income after tax Discount rate Present value 2009-10 2010-11 2011-12 15,200,000 34,960,000 40,204,000 (14,052,445) (30,915,379) (34,006,917) 1,147,555 4,044,621 6,197,083 (393,409) (374,033) (351,750) 754,146 3,670,588 5,845,333 (301,659) (1,468,235) (2,338,133) 452,488 2,202,353 3,507,200 20% 20% 20% 377,073 1,529,412 2,435,555 2012-13 2013-14 46,234,600 53,169,790 (37,407,609) (41,148,369) 8,826,991 12,021,421 (326,125) (296,656) 8,500,866 11,724,764 (3,400,347) (4,689,906) 5,100,520 7,034,858 20% 20% 3,542,028 4,885,318

TESTING SCENARIO
Base case Best case Worst case 0 (8,493,500) (8,493,500) (8,493,500) 1 377,073 377,073 377,073 2 4,870,426 3,381,597 1,529,412 3 6,002,675 5,612,017 2,435,555 4 5,773,388 7,671,861 3,542,028 5 5,449,532 11,504,752 4,885,318 NPV 13,979,595 20,053,800 4,275,886

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A1 9. SOCIA L COS T-BENEFIT ANALYSIS ASS UM PTIONS

Potato utilization benefit is BDT 200/ton and potato storage benefit is BDT 2500/ton. Reducing dairy allergy and malnutrition is BDT 500/ton of milk. Aesthetic beauty is BDT 10/person visit. Oxygen supply and CO2 absorption is by 100 trees in premise. Employment benefit is BDT 2000/family person of 41 employees assuming 4 persons in a family. Total social cost includes social cost of goods sold, social operating cost, interest expense and tax. Social discount rate is assumed to be 25% including 5% social risk on normal discount rate of 20%.

SOCIAL COST-BENEFIT ANALYSIS

Social revenue Other social benefits Total social benefits Less: Total social cost Social profit Social discount rate Discounted social profit Social PV Less: Opportunity cost Social NPV Social IRR 2009-10 15,960,000 1,244,200 17,204,200 14,747,512 2,456,688 25% 1,965,350 31,517,950 (8,493,500) 23,024,450 56% 2010-11 43,890,000 2,618,200 46,508,200 34,786,587 11,721,613 7,501,833 2011-12 53,865,000 2,867,200 56,732,200 40,927,377 15,804,823 8,092,069 2012-13 60,401,250 3,124,200 63,525,450 45,553,302 17,972,148 7,361,392 2013-14 67,200,000 3,373,200 70,573,200 50,439,821 20,133,379 6,597,306

CALCULATION OF SOCIAL BENEFITS

Potato utilization benefits Potato storage benefit Protecting dairy allergy Reducing malnutrition Aesthetic beauty Oxygen supply Carbon absorption Employment benefits Total social benefits 2009-10 150,000 500,000 100,000 150,000 15,000 200 1,000 328,000 1,244,200 2010-11 375,000 1,250,000 250,000 375,000 15,000 200 1,000 352,000 2,618,200 2011-12 412,500 1,375,000 275,000 412,500 15,000 200 1,000 376,000 2,867,200 2012-13 450,000 1,500,000 300,000 450,000 15,000 200 1,000 408,000 3,124,200 2013-14 487,500 1,625,000 325,000 487,500 15,000 200 1,000 432,000 3,373,200

CALCULATION OF SOCIAL COSTS

Social cost of goods sold Social operating costs Interest Income tax Total social cost 2009-10 2010-11 2011-12 8,232,000 20,739,500 24,166,100 5,820,445 8,997,445 9,494,445 393,409 374,033 351,750 301,659 4,675,609 6,915,082 14,747,512 34,786,587 40,927,377 2012-13 27,527,800 9,718,245 326,125 7,981,132 45,553,302 2013-14 31,034,600 10,068,445 296,656 9,040,119 50,439,821

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BA090013

EPIMETHEUS

A2 0. SURV EY QU ESTIONNAIR E
Name: .. Occupation: Date: 1. How frequently usually do you buy milk? Daily twice a week weekly others (please specify). 2. What size of milk pack do you buy? 250 ml 500 ml 1 litre 3. Currently which brands milk you prefer? Aarong Starship Milk Vita Ammo milk Others (please specify)

4. Do you satisfy with this current milk? yes No If yes, whats the reason behind your satisfaction Taste packing availability others (please specify). If no, whats the cause of dissatisfaction Taste supply problem smell nutrient facts packing price 5. Do you familiar with the idea Non-dairy Milk (e.g.; soymilk, rice milk)? yes No 6. If a milk; In variety of flavors (choco, Is made from quality potatoes strawberry, vanilla) Gives high energy and kilocalories And served in smart pack In lower price You would definitely buy probably buy Not sure probably not buy 7. Is there any member in your family with heart diseases, diabetes or allergy? yes No If yes, will you buy non-dairy milk for them which is free from those diseases side effects definitely buy probably buy Not sure (please specify). 8. As a brand name how you rank Poto: smart taste, drink best? Excellent very good good fair average 9. Drinks and beverage (e.g.; soft drinks, flavored milk and juice) are inextricably blended with youth life style. Are you strongly agree agree neither agree or disagree disagree strongly disagree

THANK YOU FOR YOUR COOPERATION

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