Montana Dog Food Company Nourishing Our Own Companions Business Plan Contact: Alyssa Komac 1818 Highland Helena, MT 59601 [email protected] Written by Alyssa Komac April 25, 2012 The components of this business plan have been submitted on a confidential basis. It cannot be reproduced, stored, or copied in any form. By accepting delivery of this plan, the recipient agrees to return this copy of the plan. Do not copy, fax, reproduce, or distribute without permission. 1 Montana Dog Food Company Table of Contents Executive Summary……………………………………………………………………………………………………………….….3 The Company………………………………………………………………………………………………………………………….…4 Market Analysis………………………………………………………………………………………………………………………...5 The Competition…………………………………………………………………………………………………………………….….7 Marketing Plan…………………………………………………………………………………………………………………..………8 Operations Plan…………………………………………………………………………………………………………………..…..14 Development Plan………………………………………………………………………………………………………………..….16 Team………………………………………………………………………………………………………………………………………..17 Critical Risks…………………………………………………………………………………………………………………………….18 The Offering…………………………………………………………………………………………………………………………....18 The Financial Plan……………………………………………………………………………………………………………….…..19 Appendix………………………………………………………………………………………………………………………...……...22 2 Montana Dog Food Company Executive Summary The Montana Dog Food Company (MDFC) is a local producer and supplier of quality dry dog food. The initial phase of the company limits the production to a highly-athletic canine formula that will be targeted at sled dogs, hunting and cattle dogs and other high-energy use working dogs. The initial business strategy will be based upon differentiation from other premium brands as MDFC will utilize quality ingredients that are sourced as locally as possible. This strategy will be supplemented by future intentions of exposed production within the far-too-concealed industry that currently exists. MDFC will work closely with Alaska Icefield Expeditions Inc., a large sled-dog tourism company, to formulate a quality and affordable performance dry dog food. AIE’s role and guidance in this process will allow for a superior product to be developed. This relationship will also secure a large initial market for MDFC’s product, thus limiting the initial risk of production. The Offering The Montana Dog Food Company is seeking a $30,000 investment. This investment is necessary for MDFC to match the $50,000 Montana Growth through Agriculture Grant to be used for equipment purchases, advertising/promotion or consulting services such as formulation costs and legal services. This grant has the ability to be coupled with a $100,000 loan through the program as well. In year 5, MDFC will reach $1,637,213 in revenues and have a net profit after taxes of $444,609. 3 Montana Dog Food Company The Company The Montana Dog Food Company will be based out of Helena, Montana and will be formed as a Limited Liability Company (LLC). Through the use of social media and public relations, MDFC will create a community of dog enthusiasts that are seeking a better understanding of, as well as greater engagement with, their dog’s nutritional needs. MDFC will initially focus on reaching the niche market of highly-active canines. Vision, Mission & Philosophy Vision Statement We envision a future in which MDFC is a regional leader in premium dry dog kibble, fueling canines with various nutritional needs. Mission Statement It is the mission of the Montana Dog Food Company to provide a superior yet convenient source of dog food to canines throughout the Northwest region of the United States. MDFC is unique in that it strives to provide a local and high-quality source of nutrition for dogs, all while striving to maintain transparency to the public. Values & Philosophies MDFC is an advocate of canine nutrition, industry transparency, community support and environmental consciousness. We believe strongly in creating quality value-added Montana products for canines. The Product Performance Formula: Highly Athletic All-Natural Dry Dog Kibble This premium, all-natural kibble will initially be available in 40 pound bags. It will be formulated based upon the needs of high-energy canines at roughly 35% protein and 23% fat. The kibble will have no known potential canine allergens (corn, wheat and soy), by-products or preservatives. The kibble will meet/exceed AAFCO (Association of American Feed Control Officials) minimum nutritional requirements. 4 Montana Dog Food Company Product Benefits Premium Nutrition Canines will benefit from high-quality nutrition that meet/exceeds their high-activity needs. Known potential canine allergens such as corn, wheat and soy will not be utilized. Locally Sourced Sourcing ingredients locally will allow for a Montana value-added product. Consumers will seek this attribute, knowing they are supporting Montana’s economy and assisting in Montana job creation. Furthermore, sourcing locally will reduce transportation costs as well as designate the product as environmentally-friendly. Education & Industry Transparency MDFC’s packaging and website will provide people with the opportunity to become more engaged and informed consumers. The website will provide verified sourcing of materials used within the product while the packaging will highlight one such Montana source. The website will also inform consumers of production practices. This will be utilized to gain consumer trust within the far-too-concealed pet food industry that currently exists. Entry and Growth Strategy MDFC will launch its website in January 2013. We will enter the market following the first production run of the performance formula in March 2013. We expect to produce 50.8 tons of dry dog kibble within the first year of operation, which equates to a roughly 5-ton production run per month in the first year. Five tons consists of 250 40-pound bags of dog food. Market Analysis Industry Market Size In 2010, there were 78.2 million dogs among 46.3 million households in the United States1. In that same year, over $8 billion was spent on dry dog food in the U.S.2 Applying national dog-ownership trends to Montana, we see that there are over 260,000 dogs in our state.3 1 2 American Veterinary Medical Association: Market Research Statistics, 2010 Pet Food Institute: U.S. Pet Food Sales, 2010 5 Montana Dog Food Company Market Trends Montana Dog Food Company will capitalize on many current market trends within the dog food industry. The following trends have been identified as supporting the mission of MDFC. Private label petfood remains of strong interest to retailers. In 2010 there were a record number of new private-label dog products, suggesting that pet-owners are becoming more comfortable with private label.4 Furthermore, “be local, buy local, save the local jobs will become a powerful grass root level movement” in petfood retail, thereby supporting privatelabel manufacturers.5 Humanization of petfood continues to be a market trend. Consumers are now focusing more on natural formulations, the communication of specific and understandable ingredients and products that balance the concept of human-grade foods and what is most important for pets to consume.6 Sales of natural petfoods in natural supermarkets rose 3.5% to $54.2 million in 2010. US natural petfood sales are expected to reach $2.5 billion by 2014, representing a 11% compound annual growth. Compared to the 4% annual growth for petfood overall, ‘natural’ claims are becoming increasingly popular.7 ‘Natural’ topped marketing claims in 2010 for the third year in a row, far outpacing the next most used claim.8 Furthermore, allergen-free petfoods have supplemented this nutrition trend.9 Sustainability is another driving trend within the petfood industry. 62% of petfood company respondents cited consumer demand as the primary reason their companies are adopting “green” practices.10 These practices involve natural ingredients, recyclable packaging and manufacturing practices. Premium petfoods, defined here as those priced at least 10% above the category average, accounted for 40% of petfood sales in 2010, followed by regular and value petfoods at 27% and 14%, respectively.11 3 American Veterinary Medical Association: Market Research Statistics, 2010 Petfood Industry: US Petowner Buying Trends, November 2011 5 Petfood Industry: Research – What’s In Store for Pet Retail, May 2010 6 Petfood Industry: New Petfood Products: What comes after humanization?, October 2011 7 Petfood Industry: Natural petfood market follows human market growth, September 2011 8 Petfood Industry: Natural petfood market follows human market growth, September 2011 9 Petfood Industry: Nutrition Trends - Allergen-free petfoods, October 2011 10 Petfood Industry: Survey - Consumers drive sustainability in petfood, July 2010 11 Petfood Industry: Market update – Superpremium petfood post-recession, August 2011 4 6 Montana Dog Food Company Consumers are now more than ever seeking out information related to their pet’s health. Tools such as books, blogs and social media are enabling this trend. “The combined forces of the largest petfood manufacturers are no longer controlling the information flow.” 12 Market Growth US dog food sales are projected to grow by 4% in value and 1% in volume in the next year. 13 Pet ownership will once again begin to increase, thereby increasing the demand for dog food. Furthermore, humanization trends, as identified above, will likely drive the premium end of the category. These projections account for value sales outpacing growth in volume sales. The Customer End-users of MDFC’s product will be informed middle-class dog owners who support locallyproduced goods. The initial niche customers MDFC will target are those owners of highly athletic dogs, such as mushers, ranchers, agility trainers and hunters. Channels MDFC will make its product offerings available both online and through various retail outlets within Montana and the Northwest. MDFC will aim to target retail channels that parallel our mission and views and are appropriate venues for dry dog food. The Competition Highly Athletic Formulations Figure 1 compares MDFC’s performance dog food with that of other top performance dog foods currently on the market. As the table illustrates, MDFC’s performance formula will be comparable in terms of both quality and price to others currently on the market. Differentiation of MDFC’s product will lie in its local and transparent production characteristics as outlined in the product strategy portion. 12 13 Petfood Industry: Market report – Pet Owners Seek New information sources, August 2010 Euromonitor: Dog food in the US, July 2011 7 Montana Dog Food Company Figure 1: Performance Dog Food Comparison Company Red Paw Caribou Creek Dr. Tim’s MDFC National Annamaet Eagle Pack Product PowerEdge 32k Gold Momentum Sport Competition X-tra Ultra Endure 40 40 35 40 38 40 40 38:25 37:25 35:25 35:25 34:20 32:20 30:20 Price ($/lb) 1.38 1.40 1.23 1.25 1.20 1.63 1.25 Distribution Retail, Online Retail Retail, Online Retail, Online Retail Retail, Online Retail, Online Largest Bag Size Offered (lbs) Protein %:Fat % Marketing Plan Target Market Strategy MDFC will target owners of highly-active dogs who support local/regional products. Our product will have both a cognitive and emotional appeal to the consumer as they make the connection between neighbor and product. Product Strategy Each bag of dog food will inform the consumer of the product they are purchasing. The product will be used as a tool to entice the customer to learn more about MDFC and dog food nutrition and production, in general. Packaging will be utilized to highlight locally sourced ingredients, with different production runs showcasing a different supplier. Pricing Strategy At $1.25 per pound, MDFC’s performance dry kibble will be priced comparably to other popular high-quality performance dog foods. A 40-pound bag will cost $50.00 at retail. Distribution Strategy MDFC will target pet specialty stores throughout Montana and the Northwest, as well as alternative retailers, and direct and online purchasers. 8 Montana Dog Food Company Alaska Icefield Expeditions MDFC will be working very closely with Alaska Icefield Expeditions Inc. (AIE) to produce our first dry dog food formula for active canines. Through this relationship, MDFC anticipates fulfilling the sled-dog tourism company’s dry dog food needs, which equate to roughly 600 pounds of dog food daily. This relationship will provide a discounted cost of quality food for AIE as well as a large initial market for MDFC. MDFC anticipates working with other large direct purchasers in the future as well. See Appendix for letter of interest from AIE owner Chris Turner. Pet Specialty Retailers Pet specialty retailers include smaller stores that are locally owned and operated and focus primarily on pet care and nutrition. Figure 2 lists potential pet specialty retailers of MDFC’s product within five Montana cities. Alternative Retailers Alternative retailers include outlets that have a primary focus other than pet nutrition, yet have missions or values within the realm of MDFC’s. Alternative retailers include veterinary offices, natural and local grocers and home supply retailers. A primary alternative retailer MDFC will target is Murdoch’s Ranch and Home Supply. Murdoch’s has a total of 22 stores in Montana, Colorado, Wyoming and Nebraska. The eight stores in Montana are located in Missoula, Helena, Dillon, Bozeman, Butte, Hamilton, Kalispell and Miles City. The Missoula store’s dog food purchaser felt that MDFC’s dog food would be a great fit as Murdoch’s is trying to incorporate more local product offerings. Other alternative retailers MDFC would consider approaching include Ace Hardware’s across the Montana as well as local veterinary offices and natural/local food retailers. Figure 2 lists potential alternative retailers of MDFC’s product within five Montana cities. 9 Montana Dog Food Company Figure 2: Montana Retailer Examples Location Pet Specialty Alternative Missoula GoFetch! Neff’s Animal Specialty Pet Nebula Murdoch’s Good Food Store Orange Street Food Farm Helena Pet Town Murdoch’s Real Food Store Alpine Animal Clinic Bozeman Dee-O-Gee Barkenhowell’s Bridger Feeds Murdoch’s Montana Harvest Natural Food Store Billings Equus & Paws Loveable Pets Bakery & Boutique Mary’s Health Foods Whitefish The General (Pet) Store Third Street Market Mountain Valley Foods Online/Drop-Ship MDFC will have a strong web presence in which consumers may order the product directly online. A negotiated number of bags will be stored at the manufacturer’s warehouse and will be mailed upon each online order placed. This distribution method will equate with a higher gross profit per bag sold as it will eliminate the retailer’s margin; however, a portion of that money will be allocated for the manufacturer as compensation. Regional Events MDFC will have a strong presence at various regional events related to dogs and local goods. This will include dog-centered events, such as Five Valley Kennel Club’s Agility Trials and Dog Shows, Montana’s Race to the Sky and Helena’s “Don’t Fence Me In” Dog Trail Run, as well as farmers’ markets and trade shows. MDFC will sell product at these events when allowed, however, we do not anticipate this outlet method being a prominent distribution strategy. Regional events will serve the greater purpose of engaging with Montana communities and educating the consumer. 10 Montana Dog Food Company Advertising & Promotion Brand MDFC will rely heavily on product branding to differentiate our product from others offered. We will focus primarily on our “Made in Montana” status. This will include registering through the “Made in Montana” program and utilizing the logo as well as incorporating local information relating to our product on our packaging and website and in all advertising campaigns. Such information would include locations of sourced ingredients, often highlighting the ranch or farm that supplied the product, as well as identifying local supporters of our product. Another tangent of the Montana-related branding of our product will be creating an advertising campaign that focuses on what it means to be a “Montana Dog.” This campaign will highlight the incredible tasks and activities many dogs in Montana regularly partake in, including hunting, mushing, agility trials and herding. MDFC will brand our product so that the consumer associates our dog food with owning a “Montana Dog” and thereby creating pride in purchasing our product for their loyal companion. Also critical to MDFC branding is our ability to engage and inform the public. MDFC will be transparent from day one. This aspect of our business will be important to communicate to the public so that it may be embraced by consumers. Positioning MDFC will position our product as a high quality, affordable dry dog food. MDFC will educate the consumer and become a thought leader within the dog food industry. Advertising Figure 3 outlines MDFC’s forecasted marketing budget along with the anticipated advertising campaigns to be conducted. 11 Montana Dog Food Company Figure 3: MDFC Forecasted Marketing Budget Year Advertising Campaigns Annual Budget 1 Retail Advertising Word-of-Mouth Social Media/Web Site Free Local Media Opportunities Regional Events $1,651 2 Add Montana Print Advertising $6,035 3 Add Montana Television Commercials $14,840 4 Add Regional Print Advertising $26,640 5 Maintain Media Mix $32,744 Social Media MDFC will interact heavily with potential consumers. This will be done primarily through a Facebook page and MDFC’s website forum. Interactions will include answering questions, informing consumers of production practices and sharing relevant industry information. Public Relations MDFC will capitalize on various public relations opportunities, including interviews and community donations. Sales Strategy MDFC’s sale strategy will rely upon wholesale to retailers and large, direct purchasers and direct to consumer sales via MDFC’s website. Wholesale Pet specialty and alternative retailers, as outlined earlier, will be the primary sales method. Large, direct purchasers such as AIE will make up the remainder of MDFC’s wholesale segment. 12 Montana Dog Food Company Direct to Consumer Consumers wishing to order dog food online may do so via MDFC’s website. A drop-ship agreement will be arranged with the manufacturer to allow for this sales strategy. Sales Forecast Wholesale Analysis Figure 4: Number of 40 lb. Bags of Dog Food Sold AIE Pet Specialty Alternative Drop-Ship Annual Year Annual Monthly Annual Monthly Annual Monthly Annual Total 1 500 168 2,016 0 0 2 24 2,540 2 2,025 360 4,320 112 1,344 4 48 7,737 3 2,025 900 10800 450 5,400 8 96 18,321 4 2,025 1,540 18,480 1,000 12,000 32 384 32,889 5 2,025 1,800 21,600 1,350 16,200 50 600 40,425 13 Montana Dog Food Company Operations Plan Business Model What is key to note concerning MDFC’s business model is the lack of distributor between packaging and retail. A distributor will not be utilized until after year 2 to trim costs and increase margins for both MDFC and retailers. An increased profit margin for MDFC in the first few years will help ensure adequate cash flow. Increased retail margins for the first few years will encourage the sale of our product by retailers. Distribution of our product will be bootstrapped for the first two years by simply delivering the product to retailers with my own truck and trailer. After which, MDFC will contract with a distributor. Figure 5: Business Model Years 1 & 2 14 Montana Dog Food Company Formulation Tom Willard and Greg Aldrich of Pet Food Ingredient and Technology, Inc. will be hired to assist in formulating MDFC’s performance dry dog food kibble. Their consulting fee is $200 per hour, with an expected time contribution of 40 hours. Formulation costs are therefore $8,000. Nutritional analysis of MDFC’s product will be done at Montana State University through Dr. Jane Boles. Also, MDFC will utilize Dr. Brent Ruby at the University of Montana to supplement the nutritional analysis component of our product. Suppliers Trim from cattle and other carcasses such as lamb and buffalo would be the primary protein source for MDFC dog food and therefore would be the ingredient of the greatest quantity utilized in production. Ranchland Packing, a meat processor in Butte, MT, has been identified as a primary source for these ingredients. Any meat needs not met by Ranchland Packing could be addressed through purchasing cattle directly from Public Auction Yards in Billings, MT after which Ranchland Packing would do the processing. Agricultural products from within Montana will be utilized heavily. Once the formulation has been created, MDFC will contract with agricultural cooperatives, such as Big Sky Local Food, Western Montana Grower’s Cooperative and Mission Mountain Food Enterprise Center, to source local agricultural ingredients. Those ingredients that are not able to be sourced locally, whether due to lack of availability or financial limitations, would be sourced out of state through traditional petfood industry outlets. It is MDFC’s objective for at least 55% of the ingredients used in production to be sourced from Montana. Production MDFC will utilize the services of Montana Food Products for FDA approved food manufacturing and packaging capabilities. They specialize in source-verified meat products, thus making them a natural fit for MDFC. Their facility is located in Laurel, MT and is currently at less than half capacity. MDFC will contract with them to establish in-state production initially. Dry dog food manufacturing utilizes some equipment most human-food processors don’t have. It would be necessary to purchase an extruder, which pushes the mixed formula through a highpressure, high-heat tunnel to shape and cook the kibble. I have estimated the necessary additional equipment purchases at $100,000. See the Appendix for information regarding the Growth Through Agriculture Loan that would make this purchase feasible for MDFC. 15 Montana Dog Food Company Development Plan Phase I: Bootstrap Figure 6: Year 1 Timeline Activity Months 1 & 2 Formulate Performance Dog Food X Launch Website & Market Product X 5-ton Production Run each month Months 3 & 4 Months 5 & 6 Months 7 & 8 Months 9 & 10 Months 11 & 12 X X X X X X X X X Market Product & Deliver Phase 2: High Growth Figure 7: Years 2-5 Timeline Year 2 Formulate AllLife-Stages (ALS) Formula Expand Montana Retail Market Expand into Northwest Retail Market Expand Production Facilities Formulate Additional Product Lines Year 3 Year 4 Year 5 X X X X X X X 16 Montana Dog Food Company Team Management Alyssa Komac Alyssa is a Business Management major at the University of Montana with an expected graduation date of December 2012. She has completed a minor in Environmental Studies and is currently completing the prerequisites necessary to apply to veterinary schools. Alyssa attended the 2011 Petfood Forum & Workshop in Schaumburg, Illinois and has been mushing sled dogs in Alaska for the past three summers. She is passionate about Montana and animals, making the Montana Dog Food Company a perfect fit with her interests. Advisory Board Dr. Timothy Hunt Dr. Tim is a practicing veterinarian and dog musher in Marquette, Michigan. In 2005, he and his wife Mary started producing a premium, all-natural dog food under the brand Dr. Tim’s. The company currently produces a highly athletic canine formula, an active canine formula, an alllife-stages canine formula and a feline formula. Dr. Tim’s industry experience and knowledge proved invaluable to this business plan. Don Gaumer Don is an adjunct instructor in the Department of Management and Marketing and the Department of Accounting and Finance at the University of Montana’s School of Business Administration. He also works as a financial advisor at S.G. Long and Company in Missoula, MT. Don received his MBA from the University of Montana and since then has been involved in banking, investments, corporate finance, corporate senior management and various start-up ventures. Don’s guidance in developing this business plan has been crucial. Cooper Burchenal Cooper is the founder of Omnibars, a Montana-based producer of wholesome beef energy bars. Cooper proved instrumental in identifying various resources and points of contact within Montana that allowed me to recognize the potential to manufacture dog food within the state. Dan & Chris Turner Dan and Chris are the founders of Alaska Icefield Expeditions, a glacial sled-dog tourism company operating in Southeast Alaska. Alaska Icefield Expeditions feeds over 600 active sled 17 Montana Dog Food Company dogs for a four-month period each summer. The Turners’ knowledge of quality dry dog food as well as their experiences as serial entrepreneurs has been critical to the formation of this business plan. Critical Risks Unpredicted Sales Growth A major risk for MDFC is sales growth because demand may exceed anticipated sales or just the opposite; demand may not be as great as forecasted. To address this risk, MDFC will secure purchasing contracts from retailers before the first production run. Furthermore, MDFC will be working closely with AIE, Inc. to develop our product, thus ensuring a large initial market for our product. Should demand exceed initial production capabilities, MDFC will scale back the retail outlets until demand can be met in a timely manner. Market development will continue once production capacity has increased. Dramatic Increases in Ingredient Prices Unexpected and severe increase in ingredient prices is a critical risk for MDFC. To protect MDFC from unexpected price variation, we anticipate buying materials in bulk when possible as well as agreeing upon prices with suppliers’ months in advance of utilizing the purchased goods. This will allow MDFC to react accordingly should prices increase drastically. The Offering Figure 8: Sources and Uses of Funds Sources of Funds Founders, Family & Friends Investor Growth Through Agriculture Grant Growth Through Agriculture Loan Total Uses of Funds Research & Development $30,000 Equipment Professional & Legal Year 1 $50,000 COGS Year 1: Ingredients & Production Year 1 Operating $100,000 Costs Contingency Cash $20,000 $200,000 18 $12,000 $100,000 $5,000 $35,983 $21,167 $25,850 $200,000 Montana Dog Food Company The Financial Plan Figure 9: Retail Price Break-Down Years 1 & 2 and Years 3-5 19 Montana Dog Food Company Figure 10: Collections Schedule Net 30 75% Net 60 15% Net 90 8% 5 Year Balance Sheet 20 Uncollectible 2% Montana Dog Food Company Monthly Break-Even Point: $12,624 Figure 11: Break-Even Analysis Detailed 5 Year Income Statement and 5 Year Statement of Cash Flows can be found in the Appendix. 21 Montana Dog Food Company Appendix AIE Letter of Intent to Purchase…………………………………………………………………………………………….…23 Growth Through Agriculture Program………………………………………………………………………………………24 Detailed 5 Year Income Statements…………………………………………………………………………………………26 Detailed 5 Year Statement of Cash Flows……………………………………………………………………………..….29 22 Montana Dog Food Company AIE Letter of Intent to Purchase 23 Montana Dog Food Company Growth Through Agriculture Gant and Loan 24 Detailed Accounting Follows Income Statements Cash Flow Statements 25 Montana Dog Food Company Year 1 Income Statement 26 Montana Dog Food Company Years 2 & 3 Income Statement 27 Montana Dog Food Company Years 4 & 5 Income Statement 28 Montana Dog Food Company Year 1 Statement of Cash Flows 29 Montana Dog Food Company Years 2 & 3 Statement of Cash Flows 30 Montana Dog Food Company Years 4 & 5 Statement of Cash Flows 31
© Copyright 2024 Paperzz