Business Plan on Fruits and Vegetable Supply Chain

A Business Plan on

Haat at your home

Presented By: Kishan Tank (10F17) Prakash Kava (10F29) Udaysinh Barad (10F37) Viral Gondaliya (10M41)

Presented To: Dr. H. J. Jani

G. H. Patel Post Graduate Institute of Business Management Sardar Patel University, Vallabh Vidyanagar G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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PREFACE This report contains the business plan of fruits and vegetable supply chain. This is like a map. Starting the business without any plan is same as a journey without map or guide. Business plan checks the reality and viability of proposed business. We have tried to justify the project by analyzing the feasibility of business. This project also includes the estimation of future income statements, cash flows and break even analysis as well. The object of this project report is to learn how to write business plan and how to check the feasibility of proposed business

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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ACKNOWLEDGEMENT It is really a matter of great pleasure for us to undertake & present this creative & practical work, a project report on business development plan. This report has been prepared by keeping in mind various aspects relating to market condition, financial feasibility and operational feasibility as well. We undertake this opportunity to express our sincere thanks to Prof. (Dr.) H.J.Jani (Director, GHPIBM) who has guided us in preparing this report. We would like to thank Dr. Swati Mehta, who has guided us at each and every step while developing the business plan. our. Finally, we would like to thank our family and friends for their support and encouragement.

Date: Place: Vallabh Vidyanagar. Kishan Tank

(10F17)

Prakash Kava

(10F29)

Udaysinh Barad (10F36) Viral Gondaliya (10M41)

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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INDEX

Sr.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Particulars INTRODUCTION PERSONAL INFORMATION PRESENT STATUS & MARKET POTENTIAL TYPE OF UNIT & SITE SELECTION COST OF PROJECT MEANS OF FINANCE PRELIMINARY EXPENSES OPERATION PROCESS FACILITIES REQUIRED MANPOWER REQUIREMENT UTILITIES ADMINISTRATIVE EXPENSES PROJECTED INCOME STATEMENT PROJECTED CASH FLOWS BREAK EVEN ANALYSIS PROJECT IMPLEMENTATION SCHEDULE CONCLUSION BIBLIOGRAPHY

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Page no. 05 07 08 10 13 13 14 15 16 17 18 18 21 22 23 25 26 27

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INTRODUCTION India is the second largest producer of vegetables in the world (ranks next to China) and accounts for about 15% of the world’s production of vegetables. The current production level is over 92 million MT and the total area under vegetable cultivation is around 6.2 million hectares which is about 3% of the total area under cultivation in the country. In case of vegetables, potato, tomato, onion, cabbage and cauliflower account for around 60% of the total vegetable production in the country. Vegetables are typically grown in India in field conditions; the concept is opposed to the cultivation of vegetables in green houses as practiced in developed countries for high yields.

India is the second largest producer of fruits & vegetables in the world with an annual production of around 94 million tones. It has the distinction of producing almost all-tropical and exotic fruits and vegetables because of varied climatic conditions. Due to the short shelf life of these crops, as much as 30-35% of fruits and vegetables perish during harvest, storage, grading, transport, packaging and distribution. Only 2% of these crops are processed into value-added products. Hence, there is a need for maximum commercial utilization of fruits and vegetables and to adapt production and marketing activities to the requirements of the world market and to cater to domestic demand which, over the past few years, has been increasing because of various socio-economic factors. Our proposed business is to channelize the fruits and vegetables from the market to direct customers through home delivery with freshness and good quality.

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Company Summary: Fresh Mart will be a company which provides fresh fruits and vegetables to the customers at reasonable price and at their convenience. The company will be aiming for customer satisfaction and retention rather than on expansion and huge growth. The company will be delivering fruits and vegetables at the door of the customer. Customers in the western part of ahmedabad city do not have access to the informal vegetable markets and so, they have to purchase their required produces from the malls and super markets which sell these fruits and vegetables at higher margins. The customer also do not mind to pay the extra price for the quality produce which these retail formats provide. You will find it while standing in the queue at reliance fresh or big bazaar that people are purchasing their fruits and vegetables for the whole week or for three to four days and are paying bills of more than Rs. 500 for their fruits and vegetable requirements. In this scenario, fresh mart will provide relief to the customers from going and standing in the long queues for their requirements. The convenience and quality produce will ensure the customers satisfaction and will be the seed for the company development and growth. Mission: To become a market leader in fruits and vegetables market in Ahmedabad city within 5 years. Objective: 1. To provide qualitative fruits and vegetables to consumers at reasonable price. 2. To benefit from eliminating the limitations of existing traditional supply chain.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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PERSONAL INFORMATION Name:

Prakash Kava

Telephone no.:

7567028716

Date of Birth:

12/02/1990

Educational Qualification:

Name:

MBA(Finance)

Kishan Tank

Telephone no.:

7567515651

Date of Birth:

05/06/1990

Educational Qualification:

Name:

MBA(Finance)

Uday Barad

Telephone no.:

9274756208

Date of Birth:

31/12/1989

Educational Qualification:

MBA(Finance)

Name:

Viral Gondaliya

Telephone no.:

9624586241

Date of Birth:

26/07/1989

Educational Qualification:

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

MBA(Marketing)

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PRESENT STATUS AND MARKET POTENTIAL: Basic market Information: Currently the majority of the fruits and vegetables market is unorganized. Organized retailers are also there in Ahmadabad city but they would not be forming more than 10% of the total market. Ahmadabad city have wholesale sabji market at Kalupur and APMC at Saraspur. Customers of the city expect the quality products at reasonable price. Existing Fruits and vegetables retailers in the area: There are major organized players in this area such as Big Bazaar near ISKON temple, Star Bazaar at Shiv Ranjani cross road and Reliance Fresh having 3 stores in the area. They pose a strong competition base for the company. Their sales data during last year are as follow: Expected Customers and Selected Areas: The customers will be those people who want to spend the quality time with their families and expect quality fruits and vegetables at their convenience. The company is going to serve the major four areas of the Ahmedabad city – Prahalad Nagar, Satellite Area, Bodakdev Area and Thaltej Area. Combined these areas include around 125000 households. The company is aiming to get 1000 customers initially. Annual Market Need: The annual consumption of fruits and vegetables in the Ahmadabad city can be estimated at around Rs. 2000 crores annually. Scope for Diversification: Fresh Mart has huge scope for diversification in various other products like FMCG and Grains. The company can also go for online business. Fresh Mart also has huge opportunity for expansion the market base as it will less capital expenditure. Fresh Mart is also planning to procure the fruits and vegetables directly from the farmers which will open the flood of opportunity for the company for trading with

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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other organized retail stores, wholesale open market operations and easy expansion for the home delivery model. Though the company has many diversification opportunities, it will insist more on sticking to the core business of fruits and vegetables business. The company wants to build a strong brand for the fresh fruits and vegetables. The expansion of the home delivery model will be the core focus for the company growth and expansion. Risk Factor: 1. Fresh Mart will have to strive hard to keep the delivery cost in control. 2. Procurement of the quality products and their quality maintenance while transit will also require substantial system and efforts. 3. The price of the fruits and vegetables are very much volatile. Sudden price increase may couch on the profit margin of the company. Conclusion: Though there are several competitors in the market of Ahmedabad city, Fresh Mart will be able to achieve success through its core focus on the product quality and high level of on time commitment.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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TYPE OF UNIT & SELECTION Name of the unit: FRESH MART – A Haat at your Home Name of our unit will be Fresh Mart –A haat at your Home because it is the project which helps customers to get the fresh fruits and vegetables at their home. Home delivery system is one of our competitive edges. The system of home delivery will not only help the customers but it will also help us to reduce the wastage and efficient purchasing as per the order. Products: Primary product of the company is fruits and vegetables. It will include all the seasonal fruits & vegetables, off season fruits & vegetables. Address: We will be operating in Ahmadabad, Sarkhej-Gandhinagar high way. Type of unit: The fresh Mart will be a partnership firm. The fresh mart will fall under the category of Small Scale industry unit because its turnover as well as the capital investment in fixed assets is less than Rs. three crores. Techno economic reasons for site selection: Techno economic factors must be considered before selection of site because it is the decision which is irrecoverable in nature and it is very hard to change the location. There are many reasons for site selection. Our decision of site selection is based on the following economic reason. Nearness to customer base Easy for transportation Efficient time management

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Location of Warehouse: the warehouse will be located at Sarkhej,Ahmedabad as the it is located on the SG Highway and near to the customer base. Requirement of land: The basic activity of the Fresh Mart will be to acquire and pack the fresh vegetables and fruits and deliver it. One warehouse will be taken on rent. The goods will be purchased daily and there will be no any storage. One warehouse of 10000 square feet will be enough for above stated activities.

Marketing feasibility

Positioning: Whenever customers need fruits and vegetables, ‘Fresh Mart’ must come first in their mind first. Fresh Mart will be positioned as the fresh fruits & vegetables provider for on time delivery. Fruits like grapes, strawberry, blackberry will be cooled at the assortment centre and then will be delivered. Only qualitative fruits and vegetables will be packed and poor quality fruits and vegetables will be assorted and sold in the wholesale market if possible. On time delivery schedule also will be strictly adhered. Drivers will be negatively reinforced for on time delivery to the customers. Management concentration will be more on existing customer satisfaction and customer retention rather than on expansion. Segmentation: Target segment will be upper middle and upper class people living in the targeted area. Target customers would be those housewives who do not want to move around for purchasing fruits and vegetables.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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Customer Relation: Existing customers would be retained by providing fresh, hygienic and good quality fruits and vegetables; timely delivery is also highly insisted for higher customer satisfaction. In case of non delivery of the goods; those goods will be delivered for free on the next day. The customers will be allowed to change their order till 10pm. Competition: Fresh Mart will have competition from Reliance Fresh, Big Bazaar, Star Bazaar, More Retail Store, local fruit & vegetable stores and fruits vendors & vegetables venders.

Competitive Advantage: Fresh Mart will be able to deliver goods at the customer’s home. Home Delivery Model has ensured zero cost in real estate; which will help to serve customers at lower/reasonable price. Loyal customer base creation will help for sustainable development/growth.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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COST OF PROJECT Amount in Rs.

Particulars Deposit for warehouse

300000

Warehouse development expenses

50000

Karat (300*100)

30000

Weight machine(8000*4)

32000

Fridge

70000

Auto rickshaw carrier (20000*5)

100000

Preliminary expenses

60000

Working capital

200000

Software & It

30000

Computer

25000

Telephone (1500*2)

3000

TOTAL

900000

MEANS OF FINANCE: MEANS OF FINANCE Particulars

Amount in Rs.

Promoter's contribution ( 115000 Rs. by each)

460000

Long term loan from SIDBI

500000

TOTAL

960000

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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PRELIMINARY AND PREOPERATIVE EXPENSES:

Particulars Legal expenses Project report preparation

Amount in Rs. 10,000 5,000

Electrification & water deposits

10,000

Inauguration expenses & other expenses

10,000

Market research

10,000

Initial advertisement expenses

15000

TOTAL

60000

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OPERATION PROCESS:

Purchasing fruits & vegetables from wholesale Market Making standard sized packages of fruits & vegetables Packaging as per customers’ orders Loading of the packages in Vehicles and delivery of the goods Taking orders for the next day

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REQUIRED INFRASTRUCTURE AND FACILITIES Particulars Delivery Vans Karats Computers Billing Machines Warehouse Chairs Tables Refrigerator

No. 5 100 1 2 1 10 3 1

Expected Operational Capacities Delivery Van Karat Refrigerator storage capacity

1000Kg 25Kg 500Kg

Expected Operational Efficiency Average Customer Interaction time at Delivery Time (Payment 1.5 Minutes collection) Delivery Van Mileage 15Km/Ltr Average customer Packaging Time 1 Minute Average Order Taking Time (On Phone) 1 Minute Other Assumptions Expected Amount Per Order Packaging Cost Transport Route of Vehicle (2 Routes for a vehicle per day) Electricity Units consumed per day Average No. of customers per day

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

Rs. 100 50p/package 20 Km/Route 20 Units 500

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MANPOWER REQUIREMENT: Sr. No.

Particulars

Nos.

Salary Monthly (in Rs.)

A)

Yearly (in Rs.)

Warehouse staff Supervisor

1

10,000

120000

Packing staff cum delivery man

5

30000

360000

Clerk/typist

1

3,000

36,000

Accountant

1

6,000

72,000

C)

Purchase staff

3

27000

324000

D)

Drivers

5

30000

360000

93000

1272000

B)

Office staff

Total

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UTILITIES AND OVERHEAD: AMT. IN RS. Particulars

Monthly

Yearly

Rent

30000

360000

Transportation (inward carriage)

15000

180000

3500

42000

-

10000

Electricity Miscellaneous TOTAL

592000

ADMINISTRATIVE EXPENSES: Sr. No.

Particulars

Monthly

Yearly

1

Stationary and printing

1,000

12,000

3

Telephone and fax

5,000

60,000

4

Legal charge

5,000

60,000

6

Travelling

9000

108000

7

Miscellaneous

-

10,000

Total

250000

Note: 1. Travelling expense includes fuel expense of the person collecting orders and taking feedbacks.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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RAW MATERIAL REQUIREMENT:

Amt. in Rs.

Particulars Fruits & Vegetables

1,05,88500

DEPRECIATION: Particulars Refrigerator (@ 10% on Rs. 70,000)

Amt. in Rs. 7000

Karat ( @ 50%)

15000

Computers (@25%)

6250

Weight machine (@ 33.33%)

10667

TOTAL

38917

SELLING & DISTRIBUTION EXPENSES: Particulars

Monthly

Yearly

Delivery expenses (fuel cost)

20000

240000

Vehicle rent (5000*5)

25000

300000

6000

72000

Outward carriage

Packing expenses TOTAL

612000

Assumption: 1. Packaging expense will be 50 paisa per order.

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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INTERST CALCULATION: Particulars

Amt. in Rs.

Interest On Term Loan from SIDBI (@ 10%)

50000

TOTAL

50000

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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PROJECTED INCOME STATEMENT Years Particulars

(in Rs)

1

2

3

4

5

18000000

36000000

72000000

144000000

288000000

10588500

21600000

43200000

86400000

172800000

Depreciation

38917

77834

155668

311336

1122672

Repairs& maintenance(vehicle)

20000

40000

80000

160000

320000

1272000

2544000

5088000

10176000

20352000

Administrative expenses

250000

400000

640000

1024000

1638400

Selling & distribution expenses

612000

979200

1566720

2506752

4010803.2

50000

40000

Advertising expenses

150000

300000

600000

1200000

2400000

Warehouse expenses

592000

888000

1332000

1998000

2997000

Wastages

500000

850000

1445000

2456500

4176050

14073417

27719034

54107388

106232588

209816925

3926583

8280966

17892612

Sales revenue Less:- expenses Cost of goods sold

Salaries & wages

Interest

Total expenses PBT

37767412 78183074.8

Income tax @ 30%

1177974.9 2484289.8 5367783.6 11330223.6 23454922.4

Net profit

2748608.1 5796676.2

12524828 26437188.4 54728152.4

Assumptions: 1. Company aspires to grow at 100% growth rate y-o-y. 2. Loan will be paid in the second year fully. 3. Salary and wages will be increasing at 100% y-o-y.

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4. Administrative expenses will be increased at 60% due to increase in the span of operation. 5. Wastages will be increasing at 70% on y-o-y basis. 6. Company will increase advertisement expenses at 100% on y-o-y basis. 7. Volume of the orders has been considered instead of the individual items. 8. Gross margin rate is considered to be the same. 9. Additional Refrigerator, karats, computers, weighing machine will be purchased every year due to higher capacity requirements. 10. Company office will be opened in the fifth year. PROJECTED CASH FLOW STATEMENT: Years 1

Particulars

2

(in Rs) 3

4

5

Sources Promoters contribution

460000

Loan from SIDBI

500000

Cash flow from operating activity

2787525

5874510

12680496 26748524

55850824

Total

3747525

5874510

12680496 26748524

55850824

Applications Cost of project

900000

Preliminary exp.

60000

Increase in assets Repayment of loan

157000 100000

Increase in working capital

157000

157000

5157000

400000

600000

800000

1000000

757000

957000

6157000

11923496 25791524

49693824

400000

Total

1060000

957000

Net cash flow

2687525

4917510

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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BEP CALCULATION: Particulars

AMT. IN RS.

AMT. IN RS. 1,80,00000

TOTAL REVENUE LESS:- VARIABLE COST Cost of goods sold

10588500

Transportation

180000

Delivery expenses (fuel)

240000

Packing expenses Wastages Total

72000 500000 11580500

6419500

CONTRIBUTION LESS:- FIXED COST Administrative expenses Salaries & wages

250000 1272000

Vehicle rent

300000

Depreciation

38917

Repairs & maintenance

20000

Electricity

42000

Interest

50000

Miscellaneous expenses

10000

Advertisement expenses

150000

Warehouse rent

360000

Total

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

2492917

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Contribution margin ratio (= 1-Variable cost/ sales )

(1--.64)

0.36

BEP (IN RS.)= Break Even Sales in Rs. = [Fixed Cost / 1 – (Variable Cost / Sales)]

2492917/0.36

6924769

Break even sales is Rs. 6924769 so we will be able to break even in 139 days (break even sales/ daily sales)

G.H.PATEL P.G.INSTITUTE OF BUSINESS MANAGEMENT.

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PROJECT IMPLEMENTATION SCHEDULE: PROJECT IMPLEMENTATION SHEDULE Particulars Product selection & completion of market survey Project report preparation

DAYS 10 5

Site selection

10

Selection of vehicle & customization

10

Warehouse development

15

Recruitment of manpower

5

Sales arrangements

3

No. Of days required to implement project

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CONCLUSION

Looking at the overall business plan we can conclude that, as far as the need of the consumer is concern, it can be satisfied with the help of this business model. Freshness is the aspect which matters as far as the fruits and vegetables are concerned. This model emphasizes home delivery system. The challenge for this model will be inventory management, effective procurement and waste reduction and cost reduction. As far as the profitability is concerned, this project is very lucrative and attractive.

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BIBLIOGRAPHY

Websites: www.freshndaily.com www.bplan.com www.magicbricks.com

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