authors: scott lester, amy xue · authors: scott lester, amy xue moose’s exports orporation 2221...
TRANSCRIPT
Authors: Scott Lester, Amy Xue
Moose’s Exports Corporation
2221 S. 10th St. W,
Missoula, MT 59801
(406) 261-2539
P a g e | 1
Table of Contents
Executive Summary ................................................................................................................................. 3
Background ............................................................................................................................................. 4
The Business Description ........................................................................................................................ 4
Management Team ............................................................................................................................ 6
Vision Statement ................................................................................................................................. 6
Mission Statement ............................................................................................................................. 6
Business Goals ................................................................................................................................... 6
Business Values and Philosophies....................................................................................................... 7
Key Personnel and Responsibilities ................................................................................................. 7
Directors ............................................................................................................................................. 8
Strategic Alliance ................................................................................................................................ 9
The Market .............................................................................................................................................. 9
Food Industry Analysis ........................................................................................................................ 9
Imported Food Industry Analysis ...................................................................................................... 10
Baking Industry Analysis ................................................................................................................... 10
Product/Service Positioning and Differentiation .............................................................................. 11
Competitive Advantages ................................................................................................................... 12
Market Size ....................................................................................................................................... 13
Target Market/Customer Profile ...................................................................................................... 13
Marketing Strategy ........................................................................................................................... 14
The Store ....................................................................................................................................... 14
Moose’s Bakery Online ................................................................................................................. 14
Mascot .......................................................................................................................................... 15
Moose’s Exports – U.S. Operations ....................................................................................................... 15
Suppliers ........................................................................................................................................... 15
Moose’s Organics – Chinese Operations .............................................................................................. 16
Moose’s Bakery ..................................................................................................................................... 16
Business Description ......................................................................................................................... 16
Products and R&D ............................................................................................................................. 16
Competition ...................................................................................................................................... 16
Expansion .......................................................................................................................................... 17
Moose’s Foods ...................................................................................................................................... 17
Business Description ......................................................................................................................... 17
P a g e | 2
Services ............................................................................................................................................. 18
Distribution Channels ....................................................................................................................... 18
Competition ...................................................................................................................................... 18
Expansion .......................................................................................................................................... 19
Financials ............................................................................................................................................... 20
Sources and Uses of Funds/Offering ................................................................................................ 20
Revenue Projections ......................................................................................................................... 20
Income Statement (5 Year) ............................................................................................................... 21
Cash Flow Statement (5 Year) ........................................................................................................... 22
Break Even Analysis (5 Year) ............................................................................................................. 22
Balance Sheet (5 Year) ...................................................................................................................... 23
Exhibit 1, Maps ...................................................................................................................................... 24
Exhibit 2, Timeline ................................................................................................................................. 25
Exhibit 3, The Bakery ............................................................................................................................. 26
Exhibit 4, Packaging............................................................................................................................... 27
Exhibit 5, Export Procedure .................................................................................................................. 28
Exhibit 6, Baked Goods ......................................................................................................................... 29
Exhibit 7, Competitor Baked Goods ...................................................................................................... 29
Exhibit 8, Wheat Grinder Display .......................................................................................................... 30
Exhibit 9, Export Ingredients ................................................................................................................. 31
Exhibit 10, Competing Bakeries ............................................................................................................ 31
Exhibit 11, Wuxi Bakeries ...................................................................................................................... 32
Exhibit 12, Financial Assumptions ......................................................................................................... 33
Exhibit 13, Revenue Projections and Material Costs (5 Year) ............................................................... 34
Exhibit 14, Sensitivity Analysis (5 Year) ................................................................................................. 35
Exhibit 15, Valuation ............................................................................................................................. 36
Exhibit 16, Financial Summary (5 Year) ................................................................................................. 36
Exhibit 17, Property Plant and Equipment (5 Year) .............................................................................. 37
Exhibit 18, Personnel (5 Year) ............................................................................................................... 38
Exhibit 19, Critical Risks ......................................................................................................................... 39
Exhibit 20, CEO, Scott Lester, Resume .................................................................................................. 40
Exhibit 21, COO, Amy Xue, Resume ...................................................................................................... 42
Exhibit 22, References ........................................................................................................................... 43
P a g e | 3
Executive Summary
Moose’s Organics is designed to take advantage of several trends in the Chinese food
market. First, the Chinese people are consuming more organic food, especially because
the environment of China is being heavily polluted. Second, consumption of imported
food from developed countries to China is rapidly increasing because it’s perceived to be
better quality and safer. Third, the Chinese people are spending more money on baked
goods and are also learning how to bake at home.
Amy Xue, a Chinese citizen and MBA student, came up with the idea after spending the
past year looking for opportunities to start a business in the U.S. or China. Moose’s
Organics is designed to serve a niche created by the current circumstances in China.
Basically, Moose’s Organics will export US organic agricultural goods to China. Its
Chinese subsidiary will then use these goods in a bakery to produce organic bread,
cookies and pastries—all designed to appeal to Chinese tastes. In addition, Moose’s
Organics will encourage the Chinese to bake at home by providing Moose’s branded dry
goods and mixes through the bakery and a separate distribution channel. Moose’s
Organics will also provide baking instructions and recipes on its website.
Moose’s will start its business based on three “firsts” – the first organic bakery in China;
the first American-style bakery in Wuxi, the Chinese city where the company starts; the
first American brand selling a portfolio of organic food products in Wuxi, and possibly
throughout China as well.
The general goal for the business is to become the best in three categories – the best
American styled organic bakery; the best American organic baking-food products; the
best Chinese baking online reference.
Amy Xue and Scott Lester, each 50% shareholders, will raise the capital, or personally
come up with an initial investment of $200,000, to meet the startup financing
requirements.
It is estimated that by the end of year three, company’s revenue will reach $1.6 million,
at which point cash flows would allow for the complete repayment of the initial
investment.
Moose’s Organics has already been established, and is based in Missoula, Montana.
Management plans to start its first bakery in China no later than February 2011.
P a g e | 4
Background
Moose’s Organics is designed to address and take advantage of the current situation in
China, where food quality has become a major concern. In 2008, a public survey1 found
that 60.7 percent of Chinese are concerned about food safety. As a result, affluent,
urban Chinese, who can afford more expensive food, have begun to purchase foreign
food or domestic organic food. These foods are perceived to be safer and better quality.
As the population of affluent Chinese has increased in the past decades, due to
economic development, the consumption of imported food and domestic organic food
has increased accordingly, expanding that important consumer market.
The Chinese import food industry is growing at a 15 percent annual rate2. Consumption
of organic food has also been growing rapidly. Though many purchasers still doubt the
authenticity of Chinese organic foods3,4, it is generally perceived to be safer than non-
organic food. While the perceived quality and authenticity of Chinese organic good is far
behind that of US organic food5, the price is equal to that in the U.S. or even more
expensive. For example, U.S. organic flour purchased wholesale in Montana, including
the shipping and tariff costs, could be sold at a discount to Chinese organics in China.
Furthermore, the Chinese are purchasing more baked goods, such as bread and cakes,
making the baked goods industry one of fastest growing sectors of the Chinese
economy6. The Chinese are starting to learn how to bake, augmenting that market. This
is evidenced by the doubling of annual sales of ovens over the last five years7.
The Business Description Moose’s Organics was created to meet the Chinese demand for safe and high quality
food products. Thus, Moose’s Organics will not only export price-competitive US
certified organic foods, but will also use value-added processes to create packaged
baking ingredients and finished baked goods that specifically appeal to Chinese
consumer preferences. Through this approach, Moose’s Organics will utilize a multiple
of marketing and positioning strengths to secure a unique niche as a first mover in
China’s food market. This company structure is designed to reinforce Moose’s strategy.
The organization structure can be seen in the chart on the next page.
Moose’s Organics is a Chinese wholly-owned subsidiary of a U.S. headquartered
exporting business named Moose’s Exports1. Moose’s Organics will import U.S. certified
organic wheat, butter, sugar and other baking commodities. These products will be used
to produce finished baked goods and branded ingredients for sale in the retail grocery
P a g e | 5
and bakery markets in China. Moose’s Organics will sell these products through two
business units: Moose’s Bakery and Moose’s Foods.
Moose’s Bakery initially will be opened in the Chinese city of Wuxi, population six
million, 100 miles inland from Shanghai. (See Exhibit 1, Maps) The bakery will sell
western-style (but Chinese-customized) breads, cookies, and pastries, using mostly U.S.
certified organic ingredients. Not only will it be the first organic bakery in Wuxi, but
most likely the first in China. In addition, it will be the first western-style bakery in the
city.
Moose’s Foods will start in the second year, after awareness of the Moose brand is
generated among Chinese consumers, and will distribute Moose’s branded products to
the retail market. It will also seek partnerships with local businesses to increase
distribution of Moose’s organic products. By meeting unique domestic needs, it will be
the first American organic agriculture products wholesale/distribution business in Wuxi,
and, as noted, probably also the first in China.
While sharing resources, information, and brand recognition under Moose’s Organics,
each business unit will be responsible for its own unique characteristics of competencies,
efficiency and profitability.
Moose’s Exports Purchasing
Packaging
Shipping
Moose’s Organics Receiving
Packaging
Allocating
Moose’s Foods Distributing Moose’s
branded products
Moose’s Bakery Selling baked goods
Creating brand awareness
UUSS OOppeerraattiioonnss
CChhiinnaa OOppeerraattiioonnss
P a g e | 6
Management Team
The team will consist of Amy Xue and Scott Lester—both MBA students at the University
of Montana. Each partner initially will have equal shares of ownership in Moose’s
Exports Corp. and all of its interests.
Amy decided to start her own business when she came to the University of Montana
from China two years ago. Having determined what she wanted to do, she will begin in
the summer of 2010, and will be taking a two-year leave from school to execute the plan
in China. She will be responsible for setting up the business units in her Chinese
hometown, Wuxi, assisted by her family business’ resources, connections, and expertise.
Scott is graduating from the MBA program on May 15th. And will be responsible for
managing all of the U.S. operations and assisting with decision making.
Vision Statement
We bring high-quality, nutritious, U.S. organic foods to the people of China, and help
improve the quality of the lives of our customers and employees.
Mission Statement
The Moose’s brands are to be of the most trusted brands in China for tasty, nutritious,
organic foods. Moose’s companies will strive to improve the lives of all of its
stakeholders by insisting on excellence, honesty, and service in all its activities.
Moose’s Bakery will strive to be the most trustworthy baking reference in China, not
only by producing high-quality, nutritious, organic baked goods, but by educating and
encouraging the Chinese to bake at home.
Moose’s Foods will help create and meet demand for superior U.S. produced organic
food in China in a way that demonstrates a commitment to excellent food quality and
service.
Business Goals (See Exhibit 2, Timeline)
Year 1 – Open the first Moose’s Bakery in Wuxi; revenue of baked goods and raw
ingredients projected to reach a total of $200,000 at the end of the year; reach
projected twenty-five thousand website visitors a month.
Year 2 – Moose’s Bakery revenues projected to increase to $472,000; Moose’s Foods
starts to distribute Moose’s branded goods to grocery stores in Wuxi; Moose’s Foods
revenues reach expected to be $279,000 at the end of the year.
P a g e | 7
Year 3 – Start the first franchise bakery in Shanghai with Moose’s Bakery revenues
anticipated increasing to $709,000; Moose’s Foods revenue should reach $1,687,000 at
the end of the year.
Year 4 – Two or three more franchise bakeries open either in Wuxi or Shanghai; Moose’s
Bakery revenue projected to increases to $886,000; start to distribute Moose’s branded
goods to groceries in Shanghai; Moose’s Foods revenue expected to reach $2,446,000 at
the end of the year.
Year 5 – Expand Moose’s Organics to saturate nearby markets reaching total revenues
of $5,212,000; explore other value-added processes/partnerships to increase demand of
Moose’s branded goods. Re-evaluate expansion opportunities, costs and ownership
preferences.
Business Values and Philosophies
Moose’s Organics advocates that living a healthy life is based on eating healthy foods.
Moose’s Organics provides value to customers, not only by making available products
which are organic and quality-guaranteed, but also by delivering services to help
customers realize and integrate organic foods into their daily lives and thus live a
healthier life.
Moose’s Bakery offers American-style customer service that emphasizes exceeding
customer expectations and predicated on a friendly service environment with 100
percent guaranteed customer satisfaction.
Management believes that happy employees are essential to a successful business. Data
studies of work values in successful companies have demonstrated that productivity is
married to positive attitudes and those attitudes among employees will be transmitted
to consumers. Satisfaction is contagious. All employees will be considered partners in
the venture, so that their own success is integrated with the success of the business.
Key Personnel and Responsibilities
Scott Lester (American), CEO of Moose’s Exports in the United States, will be responsible
for:
- Buy raw materials from different source in the United States
- Organize the packaging of materials at Wheat Montana in Three Forks
- Coordinate the pick-up and delivery by freight forwarder
- Go to China and advise the business occasionally
P a g e | 8
- Help with business-supporting facilities such as the store design, website,
transportation, packaging, employee training manuals, etc…
Amy Xue (Chinese), is general manager of Moose’s Organics in China, will be responsible
for:
- Maintain inflow and outflow of raw material based on business needs
- Establish business-supporting facilities such as designing and outfitting the store,
as well as the website, transportation, warehouse, packaging, etc…
- Hire and train employees
- Keep the accounting books
- Manage day-to-day activities
Qingyang Lu (Chinese), general manager of Moose’s Foods in China, will be responsible
for:
- Deal with government issues, including all kinds of policies related to
establishing a company, importing requirement, legal issues, etc.
- Public relations and market research
- Overseeing operations at Moose’s Foods.
- Assist CEO’s day-to-day activities
Rachel Cross (American but fluent in Chinese), spokesperson for Moose’s Organics, will
live in China and develop initial customized recipes for Moose’s Bakery and product
awareness, including:
- Provide baking courses on Moose’s website
- Hold regular baking workshop at Moose’s Bakery
- Support other baking-related activities
Directors
Dean Folkvord: Dean is President of Wheat Montana Farms, Inc. He has carved out a
notable position in this U.S. regional economy by using vertical integration to turn his
family farm into a multi-state brand powerhouse. Dean explains how he did it.
“We’ve learned that when you open a deli, you sell more bread in the local grocery
stores. The integration effect of brand development works in multiples.”
Kristin Juras: Ms. Juras is a Professor of Business Law at the University of Montana.
Prior to teaching, she has more than 20 years of experience in conducting business
transactions in addition to tax and estate planning. She has served as general counsel
for a publicly traded corporation and has practiced international law.
P a g e | 9
Strategic Alliance
Wheat Montana Farms and Bakery has successfully created a
strong brand that enables it to sell its premium wheat in the retail
grocery and restaurants markets. Although Moose’s will have a
different product mix and distribution channels, this multi-channel
distribution of premium branded commodities is a model very
similar to Moose’s Organics. Therefore, Moose’s Organics will source its purchasing,
processing and packaging of wheat products from Wheat Montana Farms in Three Forks,
Montana. Moose’s Organics’ management team has, and will continue, to seek the
advice and counseling of Wheat Montana staff and management.
The Market
Food Industry Analysis
China is facing abysmal environmental
degradation. According to the government of
China, pollution and soil damage is taking a
significant toll on China’s food supply as
cropland is affected. More than 10 percent of
China’s cropland has been polluted with
heavy metals, while more than 70 percent of
China's waterways and 90 percent of its
underground water are contaminated by
industrial pollution8. All of this is decimating
China’s supply of quality foods. It is estimated
that heavy metals contaminate as much as 12
million tons of grains each year in China9.
In addition to degradation of the food supply by pollution, Chinese producers often
mislabel food or provide inferior quality food. In 2004 and 2008, un-fortified baby
formula was blamed for the death by malnutrition of dozens of babies in China, and
adversely affected an estimated 300,000 babies10. A world health spokesperson said
that the scale of the problem proved that it was "clearly not an isolated accident, but a
large-scale intentional activity to deceive consumers for simple, basic, short-term
profits11."
As a result of these problems, Chinese consumers are looking for safer and better
quality food. One major source has emerged in the recent years – the organic food
industry, which mostly caters to relatively affluent Chinese. The population of affluent
P a g e | 10
Chinese has been increasing rapidly due to China’s decades-long economic boom. It is
forecasted that in the next ten years, Chinese organic consumption will rank as fourth
largest in the world12. Correspondently, the area of cropland occupied by organics is
currently growing at a 20-30 percent annualized rate13. Unfortunately, based on the
previously stated food quality concerns, the demand for good, nutrition-rich foods can’t
be expected to keep up with such a high growth rate. Moreover, the integrity of
Chinese-produced “organic” foods is suspect, due to the prevalence of bribery between
some farmers and organic certification agencies in China. As a result, Chinese do not
trust domestic certified organic foods in China3,4, although there is a clearly
demonstrated preference for organic foods when available.
Imported Food Industry Analysis
China’s imported food market is currently growing at a 15 percent annual rate2. Grocery
importing is forecasted to be among the top 10 most promising businesses14 in the
country. There is strong demand for imported foods in China because imports usually
are superior in quality to comparable domestic food items. The Chinese also are curious
about imported foods and are willing to try foreign- branded goods. According to the
U.S. foreign agricultural service, China is the United States’ fourth-largest, and fastest-
growing, market for agricultural exports. Agricultural exports from the U.S. have grown
from less than $1 billion in 1999 to nearly $13 billion in 2009.
Since China joined WTO in 2001, customs duty on US imported food has dropped more
than 50 percent. It’s becoming more financially feasible for the US to export food
products to China, especially with the potential of a continued increase in value of the
Chinese currency. Furthermore, with WTO rules seeking to eventually eliminate all
tariffs, this trend is likely to continue. Currently, the majority of US imported foods
include chicken, meat, fruits, nuts, etc. There is also not much US organic food being
imported to China, except for baby formula and baby foods.
Baking Industry Analysis
Research has yet to find any bakeries in China that offer organics. As a whole, the
Chinese baking industry is still quite homogenous, even after 5 years of over 25 percent
growth rates. Currently, there are three major outlets for baked goods-- franchised
bakeries, bakery departments in grocery stores, and small home-based stores. Baked
goods are used in different ways in Chinese homes, compared to the United States. For
example, Chinese usually use baked goods mostly for breakfast or snacks. Rarely, bread
may also be used as a substitute for rice. Purchase of cookies, especially American-style,
is unusual. That is primarily because it is difficult to get butter, an important essential
ingredient.
P a g e | 11
Chinese have to get their baked goods in stores because home baking has been
historically unfeasible. Throughout Chinese history, cooking recipes were closely
guarded secrets. People seldom share recipes (with actual quantities of ingredients.)
Recently, the modern well-educated Chinese have realized that proven recipes can
make cooking much easier; therefore, the number of available recipes has started to
proliferate. Despite the greater availability of reliable recipes, there are still three main
obstacles to Chinese consumers baking at home.
First, until quite recently, most Chinese did not have an oven. However, in the past five
years, this obstacle has been somewhat ameliorated by the increasing availability of
affordable, small ovens (microwave-sized.) In fact, thanks to companies such as Galanz
or Philips, who produce these ovens specifically for the Chinese market, the use of
ovens has almost doubled
Second, it is difficult to get ingredients needed for baking, especially some dairy
products, such as butter. China does not produce good quality dairy products, and they
are expensive. Other ingredients such as baking soda or baking powder are not readily
available to most households.
Third, the poor quality of those ingredients which are available result in uneven and,
often, unsatisfactory results. For example, the quality of flour in China is much lower
than in the United States. Even if people follow a recipe, for example a banana bread
recipe from the US, it rarely turns out as they expected.
However, Chinese are becoming more and more interested in baking. Not only are they
purchasing more ovens, they have a strong willingness to learn how to bake. More
stores have started to offer baking tools. Baking books have also become top sellers.
Baking recipes, available on web blogs, with pictures showing the entire baking process,
would likely attract thousands of hits. Currently, there is no Chinese website dedicated
to share recipes and teach people how to bake more systematically.
Product/Service Positioning and Differentiation
Moose’s business model is designed and built to capture these unique opportunities in
the Chinese food market. The strategy takes advantage of two trends to target one
niche. The “two trends” refer to the increase in foreign imports and organic food
consumption while the “one niche” is the baking-related food industry.
Moose’s Exports will seek to become the best known and most-trusted organic brand in
China. In contrast, Chinese organic brands, though numerous, are mostly localized and
homogenous. There is no nationally recognized organic brand, especially one that offers
P a g e | 12
a variety of foods. Similarly, no other foreign country has developed the niche for baked
goods in China, thus providing an open field for high quality, organic and appealing
baked goods from the United States.
Moose’s Bakery will be the first organic bakery in China which will drive attention to
similarly branded products. Moose’s branded goods will be sold in the bakery, and
online and in grocery stores, starting in the second year. Moose’s Bakery will expand
through franchising, striving to reach other major cities in China. At the same time,
Moose’s Foods will be developing nation-wide distribution channels to make Moose’s
branded products widely available. These two business units will reinforce each other as
the company expands its businesses.
Moosesbakery.com will also seek to be the top baking reference in China. Moose’s
bakery not only sells baked goods, but also makes baking easy for everyone. In order to
achieve this goal, Moose’s will share recipes (though not the proprietary ones for the
bakery) through Moose’s website, encouraging customers to share, amend, and share
recipes. This would make the Moose’s the largest baking recipe website in China. In
addition, the company will make most ingredients available with consistent labeling and
quality. As a result, consumers who follow the recipes will likely experience success and
will become even more interested in baking at home.
Competitive Advantages
While Moose’s business will be constantly developing competencies that exceed any
competitors (though no direct competitors exist,) it also has several intrinsic advantages
that are difficult to imitate.
As an American premium brand as well as the first American bakery in Wuxi, Moose’s
Bakery provides a highly distinguishable northwestern American store environment.
Accordingly, Moose’s Bakery specializes in western styled bread, cookies and pastries
(Chinese tastes adjusted) and will be very different from most other Chinese bakeries
which are more of a Japanese or Taiwanese style.
Moose’s Bakery has a authentic American baker as the spokesperson, Rachel Cross who
can speak fluent Chinese. Chinese people appreciate foreigners who can speak Chinese
well (it’s quite rare.) Ms. Cross will not only develop good will among Chinese
consumers, she will help position the company and products as both genuinely
American and respectful of China’s language and culture.
P a g e | 13
With all the integrated businesses Moose’s has -- from raw materials which can use in
whatever way the consumer wants, to finished baked goods -- Moose’s high exposure
to the daily lives of Chinese consumers will foster competitive brand loyalty.
Market Size
Moose’s Organics, the wholly owned subsidiary
of the US Company Moose’s Exports, will start
in Wuxi, China. One of the most developed
cities in China, Wuxi’s GDP per capita in 2009
was $11,885 for registered residents, an 11.6%
increase from one year before. The city has a
total population of over 6 million, among which
4.7 million are registered residents. Moose’s
store will be in the downtown area of the city
where it will be exposed to high foot traffic from
people coming and going to work at white collar jobs.
Target Market/Customer Profile
Moose’s Organics’ heavy consumers, who might purchase Moose’s products on a daily
or weekly basis would consist of the following groups.
1. Better educated, health-consciousness, middle-age urban Chinese, age 35-55. These
semi-affluent people have an annual income over $15,000. They are beginning to
experience some health ailments as they get older, so they are starting to pay more
attention to their eating habits and attempting to buy safer food. Management
estimates this category consists of about 15-25% of the population.
2. Semi-affluent and educated younger generations, age 25-35. This group of people is
more quality sensitive and they make up the majority of consumers who purchase
imported food because they like foreign brands. They are good online shoppers and are
usually tech savvy. This category consists of about 10-20% of the population and earns
around $8,000 a year.
Moose’s Organics’ light consumers, might purchase Moose’s products once, or
occasionally, would be the Chinese who earn average or below average incomes and
whose ages vary. They occasionally purchase expensive products, either to try new
things or to give themselves a treat. In addition, they purchase expensive things as gifts,
which is part of Chinese culture.
P a g e | 14
Marketing Strategy
The Store
Instead of conducting expensive mass media promotions, Moose’s Organics will utilize
its well-designed store to make sure that the atmosphere communicates the value
proposition of the brand. The store will be designed by Matt Faure, a well-known
architect in Great Falls. Wood will be the main decoration material to create a theme of
natural, earthy and American styled. The lobby will have pictures of unpolluted clear
running rivers, blue skies, wheat fields, with an open lobby area to give the feel of open
spaces. Furthermore, unlike other Chinese bakeries, which have their goods trucked in
from large commercial bakeries or which wall off their kitchen area, Moose’s customers
will be able to see the baking operation taking place in the back of the store. As a whole,
every detail of the store will reinforce the brand as high quality. (See Exhibit 3, The
Bakery)
There will be descriptions about the ingredients, products and company on the wall as
well as flyers and brochures available for people to take home if they want. A store sales
person will greet customers once they come in. Every product will have detailed
descriptions regarding the ingredients, nutrition content, and origination of ingredients.
All the raw materials as well as baking mixes will be displayed on the shelves (See
Exhibit 4, Packaging). Once any customers show interest in baking at home, they will be
encouraged to buy ingredients and to go to the website.
Moose’s Bakery Online
The website will be created to be all-in-one. Not only will people be able to learn how to
bake, but they will also eventually be able to buy Moose’s branded ingredients. Other
baking supporting goods such as ovens, appliances or books will be offered by other
businesses with links on the website. As a result, people will basically get everything
they need to start baking at home.
The website, www.moosesbakery.com, is also a tool to reach customers outside of Wuxi.
Traffic will be driven mainly through the recipe page of the website, people will initially
be greeted by Moose’s spokes-person, Rachel Cross, and be told that baking is easy.
Baking recipes will be introduced and updated on the website, some of which will have a
video demonstration by Rachel. People are welcomed to share their recipes and give
reviews. The goal behind the website is to create a Chinese version of “allrecipes.com”
for baking.
Management expects to take advantage of the rapid growth in online shopping to
create more sales. Since the shipping cost in China is only about 20% of what it costs in
P a g e | 15
the United States, it’s very likely that Moose’s online sales would become a major
revenue source in a short period of time.
Mascot
Obviously, the Mascot of the company is a Moose, with a given name of “John”.
Moose’s will have John outside of the bakery especially on big
occasions such as Chinese holidays to drive customers into the
store. Having a Mascot is still a new thing to Chinese people, and
they would be interested in having a closer contact with him. Also
children will like John, and will want to come to the store with
their parents. Since Moose’s business advocates living a healthier
life, John will also appear in all activities with topics about related
Moose’s Exports – U.S. Operations The U.S. company that will carry full ownership of all U.S. and Chinese operations is
Moose’s Exports Corporation, which is established, and is based, in Missoula, Montana.
Scott Lester will be responsible for buying, packaging, insuring and shipping all materials
and equipment needed for the businesses in China. He will strive to drive down costs of
purchasing, packaging and shipping raw materials and to provide excellent service to the
company’s wholly owned subsidiary, Moose’s Organics, in China. (See Exhibit 5, Export
Procedure)
Suppliers
Moose’s Exports will buy agriculture products from a 13 state region in the northwest
United States, and will do so under the consulting of WUSATA (Western U.S. Agricultural
Trade Association.) The company will work closely with this organization to find the best
sources to supply the company. Moose’s Exports has been, and will continue, working
with both state and federal government departments of agriculture, U.S. Wheat
Associates, and the U.S. Commercial Service.
All the flours and grains are going to be purchased in Montana, mostly from Wheat
Montana. Butter will be purchased in Oregon, packed with dry ice, and shipped express
freight to China. Sugar and other ingredients will be shipped to Three Forks and
palletized at the Wheat Montana plant. Wheat Montana will initially offer packaging
assistant for certain ingredients such as flour, sugar, oats, etc. As business grows, this
activity will be shifted to China and become one of Moose’s Organics responsibilities.
P a g e | 16
Moose’s Organics – Chinese Operations Moose’s Organics is the Chinese wholly owned subsidiary of the U.S. based Moose’s
Exports, managed by Amy Xue. Moose’s Organics will be receiving, paying tariffs,
packaging and transporting imported goods as well as managing the inventory needs of
the entire company. Moose’s Organics’ major responsibility is to oversee its two
business units, Moose’s Bakery and Moose’s Foods, and make sure each unit
concentrates on best performing their unique activities.
Moose’s Bakery
Business Description
(See Exhibit 1, The Store)
The store’s primary merchandise is finished baked goods, such as breads, cookies and
pastries. In addition, there will be shelves in the store for Moose’s branded goods. Mixes
will be part of branded goods, which make home baking even easier. But the majority
of products will be baking ingredients such as butter, flour, honey, sugar, baking soda,
etc. Baking at home, using Moose’s branded ingredients is encouraged. However,
consumer may use those ingredients in whatever way they want, such as using flour to
make noodles.
The store will directly communicate the company’s value proposition – 100% organic,
American styled baked goods and premium quality products. This will be accomplished
through store design, marketing and service, as well as the products themselves. Most
communications will be in English and Chinese. The store will also drive traffic to the
website.
Products and R&D
Moose’s Bakery’s main products are finished baked goods. (See Exhibit 6, Baked Goods).
All the recipes are carefully chosen and modified to fit Chinese palates. In order to do so,
the founders will first select around forty to fifty recipes either from families in Montana
or recipe books and websites. Before opening the business, a three month R&D period
will be spent adjusting recipes and testing the market in China. An initial investment of
$10,000 on the part of each of the founders will be made for research and development
costs.
Competition
Moose’s Bakery’s products will fall in more or less direct competition with Japanese and
Taiwanese bakeries in Wuxi which sell baked goods at premium prices. Such bakeries
P a g e | 17
depend on the attractive appearance of their food products and their stores’
environments. (See Exhibit 10, Competing Bakeries) Moose’s pricing in this category
will be no more than 30 percent higher than its Japanese and Taiwanese competitors,
while still maintaining attractive gross profit margins between 100-500 percent.
There are three major outlets for baked goods in Wuxi, as well as in China – Franchised
bakeries, grocery stores’ baking sections, and small home-based bakeries. Overall,
Moose’s Bakery has several advantages: store design will distinguish the brand as one
from America offering premium quality products while online sales and service models
will drive more traffic and spread brand awareness.
(See Exhibit 7, Competitor Baked Goods). As far as its products are concerned, Moose’s
Bakery is different because its premium ingredients guarantee that the finished
products are obviously superior. Currently, the bakeries in Wuxi use chemicals and
additives to preserve freshness and appearance. They universally use artificial cream
because butter is rare and expensive. Dyes are very common, especially for making fake
whole wheat bread. Moose’s will not use colorants or additives, and will preserve
freshness using real honey.
Expansion
Moose’s bakery will expand through franchising. The current franchising strategy calls
for little or no franchise fees, but a requirement that franchisees buy their raw
ingredients from Moose’s Organics. The goal is to begin franchising as early as year 3 in
Wuxi and nearby cities.
Moose’s Foods
Business Description
Moose’s Foods takes care of the distribution of the company’s branded products, which
includes branded baked goods, such as Moose’s bread and cookies under the name of
Moose’s Bakery, and all other ingredients under the name of Moose’s Organics. The
main distribution channels for these products are grocery stores and the website. Other
than that, Moose’s Foods facilitates the wholesaling process, from packaging design to
products selection. Finally, Moose’s Foods will explore relationships with other
businesses which would either be willing to sell Moose’s branded products or use
Moose’s ingredients in their products.
P a g e | 18
Services
Moose’s Foods does not produce products; instead, it sells whatever the company
purchases from US suppliers as well as products from Moose’s Bakery. This will initially
consist of baking ingredients such as butter, flour, honey, sugar, baking soda, etc.
However, it will have the final determination on what goods the company should
purchase as well as what baked good Moose’s Bakery should produce for Moose’s foods’
customers, who may differ as the distribution channels differ.
Distribution Channels
Grocery channel – Most of Moose’s Foods’ resources will initially be used in realizing
grocery distribution. Most Chinese grocery stores don’t require vendors be aligned with
a distributor, so unless Moose’s Organics can find a trustworthy distribution partner
that would enable saved cost, Moose’s Foods will directly merchandise products in each
grocery store. Grocery shelving fees vary from store to store but average around 25
percent in China. Moose’s Foods will use wheat grinder displays, initially provided free
by Wheat Montana, to sell pre-packaged and bulk products. Management expects these
to be an effective marketing tool in Chinese grocery stores. (See Exhibit 8, Wheat
Grinder Display)
Online channel – All of products selling on Moose’s website will be supervised by
Moose’s Foods. The online distribution channel is the most cost effective way to reach
customers outside of the immediate geographic area. Online sales could reach similar
volumes as local grocery distribution.
Partnerships with other business – Moose’s Foods will seek partnerships with business
that would like to sell Moose’s branded products or would like to use Moose’s branded
products as ingredients. For example, Moose’s Foods would seek relationships with five-
star restaurants by giving their customer a free cookie. Another possibility would be to
allow some local noodle shops to use the company’s flour to produce high quality
noodles.
Competition
Moose’s Foods faces competition from other organic food wholesale and distribution
companies. Few companies in China fall into this category. Data shows that 60 percent
of the imported food comes through a Shanghai based company called “City Shop”,
which is a small grocery store chain with about 10-20 stores in several of China’s major
cities. It also sells about 20 percent domestic foods. For the other 80 percent that is
imported goods, only a small portion is organic. There are a few online retailers, mostly
based in Shanghai, that sell organic food, but nearly all their products are domestic
foods.
P a g e | 19
In terms of Moose’s products themselves, Moose’s products will be positioned as
premium quality. It’s a little difficult to compare Moose’s price with Chinese equivalents.
That’s because organic foods are relatively new in China so lots of goods, such as whole
wheat flour or butter, don’t have organic versions.
The lack of apples to apples comparisons makes it difficult to compare the product
prices with Chinese equivalents. But where there are comparables, Moose’s branded
ingredients will be priced slightly above the competition—helping earn good gross
margins and premium positioning. Below is a competitor analysis of Moose’s Foods
imported products compared to products being sold on shelves in Chinese grocery
stores such as Carrefour in Wuxi. It shows that as a whole, Moose’s branded products
are still competitive in terms of its price. Underlined prices reflect actual target prices
used in revenue projections for products that will be initially sold. Prices include an
allowance for grocery shelving fee (25 percent), while allowing for gross margins of 50
percent.
Expansion
Moose’s Foods will consider two expansion models: First, it will expand its distribution
capabilities to achieve economies of scale. In this scenario, Moose’s Foods would not
only distribute Moose’s branded products, but also other imported organic foods. The
ultimate objective would be to become the largest imported organic foods distribution
company. Second will be expansion of the portfolio of Moose’s products to include
goods outside of baking related foods. For example, Moose’s would introduce branded
jam, snacks or baby formula. The ultimate objective for this option would result in the
biggest portfolio of organic products available in the country, thus becoming the
Chinese adapted version of “Organic Valley” or “Wild Harvest”.
Ingredient
Moose's
Price In U.S.
Shipping
and
Packaging
Duty and
Tax
Moose's
Cost in
China
Moose's
Retail Price
Chinese
Equivalent
Products in
Grocery
Note on
Comparability
Moose's
Premium or
discount
Organic Whole Wheat Flour (lb.) 0.35$ 0.15$ 0.09$ 0.59$ 1.45$ - Not-available -
Organic White Flour (lb.) 0.40$ 0.15$ 0.10$ 0.65$ 1.27$ 1.02$ Chinese Organic 25%
Organic Brown Sugar (lb.) 2.50$ 0.15$ 0.64$ 3.29$ 5.75$ - Not-available -
Organic Sugar (lb.) 0.70$ 0.15$ 0.20$ 1.05$ 2.65$ 2.70$ Chinese Organic -2%
Baking soda (lb.) 2.00$ 0.15$ 0.48$ 2.63$ 4.61$ - Not-available -
Organic Chocolate Chips (lb.) 5.00$ 0.15$ 1.39$ 6.54$ 11.45$ - Not-available -
Organic Oats (lb.) 0.80$ 0.15$ 0.26$ 1.21$ 2.11$ 2.87$ Chinese Organic -26%
Cocoa (lb.) 5.00$ 0.15$ 1.65$ 6.80$ 11.90$ 5.55$ Non-organic 114%
Walnuts (lb.) 8.00$ 0.15$ 2.28$ 10.43$ 18.26$ - Not-available -
Organic Butter (lb.) 3.50$ 1.25$ 1.57$ 6.32$ 12.50$ 9.98$ Non-organic 25%
P a g e | 20
Financials
(See Exhibit 12, Financial Assumptions)
Sources and Uses of Funds/Offering
Management is interested in taking investors as Scott and Amy would like to share the
risk and opportunity with investors. Management values the company at $400,000. (See
Exhibit 15, Valuation) 50 percent of the shares will be made available to purchase for
$200,000. Of that, Scott and Amy will invest $25,000 each ($50,000) total. The
remaining shares will be sold. If, however, equity investors are not found, this business
will be funded by the founders.
As sole founders, Scott and Amy are able to come up with an initial investment of
$100,000 each or $200,000 total—to do so Amy will borrow money from family and
Scott will sell or leverage real estate. It is estimated that there will be an additional
$100,000 in working capital needed in year 2, at which time management will apply for
USDA or SBA loans.
Revenue Projections
(See Exhibit 12, Revenue Projections and Unit Costs)
Unit volumes are based on similar business units in the same industry (however not in
China.) Management expects actual sales numbers to be significantly better, considering
the much larger potential customer population. This is especially true of the bakery,
where projections show the business reaching full capacity around year five. This may
happen as early as year three. On the Moose’s Foods side, the scalability is much better.
To measure the impact of different sales volumes on financial performance see Exhibit
14, Sensitivity Analysis.
The chart below demonstrates the limited capacity of the bakery as well as the
scalability of the Moose’s Foods business unit.
Year 1 Year 2 Year 3 Year 4 Year 5
Moose's Bakery 189,070 472,675 709,013 886,266 930,579
Moose's Foods 25,419 279,605 978,616 2,446,540 4,281,445
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000 Annual Sales of Business Units
P a g e | 21
Income Statement (5 Year)
Income Statement Year 1 Year 2 Year 3 Year 4 Year 5
NET REVENUES 214,489 752,280 1,687,629 3,332,806 5,212,024
COST OF REVENUE 109,950 452,880 1,036,239 2,034,747 3,272,534
% of Revenues 51.3% 60.2% 61.4% 61.1% 62.8%
GROSS PROFIT 104,539 299,399 651,390 1,298,059 1,939,490
% of Revenues 48.7% 39.8% 38.6% 38.9% 37.2%
OPERATING EXPENSES
Sales & Marketing 6,435 27,568 68,893 124,962 190,309
Research & Development 18,645 7,523 16,876 33,328 52,120
General and Administration 177,016 214,377 256,808 373,279 481,915
Total Operating Expenses 202,096 249,468 342,577 531,569 724,344
% of Revenues 94% 33% 20% 16% 14%
EARNINGS FROM OPERATIONS (97,557) 49,931 308,812 766,490 1,215,146
EXTRAORDINARY INCOME / (EXPENSE) (7,000) (2,000) (4,000) (4,000) (4,000)
EARNINGS BEFORE INTEREST & TAXES (104,557) 47,931 304,812 762,490 1,211,146
INTEREST INCOME / (EXPENSE) 0 (12,000) (10,800) (9,600) (8,400)
NET EARNINGS BEFORE TAXES (104,557) 35,931 294,012 752,890 1,202,746
TAXES 0 0 (90,154) (301,156) (481,098)
NET EARNINGS (104,557) 35,931 203,858 451,734 721,648
% of Revenues -48.7% 4.8% 12.1% 13.6% 13.8%
P a g e | 22
Cash Flow Statement (5 Year)
Break Even Analysis (5 Year)
Cash Flow Statememt
Year 1 Year 2 Year 3 Year 4 Year 5OPERATING ACTIVITIES
Net Earnings (104,557) 35,931 203,858 451,734 721,648
Depreciation 9,371 12,057 20,014 21,100 22,457
Working Capital Changes
(Increase)/Decrease Accounts Receivable 0 0 0 0 0
(Increase)/Decrease Inventories (15,074) (46,414) (75,823) (133,955) (136,457)
(Increase)/Decrease Other Current Assets 0 0 0 0 0
Increase/(Decrease) Accts Pay & Accrd Expenses 0 0 0 0 0
Increase/(Decrease) Other Current Liab 0 0 0 0 0
Net Cash Provided/(Used) by Operating Activities (110,259) 1,574 148,049 338,879 607,648
INVESTING ACTIVITIES
Property & Equipment (63,000) (18,000) (54,500) (6,000) (7,500)
Other
Net Cash Used in Investing Activities (63,000) (18,000) (54,500) (6,000) (7,500)
FINANCING ACTIVITIES
Increase/(Decrease) Short Term Debt 0 0 0 0 0
Increase/(Decrease) Curr. Portion LTD 0 0 0 0 0
Increase/(Decrease) Long Term Debt 0 100,000 (10,000) (10,000) (10,000)
Increase/(Decrease) Common Stock 0 0 0 0 0
Increase/(Decrease) Preferred Stock 0 0 0 0 0
Dividends Declared 0 0 0 0 0
Net Cash Provided / (Used) by Financing 0 100,000 (10,000) (10,000) (10,000)
INCREASE/(DECREASE) IN CASH (173,259) 83,574 83,549 322,879 590,148
200,000
CASH AT BEGINNING OF YEAR 200,000 26,741 110,314 193,863 516,742
CASH AT END OF YEAR 26,741 110,314 193,863 516,742 1,106,890
Break-Even Analysis Year 1 Year 2 Year 3 Year 4 Year 5Revenue 214,489 752,280 1,687,629 3,332,806 5,212,024
Cost of Revenue
Variable 104,950 408,687 977,672 1,966,952 3,192,016
Fixed 5,000 44,193 58,567 67,795 80,518
Total 109,950 452,880 1,036,239 2,034,747 3,272,534
Operating Expenses
Variable 10,724 37,614 84,381 166,640 260,601
Fixed 191,371 211,854 258,196 364,929 463,743
Total 202,096 249,468 342,577 531,569 724,344
Total Costs & Expenses
Variable 115,674 446,301 1,062,054 2,133,592 3,452,617
Fixed 196,371 256,047 316,763 432,723 544,261
Total 312,046 702,349 1,378,816 2,566,316 3,996,878
Variable Costs/Revenue Ratio 0.54 0.59 0.63 0.64 0.66
Break-Even Point Revenues 426,248 629,519 854,539 1,202,607 1,612,306
P a g e | 23
Balance Sheet (5 Year)
Balance Sheet Begin Year 1 Year 2 Year 3 Year 4 Year 5
ASSETS
CURRENT ASSETS
Cash 200,000 26,741 110,314 193,863 516,742 1,106,890
Accounts Receivable 0 0 0 0 0
Inventories 15,074 61,488 137,311 271,267 407,723
Other Current Assets 0 0 0 0 0
Total Current Assets 200,000 41,814 171,803 331,175 788,009 1,514,613
PROPERTY & EQUIPMENT 0 53,629 59,571 94,057 78,957 64,000
TOTAL ASSETS 200,000 95,443 231,374 425,232 866,966 1,578,613
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short Term Debt 0 0 0 0 0 0
Accounts Payable & Accrued Expen 0 0 0 0 0
Other Current Liab 0 0 0 0 0
Current portion of long term debt 0 0 0 0 0 0
Total Current Liabilities 0 0 0 0 0 0
LONG TERM DEBT (less current portion) 0 0 100,000 90,000 80,000 70,000
STOCKHOLDERS' EQUITY
CommonStock 200,000 200,000 200,000 200,000 200,000 200,000
Preferred Stock 0 0 0 0 0 0
Retained Earnings (104,557) (68,626) 135,232 586,966 1,308,613
Total Equity 200,000 95,443 131,374 335,232 786,966 1,508,613
TOTAL LIABILITIES & EQUITY 200,000 95,443 231,374 425,232 866,966 1,578,613
P a g e | 24
Exhibit 1, Maps
P a g e | 25
Exhibit 2, Timeline
First 12 MonthsJun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
Amy trains in U.S. bakery
1st shipment of goods sent
Amy returns to China
Moose's Organics established
Oven purchased
Three bakers hired
Recipes test marketed
Bakery leased and set up
2nd shipment of goods sent
Scott goes to China
Customer service hired and trained
Bakery opened
Website development and launch
Financials Begin (Pre-Jan 1 expenditures accounted for Jan, 2011)
Moose's Foods established as business entity
Three Year Timeline
Q4
2010
Yr 1
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Yr 2
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Yr 3
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Preparation for opening
Moose's Bakery established
Financials begin
Moose's Foods established
Moose' Bakery promotes store manager
Moose's Foods begins packaging in China
Moose's Foods begins marketing to grocery (Amy)
Moose's Foods hires/promotes operations manager
Moose's Foods online development begins
Organize and begin franchising operations
Broaden distribution of Moose's Foods' products
P a g e | 26
Exhibit 3, The Bakery
P a g e | 27
Exhibit 4, Packaging
P a g e | 28
Exhibit 5, Export Procedure
1. Flour and other agricultural products will be packaged in branded, moisture-
sealed packaging at the Wheat Montana Plant in Three Forks, MT.
2. 2000-4000 lbs of these products will be stacked on a heat
treated or plastic pallet bearing the internationally
recognized IPPC stamp (special pallet certified pest free
for international shipping).
3. The L48”* W40” *H48” Pallet will be shrink-wrapped and the following
documentation will be attached to the pallet: Certificate of origin, Export
Declaration (including schedule B numbers), Letter of instructions, and Packing
list.
4. The freight forwarder will be prepaid for shipment and insurance.
5. A freight forwarder’s truck will pick up from any location with a dock or forklift
(Wheat Montana Plant).
6. First shipment it will be delayed at U.S. port for 14 days while background check
is done on company.
7. Once shipment arrives in Port of Shanghai, recipient will be contacted to pick up.
8. Moose’s Organics personnel will pick up pallet and pay customs duties and taxes.
P a g e | 29
Exhibit 6, Baked Goods
Exhibit 7, Competitor Baked Goods
Moose's Bakery Baked Goods and PricesScottish Shortbread
pc. 0.40$
Light Whole Wheat
Round Loaf
Supersize
Blueberry Muffins 1.30$
1.75$
Pound Cake (pc) 1.30$ Dark Whole Wheat Round Loaf Banana Bread (pc) 1.30$
1.75$
Lg. Chocolate-Chip Cookie White Wheat Round Loaf Other Moose's Recipes
1.25$ 1.75$ *Meat Pies
*Mini Bread Loaves
* Sticky Buns
* Whole Wheat Scones
* Raspberry Muffins
Lg. Walnut Brownie 1.55$ Sausage Buns 2.00$ * Banana Nut Muffins
* Fruit Pies
* Cupcakes
* Bread Rolls
* Oatmeal Cookies
* Macadamia Cookies
Sample of Chinese Bakery Goods and PricesCantaloupe Flavored Bread Seven Pieces of White Bread Egg Sandwich Sweet Cakes (.1 lb.)
1.00$ 1.00$ 0.75$ 0.50$
P a g e | 30
Exhibit 8, Wheat Grinder Display
Display donated for test marketing in China. Purchase 12 in year 3.
P a g e | 31
Ingredient
Schedule B
Number
Import
Duty Rate
Value
Added
Tax
Flour 1001000000 5% 13%
Brown sugar 1701000000 7% 17%
Granulated sugar 1701120000 7% 17%
Baking soda 2836300000 6% 17%
Chocolate chips 1806209000 10% 17%
Oats 1104120000 20% 13%
Cocoa 1805000000 15% 17%
Walnuts 802320000 20% 13%
Butter 405100000 10% 17%
Yeast 2102100000 25% 17%
Pecans 0802901500 10% 13%
Almonds 802120000 10% 13%
Macadamia nuts 802608000 50% 13%
Honey 409000055 15% 13%
Exhibit 9, Export Ingredients
To the right are the ingredients that will be included in
the first shipment to China. While the duty rates must
be paid, the value added tax or VAT tax is a
reimbursable cost. There are companies that specialize
in retrieving VAT paid. All financial assumptions assume
this tax is not retrieved.
Exhibit 10, Competing Bakeries
P a g e | 32
Exhibit 11, Wuxi Bakeries
Name Number of
stores Originality Price range Traffic
爱维尔蛋糕 5 Taiwan Medium to high High
85 度 C 3 Taiwan Medium High
面包新语 4 Singapore High High
贝儿多爸爸的泡芙工房 1 Japan High Medium
黄记手礼 2 Wuxi High Medium
元祖食品 12 Taiwan Medium High
克莉丝汀饼屋 33 Taiwan Medium High
杏花楼 5 Shanghai Medium Medium
福吉佳西饼屋 24 Wuxi Medium Medium
香榭丽舍 13 Wuxi Medium Medium
伊芙令饼屋 3 Wuxi Medium Medium
Carême 烘焙大师 2 Shanghai Medium Medium
安特鲁 7 Nanjing Medium Medium
金苹果 11 Wuxi Medium Medium
稻香食品 9 Wuxi Medium Medium
灵山食品 3 Wuxi Medium Medium
咀香食品 4 Wuxi Medium Medium
乐多滋 7 Wuxi Medium High
凯司令西饼屋 4 Wuxi Medium Medium
BREACO 布瑞克面包吧 2 Wuxi Medium High
茜茜公主烘焙工坊 1 Wuxi Medium Medium
金块 Q3 1 Wuxi Medium Medium
MU.BREAD 麦卡优娜 1 Shanghai Medium Medium
缇苏拉米 1 Wuxi Medium High
麦趣多面包烘焙工坊 1 Wuxi Medium High
东哥时尚面包 1 Hangzhou Medium High
爱上 C 2 Wuxi Medium High
玛缇娜 2 Wuxi Medium Medium
甜丫丫西点 1 Wuxi Medium Medium
金陵包饼房 1 Wuxi Medium Medium
欧香坊 1 Wuxi Medium Medium
艾玛利 1 Wuxi Medium Medium
百滋百特甜甜圈 1 Hangzhou Medium High
我爱甜甜圈 1 Wuxi Medium High
P a g e | 33
Exhibit 12, Financial Assumptions
Equity and Debt levels, needed to achieve growth rates while meeting cash flow
requirements, are $200,000 in equity initially and $100,000 in debt at the
beginning of year two.
Sales Volume at Moose’s bakery is based on information obtained through this
business’s strategic partnership.
Revenue at Moose’s Organics assumes a high rate of growth initially, that is
reduced as the bakery approaches 100% capacity. Revenue for the bakery does
not include more than anticipated from the initial store. Revenue assumptions
do not include any franchise fees or the costs of opening new stores. However,
Moose’s Foods is a much more scalable business. Moose’s Foods’ sales assume
demand created by the opening of more bakeries.
Material Costs are expected to drop in the future as more efficient shipping and
packaging methods are utilized. Revenue projections retain those savings within
the company. Projections assume costs of goods sold decline from their original
amounts at non-compounded rates of: Five percent in year two, 10 percent in
year three, and 15 percent in year four and thereafter.
Cost of Revenues estimates a small warehouse location can be rented for about
$1200/month starting in year two. All other costs of revenue to include
international travel.
Operating Expenses includes $16,500 brought forward from the R&D period
which includes hiring three bakers, paying half year of Amy’s salary, buying a
small commercial oven, mixer and shipping $4000 in ingredients, to be used for
fine tuning recipes. (Actual budget $13,430)
Property Plant and Equipment reflects capital expenditures based on prices
obtained from U.S. suppliers. Much of the equipment needed is made and sold
in China at discounts averaging 50 percent of the U.S. prices. For example Amy
helped Wheat Montana obtain a sophisticated bagging machine in China for
$46,000. The same machine costs $150,000 in the U.S
Valuation. If projected growth levels are achieved, and based on a PE multiple of
15, the business is expected to be worth $7.2 million in 5 years.
P a g e | 34
Exhibit 13, Revenue Projections and Material Costs (5 Year)
Revenue Projections Year 1 Year 2 Year 3 Year 4 Year 5
Bakery units a day
Price
Expected Growth 150% 50% 25% 5%
Shortbread 0.40 45 113 169 211 221
Cookies 1.25 85 213 319 398 418
Muffins & Cakes 1.30 75 188 281 352 369
Sausage buns & Meat Pies 2.00 65 163 244 305 320
Breads 1.75 95 238 356 445 468
Bakery Revenue (365 Days) 189,070 472,675 709,013 886,266 930,579
Food units a day Price
Expected Growth 1000% 250% 150% 75%
White Flour 1.27 12 132 462 1155 2021
Whole Wheat 1.45 8 88 308 770 1348
Butter 12.50 3 33 116 289 505
Suger 2.65 2 22 77 193 337
Foods Revenue (365 Days) 25,419 279,605 978,616 2,446,540 4,281,445
Net Revenue 214,489 752,280 1,687,629 3,332,806 5,212,024
Material Costs Year 1 Year 2 Year 3 Year 4 Year 5Bakery units a day Cost
Shortbread 0.18 45 113 169 211 221
Cookies 0.38 85 213 319 398 418
Muffins & Cakes 0.74 75 188 281 352 369
Sausage buns & Meat Pies 0.81 65 163 244 305 320
Breads 0.36 95 238 356 445 468
Bakery Costs (365 Days) 66,704 158,421 237,632 289,223 303,684
Discount rate in food costs 5.0% 5.0% 7.5% 7.5%
Food units a day Cost Grocery Year 1 Year 2 Year 3 Year 4 Year 5
White Flour 0.65 0.97 12 132 462 1155 2021
Whole Wheat 0.59 0.95 8 88 308 770 1348
Butter 6.32 9.45 3 33 116 289 505
Suger 1.05 1.71 2 22 77 193 337
Grocery shelving fee 25%
Foods Costs (365 Days) 18,611 184,252 644,883 1,522,641 2,664,622
Discount rate in food costs 10% 10% 15% 15%
Net Material Costs 85,315 342,674 882,515 1,811,864 2,968,306
P a g e | 35
Exhibit 14, Sensitivity Analysis (5 Year)
Revenue Growth Down 40% Year 1 Year 2 Year 3 Year 4 Year 5
Adoption rates much less than expected
NET REVENUES 214,489 537,163 911,828 1,382,222 1,778,659
COST OF REVENUE 109,950 336,682 580,099 865,630 1,144,451
% of Revenues 51.3% 62.7% 63.6% 62.6% 64.3%
CASH AT BEGINNING OF YEAR 200,000 26,693 38,658 (23,799) 12,146
CASH AT END OF YEAR 26,693 38,658 (23,799) 12,146 58,403
NET EARNINGS (104,557) (52,231) 13,142 68,952 69,132
% of Revenues -48.7% -9.7% 1.4% 5.0% 3.9%
RETURN ON EQUITY -109.5% -120.9% 23.3% 55.0% 35.6%
Revenues 25% Less Than Expected Year 1 Year 2 Year 3 Year 4 Year 5
NET REVENUES 160,866 564,210 1,265,721 2,499,604 3,909,018
COST OF REVENUE 87,012 357,968 802,953 1,556,785 2,491,367
% of Revenues 54.1% 63.4% 63.4% 62.3% 63.7%
CASH AT BEGINNING OF YEAR 200,000 2,618 13,813 41,520 235,401
CASH AT END OF YEAR 2,618 13,813 41,520 235,401 590,845
NET EARNINGS (132,561) (47,823) 126,486 285,146 447,634
% of Revenues -82.4% -8.5% 10.0% 11.4% 11.5%
RETURN ON EQUITY -196.6% -243.8% 86.6% 66.1% 50.9%
Material Costs Increase 25% Year 1 Year 2 Year 3 Year 4 Year 5
Instead of improved economics, Yuan crashes
NET REVENUES 214,489 752,280 1,687,629 3,332,806 5,212,024
COST OF REVENUE 105,297 524,906 1,246,641 2,521,667 4,097,285
% of Revenues 49.1% 69.8% 73.9% 75.7% 78.6%
CASH AT BEGINNING OF YEAR 200,000 31,987 33,894 (19,794) (2,895)
CASH AT END OF YEAR 31,987 33,894 (19,794) (2,895) 56,981
NET EARNINGS (99,904) (36,095) 83,611 180,538 226,797
% of Revenues -46.6% -4.8% 5.0% 5.4% 4.4%
RETURN ON EQUITY -99.8% -56.4% 56.6% 55.0% 40.9%
P a g e | 36
Exhibit 15, Valuation
Exhibit 16, Financial Summary (5 Year)
Venture Capital MethodAssumptions:
Investor required IRR 100%
P/E ratio at IPO or acquisition 15
Initial investment $200,000
Shares 50000
Shares in offering 25000
Price Per Share $8.00
Valuation Calculation Year Net Income
Market
Capitalization
Required
Future Value
(Investor)
Investor's
Share
Investor's
Required
Return
Business's
ROI
Investor's
IRR
Calculation Income Stmt B * E FV(F,D) C / G F * H I / C IRR(I,C,D)
Liquidity Event in Year 1 1 (104,557) ($1,568,355) $400,000 100.0% $0 0% #N/A
Liquidity Event in Year 2 2 35,931 $538,966 $800,000 148.4% $538,966 269% 64%
Liquidity Event in Year 3 3 203,858 $3,057,865 $1,600,000 52.3% $1,600,000 800% 100%
Liquidity Event in Year 4 4 451,734 $6,776,012 $3,200,000 47.2% $3,200,000 1600% 100%
Liquidity Event in Year 5 5 721,648 $10,824,714 $6,400,000 59.1% $6,400,000 3200% 100%
Year
Investor's
Share
Investor's
Return
Investor's
ROI
Investor's
IRR
1 50.0% $0 0% #N/A
2 50.0% $269,483 135% 16%
3 50.0% $1,528,932 764% 97%
4 50.0% $3,388,006 1694% 103%
5 50.0% $5,412,357 2706% 93%
Financial Summary Year 1 Year 2 Year 3 Year 4 Year 5Summary Financials ($)
Revenue 214,489 752,280 1,687,629 3,332,806 5,212,024
Gross Profit 104,539 299,399 651,390 1,298,059 1,939,490
EBIT (104,557) 47,931 304,812 762,490 1,211,146
EBITDA (95,186) 59,988 324,826 783,590 1,233,603
Net Earnings (104,557) 35,931 203,858 451,734 721,648
Net Cash from Operating Activities (110,259) 1,574 148,049 338,879 607,648
Capital Expenditures 0 18,000 54,500 6,000 7,500
Interest Income/(Expense) 0 (12,000) (10,800) (9,600) (8,400)
Dividends 0 0 0 0 0
Cash 26,741 110,314 193,863 516,742 1,106,890
Total Equity 95,443 131,374 335,232 786,966 1,508,613
Total Debt 0 100,000 90,000 80,000 70,000
Growth
Revenue Growth Rate - CAGR: 251% 124% 97% 56%
Net Earnings Growth Rate - CAGR: Nil 467.4% 121.6% 59.8%
Profitability
Gross Profit % 48.7% 39.8% 38.6% 38.9% 37.2%
Operating Expenses % 94.2% 33.2% 20.3% 15.9% 13.9%
Net Earnings % -48.7% 4.8% 12.1% 13.6% 13.8%
Return on Equity -109.5% 27.4% 60.8% 57.4% 47.8%
P a g e | 37
Exhibit 17, Property Plant and Equipment (5 Year)
Property and Equipment Year 0 Year 1 Year 2 Year 3 Year 4 Year 5Purchased
Net Revenues Assets 214,489 752,280 1,687,629 3,332,806 5,212,024
Capital Expenditures
Computers, Software & Office Equipment 6,500 2,000 3,000 4,000 5,000
Plant & Equipment (baking equipment, etc.) 17,500 15,000 25,000
Other (Decoration & Website) 39,000 1,000 26,500 2,000 2,500
Total Capital Expenditures 0 63,000 18,000 54,500 6,000 7,500
% of Revenue 29.4% 2.4% 3.2% 0.2% 0.1%
Depreciation Computers, Sofware & Office Equipment (allocated to General & Administrative Expenses)
Depreciation Rate: Years 5 5 5 5 5 5
Year 0
Year 1 1,300 1,300 1,300 1,300 1,300
Year 2 400 400 400 400
Year 3 600 600 600
Year 4 800 800
Year 5 1,000
Total Depreciation 1,300 1,700 2,300 3,100 4,100
Depreciation on Plant and Equipment (allocated to Cost of Revenue)
Depreciation Rate: Years 1 7 7 7 7 7
Year 0
Year 1 2,500 2,500 2,500 2,500 2,500
Year 2 2,143 2,143 2,143 2,143
Year 3 3,571 3,571 3,571
Year 4 0 0
Year 5 0
Total Depreciation 2,500 4,643 8,214 8,214 8,214
Depreciation Other (allocated to General & Administrative Expenses)
Depreciation Rate: Years 1 7 7 7 7 7
Year 0
Year 1 5,571 5,571 5,571 5,571 5,571
Year 2 143 143 143 143
Year 3 3,786 3,786 3,786
Year 4 286 286
Year 5 357
Total Depreciation 5,571 5,714 9,500 9,786 10,143
Total Depreciation 9,371 12,057 20,014 21,100 22,457
% of Revenue 4.4% 1.6% 1.2% 0.6% 0.4%
Property & Equipment
Gross Asset Value 63,000 81,000 135,500 141,500 149,000
Accumulated Depreciation 9,371 21,429 41,443 62,543 85,000
Net Property and Equipment 53,629 59,571 94,057 78,957 64,000
% of Revenue 25.0% 7.9% 5.6% 2.4% 1.2%
P a g e | 38
Exhibit 18, Personnel (5 Year)
Personnel Year 1 Year 2 Year 3 Year 4 Year 5
Net Revenues 214,489 752,280 1,687,629 3,332,806 5,212,024
Sales & Marketing
Moose's Foods Outside Sales 8,000 10,000 12,500
Customer service (online) 1,200 1,440 1,728
Total Salary 0 0 9,200 11,440 14,228
Benefits
Percent (%) 15% 15% 17% 20% 20%
Total benefit costs 0 0 1,564 2,288 2,846
Total S & M Compensation 0 0 10,764 13,728 17,074
% of Revenue 0.0% 0.0% 0.6% 0.4% 0.3%
General & Administration
Chief Operating Officer, Amy Xue 6,000 8,000 16,000 35,000 60,000
CEO, Scott Lester 4,000 8,000 35,000 60,000
Secretarial 22,000 32,000
Bakery Manager 9,000 9,900 10,890 11,979
Baking Consultants (customer service) 9,000 14,400 17,280 20,736 24,883
(other…)
Total Salary 15,000 35,400 51,180 123,626 188,862
Benefits
Percent (%) 10% 10% 15% 20% 20%
Total benefit costs 1,500 3,540 7,677 24,725 37,772
Total G & A Compensation 16,500 38,940 58,857 148,351 226,635
% of Revenue 7.7% 5.2% 3.5% 4.5% 4.3%
Cost of Revenue
Manufacturing Personnel
Operations Manager (Moose's Foods) 6,000 12,000 13,000 15,600
Warehouse Worker (Moose's Foods) 4,000 4,200 8,400 12,600
Delivery/Merchandizing (Moose's Foods) 6,000 6,250 6,500 7,800
Total Salary 0 16,000 22,450 27,900 36,000
Benefits
Percent (%) 10% 10% 15% 15% 15%
Total benefit costs 0 1,600 3,368 4,185 5,400
Total Salary Costs 0 17,600 25,818 32,085 41,400
Hourly Personnel (baker)
Number of employees 3 6 8 9 10
Average wages per employee 4,000 4,400 4,840 5,324 5,856
Total wages 12,000 26,400 38,720 47,916 58,564
Benefits
Percent (%) 10% 10% 15% 15% 15%
Total benefit costs 1,200 2,640 5,808 7,187 8,785
Total Wage Costs 13,200 29,040 44,528 55,103 67,349
Total COR's Compensation 13,200 46,640 70,346 87,188 108,749
% of Revenue 6.2% 6.2% 4.2% 2.6% 2.1%
Total Salary & Wages 36,000 77,800 121,550 210,882 297,654
Total Benefits 2,700 7,780 18,417 38,386 54,803
Total Compensation 38,700 85,580 139,967 249,268 352,457
% of Revenue 18.0% 11.4% 8.3% 7.5% 6.8%
P a g e | 39
Exhibit 19, Critical Risks
Market Interest
While management expects there will be immediate demand for Moose’s Organics’ products, it
is possible that Chinese bakery and grocery customers will be unwilling to pay a premium for
organic goods. This risk will be addressed during the R&D period. Management will test
customer’s willingness to pay for goods offered by selling pre-packaged flour and baked goods
before the bakery is opened. If there is significant customer resistance, or simply a lack of
interest, management will terminate plans to open the bakery with no more than $16,500
invested.
Growth Potential
With the bakery, it is possible that revenue growth will be restricted because of limited capacity,
or restricted customer access to the bakery. To address the issue of full capacity, a baking facility
could be opened in an inexpensive park where rents are less expensive. This facility could help
supplement demand at the bakery as well as other channels.
In the case where customers cannot get to the bakery, Moose’s Foods could develop grocery
channel distribution for baked as well as dry goods. Also, local delivery is commonly about $1 a
parcel. Delivery could be arranged for customers, whether products are ordered online or
directly through the store.
Competitor Response
If Moose’s Bakery is able to generate significant customer traffic for its relatively high priced
baked goods, competitors are sure to offer competing products or make competing claims. This
is especially a concern, because Chinese competitors are known to make false claims to
compete and to duplicate successful businesses. In that case, management will hope that its
combination of unique attributes will protect it from direct competition and duplication. These
include: Access to USDA certified organic ingredients, a U.S. company and brand, original
proprietary recipes from the U.S., American spokesperson, wheat grinders in stores, and
premium pricing with no discounting.
Managerial Resources
With so many activities to take place under the COO in China, it may be difficult for Amy to do
them all well. However, the plan has resources budgeted for support staff at critical junctures in
the business’s expansion. Furthermore, the human resources plan is designed to provide
excellent training and employee retention, which should help provide trained managers to be of
support at those junctures. Finally, in year three, the plan has outlays to hire U.S. exporting
activities, which will free up the CEO to move to China to work full time with operations there.
P a g e | 40
Exhibit 20, CEO, Scott Lester, Resume
(406) 261 2539 • 2221 South 10th Street West, Missoula, Montana 59801 • [email protected]
Business Development Professional
ighly motivated individual with proven track record of effectively employing self-sufficiency, creative problem solving, leadership, and solid communication skills. History of exceeding departmental and project goals, especially in marketing and business-to-business sales.
Experienced in business-strategy implementation, account management, public relations, and project management. Seeking an opportunity to exceed expectations in a fast-growing company.
Core Competencies
New Market Development • Key Account Management • Project Management Public Relations • Employee Supervision • Marketing Strategy Execution
Career Path
Outside-Sales Manager—helped develop and execute sales and marketing strategy for a three store
appliance and cabinet business.
“Today I owe some of my best employees and my Kalispell sales manager to Scott’s hiring and recruiting efforts. I
have asked Scott to be on our board of advisors in the future.” —Chris Neater, President
Burton’s Brand Source, Kalispell, MT, 2006—2009
Recruited, hired and trained salespeople for both inside and outside sales.
Developed and executed marketing plan, including an outside-sales push which was credited with contributing to top-line growth of 15 percent in a year of industry-wide decline.
Contacted new accounts and set the bar within the company for service and profitability. In first calendar year with the company, personally led salespeople in gross profit generated.
New Media Director/Account Executive—Grew established client list for a circulation 20,000
newspaper and in 2005, assumed management of the dailyinterlake.com.
“Scott demonstrates great personal integrity and was well liked by all.” —Cindy Sease, Advertising Director
The Daily Inter Lake, Kalispell, MT, 2003—2006
Led the way to double revenues of the dailyinterlake.com in one year by going on assisted sales calls to demonstrate best practices, as well as using training, product-creation, product-enhancement, employment of interns and peer-collaboration.
Built strong relationships with clients to dramatically increase sales in newsprint advertising. Doubled revenue for an established book of business over a three-year period.
Assigned exclusively to target high profile clients, attend conferences, and train salespeople.
Helped design, test, and implement, a sales-team system within the advertising department that contributed to company-wide double-digit percentage annual revenue growth.
H
P a g e | 41
CEO, Scott Lester, Continued
Page 2
Lead Installer—Managed jobsites for preferred installation company of Tellabs’ transmission
equipment in Midwest U.S. Quest and AT&T offices.
“Of all my lead installers, you’re my best one—we’re going to miss you” --Doug Larson, Vice President Installation
Contel Inc., Chicago, IL, 2000—2001
Promoted after 3 months with the company to Crew Lead position.
At one point, simultaneously supervised 10 employees and 3 jobsites, successfully satisfying customer preferences, employee needs, jobsite deadlines, and costs.
Selected to manage Northwest U.S. pilot job, which helped win a significant amount of new business in the region for Contel.
Supervised crews were recognized for producing the highest quality jobs in the company while concurrently bringing in every job on time and under budget.
General News Reporter—Responsible for researching and writing two stories a week during a summer internship for a circulation 14,000 newspaper
Helena Independent Record, Helena, MT, May--September 1999
Researched and composed breaking news stories, business profiles, and front-page features.
Community Involvement and Interests
Civic Activities
Big Brothers Big Sisters of the Flathead Valley, 2004—2006 Junior Achievement of Helena, 1992-1996
Hobbies and Interests
Fly fishing and pheasant hunting; backpacking and multi-day float trips; international travel
Education
MBA (May 2010), BA Journalism (2003), the University of Montana, Missoula
P a g e | 42
Exhibit 21, COO, Amy Xue, Resume 1019 Poplar Street Missoula Montana 59802 - 406.750.2446 - [email protected]
PROFILE_____________________________________________________________________ MBA-track professional with educational and experiential training in environmental engineering and project management. Three-years experience aiding in improvement and supervision of Chinese governmental sponsored environmental-impact projects and negotiating contracts. Published scholar, recognized for academic excellence. Bilingual Mandarin Chinese and English. EDUCATION ________________________________________________________________ Master of Business Administration, The University of Montana, GPA 3.8, May 2011 Master of Environmental Management, Xiamen University, China, GPA 3.7, 2008 Bachelor of Environmental Engineering, Nanjing University of Tech, China, GPA 3.3, 2005 Awards University of Montana SoBA Dean's MBA Scholarship (2009-2010) SoBA Teacher Assistantship (2009-2010) Diversity Advisory Council Student Achievement Award (2009-2010) Nanjing University of Technology Scholar Awards: First Prize, 2002; Second Prize, 2003, 2004; Third Prize, 2002, 2004, 2005 Excellent League Member, 2005 Publications Xiamen University
Xue, S. (2008) Study of Public Participation in Environmental Protection. Journal of Environmental Science and Management. Xue, S. (2008). Methods of Evaluating Performance of Comprehensive Environmental Rehabilitation. Journal of Environmental Sanitation Engineering.
CAREER HISTORY ___________________________________________________________ Project Management Intern Wuxi Environmental Protection Agency - Wuxi, China, Summer 2005
Assisted with review and assessment of environmental impact projects, completion of appropriate paperwork, and processing of approval or denial of governmental contracts.
Managed on-site evaluation of approval procedures and compliance with governmental impact standards for companies contracted to conduct road construction and repair.
Assistant Project Management Intern Wuxi No. 4 Municipal Construction Co., Limited – Wuxi, China, Summer 2006
Assisted manager with on-site contractors evaluations, ensuring projects were appropriately approved, on schedule, and within budget.
Interfaced with suppliers and project directors to negotiate prices of constructing new roads and repairing roads in poor condition.
COMMUNITY INVOLVEMENT _______________________________________________ President of Graduate Student Association, University of Montana Graduate Assistant, School of Business Administration Committee member, Presidential Search Advisory Committee, University of Montana
P a g e | 43
Exhibit 22, References 1. http://www.enviroasia.info/news/news_detail.php3/C08010903C
2. http://news.u88.cn/zx/shipinzixun_wtozhuanti/688227.htm
3. http://news.qq.com/a/20100221/000899.htm
4. http://milk.39.net/yyenf/yyewycs/099/29/1014718.html
5. http://www.zhong5.cn/folder501/folder503/2009/03/2009-03-26119832.html
6. http://www.accfutures.com/detail.jsp?id=26222
7. http://www.ce.cn/cysc/zgjd/kx/200812/29/t20081229_17818779.shtml
8. http://news.sohu.com/20090304/n262598681.shtml
9. http://news.sina.com.cn/c/2006-07-19/10029507436s.shtml
10. http://news.sina.com.cn/z/wtnfyesjs2008/
11. http://www.americanchronicle.com/articles/view/85479
12. http://cpfd.cnki.com.cn/Article/CPFDTOTAL-ZGNX200109001001.htm
13. http://www.shac.gov.cn/fwzx/hwzc/ltmy/200902/t20090216_1203904.htm
14. http://www.875.cn/news/show/11363