The proposed business is ‘Living Foods,’ which will produce and sell microwaveable healthy grilled-food items in the UK. The business owner is Mr. XYZ who has worked for more than seven years in different food companies. He has mastered the art of cooking and has developed amazing recipes which have been tried and tested by many consumers at various food festivals and conferences. The proposed company will be a sole proprietorship, and it will be set up in Newbury, Berkshire. The business will operate a complete cooking and production unit and sell its products via online and retail channels. The competition in the market is intense and mainly based on the pricing of products. The company will bring innovation to the food sector by introducing new products. It is anticipated that the business will generate growing sales in the months after its inception. It will generate a small profit in the first year of operations, which is expected to increase significantly in the second and third year.
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The proposed business will be a ready-made healthy food company that will sell microwaveable ready meals including healthy grilled meats and vegetables. The suggested business name is “Living Foods,’ and it will be located in Newbury, UK. A light industrial unit that has almost 3,700 sq. ft. of space will be rented out to carry out the business operations. The reasons for selecting Newbury for this business are its proximity to London which is the largest sub-market in the UK and easy access to distribution channels. The management has identified the following keys to the success of the proposed business.
- Highly nutritious, delicious, and healthy food products.
- Giving priority to customers’ healthy eating and lifestyle.
- Generating strong financials and growth.
The mission of Living Foods is to become a leading microwaveable healthy food brand in the UK.
The business will be a sole proprietorship to be owned and managed by a single individual. The benefit of this form of business is that it is easy to set up and the owner has full control and can withdraw all profits without sharing. However, it has drawbacks as the entire responsibility of the business is on the owner, and it could be difficult to obtain additional financing if required (Miller 2016). This form of business is selected as the owner wants to maintain full control of decisions and outcomes. The owner has a clear plan to launch this business and achieve the best results. He will use personal equity to raise finance for the proposed business. Furthermore, a bank loan will be sought from a local bank in the UK.
The objectives of the proposed business are given in the following.
- To become a reputable healthy food brand in the UK market.
- To produce, package, and deliver healthy food by adopting environmentally sustainable practices.
- To secure a retail space in different stores including Tesco, ASDA, and Sainsbury’s.
The primary target market is the United Kingdom (UK) which is a major economy in Europe, and it produces 60% of its food requirements. The country held a referendum to exit the European Union in 2016. It has adversely affected the value of the British Pound and has increased the cost of business operations. Moreover, consumer prices have also risen (Central Intelligence Agency 2018). The company will target young individuals who are in the age group of 18-34 years. These customers are health cautious and have a high disposable income. Moreover, they are educated and understand the importance of a healthy lifestyle (Dunne and Naden 2015). Although the production facility will be set up in Newbury, the company will distribute its healthy frozen products throughout the UK.
There are eight significant competitors including Tesco, Sainsbury’s, Morrison’s, and Ocado, etc. All of these companies have a separate product line of prepared healthy foods in their stores. These companies compete on prices and provide a wide range of healthy food items. However, it is noted that these companies lack a focus on innovation in the food sector. The new business will target a particular segment in the market by focusing on grilled low-carb healthy products that are expected to generate high demand from consumers.
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It is indicated that the competition in the UK market is intense and the key to success is selling high-quality food as per the expectations of health cautious customers. The new business will produce and sell healthy and delicious recipes that the owner has developed over the years and tried while working in different food companies in Manchester and Berlin. The owner is confident that the new business will be successful as consumers want to try out new flavors and healthy options.
The objective of the proposed business is to bring flavors from different parts of the world and produce delicious and healthy food for health cautious consumers. The new business will produce healthy grilled meats and vegetables which will be packaged in microwaveable boxes. The owner personally developed all recipes. The packaging will provide details of all ingredients along with the total calories per item.
Marketing Strategy and Activities
The marketing strategy will encompass decisions related to the 4Ps of the marketing mix, which is described in the following.
Price: The new business will follow the competitive pricing strategy which implies that a low-profit margin will be earned.
Product: The company will produce microwaveable grilled healthy-food items for health cautious customers.
Promotion: The company will offer various promotional deals such as a discount on multipack purchases or new products. The business will be promoted through social media including Facebook and Pinterest. Furthermore, the company will carry out marketing through printed media such as various food magazines including New Food Magazine and Food and Drink News Magazine. The company will also use SMS and e-mail marketing tools. Moreover, the owner will also participate in different food-related events to promote the new business.
Place: The business will operate in Newbury and sell its products throughout the UK.
Sales and Operations
The company will sell its products to different small and large retail stores. The owner will manage the new business. However, its operations will be managed by the Production Manager and Quality Controller who will be hired after the approval of a bank loan. The inventory manager will be responsible for managing and controlling inventory. The quality controller will manage kitchen operations and ensure food quality and consistency. The owner will perform managerial responsibilities including compliance with UK Food Safety Regulations, accounting, and tax management. The production manager will implement safety standards and provide training to machine operators. The company will also hire loaders and a cleaner to support production and other operations. It will also develop an e-commerce website and deliver its products directly to consumers. The owner will contract with a food delivery company – NFT (nft.co.uk) to provide logistics services.
The owner has used the following assumptions for preparing a sales forecast.
- The company will use a competitive pricing strategy.
- The company’s sales will significantly increase after it secures a purchase order from the first major retailer. However, they are expected to increase in the first 12 months gradually.
- The owner expects to sign a contract with a major retailer by the end of the first year of operations.
- The company will achieve a 30% increase in sales in 2020 and 2021.
- There are two sales channels identified for the first year of operations including online websites (40%) and small retailers (60%).
- The expected inflation rate in 2020 and 2021 will be 1.95% (Statista 2018), which will increase the cost of sales.
Table 2 provides the sales forecast including sales and direct cost of sales.
|Direct Cost of Sales|
|Subtotal Direct Cost of Sales||16,000||15,200||14,800||14,000||13,600||14,400||15,200||15,400||14,800||14,400||14,000||14,800||176,600|
Table 1. Sales Forecast.
The new business will be located in Newbury, Berkshire, and the yearly rent of the selected commercial property is estimated to be £42,000 per annum. The property is suitable for the production unit. However, it requires a significant investment in leasehold improvements. The start-up will require business registration, licensing, and approvals from the food regulatory authority. The premise will be rented on an annual basis.
Moreover, the Production Manager and Quality Controller will be hired In January 2019 to start working on the project with the owner. The company’s production and sales will start on July 1, 2019. Table 3 provides details of the initial funding requirements.
|Production Manager Salary (6 Months)||9,000|
|Quality Controller Salary (6 Months)||9,250|
|Business Registration and Licensing||6,500|
|Trial and Testing||10,000|
|Start-up Assets to Fund|
|Inventory Management System||1,200|
|Customer Management System||850|
|Additional Cash Reserve||25,000|
|One-Year Payroll Expense||161,100|
|Total Funding Requirement||313,400|
Table 2. Start-Up Costs and Expenses.
A bank loan will be sought for a 5-year term, and the interest rate is estimated to be 3.94% per annum. The company will pay off the principal amount after five years.
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The owner will not withdraw funds from the business but instead receive a salary of £22,000 per annum in the first year. The company will also hire ten individuals for different roles including Quality Controller, Production Manager, Machine Operator, Marketing Manager, Inventory Manager, and Cleaner. The personnel plan including details of salaries is given in Table 4. All salaries are expected to increase by 4% in the next two years.
|The owner (Salary)||22,000||22,880||23,795|
|Machine Operators (3)||48,000||49,920||51,917|
Table 3. Personnel Plan.
The income statement for the first three years of operations is provided in Table 6. The equipment to be purchased has a useful economic life of 20 years, and its value will be depreciated by using the straight-line method. Other assets will be depreciated over their estimated useful life of 10 years.
|Year 1||Year 2||Year 3|
|Cost of Sales||176,600||234,034||304,244|
|Earnings Before Interest||43,550||109,692||202,430|
|Earnings After Interest||38,611||104,753||197,491|
Table 4. Income Statement.
Cash Flow Statement
The cash flow statement for the first three years of operations is provided in Table 6.
|Year 1||Year 2||Year 3|
|Collection from Sales||441,500||573,950||746,135|
|Cost of Sales||176,600||234,034||304,244|
|Net Cash Flow||36,439||76,402||132,045|
|Ending Cash Balance||222,539||304,806||467,907|
Table 5. Cash Flow Statement.
|Balance Sheet||Year 1||Year 2||Year 3|
|Liabilities and Equity|
|Total Equity and Liabilities||344,649||417,800||546,595|
Table 6. Balance Sheet.
Strengths and Risks
The major strengths of the proposed business are listed in the following.
- The owner has worked in the food industry for more than seven years.
- The owner has developed unique food recipes from different parts of the world.
- The demand for healthy food is increasing (Wells 2017).
The proposed business also faces certain risks which are highlighted in the following.
- The competition is intense in the food market.
- It is crucial to maintain the quality of food served and mismanagement of other factors such as customer service, food storage, fire safety, and hygiene can also affect the sustainability of operations.
- Poor customer feedback can destroy the brand image.
Living Foods is a healthy food manufacturing company which will be located in Newbury, UK. The company will produce delicious and healthy microwaveable grilled food items. The business will start its operations in July 2019. The company will operate as a sole proprietorship and target young consumers through its online and retail network. Based on the market analysis and demand for healthy food, it is projected that the new business will generate a small profit in the first year. The business will have sufficient cash flows to invest in the expansion of its operations in the UK after three years. There are few risks related to the business that are identified in this plan, which requires careful planning and controls.
List of References
Central Intelligence Agency. Europe: United Kingdom. Virginia: Central Intelligence Agency. Web.
Dunne, D. and Naden, T. Marketing to health-conscious ‘millennials’. Surrey: PMGroup Worldwide Ltd.
Google Maps, 2018. Newbury Google Maps. California: Google LLC. Web.
Miller, R. L., 2016. The legal environment today – summarized case edition: business in its. 8th edition. Stamford: Cengage Learning.
Statista. United Kingdom: Inflation rate from 2012 to 2022 (compared to the previous year). Hamburg: Statista.
Wells, L. UK shoppers increasingly buying healthy food, finds the report. Croydon: Talking Retail.