THE ORGANIC STORE

Submitted by:GROUP 2Abdul Rehman SohailSyeda Rida RizviUsama MudassarZahra Daha

Submitted to:Mr. Salman EhsanOperations Management, Section LLahore School of Economics

The Organic StoreIntroduction:To begin with, organic food items are defined as those which are produced without the use of chemical fertilizers, pesticides, or other artificial chemicals.Our brand The Organic Store offers 100% organic meat, chicken, milk and eggs. The idea behind choosing such business is that this market is unsaturated and there are potential users of such products in the society that is evolving at a faster pace.Current Situation Analysis:The world organic market is growing steadily and, according to US Food Market Highlights of 2006, it is expected to have a market value of $15 to $100 billion by year 2030. However, the organic agriculture is still in its infancy in Pakistan [see figure 1, Appendix A]. Tremendous opportunities exist in a wide range of organic foods including fruits and vegetables, cereals and grain, beef, poultry and eggs, honey and several other processed products. This implies that with proper guidance, support and strategies, the Pakistani farmers should be capable to cater for the domestic demand and penetrate the foreign organic food markets as well.There are two international worldwide standards, the Codex Alimentarius Guidelines for organic production (FAO) and IFOAM Organic Standard. These form the basis for legislation in the EU, USA, Japan and other countries. The guidelines are intended to facilitate the harmonization of requirements for organic products at the international level, and they provide assistance to governments wishing to establish national regulations in this area.Pioneer advantage:Our brand is the first entity that provides organic meat and milk in Lahore. Therefore, we have the advantage of tapping this market segment for the first time. Further we will be able to develop a top of mind in consumers mind using the pioneer advantage.Health concern:No chemicals or preservatives are added in our products, so people who consume our product have less health risks attached with the product. Our meat does not contain antibiotics or growth hormones. Rich in taste and nutrition:Since our products (milk, meat, eggs) do not have added materials in it so they have natural taste and rich in nutrition. Fodder that is grown organically for our cattle has excess phosphorous and sodium that helps cows to give milk which is rich in calcium and meat that is rich in proteins.Need Identification: As society is evolving, needs and trends are changing and people are becoming more concerned about their health and appearance. The drive for need of organic food items recognized is the growing concern for health. The key problem that we have decided to address is to fill the gap of naturally grown products; that is organic food. Brand image: Our brand focuses on a healthy lifestyle and aims to serve quality food to its consumers. Since our major products are milk and meat, which are a part of every households expenditure, our goal is to associate a family oriented image with our brand. The degree of self-consciousness is also higher in the upper class. Moreover, the prices associated with our products are comparatively higher. Therefore, the brand image is healthy, family oriented and elite.SWOT Analysis:SWOT analysis includes strengths, weaknesses, threats and opportunities that affect the operation of the businesses. Strengths and weaknesses are internal factors to the company; whereas, threats and opportunities are external factors that are out of companys control. SWOT analysis for our brand is as follows:Strengths: Organic food is gradually gaining importance in Pakistan. Our products are rich in minerals, fiber, vitamins; and provide high energy. Unlike other food products available in market, our products are chemical free with higher nutrient content. Organic milk and meat are the products that are new in the market, hence, provide people a new experience. These products have never been introduced in the market.Weaknesses: In Pakistan, people are generally unaware about organic food concept and its consumption in packaged or branded form. It becomes a little challenging to change the rigid mentality of people in Pakistan. Since the concept of organic food is new, it might take some time for people to switch especially when it comes to the consumption of readily available products like eggs.Opportunities: As more and more people are getting health conscious in Pakistan which is evident from the rapid increase in the number of gyms and diet products, the organic minded consumers in Pakistan have limited number of choices of organic food. In Pakistan, food habits are changing and so are standards of living. There is a great room for expansion in the organic food market. Nilofer Saeed set the trend in the restaurant industry by offering dishes with purely organic ingredients in Necos Caf in Karachi. Becoming a supplier of such restaurants can be an opportunity for our brand in future.Threats: Since organic food is comparatively costly than the other food products, price sensitive consumers might hesitate. Sungold Organics is a label that caters chemical-free and naturally grown vegetables, salads, organic bread and eggs. This can serve as a possible threat to our organic food products. The Organic Meat Company is a processor and exporter of halal meat around the world. They are currently serving clients in Iran but can act as a future threat to our brand by extending their product line in Pakistan. People like Mariam Ibrar and Samiya Mumtaz took an initiative with Daali Earth food to enter the organic food market. Daalis organic products are available at various departmental stores in Lahore, Karachi, Islamabad and Faislabad.PESTEL AnalysisIn order to identify the barriers, we have conducted PESTEL (Political, Economic, Social, Technological, Environmental and Legal) Analysis.Political factors:Considering the organic food business, tax policies are an important factor as taxes are imposed on the land where the farming is done. The stability of government in a state is very important for any business. If businesses wish to export then they also have to consider the government regulations about the exports. Talking about Pakistan, government is not stable and frequent fluctuations in the rules and regulations can affect our brands operations.Economic factors:Economic conditions of our country are not satisfactory as inflation and recession are ongoing problems, leading to a decrease in the purchasing power of the consumer. The consideration of these factors would be reflected in our brand decisions. For instance, if we plan to go for loans for expansion or to meet our requirements, then the interest rates, fiscal and monetary policies will affect our costs and eventually the brand.Social factors:Our concern for nature and environment would give our brand a socially responsible image. Products that we offer would benefit our customers and hence eradicate any threat imposed on society. Corporate Social Responsibility (CSR) will be in practice in order to account for our concerns for the environment and society at large. Our packaging will also reflect this philosophy, making our brand more acceptable. Consequently, people will value our products as they have become more concerned about the world they are living in.Technological factors:Technology plays an important role when it comes to slaughter house machinery, automatic sheds, and milking equipment, etc [see Appendix C]. Hence, it becomes crucial for our brand to take all the considerations like budgeting and importing such heavy equipment.Environmental factors:Environmental implications of our brand are quite positive, since we are not using any artificial or harmful methods which will erode the fertility of the soil. Natural methods like dunk piles would be used to control pests and accelerate growth of our fodder. Threat of harmful by-products; which are commonly generated by the industries, will be eliminated as all the production methods are natural. Here again our packaging gives an environmental friendly image which would be basic and easy to dispose off. The Organic Store would be a healthy brand which cares about the nature and environment.Legal factors:For any business, legal processes and regulations are vital for its smooth functioning. Legal factors include the certification, licensing and discouragement of making false claims. In Pakistan, for corporate agricultural farming (CAF), the Securities and Exchange Commission of Pakistan (SECP) issues licenses. If any false claims are made, the business can be stopped from functioning according to the Companies Ordinance that applies to the all businesses and sectors. Beside this, following agriculture related activities are included in CAF under the approved policy package (SECP, 2010):i. Land development/reclamation of batter land, desert and hilly areas for agriculture purpose and Crop farming ii. Reclamation of water Front Areas/Creeks. iii. Crops, Fruits, Vegetables, Flowers Farming/ Integrated Agriculture (Cultivation and processing of Crops).iv. Modernization and Development of Irrigation Facilities and Water Management. v. On farm construction of wheat/grain storage and construction of cold storage for captive use (not on commercial basis).Target marketGoing ahead, our objective was also to target those people who were very health conscious and also those who work out in gyms and clubs but dont know what food they really have to take in order to get maximum health benefits. We also want to create health awareness in our target market and by telling them the importance of organic food for their healthy lives.Taking into consideration the high prices we will be charging, the area that we have identified to cater for only constitutes DHA and Gulberg. Organic food consumption is not targeted to the lower and middle class due to its comparatively higher prices. The degree of self-consciousness is also higher in the upper class.The target market that we have identified has the resources, wants to spend, but either lacks awareness or doesnt have the desired products. We are providing naturally grown and home made products under the brand name The Organic Store, which would satisfy the needs of those people.Segmentation: Segmentation for our brand is done on the basis of:1. DemographicsThe profile of the consumer that we have constructed keeping in mind the quantifiable factors include: Social class: A1 and A2. Wealthy and elite. Education: High education level. Income: Disposable income of Rs. 50,000 and above for single earner and Rs. 100,000 and above of family income.2. Psychographics:This dimension includes the factors like personality, AIOs (attitude, interests and pinions), and lifestyle. Personality: Traits like caring, self and health conscious, class conscious, quality seeking. Lifestyle: Classy, social, and posh life style where individuals work and balance social lives. Interests: Exercising, good and nutritious food lovers. Attitude: Less price sensitive, product choices on the basis of nutritional benefits, perceiving high price products as good. Positive attitude towards healthy products and rationalizing consequences of junk food. Opinions: A group sharing opinions like healthy diet for active life style and frequently communicating those opinions among social circles and reference groups.Products and Relative PricesThe products that we are introducing are organic meat (red & white), eggs and milk. Meat Milk: The milk that we are providing is 100 % organic. The fodder that the cows will eat is grown organically. Eggs: Since our chicken is 100% organic, eggs are produced without feeding the chicken with processed feed.The approximate price list of our products is in figure 2; Appendix A. Prices are determined by using competitors prices as the reference price.ProductionThe supply chain for our company is shown in Appendix B.Budget allocated for land and outlets:The organic store will use a land of 200 canals (25 acres) near Raiwind Road. This land will be used for setting up cattle sheds, cultivated farms, storage rooms, slaughterhouses and milking sheds. In the initial phase the organic store will open its outlets in Defense Y-block and Gulberg Main Boulevard. The costs are shown in figure 3, Appendix A; and we have acquired the price list from two sources. Source 1: Bilal Razzaq Qureshi, Bilal and company (2013). Source 2: Zameen.com, 2013 .The total budget allocated for land and outlets sums up to Rs. 65 million.Budget allocated for cattle, poultry and milking sheds:The Organic Store has plans to build an automatic poultry shed with capacity for 25,000 chickens. Initially we are going to grow only 12,000 chickens but after forecasting for future demands it is feasible to build a shed that has at-least capacity of 25,000 chickens. For goats and cows 15 separate automatic (that controls temperature, feed requirements, and lightening) sheds will be built. Each shed will have a capacity of at-least 100 cattle in it. Besides these livestock sheds, we will build two separate sheds with capacity of milking 100 cows at a time. Automatic milking machinery will be installed in these sheds. Source: Bilal Razzaq Qureshi, Bilal and company (2013). The total budget for sheds sums up to Rs. 44 million.Budget allocated for buying of cattle and poultry:Initially for meat, The Organic Store will buy cows and goats that will be just two months old. To make their meat organic, these cattle will be grown at our farms with organic fodder. Similarly, chicks will be bought from the markets that are only 5 days old. They will be then grown at our poultry farm with organic feed. In every 20 days a chick is converted into hen having weight of 1.1 kg. For milking purpose we will buy 100 cows from the market. These cows will be fed with organic fodder, and the milk produced by these cows will be eventually organic. Source: Bilal Razzaq Qureshi, Bilal and company (2013).The total investment required to purchase initial cattle and poultry sums up to Rs. 31.96 million. In future the organic store has plans to produce its own animals by the breeding of previous ones. Budget allocated for slaughterhouses:The Organic Store will construct its own separate slaughterhouses for cows, goats and chickens. Keeping in mind the cultural and religious values of its customers, the slaughter houses will be designed in a way that animals are slaughtered by human hand and rest of the processes like making pieces, mincing, and packaging are done through machines. Source: Bilal Razzaq Qureshi, Bilal and company (2013). The total budget allocated for slaughterhouses sums up to Rs. 50 million.Budget allocated for transportation vehicles:The Organic Store will buy Dongfeng Meat Transport Refrigerated Trucks for the supply of meat and milk from farms to its outlets. Because of their small size these mini trucks are also convenient and faster for transportation within city. The luggage cabins will be fully refrigerated so that milk or meat may stay fresh for long. Further Suzuki Bolan Euro 2 will also be purchased for the transportation of employees and officials. The sources, from where we have taken the information, are Pakwheels.com, 2013; Alibaba.com 2013. The total budget allocated for transportation vehicles sums up to Rs. 17.76 million.Budget allocated for growing organic fodder:To produce organic milk and meat cattle should be fed with organic feed. For cows and goats we are growing our own fodder through organic ways. We will not use any fertilizer or any pesticide. The yield of a crop grown without fertilizer is 30 percent less than the yield of crop that is grown with the use of fertilizer. We will use traditional and natural ways to kill pests that will be environment and crop friendly. For chickens organic feed is available in the market. The organic fodder costs us Rs. 22/kg and organic chicken feed costs Rs. 11.76/ chicken daily. Source: Bilal Razzaq Qureshi, Bilal and company. 2013.Total monthly budget allocated for organic fodder and feed sums up to 16.14 million.Profitability:Since the initial investment is large, it can be estimated that it will take our brand a few years e.g. 2-3 years, to cover its start up costs. In addition to this, as the company will be spending heavily on advertisement, for the purpose of creating awareness regarding the availability of organic products; it will take our company a few years to gain the market share and become profitable.In future years, the company will become profitable, after tapping the segment in which health concerns are growing and after gaining a significant market share in the meat and dairy industry. A forecasted income statement is generated [see figure 4, Appendix A], with the help of adopting a profit and loss statement of Whole Foods Market Inc., to show the potential of The Organic Store to generate revenue and become profitable. Conclusion and Recommendations:In a nutshell, we may conclude that the growing organic markets abroad provide an ideal opportunity for the Pakistani farmers to compete and establish their niche in the overall world market. Considering the growing size of the world organic market and the strengths of the Pakistani agriculture, we can safely infer that there exists a strong market potential for Pakistani organic produce to penetrate, expand and consolidate its share in the markets abroad.In order to be profitable in the future, there would be a great need to initially advertise our brand and our products. Despite the fact that there are potential buyers of organic meat and dairy products, these customers are not aware of the availability of such products. Therefore, use of conventional media and other communication tools like direct marketing, PR and publicity and sponsorships will be used in the upcoming years in order to create awareness for organic food, further boost our sales and to maintain our image in the market.

References SECP (2010). Available at: http://www.secp.gov.pk/ Pakwheels, (2013). Available at: www.pakwheels.com Zameen.com (2013). Available at: www.zameen.com Alibaba. Product sales. Available at: http://www.alibaba.com/product-gs/505240439/Curved_Glass_refrigerator.html/.

Qeemqt (2012). Hyundai. Available at: http://www.qeemat.com/toyota-hiace-commuter-2012-price-in-pakistan/ Bilal Razzaq Qureshi, Bilal and company (2013) PILdAt. 2011. Taxing the Agriculture income in Pakistan. Available at: http://www.pildat.org/publications/publication/EcoFinance/BP42-TaxingtheAgricultureIncomeInPakistan.pdf. Stiftung Oekologie und Landbau-Survey, February 2012 Financial Statements For Whole Foods Market Inc (WFM). Available at http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=WFM

Appendix A

Figure 1 Source: Stiftung Oekologie und Landbau-Survey, February 2012

ProductPrice1

Organic Milk100 (per liter)

Eggs 150 (per dozen)

Mutton:

Mutton chest800 (1 kg)

Mutton neck800 (1 kg)

Mutton chops810 (1 kg)

Back chops800 (1 kg)

Mutton shoulder820 (1 kg)

Mutton leg850 (1 kg)

Mutton paya300 (per piece)

Mutton mince840 (900 gm)

Mutton boneless cube810 (900 gm)

Beef:

Beef with bones410 (1 kg)

Beef silver side550 (1 kg)

Beef chops440 (1 kg)

Beef leg440 (1 kg)

Back chops440 (1 kg)

Nehari cut (leg)480 (900 gm)

Nehari cut boneless550 (900 gm)

Beef steak600 (900 gm)

Strip line steak700 (900 gm)

Beef mince500 (900 gm)

Beef boneless cube550 (900 gm)

Beef eye round700 (900 gm)

Chicken:

Full chicken340 (1 kg)

Biryani cut355 (12 pieces)

Quorma cut355 (16 pieces)

Karahi cut355 (18-20 pieces)

Drum stick449 (1 kg)

Neck179 (1 kg)

Thai chops420 (1 kg)

Chicken wings217 (1 kg)

Breast with bone399 ( 1 kg)

Leg with bone399 (1 kg)

Desi chicken600 (1 kg)

Figure 2 Price List [Source: Zameen.com, 2013]

Figure 3 CostsCategoriesTotal cost(million)

Farm land30

Outlet Rent(per annum) 24

Interior designing6

Curved glass refrigerated racks(30 racks)45

Source: Bilal Razzaq Qureshi, Bilal and company. 2013. Zameen.com, 2013

CategoryNo. of shedsCost per shed(million)Total cost(million)

Poultry155

Cows(meat) 61.59

Cows(milking)2918

Goats 81.512

Source: Bilal Razzaq Qureshi, Bilal and company. 2013.

Category Unit cost(Rs.)Units to be purchasedTotal cost(million)

Cows(milking)250,00010025

Cows (meat)70005003.5

Goats 40008003.2

Chicken(broiler) 2010,0000.2

Chicken(desi)3020000.06

Source: Bilal Razzaq Qureshi, Bilal and company. 2013.

Category Cost (million)

Building (Combined)10

Cows:

Machinery15

Installation 2

Goats:

Machinery10

Installation 2

Chicken:

Machinery10

Installation 1

Source: Bilal Razzaq Qureshi, Bilal and company. 2013.

Category Unit cost(million)Units to be purchasedTotal cost(million)

Dongfeng Meat Transport Refrigerated Truck2.5615

Suzuki Bolan Euro 20.6942.76

Source: Pakwheels.com, 2013Alibaba.com, 2013

Category Unit cost(per kg)Units to be consumed(kg)Total animalTotal monthly cost(million)

Cows(milking)22401002.64

Cows(meat)22165005.28

Goats 2278704.0194

Chicken 5.83212,0004.1976

Source: Bilal Razzaq Qureshi, Bilal and company. 2013.

Figure 4: Forecasted Income Statement

Appendix BSupply Chain

Figure 5 Supply ChainAppendix C

Figure 6 Machinery

Appendix D