An interesting sample business plan – Part 1: Build a soy milk processing plant

In this article, I share part 1 of a comprehensive business plan on the establishment of a soy milk processing plant in Northern Tanzania.  The plan is well documented, supported by weeks of research data and accompanied by necessary financial statements. You can recycle this plan to suit your needs or use as is and only refine the financials.

Our previous article looked at the fundamentals of a sample business plan. Should you choose to write your own business plan and have questions or if you need help preparing one for your business idea, leave a comment or contact me directly and I’ll respond within 48 hours.

SAMPLE BUSINESS PLAN (AGRI-BUSINESS) – SOYA DELIGHTS LTD

1. EXECUTIVE SUMMARY

In the realm of “plant-based beverages” SOYA DELIGHTS wants to be at the forefront. If it’s a term you have never heard, it is a product you have surely seen.

Do you know your farmer? Do you know your food? For many consumers, the answers to these questions will be “No.” By educating consumers about the benefits of soybeans and soy products SOYA DELIGHTS LTD will help the public make educated decisions and keeping agriculture a relevant part of their daily lives.

For the skeptic, it would not be too far-fetched if you thought of soy as meat, milk, cheese, bread and oil at least from an oriental perspective. I intend to make you see soy as the “Cow of the field”, or “Gold from soil”. Being a versatile crop with innumerable possibilities, soybean can support many agro-based industries. This project is dedicated to providing low cost food solutions primarily soy milk and its derivative soy foods, already well known for their nutritional value, functionality and the sustainability of their agriculture and production.

Some would put forth an eloquent analogy that, “Soy ice cream is to real ice cream as a vibrator is to sex.” Still enjoyable, but just not the same. We don’t claim it differently; however, with some, the diary air is not that pleasant. What if you just can’t digest lactose? What would you give for an organic, diary-free, chocolate-flavored (mocha) fudge, creamy gluten-free vanilla or agave-sweetened blissful mint?

Milk is an important source of proteins, vitamins and minerals. Although the general public is usually aware of the importance of milk and milk products, per capita milk intake in Tanzania of 40 liters/annum¹1Use of locally available flavoring materials in suppressing the beany taste in soy milk by Henry S. Laswai, Thonya, D. Yesaya, V.C.K. Silayo, K. Kulwa, J.J. Mpagalile, W.R.W. Ballegu is low. This is mainly due to low milk production, prevalent animal diseases, unaffordability by a majority of low income households together with unavailability.

Many parts of Tanzania cannot support livestock keeping. This makes it difficult for many households to rely on milk from animals for feeding children. In this regard, they rely on other foods for such children and this practice cannot cater for the infants who cannot eat solid foods. Therefore cow’s milk substitutes like soy milk become necessary but difficult to obtain.

Soy milk shows a bright future due to recent promotions of its production, processing, utilization and marketing in Tanzania. Bulk sales of soybean to the food industry (as for use in baked foods or in fast food establishments in place of milk) also hold great promise, with many opportunities for innovation as a dairy extender or analogue. Using soy milk in Third World countries will decrease losses of precious foreign exchange used on milk imports.

Furthermore, it will allow the implementation or expansion of feeding programmes for nutritionally at-risk infants and school children, decrease costs and increase protein availability for the general population. It will also aid in the potential establishment of new soy milk plants and related jobs, prevent problems of lactose intolerance, aid the prevention of heart, cancer and bone diseases and help combat chronic milk shortages.

Soy milk is growing in popularity for those who don’t consume animal products or for people who just want to eat better and it is being marketed as an alternative to cow’s milk. It is cheap and a majority of low-income households in rural Tanzania could afford it. Although soy milk has different nutritional properties, it is marketed as though it was a milk product possessing similar nutritional properties as cow’s milk. Despite these marketing efforts, little has been done to assess consumer perception of soy milk as cow’s milk substitute.

Despite the wide variety of uses, soy milk is still not consumed to the extent expected, due to the undesirable beany flavor. Acetaldehydes, acetone and n-hexanal are the major carbonyl compounds found in soybean. N-hexanal has a low flavor threshold and is believed to contribute to the beany flavor. It is believed to be a product of oxidation of polyunsaturated fatty acids by oxygenase. Many of the flavors found in soybean products, particularly soy milk may be generated enzymatically by lipoxygenase, resulting during the initial grinding step.

Soy and Health

In comparison to many of today’s major food sources, soybeans are truly a nutritional superpower. They contain the highest amount of protein of any other grain or legume, and substantial amounts of fat, carbohydrates, dietary fiber, vitamins, minerals and a virtual drugstore of phytochemicals useful for the prevention and treatment of many chronic diseases.

Currently, a great deal of research is being conducted to investigate possible health benefits of soy from combating Childhood Obesity, helping Weight Loss through Dietary Fiber, Weight Loss & Breakfast, avoiding Fad Diets, Heart Health against Heart Disease, Omega-3’s, keeping Blood Pressure balanced, Menopause, aiding Pregnancy, fighting Breast Cancer, Isoflavones against Cancer, Prostate and Colon Cancer and Diabetes.

SOYA DELIGHTS LTD takes pride in enriching the lives of consumers throughout Tanzania with the distinctive qualities of its soy foods and beverages. We look forward to growing from humble beginnings to become a company that provides a comprehensive range of soy foodstuffs, superb dining, and effective biotechnology. We are constantly searching for new recipes to enhance the flavors of our soy products most of them based on Western and Oriental cuisines, but drawing on local experience to satisfy conservative African tastes.

Superseding these activities is a higher goal of contributing to the health and happiness of the communities in the areas in which we operate.

The fact that soy milk does not taste the same as cow’s milk poses many challenges regarding acceptability. A study was, therefore, conducted to assess suitability of different soybean varieties cultivated in Tanzania for soy milk production and further investigate the effect of blending with pineapple, banana, lemon grass, and honey or sugar on acceptability of the resulting blends.

2. BUSINESS DESCRIPTION

2.1  Definition of Business Concept

The business project is about installing a soya beans processing unit that produces and sells Soya products and foods. Soya Delights’ food production will use aqueous extraction processes resulting primarily in dairy alternative products and derivatives including soy- based beverages, yogurts, tofu, desserts, spreads, etc. It would be a gross understatement to call the market for soy foods “diverse”. The potential is gargantuan!

We are talking whole families especially with active members, oriental populations, vegetarians, lactose intolerant persons, diabetics, school feeding programs and feeding centers, athletes, pregnant and nursing/lactating mothers, the elderly, grown-up children, babies, infants – it is significant that Chinese infants weaned using soybean milk in lieu of cow’s milk are practically free from rickets! – Under-malnourished groups, orphanages, refugee camps (as a food supplement), HIV-affected groups, patients with heart problems, cancer and appetite disorders.

2.2  Investment Cost and Financing Plan

Investment cost – The initial project costs are estimated at around USD 35,000. The project is set up as one integrated unit. The capital investment for the proposed unit with one soya milk maker is from USD 10,000 to cover machinery (including taxes and duties), facility and  initial operating costs. There are some costs associated with installing or consuming  electricity or running water; a tofu maker and an extra soy milk machine; these would amount to USD 7,000.

To process the beans, a soya bean storage, dehuller, binder, extruder, dryer- cooler, pin mill, boiler, water treatment and lab will require USD 18,000. Sources of funds – Options we’ll consider besides private equity are investor equity, grants (the BDG grant would nearly half the finance needed), donor funding and short-term bank loans.

2.3  Collateral Arrangements

The founder will consider putting up two plots of land for collateral as regards bank credit should the need arise but the investor equity option will be pursued preferably in line with the company’s expansionist vision of later listing with the stock exchange.

3. COMPANY DESCRIPTION

3.1  The Vision

To deliver our consumers the world’s highest quality and best tasting healthy soy based food and beverage products.

3.2  The Mission Statement

Soya Delights will be East Africa’s leading branded manufacturer and distributor of healthy soy based food and beverage products, delivering profitable, sustainable growth to our shareholders.

3.3  Legal Status

Soya Delights has secured a Certificate of Registration and Extract and will be licensed as SOYA DELIGHTS LTD but is yet to acquire trading status or identify with the Tanzania Revenue Authority.

3.4  Profiles of Key Principles

The firm will boast an array of young professional whose experience in processing, quality control, development of products, CRM, logistics and storage in agri-business industries, combined with relevant academic training, background and entrepreneurial tendencies put me

in a favorable position to develop this idea which has been explored experimentally with very encouraging results. Reputable board members will complement management.

4. INDUSTRY ANALYSIS

4.1  Industry Overview

The Food Industry is one of the largest industries in Tanzania and is also one of its most profitable sectors. The relatively huge size of the industry is manifested in the countless food chains and food products that can be found in the market. The industry lies somewhere in between the early growth and the late maturity phase.

Soy foods require extensive promotional activities on the national level to make them popular. The leading regions for soybean production are Ruvuma, Mbeya, Rukwa, Iringa and Morogoro. It is early days with soybean processing and utilization capacities in Tanzania. To date, there are at most five large scale soybean extruding machines each with a 2,000 ton annual capacity compared to the two million annual production potential. Recently, many small scale soybean processors have emerged; they are manufacturing foodstuffs for consumption.

The common recipes at household level are soybean porridge, soya ugali (stiff porridge), soybean biscuits, soybean cakes, soybean vegetable relish (similar to groundnut vegetable relish), soy milk and soyee (soybean coffee). Despite the fact that these small scale processors do contribute to utilization of soybean, they cannot contribute significantly to exploitation of the existing potential. Therefore medium and large scale investment is required. Most soybeans from leading global producers are genetically modified. Soya Delights plans to be thoroughly organic in line with national policy which discourages GM foods and products.

4.2  Product / Service Description

Soy milk – It is a creamy, milk-like product made by soaking soya beans in water, then grinding the soaked beans in water, cooking and straining. The pulp is separated from the milk by filtration. It is generally opaque, white or off-white in color, and approximately the same consistency as cow’s milk. In some countries, it is marketed under the name soy drink, the term milk being reserved for real dairy products. The firm will apply various fruit flavors such as mango, strawberry, pineapple, and coconut. Soya milk could be packaged in plastic bottles, and yogurt in plastic pots.

Tofu / Tokwa and its derivatives such as tofu curds, tofu burgers, tofu brochettes and tofu  pizza – Tofu is the most popular among all soy products. Also called soy paneer (in India) and bean curd it is a tasty and very nutritious product made by coagulating hot soy milk with some food grade chemicals such as calcium chloride, magnesium chloride, calcium sulphate, acetic acid and citric acid etc. and then pressing the resulting curds into blocks. The making of tofu from soy milk is similar to the technique of making cheese from milk. Soya Delights LTD will market frozen and flavored Tofu. Tofu is the perfect and least expensive substitute of milk cheese or paneer.

Okara – This is the undissolved residual portion left after extracting soy milk from soybeans during the process of making soy milk. Okara is rich in protein and fiber and is mainly used in the preparation of biscuits and other bakery items and for the thickening of soup and gravy etc. Okara is also used as a main protein source in cattle feed.

Soy milk powder / Soy flour – This is concentrated and dried form of soy milk that is prepared after its evaporation and spray drying. This powdered soy milk is used to prepare baby food and nutritious bakery and confectionery items.

Soy yogurt – Good quality acceptable yogurt can be made with soy milk, salt, and sugar and can be made the same way as dairy yogurt.

PinIce Creams & Frozen Desserts – These have recently grown very popular. Soy-based creams are low fat and cholesterol free, a healthy alternate to ice cream, very economical, have excellent acceptability potential and can be home-made.

Soy custard (taho) – soft, sweet, creamy soy custard is served chilled with a sweet, thick caramel sauce, a thin syrup laced with ginger, or served mixed with fruit, honey or sugar syrup and chunks of coconut jelly. Soya Delights LTD will serve flavored chilled taho and intends to make powderized taho in the long run.

4.3  Business Environment Scanning-SWOT Analysis

Marketing strategies will incorporate visual elements easily noticed and eye-catching to the consumer on the selling attire, neon banners and distinctive branding; participation in mass events such as fairs, exhibitions and marches to create goodwill for the brand and foster public relations. Offering customers the opportunity to place a deposit on glass bottles, and then encouraging them to return these for a deposit refund will probably reduce packaging costs in the short term rather than incur costly expansions to finance an increase in volume. A sterilizing component will accompany this creative packaging solution to meet health standards.

4.4  Business Positioning

The idea of “beany” milk does not sit well with traditionalists or conservatists. Rather than being perceived as an idealist with imaginative concepts, Soya Delights wants to be seen as energetic, affordable, a pioneer and leading supplier in nutritious foods.

5. MARKET AND MARKETING

5.1  The Market Definition

Soya milk, tofu and yogurt are suitable food products for all members of households concerned about their nutritional status/ health-conscious, those that adore custard-based products especially children and students, young professionals, workers and elders leaving in urban or rural areas where nutritious food is scarce. The soya products could be supplied as well to individual households, restaurants and hotels.

Soya Delights will be more successful targeting niches where bigger brands can’t effectively compete such as through direct sales at specialized markets, mall or storefronts and retail outlets that are rooted in local and artisan products.

Soya flour has potential markets in school feeding programs, social welfare feeding programs, confectionery industries, baking industries, for nuggets and chunks manufacturing

and as a supplement for wheat flour. The profiled target audience is expected to include investors / entrepreneurs, FMCGs, retailers, suppliers, restaurants and mall operators.

SEGMENT INFORMATION

SOYA DELIGHTS LTD categorizes its business operations both in Tanzania into three reporting segments:

• Domestic Foods–Manufacturing and Sales
• Domestic Others
• Domestic Foods –Wholesale Domestic

Domestic Foods–Manufacturing and Sales

This business segment comprises manufacturing and sales in Tanzania of products from the Soy Sauce Division; the Food Products Division, which includes tofu, miso, tempeh, dipping and marinade sauces; and the Beverages Division, which includes soy milk and its derivatives (soy yogurt and soy ice cream).

Soy Sauce Division

We’ll push for the steady popularization in the market of 750 ml bottles of Shoyu (premium soy sauce) and Leso Shoyu (less sodium soy sauce) and later plan to a new product Fraw Shoyu (fresh raw soy sauce with filtration).

Food Products Division Regular (plain) soy flour

Sales are expected to continually grow strong as the customer base is steadily expanded, reflecting aggressive product development and storefront promotion activities.

Business Areas of SOYA DELIGHTS LTD

The firm will pursue national operations in the following fields:

1. Manufacturing and marketing soy food products
2. Providing products and services related to food and health

5.2  Market Size and Trends

The dairy products (milk, yogurt, ice cream etc.) industry in Tanzania has experienced successive years of growth from 2004 to 2009, with several national and multinational FMCG’s capitalizing on this trend. Local giants Bakhresa are currently enjoying quite a monopoly of the market. Foreign firms such as Nestle, Unilever and Baskin Robbins have entered the industry and benefitted from the growth witnessed in the sector over the past five years.

Primary demand drivers of this industry in Tanzania, that is, income and population are forecast to grow until 2015. Another element which will boost the demand for these products is the growing population of children, which comprises at least 25% of the population. The number of teenagers alone is forecast to grow by over 40% from 2010 to 2020.

One niche market that remains unexploited is the market for soy milk, soy yogurt, soy milk ice cream and several other derivatives. The size and demographic make-up of the target market will consist not only of those individuals who suffer from dairy allergies or lactose intolerance, but also those who avoid dairy products by choice, medical and/or ethical

reasons and those with a craving for nutritious non-traditional drinks. Content will be directed to the low and mid socio-economic economic segments. The industry dynamics with respect to the nature and size of competitors reveal that the market for dairy substitutes is under- supplied, thereby providing opportunities for diversification beyond the manufacture of soy milk to butter and cheese as well.

Future outlook and trends

There is a positive outlook for this industry since the demand for soy foods is increasing and the industry itself is yet to mature. The acceptance of the product by the consumers is the main determinant of future expansions that the business might make while the availability of supplies can also be a major influence in the future.

5.3  The Competition

Artesian fabricants of soy milk are minimal commercially – Power Food Industries Ltd – and the little that do exist are embodiments of aid and/or community projects of international organizations such as UNIDO in Muheza and Kigoma; ordinary street vendors, and small- scale marketers of soy flour. Approximately 7% market share is held by the formalized establishments dedicated to this activity. It is the substitute competition however, that looks to be calling all the shots.

Promasidor (Tanzania) (Pty) Ltd (milk powder), Tan Diaries Ltd (Yoghurt, ghee, butter, cream, milk and honey). Natural and flavored waters including whole milk and its derivatives account for as much as a whooping70% of the market. Energizing beverages such as Burn and Red Bull occupy around 10% while artificial and hydrant beverages comb up the remaining 13%. Basically, the competition is yet to beef up allowing room for entrants such as Soya Delights LTD.

5.4  Marketing Strategy and Plan-The 4Ps

The first challenge that we will face is with the raw materials, ensuring that the cost, quality and availability of the materials used to make our soy products are consistent. The second issue is the capability of selling the finished product at a competitive price and how to select a proper market. The final step is consumer acceptance and safe use of the products.

The keys to success in the market are to 1) make a quality product both in terms of safety and appearance, 2) sell at a competitive price, 3) develop new products 4) develop a solid reputation for the company and 5) know the marketplace and its inherent limitations.

The following are the detailed marketing strategies of the business.

Product

1. Be practical and anticipate product demand and consider capacity.

One critical element is not to over extend or take on orders that are well beyond the production capability. While it is always very appealing to have the product accepted by the target market, it can hurt a growing or small company. It is imperative to review all costs–both direct and indirect costs. Freight in and out should also be considered. But, we will be choosing an alternative that will give us lesser transportation costs.

2. Ensure Product Quality

Establishing a business involving soy is often seen as a risky investment because of the shorter shelf life of soy products. To resolve this, Soya Delights LTD will follow the following schedule of production to ensure the quality of their products.

Taho

Shelf Life: 24 hours if kept chilled; up to two weeks if refrigerated.

Production Schedule: Everyday

Soy milk

Shelf Life: 24 hours at room temperature in tetra packs, 1-2 weeks if refrigerated and 3-6 months if sealed in sterilized bottled containers

Production Schedule: Four times a week

Tokwa

Shelf Life: 1 week, 2-3 days at room temperature if soaked in water Production Schedule: Twice a week

3.  Compete head on with the market.

One of the most appealing trends when it comes to food business has always been the ability for a company to compete in certain markets, regardless of its size. Even the smallest business has the ability to succeed because of their personal attention, potential for offering a wide range or variety of food products, and their ability to react to small orders in a rapid manner.

Pricing

Pricing decisions are quite hard yet the most important decisions management must take. So much consideration has been looked upon before setting the prices of the products. This has been carefully done to meet the primary business objective, to make profit.

The researchers considered the following in setting up the price.

Cost and desired mark-up – The business must be sure that the set price will meet and recover the cost included in the product/service and also the desired mark-up.

Competition – the price of the competitors has been considered. Of course, no one will avail of the service if the set price is more than the price of existing businesses.

Customers’ demand – to be assumed that the market with regards to their demand will patronize the set price for the products.

Company’s objectives – A company’s objective is mostly to make profits for the business. To meet this, the pricing method focuses on the ability of the business to meet the same.

Humanitarian Decisions – included because the researchers believe that they have to think not only of the welfare of the business but also the welfare of the client.

Overpricing will be avoided – The business will make sure that the products will be of reasonable prices. This is because it would want to capture those who are not willing to spend much on soy drinks and value foods.

Place of Distribution

1. Grab every opportunity (i.e. trade fairs, exhibitions etc)

A good source for selling soy products is through fund raisers with local organizations. This is a “win win” situation for both parties since payment typically is received at the time goods are sold. This lets you start to build a local following in the community with the fund raising organization serving as “sales representatives”. The good thing is that after the event is over, many people still will be interested in purchasing our products.

Included in the government agencies which support the Small and Medium Enterprises is TESDA. We would also grab opportunities for product promotion during Business Weeks, and during Local and international trade fairs. The idea is to be able to let the market know about the existence of our products – their quality and health benefits.

2. Develop business’ network.

It would serve our interests to establish a good relationship with customers as well as with suppliers.

Promotions / advertising

1.  Have a good website.

A well designed web site is always a good idea. We will ensure that the website is easily accessible by the public. That way, Soya Delights can go global. The consumers are assured of good taste, cleanliness, affordability, and consistency of the products.

Marketing strategy

Taho and soy milk – Consignments to schools, other business enterprise, Roving Vendors Tofu – consignments to supermarkets

Initial intensive marketing through the radio, print media, television and promotional materials; easily interpreted visual elements like posters and banners, distinct branding, alliances with mass events’ promoters aimed at health care. Perishables will require relatively short distribution channels – ideally suited to using intermediaries such as retailers. Food service distributors, rack jobbers, meat producers, flour mills, bakeries, popular beverage distributors among others will also market Soya Delights. Selective distribution intensity will be preferred. The majority of tofu and soy milk enthusiasts buy these products in supermarkets and grocery stores/outlets.

Innovation in this industry is best explained in terms of consumer perception, customer goodwill and therein lays the differential value. Soya Delights will communicate to consumers the benefits of a 100% protein and organic drink whose health benefits scream value! Expansion into the international market is lucrative and highly feasible. Our portfolio could grow to include soybean oil, nutritious cereal blends as far as the consumption per capita of soy foods increases. Soya Delights plans to market it in poly pouches under refrigeration which in turn affords lower selling prices.

5.5  Estimated Sales

Year/period of operation	Amount in dollars	Exchange rate
First quarter	13750	USD=1600 TZS
Second quarter	15000	USD=1600 TZS
Third quarter	15000	USD=1600 TZS
Fourth quarter	16250	USD=1600 TZS
Second year	78000	USD=1650 TZS
Third year	109200	USD=1700 TZS

Summary

In the next article, we’ll look at part two of this sample business plan. We’ll cover the technical aspects, management and organization, financial analysis, risk analysis, corporate data as well as supporting financial documents. In part 2, I’ll provide links to the sample business plan PDF document and supporting documents.