Investment in the Food Processing Industry

Few industries are as broad as the food processing industry, but Bangladesh does well on all fronts: confectionery as well as organic, frozen, and chilled foods. Our market – one of Asia’s largest – brings almost every international food player here. This strength is only expected to improve as consumption trends and the good reputation of our products promise higher future sales. For investors, too, the time is ripe. A fragmented, pre-consolidation industry allows investors access to the market, its distribution channels, and its technological capabilities.

Bangladesh has a well-established food processing sector, which relies on domestic agricultural production and is oriented mainly to domestic needs. It includes sugar refining and milling, production of edible oils, processing and preserving of fruits and fruit juices as well as fish processing, especially shrimp and prawns. As a tropical country Bangladesh has a plentiful domestic supply of exotic fruits and sea species. We have decided to take Processed Fruit Products as our industry item.

Targeting the upper and upper middle class consumers of the major cities as more and more people live in the cities far away from where food is grown and produced food.

In many families the adults are working away from home and therefore there is little time for purchasing fresh fruits and make any item out of that. The Fruit Processing Business model: The Theme: We have selected processed food industry for our analysis. We are focusing on the processed fruit segment. Our idea is to establish Fruit Processing Centers at different places of the city.

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The place would be something like a refreshing corner for the customers just after a tiring journey, or place where they can think of visiting at a break from the days work. The centers will sell different seasonal fresh fruit juice along with young coconut water, milkshake, etc. they can also have different dried fruits and fruit salads. Customers can have it sitting at the juice corner; again they can take away to home for having the item later. Logic of the business: Nowadays customers are moving toward healthy products. They are more and more conscious towards avoiding cholesterol and thus try to avoid junk foods as much as they can.

But usually it is tough to find a food corner where health conscious items are instantly available. Lots of people love different sorts of seasonal juicy fruits, but they are quite bored with have it at home in a regular way. Some are again okay with having fruits at home but definitely they would love to have it after a tiring task outside home, near their workplace. For example, students after a long lecture session or exam would love to have a glass of fresh juice if it’s presented in clean and delicious way. People at office would love to have a juicy break after a meeting or at any office break.

What these customer groups are having now around them? Just regular fruits sold at regular manner. They may not feel to buy and then peel it off to have it. They may be even conscious about cleanliness. They are absolutely not a position to prepare fresh juice by themselves even if they want. They can have at best clinically processed and preserved juices at stores. But there is no readily available corner where consumers can have processed delicious fresh fruit items, which can serve as both refreshment and nutritious recipes for them.

So FRUITY FRESH would be there to supply something real fresh and delicious. Brand name ‘FRUITY FRESH’: The target is to establish brand name FRUITY FRESH. To fulfill this objective all outlets would have to decorate similarly. A logo needs to work out, which will be seen everywhere at signage, advertisement, inside the outlet, even at tissue papers that would be served to customers. Special crockery with the logo would have to order that would be used for customers. The workers and sellers of outlets would have to have specific dresses (with logo symbolized) to serve the customers.

The idea is to spread the feel of FRUITY FRESH towards consumers mind. The target is to establish the outlets to that extent where customers would feel same at any outlet of FRUITY FRESH. The name would serve as identity of the business in the market. Customers will be thrilled to visit the place to get refreshed; on weekdays, being tired to feel rejuvenated and on weekends to hang out with family and friends. Demographics of the target customers: The target customers are the upper, upper middle class and middle class customers, who seek quality over price.

In case of education, occupation and income, they tend to be closely correlated in almost a cause-and-effect relationship. So, our target customers are desired to have good educational backgrounds that may be working or may not be working. Students of private universities, shoppers, office employees are special segment. Business Units: To enter into the industry we need to chalk out a plan first on how to do the business. Business units will be like following: -Central Administrative office -Selling outlets at different places of Dhaka city.

The outlets would serve customers from different sectors for their different needs. In these outlets customers can both have them instantly and again can take it away for have it later. Sitting arrangements of 20 people at a time would be there. The outlets would have some shelf items too. These are mainly canned juice, canned coconut milk, canned fruits, dried fruits like nuts, dates, etc. Customers would get fruits in these outlets depends on season as well as availability. Premise Decoration Selling outlets would be painted in soothing colors. Cleanliness of premise would be at utmost preference.

The goal is to “Customers will have to feel cool & light just after entering by looking at a clean nicely decorated place”. Sufficient lights will have to be there. Glass built areas will have to clean hourly. Instant cleaning people will have to there for this sort of service. Though it will increase little cost, but it will attract customers to visit the place again and again. If after a tiring journey or being overloaded at office they can breathe well while having a glass of juice, they will try to go there frequently. They will happily refer to friends & family regarding the place.

Fruit category will depend on season and availability. One special item of these outlets is coconut. Young coconut water is very popular to people of all age group. It instantly refreshes all from their tiredness. So FRUITY FRESH would be there to serve coconut water. A cleanly processed coconut, with a colorful straw in it would give them a feel of freshness just after looking at it. Again in our culture coconut milk adds a new taste in recipe. So readily processed coconut milk served in can, would relief its desired customer group. It will save their time and effort at home.

Besides regular items on fruit, tea, coffee, mineral water, soft drinks etc would be available. Dried fruits of several kinds would be there in pack form. Different fruits would be served as candy bar. In our culture, mango bar is very popular to people of different age category. Presentation of products: The presentation of juice and other items would be exclusive. Branded glass and crockery will be used. The fruits itself would be used to decorate the item. For example, there would be a slice of lime with lemon juice. The juice content would be clear, simply looking fresh and chill.

The presentation itself would make the brand a exclusive one. Expertise from chefs will add a new look in items. Uniqueness of presentation will add an extra point to bring customers towards FRUITY FRESH. Raw materials requirements As the business implies, fruits are the main raw materials. The FRUITY FRESH will be real choosy to select fruits from its vendors. The fruits have to be fresh enough to serve after few hours. Other than fruits some items would be required regularly. These can be sugar, vinegar for salad, milk for tea, coffee, shakes, etc.

Necessary items would have to purchase from vendors offering competitive prices. Other requirements: All outlets will have to have juicer machine, blender machine, coffee makers, etc. machinery items sufficiently. Crockery items, cleaning items, tissue papers, paper cups (as required) are needed. All sorts of items need to be purchased from local markets having good quality and in competitive prices. Michael Porter’s 5 Forces Analysis: Bargaining power of Suppliers: Suppliers of raw materials, components, and services (such as expertise) to the firm can be a source of power over the firm.

Suppliers may refuse to work with the firm, or e. g. charge excessively high prices for unique resources. But in case of the fruit processing industry we found the following points. The basic raw material of Fruit Processing industry is Fruit. As the production and export of Fruits is not controlled or syndicated in Bangladesh, we feel there will be minimal possibility of hard bargain on the part of the suppliers. Again as we are not going to focus on one specific fruit rather will try to inherit a seasonal flavor in the production, the possibility of facing a supply crisis is minimized. Fruit processing machineries of good quality are easily available at a competitive price from different international suppliers. A good number of vendors are available to supply crockery and stationeries with the logo.

Bargaining power of Customers: The ability of customers to put the firm under pressure and it also affects the customer’s sensitivity to price changes. -In terms of Buyer vs. Seller concentration this industry will be on the winning side as there are very few Fruit processing units in the country producing demandable quality products. And the demand for processed fruit is growing amongst the target consumers. As the target consumer group will not be willing to compromise quality and hygiene for price, there will be less threat to overcome the cost of product. Most of the product will be of the shelf products. The threat of substitute products The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).

But, There is no substitute product for fresh fruits, other than the substitution amongst the different verities of fruits. But as the seasonal fruits of are unique in taste there is little chance of one being substituted by the other. The other threat is from the differential process mechanism of the fruit and the way it is being presented. Substitute products threatening the proposed project: cold drinks (e. g. Fanta, Mirinda), instant drinks (e. g. Tang, Foster Clerk) etc. The threat of the entry of new competitors Profitable markets that yield high returns will draw firms. The result is many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).

And this industry is no different. Fruit processing industry has very few players in Bangladesh and it is a growing industry there will be little or no restriction for new competitors to enter into the business. The supply channel is wide enough to accommodate new entrants The consumer size is more than the seller size so the entrants may well be playing a supporting role rather than a threatening role. The intensity of competitive rivalry For most industries, this is the major determinant of the competitiveness of the industry.

Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc. In this case the main competition will be on, Quality of products -Freshness of raw material i. e. Fruits Price of products Variety of products, Presentation of the products, Location and reach The existing competitors are, The local packed juice producing companies (e. g. Pran, Sheezan), The international packed juice producing companies (e. g. Frooti, Tropicana), Existing outlets providing of-the-counter fresh fruit juice. oLocal packed processed fruit products like Pran Mango Bar.

Conclusion

From the Porter’s Five Forces Analysis presented above, it is seen that this business has a high potential for profitability and growth. Bargaining power of supplier and threat of substitute product is not a matter of concern. Entry of new competitors is the main threat to be considered as it will increase the intensity of the competitive rivalry as well as bargaining power of the customers day by day. However, exploiting the opportunity as the first mover, building a strong brand and increasing the number of outlets in prime locations will ensure a sustainable growth of the business.