Business Plan

Of

Prepared by:-
Kushal Man Shrestha
Sohel Tamrakar
Suzita paudel
Dhiraj Pahari

Submitted to:-
Sashi Raj Bajracharya
Table of Contents:

1) EXECUTIVE SUMMARY
a) Business Concept
b) Mission Statement
c) Operating Plan Summary
d) Marketing Plan Summary
e) Financial Plan Summary

2) BUSINESS DESCRIPTION
a) Firm Identification
b) Business History
c) Management/Key People
d) Products/Services

3) OPERATING PLAN
a) Location
b) Operational and Quality objectives, strategies(VFP & KPI)
c) Operation Procedures
d) Facilities and layout
e) Purchasing and Distribution
f) Inventory Management and Control
g) Quality Control and Customer Service

4) ORGANIZATION PLAN
a) Legal form of ownership
b) Management Philosophy
c) Organization Structure
d) HR Objectives & Strategies (VFP & KPI)
e) Key Personnel Assessment/Job description

5) INDUSTRY ANALYSIS
a) Industry Description
b) Industry Competition
c) Industry Growth and Sales Projections
d) Sales objectives and strategies(VFP & KPI)

6) MARKET ANALYSIS
a) Target Market Description
b) Market Competition
c) Sales Forecast
d) Marketing objectives and strategies(VFP & KPI)

7) FINANCIAL PLAN
a) Financial Plan Summary
b) Situational Review: The annual financial statements for the first three years of
Company operations
c) Financial objectives and strategies(VFP & KPI)
d) Key Financial Indicator
e) Financial goals
 f) Cash flow Planning
g) Pro Forma Financial Statements
 Annual Income Statements: 3 yrs 2010, 2011, 2012
 Annual Balance Sheets: 3 yrs
h) Breakeven Analysis

11. WORK-CITED LIST

12. APPENDIX
Executive Summary:

Business Concept:
„Flavors of Nepal‟ is dedicated in providing the quality organic coffee in various ways which are
Green Coffee Beans, Parchment Coffee Beans, Instant Coffee and Roasted Coffee Beans.
The firm plants coffee plants in a leased land where there is proper climate for the coffee to
grow without using any sorts of chemical making it organic. It is a long term business plan which
will start generating revenue after 3 years only.

Since the plants require at least of 3-5 years to harvests and produce organic coffee, the coffee
will be processed and sold only after this. So the product will be supplied on the market after 3
years minimum. The produced and processed coffee will be distributed not only in the massive
consumption cities of Nepal, but also in abroad. The basic target markets are the coffee houses,
foreigner markets, household coffee consumers and small vendors.

As the business grows, „Flavors of Nepal‟ will be establishing a cafe under its own name giving
competition to café such as Himalayan Java, Himalayan Bud etc. The café will be placed in
Pokhara and later on expanded to other city areas such as Butwal, Kathmandu, Lukla etc. With
a specific strategy of marketing, distributing and managing, „Flavors of Nepal‟ will hopefully be
able to compete in the foreign coffee market.

Mission:
With a strong core belief of socially responsible entrepreneurship, „Flavors of Nepal‟ aims to
improve and increase the foreign market share of Nepalese coffee industry by providing wide
range of organic coffee products. To promote the fledgling Nepalese coffee industry by investing
in the people from grower to consumer and create awareness by promoting Nepalese coffee
domestically and in the international niche market is our main target. With a farmer friendly,
quality, traceability and sustainability element in the firm, „Flavors of Nepal‟ has a mission to
capture not only the local market of coffee, but also certain portion of foreign market. More and
more organic coffee will be produced and distributed as the firm expands and enters in
international business.

Operating Plan Summary:

Having the location at Palpa enhances the coffee to grow in a proper climate with a good
environment. The other outlet is located at Kathmandu where all the processing and distribution
will be done. Since organic coffee is distinct from other production methods in a number of
ways, it will be following organic growing and production principles such as soil management,
pest management, organic system plant etc. Following are the procedures that will be held:
 Plating
 Harvesting
 Pulping
 Roasting
 Packaging
 Labeling
 Grinding
With 20 ropani of land taken on lease, most of the portion will be utilized to cultivate coffee
plants and the others for processing and storage. The environment will be created as per
required for the coffee plant. The storage and processing will all be done in a building beside the
farm. The exact same storage and processing building will be created in the Kathmandu outlet.

Since coffee plantation is mostly a labor intensive, there is less input to be purchased. A good
quality of seed will be purchased and harvested. After that, the ripped coffee berries will be
dried and used as seeds. Machines that grind and roast are the main fixed assets for the firm.
Green Coffee Beans and Parchment Coffee Beans are the two main product that will be
distributed in the initial phase. The fully produced organic coffee beans will be processed as per
requirement and distributed to various cities, café, foreign countries etc.

Coffee beans will be stored in a sisal bag helping to capture its moisture. It will be kept in a cold
and damp place. Building a quality product, „Flavors of Nepal‟ tend to maintain and sustain the
quality through system effectiveness. We will follow every standard and quality set by the Nepal
government.

Marketing Plan Summary:

Nepal coffee consumption has shown steady growth, with parchment coffee having the
strongest growth. Coffee drinkers in the city areas are among the most demanding ones.
„Flavors of Nepal‟ will strive to build a loyal customer base by offering a great tasting coffee in
a relaxing environment.

„Flavors of Nepal‟ targets the household for their instant coffee, café and restaurants for their
roasted coffee beans, local vendors for their parchment coffee beans and foreign countries for
green coffee beans. Although facing competitions from various firms, „Flavors of Nepal‟ will be
having edge of being an organic coffee. The organic coffees are hard to be certified and the
most coffee industries are not certified providing no assurance of being an organic coffee.

Having the organic coffee plants to harvest up to 3-5 years, „Flavors of Nepal‟ will be putting its
product in the market only after it is fully harvested. Focusing on the direct sales to the importers
of various countries and catching the eye of local people through a proper brand philosophy,
„Flavors of Nepal‟ will be able to adapt in the coffee market environment properly.

Financial Plan Summary:

Flavor of Nepal will require an initial investment of Rs.1, 20, 00,000 of which 50% will be
invested by the 4 principle owners and for the rest 50% a loan from Agricultural development
bank will be taken. For the first three years there is expected to be heavy intake of expenses,
this is so as it will take time for the coffee plant to produce cherries which in turn can processed
into organic beans and roasted beans.

By the end of 4th year we will be able to conduct our business proceedings, the company will
sustain from thee revenue generated by selling its various products like parchment, organic
beans, roasted coffee beans etc. By the revenue generated the company will be able to pay off
debt, payment to employees, return to investors etc.
By the 6th year annual net income will reach RS.25 lakhs so the company can now focus on
future plans which it intends to establish like mobile café, barista training, and farm visit etc. This
in turn will help in generating more revenue which can be utilized for further growth in terms of
land ownership so that more amounts of coffee beans can be produced.

Business description

Firm Identification
Flavors of Nepal will be the operating firm that will plant, grow, and extract fresh and organic
coffee on our anticipated leased land of 20 ropani which will be located in city of Palpa. Palpa
has the appropriate altitudinal range (800m-1600m) which is suitable for coffee plantation and
has the climate that supports coffee plantation; the market value of land there is considerably
low. The firm will have lands acquired for the installation of the factory and a storage space.
The firm will take the advantage of the local and organic coffee and trade them all over the
nation in its initial stage as the business continues to operate there will be export activities
performed to various nations such as Japan, Brazil, India, China, America etc

Objectives

 Planting the coffee in beautifully hilly region facilitated on reducing the global warming.
 Formulate to assist the National Economy through export, orientated sales and
consequent Foreign Currency earnings, by making one of the largest industries in
agriculture.
 Encouraging skilled manpower on coffee farming, creating employment and income
earning opportunities Villages & Smallholder farmers.
 Making coffee farm a model development as a pilot project in the country and give
training, implementing a program one household at least 100 coffee bushes in a village
area.
 Distributing the coffee plants to the indigenous people, making aware of value of coffee
farming and increasing of the income source for their living condition.

Business History
Coffee is an important beverage throughout the world. Coffee drinking has become a regular
habit of people in many countries and it is also becoming increasingly popular among the
Nepalese community. Coffee plantation is still a new area in Nepal. Around 1938, a hermit
named coffee-1Hira Giri bought some coffee seeds from Sindu Province of Myanmar and
planted them in Aapchour of Gulmi District for the first time in Nepal. Then it spread from one
farmer to another as peculiar ornamental plant for the next four decades. It was only in the
1980s that coffee was finally considered to be a cash crop in Gulmi District. It has been gaining
popularity as highland coffee in the international market and the area under cultivation is also
increasing.

The firm being a new business is not associated with any ongoing companies or is a part of any
association, but soon we would like to join alliance with different association which may help us
deliver products of the highest quality. Though the fields and farmers are the locals only and the
methods used for cultivation is quite traditional, the use of the modern tools and equipment is
viewed to be of great help in improving the quality of the product even more. Coffee beans
needs to be extracted from its cherries which grows on the plants for that purpose as well we
will use modern machinery available in the national level market to speed things up. There will
also be hiring of professionals related to the field from the international level which will ensure
product quality.

Management/ key people

As we are planning to establish a new business we will require personnel to help us excel in our
proceedings.

 Chief executive officer

Chief executive officer will be selected amongst the partners; he/she is expected to form
new vision in the organization and also set the objectives each year. He/she has to
devote their full time in the company, for this he/she will receive salary along with the
profit which will be shared among the partners.
 Partners
All the partners are expected to invest 15 lakhs in the initial stage, they are expected to
attend meetings and are given certain position in the company itself (quality and
development directorate, strategy and business development directorate etc)
 Managing director
Managing director will be selected on interview basis and is expected to achieve the
objectives set by the CEO. He/she will require basic management skill and has to have
good communication
 Accountant
The accountant has to have basic book keeping skills along with advanced accounting
skills so that the companies‟ books of accounts will be well maintained.
 Transportation In charge
As the farm land is situated in Palpa, the transportation in charge should be able to deal
with the drivers and also make the necessary preparation like petrol arrangement,
vehicle repair and maintenance etc.
 Quality Supervisor
The main work of the quality supervisor will be to check the quality of the plants, test soil,
hand-picked cherries, and organic beans. For this purpose he/she has to have botanist
knowledge and also prior experience in dealing with coffee products.
 Various level of manager (production manager, sales manager, finance manager,
human resource manager, marketing manager)
 Lower level employee (people who will perform organic coffee beans extraction from the
plant)

Priority of the work force will be given to locals of Palpa as we will be establishing our main
outlet there with sublet office here at valley. Never the less hiring individuals with exceptional
skill related to organic coffee plantation will also be done from the international countries, doing
so will not only help us excel in the business but also it will educate our available workforce.
Land area will be taken on lease with option to extend at will of both of parties.

Product/service
At the initial phase the chief product of our firm will be Coffee beans (which will be distributed at
national level but later on after 5 to 6 years the firm will start exporting the product at
international scale to various countries like Brazil, India, and America etc.

The following product and services will also commence 5 to 6 years down the line.

 Mobile café which will have its own barista where our organic coffee will be served.
 Distinctly roasted organic coffee beans (medium-rare, light, dark etc)
 Flavors of Nepal not only produces organic coffee but also offers organic farm
volunteering, agriculture internship
 Farm tours and coffee farming training on seed selection
 Nursery preparation plantation, caring, disease control, weeding, harvesting, picking,
grading, pulping, wet and dry processing, drying, roasting, packing, marketing
 Advice for farmers about all stages of production.
 The waste we get after extracting coffee can be re-utilized as manure to crops in our
farm lands or can be sold at minimal cost to local farmers.

Operating plan
Location

Our business, Flavors of Nepal is a coffee plantation program which will be located in Palpa
district of Nepal. We will have all the major activities that needs to be done for the extraction of
coffee beans done in Palpa itself, it includes plantation, picking coffee, processing the cherries
in to beans and storage.

Reason for selecting Palpa for plantation-

 It has the altitudinal range which is perfect for coffee plantation. [Palpa=1350m] [coffee
plantation= 1000m-1600m]
 It has the appropriate climate which must be between (15-24 Celsius) along with that
Palpa receives abundant rainfall (100cm-200cm) which is vital for the growth of coffee
plant.
 Palpa also qualifies for its topography and fertility in soil.
 It is the third most coffee producing district after syangja and gulmi.

Besides our plant in Palpa we will have an outlet in Kathmandu which will distribute coffee
beans to traders and also store coffee beans in negligible amount.
Operation Procedure:

An operation procedure is a procedure which defines how a company is going to function on a

daily basis. This varies from firms to firms depending upon the type of business and the services
or good provided by the company.
Organic coffee is distinct from other production methods in a number of ways. The most
important part is that it has a strict set of government standards unlike any other certification
standard which are established by the National Organic Program.
Following are the Organic Growing and Production Principles that any Organic Coffee Farmers
must abide by:

 Soil Management:
Before any planting can occur, the land may not have had any prohibited substances applied for
at least 3 years. Whether the land had been previously cultivated, organically or conventionally,
or is a newly cultivated plot, the accredited certifying agency (ACA) must be able to verify the 3-
year absence of prohibited materials.

 Organic System Plan:

Once the land is deemed certifiable by the ACA, growers must develop and maintain a plan,
which is agreed upon and approved by the certifier.

 Pest Management:
When it comes to pest, weed and disease prevention, the standards are similar to those in place
for fertility management.
The certification does not end till the harvest only. It further carries on regularly until the beans
are ready to be consumed after going through steps of processing.

Our business company, „Flavors of Nepal‟, abiding the Organic Growing and Production
Principles will be going through the below operation procedures:

a) Planting:
Maintaining a proper space between each hole for the seed plantation, seeds will be sprinkled
equally in each hole.

b) Harvesting:
Our organic coffee farmers will get right up the coffee plants and carefully hand-pick the cherries
only at optimum ripeness. The coffee processed from ripe cherries is naturally sweet and
shimmering with floral and fruit notes. The optimum ripeness of the cherries will take longer time
period up to 3-4 years than unripe but good things come to those who wait.

c) Pulping:
After harvesting, the farmers pulp the cherries by squeezing them to separate the 8 layers to get
the actual bean inside from the pulpy fruit on the outside. They soak the beans next to remove a
pulp that remains.

d) Roasting:
The roasting process is more than adding heat to the green coffee beans. It transforms these
raw beans into the distinctively aromatic, flavorful, crunchy beans that we recognize as coffee.
The most common way to describe coffee roast levels is by the color of the roasted beans,
ranging from light to dark. As coffee beans absorb heat in the roasting process, their color
becomes darker. Combining with the typical roasting temperature that yields a particular shade
of brown color is a convenient way to categorize roasting levels.

e) Packaging:
As soon as the roasting is done, the coffee beans is packed in a tetra pack having an air lock.
This will maintain the flavor and temper of the coffee beans

f) Labeling:
Labeling is a very important part of the NOP, as labels help consumers understand what they‟re
buying. How agricultural products have been handled, processed and combined with other
ingredients determines how they can be labeled organic. Labeling should help the consumers.

g) Grinding:
Coarse, medium and fine grinds are used for various brewing methods to get the best flavor
possible. The grinding process will be done through blender machine as per the requirement of
the customers.
Facilities and layout

The plant will be established on 20 ropani land which will be taken on lease. The major portion
of the land will be utilized to grow and cultivate coffee plant; the rest of the portion will be utilized
to set up the processing system and also storage of coffee beans.

Coffee farming will be done with a shade on top of every plant as direct sunlight is not good at
early stages, a 20x20 inch space will be separated between each plant as it provides necessary
space for growth and also it will be easy to provide manure to the plants.

The oval office will be a three story building with one story placed underground which will be
utilized for storage purpose, this is so as the extracted coffee beans has to be stored in a cool
and damp place. The oval office will house the equipment (plough, leveler, harrow, mallet etc)
which will be required for farming purpose and also contain machinery, extract coffee from both
the popular method of extraction (wet and dry). The various machines which will be needed are
Pulping machine, hulling machine, grader, roaster, grinder and packaging machine. The oval
office will also have offices for different personnel and sleeping arrangements for guards. The
chief operating activities of transforming the coffee cherry into roasted coffee beans will take
place here.

For out outlet in Kathmandu we will acquire flat with a central office and storage unit as this will
be our main distribution hub.
Purchase and Distribution
„Flavors of Nepal‟ will be purchasing the coffee seeds of a good quality which we will be sowing.
We can also dry up the ripped coffee berries as seeds. Most of the farming part will be labor
intensive as it requires careful functioning. The roasting and grinding will require heavy
machineries which will be imported from abroad.

We will be dealing with two main products one will be green bean (organic coffee) and the other
will be parchment which will be sold to institutional buyers. Products are shipped to distributors
or to retail stores. Roasted coffee will be distributed to modern format stores (café).

To ensure ongoing organic integrity, products must be protected from contamination by non-
organic products. Prior to loading and unloading, trucks are verified for shipping practices that
maintain this integrity, such as the prevention of commingling of organic and non-organic
products and impermeable packaging.
Products are compiled from farms, processors, or other distributors to one central location which
will be Kathmandu in order to distribute products.
Since „Flavors of Nepal‟ is a long term business which will be producing organic coffee, it will
take up to 3-4 years to produce the final output. Once it is produced, we pack and transfer the
coffee in a jute bag to different cities of Nepal where coffee is highly consumed such as
Pokhara, Kathmandu, Butwal, Hetauda and so on. The organic coffee will be distributed to
different coffee houses, café in the city.
Since coffee produced in Nepal is one of the best, this will not require much of an advertisement
or marketing. People from abroad will come searching for coffee made in Nepal that will start
the export phase of „Flavors of Nepal‟.
Inventory management and control

We will have two separate storage unit one situated in Palpa and in our outlet in Kathmandu.
The most important thing to remember is coffee beans cannot be stored for more than a year,
but that will hardly be a problem as the demand for coffee is very high in the market.
Coffee beans will be kept in jute bag with the average quantity of 60kg, the sisal bags will help
to capture the moisture of the coffee. It will be stored in a cold and damped place in the
underground storage unit. For the case of roasted coffee it will be immediately packed in an
airtight plastic container or vacuum-sealed wrapping. The packaged coffee will be sent to
Kathmandu for selling purposes.

Storage facility is also required for other storage purposes like-

 Farming equipment and tools
 Packaging bags
 Greens beans (organic coffee)
 Roasted beans
 Instant coffee powder
 Miscellaneous office requirements

Quality Control and Customer Service

Building a quality product from the start, „Flavors of Nepal‟ tend to maintain and sustain the
quality through system effectiveness. We will be having proper supervision of the operation
processes frequently and ensuring that the customer suggestions will be heard and taken into
actions.

Flavor of Nepal will follow the following standard and quality set by the Nepal government.

1. Coffee farming shall have to be conduct in hilly region above 800 m from mean sea
level.

2. Organic Certificate: Chemical fertilizer and pesticide should not be used in coffee
farming.
Organic fertilizer and insecticide shall have to be used.

3. Arabica: The coffee shall have to be the product of Arabica variety which is best coffee.

4. Size of Green Beans: The size of green bean should be above 14mm.

5. Coffee processing method

I. The ripped fresh cherry shall be sun dried after picking up from the coffee plant in case of dry
processing method.
II. In case of wet processing, fresh ripped cherries shall be pulped within 24 hours of harvesting
After pulping, fermentation should be done for 24-48 hours. Then should be cleaned by clean
water, it should be dried on the shed first then to the sun. The moisture content has to be
maintained up to 11-12 percent.
Standard Quality of Coffee: The external substance or coloring should not be used in coffee and
the coffee should have following standard of quality.

S.N. Details The standard prescribed by

government of Nepal (%)
1 Total ash (temperature of 100 Celsius) From 5.5 to 8%
shall have to be dried by making fixed
wet.
2 Water soluble ness Not less than 40% of total ash
3 Ash insoluble in dilute HCL Not exceeding 1% (on the basis of dry
weight)
4 The weight of extract obtained by Not
boiling coffee to be made constant less than
in 100ºC by refluxing in 100 35%
parts boiling water in one hour

5 The nature of alkalinity of the From 1% to 2%

soluble ash (On the basis of Pa)

6 Caffeine 1 to 1.92 % (On the basis of

(Arabica Coffee) Content dry weight)

7 Moisture Green Bean Maximum 12

The company focuses on four key elements that drive the company‟s business philosophy and
ultimately create value for the consumer:

a. Farmer-friendly:
We work directly with the farmer or the farmer cooperative to acquire supply at a fair price with
fair terms.

b. Quality:
All of our coffee is certified organic and fair trade. Our coffee receives a premium quality grade,
meeting or exceeding coffee quality standards.

c. Traceability:
We provide 100% case level traceability on all products to ensure consumer safety. Each bag of
coffee has a lot number and a “roasted on” date that makes it possible to trace the origins and
production journey of each bag.

d. Sustainability:
We are committed to organic farming, fair trade practices and best agricultural practices.
Through commerce, consumers and businesses have the power to improve the standard of
living for the farming communities by rewarding farmers financially for organic and sustainable
production practices; we also help protect the environment in a compromised region of the
world.
Organizational Plan

Legal Form of Ownership

Every small business must select a legal form of ownership. Our business will be based on
partnership and all partners are responsible for the business. A partnership is two or more
people voluntarily operating a business as co-owners for profit. In partnership, two or more
people share ownership of a single business. In our organization i.e. Flavors of Nepal, there are
4 partners sharing the ownership of the business.

The partnership agreement contains such basic information as the name and principal location
of the firm, the purpose of the business, and date of inception. In addition, our organization
specifies relationships among the partners, such as:

1. Names and capital contributions of partners.

2. Rights and duties of partners.

3. Basis for sharing net income or net loss.

4. Provision for withdrawals of assets.

5. Procedures for the withdrawal or addition of a partner.

6. Rights and duties of surviving partners in the event of a partner's death.

In our organization, the partners are jointly and severally liable for all debts of the firm. Each
partner has their own particular designation in the company. We have made a legal agreement
that sets forth how decisions will be made, profits will be shared, disputes will be resolved and
how risks will be distributed.

Management Philosophy

Management philosophy is the philosophy adopted by a company's executives outlining how

they believe a business should be directed, particularly with regard to the treatment of fellow
workers and employees. The company seeks to maximize its profitability and customer
experience, yet it uses its management philosophy to act as a check upon those instances in
which the desire for profits tempts managers towards worker abuse.

The philosophy of our business “Flavors of Nepal” is to provide qualitative organic coffee to all
the consumers in a reasonable way. Similarly, creating and adding value to the products and
services offered by the organization and provide the best services to our customers in
everything we do. Contribute to the upliftment of the nation‟s economy focusing on environment
and target on managing the organization effectively and efficiently to continue the business
enterprise targeting further growth. All the team members have their own responsibility to
perform and manage their works effectively. Our goal is to strike the proper balance between
employees, customers and organizational profitability.

Organizational Structure

Flavors of
Nepal

Board of
Directors

Administration Financial Manager Marketing Manager Operation Manager

Manager
Kushal Man Shrestha Sohel Tamrakar Sujita Poudel Dhiraj Pahari
Salary Distribution

Human resource Salary (in Rs)

Farmers * 10 100,000
HR Manager 30,000
Sales * 3 As per order
Auditor 40,000
Accountant 15000
Supervisors * 2 40,000
Disposal In-charge * 2 30,000
Transporter * 1 As per no of working
days

HR Objectives & Strategies (VFP & KPI)

S.No. Objectives/Valuable Final Products At the time of At the time selling

buying
1 Motivating employees towards their work 65% 85%
2 Establishing a worker friendly 40% 75%
environment
3 Enhancing co-ordination among 50% 90%
employees

a) Motivating employees towards their work

This will be the first HR objectives which will be implemented by the company as it is believed if
the employees are well motivated they prefer reduce absenteeism and also perform their
respected work properly. We can obtain this by options such as profit sharing, fringe benefits,
recognition etc. by doing so employees get well motivated and have positive attitude towards
their work.

b) Establishing a worker friendly environment

Here worker friendly refers to an environment where there is no discrimination between male
and female, no sexual harassment, cheerful bonding of employees etc. We can achieve so by
stating what the company expects from each and every employees during the interview stage of
recruiting. Company rules and guide lines can also help the employees understand what they
are expected to do and not to in the organization.
 c) Enhancing co-ordination among employees
Coffee business requires good co-ordination among employees as it is one step after another,
after hand picking the cherries we will have to extract it cover and process it further until it is
ready for consumption. Co-ordination among employees will ensure that the resources are
being utilized effectively and efficiently. This will allow the organization to reduce their waste.

Key Personnel Assessment/ Job Description:

1) Financial Management

The Finance Management is responsible for Treasury Management, preparing Financial

Accounts and Management Accounts and ensures proper accounts and records of the
Authority‟s transactions and affairs.

a) Internal Audit and Compliance Department:

The main function of the department is to carry out internal audits to ensure value for money. It
is also responsible for updating the risks register identifying the major risks likely to affect the
operations of the authority and their mitigation.

b) Financial Information, Reporting and Strategic Team:

Under this department of finance various activities like: Capital accounting, Report and Audit,
Planning and Budgeting, Analysis, Investment and Endowment will be carried out in a detailed
basis.

c) Income Section:

The Income section lists out the various procedures carried out to collect all the revenue
streams from various sales of the décor item. It studies Bill Payment, Customer Statement and
invoices required for revenue collection.

d) Research Grant:

This section provided additional reward for those departments who aims to carry out adequate
and scientific market research for the company‟s promotion and growth.
 e) Tax and VAT sector:

It also looks after the various taxes and Vat due to be paid to the government in order to
maintain a good reputation and clear financial statement in the industry.

2) Administration Management
This department is responsible for development, redevelopment and maintenance of properties
as well as efficient deployment of corporate assets.

a) Management Information Systems (MIS) Department

This department is responsible for coordinating the development and implementation of

appropriate Management Information Systems to ensure timely availability of relevant
information for key Flavors of Nepal stakeholders. It also facilitates quick decision making and
reporting at all levels. It ensures a functional results-based monitoring and evaluation system.

b) Human Resource Department

Headed by the HR Manager, the department is responsible for human resource management;
recruitment, retention, and motivation of staff. The department is also responsible for career
development of staff to improve their efficiency in service delivery.

c) Corporate Communications Department

This department is headed by the Corporate Communication Manager. It is responsible for

Flavors of Nepal‟s visibility as a development and regulatory authority, stakeholder engagement
and handling corporate social responsibility issues.

a) Procurement and disposal Department

Headed by the Procurement Manager, the department is responsible for procuring and
disposing of all assets in line with the act and regulations.
 3) Operation Management

a) Technical Services
The department is responsible for providing extension services to farmers on good agricultural
practices and Agribusiness as well as technical services at the post-harvest level.

b) Coffee Research and Technology Development

The department is responsible for facilitating the dissemination of research results in the field
through regional and district officers and transfer of new technologies in order to increase
productivity.

c) Quality Assurance
The department is responsible for enforcing coffee regulations at farmer, primary processors,
exporters, roasters operators. It inspects analyses and certifies exports.

d) Value Addition and Promotion department

It undertakes initiatives to add value and also promote domestic coffee consumption and
branding.

e) Sustainable Coffee department

The department concentrates on profiling, capacity building of sustainable coffee producers.

4) Marketing Management

a) Advertisement and Promotion:

The marketing sector should carry out rigorous advertisement and promotion activities. Here the
marketing sector will divide separate amount for advertisement done through various
newspaper and TV channels. Also good word of mouth will be carried out through customer
satisfaction.
 b) Target Marketing:

Marketing Sector undergoes through a detailed market study of the furniture industry. It focuses
on studying all the demographic, psychographic and behavioral sector of the industry. It fosters
that market that seeks creativity and antique style reflected in their furniture.

c) Sales Assessment:

Another major activity of this sector is that it hires 2 sales persons for the sales activity carried
out in the showroom. It aims to provide proper training to the sales person so that they create a
customer friendly environment in order to target both customer driven company as well as sales
increment.

d) Market intelligence and information Department

This department maintains a national coffee production, export statistics and crop forecasting,
disseminates market information daily to coffee industry stakeholders and carries out surveys
and market studies periodically on coffee crop size, stock verification, factors affecting the
production, trade and consumption.

e) Monitoring and Evaluation Department

This department is responsible for monitoring and evaluating all Flavors of Nepal‟s programs,
activities and also coordinates any Monitoring and Evaluation activities undertaken by other
stakeholders. In this regard, it develops performance, effects/outcome and impact indicators.

Industry Analysis

Industry Description

During the past five years, the Coffee Production industry fared well, exhibiting revenue growth
due to increases in input commodity prices that were passed on to customers. Moreover, in the
next five years, the industry will benefit from increased consumer demand for premium coffee
products. As the world price of coffee is expected to rises, coffee producers will benefit from
less volatile input commodity prices, compared with the previous period. The geographic spread
of coffee production establishments is strategically located in proximity to sources of key inputs,
while remaining within serviceable distance to large city markets. Industry establishments have
moved minimally in recent years. Flavors of Nepal will be the operating firm that will plant, grow,
and extract fresh and organic coffee on our anticipated purchase of 20 ropani land (leased)
located in city of Palpa. Palpa has the appropriate altitudinal range (800m-1600m) which is
suitable for coffee plantation and has the climate that supports coffee plantation; the market
value of land there is considerably low. The firm will have lands acquired for the installation of
the factory and a storage space.
The firm will take the advantage of the local and organic coffee and trade them all over the
nation in its initial stage as the business continues to operate there will be export activities
performed to various nations such as Japan, Brazil, India, China, America etc. Priority of the
work force will be given to locals of Palpa as we will be establishing our main outlet there with
sublet office here at valley. Never the less hiring individuals with exceptional skill related to
organic coffee plantation will also be done from the international countries, doing so will not only
help us excel in the business but also it will educate our available workforce.

Land area will be taken on lease with option to extend at will of both of parties. In the 20 ropani
land we plan to make 3 farmlands where coffee plants will be planted along with a office building
where full facility of processing and storing of coffee will take place.

Industry Competition
As competitiveness of any product depends mainly on quality and the price, the same is true
with Nepalese coffee. Regarding quality, Nepalese coffee is considered very well due to the
favorable factors like altitude, aroma, flavor, body and viscosity. It will be very beneficial if our
coffee can maintain the unique character of coffee and still be competitive in the international
markets even with the inorganic coffee as the productivity of the inorganic coffee is double or
more than that of the organic one. Besides quality, the importers look satisfied with the price
they are presently paying for Nepalese coffee. However, it is realized that the Nepalese
processors / pulper operators are not receiving the equitable price margin. The Coffee export
history in Nepal is very new and is not even 10 years old. Likewise, the present volume and
value of export is also not substantial. But, as the concerned sectors both in the private,
(including the farmers), and public are showing serious concern to develop coffee, ways and
means of increasing its production, productivity and quality are of urgent need in order to
formulate plan and policies to achieve these objectives. Since, this coffee industry is growing at
an increasing rate; there is high industry competition nowadays. We can analyze this
competition through the five competitive forces of Michael Porter. These forces include the
following:-

• Threat of Substitutes: In general, industries are more attractive when the threat of
substitutes is low. In Nepal, there are new emerging coffee industry can be the threat to
our business.

• Threat of new entrants: In general, industries are more attractive when the threat of new
entrant is low. Since, the new product is making a profit in this upcoming market.

• Bargaining Power of Buyers: In general, industries are more attractive when the
bargaining power of buyers is low. Buyers can suppress the profitability of the industries
from which they purchase by demanding price concessions or increases in quality. Ours
 is coffee industry and the taste and demand of each customer widely varies. Therefore
the bargaining power of buyers is high in this industry.

• Bargaining Power of Suppliers: In general, industries are more attractive when the
bargaining power of suppliers is low. In some cases, suppliers can suppress the
profitability of the industries to which they sell by raising prices or reducing the quality of
the components they provide like quality of coffee beans. Since this industry is
comprised of multiple sub groups of industries, there is always high bargaining power of
suppliers.

• Rivalry among Existing Firms: In most industries, the major determinant of industry
profitability is the level of competition among the firms already competing in the industry.
In case of intense competition among the existing firms, industry wise losses occur.
Around 10-12 similar organizations exist in Nepal. Since there is high competition among
the existing firms, there is high rivalry in this industry.
Besides this we can also expect competition from Nepali masala tea, herbal tea, indian imports
(nescafe, mac coffee).

Industry growth and sales projection

The main aim of any business is the profit which is earned from selling its goods and services.
Profit will ensure payments of debts, salaries, wealth maximization among other things. In
broader sense profit earned by rendering services can be utilized for the growth and
development of the industry.

In the coffee business the first year is all about expenses with very little or no revenue. This is
so as the planted coffee seeds will require time and care to mature. In the second year also
there will be less revenue collection as the harvest will not be to its full potential. It is believed a
coffee plant takes 3 years to fully mature and reap coffee cherries to its full capacity. From the
3rd year a coffee plant can easily survive for 25-40 years although the quality of coffee beans
decreases in the later years.

5 year plan

Year 1st 2nd 3rd 4th 5th

Net profit -30,00,000 -10,00,000 -2,00,000 12,00,000 25,00,000
(RS)

Once well established with proper management a blooming coffee business can easily provide
a net profit 25 to 45 lakhs The profit can easily utilize for development purposes, some of the
upgrades can be-

 Acquisition of new land for more coffee plantation

 Purchase of new machinery which can harvest/roast/wash/extract/pack the coffee beans
(different machines)
 Hiring of skilled labor both in technical and managerial field
  Increase in storage space
 Moving ahead with the plans (different services discussed by the company partners i.e.
moving coffee barista, barista training etc)

If things go according to plan we are expected to meet our total investment break-even point by
the end of 5th year. After that the company can focus on its growth and development.

Sales objectives and strategies

In the coffee business we will have to calculate various factors to come up with the before cost,
some of the factors to be considered are land rent, use of machinery, wages and salaries,
packaging and distribution. The selling cost is simply a markup and the price can be justified by
the value provided by our product.

We have two premium products Organic coffee beans and roasted coffee beans which will
target the foreign market and three basic products parchment Grade A, dry cherry Grade A and
fresh cherry which will be sold in the local as well as in the foreign market .
Valuable final product At the time of buying At the time of selling
Organic coffee beans $12 $18.99/ 500 gm
Roasted coffee beans $9 $14.99/ 500 gm
Parchment Grade A 220 400/ kg
Dry cherry Grade A 90 140/ kg
Fresh cherry 50 80/kg

The pricing listed of our basic product parchment Grade A, dry cherry Grade A and fresh cherry
is the government approved prices. The premium products prices are listed in response to our
competitors; though the prices seem to be high the value provided by our product will be higher.

Market Analysis
Target Market Description
a) Local Venders:
The Nepalese market suggests that most of the parchment coffee beans are purchased and
consumed by the local Nepalese themselves. Thus, the parchment coffee beans will be sold to
Nepalese local vendors. In order to handle the quantity supplied to these vendors, we will be
using only 20% of the coffee plants to process for parchment.

b) Export:
In the foreign market, the most exported product of coffee is the green coffee beans. The
foreigners purchase the fresh coffee beans and roast as per their taste and preferences. The
green coffee beans exported will be jute packed. Most likely exporting countries are Japan,
India (since it is easily accessible), China, Germany, Netherland, South Africa, Argentina,
Australia, America, etc. The foreign export of green coffee beans holds the most value among
any of the coffee products. Thus, 50% of the coffee plants will be used to produce green coffee
beans only.
 c) Café and Restaurant:
Roasted coffee beans are mostly used by the café and restaurants to make the coffee drinks.
Flavors of Nepal will be serving varieties of quality roasted coffee beans to the café as per their
requirements. Café Soma, Karma Coffee Bar, Café De Genre, Roadhouse Café, Roots Eatery
etc. are some of the potential targets for selling the roasted coffee beans. 20% of the coffee
plants will be roasted to sell.

d) Households:
The coffee plants are further processed and grinded to make instant coffee. These instant
coffees are sold in the supermarkets and then to the final consumers. The examples of market
of instant coffees are Big Mart, KK Mart, Bhatbhateini etc. Since the instant coffee market holds
less value and profit margin is high due to high processing expenses, only 10% of the coffee
plants are processed to instant coffee, packed and sold in the market

Market Competition

In the business of coffee, Flavors of Nepal will have to face various competitors in the market. In
each stages of the coffee (i.e. products), there will be numerous competitors having their own
competitive advantages.
The Nepalese coffee brands such as Himalayan Java, Himalayan Bud, etc. are the types of
competitors for the parchment coffee beans and roasted coffee beans. Himalayan Java‟s
marketing strategy is to promote Nepalese coffee industry and attract Nepalese as well as
foreigners. They are on the top when it comes to Nepalese coffee industries. Both Himalayan
Bud and Himalayan Java are a coffee brand where they have their own coffee farm and
distribute it to various café. They use it to export and in their own café as well. There are
approximately 150 exporters of green Arabica beans in Brazil. Vietnam, Columbia, Germany,
Italy etc. are some of most likely competitors when it comes to exporting of green coffee beans.
The likes of Nescafe, Starbucks, Nestle etc. providing quality coffee of wide flavors,. will
compete against Flavors of Nepal‟s instant coffee.

The purchase decision for our customer is based on trust in our process and bean selection. We
have established relationships with our customers which extend beyond that of the buyer/seller.
The Flavors of Nepal tag means that the product has been chosen and prepared with the
highest quality standards in mind.

Sales Forecast
As per the principles of a Standard Organic Coffee, a coffee plant should be grown without
using any sorts of chemical for around 4-5 years of time. Thus, the sales of the standard organic
coffee will start from 2021 (i.e. 4years later).
Following is the table for the sales forecast after being certified as a standard coffee bean:

Year 2021 2022 2023

Unit sales 13 tons 16 tons 25 tons
Organic green beans 6.5 tons 8 tons 12.5 tons
Parchment coffee 2.6 tons 3.2 tons 5 tons
beans
Roasted coffee beans 2.6 tons 3.2 tons 5 tons
Instant coffee 1.3 tons 1.6 tons 2.5 tons
Total sales Rs 43,00,000 Rs. 52,00,000 Rs. 82,00,000

Marketing objectives and strategies (VFP & KPI)

S.No. Objectives/ VFP At the time of At the time of

buying selling
1 Print media 30% 60%
2 Direct selling to importers 20% 70%
3 Social media 20% 50%
4 Brand philosophy 25% 80%
5 Campaign 50% 75%

Brand Philosophy
The Flavors of Nepal must come up with a brand statement, brand mission, brand core values,
and its brand personality. A story behind the establishment of the company can be an
interesting start to it. We do have a catch motto, Flavors of Nepal (rise and shine) or (a cup
enough to run the day). The company motto encourages the consumers to drink the coffee and
shine or be active throughout the day, the caffeine intake does help the consumer to be active.

Print Media:
The firm will be promoting the brand on various places through display of flexes, flyers of the
firm. This well make the firm‟s brand recognized through not only the consumers of coffee, but
also the non-consumers. It can encourage the non-consumers to try out the brand‟s product and
can increase the sales proportion of the firm.

Direct Selling to Importers:

Flavors of Nepal will capitalize on existing relationships with importers who have stated their
willingness to contact the firm and recommend the brand. By this, the firm will be selling directly
to importers.

Social Media:
As most of the coffee consumers are found getting touched to the current social media, the firm
will be promoting the brand through various social media such as Instagram, Facebook, Twitter
etc. as well as through websites. The social media strategy can reach out to various consumers
who are in far distance across international borders.
Campaign:
Campaign as in sample survey, questionnaires, interviews will be carried on in order receive
feedbacks on the brand. This will help the firm to modify or improvise on any certain quality of
the product which will impress the likes of the consumer.

Financial plan
We intend to start business by investing capital of RS 12000000 (1 crore 20 lakhs) in two ways;
first ADB loan of RS 6000000 (60 lakhs) and the rest RS6000000 will be invested 4 principle
owners. The bank charges an interest of 6%, each owner has 25% ownership in firm.

Getting the Agricultural Development Bank loan can be difficult as one has to go through
government procedure of proving the business is an agricultural one, after this by showing the
plans, revenue generation, return etc. we can apply and get the ADB loan.

As the firm is supposed to plant the coffee, and generate income by selling it, the later cannot
be done instantly as it takes 3 years for coffee plant to produce green cherries. By the end of 3 rd
year the firm expects a 9500 kg of fresh cherries to be accumulated. Different plant will be
cultivated in the spare land during the first two years which expects to generate sales revenue
of RS 20000. The sum can be utilized to fund the operating expenses.

Huge expenses are expected during the first three years, sale of coffee beans will be conducted
from the third year which will generate revenue RS 5200000, sales is expected to increase
gradually. The major expected expenses during the first 3 years are leased rent, salaries and
wages, marketing expenses, purchase of seeds. Capital will be spent on construction
appropriate farm land and office unit. At the end of the 3rd year all the necessary facilities are
storage unit, processing unit, and office outlet will completed.

Capital structure

ADB loan
Owner investment
Financial objectives and strategies
All the objectives or strategies will be implemented by the end of 5th year; this is so as it takes 3
years for the firm‟s sales to commence.

Objectives/VFP At the time of buying % At the time of selling %

Achieving break even 30 80
Decrease in long term debt 10 70
Reducing cost incurred 20 60

a) Achieving break even

The firm is expected to meet break even in terms of investment after the completion of fifth year.
We will know we have achieved break even once the overall net income equals to our initial
investment of Rs 12000000. After implementation of this objective it will 80% the company will
reach its breakeven point.

b) Reducing cost incurred

The firm will look to implement a cost reduction strategy; cost will be saved on various headings
such as marketing expenses, transportation expenses, storage expenses, equipment cost.
Unnecessary cost will be recognized and will be cut off this will ensure efficient utilization of
resources with minimum waste. Before implementation of this strategy the company is only 20%
cost effective whereas after implementing it, it is believed the firm will be 60% cost effective.

KEY FINANCIAL INDICATOR: Decrease in long term debt

As we know the firm will be taking a loan of RS 6000000 (60 lakhs), clearing off, of this debt will
indicate major business success, as after clearing of loan the owners will finally gain some
amount of return from their investment. Coffee beans in different forms will be sold in both
domestic and foreign market to achieve this objective. After this objective is taken into
consideration 60% more loan will be cleared off.
Pro-forma financial statements
1. Annual Income statements

Particulars Year 1 Year 2 Year 3 Year 4

Sales 20,000 20,000 20,000 5200000
Less : Sales return - - - 200000
Net sales 20,000 20,000 20,000 5000000
Less : COGS
Purchases 500 500 500 240000
Gross profit 19500 19500 19500 4760000
Less : operating
expenses
Salaries & wages 350000 200000 200000 500000
Advertising 100000 50000 50000 100000
Maintenance - 5000 5000 25000
Depreciation - - - 260000
Office expenses 8000 4000 4000 15000
Miscellaneous 1000 1000 1000 2000
Telephone 500 500 500 1500
Utilities 3500 3500 3500 6500
Leased rent 100,000 100,000 100,000 100,000
Packaging cost - - - 30000
Total operating cost 473000 274000 274000 850000
EBIT (443500) (244500) (244500) 3920000
Less : Interest expense 360000 360000 360000 360000
Net profit before tax (803500) (604500) (604500) 3560000
Less: tax (30%) - - - 1068000
Net profit (813500) (614500) (614500) 2392000

Break-even analysis (4th year)

We will take the 4th year as the model of break-even analysis as by this year we will be to
ascertain revenue, variable cost and fixed cost properly
Unit sales- 8000kg
Sales amount – RS.5200000
Sales/unit – 650/kg
Fixed cost – Rs2000000 (leased rent, accumulated depreciation)
Variable cost – 150/kg

Breakeven in unit = Fixed cost/ sales per unit- variable cost per unit
= 2000000 / 650-150 = 4000 units

The company expects it will achieve breakeven in 4 tons anything above that will yield profit for
the organization. In amount 4000 x 650 = Rs2,600,000
 2. Annual Balance Sheet

The firms balance sheet of 4th year is presented as major acquisition of machinery and
construction of storage unit and other facilities will completed during this year.

Particulars Amount (Rs)

Assets
Fixed assets
Machinery 2574000
Less : Depreciation expenses (26000)
Building 3500000
Facility 5000000

Office unit 500000

Furniture 45000
Less : depreciation expenses (5000)
Current assets
Notes receivable 10000
Inventory 20000
Cash 150000
Total assets 11799000

Liabilities and owner’s equity

Current liabilities 30000
Long term debt 5000000
Total liabilities 5030000
Equity capital 6000000
Retained earning 769000
Total liabilities & Owner’s Equity 11799000

3. Key Financial Ratio

Ratios Year 4
a. Liquidity Ratios
Current Ratio 6:1
Net Working Capital RS.150000
b. Activity related (time)
Inventory Turnover Ratio 250
Days sales in inventory 3.28
Fixed assets turnover ratio 0.45
Total assets turnover ratio 0.42
c. Leverage Ratio
Equity multiplier (times) 1.97
d. Profitability Ratio
Gross profit margin 0.94
Net profit margin 0.49
 Return on assets 0.21
Return on equity 0.41

Financial Goals
Financial goals for the firm will only be set from the 3rd year and will be implemented at 4th year.
The nature of business doesn‟t allow the firm to ascertain the financial objectives instantly after
the firm is established.

Like any other business the main goal of the firm is Profit maximization by achieving this goal
many other targets will be met like-

 Satisfaction to the owners

 Profit will ensure sustenance of the firm
 The saving up of profits into various funds will ensure that organization will be able
commence various other plans i.e barista training, mobile coffee café etc
 Profit will also help in the expansion of the fund, some portion of profit will first be utilized
for clearing of debt then it can saved for expansion purpose
Work-cited list
http://himalayanarabica.com/
http://himalayanarabica.com/nepal-coffee-price-2016-harvest/
https://legacy.sweetmarias.com/library/node/9372
https://espressocoffeeguide.com/gourmet-coffee/asian-indonesian-and-pacific-coffees/nepal-
coffee-nepalese-coffee/
http://ventureplus.com.np/taking-nepali-coffee-to-the-world/
http://www.nepjol.info/index.php/IJASBT/article/view/11252
http://www.fao.org/docrep/008/ae939e/ae939e05.htm
http://www.nepaliorganiccoffee.com/Nepali_Organic_Coffee_-_Namaste%21/Welcome.html
http://www.himalayaorganiccoffee.com/
http://www.nocp.com.np/
http://highlandcoffeenepal.com/
http://www.agricultureinnepal.com/coffee-farm
http://www.coffeenepal.org.np/members.html
http://himalayanjava.com/nepali-coffee-industry/
http://www.himalayaorganiccoffee.com/?action=history
https://en.wikipedia.org/wiki/Coffee_production
http://www.agricultureinnepal.com/coffee-farm
http://www.ncausa.org/About-Coffee/10-Steps-from-Seed-to-Cup
http://www.zecuppa.com/coffeeterms-farming-processing.htm
https://en.wikipedia.org/wiki/Economics_of_coffee
https://www.ft.com/content/3557c8e4-096f-11e7-ac5a-903b21361b43
https://www.sustainabilityxchange.info/filesagri/Coffee-
farming%20as%20a%20business%20manual%20complete.pdf
http://lib.icimod.org/record/14057/files/3514.pdf
https://assets.helvetas.org/downloads/coffee_database_in_nepal__2014_.pdf
http://pact.gov.np/docs/publication/Value%20Chain%20Development%20Plan%20for%20Organ
ic%20Coffee.pdf
http://pact.gov.np/docs/publication/Proceeding%20of%20Coffee%20Sub%20Sector.pdf

Reference

Marich man tamang

Everest coffee brewery Pvt.td
9851134050
APPENDIX
Formulas related to the financial statements:
Assets = Liabilities + owners‟ equity
Current ratio= current assets/current liabilities
Working capital = current assets - current liabilities
Inventory turnover ratio = sales/ending inventory
Fixed assets turnover ratio = sales/total fixed assets (net of depreciation)
Total assets turnover ratio =sales/total assets
Debt ratio = total debt/total assets
Equity multiplier = total assets/ equity capital
Gross profit margin = gross profit/sales
Net profit margin = net profit/sales
Return on assets = net profit/total assets
Return on equity = net profit/equity capital
Rate of return = net income/total investment