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Vitamin Water

A Global Business Proposal


for
Lima, Peru

Dorothy Bui
Sarah Chen
Binet Lee
Danielle LoPresti
Kenric Ware

EXECUTIVE SUMMARY
VivaAqua is a US company based in Dallas, Texas that provides a refreshing and organic
alternative to the sugar laden vitamin waters currently on the market today. With distribution all
across the continental US, we have captured 15% of the organic beverage market and are now
focusing our sights on international opportunities.
With its current trend towards organics and a rapidly advancing economy, our first venture into
the international foray is slated for Lima, Peru. We believe our products are in line with Perus
current market and will offer a higher quality alternative that respects both their culture and their
communities.
With that in mind, our initial introduction will include ingredients which are currently prevalent in
the Peruvian diet. These ingredients will be procured through fair trade practices utilizing the
regions local farmers.

We will also source 90% or our plant personnel from the surrounding

communities. Our hope is that this approach will also directly impact Perus economy by creating
jobs that increase the standard of living for its population.
By forming strong alliances with industry leaders such as Supermercados Peruanos, S.A., we expect
to fully realize a successful introduction into Perus marketplace that is well received by consumers.
We believe that the strength and quality of our brand will hold true for Peru, just as it has in the US,
and will quickly set us apart from our competitors.
BUSINESS/PRODUCT SUMMARY
Business Profile
As a leading organic beverage corporation, VivaAquas goal has always been to cultivate
products that are reflective of a healthful, high quality nature and respect the people and planet
involved while doing so. Our current operations are located in the US, which consist of production
plants in California and Florida, with headquarters located in Dallas, Texas.
Our current company structure is vertically organized with forward thinking key personnel. It is this
ability to look toward the future that we venture into the South American marketplace. With this
new endeavor, our organizational structure will also take on geographical characteristics as well.

Our beverages are produced through sustainable methods and use only the highest quality
organic ingredients which are sourced locally. We believe that it is this commitment to quality
and environmental responsibility that sets us apart from our competitors.
Product Profile
In an effort to cater to Perus diversified tastes, VivaAqua will be introducing three initial flavors
Fresh, Citrus and Tropical.

Fresh will be our primary product which consists of the popular

ingredients, cucumber and mint. Citrus will be a lemon lime flavor, and Tropical will contain the
Peruvian specific fruits, cherimoya and guava. These organic ingredients will pack a significant
vitamin punch and provide the daily equivalents for vitamins A, C, E, K, B6 and potassium.
To add to the nutritional benefits of our beverages, VivaAqua will include electrolytes as well to
help maintain the consumers hydration levels. Our process will also utilize ionization which will aid
in shelf life and prevent the breakdown of nutrients.
All ingredients will be locally sourced and our water will be derived from the Rimac River, which is
the most important source of potable water for the Lima metropolitan area. To lessen the burden
on this resource, we will also utilize rainwater/gray water harvesting, which will also meet our
sustainability goals.
Value Proposition
Targeting the rising middle and upper classes, VivaAqua is a vitamin water that will add health
and vitality to its consumers, as well as respect Perus heritage and offer value to local economies.
Guarantees
VivaAqua guarantees that only the freshest, highest quality ingredients will be used to create
beverages that are superior in taste and that add to Peruvians quality life.
Outstanding Customer Service
Our facility in Lima will employ people from the local communities, who are representative of the
culture, to assist with customer issues and concerns. Our marketing group will also consist of
support teams that are assigned to the various Vivanda locations to aid in promotional activities
and product training. VivaAqua will also offer a direct help line to be manned 24 hours.

COUNTY ANALYSIS
Peru as expressed through the ECLIPTER model:
Econography
Peru is a widely diversified and developing country in Western South America, officially known as
the Republic of Peru. It is divided into twenty-five regions, which includes the province of Lima.
Peru is a multi-ethnic country with an estimated population of around 30.4 million. This population
includes Amerindians, Europeans, Africans and Asians. The dominant language in Peru is Spanish,
which is spoken by 84.1% of the population, although there are a significant number of Peruvians
who speak Quechua and other native dialects. Perus government is a Constitutional Republic
government much like that of the United States.
Current spending habits in Peru are focused on attention to quality, with a small segment willing
to pay premium prices for convenient, packaged, easy to consume products. Peru is highly
dependent on imports and interested in trying new products as a result.
Culture
Peru is a country rich in culture, largely due to its diversity. Peruvian consumers have a strong sense
of family and community obligation. Education has improved for later generations, which has
given rise to the middle class and an increase in disposable income. The tradition of woman
staying home to mind the house and raise the children is rapidly departing as more women are
advancing their education and joining the workforce. The quality of life for Peru is also improving,
with efforts being directed towards economic development and public health.
Legal
Trademarks
Peru has a first to file system that requires no evidence of prior use or ownership which leaves
the registration of popular foreign trademarks open to third parties. It is highly recommended for
any foreign investor seeking to manufacture and distribute their products in Peru to register their
trademarks, logos, or any Office of Distinct Signs with the INDECOPI.
Patents
Since, Peru is not a member of Patent Cooperation Treaty, a domestic patent application must
be filed with Perus Patent Office within INDECOPI to protect current patent rights.

If a patent

holder suspects infringement, they may first file an infringement action with the INDECOPI. Once

it has been approved, the patent holder may later seek damage restitution with the Peruvian
Judiciary.
Zoning Laws
The government relies on a vast range of policy tools and institutions to achieve the best use of
the land. The city hall uses master plans, zoning, subdivision regulations, building codes and other
public policies to organize and shape the development. In Lima, there is a government sector
known as LUM (Land Use Management), with its main functions being to record the public and
private use of land, and advising on registration procedures for business uses of land.

Income Profile
In Peru, the population is divided into five socio-economic classes:

A, representing the richest and wealthiest families

B, representing the upper middle class

C, representing the middle class

D, representing the working class and lower income families

E, representing the marginalized poor

There is growing segment of the population becoming knowledgeable in mining and the drug
trafficking, which is widening the gap between the rich and the poor. As of October, 2014, the
average monthly wage in Peru has increased to 1,623.52 PEN (~546.65 USD).
Political Risk
The primary political risk in Peru is the conflict over natural resources. Research shows that one
third of Peruvians say the extractive industries near their homes threaten their lifestyles and do not
benefit them at all. Presidential and government candidates say more must be done to minimize
violent conflict and better utilize and distribute the countrys resources.
Tax Regime
Perus top individual income and corporate tax rates are approximately 30%. Some businesses
are also subject to VAT (value-added tax) and financial transactions taxes, however, there are
some tax advantages as Perus average tariff rate is 1.5%. Also, with the creation of the Pacific
Alliance Free Trade Agreement in 2013, 90% of tariffs between Central and South American
countries have been disallowed.

Exchange Rate
1 Peruvian Nuevo Sol (PEN) = 0.3 US Dollars
Restrictions
Current global trade restrictions exist on imports of used clothing and vehicles, however, foreign
and domestic investment are treated equally under Perus constitution.
INDUSTRY ANALYSIS
Customer Profile
Peru currently has the fastest growing economy within South America. Most recent estimates of
real GDP growth for 2014 are above the regional average of 3.5% by 1.8% and inflation has been
low compared with 2013s target range of 2.9%.
Peru is the midst of most progressive economic period in history. As Peru becomes a strong middle
class country, demand for quality goods is increasing. Consumers are enjoying rising levels of
disposable income, allowing them to buy certain items for the first time or upgrade items across
virtually every category of expenditure. However, poverty still persists in many parts of country
and older generations retain their traditional values, which has widened the gap between classes.
Competition
The soft drink industry is highly concentrated in Peru. The major competitors are Coca-Cola, Pepsi,
and Ajegroup. Coca-Cola and Pepsi have been struggling to assert themselves in the face of
comparable, less-costly products like Kola Real. Intense local competition has caused Ajegroup
to expand and begin selling bottled water. Clearly, it believes it has found a winning formula:
produce a quality product, keep costs low, and sell for less than your main rivals. This strategy
appears to be working and has successfully been replicated in numerous other South American
countries.
Coca-Cola, on the other hand, simply bought a successful national brand (Inka Kola) and hopes
to continue marketing its product as the national Peruvian soft drink in an attempt to convince
consumers that Inca Kola is the soft drink that goes with Peruvian food much better than Coke,
Pepsi, or Kola Real.

To this end, Inca Kolas distribution channels include not only super or

hypermarkets but also restaurants. Coca-Cola offers restaurants that carry Inca Cola incentives
and marketing assistance. In the past twenty years the Peruvian marketplace has changed
drastically. It is now no longer enough for US companies to simply produce a product that
everyone recognizes and deliver it to stores and restaurants with the expectation that it will sell.

Market Segment & Potential


While food expenditures vary widely within Peru due to the countrys imbalanced income
distribution, beverage consumption has increased throughout the country.

Peruvians enjoy

drinking cool beverages with their meals. Adults are usually drinking a beer made of fermented
maize. Children like drinking carbonated drinks, juices, and chocolate beverages. Also studies
have shown that in 2006, 57% of the population over 12 years of age drink soft drinks daily or several
times per week.
Since it is hard to get drinkable water in Peru, and the beverage industry has a big market share
in the Peru. Peruvian likes to drink beverage or alcohol while they are eating or celebrating with
their family. As VivaAqua we think by making a flavorful beverage drink will be a good product
for us.
Furthermore due to the geographic of Peru, it is hard to get a clean water in Lima. People usually
drink bottled water at home this will be our advantage for our company to enter the Peruvian
market.
MARKET ENTRY
Mode of Entry
Initial mode of entry will be in the form of foreign direct investment, by which VivaAqua will
commence operation of their first South American facility in Lima, Peru by the first quarter of 2015.
This 14,000 square foot facility will house all aspects of operations, processing and distribution, and
will represent the hub for all South American sales. We believe that this mode of entry will provide
a higher degree of control and will also allow us to better know the consumer and the competitive
market. Upon completion of renovations of the facility, personnel will be sourced from local
communities to increase VivaAquas localization.
Market Strategy
In order to increase market agility and consumer responsiveness, it will be advantageous to enlist
the help of a local agent who has strong working knowledge of both the market and the culture.
VivaAqua plans to employ such an agent so as to acquire information on consumer trends and
identify niche markets, current market developments, and business practices. This approach will
help to develop a local presence for visibility within the community and the marketplace.

Supermarket chains and hypermarkets are constituted to be the main market for imported food
and beverage products, which targets high and middle income consumers. In recent years,
organics have become increasingly popular and made available mostly through these venues,
which suggests that working with these supermarkets directly would increase the likelihood of a
successful introduction into the marketplace.
New entrants must be committed to the market over the long term, and as such, must also be
committed to their partnerships within that market. Currently, Supermercados Peruanos S.A. is one
of the largest supermarket and hypermarket chains in Peru. Their Plaza Vea hypermarkets are the
most important and powerful branch of the group, with 15 stores in Lima alone. While their
Vivanda supermarkets currently only have 8 locations in Lima, they are dedicated to the upper
and middle class consumer (our target market) and provide more of a shopping experience by
offering a variety of imported goods, organics, and in store cafes with free WIFI. Given their
strength within the market, VivaAqua will forge a strong alliance with Supermercados Peruanos
for initial entry, with product being offered exclusively through their Vivanda stores.
Market Structure
There is a current health and wellness trend in the Peru that is expected to continue to develop
and grow rapidly. Penetration is still somewhat small, but there is important growth potential, as
the fruit and vegetable juice sector is currently experiencing an annual growth rate of 30%. These
figures confirm the viability of this market for importers and foreign companies.
Peruvian consumers are also becoming increasingly aware of environmental issues and
approximately 60% of young consumers are currently embracing both stores and products that
claim to be environmentally conscience. This demand has dramatically impacted the vision and
strategy of local food and beverage manufacturers and retailers, and has instilled profound
change towards lessening the impact on the environment. As such, more companies are rushing
to offer organic and sustainable versions of their products which has spurred an increase in
competiveness within this segment and created a perfect competition market structure.
Peru currently executes a Free Trade Agreement in full force with US companies, and the Peru
Trade Promotion Agreement reinforces US competitiveness within the Peruvian market. With the
quality of US products being strongly recognized among high-end consumers, the attractiveness
of those products is further enhances and preferred over competitors.

Infrastructure and Logistics


With Perus middle class burgeoning, demands on current infrastructure are increasing.

The

government has already awarded as much as $10.7 billion in concessions to infrastructure projects
this year, indicative of the lengths to which Peru will go to sustain its economic health.
Lima houses approximately 30% of Perus population, and as such has an essential need for
transport infrastructure. It is this need that has spawned the Via Parque Rimac Project, which will
improve the connection between the capital and its two main transportation hubs, the Jorge
Chavez International Airport and Callao port.
Local Environmental Laws
The National Office for the Evaluation of Natural Resources is the principal policymaking body for
resource development, while the General Department of the Environment, which is part of the
Ministry of Health, deals specifically with the control of pollution problems. Water, forest and
wildlife resources are the jurisdiction of the Ministry of Agriculture.
Although numerous environmental protection measures have been passed in recent years,
enforcement is lax and hampered by inefficient management and scarce fiscal resources.
Key Relationships
The negotiating power of major supermarkets towards food and beverage suppliers is strong. In
many cases, major chains require exclusivity rights to new suppliers, but since these chains prefer
high-end products through direct channels, this results in higher margins for suppliers. Investing in
local partnerships can greatly increase market opportunities. It is in response to this concept that
VivaAqua will form a strategic alliance with Supermercados Peruanos, S.A. to supply all of their
Vivanda locations exclusively for the first year of introduction.
To increase the integrity of VivaAquas supply chain, we will utilize local sources and employ fair
trade practices that enhance the lives of marginalized producers and workers by achieving better
trading conditions, securing rights, and promoting sustainability.
In response to our local business partners, constant in-store promotional activities will be prevalent
in an effort to foster strong relationships and aid in consumer appeal.

Corporate Responsibility
VivaAqua is a beverage company that is committed to both its consumers as well as the
environment. We use the highest quality organic ingredients sourced from local farmers utilizing
fair trade practices. We believe in sustainability and have a Zero Waste policy within our plants.
As such, our plant in Lima will be constructed under LEED Silver guidelines using recycled materials
and employing rainwater/gray water harvesting and recirculation technology. Our goal is to add
health and vitality to both the people and the planet.
MARKETING PLAN
Market Objectives
VivaAquas goal is to sell 1,500,000 individual units in the first year, and realize retail sales totaling
886,706.08PEN. In having its roots in Limas middle class communities, VivaAqua aims to gain 35%
of that demographic within the first year of the products introduction. VivaAqua plans to use
price penetration to gain market share within the health-based beverage market, strengthening
the VivaAqua brand name, and maintain the quality of our product to develop a word of mouth
advantage to increase sales. Over time, we intend to develop a loyal customer base, such that
VivaAqua products will gradually become a staple product that is consumed frequently to gain
access to health benefits that complement a more active lifestyle. Overall, VivaAqua intends to
attract the attention of the health-conscious and cosmopolitan Peruvian middle-class
demographic, while still maintaining cost leadership as a means of attaining increased market
share and making our brand image one of reliability and quality.
Target Markets
VivaAquas primary target market is individuals between the ages of 18-35, mostly located in Lima,
due to a high population of emerging health-conscious consumers in that city. In addition, our
most targeted consumers will be of medium to high economic status. They will also have a
preference towards organic and wholesome products. These consumers should have a desire to
stay well-hydrated and experience the practical health benefits of essential vitamins and minerals,
while enjoying flavor without the use of added sugars.
We have chosen to target this particular market due to a growing trend of consumers who desire
healthy and organic beverages, and seek a staple source of a variant of bottled water. In
addition, our position as a moderately priced, yet high quality product will enable VivaAqua to
become a staple product that helps to fulfill a healthy lifestyle, wherein a devoted and active
individual may buy up to twelve bottles of product per week, with two bottles or more consumed

a day. Marketing will aim to promote an active lifestyle that is supplemented by the consumption
of VivaAqua, as doing so could increase the frequent user base as well as dramatically enhance
sales. Paired with a marketing team and social media campaign to create awareness about the
products positive qualities, VivaAqua can ensure that demand is maintained for the product,
and as the brand builds its reputation, word of mouth throughout the community can be relied
upon to help further market the product effectively.
Situational Analysis
Competitors:
VivaAqua is an organic beverage that keeps consumers hydrated and healthy. The competition
for this product consists of other popular native non-alcoholic beverages such as Inca Kola and
Chicha Morada. At the same time, alcoholic beverages such as Pisco Sour, with origins in Lima,
have already gained traction nationally as preferred alcoholic beverages. VivaAqua has an
advantage over its competition due to the appeal of having no sugar or chemicals added and
minimal calories, while still providing noticeable health benefits that contribute to the
maintenance of a healthy lifestyle. Our focus in gaining market awareness over locally preferred
brands in the Lima community can be accomplished by directing special attention at marketing
to the middle class and healthy lifestyle communities, emphasizing the clear benefits that are not
present in our competitors products.
Economic Factors:
VivaAqua has an economic advantage due to the low production costs equating to a total of
$1.39 per unit. The beverage will be affordable to consumers of low and medium income families,
with our retail price being set at $1.99 per unit.

VivaAqua uses basic and easily procured

ingredients such as water, fruits and herbs, which allows us to have a constant supply of resources
to ensure we are able to satisfy an increase in demand.
The economic threat to this market would be if the business cycle experiences a recession, as
certain individuals may not have the discretionary income to spend on VivaAqua products due
to the increase in unemployment and reduced consumer spending. Fortunately, Peru has seen a
steady trend of economic growth, with the results of globalization actually reducing poverty rates
from 54% to 28% as recently as 2013, which has since increased our potential target market. In
addition, Perus GDP growth of 3.5% is higher than the regional average, and inflation of 2.9% is
low enough to stimulate economic growth. Overall, Peru seems poised to maintain its current
economic prosperity while still maintaining a trend of growth.

Cultural/Social trends:
VivaAqua will be available for purchase to all Peruvian class structures, but our product will be
marketed to appeal to a growing healthy lifestyle trend that is becoming far more popular in Lima.
Many Peruvians with disposable income are viewing bottled water as a distinct option for regular
purchase, whereas most lower-income Peruvians get their water from water trucks of dubious
quality. As such, there is an increased demand in beverages that can provide guaranteed safe
hydration and still provide some other nutritional benefit as well as flavor. In order to win over the
growing number of young to middle-aged consumers with disposable income, we must be able
to appeal to their cosmopolitan interests, as well as their newfound desire to purchase borderline
luxury products. Our marketing team will emphasize added health advantages with the regular
consumption of this beverage to try and gain consumer loyalty, as well ensure a steady source of
revenue.
Political factors:
The Peruvian government is actively trying to reduce the number of health problems in the
country, having recently attained political stability. More recently, they have started a campaign
for consumers to buy products that are Hecho en Per (Made in Peru). To this end, our product
may have trouble gaining traction against local products. On the other hand, the Ministry of
Health in Peru has also begun a campaign called Por tu salud, muvete Per (For your health,
move Peru), in an effort to try and prevent the spread of obesity. If VivaAqua is able to market
itself as a healthy beverage whose consumption can facilitate a more active lifestyle, Peruvians
may be more attracted to our product.
Natural Environment:
We will be using a minimal amount of manufacturing equipment to create our final product, and
as such, we have the potential to mitigate environmental hazards, such as contributing to carbon
emissions and releasing certain chemical byproducts into the atmosphere. Peruvians in general
are becoming more aware of potential hazards to the environment, a trend that is becoming
especially prevalent in the rising younger generations. There is an emphasis on Ecodiseo (Ecodesign), which has even prompted some supermarkets to begin offering recycled grocery bags
alongside traditional plastic options.

A message of sustainability that comes as a result of

supporting VivaAqua could have a positive effect not only on the environment, but also general
public opinion.

SWOT Analysis
Strengths:

Product has noticeable health benefits using only organic ingredients

Product labeling and packaging will be culturally appealing and draw attention to potential
future customers/consumers.

Social media will be a beneficial source of advertising and will increase sales exponentially in
the first few years of the products life, as well as appeal to the targeted market of middle to
upper class consumers that are capable of using newer technology

The brand contains numerous vitamins that aid in the consumers daily nutrition, allowing
VivaAqua to be a candidate for daily consumption

Choice of three flavors, namely Fresh, Citrus and Tropical, allow consumers a choice in
flavors as well as health benefits

Due to the use of simple ingredients, costs per unit for the company will be manageable and
relatively low

Weaknesses:

Flavors may be weak compared to other competitive brands due to lack of artificial flavoring,
coloring, or preservatives

Print advertising may not be as strong a source due to the new brand, leading to reduced
market awareness when concerning the general public

Fluctuation in demand can affect sales and fade away the brand image

May not be appealing to target market if marketed in a way that does not appeal to Peruvian
tastes

Opportunities:

A rise in sedentarism has been seen in Peru, which is a result of changes in lifestyle and
economic benefits. If we appeal to this particular market, we can market our product as a
way to deter an unhealthy lifestyle

The brand has the opportunity to specifically tap into the emerging middle class of Peru, who
are becoming very health-conscious

The demand for soft drinks has declined as people are preferring healthier drinks, which opens
doors for VivaAqua

Rising disposable income, coupled with a prime location in Lima, which is the economic center
of Peru, means that there is potential to appeal to the urban market

By adopting flexibility in product formation, we can listen closely to initial consumer feedback
to determine what flavors or benefits are most desirable, and work towards creating improved
products in future iterations

Threats:

Peru suffers from a large amount of income disparity, and if our product is not received well
by our target market, it will be difficult to downgrade our price such that it will appeal to the
rural market in Peru

There are already established beverages of preference in Peru, such as Inca Cola and Pisco.
VivaAqua must be able to distinguish its values from these beverages in order to obtain market
share

If the fruits used in our vitamin water are not as fresh as possible, the quality of the beverage
may be compromised, leading to possible liability risks should a consumer fall seriously ill as a
result of our product

An economic crisis could have an adverse effect on the regular purchase of the product, as
people will opt for cheaper beverage alternatives that lack the added health benefits of
VivaAqua

Marketing Mix
Our product is healthy not only due to the use of natural ingredients, such as cucumber, mint,
cherimoya, and guava, but also for the fact that all the ingredients contribute to an end-product
that provides real nutritional value that Peruvians will value. For example, through the process of
creating our product, cucumbers antioxidants which include vitamin C and beta-carotene will
diffuse into the beverage, and cherimoya is a native South American fruit that is also rich in vitamin
C, as well as B-complex vitamins. In all cases, we have ensured that our final three flavors are
geared towards providing nutritional benefit and taste without the addition of sugars.
Our packaging will lean towards a minimalist style, mimicking the style of higher end brands that
can be seen in the United States, such as Smart Water. Our emphasis will be on simplicity, but will
still stand out in the consumers daily routine. We will be using glass bottles coupled with plastic
caps so as to minimize potential negative effects on the environment.
Product demonstrations and distribution will occur at all Vivanda supermarkets located in Peru,
and will be essential to establish the health benefits that consumption of VivaAqua can provide.
At first, we will begin supplying to three of the most popular supermarkets, namely the Vivanda

stores that are located in the districts of Magdalena del Mar, San Isidro, and Miraflores. The
rational for choosing these particular locations is that they are all located in relatively close
proximity to each other, as well as being near the coast, facilitating logistics if necessary. Over
time, should our marketing campaign be successful and sales experienced as projected, we will
be able to expand to other Vivanda supermarkets within Lima districts, such as in Lince and
Surquillo. Our strategy of slow but intentional expansion is geared towards creating Peruvian
familiarity with our product. In a culture where markets are still used and word of mouth is strong,
it is essential that we have the local community supporting our product before we engage in
large-scale distribution.
For promotion, VivaAqua will concentrate on both push and pull strategies to optimize awareness
of our advertising message. The message will center on the health benefits of the product, as well
as the ease of accessibility of the beverage. There will be an emphasis on the variety that will be
provided to consumers, as well as practical health benefits of consumption of the beverage on a
regular basis. Our on-site promotions will help increase product awareness, as well as potentially
boost sales based on increased consumer interest. We intend to hold public demonstrations
showcasing the positive effects of our products during the afternoon lunch break, as well as
evenings shortly after 6:00 P.M., on Monday, Wednesday, Friday, and Saturday, at each of our
initial supermarket locations.
Our social media campaign will engage the community in at least one major contest every three
months, beginning in March, so as to generate additional awareness of the benefits of our
product.

With a persistent on-site marketing team and community interactive social media

presence, we intend to develop a customer base than can attest to the products benefits,
thereby facilitating a word of mouth advertising foundation.
For our pricing strategy we must consider internal marketing factors, and understand the cost that
goes into producing our product. VivaAqua will focus on keeping its fixed costs at a lower end,
keeping our facilities low profile, and initially leasing our equipment installations, and making sure
that the equipment has appropriate production efficiency relative to its costs. Our variable costs
will also be kept fairly low, and we will purchase our organic raw materials, such as fruit and water,
in bulk amounts to reduce overall costs.
With low variable and fixed costs, we can then choose to employ a penetration pricing strategy,
setting the product at a low initial cost to attract customers.

Based on the prices of our

competitors, we will be selling our product to retailers at the price of 1.75PEN, and in turn, the
manufacturers suggested retail price will be 2.49PEN per unit, employing odd-even pricing as well
as a penetration strategy. Considering our cost of production per unit to be .44PEN, our margin
of profit per unit will be 1.31PEN. Due to the presence of more culturally accepted products, such
as Inca Kola, we choose to appeal particularly to our target market of younger Peruvian
individuals that are looking for a beverage that provides health benefits as well as hydration at a
reasonable price, such that it is not only affordable, but that they can make it the staple product
for their active lifestyle.
We realize that demand for our product is largely elastic, and hope to develop market awareness
as well as increase demand. By maintaining a low price, as well as a quality product, demand
will increase over time, and our products will become a regular purchase to fulfill consumers
healthy lifestyle needs, as well as gaining awareness within the rest of the middle-upper class
community in Lima. With an increased demand, we can afford to maintain larger production
quantities, and use marginal revenue to recover costs from our initial investments to reach our
break-even point, and possibly sell our product to gyms, restaurants and other supermarket
retailers. If the market awareness of VivaAqua continues to spread throughout Lima, and demand
continues to increase, we can continue to maintain our reasonable prices to generate substantial
revenue amounts, while still gaining market share and expanding our staff and facilities in years to
come.
OPERATIONS PLAN
General Operation Plan
Business days and hours of operation will be as follows:

6 am 12 pm Monday thru Friday

6 am 8 pm Saturday

Closed Sunday

These days and hours of operation are subject to change due to market demands.
Location
Location is one of the key factors contributing to a business success. VivaAqua has focused its
efforts on a 14,000 square foot facility that is accessible to major highways, as well as the airport
and nearby port, with projection costs being based on a per square foot basis.

Business Start-Up Plan in Peru

Create an original business entity and verify the uniqueness with the public registry office in
Lima.

Notarize our incorporation documents

Open relative business accounts

Register the company incorporation documents

Obtain official stamp on all accounting records and minutes

Acquire a taxpayer identification number specific to Peru

Acquire a Certificate of Compatibility application

Request a technical report of approval

Submit a formal request for a municipal license

Insurance Requirement
Peru simplifies its insurance system to attract investors by requiring the following documentation:

A certificate issued by the competent authority

The date the company was authorized to commence operations in the country

A copy of the companys current fiscal balance and financial statements

A legalized copy of the companys Articles of Incorporation

A Certificate of Good Standing

A legalized copy of power of attorney or a Peruvian resident

A sworn statement of the companys legal representative

A list of individuals or companies which the company is economically related

Proof that the company has net assets of at least $10m

Income Tax

Companies in Peru are subject to income tax from domestic and foreign sources

Fiscal year ends on 31st December

Expenses incurred to generate income are deductible for purposes of income tax

VAT (Value Added Tax) paid on the purchase of goods or services may be used as a tax credit
against the VAT

Capitalization Activities
Much thought has been given to the selection of necessary assets needed to produce
VivaAquas vitamin water. We have determined that investment in the following items will be
necessary:

Equipment:

Flavor infusing water systems

Commercial fruit and vegetable cutting machines

Labeling and packaging machines

Shrink wrapping machine

Material and Supplies


To service a global market, its necessary to invest in materials and supplies.
Operational Workflow
VivaAquas operational workflow is quite uniform and standard consisting of the following:

Procurement of organic ingredients from local producers

Purification of potable water resources

Infusing said ingredients into purified water

Inclusion and balancing of electrolytes

Ionization of final product to enhance shelf life

Packaging and labeling of final product

Distribution to retail partners throughout Lima

Management Structure
VivaAquas management structure will be vertical in natural with a hierarchical approach will be
utilized to convey directives to managers and employees. We believe that this approach will add
to the efficiency of production processes.
Personnel Needs
Key personnel will include a CEO, marketing and social media teams consisting of approximately
20 individuals, production personnel of 100 250 individuals depending on product demand and
seasonality, and minimal administrative and clerical staff.
Mission Statement
Our mission is to create a healthy and high quality beverage that is affordable to all, and to be
the leading supplier of organic beverages in Peru and all South American countries. To attain
these goals we must focus on:

Innovation

Providing quality, reliability, and integrity to our customer

Cultivating long term relationships with employees, suppliers, business partners and the
communities in which we sell our products

Vision Statement
Our vision is to produce high quality, organic beverages that add health and vitality to individuals,
bring prosperity and economic freedom to communities, and respect the earth while doing so.
CULTURAL & HUMAN RESOUCE ANALYSIS
Situation Analysis of the anticipated synergies and differences attributed to cultural factors are as
follows:
Cultural acceptance of our product
Since Peruvians are leaning towards health and better lifestyle choices, they are adapting to new
products and services that help them improve those areas of their life. Peru has also had large
increases to their GDP due to an influx of foreign direct investment by countries recognizing the
growing demands of Peruvians, which has created greater amounts of disposable income
.
Availability of skilled and unskilled labor in the host country
There is a strong sense of importance to hire personnel with certain skills and beliefs that contribute
to the overall communities. Many organizations in Peru use a conversion process, in which they
hire and train towards corporate culture over the benefits of local workers. With large numbers of
local workers being limited in their skills, organizations typically emphasize those skills and provide
the training needed for jobs in an effort to manage community relationships and conflict
effectively.
Industrial and labor laws in Peru
Peru has very similar labor laws as compared to the US. The following are Perus main focus in
terms of labor standards.

Freedom of association

The effective recognition of the right to collective bargaining

The elimination of all forms of forced or compulsory labor

The effective abolition of child labor, a prohibition on the worst forms of child labor, and other
labor protection for children and minors

The elimination of discrimination in respect of employment and occupation

Acceptable conditions of work with respect to minimum wages, hours of work and
occupational safety and health

Company image
VivaAquas most important role is to build relationships within the community and establish trust
with its stakeholders. Executive management must facilitate this focus on community relationships
and regard it as importantly as operations and other business functions.

An internal cross-

functional committee should be established to discuss community relationships and resolution.


Organizations tend to be more successful when cross-functional conferences are employed, as it
helps them find creative solutions for both the company and the communities in the long and
short term, rather than just adhering to a strict compliance approach to meeting social standards.
Strong organizational culture
VivaAqua has top management based in Lima, and frequently visits retail sites to assess
profitability and community support. Organizational culture is often highly dependent on the
structure of the company, whether it is a hierarchical company led by a powerful personality or a
company with much flatter structures, these factors have to be taken into account when looking
at changing culture for a particular purpose, including more effective conflict management.
There is some degree of trade-off between being a strong hierarchical structure and a strong
cross-functional collaboration when managing community relationships.

If there is an over-

reliance on individuals, the company could lose organizational knowledge.


Committed employees
To sustain a high degree of employee commitment, the organization must be focused on
employee satisfaction and go above and beyond merely following Perus labor laws.
Political and economic stability of the country
Current President, Ollanta Humalas term will end in 2016. Since 2011, Humala has been working
to maintain free-market policies, as well as narrowing the wide economic distribution gap and
eliminating the social exclusion of Perus poor, mostly indigenous population. As of 2014, Perus
economy was still growing by an average of 5.6% and has remained stabilized for the past
decade. With a wide range of important metal and mineral resources, Peru is the world second
largest producer of silver and the third largest producer of copper.

Peru currently participates in the following wide range of international and regional fora, which
has also benefited its international trade relations significantly:

United Nations

World Trade Organization

Organization of American States

International Monetary Fund and the World Bank

The Union of South American States

The Forum for East Asia and Latin America Cooperation

The Community of Latin American and Caribbean States

FINANCIAL PLAN
Financial Climate of Peru and Openness to Foreign Investment
Peru as a whole innately suffers from an overall high level of disparity, in regards to the distribution
of income between the upper and lower classes. However, when looking specifically at Lima, the
city is responsible for over 50% of the countrys GDP, and is specifically where the majority of wealth
is located. Therefore, within Lima, there is a target market that specifically is willing and open to
the purchase of new goods such as VivaAqua, but far less of a potential market outside of the
city.
Overall, Peru is extremely open to investment by route of foreigners, and in 2009, the total stock of
foreign direct investment amounted to $18.8 billion, with an increased focus in banking, finance,
and mining, thereby enhancing Perus own economic situation. Recently, the increase in demand
for raw materials, especially when considering the mining of silver, coal, gold, and zinc, has made
Peru a valuable player in the arena of international trade.

The U.S.-Peru Trade Promotion

Agreement (PTPA) was implemented in 2009, while similar agreements were also negotiated with
the European Union in 2013. Perus openness for foreign investment is backed by the 1993 Peruvian
Constitution under Article 6 of the Supreme Decree No. 162-92-EF, and as such foreign investors
enjoy the same rights as native Peruvian investors, and receive hefty tax exemptions, investment
incentives, and prosperous economic activity. With large amounts of capital coming from foreign
investment, Peru comes out ahead of their Latin American neighbors, enjoying a potential 3.5%
growth per year in terms of GDP relative to the 1.2% experienced by other nations.
At a favorable exchange of $2.96 for every one PEN, the US Dollar travels far in Perus economy.
In addition, Perus currency, the Peruvian Nuevo Sol, or simply PEN, is one of the most stable
currencies in Latin America. Much of the currencys stability can be attributed to Perus generous

policy towards foreign investment, wherein a reversal of trends on foreign exchange would be
detrimental to Perus GDP. In addition, as a result of foreign investment, the total amounts of
liabilities in Peru are dwarfed by the accumulation of external foreign assets in the country,
creating a financial climate that trends toward capital outflows. Interest rates in Peru are currently
residing at 3.50%, with inflation rates at 2.9%, which contribute to Perus high growth in recent
years, and have been maintained by Perus judicious macroeconomic policy under its new and
stable government since 2011. Stability of the PEN is of high priority for Peru, and has been the
reason for its relative economic prosperity compared to other Latin American countries, and
maintained Perus status as one of the premier countries in Latin America to do foreign investment.
Since VivaAqua has originally been based in Dallas, Texas, we will be using funds from our previous
successes of selling VivaAqua products in the Dallas-Fort Worth area and across the continental
US. For our initial capital investment, well be spending a total of $750,000, or roughly 2.2 million
PEN to cover initial installation costs. This includes the cost of the facility, equipment, as well as
new business licenses and fees as required in Peru. We will also have to broker agreements for
local capital in Lima, preferably from Banco de Crdito del Per, which is the largest Peruvian
bank in the country.

Income Statement of First Year and Cost to Make Product

Income Statement
Year Ending 12/31/2015
*Expressed in Nuevo Sol
Revenue
Gross Sales*
Less: Sales Returns and
Allowances

886,824.32
118.24

Net Sales

886,706.08

Cost of Goods Sold


Beginning Inventory
Add:

Purchases*
Freight-in

0.00
177,364.86
743.24

Direct Labor*

1,669.26

Less: Ending Inventory

44.59

Cost of Goods Sold

179,732.77

Gross Profit

706,973.31

Expenses
Advertising

20,972.20

Refrigeration

1,182.43

Depreciation

168.92

Waste

337.84

Insurance

810.81

Licenses and Fees


Office Expenses

1,216.22
67.57

Taxes

4,756.76

Rent

13,783.78

Utilities

1,216.22

Wages

62,837.84

Total Expenses

107,350.58

Net Income

599,622.74

Fresh Drink
Cost of Production
Bulk Cost

Direct Materials
Container and Labeling
1/2 Cherimoya
1/2 Cup Blackberries
1 Cup Guava
Ionization Process
Pinch Salt
16.9 ounces of purified
Water

Cost per
item

.15 PEN each glass w/ plastic top


3,200 PEN for 47,500 lbs
1,400 PEN for 28,500 lbs
8,500 PEN for 28,500 lbs of guava
580 PEN for 119 lbs
Inexpensive

0.13
0.03
0.02
0.13
0.02
0.01

Inexpensive

0.01

Total

0.35

Total

0.04
0.04
0.09

Grand Total (in Peruvian Nuevo Sol)

0.44

Direct Labor @ 4 sol per hour


Muddle Fruits
Drink Assembly

Explanations for important values are as follows:


Gross Sales: Expected number of units was calculated by assuming the marketing team would be
efficient enough to produce and sell approximately 1,500,000 units, multiplied by 1.75 PEN for
retailers price.
Purchases: We will purchase supplies to produce about 1,750,000 units, creating a surplus of
inventory to store in case of samples or emergencies, such as loss of inventory during delivery. This
number of units is then multiplied by the cost to produce one unit of good in terms of raw material,
.35 PEN.
Direct Labor: Based on the number of created units, 1,750,000, but now multiplied by cost of labor
4 PEN per hour.

Advertising: Advertising fees are computed as a percentage of gross sales, with 7% of gross sales
going to funding advertising costs, as well as covering incentives for exceptional sales behavior,
or for rewarding customer loyalty. From there, 80% will go to supporting on-site advertisement.
Rent: The particular building that we are renting will be located just outside of Peru, and will total
about 14,000 PEN per year to rent out all its facilities.
Wages: Remaining wages not devoted to production will be divided up between 1 CEO, 15
Marketing Representatives, 6 Social Media Consultants, as well as other more minor administrative
and clerical staff. Initially wages at this point will be fairly low, but all parties have entered into a
long term employment arrangement, and with company bonuses such as stock shares, their
loyalty will be rewarded.
VivaAqua - Fresh - Cost to Produce: All products are bought in bulk and listed
Future Financial Projections
For the first year, we are projected to have a total net loss of approximately 1.6 million PEN, due
to turning a profit of only 600,000 PEN in our initial year against the 2.2 million PEN investment.
However, since this is a one-time investment, we should be able to recoup the losses within the
first few years, and especially as we increase our market share in Lima. As time goes on, we are
projected to have a profit of 1,000,000 PEN by 2015, and 1,500,000 PEN by 2016, should we reach
our unit sales goals of 2 million units and 3 million units respectively. Within a span of 2.5 years, we
will most likely have broken even, and from that point on, VivaAqua will be turning a healthy profit
for years to come.
EXIT STRATEGY
VivaAquas initial exit strategies will focus primarily on recapitalizing and aligning the company for
buyout at both the management and employee levels. At the management level, this strategy
limits the necessary due diligence, as the buyers already have full knowledge of the companys
operations available to them. Through this type of transaction, the liquidity is immediate for the
original owner and its early shareholders, and allows the company to continue as a private
enterprise.
The benefit to this strategy is that the transition is smooth, as the founders are more than likely not
managing the business on a day-to-day basis and are conceding to the current management

team on those decisions. This strategy marks a change in ownership, yet provides for a seamless
transition for the company, the employees, and all other constituencies involved.
Once management has taken possession of the company, an equity benefit plan will be then be
created in which employees will receive a stake in the company.

This strategy will reward

employees with equity ownership and stimulate company performance, and can also serve as

an invaluable retirement benefit.