Quit Smoke Smartly!

Members Patrick Kanny Sarkar Ashiqur Rahman Sarker Md. Nafeesur Rahman Khan Md. Ashiqul Islam Kaiser Mahmud Saddam Hossain

Class ID 801 811 821 1332 1983 2137

Countrys first ever nicotine chewing gum Alternative nicotine source for smokers Prevents smokers from inhaling 3000 plus harmful chemical Helps smokers give up the deadly habit of smoking

Nicotino identifies these problems as opportunity and combines two solutions into a single direction which is producing a chewing gum that reduces the nicotine craving of the smokers by supplying very small amount of nicotine and ultimately directing them to give up this habit.

 Nicotino original- Original sweetened

nicotine gum.

Nicotino fresh mintfresh mint flavored gum

Nicotino cinnamoncinnamon flavored gum

Totally new concept in Bangladesh Commercially and technically viable NRT Enables users to quit smoke in 2-3 months, maximum 6 months No artificial sweetener, color, flavor will be used

Entirely production and manufacturing based. Nicotino will: Use ecofriendly production process. Sell product in 2 packet size containing 2mg strength tablet.
Nicotino firm Valued customer

Gum ingredients

Nicotine gum

Money

Vision: To create a smoking free Bangladesh and a healthy nation.

Mission statement: Nicotino wants to offer its nicotine chewing gum to help the smokers give up smoking habit while using most efficient and state- of- the- art technology in production operation. Nicotino aims at establishing eco-friendly work environment and providing better employee incentives as it continues to expand its business.

Short term goals:

Offer quality products at a fair price. create a demand for nicotine gums as a cigarette quitting process. Persuade target customers regarding the benefits of nicotine gums as a NRT

Long term goals:

Expand its operation beyond Dhaka within 2015. New industrial unit in the west region by 2018. Adding nicotine lozenge and patch product lines.

Objectives:

Attain 20% growth by 2014. Attain 25% profit margin by2017. Repay loans by 2020. Lever up the firm with 25% debt By 2025.

Nicotino is the first production company which will introduce tobacco users to NRT. Nicotino will have no competitors in this country until Existing domestic pharmaceutical companies decide to produce this product. Other multinational companies launch their NRT products.

Burgaining power of suppliers

High

Burgaining power of buyers Threat of new entrants Threat of substitute products

Low

Low

Low

Intra industry rivalry

Low

Strengths
First movers advantage being unique product Commercially and technically viable NRT Subject to fewer government regulations

Weaknesses
Distribution highly depend on dealers Any small error in production process can hamper production hugely Need aggressive advertisement to create brand awareness

Opportunities
Increasing rate of smokers willing to quit cigarettes Government regulation against smoking compelling smokers to NRTs

Threats
Uncertain acceptance level Decreasing purchase power of potential customers due to recession Production may face losses in early stages

Making people aware about nicotine chewing gums Focusing price and unique selling propositions Building brand proposition to different consumers according to their perception Creating customer loyalty and making customer delight

Nicotino positions itself in the market on the basis of its moderate price and the health benefits the target customers can receive.
Harmless to health Nicotino Dunhill

B&H
Gold leaf Marlboro

Low price

High price

Hazardous to health

Geographic location: Dhaka city for first 3 years Demographic: Social classmiddle class and high end consumers. Age 20-35 and 35-55 are two prospective buyer segments for flavored gum and original gum respectively. Prospective buyers: Around 540,000 ( 30% of Dhaka citys total cigarette smokers)

Nicotino uses state-of-the-art technology for packing its offers.

The shelf life of Nicotino is 30 months for both original and flavored gum.

Market-skimming pricing strategy will be used for the product Nicotino. The reasons are: 68.6% smokers want to give up smoking Competitors are unlikely to emerge easily
Nicotino Original Piece per pack Wholesale price (BDT) Retail price (BDT) 30 60 Nicotino Fresh mint 30 60 Nicotino Cinnamon 30 60

195 240

390 480

195 240

390 480

195 240

390 480

Production: Done in Sirajganj because of the availability of raw-materials as well as the convenient transport and communication. The Dhaka city is divided into 8 different zones covering 16 areas
Zone Zone-1 Zone-2 Zone-3 Zone-4 Zone-5 Zone-6 Zone-7 Zone-8 Covering areas Mirpur, Pallabi Cantonment, Kafrul, Mohammadpur, Dhanmondi Ramna, Tejgaon Gulshan, Uttara Lalbag, Kotwali Demra, Sutrapur Sabujbag, Motijheel

Nicotino uses pull strategy as its promotion mix strategy:

Nicotinos marketing communication mix or promotion mix includes all the typical elements : Advertising Sales promotion Public relation Personal selling Direct marketing

Advertising

Electronic media, print media, point of purchase ads.

Sales promotion Public relation

SMS contest, price discount Using opinion leaders, written articles, features, arranging a anti tobacco campaign

Instead

Personal selling

Try This

Temporary selling booth, quality assurance campaign

Direct marketing

Web, email marketing

The project implementation schedule is as follows:

At the initial phase, the operation of Nicotino is monitored by six department heads

The needs of staffs can be illustrated below based on the organizational structure:
2012-13 Finance unit Head Manager Staff Human resource unit Head Manager Staff Marketing unit Head Manager Supervisor Staff Manufacturing unit Head Manager Supervisor Staff R&D unit Head Manager Staff Storage unit Head Manager Supervisor Staff 1 1 1 5 1 1 1 6 1 1 1 6 1 1 6 1 1 7 1 1 7 1 1 3 12 1 1 3 13 1 1 3 13 1 3 4 16 1 3 4 17 1 3 4 17 1 1 3 1 1 3 3 1 1 1 3 1 1 3 1 1 3 2013-14 2014-15

Distribution channels and process:

Website

Nicotino
Order form

Consumer

Nicotino
Website

Retailer

Consumer

The distribution process goes as the following: Finished product is delivered from Sirajganj plant to Dhaka warehouse. product representatives will deliver products to super stores, drug stores and departmental stores. Retailers will sell the products to the valued customers.

Nicotinos head of the marketing department, chief marketing officer holds overall responsibility for all of the companys marketing activity.
Chief Marketing Officer

Sales Manager

Advertising Manager

Promotion Manager

Regional Sales

Advertising Analyst

Promotion Analyst

Regional Sales

The following schedule shows one year plan of our advertising and promotional campaign:
Jan 13 News paper ads Direct marketing Television ads SMS contest FM radio ads Point of purchase ads Contest among retailers Website and online ads Discount offer Advertising using celebrities Feb 13 Mar 13 Apr 13 May 13 Jun 13 July 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13

Following is the three year allocation of our marketing budget at affordable method:
2012-13 2013-14 2014-15

Advertising

2,983200

5,146,400

5,146,400

Sales promotion

150,000

200,000

200,000

PR and personal selling

1,146,600

933,600

1,233,600

Direct marketing

20,000

20,000

20,000

Total

4,300,000

6,300,000

6,600,000

Financial statement assumptions:

Total original and flavored nicotine gum production proportion is 50:50. The wages of production staff increased by BDT 300 yearly started from BDT 4200. Wholesale price of both original gum and flavored gum is BDT 6.5/ piece. Salaries of employees increased by BDT 1000 yearly. Marketing and promotion expense is the highest indirect expense and the marketing budget is calculated using affordable method. Office rent includes the rent of Dhaka office and warehouse. Accounts receivable is 10% of sales revenue each year. Accounts payable is 35% of the raw materials cost.

Accounting Assumptions:
Depreciation policy is straight line method. Depreciation rate is 5% for long term assets. Inventory valuation is done by FIFO method. Tax rate is assumed to be 40% on net income before tax which is payable annually.

Financial Assumptions:

The firms initial investment is BDT 8,493,500 which is financed by 69% equity and 31% debt. The cost of capital or discount rate is assumed to be 20%. Interest for loans is 15% per annum repayable annually.

Initial Investments:
Amounts in BDT

Startup Expenses:
License and approval Patent and trademarks Product development cost Infrastructure development Others Total startup expenses Startup Assets: 52,000 25,000 64,000 327,500 45,000 513500

Land and registration

722,500

Building Machinery and equipment Vehicle Cash requirement Other short-term assets Total startup assets Total Requirement

600,000 4,302,600 606,300 1,698,600 50,000 7,980,000 8,493,500

Means of finance Equity Debt

Amount in BDT 5,870,775 2,662,725

% of Total 69% 31%

Loan Repayment Schedule:

Loan taken ( in BDT) Date of loan taken Repayment years No. of installation per year Interest rate Periodic loan repayment 2,622,725 July 1, 2012 10 1 15% 522,583

Period 1 2 3 4 5

Beginning Balance 2,622,725 2,493,551 2,345,000 2,174,167 1,977,710

Loan Repayment 522,583 522,583 522,583 522,583 522,583

Interest 393,409 374,033 351,750 326,125 296,656

Principal 129,174 148,550 170,833 196,458 225,927

Ending Balance 2,493,551 2,345,000 2,174,167 1,977,710 1,751,783

Projected Income Statement:

2012-13 Operating revenue Sales revenue Less: Cost of goods sold Gross Margin Less: Operating expenses Salaries Marketing expenses Office rent and utilities Depreciation Insurance and others Total operating expenses Income from operations Less: interest expense@ 15% Net income before tax Less: income tax @ 40% Net income after tax 825,000 4,300,000 210,000 275,445 210,000 5,820,445 1,147,555 393,409 754,146 301,659 452,488 1,782,000 6,300,000 420,000 275,445 220,000 8,997,445 12,063,055 374,033 11,689,022 4,675,609 7,013,413 1,914,000 6,600,000 480,000 275,445 225,000 9,494,445 17,639,455 351,750 17,287,705 6,915,082 10,372,623 15,200,000 8,232,000 6,968,000 41,800,000 20,739,500 21,060,500 51,300,000 24,166,100 27,133,900 2013-14 2014-15

Estimation of cost of goods sold:

2012-13 Purchase of ingredients Transportation cost Packaging cost wages utility Other direct expenses Cost of goods sold 4,390,000 550,000 1,520,000 756,000 960,000 56,000 8,232,000 2013-14 10,820,000 1,100,000 4,180,000 1,782,000 2,700,000 157,000 20,739,500 2014-15 12,070,000 1,400,000 5,130,000 2,073,600 3,300,000 192,500 24,166,100

Projected Balance Sheet:

2012-13 Cash Accounts receivable Inventory Other current assets Total current assets Long term assets Accumulated depreciation Total long term assets Total assets Accounts payable Other current liabilities Total current liabilities Long term liabilities Total liabilities Paid up capital Retained earnings Total equity Total liability and equity 2,082,550 1,520,000 3,800,000 64,229 7,470,779 6,231,400 275,445 5,955,955 13,426,734 2,881,200 1,728,720 4,609,920 2,493,551 7,103,471 5,870,775 452,488 6,323,263 13,426,734 2013-14 4,668,825 4,180,000 9,500,000 3,266,461 21,615,287 6,231,400 550,890 5,680,510 27,295,797 7,258,825 4,355,295 11,614,120 2,345,000 13,959,120 5,870,775 7,465,901 13,336,676 27,295,797 2014-15 9,664,310 5,130,000 10,450,000 8,767,107 34,011,418 6,231,400 826,335 5,405,065 39,416,483 8,458,135 5,074,881 13,533,016 2,174,167 15,707,183 5,870,775 17,838,524 23,709,299 39,416,483

Projected Cash Flow Statement:

2012-13 Cash flow from operating activities Cash received from buyers Cash paid for cost of sales Cash paid to employees Cash paid for promotion Cash paid for rent and utilities Cash paid for other purposes Cash paid for interest Cash paid for income tax Net cash provided by operating activities Cash flow from investing activities Cash paid for startup assets Cash paid for startup assets expenses Net cash provided by investing activities Cash flow from financing activities Cash received from loan term loan Cash received from paid up capital Cash paid for loan payment Net cash provided by financing activities 2,622,725 5,870,775 (522,583) 7,970,917 0 0 (522,583) (522,583) 0 0 (522,583) (522,583) (6,281,400) (513,500) (6,794,900) 0 0 0 0 0 0 13,680,000 (8,232,000) (825,000) (4,300,000) (210,000) (210,000) (393,409) (301,659) (792,067) 37,620,000 (20,739,500) (1,782,000) (6,300,000) (420,000) (220,000) (374,033) (4,675,609) 3,108,858 46,170,000 (24,166,100) (1,914,000) (6,600,000) (480,000) (225,000) (351,750) (6,915,082) 5,518,068 2013-14 2014-15

Net increase in cash Cash balance at the beginning of the year Cash balance at the end of the year

383,950 1,698,600 2,082,550

2,586,275 2,082,550 4,668,825

4,995,485 4,668,825 9,664,310

Break-even Analysis:

2012-13 Total costs Per unit selling price (BDT) Break even selling unit 30 piece /packet 14,445,854 6.50 2,222,439 74,081

2013-14 30,110,978 6.50 4,632,458 154,416

2014-15 34,012,295 6.50 5,232,660 174,422

If there comes any crisis that pushes Nicotino to exit the market, then following strategies should lessen the risk Firms primary exit strategy is converted into private limited company from partnership firm. Firms secondary exit strategy will be to convert the product from nicotine chewing gum to a usual chewing gum.

Ingredients

Purpose

source

Nicotine Polacrilex

Stop smoking aid

Nicotine compound, solid, n.o.s. UN1655

Chewing gum base, containing butylated hydroxy toluene (E321) Sorbitol

Carrier of ingredients and mouth freshener

Produced from chicle or rubber

Sweetener

Obtained by reduction of glucose

Sodium carbonate, anhydrous Sodium bicarbonate

Reduces acidic taste Works as mouthwash

Produced from soda ash Produced from soda ash, dissolved in water treated with carbon dioxide

Flavor for smoker

Flavor

Vegetable based (cinnamon, mint)

Haverstroo flavor

Flavor

Produced from Haverstroo compound ZD 4932

Glycerol

Sweetener and mouth bacteria By product of biodiesel cleaner

Talcum

Creates gum substance

Produced from talc carbonate

Calcium carbonate

Works as gastric antacid

Retrieved from calcium

carbonate compound

Quit Smoke Smartly!