Ethnic Food Supplier

BUSINESS OVERVIEW

MANAGEMENT SUMMARY

COMPANY HISTORY

MARKET ANALYSIS

MARKETING & SALES

OBJECTIVES

RISK FACTORS

GROWTH STRATEGY

OPERATIONS

FINANCIAL ANALYSIS

CONCLUSION

World Cuisine

341 Blanco Blvd.
Portland, OR 97201

Gerald Rekve

Worldwide Cuisine, located in Portland, Oregon, is a wholesaling company specializing in importing high–quality Indian, Chinese, Japanese, and Pakistani foods and repackaging them for sale to specialty food restaurants, retailers. The business was established to offer authentic Indian, Chinese, Japanese, and Pakistani foods to the growing immigrant population in the Portland area as well as an ever-increasing market of urban professionals who enjoy eating more adventurous specialty ethnic foods.

BUSINESS OVERVIEW

Research indicates that the International Foods industry in the United States has annual sales of $180 million and is growing at an average rate of 30 percent per year. The Portland market alone is estimated to be worth $25 million. In fact, the Indian, Chinese, Japanese, and Pakistani population in Portland— the end user of Worldwide Cuisine’s products—is growing at 6 percent per year and an estimated 44 percent of this population purchase high–quality Indian, Chinese, Japanese, and Pakistani food products on a monthly basis. In the general population, 32 percent of people purchase specialty ethnic foods on a monthly basis. According to the Association of United States Food Distributors, ethnic food in general and Indian, Chinese, Japanese, and Pakistani food specifically are poised for substantial growth in Portland and a total of ten Indian, Chinese, Japanese, or Pakistani restaurants were opened in the greater Portland area in 2006–2007. We have reached revenues of $700,000 in our first year and project revenues of $1,500,000 in our second year in business.

Competition

There are a large number of competitors for our share of the market, some are small and others are large. Although all the ones we researched seem to be thriving, there are a number of categories on which we are competing. Price is the strongest factor: all large competitors sell their products at higher prices than Worldwide Cuisine. Our strong relationships with major Indian, Chinese, Japanese, and Pakistani exporters allow us to sell our products at a price comparable to or lower than the competition. In addition, the competitors have focused primarily on marketing to the Indian, Chinese, Japanese, and Pakistani buyer. Worldwide Cuisine fully exploits the potential market made up of non–Immigrant urban families that want to venture out and try something different. Young professionals would be another target market for us, achieved through attractive packaging and an extensive local brand awareness campaign.

Currently, we have very little direct competition as there are no other Indian, Chinese, Japanese, or Pakistani food wholesalers that sell exclusively to specialty restaurants and retailers. All of our competition is indirect in the form of wholesalers who sell predominantly to grocery store chains. They do not compete directly for business at the specialty stores but they do compete indirectly for the end Indian, Chinese, Japanese, or Pakistani food consumer. Market research shows that these generic brands currently account for 67 percent of the ethnic food market. There are 124 American companies that import food from Japan, however only 17 import so–called luxury items.

The largest roadblock facing potential competitors entering into our market is the difficulty and expense of establishing good relationships with suppliers in the Far East. My years of experience in the ethnic food market have enabled me to develop solid relationships built on trust and a 14–year track record. It would take years and many thousands of dollars in travel costs for a potential competitor of ours to match our network among Indian, Chinese, Japanese, or Pakistani suppliers.

We use a custom written software program in which we use four computer–based inventory control software systems designed for wholesalers. This software cost us close to $75,000 to write, but we needed it. We know our small competitors will never be able to afford to have this done. The software allows us to control the inventory from the time it leaves Asia to sitting on our warehouse shelf in Toronto. Because our entire product is food related, we have to insure quality of food and dispose of any outdated inventory. In fact we go one step further—if one of our clients buy a product and it does not sell, rather than the client having to leave the product on the store shelf, we will offer to buy the inventory back for 70 percent of what the client paid us for it. This also insures that we either stop selling or reduce inventory on product that does not sell. This will always insure the best in quality of food for our end users. We know our competitors do not offer this type of guarantee. We know it will cost us money, but in the long run feel it is best for our business’s long term success and growth.

This is an advantage over a number of smaller food importers who continue to use more archaic and cumbersome hand–written inventory systems. By keeping track of inventory electronically, we are able to monitor when products were received as well as their “best before” dates. This results in a lower spoilage rate. In addition, this system allows us to track popular items, which are used in the development of additional product lines. The company also uses a fax machine as a rapid and efficient way of dispatching orders to overseas suppliers.

As part of the software we wrote, we also incorporate a security patch to USA’s Homeland Security, allowing us as requested by police instant access to who bought our products, which ones they bought and the day the client took delivery of our products. This gives us instant ability to track shipments that may have been contaminated, contact the stores to pull off shelves, etc. We have already been approved for Homeland Security and the FDA for access to the USA Markets in the USA and Canada.

MANAGEMENT SUMMARY

Overview

As president and sole owner of Worldwide Cuisine, I own 100 percent of the company’s shares. I bring my ten years experience working in my family’s business in Japan to the company. I have forged long–term business relationships with three major Indian, Chinese, Japanese, and Pakistani food exporters, all of whom guarantee Worldwide Cuisine’s excellent prices. In addition, I have been using the services of Makoto Nakano who is based in Japan and acts as a purchasing agent for the company. The company also uses the services of a sales agent, a part–time bookkeeper and a part–time delivery person.

Company Structure

Title: President

Name: Olivia Sheono

Qualifications: Business degree from the University of Tokyo; 7 years experience in sales and marketing at family business in Japan; excellent financial and management skills; strong understanding of ethnic cuisine. As president, I am responsible for guiding the overall direction of the company, overseeing sales, marketing, human resource issues and accounting. I am also responsible for attending the International Food Show in November and will overseeing all marketing initiatives.

Title: Part–time Purchasing Agent

Name: Makoto Nakano

I have secured the services of Makoto Nakano who is based in Japan and acts as our part-time purchasing agent for the company, negotiating rates and managing relationships. He is uniquely responsible for quality control on–site in Asia, and inspects the products before they are shipped to Portland. His salary in $44,000. He is a resident of Japan and has 12 years experience in purchasing.

I have secured a sales agent who is paid 10 percent commission on gross sales. He has over five years experience in sales.

An accountant is responsible for processing customer orders, managing payables, receivables and generally overseeing the books.

I will hire three delivery staff with previous experience, a valid driver’s license and a clean driving record. They will each be paid $23,000 per year, plus participate in a bonus system based on customer referrals, increase in sales and lack of complaints for late delivery, etc.

I hired temporary help for giving out free samples in booths in retail outlets. These positions are filled on an as needed basis and paid at minimum wage.

Compensation

COMPANY HISTORY

Worldwide Cuisine was formed in Portland, Oregon. It is a wholesaling company specializing in importing high–quality Indian, Chinese, Japanese, or Pakistani foods and repackaging them for sale to specialty food restaurants and retailers. The business was established to offer authentic Indian, Chinese, Japanese, and Pakistani food to the growing Immigrant population in the Portland area as well as to an ever–increasing market of urban professionals who enjoy eating more adventurous specialty ethnic foods.

Business relationships with major Indian, Chinese, Japanese, or Pakistani food exporters have been established, and a purchasing agent, two sales staff members, an accountant and delivery staff have been hired. I have invested $78,000 to finance packaging, design, product and market research and $125,000 in working capital requirements.

MARKET ANALYSIS

The International Foods industry in Portland has annual sales of $450 million and is growing at an annual rate of approximately 12 percent. The gross profit margins in the food wholesale industry are typically between 27 and 36 percent.

Sectors within industry

• Manufacturers who sell to importers
• Distributors who sell products to wholesalers
• Wholesalers who sell to retailers
• Retailers who sell directly to the consumer restaurants who sell to the consumer

Seasonal Factors

Although certain sectors of the International Foods industry must contend with seasonal challenges, our company, Worldwide Cuisine, is relatively safe from such seasonal fluctuations in production since the majority of its products are rice and soy based. Rice and soy products can be grown throughout the year and are easy to acquire.

Growth Strategy

Consumer trends bode well for the international foods industry as Portland’s population continues to become more ethnically diverse. In Portland, the Indian, Chinese, Japanese, and Pakistani population is growing at 13 percent per year and an estimated 22 percent of the local ethnic population purchase high–quality ethnic food products on a monthly basis. In the general population, 16 percent of people purchase specialty ethnic foods on a monthly basis. Recent market research indicates that ethnic food in general and Indian, Chinese, Japanese, and Pakistani food specifically are poised for substantial growth in Portland and a total of ten Indian, Chinese, Japanese, or Pakistani restaurants were opened in 2006–2007.

In addition, the early 2000s have seen a trend toward healthy, low–fat cooking with an emphasis on vegetarian cuisine.

Position in the Industry

Our company acts as a wholesaler, dedicated to importing high–quality Indian, Chinese, Japanese, and Pakistani delicacies, repackaging them for sale to specialty food restaurants and retailers. Unlike competition that sell mass market items to large grocery store chains, Worldwide Cuisine focuses on selling products to higher–end boutique food stores. Currently, of the 26 American companies that import food from Japan, only three import so–called luxury items. Of these companies, some are based in Portland; all the company’s products are sold at a higher price point than our products, which gives us a significant niche in the retailing of high–quality yet reasonably priced food items. Also, since the direct competition is based primarily in Eastern Canada, we benefit from the lack of local competition as we grow the eastern Canada sector, we will look at western Canada and the USA markets.

Legal Issues

We have registered the Worldwide Cuisine name and intend to do the same for our best–selling product names.

MARKETING & SALES

Customers

Our target market is high–end specialty boutique food stores. Specialty retailers compete by selling unique products which are not available at large grocery chains. People choose to shop at specialty stores for a unique experience. Therefore our target market looks for suppliers, like Worldwide Cuisine who supply unique products that can’t be found on the grocery store shelf.

The end–user of Worldwide Cuisine’s products can be categorized into a few groups. The first is urban professionals between the ages of 22 and 60, living in the greater Portland area with a salary of greater than $44,000 per year who enjoy eating more adventurous ethnic foods and prefer to shop in gourmet or specialty food stores. The second is immigrants from Pacific Rim countries who are living in the Portland area and demand authentic, superior quality Indian, Chinese, Japanese, and Pakistani food products.

The Portland retail market for gourmet ethnic foods is estimated to be $53 million and sales have grown at an average annual rate of 3 percent over the last five years. This translates into more than three million units of product being sold per year in the greater Portland area.

Portland’s population continues to become more and more ethnically diverse. With the recent events in the Middle East and Europe, there has been a large increase in immigrants to the United States. With an aging, baby boomer population with significant disposable income, projections for specialty food sales are positioned for continued growth. In addition, there has been a significant movement in the industry toward the production of low–fat and vegetarian foods that suit today’s healthier eating habits.

Our strategy is to sell our authentic Indian, Chinese, Japanese, and Pakistani products to high–end specialty food retailers who cater to the tastes of upwardly mobile urban Portland residents. We have positioned ourselves as a specialty brand and not a generic or discount brand. We make our products available to high–end boutique food stores only. Considering the trend towards healthy, low–fat cooking in North American society, our gourmet products are marketed as low–fat healthy eating.

Sales/Distribution Plan

Worldwide Cuisine has contracts with one chain of health food stores and several specialty food shops. The company has purchased used trucks—at an estimated cost of $15,000—for deliveries. We have employed sales staff and delivery drivers.

Pricing Strategy

Due to our strong network of exporters in Japan, we are able to receive, and profitably sell, our products at a price comparable to wholesalers who supply the grocery chains’s generic brands. Our prices are set in such a way that, in specialty and gourmet retail locations, Worldwide Cuisine’s products are comparable to generic brands sold at large grocery stores.

After we do a credit check, customers will be given a payment term to be distributed evenly between 30, 60 and 90 days. Because of the nature of the product, there is no return policy. The client must pay for all their purchases for the first month, once the client has established a track record of writing good checks, we will review to offer the clients credit. We will also offer all our clients the ability to get discounts for payment when orders are delivered. This discount will range from 3–9 percent discount based on volume of previous month’s purchases.

Advertising

In order to support our retail customers, Worldwide Cuisine products are advertised and promoted in a number of ways, including:

• Sponsorship of an ethnic cooking show on community access television: $3,000 annually
• Free sample booths in retail outlets ten times per year: $15,000 annually
• A company web site, which raises awareness of our products: $800 annually
• Printed coupons in community newspapers: $1,100 annually
• Distribution of flyers at gourmet stores: $500 for each product
• Media relations
• Mailers to retail and restaurants
• Sales person to call on target clients
• Alliance with local wine & beverage companies offering cross promotions

In addition, Worldwide Cuisine solicits press coverage from local newspapers. We write and distribute press releases to all local newspapers in the hope of being covered as a local news item. Many of the local newspapers do weekly features on Portland entrepreneurs and since there is intense local interest in entrepreneurs from Pacific Rim countries, Worldwide Cuisine makes a fitting profile. One of the company’s advisory board members works with the local media and recommends our story regularly. Our advertising and promotional plan generated annual sales of $300,000 in our first year.

Given the success of this program, we will continue with a similar marketing strategy in the current year.

Worldwide Cuisine has produced business cards and glossy four color pamphlets outlining available products. The initial 1,000 copy print run cost $3,500 (including design). Based on initial response from retailers, we have not opted to print a second run but continue to distribute introductory flyers to launch new products.

In addition to having employed a sales representative, who is paid a 10 percent commission on gross sales, we will attend the Annual International Food Show in January as a way to expose our products to a broader potential market. The cost of exhibiting at the Food Show is estimated at $12,000.

OBJECTIVES

To date, I have invested $125,000 in packaging design, product, market research and other working capital requirements. The price commitments I have secured from three major Indian, Chinese, Japanese, and Pakistani exporters as well as contracts with one health food chain and several specialty foods shops continue to operate effectively.

In order to get our products to market, the following steps must take place:

• Place orders with exporters in Asia and Middle east
• Arrange for international payment for goods
• Coordinate delivery of products to Worldwide Cuisine warehouse facility
• Repackage products with Worldwide Cuisine’s labels
• Negotiate sales orders with local retailers
• Process customer orders
• Deliver orders
• Invoice for orders
• Implement advertising and promotional plan
• Software for inventory beta–tested

RISK FACTORS

The following events could pose problems to the distribution of Worldwide Cuisine products:

• Change in government regulations around selling food products may force a change in package or product mix
• Trade war or restrictive duties on food imports from Asia could threaten supply
• Loss of key supplier, which would result in paying higher rates for products shipping problems, would cause significant delays in fulfilling orders
• Drop in the American Dollar will make buying Indian, Chinese, Japanese, and Pakistani products more expensive

To avoid these problems, we will use a bank loan to finance day to day operations and keep inventory sufficient to fulfill contracts and further develop our supplier network in Asia. We will also seek out back up suppliers in other markets.

In the event sales would become soft, we have put in place a contingency plan. We will introduce sake and other ethnic drinks which have proven to be popular during slumps in demand for our traditional, healthier product line. In addition, I am willing to lay off our delivery person and do deliveries myself, if required.

GROWTH STRATEGY

We have registered the Worldwide Cuisine name and continue to do the same for our best–selling products.

In an effort to network with other entrepreneurs, I am a member of:

• Oregon Entrepreneurs Association
• The Association of American Food Distributors
• U.S. Restaurant Food Association

Suppliers

We have established strong relationships with three Indian, Chinese, Japanese, and Pakistani exporters and combined with my experience in our family business, I have been doing business with them for 14 years.

• Pakistani Products
• Asian Foodstuffs
• Exotic Foods

All exporters have given us prices that are lower than those paid by other wholesalers. The terms for payment in full are 30 days plus a volume discount of 3 percent for orders in excess of $20,000.

OPERATIONS

Quality Control

We have a quality control manager on contract in Asia who inspects the products before they are shipped to Portland. In the event of a problem, the quality control manager notifies the exporting company and obtains an exchange or credit. Once inspected, the products are shipped to Portland.

Land & Equipment Requirements

Worldwide Cuisine leases a 3,000 square foot warehouse space for $30,000/annually (gross). The site is conveniently located near the airport to facilitate international shipments as well as visits from Indian, Chinese, Japanese, and Pakistani exporters. We also bought a fax machine, printer, copier and desktop computer for approximately $10,000.

Inventory Control

Worldwide Cuisine uses a computer–based software inventory control software system designed for wholesalers. The end result is a lower spoilage rate as well as the ability to track popular items. This is an advantage over a number of smaller food importers who continue to use more archaic and cumbersome hand–written inventory systems.

Time Frame for Production

It takes 3.5 weeks from the time our retail customers place an order, to the time the order is received. Factors that could negatively impact this time frame are supply shortages, trade embargoes, trade war or restrictive duties on food imports from Japan, loss of key suppliers, and shipping delays. To help offset these factors, Worldwide Cuisine warehouses quantities of popular products, which also allow us to accommodate rush orders.

FINANCIAL ANALYSIS

Income Statement

Operating expenses amount to $ 23,000 per month. Worldwide Cuisine will generate $700,000 in sales in its second year of operations. The gross profit is expected to remain at approximately 33 percent, yielding $120,000 to cover administrative expenses.

Cash Flow Statement

After the first year as a start–up operation, the company broke even, from a cash flow perspective. We are expecting our sales volume to increase by 35 percent in the second year. Our monthly purchases will increase to accommodate the growth in sales. We will need a line of credit to support working capital requirements in the months leading to and following the summer, which will be our peak season. During that time, we will be able to pay down the line as cash flows permit.

There is a difference between the terms we have from our suppliers and the terms we grant our customers, also necessitating use of the line of credit during our slower months. One of our goals will be to better match payment terms between our suppliers and customers.

Balance Sheet

At the balance sheet date, Worldwide Cuisine will be in a solid financial position.

CONCLUSION

In the next year, it is my goal to get 125 percent increase in our revenue as a wholesaling company specializing in importing high–quality Indian, Chinese, Japanese, and Pakistani food for sale to specialty retailers in North America. Since my business is based in Oregon I believe my chances for success are increased for a number of reasons:

• Statistics show that the international foods industry is growing at a rate of 23 percent per year.
• Although the growth of the Indian, Chinese, Japanese, and Pakistani population in Oregon could slow down, the 3 percent increase over the last four years indicates a robust market.
• There is little direct competition supplying Indian, Chinese, Japanese, and Pakistani food to specialty restaurants and retailers.
• As a result of my ten years working in the family’s business in Asia, I have cultivated long term business relationships with three major ethnic food experts. Therefore, even if our preferred supplier is unable to meet our needs, we have a deep pool of contacts to turn to.
• Our supply of product is contingent on shipping over long distances. However, we have minimized this risk by starting to keep an inventory of our most popular products.

Our first year in business has proven to be successful. In order to continue realizing my business goals, I am asking for an operating line of $150,000 and I am willing to provide the assets of the business and a personal guarantee.

Appendix A

INCOME STATEMENT - For the year ending December 31, 2006

Appendix B

CASH FLOW - For the year ending December 31, 2006

Appendix C

Schedule detailing cash flow statement calculations