1

Business Plan For

CocoForm, LLC Chocolate creations made easy

Date: April 30, 2016 - Prepared by: |Steven Johnson |Business Development Lead Contributions by: |Drew Jaskot |Engineering Lead

|Lucas Kwong |Marketing Lead |Miranda Forrest |Business Development Lead |Trey O’Bryan |Financial Lead

Authorizing Official: |David Busacker |Team Lead - LLC File Number: 885473500025 - Address Block: 1717 University Ave SE

Minneapolis, MN 56621 USA 763-221-3858 obry0027@umn.edu

_____________________________________________________________________________________

2

CocoForm Business Plan 4/30/2016

David Busacker | Miranda Forrest | Drew Jaskot | Steven Johnson | Chun-Hin Kwong | Trey O’Bryan Index: Business Plan Executive Summary:……………………………………………………………………………..…2 Management and Organization:……………………………………………………………………………….…..3 Industry Analysis:…………………………………………………………………………………………….……..3 Market Analysis:………………………………………………………………………………………………..……7 Product and Service Design:………………………………………………………………………………………..9 Growth Strategies:………………………………………………………………………………………………….10 Funding Requests:……………………………………………………………………………………….…………11 Financials:…………………………………………………………………………………………………..……….11 Appendices:…………………………………………………………………………………………………………12 References:…………………………………………………………………………………………………………..25 Business Plan Executive Summary: CocoForm revolutionizes the custom chocolate market by providing inexpensive, high-quality custom-designed chocolate conveniently and quickly through emphasizing personal relationships with customers and utilizing a valuable portfolio of local chocolatier partnerships. In a day where custom food creations are growing and the common denominator between clients and businesses remains the stomach, CocoForm seeks to satisfy both. CocoForm serves event planners and individuals seeking a special way to make a mark on an event by performing chocolate customization quickly and reliably and making the chocolate available for pickup within the Minneapolis and St. Paul metropolitan area. Today, ordering custom chocolate for Valentine’s Day, weddings, or a corporate gala will leave an event planner with one of two infuriating problems:

● Placing the order is either too complicated, the design is limited in shape and complexity, or requires access to custom-made vector files of a desired design.

● the process is very expensive and includes a long lead time to make up for unperfected supply chains.

CocoForm solves both problems by specializing in customer service and computer-aided design to deliver a fully customized design through previously developed partnerships with local chocolatiers in major metropolitan areas. By working closely with the customer and allowing them to see exactly how their chocolate will look in 3D before molding, CocoForm will provide customization value unseen in today’s custom confectionary world. CocoForm is positioning itself as the “one-stop-shop” for all things custom chocolate. By marketing their use of 3D printing and rapid mold production, the dedicated sales team will demonstrate to new customers a personable solution to creating a professional and unique impact on any event or occasion. By charging competitive prices and creating strategic wholesale-price partnerships with custom chocolatiers, CocoForm can capitalize particularly on offseason excess capacities. CocoForm will be able to operate regional operations that generate profit from improved customer experience in addition to their lean supply chain. By making the finished products personally deliverable within the local metropolitan area, CocoForm adds additional customer interaction and ensures customer satisfaction every time. Currently, the CocoForm founders are finishing a proof-of-concept study and trial run with local Minneapolis chocolatiers. Once their initial capital request has been fulfilled, a three-month partner acquisition phase will be conducted. Upon completion, CocoForm will open their online doors to begin accepting orders. CocoForm has a goal launch date of January 1st, 2017 just in time for Valentine’s Day.

3

The CocoForm founders embody a rich variety of backgrounds from entrepreneurship to agricultural science to industrial engineering which combine to serve the critical roles of business development, strategic financing, and marketing. With their knowledge of customer service, 3D printing, and mold manufacturing, they are already perfectly positioned to begin designing and developing these valuable molds. Results from proof-of-concept trials indicate that CocoForm’s prototyped process is feasible, functional, and reliable. Each founder has already invested $30 into initial resources to maximize and expedite CocoForm’s development. Through the early proof-of-concept sales, this investment has been paid off in full already. However, to scale the current ad-hoc mold production system currently being used, initial capital investment in a thermoforming machine, industrial 3D printer, and shipping station will be necessary. The team is currently seeking funds to purchase this equipment and begin paying rent on small production and office space to house the growing operation. Management and Organization: CocoForm is committed to running a passionate, intentionally-built team to drive the CocoForm venture. The key activities of CocoForm’s business will involve client acquisition, customer service, mold production/shipment, and strategic financing. Therefore, to accomplish full fulfillment of these activities, several roles have been developed and filled by talented University of Minnesota undergraduate students passionate about all things chocolate and business. To maintain accountability and efficient progress in the start up phase of CocoForm, the team established and has successfully adhered to a founder hierarchy structure which will in the future form CocoForm’s management structure. To learn more about the CocoForm team, founder biographies and management structure can be referenced in appendices A and B below. Industry Analysis: Description of the custom chocolate industry: The current chocolate industry is primarily composed of nine local Minnesota-made chocolate companies according to the Pioneer Press. These include Legacy Chocolate, St. Croix Chocolate Company, B.T. McElrath, Mademoiselle Miel, Chocolat Celeste, Just Truffles, Regina’s Candies, Maud Borup, and Sweet Chocolat. These chocolate companies have a competitive advantage over CocoForm due to their recipes and branding, however almost all of these companies produce only truffle chocolates and not customizable chocolate shapes. The only exception to this finding is Sweet Chocolat. At Sweet Chocolat customers can choose a chocolate design from different molds already on hand, but do not have the ability to design and obtain a chocolate order to their specification. Current Market Size, Growth, and Life Cycle: Nationally the Overall U.S. Confectionery category accounted for 33.6 billion in sales in 2014 with a 6 billion increase forecasted by 20202. Recently, US Sales grew 24% from 2009 to 2014. With a 1.2 billion revenue annual average growth forecasted, the chocolate confections market remains in a growth category according to CandyIndustry.com. The introduction of our service is expected to innovate the market and cause additional growth once established. This is due to customizable molds, cheaper mold creation, and introduction into the vastly untapped market of customizable chocolates.

4

Seasonal Trends and Key Characteristics of the Industry: From an empirical evaluation of Chocolat Celeste, CocoForm learned that March (Easter), May (Mother’s Day), June – September (Wedding Season), October (Halloween), November (Thanksgiving), and December (Christmas) are the peak holidays for chocolate orders. On a quarter to quarter basis, fourth quarter is the busiest season for area chocolate producers. Chocolate product innovation has grown overall 18% between 2013 to 2014. America produces 12% of the world’s chocolate and is expected to grow as the market segment in the US becomes more specialized, according to CandyIndustry.com. Chocolate production has increased in cost due to the commodity prices on milk, sugar, and cocoa in the immediate short run, however has shown that only 3% of the overall global market will stop buying chocolate.3 Major Customer Groups and their leverage within the industry: CocoForm’s major Customers are event planners, both organizational and private, as well as individual customers that are interested in custom batches that are 50 dollars or more. Through evaluation of CocoForm, it has been determined that customers have a moderate leverage on the firm. This was determined true due to CocoForm being the only venture that can offer a truly customized chocolate confection in low and high quantities. CocoForm has a cornered market because it works directly with customers to create a chocolate design that cannot be created anywhere else within our geographic market. Below is a list of CocoForm’s competition as related to customer leverage:

• Sweet Chocolat: Company based out of Arden Hills, MN that creates custom chocolates through outsourcing its molds and capitalizing on economies of scale by providing already obtained shapes that a customer can choose from.

• Maud Borup: Wholesale Company based in Minneapolis, MN that produces custom confectionary products at a minimum order of 4,000 units per order.

• B.T. McElrath: Online chocolate company based in Minneapolis, MN that produces truffles and chocolate bars of many different varieties, however does not create custom chocolate designs.

Major Supplier groups and their leverage: As stated above CocoForm will not immediately pour its own chocolate. This component will be outsourced to local partners. The leverage exerted by our immediate partners will prove to be high. CocoForm presently works with Chocolat Celeste and does have plans to partner with another chocolate shop in the Minneapolis area. The ability for CocoForm to deliver its product rests on the priority and backlog of Chocolat Celeste currently. Due to this inherent issue, CocoForm is also investigating the possibility of renting local FDA approved industrial kitchens for order fulfillment. Looking beyond the immediate supply chain, CocoForm’s suppliers for the chocolate components will remain steady and affordable and in fact decrease over the long run due to supplier competition. The actual raw materials, as shown in appendix C, have historical price attrition. It is expected with larger contracts, CocoForm’s partners will yield larger service costs. This belief however, should be negated by volume size and cost of materials in the long run.

5

Key Competitors and Substitutes: Key Competitors: The key competitors of CocoForm identified in the area are better aligned with substitute confectionaries, as there is not a local firm that will create customized chocolate molding. Within the local area Sweet Chocolat has been identified to be our leading competitor within the customized chocolate confectionery market due to their ability to pour chocolate molds. Online, TotallyChocolate.com enables customers to submit a completed design file for the company to mold chocolate. This has proven to be a key competitor to our core product. Maud Borup is a wholesale company that can create custom chocolate designs, however requires customers to fill a 4,000-piece minimum. Substitute Confections: In the substitute market truffles have proven to be CocoForm’s largest substitute with a 40% market share. This is due to the saturation of the market and pull for profitability by chocolate companies. The local truffle market Is comprised of B.T. McElrath, Chocolat Celeste, Just Truffles, legacy Chocolates, and St. Croix Chocolate Company. Due to the saturation of the market and research on each individual company’s website and reviews, CocoForm determined that each company has approximately equal market share of the truffle market. Chocolate bars have also been determined to be a secondary substitute contributing to a twenty percent market share. The local chocolate bar market is comprised of B.T. McElrath, Mademoiselle Miel, and Regin’s Candies. This substitute has been evaluated to represent only a small amount of CocoForm’s target customer needs, and does not contribute largely as being an industry threat. Third, Alternative Chocolate Confections, such as chocolate bark, are a potential substitute in the area, but is most popular during Christmas and is not focused as being a customizable creation. This sector is believed to only have 10% of the market segment and is comprised of Legacy Chocolate and Regina’s Candies. Mold Industry: Within the mold industry CocoForm has three main competitors. CustomCandieMolds.com, utilizes the same thermoforming process CocoForm uses. CustomCandieMolds.com however charges $145 for a 1 cavity mold plus shipping cost. Micelli is a company that utilizes CNC mold forming and carries a minimum mold order of 25 at a $29 price for an overall price of $725 for a mold order. Life of the Party is a company that also uses thermoforming to create molds for their customers. The pricing data for their products was not available for comparison. Additional market share information can be located for review in appendix D. Importance of Our Target Customer to Our Competitors: Chocolatiers: Through CocoForm’s analysis, the chocolate industry is very hesitant to produce custom chocolate bars due to the high mold and start up costs of each job. This information has led us to conclude that most chocolatiers do not want to engage in custom orders unless they are of quantities between 500 to 4,000 piece minimums depending of the firm. Utilizing this information CocoForm will be able to serve customers that other chocolatiers are unwilling to serve.

6

Mold Makers: Mold makers were also shown to be less susceptible to customers of low mold ordering quantities. These companies charge a high fixed cost for the design aspect. This makes the prospective idea to design custom chocolate confection to become unpractical for most customers. By being able to drive mold and design costs down, CocoForm is able to make the customized confections market accessible to most customers. Rival and Substitute Strengths and Weaknesses: Our competition does have the ability to satisfy each of their customers orders, however they will force their customers to pick from already acquired molds to reduce costs. The customers within the local confectionary market are aware of our strategic partner, Chocolat Celeste as being a top fifty chocolate shop in the nation according to complex.com. The track record of all of our competitors and substitutes do not show signs of negative customer satisfaction overall. The staying power of the firms seem stable. All the firms researched by CocoForm seem to be hobby chocolate shops and do not rely on the venture as its only form or income for the founders and CEOs. Consequently, because of this reality it also seems that these ventures have heavy staying power as long as they can turn a profit. The ventures do not seem to have their focus on profit maximization. As for efficiency, the ventures researched seemed to be specialists in their field and rely on the uniqueness of their products for differentiation in batches. This has shown that efficient quantity is less important that quality. CocoForm has exhibited strategic strengths as a firm. Principally, CocoForm can in-house design the chocolate mold exactly to the specifications of the customer. This leads to CocoForm being able to increase overall value and satisfaction of the customer by being able to cater to smaller quantity customers previously untapped. CocoForm, though the use of strategic partnerships, is able to produce high quality chocolates for our customers as efficiently as currently practical. Through CocoForm’s observation of the local chocolate industry, it was learned that the industry at large is very relational and interconnected. By creating a web of connections through industry firms, it is believed that CocoForm will be able to obtain inter-industry awareness of the unique service that can be provided and even work with other chocolate firms in the future. Barriers to Entry: Currently the Venture CocoForm has a $180 investment cost to obtain materials, utilize equipment, and pay for labor. The future costs of the firm will comprise of a thermoform machine, 3D printer, additional labor, additional raw materials, and additional packaging. Currently, CocoForm plans on in-person delivery of their product to customers within the local Minneapolis and St. Paul metropolitan areas. CocoForm has realized the need for a chocolatier, packaging, and distribution professional. However, currently CocoForm is capable of handling all the venture tasks internally, but does see the need to expand into the future with our industry and will require the previously stated experts presumably five years after inception. The business set up includes three major sections, design, mold making, and chocolate production. Our process is much more efficient and cheaper to operate than any of our current competitors with the overall turnaround time being approximately thirty minutes per casting. The technology that CocoForm is utilizing is technology that the mainstream industry does not regularly use due to their mass production models. This technology includes a Computer Automated Design program (CAD), a three dimensional printer, a thermoform machine, and a refrigerator.

7

Currently customer resistance to CocoForm is largely due to the unknown nature of the venture. CocoForm is attempting to spread its name though a strong social networking campaign to obtain and maintain customer support and recognition. The regulatory environment includes the FDA requirements to utilize food grade plastics for our molds. The chocolate production will be satisfied by the licensures of CocoForm’s partners. Though the initial analysis on the feasibility of CocoForm no existing patent has been found on the process, equipment, or products that CocoForm will utilize. The only regulation concern remains copy write scrutiny for mold designing. Market Analysis: Distinguishing Characteristics of the Primary Market: The primary market of CocoForm includes any person that has some type of relationship in their life: family, friends, significant others. This demographic will be located within Minnesota, around 20 - 60 years of age, middle-class ($50,000 income or more), and possess post secondary education. In addition, CocoForm will market to corporate and private event planners located in the Minneapolis, St. Paul area. These two target customer profiles have shown to have more disposable income to spend on special occasions and have large budgets available to event coordinators. Often, consumers need to find creative ways to represent their relationships through gifts for special occasions. Through CocoForm, consumers can get a product that combines the two biggest obsessions within the United States: food and technology. Instead of purchasing a bag of Dove chocolates or ordering 500 pieces through current chocolate stores, they can work with CocoForm to create a unique chocolate which adds more value to the dessert. Right now there is opportunity within the market because 3D printing technology is becoming more prominent and continuing to be upgraded. The idea of using 3D printing technology to decrease turnover time has been on the rise recently and will continue as Hershey’s and other market leaders are utilizing 3D printers that aide in chocolate production. Size of Venture’s Primary Target Market: Within Minneapolis, there are 60,414 households with an income of $50,000 or more. The average household size is 2.23 which means that there are over 60,000 relationships where consumers need to purchase products for special occasions: birthdays, anniversaries, holidays, and other events. According to our survey research, about 80% of respondents would purchase custom chocolates for their significant other, whether this be for one occasion or multiple. This leaves room throughout the year where CocoForm can gain repeat purchases and capitalize on current customers. However, there is a social shift towards healthy living and for many consumers, a healthy lifestyle does not include eating chocolate. This could impact CocoForm, because consumers may want to purchase healthier alternatives to chocolate for their significant other, friend, or family member. Ultimately, this business model is built for the ability to scale out to different states within the U.S. while sourcing the chocolate production to chocolatier facilities closer to the customers. According to the 2009 U.S. census, there were about 32,000 weddings during 2009 within Minnesota boundaries. This data provides CocoForm with the knowledge that there is a substantial amount of events being planned each year. Additionally, CocoForm can take this opportunity to make chocolate a substantial part of weddings and special occasions.

8

Ability to Gain Market Share: Immediately, CocoForm can obtain about 5% of the market share because the industry of custom chocolate is small and unsaturated with companies that can provide purely custom designs to customers of all sizes. Also, because of the online presence, the spread of CocoForm will be small at first and eventually obtain the average of 10% market share. These estimates were derived from empirical observation and primary research of the company website as well as the operationalization of key frequency of products within the overall market segment. (i.e. Truffles, etc.). Though this operationalization process, substitute confections seem to hold a 70 to 80% market share, while custom chocolates seem to exhibit a 20 to 30% market share of the local chocolate confections market in the Minneapolis, MN area (see appendix D for more detail). Within our key sector of customized confections (30%) Sweet chocolate seems to have a larger market share than its competitor Maud Borup. the values of 20% and 10% of the market share were derived upon this information. CocoForm believes it can solidify a 5% share immediately and within a year can grow to take a 10% share equal to Maud Borup due to the nature of CocoForm's product. Pricing and Gross Margin Targets: Through utilizing educational facilities on campus, we can borrow the machinery to create our custom molds. Currently we are able to use the thermoforming machine through Rapson Hall and the 3D printer that is owned by one of our founders, David. However, after graduation, we will not have these sources of equipment and will have to purchase, or rent out facilities like these. Beyond the molds, we have partnered with Chocolat Celeste to outsource the chocolate production and pouring. This way CocoForm can continue being a lean startup and focus on its’ core competency: designing custom molds. In order to gain the trust of potential customers, CocoForm has been transparent with what costs go into creating its’ pricing structure. This includes posting the cost of labor, molds, design of the molds, and the actual chocolate within an invoice to provide credibility to customers (Appendix J, Invoice History). Techniques to Reach Target Audience: To get CocoForm on the map, we need to make buying and receiving the chocolates an experience. To do this, we will market through social media sites like Facebook and Instagram. This will allow CocoForm to respond to consumers in real time and keep a strong relationship with them. Through these sites, consumers can post pictures of their unique chocolates and really showcase the gift that they have received or gifted while spreading the word about CocoForm. There are 89.4 million active users of Instagram and of these users, 67.9% of them are 18 - 44 years old. This means that about 60.7 million potential consumers could view our product. According to Statista, there are 77.5 million active instagram users in the U.S. The U.S. population is 319 million while the population of MN is 5.5 million. About 24.3% (77.5 / 319 = .2429) of the U.S. population uses Instagram. With this being said, there are about 1.2 million (.2429 X 5,500,000 = 1,214,733) potential customers within Minnesota that CocoForm can capture through Instagram. This can be further quantified to a 10% market share of 121,473 customers (1,214,733 X 10% = 121,473 followers/ customers) from our proposed market share. On the B2B side of production, CocoForm is also targeting businesses that have events to plan for. This includes employees within businesses and HR representatives who put on events within organizations. In addition, outside organizations, such as wedding planners, would be able to bring CocoForm to the attention of their customers through word of mouth. This will allow for economies of scale to take place within each order so CocoForm can create a more lucrative business.

9

Sales Strategy: Purchasing a product for a special occasion is based on the relationship the consumer has with the person they are buying for, therefore CocoForm plans to gain potential customers through utilizing relationships they have with others. This way, customers know that CocoForm will do everything they can to produce the unique product they need. Also, CocoForm plans to further its relationships after fulfillment of the order through connecting on social media outlets to increase repeat purchasing. For smaller purchases, 10-20 pieces of chocolate, the minimum cost of any order will be $50. However, through economies of scale, larger orders will be less than $2 for each piece of chocolate. These prices contain the added value of working with the sales force and engineers to produce each unique product. CocoForm plans to have two sales persons. This will allow for a lean startup and less overhead to support the cheaper customization of chocolates. Our sales force will be compensated by the time and effort of each order brought into the business. If the order is more complicated and requires more time to create a design, the sales team will be paid more. Distribution Channels: In the startup phase, CocoForm will be positioned as a hub bringing in customers while bootstrapping the thermoform machine as well as 3D printer and outsourcing the chocolate production to Chocolat Celeste. Through these relationships, CocoForm has to maintain different channels of communication, which can be viewed in appendix E, Strategy and Communication Structure. Once the customer is established, the sales force needs to communicate what the design will look like to the engineer. Once the CAD design is created, the sales force will send the image to the consumer for approval to continue with the order. When the design is set, the engineer will create the 3D pieces and manufacture the molds. During this, CocoForm will communicate with the chocolate store to find a time to utilize its’ facilities to produce the chocolates. Lastly, the molds will be poured and the chocolates will be delivered within the Minneapolis and St. Paul area by CocoForm’s founders and shipped to areas outside of these cities. Results of Market Tests: Our market tests have been successful due to gaining two pre-venture launch orders (200 pieces and 500 pieces, $170 and $342.50 respectively) as proof of concept. The market however is still variable as the consumers we are targeting are so broad. The chocolate market is consumed with individuals of different ages, but can be narrowed to those with enough discretionary income to purchase premium chocolates. Currently, CocoForm is able to gain orders through current relationships with faculty, friends, and family. Because startups are so volatile in the start, it is imperative that we ask our customers whether or not they were pleased with the product through questionnaires after the order is fulfilled. This way CocoForm can continue to narrow down its target market and discover which process works most efficiently.

Product/Service Design: The process CocoForm will use to manufacture the desire custom chocolate product is a process that uses thermoforming. The part positives as approved by the customer will be 3D-printed, which adds speed and customizability, and will then be molded using a thermoform machine. This creates a cavity in a sheet of plastic that acts as the mold for the design. As of now the specifications and limitations of the designs will be determined by the team lead and engineering lead. If he/she deem that the design is too complex or infeasible then the order will be rejected. Through the use of 3D-printing the molds, it allows for shorter lead times and more customizability which in the end results in a happier and more satisfied end consumer.

10

As of now the team has worked through the prototyping stage and into fulfilling customer orders. The founding team is currently working to fulfill two orders, one for their professor and one for the Carlson School of Management graduation ceremony. The steps are laid out in the process flow map that can be seen in appendix F. The first step in the process is to purchase all necessary materials so that when an order comes through the throughput time is minimized. When an order is received, quoted, and accepted by the customer, the team lead and engineering lead will then design the customized chocolate as desired by the customer in a Computer Automated Design (CAD) software program. Once the order is designed to all of the desired specifications and the customer has accepted the design, the financial manager will collect payment from the consumer. Once payment has been received, a 3D positive of the CAD drawing will be created via a 3D-printer. The next step is to create a mold or cavity of the 3D positive. This is done by taking a food grade plastic and using a thermoform machine. Once the positive is positioned on the plastic the thermoform machine molds and forms the plastic around the positive, thus creating a cavity which replicates the positive. With this process multiple cavities of the design can be created so more than one chocolate can be produced at once if desired by the customer. Thus, the next step is to pour melted chocolate into the cavities. At this point the chocolate is put into a freezer to solidify. Once it has completely solidified, the customized chocolate piece can be ejected from the cavity and the final product has been created. To complete the process, the chocolates are individually packaged and as a result can be delivered to the end consumer. Upon completion of the order, the mold will be returned by the chocolatier per a contract negotiated between the two firms. The contract illustrates that the chocolatier must return the mold to CocoForm to prohibit further use of the mold. As previously stated, the team has outsourced the use of a thermoform machine by gaining access to the use of one through the University of Minnesota. By being a student it allowed the team free access to the use of this machine. The chocolate pouring portion of the process has also been outsourced to a local chocolatier known as Chocolat Celeste. Through personal connections and upon negotiation the team was given access to their facilities in order to successfully pour and create the final product. Growth Strategies: CocoForm will require few physical assets initially and growth will consist mainly of the purchase of a second 3D printer at the end of the 15 months of operations. This time frame is approximately when the 3D printer will become the throughput bottleneck based on estimation. According to our projections and business goals, CocoForm sales will grow 25% month-over-month for the first eight months, then slow to 11.75% until month 15, whereupon our sales will slow to a sustainable rate of 10% month-over-month. An additional salesperson will be added at about the one-year mark to maintain the aggressive sales growth rate we are predicting. As has been mentioned above, the primary market for CocoForm will initially be the Twin Cities metropolitan area. Our sales base will grow organically through repeat sales with loyal customers as well as word-of-mouth recommendations among our clients. To ensure a healthy relationship with our chocolatier partners, we will focus on building relationships with Twin Cities chocolatiers before expanding slowly into other U.S. cities to grow our market (particularly Madison, WI). Design and mold production will remain centralized in our Minneapolis office. Meanwhile, growth into other states will be as simple as sales lead road trips to surrounding states and managing those relationships remotely from the Minneapolis office. It is worth mentioning that depending on how important it is that CocoForm be housed near its chocolatier partners as observed from Twin Cities sales, CocoForm may invest in equipment and office space in other urban hubs as this regional expansion occurs.

11

Along with market expansions, product expansions will be developed as well. Although CocoForm will only be marketing a custom product consisting of flat layers, entrance into 3D curves and specialized contours will be explored by our Engineering Lead as customer relationships are developed during the early months of the venture. In addition, we plan to put our developing client relationships to use in order to develop a list of most sought after product extensions, and begin investigating how to integrate these features into our developing product. Funding Request: In CocoForm’s current state, it requires zero outside funding as all products are produced on demand. CocoForm is able to bootstrap the use of equipment through the University of Minnesota as students, however as CocoForm progresses, there are some capital purchases that will be beneficial to acquire as early as possible. In month one, all six team members will be making a capital injection of $1,000, for a total of $6,000. Following in month three, CocoForm is requesting $11,000 to purchase a 3D printer ($6,000) to improve the service quality of the chocolates as well as a thermoforming machine ($5,000) to move mold production in-house completely. Based on CocoForm’s forecasted projections, sales will be $11,258.79 in month 6, which is the breakeven point for the external injection of $11,000 in month 3 (Appendix H Financial Sheet). This injection will be funded based on equity, at which point CocoForm is offering 7.5% of the company. This gives CocoForm a valuation of $150,000, which is equivalent to total profits after 24 months of operations. Financials: Based on sales to date, market, industry research, and projected sales and expenses, CocoForm was able to generate a statement of cash flows and summary (Appendix H, Financial Sheet and Appendix I, Financial Graphs). The cash flows were generated according to key assumptions focused on costs and growth rate. These assumptions include shipping costs being 2.5% of sales and the cost of goods sold being 2% of sales. With initial sales (month 1) of $1,000, CocoForm will see a growth rate of 25% in months 1 through 8, 17.5% in months 9 through 15, and 10% in months 16 through 24. Our subcontractors will receive 50% of all sales revenue in the first 12 months. Due to the increase in sales, the amount of sales revenue subcontractors receive will drop to 45% after month 12. Among the stated costs above there are additional costs, which are referenced in the statement of cash flows in appendix G, ROI and appendix I, Financial Graphs. With CocoForm being a licensed LLC with real sales, CocoForm has registered tax information through the Internal Revenue Service and through the state, attained an employer identification number. (Appendix K, W9 Tax Information and Appendix L, LLC Certificate). It is worth noting that, in Invoice 1 to CSOM (Appendix J, Invoice History), the sales tax listed is inaccurate, and will have to be adjusted for future sales. The lowest sales tax rate the customer will pay in Minneapolis is 7.775%, this includes 6.875% in state sales tax + .25% in transit improvement sales tax + .15% in Hennepin County sales tax + .5% Minneapolis sales tax.

12

Appendices: Appendix A: Founders’ Biographies

Trey O’Bryan is from Bagley, a small town in northwestern Minnesota, where he grew up surrounded by beef cattle and small town pride. He’s a junior studying Agricultural and Food Business Management and minors in Entrepreneurship and Sustainable Agriculture with the hopes of working in emerging markets to develop agricultural enterprises and practices. He is heavily involved in Greek life and other student groups at the University of Minnesota, and is a program development intern at the Minnesota Agricultural Interpretive Center. As a member of the CocoTeam, he is the financial lead and will work on purchasing

and operations, as well as business development, to make the idea that is CocoForm a reality. He has some familiarity with entrepreneurship and small business management, and hopes to leverage those experiences into tangible success down the line.

Miranda Forrest is an undergraduate at the Carlson School of Management majoring in Marketing and Entrepreneurial Management. Exposed to her parents’ and grandparents’ businesses, the entrepreneurial fever was instilled in her at a young age. After graduation, Miranda is looking forward to starting her career in the corporate field of marketing. After gaining experience in sales and business development, she aspires to open her own flourishing business focused on providing a great experience for all ages. Miranda is currently an intern for MN Cup, helping startup companies realize how they can better their abilities and survive within the business world. She is devoted to CocoForm as an

avid chocolate lover and through this venture desires to combine the two greatest 21st Century obsessions: technology and food. CocoForm is able to do this through the use of 3D printing to create customized chocolate creations. If you desire to learn more, Miranda can be contacted at forre100@umn.edu.

Lucas Kwong is an undergraduate student in the University of Minnesota majoring in Economics. He is an international student from Hong Kong. He has been in Seattle for two years and Minnesota for one year. In the past, he took part in several organizations in another college. He was a board member of the Business Club and a founder of a club called Cantonese Culture Community. He has quite a few experiences about promoting and organizing events. He also worked as a sales representative in different retails. He has great interest in business. That's why his minor is business management. He loves creativity and innovation. Starting his own business is one of his goals. By joining

CocoForm, he is the marketing lead. His contribution would be business development, managing brand presence, managing customers' experience during pre-sale and documenting CocoForm journey. His work in this team would be more marketing based.

13

Appendix A: Founders’ Biographies (Continued)

Drew Jaskot has always been fascinated with how things work and the evolution of technology. 3D printing, in particular, is one area of expertise that he looks to further his knowledge in with the belief that it will be extremely valuable in the future. His father is an entrepreneur himself and has started his own manufacturing company that is looking into expanding into the 3D printing industry. Drew is pursuing a BS in Industrial and Systems Engineering and has extensive knowledge in process improvement and quality assurance as well as several aspects of business through his technical electives. Previously he has held an internship directly relating to process control and improvement where analyzing and assuring an effective process was the sole purpose of his role at Helwig Carbon Inc. Post-graduation in May, Drew will be pursuing a career at Orion Engineered

Seals working as an industrial engineer. Drew can be contacted at jasko009@umn.edu.

Steven Johnson is from Elk River Minnesota, where he came from an average middle class household. In 2012 Steven decided to enlist into the U.S. Air Force as a Command Post Operator after completing his associate's degree at Anoka Ramsey Community College. During his time as a Command Post Operator Steven worked two Air Force One missions for the presidential arrival into Minnesota and acted as the junior command and control operator for the strategic Exercise, Swift Response 2015. Steven in 2014 started his attendance at the University of Minnesota where he is pursuing majors in Applied Economics and Sociology of Law as well as minors in Management and Technical Writing. After he achieves his undergrad degrees, Steven plans on progressing onto graduate school where he will study Supply Chain Management. He is currently preparing for the world of

business by obtaining practical knowledge on what it takes to start and grow a business with the start-up CocoForm. He is currently a Business Development Lead for the start up and has been tasked to support and grow the business marketing and research departments. He is devoted to the success of not only his specific departments, but also the success of the venture as a whole. If you desire to learn more about Steven Johnson, He can be contacted at joh11560@umn.edu.

David Busacker is a senior in Industrial and Systems Engineering at the University of Minnesota. Discovering 3D printing during the pilot semester of an additive manufacturing course taught by two young U of M graduates, he knew that this technology would change the very way people think about manufacturing. He is now assistant-teaching the class for his third semester and is finishing an honors thesis in distributed additive manufacturing and the shared economy. His idea for CocoForm arose when he frustratedly searched for somewhere to make a custom chocolate for his fiancé during Valentine’s Day. Realizing there was an opportunity to solve this unique problem with his passion for 3D printing. With a background in the U of M student government,

acappella, and missionary work, he realized that leading the entrepreneurial endeavor with his communication and delegation skills would be maximizing his input into the CocoForm dream. After college, David will be working as a continuous improvement consultant for SGK, Inc. and developing his entrepreneurial passion for 3D printing. He is always looking to connect, and can be reached at busa0033@umn.edu.

14

Appendix B: Organizational Chart

Appendix C: Industry Raw Material Indexes Information is current as of April 25, 2016 Cocoa:

• Market leaders: Mars inc. / Mondelez international • Current pricing: $3,007 per metric ton down 9.42% from 2011.

Sugar: • Market leaders: Suedzucker AG / PS International • Current pricing: $.1527 cents per pound down 40.42% from 2011.

Milk: • Market leaders: Nestle / Dairy Farmers of America / Dean Foods / Kraft / Land O Lakes • Current pricing: $.1371 per hundred weight down by 20% from 2011.

Packaging: • Market leaders: Orion packaging / Classic Packaging corp / Plastic Ingenuity • Current pricing: $875 per metric ton down 10% from 2011.

Index Sources: Cocoa: http://www.indexmundi.com/commodities/?commodity=cocoa-beans&months=60 Sugar: http://www.indexmundi.com/commodities/?commodity=sugar&months=60 Milk: https://ycharts.com/indicators/milk_price Paper: http://www.indexmundi.com/commodities/?commodity=wood-pulp&months=60

15

Appendix D: Market Share and Competitors Direct Custom Chocolate Competitors:

• Custom chocolate market share is 30%

Competition breakdown: Sweet Chocolat:

• This company is our direct local competitor due to the loose ability for this company to outsource custom molds and pour in house.

• Market Share = 10% TotallyChocolate.com:

• This company is our direct online competitor due to the ability for customers to submit a design profile for Totallychocolate.com to produce the chocolate product. They are however not in the market for custom designing fro customers

• Market Share = 10% Maud Borup:

• This is a wholesale company that can create custom chocolate designs but requires a 4,000-unit minimum order.

• Market Share = 10% •

Substitute Market Competitors: • Substitute market share is 70%

Competition Breakdown:

• Truffle market: 40% o Legacy Chocolate | Market share = 5% o St. Croix Chocolate Company | Market share = 10% o B.T. McElrath | Market share 5% o Chocolat Celeste | Market share 10% o Just Truffles | Market share 10%

• Chocolate bar market: 20%

o B.T. McElrath | Market share = 5% o Mademoiselle Miel (Bean to Bar) | Market share = 10% o Regina’s Candies | Market share = 5%

• Alternative chocolate Confections (Chocolate Bark): 10%

o Legacy Chocolate | Market share = 5% o Regina’s Candies | Market share = 5%

16

Appendix D: Market Share and Competitors (Continued) Mold Producer Competitors: Competition Breakdown:

• CustomCandyMolds.com: o Company that creates molds though the same vacuum molding process CocoForm uses,

they cost $145.00 for a 1 cavity mold plus shipping. o Market share = 30%

• Micelli:

o Company that produces chocolate molds though CNC and carries a minimum mold production cost of 25 molds @ $29 each = $725 minimum.

o Market share = 40%

• Life of the Party: o Company that uses thermal forming to produce its customizable chocolate molds prices

and quantity information is not available. o Market share = 30%

Appendix E: Strategy and Communication Structure

17

Appendix F: Process Flow Diagram

18

Appendix G: Return on Investment (ROI)

Appendix H: Financial Sheet

Appendix I: Financial Graphs

19

Appendix J: Invoice History

20

Appendix J: Invoice History (Continued)

21

Appendix K: W9 Tax Information

22

Appendix K: W9 Tax Information (Continued)

23

Appendix L: CocoForm LLC Certificate

24

Appendix L: LLC Certificate (Continued)

25

References: eMarketer (2016). Number of Instagram users in the United States from 2014-2020 (in millions). Retrieved

from http://www.statista.com.ezp3.lib.umn.edu/statistics/293771/number-of-us-instagram-users/

eMarketer (2016). Distribution of Instagram users in the United States as of December 2015, by age group. Retrieved from http://www.statista.com.ezp3.lib.umn.edu/statistics/398166/us-instagram-user-age-

Fleming, Jess. "Need Sweets for Your Sweetie? 7 Places to Get Minnesota-made Chocolates." Twin Cities. Pioneer Press, 06 Feb. 2016. Web. 25 Apr. 2016. http://www.twincities.com/2016/02/06/minnesota-chocolates-valentines-day

"Mintel: U.S. Chocolate Market to Hit $25B in 2019." Candy Industry RSS. CandyIndustry.com, n.d. Web. 25 Apr. 2016. http://www.candyindustry.com/articles/86698-mintel-us-chocolate-market-to-hit-25b-in-2019

"NCA: U.S. Confectionery Market to Grow $6 Billion in 5 Years." Candy Industry RSS. CandyIndustry.com, n.d. Web. 25 Apr. 2016. http://www.candyindustry.com/articles/86485-nca-us-confectionery-market-to-grow-6-billion-in-5-years

Person, and Victoria Marfan. "The 50 Best Chocolatiers in America - Chocolate Celeste."Complex. N.p., n.d. Web. 28 Apr. 2016. http://www.complex.com/pop-culture/2012/02/best-chocolatiers-in-america/11

U.S. Food and Drug Administration. (2007). Retrieved March 29, 2016, from http://www.fda.gov/Food/IngredientsPackagingLabeling/PackagingFCS/ucm2006853.htm

United States Census Bureau (2009). Marriages in the last year by sex by marital status for the population 15 years and over. Retrieved from http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_09_1YR_B12501&prodType=table