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METRO LABEL TEA

A PRIVATE LABEL TEA BRAND FOR METRO CASH AND

CARRY

RESEARCH SUPERVISOR: PROF. F. A FAREEDY

TEACHING ASSOCIATE: MS. HAADIAH QAISER

RESEARCHER: AHMED JAWWAD KALEEM (09P0024)

MBA 2011

LAHORE SCHOOL OF ECONOMICS



Metro Label Tea – A Private Label Tea Brand 2011

1

LETTER OF APPROVAL

To the Project Instructor,

I am submitting herewith a project written by Ahmed Jawwad Kaleem (09P0024)

entitled “Metro Label Tea – A private label tea brand for Metro C&C” I have examined the

final copy of this project for form and content and recommend that it be accepted in partial

fulfillment of the requirement of the degree of Masters in Business Administration, with

major in Marketing.

________________________

I have read this report and

Recommend its acceptance.

___________________________________________

Prof. F. A. Fareedi




2

TABLE OF CONTENTS

LETTER OF APPROVAL ....................................................................................................................................... 1

TABLE OF CONTENTS ......................................................................................................................................... 2

AKNOWLEDGMENT ............................................................................................................................................. 4

ABSTRACT ............................................................................................................................................................... 5

CHAPTER 1: INTRODUCTION TO THE STUDY .......................................................................................... 6

1.1 INDUSTRY ANALYSIS ................................................................Error! Bookmark not defined.

1.2 PAKISTAN TEA INDUSTRY ......................................................Error! Bookmark not defined.

CHAPTER 2: LITERATURE REVIEW ........................................................................................................... 10

CHAPTER 3: RESEARCH METHODOLOGY ................................................................................................ 18

POPULATION: ............................................................................................................................................ 18

SAMPLE SIZE: ............................................................................................................................................. 18

SAMPLING METHOD: .............................................................................................................................. 18

RESEARCH METHOD: ............................................................................................................................. 18

TOOL FOR THE SURVEY: ....................................................................................................................... 18

DATA TABULATION AND ANALYSIS: ............................................................................................... 18

CHAPTER 4: FIRM INTERNAL & EXTERNAL ANALYSIS ..................................................................... 19

Internal Factor Analysis Summary ......................................................................................................... 19

Strengths ...................................................................................................................................................... 19

Weaknesses ................................................................................................................................................ 19

External Factor Analysis Summary ........................................................................................................ 20

Opportunities ............................................................................................................................................. 20

Threats .......................................................................................................................................................... 20

Strategic Factor Analysis Summary ....................................................................................................... 21




3

CHAPTER 5: FINANCIAL ANALYSIS .................................................Error! Bookmark not defined.

CHAPTER 6: RESEARCH PROBLEM .................................................Error! Bookmark not defined.

CHAPTER 7: QUALITATIVE FINDINGS ...................................................................................................... 22

CHAPTER 8: QUANTITATIVE FINDINGS .......... ........... .......... .........Error! Bookmark not defined.

CHAPTER 9: ANALYSIS OF THE DATA....................................................................................................... 39

CHAPTER 10: NEW PRODUCT DEVELOPMENT ..................................................................................... 40

Business Costing ............................................................................................................................................ 40

Capital Budgeting ..................................................................................................................................... 40

Per Unit COGS ............................................................................................................................................. 40

Depreciation & Amortization ............................................................................................................... 41

Sales Assumptions ........................................................................................................................................ 41

CHAPTER 11: RECOMMENDATIONS .......................................................................................................... 42

CHAPTER 12: CONCLUSION ........................................................................................................................... 43

REFERENCES ....................................................................................................................................................... 44

APPENDIX ............................................................................................................................................................. 52




4

AKNOWLEDGMENT

I am grateful to Allah Almighty, for enabling me to fulfill this tiring, but interesting job for

the completion of my report.

I would not be going to do justice in presenting this report without mentioning the people

around me who have been inextricably related with the completion of this report.

I would like to express my heartfelt thanks to my course instructor Prof. F. A. Fareedi for

his support and guidance, which he rendered throughout the study, and provided us with

such a wealth led ideas, to peruse and power of writing this report. It could not have been

possible to accomplish this report without his thoughtful guidance and expertise.

I would also like to acknowledge the efforts of Mr. Salman Tahir who was my mentor for

this project and a very dear friend and with whose guidance and efforts, I was able to reach

my final report completion. It is because of the above mentioned people and many others

that I have been able to complete my project otherwise it would not have been possible.

Finally, for any all too fallible errors, omissions and shortcomings in the writing of the

report only I m responsible for which I hope that all concerning regards of this report will

forgive me.




5

ABSTRACT

This report is about the business feasibility plan of launching a private label brand by

Metro cash & carry.

Metros are large chain wholesale stores which have been made for the convenience of the

retail & bulk buyers to facilitate modern consumption patterns.

It is a general practice abroad and in local market that large stores come up with their own

private label brands as they have the potential and the customer base to sell them.

The Tea industry in Pakistan is a large industry which mainly depends on 2 to 3 large

players namely, unilever & tepal and a few small local companies.




6

CHAPTER 1: INTRODUCTION TO THE

STUDY

1.1 PURPOSE OF THE STUDY

This report is aimed to study and explore a new business venture plan for Metro who deal

in a whole sale business and under their strong brand name, they can start a private label

brand of Tea which will further enhance their company image and extend their own brand

portfolio. The study will include all the current business model strengths and weaknesses

accompanied with the new market opportunities and threats to lead the company to a new

horizon.

1.2 TEA MANUFACTURING IN WORLD

There are several big players in the Tea Global market of which India and China are the key

players. In year 2004, India was the main source of Tea production followed by China with

a 25.2% of the total world Tea production but after 2006, China gained most of the share by

29% which makes it the leader in Tea production and India came on the second with an

annual production of 995 Million KGs of Tea. Kenya which is believed to be the superior

market production country of Tea and Hub of tea production showed slow growth over the

period of last decade and annual production has declined and there has been a switch of

suppliers from being Kenyan to Indian and now Chinese. Vietnam, Malawi has shown a

descent increase in the Tea production whereas Srilanka and Indonesia, which were having

a good percentage of total Tea production, have declined.1

1.3 TEA INDUSTRY OF PAKISTAN

Many attempts have been made in the past to make this Tea industry of Pakistan a

flourishing and a profitable sector but in vain. Serious efforts which began in the year

1980’s when different studies were conducted to make the economic feasibility of tea

production in Pakistan. Soon after the separation of East Pakistan, the Government made




7

serious efforts in studying the requirements of the special crop that had a lot of potential.

The growing conditions for such a special crop were only suited in the Northern provinces

and specially in the winters when the temperature was cold enough for the proper

maintenance of the crop. The Camellia sinensis and Camellia assamica broad leaf were the

two or three major leaves required for it and different flavors were a result of different

chemical composition of the fresh tea leaves. After 20 years of study & research by PARC,

the harvest went up to 5000 KGs of top trend leaves, the cost of which the farmer had to

bear was nothing in comparison to the net income per acer per year generated through its

cultivation.2

The Global demand for tea exceeds the present supply of tea in the world which creates a

gap and this gap is growing as the world’s population is on a run. There are four to five

major companies in the business of tea refining of leaves and selling of tea in Pakistan in

packed and branded for all over the country. Thou, there are several local companies who

import tea and sell on their own private label but yet do not fulfill the requirement of the

whole country. These brands like Tepal, Lipton, Brooke Bond, Supreme, Vital & Tetley not

only do they compete with one another but they also face a lot of competition from the

loose tea local market.

Tea is Pakistan’s cheapest and one of the most popular hot beverages. Tea has become the

second most populous drink after water in the whole wide world because of its salient

features as it is easy to make and mostly affordable by masses. It is one of the fastest

growing beverages at an average of 6.5% over 5 years of time. Tea consumption in Pakistan

has crossed over 230 million kilograms per year and has seen a growth in last many years.

Most of the rural population consumes tea in abundance. The tea segment is classified into

further two segments namely “blended and packed” & “loose” . The sales and distribution

are lead by the world’s biggest corporate giants not only in the tea business but in general

“Unilever” and followed by the “Tepal” and then the others smaller companies follow the

trend.3




8

1.4 COMPANY OVERVIEW

Organization has been selected for the research purposes. Firm which has been chosen is

METRO: CASH & CARRY.

Metro is the leading giant in the whole sale and retail business all around the world. Their

strategic focus is whole sale business. It was founded in 1964 and rapidly expanded into

many countries like Pakistan.4

METRO Cash & Carry announced its operations in Pakistan in January 2006 & since then it

has established itself as a potential market leader in self service wholesale.5

With around 700 stores in 30 countries, METRO Cash & Carry is the international leading

self-service wholesale operator with sales of around € 31 billion in 2010. Each day, our

more than 100,000 employees are happy to serve our customers: with a comprehensive

assortment of up to 50,000 food and non-food articles, our wholesale stores offer a wide

range of high quality products for the needs of our professional customers such as hotels,

restaurants, caterers, traders and service companies. Variety, quality, product safety,

professional services but also a true international culture, a strong corporate responsibility

and entrepreneurial spirit are trademarks of METRO Cash & Carry.6

The Company has opened its first wholesale centre in Lahore in October 2007. METRO

Cash & Carry Pakistan is now successfully operating 5 wholesale centers, 2 in Lahore, 1 in

Karachi, 1 in Faisalabad & 1 in Islamabad.7

The company’s country head office is based in Lahore at Thokar Niaz Baig near motorway.

The current Head count of employees is 1176 including Head Office & 5 wholesale centres.8

The company has joined hands with the local head to head competition in the field of

wholesalers as Metro AG (MEO), Germany’s biggest retailer, combined its wholesale

operations in Pakistan with local competitor Makro-Habib Pakistan Ltd. Metro holds a

major part of the operational business while Makro have a majority in the real estate. Now

the company has a total of 10 wholesale centers of which on is situated in Faisalabad, three

in Karachi and four in Lahore. The company has planned to further expand in many large

http://www.bloomberg.com/apps/quote?ticker=MEO:GR

http://topics.bloomberg.com/germany/


http://topics.bloomberg.com/pakistan/

http://topics.bloomberg.com/pakistan/


http://www.bloomberg.com/apps/quote?ticker=MEO:GR




9

cities of Pakistan. The company now owns a couple of private label brands which were

previously owned by Makro under the Brand name of ARO, Q-biz and Savepak. Under the

brand name of ARO, the company has its vast variety of edible oils, tissues and daily

toiletries. Q-biz is generally for stationary and Savepak includes other office utensils.

So the phenomenon of private label branding is not alien to the company or any new idea.

It is an idea or a business concept that has been used worldwide and by many large

retailers and departmental stores/hypermarkets/wholesale centers.

Other major segments and departments are as follows:

1. Dry Food department which basically has all the food items which are not consumed

as they are produced but rather have a longer useful life and a longer expiry date.

2. Fresh Food department includes all the fruits vegetables & other meat and poultry

which have a smaller useful life and expire rather quickly.

3. Non-Food department which is the biggest department which includes everything

else from electronic appliances to toiletries and anything that can be included in a

store other than food.

Metro has many functions which operate both in and out of the store to help the operations

go smooth in the company which include:

1. Commercial department team responsible for procurement.

2. Human Resources both at store and head office.

3. Operations at store include the:

a. Good receiving

b. Checkout

c. Dry/fresh/non-food departments

d. Customer Service/Development

e. Human resources

f. Security

g. Administration, Logistic & Control9




10

CHAPTER 2: LITERATURE REVIEW

2.1 TEA HISTORY The origin of TEA is debated and scholars depict in their discussions as to whether it was

originated in the interior of southern China or the border of Assam. Originally Tea has a

single species which is called the Camellia Sinosis and it gained popularity in the TS’ang

dynasty that cultivated it and later became a symbol of commerce and trade. The first ever

European writer to write about the mysterious Chinese drink was in 1559 A. D. The first

ever consignment from China was imported in 1606 A. D. to a trading base at Benton. Later,

tea was shipped to the non-tea-conscious people from Holland to France. The discovery of

tea in Assam led to the origin of tea in the sub continent but that has been argued for many

years that the East India Company brought tea plants in the country in curiosity and grew

them in parts of the sub-continent. Sir Joseph bank suggested the cultivation of tea in

Coochbehar and Ranpur districts of Bengal in 1788. To control and properly manage this

crop of tea which was turning out to be one of the major income sources in north and

southern area of the sub-continent a body was made under the name of ITA-Indian Tea

Association in 1881. In the four major recessions that took place in the latter half of the 19th

century, India, Srilanka, Netherlands and West Indies made a mutual agreement to limit the

tea production to avoid disasters that might strike the economies and further disrupt the

situation of piling up of tea inventory which was eventually going to waste. Later, an Act

was passed which was later on modified in year 1938 and 1943 by the committee called

the “tea licensing committee”.10

2.2 TEA TRENDS

The tea trends have gone through a major life cycle from a very low price to high price. In

the previous years i.e. before 1980’s, the prices were in a long term decline. This decline

was a result of many of the factors which contributed to its price volatility. One is the

supply and demand combination of it. More and more countries though tea was a favorable

product as it had a growing demand which lead the incentive to produce to be even higher.




11

This decrease in the prices was because of majorly excess supply and not so growing

demand of tea. Stocks were piling up in the supply chain of the countries’. No monopoly

was being created and the economics of the tea was such that all the countries producing

tea were producing in large amounts. The bargaining power of the buyer was high and the

buyers could easily switch between the suppliers, as there were a great number of

suppliers in every country. Tea has the ability to deteriorate quickly so the suppliers need

to get rid of old stock otherwise it will rot. The hit from the low prices by the buyers is

transferred in the form of low wages to the lowest level in the supply chain of the product.

Tea plantation is not much affected by the weather and disease if compared with the coffee

and cocoa leaves. The tea market is relatively more stable than the coffee and cocoa market

as it has less destabilizing effects due to speculations. The companies who buy tea also tend

to have a rather stable but low price levels as the benefits need to be transferred to the end

consumer. Tea is cultivated in around 36 countries of the world and rest of the countries’

buy from these countries to meet their demand for tea. The five major countries known for

their tea production are as follows:

a) India

b) China

c) Srilanka

d) Kenya

e) Indonesia

The world production of tea has been growing and different techniques have been applied

to enhance further the tea production capacity from the same area of land. Increase in

competition to earn revenues through exports have lead to a vicious cycle of lowering

down prices in the past but the prices have started to go up due to increasingly high

demand for tea in the recent years.11




12

2.3 TEA INDUSTRY

In any market the equilibrium is never set only by the buyers or only by the suppliers. It is

always the combined effect of supply and demand that makes the point where every buyer

and supplier rests. The suppliers need to work closely with the research association to find

alternate uses of tea. Thus, after many years of research the uses of tea have been extended

beyond the boundaries of just black tea. Now, tea is consumed in many other ways and in

many countries.




13

2.3.1 Production & Consumption

Globally tea is produced around 3.5 million tons . But, mainly it is concentrated in the

hands of a few top countries given in the table below.

The production of tea has doubled in the last 3 decades and has increased by 51% over the

last 20 years. However, the demand side of it has lagged creating intense competition for it

to be sold.15

Around 55-56% of the total production of tea in the highest producing countries is

consumed locally and the surplus is exported to other countries, mainly the European

market, Asian and the US markets. People in China prefer the green teas over the black one

and the black tea is normally exported out to Europe and U.S market.16




14

2.3.2 Tea Processing

The tea processing is simple and rather easy process. The engineers have made machines

which Cut, tear and curl the leaves and standardized machinery and procedures have been

developed to remove the human error part of the process. 85 – 90 % of the world’s tea

production is sold by the multinationals of which the two most famous companies are Tata

tea and Unilever trading company. Certain biochemical tests have been advised for the tea

manufacturers to be conducted to ensure the quality of tea being produced by checking on

its brightness, color, appearance, briskness, aroma and creaming down. Methods have been

introduced by modern engineers to increase the number of cups produced per given

weight of tea, reduce waste and increase solubility of made tea.14

2.3.3 Supply Chain of Tea export in world

From producing to the consuming countries, tea flows a specific supply chain which can be

briefly explain with the help of the following figure taken from SOMO report in June, 2008.

The process starts when the tea leaves are plucked and from there it either goes to the

small farmer or the plantation/estate. Farmer sells it to the collector who stores it and

further sells it to the buying center from where it is sent to the factories and transported to

warehouses. From there it goes to broker or auctioned and then goes to the buying agent.

From the factory/estate it goes by transportation to traders and buying agents. The buying

agent further sends it to the freight handler who transports it to the desired country of

import from where the tea is blended and packed by the company and branded. This

branded tea follows the same regular pattern of distribution as any other FMCG product

goes through which is from the storage to warehouse and from warehouse to distributors

and then to retailers and finally it reaches the end consumer. This is a regular route of the

product “tea” and in the process it changes many hands. The person who gets the minimum

benefit is the producer itself. Rest of the parties involved as a middle man keeps the profit margin much higher than the farmer does.17




15

The tea market majorly is controlled by the following tea packers:

Tata tea (Tetley)

Unilever (Lipton, Supreme & Brooke Bond)

R. Twinings (Associated British Foods)

Ajeepay Group (Typhoo tea)




16

Ostfriesche Tee Gesellschaft OTG: major German company which also has activities

outside Germany.

Teekanne: major German company, one of the oldest German traders.

Sara Lee International (Pickwick is the main brand on the Dutch market)18

2.4 TEA INDUSTRY OF PAKISTAN

Pakistan tea association is a dedicated body organized for the promotion of tea in the

country. It promotes the fascinating facts about tea, its history, information on tea business,

education and about the favorite places to enjoy various tastes of tea. It works with the

Food and Drink Federation, Pakistan Food Standards Agency, Department for Environment

Food and Rural Affairs, the European Food Standards Agency and a range of international

bodies, to ensure that the quality of tea imported into the different courtiers meets the

highest possible standards as regulated by law.12

According to the article that Mr. F. S. Hamid wrote in his study of the tea market in

Pakistan, tea drinking in Pakistan has become an integral part of the social life of people in

Pakistan. In Pakistan, there are not many areas where tea is grown but Pakistan has have

great imports of tea in the past and present. Pakistan is the third largest tea importer in the

world after Russia and U.K (11% of India tea export is directed to U.K).19

According to the news from the PTA website and also stated in the news about the tea

imports in Karachi, it was stated that the import duty on tea has increased. Smugglers pay

Rs. 19 – 20 to import tea into the Karachi port but people who are regular importers bear

the consequences of such increase in import duties which are in short non-tariff barriers to

the industry growth leading to price hikes and eventually reduce the import of tea.13

Tea ranks on the 8th while looking at the total direct products imported from other

countries into Pakistan. Countries from which Pakistan imports black tea are around

nineteen different countries and green tea is imported from four different countries. The

annual per capita tea consumption of Pakistan is 1 Kg. Various steps have been taken by the

government of Pakistan to have a control over such a huge import of tea and make the soil

feasibility such that people can grow tea leaves in Pakistan so that the surplus can only be




17

traded in the country and hence foreign exchange spent on tea can be conserved. As a

result of the study several areas of SWAT and MANSEHRA were identified as soil where tea

plants could be cultivated. Around 550 acres of land in Mansehra has been allocated with

consultation of Chinese tea experts. On the other hand “Unilever” also made steps in this

regard and started cultivation of tea plants on almost double this area for black tea.

Government has taken steps to increase the public private partnership in this area so that

more fruitful results can be extracted from areas where tea can be produced.20

2.5 PRIVATE LABEL BRANDING

2.6 PRIVATE LABELS IN PAKISTAN




18

CHAPTER 3: RESEARCH METHODOLOGY

3.1 POPULATION:

Target population would be of two types;

1. Retailers: Category B and C retailers

2. Consumers: SEC B & C

3.2 SAMPLE SIZE:

Sample size would be 20 retailers and 40 consumers.

3.3 SAMPLING METHOD:

Sampling technique would be convenient sampling.

3.4 RESEARCH METHOD:

Research method will be both qualitative and quantitative;

1. QUALITATIVE: In the first phase retailers informal visits will be conducted and

focus groups will be conducted for consumers.

2. QUANTITATIVE: On the basis of qualitative findings, survey questionnaire will be

designed for retailers and consumers.

3.5 TOOL FOR THE SURVEY:

Self administered questionnaires will be used as tool for data collection.

3.6 DATA TABULATION AND ANALYSIS:

Data will be tabulated using either MS Excel or SPSS and later analysis will be done with the

help of pictorial representation of data (Graphs).




19

CHAPTER 4: FIRM INTERNAL ANALYSIS

4.1 Internal Factor Analysis Summary

4.1.1 Strengths

4.1.2 Weaknesses




20

CHAPTER 5: EXTERNAL ANALYSIS

5.1 External Factor Analysis Summary

5.1.1 Opportunities

5.1.2 Threats




21

CHAPTER 6: STRATEGIC FACTOR

ANALYSIS

6.1 Strategic Factor Analysis Summary

Strengths

Weaknesses

Opportunities

Threats




22

CHAPTER 7: SURVEY FINDINGS

0

5

10

15

20

25

30

35

40

Yes No

Question No. 1

Series1 40 10

R e s p o n d e n t s

Do you consume tea?




23

0

2

4

6

8

10

12

14

Occasionally Once Daily Twice daily Thrice Daily More than

three cups

daily

Question No. 2

Series1 4 5 10 14 7


How often do you consumer tea?




24

0

5

10

15

20

25

Refreshme

nt

Pleasure Pain

reliever

Energy Sleep Others

Question No. 3

Series1 21 12 4 0 3 0


What purpose does tea serve you?




25

0

5

10

15

20

25

30

Breakfast Lunch Evening Dinner After

sports/ex

ercise

After

work/offi

ce

Not Fixed,

whenever

I like

Others

Question No. 5

Series1 27 13 23 6 4 12 8 0


What is the most likely occasion/event/time in a day

for you to have tea?




26

0

5

10

15

20

25

30

35

Black Green Pink Others

Question No. 6

Series1 33 6 1 0


What type of tea do you consume?




27

0

2

4

6

8

10

12

14

16

18

Father Mother Self Others

Question No. 7

Series1 11 11 18 0

R e s p

o n d e n t s

Who makes most of the purchasing decision in

your house?




28

0

2

4

6

8

10

12

14

16

18

20

Convenient

Store

Utility Store Hyper

Markets

Metros Super stores

Question No. 8

Series1 0 7 9 20 4

R

e s p o n d e n t s

From where do you buy your monthly

groceries?




29

0

2

4

6

8

10

12

14

16

18

20

Tea bags Tea leaves

(open tea)

Sachets Bags Box packing Jar

Question No. 9

Series1 4 2 0 9 19 5


What form do you buy tea?




30

0

2

4

6

8

10

12

14

Lipton

Yellow

Label

Tepal

Danedar

Supreme Vital tea Tetley Tea Unbranded

Question No. 10

Series1 13 14 10 1 2 0


Which available Tea Brand to you use?




31

0

2

4

6

8

10

12

14

16

18

80 gm 200 gm 450 gm 1 Kg 1.5 Kg

Question No. 11

Series1 0 8 17 15 0

R

e s p o n d e n t s

What packing size do you prefer while buying tea?




32

0

2

4

6

8

10

12

14

16

18

Rs. 440-470 Rs. 470-500 Rs. 500-530 Rs. 530-560 Rs. 560-590 Rs. 590-620

Question No. 12

Series1 0 0 3 12 17 8

R

e s p o n d e n t s

What price would you pay for a 1 KG bag of tea?




33

0

2

4

6

8

10

12

Price Consistens

y in taste

Quality Brand

name

Source of

production

nutritional

benefits

Others

Question No. 13

Series1 7 12 7 9 5 0 0


What is most important while choosing a brand for

tea?




34

0

2

4

6

8

10

12

14

Yes May be May be not No

Question No. 14

Series1 12 14 7 7


if a new brand is launched for tea, would you

try it?




35

0

2

4

6

8

10

12

14

16

18

Tea bags Tea leaves

(open tea)

Sachets Bags Box packing Jar

Question No. 15

Series1 3 0 0 5 18 14


In which packing would you buy the new brand of

tea?




36

0

2

4

6

8

10

12

14

Yes May be Do not know May be not No

Question No. 16

Series1 9 10 14 3 4


Would you recommend others to buy the new

brand of tea after using it?




37

0

2

4

6

8

10

12

14

16

18

Red Green Yellow Blue Others

Question No. 17

Series1 8 11 13 18 3


What packaging color would you prefer for this

new brand of tea?




38

0

2

4

6

8

10

12

14

16

Rs. 440-470 Rs. 470-500 Rs. 500-530 Rs. 530-560 Rs. 560-590 Rs. 590-620

Question No. 18

Series1 6 16 10 3 3 2


What is the recommended price for 1 Kg bag of

tea?




39

CHAPTER 8: ANALYSIS OF THE DATA




40

CHAPTER 10: NEW PRODUCT

DEVELOPMENT

Business Costing

Capital Budgeting

Per Unit COGSCost per 1 Kg Box

Cost of tea Rs 440.00

Preservatives Rs 15.00

cost of carton & hard pack Rs 4.25

cost of packing foil Rs 2.50

Sealing & gluing cost Rs 0.40

Total Cost Rs 462.15

Cost per 0.5 Kg Box

Cost of tea Rs 220.00Preservatives Rs 7.50

cost of carton & hard pack Rs 3.25

cost of packing foil Rs 1.50

Sealing & gluing cost Rs 0.40

Total Cost Rs 232.65

Capital Budgeting

Printing cylinder cost per color Rs 18,000

Total colors to be used 3

Printing cylinder cost Total Rs 54,000Sealing Machine Cost Rs 500,000

Gluing Machine cost Rs 350,000

Warehouse Land Cost Rs 3,500,000

Structure cost Rs 1,500,000

Setup cost Rs 500,000

Total Capital Expenditure Rs 6,404,000




41

Depreciation & Amortization

Depreciation Expense Table

Items Sealing Machine Gluing Machine

Asset Cost Rs 500,000 Rs 350,000Useful life 10 5

Depreciable amount Rs 450,000 Rs 350,000

depriciation expense per year Rs 45,000 Rs 70,000

depriciation expense per quarter Rs 11,250 Rs 17,500

depreciation expense per month Rs 3,750 Rs 5,833

Depreciation Building

Asset Cost Rs 1,500,000

Useful life 15

Salvage value Rs 100,000

Depreciable Amount Rs 1,400,000

Depreciation expense per year Rs 93,333

Depreciation expense per month Rs 7,778

Setup & startup cost Amortization

Printing Cylinder Cost Rs 54,000

Setup Cost Rs 500,000

Total startup cost Rs 554,000

amortization period 3

Amortization per year Rs 184,667

Amortization per month Rs 15,389

Sales Assumptions

No. of Customers daily 5000

20% customers buying tea 1000

Metro label customers (25% of tea customer) 250

No. of stores 9

total national sales in units 2250




42

CHAPTER 11: RECOMMENDATIONS




43

CHAPTER 12: CONCLUSION

Discount rate 12.5%

NPV Rs 2,408,950

IRR 16%

Payback Period 1 Year and 9 months




44

REFERENCES

1. Indian Tea Research.pdf; pp. 17-18.

2.

An overview of tea plantation in Pakistan; A. Waheed, F. S. Hasid and Mand Khan,

National tea research Institute; pp. 1-4.

3. Lipton’s Cardamom Tea Report; Adeel, Asma, Kashif, Rabia & Afaq, A unilever

report. pt. 6.

4. http://www.metro-cc.com/dynasite.cfm?dsmid=102631

5. http://www.metro.pk/servlet/PB/menu/1005221/index.html

6. Ibid

7.

Ibid

8. http://www.metro-cc.com/dynasite.cfm?dsmid=102632

9. Ahmed Jawwad, 2008, Makro Pakistan: Internship Report, University of the

Punjab, p. 32.

10. The Tea Industry in India: The Survey, Dr. K. G. Karmakar & Dr. G. D. Banjarjee,

Occasional Paper – 39, 2005. pp. 1-4.

11. The Tea market – a background study; “World bank Data” Friedheim , T. Price

Analysis of the World Tea Market, Heidleberg Working Paper.12. http://www.pakistanteaassociation.com/profile.html

13. http://www.pakistanteaassociation.com/news.html

14. Present status and future needs of tea industry in Bangladesh; Islam, Iqbal,

Quddus & Ali, pt. 9-10.

15. Sustainability issues in the tea sector: A comparative analysis of the six leading

producing countries; Sanne van der vaal , June 2008, pt. 21-26.

16. Ibid

17. Ibid

18. Oxfam, The tea market, a background study, 2002

19. Tea in Pakistan by F. S. Hamid*, 2003.

20. Ibid

http://www.metro-cc.com/dynasite.cfm?dsmid=102631


http://www.metro.pk/servlet/PB/menu/1005221/index.html




http://www.pakistanteaassociation.com/profile.html



http://www.pakistanteaassociation.com/news.html











45

21. Quality Perceptions of Private Label Brands: Conceptual Framework and Agenda

for Research; Abhishek Abraham Koshy, February 2008,

22.




46

Questionnaire

Name: Age:

Occupation: Gender:

Question No. 1: Do you consume tea?

a) Yes

b) No

Question No. 2: How often do you consumer tea?

a) Occasionally

b) Once daily

c) Twice daily

d) Thrice daily

e) More than three cups daily

Question No. 3: What purpose does tea serve you?

a) Refreshment

b) Pleasure

c) Pain reliever

d) Energy

e) Sleep

f) Others………




47

Question No. 4: Rate the following according to the level of importance in a good cup

of tea.

a) Taste (Least imp.) 1 2 3 3 4 5 (most imp.)

b) Smell (Least imp.) 1 2 3 3 4 5 (most imp.)

c) Color (Least imp.) 1 2 3 3 4 5 (most imp.)

d) Nutrition (Least imp.) 1 2 3 3 4 5 (most imp.)

Question No. 5: what is the most likely occasion/event/time in a day for you to have

tea?

a) Breakfast

b) Lunch

c) Evening

d) Dinner

e) After sports/exercise

f)

After work/office

g) Not fixed, whenever I feel like.

h) Others……

Question No. 6: What type of tea do you consume?

a) Black tea

b)

Green tea

c) Pink tea

d) Others……




48

Question No. 7: Who makes most of the purchasing decision in your house?

a) Father

b)

Mother

c) Self

d) Others….

Question No. 8: From where do you buy your monthly groceries?

a) Convenient Store

b)

Utility store

c) Hyper markets

d) Metros

e) Super stores

Question No. 9: What form do you buy tea?

a)

Tea bags

b) Tea leaves (Open tea)

c) Sachets

d) Bags

e) Box packing

f) Jar




49

Question No. 10: Which available Tea Brand to you use?

a) Lipton yellow label

b)

Tepal Danedar

c) Supreme

d) Vital tea

e) Tetley tea

f) Unbranded

Question No. 11: What packing size do you prefer while buying tea?

a) 80 gram

b) 200 gram

c) 450 gram

d) 1 Kg

e) 1.5 Kgs

Question No. 12: What price would you pay for a 1 KG bag of tea?

a) Rs. 440-470

b) Rs. 470-500

c) Rs. 500-530

d) Rs. 530-560

e) Rs. 560-590

f) Rs. 590-620




50

Question No. 13: What is most important while choosing a brand for tea?

a) Price

b)

Consistency in taste

c) Quality

d) Brand name

e) Source of production

f) Nutritional benefits

g) Others…..

Question No. 14: if a new brand is launched for tea, would you try it?

a) Yes

b) May be

c) May be not

d) No

Question No. 15: In which packing would you buy the new brand of tea?

a) Tea bags

b) Tea leaves (Open tea)

c) Sachets

d) Bags

e) Box packing

f) Jar




51

Question No. 16: Would you recommend others to buy the new brand of tea after

using it?

a) Yes

b) May be

c) Do not know

d) May be not

e) No

Question No. 17: What packaging color would you prefer for this new brand of tea?

a) Red

b) Green

c) Yellow

d) Blue

e) Others………………………………………………. (please specify)

Question no. 18: What is the recommended price for 1 Kg bag of tea?

a) Rs. 440-470

b) Rs. 470-500

c) Rs. 500-530

d) Rs. 530-560

e)

Rs. 560-590

f) Rs. 590-620




52

APPENDIX

Income Statement

Year 1 (complete)




53

Year 1 (Quarters)




54

Year 2




55

Year 3




56

Cash Flow Statements

Year 1 (complete)




57

Year 1 (Quarters)




58

Year 2




59

Year 3




60

Balance Sheet Statements

Year 1 (complete)




61

Year 1 (Quarters)




62

Year 2




Year 3

Documents

Second Draft Metro