Business Plan for Regional Meat Marketing Company

Business Plan for a Producer-Owned Meat Marketing Company

April 2011. Prepared by Keith DeHaan, Food and Livestock Planning, and funded by USDA Rural Development, for the South Coast Meat Project. Includes financials.

Table of Contents
Plan Summary
Download full plan (pdf, 41 pages, 310KB)

Executive Summary
Introduction
Market Plan
- Market Development
- Target Markets
- Products Manufactured
- Features and Benefits of Products
- Market Concept Names and Branding
- Marketing Budget and Requirements
- Competitive Programs
Livestock Supply
- Numbers
- Production Types
- Compensation Strategies for Producers
- Numbers and Species Used For Planning
- Other Species
Harvest and Processing Plan
- Facilities
- Expected Processing Cost
- Dry Aging Beef
- Composite Carcass Value
- Distribution Plans
Corporate and Management Plan
- Best Fit Legal Structure
- Governance
- Personnel Needs and Their Tasks
- Expected Total Capital Needs
- Company Shares and Share Value
Financial Plan
- Development of Financial Models
- Financial Statements
- Financial Summary
Barriers to Entry/Core Competencies
Literature Cited/ Credits

Tables

Promotion and Marketing Budget
Numbers and Species Used For Planning
Expected Custom Processing Fees (including further processing) by species
Carcass value by species
Expected capital need of the business
Live animal purchase price and assigned premiums
Monthly income statement and cash flows for Year 1
Monthly income statement and cash flows for Year 2
Monthly income statement and cash flows for Year 3
Annual balance sheet
Annual financial summary
Net margin by livestock category
Sensitivity analysis

Plan Summary

This is a business plan for a generic marketing company, owned and funded by a region’s livestock producers, designed to achieve scale and efficiency by marketing their own meat products from their own livestock in a cooperative manner.

Why market together?

Scale is important in order to service many customers, to reduce the workload on individual producers, and to work more efficiently with processors. Many single family enterprises already brand and label their own meat products that have been processed at small USDA-inspected meat plants. However, these plants are not always easily accessible and are shrinking in number, not expanding. The generic meat processing plant business plan can be combined with this plan in cases where there are extremely limited processing options.

This marketing company is designed to:

Purchase the producer-owners’ market-ready livestock at a fair price;
Arrange the commercial processing of the meat in a regional USDA inspected meat plant;
Market specialty meat items to discriminating markets in the region.

Market analysis needs:

The producer group must analyze the local/regional market opportunities by interviewing independent retail grocers and grocery chains, local restaurants, and food service distributors, to:

Gauge local or regional interest in the local meat products that could be produced;
Estimate volume of business;
Begin to establish possible market partnerships (i.e., possible distributor for delivering products to customers);
Begin the task of getting the project recognized by prospective customers;
Provide insight on the type of products desired by customers so the producers can raise animals that meet those specifications.

Legal structure:

The marketing company will be legally organized as a producer-owned limited liability company (LLC) or a closed cooperative. A board of directors or governors (in the case of an LLC) will set the direction of the company and hire a general manager to run the day-to-day operations and sales.

Species/Production Protocols:

The livestock producers will attempt to develop common production practices and use similar genetics to limit animal variability and create consistency in meat products. However, the species and production practices will need some level of uniqueness to distinguish the products from commodity products. This generic business plan includes the following species and production types:

Beef cattle
Grass-finished natural beef (follows USDA guidelines for grass-fed labels; assume 600/yr by year 3)
Grain-finished natural beef (no implants/antibiotics; assume 600/yr by year 3)
Cull cows (no antibiotic residues; assume 180/yr by year 3)
Pork: naturally produced hogs (no antibiotics used in production; assume 1,200/yr by year 3)
Lambs/goats (no special production criteria; assume 600/yr by year 3)

Products:

The range of products offered for sale include fresh beef, pork and lamb/goat carcasses, primals and subprimals, frozen offal, fresh and frozen ground products, precooked and cured beef and pork products, sausages of various flavors and types, and possibly portion-cut steaks.

Supply chain partners:

The company will have a business relationship with one or more USDA-inspected meat plants for meat processing services. It will enter into a business relationship with a regional distribution company to warehouse and deliver these products to customers throughout the region.

Cost/capital needs:

The company needs capital to cover the costs of administration, marketing, purchase of live animals, and processing. An equity offering that raised $280,000 to $300,000 should be sufficient to start the company.

The business model predicted the following financial results over a three-year period:

	Year 1	Year 2	Year 3
Revenue, $000	1,229	2,219	3,121
Cost of Goods Sold, $000	728	1,318	1,856
Operating Expenses, $000	548	842	1,118
Net Income, $000	-49	56	147
Return on Sales, %	-4	3	5

As for profit margins, the model predicts the following financial results by marketed species in year 3:

Species	Net margin, $/animal
Grass-finished, natural beef	$167
Grain-finished, natural beef	$261
Cull cows	$138
Natural pork	$12
Lamb	$33

Food companies with return on sales of 5% and higher and the high species net margins represented in this business plan would be considered high performing companies. Nevertheless, aggressive marketing, high focus on product quality and consistency, and diligent customer service will all be necessary to achieve the projected success.