(b) Special food service providers which includes establishments which provide food services at locations designated by customers like caterers and mobile food retailers. . Special events organized by government bodies, and grass-roots organizations. These include events such as the FIFA u-20 soccer world cup, Victoria reggae festival, jazz festival, and many more events. Food service contractors who supply food materials and kitchen equipment to retailers. These are generally large companies with wide distribution networks such as Sysco Corp. and Neptune Foods Inc. EXHIBIT 2 EARTHENS-GO GREENER OR GO IT ALONE? PRICING MATRICIES ECO-VALUE PRICE MATRIX (2A) 40 PL CS mc>com Pap Pla C/G 0 SO $0.40 $0.80 PRICE PER PLATE See Definitions Scales below for Abbreviation codes.item direct to his retail stores. It was more cost effective for someone like Green Planet Parties Inc. who already sold complementary products such as cutlery, other plates, table cloths, and food stuffs to support such a distribution channel with their established infrastructure. Distribution Channels Green Planet Parties Inc. approached Alex to change their relationship to that of a wholesaler. An offer had been presented to distribute his retail food services market product exclusively in British Columbia at a discount allowing Green Planet Parties Inc. to obtain 30% margins. As Alex had also been approached from across Canada by other interested dealers, he wondered if there was a risk in providing exclusivity. The relationship with Green Planet Parties Inc. had escalated his market exposure and provided an established distribution channel. Alex was not sure whether to funnel all his future sales to the retail sector through Green Parties Inc. in exchange for the distribution channel support and a joint marketing program. Conclusion Alex had to decide whether or not to change his strategic direction. If so, ETCI and Green Parties Inc. would need to develop a distribution channel contract to solidify their joint marketing and distribution agreement.Birds1Stone Media EARTHENS - GO GREENER OR GO IT ALONE? In August 2009, Alex Casawa, Founder and CEO of Vancouver based Earthens. Trading Company Incorporated, faced a critical strategic decision. He had two weeks to decide if he should sign an exclusive distribution agreement with Green Parties Inc. His alternative was to pursue his strategic plan for establishing his own marketing and sales program for the fully biodegradable Earthens' plates he had founded. Alex Casawa and Earthens Trading Company (ETCI) I Alex, an international student graduate from Vancouver Island University (VIU), founded Earthen Trading Company Inc. (ETCI) 1 in 2007 as a result of encouragement from his professors. He applied to the canadian federal government for a work visa based on his strategic business plan (See Exhibit 1). The future of his company and his ability to stay in Canada hinged upon Earthens' success. Alex needed to achieve his sales and profit targets before his work visa expired in 2011. Following his strategic plan, he quickly learned that there were challenges with both the product and the marketing. Alex worked with his source manufacturer in India to repackage and re-label the product for two market segments in the food services industry. Namely, the retail customer, primarily women aged 30-55, and specialty wholesale distributors such as Green Planet Parties See website: www.carthens.ca1.1 Keys to Success Product quality . Customer Service Access to distribution channels and suppliers Controlling the fixed and variable cost 1.2 Research Methodology The idea of marketing disposable plates made out of leaves in Canada was a result of a 'Sustainable Development' under-graduate school project. With inspiration and guidance from his professor, Mrinal Casewa (CEO) started research about the Areca leaf plates when he visited India in the summer of 2006. He traveled to Karnataka - South India, visited manufacturing plants, and gathered information about raw material and finished product. Over the last one year, research has continued through online sources, journals and newspapers, telephone conversations, e-mail correspondences, and formal and informal meetings. Various internet sites have been helpful in understanding the market trends, policies, and getting other information, whereas phone conversations, and meetings have been helpful in making useful contacts, and estimating administrative expenses. Local newspapers and journals were helpful in staying informed about the local community, and reports such as the CRD solid waste report were helpful in gaining insight of what difference could be made by the use of earthens. Human Activity and the Environment - 2000, http://www.library.mcgill.ca/edrs/data/dli/statcan/hae/haemain.html. [Accessed on June 18th, 2007]. 2 Definition of Triple Bottom Line (TBL) http://en. wikipedia.org/wiki/Triple_bottom_line, [Accessed on June 6th, 2007]. 2.1 Company SWOT Analysis + Strengths Weaknesses Unique product. . Limited experience. Financing available. . Strong relationship with supplier. Well-integrated distribution system. Trade-mark protection. Opportunities Threats Become part of sustainable development New entrants. movement in BC. Switching costs for customers. Environmental agencies. Seasonal variation in sales. 2010 Vancouver Olympics Currency fluctuations. Increased demand for eco-friendly- products. 4.0 Market Segmentation ETCI will target three broad segments for the first 3 years: . Businesses and institutions including: (a) Limited-service eating places or LSEP's which are places where patrons order food over a counter or a bar, pay before eating, and wait in line ups like in cafeterias and food courts. ETCI will also target relatively 'independent' franchise joints. (b) Special food service providers which includes establishments which provide food services atEXHIBIT 1 EARTHENS-GO GREENER OR GO IT ALONE? STRATEGIC PLAN (Excerpts) Executive Summary 1.0 Executive Summary Earthen Trading Company Inc. or ETCI imports bio-degradable disposable plates called "earthens" made from palm leaves made in India. It is a young sustainable company with a mission to cater to the growing demand for eco-friendly products and a vision of a greener Victoria. ETCI's product is new and unique to the Canadian market, with no other disposable dinnerware that could match the features of earthens. In other words, ETCI will enjoy a first-mover advantage in its category It will target both small and medium-sized mature businesses/organizations in BC that have high regard for the environment and/or those that seek to benefit from adopting more environmental practices and portraying a sustainable image. Many of these target groups include school and college cafeterias, bakeries, food courts in public malls, children's (and other) camp sites, special events, fairs and festivals, and "green" retail outlets. Their objective may be to gain loyalty of conscientious consumers which will help them achieve an edge over their competitors. BC boasts of 9300 retail establishments in a $4.5 billion food service industry which is dynamic in nature in terms of new products and practices. The 1996 federal Human Activity and the Environment (HAE) survey showed that 71% of Canadians realize that the capacity of the planet to provide supply materials and absorb waste is limited. Currently, environmental protection has become a priority of our era, and governments, businesses, and consumers are now working together to fight the potential damage to the environment. The total environmental protection expenditure was estimated at $6.8 billion by Canadian businesses in 2002. Funding of the company will be done through $100,000 of share capital + $63,000 commercial loan/supplier's credit. ETCI will start by importing 300,000 earthens and selling 150,000 in the 15 quarter maintaining inventories of at least 300,000 units thereon. It will start covering variable costs by the third quarter of year 1; however will make taxable profit of $58,000 in year 2 and the average gross margin will be maintained at 34.5% annually. B2B sales will be carried out directly by ETCI, and initial promotional activities will include a product brochure and an informational website (www.earthentrading.ca). Subsequent marketing done after the first year will include print ads in newspapers and magazines, local radio ads, and educational seminars. For the first year, ETCI's business will be carried out solely in the CRD of Victoria and to other parts of BC in the 2nd. ETCI will not be restricted to only importing cartheys. It will be importing other eco-friendly goods, such as cups, pen stands, cell phone holders, and soap dishes, etc. made out of coconut shells with an aim to reduce demand for plastic products. However, these products will not be imported before the fourth or fifth year of operations. 1.1 Keys to SuccessYear 5 1 Ronraconte additional Filetomarc 14 14 2. Represents units bought per customer per vear 1.5 1.5 3 Revenues less variable expenses ner unit sold $110 $110 4. Multiplies net GM per unit sold by total units sold 2,310 $ 2,310 (total net customers multiplied by units per customer) $500 $500 $1, 810 $1,810 5. Annual fixed cost for marketing strategy (note: $1,460 start up fee of $2,500 + $500 per year advertising) $3,270 6. This is calculated by subtracting expenses from Total GM 7. Break Even looks at profit and loss each year and cummulates it showing how many years before the variance cost is paid for by the gain in Total Gross Margin growth per year...in this case over 3 years 2025 2026 91 105 137 158 070.00 $ 17,380.00 $500 $500 570.00 $ 16,880.00 fixed S.Marketing Alex had his pricing and benet strategy in place (see Exhibit 2). He believed his product wn now \" well established to meet market demands. His real challenge was in developing a solid distribution .. channel. Alex decided to shi his emphasis from building more market awareness to seeming a. solid distribution channel such that he could support demand Recent Events The Wholesale Challenge Having been unsuccessful in placing his product within SYSCO or Neptune, major wholesale distributors in the Canadian food service industry Alex started to focus on the retail environment. Until volumes and demand for his product increased signicantly, large wholesalers would not stock his product unless Alex assumed all the risk (Li:- paid for the unsold inventory). These wholesalers tended to rely on market demand strategies. I Retail Niche Efforts First, Alex secured placement with Thriy Foods and IGA marketplace grocery chains on Vancouver Island and in Vancouver. ETCI also had a few placements with specialty green stores throughout the Greater Vancouver Metropolitan Area. The challenge was in proper support and positioning. Alex could not yet afford to hire someone to manage the placement and market positioning of the product on the shelves. As such, sales were slow to escalate. Although Advent, a wholesaler of green products, did not agree to carry his product, the Advent CEO's wife had an established company called Green Planet Parties Inc. and expressed interest in using Alex's product for her green consumer house parties. In so doing, Green Planet Parties Inc. provided major exposure and news articles for mm and ETCI with their local contact network and marketing skills. As a result, corporate clients in Vancouver started calling Green Planet Parties Inc. to use these fully biodegradable plates to help lessen the carbon footprint for their events and exhibitions. Impending Market Exposure Shortly thereaer, Alex was invited to participate on CTV's "Dragon's Den", a M inventor's TV program, that was going to be aired the following spring of 2010. To prepare for the expected market exposure from the TV program Alex knew that he quickly needed to build a direct distribution channel for his product as it was too costly for ETCI to distribute a one product ECO-FRIENDLY BENEFIT MATRIX (2B) Product Intrusive Energy/CF Recyclable Biodegradable Summative Eco Value Ceramic/Glass (C/G) 6 2 8+? Plastic (Pla NAJ 9 w - Corn Starch (CS) 2 8 15 Paper (Pap) IN 5 20 Palm Leaves(PL) 9 9 10 10 38 DEFINITIONS/SCALES (2C): (these are perceived values only - not scientifically deduced) Intrusive: 10 = non environmental intrusion: like the areca palm plates the core product comes from natural waste of the areca palm and is harvested from fallen husks 0-highly intrusive: requires destruction of the living environment to harvest product... harvesting has cross environmental impacts (e g-corn starch removes food stock from the food chain, paper necessitates the harvesting of trees and impacts the ozone layer) Energy/CF (carbon footprint): 10=no energy is required and the impact on the carbon footprint is perceived to be neutral 0-large amounts of energy are needed to either produce or recycle the product and the impact on the carbon footprint is perceived to be negative (high) Recyclable: 10-fully recyclable 0=not recyclable Bigdegrable; Refers to the compost ability and/or the willingness of BC communities to accept into their public composting program 0=fully biodegradable 10=not at allStrategic Plan The key focus of Alex's strategic plan (see Exhibit 1) suggested an approach that positioned ETCI as the primary marketing force to secure major wholesalers in the food services industry. However, Alex struggled to implement his strategy and by July of 2009 was faced with a dilemma: continue to follow the slowly developing strategic plan or change direction and develop a solid distribution channel first. Enviro Food Service Industry There were several competing types of disposable plates in the industry that ranged from recyclable paper plates and starch based plates, through to non-recyclable Styrofoam plates and plastic plates. There were issues with each type. Soiled paper plates could not always be composted because of the bleaching used to make them. Starch plates looked so much like plastic plates that recycling centers were refusing to accept them due to the sorting challenges. Only Alex's new ArecayPalm based plates were 100% biodegradable when soiled. In addition, the input resources came from a fallen waste product of the palm tree and thus was not as intrusively harvested as was corn, removed from the food chain, and paper produced from killed trees. During environmentally sensitive times Alex believed his cradle-to-grave-green-product biodegradable plates could truly be a winner in the hearts of consumers. Competition After several visits home to India where similar products had been produced by local farmers for years, Alex found the best manufacturing facility to develop his packaging and product. Alex saw great potential for the North American green conscious market and secured exclusive distribution rights for North America and agreed that the manufacturer could sell the product anywhere else in the world in return for a share opportunity in the manufacturing of similar future goods. As a result, by July of 2009 there were then two additional distributors in other regions of the world for the same manufacturer. Of primary concern was an impending competitor based in the United States within close proximity to the Eastern Canadian market. This importer had secured a relationship with a large manufacturer in India who by the summer of 2009 had retooled his plant to manufacture a similar plate from similar material. However, Alex still felt that his manufacturer had superior capabilities being co-located within the Areca Palm belt and having had solid ongoing relationships with the local farmers. To mitigate Alex's superior position, the US company had started to improve their packaging.MARKETING 260 CASE PREPARATION CHART STUDENT NAME STUDENT ID# Case Title: Case Assignment: 1. SHORT CYCLE PROCESS II. LONG CYCLE PROCESS (continued) C. Alternative Generation Name Position Who: N What: 3 Why: D. Decision Criteria When: W N Case difficulty Cube How: ( Analytical, Conceptual, Prese E. Alternative Assessmer Quantitative N II. LONG CYCLE PROCESS Qualitative + N + N - + N C Decision ? ? n n ? n n A. Issues(s) F. Preferred Alternativ Immediate Basic 1 Predicted Outcome W N - N G. / Implicatons/Justification of Marketing Strategy Importance Variance Forec Urgency net gain in custom Low I1 net gain in unit sales per custon net gross margin per High III IV LESS Expense of initiative (fix Low High NET PROFIT of initiative over time (0-3 ye; *IDENTIFY any & all changes needed/impacts. B. Case Data Analysis Missing Informs (Apply course framework(s) and analytical tools) AssumptionG. Implications/ Jutification of Marketing Strategy VARIANCE FORECAST Description Year 1 Year 2 Year 3 Year 4 Year 5 1 Danrocont Net Gain in Customers 10 10 12 14 14 2. Represents net gain in unit sales per customer 1.25 1.5 1.5 3 Revenlies l net gross margin per unit sold (less COGS) $100 $100 $110 $110 $110 TOTAL GROSS MARGIN 4. Multiplies S 1,000 S 1,000 1,650 $ 2,310 $ 2,310 (total net cus LESS Expense of marketing initiative (fixed) $3,000 $500 $500 $500 $500 Net Profit (Loss) $2,000 $500 $1, 150 $1,810 $1,810 5. Annual fixe BREAK EVEN ANALSYIS (cummulative) $2,000 start up fee of -$1,500 -$350 $1,460 $3,270 6. This is calc Note: Above is an example (you may have more than one type of customer to track and/ or more than one type of units sold to track (modify accordingly). 7. Break Even cummulates it cost is paid for year...in this c ACTUAL TOTAL FORECAST Description 2022 2023 2024 2025 2026 Total Customers (start with 50 in 2015) 55 65 77 91 105 Total Units Sold 55 65 97 137 158 Total Gross Margin $ 5,500.00 $ 6, 500.00 $ 10,670.00 $ 15,070.00 $ 17,380.00 Less Additional Marketing Expenses $3,000 $500 $500 $500 $500 Net Profit (Loss) $ 2,500.00 $ 6,000.00 $ 10, 170.00 $ 14,570.00 $ 16,880.00 "Note this looks profitable overall...but in actuality you don't get back enough to cover your additional fixed marketing investment (return on investment) until after 2013. So the break even is just over 3 years