What makes a great feasibility study
Introduction
Consumption of food and drinks is an enduring human need. In the modern age, lack of time is fast becoming a norm. Satisfying the need to consume food and drinks by cooking at home is becoming increasingly challenging. Cooking is now often a weekend activity, particularly associated with social gatherings rather than a part of daily routine. This has fuelled the growth in demand for packaged food and drinks around the globe. Many front running companies have achieved remarkable success by introducing the “right product” in the “right market” through the “right channel”, that offers quality, nutrition, convenience and value for the “target consumer”. Opportunities remain aplenty for entrepreneurs and established (non food and drink) businesses to enter the packaged food and drinks industry and reap success. Consumers are increasingly knowledgeable and their needs for nutrition and well-being are constantly evolving. As a result, there is always space for genuine innovation. But belief in opportunity is not enough to invest your hard earned reserves in a new food and drinks business. Without a deeper understanding of what lies ahead, the result could easily be frustration and financial loss or even bankruptcy. Even world leading companies are familiar with the bitter taste of failure when a new product launch, packaging redesign or product reformulation backfires and results in a massive drop in sales. So, what is the way forward? As a budding entrepreneur, or as an established business looking to foray into food and drinks, there are a few important questions to answer first: • What is the “right product” for the “target consumer” in the “right market”? • How to transfer the recipe from the home kitchen to the industrial kitchen? • How much of this product can be sold realistically? How much market share is achievable? • How much would it cost to set up the business of producing and selling this product? • How much would it cost to run the business successfully and profitability over its lifetime? A great feasibility study can answer these questions.What is a feasibility study?
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What constitutes a great feasibility study?
Entrepreneur’s vision
The root of a feasibility study is the vision of the business or entrepreneur. The vision usually takes shape from a simple idea. For example, “packaged ready meals for the urban population”. The idea grows into a vision based on the entrepreneur’s aim (build a multi-million dollar business in 10 years’ time), interest (cooking, healthy eating), values (quality products, affordable pricing, high availability) and knowledge (recipes).![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs03-1024x385.png)
Research and insights
Answering these questions starts with collecting relevant data and converting this into actionable insights. Comprehensive data collection will encompass the following: • Market quantification – Market volume, market value and growth of the target product category. • Competition – Is the market dominated by a few companies or is the market highly fragmented with many small companies? Are there already brands with a similar approach? • Consumer – What is the target consumer demographic (infants, children, young adults, young professionals, senior citizens, men, women, sports, expatriates, and so on)? And what are their taste preferences (traditional taste vs acquired taste)? • Packaging preferences – Plastic vs non-plastic, clear packaging vs opaque packaging, small containers vs large containers, screw caps vs sports caps vs straw vs flip closures. • Pricing – Pricing by pack type and pack size, pricing by regions within target market, pricing by channels. • Sales channels – Modern retail, traditional stores, wholesale, kiosks, hotels, restaurants, catering. • Distribution – Own distribution vs third party distribution, distribution infrastructure, cold chain, ambient chain. • Regulations – Quality standards, packaging and labelling standards. • Future outlook – Potential for the product category to see sustained future growth. • Macroeconomic trends – Political and economic situation in the country, major events in the horizon (elections, sporting events, Brexit!).![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs04-1024x378.png)
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Route-to-market recommendations
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Technical feasibility
The next and equally vital part in the process is the assessment of technical feasibility. Now that we know what the projected sales volume is, the next step is to define the process of converting this idea into reality. It starts with the development of a production process, beginning with “raw materials in” through processing and packaging to storage and “finished goods out”. Once the production process is defined, the next step is to identify the most suitable technology for various stages in the process flow. These include equipment for raw material storage (cold storage or ambient, based on requirements), raw material processing (cooking, pasteurisation, UHT treatment, mixing etc.), filling, packaging and finished-goods warehousing. As part of this, shift and manpower requirements will also be defined along with conceptual details of the factory set up required. Considerable research is required in stage. This should include conversations with original equipment manufacturers (OEMs) to understand whether an off-the-shelf solution is available that can meet the requirements of the business, or whether a bespoke solution needs to be created. Further local research must be conducted to identify operations costs such as staff salaries, costs of fuel, electricity, local taxes, cost of construction, other costs such as project management, insurance etc. All these need to be collected in order to develop a fully comprehensive financial model The technical feasibility assessment should generate the following outputs:• Production capacity required • Number of machines required to meet the production capacity • Shift and production patterns • Manpower requirements | • Factory area and layout requirements • Capital expenditure (CAPEX) requirements of the factory • Operational Expenditure (OPEX) requirements of the factory • Factory concept design |
Financial feasibility
To complete the feasibility study, a financial model needs to be developed based on all the outputs so far in the study.![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs07.jpg)
What it takes to conduct such a feasibility study
A thorough and comprehensive feasibility study is not for anyone and everyone to undertake. It requires a toolbox containing deep knowledge and expertise in the subject matter, many years of industry experience, the ability to convert the vision into a launch roadmap for the entrepreneur through modelling and analysing scenarios, and a wide network of industry contacts who can provide key actionable insights.![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs08-1024x384.png)
Ideal outputs of a great feasibility study
A great feasibility study will explore several scenarios in great depth, detailing the strengths, weaknesses and implications of each, thereby enabling the entrepreneur to eliminate some options and assess the handful of options that remain. A great feasibility study will present the entrepreneur will all information needed to make a “go or no-go” decision.![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs09-781x1024.png)
Summary
A great feasibility study requires a great deal of research and analysis followed by developing scenarios. Such a study will provide the entrepreneur with more focus and narrows down the number of alternatives to consider. It will take someone with substantial knowledge and expertise to conduct such a study. A great feasibility study will identify a reason to go ahead with the idea, or not to go ahead with it, and help the entrepreneur to make a decision.![](https://blog.zenithglobal.com/wp-content/uploads/2017/08/fs10.png)
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