A feasibility study on production and marketing of dog food for Metro Manila

Date of Publication

2001

Document Type

Oral Comprehensive Exam

Degree Name

Master of Business Administration

College

Ramon V. Del Rosario College of Business

Department/Unit

Decision Sciences and Innovation

Abstract/Summary

The study explores the feasibility of establishing a dog food manufacturing plant using the extrusion process, the current technology being used by the U.S. dog food manufacturers, catering to the potentially large demand for commercial dry dog food. The project entails the acquisition of an extruder machine where grounded coarse raw materials are processed to produced the desired shape and size of dog food similar to the imported brands.

Importation of dog food as the market study reveals account for only 6% of the potential demand creating a large room for a local dog food manufacturer to operate. However, the success of any entrant to local dog food manufacturing hinges on the acceptability of the product by the market. This acceptance is to a large extent influenced by several built-in criteria placed by consumers in product selection namely quality of the product price differential to imported brands palatability to the final end consumer time element in food preparation peer and veterinarian influence and availability of supply. These considerations in consumer behavior activity are noticeable and more pronounced among dog breeders who, being the major source of pedigreed stock in the local market are more critical in dog food selection and hold a considerable amount of influence on the brand of dog food that a dog owner would use. In this regard, the local entrant should be able to address and measure up to the stringent criteria as used by the dos breeders, who, as the market aspects of this study conclude, is the primary target of the proposed project.

Considering that the project would employ the same technology used by U.S. dog food manufacturers and with a similar product formulation, entry by a local manufacturer in the dog food industry would not be a problem especially if dog food prices are to be reduced by 35% which our market survey indicate would result to usage of the product y at least 40% of the dog breeder population. This is translated to a projected demand of at least 1,700,000 kilos of locally manufactured dry dog food reflecting an 11.30% share of the projected potential market.

Although the anticipated local demand is very encouraging, the proposed manufacturing plant is envisioned to operate at 50% of its production capacity of 2,400MT during its final year of operations. This low capacity utilization is expected considering that the technology is relatively new in the country's manufacturing scenario and would take some time for the manufacturing personnel to attain the technical expertise. This learning process however is expected to be less than a year considering that most of the actual production process is automated. Production capacity utilization is projected to increase in the succeeding years in accordance to the anticipated growth in sales volume of 10% per anum. A wastage allowance of 2.5% of production is inputted based on the estimate of Wenger International Machineries Corp., a U.S. supplier of extruder machinery.

The company's break-even sales volume is computes to be about 1,323,267 kilos or 55.14% of its annual production capacity. This column is however, projected to substantially decrease as financing charges are extinguished. As expected, the proposed project will incur a net loss of 2.452 million pesos in its initial year of operation a a result of the amortization payments made on its bank loan. However, significant improvement in the cash flow position is anticipated for the succeeding years in view of the projected increase in sales coupled with lower interest payments. As such, the project would be financially feasible and would yield a five-year internal rate of return of 34%.

Based on the foregoing, the proposed establishment of a dog food manufacturing plant is considered a viable undertaking. This is supported by the encouraging forecast of a higher GNP growth rate of 8% per anum for the next 25 years (1975-2000) as projected by NEDA based on the study conducted by Dr. Malvar Mangahas of PREPF (Population, Resources, Environment and the Philippine Future), a joint research team sponsored by NEDA, composed of DAP (Development Academy of the Philippine) UPSE (University of the Philippine School of Economics) and UPPI (University of the Philippines Population Institute) during the period 1977-1979.

Furthermore, the government has laid down the foundation for increased economic activity by inducing foreign investors and multinationals to establish their manufacturing concerns in our export processing zones with incentive and tax holidays which, in effect will provide more job opportunities and income for our local industries such as the construction, cement, transport and hauling, etc.

This favorable economic condition coupled with an attractive financial return on investment has inevitably led me to conclude that the proposed project is worth implementing.

Abstract Format

html

Language

English

Format

Print

Accession Number

OCE1052

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

1 v. (various foliations) ; ill. ; 28 cm.

Keywords

Dogs--Food

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