A&C CORPORATION LTD.

Mumbai Madira
Business Plan
Submitted by

Ankit Rana & Chander Shekhar

11/22/2007
 Table of content

Serial Particulers Page no.

no.

1 Executive summary 3

2 Business concept 4

3 Market analysis & research 5

4 Marketing plan 7

5 Product development 10

6 Financial plan 12

7 Management team 14

8 Risk factors 15

9 Financial plan 15

10 Conclusion 16

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BUSINESS PLAN

1.0 Executive Summary

Concept:

New construction of upscale residential housing in Mumbai has been

robust in recent years, leading to the formation of new communities and
need of stores and services. As the population shift continues,
opportunities arise for retail businesses ready to accommodate this
growth and capitalize on the trend.

Objective:

Madeira will be a full-service retail store of fine wines and spirits in

Mumbai. It will distinguish itself from the competition and capture market
share by securing a prime storefront location in a newly forming
residential neighborhood. It will follow the best practices of its retail
category leaders, with emphasis on excellent customer service, quality
and competitive pricing.
Mission:

Our mission is to develop into the best location to buy wine, which will be
measured by our growth in sales, and in opinions and ratings published in
the media. Inventory and sales records will be computerized, to allow the
company to identify and exploit best selling products, match volumes and
profitability to service levels, anticipate demand, manage cash flows,
assist with revenue growth plans, and optimize supplier/distributor
relationships.

Goals:

Earn and maintain rating as one of the best stores wine and spirits retail
trade business.

Establish 30% minimum gross profit margins (retail price less wholesale
cost) from inception.

Achieve a profitable return on investment within three years.

Earn a 15% internal rate of return for investors over the life of the lease.

Attract talented and motivated staff

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2.0 Business concept:
Industry overview:

The wine industry has witnessed a CAGR of over 25% over the last 3
years in the premium wine segment mainly fuelled by the strong growth
in the domestic wine consumption.

- The industry is not very capital intensive, as it requires around Rs.10-15

million to setup a Wine plant with a capacity of 100,000 liters.

- The key raw materials such as grapes, bottles, and corks account for
approximately 20% of the total costs and are higher than the
international norms.

- The industry has low entry barriers because of its low capital-intensive
nature however the industry is under pressure for profits due to high
marketing costs and low volumes. With demand increasing at a steady
pace, the industry is expected to go through a consolidation phase.

- The industry is dominated by three players viz Indage, Sula wines and
Grover wines and enjoys more than 90% of the total market share.

- The fortunes of the industry are linked to the trend in the changing
drinking habits of Indians, higher disposable incomes, growth in the
foreign tourists, and government regulations and policies.

- The Indian wineries have planned expansion plans to meet the

increasing demand.

- There is a strong growth in the imported wine market with Indian

importers importing hundreds of brands from countries like Australia, US
to Bulgaria. Some of the well-known wine producers are also present in
India like Moet and Hennessey, E&J Gallo and HWWG.

Factors for opportunity:

The new world (USA) and the newer world (Australia, New Zealand, Chile,
South Africa and good old India) are now emerging as the wonderful

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world of wine. Factor in changing tastes in India, the increasing
awareness about wines, the massive younger segment that demography
has gifted the country, the galloping economy and the increasing allocable
surplus in the hands of ever-younger people, and you begin to see what a
bonanza is waiting to be enjoyed by wine makers and importers and
sellers in the country.
Small wonder you have Seagram already in, Kyndal showing interest and
Diageo looking hard at the Indian market. The king of good times, Vijay
Mallya, is poised to enter the wine market as well, Karan Billimoria of
Cobra has made a tentative entry with his General Billimoria brand, and
there are a number of smaller players already existing, or waiting in the
wings.
One estimate has it that India's total wine market is around nine lakhs
cases. Of this, imported wine constitutes 1.5 lakhs cases. In a global
perspective, this is really minuscule. The wine market in the US is
estimated at 250 million cases and in France, around 320 million
cases. To the savvy marketer, this obviously translates into a huge
opportunity.

3.0 Market analysis and Research:

In money terms, one estimate claims that the wine market in India last
year was Rs 200 crores. This year, it could be an estimated Rs 300
crores and is slated to hit a hiccupping Rs 1,000 crores by 2008. India
has 123,000 acres of vineyards, but one percent is used for wines.
Target market:
It consists of young corporate, high and middle class consumers. NRI’s,
foreign clients, tourist and successful professionals, with high disposable
income. Multi cuisines restaurants and upcoming new societies and
communities.

Industry analysis:

38 wineries presently operating in India producing 6.2 million liters of

annually.

Maharashtra is the leading state with maximum wineries which mount

up to 36 out of 38 present. This state produces 5.4 million liters of
production.

72,000 wines cases are imported mainly by ITDC, Sansula, Brindco,

E&J Gallo and others private companies.

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7, 62,000 wines cases are sold every year out of which 46,000 cases
are of sparkling wines.

80% of consumption is in major cities such as

Mumbai- 39%

Delhi- 23%

Bangalore- 9%

Goa- 9% and rest of India- 20%

The per capita consumption in India is only0.07 liter/person/year.

Table 2. Segment wise Indian wine market during 2004 & 2005

Retail
Domestic
Value
production Imports Total
(Rs.
Sl.No (‘000 cases*) (‘000 (‘000
Million)
Segment cases) cases)
2004 2005 2004 2005 2004 2005 2004 2005
1. Sparkling wines 35 35 5 11 40 46 258 297
Still wines
2. 117 143 53 63 170 206 779 944
-premium
3. Still wines -cheap 234 240 -- --- 234 240 281 288
Fortified
4. 4 5 1 1 5 6 13 16
wines/Others
Total 390 423 59 75 449 498 1331 1545

*Note; A case is a unit of 9 litres capacity or equivalent to 12 bottles

Competition and competitors:

The present competitors are Jacksonville wine stores and Bombay

sapphire who are present in the market for a long time and plays a very
good role in production and providing of wines and spirits.

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The problem is to set up a store which is more customers friendly and
provide knowledge about the wines besides the wines supply. Providing a
low cost and high customer satisfaction is also important.

In India wines market still need more development and therefore these
competitive factors need to be worked on, they are given below:

• Available stock, product knowledge, customers service,

• Expense management, marketing program, employee productivity,

• Management of detailed information, in-store presentation, and

overall design,

• Hours of operations, incoming and outgoing delivery efficiency,

• Product packaging, customers’ loyalty, out of area competitions,

pricing and reputations.

Steps taken to counter the competition:-

1) Surrogate advertising
2) Aggressive marketing and sales promotion
3) Rich brand portfolio
4) Web initiatives like joining the dotcom brigade
5) Amalgamation, restructuring and consolidation
6) Concerns on the counter – existing and emerging

4.0 Marketing plan:

Marketing strategy:

Developing a reputation for great selection, an appealing store

environment, competitive prices, and excellent customer service. This
should engender strong word-of-mouth advertising--our most potent form
of advertising.

Developing strong relationships with our suppliers to help insure best

discount deals and best supplier services obtainable.

Keeping the staff focused, satisfied and important in their roles--to help
keep our productivity and customer service at the highest obtainable
levels.

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Maintaining an awareness of our store through regular advertising to our
target community. This may be in any combination of media--newspaper,
direct mail, in-store ads and brochures, online ads, radio, and/or
television.

Reaching out to potential wholesale clients--businesses and community

organizations.

Doing activities that can stimulate additional business: wine tastings,

matching wines with food, sharing interesting and educational wine
knowledge, publishing a newsletter, offering customer service through a
website.

Longer term, eventually extending our market penetration beyond the

physical boundaries of the store location--through direct catalog sales and
an Internet website.

Pricing:

Product pricing will be based on competitive parity guidelines. Prices will

be consistent with those of the retail stores in our area, with the
exception of very high-volume operations who have more powerful pricing
leverage.

Pricing will be monitored continuously against neighborhood and other

competitive sources (market leaders) who we can readily research.

Sales Strategy:

Management will focus on daily sales revenue goals.

Best value products will be identified to assist customers with smart

selections.

Deliveries will be geared to the customer's convenience. The situation will

be monitored to insure that the company invests adequately in its own
delivery operations.

Sales feedback will be elicited to stimulate ideas, approaches, relate

success stories, instruct in new techniques, share news, and implement
improvements.

Major accounts will be solicited through networking, neighborhood

solicitations, and opportunistic encounters at any time by management.

Sales Programs:

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Sales staff will have a level of wine and spirits knowledge that will position
company to address customer needs better than our competitors. The
company will support high potential sales staff with education tuition
assistance, and we will recruit our sales staff from students of wine
education institutes.

One of the managing partners is musically talented and will use his skill to
create programmed background music to enhance store ambience and
stimulate sales. This music will have the potential to be copyrighted and
tested as a stand-alone marketable product. The store layout will be
planned with a commercial interior designer, to present an upscale,
festive, cosmopolitan and culturally sophisticated image.

A proprietary website address has been registered, and a website will be

built to enhance customer service, supplier commerce, and direct sales.
Madira will take advantage of this opportunity as much as possible within
budgetary limits.

Peripheral sales and marketing collaterals will be used to expand product

lines and customer awareness of our store: wine glasses, recipes (that
match wine with food), corkscrews, umbrellas, calendars.

A sophisticated proprietary software tool will be developed to enhance the

customer buying experience with product knowledge matched to our
customers' tastes and preferences.

Strategic Alliances:

Madira will seek out opportunities to establish viable strategic alliances,

such as co-marketing with gourmet food operations, wine and spirits
distributors, importers, and producers. One such opportunity, and a
natural fit, is an alliance with the upscale gourmet food market that will
occupy a neighboring retail storefront. Packaging party catering and event
food services with a complement of fine wines and spirits from Madira will
help promote both businesses and provide an extra measure of service to
our customers. Coordinating gift baskets with wine orders in a single
delivery package presents another compelling co-marketing opportunity.
Information specific to pairing wines with food can be used to stimulate
sales as well.

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5.0 Product Development:
There are some steps need to be taken is order to develop the product.
Some of the majors are defined here.

License:

Before opening any wine store license the company needs to get a license
certified from the state government which is given after seeing the call
aspects of the company. A fee structure is also developed by the
government and a monthly fee is to be paid in order to get license.

Three types of licenses are given for liquor by the government

THESE ARE FL 1, FL 2, and FL 3.

Fl 1- permits for purchase of liquor directly from the distilleries and sale
to fl2 or fl3 license holders.
Fl 2- permit for purchase of liquor directly from the fl 1license holders
and sale to the local public but can’t sell liquor to fl 3 license holders.
Fl 3- permit for purchase of liquor directly from the fl 1 but not from fl2
license holders and sale to all. This license is generally given to the hotel
owners.

Problems and risks:

One of the other reasons why wine drinking has not caught on is that
quality wines are priced relatively high. Since the volumes are low,
production costs are high, as are taxes.

Thus the real challenge for winemakers in India is to develop a domestic

market, and that is where the problem arises.
Traditionally wine lovers around the world have some kind of a mental
block against Indian wines. They are just not comfortable with the Made
in India tag.

The domestic excise policy, with an insane 300 per cent duty slab on each
bottle is the huge prohibiting factor: the growing breed of wine importers,
as well as Indian makers of wine, are waiting for a rationalization in the
policy, which will allow freer, cheaper imports, as well as an opportunity
for Indian wines to be available easily all over the country.

The wine industry is both competitive and challenging. It exhibits the

characteristics of the consumer packaged goods (CPG) industry –
aggressive brand building supported by large advertising

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And event budgets, combined with high manufacturing costs. But a key
differentiation in the wine industry is the relatively higher packaging
costs– glass bottles, labels, foils etc. So a key challenge for
Industry is maintaining lower costs were to control the cost of expensive
packaging inputs.
Another challenge for the company was to manage the distribution of the
finished goods.

A few others are listed below:-

• Scarcity of water could be accounted for as the chief cause
responsible for the wine industry as the grape cultivation suffers
from unseasonal rains.
• Inadequate help by the government authorities to the wine sellers
or bar owners as far as promoting this industry is concerned.
• Ministry of Finance has imposed additional duty on imported liquor
with effect from 1.4. 2001 as countervailing duty in lieu of excise
duties paid by domestic liquor products in different States.
• These were imposed at the rates of 75%, 100% and 150% on ad
valorem basis for three different categories of CIF value.
• Considering the already high customs duty on such liquor, the
overall duties on import of liquor have gone up to 463% to 706%
on different types of products.
• Such high duties are totally counter productive and were not
justified for providing protection to local liquor companies.
• State Government has also imposed very high Sales Tax on
consumption of imported liquor in restaurants and bars.

Costs and budgets for licensing:

The Maharashtra government has decided to pare the license fee hike for
five liquor categories to 150-200 per cent. In October 2001, the
government had announced a 200-400 per cent hike in the license fees
for various categories. A government media release said while the license
fee hike had been announced in 15 categories of liquor, a rethink in the
wake of protests by the liquor industry has resulted in the new decision,
restricting the hike to certain categories.
The five categories of liquor manufacturing and sale for which the license
fee hike would be restricted to 150-200 per cent are the wholesale
segment of foreign liquor, retail segment of foreign sale,
Permit rooms and wholesale and retail sale of country-made liquor.
The release said the decision was in response to repeated pleas by
wholesalers and retailers associations that an unrealistic license fee hike
would run these segments of the industry out of business.
The government also decided to levy an additional sales tax on country-
made liquor manufacturing units at Rs 18 per box.
This will result in additional revenue of Rs 28 crores annually for the state
and is intended to offset the notional loss that would arise out of the

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decision to restrict the license fee hike that has been announced, the
official release said.
The state government’s decision in October, 2001, to raise the license
fees for liquor manufacturing and sales had evoked widespread protests
from wine merchants, restaurateurs, permit rooms and manufacturers
who felt they were already burdened with a high levy. Wine shop owners
in particular felt that their business would be the most hit as they could
not pass on the cost to their customers since they are in the retailing
sector where prices of products are pre-determined.
Hotel and restaurateurs, especially from Mumbai, contended that passing
on the cost burden of the high license fee to the customer would be an
unviable option in the wake of the already dwindling
Numbers in their clientele.
A couple of shutdowns were observed by the retailing sector and
representations were made to the state government to desist from
introducing such a huge hike in the license fee. The decision
Restricting the fee is seen as fallout of these protests.
Maharashtra has also announced a grape processing industrial policy
incorporating incentives like excise duty reduction on wines, sales tax
concessions, simplified processes and procedures, fixed license fees for a
10 year period and creation of a wine institute and a grape board for
quality control, certification and export promotion.

6.0 Financial Plan:

50%-70% of sales are projected as credit card sales, in-line with actual
experience of liquor stores.

Credit card collection is typically short, and this plan assumes a one day
collection time.

The payment day’s estimate ranges from 30 days to 28 days. Distributor’s

terms are 30 days, although substantial discounts can be secured with
earlier payments.

Distributors reward volume purchases with lower costs. The company

plans to take advantage of distributors' volume discounts, and will pass
along these savings to consumers in the form of sales and special
promotions to stimulate loyalty and further growth. Gross margins will be
maintained in the 30-33% range, which would put our business in-line
with the competition.

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General Assumptions:

General Assumptions

year 2007 2008 2009

Plan month 1 2 3

Current 9.00% 9.00% 9.00%

Interest Rate

Long-term 11.00% 11.00% 11.00%

Interest Rate

Tax rate 25.42% 25.42% 25.42%

Company ownership:

The following table outlines the start-up expenses, assets, funding, and
liabilities.

Start up Requirement

Capital investment Rs 10,00,000

Lease Rs 2,00,000

License money Rs 37,500

Marketing Rs 3,50,000

Computers $ machinery Rs 1,00,000

Telecommunication Rs 8,000

security Rs 25,000

layout Rs 2,00,000

Transportation Rs 6,500

Total A Rs 19,27,500

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 Staffing expense

Assistant manager Rs 25,000

Sales worker(2) Rs 20,000

Transporter(2) Rs 8,000

Security(2) Rs 10,000

Total B Rs 63,000

Funding and insurance:

Funds 15,00,000

Insurance 10,000

Total C 15,10,000

Grand total:

Total A+B+C 35,00,000

7.0 Management Team:

There comes the management profile of the company. As it is not a large
scale project so the management requirement is less and is done
according to the need. The profile of the company is given below:

Ankit Rana – Managing Partner

Chander Shekhar – Managing Partner

Ankur Verma – Associate Manager

Two sales people

Two security men

Two transporters

8.0 Risk Factors:

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For every business there are certain risk factors involved and this is also
true our business. Our business has some serious risk too which are
stated below:

Government policies:

First of all government policies are the one problem which is faced by
every wine producer and distributer. The policies keep on changing and
tax keep on increasing every year.

Culture:

Now the culture, which our country follows doesn’t believe in much
involvement of wines and spirits in there society and frankly saying it is
considered as bad thing to do. So making mind of customers to buy wine
and increase there involvement will be a great problem.

Climatic conditions:

Seasonality has a very crucial role in production of grapes which are used
to produce wines. Wine quality is directly propositional to the quality of
grapes cultivates and used. So one bad climatic condition can do a lot of
loss to wine industry.

Low entry barrier:

This is an industry with growing market and the barriers are low. So the
market is open for new entries and can create more competitions for us.
And the time coming, it is sure to see more and more competition.

9.0 Financial projections

Sales forecast:

Customers/day 200

Sales/day Rs 40,000

Monthly sales Rs 12,00,000

Annual sales Rs 144,00,000

Projected profit:

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 Revenue after deduction

Tax (35%) Rs 4,10,000

Operating expenses Rs 3,10,500

Total expanse Rs 7,20,500

Total net profit Rs 4,79,500

10.0 Conclusions:
Presently Indian wine industry is in a nascent stage, though it has kick
started only from Maharashtra much remains to be seen at the national
level. The growers will have to reorient themselves for wine grapes
cultivation. The Indian wine makers should learn from new world’s
(Australia and Chile) wine makers and strictly adhere to international
quality standards so that exports of wines will be their prime target.
Indians will have to go generously and in celebrating manners for wine
consumptions and be able to discriminate wines with other alcoholic
liqueurs. The wine in fact is a social and health drink, its consumption has
to be promoted through various media campaigns and wine festivals.
We hope, subsequently there exists a huge scope for expansion in
area and production of wine grapes in our country.

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