Business Case (2) - RICE BRAN OIL PRODUCTION
Business Case (2) - RICE BRAN OIL PRODUCTION
FOR
RICEBRANOIL
PRODUCTION
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BUSINESS PLAN FOR RICE BRAN OIL PRODUCTION
Prepared for:
Prepared by:
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Letter of Transmittal
Professor
Dear Sir,
With due respect, it gives me great honour and pleasure to submit my business plan on: “Rice
Bran Oil Plant” as a requirement for the course Entrepreneurship. Included in this business plan
are all the necessary sections and subsections necessary to provide a full detailed picture of the
whole business.
The main vision behind the establishment of this venture is to introduce rice bran oil as an
edible oil in the Bangladesh market. In Bangladesh, there is a huge demand for rice bran oil
but provision of supply is low. Moreover with the introduction of this edible oil Bangladesh
can capitalize on this.
I would be much indebted if you could kindly spare your valuable time to evaluate these and
oblige thereby.
Respectfully yours,
Rehanul Islam
Roll- Zr-27
Sec- A
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Table of Contents
Executive Summary................................................................................................................................. 1
BACKGROUND ......................................................................................................................................... 2
BIG IDEA .................................................................................................................................................. 3
Introduction to Rice Bran ....................................................................................................................... 4
Introduction to Rice Bran Oil .................................................................................................................. 4
EXTRACTION PROCESS ............................................................................................................................ 5
REFINING PROCESS ................................................................................................................................. 6
PRODUCT ANALYSIS ................................................................................................................................ 7
SWOT ANALYSIS ...................................................................................................................................... 8
ELABORATION: ........................................................................................................................................ 8
FINANCIALS ............................................................................................................................................. 9
RAW MATERIAL COST ........................................................................................................................... 11
PROJECT COST ....................................................................................................................................... 11
FUTURE PROJECTION ............................................................................................................................ 12
Target group ......................................................................................................................................... 14
Marketing Objectives: .......................................................................................................................... 15
Product strategy: .................................................................................................................................. 15
Cooking advantages of Rice Bran oils: ............................................................................................. 16
Price Mix strategy................................................................................................................................. 16
Promotion Mix Strategy ....................................................................................................................... 16
BTL marketing activities ........................................................................................................................ 17
ATL marketing activities .................................................................................................................... 18
Conclusion: ........................................................................................................................................ 19
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Executive Summary
The purpose of this report is to propose a business plan & list out the potential marketing activities
required to make it a success.
For this purpose, I have identified Rice Bran Oil to be our proposed product. This is a variant of
conventional vegetable oil, in that it’s derived from rice husks, and can be used in a multitude of
ways, from consumption, to saponification processes and industrial production. The demand for this
type of oil is on the rise, as consumer awareness about health hazards of conventional oil increases,
so does demand for less harmful non hydrogenated cooking oils. Moreover, the by-products formed
during the production process are also commercially -sellable. Overall, the initial project cost is
estimated to be BDT 8,893,000.00, with approximate profits of 1140BDT/100KG of oil processed
oil. The proposal is to create a B2B market where the processed oil is sold to the large retailers
of cooking oil.
The requisite industrial infrastructure is already being present in Bogra, which makes it convenient
for the production plant to be set up there. Raw materials, in this case rice husk, can easily be
acquired from the surrounding areas, since the region has large agricultural output.
Due to its multitude of possible uses, there are multiple target markets for the product. The primary
target market is the large retailers of cooking oil, who can use the RBO extract. Secondary market
consists of the local dairy farmers & soap manufacturing companies, as the residual rice husks are a
rich source of vitamin and minerals for cattle consumption, and the extracted oil a valuable input to
the saponification process.
Pricing will be done via benchmarking, where the price is fixed at the going market rate based on
other competitors. The benchmark may be a foreign company, as it is a relatively new product in the
local market
The promotion mix is a combination of ATL & BTL tools, but much like the promotional systems of
most B2B markets, primary focus will remain on the BTL tools. The intention is to create strong
links of relationship marketing, where networks are created with all of the potential buyers for long
term trade.
Some ATL tools will include online advertising labelled merchandize distribution etc, most of which
will be done in the initial 6 months of launch. BTL tools will include free sampling to the oil & soap
manufacturers & sales agents dedicated for farmers, this process would also start with the launch, but
will go on for at least the first year.
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BACKGROUND
Bangladesh is a country of whose 47.5% of the total manpower is involved in agriculture. A country
where annual production of crops is 37.266 million metric ton. In a country like this there is immense
opportunity to expand to the manufacturing sectors from the primary sectors of GDP. Even though the
manufacturing sector has improved a lot since the independence but there is still scope for
development. The expansion in the secondary section can help in increasing the GDP of the country
and move towards full employment of the country. The manufacturing business in micro level may
have the answer to solve unemployment of Bangladesh. If the crops can be used to manufacture into
other goods then there will be improvement.
Darail is a village of the Gabtalithana of Bogra district located about 12 km outside of the main Bogra
city. The village is one of the highest rice producing areas of the district. About 80 percent of the total
population of the village is engaged in agriculture and of them 90 percent are involved in rice
production. The climate, the agricultural system and the infrastructure are suitable for mass production
of rice.
This provides a solid infrastructure and available resources to start producing more with the given
facilities. Rice Bran Oil will be a favourable choice of product to manufacture in a region that is so
conveniently producing such huge proportions of rice. With increasing demand for healthy oil, rice
bran oil will be able to penetrate the market quite easily and settle itself as a prime product, given that
its marketing is done just right. There are several factors that determine the positioning of a product in
the market. Despite the fact that its demand is still somewhat latest in Bangladesh, proper use of
marketing can sell the right idea and consequently the right amount of oil among potential consumers.
The transportation system of the village is good as it is close to the Bogra city. There are two ways to
get to the village. One route from the city is from Fateh AL Shahbridge via Gabtali-Sariakandi which
is around 15 kilometers long. The road is made of asphalt and kept in good condition. The other route
is via the Chandan-Baisha road and then Dhunnot-Mokamtola road and is about 10 kilometres away
from the city. The road is also made of asphalt. This creates a huge opportunity for the business, as
communication and transportation will not be an issue for this start-up venture.
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MAP of the village
BIG IDEA
There are several factors that needs attention and evaluation before executing an idea. Factors such
as location, projection, demand, infrastructure, resources, communication and many more play an
integral part in flourishing a start-up business. In the location of Darail in Bogura, almost most of the
factors have been looked into and satisfied.
Key Notes:
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Proper use of resources can outrun demands for other popular vegetable oils.
Rice bran oil is a by-product of rice plants and is one of the most versatile oils available for
Consumption. Rice bran oil is the oil that is extracted from the inner husk of rice plants. After it
undergoes a stabilization and extraction process, the rice bran oil is carefully processed to make sure
that its flavour is preserved and it does not lose any of its natural health benefits.
In the competitive market of oils, healthy choice is becoming a more prominent demand for the
consumers. Technically speaking, delicate yet flavourful, rice bran oil just may be the world's
healthiest edible oil containing all the necessary vitamins, antioxidants and other nutrients.
Consumers are more inclines to use healthy oil that consume less in amount and thus prove to be
more cost effective. Food cooked with Rice Bran oil absorb 20% less than common oil, which results
in reduced calories and lighter tasting food. Less oil absorbed make it more economical to use, thus
making it a favourite among potential consumers. In Bangladesh, rice bran is used mainly for
preparing feed for poultry, fish and cattle. Rice bran is already a popular choice among consumers.
However, it still has a long way to go to outrun other vegetable oils like Sunflower Oil or Canola Oil.
Additionally, Rice Bran oil is more commonly used in Asian countries that has a measurably loIr rate
of cancer, obesity, heart diseases and many more. Therefore, tapping the latest demand for this oil
will not be much of a challenge. Rather, it will depend solely on the way it is launched in front of the
potential consumers. A proper marketing management strategy would ensure the beginning and
sustainability of this business.
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EXTRACTION PROCESS
By weight, rice bran has 17% oil content. After the refining process, the refined rice bran oil weighs
only 12% of the rice bran and raw material.
The extracting process starts with raw material preparation. The process contains of the following
steps listen briefly:
Advanced extracting technology and techniques Ire developed with technical assistance from
German and Belgian engineers in order to come up with Crude Rice Bran Oil that is high in Vitamin
E and Oryzanol. The Crude Rice Bran Oil is forwarded to the refining process for purifying and
packing. The extraction process is illustrated in the following flowchart to help explain the system.
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REFINING PROCESS
The refining process is the next big step to complete the production of rice bran oil. After extraction
is completed, refining is done through execution of the following steps:
1. The refining process begins by reducing excess free fatty acid then decreasing the color with
activated clay.
2. The oil is forwarded to the crystallization process before filtering the wax through a filter press
machine.
5. No thermal oil or PCB (Polychlorinated Biphenyl) involved in the production process at all.
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PRODUCT ANALYSIS
Low price, health benefits and superior cooking properties are the reasons behind the popularity of rice
bran oil. India is the world’s largest rice bran oil producer and the current production of rice bran oil
is enough to meet the demand for the oil in India. However, aggressive promotion of rice bran oil in
recent months and the agreement by rice bran producers worldwide this will lead to promote the oil
internationally are likely to see the demand grow sharply in the coming years. In our neighbouring
country India, the production of rice bran oil has gone up to 32% in the last 8 years. The statistics of
growth can be used as a reference for the potential this industry holds in Bangladesh. The relevant
statistics, illustrating the growth is given below:
This
This kind of growth has failed to take place in Bangladesh as of yet is due to lack of initiative and
awareness. Such prospects have never been brought up, let alone promoted. HoIver, from the trends
shown in India, it is evident that once the industry of rice bran oil is set up and the benefits of the oil
is effectively promoted, the growth will only increase for the best. People in Bangladesh are as
concerned about health as the people in India, so it is safe to assume a similar reaction from our
population once the beneficiary impact of rice bran is correctly advertised.
Global producers of rice bran oil have agreed to establish an international organization that will be
involved in the promotion of the oil and spread awareness of its health benefits. Rice bran oil is
growing in popularity across the world for its ability to reduce the risk of colon cancer and other health
benefits. Demand for rice bran oil is also increasing in the cosmetic industry, where the oil is used in
cosmetics for skin and anti-dandruff products. India, which happens to be the largest manufacturer of
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rice bran oil exports an amount of 820, 000 tonnes of oil, bringing in a large proportion of foreign
currency. With such profitable future prospect, an emerging industry of rice bran oil in Bangladesh
would help our country increase its agricultural export to a substantial extent. This would not only
serve Ill for the people of the country in terms of health benefits of consumers and employment of
manufacturers, it would also benefit the country itself from providing a new source of export.
SWOT ANALYSIS
STRENGTH IAKNESS
Healthy Capital
THREAT OPPORTUNITIES
Existing Health Awareness
vegetable oils
ELABORATION:
STRENGTH
WEAKNESS:
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Lack of high skilled labour
Low capital.
OPPORTUNITIES:
THREATS:
As this will be one of the Rice Bran oil in Bangladesh, there is very few competitors for the
same products. But there is a competition from other oil company products.
FINANCIALS
INVESTMENT PLAN
Investment in Rice Bran Oil is worthwhile as it utilizes national resources in producing value added
products. As a citizen of Bangladesh I have a social obligation to produce and manufacture products
that are beneficial to consumers. And by investing in this business I help the economy by creating
new employment and also profit ourselves.
The farmers of the village are the most likely to benefit from this investment in RBO as they can sell
the Rice Bran which previously would fall under wastage. If the business is established more than 30
people will receive employment and the business will be profitable as Rice bran oil market is
growing phenomenally fast around the globe not to mention in Bangladesh due to its Health
beneficial effects. Whatever investment is made for this project will have both long-term and short-
term impacts. The short-term impact would consist of the monetary profits and awareness. The long-
term impact consists of an unemployment remedy, a healthier population resulting in a longer life
expectancy and an economic growth in the country.
1. PROMOTER'S CONTRIBUTION
2. TERM LOAN
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3. GRAND FROM MINISTRY OF FOOD PROCESSING
Rice Bran
100 kg= BDT 1800
From the theories and the diagram, the following inferences can be determined.
Key Notes:
From the Financial it can be seen the working capital needed is about BDT
14,342,000. The initial project cost will be BDT8,893,000.00.
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RAW MATERIAL COST
PROJECT COST
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Electricals 480, 000
Commissions 380, 000
Building 375, 000
Deposit 30, 000
Infrastructure 5, 000, 000
Boiler 750, 000
Misc 223, 000
Preoperative 100, 000
Total 8, 893, 000
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Future projection
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India
8 Bangladesh
0
2013-14 2014-15 2015-16 2016-17
The chart shows a comparative projected growth in rice barn oil between Bangladesh and its
neighbouring exporter India. India's growth rate is considered and calculated based on its steady
growth rate of the previous years. Bangladesh has a lower growth rate due to the business novelty
and buffer periods. However, the growth is only projected to increase on the basis of growing
demand and health awareness of the population. Not the mention the feasibility and resource
availability of Bangladesh to start up this venture in a big scale.
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Marketing Plan:
Target group:
There are multiple target markets for RBO, all of which are in the B2B market. The primary target
group consists of food oil manufacturers & retailers, i.e companies that use the rice bran oil to refine
it to produce edible cooking oil. The secondary target groups are the local dairy farms & soap
manufacturing companies. The dairy farms can use the rice husk, which is a by-product in the RBO
production process, for cattle consumption, while the soap companies can use the fat extracted during
the production of RBO to reduce production costs.
Food Oil Manufacturer: The prime target market will be the various food oil manufacturers
in the market.
Company profile: Large producer and retailer. Known brand in the edible cooking oil
market.
Dairy Farms/cattle ranch: The de-oiled bran is a good source of nutritious food for the
livestock.
Company profile: Small to large dairy farms or cattle ranches. Typically require large
volumes of rich & fattening cattle fodder at a cheap price.
Soap companies: The fatty acid derived from the bran oil processing can be sold to soap
companies.
Company profile: Medium to large soap manufacturing units. Typically local, as foreign
brands are likely to have integrated supply chains already.
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Marketing Objectives:
As mentioned earlier the prime target market will be the various food oil manufacturers as the initial
plan is to be a supplier of Rice Bran Oil. So the marketing strategy will be focused on attracting the
food oil manufacturing companies and channel through them to meet the consumers need.
Marketing mix refers to the amounts and kinds of marketing variable, the firm is using
at a particular time under marketing mix I include product mix, distribution mix, communication
mix and price mix. The following strategies are going to be focused on:
Product strategy:
The product is the most tangible and important single component of marketing program. The product
policy and strategy is the corner stone of a marketing mix, without product, there is nothing to
distribute, nothing to promote, nothing to price. If the product fails to satisfies consumer demand. No
additional cost on any of the ingredients of the marketing mix will improve the product performance
in the market place.
The product strategy is to provide a singular, high quality and healthy product that meets the required
standards for health-aware consumers.
The RBO mill will produce only a single type of edible oil that is Rice bran oil. Rice Bran oil is
different and is being called as HEART oil in Japan, Korea, Thailand, China and USA as it contains
ORYZANOL and COTRIENOLS which increase HOL (good) cholesterol and loIrs LDL (bad)
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cholesterol & triglycerides. RBO oil contains sequence which improves skin tone, & delay wrinkle
formation. Rice Bran Oil also contains vitamin E, which helps in maintaining balance of nervous system. Rice
Bran oil absorbs 15% less oil which can be low in calorie intake.
The Rice Bran oil is fairly a new entrant in the market of edible oil and the growth potential is very
high. The product will be offered in competitive price and will be expected to capture the interest
from food oil manufacturers. The existing RBO is sold at 145tk/kg and ours will be sold to the
manufacturers at 110tk/kg in bulks. Some discount pricing will also be done to incentivize quick
turnover of cash, e.g. 2/10 n=30. The discounts offered will be comparatively lower, as the profit
margins are low in the agriculture industry.
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BTL marketing activities
Below-the-line (BTL) marketing activities will be a key tool to expand the customer base and increase
awareness of the product. This will continue without a specific duration, as interaction betIen
customers and the perceived responses cannot be confined to a specific timeline.
Free sampling: The food oil & soap manufacturers can be given free samples of the RBO to
evaluate the quality of the product.
Word of mouth: To approach the dairy farms and soap companies to sell the by-products word
of mouth approach can be taken. As a good reputation goes a long way in business good will
and word of mouth will be the prime mediums of marketing the goods.
Quality assurances: Potential buyers in soap & edible oil manufacturing industry will be
invited to the factory premises every 6 months to review the standards of production. This is
done to maintain the image of an extremely quality conscious company. Furthermore, any
verified reporter of expired, or low quality product will be rewarded with the entire shipment
being replaced free of charge.
Employing Sales Agents and Relationship Managers: Typically in the rice
milling industry, very little or no marketing and advertising is done at all
o t h e r t h a n w o r d - o f - m o u t h . A dedicated team of Sales Agents will be employed whose
job will be to constantly be out on the road visiting farmers, traders, and wholesalers,
and building new and managing existing relationships with them, and continually looking for
new clients and business opportunities. The common believe is that this will strengthen the
company’s relationship with the customers and also with the farmers that the company will
have contractual agreements with because they each get regular communication and visits from
dedicated sales agents to ensure their needs are catered for and that everything is running
smoothly
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ATL marketing activities:
Above-the-line (ATL) marketing campaigns will be a key tool in promoting the visibility of the
product and to increase awareness of the existence of such an oil to the targeted manufacturers. The
campaign will have duration of 6 months from product launch and will consist of the following
components:
Introduction of a local brand: A local brand can be established to approach the households
and normal consumers by packaging of the RBO. This will make a presence in the market
and will help to position the product as a brand for future expansion.
Advertisement: Advertising is necessary to make the business and the product familiar to the
public and create good will and a favourable image.
To reach the target group I can take up the following mediums:
-Stationary: Usage of letterheads, envelops and business cards will be made and
distributed among the manufacturing companies which will help to project the company’s
business image.
-Press Advertising: Leaflets, ads in newspaper, magazines etc. will be done to
increase exposure of the product and attract customers.
-Online: The options for online advertising continue to grow rapidly. They include
advertising on website, advertising on other websites, creating links to the business’s website
from other websites, publishing blogs, social networks and forums.
The website will include research covering the comparative benefits of using RBO over
conventional oil, the major partners of RBO and details regarding quality maintenance and
production process.
Activity Timeline
Activity Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Ibpage
Leaflets
Newspaper
Free Sampling
Direct Marketing
Quality Assurance
Visits
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Marketing Expense Budget
This is the budget for the marketing expenditure for the first year:
Expense Year 1
Webpage 10, 000
Newspaper 750 000
Leaflet 30,000
Direct Marketing 100 000
Miscellaneous 60 000
Total 950000
Conclusion:
I have discussed a business plan for rice bran oil production in Darail, Bogura, with reference to
different marketing strategies which will help to enhance the business in the long run. Our main
concern was to analyse the current market situation and suggest in what ways the oil production plant
can sustain for a long period of time without facing imminent difficulties. I know that Bangladeshis
although being price conscious people are now concentrating on health and quality factor as Ill. Thus
it would be easier than before to capture a significant portion of the market through successful
marketing as to have a dominant product in the market, sales promotion is crucial. As I already know
that rice bran is an incredible source of the vitamins, minerals, amino acids, essential fatty acids and
antioxidants nutrients, the popularity of rice bran oil is increasingly peaking the market demand. In
fact, the benefits that rice bran oil offer are so valuable, that they are easily replacing hydrogenated
oils containing tans fat in this competitive market. Rice bran oil is also an ideal choice for margarine
and shortening due to its structural conventionality. Hence it is very important to create a brand
image in the minds of the consumers because in the present competitive market, the consumers are
described as the king. Thus knowing its advantages, there is a high probability for the plant to self-
sustain in a matter of time resulting in higher profitability for the company as a whole and promising
prospects of further expansion of the plant.
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