Cape Breton Innovation and Research Council (CBIRC) is a newly formed private corporation, which has recently bought ownership of the Clearwater seafood processing plant in North Sydney, Nova Scotia. In August 2006, Paul Finney and Pat Jobe presented a business proposal for a frozen biscuit manufacturing operation using the Clearwater seafood processing plant. As CBIRC is looking for local businesses to present new ideas and markets for the plant, the corporation was highly enthusiastic about Finney’s and Jobe’s proposal. However, there are unanswered questions about final financials and market potentials. Both Finney and Jobe are currently full-time employed, and therefore want a clear final assessment before leaving their jobs to fully pursue the frozen biscuit manufacturing business.
Consumer trends within the Frozen dough market are shifting towards convenience and single packaging. The demand for healthy products and natural foods is expanding rapidly, as well as consumer’s interest in organic products. The demand for organic food in Canada has a growth rate of 20 percent, and 25 percent would be willing to spend up to 50 percent more for chemical-free food. According to Finney’s and Jobe’s research, customers want products that can be prepared quickly and are of high quality. There are currently no evidence of competitors who differentiate their products by offering a healthier choice. By-the-Sea Biscuits should therefore focus on promoting the Omega-3 biscuits as a healthy option, as well as offering the traditional biscuits for a lower price. Both products must have single packaging, and promoted as high quality and on-the-go biscuits.
Finney and Jobe should concentrate on Atlantic Canada, the six New England states and New York state as their target market. The population for the three target regions all together is 35,184,703 (see Table 2 for population figures). By entering all of these markets, they will be able to work together with more retailers and sell the Omega-3 biscuits for a higher price to a greater extent. The U.S is the biggest export market for Canadian bakery products, and the demand there for frozen and especially healthy products is strong.
In the northeastern U.S. market, By-the-Sea Biscuits should work with Price Chopper as their outlet. Within Atlantic Canada, they should distribute through Co-op Atlantic, Sobeys, and Atlantic Wholesalers. By-the-Sea Biscuits should sell their products in grocery stores both with and without in-store bakeries.
Product price & Break Even point for sales
Selling price for traditional biscuits: Wholesalers $13.50 per case / consumers $2.99 per dozen.
Selling price for Omega-3 biscuits: Wholesalers: $20.25 per case / consumers $4.49 per dozen.
Please note that Omega-3 biscuits has a 50 percent higher consumer price relative to the traditional biscuits, since 25 percent of Canadian consumers would pay this price for a healthier alternative.
Variable Cost per case of biscuits: $7.78
Fixed Costs: $211,100
Break Even Point: 211,100/(13.50-7.78) = 36,906 for Traditional / 211,100/(20.25-7.78)= 16,928 for Omega-3.