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SOL CHIPS, LLC

Sol Chips
Business Plan
Adrian Ortiz
Chris Grey
Seblewongel Deresse
Shiva Daryouni
Angela Grant
Sara Omer

Executive Summary
The premium potato chip market is well on its way to maturity in the U.S. market. With Kettle
Chips, Popchips, and other players, we at Sol Chips will seek an opportunity in the premium
potato chip market in an as yet untapped market: Mexico. The 3 billion dollar market for snack
foods in Mexico has many opportunities for snack foods manufacturers. The trending need for
high-quality, premium potato chips, especially among younger, more urban consumers, provides
the perfect opportunity for our Sol Chips product line. Based in Laredo, Texas, Sol Chips, LLC
produces batch cooked, premium potato chips that will meet this trending need. Our initial entry
into this market will be in Nuevo Laredo and select places in Monterrey, with a target of
expanding from Monterrey to other large Mexican cities like Guadalajara and Mexico City.
Industry and Rationale
Snacking options are in very high demand in Mexico. The snack foods market is a $3 billion
industry in Mexico. Our facilities in Laredo, Texas and Nuevo Laredo, Mexico are prime locales
for the production and distribution of premium potato chips. Conventionally produced potato
chips are developed using a conveyor belt system. The market leaders in the production and
selling of these potato chips are Barcel--a unit of Grupo Bimbo, and Sabritas--a subsidiary of
Frito-Lay. Due to stiff competition in the market for traditional potato chips, our batch cooked,
GMO-free product is better marketed towards a younger, more urban Mexican consumer.
Research has shown their propensity to buy better quality, imported food products like Sol Chips.

Company Structure
Sol Chips is a Limited Liability Company based in Laredo, Texas. Most of our personnel will be
located either in Laredo Texas, or Nuevo Laredo, Mexico. Sol Chips is functionally divided into
five separate departments: Marketing, Operations, Human Resources, Finance and Accounting,
and Compliance. The executive members of the company are made of up of the heads of each
department. The following figure shows the structure of Sol Chips:

Marketing
Our marketing department will be primarily concerned with the promotion of our product
digitally as well as working with our distributors to ensure maximal visibility and supply of our
product. Digitally, our efforts will be focused on the two largest social networks, Youtube and
Facebook. Using the Popchips campaign as a model, our digital campaign would utilize these
networks to target the younger, more urban consumers. With our distributors, our marketing
department will develop effective endcap and product demonstration program to improve
product visibility and recognition. Research has shown that these two elements, endcaps and
product demonstration are effective in driving sales of new product lines like Sol Chips.
Operations
Our operations will be divided between our U.S. facilities and Mexican facilities. On the
American side, well be focused on receiving potatoes and other raw ingredients from our
supplier and turning them into potato chips. Once made, our potato chips will be loaded into
large crates and delivered to Nuevo Laredo, where they will be packaged and labeled according
to Mexican legal requirements. This division of production helps ensure product quality and
efficient packaging.
Human Resources
Like our operations, our human resources department will have a U.S. division and a Mexican
one. In this manner well ensure our personnel decisions are appropriate for the positions
required. Of greatest concern is to acquire the best salespeople who can market our product to
the appropriate retailers and also hiring the best foreign experts who can streamline our export
process. This is to ensure not only that we maximize our reach, but also to ensure we stay
compliant with Mexican export and food and safety law.

Finance and Accounting


Because of the division of operations among country lines, our finances will also require U.S.
and Mexican divisions, with some overlap, due to the nature of our business venture. On the U.S.
side, our finance department will work to ensure our financials are in order as well as acquiring
financing for our startup costs. On the Mexican side, it will strive to meet budgetary goals and
track day-to-day expenses in Mexico.
Compliance
To ensure our compliance with both U.S. and Mexican laws and regulations, it will be necessary
to have two departments of compliance for each country. The American division will focus on
ensuring our product is produced according to U.S. food and safety laws, while our Mexican
division will ensure our product is packaged and labeled as required by Mexican law. Both
divisions will also ensure all employment, safety, and environmental laws of their respective
country are complied with.
Our Value Proposition
For the 20-40 year-old snacker, Sol Chips is a snack that unlike other potato chips is batchcooked with only the freshest ingredients while also remaining GMO-free. Quality. Every time.
SWOT Analysis
Strengths

Nutritional information provided to consumers


Adherence to food and safety guidelines
Made from high-quality health products
Efficient operating guidelines in the product line
Placed in easily accessible location
Can be taken globally
Community and age oriented business models

Weaknesses

High training costs due to high turnovers


Very minimal concentration on providing organic food
Focus on one product line may pose risks
Increasing cost of healthy raw products

Opportunities

Opening more joint ventures with several different product lines.


Responsiveness to the demand for healthier options.
Advertising the taste and nutrition to the world.
Expanding on the advertising in regards to being more socially and environmentally

responsible.
Expansions of business into newly developed parts of the world.

Threats

Concerns about underhanded marketing strategies


Contamination risks.
Downturn in the Mexican economy
The rise in price for raw inputs

ECLIPTER
Economic
Mexico had experienced significant economic developments due to the expansionist economic
policy embarked on by the government. Despite being a major oil exporter, they have diversified
their economy in recent decades. With the economy currently improving, people are more likely
to buy more expensive and healthy food products. With that in mind, people may be more likely
to purchase more premium snack foods like Sol Chips. Due to NAFTA, there is a freer exchange
of goods & services between Mexico and the U.S.

Culture
The main differences in Mexican work culture and the culture in the United States will become a
great tool for our snacks to go viral. Mexico is a country that has a high power differential; that
is, workers are, in general, more tightly knit and usually take direction from a strong
leader/supervisor. Employee participation in decision-making is not encouraged, and it is not
considered to be appropriate for workers to voice an opinion with their supervisor or manager. As
a result their reduced labor conflict, resulting in an efficient, cost-effective workforce.
Mexican culture also promotes high individualism, which works in our companys favor.
The loose ties between individuals can potentially lead to more loyal and productive employees.
Mexico has a low Uncertainty Avoidance Culture, which is more accepting of change and
variety in the workplace, and generally they are more willing to accept changes in the workplace.
Legal System
The legal environment facing our organization is going to become more complex as it
penetrates the Mexican market. All business activities in Mexico will require the expertise of
Mexican legal experts to ensure we maintain compliance. Specifically the compliance
department will ensure our compliance with consumer, employment, environmental, and food
and safety laws.
Sol Chips will be registered in different regulatory agencies including the Environmental
Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), and the
Equal Employment Opportunity Commission.
Income profile
As a result of Mexicos participation in various free trade organization, they have become a
significant world economic player. This leaves a great opportunity for Sol chips to enter into

Mexico in order to access to other markets in other countries, especially in South America. By
developing a strong relationship with Mexico, we can eliminate the external barriers to entry
posed by those countries which have free trade agreements with Mexico.
Political Risk
As Sol Chips we understand the political system and key figures relevance to our business in the
country and governance indicators. It is the countries politics that passes and enforces legislation
concerning the entire country. It is understandable that actions that will be taken by the political
parties will affect our organization and is consistent across state boundaries.
Poverty in Mexico is caused by individual, geographic and political factors. Main cause of
poverty is due to political economy of the country. The political adjustment policies that have
been applied in Mexico due to the government capability of carry out enough policies to
encourage successful development will be beneficial for our business to be a main program to
reduce poverty by minimizing the unemployment rate.
Tax Regime
Mexico has relatively low corporate taxes. Mexico has a 30% corporate tax rate compared to the
U.S.s 40% tax rate. Mexicos low corporate tax rate attracts a number businesses in many
industries, including snack producers. The lower tax rate will directly benefit the Sol Chips in
term of net profits.
Exchange Rate Risk
The peso value is expected to fall down mainly because of the slash in oil prices & the financial
crisis suffered by United States. As the saying goes "when the United States sneezes, the
economies of other nation catch a cold." Villarreal M). Mexico as a country experienced

significant monetary and political turbulence. The currency indicators are employed as proxies
for exchange rate and political risks. Sol Chips examines the exposure of U.S. industries to
movements in the value of the dollar. U.S. industries display significant cross sectional
differences in their exposure to movements in the dollar. For us the exchange rate risk seems to
be diversifiable. It shows that active hedging policies by financial managers cannot affect the
cost of capital, and reasons other than pricing arguments must explain why firms actively
manage foreign exchange risk.
Restrictions (NAFTA)
Sol Chips is a directly benefits from NAFTA agreement signed by the U.S., Canada, and Mexico.
It allows us to explore foreign direct investment opportunities in Mexico as our company grows.
With more and more foreign investment entering into the country, labor productivity on an
average increases, eventually leading to a demand in higher wages.
Under NAFTA, trade barriers for inter-regional trade have been reduced. This has been a
turning point for Mexico as it played a vital role in strengthening the economic structure of the
economy as it moves towards becoming industrialized. NAFTA has also transformed Mexico as
it experienced export-led growth. With the trade liberalization, it encouraged foreign investments
entering into the country. Moreover, it has granted the Sol Chips access into trading with other
potential partners.
Demographic factors
Mexico have a history of cooperation on demographic issues, particularly in the border area,
where there are serious environmental problems caused by rapid population growth,
urbanization, and industrialization. There have been several studies of the relationships between
environmental factors, particularly air pollution.

Porters 5 forces
Threat New Entrants
The premium potato chip market remains an undeveloped market in Mexico. Currently there are
no major players in this market, however the possibility of new entrants is high.
Competitive Threat
Sabritas and Barcel control large shares of the traditional potato chip market. They both have
high visibility and brand recognition. Though we strive to differentiate ourselves from these
brands, we cannot discount the possibility of their entry into our market.
Suppliers
Having good distribution network is essential. We must work with distributors to ensure fast
delivery and promotional cooperation. Specifically, they must ensure that our endcaps are
prominently displayed at stores and that supplies are always well-stocked.
Buyers
Mexico still low income country. Rural areas have low market potential. Urban areas are
attractive in selected areas, such as restaurants, hotels, and convenience stores.
Entry and Pricing Strategy
Entry Strategy
Our strategy in Mexico will be driven by the need to develop relationships with buyers and
distributors. For example, developing relationships with potential resellers of our product such as
hotels, convenience stores, and restaurants makes sense because they tend towards higher price
points, which would make our product more competitive. Grocery stores and Mom-and-Pop

shops tend to have lower price points, which make them a less attractive target, at least initially.
Once we achieve more brand recognition, we can expand to these markets. Perhaps the most
important method of developing relationships with our target sellers is by attending trade shows,
especially EXPO ANTAD, which would help us to develop relationships with target retailers
who sell to our target market. As our research shows, developing this face-to-face contact is of
vital importance. Because business in Mexico is conducted in Spanish, well have to have a good
team of bilingual business experts to develop close ties with these buyers.
Just as vital as developing buyer relationships is developing relationships with
distributors. Like Sabritas or Barcel, well need to develop a strong, efficient distribution system
to ensure the freshness of our product.
In our initial stages, we need a tremendous amount of flexibility centered on a strong
marketing program. If we look at how Barcel entered the marketplace in 1978, it had to sacrifice
profit in favor of gaining market share. It did this by outspending Sabritas in advertising by a 2 to
1 margin, despite having one-third of its sales in its initial years. Like Sabritas, well have to
forego much of the formal planning, organization, and human resources development in order to
be a more flexible company.
Entry Strategy
Taking advantage of the expertise of Mexicos production expertise, we will ship all products
intended for sale in Mexico to our main Mexican facilities in Nuevo Laredo, where packaging
and labeling occurs, as required by Mexican law. From Laredo, most shipments of Sol Chips will
be sent to Monterrey, where the delivery to hotels, restaurants and grocery stores are completed.
Pricing Strategy

To determine the following pricing scheme, we increased the typical prices for the respective
sizes of potato chip bags by approximately 10-15%. This would cover our higher production
costs without significant effects on profit.

Size

Price (Mexican Pesos)

35 grams

$8

50 grams

$12

90 grams

$25

Marketing Plan
Our marketing strategy will focus on two areas: Digital and Distribution. Digitally, well choose
to employ a similar strategy to Popchips, which decided on digital, as opposed to traditional
media, with a focus on celebrity endorsements. Facebook and Youtube are the largest social
networks in Mexico, so our focus will primarily be on those. On Youtube, HolaSoyGerman is the
largest most popular celebrity, so an effective digital presence would have to include either
German or a similarly popular talent.
Besides our digital marketing campaign, there will be an emphasis on an attractive
package design. Our potato chip bags will be glossy and have a transparent center. This will
serve to not only highlight our product, but also to to display the prize inside the bag. Research
shows that the Mexican consumer values prizes found in products. Other successful brands have
employed similar strategies. Prizes will range from the more traditional Mexican toys, which
would cost less than other, more modern toys like Hotweels and Hello Kitty dolls. In selected
test markets, the feasibility of using the more popular branded toys with be tested.

Equally as important as the packaging will be working with our distributors to ensure
effective endcaps are placed in retailers. Just as important, product demonstration programs will
be developed so that once a product is delivered and displayed, it can be properly demonstrated
to the consumer by our sales representatives.
Operations Plan
Sol Chips is currently in negotiations to secure a 2-year lease for a property in Laredo, Texas. We
want to be up and running within one year of securing additional funding from investors, so that
we can focus on the business of making business partnerships with retailers in Laredo, Texas,
Nuevo Laredo, Mexico, and most importantly, Monterrey, Mexico.

Operations
Time (Months)
1-3
Product Testing
Farmers markets,
trade shows
Marketing
Youtube
Distribution
Equipment and
Supplies
Purchasing of
Equipment
Installation
Production
Ordering Raw
Materials
Delivery
Production
Human
Resources
Hiring
Training
Production

4-6

7-9

10-12

Until greater business and government relations are developed in Mexico, we will base our
potato processing facilities and offices in Laredo Texas. In our administrative offices, well
manage the finances of the company, house our customer service operators and make sales calls.
At the potato processing facilities in Laredo, inspection, cleaning, peeling, and cutting of
potatoes will take place. Disposal of potatoes are placed in bins labeled according to category of
material. Then they are seasoned with our mix of salt and pepper. The chips are then sent off to
batch cook. After cooking, they are sealed in large crates, where they will be sent to our facilities
in Nuevo Laredo for final packaging and labeling. Once ready for market, they are distributed by
a third-party distribution company.
Cultural Due Dilligence
Cultural Differences
Mexico is what is called a high context culture. As a result of Mexico being a high
context culture; Mexicans place a strong emphasis on how a message is said rather than on the
words used alone. There are some miscellaneous gestures and behaviors that are considered rude
in the Mexican culture such as: throwing documents on the table while negotiating, extensive eye
contact, and using the "OK" hand gesture amongst various other things. Backing away
physically from Mexican businesspeople is considered unfriendly as they have a closer concept
of personal space than Americans.
As a direct consequence of the high context nature of Mexican communication, it is
necessary to build a personal relationship in conducting business with Mexicans. It has been said
that in order to do business with Mexican businesspeople that it is important to secure
friendships with them first. Without the context of that personal relationship, little if any

substantive communication can take place and necessary levels of trust are inadequate to
undertake most business arrangements. Americans normally handle their business relationships
quite differently than they handle their personal relationships. This would definitely require
some adjustments for Americans to do business with Mexicans successfully. Mexican business
people also prefer to avoid confrontations and disagreements. They tend to say no by saying
"maybe or I'll get back to you". This leaves room for possible misinterpretations from their
American counterparts because Americans are often use to direct communications. Mexican
business people are often pretty laxed when it comes to their sense of time which may be seen as
disrespectful to Americans. They try to drive on time to their meetings with Americans.
Business meetings and negotiations usually proceed slower than they do in the U.S. and are
usually not held on the weekends as this time is reserved for family. Since Americans are so
accustomed to working "24/7" the fact that Mexicans reserve the weekends for family times
could also be another potential issue for Americans.
While gender distinctions are strongly emphasized in Mexico than in the United States,
Mexico is undergoing a transition as well. Many Mexican women, particularly in the large urban
centers, are increasingly active in professional settings ranging from university professors to
government leaders and entrepreneurs. Finally, many Mexicans are growing accustomed to the
large number of women in the United States and Canada in leading business positions and have
become increasingly familiar with working with these foreign businesswomen in positions of
authority. Even though Mexicans are making the transition into accepting women in professional
roles, I could potentially see this as a potential issue with doing business with Mexicans as
Americans are already faced with the issue of trying to close the gap in pay between men and
women. Due to the various cultural differences between Americans and Mexicans, there will be

a considerable amount of adjustments that will need to be made on behalf of Americans looking
to do business in Mexico.
Environmental Conditions
Some of the current environmental concerns are the scarcity of hazardous waste disposal
facilities, rural to urban migration, scarce natural freshwater resources. There is also serious air
and water pollution in the national capital and in urban centers along US-Mexico border.

Financial Plan
Summary of Operations December 2015 (Projected)

Projected Gross Annual Revenue

$168,000

Net Income

$75,000

Core total operating profit

$21,000

Total Assets
Long-Term Debt

$30,000

Source of Funds:

Small Business Line of Credit - $150,000

Venture Capitalist investment based on demonstrable market validation for 25%


ownership in company - $300,000 (Long-Term after expansion in year 3-5)

Crowd Funding - $25,000

Capital Invested from current founders $50,000

Start-up Expenses

Commercial property leasing - $14,000/yr

Machinery - $30,000

Supplies - $12,000

Marketing - $17,000

Payroll - $45,000

Packaging -$10,000

Transportation -$10,000

Supplies/Materials - $35,000

Balance Sheet December 2015 (Projected)


Current Assets

Liabilities

Cash

$225,000

Accounts Payable

Accounts Receivable

$64,000

Accrued Expenses

Inventory

$33,000

Unearned Revenue

Long Term Liabilities


Machinery

$30,000

Short Term Liabilities


2-Year Lease Agreement

$13,560

$93,000

Summary and Exit Strategy


There is trending need for premium snack foods in Mexico. The main driver of this demand is
younger Mexicans concentrated in the more developed, urban areas of Mexico. The uniqueness
of our product, combined with effective marketing and distribution, make this a promising
business venture. Due to the competitive nature of the snack foods industry, and Mexicos
oligopolistic nature, we foresee a larger player such as Barcel or Sabritas purchasing the
company once our venture has proven successful.
In the event that our proposed venture is not successful, the owners will implement
necessary measures to exit the business endeavor with minimal damage to the owners, investors,
and lenders. All machinery, supplies, and materials will be sold to cover any outstanding debts.
Any remaining debt will be paid by the owners in the form of monthly payments until all debts
are paid in full. Definitions of "successful" and time limits for achieving milestones have been
included in the owners' partnership agreement.
The success of the business will be monitored monthly in the first year and quarterly in
subsequent years. It is estimated that it can take up to three years to start turning a profit, which
means losses are likely in the initial stages. All possible unfortunate events have been taken in to
consideration. The owners will keep these possibilities in mind when evaluating the state of the
business, and make adjustments when possible to keep the business running with a positive cash
flow. Acceptable losses have been determined and if for any reason the business exceeds this
amount, Sol Chips, LLC will initiate the winding down process. This may include the payment
of past debts, the merger of our company with other market players, or the selling of the
company to an interested buyer.

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