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Business Model & Operations Plan

Financial Projections Summary

BLUE WATER
Business & Operation Plan

Page 1 of 67
Business Model & Operations Plan
Financial Projections Summary

Table of Contents

1 Executive Summary.................................................................................................................3
2 Business Description...............................................................................................................5
2.1 Company Description.....................................................................................................5
2.2 Offerings & Products Definition & Position....................................................................6
2.3 Key Success Factors......................................................................................................10
3 Strategic Direction.................................................................................................................12
3.1 Value Proposition.........................................................................................................12
3.2 Mission and Vision.......................................................................................................13
3.3 Strategic Objectives.....................................................................................................14
3.4 Target Markets.............................................................................................................16
3.5 Growth Strategy...........................................................................................................21
4 Competition Analysis.............................................................................................................23
4.1 Global Brands of Premium Bottled Water ...................................................................23
4.2 Tap water and other Beverages....................................................................................25
4.3 Local and International Brands in Domestic Markets (KSA, UAE).................................27
4.4 SWOT Analysis.............................................................................................................29
5 Business Model.....................................................................................................................32
5.1 Key Activities................................................................................................................32
5.2 Key Resources..............................................................................................................34
5.3 Key Partners.................................................................................................................37
5.4 Distribution Channels...................................................................................................38
5.5 Revenue Stream...........................................................................................................39
5.6 Cost Structure..............................................................................................................40
5.7 Customer Relationship.................................................................................................41
6 Sales & Marketing Plan..........................................................................................................43
6.1 Market Positioning.......................................................................................................43
6.2 Sales & Marketing Plan................................................................................................44
7 Operations Plan.....................................................................................................................51
7.1 Legal Structure.............................................................................................................51
7.2 Organization Structure.................................................................................................51
7.3 Workflow.....................................................................................................................56
8 Financial Projections Summary.............................................................................................59
8.1 Revenues......................................................................................................................59
8.2 Operating Expenses.....................................................................................................60
8.3 Profitability Indicators..................................................................................................63
8.4 Capital Injections.........................................................................................................63
8.5 Financial Statements Projections.................................................................................64

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1 Executive Summary
Blue is a global brand for premium-bottled water, which will be incorporated in an investment
friendly European country. Blue will initially penetrate the Saudi market then will expand regionally
to the UAE and other GCC before entering the international markets for premium packaged water.

Blues offering depends on a strong differentiated branding which is a key success factor in the
premium quality water industry. Blue offers a superior water quality from multiple exotic water
origins from different corners of the world. Each bottle will tell a different story and provide a unique
drinking experience to customers.

Blues mission is to restore water as the primary source of hydration to lead a healthy and strong life.
Blues water is positioned to accompany a fine dining experience and special occasions in addition to
satisfying the everyday drinking needs.

Blue targets the niche market of high-end customers. The KSA and other GCC are considered very
attractive markets for premium-bottled water given their high-income levels and extravagant
spending patterns. Additionally; the cultural and religious background of alcohol restriction created
an opportunity to replace a wine bottle with fine premium water. The GCC is witnessing a market gap
given their high consumption of water due to high temperatures all year round coupled by limited
water resources available; depending mainly on seawater desalination. This also created a space to
market premium water. And finally, the extensive expansion in high-end retail outlets such as five
starts hotels, restaurants, commercial malls or supermarket chains created an organic distribution
channels for premium products.

Blue will aim for the high net worth individuals and families in the Saudi market with special focus on
the female segment since they are the purchases decision makers for the Saudi households. Also, a
focus is given to the young trendsetters, social elites, the health and fitness conscious, expat
community and pilgrims; which is a unique segment to the Saudi market.

Blue will adopt a flexible model to focus on core business of branding and distribution while
outsourcing the remaining activities as the procurement, packaging and logistics. Such model will
allow focus and efficient cost management along the supply chain. The driving force behind the
business will be the sales whereas the sales staff is an increasing function of the volumes sold. The
revenue stream is generated from two main channels; HORECA and wholesale distributors. Higher
margins will be attributed to the HORECA mainly served through glass packaging while higher
volumes are generated through wholesales for PET bottles.

Blues operational plan is set out to execute a flat structure built mainly around the sales and
marketing and supply chain functions. Positions will be rolled out according to the business needs.
Both strategic and operational workflow is designed to ensure smooth flow of business.

The marketing plan is based on two main pillars; branding and distribution. Blue offering is designed
to build a strong brand through premium quality, iconic designed bottle, storytelling, unique
advertising campaigns and high end social and sports events sponsorship. The digital and social

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Business Model & Operations Plan
Financial Projections Summary

media marketing will be a special focus to reinforce brand identity. The promotional strategy is set
out to initially create brand awareness and conversion then focus on retaining existing customers.
The distribution will focus on two main channels, the direct sales through HORECA and wholesalers.
After which; online retailing to offer more customized offering will be introduced as part of the
expansion strategy. Also, new retail concepts are created to achieve further penetration such as Blue
owned retail store, merchandising, water bars and other creative concepts that put water as the
centric focus. This is set out to promote water consumption in general.

Blue initial capital is estimated around SAR7MM injected across the first five years. The business is
projected to grow at CAGR of 62% during the initial five years reaching SAR 32.8MM by the end of
projection period. Bottom line is expected to read SAR6.6MM by the end of fifth year with a return
on equity of 50%.

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2 Business Description
2.1 Company Description
Blue Water is a limited liability company established in an investor friendly market in the EU
(Netherlands, Luxemburg or Malta).

The Company will create a premium-bottled water sourced from the purest natural resources on the
globe for the worlds high-end customers. Blue Water will separate itself from other premium brands
by offering high quality water from different exotic sources across the globe. Each bottle will tell an
exciting and compelling story that creates a unique drinking experience for the customer.

Blue Water will be sourced from different locations around the world not only offering the purest of
water origins but also alluring customers with its exotic nature and mesmerizing stories. The
following presents possible global sources for Blue Water:

Canadian Iceberg water


North European glacier water
Pacific deep sea water
Tasmanian Rain water
Spanish Artesian water
South Korean Volcanic water
Russian Borjomi mineral water
Jordanian water from the river Jordan
Exotic water from Tibet, Iceland and Finland

The water will be packaged in a distinctive luxuriously designed bottle, which is offered individually
or in a set of 6 variety cases to derive multiple tastes and experiences in a single social setting. Blue
will offer both still and sparkling water, which will be associated with fine lunching/dining in 5-stars
restaurants, hotels, lounges, airlines, spas, etc.

Blue Water will be priced to reflect its premium status.

The companys focus is building a globally recognized premium brand for bottled water that will
attract the upper-class customer from around the world. Hence, a business model is built to enhance
this focus through outsourcing non-sales activities to third parties. Outsourced activities include
design, bottle manufacturing, bottling, logistics and local sales. Water bottling will be outsourced to
local bottling companies after which, will be shipped directly to local distributors then to retailers.

The company targets the wealthy individuals from around the world who have a taste for
conspicuous and luxurious spending, fine dining and are looking for new and unique drinking
experiences to set themselves apart from the crowd. Also, targets individuals who are health
conscious and are looking for the highest and purest quality of beverages. Blue Water will be a

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Financial Projections Summary

globally established brand recognized by customers from across the world. However, the company
will initially penetrate the KSA then other GCC markets for their significant potential then will move
forward to the international market.

Blue Water centric focus is building strong and global brand identity for the conspicuous trendy
global customer. Blues image need to be associated with high quality, exclusivity and luxury achieved
through a unique product offering that includes health benefits, new drinking experience and vibrant
and distinctive bottle design.

2.2 Offerings & Products Definition &


Position
Blue Water will uniquely position itself on the existing global competition canvas as an ultra-
premium water brand of the new world however, on the boundaries for both the everyday and
special occasion use. This positioning occupies a new space on the competition arena and is achieved
through a differentiated product offering derived from multiple factors that need to be cohesively
and consistently interlinked to communicate a clear exclusive and distinctive image to the customer.

Blue Water

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Distinctive
Packaging
Diversified Exclusive
Taste Retailing

Highest Premium
Purity Pricing

Product
Premium Offering for
Compelling
Water Unique
Stories
Sources Drinking
Expereince

1.1.1 Premium Water Sources


The origin of the water sold is a vital component that helps differentiate a premium offering from the
average bottled water. It is challenging in the premium market to differentiate with respect to the
water sources given the limited natural resources located around the world. However, Blue Water
will offer multiple sourced premium water from exotic parts of the globe that enhances the high
quality and purity and offers alluring stories to experience seeking customers. The diversity and
exotic aspect of the sources are embedded features in the product offering that sets Blue Water
apart from other premium brands known to be single sourced. An exotic water source will be an
attractive proposition that matches the luxurious lifestyle of the KSA high-end customers looking for
exciting new and foreign products shipped from across the world to their own hands.

1.1.2 Highest Purity


The growing health awareness is the main impetus behind the growth wave in the bottled water
consumption since consumers are turning away from CSDs and high sugar beverages like Juices and
towards the healthier H2O alternative. And in a country such as the KSA known for its high
temperatures and dryness throughout the year; high quality hydration solution is called for. The KSA
depends on seawater desalination, which makes the quality of tap water ever more questionable.
This has created a remarkable market place for higher quality bottled water. Premium water
however; needs to offer superior quality through precisely calibrated PH levels, minerals and purity.
The balance of elements inside the water helps shape its crystal purity and differentiate the water
from other brands. Some premium brands offer added ingredients like Vitamins or electrolytes to
boost the functional benefits of the water. Blue Water will focus on achieving the highest purity
through an ideal balance of the natural elements that provides the hydration and nutritional needs
for health conscious affluent customers. The water purity needs to be tested and accredited by a
globally recognized institution and gain global ranking. The water purity is another story to tell that
will help attract and educate customers about the importance of the elements inside the cup of
water they drink daily.

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1.1.3 Diversified Tastes


Water is the most basic beverage that exists on earth. Therefore, creating different tastes is one of
the most challenging factors in the bottled water industry. Some companies add flavors and fruits to
differentiate their tastes. However; Blue Water will focus on the natural and organic difference that
comes with the different water sources. It will create an enticing sensation to be looking for a subtle
difference in taste, which is embedded in the customers brains by the differentiated bottles and
stories. The KSA is known for family exclusive dining and therefore offering a variety of tastes will
strike up a social gathering with exciting story telling behind each bottle. Blue Water will also be
offering its premium bottles in both still and sparkling forms to fit a wider range of occasions.

1.1.4 Distinctive Packaging


Offering distinctive packaging elevates a bottle of water to a premium status in the eye of the
customer. The bottle design is of the greatest importance to set the premium brand. Designer bottles
and limited editions creates an exclusive aura around the brand; cementing its premium position in
the market. While unique bottle shapes, textures and minimalistic design is trending among the
premium brands. Different bottle materials and sizes will be used to serve different needs. A high-
quality glass bottle of a large size would be used for on-premises consumption during
lunching/dining. On the other hand; PET recyclable packaging and small sized bottles will be used
during the day to stay hydrated; they need to be easily accessible and disposable. Limited editions
and custom designer bottles will be used in special occasions such as luxury weddings, anniversaries,
high end social or sports events. It can also be given as gifts. The KSA is a Muslim country where
alcoholic beverages are restricted and therefore, premium water in elegant bottles can substitute for
expensive wines that are used in special occasions and given as personal or business gifts.

1.1.5 Exclusive Retailing


Capturing the eye of the target customer, Blue Water will initially be offered exclusively at high-end
restaurants, hotels, airline lounges, commercial malls, health centers, spas, prestigious sports and
social events. Blue Water will establish its premium status through such exclusive availability where
the Blue Water bottle will be seen on the finest dining tables and elite spaces. The product will reach
the hands of the wealthy Saudi individuals and families, affluent businessmen and expats, the health
conscious and athletics and most importantly the upper-class females of the Saudi economy. The
wealthy females especially in the KSA market are main targets of designer brands not only because of
their conspicuous spending habits but also, they are trend setters and the main decision maker for
the household purchasing decisions.

At later stages, distribution will be expanded through high-end retail stores and supermarkets to
achieve further penetration for the established brand of Blue Water. KSA has been witnessing
growing high-end supermarkets chains and stores in the recent years, which provide a promising
opportunity to accommodate premium brands.

Having a presence at the online platform is an increasingly popular way to differentiate the product
offering and reinforce brand identity in the luxury industry. A customer in KSA could place an online
customized order for his chosen bottle of water; selecting among a variety of different water sources
and bottle designs to be delivered from across the world to his doorstep. This will create uniqueness
in drinking water that separates the brand apart.

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Future expansion strategies can be executed through creating new concepts in the Saudi market such
as the now trendy water bars. Since KSA is a Muslim country and alcohol-serving bars are prohibited,
therefore, creating a hub for the young and hip segment will be through introducing the water bar
concept where premium brands are offered on a water menu. Also, further down the line, Blue
Water will consider selling through its brand retail stores located at the exclusive shopping districts.
The store design could reflect the natural origins of the bottled waters; creating a shopping in
addition to the drinking experience.

1.1.6 Premium Pricing


Blue Water is positioned among the premium brands such as Evian and accordingly sets the
benchmark for its pricing. Premium pricing would hamper mass consumption and provides the
exclusive element of premium water. The KSA is characterized by a high income per capita and
known for its affluent individuals, wealthy families, large expats community and conspicuous lifestyle
and spending. The population composition of the KSA provides a large customer base for premium
waters.

1.1.7 Compelling Stories


Behind every bottle of Blue Water there is an exciting story to tell. Different stories will be cited
about the history behind the water origins that goes back thousands of years. Also, stories about the
local bottling plants and the shipment journey of the bottle of water will be told. The stories will
include awareness messages regarding the content of the water, its purity and the nutrition value of
its elements. Such stories will forge the brand identity of Blue Water that creates experience,
uniqueness and exclusivity for its customers.

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2.3 Key Success Factors


The core business of Blue Water is building a strong brand within the niche market for premium-
bottled water. Branding is critical to the business success and accordingly the business model is built
to create this focus through outsourcing most of business activities to reputable third parties. The
Company will invest heavily in building an appealing brand among its niche target market. The
branding process will be timed strategically to enable a successful launch of the product and to
ensure building customer loyalty to the brand, which will help to preserve a market share in a
constantly growing market.

Brand strength is considered throughout the value chain of the business process, which is strongly
influenced by key factors; strategic positioning, superior water quality, iconic bottle design and
exclusivity.

Superior
Water

Strategic Brand Iconic


Positioning
Strength Packaging

Exclusivity

1.1.8 Strategic Positioning


To build a strong brand, a new space needs to be created and occupied on the competition canvas to
be able to compete with an already existing and well-established brand on the international market
for premium bottled water. Blue Water will separate itself from other brands by positioning itself as a
premium brand that fits the daily hydration needs and the special occasions luxury consumption.
Identifying a territory will help in creating the right brand to occupy the new space and fend off
competition.

1.1.9 Superior Water


Justifying the premium status; the quality of Blue Water needs to be of a superior and differentiated
nature. While it is paradoxical to differentiate a generic product however, science and technology

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provided an opportunity to create flavors and added ingredients to enhance wellness, fitness and
beauty benefits. Blue Water offering depends on the natural and organic purity and the diversified
and exotic premium water sources that will provide interesting storytelling dimension.

To control and maintain the quality of the end product, an efficient supply chain is designed to cater
for the requirements of the business.

The bulk of the production process (extraction and packaging) will be outsourced to reputable third
parties that will always ensure that the high end product is delivered to the hands of the end
customer in its purest form possible. Technical operations will be designed and monitored by global
well-known water treatment consultant. This highlights the importance of third party analysis, which
is a key determinant of the quality and purity produced and delivered to customers.

A key contributor to success of the business will be the transportation process of the packaged water
from the source till the reach of the client. Overseas transportation will be firmly controlled to
ensure maintaining the quality of the product, while at the same time minimizing the transportation
cost per unit. To do so, an optimum shipment volume will be determined in agreement with the
shipping agency, to allow for quality maintenance at least possible cost.

A fleet of companys owned trucks will ensure that orders are delivered directly to customers
warehouses in a timely manner; ensuring that no client faces a shortage in supply at any point in
time, which can easily be covered by competitors.

1.1.10 Iconic Packaging


Packaging extends a functional and aesthetic dimension. Different materials and sizes are used to
meet the different drinking occasions. Glass bottles are used during fine dining while PET will be
consumed during the day. However; the bottle design serves as a crucial pillar to building a strong
and iconic brand. Bottle design is cohesively associated with brand name. An eye-catching design will
allure customers to select Blue Water from the shelves of premium brands. Limited editions and
collaborating with designer brands will add to the appeal and mystique of the brand name.

1.1.11 Exclusivity
Premiumization is associated with exclusivity; that elevates the brand to a deserved premium status.
Premium pricing, superior quality, high-end retail channels, exotic, custom made and limited editions
all create an exclusive ambiance for the high-end targeted customers.

Blue Water will be exclusively available in high-end restaurants and commercial malls, luxurious
lounges in airports and 5 star hotels, prestigious sports events (e.g. horse races, polo, bridge, etc.).
These places and events will be targeted by a strong marketing plan to quickly create and build a
brand loyalty across the target market.

At the early stages of the business, sales will focus on institutional clients (e.g. hotels, restaurants,
airlines, etc.). Going forward, distribution channels will expand to include wholesalers and high-end
retail stores. New innovative concepts can be developed along the way like water bars, Blue Water
stores and online custom made ordering.

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3 Strategic Direction
3.1 Value Proposition
Blue provides its client a promise of a differentiated drinking experience; given:

PURITY

Blue offers the purest of water that exists on the surface of the earth. Each bottle is sourced from the
most exotic natural resources across the globe to the hands of our customer. Blue Water is pure,
organic and natural.

MULTIPLE TASTE

Blue provides a variety in taste to the most generic product in the world. The different water sources
extend an intriguing and subtle difference in taste due to the natural difference in the elements
balance of the water content. The customer can taste a different experience within each bottle.

STORYTELLING

Each bottle of Blue Water has a different story behind it, starting from its origin up till it reaches the
clients hands

WATER AS A LIFESTYLE

Water is the source of life on this planet however; it is consistently competing with unhealthy
alternatives. Water needs to regain its status as our first drink of choice. Blue looks to transform
water from a hydration need to a healthy lifestyle solution through attaching premium brand, taste
and quality to the most basic beverage. Our customers will not drink Blue Water only because they
are thirsty but because it provides a better lifestyle. Each bottle of Blue water provides health,
beauty and status. Our customers will come to embrace the true and high drinking value of Blue
Water.

RESPONSIBILITY

Blue is committed to its environmental responsibilities by creating Green Water. Blue is incorporating
the highest environmental friendly measuring throughout its supply chain. Blue will also be helping
to providing access to clean and safe drinking water to those communities in greatest need.

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3.2 Mission and Vision

MISSION STATEMENT

To bottle a unique drinking experience.

The purest of water is extracted from the most natural and exotic locations across the global. Each
bottle tells a different story throughout the water origination till it reaches the hands of our
customers.

Our water promises premium quality and taste, nutrition value and beauty benefits in an iconic
designed bottle for our customers who are looking for a healthy and exclusive beverage.

We provide everyday luxury to the everyday drink.

VISION STATEMENT

To restore water to its original life source status as the primary drink of choice through attaching
taste, experience and luxury to the basic beverage to lead a healthy and exclusive lifestyle.

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3.3 Strategic Objectives


1.1.12 Short-Term Objectives (Years 0-2)
Establish a notable brand in the premium quality water market in KSA:

Create clear brand communication to speak Blue Waters values through the right slogan and
logo.

Collaborate with high-end designers to create an eye-catching bottle design using PET and glass
to fit multi-purpose consumption and occasions.

Arrange a pre-launching advertising campaign through TV, digital media and high-end events to
create customer awareness. Build public relations to raise media presence.

Establish website to digitally introduce and communicate the brand values.

Ensure premium quality:

Access at least 3 sources of premium quality water.

Identify and hire qualified third parties for extraction, bottling and shipment to ensure the water
quality is maintained throughout the supply chain.

Hire reputable water technical consultant to certify water quality, produce water report and gain
international ranking.

Gain significant market share in the KSA premium water market, measured in both market volume
and value:

Build an extensive distribution network across KSA.

Establish strong relationships with key accounts of high-end hotels, restaurants. Lounges, malls,
spas, social and sports events.

Ensure smooth business operation:

Design & Establish an efficient supply chain model that enables the business to maintain
sustainable healthy margins.

Recruit in house management, marketing and branding and supply chain teams.

Agree with qualified third parties to outsource the bottle manufacturing, bottling, logistics and
distribution activities.

Ensure execution of the environmental standards throughout the supply chain.

Obtain all the required legal and regulatory approvals and finalize paper work for the company
establishment and extraction rights.

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1.1.13 Medium-Term Objectives (Years 3-5)


Further penetration in the KSA market:

Access 3 new premium water sources; marketed in different packaging to attract/expand


new/existing customer base.

Develop limited editions in luxuriously design bottled.

Expand high-end retailing in prestigious supermarket chains.

Develop online retailing and custom made ordering.

Penetrate GCC markets and gain significant market share in its key markets (UAE and Kuwait)

1.1.14 Long-Term Objectives (Years 5-10)


Define a sustainable expansion strategy:

Establish new international markets and develop global branding strategy.

Develop new products to enable further penetration.

Develop new innovative ideas to increase water consumption and raise health awareness as new
water events, water bars, and water stores.

Diversify through integrating within supply chain; possibly retailing and developing concept retail
stores for Blue Water to control and elevate brand image.

Establish and execute a humanitarian cause:

Promote access to safe and clean water to those communities in need.


Donate a certain percentage of bottom line profits to fund clean water access points and
sanitation facilities.
Establish a foundation under same brand name to dedicate its efforts for clean water programs.

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3.4 Target Markets


Target markets are defined in terms of customer segmentation and geographical locations. The target
market for premium high quality water offerings is defined to be a niche market of high net worth
individuals and families, looking for a differentiated drinking experience in terms of quality.
Generally, Blue targets the high net worth cluster in the GCC market, with a primary focus on the
Saudi Market.

1.1.15 Customer Segments


Blue Water generally targets a niche market of high-end customers with the following profiles:

High Net worth

Affluent individuals and families with conspicuous spending habits with an eye for luxury. Saudis are
known to have large families that can be reached through restaurants (some are family exclusive)
and hotels. Packaging a set of bottle cases will be marketed to serve the multiple members of the
same family.
Young Generations

Social elites and young trendsetters who are looking for new experiences and exclusivity. The young
crowds are reached through trendy new restaurants and hot spots. They usually have strong social
media presence; therefore, online communication is essential.

Health Conscious

The wealthy health conscious, fitness and athletic crowds since they will have hydration needs and
are more aware of the water health benefits. They scrutinize water content, quality and elements
balance. Health centers, fitness and nutrition programs and sports events should be targets to reach
said segment. The water needs to be packaged in easily disposable on-the go bottle to suit the
active nature of such customers.

Business and Expats

The expat community and businessmen as the KSA and other GCC are growing business hubs; with
extensive living allowances. Businessmen will be reached through the traditional restaurants and
hotels channels. However; business conferences and events will also be targeted. Businessmen
usually give gifts to one another; in the western world, this is sometimes a wine bottle. In a Muslim
country, a limited edition premium bottled water substitutes for such business tradition.
Females

The high net worth females who are ultimate decision makers for the household purchases. Women
have expensive taste and therefore they form the most important customer for luxury brands, and
within the KSA market there are many ladies exclusive places such as spas, health centers and
lounges, which offers promising opportunity to access the ladies world. Also, women believe in the
beauty benefits of quality water for softer skin and better complexion.

Pilgrims

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The premiere pilgrims and Umrah visitors. There are different tiers for the Hajj and Umrah visits,
premium water need to target the higher-end visitors through their 5-starts hotels and allocated
ritual site camps.

1.1.16 Geographical Markets


The initial targeted geographical markets are mainly the KSA and UAE, after which further expansion
in the gulf region will take place. The GCC countries offer promising markets for bottled premium
water due to the following:

High willingness to pay

The gulf countries have one of the highest incomes per capita worldwide. Additionally; a large
proportion of the population lead an extravagant lifestyle with expensive taste and lavish spending
habits.

Existing and widening market gap

There is an increasing market gap between the supply of water and demand. KSA and other GCC
have limited underground water resources and depend mainly on desalinated seawater, which is a
very expensive process and the end product is not of the highest quality. In addition, the climate
change will reduce rainfall and increase evaporation rate, which will further limit the water supply.

On the other hand; water consumption has been on the rise given the growing size of the KSA and
gulf population along with increasing number of visitors; whether tourists, expats or pilgrims.
Additionally; the already high water consumption per capita is further rising due to the climate
change and witness higher temperature and therefore raising hydration needs. Furthermore; the
changing trend towards a healthier lifestyle increased water consumption on the expense of other
sugary drinks.

Favorable Culture

The Muslim countries have restricted alcohol consumption due to religious beliefs. Therefore; there
is more room for consuming additional quantities of water.

Accommodating market conditions

The GCC are witnessing major expansion in the premium retail outlets as high-end commercial malls
and supermarket chains. This trend provides complementary retail channels for premium-bottled
water, which is, underpenetrated market in the region.

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High Income Per Capita


Willingness To Pay
Conspicuous Spending Habits

High Water Consumption Per Capita


Growing Population
Growing Tourism & Expats
Widening Marekt Gap
Changing Lifestyle
Limited Water Resources
Climate Change

Favorable Culture Restricted Alcohol Consumption

Accomodating Market Expanding Premium Retails Outlets


Conditions Underpenetrated Premium Water Market

High Income Per Capita

The GCC has the second highest income per capita after USA; with an average GDP per capita of USD
41k compared to a global average of USD 11k. The bulk of the GCC income is concentrated in three
countries namely KSA, UAE and Qatar. Accordingly; a large proportion of the population represents
the niche market sought by premium water producers. Hence, the GCC offers a wide customer
segment for premium water that will be willing and able to buy a bottle of water at premium and
ultra-premium prices. Although, the downward pressure of oil prices is depressing GDP growth to
2.6% P.A. for the upcoming five years, more diversified economies sought by the GCC governments
are expected to lift the regions average significantly.

Conspicuous Spending Habits

Not only does the GCC enjoy high income however, they are known for their lavish lifestyle and love
for luxury. Their extravagant spending habits matches the premium offerings of the high-end bottled
waters.

High Water Consumption Per Capita

GCC have some of the highest per capita water consumption rates in the world. In the UAE, the per
capital consumption stood at 105.4 liters compared to a global average of 27.7 liters. The high water
consumption is a result of high temperatures and dry weather all year round.

According to World Bank; GCC countries also see biggest gaps between renewable supply and
demand: Bahrain uses 220% of its available renewable water reserves, compared to 943% in Saudi
Arabia and 2,465% in Kuwait. This has paved the way towards a rising bottled water market. Bottled
drinking water consumption is expected to increase in GCC countries with an annual average of 6% to
7%, hence increasing their expected apparent consumption to almost 21.3 billion USD in 2020.

Growing Population

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KSA hosts by far the highest population in the GCC, which is estimated to have exceeded 30MM in
2014. Population growth averaged around 2.4% annually during the period 2010-2015. The
Kingdoms population is expected to continue its growth pattern during the next five years, to grow
at a 5 year CAGR of 2% to approach 35MM by 2020. The growing population will result in an organic
growth for the bottled water market.

Growing Tourism & Expat Community

The tourist is an important segment for premium-bottled water. Hajj and Umrah ensures a constant
flow of visitors to the KSA with the peak witnessed in the season. This forms a stable and safe
segment of high-end Hajj and Umrah visitors for the premium water market in the KSA. UAE has
been very successful in attracting high-end tourists with reported 13k visitors in Dubai alone in 2014.
Also, the country was able to win hosting a number of international events that brings in a growing
number of visitors as the expo 2020. In line with the growing tourism, a growing number of high-end
establishments as five and even seven starts hotels, restaurants and malls, which are the primary
channels for premium, bottled waters.

Also, the region is becoming a global business hub; attracting international businesses and expats
through investment incentives and attractive packages. The influx of businessmen necessitates
further growth in fine dining destinations that is associated with premium water consumption.

Changing lifestyle

In line with the global trend; leading a more active life is being promoted by having growing number
of health clubs, open parks, gymnasium and work out classes and nutrition and dietary programs
that further encourages water consumption.

Limited Water Resources

The MENA is home to 6% of the worlds population and less than 2% of the worlds renewable water
supply. In fact, it is the worlds driest region with 12 of the worlds most water scarce countries:
Algeria, Bahrain, Kuwait, Jordan, Libya, Oman, the Palestinian Territories, Qatar, Saudi Arabia, Tunisia,
the United Arab Emirates, and Yemen. On average, water availability is only 1,200 cubic meters,
around six times less than the worldwide average of 7,000 cubic meters.

Most MENA countries cannot sustainably meet their current water demand. With population growth
and increased demand, water availability per capita is expected to be halved by 2050. To meet water
demand, many countries in the Middle East rely on desalination plants. Over 75% of worldwide-
desalinated water is in the MENA, 70% of which is in the GCC countries (Saudi Arabia, Kuwait, Qatar,
Bahrain and the United Arab Emirates) and 6% in Libya and Algeria.

The limited natural groundwater resource and reliance on desalinated seawater especially in KSA and
UAE, enhance the poor perception of the tap water quality and furnishes the road towards packaged
water of higher quality and better taste.

Climate Change

The changing climate resulting from the global warming will lead to higher temperatures raising the
hydration needs. Also, climate change is expected to bring an expected 20% reduction in rainfall and
higher rates of evaporation that will make water scarcer. Therefore, bottled water consumption
would be expected to rise in the region.

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Restricted Alcohol Consumption

The prohibited alcohol consumption amongst the Muslim population, especially in KSA, offers an
extra space for water consumption.

Expanding Premium Retails Outlets

The growing range of premium retail outlets including restaurants, hotels, cafes, malls and high end
retail supermarkets and grocery stores to accommodate for the growing inflow of tourists and
business expats, caters the premium bottled water retail channels by increasing accessibility to
exclusive water offerings. Also, the growing healthier customers shift focus away from fast food
chain restaurants towards the European concept of dining, which currently constitute one third of
the food service sector in the KSA, that complements premium water drinking;

Under-Penetrated Premium Water Market

Despite having a higher income per capita than global average however, the premium water
consumption remained below average in the GCC and Middle East, having a market share of 1.1%
from total bottled water market compared to a global average of 5.2% in 2014. Hence, the GCC
remains an under-penetrated market with further growth potential in the premium sub-segment of
packaged water.

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3.5 Growth Strategy


The Growth strategies employed must be aligned with the business objective and timescale.
Different strategies are adapted to achieve the objectives of each phase. During the startup phase;
the main goal is to gain share in the local KSA market through market penetration strategy. Growing
the market share is achieved through product differentiation. While regional and international
market penetration strategy is used for the medium and long-term expansion plans. Over the longer-
term the business will consider diversification through vertical integration as further growth
strategies.

1.1.17 Home Market Penetration


The main post -launching objective is to gain market share in the KSA through building brand
awareness amongst the targeted segments and compete with existing brands. Strategic marketing
tools need to be used such as establishing strong distribution networks and win key retail accounts to
create accessible channels for the customers and enhance premium brand image. Also; launching an
influential advertising campaign, building strong public relations and sponsoring key events will
spread brand recognition. To achieve further penetration new retail platforms are developed through
the brands on-line store.

1.1.18 Product Differentiation and Market


Development

Product differentiation and increased customization

Product differentiation is a key strategic direction embedded within Blues offering in terms of
diversifying the water source, size and shape. As the business evolves, the products served to
customers will be highly customized compared to other products in the market, which strengthens
the brand identity. The customer will be able to tailor his drink through a selection of different
premium water sources, variety of designed bottle editions, sizes, flavors and still or sparkling. This
wide range of variety, differentiation and high degree of customization will allow the company to
increase and defend its market share by eating up its own brands. A similar strategy is followed by
other major players; where the same company introduces multiple brands to cannibalize its own
share. However; doing that by introducing different products under the same Blue brand will
reinforce brand name and hold a stronger place in the market.

Develop new markets

The company can develop new customer segments for its products.

1. Multi- national companies can be a very promising sector for premium water dispensers
especially as the gulf countries host numerous international businesses.
2. Schools and other educational institutions are promoting healthier drinks for children.
Children are an overlooked segment in the water industry; they are more active and
therefore have higher hydration needs. Parents are protective of their children, hence willing

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to provide them with the highest quality of water especially as they are building up their
immunity. Countries like the gulf are home to many international schools that lack access to
quality tap water and can afford premium products.
3. Coffee shop chains are on the rising trend with excessive flagship stores and premium coffee
offering around every corner. Target coffee drinkers through coffee shops retailing is a
complementary sales channel to a premium-bottled water.

1.1.19 Regional and International Market Expansion


At the startup phase, the primary focus of Blue will be on the Saudi market. As the business further
develops and a satisfactory market share is obtained in KSA with an established brand, it will be
taken out to other key GCC markets.

During the sustainable growth phase, the business will target to benefit from economies of scale by
expanding its presence across the key market across the globe (mainly Western Europe, South East
Asia, and North Africa)

1.1.20 Vertical Expansion and Diversification


As the business becomes well established with strong local and international presence, further
expansion is achieved through brand developed retail outlets. New concepts are employed to
promote water consumption and build on brand name. The company at this point will consider
development brick and mortar retail stores for its products and merchandise line. This will be a new
concept in the water industry however; such tactic was used by Nespresso to promote its own coffee
products. Also, water saloons and water bars will be the new coffee places. Having own brand retail
outlets will establish more powerful brand name and stronger control over image. Also, new
interesting concepts will increase the water consumption and sales volume for the whole industry.

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4 Competition Analysis
There are multiple layers of
competition for premium-packaged Alternative Beverages
water. Direct competition includes Soft drinks, Juices, Tea & Coffee
other competing premium brands
however; secondary competition
comes from non-premium bottled Secondary Competition
waters, private labels and tap water. Non-Premium Bottled Water & Tap Water
While alternative beverages such as
carbonated soft drinks, energy drinks, Direct Cometition
fruit juices and hot drinks compete Premium Brands
with water for the daily liquid intake.
The next subsections will discuss each
layer of competition, provide industry
highlights and conduct SWOT analysis.

4.1 Global Brands of Premium Bottled Water


Premium Water Global Sales by Brand (2014)

14.51%
Evi an
Vol vi c
10.11%
Vi ttel
54.15% Gerol stei ner
10.01%
San Pel l egrino
5.71%
5.51% Others

The market for premium-bottled water is


monopolized by two companies; Danone and Nestle Waters. Both companies account for 40% of the
total market through their four leading brands. Danones two main offerings, Evian and Volvic, and
Nestle Waters two major brands, Vittel and San Pellegrino. The top five leading brands account for
46% of the total global premium water market.

Introducing differentiated products to cannibalize sales strategy

One of the strategies employed to achieve market dominance by major players is introducing
multiple brands to cannibalize their own sales. Introducing new flagship brands provides the sense of
novelty, which is key in the premium market. Also, new brands are marketed to different segments
without creating confusing images for the established brands.

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On the other hand; Blue will depend on its single flagship name however; producing differentiated
products in terms of multiple water source, packaging, flavors, sizes, still and sparkling form under
the same brand would serve the same purpose. The variety of product range will be employed as a
strategic tool to differentiate Blue offering, penetrate the market and reinforce brand identity.

An opportunity in the sparkling segment

San Pellegrino is the only sparkling brand in the top five leaders. The taste for sparkling water has
been on the rise in recent years since it adds sense of sophistication of the dining experience. Also,
as consumers move away from sugary soft drinks, they need to replace the fizzy sensation with a
healthier alternative. The sparkling water makes only 17% of the global packaged water volumes. The
sparkling market in Western Europe is highly penetrated accounting for 44% of packaged water sales
while only 2% in Asia. The figure is even lower in the MENA region. The underpenetrated market of
the sparkling water in the emerging market represents an expansion opportunity by establishing a
Blue sparking water premium brand to satisfy the rising popularity of the sparkling form.

Focus on home market before going global

Also, the established brands are characterized by strong global presence without dependence on a
single market, except for Gerolsteiner brand, that depends mainly on Germany as its home market.
Western Europe is the biggest market for premium water with 74% of global share followed by North
America. However, emerging markets in Asia, Africa and the Middle East represent the highest
growth opportunities due the rising of average income and the middle class. Tapping into the
premium water through fast growing markets in Asia and MENA would form a sensible penetration
strategy than going through the mature markets of Western Europe. A successful penetration in the
home market is crucial to gain a foothold prior to expanding into other regional and international
markets.

The rise of the ultra-premium sub-segment

The premium water market has witnessed sub-segmentation of ultra-premium brands such as Voss,
Fiji, Icelandic, Berg, etc. they are characterized by their exclusivity, designed bottle and super
premium water sources. Such brands represent competition for Blue for the special occasions
consumption given they are only available in exclusive outlets. Other premium brands compete on
the daily use frontier given their availability and more affordable premium pricing. Blues diversified
offering of premium water sources and different bottle packaging in terms of material, size and
limited edition designs provides a competitive platform for both the premium and ultra-premium
category. Also, employing multi-channels of high-end retailing would provide an availability and
exclusivity quality to the brand.

Blue penetration strategy

In the light of the existing competition environment for premium-bottled waters; the following are
the summed up penetration strategies for Blue:

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1. Focus on establishing strong presence in the home, KSA, market prior to expanding to other
regional or international markets. The KSA has a strong potential for successful penetration since
it is a fast-growing market while being underpenetrated in the premium segment.
2. Introduce differentiated offering with multiple water sources under the same brand will
cannibalize sales to sustain market share. Similar strategy followed by major players however;
through establishing multiple brands.
3. Focus on penetrating the sparkling segment. Sparkling water has a large volume share in the
western countries but very limited in other markets. Therefore, there is more potential room to
grow in this segment and produce higher profitability. Blue will aim for a leading position for its
sparkling offering.
4. Bring an ultra-premium flavor to the value proposition through retailing an exclusive high-end
establishment and introduce limited edition packaging to capitalize on the rising popularity of
this sub-segment.

1.1.21 Non-Premium Bottled Water


Regular brands do not pose direct threat to the premium sub-segment since they have different
target customer. The premium brands target the higher-end customers while non-premium brands
target the masses. Therefore; the regular brands compete for volumes while the premium brands
aim for higher margins. Hence the premium market commands higher share in terms of value, 11.8%
of the total market, while only having a 5.2% share of the total market volume.

Only during economic downturns, the non-premium brands are a threat to the premium segment
taking up more of their volume share since consumers become more price conscious and trade down
to more affordable brands.

This was evident back in 2009 during the global crisis where the premium bottles were losing volume
share to the remaining packaged water. Therefore; the degree of competition between premium and
non-premium brands depends of the economic conditions.

The competition from the non-premium brands is less of a threat in the gulf countries since the
market is more attractive for premiumization where higher value per liter can be charged due to the
following:

The gulf countries enjoy one of the highest incomes per capita in the world.
There is a supply-demand gap in the water market where the GCC has only limited
groundwater resources, relying mainly on desalinated seawater and importation of bottled
packaged water. The shortage of local water production justifies charging higher value per
liter for a premium brand, which is afforded by a large proportion of the wealthy
populations.

The gulf countries have one of the highest per capita water consumption due to the high
temperature and dry climate all year round. The particularly high demand justifies higher
value per liter, making the gulf region a more attractive market for premium water.

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4.2 Tap water and other Beverages


1.1.22 Tap Water
In many developing countries, especially in Asia and the Middle East tap water is perceived of low
quality and bad taste. Therefore, people are depending on bottled water for their daily intakes.

Tap water is effectively unusable for drinking purposes particularly in the KSA and GCC markets.
Hence; bottled water is the primary source for drinking consumption due to:

Poor Tap Water Quality

Markets as the KSA and other GCC have limited water resource and accordingly depend on
desalinated seawater for their water supply systems; further downgrading the quality of tap water.

Easy Access for Bottled Water

Since such countries enjoy vast array of retail outlets; bottled water is easily accessible; enhancing
the consumption. Additionally; with the fast pace of todays world consumers are looking for more
convenient on the go packaging increasing the appeal for bottled water consumption coupled by the
fact that the point of use for tap water is not being accessible in many places.

On the other hand, in some developed countries tap water is drinkable and people do not perceive it
as having a bad taste; hence it could replace bottle water consumption especially during economic
crunches where bottled water will be perceived as a luxury then. However; the overall trend is
moving away from tap water and towards packaged, easily accessible and convenient bottled water.

In conclusion, tap water is not considered a competition for bottled water in most countries due to
its low quality and uneasy access, which makes it virtually undrinkable, however, in some developed
countries where tap water is drinkable, it constitutes a threat to the bottled water industry during
economic downturns.

1.1.23 Soft Drinks and Juices


The rising global trend towards leading a healthy lifestyle has pushed consumers away from sugary
high calorie beverages as carbonated soft drinks and fruit juices; which are replaced by higher water
consumption to satisfy hydration needs and daily liquid intake.

Also, the increasing awareness for the wellness, fitness and beauty benefits of drinking larger
amounts of water and staying hydrated have increased bottled water consumption. The rising
concerns regarding obesity and diabetes especially among children has encouraged higher level
policies promote drinking healthier low sugar and calorie drinks including water.

The health concerns and rising wellness awareness gave particular attention to the water purity,
content and elements balance. This has created grounds and differentiated opportunities to sub-
segment the bottled water industry into premium water to compete on basis of premium water
sources known for purity and superior quality.

In conclusion, water has been taking away market share away from CSDs and other sugary beverages.

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1.1.24 Hot Beverages


The rising trend in hot drinks

There is no denying that hot drinks, namely coffee and tea are showing growing preference among
the consumers; especially those seeking healthier substitutes for sugary high calorie drinks. They are
marketed as offering antioxidants and other nutritional values. Premium coffee/ tea is a fast-growing
market through offering a variety of different blends through their flagships coffee shops that created
a new sensation for coffee drinking. The rising popularity of international coffee shop chains like
Starbuck and Costa created new points of consumptions for hot beverages.

Also, creating flagship brands coffee pods and coffee machines like Nespresso provided new
merchandising opportunity. Now consumers can drink their coffees in a convenient on-the go
package cup during their commute, in their homes or coffee shops. Multiple consumption occasions
and the different experience provided by the modern designed coffee places or by grinding your own
coffee in the convenience of your own home are key success factors of the coffee industry.

Replicating the coffee industry business model

Premium water industry should follow the coffee business model by creating a different experience
when drinking water through innovative new concepts. Water is usually associated with need
however; moving to the luxury concept, water needs to be associated with experience and hedonic
sensation. Hence; creating concepts that revolve around water as the centric focus rather than being
a complementary product to dining.

Coffee shops offer new retail opportunities for premium water

Coffee shops create a complementary retail outlet for water, especially premium water, as they
match the image for the premium flagships stores like Starbucks. Hence, coffee places are employed
to push premium-bottled waters to coffee drinkers and market for increased water consumption.

Coffee flagship stores occupy the cities streets, with a standing store around every corner. Hence;
creating a massive retail outlet network to push through volumes of premium bottled waters. Such
coffee places target similar customer base as the premium water of the higher income market niche
where individuals are willing and able to pay premium prices for a differentiated coffee/tea drinking
experience. They offer multiple consumption chains to satisfy the different needs of customers
where coffee can be consumed on premises or on to go basis. Accordingly, premium water can be
channeled through the coffee store chains for both the PET and Glass packaging since customer can
stay in or take away their drinks.

4.3 Local and International Brands in


Domestic Markets (KSA, UAE)
1.1.25 KSA
Global Brands

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The KSA market depends on importation of international brands for bottled water. Mainly Evian and
Volvic dominates the premium segment with the higher price per liter in the market. Retail pricing
per liter of a premium brand ranges from SAR 6-11 for PET packaging. Evian offers glass bottles that
charges higher pricing. Other premium brands however; on the lower pricing range include Acqua
Panna and Nord that occupy significant shelf space.

Tanourine and Sohat are Lebanese brands that are widely available in the KSA market however; they
are not considered premium brands. Their price range from SAR 2-3 on per liter basis.

San Pelligrino, Perrier and Badoit are market leaders for the sparkling water segment with a price
ranging SAR 8-20 per liter.

Blue will initially target an average pricing of the existing premium brands on a per liter basis. It will
also match the bundling and packaging offering to capture eye level shelf positioning

Local Brands

The competition in the premium water market in the KSA is comprised mostly of the previously
discussed global brands. There exist several local bottled water manufacturers however; they do not
primarily target the niche segment of premium water. Since premium water is mainly imported, a
higher value per liter can be commanded compared to local regular bottled water.

The leading local producer for bottled water in KSA is Al Manhal Water Factory with a 23% value
share. The companys flagship brands Al Manhal and Pure Life benefits from its strong distribution
network, which ensures its presence across all relevant retail channels within Saudi Arabia, even in
the smallest of corner shops. The brand enjoys attractive eye-level shelf positioning in many retail
channels, particularly supermarkets and hypermarkets, and for this reason the rapid development of
these retail channels has helped it to further strengthen its position.

Blue will not be in direct competition with the leading local brand since it has a different target
market. However; competition will remain for shelf spaces in retail outlets.

1.1.26 UAE
Competition by Global Brands

Evian is the brand leader in the premium water segment with 41% market share; followed by San
Pellegrino for the sparkling water. Tourists and expats are important segments for the premium
market, especially in Dubai, known for its large and growing number of international visitors. The
UAE is dominated by imported global brands with Danone and Nestle making up almost 70% of all
sales and claiming higher value per liter than in their home markets. Over the recent years; other
imported brands such as Voss, Hildon and Anitpodes have been gaining popularity.

Competition by Local Brands

There is limited competition from local production since no premium brand currently exists.
Although; AL-Ain brand is not classified as premium however; it is exclusively stocked at high-end
hotels as Raffles, Atlantis, Emirates Palace and Hilton. Hence; it represents a competition in the high-
end retail channels.

Growth Opportunities

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The UAE market is readily willing to receive wider range of brands of higher premium status. UAE,
namely Dubai, is characterized by its fast development pace and high-end establishment to
accommodate for the consistently growing international visitors. Additionally, Dubai hosts numerous
international events including the high scale expo 2020 which is expected to flood the city with
visitors from all over the world. This frames UAE as a very attractive market for premium products
with fast growth prospects and provides access to the international customer given the high number
of tourists and expats from all over the world.

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4.4 SWOT Analysis


1.1.27 Strengths
Differentiated offering that can build a premium brand and create a strong positioning in the
market.

The brand introduces a new proposition of unique drinking experience based on multiple sourced
and diversified taste premium water that provides an exotic sensation through its narrative designed
bottle. A solid brand identity dictates a strong market position and provides natural defense against
the other established brands. Strong brand is key to successful penetration of the market and
creating loyal customer base.

Global branding would lend accessibility to the international markets.

Although the brand will be initially introduced in the KSA and other GCC, it is established as a globally
recognizable brand. Creating a brand that fits a global status will extend easier access to the
international markets that provides a smoother strategic expansion post the domestic markets
penetration.

Establishing a business model that focus on core business activity

The business model is built around promoting and enhancing brand strength as a key success factors
for successful operation. Accordingly; branding and strategic marketing are the key activities
performed in-house while the remaining tasks will be outsourced to a well-studied qualified third
parties. This helps to create business focus on the brand as a critical factor in the premium market
while outsourcing other non-core activities to specialized organization will add an experienced and
credible work to a newly established business. Also; outsourcing to experienced parties improve
operational and helps produce better margins.

1.1.28 Weaknesses
Competition with leading international brands can hamper successful penetration in the markets.

Established global brands with strong market shares and extensive distribution networks act as a
barrier to successful entry into the market. Therefore; a new brand needs to capture the customer
attention to build a healthy market share and loyal customer base. Accordingly; heavy investments in
branding is essential to stand the fierce competition in marketing and distribution terms.

Having multiple water sources would create complex supply chain.

Despite being a strong suit in the product offering however; multiple water sources are a major
weakness in the construction of the supply chain. Having several extraction locations would require a
sophisticated and well-designed supply chain to achieve operational efficiency and maintain quality.
Therefore; a strong qualified supply chain management is needed to select outsourced parties and
coordinate activities along the value chain across the different locations.

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1.1.29 Opportunities
Healthy growing market with encouraging income and expenditure patterns

The premium water is a globally growing market for numerous factors; as previously mentioned, such
as rising in the disposable income, the healthier lifestyle trends and the lower quality of tap water in
some regions. Growth potential is particularly evident in GCC given the higher income levels and
spending habits, growing population, hot and dry climate, high tourism for Umrah and Hajj in KSA
and expats communities, restricted alcohol in Muslim countries and encouraged service sectors
including fine dining to shift dependence away from the volatile oil sector. The aforementioned
factors compose a very attractive and organically growing markets for premium packaged water.

Underpenetrated niche market for seekers of premium quality packaged water

The economic recovery in the developed nations and the rising income level and middle class in
emerging markets are stretching the niche segment of customers looking for more distinguished
superior products to reinforce their social status. There is a customer base yet to be reached to
supply them with the premiumization they seek. This is particularly true for the Gulf countries who
enjoy above average income per capita with lavish spending and brand seeking are the norm
amongst the higher end tier. However; the premium water market remains underpenetrated with
premium consumption stands below the global average, which presents an opportunity to introduce
a new premium brand.

1.1.30 Threats
The downward pressure on oil prices could hurt confidence in the GCC economies and shrink
luxury spending

Economic conditions dictate the luxury spending patterns. Premium water is considered a luxury
rather than necessity and therefore during an economic crunch consumers re-think their spending
habits and trade down to lower priced brands. The gulf countries depend on the oil industry to drive
their economic growth and therefore susceptible to uncertainty given the volatility in the oil prices.
Currently GCC are witnessing downward pressure on the oil prices that is slowing down the economy
and inhibiting expenditure. GCC governments are promoting the service sector to shift the reliance
away from the oil sector. Nonetheless; the gulf countries remain to be to be one of the richest
nations on the globe despite the economic hit.

The bottled water industry is a target for environmental scrutiny.

Bottled water producers are criticized for the environmental impact of unnecessarily shipping a basic
product half the way across the world in plastic packaging. Therefore; manufacturers must strongly
justify their premium position in terms of water quality and benefits and promotes environmental
friendly measures across their supply chains including usage of recyclable PET.

The ethical debate surrounding the premiumization of water while a large proportion of the
worlds population has no access to safe water.

Many communities in todays world remain without access to clean and safe drinking water
especially in Sub-Saharan Africa. Critics of premium water believe resources could be better allocated
to help promote safer drinkable water. So, to gain favorable grounds on the issue, bottled water

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producers establish humanitarian initiatives and foundations to donate a portion of the profits to
charitable causes.

STRENGTHS WEAKNESSES

Differentiated offering that can build a Competition with leading international


premium brand and create a strong brands can hamper successful
positioning in the market. penetration in the markets.
Having multiple water sources would
Global branding would lend accessibility create complex supply chain.
to the international markets.
Establishing a business model that focus
on core business activity.

OPPURTUNITIES THREATS

Healthy growing market with encouraging The downward pressure on oil prices
income and expenditure patterns could hurt confidence in the GCC
Underpenetrated niche market for economies and shrink luxury spending
seekers of premium quality packaged The bottled water industry is a target for
water environmental scrutiny.
The ethical debate surrounding the
premiumization of water while a large
proportion of the worlds population has
no access to safe water.

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5 Business Model
5.1 Key Activities
There are three key activities; representing the business pillars; strong brand, premium water sources
and efficient supply chain to deliver the end product to consumers. Key activities are performed by
in-house staff where the management lays down the business strategies and broader operational
guidelines. However; a number of tasks is undertaken by outsourced third parties to add their
expertise to the value chain and provide more flexibility to the business model in terms of cost
management and adaptability to a dynamic market.

1.1.31 Build a Leading Premium Brand


The Brand of Blue is the cornerstone around which the whole business will be built. A strong brand is
the key factor to a successful business in the premium segment. The goal is to establish a brand
targeting a niche market, which will boost sales to the key account clients and distributors.

The business management team will establish the branding and marketing strategies since they are
crucial to successful operations however; Some of the involved tasks will be undertaken by
outsourced third parties with the specialized knowledge and experience in their relative fields.

Key tasks under this activity include:

Building a unique brand identity that can deliver the message of the underlying product.
Clear communication of the brand identity would deliver the value proposition, market
positioning and business mission to the target market.
Create the brand slogan, logo and bottle design with multiple packaging materials to meet
different consumption occasions. This task is carried out by a marketing organization.
Arrange advertising campaigns across the different platforms create public relations and
sponsor events to spread brand awareness and build customer loyalty. This is undertaken by
specialized advertising and marketing agencies.
Create digital platform and online presence through an interactive web page and social
media communication designed by a specialized web-designers and social media marketers.
Other marketing tools such as pricing and channels are employed to reinforce brand identity
across the target market. A clear strategy is deployed to rely the marketing message to the
intended niche market

1.1.32 Locate and Access Premium Water Resources


The quality of the packaged water is the key to penetrate the target market (that is looking for
uniqueness and quality rather than other factors).

The key tasks within the activity includes:

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Locate unique geographical sources of quality water, with preference for sources that are not
common in the target market.
Hire technical consultant to advise on water content and purity for the different sources,
certify for quality assurance according to international water standards and produce water
report to gain global ranking.
Build an attractive selling story around the source of the water; that will be used a marketing
tool for the product.
Test the location against the logistic requirements needed to deliver the packaged water to
the target market (ease and availability of packaging and transportation facilities at a
relatively accepted cost with ability to control the quality of the process).
Analyze the feasibility and attractiveness of each source to prioritize the introduction into the
market.
Obtain the required permits and licenses for the rights to water extraction/procurement
from the different locations.

1.1.33 Deliver Packaged Premium Water to Target


Market
This key activity involves the construction and management of an efficient supply chain to ensure the
product is delivered to the intended market in the most effective way and maintains quality across all
phases.

The key task under this activity is to find and handle relationships with all stakeholders that will
provide logistic services needed to deliver the premium quality water from its origin till the clients
hands.

Conduct third party analysis for the outsourced activities, which include water extraction,
bottle manufacturing, packaging and overseas and local transportation.
Select with the most suitable parties and reach an agreement in terms of pricing, service
level, payment terms, etc.
Build a distribution network to deliver the product from the warehouses to retail outlets.
Agree on pricing, discounts, delivery terms, stocking level, presentation and promotion
material, shelf positioning, etc., in line with the established marketing strategy.
Recruit sales team to target key accounts through direct sales and distributors; channeling
the product to the target consumers.
Transport the sold products from the companys warehouse to the distributors or directly to
the point of sale using owned equipped vehicles.
Develop quality and environmental measures and ensure implementation across the supply
chain.
Select and recruit supporting team to handle the financial and HR functions.
Establish ICT infrastructure, run and maintain electronic systems and train staff to use such
systems. This task is handled by an outsourced party.

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5.2 Key Resources


The following schematic summaries the key resources required for Blue at the startup phase:

In House

Human Resources

Outsourced

Headquarters

Capital Resources Distribution Centers

Delivery Vehicle Fleet


Key Resources

Water Procurment Agreements

Third Party Agreements

Operational Resources
Water Quality Assurance
Certificate

ICT Systems

Injected Capital

Financial Resources

Retained Earnings

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1.1.34 Human Resources


The human resources needed are classified based on whether they are in house staff or outsourced.
The bulk of the production operations (packaging and transportation) are outsourced to third parties
at their premises. As mentioned earlier; the in-house staff is mainly responsible for the developing
business strategies, operational guidelines, overlook and coordinate third parties performance and
handle sales activity. This approach ensures that the key activities are controlled by the business
management while the specialty and operational efficiency of the third parties are provided to
extend the business with improved cost management and overall business flexibility to change and
adapt to different market conditions. Hence, a limited number of staff is needed to be hired,
elaborated as follows:

5.2.1.1 In House Staff


The detailed organization structure including main duties and responsibilities for each role, salary
scale and the coordination between the different teams is provided in a later section.

Senior Management Team


Sales & Marketing Team
Supply Chain Management Team
Supporting Function Team (Finance & HR)

5.2.1.2 Outsourced
Branding & Marketing Teams
ICT Team
Supply Chain Teams
Technical Consultant

1.1.35 Capital Resources


5.2.1.3 Headquarters
The headquarters of Blue will be located in KSA (Riyadh or Jeddah). It is a mid-sized commercial
space to host the expanding management and sales teams with a warehouse space that can serve as
a regional distribution facility

5.2.1.4 Distribution Centers


Rented warehouses of various sizes scattered around KSA that can ensure a quick flow of the product
at the downstream of the supply chain. At the startup phase, the warehouses of the distributors will
be utilized, but as the volume of business grows, independent warehouses for Blue will be a must.

5.2.1.5 Delivery fleet


Blue will purchase its own fleet of trucks to deliver the product from its warehouses to the
distributors or directly to the retail outlets. The number of trucks would be a function of sales;
adding more vehicles as sales multiplies. Drivers will be hired to match the number of trucks
available and deliveries. Delivery is an in-house activity since it is essential for building strong
relationships with customers and control delivery schedule.

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1.1.36 Operational Resources


5.2.1.6 Water Procurement Agreements
Water procurement agreements are the key to launch differentiated and sustainable business. These
agreements will be of medium term nature (3-5 years) and a term of exclusivity to export water from
the source to the GCC region will be negotiated and obtained.

The target is to secure 3-5 agreements with different water resources within the first five years of
operations.

5.2.1.7 Third Party Agreements


Third party agreements are crucial for the production process. The outsourced processes include
bottle manufacturing, water bottling and packaging and logistics. These agreements will be in a form
of a medium-term contracts (3-5years) to ensure smooth operation. Fixed prices need to be
negotiated or at least pre-determined margins of increase to accurately project the financial
performance.

5.2.1.8 ICT Systems


The ICT systems are the foundation for efficient business operations and are key to functions such as
inventory and procurement management, delivery scheduling, financial systems, etc. An outsourced
IT specialist will be hired to establish, run and maintain ICT infrastructure and provide the necessary
training to staff

5.2.1.9 Water Quality Certifications


Quality assurance certifications are needed to build trustworthiness among customer base and
monitoring authorities. Such certifications resonate the brand quality and reputation across the
different markets.

1.1.37 Financial Resources


The business will be exclusively financed by the shareholders equity; with no debt finance obtained.
Capital will be injected across the startup period of the first five years while retained earnings from
operations would fill in any financing gaps.

5.2.1.10 Injected Capital


A total capital of SAR 7m would be injected to finance business assets and operations. The capital will
spread over the startup phase of the first five years; with SAR 2m for the set-up expenses, another
SAR 2.5m would be injected in the first operational year followed by SAR 1.5m then SAR 500k for two
consecutive years.

5.2.1.11 Retained Earnings


Based on the financial modeling, attached with the business plan, the business is expected to
generate positive cash flow, which would be fully re-invested to satisfy any existing financial gaps.
Dividends are not planned to be distributed during the startup phase of the first five operational
years.

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5.3 Key Partners

Distibutors

Buyers

Key Accounts
Key Partners

Water Suppliers

Suppliers

Supply Chain

Independent Consultant

1.1.38 Buyers
The buyers at the startup phase are mainly wholesaler distributors who will be in charge of
distributing the product to retailers and key retail accounts (e.g. hotels and corporate) within their
respective regions.

1.1.39 Suppliers
5.3.1.1 Water Suppliers
Water suppliers are either local authorities or private companies that own extraction rights of the
water at the selected locations. As previously explained, the agreements will be a medium-term
nature to ensure sustainable supply of water.

5.3.1.2 Supply Chain


The supply chain consists of:

Packaging of the purchased water


Outbound transportation of water
Inbound transportation of water

Preferably, Blue will look for water suppliers with packaging facilities. However, if these are not
available, the closest packaging facilities to the water source will be identified and agreements will
be reached with them (with a maximum tenor matching the water source agreement) to package
extracted water.

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The packaging will be on private labeling basis, in which Blue will provide the designs and specs of
the packaging material.

Transportation suppliers are world-class freight services that provide high quality and sustainable
logistics services that ensure the flow of the product from the source to the destination. Timing and
preserving the quality are key factors in agreement with the logistics provider.

A long-term agreement will be negotiated, by which Blue can minimize the transportation cost (e.g.
agreement on certain toll or pay minimum volumes per year)

1.1.40 Independent Consultant


An independent consultant is recruited to test the water content in different locations and help with
the selection of premium water sources. Also, it will monitor, improve and certify the water elements
and purity; which are grounds for differentiated offering and justify premium status. Water reports
are presented to obtain global rankings.

5.4 Distribution Channels


The purpose of the distribution channels is to deliver the product to the clients hands. There are two
key points of sales for the premium-bottled water where the target customers are reached; on-trade
and off-trade.

HORECA
On-Trade Direct Sales

Distribution Events
Channels

Off-Trade Wholesaler Retailers

1.1.41 On-Trade
On-trade sales channels are where the product is consumed on premises such as in restaurants,
hotels, lounges, cafes and sponsored social or sports events. Consumption through such channels is
considered special occasions and therefore; water is packaged in higher-end glass bottles. This on-
trade channels usually claim higher margins and hence; are attractive especially during initial
penetration where volumes are limited. Direct relationships are established with key customers
mainly in the HORECA sector through the business sales and marketing team.

1.1.42 Off-Trade
Off-trade market is where the product is consumed off premises or on-the go such as
super/hypermarkets, convenience stores, independent retailers and kiosks. Given that these retail

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outlets are widely dispersed to reach out for larger customer base, they are contacted through
wholesalers. Such channels are useful to push through larger volumes however; they are associated
with larger discounts and lower margins. Those will be employed to achieve higher penetration into
the market and economies of scale. These markets require PET and convenient on-the-go
packaging.

5.5 Revenue Stream


The revenue stream is affected by two key factors; volumes and margins, which in turn depend on
the distribution channel. Blue will have two main revenue streams derived from direct sales and
wholesale distributors.

Revenue
Stream

Wholesale
Direct Sales
Distribution Channel
Distirbutors

HORECA & Other


On/off Trade Market Retailers
Key Accounts

Glass
Packaging PET

Higher
Revenue from Margins
Margins/Volumes Larger Volumes

1.1.43 Direct Sales


Initially Blue will depend on its sales force to establish direct relationships with key retail outlets in
the HORECA sector mainly. The revenue generated from on-trade markets usually command higher
margins for two reasons. First; the product is directly delivered to the point of sales, cutting the
distributors (middleman) margins and therefore a larger portion of the margin goes into Blues
pocket. Second; the customer consumes the product on premises of high-end establishments as five
starts hotels or restaurants and therefore, more willing to pay premium price for a fancier bottle of
water packaged in Glass.

This revenue stream depends on the higher margins element and therefore is considered an
attractive business segment for income generation especially during the startup where awareness
and brand recognition need to be built.

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1.1.44 Wholesale Distributors


For Blue to achieve further penetration into the market, it requires to push volumes to expand
customer brand. Hence, wider distribution network is established through wholesalers to reach out
to more customers through spread out areas. The off-trade market would move volumes since
customers usually shop in bulks at super/hypermarkets. However, they also look for bargains and
therefore; higher discounts are offered to wholesalers to accommodate for the higher volumes and
lower willingness to pay by customers at off-trade markets.

As different water sources and sparkling water are added to the product portfolio, prices and margins
will vary depending on the premium source, transportation cost and the popularity of the product in
the market.

5.6 Cost Structure


The business model is based on outsourcing main activities such as production and transportation.
Hence, limited capital investments are required and therefore the cost structure consists mostly of
operating expenditures.

Total Expenditure

Operating Costs/Expenses Capital Expenses

Brand & Tangible Fixed


Variable Cost Fixed Cost
Assets

1.1.45 Capital Expenses


The main capital expenditure incurred in the setup phase is the brand creation and market research.
Branding expenses would include logo, slogan, bottle design, launching events, etc.

The expenses associated with the market research and research for premium water sources during
the pre-operations phase are considered capital expenditure as well. Both the brand creation and
market research are considered sunk cost during the setup phase.

Other capital expenditure incurring during operations are the cost of equipment, trucks and the
software systems installed. These are owned directly by the business and therefore considered fixed
assets however; they make up an insignificant portion. Most of the businesss facilities such as
headquarter and warehouse are rented.

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1.1.46 Operating Costs/Expenses


The operating costs consist of both variable and fixed costs. The variable costs represent the bulk of
expenses since most of operating activities are outsourced to provide the business with flexibility in
cost management and efficiency. Hence; most cost incurred are related to production and volumes.

Cost Structure

Fixed Cost Variable Costs

Water Procurement
Branding & Advertising
(Cost/Ton)

HQ & Warehouse Rent Freight & Logistics Cost

Salaries & Compensations Sales Commissions

5.7 Customer Relationship


Customer relationship management (CRM) is key to sustain brand reputation and gain market share.
Offering enhanced customer service is another way to create a differentiated offering to retain
customer satisfaction and attract new prospects. Also, a distinguished customer relationship
management will enable the company to understand customer needs, track changing trends and
keep ahead of the competition. Therefore, it is an integral sales and marketing tool, which is mended
in the organization culture and structure. There are two customer categories; the direct customers
which are the wholesalers and retailers and the end-users. Both requires different communication
channel to build strong and trustworthy relationship.

Customer Relationship Management of Account Portfolio

During the startup phase, relationship management of the key retailers accounts and wholesale
distributors will be more prominent since it is critical to build extensive distribution networks to
successfully penetrate the market. The sales team will directly manage the relationships for the
whole portfolio of accounts to ensure service quality and timely delivery, resolve queries and
consistently seek improvements. Strategic and key accounts that influence brand positioning and
penetration strategy and involve bulk volumes are handled by higher levels of management.

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Customer Relationship Management of End Users

As the business grows it will become more important to set direct communication channels with the
end-consumers to reinforce brand reputation and retain customer loyalty. The most effective way to
reach to a wider customer base is through social media where individuals post their opinions and
reviews about the product, marketing material l or advertising campaigns. It is essential to consider
such feedback to predict trends and consumption patterns and in turn develop a competitive edge.
CRM through online platforms and social media will be initially managed by a third-party marketing
agency under the direction of the sales and marketing directors. However; as the business expands,
it will be important to move the function in house through a CRM section under the sales and
marketing department via online and telephone helpdesks.

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6 Sales & Marketing


Plan
6.1 Market Positioning
The market for packaged water consists of three main categories:

The non-premium segment Ul


tr
Makes up the larger portion of the customer a
Pr
base since it targets the masses. There are
e
numerous players in this segment. Price and mi
shelf position are the main basis for u
competition in this category. Prem
m ium

The premium segment

Targets the higher- end of the market for Regular Bottled


bottled water. This segment is dominated by a
Water
few number of global brands where branding
and water quality are key differentiators.
Although the market for premium water has a limited client base however; they command premium
prices and higher margins and hence; generates higher profitability.

Looking at the competition canvas of the premium brands; they are categorized by the consumption
occasion. Brands like Evian occupies the everyday consumption end-of the spectrum while brands
like Voss and Fiji fills in the special occasions space.

Blue is positioned in the premium segment; targeting the niche market of higher-end consumer. Blue
brand aims at occupying the everyday consumption through building extensive distribution networks
to push through volumes. Blue would also target special occasions by directly establishing
relationships with high-end establishments to derive higher margins.

Extensive sales and marketing strategy is needed to acquire and sustain the targeted market position
for Blue Brand.

The Ultra-premium

The ultra-premium is considered sub-segmentation of the premium bottled water; targeting the top
end of the market. There are limited number of brands to serve a market characterized by exclusivity
and luxury.

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Although this is not the main target market for Blue however; penetrating the ultra-premium
segment could be considered future expansion strategy through introducing limited editions for
example.

1.1.47 Brand Image and Identity


From the startup phase, the corporate identity of the business will be aligned with the brand. The
logo, stationary, layouts, etc., of the Company will reflect the brand and the offerings. The designs
used will be highly elegant and specially designed to reflect the nature of the Blues offerings.

The brand design reflects the spirit behind Blues offerings, being packaged water procured from
superior and unique resources from around the globe.

For the sake of differentiation, there will be two main themes of brand designs, one used for still
water offerings and the other will be dedicated for sparkling water offerings.

Branding is multidimensional that needs to be aligned and consistent. Strong brand could establish
brand equity and add value to the companys net worth. It is reflected in the following aspects of the
business:

Logo
Slogan
Graphics, Fonts, Colors used in marketing material
Advertising messages
Corporate mission
Unique offering
Premium Quality
Online Content
Sales channels
Events sponsored

1.1.48 Strategic Goals


During the startup phase of the first five operational years; the following strategic goals are set:

Become one of the top five brands in the KSA market.


Introduce five different sources of premium water to the market.
Have distribution networks in the top three cities of KSA (Riyadh, Jeddah, Mecca).
Acquire a major event sponsorship in KSA.
Acquire exclusive distribution agreements with several key accounts.
Create brand awareness and penetrate 2% of the market volume by the end of fifth year.
Meet international environmental measures.

6.2 Sales & Marketing Plan


Marketing is the key to the success and ensuring sustainability of Blue. Throughout the life of the
business, extensive marketing campaigns will be a core activity of the business. During the startup
phase, the marketing plan will aim to build brand awareness and create a space for it within the
intended target market.

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As of the operational and sustainable growth phases, the marketing plans will target maintaining and
increasing the brands market share either through opening new markets or through eating up
market shares of existing players.

When looking to eat up a market share of existing players, Blue will be looking to eat up the shares of
relatively small players who have weak existence in Blues target market (i.e. GCC region is not a key
market for these businesses), which will ensure success of the strategy.

Blue will implement a mix of marketing strategies used by standard beverage market players as well
as strategies utilized by branded consumer goods (e.g. branded perfumes and apparel).

1.1.49 Promotion Strategy


The purpose of a promotional mix is to communicate to the target customer Blues offering will
deliver key message that reflects the brand identity. Different promotion tools are used to reach
across the different customer segments. It is particularly important during launching to get the
message right across to the audience.

As Blue initially penetrates the market; the focus will be converting prospective clients to actual
consumers. This involves cannibalizing market share of other players. As further penetration is
achieved, expansion would require developing new markets through new promotion mix. After a
significant market share is acquired, it is important to retain existing consumers and increase their
consumption since at this point retention of customers will be more economic than converting a new
customer.

6.2.1.1 Conversion Strategy


Packaging

Packaging is the first thing that catches the eye of a new consumer. Therefore; an attractive
packaging and an elegant bottle design promote the brand and capture the attention of the target
market.

Different packaging is used for the still and sparkling form. Also, different material is utilized to match
the consumption occasion. Glass bottled is served at the high-end sectors of the HORECA for special
occasion consumption. While PET bottles and more convenient on-the-go packaging are used for
the everyday consumption at the retail stores.

Limited editions packaging is used as a marketing tool to create differentiated experience and
produce higher margins.

Global players introduce new brands to create a sense of new excitement to sustain market share.
Such sensation can be replicated by Blue however; through creating a differentiated packaging and
associate it with the new water sources introduced to the market. Such tactic enables blue to
cannibalize its own sales under the same brand instead losing market share to other brands.

Advertising Campaign

Launching an advertising campaign is one of the most effective tools to spread brand awareness and
communicate the product offering to the audience. Different mediums are used to reach out to
different customer segments. The ads message need to be clear, understood and match the societys
culture and norms.

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TV commercials target the masses and therefore; will be the fastest way to achieve mass awareness.
Time slots need to be carefully selected to ensure the largest number of audience is watching.
Optimum daytime is the evening where the whole family members are gathered around the TV to
watch their TV shows. Individuals are usually occupied during their mornings and noon in work,
running errands or spending the day outside.

Billboards ads are used to capture the morning working audience during their commute. Billboards
are placed on the main corridors to grab the attention of as many commuters as possible. Also, they
are placed in commercial malls, spas and coffee shops to target the female audience. Health and
nutritions centers would be destinations for health conscious and fitness oriented customers and
airport lounges and event halls will capture the attention of businessmen, expats and incoming
visitors.

Content Marketing

Content marketing is very relevant since storytelling is part of a unique selling proposition. Exciting
and grabbing content is created around the packaging and other marketing material. Video, graphics
and written material are deployed to tell the story behind each offering.

Event Sponsorship

Sponsoring a high-profile event would expose the product to new customers and encourage first
time trials. Exclusive event sponsoring will make first time consumption easier since no other
premium water brand would exist. The chosen events need to match the brand identity of a high-end
nature. This could include elegant social and sport events such as polo tournaments, Horse Shows,
High end cultural events, etc.).

Product Placement

Although product placement in a popular TV show is expensive and capture the attention of limited
audience given the short time slot, it will reinforce the brand and justify its premium status. This tool
is employed at later stages when the brand has been established in the market.

6.2.1.2 Retention Strategy


Bundling

Bundling several cases in a single packaging delivers a value offer to the existing customer and helps
encourage higher consumption levels. Although; this cuts down margins, larger volumes are
achieved.

Also, bundling of different sourced bottles and sparkling water promotes the newly introduced water
sources and attracts different customers. It also encourages developing a taste for sparkling water,
which is still not very popular in GCC, and promotes its consumption.

Loyalty Programs

Developing loyalty programs for re-current customers increases consumption in two ways. First,
collected points could be redeemed in exchange of more Blue bottled water from retailers. Seconds;
the redemption points system will be used to obtain discounts in partnered retailers of the HORECA
sector; which are serving Blue water with their dining.

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The partnered retailers need to be carefully selected to align with the premium branding and mission
of Blue in order deliver consistent message of a healthy lifestyle to consumers. This encourages two-
way referrals and generates further consumption.

Discounting

Blue will control the retail price, which should not be discounted since the target market is not price
sensitive and offering discounts would not significantly raise consumption. However; discounting will
hurt margins and profitability and hence; bundling will be more suitable tactic to offer value against
volumes.

On the other hand; discounting will be offered to retailers and wholesale distributors to push
through more volumes. Wholesalers will be offered higher discounts given the higher volumes
moved.

6.2.1.3 Online Marketing Strategy


Online marketing offers an important platform to reach a wider and more disperse customer base.
Conventional marketing is important to target the traditional individuals and families however; the
digital world targets the younger generations and the business community whom are technology
oriented.

The online marketing is more efficient for several reasons:

It reaches out to different demographics.


It reaches the international customer and builds global names.
It is more interactive and visually appealing.
It is less expensive.
It helps in obtaining end-user feedback to improve the offering.
It offers access to consumer opinions and social media interacting opportunities to create
differentiated customer experience.
It is more suitable for content marketing where more appealing tools such as videos and
graphics are used to tell a story.
It could encourage referrals through a good review about the brand posted online.

The following online marketing tools are used to promote the brand and open direct communication
with end-users:

Digital advertising

Digital ads will be placed on the companys website or other frequently visited sites by the target
customers. Popular networks would be YouTube and Facebook, which host the largest user base.

The sharing of the ad video on the social media will spread brand awareness and offering message in
a fast pace.

Website

The design of the companys website should reflect the brand image and corporate mission and
identity. It will include information about the company and management team. It will be used to
demonstrate the product portfolio.

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It is important to create mobile and tablet versions of the website since they offer more frequent and
convenient usage.

The website will contain content materials about the exclusive stories of the water origins local
manufacturing and package design.

It will also provide information about the corporate responsibility, environmental measures, quality
assurance, certifications and awards

Social media

The social media establishes direct communication with end-users. Customers post their feedback of
the company and share their opinions. Positive reviews will earn the brand new customer base.

Also, the company will release statements or replies to any enquiries or negative press. It will also
use the social media platform to promote new offerings.

Newsletter

Offering digital newsletter to subscribers will help customers stay connected and updated with the
brand. It will serve the content material and the storytelling proposition. It will also promote newly
introduced products, limited editions, sponsored events, etc.

The newsletter content will also promote health awareness messages.

Mobile Application

Developing a health application for mobiles and tablets will complement the brand message of
leading a healthy lifestyle by staying hydrated with nature, pure and organic liquid. The application
concept will be built around sending notification alerts to drink water based on your hydration
needs; accounting for your activity level, temperature, heat, time of the day, diet intake, etc.

Creating a mobile application would take advantage of the rising trend in usage of mobile devices to
promote water consumption and reinforce branding.

The application tool is used at later stages as part of a differentiating brand offering and new
promotion tactic.

6.2.1.4 Referral Strategy


The referral strategy depends on word of mouth in order recommend the brand to friends, family or
other corporate accounts. Trust and sound reputation are main factors build a successful lead
conversion strategy.

The referrals channels have been embedded in some of the previously discussed promotion tactics
however; it is useful to highlight them to monitor and track down the success ratio.

Corporate Referrals/Partnerships

Establish direct relationships with key corporate accounts especially in the HORECA sector will create
referrals opportunities. Strengthening the relationship through better servicing and pricing and
popular customer demand will improve the referrals numbers and success ratios.

An effective referral strategy would provide a two-way referral system, as previously explains through
redemption points at partnered retailers.

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Customers reviews and opinions posted online

The social media is offering direct communication with customers. Sharing the experience and
posting positive reviews of the brand on the social media will encourage others of the same network
to try the brand.

Special attention is given to individuals and bloggers with a large number of followers as those have
significant influence on their networks opinions. They provide access to their wide networks.

E-mail referrals

Referrals are encouraged through the subscribers of the newsletter to provide three of their e-mail
contacts for promotion codes or additional redemption points.

1.1.50 Sales Channels


As previously explained, the intended target market for Blue is high net worth niche in KSA and GCC.
Hence, the sales channels that will be used are highly focused to deliver the product to the hands of
the right target client.

During the startup phase, the focus is to create brand awareness at the fastest pace possible and
quickly build up sales volume to enhance economies of scale. Hence, the focus initially will be on the
wholesale distributors to produce volumes and the key accounts to derive margins. At later phases
where the business achieves volumes and build strong brand, online retailing will be added as an
additional sales channel to target new markets.

6.2.1.5 Wholesale Distributors


Wholesale Distributors who are known to be suppliers to off-trade retailers where the product is
consumed off the premises such as hypermarkets, supermarkets, convenience stores and kiosks. The
packaging used for this channel is usually PET bottles to offer easy and on-the-go packaging. It would
be the channel used to penetrate the market. These distributors will help achieve the targeted
volume sales needed to take the business to the sustainable growth phase.

The desired distributors must show their ability to efficiently cover all the key markets across KSA
(either by direct access to clients or a strong network of sub-wholesalers).

6.2.1.6 Key Accounts


Blue will seek to establish direct relationships with key customers known to have direct access to the
intended customers (mainly these are 5-star hotel chains, restaurants, cafes and airlines with heavy
business in KSA). They are on-trade markets where bottled are consumed on their premises and
therefore fancier glass packing could be used. The consumption occasion is usually associated with
special occasions and events. Higher margins are generated through this channel.

The key accounts will be able to negotiate better pricing terms against Blue at this phase, but they
will provide a direct access to the intended client base, assisting quicker buildup of the brand.

6.2.1.7 Online Retailing


Online sales are used as an additional channel in later phases when it becomes more feasible with
larger customer base and established brand. It will be used to develop new market segments, which
was previously missed by the traditional channels.

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It will complement the existing digital resource of the companys website and social media pages.
Also, offering online selling will capitalize on the existing digital followers of the brand across multiple
online platforms.

Online stores will offer a differentiated shopping experience to reinforce brand name. The online
store will offer customize ordering; selecting from a range of water sources, packaging and limited
edition bottles for still and sparkling.

1.1.51 Pricing Strategy


Although Blues target market is not highly sensitive to pricing, a consideration must be given to the
fact that the market landscape is of a monopolistic nature; hence competitors pricing must be taken
into consideration when setting the retail price.

In general, the brand will control the retail price of its offering across the market. Pricing is set at the
average price per liter of the premium brands existing in the KSA market.

The average price per liter is higher for glass bottles than PET packaging. Also, sparkling water
charges higher prices per liter than still water. Pricing will also depend on the sales channels where
on trade HORECA market commands higher retail price.

Bundle pricing drives down the price per liter and accordingly margins. The bundle package price is
set at the average price per liter of the other premium brands bundles.

The margins of the distributors will be subject to negotiations within a set benchmark range set
internally by Blue. Higher discounts are offered to distributors since they move bulk volumes than
the direct sales.

The pricing strategy is revised based on the extent of penetration and the market share acquired.
Profitability per offering will be a key determinant of the pricing at the next phase.

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7 Operations Plan
7.1 Legal Structure
A limited liability legal entity will be established in an investor friendly European Country, with the
main shareholders being the business investors.

The Company will build and develop the brand. The offerings trademarks will be registered and its
market value will be constantly evaluated and registered on the Companys books; being the major
asset owned by the company.

7.2 Organization Structure


Given the size of the business, especially at the startup phase, a flat organizational structure will be
implemented.

The flatness of the structure mainly aims to:

1. Cut operational costs and


2. Ensure enough flexibility and interaction amongst all teams

Its crucial for Blue to construct its organization structure in a way that enables it control its supply
chain and at the same time be strongly present in its target markets.

Sales & Marketing S&M


S & M Supervisor
Manager Representative
Supply Chain Supply Chain Government
Boardof Directors

General Manager Manager Coordinators Relation Officer

Accountant
Finance & HR
Manager HR & Admin
Specilaist

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1.1.52 Organizational Structure Rollout phases


Position Year 1 Year 2 Year 3 Year 4 Year 5
General Manager 0 1 1 1 1
Sales & Marketing Manager 1 1 1 1 1
Supply Chain Manager 0 0 1 1 1
Finance & HR Manager 1 1 1 1 1
Sales & Marketing Supervisor 0 0 1 3 3
Sales & Marketing Representative 2 3 6 10 16
Supply Chain Coordinator 1 1 2 3 4
Government Relations Officer 1 1 1 1 1
Accountant 1 1 2 3 4
HR & Admin Specialist 1 1 1 1 1
Total Number of Staff 7 10 17 22 30

During the setup phase; only positions of strategic importance will be filled. As the business size
grows more positions will be assigned according to the business needs.

The general manager is hired during the second year of operations where the middle management
will be reporting directly to the board of directors.

Sales and marketing are driving force behind the business to achieve strong initial penetration into
the market. Hence; sales and marketing manager and representatives are a first-year hire. However;
the position of a sales supervisor will be irrelevant in the first couple of years given the small size of
the sales team. Sales representatives will be reporting directly to the sales and marketing manager.
The size of the sales team would be a function of the growing sales volume.

Initially the supply chain function will be relatively simple given single source procurement during the
first two years along with limited number of distributors. However; as the business grows, adding
more sources from multiple locations and establishing wider distribution networks, a more
sophisticated supply chain need to be managed. Hence; a supply chain manager is planned to be
recruited in the third year.

The supporting functions of finance and HR will be required from the startup face to manage daily
transactions and ensure smooth business operation.

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1.1.53 Salary Scale


Position Salary (SAR 000s)
General Manager 20
Sales & Marketing Manager 15
Supply Chain Manager 7
Finance & HR Manager 12
Sales & Marketing Supervisor 13
Sales & Marketing Representative 10
Supply Chain Coordinator 5
Government Relations Officer 5
Accountant 5
HR & Admin Specialist 5

The salary scale is benchmarked against the market average in the KSA. The salary includes total
compensations for each position.

1.1.54 Organizational Structure Definition& Role


Description
7.2.1.1 Board of Directors (BOD)
The board consists of executive members, with management powers as well as non-executive
members representing the shareholders. All shareholders could be appointed as board members or
some shareholders will delegate others to present them in the BOD.

Also, independent experienced non-executive members may be hired based on the need for them
and the approval of the whole board.

Board's responsibilities are:

Setting the general strategy of the business


Approving the annual budget submitted by the General Manager
Hiring& releasing the General Manager
Approving/Rejecting of General Manager's recommendations to hire/fire head of business
units
Monitoring and appraising the performance of the General Manager and heads of business
units

BOD members will be appointed within the middle management layer, especially at the startup
phase to ensure that the model's vision and mission is within the board's strategy.

7.2.1.2 General Manager (GM)


Reports to the BOD, and he could possibly be a board member as well, the GM's main role is:

Ensuring the implementation of the BOD's strategy

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Liaising workflows among different business functions to ensure that they collectively
coordinate to achieve the BOD's targets
Setting the annual budget and obtain BOD's approval for it
Approving the monthly and quarterly budgets
Being accountable against the BOD for implementing the annual budget

Approving/Declining the recommendations of Business Heads to hire/fire their respective reporting


staff

7.2.1.3 Sales& Marketing Manager


He/she is experienced sales personnel in niche market consumer goods, and reports to the GM.
His/her key roles include:

Preparing sales forecasts for different operating segments


Setting marketing strategy and budget
Handling relationships with third party marketing and branding agencies that will be
hired in the target markets
Recommending to the GM hiring/firing required staff for sales teams under her/his
supervision
Handling relationships with key clients
Supervising the sales teams

7.2.1.4 Supply Chain Manager


A highly-experienced supply chain manager with long-term experience of handling overseas supply
chain functions (handling third party relationships, import/export businesses, shipping/aviation
relations).

Key roles include:

Setting and monitoring effective and efficient agreements with third party service providers
at different stages of supply chain (Source, Packaging, Quality Control and transportation &
warehousing)
Ensuring smooth supply chain flow from the water source till the distributors
Controlling operational costs to ensure meeting profitability targets set by the BOD
Supervising the supply chain coordinators who are spread out across the supply chain to
ensure efficiency

7.2.1.5 Finance & HR Manager


An experienced finance manager, preferably with strong experience in a multinational consumer
good provider. He/she reports to the GM and liaises with other business functions to:

Prepare the periodical statements of the business


Manage the cash and banking relationships of the business
Monitors the collection of receivables and settlement of payables of the business
Handles all HR related issues (hiring& firing staff, compensations, vacations, work
permits, etc.)
Handles relationships with taxes and zakat authorities
Handles insurance relationships

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7.2.1.6 Sales & Marketing Supervisor


Experienced sales personnel with strong market knowledge and leadership track record. He/She will
report directly to the sales and marketing manager with the following responsibilities:

Recruit and manage a team of sales representative


Set and communicate sales plan and targets
Handle key customer accounts and negotiate bulk contracts
Report sales performance and market updates
Supervise, guide and motivate sales team

7.2.1.7 Supply Chain Coordinator


Experienced personnel in supply chain management with previous track record in handling overseas
functions. He/ She will work under the supervision of the supply chain manager with the following
responsibilities:

Handle operations with third party water procurers and freight services to ship and deliver
goods to the customers; warehouses.
Liaise with sales team to determine order quantity and prices and coordinate delivery
schedule with customers.
Ensure cost management across the supply chain to meet budget targets
Coordinate with government relation officer to ensure all relevant paperwork is in order with
local laws and regulations.
Ensure correct ordering and payment of suppliers

7.2.1.8 Accountant
Experienced in financial working. He/she will report directly to the finance & HR manager with the
following responsibilities:

Prepare journal entries and maintain general ledger


Handle banking operations
Generate financial reports and closing statements
Process payments and manage cash collections in liaise with sales team
Prepare and compute tax/zakat returns

7.2.1.9 HR & Admin Specialist


A specialist in human resources management; reporting to the finance and HR manager.

The role includes:

Manage the recruitment, termination, promotion and transfer process of employees


Finalize contracts and paperwork related to employees
Handle payroll and insurance claims in coordination with finance
Screen job candidates for vacant positions
Ensure abidance with local labor laws and regulations

7.2.1.10 Sales & Marketing Representative


An experienced sales representative with experience in sales and customer service field. He/she will
report to the sales and marketing supervisor.

His/her role includes:

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Establish and manage customer relationships and ensure customer satisfaction


Negotiate and agree to contract terms with customers
Be representative of the companys values and brand image
Answer customers queries and resolve any issues/complaints
Generate new sales leads and promote companys products
Attend sales and marketing events to establish new relationships

7.2.1.11 Government Relations Officer


A government relations officer must have strong knowledge of local laws and regulations with strong
network among authorities staff. He/she will work under the supervision of the supply chain
coordinator with the following role:

Ensure all relevant paperwork regarding the procurement, shipment and water content
complies with the standard policies and regulations
Finalize all customs related documents to release the goods at ports
Attend to the companys legal documentation and registration

7.3 Workflow
1.1.55 Strategy Workflow
The strategic flow chart illustrates the procedural setting for the business at the top and middle
management level.

The BOD and GM jointly set the strategic targets and budgets in agreement with the business lines
heads. The performance of each business unit will be assessed periodically against the set targets
and the business heads and GM shall be held accountable in front of the BOD.

The GM along with relevant business heads will also be responsible for managing strategic
customers, suppliers and third parties relationships.

Horizontal coordination between the business lines and supporting functions is set to ensure
cohesiveness of operations and alignment of targets. The sales and supply departments shall work
closely to plan sales forecast and procurement requirements to ensure meeting sales and budget
targets. Both departments will liaise with finance & HR to agree on acceptable payment and
collection policy, produce budget plans and fulfill the human resources requirements.

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7.3.1.1 Vertical Flow


1- Jointly set overall strategy

BOD
2- Set targets and budgets for each business unit

3- Assess performance against targets

4- Re-evaluate direction
GM

1- Agree on sales targets and budgets


2- Handle strategic customers
3- Handle third party agreements for marketing and branding
4- Recruit sales team Sales &
5- Report sales performanceMarketing
Manager

1- Set cost management measures


2- Negotiate strategic contracts with water suppliers and freight services

1- Prepare budgets and cost allocation


2- Produce financial statements and reports
Supply Chain
Manager

Financa & HR
Manager

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7.3.1.2 Horizontal Flow


1- Coordinate sales 1- Jointly set related 1-Agree on credit terms
forecast with demand budgets offered to customers
planning
2- Agree on suppliers 2-Agree on cash
2- Liaise to ensure timely payments terms collection procedures
delivery to customers
3- Fulfill HR 3-Fulfill HR requirements
3- Cooperate to set requirements for the for sales department
pricing and cost strategy department

Sales & Marketing Supply Chain Finance & HR Sales & Marketing
Manager Manager Manager Manager

1.1.56 Operational Workflow


The operational flow charts the sequential set of processes required for running the daily business
operations in an efficient and effective manner. It shall be used as a reference by the junior level staff
to carry out their day-to-day tasks in accordance to the standards procedures layout hereunder. The
workflow shall be reviewed regularly to better fit the business needs.

The process commences by receiving an order by the


client. The sales teams will be responsible for drafting Customer Prepare
the purchase order to include prices, volumes, Places an Order Purchase Order
delivery and other relevant terms of trade.

Then it shall be reviewed by the sales supervisor and


the supply chain coordinator to ensure quotation will Review &
generate required margins and that the terms of trade Approved Evaluate Terms
of Trade
will be acceptable by suppliers. If not; sales team need
to renegotiate with the customer.

Upon customer acceptance of the revised terms; the


Place Order
order and shipment shall be arranged by the supply with Water Shipment
chain coordinator. Upon goods arrival; customs and Procurer
relevant paperwork will be finalized by the
government relations officer and delivered to the
customers warehouse. Receive &
Prepare & Transport Goods
An invoice is prepared and handed to customer after Deliver Invoice to Customer's
which; the cash collection is followed up the sales Warehouse
team in coordination with finance. While the supply
chain arranges with finance to make suppliers
payments. The cycle ends when cash is collected from Make Payment to
customers and payments are made to suppliers. Suppliers & Receive
Payments from Customer

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8 Financial Projections
Summary
8.1 Revenues

Net Revenues Breakdown (SAR 000)


25,000
20,000
9,656
15,000
6,082 10,000
3,558 12,875
2,094 8,109 5,000
1,396 2,792 4,744
1,861 -
1 2 3 4 5
Di rect Sal es Key Di stri butors
The below graph shows the expected
net revenues over the first five years of operations.

Each sales channel is expected to contribute equally to the total net revenues.

Net revenues are expected to grow at a CAGR of 70% between the first and fifth operational year;
starting from a total of SAR 2.4MM to SAR 18.7MM.

The growth is mainly derived from growing sales volumes since prices are expected to be consistent
across the first five years.

1.1.57 Sales Volume


The growth in volumes is triggered by the capital injections, which are spread across the first five
years of operation. The bulk of each capital injection is used to fund opening new supplier channels.

New water sources are added gradually throughout the years; commencing with China then adding
Iceland, Norway and finally USA and Canada.

The CAGR of sales volume mirrors the 50% of the growing net revenues; starting from 213 tons till
reaching 1,640 tons by the end of the fifth year.

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Sales Volume Evolution by Origin (Tons)


2,500

2,094
2,000

1,500 1,328

1,000
796

480
500 320

-
1 2 3 4 5

China Iceland Norway Canada USA Total

VPL (SAR)
16
14
12
10
8
6
4
2
0
1.1.58 Reta i l Pri ce Key Account Di rect Cl i ents
Pricing and
Discounting
The retail pricing is set at the average price per liter for premium brands in the KSA market. The retail
price is set around SAR 15 per liter.

The wholesale price offered to distributors will be at 40% discount rate while direct accounts will be
offered 20% discount.

8.2 Operating Expenses


Blue is expected to generate negative EBITDA during the first two years. However; as the sales grow,
revenues will cover the operating expenses to result in a healthy EBITDA margins thereafter.

EBITDA margin is expected to rise from -16% in the first year to 22% in the fifth year.

COGS contributes to the bulk of the operating expenses and hence; running an efficient supply chain
significantly influence margins and operating profits.

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Operating Expenses Breakdown


30,000

1,804 25,000

20,000
12,608
1,565
15,000

8,324
1,361 10,000
1,549 5,450
1,526 10,729 5,000
3,670 6,758
2,332 3,953
1,551 2,326
-
1 2 3 4 5

COGS Tota l Sel l i ng Expens es Tota l Admi n Expens es

1.1.59 Cost of Goods Sold (COGS)


COGS Breakdown (SAR 000)
12,000
10,000
8,000
6,000
4,000
2,000
0
1 2 3 4 5
Total Raw Materi al Cost Tota l Trans portation Cost
Blues COGS allows for a healthy
gross profit margins throughout the five years of projection period.

The gross profit margins is constant around 67%, given that the price increase of raw materials is fully
passed to the end client.

The bulk of COGS goes to the cost of procurement, which includes packaging.

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1.1.60 Selling, General & Administrative Expenses


(SG&A)
8.2.1.1 Selling Expenses
Selling Expenses Breakdown (SAR 000)
3,500
3,000 312
2,500
2,000 312
312
1,500 156 2,520
1,000 600 960 1,560
156
500 360 820
420 620 370
0 120
1 2 3 4 5
Advertis i ng
Sal es Staff
Inl a nd Trans portation Costs
The bulk of the selling expenses goes to the
sales staff salaries. As illustrated in the graph the proportion of the sales staff expenses increases
across the projection period since the sales teams is a function of the growing scale.

The advertising budget is derived by funds produced from the capital injection or retained cash.

8.2.1.2 General & Administrative Expenses


Admin Expenses Breakdown (SAR 000)
2,000
1,800
1,600 372
97 120 253
1,400
169
1,200
642
1,000 642
999 999 642
800 100
600 100
100
400 100 100 420 540
180 Contingent180 300
200 Other Admi n Expens es Middel Mana gement
Permi
150ts & Li cens150
es 150 Admi
150 n Staff 150
0 Centra
1 l Warehous2e Rent 3 4 5
The middle management
compensation makes up the bulk of the administrative expenses.

Impaqata assumes the general manager role during the first couple of years to ensure that the
startup phase passes smoothly and the business is on its right path. Later on, the general manager
will be hired

The administrative staff expenses grow proportionately alongside the business size.

The other expenses are utilities and contingent admin expenses.

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8.3 Profitability Indicators

Bottom Line Profit (SAR K) & NPAT Margin (%)


8,000
25% 7,000
6,000
15% 5,000
4,000
5%
3,000
2,000
-5%
1,000
-15% -
1 2 3 4 5
(1,000)
-25% (2,000)
The business turns profitable starting the third
year of operations.

The bottom line profits increase from SAR -830K till SAR 6.6MM by the end of fifth year. The NPAT
margin rises from -18% to 19% by the end of the projection period. The ROE inclines from -18% in
the first year to 50% in the fifth year.

A flat tax and Zakat rate is set around 5% of the pre-tax profits.

There will be no dividends distribution during the first five operational years where all profits are
retained to be reinvested in the business to upscale the procurement volumes. After which the
management shall decide during board meetings on distribution the excess cash to shareholders.

8.4 Capital Injections

Capital Injection Schedule (SAR 000)


3,500
3,000
300
2,500
900
100 2,000
200
300
1,500
700
50 1,000
1,500 500
1,000 50
- - 500
400 250 500
200 -
1 2 3 4 5
Procurment of Goods Advertis i ng
Suppl y Chai n Others
A total capital of SAR 7MM shall
be injected gradually into the business.

The capital will be allocated to three main categories; opening new supply channels, supply chain
and advertising.

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The amount of capital along with retained cash from business operations will be used to fund
procurement.

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8.5 Financial Statements Projections


1.1.61 Income Statement

1.1.62 Balance Sheet

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1.1.63 Cash Flow Statement

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