Chemical Laboratory Business Plan

Granite Industries, Inc.

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Market Analysis Summary

We are a highly technical niche player with a specialized product line that is in great demand. Our target markets are the distributors who have established relationships with speciality products firms, textile chemical companies, and consumer products outlets. We are essentially the manufacturing arm for these distributors and can provide development services, as well as products for them.

4.1 Market Segmentation

Our market is divided into three segments:

• Industrial Products: In this segment our customers include Customer B, Customer D and Distributor A.
• Consumer Products: Handled primarily through distributors.
• Textile Products: Customers are: Customer E, Customer C, Customer F and Customer G.

Customer Profiles:

• Customer E. This family of  companies are manufacturers and distributors of textile speciality chemicals. Our sales to them in 1999 were $59,000, and were $72,000 in 2000. Our sales to them are estimated to grow to $250,000.
• Customer A. A marketing and chemical broker company. We provide product and process development and manufacturing services. They are the agent for Creatine Monohydrate, Kelate CU, and Melasyn 100. The potential here is over $2 million in sales.
• Broker A. A marketing company and chemical broker. We process ion exchange resins and purified Flavoring Product A for them. We can anticipate $200 to $300,000 in sales to them per year.
• Distributor A. A marketing company. They specialize in cosmetic and personal care products. They are the distributors of Kelate Cu, Melasyn 100, and Provitamin B-5, all of which we produce for them.
• Customer B. We produce corrosion inhibitors for them.
• Customer C. The world's largest supplier of industrial buffing pads. We have developed special coatings for them which have been approved and recommended to their worldwide subsidiaries.
• Customer D. Manufacturers and distributors of ion exchange resins. We provide both custom and toll manufacturing processes for them. Custom and toll manufacturers are two types of distributors that Granite serves. A custom manufacturer may provide the materials for Granite to use the formula and processes on. A toll manufacturer provides their own materials and formulation for Granite to mix the product.

Note: Customer and Distributor company names and financial information have been removed from this sample plan to protect proprietary and confidential information.

4.2 Target Market Segment Strategy

Consumer Market: This is potentially our biggest market for Creatine Monohydrate; it is limited only by our ability to produce. We have distributors who are begging for the product and we have back orders now, so it is only logical that we will devote most of our time meeting this demand. We look at the potential in this market as the basis for our growth.

Industrial Products: Here, we are selling both through distributors as well as direct to manufacturers. This is an untapped market and has been sustained by our reputation and ability to meet formulation criteria. We know that a marketing effort in this segment will produce sales that could quite possibly bring this segment to an equal level with the consumer market.

Textile Products: We have enough experience within this segment to know that once our manufacturing capability is up and running we could actually devote an entire marketing effort to this segment alone. Both our toll and custom manufacturing capability is strategically attractive to all textile manufacturers, including growing markets outside the U.S.

4.3 Industry Analysis

The chemical industry is characterized by a wide variety of companies ranging in size from the large companies such as DuPont and Monsanto to smaller specialty firms such as ours. The companies are generally organized by either end-use markets or product technology. In the past decade there has been a general trend in the industry to change emphasis from chemicals to biotechnology and pharmaceuticals. The cost of product development and the need to operate factories at high levels of capacity have caused chemical companies of every size to outsource parts of the chemical and manufacturing processes. This has created opportunities for smaller companies to create and occupy niches in development and contract manufacturing. The outsource industry providers occupy a market segment commonly identified as custom and toll manufacturers.

4.3.1 Competition and Buying Patterns

In the mainstream business, channels are critical to volume. Manufacturers and distributors with impact in the international chemical market desperately need speciality and toll manufacturers like us to meet the demand. There are many specialty manufacturers, all of whom seem to have carved out a specific niche of expertise, and upon whom these major manufacturers depend for products. In competition, it seems that the line is drawn at the level of quality performance. We have achieved that level and are recognized for a high standard of quality performance. Companies who would seem to be our competition have subcontracted production to us because they do not have the ability to supply that level of quality.

We have achieved another milestone in the industry by developing certain formulations which we estimate would cost another firm $450,000 to duplicate. The Creatine Monohydrate formulation and process is one of them. We have the only process in the world that can produce this supplement in liquid form. It is extremely important that we seize this opportunity and begin to exclusively market this product.