Market Analysis Summary
Latheethen Feeds is the only custom feed manufacturer in the Midland, Michigan area and surrounding 50 mile radius. In the past, our market has been individual end users. Recent market analysis suggests that our custom feeds could be marketed to other direct feed stores outside of this 50 mile radius.
In reviewing our existing customer base, and recognize the broad range of local organizations such as 4-H and Future Farmers of America (FFA) and area farms and ranches, we have seen the possibilities for potential market growth. Latheethen’s has never had a direct sales force, advertised, or approached the specialized market they dominate with any zest for growth.
More than sixteen years in this business with success in the creation of formulas of high quality, cost-contained custom feed, mixed with the energy of youth and enthusiasm to grow this family business is greatly reinforced by the simple market analysis outlined below.
4.1 Market Segmentation
Latheethen Feeds, Inc. will focus on the following markets:
- 4-H Enrollments: Simply put, this segment of our market is our future. We are working with 4-H to further interest in animals, their nutritional needs, and means of cost containment. Through offering quality custom feeds we will provide success for today and many tomorrows as these youth become adult consumers (while annually, new youth will be targeted). This market will allow for sales of all our feed products as 4-H offers exposure to a variety of animals.
- Cattle Farms: The number of cattle farms within a 100 mile radius of Latheethen Feeds is quite phenomenal. There are many different purposes for these farms as well. Some raise cattle for auction and slaughter while some raise cattle for milk processing. All together, this is a market that is small, but would be very lucrative just by having a few of these commercial accounts purchase their feed from us on a weekly basis. The cattle market is very tough, but with our low prices and quality service, we should be able to obtain at least 10% of the overall market.
- Horse owners: We will provide custom feed while building customer relationships for long term growth and expansion into our goals of massage, boarding and other related services. Horse owners range from individual owners to ranches and even direct marketing to area race tracks will be undertaken.
- Hunters: These customers, of all ages and genders, have contributed a great deal of the Latheethen’s cash flow over the years. Expanding on simple hunter spontaneous purchases (jerky, nuts, dried fruit) will increase net revenue without an increase in labor, space or marketing costs. During the hunting season, “regulars” stop for beets, carrots, corn and apples on their way to their blind. Adding these impulse-purchase items will add to our bottom line.
- Livestock Farmers: This market is virtually up for grabs. Tax-exempt farmers look for the best in quality and price, both of which Latheethen’s offers to our customers. Farmers also look for availability of large quantities. Again, at Latheethen’s, we can handle any size order from less than a pound through orders containing thousands of pounds. Latheethen’s custom feed mill will again prove to be a big asset when dealing with the farmers.
|Other Livestock Farms||3%||649||668||23,833||25,741||731||3.00%|
4.2 Target Market Segment Strategy
Strategically targeting all the 4-H enrollments close to our business helps serve the needs and requirements of our local customers, and ties in logically with our marketing plan (see below) and our style of feed store. The youth of the 4-H are our future. These customers have regimented schedules, and find value in exceptional service, low prices and high quality feed. This first tier of our market segment is also the primary focus of our marketing plan, which has a deep commitment to focusing on the support of the 4-H kids and their community.
Our SECOND-TIER market group, Cattle Farms, will also find value in great service and quality feed, and will appreciate a supplier that keeps their products fresh and ready for immediate delivery. Finding the niche in all our targeted markets has been relatively easy… customers are looking for a feed supplier who maintains a complete line of fresh products and has the ability to deliver. Latheethen’s provides custom-made feed, much more economical than other name brand feeds, and as an added bonus we will deliver directly to their farms. This particular group is smaller in size, yet the number of cattle to feed on each farm is substantially larger than most other livestock farms. (The average size of each farm is 70 cattle.)
Our THIRD-TIER group, Horse Owners, will find that Latheethen’s special blend of oats and grains, all mixed in with our high quality minerals, results in premium feed at an affordable cost. All of these things are essential factors in a customer’s feed-buying decision. Our specialty horse feeds are made for both the average horse and for the equine racer, both of which are numerous in our area. We need to market the right avenues to gain industry share in this rapidly expanding market.
Our FOURTH-TIER, Hunters, is simply the largest in number of individual purchasers. Hunters are mostly seasonal customers, from the months of September through December we will see our numbers skyrocket when compared to the other eight months of the year. For projection purposes, we figured on having a low 30% of the total available market (69,232). This total potential market includes hunters from six of our surrounding counties (within a 50 mile radius). The actual number of hunters that stop by on their way to their cabins or blinds is substantially higher than forecasted.
Our FIFTH-TIER, Other Livestock Farms, represents a market that has an abundant number of feed users. Our custom feed mill allows us to manufacture any type of animal feed we desire, which help us acquire the available customers in this tier. From sheep and goat feed to rabbit and turkey feed, we make it all. Again, when we make our high quality feed, we make it with the highest quality products and sell it at wholesale prices. This market is basically up for grabs, as there are currently no competitors within a 125 mile radius that can supply these customers with such a high quality feed at the lowest costs possible.
We acquired our data for our market analysis from the Department of Natural Resources, the 4-H Council, and from USDA National Agricultural Statistics Service.
All of our projections are based on actual, real-life numbers (number of people/farms/etc.). We forecasted conservatively to show the actual amount of business we can easily obtain through a few advertisements and direct marketing.
4.3 Service Business Analysis
Currently, Latheethen Feeds, Inc. is involved in the manufacture and retail sale of custom feed and related products. Latheethen Feeds straddles two industries – manufacturers of feed, and retailers of feed and farm supplies. Latheethen’s 16 years of success in the custom feed industry is the strong foundation for the success and continued growth.
There are over 7,000 farm product raw materials businesses in the United States, according to the 2002 U.S. Census Economic report. According to the same source, farm supplies and raw materials wholesalers currently sell over $62,000,000 of goods per year. Of these, only 843 of these were selling poultry and livestock feeds mixed on location. With total sales of $8,141,368, businesses like ours sold an average of $9,658 in goods each, per year. This reflects the fact that most of the custom-feed mixers in the United States are very small operations; many of them are farmers who mix their own feed for their own livestock, and sell the extra to neighbors. Latheethen Feeds started out this way, but expanded its product line with snacks for people, and wild and exotic animal feed. By becoming a full-service custom-feed store, and developing a reputation for great service and high quality feed, we have far surpassed the industry average for revenue.
Our products are purchased from wholesale suppliers and re-sold to retail consumers. Our custom feed is a huge competitor with other retail products. The raw goods and time to manufacture cost at least 80% less than similar feeds. With more focus on the overall quality of our feeds, the cost savings to our customers will become more of a word of mouth advertising from end user to end user. Direct referrals are always the best source of committed customer and sustained reliable growth.
There really is no competitor within a 50 mile radius of Latheethen Feeds for custom feed for the wide variety of animals we provide for. Our tasks are to encourage our customers to make referrals, to implement direct marketing to groups such as the 4H and FFA, and to go out to the various ranches and livestock farms and introduce our company and our line of custom feeds.
At this point, we are a great-kept secret, when comparing our customer base to the existing market research potential.
4.3.1 Competition and Buying Patterns
Within the feed and farm supply industry, businesses compete on price, quality, customer service, and delivery. Customer service can include things like ability to produce a range of quantities, and custom-feed options. Customers must also trust the supplier for regular, reliable service and consistent quality, since sudden changes in feed can really disrupt their animals’ digestion and health.
Our existing customers have pretty routine buying patterns. The same customers come at the same time of the week or every other week. Their deliveries are scheduled for the same time, with the same volumes each time. When asking our customers why they use our products, they always have the same answer: “your custom feed is so good for my animal and it is priced just right.”
Most of our customers have been doing business with us for several years. Solid customer relationships, a friendly atmosphere and being available to provide quality products at a good price all add to a successful bottom line.
We strongly believe that by offering delivery services, we will gain a substantial number of new customers, both through the advantages of the new service, and with the new advertising (signs on our truck). We will gain the recognition of new customers through our focused marketing plan.
4.4 Sales Strategy
Latheethen Feeds, Inc. will be entering into direct sales for the first time. Starting in October and November, we will approach members of our target markets within 10 square miles both via phone and with direct visits. Where possible, we will ask existing customers to provide us with an introduction or to mention us to their neighbors and friends before we approach them. This will both lend credibility and pre-qualify potential customers as genuinely in need of our services, based on others’ knowledge of them.
We will tell them about our current products and services, and then ask them clearly what we need to do to earn their business. We will listen to their desires and individual goals. We will then mirror back to them what they have said, to be sure we understand their needs. Finally, we will create an individualized sales proposal with their specific needs (products, volumes, frequency, price, other services) included.
We will present the proposal as a written agreement ready for signature by both parties to begin doing business.
Details for each order will be entered into our customer database. We will then adjust our planned shipments of raw goods to include arrival of fresh product necessary for new orders, to be manufactured and delivered as agreed by the timeline. Deliveries will be automatically scheduled through our point of sale/delivery database. Each customer price grid, conditions and all specific comments will be clearly maintained for all to review and to guarantee complete customer satisfaction. Each order will be reviewed by one of the owners prior to delivery to guarantee quality, accuracy and completeness. Terms for payment will be COD and an invoice for each shipment will be faxed or called to each customer the day prior to delivery to ensure payment is ready at the time of delivery. (This will all be part of the agreement terms.)
Follow up calls will go to each customer within 24 hours of each delivery to ensure satisfaction. If for any reason there is an issue, it will be handled immediately by one of the owners directly with the customer.
Latheethen’s has previously been successful do to repeat customers. As the business switches hands we will also focus on keeping the existing customers happy and successfully introducing our new products and services. We will always focus on our repeat customers. The loyalty and respect we get from those customers will all play a big role in growing the business and taking it to the next level.
4.4.1 Sales Forecast
The sales forecast for Latheethen Feeds, Inc. includes all varieties of feed, as well as non-feed supplies and future forecasts for boarding stable revenue.
Adding the boarding stable will utilize vacant land and make it work for the company. The addition of the boarding stable will add to our company’s feed sales, and to the specialized services we offer. Boarding Stable costs include laundering of horse blankets, feed used by horses during their stay, and wear and tear on grooming instruments.
The annual growth rates fluctuate and are defined as:
- 2005 – 3.37%
- 2006 – 8.83%
- 2007 – 34.63%
- 2008 – 16.68%
- 2009 – 14.81%
The reasoning behind the initial dramatic increase in sales is due to accurate reporting and tracking, and growth of sales (generated through direct sales and advertising). For 2007, 2008 and 2009 we are forecasting significantly increases in our sales as we open the boarding stable. We anticipate that it will take three years to book out all of our stalls.
In 2009, we are forecasting a modest increase of 12.84%, based on the growth of feed sales and stable services alone. We are also planning on bringing back the rodeos and livestock shows that the previous owners have held in past years. This year could prove to be the year to bring back some of the good old days to the new Latheethen Feeds location.
|FY 2005||FY 2006||FY 2007||FY 2008||FY 2009|
|Misc. Products & Supplies||$6,000||$7,000||$8,000||$9,000||$10,000|
|Direct Cost of Sales||FY 2005||FY 2006||FY 2007||FY 2008||FY 2009|
|Corn, Oats, Molasses, Other Ingredients||$40,400||$42,258||$44,202||$46,236||$48,362|
|Misc. Products & Supplies||$3,000||$3,500||$4,000||$4,500||$5,000|
|Bags, Ties, Pallets, Labels||$1,440||$1,506||$1,575||$1,648||$1,724|
|Subtotal Direct Cost of Sales||$44,840||$47,264||$58,177||$64,984||$71,886|