Feasibility Study of Establishing a Small Scale Mozzarella Cheese Processing Plant in Magdalena, Laguna
Date
5-2015
Degree
Bachelor of Science in Agribusiness Management
College
College of Economics and Management (CEM)
Adviser/Committee Chair
Glenn N. Baticados
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Abstract
Mozzarella Cheese is a cheese of Italian origin. It is primarily used in pizzas and salads. The milk used in processing mozzarella varies in different countries and practices. In the production of mozzarella, either cow’s milk or buffalo’s milk can be used. The proposed project aims to put up a mozzarella cheese manufacturing factory in Magdalena, Laguna which utilizes both milks. Specifically, the study aims to: 1) present the mozzarella processing plant and its proposed operation in Magdalena Laguna; 2) determine the market, production, organizational and financial viability of operating a small scale mozzarella cheese processing plant; 3) identify possible risks and potential problems in the implementation of the project; and 4) recommend specific courses of action based on the findings of the study.
Common methodology and analysis was used in the study. Primary data were gathered by conducting surveys and interviews in different institutions connected to mozzarella cheese processing. Trials for mozzarella cheese production were conducted with the help of DTRI-UPLB and Dr. Olive Emata. Secondary data were obtained from different books and journal articles. These data are related to dairy production and processing. Descriptive analysis was used in order to analyze the data gathered. To further assess the feasibility and viability of the study, financials were evaluated using net present value (NPV), internal rate of return (IRR) and payback period analysis. In getting the NPV, the weighted average of cost of capital (WACC) was determined and was used to discount the cash flows of the project.
For the market aspect, the product would be named San Latteria, which comes from to Italian words Sano and Latteria that means healthy and dairy respectively. The products target markets are institutional buyers from Manila and small restaurant and household owners around Laguna. Since the company would be processing fresh mozzarella, it would position itself as a high quality product with a reasonable price and exquisite taste.
For the processing of the cheese itself, the whole production cycle would last for around 9-10 hours this would mean that there would be 1 production cycle per day. The processing plant would manufacture two sizes for the cheese: 1kilogram cheese blocks and 500 kilogram cheese blocks. The manufacturing plant would operate 3 times a week every Mondays, Wednesdays and Fridays.
For the organizational aspect of the company, the project would need 4 permanent employees which comprises of the 1 supervisor, 2 production staffs and 1 store staff. Recruits would come ideally from Magdalena so as to prevent housing costs for the employees. Each would be compensated by the level of difficulty of work with accordance to the minimum wage imposed by the law in the municipality of Laguna.
The project would have a life span of 10 years, and would work under 70% debt (Php 618,933.48) and 30% equity (Php 265,257.21). The financial institution targeted fund 70% of the business is the Small Business Corporation, a financial institution which funds numerous SMEs in the country.
Based on the results of the study, the proposed project requires an initial investment of Php 884,190.69. Fixed assets would amount to Php 705,166.75 which comprises the cheese vat, delivery vehicles, refrigerators and others while working capital would amount to Php 171,187.34 this would be from the milk used, rennet, starter cultures, packaging materials and others.
On the base scenario, it was found that the project would be feasible and would yield an NPV of Php 1,044,964.96 and an IRR of 33% with a payback period of 2 years and 10 months. Despite of the high cost initial investment required by the project, it was seen to be profitable in its 10 years of operation. Three different scenarios were used for the sensitivity analysis of the project. The first scenario is concerned to the rise in cheese product demand. On the other hand second scenario assesses a 1% decrease in the yield of processing. The third scenario focused on a 1.6% increase on the dairy product index which causes a decrease in the sales of the product. In the first and third scenario, the project showed positive NPV and IRR. However, in the second scenario, wherein a 1% decrease in processing yield was assessed, the project was proved to be infeasible.
As observed in other businesses, potential problems regarding the establishment of the project were also identified. These problems are: 1) competition with imported brands; 2) scarcity of milk supply; 3) presence of cheap substitutes; and 4) marketing loss due to product spoilage.
In conclusion, the establishment of the project was assessed to be viable in all business and profitable in the long run. The researcher recommends that there be an in-depth analysis for the marketing of the product. Furthermore, another study may be conducted concerning the utilization of the by-product of mozzarella cheese processing so as to maximize the net profit of the processing plant.
Language
English
LC Subject
Mozzarella cheese, Cheese industry
Location
UPLB College of Economics and Management (CEM)
Call Number
LG 993 2015 M17 I24
Recommended Citation
Ibe, Joseph Khristian P., "Feasibility Study of Establishing a Small Scale Mozzarella Cheese Processing Plant in Magdalena, Laguna" (2015). Undergraduate Theses. 12251.
https://www.ukdr.uplb.edu.ph/etd-undergrad/12251
Document Type
Thesis
Notes
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