Case Business Idea, Team Food Waste
1) A list of all the costs that will go into the business.
3) Please identify which costs will change in relation to sales volume (i.e., variable costs) and which costs will not change relative to volume (i.e., fixed costs).
6) Use the weighted average contribution margin technique to determine breakeven point in terms of units sold per revenue driver.
Haul away without coupon CM = -$0.895 (25%); BE = $1925/-$0.895
Haul away with coupon CM = -$1.895 (25%); BE = $1925/-$1.895
Pulped for Pig Feed or to Digester CM = -$0.9005 (31.5%) = $2425.5/-$0.9005
Pulped for Compost CM = -$0.8985 (18.5%) = $1424.5/-$0.8985
7) How many units of each revenue driver do we need sell to breakeven per month? Per week? Per day?
- Customer downloads Food Forward app for Free (web version also available).
- After food purchase at a participating retailer (grocery stores like Publix and participating restaurants), scan the receipt's barcode into the app.
- The food items and their "best by" dates and "resell by" dates are uploaded into the app's data.
- Customer gets a reminder before food hits its "best by" dates (no inventory control just calendar information), which allows customer to remember to use up what's in the fridge or move it to the freezer to preserve it longer.
- Customer gets a reminder before food hits its "resell by" dates.
- To resell, customer brings the unused/unwanted foods back to the original store, for example when cleaning out the fridge to make a new grocery list for the week, instead of throwing the food away, return it for a coupon. If the food is in unused condition before "best by" dates it could be returned for full price. This model focuses on giving the customer a $1 coupon to the retailer in exchange for each pound of not-resellable-food.
- Food Forward drivers pick up the "food scraps" from the registered retailers, and the registered retailers can participate as well. (hotels, universities, etc.) OR the retailers may pay premiums to have their food waste hauled (i.e. Rutgers pays $30 per ton to a local farmer to haul away the scraps instead of paying the city $60 per ton for waste disposal)
- Food Forward reimburses the retailer $1 for every $1 coupon a customer redeems at the retailer.
- Food Forward separates the food scraps into animal feed, composting materials and pulping. Processes food material accordingly.
- Food Forward sells the food scraps to business customers at low price (animal scraps, composting, industrial uses, etc.) or sells pulp to bioenergy generators (such as anaerobic hybrid digester technology).
1) A list of all the costs that will go into the business.
Variable Costs (weekly); $2.82/lb
- Coupon reimbursement (aka cost of buying the scraps): at $1/lb avg. $11,000/week (based on EPA data US wastes 22,000 lbs weekly)
- Driver Wages: avg. $18,000 ($1.6/lbs)
- Gas costs: avg. $2,500 ($.22/lb)
- Pulper energy cost: $0.0005/pound
Fixed Costs (weekly); $7,700
- Loan repayment for initial app development and pulper purchase: $300
- Admin Salaries: $6,250
- Marketing: $250
- Rent: $750
- Admin Costs: $50
- Truck maintenance: $100 (although increased sales is increased wear on the car)
- Haul away: $0.015 per pound ($30 per ton) (approx 11,000 lbs per week)
- Pulper --> Pig Rancher Animal Feed: $0.01 per pound ($30 per ton) (approx 3,472 lbs per week)
- Pre-Pulp or Post-Pulp Fruits and Veggies --> Compost Material $0.012 per pound ($50 for 4,056 lbs)
- Pulper --> Sale to digesters for wastewater or manure treatment: $0.01 per pound ($30 per ton) (approx 3,472 lbs per week)
3) Please identify which costs will change in relation to sales volume (i.e., variable costs) and which costs will not change relative to volume (i.e., fixed costs).
See above.
4) Determine an appropriate price level for for each revenue driver.
4) Determine an appropriate price level for for each revenue driver.
See above.
5) Calculate contributions margins per revenue driver
5) Calculate contributions margins per revenue driver
- Haul away without coupon CM = $0.015/lbs - $0.91 = -$0.895
- Haul away with coupon CM = $0.015/lb - 1.91/lb = -$1.895
- Pulped for Pig Feed or to Digester CM = $0.01/b - $0.9105 = -$0.9005
- Pulped for Compost CM = $0.012/b - $0.9105 = -$0.8985
6) Use the weighted average contribution margin technique to determine breakeven point in terms of units sold per revenue driver.
See #8
8) Do you believe this is 'doable'? Why or why not?
Absolutely not possible, we lose money from the beginning!
8) Do you believe this is 'doable'? Why or why not?
Absolutely not possible, we lose money from the beginning!
Hey Jason, Great post. I think this is the type of assignment that is near impossible to accurately do since there are so many factors involved. I like how you accounted for different items such as marketing, rent, maintenance, etc. Good job
ReplyDeleteOoops, meant Christie
ReplyDeleteWow Christie this is very nicely done - you went the extra mile to break down the cost to one tenth of a penny! I like your haul-away angle - I did not think of this use before. And adding the coupons makes it that much more attractive. Sign me up - I am all in on Food Forward.
ReplyDeleteHi Christie,
ReplyDeleteHow are you?
Thank you for sharing your Break-even Analysis blog post with our South Florida MBA class at University of Florida. As always it was a pleasure to read your posts. Reading your blog I learned and reflected more about my own comments.
Thank you and best of luck
Hi Christie,
ReplyDeleteI love your analysis - very detailed! Although it sounds like we may have to be a non-profit rather than a for-profit venture here. I actually stumbled on another website that was promoting the haul away idea - turns out it was a cover website for an anti-hunger campaign. Got me good, but also shows that it might be difficult to actually profit on this idea. Great job overall on the posting, you clearly understand the concepts.
Hi Christie,
ReplyDeleteGreat post, a lot more thorough than mine!! The haul away idea is good also, not something I considered. I agree with Andrea, I wonder how much profit any of us could gain. You did a great job.
Christie,
ReplyDeletejust as everyone else as said, very thorough analysis. I didnt go into near the level of detail. I like how you broke it into different drivers of haul away, pulper, prepulper etc. I didnt even think of this type of business model. Good creativity. Nice Food Waste Hierarchy visual as well. I also found that is is likely not doable to business model for my business model as well. I like the idea of promoting with coupons as well. Could help to pull customers in. Thanks for sharing! Tara