MBB first round - Soy Technologies

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The new venture should focus on Soy Protein bars for 3 key reasons:

First, the product has a healthy mix of customer base and purchase frequency, giving us an expected sale of around 130M units per year. This is higher than all other categories except Soy milk, which is in contrast a riskier item due to it being perishable.

Secondly, the product seems to have the best taste out of all other products and maintains great consistency and shelf-life in contrast to cookies.

Thirdly, the raw material for soy protein bars is soy isolate, allowing us to produce soy protein powder in the event that demand for soy protein bars declines or as an alternative revenue stream if we have excess capacity.

It appears we can anticipate a $2M profit from the production of Soy Protein Bars. This could be a dangerous endeavour, given that the result implies a 20% profit margin and is based on the premise that we sell all of the boxes we create. Considering the significant fixed costs involved with soy bean harvesting, the client should contemplate switching to items with greater margins or to those that maximise crop yield.

It appears that it would take us six years to recoup our investment, which is a considerable amount of time. There may be a decline in demand, a shift in consumer preferences, or even the development of more efficient machinery within the next six years. Consequently, I would like a more detailed breakdown of the equipment and other costs in order to discover possibilities for cost reduction and maybe reach break-even more quickly.

Based on everything we have analysed, I recommend that the client keep their current processing methods and abstain from investing in new product categories. My two reasons for this are:

• Firstly, in a best case-scenario where we can sell all of our crops, we can attain a $2M/year contribution. Given the high harvest cost, and uncertainty over the expected demand for our product, this seems like a very risky endeavour.
• Secondly, we anticipate breaking even within six years, which is far longer than the industry standard of six to 18 months. We might investigate ways to lower the investment expenses or raise our annual profitability, but this is unlikely to dramatically shorten the timeline.

Regarding next steps, I would like to determine whether we can identify an alternative product category that may be more profitable, such as cookies or soy protein isolate, or if there are ways to lower the investment and harvesting expenses to make this venue more appealing.