FREE ESSAY ON MARKETING PLAN

MARKETING PLAN

Marketing plan for ice dreams, an icecream shop
Ice Dreams will sell shave ice as its primary product in addition to soft drinks and
frosty Latin drinks called licuados. Shave ice is the hottest new dessert since frozen
yogurt! Shave ice is heating up rapidly and shows no sign of cooling (Crystal Fresh,
Inc., 1995). Shave ice has been around for many years, beginning in Asia, then becoming
popular in Hawaii. People would shave ice by hand, creating a cold, flaky snow. Then
they'd top it with fruit juices to create a refreshing treat. Something this good
couldn't remain a secret. In recent years, the taste for shave ice has spread all over
the world. Shave ice is much different than a sno-cone in that it is made by a small
counter-top machine that shaves ice rather than grinding it like a sno-cone machine,
which results in ice so fine that it rivals real snow! The snow is then placed in bowl or
cup and filled with high quality tropical fruit flavors. Because the snow is so soft the
syrup is held within its tender texture versus settling to the bottom like traditional
sno-cones. Since the syrup is absorbed into the snow, it must be eaten with a spoon
instead of a straw. Because shave ice is so tender and made with the thickest,
best-tasting tropical fruit flavors, it is preferred by adults and children of all ages
and ethnic backgrounds. A drive-through business will be built on privately-owned
commercial property on Highway 86 (Adams Avenue) in El Centro, California. Other products
which will be incorporated into the business including beverages (soft drinks and
licuados). 
1.1 Objectives
1. To construct a drive-through building (12' x 20') on existing privately-owned
commercial property (50' x 120').
2. To produce a net profit of at least $50,000 by the third year of operation.
3. To sell 20 different tropical and Mexican flavored syrups. 4. To sell other products
such as soft drinks and licuados.
1.2 Mission
Ice Dreams will produce and sell shave ice with 20 different flavored syrups, soft
drinks, and licuados to consumers in El Centro, California. Retail customers will be in
the low- to mid-income bracket, and will range in age from children to adults.
1.3 Keys to Success
The keys to success are:
1. Will be the first business of its kind in the city of El Centro, California.
2. Business will be located on a major city highway, next to several housing
developments, the city pool, near schools and parks, and along a major restaurant and
motel strip.
3. Product quality will include a large variety of tropical and Mexican flavored syrups.
4. Business has the potential for expansion into other Imperial County communities.
5. City of El Centro experiences warm to hot weather approximately seven months of the
year.
6. Two-way traffic on Highway 86 averages 48,300 vehicles on a daily basis.
2.0 Company Summary Ice Dreams will be known for selling shave ice with 20 different
tropical and Mexican flavored syrups to children and adults in El Centro, California.
Other products will include soft drinks and licuados. 2.1 Company Ownership
Ice Dreams will be owned by Ofelia R. Arellano as a sole proprietorship.
2.2 Startup Summary
Start-up costs will be apprximately $52,010 which will include facility construction
including sidewalks, parking, inventory, mandatory city permits, and other expenses
associated with opening this business. The start-up costs will be financed through a
loan.
Start-up Plan
Start-up Expenses
Consultants $100
Insurance $1,200
Other $34,710
Total Start-up Expense $36,010
Start-up Assets Needed
Cash Requirements $10,000
Start-up inventory $1,325
Other Short-term Assets $675
Total Short-term Assets $12,000
Long-term Assets $4,000
Total Assets $16,000
Total Start-up Requirements: $52,010
Left to finance: $0
Start-up Funding Plan
Investment
Investor 1 $0
Other $10,000
Total investment $10,000
Short-term Liabilities
Unpaid Expenses $0
Short-term Loans $42,010
Interest-free Short-term Loans $0
Subtotal Short-term Liabilities $42,010
Long-term Liabilities $0
Total Liabilities $42,010
Loss at Start-up ($36,010)
Total Capital ($26,010)
Total Capital and Liabilities $16,000
Checkline $0
2.3 Company Locations and Facilities
Ice Dreams will be located on Highway 86 in El Centro, California which experiences a
high volume of traffic on a daily basis. According to a study by Cal Trans (Traffic
Volumes, 1995), approximately 48,300 vehicles pass through this location on a daily basis
making it an ideal location for business. The majority of traffic enters and exits via
Imperial Avenue and Fourth Avenue traveling through Highway 86. A 240 square foot
drive-through facility will be built on a privately-owned commercial property which will
also include parking facilities, landscaping, and a small sitting area. Other major
businesses located on Highway 86 include Carl's Jr., Roberto's Restaurant, La Fonda
Restaurant, Raging Bull Restaurant, China Restaurant, Donut Shop, Steak House, Big John
gas station, Recreation Center, and several motels. The appendices provide additional
information on the company facilities, a tentative plot plan, and highlights of the
traffic study conducted by Cal Trans.
3.0 Products
Main products to be sold through the Ice Dreams business will be shave ice topped with
tropical and Mexican flavored syrups in three main sizes: small, medium, and large. Other
products will include three soft drinks (Sprite, Coke, and Diet-Coke), and licuados.
3.1 Product Description
One major product will be sold through Ice Dreams which will include shave ice topped
with tropical and Mexican flavored syrups. Twenty different tropical and Mexican flavored
syrups will be sold and include the following:
Wild Watermelon, Pina Colada, Pink Lemonade, Guava Grape, Cherry Jubilee, Root Beer,
Kiwi, Strawberry, Blue Bubble Gum, Orange Mango, Raspberry Red, Luscious Lime, Bodacious
Banana, Tamarindo, Jamaica, Hortacha, Melon, Papaya, Manzana, and Limon. Other products
will include soft-drinks in three flavors: Coke, Diet-Coke, and Sprite, and licuados in
three flavors (strawberry, banana and mango).
0 3.2 Competitive Comparison
No other business in El Centro specifically caters to the shave ice market on a large
scale. It is anticipated that prices will be competitive with other businesses who sell
shave ice on a smaller basis.
3.3 Sales Literature
Sales literature to be distributed to the general community will include fliers,
advertisement in the local newspaper (Imperial Valley Press), and other print media.
3.4 Sourcing
Ice Dreams will purchase products from Crystal Fresh, Inc. which manufactures and
distributes high-quality syrups and ice shavers. All equipment and supplies are available
through a regional distributor. Mexican flavored syrups will be purchased in Mexicali,
Baja California, Mexico.
3.5 Future Products
It is anticipated that 10-15 additional syrups will be added such as Spearmint, Black
Cherry, Cinnamon, Blueberry, Peach, Red Apple, Tutti Frutti, Coconut, Cola, Green Apple,
Tangerine, and Vanilla. Also, future products to be sold will include ice cream in
vanilla and chocolate flavors.
4.0 Market Analysis Summary
El Centro is geographically situated at the junction of major east-west and north-south
transportation routes. El Centro is also referred to as the center of opportunity with
benefits created by the North American Free Trade Agreement (NAFTA) becoming one of
Southern California's most promising new commercial/industrial areas. El Centro is
accessible via Interstate 8, State Highway 111, and State Highway 86, where Ice Dreams
will be located. Shave ice is an ideal business for El Centro given both the potential
market segment, location, and climate. Utilizing averaged priced units ($1.25) for shave
ice and other products to be sold, the shave ice business has the potential market of
$104,446 gross sales by the third year of operation.
4.1 Market Segmentation
According to Advertising Age (September, 1995), premium ice cream and frozen yogurt
products are losing market share to mid-priced and other frozen dessert products.
Information Resources reported that frozen ice products comprised a third of the $2.4
billion ice cream category for the year ending May 21, 1995, generating $717.7 million,
up 9.3% from the previous year. Based on this information, it is anticipated that the
frozen dessert market can be divided into two customer segments. The first segment
prefers premium ice cream and frozen yogurt products. The other segment obviously
includes those that prefer frozen ice products. Shave ice products are ideal for today's
health-conscious consumers. They boast no fat, no cholesterol, and are relatively low in
calories. Ice Dreams will target all segments of El Centro's population: children,
teenagers, and adults. The Hispanic population will be of special interest since it
comprises 65% of El Centro's total population. This population will be targeted with
Mexican flavored syrups and licuados. 4.2 Target Market Segment Strategy Ice Dreams will
target the low- to mid-income consumers who want to have a high quality dessert for
moderate prices. Ice Dream's shave ice meets the quality required by these customers
since it will also cater to the large Latino population in El Centro with its Mexican
flavored syrups. 4.3 Industry Analysis One of the best known shave ice businesses is Sno
Biz Shave Ice under the parent company of Crystal Fresh, Inc. Dealerships such as Sno Biz
have demonstrated the success and feasibility of selling shave ice. The Sno Biz
dealership has been in existence for the last 11 years with over 3,000 individual
dealerships throughout the United States. Sno Biz syrups products are also sold in Wal
Marts throughout the country. While no Sno Biz dealership currently exists in California,
Sno Biz products are sold at the San Diego Zoo, Lion Country Safari, and the San Diego
Military base with great success. The potential success for selling shave ice is
attributed to the following:
1. Compared to other food service products, Ice Dreams will be a relatively simple
business to operate.
2. Shave ice is similar to a Mexican favorite called raspado, but because it is softer
and tastier, it is preferred over raspados.
3. Shave ice has a low food cost and is easy to prepare, which keeps speed-of-service at
optimum levels to keep up with high-traffic volumes.
4. Ice Dreams will be easy to maintain and clean.
5. Shave ice is a product that has yielded a considerable profit in terms of cost to
produce at $0.16.
6. Shave ice is an ideal product for the health-conscious consumer.
Market research conducted in El Centro did surface one raspado (sno-cone) business on a
small scale called Snow Shack located on State Street. Snow Shack consists of a small
trailer that accommodates only one employee. Sno-cones are sold in cups at prices ranging
from $1.00 (small), $1.25 (medium) to $1.50 (large). Sno-cones were also found to be sold
at Garcia's Food Market and Wal Mart. Each sold sno-cones in one regular size at $1.00
each. Research conducted in Bullhead City, Arizona noted that the Sno Biz dealership only
sells shave ice as their primary product. Shave ice units sold for $1.25 (small), $1.75
(medium) to $2.25 (large) per unit. In interviewing the current owner, he indicated that
during his first year in business he was selling 200 units per day. Research in San
Diego, California revealed that shave ice is sold along with other products. Several
businesses in Mission Bay sold shave ice with prices ranging from $1.79 (small), $1.99
(medium) and $2.39 (large). In terms of licuados, prices were $2.79 (regular) and $3.15
(large). Research conducted in Honolulu, Hawaii, showed that in some locations, shave ice
sold as high as $5.00 for a regular size. However, the majority of sno-cones were sold by
the flavor and not necessarily by the size. For example, one flavor was $1.79, two
flavors were $2.29, and three flavors sold for $2.79.
4.3.1 Industry Participants
The shave ice industry in El Centro, California currently has no key players since no
other business of this type currently exists in the Imperial Valley.
4.3.2 Competition and Buying Patterns
The shave ice business will be new to El Centro. Competitors in this type of business
primarily sell raspados or sno-cones and do not focus on the shave ice market. One major
competitor is the Snow Shack located on State Street. Snow Shack sells sno-cones through
a small, one person trailer with limited choices of syrups. Other competitors sell
sno-cones through Garcia's Market and the Wal-Mart store which also have limited syrup
selections and do not necessarily focus on the sno-cone or shave ice industry as their
primary product. The keys to success will definitely focus on selling shave ice and not
sno-cones made with coarse ice and selling high quality syrups. Prices will also be
competitive with those of the competition.
4.3.3 Main Competitors
Main competitors include the Snow Shack, Garcia's Market, and Wal-Mart. The following are
strengths and weaknesses of each. ? Snow Shack Strengths: The main strength of Snow Shack
is that it is the only business in El Centro that caters to the sno-cone market. It also
has very reasonable prices.
Weaknesses:
The primary weakness of Snow Shack is that it does not sell shave ice but rather
sno-cones made from very coarse ice. Syrups are also not of good quality.
? Garcia's Market
Strengths:
The main strength of sno-cones sold by Garcia's Market is their low price of $1.00 and
the convenience to the shopper in buying sno-cones while doing their shopping.
Weaknesses:
The main weakness of sno-cones sold by Garcia's Market is that they do not sell quality
syrups and prefer to sell the more inexpensive brand with lower quality taste.
? Wal-Mart Strengths:
Main strength of sno-cones sold by Wal-Mart is the convenience to the shopper and low
price.
Weaknesses:
Wal Mart's weakness, like Garcia's Market, is that they do not sell quality syrups. Also,
the sno-cone business is not their primary focus or product. 5.0 Strategy and
Implementation Summary
Ice Dreams is planning for slow growth by expanding flavors available from 20 to 30 in
year two of operation. Also, an additional product to be sold in year two will include
ice cream in flavors of vanilla and chocolate.
5.1 Marketing Strategy
Ice Dream's overall marketing strategy will be to create an image of offering the highest
quality shave ice in Imperial County. The business will be located in a high traffic area
of El Centro. Customers will be reached through advertisements such as fliers, newspaper
ads, and through its grand opening ceremonies. A special marketing program will also be
incorporated by offering special coupon prices for nearby restaurants, motels, city pool,
the donut shop, and the gas station to customers who purchase any product at Ice Dreams.
5.1.1 Positioning Statement
Distribution of shave ice will be through the business facility only. It is anticipated
that in the future, a small portable ice shaver will be purchased such that the product
could be sold on site at various fund raising functions through churches, schools, etc.
5.1.2 Pricing Strategy
Shave ice will be offered at the following prices:
? Small $1.00
? Medium $1.25
? Large $1.50
Soft Drinks
? Regular $0.79
? Large $0.99
Licuados
? Regular $1.35
Products will be sold on a cash basis only.
5.1.3 Promotion Strategy
1. Flier distribution to consumers' homes within a five-mile radius.
2. Newspaper advertisements will be purchased during the first three months of business
until a clientele is built.
3. Ice Dreams will offer discounts to recreational groups such as children/adult baseball
and football teams who play in nearby facilities.
4. Promoting products for an introductory price at its Grand Opening.
5. Ice Dreams will adopt a school and provide shave ice to individuals who are selected
for having excellent attendance, good grades, and good citizenship. Other incentives will
include sponsoring a good attendance program by purchasing a bike and raffling it to
students with the best attendance. This will be a promotional strategy to encourage
business.
5.1.4 Marketing Programs
Major marketing will be conducted through newspaper advertisements and local flier
distribution during the first three months of operation. Total costs will be
approximately $500.
5.2 Sales Strategy
Sales strategy will be directly linked to marketing programs since all sales will be
through the business facility only.
5.2.1 Sales Forecast
Consumer sales will start in January, 1997 (or sooner if construction it completed before
targeted date) with its grand opening anticipated by then. Sales and units costs for the
first six months of 1997 are shown in the sales forecast as projected numbers. As
indicated, primary sales will occur during the peak warm weather months as noted by the
following table.
Sales Forecast
Sales 1997 1998 1999
Sales $52,217 $77,383.00 $104,446.00
Other $0 $0 $0
Total Sales $52,217 $77,383 $104,446
Direct Cost of sales 1997 1998 1999
Sales $12,114 $17,772 $24,227
Other $0 $0 $0
Subtotal Cost of Sales $12,114 $17,772 $24,227
6.0 Management Summary
Ice Dreams will hire an employee to assist with the business. Ice Dreams will require
minimum daily supervision after it has been established since all three products are
fairly easy to make.
6.1 Organizational Structure
Ofelia R. Arellano, the owner, will have one individual assisting her with the business.
Long range plans will include a second employee to assist with the weekend hours.
6.2 Management Team
Ofelia R. Arellano is the most important member of the management team. Dr. Arellano is a
graduate of the University of California, Santa Barbara with several advanced degrees
(Masters and Doctorate in Psychology). She has spent the last six years working as an
administrator overseeing a budget of approximately $800,000. Ofelia will oversee the
business primarily during the weekend hours and Frank Arellano will oversee the business
during weekdays along with one employee.
Business expertise include:
? Budget Control
History Based Budgeting
Object-Code Budgeting
Program Budgeting
Planned Programming Budgeting Systems
? Personnel Management
Management by Goals and Objectives
? Strategic Planning
Long-Range Planning
Total Quality Management
Operational Planning
? Public Relations
Advertising for Educational Purposes
Marketing Research
Consulting
? Community Leadership
Advisory Boards
Business and Educational Partnerships
? City Planning and Development
Board of Director, San Ysidro Planning and Development Group
? Business Needs Assessment and Consultation
Board of Directors, San Ysidro Chamber of Commerce
Frank Arellano will serve as a consultant on a volunteer basis.
Mr. Arellano spent over 35 years in the retail business handling marketing and inventory
for a major food chain. He is familiar with all aspects of business management and
operations having owned and operated his own grocery store in El Centro. Mr. Arellano
will also assist in the building design, landscaping layout and business marketing. Mr.
Arellano will supervise the business during the week days which means managing one
employee.
6.3 Personnel Plan
Monthly personnel cost estimates are included in the following table.
Personnel Plan
Personnel 1997 1998 1999
Assistant $10,800 $11,232 $11,681
Other $0 $0 $0
Other $0 $0 $0
Total Payroll $10,800 $11,232 $11,681
Total Headcount 0 0 0
Payroll Burden $2,484 $2,583 $2,687
Total Payroll Expenditures $13,284 $13,815 $14,368
7.0 Financial Plan
? We want to finance growth mainly through cash flow. We recognized that this means we
will have to grow slowly.
? The most important indicator in our case is that minimal inventory will have to be
stored for these products.
7.1 Important Assumptions
Monthly sales are the largest indicator for this business. There are some seasonal
variations with the months of March through September being the highest sales months.
General Assumptions
1997 1998 1999
Short-term Interest Rate % 13.50% 13.50% 13.50%
Long-term Interest Rate % 0.00% 0.00% 0.00%
Payment Days Estimator 30 30 30
Inventory Turnover Estimator 12.00 12.00 12.00
Tax Rate % 30.00% 30.00% 30.00%
Expenses in Cash % 0.00% 0.00% 0.00%
Personnel Burden % 23.00% 23.00% 23.00%
7.2 Key Financial Indicators
7.3 Breakeven Analysis
The following table and chart show the current break-even analysis. The operation will
require sales of approximately $2,900 to break even during the first year of operation.
Break Even Analysis:
Monthly Units Break-even 2,500
Monthly Sales Break-even $2,900
Assumptions:
Average Per-Unit Revenue $1.16
Average Per-Unit Variable Cost $0.36
Estimated Monthly Fixed Cost $2,000
7.4 Projected Profit and Loss
We expect a profit of $6,740 in year one; $19,212 in year two;
and $32,886 in year three of operation.
Profit and Loss (Income Statement)
1997 1998 1999
Sales $52,217 $77,383 $104,446
Direct Cost of Sales $12,114 $17,772 $24,227
Other $0 $0 $0
------------ ------------ ------------
Total Cost of Sales $12,114 $17,772 $24,227
Gross Margin $40,103 $59,611 $80,219
Gross Margin % 76.80% 77.03% 76.80%
Operating expenses:
Advertising/Promotion $600 $624 $649
Travel $450 $468 $487
Miscellaneous $0 $0 $0
Other $360 $374 $389
Payroll Expense $10,800 $11,232 $11,681
Payroll Burden $2,484 $2,583 $2,687
Depreciation $2,196 $2,284 $2,375
Leased Equipment $0 $0 $0
Utilities $1,720 $1,789 $1,861
Insurance $1,200 $1,248 $1,298
Rent $0 $0 $0
Other $0 $0 $0
Contract/Consultants $0 $0 s0
------------ ------------ ------------
Total Operating Expenses $19,810 $20,602 $21,427
Profit Before Interest and Taxes $20,293 $39,009 
$58,792 Interest Expense Short-term $5,672 $5,672 $5,672
Interest Expense Long-term $0 $0 $0
Taxes Incurred $4,386 $10,001 $15,936
Net Profit $10,235 $23,336 $37,184
Net Profit/Sales 19.60% 30.16% 35.60%
7.5 Projected Cash Flow
Projected cash flow is estimated as follows for the next three years:
? 1997 - $31,715
? 1998 - $63,931
? 1999 - $109,900
Pro-Forma Cash Flow
1997 1998 1999
Net Profit $10,235 $23,336 $37,184
Plus:
Depreciation $2,196 $2,284 $2,375
Change in Accounts Payable $1,266 $365 $374
Current Borrowing (repayment) $3 $0 $0
Increase (decrease) Other Liabilities $0 $0 $0
Long-term Borrowing (repayment) $10,500 $10,500 
$10,500 Capital Input $0 $0 $0
Subtotal $24,200 $36,485 $50,433
Less: 1997 1998 1999
Change in Inventory ($1,013) $146 $166
Change in Other Short-term Assets $0 $0 $0
Capital Expenditure $0 $0 $0
Dividends $0 $0 $0
Subtotal ($1,013) $146 $166
Net Cash Flow $25,213 $36,339 $50,267
Cash Balance $35,213 $71,553 $121,820
7.6 Projected Balance Sheet
The balance sheet shows a slow but steady upward growth in net worth after initial
start-up as follows:
? 1997: ($19,272)
? 1998: ($61)
? 1999: $32,825
Pro-forma Balance Sheet
Assets
Starting Balances
Short-term Assets 1997 1998 1999
Cash $10,000 $35,213 $71,553 $121,820
Inventory $1,325 $312 $458 $624
Other Short-term Assets $675 $675 $675 $675
Total Short-term Assets $12,000 $36,200 $72,685 $123,119
Long-term Assets
Capital Assets $4,000 $4,000 $4,000 $4,000
Accumulated Depreciation $0 $2,196 $4,480 $6,855
Total Long-term Assets $4,000 $1,804 ($480) ($2,855)
Total Assets $16,000 $38,004 $72,205 $120,264
Liabilities and Capital
1997 1998 1999
Accounts Payable $0 $1,266 $1,632 $2,005
Short-term Notes $42,010 $42,013 $42,013 $42,013
Other Short-term Liabilities $0 $0 $0 $0
Subtotal Short-term Liabilities $42,010 $43,279 $43,645 44,018 
Long-term Liabilities $0 $10,500 $21,000 $31,500
Total Liabilities $42,010 $53,779 $64,645 $75,518
Paid in Capital $10,000 $10,000 $10,000 $10,000
Retained Earnings ($36,010) ($36,010) ($25,775) ($2,439)
Earnings $0 $10,235 $23,336 $37,184
Total Capital ($26,010) ($15,775) $7,561 $44,745
Total Liabilities and Capital $16,000 $38,004 $72,205 
$120,264 Net Worth ($26,010) ($15,775) $7,561 $44,745
7.7 Business Ratios
Standard business ratios are included in the table that follows.
The ratios show a plan for balanced, healthy growth.
Ratio Analysis
Profitability Ratios: 1997 1998 1999 RMA
Gross Margin 76.80% 77.03% 76.80% 0
Net Profit Margin 19.60% 30.16% 35.60% 0
Return on Assets 26.93% 32.32% 30.92% 0
Return on Equity 0.00% 308.64% 83.10% 0
Activity Ratios 1997 1998 1999 RMA
AR Turnover 0.00 0.00 0.00 0
Collection Days 0 0 0 0
Inventory Turnover 14.80 46.18 44.79 0
Accts Payable Turnover 14.72 15.05 15.60 0
Total Asset Turnover 1.37 1.07 0.87 0
Debt Ratios 1997 1998 1999 RMA
Debt to Net Worth 0.00 8.55 1.69 0
Short-term Liab. to Liab. 0.80 0.68 0.58 0
Liquidity Ratios 1997 1998 1999 RMA
Current Ratio 0.84 1.67 2.80 0
Quick Ratio 0.83 1.65 2.78 0
Net Working Capital ($7,079) $29,041 $79,100 0
Interest Coverage 3.58 6.88 10.37 0
Additional Ratios 1997 1998 1999 RMA
Assets to Sales 0.73 0.93 1.15 0
Debt/Assets 142% 90% 63% 0
Current Debt/Total Assets 114% 60% 37% 0
Acid Test 0.83 1.65 2.78 0
Asset Turnover 1.37 1.07 0.87 0
Sales/Net Worth 0.00 10.23 2.33 0