* The Company
Forest Essentials is an Indian natural cosmetic manufacturer. The company was founded in 2000 after many years of research on Ayurvedic methods that lead to the development of a range of natural skin care and hair care products. The name Forest Essentials comes from the fact that all the ingredients are sourced from plants, trees and herbs naturally grown in Indian forests. The spring water is sourced from the heart of a forest.
* The Product
High quality natural skin care products made with natural ingredients without synthetic and chemical ingredients. 120 products will be sold through four broad categories – Body, Facial, Hair, and Wellness. Forest Essentials skin care products are made in the Himalayas, by local labor in villages in Uttaranchal, using: * only naturally distilled pure essential oils, pure cold pressed, organically grown vegetable oils and plant extracts; * spring water with therapeutic and regenerative qualities, certified by laboratories in France as being rich in mineral deposits, which makes for its unique properties * age-old Ayurvedic formulations from scholars who practice an austere code and devotion to their incredible font of knowledge * farmers are required to harvest the highest quality of precious ingredients; * rigorous method of sourcing;
* products are never tested on animals;
* none of its products are manufactured using child labour.
* Why the Chinese Market
China is one of the fastest growing skin care markets with annual growth rates over 10% project per year for the next 3 years. Sales increased for the skin care market by 18. 7% in 2011. Total market is worth over 110 Billion RMB. The growing Chinese female middle class has been demanding higher end products and are increasingly willing to pay top price for these premium products.
* Target market and Plan
The target market includes both the consumer segment of medium-high income (high discretionary spending) Chinese women (high level of awareness on natural skin care benefits) and the segment of SPA, beauty center (professional use of the products). These are going to be “ CSR-conscious” people, who are concerned with anti-aging. We will start by opening four boutique shops in Shanghai within key locales. The stores will all be retail locations on street level, strategically located in the luxury clusters of Xintiandi, West Nanjing, The Bund, and Pudong. The boutiques will be roughly 100 square meters and designed with a “ high-end” branded feel. The promotion of the store and product will be done through three main avenues: magazine advertisements, billboards, and online discussion boards.
* The Numbers
Initial capital needed is $1, 000, 000 USD. The capital will be used primarily for first year operating costs and working capital. The breakdown is as follows: $200, 000 for Marketing, $150, 000 for tenant improvements of the four stores, $250, 000 for initial inventory, and the remaining $400, 000 to cover operations of the stores for the first eight months. Below are three possible scenarios. Worse Case – 0. 5% market penetration in first year followed by 5% yearly growth. This results in a cumulative 5 year loss of $1, 184, 902.
Base Case – 1. 2% market penetration in first year followed by 20% yearly growth thereafter. This results in a cumulative 5 year cash position of $1, 077, 744.
Best Case – 1. 5% market penetration in first year followed by 50% yearly growth thereafter. This results in a cumulative 5 year cash position of $5, 453, 000.