Micro Level Mushroom FarmingMushroom Farming in Pakistan: A Business Venture to Alleviate Poverty and Revive the Cottage IndustryAugust 29, 2008

Roadmap to a new beginningSubmitted to:

Ministry Of Youth AffairsIslamic Republic of Pakistan

2

Table of ContentsExecutive Summary...................................................................................3 Business Idea................................................................................ ............6 . Market opportunity...................................................................................8 My Team....................................................................... .............................9 SWOT Analysis.............................................................................................................10 Financial Plan........................................................................... ................11 Economics of Phase-I...................................................................................................12 Economics of Phase-II.......................................................................................... .......14 . Income Statement ................................................................................ ...15 .

Social & Economic Benefits......................................................................16 Environment Assessment.........................................................................17

3

Micro Level Mushroom FarmingMushroom Farming in Pakistan: A Business Venture to Alleviate Poverty and Revive the Cottage Industry

Executive SummaryWith the rising costs of basic foods required for survival, malnutrition among the masses is a pressing issue. One estimate puts malnutrition in Pakistan at 30%. The long-term effects of this situation are ruinous, including the incidence of various diseases and medical conditions such as poor development of brain cells leading to reduced IQ levels. This situation, though alarming, can be readily remedied at a very reasonable cost. In fact a profitable venture, with potential for foreign exchange earnings, can be This venture is the growth; established at very little cost on a community-based business model. consumption, and potential export of mushrooms. Mushrooms are a rich source of proteins; carbohydrates; valuable salts and vitamins. Their nutritional value lies between meat and vegetables. They have been equated with muscle proteins and are called vegetable meat. Thus mushrooms provide a high protein, low caloric diet and are very valuable as a nutritional supplement. They are highly recommended for heart patients. All essential amino acids required by an adult are present in mushrooms. Not only appetizing, mushrooms have the ability of converting nutritionally valueless substances into high protein food. In Pakistan, we plan to farm mushrooms in the Punjab provinces by providing service to the local individual cottage farmers through a highly sophisticated process. Not only does our business plan address the issue of food shortage, it will also provide profitable business for the local farmer. The unique advantage of our plan is that since we will not have to buy or build a farm to implement the process; there will be zero infrastructure cost as far as mushroom production is concerned. Additionally, by adopting our method of dividing the production unit into smaller cottage units, the probability of being affected on a large scale by a bad crop is less likely. High prices coupled with low quality food are the key factors responsible for the prevalence of malnutrition in our part of the world. Our business plan will attract a variety of consumers and investors as it provides a high quality food product at an affordable price, specifically, a very low price for farmers.

4

The key benefits of our business plan are as follows: 1. Create new employment.

2. Alleviate the food crisis. 3. Generate economic flow in the poor and impoverished communities. 4. By using organic waste, propel Pakistan forward in the global trend towards protecting the environment by eliminating possible environmental hazards. Rather than benefiting a single entity, which only triggers wealth accumulation, our plan will boost the local economy by ensuring money circulation among the masses. Overall, our plan would positively affect the masses. Being the only one of its kind, our venture will enjoy monopoly in the market, and this point alone will be a major attraction for investors. The actual market for mushrooms has dramatically expanded over the past few years, and many factors have fueled this rapid growth: globally, the demand for mushrooms has increased significantly, and there is a huge disparity between the demand and supply, where demand outnumbers the supply by leaps and bounds. In addition to this, the local restaurant industry has grown exponentially thanks to the emergence of new Western and Chinese restaurants which extensively use this brilliant vegetable. With this trend, in the next 5 years the market for mushrooms will spread out further, and more production units will be required to fulfill the resulting enormous demand. The market for mushrooms in Pakistan is significantly widespread, and there is not a single producer present locally to cater specifically to this demand. As a direct result of this deficiency, mushrooms are imported carrying high costs. Since we plan to produce quality mushrooms on a large scale locally, we will be able to provide mushrooms at a cost half that of those which are imported. Therefore, initially, we expect to earn at least 70% of the market, given the scale and resource available to us. Initially, we plan to target restaurants and general supermarkets for our customer base, and as our business develops, we eventually aim to expand our customer base outside of Pakistan. Our marketing strategy will focus mainly on introducing and presenting mushrooms as a vegetable that could be used to make delicious dishes at a very affordable prices.

5

Below is a brief outline of our Operational Process:1. Service and workshops.

2. Production by farmers. 3. Collection of mushrooms through a systematized process. 4. Post production (canning). 5. Marketing and selling.

We plan to build a direct relationship with our customers and market and sell our product using a team comprised of highly enthusiastic volunteers and paid workers. Additionally, we plan to organize different events which will promote the use of mushrooms as a common Pakistani household vegetable. In an effort to achieve this, one specific marketing strategy is to run a weekly mobile restaurant which will feature dishes with mushrooms. As discussed earlier, being the only one of its kind in the market, we will have little to no competition for revenue. By directly providing profitable business to local farmers, our business will not only improve the financial condition of the local population in which the business is located, but the project has many far-reaching consequences: for example, the project will work as a catalyst in spreading awareness regarding the withering cottage industry in Pakistan. A booming cottage industry will not just bring wealth to the local farmers and craftsmen but it will also generate good revenue in terms of exports for Pakistan. From the foregoing account it will be abundantly clear that at very little fixed and recurring cost, a poor householder can make a reasonable profit. Furthermore, a good source of nutrition is available at his door step. Additionally, marketing at an economically feasible scale can fetch good returns. This is all the more true in case of exports, which will earn valuable foreign exchange. It is urged that consideration be provided to this and other such micro scale, intensive enterprises.

6

Section 3.0

Business Idea & Unique Selling PointWhat?o We plan to farm mushroom in Pakistan , Punjab, by providing service to the local individual cottage farmers through a highly sophisticated process.this is a 2 phase plan

Phase I: Providing training and service to the local farmers for the proper farming and cultivation of mushroom and post harvest technique to get best quality yield. Phase II: Intallaling a post mushroom production unit to process the locally produced mushroom for foreign and nation wide export.

o

Our product satisfies the need for food shortage and as well as will provide profitable business to the local farmer.

How?o As we are not going to have our own farm , so theoretically speaking will have zero infrastructure cost as far as mushroom production is concerned (except for the canning unit , that we may have , but still the bigger portion would be covered) secondly by adopting our method that is to divide the production unit into smaller cottage units , the probability of our getting affected by a bad crop on large scale becomes less significant. o High price coupled with bad quality food is solely responsible for the phenomenon of Mal nutrition in the our part of the world . Our product will attract the customers as it will provide high quality food in affordable price. (REALLY CHEAP FOR LOCAL PEOPLE).

7

The key benefits of our product are as follow 1. Creating new employment 2. Improving food conditions 3. By using organic waste, eliminating possible environmental hazards. Rather than benefiting a single entity that triggers wealth accumulation this plan would help improve the locals economics by ensuring the money circulation among the masses . Our plan would positively affect the masses. Being the sole of its kind the company will enjoy monopoly in the market. (This point is an EYE CATCHER for investors).

8

Section 4.0

Market OpportunityThe actual market size for mushroom has dramatically expanded over the recent years. The demand for mushrooms has become more significant and grave. there is a wide gap between the demand and supply, demand outnumbering the supply by miles, other than that, local restaurants industry has progressed and, new western and Chinese restaurants have pop up , that extensively use this wonderful vegetable .so in the next 5 years the market will further expand and more production unit would be required to full fill that enormous demand. The market for mushroom in Pakistan is significantly large and there isn't a single producer present locally to cater for this demand, as a direct result mushroom are imported, as we plan to produce quality mushroom on a large scale locally, providing mushroom at a cost half that of imported, so we expect to get at-least 70% of the market initially given the scale and resource available to us. Specifically our customers are restaurants and big general store, but with our excellent marketing we expect to expand this range. We aim at introducing mushroom as a vegetable that could be used to make tasteful dishes at a very affordable price.

OPERATIONAL PROCESSService and workshops.1. Production by Farmers.

2. Collection of mushroom through a systematize process. 3. Post production (canning, simple packing to sell fresh). 4. Marketing and selling. We plan to adopt direct relation with customer or PR approach to market and sell our product though a team of highly enthusiastic volunteer and paid workers. Other than that's under our plan we would be organizing different events that would promote the use of mushroom as a useable vegetable. For this reason a weekly mobile restaurant is also among the strategy.

We dont have any competitors to look for.9

My team and supportTeam member1. Osama Ahmed (team leader)

2. Harris bin khurram

(CVS OF THE TEAM MEMBER ARE INCLUDED WITH THE REPORT)

Supporters: Shanila Faghfoor holds a Bachelors of Science in Biotechnology. She has over 3 years experience in writing and editing and currently works as a Scientific Writer for an American pharmaceutical company. For this project, her support will be advisory in nature with some logistical duties such as document control. Dr. Muhammad Asif Ali, Associate Professor and Research Scientist Mushrooms, Mushroom Lab, Institute of Horticultural Sciences, University of Agriculture, Faisalabad sees this highly feasible and profiting yielding business plan Dr. Asif extended his full support in form of technical training and guidance throughout the different phases of this project.his business would be implemented as a private business

10

SWOT AnalysisStrengths

New idea that has never been introduced before. People already have awareness of mushroom Very high profit rate Easy implementation Inexpensive row material Climatic conditions congenial for mushroom production. Abundant raw material, technical pace, cheap manpower, enormous domestic market coupled with government support.

Weaknesses

Illiteracy that can be easily overcome by ardent training. Higher cost of finance, packing material, energy and transportation.

Opportunity

Decline in production of mushroom in other countries . Well adapted management. modern technologies for production and post harvest

To expand the capacity Arrange events on larger scale like to promote cottage industry

11

Threat

Existing players in the market Threat from Chinese Mushroom Industry.

12

Section 5.0

Financial planHow would the Business make money?In the start the business will only return the investment with a very small profit, but soon after the breakeven which will be attained by gradual increase in the production and export, the business will not only become independent but also profitable.

What are the milestones of the project?The project is two phased, in the first phase (consisting of at least two years) we will be looking forward to educate and train local farmers for the domestic production. This will cost us the expenditure of training workshops and the farm setup material, which in the end will be bought by the farmers. The risk factor is low as the production is on small scale in the beginning. Once we start getting production from small production units, the product will be processed and treated on a small scale and will be prepared for the local market. After the success in the local market and enough training, the production will be increased and the processing will be enhanced for the inter district export, and later on inter provincial and overseas export. We would be installing the canning plant two years after the start of the project.

Financial SustainabilityThis unique business plan is definitely financially sustainable. All kind of risk factor have been taken into account. If the plan goes as planned the company would generate enough money in shot span to sustain itself in critical conditions

13

Economics of Phase-IThe economics for Phase-I of mushroom farming are as follows: EXPENDITURE & INCOME: (Per Annum). FIXED COST: Kulla 5 ft x 5 ft x 7 ft high I @ Rs.50/- sq ft. ---- Rs. 1,250.00 II Shelves x 8 @---- Rs. 50/- Rs. 400.00 III Tools; sprayers etc. ---- Rs. 1,000.00 TOTAL: ---- Rs. 2,650.00

DEPRECIATION/ INTEREST @ 25%: ---- Rs. 662.50

RECURRING EXPENDITURE: I Spawn 80 bottles @ Rs.25/-: ---- Rs. 2,000.00 II Fertilizer/Chemicals. ---- Rs. 1,400.00 III Compost Material: ---- Rs. 880.00 IV Calcium Chloride: ---- Rs. 220.00 TOTAL: ---- Rs. 4,500.00

RETURNS: I 400 Kg @ ---- Rs. 40/- per Kg. 3 crops, 2 pickings each. ---- Rs. 16,000.00 II Dep./ Int. + Cost: ---- Rs. 5,162.50 III Profit: ---- Rs. 10,837.50 Cost of Production, 1 Kg: ---- Rs. 12.90 Net Profit per Kg: ---- Rs. 27.00

14

Conclusion Phase One :From the foregoing account it will be abundantly clear that at very little fixed and recurring cost a poor house holder can make a reasonable profit. Most importantly a good source of nutrition is available at his door step. Apart from this, if the activity is carried out on a community basis, credit can be provided for inputs and even fixed cost. Secondly, marketing at an economically feasible scale can fetch good returns. This is all the more true in case of exports, earning valuable foreign exchange. The technology is easily transferred and local training can be carried out through demonstration. It is urged that consideration be provided to this and other such small scale or rather micro scale, intensive enterprises.

(Survey Report by Khidmat Foundation SNDP)

15

Economics of Phase - IICanning Machine Cost (Unit and Installation) Cutter Abrasive peeler Rs. 50,000 Rs. 100,000 Rs. 80,000 Rs. 300,000 Rs. 20,000~25,000 Rs. 300,000~350,000 Rs. 35,000 Rs. 15~18 940000

Two Washing Tubs (6x4x1) Sealing Machine Retard (250 box per batch) Steam generator Cooling Tank Raw Material (Can 425gm)Grand Total (of Maximum)

Plant Crew and skilled laborSkilled Workers x 10 Supervisor ManagerGrand Total (of Maximum)

7,000 ~ 8,500 15,000 25,000 125,000

Income Statement after the Installation of Canning unit16

Particulars Market Share Selling Price Sales COGS Gross Profit Administration Exp. Advertising Exp. Maintenance Exp. Miscellaneous Exp. Total Fixed Cost Net Profit

Year-I 750,000 60 45,000,000 15,000,000 30,000,000 2,400,000 500,000 500,000 1,200,000 19,600,000 10,400,000

Year-II 1,200,000 60 72,000,000 24,000,000 48,000,000 2,400,000 500,000 500,000 1,200,000 28,600,000 19,400,000

Year-III 1,800,000 60 108,000,000 36,000,000 72,000,000 2,400,000 500,000 500,000 1,200,000 40,600,000 31,400,000

1.4 Million Ruppees

19.4 Million

31.4 Million

17

Section 6.0

Social & Economic BenefitsImportance of Cottage Industry Profitable business Job creation Eradicating food shortage Providing livelihood to widows and housewives By reviving cottage industry that would create employment for the youth , rural to urban migration could be stopped which inevitably results in poor quality of urban life.

This business plan by directly providing profitable business to local farmer would not only better the financial condition of the locality in which the business is located but the project has further out reaching consequence , the project will work as a catalyst in spreading awareness regarding withering cottage industry in Pakistan . A blooming cottage industry will not just bring wealth to the local farmer and craft men but also will fetch considerable revenue in terms of exports for the country.

Environment assessmentFarming Mushroom is one natural way of converting hazardous organic waste into useful edible protein. All kind of organic waste is suitable for growing mushroom, and depends upon the locality where farming is done.

18