business case - application of trade finance to expand an fmcg trading ent (autosaved)

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION1. EXECUTIVE SUMMARY

1.1 Project Brief

EMMARK CONGO is a well-established consumer goods trading enterprise that has been doing a fast-growing business in western DR Congo’s Kinshasa for the last 6 months. EMMARK CONGO sells its fast moving consumer goods (FMCG) line of products through an established departmental store in Kinshasa city – which is the capital city of DR Congo that offers a potential market catchment area of well over 12 million consumers. EMMARK CONGO has so far managed to establish a strong product distribution network within Kinshasa city itself and is seeking to expand its product distribution and delivery network to cover other prospective FMCG high-consumption cities to the east and south of DR Congo like Goma, Bukavu, Butembo (all in Kivu Region) and Lubumbashi in Katanga Province.

Currently, EMMARK CONGO imports single container-loads of FMCGs from Europe (mostly the UK) worth about US$ 160,000 into DR Congo and the stock sales turn around period is usually about one month. Sales turnover is always in the region of two-and-a-half (2.5) times the landed cost value of each container-load of FMCGs. Market demand for FMCGs in Kinshasa is quite high going by the fact that domestic industrial production for an overwhelmingly large part of consumer goods used by Congolese is still at a very low level – as the country is more renowned for its production of high-value minerals like Gold, Copper, Diamonds, Tantalum and Tin rather that for its industrial production of basic consumer goods. Another reason for the high mark-ups and fast consumption rates on imported consumer packaged goods in DR Congo is that the government does not impose high import duties on such imports since there is no significant local industrial base to protect and at the same time such imported basic consumer goods must be sold off at market prices that are both affordable and attractive for the domestic consumers. In the absence of a strong domestic industrial production capacity for basic consumer packaged goods, imports will remain the only viable option to meet the needs of domestic consumers in large urban centres like Kinshasa, Goma, Bukavu, Lubumbashi, Bandundu, Mbandaka, Kananga, Mbuji Mayi, Matadi, etc.

DR Congo’s population is currently estimated at about 75.5 million inhabitants and with such a large and fast-expanding market of consumers in the foreground, EMMARK CONGO would like to capitalize on its robust business growth potential to expand its business portfolio – both in the volume and range of consumer packaged goods and durable products that it

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONcan offer on such a large and become competitive in the short-to-medium-term. The immediate strategy for EMMARK CONGO in this sense is to recourse to flexible and responsive bank trade-finance instruments like Revolving Stand-by Letters of Credit (SBLCs) and Usance Letters of Credit for time periods of 180 days that will enable the company to increase supply volumes, to promote its line of products/merchandise in this new market and to gain competitive advantages; it will allow the company to structure its payment plan under the contract according to its import interests; it will also enable the company to protect its cash flow so that it can win new business and support existing business contracts in the market.

The most appropriate monetary value of Revolving SBLCs and/or Usance Letters of Credit that EMMARK CONGO seeks in order to expand and diversify its import trading business would in the range of US$ 1.5 million to US$ 1.6 million for each 180-day trading cycle. EMMARK CONGO will commit a mix of cash and physical asset collateral to secure performance of its obligations on these trade facilitating bank instruments.

1.2 Opportunity Rationale

Presently in Kinshasa, the concert of running a consumer packaged goods business through the operation of a centralized large departmental store with a well-established distribution network has increasingly gained in popularity as consumers can shop for practically all their needs in one place at pocket-friendly prices. Currently there is a new trend and large investments have been made in super storesand hyper markets by few multinational and local companies i.e. Shoprite Checkers (with a daily sales turnover of US$ 200,000 – 350,000), Kin-Mart Supermarket, City Market, Alimentation, Express, Peloustre, Zatrimex, Extra Plus, etc. The Kinshasa consumer market has liked this concept due to the availability of all basic commodities and utilities under one roof which saves their time and for which people are quite conscious these days. The key factors that make this project viable in DR Congo are:

Easy access to wholesale markets Plentiful availability of human resources/salesmen No process/transformation involved Sale of a variety of goods under one roof Margin for innovation Easy diversification towards new product mix

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION

2. PURPOSE OF THE DOCUMENT

The objective of this business case study is to highlight the need to pace a fast growth business potential of trading in Fast Moving Consumer Goods/Consumer Packaged Goods (FMCGs/CPGs) by EMMARK CONGO in the Kinshasa area of DR Congo that it has so far recorded since it established there a comprehensively-stocked departmental store with a well-coordinated supply chain/distribution network to serve a diverse range of consumers. This brief document/study also serves as the basis of an important investment-expansion decision with a view to solicit trade finance facilitation instruments from the banking sector in order to scale up EMMARK CONGO’s FMCG trading portfolio, grow the business turnover volume, and ultimately become competitive in a fast-growing and dynamic DR Congo market that opens up a whole new range of business expansion prospects for any trading investor that is willing and capable of playing for higher investment and venture finance stakes to capture such an opportunity. The document also provides background trading enterprise information, SWOT analysis and product market analysis, which have some bearing on the project itself. This particular business case study is regarding a wholesale/retail departmental store with an interlinked urban goods distribution network which comes under the trade sector.

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3. CORPORATE INFORMATION

3.1 Project Description

EMMARK CONGO is the DR Congo-based trading subsidiary of EMMARK TRADING based in Kampala, Uganda. EMMARK TRADING started its operations in 2012 and works in active collaboration and partnership with DYNAPHARM AFRICA that deals in a wide range of nutritional supplements and cosmetics/personal care products and is strongly represented in many countries in Africa including: Angola, Burundi, Mozambique, Tanzania, Kenya, Uganda, Mali, Nigeria, Sierra Leone, Senegal, DR Congo, Republic of Congo-Brazzaville, South Africa, South Sudan, Zambia and Zimbabwe. Presently, EMMARK CONGO that has been active in DR Congo since the beginning of 2013 operates through a large centralized departmental store with a bonded warehouse in downtown Kinshasa and well-established supply chain distribution network. The additional equity assets of EMMARK CONGO are its management structure and a few FMCG distribution trucks. The company plans to expand the scale and scope of FMCG line-of-business five-fold through the application of bank trading instruments like importation Stand-by Letters of Credit and Usance Letters of Credit carrying a 180-day import credit-trading period. The company also plans to expand on its goods distribution supply chain capacity through the acquisition and operationalization of more distribution trucks and opening up of additional regional distribution urban centres in eastern and southern DR Congo such as Goma, Bukavu, and Lubumbashi.

3.2 Company Profile Brief

Name: EMMARK CONGOType: Private LLCIndustry: FMCGFounded: 2012Headquarters: Kampala, UgandaEquity Assets: Centralized departmental store & bonded warehouse; management structure in place; FMCG products distribution network/supply chain and distribution trucksKey People: Emma Barigye Kiremire (C/MD), Esther AmpumuzaProducts: Groceries and food items; soaps, detergents and chemicals; crockery and plastic items; ice cream and beverages; electronic and electrical appliances; general items; etc.Current Revenue: USD 750,000 every six (6) months

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONEmployees: 32

3.3 Vision, Mission and Philosophy

EMMARK CONGO is a customer-focused company committed to consistently offer better quality products and services that maximize value to the customer.

This customer-centric philosophy has been well emphasized at EMMARK CONGO through:

Continuously exploring & developing new products & processes. Laying emphasis on cost effectiveness. Maintaining effective Quality Management System. Complying with safety, environment and social obligations. Imparting training to all involved on a continuous basis. Teamwork and active participation all around. Demonstrating a sense of belonging and exemplary behaviour towards

organization, its goals and objectives.

EMMARK CONGO is a phenomenon and synonymous with Value for Money. The brand transcends the specific dynamic of any particular product category, which is best captured in its above mission statement - a statement of sustained innovation, an unceasing effort to deliver better value to consumers, through better product quality.

3.4 Sponsor/Cost/Location

Project Sponsor and Major Shareholders of Project Company

EMMARK CONGO started business in 2012 as a distributor/wholesaler of a wide range of fast-moving consumer goods products in DR Congo and it is a 100% subsidiary of the Uganda-based EMMARK TRADING. The ultimate beneficiaries of EMMARK CONGOare Ugandan and Congolese business personalities.

Shareholding Structure of Project Company

The total authorized share capital of the company is USD 907,546 which is distributed amongst the shareholders through the following shareholding structure:

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Table 1: EMMARK CONGO Shareholding StructureName of Shareholder Value of

Shareholding (in USD

%age of Total Share Capital

Prof. Bernard Kiremire 92,385 10.18%Emma Barigye Kiremire 57,304 6.31%Esther Ampumuza 100,000 11.02%King Oine 19,500 2.15%Deo Katongole 10,584 1.17%Grace Ashabe 40,000 4.41%Jane Barigye 34,000 3.75%Ambrose Mutafungwa 20,000 2.20%Daniel Vanderleo 30,000 3.31%Apolomille MaluMalu 50,000 5.51%Sub-Total Shareholders Capital 453,773 50.00%Floating Shares 453,773 50.00%TOTAL SHARE CAPITAL 907,546 100.00%

Location of Project Company

The EMMARK CONGO wholesale/retail departmental store and bonded warehouse are centrally and conveniently located in downtown Kinshasa – the capital of DR Congo. Plans are afoot to expand the same FMCG departmental warehouse concept to other big cities in DR Congo to the east and south – especially Bukavu, Goma and Lubumbashi. In the medium-term, the project company will also roll out to expand its continental presence to other countries in the SADC region such as Angola and Zimbabwe and even further east to Somalia.

3.5 Key Success Factors

The EMMARK CONGO wholesale/retail departmental store is full of opportunities for success which it is ready and willing to catch using the following strategies:

Customer card system can be one of the best strategies for the retention of existing customer and developing new customers. Card System maintains data base of customer which can be later on used

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONfor permanent promotional and marketing activities. Customer Card System is one of the best Customer Relationship Management (CRM) practices used globally.

Provision for state-of-art facilities in the departmental store to attract and retain customers.

Use of regular and sustained marketing through distribution of fliers and use of Cable TV.

Ample and secure outside car parking space for customers’ vehicles. Employment of well-trained and motivated staff capable of serving

customers with etiquette. Offer of free gift schemes and surprise gifts to customers, valuable

customer dinners can be additional success factors.

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4. SERVICES & PRODUCTS

4.1 Product Description

The FMCG industry is one of the most rapidly emerging industries nowadays in the DR Congo as well as global markets. In DR Congo, it is one of the top four (4) single largest markets in the country, which shows how important the industry is and how much it contributes towards the Congolese economy. This industry essentially comprises Consumer Non-Durable (CND) products and caters to the everyday needs of the population.

Also known as Consumer Packaged Goods (CPG), Well established distribution network, Low penetration levels, Absolute profit made on FMCG products is relatively small but they sell

in large quantity & earn large profits, Intense competition between the organized and unorganized

segments, Lower per capita consumption,and Low operating cost.

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG) are products that are sold quickly at relatively low cost. Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be large.

Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, teeth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, light bulbs, batteries, paper products and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products and drinks, although these are often categorized separately.

FMCG have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs—such as meat, fruits and vegetables, dairy products, and baked goods—are highly perishable. Other goods such as alcohol, toiletries, pre-packaged foods, soft drinks, and cleaning products have high turnover rates. An excellent example is a newspaper—every day's newspaper carries different content, making one useless just one day later, necessitating a new purchase every day.

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http://en.wikipedia.org/wiki/Newspaper

http://en.wikipedia.org/wiki/Inventory_turnover

http://en.wikipedia.org/wiki/Soft_drink


4.2 Product Characteristics

Products belonging to the FMCG segment generally have the following characteristics:

They are used at least once a month They are used directly by the end-consumer They are non-durable They are sold in packaged form They are branded

Main characteristics of FMCGs:

From the consumers' perspective: o Frequent purchaseo Low involvement (little or no effort to choose the item – products

with strong brand loyalty are exceptions to this rule)o Low price

From the marketers' angle: o High volumeso Low contribution marginso Extensive distribution networks

High stock turnover

4.3 Industry Segments

The main segments of the FMCG sector are:

Personal Care: oral care; hair care; skin care; personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; paper products (tissues, diapers, sanitary); shoe care.

Household Care: fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellants, metal polish and furniture polish).

Branded and Packaged Food and Beverages: health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Spirits and Tobacco

4.4 Product Mix

The EMMARK CONGO departmental store regularly sells FMCGs to customers in the following proportions:

Table 2: Range of FMCG Goods Traded by EMMARK CONGOCategory of Items Proportion Avg. Gross

MarginGroceries and food items 55% 130%Baby garments and baby products 5% 330%Crockery and plastic items 4% 280%Soaps, detergents and chemicals 15% 80%Cosmetics and artificial Jewellery 5% 280%Ice cream and Beverages 5% 80%Stationery and Greeting Cards/Gifts 1% 180%Watches and Clocks 1% 280%Electronic and electrical appliances 2% 280%General items 2% 130%Bakery items 5% 180%Total 100%

The income statements and profitability are prepared on the basis of 151 percent margin.

Figure 1: Some Key Drivers in the 21st Century FMCG Supply Chain

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5. SWOT ANALYSIS

5.1 Market SWOT Analysis

Strengths: Low operational costs Presence of established distribution networks in both urban and rural

areas Presence of well-known brands in FMCG sector

Weaknesses: Lower scope of investing in technology and achieving economies of

scale, especially in small sectors Low exports levels "Me-too” products, which illegally mimic the labels of the established

brands. These products narrow the scope of FMCG products in rural and semi-urban market.

Opportunities: Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Large DR Congo domestic market- apopulation of over 75 million

consumers. Export potential High consumer goods spending

Threats: Slowdown in rural demand Tax and regulatory structure

5.2 Company SWOT Analysis

Strengths: EMMARK CONGO has managed to establish a strong market presence

in DR Congo including a strong brand portfolio; Good distribution network in Kinshasa; consumer understanding; distribution reach(networking) and high quality manpower; Economical products with a wide product line; As the importation is done on a large scale it has the benefit of

economies of scale.

Weaknesses:The company's weaknesses identified hereby include:

Increased consumer spending on education, consumer durables, entertainment, travel, etc. resulting in lower share of wallet for FMCG;

Complex supply chain configuration and unwieldy number of stock keeping units (SKUs) with dispersed manufacturing locations;

Price positioning in some categories that allows for low price competition and high social costs in the FMCG trading business.

Limited financing to expand product import and sales capacity to respond to high market demand and gain competitive advantages with other large suppliers in Kinshasa.

Opportunities:EMMARK CONGO sees its opportunities as:

Market and brand growth through increased penetration especially in other large urban centers of DR Congo;

Brand growth through increased consumption depth and frequency of usage across all categories;

Upgrading consumers through innovation to new levels of quality and performance;

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Current market consumption patterns in DR Congo for FMCGs show that there

is still quite a large demand-supply gap to fill up; Emerging modern trade to be effectively used for introduction of more

upscale personal care products; Growing consumption in out of home categories; Low market share for EMMARK CONGO in DR Congo to be rectified by

recourse to trade finance to scale up supply capabilities and the application of a focused aggressive marketing campaign.

Positioning EMMARK CONGO as a sourcing hub for smaller FMCG wholesale/retail dealers elsewhere in DR Congo and leveraging the latest IT technologies.

Threats: Perceived threats:

span low-priced competition now being present in all categories; grey imports; spurious/counterfeit products in rural areas and small towns; changes in fiscal benefits.

6. PRODUCT MARKET ANALYSIS

6.1 Market Segment

Food products is the largest consumption category in DR Congo, accounting for nearly 21 per cent of the country‘s GDP.

Figure 2: DR Congo FMCG Market Segments

2%

12%

43%

8%

4%

4%

5%

22%

DR Congo FMCG market segment

Baby CareFabric CareFood ProductsHair CareHouseholdOTC ProductsOthersPersonal Care

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6.2 Advantage to DR Congo

Figure 3: Advantage to DR Congo

6.3 Five Forces Analysis of FMCGs 14

AdvantageDR Congo

LARGE AND GROWING

YOUTH POPULATION

EMERGENCE OF ORGANISED

RETAIL BUSINESS

GROWING URBANISATION

INCREASING DISPOSABLE

INCOME

SIGNIFICANT INCREASE IN

CONSUMPTION LEVELS

INFRASTRUCTURE DEVELOPMENT


SUPPLY

Abundant supply in metros Competition is beefing up their distribution network to penetrate the

rural areas.

DEMAND

At an average annual GDP growth rate of 6.17% registered for the period 2003 - 2012, the present consumer demand is set to boom by almost 60% over the subsequent period.

Most FMCG companies are awaiting to tap this latent growth market.

BARRIERS TO ENTRY Huge investment in promoting brands, setting of distribution network

and intense competition.

BARGAINING POWER OF SUPPLIERS

Many established players have a slight edge in bargaining power given the keen competition among suppliers.

Some of the companies have backward integration, which reduces the suppliers’ clout.

BARGAINING POWER OF CUSTOMERS

Due to increase in branded products, there is less chance that the consumer can influence, but intense competition within FMCG companies result in value for money deals for consumers. (e.g. getting one FMCG product free with one FMCG product unit bought).

COMPETITION

In the FMCG trading sector of DR Congo, the average gross profit margins on imported FMCGs are high (in the range of 150%) and they also sell in huge turnover volumes.

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION To beat the competition companies mainly use various strategies like

discounts and freebies. Unbranded players are growing at the rate of 10%. Local players have no large distribution network so they are giving

fight to the branded products by giving huge margins to retailers which is an important part of supply chain.

6.4 Factors that will drive growth in this sector

Increasing rate of urbanization, expected to see major growth in coming years.

Rise in disposable incomes, resulting in premium brands having faster growth and deeper penetration.

Innovative and stronger channels of distribution to the rural segment, leading to deeper penetration into this segment.

Increase in rural non-agricultural income and benefits from government welfare programmes.

7. BUSINESS & MARKETING STRATEGIES

7.1 Overview

EMMARK CONGO has employed various innovative techniques to capture the DR Congo FMCG urban consumer market in a big city like Kinshasa. It has for instance introduced various small budget FMCG consumer goods to attract the urban consumers in downtown Kinshasa. EMMARK CONGO has targeted mainly on the third class consumers to market its diverse range of FMCG products. The company has introduced toilet soaps, detergents and other FMCG consumer attractive goods at a low cost.

EMMARK CONGO has also come up with various other marketing strategies such as pricing and supply chain management process and distribution strategies by using its own distribution trucks to make incisive inroads into the urban DR Congo consumer products market. The company’s distribution fleet of trucks makes timely and cost-effective deliveries to smaller FMCG product wholesalers and retailers throughout the Kinshasa area.

7.2 Packaging

Attractive packs Vibrant colors Pack that show the important features of product Protective packaging (especially for coffee products)

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Size-wise packing (for some cooking oils and toothpaste products) Done according to segmentation of the Market Packaging is enhanced and improved upontime after time Affordable small-sized packs (especially for soft drink beverages).

7.3 Advertisement

Huge investment expenditure on advertisement Frequent broadcasts Targeted advertisement especially during peak hours During live matches During popular TV shows Target TV channels in Kinshasa Through banners, posters, trial packs, events, hoardings, FM radio, etc. Based on Market Research

7.4 Marketing

Regular and sustained marketing is required for a successful business of a departmental store. The important marketing channels that are used by EMMARK CONGO are flyer distribution, billboards, banners, Cable TV, etc. Regular advertisement expense usually falls in the range of 0.5% to 1% of sales in the departmental store business.

Some of the marketing and promotional techniques that are employed by EMMARK CONGO are as under:

Use of existing customers as the best referrals. Knowing customers’ needs. Introduction of home delivery services free of cost for shopping of

more thanUSD 20. Frequent clearance sales

7.5 Pricing

Every retailer has a basic philosophy towards pricing their product. In the case of EMMARK CONGO, it is important is that it creates and sticks to a strategy for pricing so as to convey a clear message to the consumer. The market has certainly created the need for all retailers, even those at the higher end, to become more value-oriented. That is not to suggest that EMMARK CONGO necessarily needs to compete on price, only that it has awareness about providing consumer perceived value.

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONSome value pricing strategies that are employed by EMMARK CONGO are as follows:

Provides the consumers with incentives to become repeat customers by offering them future discounts.

Frequent clearance sales Inclusion of gifts within specified amounts of purchases at the

departmental store. Display Featuring of discounted prices regularly.

8. COMPANY MANAGEMENT & ORGANIZATION STRUCTURE

8.1 Overview

EMMARK CONGO is acutely aware of the imperative need to put in place and maintain a winning consumer goods organization that will underpin its ability to drive growth and keep costs down. In order to do so, EMMARK CONGO needs to operate with an efficient and effective management organizational structure that can take advantage of scale; strengthen and amplify the degree of centralization and specialization in the marketing, sales, and back-office functions; and most importantly use a specialized but skeletal staffing structure in an emerging FMGC market like that one of DR Congo.

Generally speaking, the experience that EMMARK CONGO has so far gathered in it’s almost one-year’s trading in consumer packaged goods in DR Congo is that:

It pays to have a locally deployed marketing function, in which most marketing employees work in country offices supported by a small set of centers of excellence. Our own experience is that companies that take this approach tend to grow faster and to have lower costs than those with a large proportion of centrally located marketing personnel.

In the emerging FMCG markets, staff size doesn’t matter: we have so far found no link between the number of employees in such a market

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONand a company’s growth rate there. What matters is having a skill mix tailored to local market dynamics.

8.2 Company Organizational Structure

Going by the company organizational observations deducted in the sub-section above, EMMARK CONGO has created and deployed a lean but market-focused organizational structure with 32 employees on board. This organization structure is specifically designed and tailored to achieve the principal marketing objects of the company that include: high volume sales of consumer packaged goods; execution and maintenance of an extensive distribution network; and achieving high stock turnover in relatively short periods of time.

To be able to achieve these key marketing objectives, EMMARK CONGO has instituted a core management structure that comprises of four departments that include: procurements and logistics department (which also includes stores); sales and marketing department; accounts and finance department; and the administration and human resources department which is based at EMMARK TRADING Headquarters in Kampala, Uganda. Another key consideration is that it is important to have a lean but highly efficient and effective management structure that can deliver sustained business growth, cut costs and attain economies of scale, drive expansion of the consumer product distribution and supply chain logistics, build up enterprise competitiveness, and enable the company to protect its cash flow and structure its bank trade-finance instruments payment plan under the contract according to its FMCG importation interests.

The business operations of EMMARK CONGO are basically driven by the first three departments (i.e. procurements and logistics department; sales and marketing department;; and accounts and finance department) and it is these three for which detailed job descriptions are given in Sub-section 8.4 on roles and responsibilities below.

8.2.1Procurement and Logistics Department

The Procurement & Logistics department ensures that the materials and services needed for the EMMARK CONGO consumer goods trading enterprise in DR Congo are available on time, in full and under competitive conditions.

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONHigh commodity prices as well as rising oil prices and transportation costs are undermining consumer packaged goods companies’ ability to maintain margins. In part, this is a function of not having a true understanding of their total cost of ownership and its impact on the extended supply chain. Global sourcing is one part of the solution and is a viable solution for a consumer packaged goods company like EMMARK CONGO that is willing to invest in improving the core components of its procurement operations.

In addition to EMMARK CONGO having a well-established procurement organization for its direct materials it also needs to ensure indirect suppliers operate at the same level of efficiency to achieve high performance. This is particularly important as the growth in new and emerging markets brings more opportunities to find synergies and savings among members of the supply network but also brings added complexity.

Employees in the Procurement & Logistics department think in processes instead of departments, are ambitious and professional and can quickly react to events. Both large and small decisions have a direct impact on EMMARK CONGO’s trading activities.

Internally, the Procurement & Logistics department works together with Project Management and the Accounts and Finance department, because the importance of the purchase quote and the related financial significance of purchasing and logistics are relatively large.

8.2.2Sales and Marketing Department

Cooperation between multiple departments in a company is essential for increased profits. Production departments and marketing or sales departments have different functions, but a similar overall objective. Both departments look to enhance sales and profits by supplying products that customers need or want. Marketing and sales support within the production department can help tie customer preferences to the production process.

The EMMARK CONGO marketing and sales departments work together based on a solid plan to maximize profits while creating long-term clients and adding value to the company’s products. The functions of the sales and marketing department is to increase product sales for the company.

EMMARK CONGO has also introduced a functional customer marketing department within the sales and marketing department as an essential component for building high-impact strategies and messaging that conveys

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONmaximum value about a EMMARK CONGO’s products and services to retailers. This team can also be called upon to act as skilled mediators between sellers and marketers, two groups often in a state of conflict.

The sales and marketing department’s new incarnation has produced one unified marketing team focused on brand building and a steady pace of new product introduction to create a large, innovative product portfolio. It has also brought together disparate company sales teams by assigning them to a strictly defined customer segment to whom they are expected to sell the whole range of FMCG goods.

8.2.3Accounts and Finance Department

The Accounts and Finance Department of EMMARK CONGO has two sub-departments: that one of finance and a separate one dealing with company accounts matters. The functional roles for each of these two sub-departments are given as follows:

Accounts Department: Determination of payroll Accounting for receivable cash collections Accounting for payables cash payments Tracking of procurement and inventory Company property accounting

Finance Department: Preparation of company budgets Financial management of borrowed funds and bank trade finance instruments Management of Investments of EMMARK CONGO Management of Taxes Management of Financial Risks

8.2.4Administration and Human Resources Department

The Administration and Human Resources Department of EMMARK CONGO has two core functions: administration and human resource management. The functional roles of each of these two departmental components are given below:

HR Department: Manpower Planning Job analysis and Job description Determining wages and salaries

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TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Recruitment and Selection Performance Appraisal Training & Development Employee welfare and motivation Labour management relations Implementing organizational policies Dismissal and redundancy

Administration Department:The Administration component of the department is tasked with providing administrative and logistical support to the entire organization.

Mandate of the Administration Department includes:

General office Management and Running. Registry Management. Assets Management. Property Management. Security and Safety.

Figure 4: Organization Structure of EMMARK CONGO

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BOARD OF DIRECTORS

CHAIRMAN/MD

DIRECTOR PROCUREMENT & LOGISTICS

DIRECTOR SALES &

MARKETING

DIRECTOR ACCOUNTS &

FINANCE

DIRECTOR ADMIN & HR

Stores Manage

r (1)

SPM (1)

SCLO (1)

Accounts Officer

(1)

Trade Finance Expert

(1)

Asst. Accounts Officer

(1)

Cashiers (2)

Helpers (6)

Sales Staff (4)

Drivers (6)


Legend:SPM: Sourcing & Procurement ManagerSCLO: FMCG Supply Chain Logistics Officer

8.3 Staffing

The manpower requirements are specifically tailored to the business opportunities and organizational dictates of the FMCG trading enterprise in DR Congo. The following Table 3 presents the manpower structure for EMMARK CONGO:

Table 3: EMMARK CONGO Staffing StructureStaff Description Number

Sourcing and Procurement Manager 1Stores Manager 1Trade Finance Expert/Specialist 1FMCG Supply Chain Logistics Officer 1Accounts / Financial Officer 1Asst. Accounts / Financial Officer 1Sales Staff / Order Bookers 4Billing Staff 2Cashiers 2Helpers / Cleaners 6Drivers 6Loaders 6Total 32

8.4 Roles and Responsibilities of Company Staff

FCMG Stores Manager: Providing excellent customer service; Managing stock effectively;

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Billing Staff (2)

Loaders (6)

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Adhering to store plans and visual layouts; Maintaining hygienic, safe & well organized sales floor; Ensuring store readiness for daily trade; Keeping inventory records and stocktaking.

Sourcing & Procurement Manager: Responsible for the execution of the geographic category strategies

and development of sourcing plans at a local/regional level; Ensuring that the category sourcing and contract(s) meet the business

requirements through the execution of the strategic sourcing process; Applying global policies, standards and platforms including the agreed

Sourcing Management methodology and approach and to deliver robust terms and conditions that manages the Company's service delivery and commercial risk;

Managing negotiation and supplier selection within the framework of the sourcing strategies;

Applying the agreed global policies, standards and platforms; Owning commercial supply base management and building strong

internal and external business relationships to ensure the delivery of the category goals;

Facilitating the creation of supplier SLA's and performance check-points;

Managing and resolve contractual performance issues and escalating where required.

Trade Finance Expert: Assist the CMD and Director of Accounts and Finance (DAF) in

structuring trade finance deals - Liaising with insurance companies, banks, and counter-parties to obtain timely information and also in execution of deals.

Maintaining and enhancing relationships with the existing banks and developing new banking relationships.

Managing collateral and inventory financing processes with the banks. Creating databases of Letters of credit and ensuring compliance with

all UCP regulations. Ensuring timely issuance of Letters of credit by co-coordinating with

the banks and suppliers and also ensure that export Letters of credits are received as per contracted time lines.

Compiling all relevant documents for negotiating letters of credit and smoothly resolving discrepancies by coordinating with the counterparts and banks.

24

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Closely monitoring credit limits and utilization and report the same to

the DAF. Constantly seeking to improve the quality /type of credit limits by

working closely with the banks and also improving pricing received on these limits.

Preparing cash flow statements and report surplus/ deficits on a timely basis to the DAF.

Monitoring developments in trade finance arena and provide innovative ideas in financing deals.· Implementing policies and procedures for trade finance department and work towards improving internal policies and procedures.

FCMG Supply Chain Logistics Officer: His/her key task is to organise the safe and efficient storage and distribution of FMCG goods, and to ensure that orders are satisfied correctly.

Other responsibilities include:

organising shipments coordinating drivers, vehicles, loads and journeys operating IT systems negotiating and agreeing contracts developing and confirming schedules planning for and negotiating technical difficulties preparing paperwork for regulatory bodies liaising with staff.

Accounts / Financial Officer: Handling of Day-to-day Cash payments and bank payments/ receipts Monitoring of creditors and payments on due dates Accounting of bills relating to expenses Scrutiny of Trial Balance and necessary corrections /alterations Inventory Management & Accounting Handling Taxes: VAT, Income Taxes, etc. Handling Statutory compliance & Maintaining records Bank Reconciliation

Asst. Accounts / Financial Officer: Responsible for daily routines in the process of accounts receivable &

payables. Handle General Ledger accounting entries, including preparing

accounting voucher and filing. Assist in the month-end closing and prepare for account schedules.

25

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION Reconcile and follow up outstanding invoices and suppliers'

statements. Provide general support to the EMMARK CONGO accounting teams.

Sales Staff/Order Bookers: Salesmen do sales budget setting, route planning, trade negotiations from store level to national buyers. They also routinely visit customers at their designated area as per schedule provided and book their orders. Salesmen also price the goods and stack them in the shelves according to their specifications. Furthermore they assist the FMCG customers in locating the products.

Helpers/Cleaners: Helpers are next in place to the salesmen who assist them in their activities. Their core job description is to dust the products twice daily so that the customers don’t get a negative image of the departmental store. Additionally, they also help the cashiers to pack the goods in plastic bags.

Cashiers: Are responsible for managing funds and maintaining books of accounts. The cashiers are required to record all transactions manually and verify the same with the billing status as shown on the computer. The cashiers also receive payments from outdoor sales staff and match it with the daily sales figure reported by sales staff. Before commencing work, previous day’s position is crosschecked with the cash position to ascertain and verify the cash balances.

Billing Staff: These are the people responsible for handling cash and closing the position at the end of the day once all sales transactions have been entered. The cashiers would subsequently crosscheck the figures before commencement of day’s operations.

26


9. FINANCIAL PLAN

8.1 Trade Expansion/Scale-Up Requirements

EMMARK CONGO requires an Import Letter of Credit worth USD 1.5 – 1.6 million for a maximum period of 180 days to finance the importation of fast-moving consumer goods into DR Congo where it has an established and promising market presence with a good trading history.

Current trading turnover by EMMARK CONGO is about USD 750,000 for every six (6) months trading cycle.

EMMARK CONGO seeks to scale-up its FMCG products trading portfolio five-fold to about USD 3.75 million for every six (6) months trading cycle.

EMMARK CONGOwould also like to use the applicableImport Letter of Creditto implement additional business –expansion strategies that include:

Promoting its line of products/merchandise in the booming DR Congo market in order to gain competitive advantages;

Structuring its payment plan under the FMCG goods importation contract in accordance with its import interests;

Protecting its cash flow so that it can win new business while retaining the confidence and support of existing customers.

EMMARK CONGO works in active partnership and collaboration with DYNAPHARM AFRICA and they can together can put up and offer

27

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONsubstantial collateral security to secure the required ban trade-finance facilitation instruments that will include:

A solid and sound trading history; Substantial business assets in DR Congo including a FMCG

products distribution centre and bonded warehouse and a product distribution fleet of vehicles;

Competent and dynamic management structure in place; FMCG supply chain network in place.

8.2 Trade Financing Options

1) Stand-By Letters of Credit (SBLCs) for 180-day credit periods; OR2) Usance Letters of Credit for 180-day credit periods; OR3) Mix of L/C and Cash Loans for 120 days with Cash: L/C Ratio building

up from 30: 70 to 50: 50 as trading progresses and business confidence grows, OR

4) Use of secured Import Loans within the SBLCs for 90/120 days

8.3 Functioning of the Stand-by Letter of Credit

Figure 5: Functioning of the Stand-by Letter of Credit

8.4 Financial Reporting

28

Issuing Bank Advising Bank

Exporter of Goods

(UK/USA)

EMMARK CONGO

3. Issuing of the SBLC

7. Forwarding of documents

8. Making payment

1. Entering into agreement

5. Dispatch of goods

2.

Ap

plic

ati

on

of

the

SB

LC

10

. Fo

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ing

of

docu

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ts t

o t

he

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4.

Ad

vis

ing o

f th

e S

BLC

9.

Maki

ng p

aym

ent

6.

Forw

ard

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docu

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Based on mutual understanding with the project financiers, the following reports will be submitted:

1. Inception report and first annual work plan to be submitted at the end of the first month for the first full project financing year.

2. Annual reports submitted at the end of the first month for the subsequent project financing years.

3. Budget and forecast requests to be submitted semi-annually, to include the budget request for operating funds for the coming 6 months and a forecast for the following 6 month period.

4. Quarterly status reports both narrative and financial to be produced at the end of the month following each quarter of the project financing year.

5. Audit reports due together with the progress reports by the end of March for the previous calendar year.

6. Final project report due three months following the end of the project financing.

8.5 Key Assumptions for Trading Process

8.5.1Operating Assumptions

Hours operational per dayDays operational per yearStock inventory remaining in storeCategory of item No. of days Groceries and food items 7 Baby garments and bay products 30 Crockery and plastic items 30 Soaps detergents and chemicals 15 Cosmetics and artificial jewellery 30 Ice cream and beverages 7 Stationery and greeting cards/gifts 30 Watches and Clocks 30 Electronic and electrical appliances 30 General items 30 Bakery items 3

8.5.2Economy Related Assumptions

Electricity/Fuel cost growth rate 10%Salaries growth rate 10%Corporate tax rate (DR Congo) 40%

29


8.5.3Cash Flow Assumptions

Accounts receivable (average) 0 daysAccounts payable (average) 15 days

8.5.4Expense Assumptions

Telephone expenses (% of Revenue) 0.3%Repair and maintenance (% of Equipment & Building) 1%Entertainment Expenses (% of Revenue) 0.5%Insurance of stocks (% of stock) 4%Capacity Utilization Growth Rate 10%Amortization of Pre-operating Cost 20%Advertisement (% of Revenue) 1%Electricity growth rate 10%Travelling and conveyance (% of Revenue) 0.2%Supply Chain Distribution Expenses (% of Revenue) 0.18%Printing and stationery (% of Revenue) 0.1%Proportion of VAT (@ 16%) taxable sales and purchases 70%Revenue price growth rate 6%Sales price growth rate 6%

8.5.5Financials Assumptions

Projection Period (Years) 5Interest rate on Stand-by Letters of Credit 8%SLBC tenure (Years) 5SLBC Repayments per Year 2SLBC Operating/Application Cycle (Days) 180Value of each SLBC (USD) 1,500,000

30

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION8.6 Revenue Calculation (In USD)

Optimum Year 1 Year 2 Year 3 Year 4 Year 5

0 - 6 month

s7 - 12

months13 - 18 months

19 - 24 months

25 - 30 months

31 - 36 months

37 - 42 months

43 - 48 months

49 - 54 months

55 - 60 months

Projected Revenue (USD)

3,750,000

3,750,000

3,975,000

3,975,000

4,200,000

4,200,000

4,462,500

4,462,500

4,725,000

4,725,000

(USD 20,833 per day)

Sales Price growth rate Accumulated 6% 12% 19% 26%Purchase Price growth rate Accumulated 6% 12% 19% 26%

Revenue (USD):Proportion

1 Groceries and food items 55%2,062,5

002,062,50

02,186,25

02,186,25

02,310,00

02,310,00

02,454,37

52,454,37

52,598,75

02,598,75

02 Baby garments and baby products 5% 187,500 187,500 198,750 198,750 210,000 210,000 223,125 223,125 236,250 236,250

3 Crockery and plastic items 4% 150,000 150,000 159,000 159,000 168,000 168,000 178,500 178,500 189,000 189,0004 Soaps, detergents and chemicals 15% 562,500 562,500 596,250 596,250 630,000 630,000 669,375 669,375 708,750 708,7505 Cosmetics & artificial jewellery 5% 187,500 187,500 198,750 198,750 210,000 210,000 223,125 223,125 236,250 236,250

6 Ice cream and Beverages 5% 187,500 187,500 198,750 198,750 210,000 210,000 223,125 223,125 236,250 236,2507 Stationery & greeting cards/gifts 1% 37,500 37,500 39,750 39,750 42,000 42,000 44,625 44,625 47,250 47,250

8 Watches and clocks 1% 37,500 37,500 39,750 39,750 42,000 42,000 44,625 44,625 47,250 47,2509 Electronic and electrical appliances 2% 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,500

10 General items 2% 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,500

11 bakery items 5% 187,500 187,500 198,750 198,750 210,000 210,000 223,125 223,125 236,250 236,250

Total 100%3,750,

0003,750,0

003,975,0

003,975,0

004,200,0

004,200,0

004,462,5

004,462,5

004,725,0

004,725,0

00

31


8.7 Purchases & Stock Calculation (in USD) Year 1 Year 2 Year 3 Year 4 Year 5

0 - 6 mths

7 - 12 mths

13 - 18 mths

19 - 24 mths

25 - 30 mths

31 - 36 mths

37 - 42 mths

43 - 48 mths

49 - 54 mths

55 - 60 mths

Gross margin % of Sales:1 Groceries and food items 130% 130% 130% 130% 130% 130% 130% 130% 130% 130%2 Baby garments and baby products 330% 330% 330% 330% 330% 330% 330% 330% 330% 330%3 Crockery and plastic items 280% 280% 280% 280% 280% 280% 280% 280% 280% 280%4 Soaps, detergents and chemicals 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%5 Cosmetics & artificial jewellery 280% 280% 280% 280% 280% 280% 280% 280% 280% 280%6 Ice cream and Beverages 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%7 Stationery & greeting cards/gifts 180% 180% 180% 180% 180% 180% 180% 180% 180% 180%8 Watches and clocks 280% 280% 280% 280% 280% 280% 280% 280% 280% 280%9 Electronic and electrical appliances 280% 280% 280% 280% 280% 280% 280% 280% 280% 280%10 General items 130% 130% 130% 130% 130% 130% 130% 130% 130% 130%11 bakery items 180% 180% 180% 180% 180% 180% 180% 180% 180% 180%Purchases (USD):

1 Groceries and food items 825,000 825,000 874,500 874,500 924,000 924,000 981,750 981,7501,039,50

01,039,50

02 Baby garments and baby products 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,5003 Crockery and plastic items 60,000 60,000 63,600 63,600 67,200 67,200 71,400 71,400 75,600 75,6004 Soaps, detergents and chemicals 225,000 225,000 238,500 238,500 252,000 252,000 267,750 267,750 283,500 283,5005 Cosmetics & artificial jewellery 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,5006 Ice cream and Beverages 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,5007 Stationery & greeting cards/gifts 15,000 15,000 15,900 15,900 16,800 16,800 17,850 17,850 18,900 18,9008 Watches and clocks 15,000 15,000 15,900 15,900 16,800 16,800 17,850 17,850 18,900 18,9009 Electronic and electrical appliances 30,000 30,000 31,800 31,800 33,600 33,600 35,700 35,700 37,800 37,80010 General items 30,000 30,000 31,800 31,800 33,600 33,600 35,700 35,700 37,800 37,80011 bakery items 75,000 75,000 79,500 79,500 84,000 84,000 89,250 89,250 94,500 94,500

Total Purchases1,500,

0001,500,0

001,590,0

001,590,0

001,680,0

001,680,0

001,785,0

001,785,0

001,890,0

001,890,0

00Stocks (USD):1 Groceries and food items 52 15,865 15,865 16,817 16,817 17,769 17,769 18,880 18,880 19,990 19,9902 Baby garments and baby products 6,250 6,250 6,625 6,625 7,000 7,000 7,438 7,438 7,875 7,875

32

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION123 Crockery and plastic items 12 5,000 5,000 5,300 5,300 5,600 5,600 5,950 5,950 6,300 6,3004 Soaps, detergents and chemicals 24 9,375 9,375 9,938 9,938 10,500 10,500 11,156 11,156 11,813 11,8135 Cosmetics & artificial jewellery 12 6,250 6,250 6,625 6,625 7,000 7,000 7,438 7,438 7,875 7,8756 Ice cream and Beverages 52 1,442 1,442 1,529 1,529 1,615 1,615 1,716 1,716 1,817 1,8177 Stationery & greeting cards/gifts 12 1,250 1,250 1,325 1,325 1,400 1,400 1,488 1,488 1,575 1,5758 Watches and clocks 12 1,250 1,250 1,325 1,325 1,400 1,400 1,488 1,488 1,575 1,5759 Electronic and electrical appliances 12 2,500 2,500 2,650 2,650 2,800 2,800 2,975 2,975 3,150 3,15010 General items 12 2,500 2,500 2,650 2,650 2,800 2,800 2,975 2,975 3,150 3,15011 Bakery items 120 625 625 663 663 700 700 744 744 788 788Total Stocks 52,308 52,308 55,446 55,446 58,585 58,585 62,246 62,246 65,908 65,908

8.8 Operating Expenses (in USD)

Year 1 Year 2 Year 3 Year 4 Year 50 - 6 months

7 - 12 months

13 - 18 months

19 - 24 months

25 - 30 months

31 - 36 months

37 - 42 months

43 - 48 months

49 - 54 months

55 - 60 months

Administrative Salaries 17,000 17,000 18,700 18,700 20,570 20,570 22,627 22,627 24,890 24,890

Legal & Audit Fees 1,000 1,000 1,100 1,100 1,210 1,210 1,331 1,331 1,464 1,464

Entertainment 18,750 18,750 19,875 19,875 21,000 21,000 22,313 22,313 23,625 23,625Telephone, Fax & Postage 11,250 11,250 11,925 11,925 12,600 12,600 13,388 13,388 14,175 14,175

Electricity 8,000 8,000 8,800 8,800 9,680 9,680 10,648 10,648 11,713 11,713

Advertisement 37,500 37,500 39,750 39,750 42,000 42,000 44,625 44,625 47,250 47,250

Repair of Building & Equipment 500 500 700 700 1,000 1,000 1,200 1,200 1,500 1,500

Distribution vehicles delivery 6,750 6,750 7,155 7,155 7,560 7,560 8,033 8,033 8,505 8,505

Insurance of stocks 2,092 2,092 2,218 2,218 2,343 2,343 2,490 2,490 2,636 2,636Travelling and conveyance 7,500 7,500 7,950 7,950 8,400 8,400 8,926 8,926 9,450 9,450

Printing & stationery 3,750 3,750 3,975 3,975 4,200 4,200 4,463 4,463 4,725 4,725

33

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONDepreciation 1,750 1,750 1,620 1,620 1,503 1,503 1,394 1,394 1,295 1,295

Amortization 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Total117,84

2 117,842 125,768 125,768 134,066 134,066 143,436 143,438 153,228 153,228

8.9 5-Year Projected Income Statement (In USD)

Year 1 Year 2 Year 3 Year 4 Year 50 - 6 mths

7 - 12 mths

13 - 18 mths

19 - 24 mths

25 - 30 mths

31 - 36 mths

37 - 42 mths

43 - 48 mths

49 - 54 mths

55 - 60 mths

Cash Inflows:

SBLCs1,500,0

001,500,00

01,590,00

01,590,00

01,680,00

01,680,00

01,785,00

01,785,00

01,890,00

01,890,00

0

Sales/Revenue3,750,0

003,750,00

03,975,00

03,975,00

04,200,00

04,200,00

04,462,50

04,462,50

04,725,00

04,725,00

0

Total Cash Inflows5,250,

0005,250,0

005,565,0

005,565,0

005,880,0

005,880,0

006,247,5

006,247,5

006,615,0

006,615,0

00

Cost of Sales:

Add opening stock 52,308 52,308 52,308 55,446 55,446 58,585 58,585 62,246 62,246 65,908

Purchases1,500,0

001,500,00

01,590,00

01,590,00

01,680,00

01,680,00

01,785,00

01,785,00

01,890,00

01,890,00

0

Less closing stock -52,308 -52,308 -55,446 -55,446 -58,585 -58,585 -62,246 -62,246 -65,908 -65,908

VAT (16%)-

168,000 -168,000 -178,080 -178,080 -188,160 -188,160 -199,920 -199,920 -211,680 -211,680

Total Cost of Sales1,332,

0001,332,0

001,408,7

821,411,9

201,488,7

011,491,8

401,581,4

191,585,0

801,674,6

581,678,3

20

Gross Profit3,918,

0003,918,0

004,156,2

184,153,0

804,391,2

994,388,1

604,666,0

814,662,4

204,940,3

424,936,6

80

34


Cash Outflows:

Operating Expenses: 117,842 117,842 125,768 125,768 134,066 134,066 143,436 143,436 153,228 153,228

Operating Profit3,800,

1583,800,1

584,030,4

504,027,3

124,257,2

334,254,0

944,522,6

454,518,9

844,787,1

144,783,4

52

SBLC Repayments1,500,0

001,500,00

01,590,00

01,590,00

01,680,00

01,680,00

01,785,00

01,785,00

01,890,00

01,890,00

0

SBLC Interest 60,000 60,000 63,600 63,600 67,200 67,200 71,400 71,400 75,600 75,600Profit before Taxation

2,240,158

2,240,158

2,376,850

2,373,712

2,510,033

2,506,894

2,666,245

2,662,584

2,821,514

2,817,852

Taxation (40%) 896,063 896,063 950,740 949,4851,004,01

31,002,75

81,066,49

81,065,03

41,128,60

61,127,14

1

Profit after Taxation1,344,

0951,344,0

951,426,1

101,424,2

271,506,0

201,504,1

361,599,7

471,597,5

501,692,9

081,690,7

11

Acc. Profit brought forward 01,344,09

52,688,19

04,114,30

05,538,52

77,044,54

78,548,68

310,148,4

3011,745,9

8013,438,8

88

Un-appropriated Profit carried forward

1,344,095

2,688,190

4,114,300

5,538,527

7,044,547

8,548,683

10,148,430

11,745,980

13,438,888

15,129,599

35

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATION10. CONCLUSION

The business case study considers raising trade facilitation credit through the available bank trade finance instruments such as Stand-by Letters of Credit and Usance Letters of Credit in order to scale up business turnover for a promising FMCG trading enterprise by EMMARK CONGO in Kinshasa – the capital of DR Congo.

The FMCG goods sector is one of the fast-rising trading sectors – not only in DR Congo but all over the world, and EMMARK CONGO would now like to capitalize on the market presence it has established in the DR Congo market to roll out and also consolidate its FMCG supply chain and distribution network so as to increase its trading output five-fold, promote its line of merchandise in this relatively new market and gain competitive advantages in the short-to-medium-term.

In the short space of time that EMMARK CONGO has been doing business in DR Congo, business has been quite strong with periodical indicative sales of USD 750,000 every six months or so. Market prospects are quite strong at the moment to the extent that EMMARK CONGO has a more that average possibility of scaling up sales to five times that six-month turnover to about USD 3.75 million going by the prevailing market sales and demand indications. The reason for such strong company performance prospects are due to its diversification, vertical and horizontal integration, breadth and depth of its FMCG product line and innovative and customer-oriented product introduction. Thus EMMARK CONGO now needs to focus on its distribution channels, networking, marketing strategies, sales promotion etc. in order to scale up and enjoy more success in the market.

The only way this goal can be realized by EMMARK CONGO is to seek recourse to the available flexible and innovative bank trade-finance instruments to grow business and build market competitiveness so that it can both expand and protect its cash flow in order to increase its market penetration and support existing retail/wholesale purchases going forward.

EMMARK CONGO has now built up a solid trading history; accumulated sizeable business assets that include a well-established FMCG products distribution centre and bonded warehouse and a product distribution fleet; built up a functional supply chain network; and put in place a competent and dynamic management structure that collectively count as substantial company equity collateral that it can use to secure the requisitioned bank

36

TRADE FINANCE FOR FMCG TRADE EXPANSION & FACILITATIONtrade-finance instruments while also guaranteeing the future performance of the FMCG products retailing/wholesaling business.

37

business case - application of trade finance to expand an fmcg trading ent (autosaved)

Documents

basic consumer packaged

capital city of dr congo

production of high

project brief emmark

market of consumers

kinshasa city

western dr congos kinshasa

high markups