Promoting Handwashing among Rural Households to Improve Public Health in Vietnam, Oct 2010
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Transcript of Promoting Handwashing among Rural Households to Improve Public Health in Vietnam, Oct 2010
COMMERCIALIZING A HANDWASHING DEVICE IN RURAL VIETNAM
Global Young Leaders Programme Ho Chi Minh City, Vietnam: November 2010
Table of Contents
• Executive Summary 1
• Overview 3
• The Case for Commercialization 11
• Business Plan
• Business Model 22
• Sales & Marketing Strategy 38
• Operational Plan 58
• Risk Management 68
• Management & Governance 73
• Financials 83
• Recommendations 92
• Conclusion 93
• Appendix 94
Execu@ve Summary
¨ With a lack of hygiene awareness in Vietnam and the importance of the proper enabling environment to drive behavior change, the proposed enterprise has identified a market opportunity for a hand washing device “HWD” to be commercially distributed throughout the country.
¨ Considering a target market initially comprised of individuals earning US$50-‐US$70/month, the device will be marketed as an essential household item and priced at US$6.
¨ With potential strategic partnerships along the entire supply chain, the operation is forecasted to sell 975,000 units over the next 5 years, in 3 distinct phases: pilot, growth & optimization, and expansion stages.
Execu@ve Summary (2)
¨ A mutually beneficial partnership with the Vietnam Women’s Union will allow the device to gain exposure to local households through its 13 million members, whilst providing positive social and monetary value in return.
¨ With an estimated capital requirement of US$ 752,500 over the 5 years, the potential added value to the soap market is projected to reach over US$3 million. NPV for the enterprise is estimated at US$50,000, with a payback period of 7 years.
¨ The venture is expected to improve the living standards of Vietnam’s rural communities, while providing a sustainable business model for the success of all stakeholders involved.
i. Vietnam: Country Background ii. Objective
Overview
Vietnam: Country Background
¨ Population : 85.7 million ¨ Per capita income rose from US$220 in 1994
to US$1,052 in 2009
¨ Life expectancy is currently estimated at 71.94 years and the under-‐five mortality rate is 23 per 1000 live births
¨ Avian flu is an ongoing threat in addition to other potential infectious pandemic outbreaks
Rapid economic development with ongoing risks of pandemics
Vietnam: Country Background (2)
¨ 70% of population resides in rural areas ¨ Large inequalities exist between urban
and rural areas in income, infrastructure and resources
¨ Public investment in water and sanitation is low compared with other sectors. (e.g. US$10 million per year on average)
Investment in rural areas is CRITICAL
Hygiene and Sanita@on in Vietnam
¨ Lack of access to water supply, sanitation and hygiene is a global challenge and is associated with 2.2 million deaths per year in the world
¨ In Vietnam, economic costs to health due to poor sanitation is estimated at US$262 million per year
¨ In rural Vietnam : ¤ 58% of people have access to clean water
¤ 18% of households have hygienic latrines
Poor hygiene and sanitation creates negative impacts on health, preventable economic loss
Need for Hand Washing with Soap
¨ Only 6.1% of people practice hand washing with soap before eating
¨ Similarly low percentages of people wash hands with soap before and after baby changing, handling animals, toilet use and food preparation
¨ Effective hand washing with soap in Vietnam would reduce the annual 0.9 million deaths from Scabies, Helminthes, Hepatitis A and Trachoma by up to 34%
Washing hands with soap significantly reduces disease
¨ The threat of pandemic flu is ongoing and the risks to countries like Vietnam have only increased with high population densities and human-‐animal contact. Further outbreaks are expected over the next five years.
¨ Global studies show that hand washing with soap when handling animals is critical in preventing and containing infections.
¨ Vietnam is one of a handful of countries that has the highly pathogenic H5N1 avian influenza. One of the key messages for prevention of avian flu is hand washing with soap
Pandemic Flu Preven@on
The need for hand washing with soap would increase exponentially in the event of an outbreak.
Business Plan Objec@ve
Hand Washing Behavior
Market Opportunity
Income generation
+ Improvement of livelihoods
Lower child mortality rates
Hygiene improvement / promotion
=
A commercially viable solution to rural hygiene challenges
Why a Hand Washing Device?
A commercial model that addresses a serious social issue and benefits several stakeholders
• Achieve Goals • Positive Social Impact
• Revenue Stream • Brand Awareness & Trial
• Increased Income • Sense of Purpose
• Improved Hygiene • Family Wellbeing
Customer Distribution
Partners
Public & Private
Partners Supplier
i. Value Proposition ii. Introducing the Hand Washing Device iii. Venture Concept iv. Social Benefits v. Market Opportunity
The Case for Commercializa@on
Value Proposi@on
¨ A hand washing device that provides a solu@on to a public health issue using a commercial model, which effec@vely leverages both the public and private sector.
¨ Providing an aYrac@ve financial incen@ve to sell the device
has the poten@al to make the social venture sustainable. ¨ The business model will have a posi@ve social impact on the
lives of the Vietnamese people through promo@on of hand washing with soap.
Introducing the Hand Washing Device
¨ Improves hygiene of rural households ¨ Helps the Vietnamese government to
measure the impact of its hand washing initiative
¨ Provides an educational tool to support the hand washing initiative
¨ A trendy lifestyle product designed by award-‐winning design house IDEO
¨ Creates a communication platform for an FMCG MNC in rural households
Product Features
¨ Removable lid ¨ Easy to open & close lever
¨ Perforated tap to conserve water
¨ Handles for easy carriage
¨ Detachable basin for easy filling
¨ Bar soap holder ¨ Different color options for lid & base
¨ Drainage for used water
Social Benefits: Health
¨ Reduces Infectious Disease ¤ Hand washing with soap is essential for reducing risk of seasonal
and pandemic flu outbreaks ¤ Hand washing with soap has been shown to reduce diarrheal
disease by 47%, and respiratory infections by 34% ¤ Diarrheal disease is the 2nd most common cause of child deaths
globally n UNICEF estimates one child dies due to diarrhea-‐related causes every 30 seconds, every day
Hand washing with soap saves lives!
Social Benefits: Economic
¨ The Water & Sanitation Program (WSP) estimates annual financial losses due to poor sanitation of $780 million
¨ Proposed social enterprise builds capacity for a sustainable future commercial venture
¨ Creates jobs at all stages of the value chain
¨ Reduces absenteeism at both school & work
Economic empowerment for local women
Market Opportunity
¨ 75% of Vietnam’s population are rural dwellers with a need for the hand washing device: ¤ Approx 64million people – 16 million households
¨ Hand washing with soap ¤ Domestic soap market is US$39 million, growing 10% per year
¤ Hand washing initiative is changing behavior
¨ Potential for nationwide distribution through Women’s Union network
¨ New product lines and expansion into new markets
Potential market for hand washing device: US$96 million
Soap Market Poten@al
¨ 975,000 households reached in 5 years ¨ Bar soap will be purchase by each household to complement
the hand washing device
1 bar/ month
1 bar/ quarter
1 bar/ 6 months
1 bar/ year
Soap Sales Volume
25 million bars 8 million bars 4 million bars 2 million bars
Soap Sales Revenue
USD 7.5 million
USD 2.4 million
USD 1.2 million
USD 0.6 million
Vietnam Hand Washing Ini@a@ve
¨ Running from 2006 through 2011. Led by the Ministry of Health and supported by Women’s Union (WU), NGOs, & private sector partners
¨ To-‐date, over 3.2 million contacts reached
The foundation for creating a market for a hand washing device has been laid
Venture Concept
Women’s Union Rural Households “Happy Team” Social Enterprise
Province Level
District Level
Community Level
A social enterprise that seeks to improve public health in Vietnam through a commercially viable business model
i. Business Model ii. Production Plan iii. Sales & Marketing Strategy iv. Risk Management
Business Plan
i. Strategy ii. Key Partners iii. Value Proposition for Key Partners iv. Business Model Design v. Critical Success Factors
Business Model
Strategy
¨ Phased Approach: A transition period from a non-‐profit to commercial venture
¨ Pilot Phase: Launch covers limited geographic areas, but commercially driven in order to verify the operation model and to obtain market segment insights
¨ Transition of Ownership: Aim to complete the transition right after the first pilot phase. Depending on the situation, it may be required to add additional phases before transitioning into the for-‐profit business
Social Benefits of HWD
Phase 3 Pilot Phase
Phased approach: From non-‐profit to profit
Phase 2
Partner Steering Committee/ Board
Social Venture
Manufacturer
Women Union
Funding
Participating
Place Order
Distribute
Train/Manage
Sell Pay
1
WU Happy Team
End Consumer
1
2
3
FMCG, NGO, donors provide start up
funding
Entity that manages product manufacturer, Women’s Union Relationship (Sales channel)
Women’s Union in different tiers
Key Partners & Business Model Diagram
2
3
¨ Promotes gender rights and women’s issues
¨ 13 million members
¨ Leverage members network to sell HWD
¨ NGO specializing in supply chain and demand creation
¨ Lead the project during the pilot phase
¨ Leverage know-‐how of market dynamics across rural Vietnam
WOMEN’S UNION IDE
¨ Leverage distribution network to further market HWD
¨ New product line and revenue stream for manufacturer
MANUFACTURER
Key Partners
Key Partners (2)
¨ Provides insights into the personal care market in Vietnam
¨ Provides in-‐kind product for promotion which will boost HWD sales
¨ Mutually beneficial relationship with HWD
¨ Provides start-‐up capital
¨ Offers management and financial know-‐how
¨ Insights into corporate governance
FINANCIAL INVESTORS FMCG PARTNER
Value Proposi@on for Key Partners
Outcome Contribution
Women’s Union • Improve hand hygiene and decrease incidence of disease • Increase members’ income • Preparation/Pilot for self-‐funded initiatives
• Create the demand for HWD • Sales network • Sponsorship/financing initiatives • Channel and distribution support
Water and Sanitation Program
• Achieve Hand Washing Initiative objectives
• Start-‐up funding • Oversight until Nov 2011 • Manage relationship with Ministry of Health
WaterSHED • Achieve Hand Washing Initiative objectives • Test case for other countries
• Start up funding • Oversight
Value Proposi@on for Key Partners (2)
Expectation Contribution
International Development Enterprises (”IDE”)
• Achieve Hand Washing Initiative objectives in a commercially viable way
• Start-‐up funding • Project ownership • Business/sales training to WU members • Supply chain management
FMCG MNC • Branding • Increase soap sales • Increase market share • Meaningful CSR initiative
• Start-‐up funding support • Product donation for co-‐branding promotion • Sales training • Market intelligence
Business Model: Pilot Phase
Leveraging WU members network to initiate HWD pilot project to rural customers
Formed by IDE, and other stakeholders. Responsible for reviewing progress, milestones and fund usage.
In charge of daily operation and project execution including supply chain management and WU liaison
Steering Committee
Women Union Members
Rural Households
HWD Initiative (Department within IDE)
Delivering an affordable product to the end user and gathering feedback in terms of design and function prior to Phase 2
Pilot Phase: Implementa@on Strategy
Execute Contract With
Partners
Form Steering
Committee
Finalize Design of Product
Manufacture Products
Design Sales &
Distribution Processes Develop
Sales Training With
Partners
Develop Implementation
Plan with Partners (WU)
Build/Lend Warehouse Facilities Execute
Implementation with
Partners (WU)
Raise Startup Funds
Organize Management
Team
Deliver & Store Inventory
Manage Project
Today 6 months 3 months
Pilot Phase: Steering CommiYee
Steering Committee ¨ Includes representatives from WU, IDE and other partners in the HWD Initiative
¨ To seek financial sponsorship from IDE, FMCG MNC, WSP and other NGOs to fund HappyTap Initiative
¨ To leverage on WU members to promote HWD
¨ To negotiate and manage relationship with manufacturers
IDE Role and Deliverables ¨ IDE to lead pilot project – HWD Initiative
¨ IDE together with WU or third party will provide training to the sales force
¨ Upon success of the project, the HWD will be introduced to more rural customers in Vietnam via introduction of Phase 2
Pilot Phase: Role of Women’s Union
¨ Women’s Union Support for various aspects is critical: ¤ Political: The program can become a showcase for the Women ‘s Union
¤ Health: Lobby Women’s Union to use HappyTap as a measurement of success of the Hand Washing Initiative
¤ Financial: Commission scheme to Women’s Union and the HappyTeam
¤ Strategy: Convince Women’s Union that the initiative can be a test case to set up future sustainable social business entities
* Assumption: 230,000 units are sold for the first 2 years; $0.50 hourly pay/$ 600 annual pay. $0.25 per device
sold goes to Women’s Union
Margin Revenue Translate into Work hours
Translate into Headcount Cost/Per Annum
10% $57,500* 115,000 48
Pilot Phase: Cri@cal Assump@ons
¨ The sales agent makes enough income to support and endorse the program
¨ The Happy Team will treat the sales of HWD as a significant income stream
¨ Sales should increase income by 14%-‐20% to make the Happy Team viable
Retail Price Margin No. of Monthly Sales Income % of income*
$6 18% 6 $6 12%
$6 18% 7 $7 14%
$6 18% 8 $8 16%
$6 18% 9 $9 18%
$6 18% 10 $10 20%
$6 18% 12 $12 24%
*Use $ 50 as average monthly income (between VND955K in TG Province and VND828K in HY Province); Source: Result of the survey on Household Living Standards 2008, General Statistic Office, Vietnam
iWash Ltd
Continue to leverage on WU members network to market HWD to rural households
IDE FMCG MNC
HWD Pte Ltd
Women Union Members
Rural Customers
Manufacturer Women’s Union
Other Financial Investors
Submit the fund raising proposal to partners investment department
Work with IDEO to develop other personal care products
Invite Pilot Phase partners to participate in the new share holding structure
Business Model: Phase 2 & 3
Phase 2 & 3: Ra@onale
¨ Start up capital provided by the aforementioned investors ¨ Women’s Union will provide access to its members network
¨ Manufacturer will help brand the products to make it more attractive for rural customers
¨ MNC will provide market intelligence and strategic planning for the company
¨ IDE will promote and facilitate the successful launch of HWD
¨ IDE and Women Union will continue to train the sales staff
Alignment of shareholder interests is key
Business Model Roadmap
• Steering Committee with Project management Office
• Raise fund and transforming to a share holding structure
Pilot Phase (1 Year) Phase 2 (1 Year) Phase 3 (3 Years)
• Corporate Governance • Preparation for Initial Public
Offering
• Secure funding support for the initial launch of HWD
• Leverage WU network an effective sales/distribution network
• Expand from rural areas to urban areas
• Expand from Vietnam to other countries
Management & Governance
Business Model
• Promote HWD into rural household commercially
• Create a social venture with key stakeholders in Vietnam
• To continue to grow via introduction of new hygiene and public health products e.g. septic tank
Objective
• Utilize the proven business model and network resources to expand from HWD to other households products that bring social economic benefits to rural households
Cri@cal Success Factors
Pilot Phase (1 Year) Phase 2 (1 Year) Phase 3 (3 Years)
1. Funding Support for start up
2. Endorsement from WU HQ to make HWD a measurement of success for HW initiative
3. Women Union Performs in distribution and sales network
4. The sales force makes money
5. Provide good quality and distribution capability
6. Project management
1. Intention for WU to set up a social enterprise under JV structure
2. Optimize the sales/ distribution network
3. Demonstrate the successful business case so to get the interests from the potential investors
4. Buy in from the Investors and Sound Business Plan
1. Introduce HWD to all parts of Vietnam
2. New product introduction 3. Replicate Business Case
regionally
i. Opportunity ii. Target Market iii. Value Proposition & Brand Strategy iv. Sales Process v. Implementation Strategy vi. Sales Projections
Sales & Marke@ng Strategy
¨ Potential market for hand washing device is $96 million
¨ Leverage powerful nationwide partners to drive sales
¨ First year sales will surpass 100,000 units
¨ Exclusive co-‐branding for private partner
Sales Opportunity
Market Research Focus
¨ Current hand washing situation in Vietnam?
¨ What are the hygiene risks associated with hand washing without soap?
¨ What are some of the effective ways to promote hand washing behavior change?
¨ What are a few of the possible solutions?
¨ What should be the target market? ¤ Geographic
¤ Demographic
¨ What would be a good user-‐friendly design?
¨ What is the potential market demand?
Market Research Key Findings
¨ Low hygiene standards: ¤ In rural areas, only 8.6% of the population has a water source inside
the household
¨ Rural women’s aspirations: ¤ Children’s wellbeing and future is a primary motivation
¤ Desire to provide better lives for the family
¨ Demand of device in rural areas: ¤ No access to water near latrine or kitchen
¤ Need for a clean water source
¤ Easy reminder to hand wash
¨ Critical hand washing junctures ¤ Toilet use, food preparation, baby changing, animal handling
Target Market
¨ Monthly income US$50-‐US$70 per capita
¨ Rural households with children under 5
¨ Potential institutional customers ¤ Rural health stations/hospitals
¤ Universities, schools
¨ Potential corporate customers
¨ Commercial farms, private hospitals, etc
¨ Nationwide
¨ Rural areas
¨ Commune level
Consumer Demographics Geographical Focus
Visual Iden@ty
Price Point
¨ Focus groups and field research conducted by WSP, IDE, IDEO, and GIFT showed that end-‐user willingness to pay for the device is $5 -‐ $7
¨ HappyTap will be marketed as more than just a hygiene product and to reflect that price point is set at $6
Price point must reflect true economic value
Vietnam Women’s Union
¨ Engage Vietnam Women’s Union to take ownership of the sales process in year one ¤ In line with their mission to empower Vietnam’s women to
work creatively, improve their material lives, & nurture happy families
¤ A national network that includes 13 million members and spans all 63 provinces, 500 districts, and 11,000 communes
¤ Already a key partner in executing the ongoing Vietnam Hand Washing Initiative
Women’s Union is the ideal distribution partner
Vietnam Women’s Union
¨ As well as having extensive reach, the WU is an influential and trusted body for women nation-‐wide
¨ Although not it’s main function, the Women’s union has been successful in a number of commercial ventures ¤ Domestic & regional tourism
¤ Rural sanitation marketing & latrine sales ¤ Microfinance
¨ After trial phase WU will have option to set up a new venture ¤ Expand coverage, product lines, and sales force
Project will build capacity within Women’s Union for future commercial ventures
The Happy Team
¨ Within each commune WU has a 15 member executive board ¤ These are the champions, the sales agents – The Happy Team!
¨ In exchange for the benefits attached to HappyTap, a project partner will provide WU training to equip the Happy Team with the “sellers toolkit” ¤ Commercial knowledge
¤ Sales & Bookkeeping skills
¨ Innovative distribution model means $1.25 incentive per device can be offered to WU ¤ $0.25 to the organization
¤ $1 to the individual (12%-‐24% increase in monthly household income based on sales agents current average earning of $50/month)
Distribution partnership is a win-‐win!
The Sales Process
✚
5 6
1. Manufacturer Ships product to Women’s Union
2. Coordination /support from IDE
3. Women’s Union sends product out to Happy Team
4. Happy Team promotes and sells, receives incentive
Women’s Union can finance purchase of HappyTap
¨ WSP ¤ Feature in hand washing
initiative campaign
¨ Private Partner ¤ Mention in TV commercials
¨ Women’s Union ¤ Radio loudspeaker throughout
region
¨ Women’s Union ¤ Hand washing activities
¤ Monthly meetings & other scheduled events
¤ Household visits
¤ Internal communications
¨ Private Partners ¤ Grass-‐roots activation
Mass Media
Low cost, High impact
The Marke@ng Mix
Direct Marketing
Private Marke@ng Partner Support
INPUT BENEFITS
PRIVATE SECTOR PARTNER
§ Seed Funding § In-‐kind product:
§ 100,000 Soap bars § Training for the Happy Team § Integra@on into exis@ng marke@ng campaign
§ Exclusivity § Brand Awareness § Trial § Increased Penetra@on § Future sales § Posi@ve Social Impact:
§ Follows Hindustan Lever “Shak@” model
Contribute to community and boost sales
Co-‐Branding Opportunity
Women’s Union and
private partner enjoy
co-‐branding on HappyTap
✚
First 50,000 units will be
offered with two free soap bars
Achieve brand association and encourage product trial
SOAP SOAP
Implementa@on Strategy: Pilot Phase Objec@ves ¨ After the Pilot Phase, we expect to
collect the following market data
¨ Differences between… ¤ Northern Region (Hung Yen) and
Mekong River Delta Region (Teng Giang)
¤ Income levels of end user
¤ Household with kids and without kids
¤ Product as a whole or only top portion
¤ Household where water infrastructure is available or not available
Implementa@on Strategy: Pilot Phase Ini@al Target Area
• 2 provinces (Teng Giang, Hung Yen) • 4 districts (2 in each province, TBD) • All communes under selected districts (around 80 comm. total)
• Total 120,000 households
WU Province
Social Enterprise
Women’s Union Rep.
WU Province
WU Dist.
WU Dist.
WU Dist.
WU Dist.
WU
Com. WU
Com. ・・・ WU Com.
WU
Com.
Selection Principles
¨ Align with Women’s Union
¨ At least two regions
¨ North and South
¨ Handwashing initiative ongoing
Implementa@on Strategy: Sales Area Expansion
¨ Phase 2 ¤ By adding new districts within the same province
¤ For new province, start in 2 districts, then expand to all remaining districts within the province.
¤ Expand to adjacent districts/provinces first
¨ Phase 3 ¤ Nationwide
¤ Different Countries (i.e. Cambodia, Laos)
Plan to reach 600,000 households by Phase 2, 3,360,000 by Y5
Sales Forecast – Assump@ons
¨ Penetrate 2 new Provinces each year in Yr 1 and Yr 2 ¤ Thereafter, 3 new Provinces in Yr 3 and Yr 4 respectively, and 4 new
Provinces in Yr 5
¨ 8 districts will be targeted in each province, starting with 2 in the first half of the year, and 6 in the second half
¨ Within each district, 20 communes will be targeted
¨ There are on average 1,500 households in each commune
¨ 8 sales agents will be appointed in each commune to create awareness of the HWD
Over 3 million households will be reached by Year 5
Sales Forecast – Assump@ons (2)
¨ Through the sales agent network, it is estimated that 48 households will be reached every month by each sales agent; in 4 months, all our target market in one commune will be reached
¨ Market Penetration
(calculated as % of households buying one HWD out of the total no. of households reached in each commune)
By end of Yr 0.5 Yr 1 Yr 1.5 Yr 2 Yr 2.5 Yr 3 Yr 3.5 Yr 4 Yr 4.5 Yr 5
Base 20% 28% 29% 30% 31% 32% 33% 34% 35% 36%
Best 25% 32% 33% 34% 35% 36% 37% 38% 39% 40%
Worst 10% 13% 14% 15% 16% 17% 18% 19% 20% 21%
Sales Volume Projec@ons
¨ No. of HWD sold (Cumulative)
By end of Yr 0.5 Yr 1 Yr 1.5 Yr 2 Yr 2.5 Yr 3 Yr 3.5 Yr 4 Yr 4.5 Yr 5
Base 24,000 105,600 159,600 246,000 316,800 448,800 539,400 678,600 788,400 975,600
Best 30,000 128,400 184,800 288,000 364,200 521,400 615,600 780,000 896,400 1,117,200
Worst 12,000 51,600 75,600 120,000 154,800 223,800 437,400 513,600 572,400 675,600
Pilot Phase 2 Phase 3 Phases
Huge market potential: 1 million units will be sold by Year 5
i. Supply Chain ii. Sourcing & Fulfillment i. Distribution & Logistics ii. Inventory Management iii. Partner Selection Criteria
Opera@onal Plan
Supply Chain
Partners
Manufacturer
End User Enterprise
HappyTap
Soap
Soap + HappyTap
Production Order+ Mold(1 time)
Monetary Input Payment for purchase
$$$
Revenue
$$$
$$$
$$$
Sales training
WU
Revenue
$$$
Soap + HappyTap
Happy Team
Enterprise takes ownership of product until sale is made
Sales and Opera@ons Plan (S&OP)
¨ S&OP is the alignment of demand, supply and financial resources
¨ Benefits: ¤ Maximize Utilization of Plant and Equipment
¤ Minimize Costs/Maximize Profits
¤ Minimize Changes in Production Rates ¤ Minimize Changes in Workforce Levels
¤ Minimize Inventory Investment
Demand and supply should be aligned
Produc@on Capacity
Production Capacity vs Sales Forecast
05000
1000015000200002500030000350004000045000
Y0-Q1
Y0-Q2
Y0-Q3
Y0-Q4
Y1-Q1
Y1-Q2
Y1-Q3
Y1-Q4
Y2-Q1
Y2-Q2
Y2-Q3
Y2-Q4
Y3-Q1
Y3-Q2
Y3-Q3
Y3-Q4
Y4-Q1
Y4-Q2
Y4-Q3
Y4-Q4
Y5-Q1
Y5-Q2
Y5-Q3
Y5-Q4
Production Capacity Sales Forecast
Production Capacity
Increased Production Capacity
Sales Forecast
PILOT PHASE PHASE I PHASE II
Forecast shows additional capacity is available
HappyTap Product Requirements
¨ High Quality ¨ Low cost
¨ Flexible, highly durable
¨ UV Resistance for permanent outdoor application
¨ Possible Transparency of water container
¨ Water tightness
¨ Color modification
HappyTap Assembly
No Name Weight (gram)
Proposed Material
1 Water Container 776 HDPE/PP
2 Container Lid 222 PP
3 Container Stand 660 PP
4 Valve Spout 48 PP
5 Valve Spray Bar 10 PP
6 Valve Handle 10.1 PP
7 Valve Nut 2 open
8 Valve Ball 5 open
9 Valve Washer 2.6 open
10 Valve Core 2.5 open
11 Valve Connector 1 30 open
12 Valve Connector 2
52 open
Design and product features have not been finalized
Distribu@on Model
Province Level
District Level
Commune Level
Women’s Union Households Happy Team Production
Distribu@on and Logis@cs
¨ Program Owner instructs production to manufacture HappyTap
¨ Products are manufactured and stored at factory
¨ Products are distributed to Women Union’s district headquarters
¨ Women Union district headquarters store inventory for sale and remain in charge of distribution to communal headquarters
¨ Happy Team sales force is expected to manage transportation from communal headquarters to the end users
Enterprise
Production Program Owner Province WU District WU Commune WU
Happy Team End User
Inventory Management
¨ Ownership: Social enterprise
¨ Storage: ¤ Mass Inventory: at production site
¤ Inventory for frontline sale: at targeted WU district office
¨ Inventory Management: ¤ District WU: maintains sufficient inventory for sales
¤ Province WU: consolidates districts’ orders to Social enterprise
¤ Social enterprise: manage production, inventory and distribution flow
¤ Production: distribute product by owner’s order * Above flow applicable to all phases
Inventory
Production Enterprise
Production Social enterprise Province WU District WU Commune WU
Happy Team End User
Manufacturing Partner Selec@on Criteria
¨ Required ¤ Manufacturing experience in plastic products ¤ Ability to meet production capacity and quality standards ¤ Scalability and expansion capacity of workforce and
production ¤ Established distribution network ¤ Ability to meet the security, privacy and intellectual property
requirements ¤ Availability of storage space ¤ Humanitarian: No usage of child labor in the entire
production process
¨ Preferred ¤ Ability to support the required cost for catalogues and/or
shelf space and more ¤ Ability to support the chain with education and/or
information ¤ CSR friendly processes used throughout production ¤ Company Website
Risk Management
i. Risks & Mitigation ii. Contingency Plan iii. Exit Strategy
Risks & Mi@ga@on
¨ Ownership Structure ¤ Phase 2 & 3 are contingent
on the success of Pilot Phase
¨ Potential Social Issue ¤ Negative association with
multi level marketing
¨ Sales & Marketing ¨ Contingent on WU sales &
marketing capability
¨ Monitor sales progress closely and make appropriate adjustments
¨ Seek legal advice from local law firms and WU
¨ Provide regular training and monitoring
Risks Mitigation
Risks & Mi@ga@on (2)
¨ Secure strong investor with long term social view
¨ Collect market feedback and fine tune design for newer version
¨ Need to structure deal to take into account future production
¨ Business Partners ¨ Value proposition may not be
well understood by pure financial investors
¨ Usability ¨ The product may not be user
friendly which may result in poor sales
¨ Manufacturer won’t produce small quantities for pilot
Risks Mitigation
Con@ngency Plan
¨ Women’s Union ¤ Success or failure is contingent on Women’s Union commitment on the
program
¤ Besides relying on Women’s Union, we need to seek other avenues to distribute HappyTap commercially
¤ We may need to consider OEM model and develop our own sales channel
¨ Distribution Network ¤ Ensure the Happy Team is properly incentivized. We provide an opportunity
for women to increase their monthly household income by 25% if they manage to sell 10 units of HappyTap
¤ Provide regular training and monitoring of sales target
¤ Besides WU, need to actively explore other distribution network concurrently
Exit Strategy
¨ IDE to exit upon commercialization of HappyTap
¨ Investors to exit via trade sale
¨ In the event that HappyTap does not take off after Pilot
phase, IDE will continue to house the project through the current organization structure or spin off a new entity under the IDE umbrella
i. Objectives of Governance ii. General Governance Principles iii. Corporate Governance & Management
�
Management and Governance
Governance Objec@ves
Governance plays the key role of setting and monitoring the direction of the organization, so as to ensure:
¨ To administer the Plan and the Funds in a prudent and cost effective manner.
¨ To prudently invest the Funds for long-‐term growth at a minimum level of risk.
¨ To meet the objectives and expectations of the key stakeholders.
¨ Organization works at a high level of professionalism both internally and externally
¨ Organization remains financially sound and sustainable
¨ Legal compliance
Governance Principles
¨ Compliance with all national laws relevant to the business.
¨ Fulfilling socially obligations : ¤ Product safety. ¤ Commitment towards the community.
¤ Commitment towards the partners and the stakeholders.
¨ Management and finance transparency and disclosure.
¨ Safeguarding of interests of various stakeholders (shareholders, board of directors, community council, manufacturer and employee etc.)
¨ Protect the reputation of all the key shareholders.
¨ No political payments / bribery
¨ All funding will only be used for the intended project
Corporate Governance & Management: Pilot Phase Governance Structure
Steering Committee Organization
• Ownership of project as a leader (IDE)
• Ownership of HWDs until sales point
• Oversight of manufacturing & mold creation
• Oversight of link between manufacturer & Women’s Union
a. Transport & Storage at (Provincial, District, Community)
b. Inventory management
c. Payment Process
d. Assurance of Key Success Factors
e. Happiness of end users
f. Training of A team
Steering
Committee Leader:
IDE
Manufacturer
WSP
WATERSHED FMCG MNC
Women’s Union
Phase 2: Proposed Ownership Structure
New Entity setup -‐ HappyTap Ltd. p With the successful roll-‐out of pilot
phase, IDE will set up the new entity. Shareholders & Ownership p Women’s Union is offered sweat equity
in new company with contribution of sales and marketing efforts and network resources
p Women’s Union takes the lead in the new entity.
p Other potential shareholders are FMCG, Manufacturer and other social investors.
The proposal is only based on current assumptions. Ownership structure is expected to be re-‐aligned after Phase II.
Ownership Concentration Ratio
Phase 2 & 3: Proposed Organiza@on Structure
Management of system and processes ¨ To ensure stable and transparent processes are conducted
¨ Have system and objectives established that are met in alignment of the shareholders interest
Key Management Tools ¨ Organization Management
¤ Define reporting line and escalation rules ¤ Create RASIC chart (Responsible, Approve, Support, Inform, Consult) to
definite job responsibilities on departmental and individual level ¤ Organize regular meetings on Board level, management level and department
level to facilitate information flows and create action plans to adjust business plans and timelines
Phase 2 & 3: Management System and Monitoring
Key Management Tools ¨ Process Management:
¤ Operations guidelines / SOP documentation on departmental level ¤ Define Reporting system
¨ Operations and Performance Management ¤ Sales Report, Stock Report ¤ Market Penetration Analysis ¤ Finance Balance Sheet / cost and profitability analysis
¨ HR Management ¤ Staff Skill requirement and training development ¤ Staff engagement survey ¤ Staff annual assessment
Phase 2 & 3: Management System and Monitoring
Phase 2 & 3: Management Role of the Board It is proposed that the board of directors will consists of 6 members : 4 non
executive directors and 2 executive directors. ¨ 4 of the executive directors are shareholders of the HappyTap.
¨ 2 of the non executive directors are from Women’s Union.
Selection of the Non executive Directors: ¨ As the women’s union played a big role in the sales of the product, engagement of the
communal interests and distribution of the products. It is hence essential that that the women’s union has a role in the BOD.
¨ Women’s union shall act as a voice of the communal and align their interests to the interests of the share holders.
Overall Roles of the Board : ¨ They will appoint one CEO whose remuneration is decide by the board.
¨ The board ensures that all there is equal rights for all shareholders.
¨ Exercise accountability to shareholders and be responsible to relevant stakeholders
Phase 2 & 3: Management Role of Chief Execu@ve
¨ Develop strategy proposals for recommendation to the Board and ensure that agreed strategies are reflected in the business.
¨ Develop annual plans, consistent with agreed strategies, for presentation to the Board for support.
¨ Plan human resourcing to ensure that the Company has the capabilities and resources required to achieve its plans.
¨ Develop an organisational structure and establish processes and systems to ensure the efficient organisation of resources.
¨ Be responsible to the Board for the performance of the business consistent with agreed plans, strategies and policies.
¨ Lead the executive team, including the development of performance contracts and appraisals.
¨ Ensure that financial results, business strategies and, where appropriate, targets and milestones are communicated to the investment community.
¨ Develop and promote effective communication with shareholders and other relevant constituencies.
Financial Plan
i. Key Points ii. Pricing Structure iii. Capital Requirement iv. Financial & Volume Projections v. Scenario Analysis vi. Recommendations & Conclusions
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Key Points
¨ Financially attractive business proposition for the sales agent ¤ Additional 12% -‐ 24% income to one household
¨ Financially sustainable business venture ¤ NPV: US$ 50,000 ¤ Initial Capital Requirement: US$326,500
¨ Huge potential for soap market ¤ Soap Sales Revenue: US$ 2.4-‐7.5million
Pricing Structure
¨ Retail Selling Price $6.00
¤ Manufacturing Cost $3.57 ¤ Transportation $0.97 ¤ Women’s Union Margin $0.25 ¤ HappyTap Margin $0.21 ¤ Sales Agent Margin $1.00
Pushing sales through the sales agent incentive!
Capital Requirement
¨ Initial Capital Requirement: $326,500
¤ Molds: $103,000 ¤ 50,000 units: $ 178,500 ¤ Management: $ 20,000 ¤ Branding: $ 20,000 ¤ Others: $ 5,000 ¤ Year 5 additions $ 426,000
2011-‐2016 Projec@ons
¨ Profit & Loss Projections:
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 633,600 842,400 1,216,800 1,378,800 1,782,000
Trade Margin 126,720 168,480 243,360 275,760 356,400
COGS 376,992 501,228 723,996 820,386 1,060,290
Gross Profit 129,888 172,692 249,444 282,654 365,310
Marketing & Transport
102,432 144,612 208,884 236,694 305,910
Net Profit 27,456 28,080 40,560 45,960 59,400
Financial Evalua@on: Summary
¨ 7-‐year funding required: $ 752,500 ¤ Initial Capital: $ 326,500 ¤ Additional Capital: $ 426,000
p Net Present Value: $50,000 ¨ Payback Period: 7 years
High growth rate* of 74% p.a. is achieved
*Growth rate is calculated as the Compound Annual Growth Rate for the 5-‐year period.
Sales Volume Projec@ons – Base Case
0%
10%
20%
30%
40%
50%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Yr 0.5 Yr 1 Yr 1.5 Yr 2 Yr 2.5 Yr 3 Yr 3.5 Yr 4 Yr 4.5 Yr 5
% M
arke
t Pen
etratio
n
No. of H
WD sold
By the end of each period
Sales Projections Market Penetration
Volume Projec@ons Sensi@vity Analysis
¨ Best Case
¨ Worst Case
0%
10%
20%
30%
40%
50%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Yr 0.5 Yr 1 Yr 1.5 Yr 2 Yr 2.5 Yr 3 Yr 3.5 Yr 4 Yr 4.5 Yr 5
% M
arke
t Pen
etratio
n
No. of H
WD sold
By the end of each period
Sales Projections Market Penetration
0%
10%
20%
30%
40%
50%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
% M
arke
t Pen
etratio
n
No. of H
WD sold
Under the worst case, market penetration rate of 21% is
maintained
Scenario Analysis
HWD Volume Sales Agent NPV Soap Volume
Best Case 1,117,000 USD 8/mo 423,000 28,750,000
Base Case 975,000 USD 6/mo 50,000 25,000,000
Worst Case 675,000 USD 3/mo (48,000) 17,500,000
-5
0
5
10
HWD Volume Sales Agent NPV Soap Volume
% Change
Best
Base
Worst
Recommenda@on
¨ Due to the benefit earning all parties a win-‐win ; better health and hygiene to villagers, extra income to women in rural areas, accomplishment of IDE and public partners mission, business opportunity and brand recognition for plastic manufacturer and FMGG, recommendations are:
¨ Women’s Union resources can be extensively utilized to contribute to the success of the project.
¨ Project to be broken into phases as to ensure efficiency and reduce risk of failure.
Conclusion
¨ This enterprise has the ability to raise considerable hygiene awareness amongst Vietnam’s poorest communities, whilst providing a sustainable social investment platform for the region.
¨ Furthermore, sales agents commissioned to distribute the products are
also able to create income for their households. ¨ In addition to the social and monetary value created in the rural
population, the venture is able to significantly propagate interest in the lagging local soap market.
¨ As a result, the soap industry will greatly benefit from additional revenue
creation.
Appendices
i. Key Assumptions ii. Payment Process iii. Financial Spreadsheets Attached
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Key Assump@ons
p Year zero is based on the 6 month pilot phase for testing and redesign
p Molds purchased in year zero,4 & 5: production capacity per mold up to 400,000
p Sufficient production capacity in delivering sales until year 5
p COGS comprise of labor, raw material, injection molding press time, packaging, other overheads and manufacturer’s profit margin
p Marketing expenses amount to 1% of sales
Key Assump@ons
¨ HWDs will be distributed every month to the WU
¨ Happy Team sales agents current income on average is $50/month which
allows for sufficient incentive of $6/mo from HappyTap sales
¨ Minimal storage space is required and WU office will be leveraged
¨ Just-‐In-‐Time inventory
¨ Assumed tax free entity
¨ NPV is based on initial funding amount
¨ Discount rate 10% up to 15 years
Payment Process: Phase 1
Production Program Owner
WU Province
WU District
Happy Team End User
WU Commune
COD
Consignment (30 days credit) 50% deposit and 50% upon delivery (30 days credit)
Payment Process: Phase 2 & 3
COD
Consignment (sellers pay for goods sold on a monthly basis)
Payment with credit for 1 month curtained period
Production Program Owner
WU Province
WU District
Happy Team End User
WU Commune
Payment with credit for 1 month curtained period