eConcordia

FITTskills International Trade Management Course

International Business Plan for The UAE

Maple Springs Mineral Water Company

In memory of The Sheik.

Name: Daniel J. Costello Student ID: 1811

Address: Daejin University, Department of International Trade and Management,
Pocheon, Gyeonggido, 487-711, South Korea. Telephone Number: +82-(0)31-535-
 3554
E-mail: costello_daniel@yahoo.com

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 2
II. CORPORATE PROFILE/NATURE OF BUSINESS. . .. . . . .
......4
III. MANAGEMENT AND HUMAN
RESOURCES. . . . . . . . . . .. . . . . . 6
IV. TARGET MARKET/ENVIRONMENTAL
SCAN.......... . . . . . . . . . . 7
POPULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . ... ... . 7
UAE
NATIONALS..............................................................................
................…...7
BUSINESS ENVIRONMENT………………………………………………
8
ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .. 9
MINERAL WATER RETAIL
SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 10
HOTEL/RESTAURANT/INSTITUTIONAL
SECTOR . . .. . . . . . . . . .. . . 12
CONSUMPTION TRENDS/CULTURAL
NOTES . . . . . . . . . . . .. . . . . .... 12
TARGET CUSTOMER/PROFILE…………………………………..…12-
16
V. MARKET ENTRY/MARKETING
STRATEGY………………...17-22
VI. OPERATIONS
OVERVIEW……………………………………..23-24
VII. FINANCIAL RISKS AND MANAGEMENT STRATEGY. .
. .25-32
VIII. CONCLUSIONS AND
RECOMMENDATIONS……………….33
IX. BIBLIOGRAPHY..……..……………………………………....
….34-36

2
APPENDICES
I. GCC LABELING REQUIREMENTS
II. UAE IMPORTERS OF MINERAL WATER
III. GOVERNMENT MINISTRIES
IV. UAE IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINE
V. TRADE SHOWS

I. EXECUTIVE SUMMARY

Healthy drinking water is a scarce resource in the United Arab Emirates. Conspicuous
consumption however is not. With the improvement of local luxuries, sales of bottled
drinking water have increased sharply, rising 10 to 14% annually since 2002. It is
forecast that UAE drinking water needs will continue to grow as the population grows
as much as 40% over the next five years with only inflation as a serious concern for
the slowing of the local exploding economy which should little affect our chosen
customers.

Urban areas are mushrooming liberally throughout the UAE as are the numbers of
resident millionaires. Distribution systems are superb, and still improving. Modern
retail includes supermarket, hypermarket and convenience stores. However these
outlets provide poor points of sale for any new Canadian entrant saturated with a
coven of Nestlé’s or DANONE’s label collecting knock-offs. Upper class consumers
are ill-served with few premium genuine luxury water products. Most competitors are
flogging PET bottle concoctions of questionable quality especially unknown plastic
leeching chemicals, dissolved solids, etc. The five star hotel, and luxury class
restaurant and institutional sectors offer a comfortable setting for expensive mineral
waters seeking to replicate new wine-like market segmentations. Demand for
premium bottled waters is growing, however, few new, or Canadian premium waters

3
 are found in the UAE market.

The UAE domestic producers dominate the mass market and bulk water distribution
network. However, The UAE still imports many water products in order to meet
consumer preferences for trusted global brands. Many constraints limit premium
water positioning among Canadian companies. Among these shipping costs,
competitor positioning, lack of global brand awareness and unfavourable distribution
agreements may be observed. In addition attempting to penetrate in the mass market
sector clearly overloaded, is problematic. At the same time, a low 5% import tax
ensures that any premium water imported based on ex-work and shipping costs or
CIF values will have a nominal impact on premium pricing profits. GCC packaging
and labelling requirements appear reasonable as well several opportunities exist to
network and build relationships in one of the Arab world’s most successful and
moderate business-friendly environments.

Despite challenges, risks and constraints there are potential opportunities for Maple
Springs Mineral Waters. This report attempts to carefully assess market access with
what may be known about it in an as exhaustive study as may be borne in a sparse
number of pages. Forecasts for MSMW conclude that some risks are worth taking
especially with non-performing capital assets. Canada appears rife with them. It is the
hope that somewhere along the line Maple Springs leadership may spring forth and
take the reins and procure real profits.

II. CORPORATE PROFILE

NATURE OF BUSINESS: Maple Springs Mineral Water Company (MSMW)

originated in Baxter’s Harbour, Nova Scotia in 1969 as a sole proprietorship. The
company sells mineral water in the provincial domestic market of Nova Scotia and has
logged steady 10-15% annual growth with a consistently profitable office water supply
service primarily in the Halifax Regional Municipality with 18.9 L coolers providing
50% of business and consumer-size recyclable bottles (500 ml and 1.5 L) at convenience
stores and supermarkets across the province supplying the other 50%. At present MSMW
is a leader in both of these sectors in Nova Scotia. MSMW operates as a direct sales
manufacturer, agency and distributor to supermarkets and convenience stores with no
branches, divisions, business relationships, or joint ventures networks.

PRODUCT DESCRIPTION: MSMW provides an organic, natural mineral

water with Mic Maw legends describing it as having miraculous, healing and restorative
medicinal powers. The water source is completely controlled by MSMW and it delivers
its products to market either in 500 ml, 1.5 L PET bottles or 18.9 L PET cooler bottles
(See Appendix 1: Product Specification).

4
DUBAI MARKET MODIFICATIONS: Research indicates that the UAE
market is highly competitive at the retail and supermarket food services sector. Demand
is high in the 5-star hotel and glass bottles packaging importers and distribution market.
Delivering tetra-pak drinking boxes is considered a cost-effective and environmental
alternative to PET packaging for the UAE retail market. However this would undermine
premium positioning. Clay fired pottery bottles for retail sales and attractive stainless
steel milk dispenser ready single use 5 gallon water bags would be attractive packaging
for the premium water market. GCC market labeling requirements include production and
expiry dates with ingredient labelling in Arabic all necessary as of 2008.

QUALIFICATION TO PURSUE UAE EXPORT MARKET: At

this time MSMW has neither previous exporting experience nor premium market
products however it seeks to expand sales potential, reduce dependence on Canadian
domestic sales, improve local competitiveness through redesign of products, reorient and
increase manufacturing productivity, and gain experience in developing and marketing
premium water products abroad. Review of financial statements indicates retained
earnings with a solid export strategy and continued domestic market growth should
provide the necessary capital to expand into the UAE imported premium mineral water
market sector.

III. MANAGEMENT AND HUMAN

RESOURCES

MANUFACTURING: Current capacity is insufficient. Installing a new tetra-pak

line in place of current PET molding facility would reduce production time by 50% and
take up 50% of current factory floor space. Premium 5 gallon single use bags may be
processed at local diary packing facilities on daily down-times. This would increase
current inventory volume capacity by 50%. Concurrent construction of a pottery bottle
based filling line would fulfill premium bottled water inventory requirements. This would
eliminate need to hire more line workers. MSMW will require for proactive export
strategy:

A. International Sales and Marketing Manager

B. International Documentation/Contracts Specialist

Maple Spring Mineral Water Organizational Chart:

5
Proactive
Executive (ownerExport
and assistant)
Domestic Sales and Marketing (5
employees)
Domestic Quality Assurance (2
employees)
Domestic Production (23 employees)
Domestic Logistics (12 employees)
Domestic Accounting (6 employees)
Domestic Human Resources (2
employees)
International Sales and
International
Marketing Manager (1)
Documentation/Contracts
employee
Specialist (1)
Duties described below:

A. International Sales and Marketing Manager

SALES: Negotiates and secures local partnerships either through agency

and/or distributorship agreements. Attends annual trade shows in
Dubai such as: The Gulf Food Expo, The Middle East Natural
and Organic Products Expo, The Halal Food Expo, as well as the
Annual Arab Water Forum. Contact with retail operators such as:
Majid Al Futtaim (MAF)/ Carrefour UAE, Emke Group/ LuLu
supermarkets, Spinneys Dubai LCC, and Dubai Duty Free.
Federal Foods LLC and Union Beverages Factory represent the
largest food sector distributors requiring contact in the UAE
market while Maritime & Mercantile International (MMI) and
African & Eastern NE BVI Ltd represent the two largest
alcoholics drinks distributors in the UAE requiring contact (See
Appendix Two: Retailers and Distributors). Signs contracts with
any of them on site visits.
MARKETING: Designs collaborative marketing, forecasting and export
promotional planning services required.
ADVERTISING/SALES Prepares brochures, flyers and public relations materials in
AND PROMOTION: English and Arabic useful for all trade fairs and contract
negotiations.

B. International Documentation Specialist

TRANSPORTATION: Selects and contracts shipment and freight forwarding services

with UAE licensed import logistics providers at Jebel Ali.
FINANCE: Ensures all payments, L/C and non-payment insurance
documentation is completed correctly.
ACCOUNTING: Ensure all invoices, deposits, and financial records for export
sales are in proper order.
EXPORT Monitors and prepares all order processing, price quotes,
ADMINISTRATION: travel arrangements and export shipping documents.

6
LEGAL: Engages all necessary international legal services necessary to
write export agreements and ensures patent and trademark
protection in the UAE with local/foreign attorneys.

IV. TARGET MARKET: THE UAE

Zayed University (2008)

POPULATION
“The UAE has one of the highest population growth rates in the world, estimated at 5.6
per cent, and 45 per cent of the UAE population is less than 15 years of age.” (Kahleej
Times, 2005) Abu Dhabi projects 40% total population growth over the next five years,
to 1.3 million.1 Dubai currently inhabits a population 1.6 million as of 2006 (and in 2006
a total of 292,000 people became permanent residents = 24,300 people added each
month). 2 The UAE Ministry of Economy reported a total population estimated nearing

1
HC Securities, (2008) “UAE Market Brief”

7
4.48 million at the end of 2007 with projections of 6.12 per cent growth to nearly 4.76
million by the end of 2008 and 6.31 per cent growth to 5.06 million at the end of 2009.3

UAE NATIONALS

Staff Reporters (2006) “TEDAD Census 2005 Graph,” The Gulf News.

The 2005 TEDAD UAE Census reveals the small population of Emirati nationals as
compared to foreigners who make up the majority of the approximately 4.5 million
residents of the UAE. A large proportion of the data 38.1% consists of nationals less than
14 years old with nationals less than 20 years old at 51.1%. Emirati nationals total
824,921 or 20.1% of the total UAE population. Of these males and females are closely
similar in percentages with national males of 418,057, consisting of 50.7 % population
and national females representing 406,864, or 49.3 % of total Emirati population.
Literacy rates exceed 91% and higher education opportunities are growing but only 11%
of nationals complete a university degree. Over half of these students are female. Young
men have other opportunities, in the police or armed forces revealing women may be
more career-minded. At the same time there are nearly 30,000 unemployed nationals in
the UAE and total nationals employed in the private sector are less than 2% of the total.4

BUSINESS ENVIRONMENT

2
Abeidan, S (2008) ”Global Development One World – One Community,” UDIA National Conference, 2008,
slide 12.

3
Kawach, N. (2008) “Expat growth widens UAE demographic gap,” Emirates Business 24/7, September 25,
2008, Arab Media Group.

4
Staff Editors (2008) “Emirates: Abu Dhabi Country Profile,” Oxford Business Group 2008.

8
The United Arab Emirates is comprised of seven regional emirates: Ajman, Fujairah, Ras
al-Khaimah, Sharjah, Umm al-Quwain and the two largest are Abu Dhabi and Dubai.
These are politically led by a generous and equitable federal government highly
influenced by local tribal associations. The UAE is a Muslim nation with a moderate
position for example; Christian, Catholic, Hindu and Buddhist temples are all locally
permissible and are attended generally by foreign workers and residents. Shari’a and civil
courts comprise the legal system and court procedures are bureaucratic in nature.

“The creation of strategic free-trade zones in recent years has further enhanced the attraction of the UAE as
a sensible and reasonable legal environment in which to conduct business. I have no doubt that the UAE
will continue to lead the way within the region in attracting foreign investors and providing them with a
legal environment that supports and protects their investments.” (Andrew Wright, general counsel of Dubai
International Capital)5

While Arabic is the official language English is widely spoken and Malayalam, Persian
and Urdu are often heard due to large proportions of hired labour sourced from India, Iran
and Pakistan. The communications systems courtesy of Etisalat are world-class and lead
the region in reliability. Taxes are minimal to non-existent however ever-present fees for
every possible local permit exist and increase in cost annually. 6 A.T. Kearney stated,
“The United Arab Emirates rose to 8th position in the 2007 FDICI, up from 22nd in 2005
FDICI.” (Foreign Direct Investment Confidence Index) (AME Info, 2007)

ECONOMY
Recent 2003 2004 2005 2006 2007(a) 2008(b)

economic
indicators:
GDP (US$bn) 88.6 103.8 133.0 163.3 192.6 239.9
(current prices):
GDP PPP (US$bn) 104.7 116.4 134.5 151.7 167.3 181.4
(c):
GDP per capita 24,945 27,595 32,392 38,613 42,934 50,383
(US$):
GDP per capita 29,490 30,954 32,751 35,882 37,293 38,108
PPP (US$) (c):
Real GDP growth 11.9 9.7 8.2 9.4 7.4 6.3
(% change YOY):
Current account 7,586 10,335 24,321 35,942 41,666 65,888
balance (US$m):
Current account 8.6 10.0 18.3 22.0 21.6 27.5
balance (% GDP):
Goods & services 79.9 88.6 93.2 91.5 94.4 91.9
exports (% GDP):
Inflation (% 3.2 5.0 6.2 9.3 11.0 9.0
change YOY):
5
Jafar, S. (2007) “United Arab Emirates: Reform and Growth in Parallel,” IBA Daily News (Singapore
Conference), Legal Media Group, October 17, 2007, p.10.

6
The author resided, worked and studied international business at UOW Dubai while in The UAE as a
civilian military officer-class employee of Abu Dhabi Naval College from 2000-2003 and feels confident his
experience and expertise is sufficient to describe general business conditions there.

9
Market Information and Analysis Section, DFAT, Australia (2008) “UAE: Fact Sheet,” ABS, IMF Data.

Actual GDP growth reached 7.4 per cent in 2007. Growth in all sectors due to market
liberalization policies with non-oil sector contributing 64.3 per cent of total GDP.
Tourism, commerce, infrastructure, industry, finance, and banking services have
contributed to consumer expenditure and external trade. A stable political system, solid
infrastructure, high oil revenues, excellent geographical location and developed banking
system are described as factors maintaining UAE economic growth. Inflation appears a
challenge which may hinder growth. Inflation reached 11.1 per cent in 2007, a 9.3 per
cent increase from 2006. The US dollar, real estate costs, fuel and building materials
prices are all described as significant factors. (Emirates Business, 2007)

The UAE business environment has been making significant progress since WTO
membership in 1995. Local investors still require private sector partnerships in the
beverage industry inclusive of bottled mineral waters. An exponentially increasing food
sector trade fairs schedule and simplification of trade license issuances is adding
improved business support services as well as numerous new free zone facilities to
investor opportunities. The UAE is signatory to the Paris Convention for the Protection of
Industrial Property, the World Intellectual Property Organization (WIPO), and the WTO
Agreement on Trade - Related Aspects of Intellectual Property (TRIPS).7 Customs
clearance are some of the easiest in the world along with some of the lowest global
import costs, as well as quality of infrastructure, ease of hiring foreign labour and
reliability of transport services. 8

Dubai is the business capital of The United Arab Emirates. Being situated in a
commercial logistics transshipment centre of the Arab Gulf and a major source of 10 %
of global petroleum and natural gas supplies (mostly in Abu Dhabi) the rulers of Dubai
have embarked on an aggressive campaign to attract global financial and transnational
corporations to Dubai with generous real estate and flexible residence visa programs as
well as several state of the art research and development, educational and leisure hubs to
attract global investors. Foreign investment is encouraged however care must be taken in
any local partnership arrangements as some local partners are more reliable than others.
Dissolution of partnerships is common and the local legal system is not generally
sympathetic to the preferences of foreign investors. Funds repatriation under dissolution
of contract terms might be quite challenging.9

7
Ministry of Finance and Industry (2008) “UAE Business Environment,“ The Government of the United Arab
Emirates.

8
World Economic Forum (2008) “The United Arab Emirates,” The Global Enabling Trade Report 2008.

9
Author’s reference.

10
 MINERAL WATER RETAIL SECTOR
BULK COOLER SALES: Cooler bottles represent nearly 60% of total drinking water
sold in the UAE in reusable 18.9 L bottles (5 gallons) for use in coolers. An emerging
trend is market leader Masafi entering the bulk purified water market with the launch of
100% fully recyclable 4-gallon bottles (single-use bottles with pick-up of empties and
non-food industries recycling) in the Middle East. Oasis has also announced plans for a
4-gallon single use bottle. Oasis holds nearly 75% market share in the bulk water
segment in the UAE. Therefore MSMW clients would represent those buyers who prefer
imported cooler bottled water which make up a mere 4% of the total purchasing
segmentation.10 What remains absent is an exclusive premium stainless steel cabinet
supported sales mode for 5 gallon single use clients.
CONSUMER SIZED RETAIL BOTTLES: Supermarkets generally have two rows
of over a half-dozen domestic brands, usually including a house-brand, and Evian,
Volvic, Contrex, San Pellegrino, Apollinaris and Perrier. Flavoured water varieties are
described as recording annual compound growth rates of 15%.Al Ain Mineral Water
Company has in excess of a 23% share of the UAE bottled water market while Oasis
sponsors the annual Terry Fox Run. Perrier has a 65% segment share of premium
sparkling water across the region. The UAE grew by 20% last year for Perrier, to reach
sales of 2.75 million bottles. Their success is described as:
A. Targeting entire food services sector (including upscale outlets like Starbucks)
B. Flexible range of product sizes (from mini-bar to airline sizing)
Water bars which provide a selection of premium bottled waters from various countries
such as the Magnolia Restaurant are developing a small niche in Dubai.11 As of present
no global premium water companies are delivering pottery inspired packaging or
attractive stainless steel or rosewood topped rubber bung or cork stoppers.

10
Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food
Program Section, Consulate of Canada, Dubai, UAE.

11
Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food
Program Section, Consulate of Canada, Dubai, UAE.

11
UAE Brand Sales Prices and Market Share12
Brand Format AED Shelf Retail
Price(2) Share(3)
Masafi (local) 1.5 L 1.25 37.9%
Al Ain (local) 1.5 L 1.25 23.6%
Aquafina (local) 1.5 L 1.50 6.6%
Oasis (local) 1.5 L 1.25 6.0%
Arwa (local) 1.5 L 1.25 5.4%
Gulfa (local) 1.5 L 1.50
Nestlé (Pure Life, local) 1.5 L 1.25
Home Choice (local) 1.5 L 0.85
Volvic (France) 1.5 L 4.75
Evian (France) 1.5 L 6.50 15.0%
San Pellegrino (Italy) 750 mL 5.50
Perrier (France) 750 mL 5.75
Eau de Perrier (France) 750 mL 6.25
Oasis Blu (local, sparkling) 1.0 L 7.00
Clearly Canadian (Canada) 414 mL 5.95

HOTEL/RESTAURANT/INSTITUTIONAL SECTOR
The last decade has seen annual GDP growth rates exceeding 16.7% in Dubai making it
the world’s fastest growing urban consumer market. At the same time major global and
regional hotel management teams have developed an impressive array of hospitality
services. At present there are more than fifty five star hotels in Dubai. The Statistics
Centre of Dubai notes a total of 302 hotels with 30,648 rooms with an average overall
occupancy rate of 75.5% further supplemented 111 hotel apartments totaling 8652
serviced apartments with an average occupancy rate of 71.1% as of 2006.13 Premium
dining suggests service modes should exclude the average plastic water cooler in place
something stainless steel would enrich the water drinking experience.

CONSUMPTION TRENDS/CULTURAL NOTES

Consumer spending in Dubai is considered excessive and potentially economically
dangerous according to experts. UAE private consumption by individuals and families on
goods and services totaled $84 billion as of 2006. An average of $19,761 per individual
for a population of 4.25 million was noted as the world’s highest by the Abu Dhabi-based
Arab Monetary Fund (AMF). This consumption pattern has highly impacted premium
12
Agri-Food Trade Service (2008) “Trends... food in the United Arab Emirates Potable Water,” Agri-Food
Program Section, Consulate of Canada, Dubai, UAE.

13
Staff Editors (2008) “Analysis 2007: Dubai Hotel Establishment Statistics,” Government of Dubai,
Department of Tourism and Commerce Marketing, Dubai, UAE.

12
bottled water products in the UAE.

With the highest per capita liquid consumption in the world, the Middle East and wider region offers
fantastic opportunities for companies in the drinks sector. The United Arab Emirates has reached the
highest levels of per capita consumption of 635 litres a year, compared to the global average of 197
litres in 2006. Hot and dusty conditions, a fast-growing population, and increasingly sophisticated
demand for “designer" drinks have all fuelled growth in the market. (Eye of Dubai, 2008)14

On June 28, 2008 the Abu Dhabi Department of Planning and Economy released a report
detailing adverse effects of such consumer spending. Consumer borrowing in the UAE
has doubled in the last four years with an increase of 47 percent in the last year of
reporting. In addition inflation reached 11.1% in 2007 with negative real interest rates
increasing demand for credit. The report describes a "hidden poverty" in the UAE,
"where a certain segment of the society seeks to possess luxurious items at the expense of
essential goods." It therefore may be assumed premium imported bottled water is a
luxurious item.15
TARGET CUSTOMER/PROFILE
MSMW’s target customers represent hoteliers, distributors, and food sector agencies
available to locally market and sell imported bottled water. As it is likely that Perrier’s
strategy of wide ranging market accessibility of products is necessary to capture
increasing annual market share MSWM will also have to locally negotiate wide ranging
and non-exclusive distributed and agency positioned bottled waters in as many potential
sales locations as possible. Time contingent contracts may be an option particularly in
synchronizing timing of market launch and will require significant negotiations lead time.
Time is in fact a commodity MSMW can claim easily. In Arabia there is often no need to
rush and in terms of business practice slow and steady wins the race. The longer MSMW
takes to negotiate wide ranging and diffused market penetration patterns the better the
results that may be expected and the more cumulative the purchasing points accumulated.
However customers B and D represent mass market consumption which will provide
lower potential sales opportunities and perhaps excessive price and positioning
competition for our premium products.

CLIENT SCENARIOS CUSTOMERS SALES

LOCATIONS

14
Staff Reporter (2008) “Middle East Beverage Market Offers Untapped Opportunities,” Eye of Dubai,
Fourth Dimension, February 14, 2008.

15
Staff Reporter (2008) “Consumer splurge threatens UAE economy,” Reuters, June 29, 2008.

13
Customer A: Males (more likely 5 star hoteliers Over fifty in Dubai alone
foreigners)
Customer B: More likely Hypermarkets/supermarkets Majid Al Futtaim (MAF)/
females (nationals or foreigners) Carrefour UAE
Emke Group/ LuLu
Spinneys Dubai LCC
Customer C: Foreign males and Off License Liquor Stores Dubai Duty Free
females exclusively. African & Eastern
Gray - Mackenzie
Spinneys Liquor
Customer D: Males and females Convenience stores, snack Bars, Dunkin Donuts
(nationals or foreigners) food marts, coffee shops Starbucks
Gas stop
Customer E: Males and females Water bars, casual dining, fast Magnolias
(nationals or foreigners) food restaurants TGIF
Chilies
Customers A, C, and E seek to purchase MSMW bottled water products to service our
target clients (and their needs) for the following reasons:

A. Canada is seen as a reliable supplier of imported bottled

water: Canada’s Dubai Consulate provided evidence that for example of B.C.'s
premium Canaqua water (other described as the most expensive water in the world),
Whistler water, and Clearly Canadian (a more generic and mass market flavoured water)
are all (periodically) available. There are perhaps problems in distribution without a
Perrier-like market penetration.

B. Canadian imported bottled waters are under-represented in

the UAE market: Such a statement leads from A as the marketing
and distribution of these bottled waters has not been wide ranging
enough to capture solid market share. This is to MSMW’s possible
advantage in limiting market entry to customers A, C, and E .

C. Canadian export products have a positive safe image (food

safety): Canada’s global product image, if there is one, is of nature,
naturalness and safety. These are all motivators of purchase intention
among premium imported bottled water purchase clients.

D. Growing demand for bottled water products in the UAE: “The

UAE foodservice market is larger and more important than is initially apparent and is
also growing at rates not seen in any developed countries of the world. (over 10% per
annum in most channels)” (Drink Expo UAE, 2008) It would appear that such growth is
primarily in the mass market sector thus higher growth may be possible in the premium
market segment. This mirrors Canada’s own increase in bottled water consumption trend,
“Over the past few years, bottled water sales have grown at double-digit rates in both the
U.S. and Canada.”16
LIMITS OF CLIENT PROFILE
16
“TrendWatch—Consumers Quench Thirst with a Flood of Bottled Waters,”
Consumer Insight, AC Nielsen, Summer 2002.

14
Dubai represents 45% and Abu Dhabi represents 19% of the total client population. As
the inhabitable area of the entire nation is roughly the size of Rhode Island while these
two markets demographically represent the leaders the rest of the nation is still 36% of
our demographic client base. The mean distances between other population centres such
as the east coast or Al Ain (south east of Abu Dhabi) are not beyond distribution points in
Abu Dhabi and Dubai. The proportion of national or foreigner clients purchasing
imported water at premium prices is essential yet unknown. In particular these customers
represent 3% of the total market share sales of imported water and thus extrapolating this
total to the population results in potentially 135,000 individuals. It must be assumed that
cost for quality is not a factor and that premium prices represent the top 20% income
earning population. However if national, then it may be assumed that the majority of
these customers are Emirati females who do most of the shopping (if not through the
agency of their servants) and that the comparable foreign population is also representative
of an over-emphasis on female purchasers both at the retail supermarket sector. Males
would more likely represent customers in highly visible impulse purchase decisions sales
domains such as convenience stores, hotels and/or water bars as well as liquor store
outlets. Entry into this market will require highly visible advertising and marketing at all
of these locations supplemented by wide ranging sales outlet suitability to affect and
draw new users out of local non-loyal and loyal switching consumer purchase intentions.
In addition, creating a premium bulk water supply network for the first time where there
currently is none could be problematic and initially highly selective.

POTENTIAL REVENUE
The potential is to produce and sell a product which costs us virtually nothing more than
the 5% tax to import in the UAE and the shipping and insurance costs to cover a single
dollar of glazed pottery bottle value as well as the advertising and marketing to maintain
a premium position in a market where few premium luxury imported waters exist. The
potential revenue is significantly higher on a bottle of water retailing in the region of
twenty to twenty-five dollars rather than a mass market product which is perhaps equal in
all cost aspects in market that is seeing cumulative 14% growth annually in the bottled
water sector specifically and 10% annual growth in the food sector generally.

FIT FOR PRODUCT OR SERVICE

TETRA-PAK: This mode suits domestic environmentally conscious mass market
consumers and reduces unit costs and ex-factory/ex-works invoice pricing. In addition it
mitigates affects of bisphenol A plastics contamination levied at PET which is a good
first move mass market packaging shift which will probably become prevalent in the next
few years. While it is certainly a trend in the Gulf Region it better suits a transition in our
domestic sales first to give us time to build up brand recognition at the premium level
where demand and entry for our product may be easier. 17

CLAY FIRED AND GLAZED POTTERY BOTTLES: A review of fine waters

website illustrates that there is no preferred packaging or design mode for premium
17
Lloyd - Jones, T. (2007) “Arab beverage markets in transition,” Business
Intelligence Middle East, August 17, 2007.

15
bottled waters and allows wide flexibility in the fit for product positioning. This mode
suits UAE environmentally conscious premium market consumers and minimally impacts
unit costs and ex-factory/ex-works invoice pricing due to local clay sourcing and
production at our Baxter’s Harbour facility. In addition it also mitigates affects of
bisphenol A plastics contamination levied at PET. In addition

PREMIUM BULK WATER DISTRIBUTION: There is no current Rolls

Royce of bulk water distributors in the UAE. The market is dominated
by local mass market competitors often achieving share through heavy
price competition. MSMW might find topping this market to be a
gamble worth taking. Especially if Maple Springs is the first to achieve
it. There are plenty of people who spare no expense in Dubai. Where is
the bulk water supplier to match their other consumer preferences?

PRODUCT DIFFERENTIATION
The majority of the local imported competition is segmented and selling to customers and
clients in customer B and D profiles or hyper/supermarkets and convenience stores.
These segments also likely provide the largest proportion of bottled water sector gains.
The following tables illustrate that the price competitiveness in these two sales segments
appears fairly saturated and would not necessarily provide well differentiated positioning
for our products further emphasizing that the premium bottled waters are a very small
portion of a very small piece of a very big pie.

Market size The United Arab Emirates

and growth18
2006 Mn 2006 CAGR % Share %
litres US$ Mn 02-06 Imports
Bottled water
575.0 129.5 14.0% 3%
Compounded annual growth rates as of the four year period are described as 14.0% for
mass market driven import products with which MSMW premium bottled waters would
not enter into direct competition.

Market pricing domestic and The United Arab Emirates

imported19
Bottled water UAE CAD equivalent
Dirham (CAD = Drh 3.13)

18
UK Trade and Investment for Yorkshire and Humber & Asian Trade Link in Bradford
(2007) “Accessing the Gulf States: United Arab Emirates and Saudi Arabia A guide to
doing business for Yorkshire and Humber food and drink companies,” Food from
Britain, London, England.
19
UK Trade and Investment for Yorkshire and Humber & Asian Trade Link in Bradford
(2007) “Accessing the Gulf States: United Arab Emirates and Saudi Arabia A guide to
doing business for Yorkshire and Humber food and drink companies,” Food from
Britain, London, England.

16
 Local brand 1.5 l still 1.10-1.25 0.35-0.40

PERRIER 750 ml 5.00 1.60

sparkling

These market prices would not sustain the impetus for MSMW exports to the UAE. Thus
premium water segments and marketing strategy provide the only identifiable under-
resourced segments for Canadian water exports to the UAE.

MARKETING STRATEGY

Direct sales may be possible with small niche players in our chosen customer segments: 5
star hoteliers, off license liquor stores, water bars, casual dining, and fast food restaurants
however it would be a “chalk and cheese” or ill-assembled piecemeal method of market
penetration where we might make more impact towards segments entry attempt as many

17
open ended, time synchronized and non-exclusive distributorship agreements as possible.
Regardless of our entry method the GCC tax of 5% will be levied on any exports we
make. Preparing an English and Arabic enabled sales website for wholesalers and direct
purchasers is not a bad idea. However as UAE liquor stores are monopolized by two
distributors, African & Eastern and Grey Mackenzie, it would appear reasonable to rely
upon their distribution knowledge and experience particularly as they also supply all of
the five star hotels. There are a few other major imported water distributors. It would be
conducive to generously apply sales incentives to boost equitable distribution of profits
for meeting sales growth targets which meet or exceed the imported bottled water
averages for each year of distribution. In addition the larger number of contracted
distributors then the more competitive their efforts may be to secure further contracts
beyond an initial three year to five year period. There are no known methods of green
fielding imported bottled water supplies and this in itself might defeat our efforts and the
purpose of the enterprise.

DOMESTIC PRODUCT CONVERSION TO SUPPORT EXPORT

EXPANSION
TETRA-PAK CONVERSION: This initial cost outlay would provide more flexible
market positioning in our current domestic marketing and free up necessary production
volume to double our current capacity to permit more ranging access to segmentation in
Nova Scotia and support expansion to neighbouring provinces mostly through increasing
brand awareness based on increased surface area of advertising on packing versus PET.
This would increase our annual profits locally to provide additional export market
capitalization. Our goal is to double Canadian sales volumes in three years due to tetra-
pak. The flexibility in sizing meets Perrier’s variable mode strategy useful for us in
Canada. “Whatever one’s reasons are for consuming bottled water, and despite the
controversy that continues unabated, sales of bottled water grew 55.4% from 2006 to
2007, according to Mintel Reports.”20

PREMIUM EXPORT PRODUCT DESIGNED FOR UAE LUXURY

20
Mellgren, J.(2008) “2008 Trend Report: Specialty Beverages,” The Gourmet
Retailer, Nielsen Business Media, Inc. July 3, 2008.

18
MARKET
CLAY FIRED AND GLAZED POTTERY BOTTLES: Our export earnings will
be affected by our contingency and equitable profits distribution with distributors and
retail outlets in the premium customer/client service modes described as customers A, C,
and E. Our purpose in the first three to five years should be to gain market share and
finance the exercise to the point that the UAE market itself is not costing our company
any money after that point. Self financing is our initial goal thus our potential revenue to
gain acceptance among our customers is to share a significant portion of our profit
margins which should be excessively high as our cost to produce designer decorator
bottles should be kept below one dollar CAD per unit. Our target range of pricing is not
less than that of Canaqua to identify this particular Canadian brand as our single current
major market positioned Canadian competitor. Our profit margins would thus be within a
similar range. Our environmental footprint will also benefit as plastics, aluminum and
glass will all continue to reflect variable pricing while our glazed pottery breathes
environmental awareness and falls under our complete quality and raw materials sourcing
and supply on site.

PREMIUM BULK WATER DISTRIBUTION: This would be the actual hidden

target of our export market revenue plan following five years in market. Once our
premium bottled water is well positioned in the UAE under terms of customers A, C, and
E we could then support an association with Hubert milk dispensers of Germany to
specialize their large cabinet sized products which would require little to no
modifications from use with milk versus water to establish the Rolls Royce of home
water distributors in the UAE market. Our cost of production on what is essentially a
single use 5 gallon goat-skinned sized plastic bladder might approach 1000% cost profit
margins. This would create a new customer, customer F which would represent premium
sports car, yacht, golf and private clubs, show rooms, where associated excesses,
luxuries, and taste for premium mineral waters is perhaps unmatched and currently un-
segmented.

PRICE
MSMW is able to predict that its value added (luxury premium value) price should be at
the very most somewhat lower than the lowest offerings of Bling H2O (around 23 USD)
and far above the 3.15 CAD charged for Canaqua at Harvey Nichols in Dubai. The
pricing benefit to premium water segments is that our customers could not care less about
the price. In fact the higher the price the more likely they will seek to purchase it.
MSMW would prefer the moniker, “Canada’s most expensive water” minus the plastic
bisphenoyl A leeching bottles, to which could also be added, “most elegant.” To repeat,

19
our customers are not price conscious. For this reason we may follow Nestlé’s adaption
or polycentric pricing policies with encouraged higher prices and list retail suggestions.

SUGGESTED LIST PRICES

MSMW glazed pottery 500 ml bottle: 6.30 CAD (ex-works cost $1.25 each)
(Distributor selling price $75.60 / Retail selling price $151.20/case of 24)
(Gross margin: 2.10 each)

MSMW glazed pottery 1.5 L bottle: 18.90 CAD (ex-works cost $1.63 each)
(Distributor selling price $113.40/ Retail selling price $226.80 /case of 12)
(Gross margin: $6.29 each)

We desire 33.33% of total gross sales to cover our fixed costs, shipping, insurance and
whopping profit margins. The equitable distribution incentive ideally positions 33.33%
with the distributor to include local advertising and marketing expenses as well as
33.33% for the retail customer as incentive to sell the product. In fact we will stipulate
that under normal pricing conditions MSMW will not accept lower than 33.33% of these
posted prices. However as our contract will only be with the distributors we will allow
them to arrange the profits sharing of 66.66% as they see fit with the customers. In
addition our distributors will not pay for our product until it is sold or within 90 days,
whichever comes first. This will be risky but for the first three to five years we will
permit a flexible approach first from open account facilities and with increasing sales
volumes, then requiring partial installments in advance first in the second year, then 50%
of distributor selling price in advance in the third year, etc. We feel confident that our
distributors will more likely understand our payments plan in the long term perspective
and gain confidence in the payments approach over time as we gain market share.

FIVE YEARS FROM NOW

• MSMW single use 18.9 L Hubert Cabinet Bladder: 200.00 CAD (slight
discount)(German cabinet: 1400 USD dollars ea.): This will be a highly
confidential product development on successful achievement of our sales and
annual growth goals in the UAE. We will not inform any distributors of this plan
until we are ready to commit and implement it. Hubert will sign an exclusive
water cabinet available only to us in the UAE market to direct deliver to
customers and clients while our distributors take orders and limit profit sharing
with our distributors to our water sales only. MSMW seeks no commissions on
Hubert dispenser sales and is willing to pass on any/all commissions to
distributors and/or absorption of shipping costs which ever is more cost effective
in agreement with Hubert contingent that Hubert fulfill any or all warranties or
after sales service of said dispensers as well as etch/emblazon the facing panel
service area with MSMW logo free of cost.

Price Discussion
These would represent standard retail prices with our ex-works prices working out to
about one CAD per unit above current domestic factory ex-works which would be our
quoted import valuation on replacement value and shipping which will be roughly equal

20
in price to our ex-works cost of product. Once distributor has our products customer and
client pricing will come into effect. Seasonal variations exist in water purchases which
mirror the food sector in general and tend to be affected by religious holidays and fast
breaking during feastings of Ramadan and Eid al Fittir and Eid al Hatta. At these times
our distributors might choose to make sympathetic price discounts to encourage larger
volumes of purchases to which our minimum stocking orders would rise. These seasons
change annually with the holiday’s dates. Marginal cost pricing is in effect.

PLACE
Shipping method will be through containerized palettes from Halterm in Nova Scotia CIF
Jebel Ali. Transit points will include the port zones delivery from factory to Halifax and
Jebel Ali to distributors warehouses in Dubai state mandated in the UAE, “mineral water
must be transported in chilled containers with temperature not to exceed 25 C.”21 Highly
specific packaging and labelling requirements exist (See Appendix: GCC PACKAGING
AND LABELLING REQUIREMENTS).22 Freight forwarders, customs brokers and local
trucking utilized both by MSMW in country and our distributors in the UAE. A number
of possible distributors systems exist (See Appendix: UAE
IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINE). Physical locations: 5 star
hoteliers, off license liquor stores, water bars, casual dining, and fast food restaurants.
Internet service: selected users may place orders over the system. Currently Canaqua
does not permit Canadian purchases however their internet site does function as a sales
outlet worldwide.

PROMOTION
Deluxe packaging mode invites consumer participation through regular seasonal design
modifications and potential client design contest competitions allowing the product to be
continually reintroduced as “new” to the market in a periodic advertising and marketing
fanfare which would be premium bottled water’s UAE equivalent to France’s annual
celebration of Beaujolais Nouveau in concert with numerous food and beverage annual
expos as well as shopping festivals, water parks, water display installations and water
sports events (See Appendix: TRADE SHOWS).

Media to be used:
• 5 star hoteliers: brochure stand alone card near or upon room/bar fridges
• off license liquor stores: large cardboard display at or near palette
• water bars, casual dining, fast food restaurants: table stand alone placards
• airport first class lounge and only the best/newest large mall hoardings

21
Taha M. and Williams, D. (2007) “United Arab Emirates: Food and Agricultural
Import Regulations and Standards, GCC Proposes Standardized Import Procedures for
Food Products,” GAIN Report: Global Agriculture Information Network, USDA Foreign
Agricultural Service, p. 7.
22
GSO Technical committee for sector standards of food and agricultural products
GCC Standardization Organization (2008) “Bottled drinking water,” GSO5 FDS,
(GSO), p.9.

21
It would be better to estimate the costs of advertising in the terms of advertising to cost
ratios as these are most evidently available for example, one may extrapolate the
percentage of the Swedish bottled water market with 60% imported brands penetration as
an ideal market for such low fixed costs products and a calculated advertising to cost
ratio of 6.8% which is perceived as high when compared to other food sectors such as
cereals which rise to 10.8%.23 Considering the small UAE 3.5% market share of all
imported bottled waters this ratio appears quite conservative and might be considerably
higher however alternative data is unknown. Furthermore considering our small
knowledge of local marketing costs it might be better to ask our distributors to
competitively submit marketing proposals in cooperation with professional domestic
agencies locally prior to contracts negotiation. Press releases would be regularly timed to
coincide with promotional events with The Gulf News and The Khaleej Times as well as
various other Arabic language newspapers all highly oriented to business promotional
reporting generally free of charge.

CLIENTS CUSTOMERS SALES

LOCATIONS
Customer A: Males (more likely 5 star hoteliers Over fifty in Dubai alone
foreigners)
Customer C: Foreign males and Off License Liquor Stores Dubai Duty Free
females exclusively. African & Eastern
Gray - Mackenzie
Spinneys Liquor
Customer E: Males and females Water bars, casual dining, fast Magnolias
(nationals or foreigners) food restaurants TGIF
Chilies

PEOPLE
To reiterate our customers know few price limitations in terms of spending and as Merrill
Lynch (posthumously) relates the UAE has more than its fair share in a 17.5% increase in
the number of millionaires in 2007 all spending 14% of their high net worth in luxury
consumables and over 10% of their wealth on health and wellness annually. 24 These are
our target customers.

Purchasing criteria: (Reiterated)

A. Canada is seen as a reliable supplier of imported bottled

water: Canada’s Dubai Consulate provided evidence that for example of B.C.'s
premium Canaqua water (other described as the most expensive water in the world),
Whistler water, and Clearly Canadian (a more generic and mass market flavoured water)
are all (periodically) available. There are perhaps problems in distribution without a
23
Friberg, R and Gansland, M. (2005) “An empirical assessment of the welfare
effects of reciprocal dumping,” Journal of International Economics, Volume 70, Issue
1, September 2006, Pages 1-24.
24
McCann, R. J. and Lavayssière, B. (2008) “World Wealth Report 2008,” Merrill Lynch
& Co., Inc. and Capgemini.

22
Perrier-like market penetration.

B. Canadian imported bottled waters are under-represented in

the UAE market: Such a statement leads from A as the marketing
and distribution of these bottled waters has not been wide ranging
enough to capture solid market share. This is to MSMW’s possible
advantage in limiting market entry to customers A, C, and E .

C. Canadian export products have a positive safe image (food

safety): Canada’s global product image, if there is one, is of nature,
naturalness and safety. These are all motivators of purchase intention
among premium imported bottled water purchase clients.

D. Growing demand for bottled water products in the UAE: “The

UAE foodservice market is larger and more important than is initially apparent and is
also growing at rates not seen in any developed countries of the world. (over 10% per
annum in most channels)” (Drink Expo UAE, 2008) It would appear that such growth is
primarily in the mass market sector thus higher growth may be possible in the premium
market segment.

AFTER SALES SERVICE

An English/Arabic customer service enquiries line will be maintained locally through our
distributors and will be enclosed in the terms of the distribution agreement. There will be
no guarantees or warranties however customer opinions and feedback will be essential in
measuring our ability to meet/shape purchase intentions.

OPERATIONS OVERVIEW

ISO 9000 is a strong recommendation for the UAE market as it has high local value as

23
well all products which already conform to Canadian health standards bottled at source.
Production requires regular routine testing of dissolved minerals and solids. “Canada
bottled water is regulated under the Food and Drugs Act and Regulations as a food
product.” Our fixed price costs are quite low and represent some of the lowest in the food
sector industry. As our production system is automated the equipment is tailor-made and
installed by industrial engineers by tri-party tender process.

International Order Flow Chart

UAE customer orders product from UAE

distributor

Minimum stocking order supplied

distributor forwards order to
International Sales
International and Marketing
Sales and Marketing
Manager at
Manager MSMWInternational
consults
Documentation Specialist who then
confirms order pricing with MSMW
Domestic Accounting Manager and
notifies Production Manager

Domestic Production Manager confirms

order delivery with Domestic Logistics
Manager who notifies international
freight forwarder.
International Freight Forwarder advises
packing and documentation
requirements receives delivery at
Halterm from MSMW trucks and invoices
and insures order for delivery to CIF Jebel
Ali.

First of all, we have decided to upgrade our entire administrative process with DHL
inspired online ordering, tracking and JIT software facilities. We may more easily
monitor and adjust our forecasts as a result and streamline our necessary administrative
loads so that each domestic manager will have additional time resources to devote to
consultation with our international sales and marketing manager and international
documentation specialist. In addition these staff will be able to respond quickly to
feedback, customer requests and be available for cross-team planning and research
activities led by the learning through doing principle as applied to their new status
regarding MSMW’s first offshore export market. In addition their extra time will be well
spent in the pleasant crafting of pottery and learning as well as operation and
maintenance of the anagama kiln, earth ship and mucking about in our spring’s extensive
clays and muds collecting quality packaging material. The ordering system learning will
also save time and money for the company.

24
Export packing materials required as well as ink labelling on glazed pottery bottles to
meet GCC requirements. Entire pottery production facility to be built on site to green
building quality standards similar to an earth-ship or bermed tires and straw bale
construction - one of the lowest square footage costs on the planet..

FINANCIAL AND RISK MANAGEMENT

STRATEGY

MSMW Case Study: Pro-forma Balance Sheet of Third Quarter, 2008

ASSETS
Current Assets
Cash at Bank: $800,000
Inventory: $250,000
Accounts Receivable/Debtors: $250,000
Prepaid Expenses: TBA/NA

25
Other Current Assets: TBA/NA
Total Current Assets: $1,290,000

Fixed Assets (Tangible)

Equipment/Machinery: $1,000,000
Buildings/Land/Factory: $2,005,000
Fixtures/Fittings: $100,000
Other Fixed Assets: TBA/NA
Less: Accumulated Depreciation: $1,500,000
Total Fixed Assets (less depreciation): $1,605,000
Other Intangible Fixed Assets: TBA/NA
TOTAL ASSETS: $2,895,000

LIABILITIES
Current Liabilities
Accounts Payable/Creditors: $400,000
Short-Term Loans: TBA/NA
GST: TBA/NA
Total Current Liabilities: $400,000
Long-Term Liabilities: $0.00
Long-Term Loans: $0.00
Mortgage: $0.00
Total Long-Term Liabilities: $0.00
TOTAL LIABILITIES: $400,000

EQUITY
Owner's Equity - Share Capital: $495,000
Retained Earnings (Previous Year): $2,000,000
Current Year Earnings: $267,200
TOTAL EQUITY: $2,762,200
TOTAL LIABILITIES AND EQUITY: +$2,362,200

DISCUSSION

First, I will assume that the pro-forma balance sheet of 2002 actually represents 2008
otherwise I would have calculated cumulative inflation and growth of 10-15% annually.
In summary a positive balance in total liabilities and equity indicates a possible self-
financing export plan which would be ideal. However, utilizing possible EDC buyer
supported purchase loans would be a somewhat secure method of kick-starting
international sales.

ASSETS
Current Assets
Cash at Bank: $800,000 could be exercised as performing assets either in high interest
savings or as basis for capital loans extensions which might not exceed half of its net
value therefore project a 400,000 loan could be available on this amount at any time.

26
Inventory: $250,000 appears to be almost equal to current years sales profits. While
acting as inventory it is a little scary to imagine that much inventory in proportion to sales
volume. I would rather see it as sold goods so the domestic operation needs to find a way
to clear inventory and turn into increased sales.

Accounts Receivable/Debtors: $250,000 again appears horrendously like nearly an

entire years profit is tied up in outstanding accounts. What are we paying all of these
managers for if it is not to turn debits into credits? I would like to see no more 10-15% of
accounts receivable on annual profits.

Prepaid Expenses: TBA/NA

Other Current Assets: TBA/NA
I suspect MSMW has not creatively explored its other current assets category if its
inventory and accounts receivables are in such shape. It's time to start turning over rocks
on digging up other assets. For example, what exactly are the minerals located on our
site? What about possible value of those healing muds in their gross form as plain old
mud?

Total Current Assets: $1,290,000

As for liquidity we only really have our cash at the bank immediately. Optimism required
turning those kinds of figures in inventory and unpaid accounts as actual liquid cash at
any time.

Fixed Assets (Tangible)

Equipment/Machinery: $1,000,000
Buildings/Land/Factory: $2,005,000
Fixtures/Fittings: $100,000
Other Fixed Assets: TBA/NA
Less: Accumulated Depreciation: $1,500,000

Total Fixed Assets (less depreciation): $1,605,000

Obviously our depreciation rates should be telling us something about the perceived
value of our fixed assets we are only getting about 50% of their value out of owning
them. Either we find a way to distribute our depreciation expenses over future time to
minimize its impact on our total fixed assets or we consider investing in new machinery
especially if the part sales of half of our fixed assets add up to more than accumulated
depreciation.

Other Intangible Fixed Assets: TBA/NA

We might consider quantifying our accumulated staff as intangible knowledge assets
which do have a monetary value to boost our fixed assets. Not sure if I would include the
inventory or accounts department staffs.

TOTAL ASSETS: $2,895,000

27
Only about 25% of this is actual liquid cash and the rest is going to have a severe sellers
discount attached to its value if we try to liquify it.

LIABILITIES
Current Liabilities
Accounts Payable/Creditors: $400,000
Short-Term Loans: TBA/NA
GST: TBA/NA
Total Current Liabilities: $400,000

MSMW is blessed with no accounts payable/creditors or short-term loans (GST

calculated in annual earnings). However this would have to be the first and perhaps only
business in Eastern Canada which does not owe money to someone. It wouldn't hurt to
borrow a little. Look how we are lending to our buyers and inventory departments! Let's
knock on EDC's door and see what water we can squeeze out of their stones.

Long-Term Liabilities: $0.00

Long-Term Loans: $0.00
Mortgage: $0.00
Total Long-Term Liabilities: $0.00

Again these are blessings which only a case study could bestow. Fast cash possible in all
of these categories except perhaps mortgages at the current time and who wants
liabilities? However the minute potential lenders see our inventory holding and accounts
due as well as depreciation on assets they might just shake their heads and point the way
to the door. Our company accountant has been sleeping at the wheel.

TOTAL LIABILITIES: $400,000

EQUITY
Owner's Equity - Share Capital: $495,000
Retained Earnings (Previous Year): $2,000,000
Current Year Earnings: $267,200

Retained earnings literally sitting there doing nothing. That's two million we have to play
with and should have been playing with all along. Owner's equity - a nice cherry on that
thick wad of cash ready for re-investment, appears over-ripe. That's nearly a decade of
current year's earnings sitting there doing nothing like a lump of clay. Who could we be
even just lending it to for impressive interest? Bear-Sterns? Lehman Brothers? Fannie
Mae? Freddie Mac? We might make more money lending that money than exporting with
it anyway?

TOTAL EQUITY: $2,762,200

28
TOTAL LIABILITIES AND EQUITY: +$2,362,200
We are equity rich! Let's do something with all of this cash! Furthermore, a stock
offering would be a pretty sure way of gathering cash for lending and boosting our
confidence. With all that money lying around and a water-tight export plan we should
come up with a few investors. We already have annual 10-15% growth domestically. If
we need to borrow money we would be crazy on this pro forma.

CAPTIAL BUDGET

EDI System: Estimated $100,000 outlay in full service package.

Tetrapak production line installation: Equipment/Machinery: $500,000 (estimated) as

this is forecast to take up half the amount of space in our plant and half the amount of
time to fill the same number of bottles per hour.

PET to Pottery bottle conversion: $100,000 (estimated) as the clay bottle is 20%
heavier than the PET bottle it will require stronger line reinforcement but will remain the
same sizes (500 ml and 1.4 L).

Pottery production installation: At $100 dollars per square metre a 200 square metre
pottery drying facility “earth ship” would cost little more than $20,000 for the structural
components. An additional $20,000 budgeted for slab concrete foundation and fittings.

Anagama wood kiln: Possibly an additional $20,000 for the construction of the wood
fired kiln as seen above. This would be installed by a certified pottery technician who
would oversee training of our entire staff in the rotational pottery design and production
of standard sized glazed ceramic 500 ml and 1.5 L water bottles. Downtime and overtime
rates would apply to permit all line employees contribute 10% of their usual working day
to pottery production. The free time would be found through the process time reduction
of conversion from PET bottle manufacturing to tetra-pak manufacturing which would
halve the lead time and result in required inventory holdings half of the size of previous
methods resulting in half again of our warehouse being made vacant and thus ample and
logical placement of new tetra-pak filling facility.

29
TOTAL CAPTIAL PURCHASES: $760,000
Entire outlays financed by total equity of $2,362,200
Equity remaining: $1,602,200 (to be deposited in high interest earnings CD accounts)

THREE YEAR FORECAST

Revenue: DOMESTIC DOMESTIC DOMESTIC INT’L INT’L INT’L
2009 2010 2011 2009 2010 2011
Gross sales 11,278,246 15,037,285 20,049,212 2,177,280
(33.33% x2
projected
4,354,560 4,790,796 5,269,798
increase
annually for
Begins at 10%
three years to
of domestic
double Canadian
volume sales
sales volumes
forecast
with tetra-pak)
10% increases
based on
conservative
sector
standards
Net Sales 11,278,246 15,037,285 20,049,212 725,687 x2 1,596,511 1,756,162
Est. Est. 1,451,374 Est. Est.

Cost of
goods sold
Beginning 333,250
inventory
Jan. 1

30
Production 8,557,860
Labour and
Materials
Less ending 333,250
inventory
Dec 31
Cost of 8,557,860 11,410,194 15,213,212 619,776 681,754 749,929
goods sold Est. Est.
Gross Profit 2,720,386 3,627,090 4,836,000 831,598 914,757 1,006,233
Margin

Product and materials costs for export 500 ml and 1.5 L in 2009 (10% of domestic)
International growth of 10% annually for the next three years.
500 ml 14,400 cases produced (cost of $30.00 /case of 24)
1.5 L 9,600 cases produced (cost of $19.56/case of 12)

Operating Expenses
General 173,880 17,388 18,257 19,170
administration : Assume 5% Assume 10%
inflation costs of all domestic
increased each costs.
year.
Marketing: 403,200 40,320 95,256 100,019
(in addition to
distributor
costs) + 50,400
for new
management
staff
Quality 102,900 10,290 10,805 11,345
Assurance:
Production 63,000 6,300 6,615 6,946
Physical Plant 50,400 5,040 5,292 5,812
Logistics 510,300 309,888 340,877 374,965

(estimate 50%
of total
production
cost)
Accounting 214,200 21,420 + 75,411 79,182
50,400 for
new

31
 managemen
t staff
Human 113,400 11,340 11,907 12,502
Resources
Building and 126,000 12,600 (for 13,230 13,892
Property Tax new
additions)
Total Operating 1,757,280 1,845,144 1,937,401 535,386 577,650 623,833
Expenses Est. Est. Est. Est. Est.

Net Profit 963,106 1,284,109 1,712,103 296,212 337,107 382,400

Est. Est.
Less income tax 105,000 525
expense (No domestic
taxes on
international
profits only
5% import tax
on products
ex-works
value)
Net income 768,102 296,212 337,107 382,400
profit after tax
Revenue: DOMESTIC DOMESTIC DOMESTIC INT’L INT’L INT’L
2009 2010 2011 2009 2010 2011

Actual Sales Figures for Export 500 ml and 1.5 L in 2009 (10% of domestic)
Wholesale at ex-works to distributor, customer price, and suggested retail price for the
next three years.
500 ml 14,400 cases (selling price $75.60 / $151.20/case of 24)
1.5 L 9,600 cases (selling price $113.40/ $226.80 /case of 12)

FIVE YEAR CASH FLOW FORECAST

YEARS 2009 2010 2011 2012 2013

DOMESTIC 768,102 1,024,110 1,365,446 1,501,991 1,652,190
INT’L 296,212 337,107 382,400 420,640 462,704
TOTAL 1,064,314 1,361,217 1,747,846 1,922,631 2,114,894

32
DISCUSSION OF FORECAST: Domestic sales annual increases to meet sales growth
targets of 33.33% annual increases by expanding into neighbouring provincial markets
with high visibility tetra-pak advertising influencing more purchase intention fulfillments
based on frequency and reach to match customer needs followed by slower annual rates
of growth of 10-15% in line with current growth and also due to several competitors
adopting our tetra-pak lead. UAE growth conservative estimates of 10% annually
compounded. MSMW appears awash in positive cash flow and capital outlay pays for
itself in approximately two years.

HIGH RISK VENTURE: Basically starting with open account and as distributors
become more confident with the product will begin partial payments/installments plan
progressively. Generally when well considered and treated with patience and generosity
an Arab business partner is true to the letter and spirit of global business partnership. The
risk is in moving too quickly and attempting to rush the Arab business process which
may often appear and in fact may exactly often be periodic in that westerners often feel
they must, “hurry up and wait.” EDC Insurance may not be applicable in open account
processes however the spirit of Arabian business is often exactly that. In Arabia
businesses often get the partners they deserve. With the best water product and delivery
mode on the market it should be apparent that the best distributors and partnerships will
be a matter of course. Our best insurance is selecting the best distributors, taking our time
to ensure each of customers are aligned and satisfied with our contract provisions.
Equitable three way split appears generous and generosity pervades The United Arab
Emirates.

CONCLUSION AND RECOMMENDATION

Research indicates that the UAE provides the highest possible return on the lowest actual
cost out-lays for a food sector product like bottled water with some of the lowest fixed
costs in the market. The trend both domestically and globally away from PET bottles
towards tetra-pak could prove a Canadian competitive advantage for Maple Springs
Mineral Water. The capital outlays required appear modest by comparison to the
potential forecasted annual growth possible with new technology, new EDI systems, new
premium products for the global market and improved cash flow for re-investment either
to pursue other export markets in future or to invest in lower risk cash deposit guaranteed
investment plans. For all of the planning possible to mitigate and explore scenarios, risks
and possible pitfalls, a few concepts remain quite clear.

Moving to a premium positioning with a packaging sourced material like glazed and fired
pottery adds an intangible cultural element to the process of selling Canadian water
products. Uniqueness, creativity and innovation combine to provide the key sales drivers
of luxury mineral water products. In terms of value added, it is the only real next stage

33
for Canadian water products globally. In the UAE one may find the opportunity to
design, build, manage and perform on the stage of a business platform’s choosing.

While the element of risk is very real the risk appears worth taking as the gains made
with cash assets otherwise underperforming must in some way attempt to recoup the
losses in holding capital without any investment plan. While this may be the challenge of
the next generation of mineral water companies in Canada it is by no means a
requirement that progress be made in a foggy plastic and fixed environment of global
business planning.

Even a modest product when packaged correctly may shine and redeem great profits.
This is certainly the case for Maple Springs Mineral Water Company. To lead one must
perhaps simply seek to achieve more. This is the spirit of the UAE market today. Without
knowledge a country and a company can do nothing. In closing the chances are worth
taking. In memory of The Sheik.

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APPENDIX I: DETAILED PRODUCT DESCRIPTION

500 mL Bottles
Packing: Cardboard trays and shrink wrap (L39.5 cm X W27.5 cm X H20.5 cm)
Units/tray: 24, Tray weight: 15.69 kg
Size of pallet: 101.5 cm X 121.9 cm
Number of trays/layer: 10
Number of layers/pallet: 8
Height of complete pallet: 180.5 cm
Gross weight: 1255.2 kg
Number of pallets/20’ container: 10
Number of pallets/40’ container: 20

1.5 L Bottles
Packing: Cardboard box (L28 cm X W37 cm X H32 cm)
Units/Box: 12, Box weight: 19.92 kg
Size of pallet: 101.5 cm X 121.9 cm
Number of boxes/layer: 9
Number of layers/pallet: 5
Height of complete pallet: 120 cm

37
Gross weight: 896.4 kg
Number of pallets/20’ container: 10
Number of pallets/40’ container: 20

APPENDIX II: GCC LABELLING REQUIREMENTS

38
Packaging

8.1 Without prejudice to what is stated in Gulf standard mentioned in item (2.7), bottled water
shall be packed in hygienic suitable, clean and hermetically sealed containers that would
prevent contamination of the water and preserve its physical and chemical properties.

8.2 Filling and sealing operations of containers shall be done in an aseptic atmosphere
according to Gulf standard mentioned in item (2.2).

8. Labelling:

Without prejudice to what is mentioned in Gulf standard in item (2.1) the following
information shall be declared on the label in case of bottled drinking water:

9.1 The name of the product shall be —bottled drinking water“. Any statement that would give
wrong impression regarding the nature and properties of the product shall not be declared
on the lable.

9.2 Water content of the different anions ( chloride œ sulphate œ nitrate œ carbonate œ
bicarbonate œ fluoride ) and cations ( Calcium œ magnesium œ sodium œ potassium _ ,
total hardness and total dissolved solids expressed in ppm.

9.3 PH.

9.4 The net volume in metric system, unit.

9.5 Packaged water containing added fluoride shall be labelled —Fluoridated water“.

9.6 Filling date and expiry date by day month and year in a non - codex manner.

9.7 The labelling information shall be written on the containers and shall not be written only
on carton boxes or the like

GSO Technical committee for sector standards of food and agricultural products GCC Standardization Organization
(2008) “Bottled drinking water,” GSO5 FDS, (GSO), p.9.

39
 APPENDIX III
UAE IMPORTERS OF MINERAL WATER PRODUCTS

Majid Al Futtaim (MAF)/ Carrefour UAE

Dubai, UAE
Tel: + 971 4 295 1600
Fax: + 971 4 295 1601
Website: www.carrefouruae.com

Emke Group/ LuLu supermarkets, hypermarkets

Chairman: Mr. MK Abdulla
Managing Director: Mr. Yousaf Ali
PO Box: 4048
Abu Dhabi, UAE
Tel: +971 2 642 1800
Fax: +971 2 642 1716
Website: www.emkegroup.com

Spinneys Dubai LCC

CEO: Jannie C. Holtzhausen
Marketing Manager: Mr. Warwick Smith
PO Box: 677
Dubai, UAE
Tel: +971 4 355 5250
Fax: + 971 4 351 5538
Website: www.spinneys.com

Dubai Duty Free

Managing Director: Mr. Colin McLoughlin
PO Box: 831
Dubai, UAE
Tel: + 971 4 216 2453
Fax: + 971 4 224 4036
Website: www.dubaidutyfree.com

Union Co-operative Society

PO Box: 3861
Dubai, UAE Tel : + 971 4 3312891, 3331816
Fax : + 971 4 3315150 Email: unionco@emirates.net.ae

40
 APPENDIX IV. GOVERNMENT MINISTRIES
Ministry of Economy & Planning
PO Box: 904
Abu Dhabi, UAE
Tel: + 971 2 626 5000
Fax: + 971 2 626 0000
Website: www.economy.ae

Ministry of Finance & Industry

PO Box: 433
Abu Dhabi, UAE
Tel: + 971 2 672 600
Fax: + 971 2 676 8414
Website: www.uae.gov.ae/mofi

Ministry of Agriculture & Fisheries

The Minister : H.E. Saeed Mohammed Al Raqbani
PO Box : 213 Abu Dhabi Tel : 02 4495111 Fax : 02 4495154
Website: http://www.uae.gov.ae/maf

Dubai Chamber of Commerce & Industry

PO Box:1457
Dubai, UAE
Tel: + 971 4 228 0000
Fax: + 971 4 221 1646
Website: www.dcci.gov.ae

Jebel Ali Free Zone Authority

PO Box:17000
Dubai, UAE
Tel: + 971 4 881 5000
Fax: + 971 4 881 16466093
Website: www.jafza.ae

Dubai Municipality
PO Box: 67
Dubai, UAE
Tel: + 971 4 2215555
Fax: + 971 4 2246666
Website: www.dm.gov.ae

eConcordia FITTskills: International Business Plan Page 41

 APPENDIX IV.
UAE IMPORTERS/DISTRIBUTORS OF LIQUOR AND WINE

African & Eastern (N.E) Ltd. 02-6676041 / 02-6448685

Gray Mackenzie Liquor Shop 02-6765954 / 02-6123545

Spinneys Liquor 02-6812356 / 02-6271090

eConcordia FITTskills: International Business Plan Page 42

APPENDIX V. TRADE SHOWS

Dubai Drink Technology Expo 2008

Date: December 14-16, 2008
Venue: Dubai Convention & Exhibition Centre, in Dubai, UAE. Zabeel Hall
Website: http://www.drinkexpo.ae

Gulfood 2009
Date: February 23-26, 2009
Venue: Dubai International Exhibition and Convention Centre
Website: http://www.gulfood.com/Default_en_gb.aspx

2nd Halal Expo 2008- Dubai

Date: November 24-26, 2008
Venue: Crowne Plaza Hotel, Dubai, UAE
Website: http://www.worldhalalexpos.com/

Middle East Natural and Organic Products Expo 2008

Date: November 16-18 2008
Venue: Dubai International Exhibition Centre, Dubai World Trade Centre
Website: http://www.globallinksdubai.com/

eConcordia FITTskills: International Business Plan Page 43