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CHAPTER II

Market Study
Introduction

Mushrooms are fungi characterized by the presence of gills under the umbrella-shaped
cap called pileus. Some grow in mass or in clusters; others develop in singles or in pairs. Others
thrive well on cool weather, some in warm places.

Like plants, mushrooms have seeds responsible for propagating the species. They
produce spores like all fungi. When they happen to fall on a suitable agricultural waste, these
spores germinate and develop into mycelium. If the conditions are favorable, it continues to
grow, ramify and develop into mushrooms.

Mushroom cultivation is an income-generating activity that can be done both in rural and
urban areas. Mushrooms can be grown on commercial or small scale using either highly urbane
equipment or low-cost materials and agricultural wastes.

Mushroom production involves a number of complicated steps and operations. Each


operation consists of many sequential steps that are crucial and important if success is to be
achieved. The choice of species and technology will depend on the conditions prevailing in the
place where one prefers to grow the mushrooms, the availability of the substrate to be used and
the availability and amount of capital.

Land and climate play a minimal role in mushroom cultivation. Access to sufficient,
suitable and locally-sourced substrate and spores are key determinants as to whether
mushroom cultivation is likely to be successful and sustainable or not.

Mushrooms are not labour intensive and can be undertaken as an additional livelihood
activity which fits around other household or productive tasks. For local consumption and trade
needs, a different level of equipment and infrastructure is needed than a small commercial
enterprise. Many of the physical assets required to undertake mushroom cultivation are not
exclusive items, but rather assets which help meet livelihood needs in general, including the
transport and communication infrastructure, clean water, a source of energy, and buildings for
shelter and storage. The more developed the infrastructure, the easier it is to establish and
undertake mushroom cultivation.

In the past few years, the Philippine government has given emphasis in the use of
environment-friendly technologies that paved way to the rise of mushroom production.
Recently, in Albay, there has been a concomitant rise in tourism which has lead to the
growth in the number of hotel and restaurants which then boost the demand for
mushrooms.This is owing to the fact that most of the people contributing to the rise in demand
are from foreign countries that are fond of eating cuisines with mushrooms as its ingredient. It is
also important to note that unlike before, there has also been an expansion in the type of
mushroom preferences and demand.

Uses of Mushroom and Mushroom Cultivation

Mushroom cultivation activities can play an important role in supporting the local
economy by contributing to subsistence food security, nutrition, and medicine; generating
additional employment and income through local, regional and national trade; and offering
opportunities for processing enterprises.

Mushrooms both add flavour to bland staple foods and are a valuable food in their own
right: they are often considered to provide a fair substitute for meat, with at least a comparable
nutritional value to many vegetables. The consumption of mushrooms can make a valuable
addition to the often unbalanced diets of people in developing countries. Thus, proving the
spectacular growth in commercial activity associated with dietary supplements, functional foods
and other products that are more than just food.

Objectives of the study

1. To establish a mushroom facility that will contribute to the supply of mushrooms in the
market and meet the demand of the consumers.

2. To contribute to the economic progress of the region when it comes to agriculture.

3. To provide employment to those people living within the area of operation.

Target Market

Basically, the studys target market includes supermarkets, restaurants and fast food
chains in the Province of Albay. All this entities are offering mushrooms in their business
operations. Also, there is a planned extension of operation to provide fresh mushrooms outside
Albay area. Below are the different supermarkets and restaurants which are potential customers
of the company:

Basically, the studys target market includes supermarkets, restaurants and fast food
chains in the Province of Albay. All this entities are offering mushrooms in their business
operations. Also, there is a planned extension of operation to provide fresh mushrooms outside
Albay area. Below are the different supermarkets and restaurants which are potential customers
of the company:

Name: Mariz Noleal Name:

Business: Bob Marlin Restaurant Business: Cofibreak Restaurants

Name: Omar Apuyan Name: Anthony Nulias

Business: DIY Burger Business: Sef's Place

Name: Name: April Joy Guadalupe

Business: Biggs Diner Business: La Mesa

Name: Name: Desiree Apuli

Business: Poison Couldron Business: Delica

Name: Albert Lennox Name: Aldrin Borbe

Business: Grilled and Dine by Jose Business: Retailer


Supply of the Products

The mushrooms breeds are White Oysters, Shiitake, Wood Ear, Champignon and Button
mushrooms. Mushroom Cloud will cultivate 1500 bags each for Shiitake and Button mushrooms
and 800 bags each for the other three types of mushroom. The facility will produce 1750 kilos
of fresh mushrooms per week to be delivered to 25 stores and 1050 kilos of fresh mushrooms
for 25 restaurants and food chains in the Bicol Region.

Demand and Supply Analysis

Since the mushroom production in Albay is still on the process of developing, the market
is still to be established. Thus, no historical data of supply and demand in mushroom production
can be obtained. Nevertheless, the growth in the demand is continuously rising for the past few
years. Due to this fact, a supply of mushrooms is highly necessary.

Projected Sales Volume

Projected Sales Volume is computed based on the production capacity equivalent to


134 400 kilograms per year. On the first year of the companys operation, the first 3-5 months
will be used to cultivate the mushrooms since the company is only starting its operations.
Initially, the market share of the company is expected to be on a moderate state since it will
operate in a considerable production capacity. Starting from the second year onwards, the
market share is expected to increase by forty percent (40%) since the idea of mushroom
production will be introduced extensively to the target market and a supplier to buyer
relationship will be established.

Marketing Program

The fresh mushrooms are marketed once they reach maturity. There are typically three
principal marketing routes for mushroom growers:

The grower can sell directly to the consumers either at the farm gate or at local
markets;
The grower can sell to an agent who then sells the mushrooms either to local or
distant markets, including exports.

The grower can belong to a cooperative or another farm organization, which offers
easy market linkages to both local and distant markets, including export markets.

Up-to-date information of market prices of fresh mushrooms or where it is needed and


how much is needed should be obtained.

A. Channel of Distribution

Establishing a good relationship with a buyer by delivering a reliable quality and


quantity of product is fundamental. It is important to start modestly and secure a buyer or
small network of buyers to whom one can deliver a reliable distribution.

Mushroom Grower

Middleman

Supermarkets

Restaurants

Fast Food Chains

Consumers

Figure . Channel Distibution

B. Human Resource

The marketing department is composed of 6 persons - one Marketing Manager,


one Sales Supervisor, two Sales Clerks, two Delivery men.

C. Advertising and Promotion


There are only few mushroom culture facility in the country at the present.
However, there is still a need to exert effort in order for the facility to be known and be
distinguished from others in this industry.

The promotional instruments to be used in selling mushrooms would be the following:

Brochures - can be used to introduce the uses and benefits of


mushrooms

Website - can be used for inquires and orders from the customers

Food exhibits - can be held to promote the products

Mass Media - can provide the widest dissemination of informatiom to every


individual via various television programs which caters agricultural businesses

D. Terms of Sale

The company will offer cash and credit sales (n/30).

E. Pricing Policy

Price is a vital factor which must be considered in order to see whether the
product offered will be accepted in the market or not. The prices of the different types of
mushrooms vary form one another. Ready to market fresh mushrooms can be priced in
different ways: Wholesale pricing, Retail pricing and Farm gate pricing.

Farm gate pricing was the method chosen to be used in pricing the fresh
mushrooms. Through this the company will be able to remain competitive in terms of
pricing in contrast with the competitors.

Competitors

There is no supplier of mushroom in the Province of Albay and only one supplier in the
Bicol Region. Most of the supplies of fresh mushrooms are imported from distant places in the
country. There are only few competing facilities in the phillipines that can be listed as
competitors in this industry. Below are the list of the facilities:
Name of Business: AB Seeds Supply

Address: Naga City

Name of Business: Annie & Abraham's Mushrooms

Address: La Trinidad, Baguio City

Name of Business: Mushroom Producers Cooperative

Address: Tarlac City

Name of Business: JMP Mushrooms

Address: Del Mundo Village, Caloocan City

Compensation of Employees

Mushroom Cloud will meet the terms of the law on Labor Standards and Employment
Relations of the Labor Code of the Philippines. The lending points on employee conditions and
benefits as stated in the Philippine Labor Code are as follows:

1. Hours of work are 8 hours per day or equivalent to 48 hours per week. Short rest
periods during work hours are considered as hours worked.

2. The workday is 24-hour period, which starts from the time the emploee regularly starts
to work.

3. By Law, the company is required to give its employees a 13th month pay, which is
equivalent to 1 month pay.

4. As mandated by the law, the employer and employee are required to contibute for the
social security benefits of the employee.
5. As mandated by R.A. 7835 on Medicare Program which is administered by the
Philippine Health Insurance Corporation ( PhilHealth), both the employer and employee
are to contribute for the health benefits of the employee.