JF is a private limited company which owns a farm. It produces crops including maize and sunflower seeds. The crops are sold to manufacturers that produce cooking oils for supermarkets. Jim is worried as the price JF receives for its crops is falling. JF is only paid four times a year when the crops are ready, so cash flow is poor. Sam, Jim's son, has recently completed a management degree at university. He is worried that the farm will not reach its break-even point if the price continues to fall. He has researched ways his father could increase the value added to the crops. Sam has identified that healthy eating is a growing trend. He has created a plan for the business which considers two options, shown in Table 1.1. Sam has identified that supermarkets would buy most of the new products and he could also sell them to independent retailers. Table 1.1: Options for the future of JF | Product | Option 1 Healthy snacks | Option 2 Healthy cooking oil | | :------------------------- | :-------------------------- | :--------------------------- | | Market type | Mass | Niche | | Start-up capital ($000) | 100 | 75 | | Annual expenses ($000) | 50 | 35 | | Annual cost of goods sold ($000) | 60 | 75 | | Forecast annual market growth | 10% | 15% | | Forecast annual sales | 300000 units | 100000 units | | Proposed price per unit | $0.50 | $2.00 | Figs. 1.1 and 1.2 show extracts from articles about the two options. Healthy eating campaigns in schools are changing the way that young people snack and the sales of 'healthy snacks' made from nuts and seeds are growing. Healthy eating is rapidly becoming an important social issue and for some consumers, quality is more important than price. Fig. 1.1: The rise of the healthy eating campaign Business analysts are excited about the potential profitability of premium cooking oils, which offer a healthy alternative to traditional products. High income consumers are prepared to pay high prices for healthy oils made by small independent producers. Fig. 1.2: Future demand for healthy cooking oil