Project study for a baker's yeast plant

• Main Author: Lagua, Fernando A.
• Format: text
• Language: English
• Published: Animo Repository 1967
• Subjects: Yeast industry > Philippines; Business Administration, Management, and Operations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/115; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=6953&context=etd_masteral
• Institution: De La Salle University

This project study is conceived to be undertaken by Republic Flour Mills whose sister corporation, the Araneta Institute of Agriculture (AIA) Feed Mills owns and operates a fodder (animal) yeast plant. It is the intention to integrate a baker's yeast plant of 300 ton capacity with this fodder yeast plant at an estimated cost of 2.5 million pesos. Republic Flour Mills considered a baker's yeast plant as a logical area of investment because of its established hold on the flour market. The demand for baker's yeast was derived from that of bakery flour because it is used exclusively for the baking of bread. This demand was solely supplied by Fleischmann's Yeast Co., the only baker's yeast plant in the Philippines. At the usage level of 2.38 to 3 ounces of yeast per 50 lb. bag of flour and based on a projection of flour demand, the market for baker's yeast justified the establishment of another plant. The study was patterned after the Program Implementation Agency project study guide for prospective investors. The financial studies, mainly projections of operations for five years were based on nine sets of assumptions in order to test the sensitivity of profitability to varying prices of yeast, sales volume, and cost of molasses - the principal ingredient in the production of yeast. These factors were considered very uncertain due to lack of experience as to their possible market reaction to competition where Fleischmann's Yeast Co. monopolizes the market. To handle these uncertainties and bring about a means of shaping the conclusions for the study, the financial projections were subjected to conditional and expected value analysis based on probability. The study recommended not to proceed with the implementation of the project on the grounds of low profitability and high business risk principally due to uncertainties of the market.