University of Roehampton: Business Report for Pecan Peanuts 2020

This business report for Pecan Peanuts provides a comprehensive analysis of the company's operations and potential for growth. It begins with an introduction to Pecan Peanuts, a UK-based packaged food producer importing nuts from Australia, and sets the stage for an examination of key issues. The report delves into the Australian pecan industry, forecasting export production for 2021 and 2022, and analyzes health aspects within the pecan, peanut, cashew, and pistachio market. It then explores quality assurance conditions for machine working, evaluating the costs of a new machine through NPV and payback period calculations, and conducts hypothesis testing to compare machine performance. A pros and cons analysis is presented to determine the viability of buying a new machine, followed by an assessment of customer satisfaction based on survey data. The report concludes with an initial SWOT analysis for possible expansion and a summary of key findings. The report aims to provide insights for strategic decision-making and future business development.

Pecan Peanuts
Business Report

Date: May 2020
Table of Contents
Introduction..............................................................................................................................................3
1.Analysis of Issues forPecan Peanuts......................................................................................................4
1.1 An Overview of theAustralian Pecan Industry................................................................................4
1.2 Linear Forecast of Export Productions for 2021 and 2022..............................................................5
1.3Health Issues in the Pecan, Peanut, Cashew and Pistachio Market.................................................7
1.4Quality Assurance Conditions for Machine Working.......................................................................9
1.5Costs of a New Machine................................................................................................................10
1.6Hypothesis Testing for the Possible Difference in Two Machines..................................................12
1.7Pros & Cons Analysis “Should we buy a new machine?”...............................................................13
1.8 Customer Satisfaction...................................................................................................................14
1.9 Initial SWOT Analysis about Possible Expansion...........................................................................15
1.10 Summary.....................................................................................................................................16
2.References...........................................................................................................................................17
3.Appendices..........................................................................................................................................18

Business Report for Pecan Peanuts 2020
Introduction
Pecan produces number of the packaged food products from the man factory in UK. It produces
packets of big size for snacks and big size for home baking. It also produces other nuts products. It
imports the shell on nuts from Australia. Company is performing well in the market and profits have
increased over the period significantly. Company is significant change in the customer taste and
preferences due to trend of health consciousness. They are moving towards healthy snacks these
days. Firm is proposing to expand the business due to the increase in sales and move of the people
towards healthy snacks.
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Business Report for Pecan Peanuts 2020
1. Analysis of the Issues for Pecan Peanuts
1.1 An Overview of the Australian Pecan Industry
Pecans constitute less than five percent of the world tree nuts trade and the consumption is highly
concentrated in US which is their native nut. Demand in Europe, Asia & Middle East is also growing.
Due to this reason market of Pecan has been strong over current period after entry of the China to
world market in the previous 2000. The intense new interests from China had limited the availability
of the products to other markets in the recent years. There are number of marketable benefits of the
pecan such as high level of the antioxidants that creates demand in the market as society is becoming
health conscious & are moving towards healthy products.
Nationwide production of the pecan orchards are approximately 3000 tonnes. Production increases
are seen after long stagnation period. Global production of the nuts is concentrated in Mexico and US
accounting for around 90% of the crops. Pecans long live and it remains productive for over century
that makes them the long term investments. Significant amount of the UK production for kernel is sold
for the domestic consumption with the distribution splits between the retail as well as manufacturing
channels (Brar and Danyluk, 2019). The Farms in country operates the largest processing plants of
pecan in UK from where it makes supplies to London kernel and in shell products to the domestic &
international markets. UK exports of the pecan are sold around the globe from Europe to Middle East,
North America, as well as East Asia.
Pecans in Australia are harvested in the Northern hemisphere meaning that the fresh products could
be shipped in major markets pre-Christmas seasons. Pecan industries of Australia have been fortunate
in remaining free from the troublesome scab diseases that blight high production in US. The industry
is growing at rapid speed due to the nutritious contents of the nuts and high demand (Kluczkovski,
2019). It generates considerable revenues from the exports which is expanding the industry over new
regions.
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Business Report for Pecan Peanuts 2020
1.2 Linear Forecast of Export Productions for 2021 and 2022
Table showing forecast for 2021 and 2022
Year' Domestic Export
2014 1.2 11.9
2015 1.4 11.8
2016 1.6 15.8
2017 1.8 15.5
2018 2.1 20.3
2019 2.3 19.7
2020 2.6 25.5
2021 2.8 25.9
2022 3.0 28.1
Scatter Diagram
It could be evaluated that based on the previous years that the production of pecan is increasing
continuously. From the year 2014 there has been a constant growth in the production both for
domestic consumption and for export. However the rise is seen in every two years and not every year,
sales have been increasing due to which industry has also increased the production level from before
(Zhang, and et.al., 2017). On the basis of production till 2020 forecast of the production is made for
year 2021 and 2022. Domestic consumption forecast is 2.8 million for 2021 and 3 million for 2022.
Export production is forecasted as 25.9 for 2021 and 28.1 million for 2022.
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Business Report for Pecan Peanuts 2020
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Business Report for Pecan Peanuts 2020
1.3Health Issues in the Pecan, Peanut, Cashew and Pistachio Market
Fat per Ounce
(28 grams)
Saturated Fat in
grams
Pecan 20
Peanut 17
Cashew 12
Pistachi
o 12.5
Healthiness of the nuts in sense of the saturates fat contents
Pecan – These are generally used in the desserts but are having nutritious values. As per the
studies it is found that pecan help in lowering LDL cholesterol levels in people with the normal
levels of cholesterol.
Peanuts – Unlike other nuts the peanuts are not the tree nuts as they belong to legume
family but is having similar health benefits and nutrient profiles like tree nuts. Higher intake of
the peanuts is associated with the lower rate of death (Casulli, Calhoun and Schaffner, 2019).
Peanuts though have increased fat levels but helps in improving the risk factors associated
with the heart diseases.
Cashew – These nuts have high nutrient profile. Every ounce of cashew has 12 grams of
saturated fat. Intake of cashews helps in improving metabolic syndrome symptoms. It
improves blood pressure in the people and also increases antioxidant potential in the diet.
Pistachios – The nuts are highly rich in fibre and have 12.5 grams of fat in one ounce. It
improves the cholesterol level and increases HDL cholesterol level which is good. It also helps
in reducing the rise of blood sugar after meal.
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Business Report for Pecan Peanuts 2020
1.4Quality Assurance Conditions for Machine Working
Old machine New Machine
Probability of break
down 20% 80%
Presently Pecan Peanut is operating with two separate production lines where line uses old machine
where the other uses new machine. After analysing the machines it is found that probability of failure
of new machine is 20% where probability of failure of old machine is 80%. As per quality assurance
department insists at probability of around 99.99% that one of the machines is working all the time.
Company wants to achieve the condition of six sigma where there is no wastage of the resources.
Each product is accurate and free from errors and mistakes. As company is using two machines for
99.99% quality assurance it is required to ensure that the machines are working accurately and
without any failure (Picard and et.al., 2020). It has to ensure that the machines are repaired at proper
intervals and proper set up is made before processing next batch. It will increase the efficiency of the
machines and probability of failures is reduced more. The condition could be satisfied if both the
machines are working actively and one machine is repaired while other is working.
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Business Report for Pecan Peanuts 2020
1.5Costs of a New Machine
Calculation of NPV and payback period.
Computatio
n of NPV
Year
Cash
inflows
PV
factor
@ 9%
Discounted
cash inflows
1 24000 0.917 22018.35
2 24000 0.842 20200
3 24000 0.772 18532
4 24000 0.708 17002
5 24000 0.650 15598
6 24000 0.596 14310
Total discounted cash
inflow 107662
Initial investment 96000
NPV (Total discounted
cash inflows - initial
investment) 11662
Computation of Payback period
Year
Cash
inflows
PV factor
@ 9%
Discounted cash
flows
Cumulative
cash inflows
1 24000 0.917 22018.35 22018.35
2 24000 0.842 20200.32 42218.67
3 24000 0.772 18532.40 60751.07
4 24000 0.708 17002.21 77753.28
5 24000 0.650 15598.35 93351.63
6 24000 0.596 14310.42 107662.05
Initial
investment 96000
Payback 4
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Business Report for Pecan Peanuts 2020
period
0.2
Payback
period 4.2 years
From the above calculation it could be found that the NPV of the project is positive 11662. It shows
that the cash flows are enough to repay the loans means for covering the cost of machine. Projects
that have positive NPV are profitable
Payback period of the machine shows that cost could be recovered of the machine in 4.2 years which
is having useful life of 6 years (Fernandes and et.al., 2017). Shorter payback period of the machine is
profitable as it is the breakeven point after which it starts earning profits.
As per the above analysis it could be analysed that company should take loan for 4 years and 2 months
that is 50 months.
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Business Report for Pecan Peanuts 2020
1.6Hypothesis Testing for the Possible Difference in Two Machines
First
machine
Second
machine
Sample 30 40
Mean 180 170
Standard
Deviation 40 10
Z-score -3.75 -13
Interpretation
Hypothesis testing is a statistical method of testing the results of survey or the experiments to analyse
if the results of the two machines are adequate. In this method hypothesis which is testable over basis
of process observed which is modelled through random variables set. Statistical test could be as
method of the statistical inference. There are commonly 2 statistical data that are compared with
each other or the data derived from sampling are compared with synthetic data from idealised model.
For statistical analysis alternate hypothesis are proposed between 2 data sets and are compared to
the idealised null hypothesis which proposes nil relationship among 2 data sets. The Comparison is
deemed to be significant if the relationship between data sets is not likely realisation of the null
hypothesis as per threshold probability at significance level. The hypothesis test is used to determine
what outcomes in study will be leading to rejection of null hypothesis for the pre specified levels of
the significance.
Process to distinguish between null hypothesis and the alternative hypothesis is determined by
considering 2 conceptual errors. 1st type of the error is seen when null hypothesis is rejected
erroroneously. Second error is seen null hypothesis in not rejected wrongly (Król and et.al., 2019).
Hypothesis tests are based over statistical significance which is another method to express confidence
intervals. Hypothesis test based on the statistical significance is other method of expressing
confidence levels.
In the present case it has two machines machine one and machine two. The result shows that the two
machines could be compared to identify if the machines are viable. The z score used for identifying the
hypothesis in the two machines. The machine one is having z- score of -3.75 score that is below the
average mean. Machine 2 shows a z-score of -13 which shows it is below average mean
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Business Report for Pecan Peanuts 2020
1.7Pros & Cons Analysis “Should we buy a new machine?”
Buying new machine
Pros Score / 10 Cons Score / 10
Cost efficiency of the machine 7 Expensiveness of machine 8
Useful life of the machine 8 Scrap Vale of machine 4
Maintenance Cost 6 Operational efficiency 5
Short Payback period 5 Repair cost 6
Availability 7 Importing machine 7
Repairing duration 6 Break downs of machine 3
Production 8
Transport 5
Total Pros 52 Total Cons 33
Average Pros 6.5 Average Cons 5.5
It could be analysed that average pros of buying new machine is 6.5 and the average cons are 5.5.
From the above analysis it could be said that buying new machine will be beneficial for the company
and will be generating adequate returns.
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