RIVER CITY DRUM, INC.
300 Mansion House Center, Suite 2610 St. Louis, Missouri 63102
This industrial plastic drum company is owned by individuals with vast experience in plastic molding and packaging, as well as sales and distribution. By using competitive pricing strategies and targeting and anticipating local customers, River City Drum charts its success.
- EXECUTIVE SUMMARY
- THE COMPANY—PRESENT SITUATION
- OBJECTIVES
- MANAGEMENT
- PRODUCT DESCRIPTION
- MARKET ANALYSIS
- MARKETING STRATEGY
- MANUFACTURING
- SUMMARY & USE OF FUNDING
- FINANCIAL PROJECTIONS
Executive Summary
The plastic drum industry, while only 12 years old, has made great strides in recent years as technologically advanced plastic resins have made it possible for the first time to bring the benefits of plastic to the last bastion of metal container packaging.
The 55-gallon steel drum had been the standard for industrial containers for the past 50 years. While strong in structural integrity, steel drums were prone to rust, corrosion, and when recycled, required painting, dedenting, and a number of other costly and only partially effective means for extending their use beyond one trip. Plastic, on the other hand, had already made gigantic inroads into all other areas of packaging because of its ability to be molded into various shapes and sizes, its virtual imperviousness to acids and alkalies, its being totally rustproof and resistant to weather conditions, and, of course, plastic has long enjoyed widespread consumer acceptance at every level. In the late seventies, advanced polymer engineering provided the industry at long last with the high strength, high impact polyethylene resins that enabled the plastic fabricator to move into the large industrial drum arena, specifically the 55-gallon, but also the 30-gallon and the 15-gallon container.
Some of the leading U.S. container manufacturers, as well as their European counterparts, were quick to enter the market, and like all pioneers, the progress was steady but marked by obstacles and milestones. Now, some 12 years after its introduction, the polyethylene drum enjoys an ever-growing share of the market as more and more industries are accepting the benefits offered exclusively by plastic.
Chicago and Houston soon emerged as industry centers for the manufacture of the 55-gallon poly drum. The St. Louis industrial market has been serviced primarily out of Chicago and eastern seaboard facilities. Nevertheless, the demand for poly drums in St. Louis has steadily grown, keeping pace with the nation, and now St. Louis demands a manufacturing facility to support its need. It is this need that River City Drum intends to fill.
As this business plan will reveal, the principals and management of River City Drum are heavily experienced in plastic molding and packaging as well as sales and distribution. A market survey conducted in the fall of 1989 revealed impressive existing demand and the potential for even greater market development once a local manufacturer is on the scene.
There are certain characteristics inherent to the industrial drum business that militate against the importation of this product from beyond regional areas. First and foremost, the "just in time" philosophy that is now demanded by many industrial users is most prevalent in the large container industry because of the difficulty of storing quantities of the empty container. Users just do not like their facilities cluttered up with hundreds of drums awaiting filling.
With the closest supplier some 300 miles away, and with all the logistical problems of obtaining smooth delivery out of Chicago, our market survey quickly revealed that the St. Louis manufacturers would welcome and utilize a local manufacturer of 55-gallon plastic drums. Of further interest, a significant number of present users of steel drums would consider switching to the advantages of plastic if there were a local supplier.
Another advantage that River City Drum brings to the market is between a $1.00 to $1.50 delivered price advantage based on our location. This is due to the elimination of the freight out of Chicago or wherever the source. It is an axiom in the packaging business: "You're wasting money when you're shipping air," meaning empty containers. Shipping air is exactly what the existing competition is doing in serving the St. Louis market.
St. Louis is a market primed for a local supplier. River City Drum has carefully called on many of the principal buyers of industrial containers, preselling our product. We are confident that we will be welcomed as a supplier with some meaningful advantages to offer, both price and service. Our realistic projections call for us to reach sell-out position in our second 12 months of operation. We will then be preparing to expand our production capabilities.
As the above information has indicated, our careful research has revealed that the St. Louis market will readily support a local supplier. We also know that because of the relative size of the St. Louis market, estimated to be about twelfth in the nation, that it is not likely to attract a second drum manufacturer. River City Drum principals feel it is likely that once we establish our position in this market, other manufacturers will view St. Louis as not broad enough to accommodate two manufacturers, thus leaving us as the only local supplier in this region. Historically, this has been the case with steel drums and other smaller-sized plastic packaging.
In summary, River City Drum has found a need and filled it.
A modern plastic drum blowmolding facility is capital intensive. As subsequent material in this business plan will reveal, River City Drum has carefully researched how best to open an efficient and competitive factory. We have on board a top plastic drum product engineer as well as other outstanding support personnel. River City Drum has obtained a line of credit of some $250,000 for the leasing of various support equipment. Our primary machinery, the drum blowmolder, a Bekoft 1000, which costs $540,000, will be 80% financed by the vendor. Both principals have provided capital infusion totaling $200,000. In order to achieve our projected manufacturing and marketing goals, River City Drum will require a line of operating credit of some $350,000 to meet general operating expenses, contingent costs, and a variety of one-time start-up costs.
The Company— Present Situation
