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Business Proposal - Peter's Doughnuts
Lighthouse Roasters should enter a six-month agreement from April 2007 through September 2007 to supply Peter's Doughnuts with roasted gourmet coffee beans for $3.00 per pound for a minimum order of 300 pounds per month.
Justification: Peter's Doughnuts is currently price sensitive given its current decline in business due to increased competition from Starbucks. In addition, Lighthouse Roasters is facing competition from several suppliers to win the business of Peter's Doughnuts. This company has made it clear that it will not pay more than $3.00 per pound.
Although Lighthouse Roasters normally wholesales its beans for $4.50 a pound, we should forgo our typical pricing to establish a relationship with Peter's Doughnuts and to accommodate the special dynamics of the current business situation.
Because Peter's Doughnuts is a large chain with 76 doughnut shops across 13 states, we do not want to lose this account to one of our competitors. Should the company be successful with our product, we can expect to gain an even larger deal size than this chain's current need for 400 pounds of coffee a month during the colder months
October-March) and 300 pounds during the warmer months (April-September).
Immediate Profitability: At the reduced wholesale rate of $3.00 per pound, Lighthouse Roasters will still generate a profit of.25 cents per pound from the Peter's Doughnuts account. With the minimum order of 300 pounds per month for six months, this proposal generates a $450 profit for Lighthouse Roasters.
Long-Term Prospects: Lighthouse Roasters should reevaluate its pricing when the six-month contract expires. At this time, Peter's Doughnuts will enter its busier season and may be less price sensitive. Also, we anticipate that our excellent product will increase the overall business of Peter's Doughnuts and that it then be willing to pay higher prices for our proven product and the outstanding service we offer to our valued customers.
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