Organic Grain Cleaning Ryan Carter Ryan Goodwin Joel Marchildon Landon Zimmer

Organic Grain Cleaning Introduction NWOCM was established in April of 2002 NWOCM was established in April of 2002 Based out of Sask Based out of Sask New generation Co-op in February of 2003 New generation Co-op in February of 2003 Membership consists of 60 producers and over 100 investors Membership consists of 60 producers and over 100 investors Expansion into the value added market which includes a full line of flour and grain products Expansion into the value added market which includes a full line of flour and grain products

Organic Grain Cleaning Operations Plan

Organic Grain Cleaning Organizational Structure

Organic Grain Cleaning Road To Hwy Screening Clean Grain Bins Uncleaned Grain Cleaning Plant Milling and Packaging Plant Producers Bins Loading Dock Office Site Plan

Organic Grain Cleaning Floor Plan

Organic Grain Cleaning Process Flow Diagram De- huller Mill Sifter Wheat Flour Oat Flour Barley Flour Hopper Bin/Scale Bagger Mixer BarleyOatsWheatRye Raw Products Rye Flour Excess Bran Metal Detector Sealer

Organic Grain Cleaning Business Cycle Working hours 8:30am – 5:00pm Working hours 8:30am – 5:00pm 4 hours of milling per day 4 hours of milling per day 10 bus per hour 10 bus per hour An expected 1800 lbs of flour produced daily An expected 1800 lbs of flour produced daily Total of 432,000 lbs of flour per year Total of 432,000 lbs of flour per year

Organic Grain Cleaning Standards & Regulations Set out by Canadian Food Inspection Agency Set out by Canadian Food Inspection Agency NWOCM must follow food processing regulations NWOCM must follow food processing regulations Future HACCP certification Future HACCP certification ISO 9001:2000 ISO 9001:2000

Organic Grain Cleaning Organic Certification Certified through OCIA (Organic Crop Improvement Association) Certified through OCIA (Organic Crop Improvement Association) Also USDA approved (United States Department of Agriculture) Also USDA approved (United States Department of Agriculture) Crucial in the sale of products in health and grocery stores Crucial in the sale of products in health and grocery stores

Organic Grain Cleaning Capital Budget

Building/Land Cost Source Building (40% of total) $ 1,600 Existing Building Existing Land (40% of total) $ 4,800 Estimate Land (40% of 4 acres) $ 600 Estimate Renovations $ 25,000 Estimate: Large Storage Bins (5) $ 52,500 Flaman Sales Small Storage Bins (5) $ 4,125 Flaman Sales Office Equipment (40% of total) $ 600 Existing (50%) Total Building/ Land Cost $ 89,225 Processing Equipment Source Dehuller $ 7,500 Forsberg Industries Flour Mill $ 10,000 Existing Sifter $ 7,500 bid-on-equipment.com Mixer $ 6,388 bid-on-equipment.com Bagger $ 20,000 Norac Systems Sealer $ 10,000 bid-on-equipment.com Forklift (40% of total) $ 4,800 autotrader.com Augers $ 10,000 Flaman Sales Bucket Elevator $ 7,800 Flaman Sales Scale $ 1,450 bid-on-equipment.com Metal Detector $ 4,000 bid-on-equipment.com Vacuum System $ 25,000 bid-on-equipment.com Total Equipment Cost $ 114,438 Net Working Capital NWC $ 39,007 Total Capital Budget $ 242,670

Organic Grain Cleaning Investment Requirements Capital Budget Summary Capital Budget Summary Building/Land - $89,225 Building/Land - $89,225 Processing Equipment - $114,438 Processing Equipment - $114,438 Net Working Capital - $39,007 Net Working Capital - $39,007 Total Capital Budget $242,670

Organic Grain Cleaning Human Resource Structure

Organic Grain Cleaning Employees General Manager - $60,074 General Manager - $60,074 Office Staff - $27,432 Office Staff - $27,432 Manager – $37,344 Manager – $37,344 Plant Workers - $28,008 Plant Workers - $28,008 Part time workers - $10.00/hour Part time workers - $10.00/hour

Organic Grain Cleaning Marketing Plan

Organic Grain Cleaning The 4 P’s Product Product Organic grains and flour Organic grains and flour Price Price Competitive pricing strategy Competitive pricing strategy Promotion Promotion High end product High end product Place Place Wholesale to retail stores Wholesale to retail stores

Organic Grain Cleaning Segmentation, Targeting, and Positioning Potential Targets Potential Targets Health conscious people, large retail chains, health food stores Health conscious people, large retail chains, health food stores Segmentation Segmentation True naturals (7-11%), New green mainstream (17-23%), Affluent healers (11-22%), Young recyclers (10-14%) True naturals (7-11%), New green mainstream (17-23%), Affluent healers (11-22%), Young recyclers (10-14%) Positioning Positioning Convince customers to pay a premium price for a quality product Convince customers to pay a premium price for a quality product

Organic Grain Cleaning STRENGTHSWEAKNESSES Human Resources  Ambition, dedication, imagination, vision  High moral  Members who are good farmers  Have a good group of dedicated labor  Wide variety of skills  Have yet to develop a line of authority  Lack of clear direction in marketing  Lack of expertise (milling, recipes, business, accounting etc)  Lack of training and education Physical Resources  Good grain handling system (Cleaning)  Big yard, lots of room to expand  60 miles from Saskatoon on a primary highway  Just off Highway 16  High quality bins  Extremely low investment in building  Products well suited to them  Co-op members can shift production to suit demand  Old building  Limited storage space (Warehouse)  Major renovations required to become HACCP and ISO certified  Disorganized, unprofessional office  Office accessibility  A poor year will greatly affect production (limited area they can access grain from)  Limited to the types of goods they can manufacture from products Financial Resources  Currently have low debt  Numerous investors  Low capital investment  Good potential for profitability  Fairly liquid  Efficient  Accessibility to funding for large expansions  Cash flow in first year SWOT Analysis – Internal

Organic Grain Cleaning SWOT Analysis - External OPPORTUNITIESTHREATS  Demand for organic products is increasing  Trends towards consumer demand for healthy foods  Also towards environmentally friendly production  Opportunities exist for joint ventures  Have a number of back up product opportunities if necessary  Have a very marketable brand name and product  Chance of new information on pesticides, etc leading to health problems would create a massive shift to organic food  Competition  Changes in Government regulations (Organic cert., HACCP, ISO)  Consumer fear of food safety (could become scared of organic products)  There is a lot of large corporations getting into organic production, this is a major threat as Old School cannot compete on price basis

Organic Grain Cleaning The Market Very optimistic outlook Very optimistic outlook Sask. is one of the leading exporters of organic grains and oilseeds in Canada Sask. is one of the leading exporters of organic grains and oilseeds in Canada Sask. has over thirty organic grain processors Sask. has over thirty organic grain processors Limited number of secondary processing facilities in Saskatchewan Limited number of secondary processing facilities in Saskatchewan

Organic Grain Cleaning The Market

Organic Grain Cleaning Market Distribution Due to population, there is a limited market in Canada Due to population, there is a limited market in Canada Organic market in Canada: Organic market in Canada: 51% - Eastern Canada 51% - Eastern Canada 30% - British Columbia 30% - British Columbia 12% - Alberta 12% - Alberta 7% - Saskatchewan 7% - Saskatchewan

Organic Grain Cleaning Market Distribution Cont…

Organic Grain Cleaning Competition Two types of competition: Two types of competition: Conventional flour producers Conventional flour producers Other organic flour producers Other organic flour producers Market is new and undeveloped but is rapidly expanding Market is new and undeveloped but is rapidly expanding Many large companies are becoming involved which poses a threat Many large companies are becoming involved which poses a threat

Organic Grain Cleaning Customer/Target Markets

Organic Grain Cleaning Customer/Target Markets

Organic Grain Cleaning Product Features Certified Organic Certified Organic Environmentally Safe Environmentally Safe High Quality High Quality Locally Produced Locally Produced Traceable Traceable

Organic Grain Cleaning Sales and Profit Objectives Increasing producer profitability Increasing producer profitability Profitability and sustainability Profitability and sustainability Annual growth Annual growth 20% Return on equity 20% Return on equity

Organic Grain Cleaning Selling and Advertising Packaging and Labelling Packaging and Labelling Samples Samples Pamphlets/Flyers Pamphlets/Flyers Sales/Promotions Sales/Promotions Website Website No forms of media No forms of media

Organic Grain Cleaning Marketing Budget

Organic Grain Cleaning Financial Plan

Organic Grain Cleaning Ratio Analysis Liquidity Ratios Current Ratio Debt Structure Ratio 33.8%43.7%49.3%56.0%63.9% Solvency Ratios Debt/Asset Ratio 53.4%39.4%31.6%27.6%23.6% Profitability Ratios Gross Profit Margin 14.9%27.8%30.0%31.9%33.4% Net Profit Margin -9.1%8.9%11.3%13.7%15.7% Return on Assets -18.3%26.4%30.4%36.8%41.5% Return on Equity -45.5%40.5%42.5%49.5%53.3% Cost of Debt 5.5%4.7%4.3%3.8%3.2% Financial Efficiency Ratios Turnover Ratio Debt Servicing Ratio Cash Flow to Total Debt

Organic Grain Cleaning Co-operative Ltd. Balance Sheet December 31, 2008, 2012, 2017 Assets Current Assets Cash $ 0 $ 236,370 $ 411,380 Accounts Receivable $ 51,931 $ 103,289 $ 145,546 Total Inventories $ 36,242 $ 62,580 $ 85,269 Total Current Assets $ 88,173 $ 402,239 $ 642,195 Long-Term Assets: Buildings, Machinery & Equipment $ 198,263 Accumulated C.C.A. $ (19,604) $ (116,378) $ (160,208) Land $ 5,400 Total Long-Term Assets $ 184,059 $ 87,285 $ 43,455 Total Assets $ 272,232 $ 489,524 $ 685,650 Liabilities Current Liabilities Accounts Payable $ 49,166 $ 76,302 $ 101,473 Long-Term Liabilities Long Term Debt $ 96,317 $ 78,394 $ 46,647 Total Liabilities $ 145,483 $ 154,695 $ 148,120 Owner Equity Owner Equity $ 184,444 Retained Earnings $ (57,695) $ 150,385 $ 353,086 Total Owner Equity $ 126,749 $ 334,829 $ 537,530 Total Liabilities and Owner Equity $ 272,232 $ 489,524 $ 685,650

Organic Grain Cleaning Summary of Financials Sales Revenue $ 631,826$1,095,587$1,256,683$1,441,467$1,653,422 COGS $ 537,762$ 791,361$ 879,271$ 981,475$1,101,206 Gross Profit $ 94,064$ 304,226$ 377,412$ 459,992$ 552,216 Direct Expenses $ 345,720$ 599,479$ 687,627$ 788,736$ 904,713 Admin/Marketing Expenses $ 151,759$ 200,732$ 219,467$ 240,586$ 264,423 Net Before Tax $ (57,695)$ 103,494$ 157,946$ 219,406$ 287,793 Income Tax $ - $ 6,190$ 15,795$ 21,941$ 28,779 Net Income After Tax $ (57,695)$ 97,304$ 142,151$ 197,466$ 259,014 Dividends $ - $ 119,512$ 162,306$ 212,883 Ending Retained Earnings $ (57,695)$ 55,709$ 150,385$ 214,751$ 301,622 Net Present Value (NPV) of Equity Investment $ 281,192 Internal Rate of Return (IRR) on Equity Investment40.9% External Rate of Return on Equity Investment 31.3%

Organic Grain Cleaning Critical Variables VariableBase CaseIRR = 0% Change Wholesale Price (Average) $ 3.22 $ % Quantity of Sales 314, , % Raw Materials Expense $ 135,106 $ 212,57957% Wages $ 191,212 $ 333,70175% Distribution (as % of gross sales)15%27%80% Marketing Commission (as % of gross sales)10%22%120% Long Term Debt Interest Rate8%163%1938%

Organic Grain Cleaning Sensitivity Analysis

Organic Grain Cleaning Break-Even Analysis Break-Even Sales Break-Even Price

Organic Grain Cleaning Feasible under current financial model Feasible under current financial model Internal Rate Of Return – 40.9% Internal Rate Of Return – 40.9% Main obstacle – achieving sales quantity Main obstacle – achieving sales quantity Sales figures reflect the potential growth in the future Sales figures reflect the potential growth in the future