WestCan Hormone-Free Beef Exports By: Tanner Bradley Justin Dereniwski Keith Thoner Mark Riou

Mission Statement The mission of our company is to produce a high quality hormone free beef product in order to fill a niche market in Europe while gaining a fair return on investment

Goals and Objectives To make safe, high quality Canadian beef available for European consumers Penetrate a market by creating relationships with EU distributors and consumers Contribute to the local economy by supporting local producers and providing employment for the region Become a leader in North American beef exports to the EU

Human Resources Plan

Organizational Structure

Board of Directors Lawyer Veterinarian Government representative involved in trade European consultant involved in the selling and distribution industry Representative from feedlot and/or slaughtering plant Financial person

Methods of Financing Long Term Debt $5,000,000 Common Shares $11,500,000 Total Financing $16,500,000

Operations Plan

Capital Costs Start-up Costs are 200,000 –light duty trucks for cattle buyers –office supplies

Overhead Operating Costs Identification =$50,000 Transaction Costs = $12,500 Wages and Benefits = $503,786 Inspection =$134,000 Interest on Debt =$425,000 Leasing of Office Space = $33,000 Total Overhead Operating Costs =$1,158,286

Direct Operating Costs Purchase Calves = $839 Feedlot Costs = $525 Slaughter Costs = $100 Deboning/ Packaging Costs = $140 Shipment Costs = $170 Export Tariff = $535 Total Direct Operating Costs $2309

Direct Operating Costs Total Direct Operating Costs $2309 Capacity (head) X 10,000 Total Direct Operating Costs $23,090,000

Total Startup and First Year Costs Capital Costs = $200,000 Overhead Operating Costs =$1,158,286 Direct Operating Costs =$23,090,000 Total Costs = $24,448,286

Project Description Purchase healthy calves from producers prior to weaning Custom truck calves to Western Feedlot Ltd in Southern Alberta Custom feed calves for 10 to 12 months with the absence of HGPs Custom truck finished calves to Bouvry in Fort MacLeod, Alberta

Project Description (cont’d) Slaughter calves and cut into primals Transport primals to Calgary Transloading facility by custom truck Transport primals from Calgary to Montreal by rail Transport primals to EU by oceanliner Ownership of meat transferred to distributor once it reaches EU port

Quality Control Measures WestCan and Western Feedlots will enroll annually with the CFIA CCIA tags must be administered Calves will be inspected prior to 6 months of age at producer’s yard Transfer certificate to feedlot obtained

Quality Control Measures (cont’d) Feedlot maintains an up to date cattle registry and records any use of HGPs Calves eligible for the program are kept in separate pens from non-eligible calves A 100 cc urine analysis and a 1 kg feed sample will be taken no longer than three months prior to slaughter

Quality Control Measures (cont’d) A transfer certificate to the slaughtering plant is obtained Calves slaughtered at the start of the work shift Visual inspection of all carcasses Residue sampling of 10% of carcasses

Quality Control Measures (cont’d) All veterinarian visits must be recorded Any detection of the use of HGPs results in disqualification from the program for a period of two years Proper documentation must be provided at the request of the CFIA

Marketing Plan

The European Market There is a definite demand for high quality beef in Europe There is a 11,500 tonne annual quota for beef imports into the EU from N. America

Target Markets Restaurant market Specialty meat stores Domestic market: –“natural beef” market –regular market

Product Features Will meet all of the quality standards required by the European Union All beef will be packaged prior to export and be ready for distribution Higher quality beef due to white meat fat, due to barley based rations

Channels of Distribution Either sell to a distributor or meat broker The finished product would be our responsibility up to the point were it arrives in Europe for the distributor Distributor would sell to specialty meat stores or restaurants

Pricing Policy Price takers –whatever the European market dictates –25-40% price premium compared to domestic market Sell 10,000 head at $ each Total Revenue of $26,469,800

Strength and Weaknesses Strengths –able to produce a higher quality product at the same production costs as our European competitors Weaknesses –lack of relationships with distributors –Europeans have a lack of information about Canadian beef –difficult to follow EU regulations for importing

Opportunities and Threats Opportunities –strong demand for high quality beef with little competition Threats –changes to policies and other international factors could inhibit business –other external shocks

Financial Analysis

Profit Margin Sales Revenue =$26,469,800 Operating Costs =$24,448,286 Profit Margin $2,021,514

Break Even

Break even Analysis IRR is 13.2% NPV is -$1,420,485 Break-evens (net income = 0 in 2004) –must sell 8,957 animals –the selling price must be $2502,49

Financial Notes Cash is positive every year PV of All Cash Flows to Equity remains positive after 3rd year

Recommendations  Develop a reliable relationship with a European distributor before beginning any operations.  Make sure that the cow/calf producers, feedlot and slaughtering facilities are reliable and willing to comply with all the regulations that are required in order to export this beef to EU

Recommendations Cont’d  An expansion of the beef products, such as Organic Beef, to fill more markets can be a viable option when exporting to the EU. This will command an even higher premium.  Use experienced employees familiar with trade, food production and the EU market and work closely with governments on both sides to ensure that no mistakes are made on the protocol.

Questions?