1. Cherry Production Ag Ec 495 Business Plan Nick Petruic Jason Fehr Kyle Jordet

2. Overview Introduction Operations Marketing Financials Conclusion References

4. Introduction Produce a variety of orchard and garden products  Processing Division Creation of value added products Sour Cherry Syrup

5. Operations Plan  Processing Buys raw, cleaned cherries from Grindstone Farm Processed into Cherry Syrup

6. Flow of Work

7. Church Kitchen

8. Cost of Goods Manufactured Total Direct Materials$42,624 Total Direct Labour$6,480 Total Manufacturing Overhead$80 Total Cost of Goods Manufactured$49,184

9. Capital Budget  Grindstone Processing Very minimal 2 Steamer Juicers  Valued at $200 each All other equipment is supplied with rental

10. Working Capital Planning & Management

11. General Expenses DescriptionEstimated CostSource of Estimate Administration Costs$15 * 1 hr/day260 working days/yr = $3,900 Accountant$1,500MNP Total costs/ yr$5,400

12. AR/AP/CCC  Accounts Receivable N/A to production  Accounts Payable 30 day payment period Grindstone Farms  Cash Conversion Cycle CCC= Average Days Inventory + Average Collection Period – Average Days Payables CCC = 150 + 30 – 0 = 180 days

13. Human Resources  Technical Skills Mixing of ingredients Sterilization Product Pourer Sealing and Labelling  All training is on the job  Direct supervision from president

14. Human Resources cont.  Wages: Kate Martens $2,400/yr Employees $4,080/yr Total Deductions $542.40/yr Total Yearly Wages $7,022.40

15. Marketing “If you consider food as a way to express your inner creativity and enjoy new and exciting experiences, then Cherry Syrup is a way to add a fresh stimulating new flavor to your favorite dishes.”

16. The Four P’s Products and Services “ Cherry Syrup” is a branded name for their sour cherry syrup This syrup is a versatile meal additive Price Processing will sell their syrup for $4.50 per bottle Competitive pricing strategy

17. The Four P’s cont. Promotion Appearances on the Prairie Farm Report Visually appealing booth at Farmer Markets Websites Place Saskmade Marketplace Farmer Markets

18. Store

19. Segmentation, Marketing, & Positioning Segmentation  Food additive market  35 + age female Primary purchaser of food More adept to try new things

20. Segmentation, Marketing, & Positioning Marketing  Approximately 1510 women over the age of 35 66% of the women  One of the only sour cherry syrups currently on the market  Sask Made Marketplace will help further the market 55 785 women in the age bracket in Saskatoon alone  Website will also help to further the market to more exotic places

21. Segmentation, Marketing, & Positioning Positioning  processing will market its product as specialty syrup and as a food additive room for sour cherry syrup in the current market  Consumers will recognize our product as a truly unique and flavorful experience

22. SWOT Analysis  Strengths:  Human resources  Training is on the job  Direct supervision from manager  Manager is ambitious and dedicated  Low cost for wages  Low labor intensity  Hours are flexible  The workers have been together for many years  Workers get along well  Small chain of command  Small family oriented business  Weaknesses:  Human Resources  Availability of skilled workers  Work can be dangerous  Work is not constant  Work area is small  Requires constant manager supervision

23. SWOT Analysis  Physical Resources  Church rent is $10/day  Church is HACCP certified  Close proximity  Ample supply of cherries to process  Cherry supply is close to processing plant (9 km)  Physical Resources  Roads for transport are mostly gravel -possible threat in winter months  Dependent on outside source for processing  Weak product image  Narrow product line

24. SWOT Analysis  Financial Resources  No accounts receivables  No long term debt  Financial Resources  High CCC  Accounts payable every 30 days  Profits are dependent on sales alone

25. SWOT Analysis  Opportunities:  Sour cherry industry is new  Lots of potential  It’s a versatile product  -can be used on a variety of food products  -can be used at multiple meal times  Potential in catering industry  Threats:  Other Sask. made fruit products  Weather; drought and frost  Health conscious consumers, ie: no desserts  Cherry supply is surrounded by forest  -potential threat of fire  Thousands of cherry acres soon to enter production

26. Competition ProductAttractionsPrice (Cdn$) Pure Organic Maple Syrup Canada No. 1 Medium -An organic syrup -Attractive to the new health awareness consumer $ 12.89/ 500 mL Aunt Jemima Original Table Syrup -The most recognizable brand name in syrups -Safe choice $ 3.99/ 250 mL Smuckers syrup squeeze bottle-Brand name syrup -Safe choice $ 4.49/ 250 mL RP Saskatoon Berry Syrup-In province competition -Premium product $ 8.75/ 250 mL PGF Prairie Berry Syrup -In province competition -Specialty Syrup $ 5.75/ 250 mL

27. Product Features Cherry Syrup from Sask Carmine Jewel Cherries Locally produced Food Additive One of the first of its kind

28. Sale Objectives Product Sales (units) Yr 1Yr 2Yr 3Yr 4Yr 5Yr 6Yr 7Yr 8Yr 9Yr 10 Syrup (jars) 1,500 2,0002,5004,0009,00014,00016,00019,000

29. Channels of Distribution Ridsdale Transportation ltd.  To Saskmade Marketplace  1 Trip/month Company Van  Farmers markets

30. Marketing Budget Advertising Western Producer Ad$116 Pamphlets$30 Banner$300 Total Advertising$446 Promotion and Development Store$1,350 Farmers Markets$1,080 Donation$500 Web Page$1,500 Travel Expenses$744.80 Sample Product$1,890 TV InterviewsNo cost Total Promotional and Development$7,064.80 Total Marketing Expense$7,510.80

31. Pricing Policy Market Based Large Margin  Lots of room to move  Can sell cheaper to distributors

32. Financials Year20082009201020112012 Sales86,40088,12889,89191,68893,522 COGS30,56452,51753,57154,62855,710 Gross Margin55,83635,61136,32037,06037,812 Expenses11,78212,01712,25812,50312,753 Net Income Before Tax44,05523,59424,06224,55725,060 Income Tax4,4052,3592,4062,4562,506 Net Income After Tax39,64921,23421,65622,10222,554 Net Cash Flow to Equity39,77552,37153,41254,47455,558

33. Financials Year20132014201520162017 Sales95,39397,30099,246101,231103,256 COGS56,83958,03359,16160,32561,517 Gross Margin38,55439,29740,08640,90641,739 Expenses13,00813,26813,53313,80414,080 Net Income Before Tax25,54626,02926,55227,10227,659 Income Tax2,5552,6032,6552,7102,766 Net Income After Tax22,99223,42723,89724,39224,893 Net Cash Flow to Equity56,68457,83058,97860,14973,182 Net Present Value (NPV)54,335 Internal Rate of Return on Equity Investment28.40% External Rate of Return on Equity Investment12.90%

34. Unit Cost Breakdown Unit Cost Per Batch*20082009201020112012 Cherries$36.00$36.70$37.45$38.20$38.97 Ingredients12.741313.2513.5213.79 Packaging Materials60.4161.6262.8564.165.39 Total Unit Cost of Direct Materials$109.15$111.33$113.56$115.83$118.14 Direct Labour20.2520.6621.0721.4921.92 Overhead29.6530.1230.7231.3331.96 Total Unit Cost of Labour and Overhead$49.9$50.78$51.79$52.82$53.88 Total Cost of Production$159.05$162.11$165.35$168.65$172.02 Selling and Administration3738 3940 Total Unit Cost of Selling$196.05$200.11$203.35$207.65$212.02 Expected Average Selling Price$270$275$281$287$292

35. Critical Variables Critical ValueBase CaseIRR=0%Allowable % Change Unit Price$4.50$2.4955.3% Quantity of Sales19,20010,68355.6% Wages10.1372.74718.1% Price of Jars$19,200$81,011421.9%

36. Break Even Analysis

37. Scenario Analysis VariableWorst CaseBase CaseBest Case Number of Sales14,40019,20024,000 Average Price$3.37$4.50$5.63 NPV(104,982)54,335227,638 IRR-2.7%28.4%56.4%

38. Conclusion  Suggestions Market outside Saskatchewan  Small market place Use a distributor  Opens a world of possibilities….

39. References  APLUS Kitchen Equipment [Online]. Available at http://apluskitchenequipment.com (Verified October 10, 2007)http://apluskitchenequipment.com  Cowboy Orientated Web Sites [Online [. Available at http://www.thecattle.net. Verified on November 3, 2007http://www.thecattle.net  Net Grocer [Online]. Available at http://shop.netgrocer.com (Verified October 9, 2007)http://shop.netgrocer.com  Richards Packaging [Online]. Available at http://richardspackaging.com (Verified October 11, 2007)http://richardspackaging.com  Risdale Transport [Online]. Availabe at http://www.ridsdale.ca/thirdpagr.htm. Verified on November 3, 2007http://www.ridsdale.ca/thirdpagr.htm  Saskatchewan Governmental Insurance [Online]. http://sgi.sk.ca (verified October 12, 2007)http://sgi.sk.ca  Saskatchewan Made Marketplace [Online]. Available at http://www.saskmade.ca. Verified on November 4, 2007http://www.saskmade.ca  SaskPower [Online]. Available at http://saskpower.com (Verified October 10, 2007)http://saskpower.com  Shop Sobeys [Online]. Available at http://www.shopsobeys.com. Verified on November 4, 2007http://www.shopsobeys.com  Town of Nipawin [Online]. Available at http://nipawin.com (Verified October 11, 2007)http://nipawin.com