organic grain cleaning ryan carter ryan goodwin joel marchildon landon zimmer

Organic Grain CleaningOrganic Grain Cleaning

Ryan CarterRyan CarterRyan GoodwinRyan GoodwinJoel MarchildonJoel MarchildonLandon ZimmerLandon Zimmer


IntroductionIntroduction

NWOCM was established in April of 2002NWOCM was established in April of 2002Based out of SaskBased out of SaskNew generation Co-op in February of 2003New generation Co-op in February of 2003Membership consists of 60 producers and Membership consists of 60 producers and

over 100 investorsover 100 investorsExpansion into the value added market Expansion into the value added market

which includes a full line of flour and grain which includes a full line of flour and grain productsproducts


Operations PlanOperations Plan


Organizational StructureOrganizational Structure

General Manager of Operations (1)

Board of Directors 9 Producer Members

Office Staff 3 Full Time

Cleaning Plant Division

Cleaning Plant Staff

Cleaning Plant Manager (1)

Old School Organics Division

Old School Organics Manager

(1)

Old School Organics Staff

3 Full Time

Organic Grain Cleaning

RoadTo

Hwy

Screening

Clean GrainBins

UncleanedGrain

CleaningPlant

Milling and Packaging

Plant

Producers Bins

Loading Dock

Office

Site PlanSite Plan


Floor PlanFloor Plan

Barley Bin

Oat Bin

Wheat Bin

Rye Bin

Raw Products

Bin

De-huller Mill Sifter

Mixer

Bagger

Wheat Flour

Rye Flour

Oat Flour

Barley Flour

Excess Bran

Hopper Bin

Loading/Unloading Bay

Packing Supplies/Finished Products Storage

S e a l e r

Metal Detector


Process Flow Diagram

De-huller

Mill

Sifter

WheatFlour

OatFlour

BarleyFlour

HopperBin/Scale

Bagger

Mixer

BarleyOatsWheatRyeRaw

Products

RyeFlour

ExcessBran

MetalDetector

Sealer


Business CycleBusiness Cycle

Working hours 8:30am – 5:00pmWorking hours 8:30am – 5:00pm4 hours of milling per day4 hours of milling per day10 bus per hour10 bus per hourAn expected 1800 lbs of flour produced An expected 1800 lbs of flour produced

dailydailyTotal of 432,000 lbs of flour per yearTotal of 432,000 lbs of flour per year


Standards & RegulationsStandards & Regulations

Set out by Canadian Food Inspection Set out by Canadian Food Inspection AgencyAgency NWOCM must follow food processing NWOCM must follow food processing

regulationsregulations

Future HACCP certificationFuture HACCP certification ISO 9001:2000ISO 9001:2000


Organic CertificationOrganic Certification

Certified through OCIA (Organic Crop Certified through OCIA (Organic Crop Improvement Association)Improvement Association)

Also USDA approved (United States Also USDA approved (United States Department of Agriculture)Department of Agriculture)

Crucial in the sale of products in health Crucial in the sale of products in health and grocery storesand grocery stores


Capital BudgetCapital 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.comTotal Equipment Cost $ 114,438

Net Working Capital NWC $ 39,007 Total Capital Budget $ 242,670


Investment RequirementsInvestment Requirements

Capital Budget SummaryCapital Budget SummaryBuilding/Land - $89,225Building/Land - $89,225Processing Equipment - $114,438Processing Equipment - $114,438Net Working Capital - $39,007Net Working Capital - $39,007

Total Capital Budget $242,670Total Capital Budget $242,670


Human Resource StructureHuman Resource Structure


EmployeesEmployees

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


Marketing PlanMarketing Plan


The 4 P’sThe 4 P’sProductProduct

Organic grains and flourOrganic grains and flourPricePrice

Competitive pricing strategyCompetitive pricing strategyPromotionPromotion

High end productHigh end productPlacePlace

Wholesale to retail stores Wholesale to retail stores


Segmentation, Targeting, and Segmentation, Targeting, and PositioningPositioning

Potential TargetsPotential Targets Health conscious people, large retail chains, health food Health conscious people, large retail chains, health food

storesstores

SegmentationSegmentation True naturals (7-11%), New green mainstream (17-23%), True naturals (7-11%), New green mainstream (17-23%),

Affluent healers (11-22%), Affluent healers (11-22%), Young recyclers (10-14%)Young recyclers (10-14%)

PositioningPositioning Convince customers to pay a premium price for a quality Convince customers to pay a premium price for a quality

product product


STRENGTHS WEAKNESSES

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 – InternalSWOT Analysis – Internal


SWOT Analysis - ExternalSWOT Analysis - ExternalOPPORTUNITIES THREATS

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


The MarketThe Market

Very optimistic outlookVery optimistic outlookSask. is one of the leading exporters of Sask. is one of the leading exporters of

organic grains and oilseeds in Canadaorganic grains and oilseeds in CanadaSask. has over thirty organic grain Sask. has over thirty organic grain

processorsprocessorsLimited number of secondary processing Limited number of secondary processing

facilities in Saskatchewanfacilities in Saskatchewan


The MarketThe Market


Market DistributionMarket Distribution

Due to population, there is a limited Due to population, there is a limited market in Canadamarket in Canada

Organic market in Canada:Organic market in Canada:51% - Eastern Canada51% - Eastern Canada30% - British Columbia30% - British Columbia12% - Alberta12% - Alberta7% - Saskatchewan7% - Saskatchewan


Market Distribution Cont…Market Distribution Cont…

Type of Outlet Share (%)

Mass Market Outlets 49

- Supermarkets 44 -Other (drug store, mass merchandisers)

5

Health and Natural Product Stores

48

- Natural Food Supermarkets 31

- Natural Food Stores 12

- Natural Food Cooperatives 3

- Supplement Chains/stores 2 Farmers Markets/ Community Supported Agriculture Programs

3


CompetitionCompetition

Two types of competition:Two types of competition:Conventional flour producersConventional flour producersOther organic flour producersOther organic flour producers

Market is new and undeveloped but is Market is new and undeveloped but is rapidly expandingrapidly expanding

Many large companies are becoming Many large companies are becoming involved which poses a threatinvolved which poses a threat


Customer/Target MarketsCustomer/Target Markets


Product FeaturesProduct Features

Certified OrganicCertified Organic Environmentally SafeEnvironmentally Safe High QualityHigh Quality Locally ProducedLocally Produced TraceableTraceable


Sales and Profit ObjectivesSales and Profit Objectives

Increasing producer profitabilityIncreasing producer profitability Profitability and sustainabilityProfitability and sustainability Annual growthAnnual growth 20% Return on equity20% Return on equity


Selling and AdvertisingSelling and Advertising

Packaging and LabellingPackaging and Labelling SamplesSamples Pamphlets/FlyersPamphlets/Flyers Sales/PromotionsSales/Promotions WebsiteWebsite No forms of mediaNo forms of media


Marketing BudgetMarketing Budget


Financial PlanFinancial Plan


Ratio AnalysisRatio Analysis 2008 2010 2012 2014 2016

Liquidity Ratios

Current Ratio 1.79 4.00 5.27 5.71 6.13

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 2.32 2.76 2.57 2.61 2.60

Debt Servicing Ratio -0.14 0.01 0.01 0.01 0.01

Cash Flow to Total Debt -0.21 0.88 1.17 1.54 2.00

Organic Grain Cleaning Co-operative Ltd.Balance Sheet

December 31, 2008, 2012, 2017Assets 2008 2012 2017

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 $ 198,263 $ 198,263 Accumulated C.C.A. $ (19,604) $ (116,378) $ (160,208) Land $ 5,400 $ 5,400 $ 5,400 Total Long-Term Assets $ 184,059 $ 87,285 $ 43,455

Total Assets $ 272,232 $ 489,524 $ 685,650

Liabilities 2008 2012 2017

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 2008 2012 2017 Owner Equity $ 184,444 $ 184,444 $ 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


Summary of FinancialsSummary of Financials2008 2010 2012 2014 2016

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 Investment 40.9%

External Rate of Return on Equity Investment 31.3%


Critical VariablesCritical Variables

Variable Base Case IRR = 0% % Change

Wholesale Price (Average) $ 3.22 $ 2.69 - 16%

Quantity of Sales 314,175 204,748 - 35%

Raw Materials Expense $ 135,106 $ 212,579 57%

Wages $ 191,212 $ 333,701 75%

Distribution (as % of gross sales) 15% 27% 80%

Marketing Commission (as % of gross sales) 10% 22% 120%

Long Term Debt Interest Rate 8% 163% 1938%


Sensitivity AnalysisSensitivity AnalysisSensitivity Analysis

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Price (Average) Sales Price and Sales

IRR

Worst (-10%) Base Best (+10%)


Break-Even AnalysisBreak-Even Analysis

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

YearS

ales

Vo

lum

e Sales = Base Case Sales CF = 0 Sales NI = 0 Sales NPV = 0

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

$4.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Year

Avera

ge P

rice

Price = Base Case Price CF = 0 Price NI = 0 Price NPV = 0

Break-Even SalesBreak-Even Sales

Break-Even PriceBreak-Even Price


Feasible under current financial modelFeasible under current financial model Internal Rate Of Return – 40.9%Internal Rate Of Return – 40.9%

Main obstacle – achieving sales quantityMain obstacle – achieving sales quantitySales figures reflect the potential growth in Sales figures reflect the potential growth in

the futurethe future

organic grain cleaning ryan carter ryan goodwin joel marchildon landon zimmer

Documents

organic grain cleaning

lbs of flour

grain products expansion

year slide

line of flour

year total

daily total

grocery stores slide