Noriko Kawaguchi, Jason Shultz, Tyler Whale

AgendaAgenda

1) Industry Overview2) General Information on Orchard3) Products and Services4) Marketing

Marketing Strategy Pricing Strategy Promotion Marketing budget

5) Financial6) Risk Analysis7) Recommendations8) Summary

OrchardOrchard

Founder:Established:Place:Type of Fruit: Apple and CherryType of Business: U-pick and Apple cider

Industry OverviewIndustry Overview

Apple Production World

Main Producer in the World---China, US, Turkey

Increasing Production Canada

Canada produces about 500 mt 2002

130 mt is imported in 2005

Decreasing production for past several years

Main producers in Ontario and BC

Small amount of production in Saskatchewan

Average farm-3.3 acres

0.5% of Canada’s fruit growing land

Industry OverviewIndustry Overview

Apple Consumption

World

Stagnant or declining

Canada

Apple consumption consists 20% of fruit

consumption

Increase in consumption (fresh fruit/processed)

Industry OverviewIndustry Overview

Saskatchewan’s Apple Market

130 mt imported into Canada

500 million kg produced in Canada(2002)

Saskatchewan’s demand: 17.6 million kg/yr

Petrofka Bridge Orchard’s projected yields

2007 2011 2016

Yield (kg) 5,182 44,886 95,568

0.05% 0.6%

Products and ServicesProducts and Services

Mission of Orchard Provide customers with high quality,

organically and locally grown fresh apples and apple cider

Provide opportunity to pick apples and enjoy the overall experience

Educate customers about apples

Products and ServicesProducts and Services

1. Fresh applesU-pickPre-picked

2. Apple cider2-liter jug4 liter jug

3. Other products

Target MarketTarget Market

Target MarketU-pick---residents in Saskatoon and surrounding area, touristsApple/Apple cider---Inside Saskatchewan

Target nicheMid- to high income householdHealth conscious customerCustomer who supports locally grown product

Market AnalysisMarket Analysis

Competitors 1.U-pick

Apple orchard (1) Berry/Fruit/vegetable farm(9)

• The Berry Barn• Moonlake Saskatoon Berry Farm

Open market for apple orchard

2. Fresh appleMany international and national

competitors

Market AnalysisMarket Analysis

3.Apple ciderSanta Cruz: Organic, $2.7-3.2/lGrowers: $4.2/lPresident’s Choice: $2.0/lS Select: sparkling cider, $5.4/lHomestyle beverage: hot cider (concentrated), $1.3/l

Small varietyRelatively low competitionEach product targets specific niche

Distribution ChannelDistribution Channel

Farm gateFarmer’s marketLocal store (Bulk Cheese Warehouse)Health shop (Steep Hill Foods)Local restaurant

Product sold directly

Pricing strategyPricing strategy

Could charge premium for high quality organically and locally grown product depending on product

Different price for different distribution channels Penetration strategy for early stages

Pricing StrategyPricing Strategy

Product Price

Fresh Apples

U-pick Apples $2.20/kg

Farm-gate pre-picked $2.80/kg

Farmer’s Market $2.80/kg

Steep Hill Foods $2.60/kg

Apple Cider

2-litre jug $5/jug

4-litre jug $9/jug

PromotionPromotion

Advertising methodBillboard----road side, within SaskatoonBrochure---Independent, SFGA, Tourism SaskatchewanTV/Newspaper--- special interest stories, free paperCommunity newsletter adsWebsiteFarmers market

Marketing BudgetMarketing Budget

Promotion cost

　 #Per Year Price/Fee 2007 2008 2009 2010 2011

Advertising 　 　 　 　 　 　 　

Billboards 2 700 1,400 1,428 1,457 1,486 1,515

Brochures (5000) 5,000 0.32 1,600 1,632 1,665 1,698 1,732

Business Cards 5,000 0.05 250 255 260 265 271

Tourism Saskatoon 1 165 165 168 172 175 179

Website 　 700 700 102 104 106 108

Community Newsletters 10 50 500 510 520 531 541

Sales 　 　 　 　 　 　 　

Farmer's Markets 　 150 150 153 156 159 162

Tradeshows 5 200 1,000 1,020 1,040 1,061 1,082

Transportation/Deliveries 100 25 2,500 2,550 2,601 2,653 2,706

Office Supplies (phone etc.) 　 　 200 204 208 212 216

Total Marketing Expenses 　 　 8,465 8,022 8,183 8,346 8,513

FinancialFinancial

2007 2008 2009 2010 2011

Total U-pick (kg) 500 2,000 3,500 5,000 5,500

% U-pick 5.6% 12.0% 12.6% 13.5% 11.3%

Expected # Customers 100 400 700 1,000 1,100

Daily Customers 2 9 16 22 24

Assumptions

FinancialFinancial

Expected sales　 　 2007 2008 2009 2010 2011

Fresh Apples per kg 　 　 　 　 　

U-pick $2.20 500 2,000 3,500 5,000 5,500

Farm Lane $2.80 500 2,000 3,500 5,000 5,500

Farmer's Market $2.80 500 2,000 3,500 5,000 5,500

Local Grocery Store $2.60 500 2,000 3,500 5,000 5,500

Cider per jug 　 　 　 　 　

2-litre $5 1,357 1,717 2,780 3,425 5,469

4-litre $9 678 859 1,390 1,712 2,735

Other Productsestimated sales proportional to the number of U-pick

customers

FinancialFinancial

Expected revenue

Fresh Apple 2007 2008 2009 2010 2011

U-pick $1,100 4,488 7,854 11,220 12,342

Farm Gate $1,400 5,712 9,996 14,280 15,708

Farmer's Market $1,400 5,712 9,996 14,280 15,708

Local Grocery Store $1,300 5,304 9,282 13,260 14,586

Cider

2 Liter $6,783 8,758 14,177 17,467 27,893

4 Liter $6,105 7,882 12,759 15,720 25,104

Other Produce/Products $1,000 4,000 7,000 10,000 11,000

Total Annual Sales $19,088 $41,855 $71,063 $96,227 $122,341

Risk AnalysisRisk Analysis

Factors affecting the business Price of fresh apples & cider Quantity of fresh apples & cider Quantity of sales Wage Inflation rate

Price and Quantity has the largest effect !!

Risk AnalysisRisk Analysis

Variables used in Scenario Analysis

　 　 unit Base caseWorst

case Best case

Variable 　 　 　 　 　

Inflation 　 % 2 14.5 -20

Wage 　 $/hour 9 20 8.05

Price fresh apple $/kg 2.2-2.8 0.71 4

　 cider $/ 2 liter 2.5 1.35 5

Quantity fresh apple %/kg 22.4%/2000 0%/0 100%/9000

　 cider# of 2 liter

jug 77.6%/1,357 0%/0 100%/3548

Risk AnalysisRisk Analysis

Scenario 　 NPV IRRFirst year

Cash FlowsFirst year Net

Income

Fresh Base Case2,2644 to 120,742 21.6-28.4% 21,795-27,195

-42,475to -37,075

　Worst Case -236487 0.0% 8,385 -55,885

　 Best Case 315,477 40.2% 37,995 -26,275

Cider(2 liter) Base Case -69,304 14.8% 16,153 -48,438

　Worst Case -238,356 0.0% 7,992 -56,598

　 Best Case 268,359 37.4% 33,893 -30,698

Net Present Value and IRR

Risk AnalysisRisk Analysis

Breakeven Analysis for 100% Fresh Apple Sales

$/kg

0

1

2

3

4

5

6

7

8

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

IRR = 0

Net IncomeBreakeven

Cash FlowBreakeven

Risk AnalysisRisk Analysis

Breakeven Analysis for 100% Apple Cider Sales$/2 liter jug

02468

101214161820

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

IRR = 0

Net IncomeBreakeven

Cash FlowBreakeven

Financial OverviewFinancial Overview

2007 2009 2011 2013 2016

Total Sales Revenue 19,088 72,345 129,156 180,832 273,927

Cost of Goods Sold 52,250 63,719 91,493 116,104 154,337

Gross Profit (33,161) 8,626 37,663 64,728 119,590

Total Direct Labour 21,629 35,760 51,089 65,610 89,335

Marketing Expenses 8,465 8,183 8,513 8,857 9,399

Administration Salaries 5,138 7,566 9,413 10,618 12,582

Total Direct Expenses 4,718 9,219 17,766 27,840 48,764

Net Income (Loss) -46,764 -7,123 19,737 42,805 87,848

Recommendation & Recommendation & ImplementationImplementation

Focus on marketingStress Organically and Locally grown

Maximize fresh apple salesExpand orchard at 500 trees/yearBe conscious about consumer needsMaintain quality and positive experience…AND…

Thank you!Any questions?

MAKE SURE YOU HAVE FUN !!