Human Resources Plan

River View Orchards

1.0 Introduction

The Saskatchewan economy is primarily driven by agriculture. As a result of the agriculture industry becoming less stable, producers have begun to turn to diversification to gain more stability. One growing method of diversification is to produce niche products such as domestic and native fruits. There are a number of natural resources and marketing factors which make

Saskatchewan an excellent location to begin a vertically integrated fruit production site. Vertical integration is the means whereby a company can control all aspects of designing, manufacturing, and selling a product (taken from Webster’s College Dictionary). River View Orchards has the opportunity to utilize these factors to create a profitable business in Outlook, Saskatchewan.

1.1

Mission Statement

River View’s mission statement will provide them with a vision to follow in order to reach their goals and maintain the highest standards in customer service and satisfaction.

“River View will provide their customers with high quality fruits, warm, friendly service, and a beautiful environment in which to pick their fruit. They will strive to achieve growth and profits by marketing their products, while never forgetting to keep the rural Saskatchewan feeling alive at the orchard.”

1.2

Goals and Objectives

The main objective of River View Orchards is to get up and running, and in doing so generate profits. The initial cost of starting up this kind of an orchard is extremely high, and few returns will come in the first couple years. It will take time to establish the envisioned operation. The surrounding trees and shrubs will not grow overnight, but eventually people will come not just for fruit, but also to experience the beauty of the surroundings.

In River View’s first year of operation, only strawberries and cantaloupe will be harvested.

Finding a market for the cantaloupe will be a goal that River View will have to reach before the plants start to grow. This will be River View’s only source of income in the first year therefore the fruit must be marketed well.

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan 1


River View will strive to keep their customers happy. With proper promotion, customers will acquire a taste for River View’s products and service. It will be the acceptance of the products by

River View’s customers that will allow them to thrive in the Saskatchewan fruit growing industry.

1.3

Industry Overview

In the past decade fruit production in Saskatchewan has increased dramatically. Since the introduction of new fruit cultivars, many growers have either increased their current acreage or begun production. Fruit acreage in 1998 totaled 795, a large increase from the 660 acres in

1993 1 . Currently, data illustrates that the small fruit sector in Saskatchewan has expanded to over

910 acres 1 . These numbers are expected to increase even more in years to come (D’Arcy, 2000).

The most prosperous cultivars appear to be Saskatoon berries, strawberries, raspberries and apples. Producers are progressive and eager to move the industry forward.

Much of Saskatchewan’s fruit production is centered in the Saskatoon and Outlook regions.

Access to the river for irrigation combined with warmer temperatures and longer growing degreedays (as compared to more the northern regions) creates an area suitable for fruit production.

Currently, there are two types of operations for fruit production in Saskatchewan. The fist is Upick operations, which are commonly found throughout the province and attract those who wish to hand pick fresh fruit themselves. Secondly, primary and secondary processing have been implemented in some operations. Primary processing involves cleaning, sorting and freezing the fruit. Secondary processing produces an end product that can be further used in other products

(i.e. jams, jellies and pie fillings). The U-pick operation has become a popular entity in various locations throughout the province. Although additional fruit operations are viable at the present time, there is a possibility of a saturated U-pick fruit market in the future.

1 Saskatchewan Agriculture and Food website

2 Robin D’Arcy’s Thesis (D’Arcy 2000)



1.4 Literature Review

There appear to be many opportunities for expanding and developing both the native and domestic small fruit industries in Saskatchewan. One of the reasons that Saskatchewan is a prime place for fruit production is the comparatively low land costs and the absence of most pests detrimental to fruit crops.

Many studies completed by the University of Saskatchewan outline the market and costs of starting up a small fruit operation (for example, D’Arcy 2000, and Storey 1998). Saskatchewan

Agriculture and Food and Alberta Agriculture and Food and Rural Development are informative sources discussing the steps of small fruit production operations. There are also several contacts in the Saskatoon area, which are excellent sources of information for River View, (for example the University of Saskatchewan, Dutch Grower’s, The Strawberry Ranch, and The Saskatoon

Berry Barn Eatery and Orchard).

Table 1.1 Small Fruit Production (acres) in Saskatchewan, 1992-1998

1992 1993 1994 1995 1996 1997 1998

Sourcherry

Raspberry

(Producing)

Saskatoon

(Producing)

Strawberry

(Producing)

Other

(Producing)

Source: Trimension, 1999.

3

120

315

250

65

35

175

150

350

260

65

35

225

215

350

250

80

65

240

255

380

295

80

70

350

224

340

245

198

111

10

80

60

462

10

N/A

N/A

400

250

250

200

N/A

N/A

395

190

155

30

20

15

60

50

535

3 All of the graphs and much of the background information have been obtained from Robin D’Arcy’s

Thesis (D’Arcy 2000)



1.5

Challenges and Hurdles

River View must overcome a number of challenges and hurdles before becoming firmly established. One of the major challenges facing the success of River View Orchards will be the long-term nature of the small fruit industry. Estimates from Saskatchewan Agriculture and Food state that although the average production of River View’s fruits will commence after five years, it will actually take approximately ten years before River View will see positive gross operating profits. Therefore, River View Orchards is a long-term investment with a significant amount of risk.

The initial awareness of the company will also be a hurdle. River View will rely on various advertising methods, farmers’ markets, and word of mouth to gain the local publics’ recognition.

Challenges are also present for River View at the field level. Beginning extensive fruit production is often new to the producer, especially in Saskatchewan where fruit production to this point has been minimal, and awareness of potential problems must be carefully considered. Two buildings will be built on site. One will be a quonset for the machinery, and one will be an office/storage building that will aid in minimizing fruit spoilage.

Another major hurdle that River View Orchards must overcome will be raising the start-up capital for the business. River View will have to obtain loans and equity to provide them with the capital to purchase land, irrigation, machinery, etc. before production can commence.

2.0

The Operations Plan

2.1 Description of Operations

River View Orchards will produce strawberries, raspberries, Saskatoon berries, apples and cantaloupe on fifty acres of a sixty-acre plot on the riverbank near Outlook, Saskatchewan. The operation will focus mainly on U-pick, but some fruit will also be available for commercial sale on site. The cantaloupe produced will not be for U-pick purposes; rather it will be picked and sold directly to wholesalers. The apples, and to some extent the Saskatoon berries, will be planted in a


River View Orchards location so that they may provide some shelter for the other cultivars. The crops mature in a sequence, thus by growing the crops selected a constant crop resulting in constant business and profits will be generated throughout the growing season.

2.2 Land and Utilities

The orchard will be situated on a sixty-acre plot, just north of Outlook, Saskatchewan. The cost of the land is $15,000 per fifty acres (estimated based on the R.M. of Rudy, land location SE-28-

29-8-W3). Thus, it will cost $18,000 4 for the sixty acre plot. The orchard’s location was chosen based on the proximity of the Saskatchewan’s larger centres (customer base), the land type, topography, availability of irrigation and utilities, the growing degree-days and the climate.

2.2.1 Site Selection

The selection of the site is a very important aspect of every business venture. A business could be flawless, perfect in every sense, but if the location is poorly chosen the business may fail. The location must be such that there is close proximity to the market and the proper environmental conditions for the desired business. These aspects will play a key role in the set up and maintenance of River View Orchards. The site plan for River View Orchards can be found on the following page. On the plan the building marked as ‘shed’ is what is commonly called the quonset throughout this business plan. The building marked as storage in the figure below will be built for both storage and office purposes and is referred to as the main building for River View

Orchards.

4 In conversation with the RM of Rudy



N

River

Cantaloupe

Raspberries

Strawberries

Office Shed

Storage

Parking Lot

Main Access Road

Figure 2.1 The Site Plan for River View Orchards

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan

KEY

Saskatoon

berries

Apples

6


2.2.2 Building Costs and Contracting

River View’s main building’s primary functions are two-fold; Firstly, to offer a room to keep the coolers in for storage and commercial sale of pre-picked fruit and secondly, to serve as an office for the manager of River View Orchards. Service rooms for personnel including bathrooms and a staff room will also be present in this building. These bathrooms will be open to the public. The main building’s dimensions will be 15 metres wide and 20 metres long. The cost of construction of the building is approximately $20 per square foot 5 . This cost is for an uninsulated building

(since the fruit will only be in the building during the hot summer months) with concrete flooring including labor. Each bathroom will cost an additional $3,000. This makes the total cost of building and installation approximately $60,000. This building will first be built in year three due to the fact that only strawberries and cantaloupe will be harvested in the first two years (this is described in greater detail a little further into the operations plan). Raspberries will commence harvesting in year three. Therefore the main building will be built in year three helping to offset the initial startup costs.

The quonset’s main purpose is to contain all machinery and equipment. It may also be used to hold the strawberry seedlings in the spring (providing warmth and other adequate environmental conditions for the plants), if River View is unable to transplant them immediately. The cost of construction and materials for our 40’ x 60’ quonset will be $6,600. This cost includes the cement floor, walk in door and end double sliding door. Master Manufacturing would do the construction.

Table 2.1 Land and Building Costs

Land Costs

Building Costs

Total Land & Building Costs

18,000

66,000

84,000

5 Advance Construction



Figure 2.2 Main Building Plan

2.3 Fruit Production

River View Orchards will produce approximately 188,005 kilograms of fruit per year at maximum production. Maximum production will be realized at about year six of production. By this time all of the fruit plants will be planted and producing fruit for commercial picking. The production numbers until year six begin quite small and increase each year as more plants mature producing fruit for picking. The fruit will be sold from the orchard on a U-pick basis, with a smaller amount being sold already picked on site.

In the first years of production River View will see great costs and little revenue. This is due to the nature of an orchard. Each of the cultivars to be planted has a characteristic length of time


River View Orchards until it will produce fruit commercially. Until that time the cost will exist, with little to no revenue seen for longer maturing cultivars.

Table 2.2 Years Before First Fruits; Years Before Maximum Production

Strawberries

Raspberries

Saskatoon Berries

Cantaloupe

Apples

Years Before First Fruits

1

3

3

1

4

Years Before Max. Production

3

5

6

5

5

2.3.1 Sequence of Crop Maturation

June - Strawberries

July - Raspberries

July - Saskatoon Berries

August/September - Apples/Cantaloupe

2.3.2 Soil Testing

River View’s land will be soil tested yearly in the spring months, to determine fertilizer application. Outlook United Grain Growers will complete the soil tests at a cost of $80/field 6 .

This testing is for both macro and micronutrients and the results are included in the cost. The testing and application will take place in the spring because more time is available to perform this operation at this point. Most fruit trees require little to no fertilization. Young trees should never


River View Orchards be fertilized, as the result is a longer length of time for the trees to reach maturity and produce fruit 7 . The exception to this rule is if pale leaves or weak growth is observed.

2.3.3 Desired Crop Varieties

Strawberry

A day neutral variety of strawberry (Tristar) will be planted thus allowing for a longer season of production. Day neutral means that it is insensitive to day length and will flower continuously if temperatures remain above 2 o C and below 30 o C. Day neutral varieties also have superior fruit quality and higher yields than the typical June-bearing varieties 8 .

The cost of the strawberry seedlings is approximately $0.20/plant and they will be purchased from Dutch Growers. The cost of planting is $1,668/acre and production will begin at 4 acres and gradually increase to 10 acres at maximum production. The maximum yield will be approximately 2,041kg/acre.

The plants should be planted in early May, which is very important for their productivity. They should be planted in the form of double rows that are 12 inches from each other with a 6 inch spacing between the double rows themselves. The first flower buds should be removed after planting or their production will deter further development of the plant.

It is suggested that a straw cover should be placed on the strawberries around the beginning or mid-November. River View plans on using the leaf cover available from the apple and Saskatoon berry orchards. The leaf cover should be left on as late as possible in the spring as it helps to reduce frost damage. Once new growth is seen, the leaf cover may be removed.

Raspberry

The cost of the raspberry seeding is quite low at $4/acre. A fall bearing variety of raspberry will also be planted, again to lengthen the growing season. The Red Mammoth variety developed at the University of Saskatchewan is the choice for River View. It has an excellent taste and the fruit remains firm after picking for a longer period of time compared to other varieties 9 . River View

6 In conversation with Outlook United Grain Grower’s

7 http://www.ag.usask.ca/cofa/departments/hort/hortinfo/fruit/

8 http://www.ext.vt.edu/departments/envirohort/factsheets2/veg/feb90pr6.html

9 In conversation with Sunny Hills Nursery, Nipawin

10 http://agri.gov.ns.ca/pt/hort/berrycrops/pihbc93-04.htm


River View Orchards will also grow a variety called Boyne. Boyne is known to be winter hardy, and ripen early –mid season 10 . The fruit are small to medium in size, dark red, somewhat soft, with a fair flavor. The mix of varieties allows for more taste variety and reduces the chances of disease wiping out the entire crop. The raspberry plants are approximately 15 cm tall when transplanted and will be planted 2 feet apart from each other. Pruning will occur in the fall when required.

Saskatoon Berry

The Saskatoon berries will be planted on the relatively sandy soil of the Outlook area. Although

Saskatoons are tolerant to a wide range of soil types, surface and subsoil drainage is essential. As well, saline soils and retained standing water is not tolerated by Saskatoons. These features make the sandy soil good for the both the growth of Saskatoons and for irrigation purposes.

RoundUp will be applied in the first year as a burn off. Treflan may be required in Year 2 if the

RoundUp was not as efficient as hoped. The spacing will be 1m between plants. This wider spacing allows for better orchard ventilation reducing disease risks and pruning needs in later years. The between row spacing must be large enough to accommodate the passage of tillage and pest control equipment. Four meters will allow for approximately 1 meter of width beyond machinery.

The Saskatoon berry seedlings will be obtained from the Horticulture Department at the

University of Saskatchewan. They will be planted on 15 acres, early in the spring of the first year of production at a density of 850 trees/acre. It is estimated that an average of 171 trees/acre will need to be replanted making the replanting total $2,650. The cost of weed control is $70/acre yearly for Saskatoons and will probably include the use of the herbicides Casoron and Linuron.

Since Saskatoon berries are native to Saskatchewan, insect and disease control will have to be considered carefully. It is recommended that Decis be sprayed a total of three times during the growing season. The first application of Decis should occur at the green tip stage of flower bud development, the second during bloom (approximately 20-50% bloom) and lastly after petal drop. Other common causes of fruit loss are due to birds such as robins, starlings, waxwings and crows.



The cost of pruning increases as the trees age until the maximum cost of $84/acre is reached in

Year 7. Pruning is usually restricted to the removal of damaged or diseased material or thinning stems that have a diameter of greater than 1.5 inches at the base. More extensive pruning is possible but is not cost effective.

Cantaloupe

The cantaloupe variety that was chosen is the Early Gold variety for it’s good flavor, large size and early maturity date.

11 The seeds are grown in a greenhouse for approximately two weeks or until one true leaf is visible. The cantaloupe seeds are seeded into Jiffy 7’s, which are peat pellets that expand when placed in water 12 .

The cantaloupe seedlings are seeded with the same planter as the strawberries. They will be seeded 30 cm apart. The cost of the seedlings is $192/acre. Production will commence at 2 acres increasing gradually until it reaches 10 acres, River View’s maximum acreage allotted to cantaloupe. River View’s maximum production will be approximately 12,701 kg/acre.

A mulch layer will be applied to the cantaloupe field. This mulch is a black plastic layer that will be placed along the cantaloupe rows. The mulch is dual purpose by preventing the growth of weeds and heating up the soil surface. The black mulch was chosen over the Solar (infrared transcription) for two reasons. The Solar mulch is harder to place on the soil. It needs to be laid down extremely tight or else serious weed problems may result. This makes the Solar mulch unsuitable for very flat areas like our site. As well, the black mulch is significantly cheaper than the Solar mulch 13 . Due to the presence of the mulch no herbicides are required.

To make the microclimate more suitable to cantaloupe growth a crop cover is applied which traps heat. This tunnel-like cover is placed on the crop until pollination commences (approximately the end of June) and may be placed on the crop again in August if the weather becomes cool 11

Leaf-cutter bees are essential for the pollination of cantaloupe 14 . Approximately 6-10 hives would be needed on the 10 acres. The variability in the number of hives is due to the varying strength of the hives. The cost for each independent movement of a hive is estimated at $100 15 .

11 In conversation with Jackie Bantel, University of Saskatchewan

12 In conversation with Early’s Farm and Garden Centre

13 In conversation with PlastiTech, Quebec

14 In conversation with Oliver Green



Apple

The apples will be planted around the circumference of the production area in double rows. They will be planted approximately 20 feet apart. A number of different varieties will be planted and the seedlings will be obtained from the University of Saskatchewan Horticulture Department. The university has developed many varieties, which have a great taste and a much longer storage life than the traditional apples. The Horticulture department teaches fruit growers how to propagate their own apples. Propagation is used to ensure that all of the apple trees of each variety are identical creating more uniform fruit and an easier harvest. Again pruning will be kept to a minimum and used mainly for the removal of dead or diseased plant material.

At peak production there will be 10 acres allocated to most of the fruits, with 5 allocated to apples and 15 to Saskatoon berries. The strawberries, however, will never have all ten acres planted in one year because they require a three-year rotation period before they may be planted on the same land 16 .

2.3.4 Seeding and Harvesting Plan

For all years River View will seed the annuals in early May and harvest June through September.

In the first year of operations the total number of acres of the perennial crops will be planted.

These crops are the raspberries, Saskatoon berries, and apples. The strawberries and cantaloupe are annual crops. As such in the first year of operations River View will not be planting the total number of acres allocated to the annual crops. This will help them to reduce costs before the crops really start to produce, thus, allowing River View to decrease their debt load.

15 In conversation with Albert Robertson, U of S apiarist

16 In conversation with Bill King



Table 2.3 Overview of Fruit Production Preceding the Maximum Years

Year 1

 plant all cultivars, total acres planted of perennial crops, only partial acres planted of annual crops

 harvest only strawberries (22% of max yield), and cantaloupe (80% of max yield)

Year 2  plant strawberries and cantaloupe

 harvest strawberries and cantaloupe (increasing yields)


 harvest strawberries, cantaloupe, raspberries (8% of max yield), and Saskatoon berries (3% of max yield)


 harvest strawberries, cantaloupe, raspberries, Saskatoon berries, and apples (5% of max yield)

Years 5 & 6



plant strawberries and cantaloupe

 increasing harvests of all cultivars




first year of max harvest

2.3.5 Spraying

The spraying of the crops will be performed making sure that the proper waiting periods are observed to ensure that a residue is not left on, or in, the picked product. This will ensure the safety of the customers and the taste and quality of the berries. The spraying of the berries will also be done in a timely matter so that it aids in disease reduction, which will be especially important in hot, wet years. Another concern with regard to disease control will be crop rotation.

The suggested times before a crop can be planted on the same piece of will land will be observed.



2.3.6 Fruit Handling

The amount of fruit produced per day will vary greatly with the season, and the sequence of crop maturation. Thus, it is hard to project an accurate estimation of the production on an average day.. The buying of annual fruit seeds and seedlings will be contracted to a local company allowing River View’s specifications regarding varieties, quantity and quality a greater chance of being met. The cost of fruit seeds and seedlings for the startup year is $ 33,414 17 . Remaining with the same supplier company will enable River View to obtain their supplies by an earlier date and minimize hassles. It is also important in terms of public relations that River View deals with a local companies whenever possible to promote the local economy. When the seedlings are purchased they will be stored in the quonset shed until conditions are prime for planting.

2.4 Environmental Conditions

In an orchard type business, environmental factors are a major concern. Like all crops the weather can make or break the year. Major concerns of fruit producers include climate, available water, frost-free days, length of daylight, soil type and topography. For this business some other environmental concerns arise such as esthetics and access. Outlook is the irrigation capital of

Saskatchewan, the soil and weather are suitable for fruit growing and in the summer months there are long hours of daylight. The location chosen for River View Orchard is just north of Outlook, on the riverbank will provide an esthetically pleasing view to our customers.

There are several environmental limitations on production. These are the season itself – drought, flood, scorching heat, extreme winds, hail etc. as well as conditions such as disease, and pests.

Other important environmental challenges include early seeding and suitable harvesting weather.

Although total fruit production may be sufficent, cash flow may drop if the weather at harvest is poor and the customers do not come out to pick.

2.5 Average Business Day, Month and Year

River View’s average business day, month and year are considered after they have been in business for six years when maximum production will been reached.



2.5.1 Average Business Day During the Growing Season

An average business day at River View Orchards during the growing season will consist of many operations. Seasonal pickers will begin early in the morning so that produce will be available to visitors at the retail window throughout the day. A benefit to morning picking is that the temperature is cooler minimizing spoilage. The pickers will also create the supply of fruit to be taken to the farmers’ markets. Field maintenance operations will be occurring daily maintaining professional and well taken care of grounds. Employees will be continually distributing U-pick customers to the appropriate areas of the orchard based upon crop maturity.

2.5.2 Average Business Week

River View Orchards will be open seven days a week throughout the summer. During an average business week approximately 11,750 kilograms of fruit will be produced. This fruit will be sold to consumers as U-pick or commercial produce (with a relatively smaller amount being sold commercially). During the growing season fruit will also be sold at the farmers’ market in

Saskatoon.

2.5.3 Average Business Month

A total of 47,000 kilograms of fruit will be produced monthly during River View Orchards’ growing season. Monthly internal financial statements will be analyzed so that River View will be made aware of and be able to deal with any problems as soon as they may arise.

2.5.4 Average Business Year

In the initial year the majority of the employee’s time and energy will be consumed with planting and propagating the fruit crops. After the initial year the crops will need to be rotated according to their specific needs. The winter off-season will be spent planning the following year’s production and marketing plan.

17 price based on Saskatchewan Irrigation Development Centre



2.6 Equipment Expenses

To complete the various field management activities certain machinery and implements are required. A half-tonne truck with a topper ($30,000 18 ) is required for transporting produce around

River View and to the farmer’s markets in Saskatoon. An ATV “Gator” ($8,000 19 ) with a trailer is used for hauling various supplies and transporting visitors for tours as well as to the appropriate picking areas on the farm. For maximum production of the fruits a sprayer ($3,000 20 ), rotor-tiller

($4,637), cultivator ($737), seeder ($3,000 21 ) and mulch layer ($2,500 14 ). Irrigation is the most expensive piece of equipment at $70,000 15 . Repair and maintenance costs are included in the financial guideline.

2.6.1 Irrigation Setup and Consumption

Irrigation will play a major role in the orchard’s operations. The land purchased will need to be made fit with drip irrigation systems. The irrigation set up will be a fairly large capital cost of

$70,000 22 . After setup is achieved the actual running of the irrigation and the cost of water will be a more minor cost to the orchard. The annual cost of irrigation will be variable with the cost of water and with the number of acres irrigated. This is only true for the first few years when most of the fruit is young. When River View is at maximum production, in terms of acres planted, the approximate cost of water will be $3,000 23 per year. This value will increase with inflation.

River View will use a drip irrigation system because it is one of the best techniques to use in applying water to an orchard 24 . Drip irrigation is the controlled, slow application of water to soil.

The water flows under low pressure through plastic pipes or hose laid along each row of plants.

The water drops out into the soil from tiny holes, which are either in the hose wall or in fittings called emitters that are plugged into the hose wall at a proper spacing. The basic concepts behind the successful use of drip irrigation are that soil moisture remains relatively constant without saturating the soil preventing the plant roots from receiving air.

With proper management, drip irrigation reduces water loss by up to 60 percent or more when compared to traditional watering

18 Auto Trader website

19 John Deere website

20 In correspondence with Micromaster Air Assist

21 In conversation with Oliver Green

22 Tony Whelan, Rain Bird International, Inc.

23 Saskatchewan Irrigation Development Centre

24 http://aggie-horticulture.tamu.edu/greenhouse/new/training/garden.htm


River View Orchards methods. This is because with drip irrigation the water soaks in immediately when the flow is adjusted correctly. There is neither flooding nor run-off, so water is not wasted. With a properly used drip irrigation system all of the water is accessible to the roots. Watering weed patches, walkways and other areas between the plant and row is avoided. Wind does not carry water away as it can with sprinkler systems and water lost to evaporation is negligible 8 .

Table 2.4 Initial Equipment Costs for River View Orchards

River View’s Equipment

Estimated Cost in Dollars

Tractor

Seeder

Mulch Layer

Rotor-tiller

21,637

3,000

2,500

4,637

ATV

Drip Irrigation

Fence

Cooler

Cultivator

Lawn Mower

Sprayer

Truck

Miscellaneous

TOTAL COST

8,000

70,000

355,500

3,190

773

2,936

3,000

30,000

20,000

525,172

2.7 Working Capital

The working capital for River View will be quite variable from year to year. River View will accept 30 days for accounts receivables from the wholesalers that will be distributing the cantaloupe. The other fruit being sold directly from the orchard to the customer will require payment at the time of purchase. River View will be granted a standard time of 30 days with their accounts payables from the seedling suppliers. The inventory considered for the working capital is almost negligible. This is because in an orchard-type business the inventory that is considered

8 http://aggie-horticulture.tamu.edu/greenhouse/new/training/graden.htm


River View Orchards the working capital is the ripe fruit on the plant before it gets picked. For most cultivars the time before inventory is moved has been estimated at four days, except cantaloupe which is two days.

This is because River View’s staff will be responsible for picking the fruit.

Table 2.5 Working Capital

Working Capital

Cash

Accounts Receivable

Inventory

Year 1

84,018

3,795

467

Year 5 Year 10 Year 15 Year 20

10,987 567,443 1,145,050 1,791,476

10,479

1,405

1,383

184

3,557

216

4,567

260

Account Payables

Total Net Working Capital

3,156

85,124

Table 2.6 Capital Budget Summary

Land

Year 1

18,000

Buildings 6,000

575 143 168 197

22,296 568,867 1,148,655 1,796,106

Year 3

-

60,000

Year 10

-

Year 15

-

Year 20

-

Equipment

Total

525,172

549,172 60,000

56,850

56,850

49,019

49,019

70,932

70,932

Year three was substituted for year five in the capital budget summary because it is a year that a large expense was incurred (the main building at a cost of $60,000).

3.0

Human Resources Plan

3.1 Job Descriptions

In order to run and maintain a viable operation, River View Orchards must ensure that all employees possess a clear understanding of what is expected of them on the job. The job descriptions for each employee will be as follows:



3.1.1 Manager

The manager will be in charge of monitoring and overseeing the entire operation of the farm. The candidate will be selected based on strong managerial skills and previous experience in this type of business operation.

Due to the initial small scale of the farm, the manager will assume three main roles: marketing manager, accounts manager and operations manger.

As a marketing manager, it is essential that the individual have a clear understanding of the fruit market in Saskatchewan. He/she will be required to set up sales for the fresh fruit prior to the season’s commencement. Written contracts for cantaloupe will ensure that the end product will be sold and in turn, a profit will be generated.

It is also essential that this individual work towards promoting the U-pick operation. Due to River

View’s recent establishment, it is necessary to create awareness among both the community and surrounding areas. It is believed that this can be accomplished through promoting and selling at a larger centre’s (Saskatoon’s) farmers’ market. It will be up to the manager to book and decide upon when they will attend such events.

As an accounts manager, the individual must oversee the operation’s asset and liability accounts.

Although a professional accountant will be hired to assess and balance the organization’s annual financial statements, the manager must ensure that the farm is operating viably and producing a profit. He/she will be responsible for finalizing any large investment and purchasing decisions that arise, with his/her primary focus on accounts receivable and accounts payable.

The operations management portion of the job description can be described as a general organization of the entire operation. Initially, the manager will be responsible for ensuring that the farm is producing to maximum capacity in order to receive the highest return possible. As the operations manager, it is essential the individual possess a clear understanding of the operations process. Aside from the actual orchard operation, an operations manager must be able to manage the people working under him/her. It will be the responsibility of the manger to schedule, delegate tasks and pay the employees. As an operations manger, the individual must be able to


River View Orchards manage people and deal with any structural, internal or personal problems that arise among his/her employees.

The manager will begin at a salary of $37,000. This will increase by 3.3% annually.

3.1.2 Contract Positions

The contract positions will be temporary full-time. The employee’s contract will run from March until October, with a guaranteed re-hire each season. Initially, River View will employ two contract employees and may increase this number in subsequent years. These individuals will work more closely with the operations of River View.

The main tasks of these individuals will be maintaining the orchard from seeding until harvest.

These individuals will be skilled in all areas of the orchard to alleviate any operational problems that arise. They will possess the autonomy to make sound decisions regarding the operation if they feel it will increase efficiency. An understanding of the workings of all equipment, the irrigation system and appropriate timing for harvest are some of the main duties that the individuals must be skilled in.

The contract employees will receive $1,900 a month. This wage will increase 3.3% annually.

3.1.3 Seasonal

The seasonal employees will work four months of the year, likely from May until August. This time period is when labour will be most intensive. Seasonal employees will be more involved with the maintenance of the farm since the planning will have been completed before they start.

Rouging and harvesting will be the main duties of these individuals, along with general maintenance of the entire site. These employees will earn an hourly wage of $8, however, when harvesting begins, they will be paid on the volume that they pick. This amount will vary depending on the cultivar being picked. It would not take much to have a few pounds picked of cantaloupe; however, it would take quite a bit more to have the equivalent weight in Saskatoon berries or raspberries. Overtime will be paid at time-and-a-half and will begin after 40 hours worked in one week. In year 1, River View will employ 10 students but by year 3, will have 20 seasonal employees.



3.2 Additions of Positions

As with any small business just starting out, many positions often hold more duties than what is stated in the job description. Although this is often understood and acceptable by most employees, it is sometimes more effective to hire more individuals with less tasks, in order to ensure these tasks are completed to their full potential. At River View, this concept is one that will be implemented in years to come.

Due to the crop rotation, the first few years at River View will not require a great deal of labour.

However, as more crops begin to mature and are ready to harvest, the overlap time of fruit maturity will require increased physical labour. River View will deal with this increase in physical labour by hiring additional seasonal employees.

Segregated marketing responsibilities will be required as River View’s sales increase. With respect to marketing, it will be necessary to allot sufficient time and effort towards establishing new customers, analyzing the competitor’s market and increasing the public’s awareness of River

View Orchards.

3.3 Training Programs

River View Orchards recognizes that proper training is essential for creating a safe and efficient workplace. Although the manager will have a sound understanding of the operation, all employees will be trained regarding their position and tasks at hand.

All employees will be trained on the workings of the machinery. Practice running the equipment and related safety measures will be strongly enforced. If new equipment is purchased during the season, a formal presentation on the working of the product will be given to all employees.

The contract positions will be given more in depth training programs than the seasonal workers will. These individuals will be subject to the specifics of the plant species that they will be working with. This training will reduce any inefficiency with respect to maturity, disease and


River View Orchards overall plant development. The training programs will be run annually. The manager, who will be hired on the basis of having the skills to train employees, will do the training.

The manager will receive the most in depth and frequent training of all the employees. The manager must be familiar with all aspects of the job. This can vary from the various plant species, to the workings of the machinery, to the most effective way to manage his/her employees.

Training for the manager will be intense prior to the first season, but will turn into an annual update that will be held during the winter months.

More specifically, the training for the workings of the irrigation system will be received from the

Canada-Saskatchewan Irrigation Development Centre. The manager will then instruct all the employees as to how to plant, maintain and harvest the fruit.

3.4 Human Resource Strategy

A successful organization will often boast that their employees are one of their most effective resources. However, they way that these individuals are managed is what creates such an efficient workplace. Therefore, the human resource strategy that is implemented to mange these individuals must be carefully thought out. River View will strive to attain this goal by treating employees with fairness, equality, understanding and proper ethics.

3.5 Line of Authority

Manager

Contract 1

Seasonal Employees

Figure 3.1 River View Orchard’s Line of Authority

Contract 2

Seasonal Employees



Due to a limited number of employees at River View, the line of authority is very clear.

However, the small number of individuals employed at River View decreases the feeling of rank or status in the organization. River View works as a team to get the job done quickly and efficiently. For this reason, no employee should have an issue with approaching another individual or voicing their opinions when problems occur.

Nevertheless, some authority is required in an organization to maintain direction and control. The two contract individuals will oversee the seasonal employees and be responsible for reporting to the manager, who will finalize the decision when large problems occur. He/she will ultimately, report to the shareholders.

Table 3.1 Present and Future Cost of Employees

Year 1

Annual wage

EI (3.36%)

CPP (3.9%)

Worker’s Comp (2%)

Holiday Pay (3/52)

Total Cost

Year 2

Annual wage

EI (3.36%)

CPP (3.9%)


Holiday Pay (3/52)

Total Cost

Year 3

Annual wage

EI (3.36%)

CPP (3.9%)


Holiday Pay (3/52)

Total Cost

Manager

37,000

1,243

1,443

740

-

40,426

Manager

38,221

1,284

1,491

764

-

41,760

Manager

39,482

1,327

1,540

790

-

43,139

Contract 1

15,200

511

593

304

877

17,485

Contract 1

15,702

528

613

314

906

18,063

Contract 1

16,220

545

633

325

936

18,659

Contract 2 Seasonal (10)

15,200 51,200

511

593

304

1,721

1,997

1,024

877

17,485

2,954

58,896


15,702 79,334

528

613

314

2,666

3,094

1,587

906

18,063

4,577

91,258


16,220 109,270

545 3,672

633

325

936

18,659

4,262

2,186

6,304

125,694

Total

118,600

3,986

4,626

2,372

4,708

134,292

Total

148,959

5,006

5,811

2979

6389

169,144

Total

181,192

6,089

7,068

3,626

8,176

206,151



Year 4

Annual wage

EI (3.36%)

CPP (3.9%)

Worker’s Comp

(2%)

Holiday Pay (3/52)

Total Cost

Year 5

Annual wage

EI (3.36%)

CPP (3.9%)

Worker’s Comp

(2%)

Holiday Pay (3/52)

Total Cost

Year 10

Annual wage

EI (3.36%)

CPP (3.9%)


Holiday Pay (3/52)

Total Cost

Year 15

Annual wage

EI (3.36%)

CPP (3.9%)


Holiday Pay (3/52)

Total Cost

Manager

40,785

1,370

1,591

816

-

44,562

Manager

42,131

1,416

1,643

843

-

46,033

Contract 1

16,755

563

654

335

967

19,274

Contract 1

17,308

582

675

346

999

19,910


16,755

563

654

335

967

19,274

112,876

3,793

4,402

2,258

6,512

129,841


17,308

582

675

346

999

19,910

116,601

3,918

4,548

2,332

6,727

134,126

Total

187,171

6,289

7,301

3744

8446

212,951

Total

292,641

9,834

11,414

5,853

14,453

334,195

Manager

49,557

1,665

1,933

991

-

54,146

Contract 1

20,359

684

794

407

1,175

23,419


20,359

684

137,152

4,608

794

407

1,175

23,419

5,349

2,743

7,913

157,765

Total

344,220

11,565

13,425

6,884

17,001

393,095

Manager

58,292

1,959

2,273

1,166

-

63,690

Contract 1

47,849

1,608

1,866

957

2,761

55,041


47,849

1,608

1,866

957

2,761

185,573

161,326

5,421

6,292

3,227

9,307

185,573

Total

428,793

14,409

16,723

8,577

21,375

489,877



Year 20

Annual wage

EI (3.36%)

CPP (3.9%)

Worker’s Comp

(2%)

Holiday Pay (3/52)

Manager

68,566

2,304

2,674

1,371

-

Contract 1

28,168

945

1,099

563

1,625


28,168

945

1,099

189,761

6,376

7,401

563

1,625

3,795

10,948

Total

476,256

16,001

18,575

9,524

23,521

Total Cost 74,915

3.6 Shareholders’ Agreement

32,400 218,281 218,281 543,877

The equity that River View Orchards receives to begin production will be derived from the shareholders of the company. River View is looking to provide local farmers in the area the opportunity to invest in the orchard. There will be 30 available opportunities for individuals to invest. Thirty was chosen as the number of shareholders because the cost associated with recruiting more shareholders gets to be too high. Each individual will be able to purchase 20 shares valued at $1000 a share. It is envisioned that the people in the area will take a great interest in the orchard, as it will serve to further the economy, create jobs and bring tourists to the

Outlook area. These investments will make up the $600,000 River View requires for equity as start-up capital. The shareholders will enter into a contract that will require them to buy shares in future years. In Year 2, they will buy 6 additional shares, raising River View’s annual equity

$180,000. In Year 3, shareholders will purchase 6 shares. This contract that shareholders enter into will ensure that River View will have enough financing in the first years of production.

The agreement held between River View and the shareholders will be clear and concise. Any person has the opportunity to purchase shares in this organization. The shareholder can sell his/her investment, however, the entire amount of the investment must be sold. Therefore, all 20 shares must be sold in a package, not individually. This will maintain the number of investors at

30, and alleviate changes among shareholders, such as voting power.



4.0 Marketing Plan

4.1 Past Performance

River View Orchards has no past performance to speak of since this is strictly a concept business.

The fruit growing industry in Saskatchewan does not really have much past performance either, as there were only 795 total acres of fruit grown in 1998. Of this the acreage of the five types of fruit River View will grow are shown in the following table. All acreages are for 1998 except for the apples. The apple acreage was taken from 1996 statistics. The cantaloupe acreage was received from the Saskatchewan Irrigation Development Centre.

Fruit

Saskatoons

Strawberries

Raspberries

Apples

Cantaloupe

Area(acres)

450

190

45

39

5

Table 4.1 Fruit Acreage in Saskatchewan

Source:

Saskatchewan Agriculture and Food, 1998

4.2 The Market

4.2.1 U-pick

The U-pick market will consist of the regular U-pick population taken from a 150-kilometre radius of Outlook. This will be the core population that will provide business to the orchard.

Some of these customers will be from surrounding urban areas such as Saskatoon, Regina, and

Moose Jaw. These customers will be critical to attract and keep as regular customers.

The next part of the U-pick market will be tourists that are attracted to Outlook via promotion with other businesses in the area. Tourists will be made aware of River View’s U-pick operation by billboards along the numbers 1 and 11 highways.



4.2.2 Cantaloupe

All cantaloupe will be sold to Western Grocers. It will then be distributed to the consumers in retail grocery stores throughout Saskatchewan.

4.2.3 Farmers’ Market

All types of fruit will be taken to the Saskatoon Farmers’ Market on a weekly basis for sale to

Saskatoon customers who wish to buy fresh Saskatchewan-grown fruit.

4.3 Competition

River View will have competition from other established Saskatchewan U-pick operations. The biggest competitors will be those located around Saskatoon that are closer to the city and handy for those people with busy schedules. U-pick operations around Outlook will be the other competitors in the U-pick market as well.

An indirect competitor for the U-pick operation will be all of the grocery stores in the Outlook area and throughout southern Saskatchewan that sell fruit. This is where the majority of people buy their fruit. The fruit bought at the store may not be as fresh or good tasting, but the price and location are favourable.

A small competitor to River View Orchards will be the many personal gardens where people grow their own fruit.

In the retail market where the cantaloupe is sold, the main competitors are the companies in warm weather states such as California that grow cantaloupe on a large scale year round. These orchards can provide the cantaloupe at a lower cost and a higher supply than River View can.

Also, other melons like honeydew compete with cantaloupe. If the price of honeydew was to drop, demand for cantaloupe would fall, resulting in an increase of demand for honeydew.

The main competition in the farmers’ market will be other orchards selling their products at the market. There are a few strawberry and raspberry growers that sell at the market and there is a


River View Orchards growing demand for more diversity and supply.

25 The indirect competitors are the retailers selling the fruit.

4.4 Customers

The customers for River View’s products will be the people who want fresh fruit in southern

Saskatchewan. The customers will appreciate the added quality they will get if they pick or buy the fresh fruit. An understanding of the importance of supporting a Saskatchewan business may also be present. They will look at River View not just as a place to buy fruit, but also as a place to relax and enjoy the outdoors. The customers will range in age from toddlers to the elderly.

The age of the population of the prairies is increasing. Retired citizens will be a main customer because they have the time to do a lot of travelling. This segment of the population enjoys fresh fruit, and getting out to the country. Customers that buy the cantaloupe from the retail store will be those who would regularly buy cantaloupe. They will buy the River View cantaloupe instead of the regular California-grown, because they are ripened on the vine and have a sweeter taste which drives consumer demand 26 . The fruit that River View will produce will be of greater comparative quality because the fruit from California is picked before it is fully ripe resulting in fruit, which lacks the sweet taste River View’s will have.

At the farmers market, citizens of Saskatoon will buy the fruit brought to market. These people will be some of those who regularly come to the farmers market along with those who find out about River View’s products through word of mouth and advertisements.

4.5 Target Market

River View Orchards will have a variety of target markets that it will direct its’ message towards.

One market for the U-pick will be nearby rural centers. Radio advertising will be done on 600

CJWW in Saskatoon to get the word out to potential customers describing which fruits are currently in season. A large segment of the population River View will target will be families.

River View will provide a friendly atmosphere for children and their parents to pick their own fruit and enjoy a relaxing day outdoors.

25 In conversation with a grower at the Saskatoon Farmers’ Market

26 In conversation with Oliver Green, 2000



One problem is that the rural area around Outlook is fairly small consisting of a population of about 25,000 people 27 . Therefore a significant portion of the customers will have to be tourists and people from urban areas like Saskatoon, Moose Jaw, and Regina.

Saskatchewan’s population is aging and is healthier and more health conscious now than ever before, therefore, they will be a prime target for River View. Bus tours will be organized departing from Saskatoon, Regina and Moose Jaw enabling older people to get out to the orchard and pick fruit. Buses will be chartered from Antelope Tours of Saskatoon. Two buses will go from each centre on a monthly basis during peak season. Other Outlook area businesses such as restaurants will take part in the tours in order to provide a full day of activities. Once this market is established with the aging population it will continue to grow through word of mouth.

Saskatchewan Wholesalers that want to stock Saskatchewan grown produce will be the target for commercial cantaloupe sales. Western Grocers will purchase the entire quantity of cantaloupe that River View produces during the season from August 1 to October 1, provided it passes their quality control standards 28 .

The target market for the farmers’ market will be the people from Saskatoon and surrounding area that make weekly trips to the market. Brochures representing the orchard will be distributed at the farmers’ market in order to attract people out to River View to pick their own fruit. Also, customer service will be emphasized so that people share their positive experiences at the market with friends.

4.6 Product/Service Features

Due to the advantages grocery stores hold over River View, they must differentiate their fruit from the regular fruit that one would buy at the grocery store. Orchards that sell to grocery stores normally have better growing conditions, cheaper labour and more experience than River View does. This is because they are in California or other warm-weather areas. For example, orchards in California can hire Mexican workers who will work for far less money. This results in them being able to produce the fruit at a lower cost. River View is located in Saskatchewan, and

27 Derived from adding the populations of towns, villages, and RMs in the radius around Outlook. From the

1996 Saskatchewan Census.

28 In conversation with a buyer at Western Grocers, Saskatoon, 2000


River View Orchards although conditions are not ideal for a fruit farm, the people of Saskatchewan have high regards for products that are grown locally.

River View will have to market the idea that the fruit grown on their orchard is of far higher quality than that of imported fruits. All brochures and advertisements will emphasize this fact.

For the cantaloupe, which will compete directly with importers in the wholesale and retail markets this will be vital. They will have to emphasize that the fruit grown on the orchard at

Outlook is of far higher quality than that grown in California. Advertising will be done in the

Western Producer, the Star Phoenix newspapers and on 600 CJWW in Saskatoon. The newspaper ads will be run weekly during peak season. The radio ads will be on Fridays and Saturdays four times per day. Brochures will also be made available at the farmers’ market. However, the most important factor will be their ability to deliver on their promise of high quality. River View has to prove that they are the best.

On the U-pick scale, they are at a disadvantage to the orchards on the outskirts of Saskatoon, which have a larger population base, an established operation and constant clientele. Some people will not wish to travel to Outlook to pick fruit. Along with the fruit farm being advertised, it will be desirable that small businesses in the town such as hotels, campgrounds and restaurants cooperate in advertising in order to achieve success. River View Orchard will have to provide an experience that is more satisfying than what people could find in or near the big cities.

Many of the customers will be people from rural areas. These people will be attracted to the friendly service and outstanding quality of the fruit grown at River View. This is where the sense of small town community pride comes into play. Fruit that people pick themselves is always better than what they buy. As well, people from rural Saskatchewan enjoy the socializing that can be done at a place like a U-pick orchard. All of River View’s staff will be chosen and trained by the manager to be friendly and courteous so that people will keep coming back for more.

More than anything it will be the quality of the service that will attract and maintain the customer flow to the orchard. The experience of coming to the farm and the scenery enjoyed by customers will establish a regular clientele. River View Orchard will have to have premium products and service that is second to none in order to remain competitive.



4.7 Sales and Profit Objectives

The sales and profit objectives are shown in Table 4.2

below. Year seven is when full production will be reached, therefore is used as a replacement for year five. Prices have been quoted from

Harvey Clark of the Saskatchewan Irrigation Development Centre and Bill King (orchard owner from the Outlook area). The price of cantaloupe was obtained from a cantaloupe buyer from

Western Grocers.

Table 4.2 Price, Volume, Revenue and Profit Objectives 29

Y1 Y7 Y10 Y15

Prices

Saskatoons

Cantaloupe

4.41

0.88

5.34

1.07

5.88

1.17

6.90

1.38

Strawberries

Raspberries

Apples

Volume(kg)

Saskatoons

Cantaloupe

Strawberries

Raspberries

Apples

Revenues:

Saskatoons

Cantaloupe

Strawberries

Raspberries

Apples

3.75

5.51

1.87

-

25,402

6,352

-

-

4.54

6.68

2.27

24,705

127,010

20,410

15,880

8,555

131,997

22,354 135,413

23,820

-

92,729

106,009

19,382

5.00

7.35

2.49

24,705

127,010

20,410

15,880

8,555

145,289

149,050

102,067

116,684

21,334

5.87

8.62

2.93

24,705

127,010

20,410

15,880

8,555

170,484

174,897

119,766

136,919

25,034

Total Revenues 46,174 485,530 534,424 627,100

Net Income: (248,874) 127,580 153,707 166,692

Y20

8.10

1.62

6.89

10.12

3.43

24,705

127,010

20,410

15,880

8,555

200,111

205,756

140,625

160,706

29,344

736,542

197,795

Figure 4.1

on the following page displays the revenues for the entire twenty-year span. The revenues rise as production increases until year seven, when maximum production is reached and then continues to rise with inflation.

29 The information in the chart has been compiled from many sources. Harvey Clarke (SIDC), Bill King

(Outlook producer), and Western Grocers.



Total Revenue

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Total Revenue

Figure 4.1 Revenue Estimates for Twenty Years

River View Orchards, like all small businesses, is faced with a tough start-up situation. The procedure of getting a fruit farm established is a very costly one. This can be seen in the financial plan.

The main financial goal of River View Orchard will be to sell all the product that can be produced by the orchard. This means that efficient pickers and proper organization of U-pick areas is crucial. A great deal of promotional effort and exceptional service to customers is needed to make

River View’s goal of obtaining a positive profit by year five possible.



4.8 Channels of Distribution

4.8.1 U-Pick

U-pick products will be sold directly from the farm to the consumer. Customers will come to the farm to pick the fruit, or to purchase pre-picked fruit. The businesses that compete at the U-pick level use this same method to move their goods. The channel that the competition uses is from orchard to wholesaler to retailer to consumer.

4.8.2 Cantaloupe

Cantaloupe will be sold to a wholesaler like Western Grocers and then distributed to the retail chains. Competitors use this same method to deliver their products (cantaloupe and other melons) to the consumer. The marketing manager will also be responsible for marketing the cantaloupe to the wholesaler.

4.8.3 Farmers’ Market

Selling fruit via a farmers’ market will require the fruit to be delivered to Saskatoon. It will then be sold directly to the final customer at the market. Direct competition will be faced from the other fruit-growing businesses that sell their fruit at the market in the same manner. Indirect competition sells to the wholesaler who distributes the fruit to the retailer.



4.8.4 Map of Outlook and Surrounding Area

A map has been drawn to illustrate where River View Orchards is located in comparison to

Outlook, Saskatoon, Regina and Moose Jaw. The locations of billboards are displayed as triangles and are located in high traffic areas. The star is the symbol for the location of River View

Orchards.

KEY

Billboards Saskatoon

North

219

River View Orchards

Outlook

11

2

Regina

1

Moose Jaw

Figure 5.1 River View in Relation to Major Highways and Population Bases

4.9 Pricing Policy

River View will have to sell its’ produce at prices that are competitive with market prices in order to capture any business. Cantaloupe will be sold at a price agreed upon by the wholesaler. In time, once a taste has been established for the Saskatchewan-grown cantaloupe, River View may be able to ask for a premium. The products sold at the farmers’ market will be slightly higher than


River View Orchards the fruit sold at the orchard to cover the transportation costs, but again the will have to be close to the competitor’s price at the market.

4.10

Markets, Products and Services

The fruit that River View produces and sells will make up a small amount of Saskatchewan’s total market. The U-pick market is a niche market for those who wish to pick their own fruit, but do not have the resources to grow it. The goal for River View is to gain popularity amongst the people in southern Saskatchewan and gain a large share of the U-pick market.

The cantaloupe side of the operation will also make up a small portion of Saskatchewan’s market.

Western Grocers distributes 1600 cases per week to different retailers in Saskatchewan. In the first year of operation River View only produces a little over 1600 cases in the whole season. An agreement will be made with Western Grocers to deliver all production to them. Western Grocers will inspect the cantaloupe for quality before accepting it.

River View should be able to gain a large portion of the market at the farmers’ market because

Saskatoon does not have many fruit growers. This is an easy market to enter since different small fruit growers will enter and exit the market throughout the year.

River View plans to offer service that is second to none in Saskatchewan. The relationship that the company keeps with its customers will be what sets River View apart from the rest. The quality of service offered by River View’s employees will be unmatched by others because it will be continuously improved upon with the company’s experience. People will take the time to come pick fruit because they enjoy the beautiful atmosphere and service they receive while they are at River View. At the farmers’ market, River View’s products will be a favorite because people will like the treatment they get while they are purchasing River View’s goods. Deliveries of cantaloupe to the wholesalers must be made on time, and the cantaloupe delivered will be consistently of the highest quality.

4.11 Selling and Advertising

River View will be aggressive in their attempts to bring customers to the orchard. Advertising will be done across southern Saskatchewan via radio and newspaper advertisements. The


River View Orchards manager will be responsible for arranging this. The main focus will be to market the image of the orchard setting to attract consumers. These ads will also inform people about the different fruits that are grown and what is currently in season. They will be run every week close to the weekend during the summer months when fruit is available to be picked.

The role of this advertising will be to inform the people of southern Saskatchewan that there is an orchard in Outlook that will offer them the opportunity to pick fresh fruit. Without advertising, people will not know that the orchard even exists. The advertising will appeal to those people who want to get away to the country for a day and experience the outdoors, while picking fruit.

River View’s excellent service and fresh fruit will lead to word of mouth promotion. Customers will tell their friends about the enjoyment that River View provided them. This will result in other people coming to the orchard.

The cantaloupe will be directly marketed to the wholesalers. The quality of the product and the timeliness of the deliveries will determine whether the wholesalers will continue to do business with River View.

No advertising will be done for the farmers’ market. The farmers’ market will be used as a tool to advertise the orchard to the people of Saskatoon and surrounding area. Brochures and pictures will be available so that the people have visuals by which they can equate the fruit they buy with the orchard it came from. As well, billboards will be placed along highways 1, 11, 15 and 219.

4.12 Marketing Budget

Table 4.3 Marketing Budget

Marketing Budget

Buses – Saskatoon

Buses – Regina

Buses – Moose Jaw

Brochures

Billboards

Radio Ads

Newspaper – Star Phoenix

Newspaper – Western Producer

Total

4,922

5,564

5,136

1,281

2,996

3,360

3,108

2,335

28,702



The marketing budget for River View Orchards will be large because of the costs involved with attracting customers to the orchard. Antelope Tours provided the cost for tours from Saskatoon,

Regina and Moose Jaw. The cost for one trip to River View from Saskatoon is $575, from Regina is $650 and from Moose Jaw is $600 with GST not included. The plan is to take two busloads from each location, four times per year.

Brochures are another important part of the marketing plan. Pro Print of Saskatoon will provide the brochures at a cost of $1197.00 plus GST. This is for 5,000 glossy full colour brochures.

Billboards will be placed so that there are two on number 1 and 11 highways and one along number 219 and 15 highways. An additional billboard will be place directly in the town of

Outlook. These billboards will serve to attract those travelers to whom the orchard is unknown and to guide those travelers who are on their way to River View.

Radio advertising will be done on 600 CJWW radio in Saskatoon, which has a signal with a large radius. Advertising is $35 per occasion. The ads will be played four times per day on Friday and

Saturday during River View’s peak production.

Newspaper advertising will be done in Saskatoon’s Star Phoenix in and the Western Producer.

The Star Phoenix charges $259 plus GST for a business card size ad that is run once per week

(Friday). The Western producer charges 194.60 plus GST for the same ad. Both ads will be run once per week in the peak season.

5.0 The Accounting/Financial Plan

5.1 Financial Considerations

River View’s financial plan occurs over a twenty-year period. The reason why such a long period is projected is due to the long-term nature of the industry. River View will not start producing at its full capacity until the seventh year, therefore a ten-year model would only consider three years of maximum production and would not be sufficient.



Table 5.1 Revenue Estimates for River View Orchard.

Year

10

15

1

7

20

Total Revenue

$ 46,174

$ 485,530

$ 534,424

$ 627,100

$ 736,524

The total revenues increase rapidly in the first five years and then level off once the business gets fully operational in year seven.

The Cost of Goods Sold is made up of the direct labour that is involved in producing the fruit as well as the farm overhead. The farm overhead is divided into both fixed and variable expenses.

Fixed overhead consists of the expenses for natural gas and electricity for the building, the property taxes and the capital cost allowance for the orchard. The variable overhead costs are made up of the water/drip irrigation used for the cantaloupe, utilities storage operation, maintenance, fuel and repairs/maintenance.

The direct labour is composed of the two permanent labourers as well as the summer employees.

River View will start out by hiring ten summer staff in the first year, fifteen in the second and twenty for each consecutive year (as required).

The operating expenses for the financial model have been taken from various per acre cost of production guides received from the Canada-Saskatchewan Irrigation Development Centre in

Outlook, Saskatchewan. They were derived by multiplying the cost per acre with the number of acres River View plans to seed. The values for each crop are added together to obtain the total.

A summary of financial performance is shown in Table 5.2. It shows the total revenues, cost of goods manufactured, total expenses and net income for years one, seven, ten, fifteen and twenty.

Year seven is used in place of year five because it is the critical year when production first reaches full capacity. The numbers were taken from various sources with: Harvey Clark, Bill

King and Saskatchewan Irrigation Development Centre being the main ones.



Table 5.2 Summary of Financial Performance

Sales Revenue

Direct Materials

Direct Labour

Total Overhead

Total Cost of Goods Manufactured

Total Expenses

Total Costs

Y1

46,174

Y7

485,530

Y10

534,424

Y15

627,100

Y20

736,541

38,721

93,864

64,900

197,485

102,242

299,727

49,683

185,613

54,423

289,719

126,384

416,103

54,766

204,602

46,007

305,375

131,552

436,927

64,419

240,664

41,681

346,764

137,371

484,135

75,773

283,082

45,193

404,048

156,957

561,005

Net Income (before taxes) (253,554) 69,427 97,497 142,965 175,536

There is a net loss every year until year five. This can be seen in the Appendix A. In year seven the net income is $69,427 and it continues to rise until year 20 when it is $175,536.

5.2 Financing Plan

The financing for River View Orchard will consist of debt and equity financing. The amount of debt was calculated as an estimate of what would be allowable for River View’s operations. This was determined to be 60% of the land and buildings and 40% of the rest of the equipment 30 . It makes the most sense to have shares released over the first three years to ease the burden on investors and because not all the cash is needed at once.

Table 5.3 Planned Schedule for Debt and Equity Financing.

Year 1

Long-term Debt 250,000

New Common Shares 600,000

Total Financing 850,000

Year 2

180,000

180,000

Year 3

180,000

180,000

The method for acquiring the equity is explained in the Human Resources Plan. The debt will be paid off over a fifteen-year period at 12% interest. The payments on the debt will be $32,868 annually.

30 In conversation with Bill Brown



5.3 Economic Forecast

The economic forecast is for all of the prices to increase at the rate of inflation of 3.3% 32 . Thus, all of the expenses have also been inflated at 3.3% annually. After the levels of production are at full capacity, the only change to the revenues and expenses will be the inflation of these values.

5.4 Financial Ratios

Financial ratios have been calculated for all twenty years of the financial model.

Table 5.4 Financial Ratios in Intervals of Five Years

Financial Ratios

Production Ratios

Production Labour/Sales

Production OH/Sales

Debt Ratio

Debt to Equity

Profitability Ratios

Gross Profit Margin

Net Profit Margin

Return on Total Assets

Y1 Y5

203.3%

140.6%

41.6%

16.7%

41.6% 60.2%

71.1% 151.5%

-327.7%

-549.1%

-42.8%

30.9%

1.6%

1.9%

Y10

38.3%

8.6%

20.3%

25.5%

42.9%

18.2%

14.5%

Y15

38.4%

6.6%

0.5%

0.5%

44.7%

18.0%

10.0%

Y20

38.4%

6.1%

0.4%

0.4%

45.1%

18.8%

7.8%

IRR 8.6%

The ratios show that production labour is a large cost to River View. In year 1 labour costs

203.3% of sales, it then falls to 38% by year 6, after which it remains fairly constant. The debt and debt to equity ratios start at 41.6% and 71.1% respectively. These values decrease as the long-term debt is paid off. After the loan is paid off these ratios are both 0.4%.

The profitability ratios are all negative in the first year but increase rapidly after that. The gross profit margin is –327.7% in year 1, but by year 5 it rises to 30.9% and finally reaches a plateau of

45%. The return on assets starts at –42.8% and then rises to 1.9% in year 5. In year eight it hits a peak of 15.8% and then gradually falls to 7.8% in year twenty.



Although these ratios do not tell how River View fairs in comparison to the rest of the fruit growing industry, the ratios show improvement as time goes by over the twenty-year forecast.

5.5 Breakeven Analysis

The breakeven analysis was prepared for year seven because this is the critical year where maximum production is first reached. All years from year seven on will have approximately the same results. The breakeven was used to determine when the net income will be zero for a particular year. Breakeven analysis was prepared on each crop’s yield, with the reduction of each by the same percentage. It was also performed separately for the yields of both cantaloupe and

Saskatoon berries. Breakeven was performed on the prices customers will pay for the fruit, again dropping each price by the same amount. The maximum number of summer students was also determined.

Expected Output

Year 7

Saskatoons

Yield(kg/acre) Total Output

1,647 24,705

Cantaloupe

Strawberries

Raspberries

12,701

2,041

1,588

127,010

20,410

15,880

8,555 Apples

Net Income

1,711

69,427

Expected Prices

Year 7 Price($/kg)

Saskatoons

Cantaloupe

Strawberries

Raspberries

5.34

1.07

4.54

6.68

Apples

Net Income

2.27

69,427

Expected number of summer students

Year 7 # of students

20

Table 5.5 Expected Output, Prices and Summer Students for Year 7

Table 5.5

shows the expected amounts that the orchard will produce in year seven. Yield was the first value that was changed to bring the net income to zero. The numbers in Table 5.6

show that a 14.3% drop in the yield of every crop will bring the net income to zero in year seven.



Table 5.6 Breakeven When Yield of All Crops Decreases Equally

Year 7 Yield(kg/acre) Total Output

Saskatoons

Cantaloupe

Strawberries

Raspberries

Apples

Net Income

1,412

10,885

1,749

1,361

1,466

-

21,180

108,550

17,490

13,610

7,330

Cantaloupe has the largest total output of any crop so a separate breakeven was done by changing the yield of cantaloupe while keeping the yield of all other crops constant at their expected production. Table 5.7

shows that the yield of cantaloupe can be dropped by 48.7% before River

View will see a net income of zero in year seven.

Table 5.7 Breakeven Cantaloupe Yield Keeping All Others Constant

Year 7

Cantaloupe

Net Income


6,189 61,890

-

Saskatoon berries do not provide the same high output as cantaloupe, but because they have a high price, a decrease in yield could be equally as devastating. Table 5.8

shows that a 47.4% reduction in Saskatoon berry yield in year seven would mean a net income of zero in that year.

The table shows that if Saskatoon berry production dropped to 781 kilograms per acre there would be zero net income.

Table 5.8. Breakeven Saskatoon Berry Yield Keeping All Others Constant

Year 7

Saskatoons

Net Income


781

-

11,715

The next factor that is critical to have a positive net profit is the prices received for the produce.

Prices have about the same effect as yield. If the prices of all products were to fall by 14%, then there would be a net income of zero. This is probably the least likely of all factors to happen because River View will set the price of the U-pick products. The price used for cantaloupe is the lowest of its normal range. (Western Grocers, 2000)



Table 5.9 Breakeven by Reducing Prices by Equal Amounts

Year 7

Saskatoons

Cantaloupe

Strawberries

Raspberries

Apples

Net Income

Price($/kg)

4.52

0.92

3.88

5.70

1.95

-

The final breakeven for net income was done on the maximum number of summer students that could be hired before net income equals zero. This is a critical factor because this type of labour is a major expense. If the number of students needed in year seven increases by nine to twentynine, then there will be zero profits.

A breakeven for internal rate of return was done from year seven on, since production was not the maximum before this time. If production yields are reduced by 16% from year seven to year twenty, the numbers shown in Table 5.11 will result and the IRR will equal zero.

Table 5.10 Breakeven Yields from Years 7 to 20 to get an IRR of Zero

Saskatoons

Cantaloupe

Strawberries

Raspberries

Apples

IRR


1,383 20,745

10,669

1,714

106,690

17,140

1,270

1,711

-

12,700

8,555

In any agricultural operation and especially in the fruit industry the chance of losing this proportion of the yield is very possible. This is especially true with Saskatchewan’s unpredictable climate.

Likewise, if the number of summer students increases from twenty to twenty-nine, in year seven, there is zero net income. The goal for River View is to make twenty the maximum and only hire extras in very busy and unusual circumstances. From this it can be concluded that labour is definitely a critical factor in the success of this business.



It is very possible that the situations in Tables 5.6, 5.7

, and 5.8

could occur during the twenty years that the financial model covers. This substantially adds to the risk of the operation.

5.6 Summary

If there is interest in following through with this plan, the Orchard’s main concern will be to attract the investors to put money into the business. As well it would difficult to get customers out to pick all the fruit that is produced.

The financial information shows that the operation is profitable at the given production levels and prices. The 8.6% IRR is too low however to cover the amount of risk involved in the operation. From this it can be deduced that this operation is not a viable one for any investors looking to make good returns with little risk.



6.0 List of References

Agricultural Statistics 1998. Saskatchewan Agriculture and Food

Allen, T., Tanino, K., Storey G., and Lokken J. 2000. Nothern Vigour of Strawberry

Crowns. Economic (Production and Marketing) Feasibility Analysis and Business

Development Plan for Commercialization. Department of Agricultural Economics,

Department of Plant Sciences, University of Saskatchewan.

D’Arcy, Robin. 2000.

Developing Value Added Processing in the Native Small Fruit

Industry.

M. Sc. Thesis, Department of Agricultural Economics, University of

Saskatchewan.

Storey, G.G. 1998. Central Marketing Requirements for the Development of the

Saskatchewan Small Fruit Industry. Department of Agricultural Economics, University of

Saskatchewan.

Saskatchewan Agriculture and Food http://www.agr.gov.sk.ca/docs/processing/fruit/fruitsector.asp

Saskatchewan Agriculture and Food http://www.agr.gov.sk.ca/search.asp?firstpick=Search

Dutch Growers. Saskatoon, Saskatchewan.

Clark, Harvey. Cost of Production Sheets. Canada-Saskatchewan Irrigation Development

Centre. Outlook, Saskatchewan.

Canada-Saskatchewan Irrigation Development Centre. Outlook, Saskatchewan.

Harvey Clarke

Western Grocers, Ltd. Saskatoon, Saskatchewan. Clarence Neufeld

The Star Phoenix. Saskatoon, Saskatchewan.

The Western Producer. Saskatoon, Saskatchewan.

600 CJWW Radio Station. Saskatoon, Saskatchewan.

Antelope Bus Tours. Saskatoon Saskatchewan.

Saskatoon Farmers’ Market. In conversation with a grower.

Mastergraph Inc. Saskatoon, Saskatchewan

Pro Print. Saskatoon, Saskatchewan

In conversation with Bill King. Outlook, Saskatchewan.



In conversation with Oliver Green. Outlook, Saskatchewan.

RM of Rudy. Outlook, Saskatchewan.

Advance Construction. Saskatoon, Saskatchewan.

United Grain Grower’s. Outlook, Saskatchewan.

http://www.ag.usask.ca/cofa/departments/hort/hortinfo/fruit/ http://www.ext.vt.edu/departments/envirohort/factsheets2/veg/feb90pr6.html

Sunny Hills Nursery. Nipawin, Saskatchewan.

http://agri.gov.ns.ca/pt/hort/berrycrops/pihbc93-04.htm

In conversation with Jackie Bantel, University of Saskatchewan. Saskatoon, Saskatchewan

In conversation with Early’s Farm and Garden Centre. Saskatoon, Saskatchewan.

PlastiTech, Quebec

Albert Robertson. University of Saskatchewan. Saskatoon

Autotrader website. http://www.autotrader.com

John Deere website. http://www.deere.com

http://aggie-horticulture.tamu.edu/greenhouse/new/training/garden.htm

Micromaster Air Assist. Correspondence by email



APPENDIX A

FINANCIAL PROJECTIONS


Human Resources Plan

N

River

Cantaloupe

Raspberries

Strawberries

Office Shed

Storage

Parking Lot

Main Access Road

Figure 2.1 The Site Plan for River View Orchards

KEY

Saskatoon

berries

Apples

Manager

Contract 1

Seasonal Employees

Contract 2

Seasonal Employees

Source:

APPENDIX A

FINANCIAL PROJECTIONS

Related documents

Products

Support

Human Resources Plan

N

River

Cantaloupe

Raspberries

Strawberries

Office Shed

Storage

Parking Lot

Main Access Road

Figure 2.1 The Site Plan for River View Orchards

KEY

Saskatoon

berries

Apples

Manager

Contract 1

Seasonal Employees

Contract 2

Seasonal Employees

Source:

APPENDIX A

FINANCIAL PROJECTIONS

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