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Organic Grain CleaningOrganic Grain Cleaning
Ryan CarterRyan CarterRyan GoodwinRyan GoodwinJoel MarchildonJoel MarchildonLandon ZimmerLandon Zimmer
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
Operations PlanOperations Plan
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain Cleaning
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
Organic Grain Cleaning
Process Flow Diagram
De-huller
Mill
Sifter
WheatFlour
OatFlour
BarleyFlour
HopperBin/Scale
Bagger
Mixer
BarleyOatsWheatRyeRaw
Products
RyeFlour
ExcessBran
MetalDetector
Sealer
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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 Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
Human Resource StructureHuman Resource Structure
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
Marketing PlanMarketing Plan
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
The MarketThe Market
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
Customer/Target MarketsCustomer/Target Markets
Organic Grain CleaningOrganic Grain Cleaning
Customer/Target MarketsCustomer/Target Markets
Organic Grain CleaningOrganic Grain Cleaning
Product FeaturesProduct Features
Certified OrganicCertified Organic Environmentally SafeEnvironmentally Safe High QualityHigh Quality Locally ProducedLocally Produced TraceableTraceable
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
Marketing BudgetMarketing Budget
Organic Grain CleaningOrganic Grain Cleaning
Financial PlanFinancial Plan
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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%
Organic Grain CleaningOrganic Grain Cleaning
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%
Organic Grain CleaningOrganic Grain Cleaning
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%)
Organic Grain CleaningOrganic Grain Cleaning
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
Organic Grain CleaningOrganic Grain Cleaning
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