Introduction Produce a variety of orchard and garden products
Processing Division Creation of value added products Sour Cherry Syrup
Operations Plan Processing
Buys raw, cleaned cherries from Grindstone Farm Processed into Cherry Syrup
Cost of Goods Manufactured
Total Direct Materials $42,624
Total Direct Labour $6,480
Total Manufacturing Overhead $80
Total Cost of Goods Manufactured $49,184
Capital Budget Grindstone Processing
Very minimal 2 Steamer Juicers
Valued at $200 each
All other equipment is supplied with rental
General Expenses
Description Estimated Cost Source of Estimate
Administration Costs $15 * 1 hr/day 260 working days/yr
= $3,900
Accountant $1,500 MNP
Total costs/ yr $5,400
AR/AP/CCC Accounts Receivable
N/A to production
Accounts Payable 30 day payment period Grindstone Farms
Cash Conversion CycleCCC= Average Days Inventory + Average Collection Period
– Average Days Payables
CCC = 150 + 30 – 0 = 180 days
Human Resources Technical Skills
Mixing of ingredients Sterilization Product Pourer Sealing and Labelling
All training is on the job Direct supervision from president
Human Resources cont. Wages:
Kate Martens $2,400/yr Employees $4,080/yr Total Deductions $542.40/yr Total Yearly Wages $7,022.40
Marketing
“If you consider food as a way to express your inner creativity and enjoy new and exciting experiences, then Cherry Syrup is a way to add a fresh stimulating new flavor to your favorite dishes.”
The Four P’s Products and Services
“ Cherry Syrup” is a branded name for their sour cherry syrup
This syrup is a versatile meal additive
Price Processing will sell their syrup for $4.50 per
bottle Competitive pricing strategy
The Four P’s cont. Promotion
Appearances on the Prairie Farm Report Visually appealing booth at Farmer Markets Websites
Place Saskmade Marketplace Farmer Markets
Segmentation, Marketing, & Positioning
Segmentation Food additive market 35 + age female
Primary purchaser of food More adept to try new things
Segmentation, Marketing, & Positioning
Marketing Approximately 1510 women over the age of 35
66% of the women
One of the only sour cherry syrups currently on the market
Sask Made Marketplace will help further the market 55 785 women in the age bracket in Saskatoon alone
Website will also help to further the market to more exotic places
Segmentation, Marketing, & Positioning
Positioning processing will market its product as specialty syrup
and as a food additive room for sour cherry syrup in the current market
Consumers will recognize our product as a truly unique and flavorful experience
SWOT Analysis Strengths: Human resources Training is on the job Direct supervision from manager Manager is ambitious and dedicated Low cost for wages Low labor intensity Hours are flexible The workers have been together for
many years Workers get along well Small chain of command Small family oriented business
Weaknesses: Human Resources Availability of skilled workers Work can be dangerous Work is not constant Work area is small Requires constant manager
supervision
SWOT Analysis Physical Resources Church rent is $10/day Church is HACCP certified Close proximity Ample supply of cherries to process Cherry supply is close to processing
plant (9 km)
Physical Resources Roads for transport are mostly
gravel -possible threat in winter months
Dependent on outside source for processing
Weak product image Narrow product line
SWOT Analysis Financial Resources No accounts receivables No long term debt
Financial Resources High CCC Accounts payable every 30 days Profits are dependent on sales alone
SWOT Analysis Opportunities: Sour cherry industry is new Lots of potential It’s a versatile product -can be used on a variety of food
products -can be used at multiple meal times Potential in catering industry
Threats: Other Sask. made fruit products Weather; drought and frost Health conscious consumers, ie: no
desserts Cherry supply is surrounded by
forest -potential threat of fire Thousands of cherry acres soon to
enter production
CompetitionProduct Attractions Price (Cdn$)Pure Organic Maple Syrup Canada No. 1 Medium
-An organic syrup-Attractive to the new health awareness consumer
$ 12.89/ 500 mL
Aunt Jemima Original Table Syrup
-The most recognizable brand name in syrups-Safe choice
$ 3.99/ 250 mL
Smuckers syrup squeeze bottle -Brand name syrup-Safe choice
$ 4.49/ 250 mL
RP Saskatoon Berry Syrup -In province competition-Premium product
$ 8.75/ 250 mL
PGF Prairie Berry Syrup -In province competition-Specialty Syrup
$ 5.75/ 250 mL
Product Features
Cherry Syrup from Sask Carmine Jewel Cherries Locally produced Food Additive One of the first of its kind
Sale Objectives
Product Sales (units)Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
Syrup (jars)
1,500 1,500 1,500 2,000 2,500 4,000 9,000 14,000 16,000 19,000
Channels of Distribution
Ridsdale Transportation ltd. To Saskmade Marketplace 1 Trip/month
Company Van Farmers markets
Marketing BudgetAdvertising
Western Producer Ad $116
Pamphlets $30
Banner $300
Total Advertising $446
Promotion and Development
Store $1,350
Farmers Markets $1,080
Donation $500
Web Page $1,500Travel Expenses $744.80
Sample Product $1,890
TV Interviews No cost
Total Promotional and Development $7,064.80
Total Marketing Expense $7,510.80
FinancialsYear 2008 2009 2010 2011 2012
Sales 86,400 88,128 89,891 91,688 93,522
COGS 30,564 52,517 53,571 54,628 55,710
Gross Margin 55,836 35,611 36,320 37,060 37,812
Expenses 11,782 12,017 12,258 12,503 12,753
Net Income Before Tax 44,055 23,594 24,062 24,557 25,060
Income Tax 4,405 2,359 2,406 2,456 2,506
Net Income After Tax 39,649 21,234 21,656 22,102 22,554
Net Cash Flow to Equity 39,775 52,371 53,412 54,474 55,558
FinancialsYear 2013 2014 2015 2016 2017
Sales 95,393 97,300 99,246 101,231 103,256
COGS 56,839 58,033 59,161 60,325 61,517
Gross Margin 38,554 39,297 40,086 40,906 41,739
Expenses 13,008 13,268 13,533 13,804 14,080
Net Income Before Tax 25,546 26,029 26,552 27,102 27,659
Income Tax 2,555 2,603 2,655 2,710 2,766
Net Income After Tax 22,992 23,427 23,897 24,392 24,893
Net Cash Flow to Equity 56,684 57,830 58,978 60,149 73,182
Net Present Value (NPV) 54,335
Internal Rate of Return on Equity Investment 28.40%
External Rate of Return on Equity Investment 12.90%
Unit Cost BreakdownUnit Cost Per Batch* 2008 2009 2010 2011 2012
Cherries $36.00 $36.70 $37.45 $38.20 $38.97
Ingredients 12.74 13 13.25 13.52 13.79
Packaging Materials 60.41 61.62 62.85 64.1 65.39
Total Unit Cost of Direct Materials $109.15 $111.33 $113.56 $115.83 $118.14
Direct Labour 20.25 20.66 21.07 21.49 21.92
Overhead 29.65 30.12 30.72 31.33 31.96
Total Unit Cost of Labour and Overhead $49.9 $50.78 $51.79 $52.82 $53.88
Total Cost of Production $159.05 $162.11 $165.35 $168.65 $172.02
Selling and Administration 37 38 38 39 40
Total Unit Cost of Selling $196.05 $200.11 $203.35 $207.65 $212.02
Expected Average Selling Price $270 $275 $281 $287 $292
Critical Variables
Critical Value Base Case IRR=0% Allowable % Change
Unit Price $4.50 $2.49 55.3%
Quantity of Sales 19,200 10,683 55.6%
Wages 10.13 72.74 718.1%
Price of Jars $19,200 $81,011 421.9%
Break Even Analysis
0
2500
5000
7500
10000
12500
15000
17500
20000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
# o
f U
nit
s S
old
Base Case Cash Flow Break Even Net Income Quanity Break Even Economic Break Even
Scenario Analysis
Variable Worst Case Base Case Best Case
Number of Sales 14,400 19,200 24,000
Average Price $3.37 $4.50 $5.63
NPV (104,982) 54,335 227,638
IRR -2.7% 28.4% 56.4%
Conclusion Suggestions
Market outside Saskatchewan Small market place
Use a distributor Opens a world of possibilities….
References APLUS Kitchen Equipment [Online]. Available at http://apluskitchenequipment.com (Verified October 10, 2007)
Cowboy Orientated Web Sites [Online [. Available at http://www.thecattle.net . Verified on November 3, 2007
Net Grocer [Online]. Available at http://shop.netgrocer.com (Verified October 9, 2007)
Richards Packaging [Online]. Available at http://richardspackaging.com (Verified October 11, 2007)
Risdale Transport [Online]. Availabe at http://www.ridsdale.ca/thirdpagr.htm. Verified on November 3, 2007
Saskatchewan Governmental Insurance [Online]. http://sgi.sk.ca (verified October 12, 2007)
Saskatchewan Made Marketplace [Online]. Available at http://www.saskmade.ca . Verified on November 4, 2007
SaskPower [Online]. Available at http://saskpower.com (Verified October 10, 2007)
Shop Sobeys [Online]. Available at http://www.shopsobeys.com . Verified on November 4, 2007
Town of Nipawin [Online]. Available at http://nipawin.com (Verified October 11, 2007)
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