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					Saskatchewan Organic Meat Market COMM 492.3 College of Agriculture, College of Commerce, University of Saskatchewan December 4, 2003

Prepared for: Simon Weseen & Gary Storey

Prepared by: Kari Henderson Kim McLean Kim Minogue Kristin Nemeth

Saskatchewan Organic Meat Market__________________________________________

1.0 Introduction ..........................................................................................
1.1 Mission Statement ............................................................................................................... 5 1.2 Goals & Objectives.............................................................................................................. 5 1.3 Project Benefits ................................................................................................................... 6

2.0 Operations Plan .......................................................................................
2.1 Location................................................................................................................................ 6 2.2. Floor plan............................................................................................................................ 7 2.3 Work Plan and Flow of Work............................................................................................ 8 2.4 Organic Slaughter and Processing Guidelines ................................................................. 8 2.5 Average Business Cycle (Week)......................................................................................... 9 2.6 Capital Budget................................................................................................................... 10 2.7 Cost of Sales....................................................................................................................... 13 2.8 Operating Expenses .......................................................................................................... 13

3.0 Human Resources ......................................................................................
3.1 Organizational Structure.................................................................................................. 13 3.2 Job Descriptions ................................................................................................................ 14 3.3 Mentoring and Guidance.................................................................................................. 15

4.0 Marketing Plan ........................................................................................
4.1 Organic Livestock Market Overview .............................................................................. 16 4.2 The Marketing Mix (4 P’s)............................................................................................... 17
4.2.1 Product...................................................................................................................................... 17 4.2.2 Service ....................................................................................................................................... 18 4.2.3 Target Market .......................................................................................................................... 18 4.2.4 Pricing ....................................................................................................................................... 19 4.2.5 Promotion ................................................................................................................................. 20

4.3 SWOT Analysis ................................................................................................................. 21
4.3.1 Strengths ................................................................................................................................... 21 4.3.2 Weaknesses ............................................................................................................................... 21 4.3.3 Opportunities............................................................................................................................ 22 4.3.4 Threats ...................................................................................................................................... 22

4.4 Competition ....................................................................................................................... 23

5.0 Financial Plan .........................................................................................
5.1 Loan Amortization............................................................................................................ 25 5.2 Dividends............................................................................................................................ 25 5.3 Inflation.............................................................................................................................. 25 5.4 Ratio Analysis.................................................................................................................... 25 5.5 Summary of financial Results .......................................................................................... 26 ___________________________________________________________________________ COMM 492 College of Commerce, College of Agriculture, University of Saskatchewan

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Saskatchewan Organic Meat Market__________________________________________
5.6 Breakeven Analysis ........................................................................................................... 27

6.0 Conclusion ............................................................................................

7.0 References ............................................................................................

8.0 Appendix A............................................................................................

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Saskatchewan Organic Meat Market__________________________________________ List of Figures Figure 2.1 Proposed site location for the Saskatchewan Organic Meat Market……….6 Figure 2.2 Proposed floor plan for the Saskatchewan Organic Meat Market………….7 Figure 2.3 Flow of work diagram……………………………………………………...8 Figure 3.1 Organizational structure…………………………………………………..14

List of Tables Table 2.1 Building capital costs for lease agreement basis……………….…………..…10 Table 2.2 Equipment capital costs……………………………………….…………...…11 Table 2.3 Working capital……………………………………………….………………12 Table 2.4 Capital budget summary……………………………………..………….…...12 Table 2.5 Manufacturing overhead for year 1……………………..……………….…...12 Table 2.6 Cost of goods manufactured………………………….…….………………...12 Table 3.1 Cost of labor over 5 years………………………………….……….………...16 Table 4.1 Estimated market share and meat consumption………….………………..…19 Table 4.2 Purchase and sale prices…………………………….……………………..…20 Table 4.3 Direct competition to the market….………………….…………………..…..23 Table 4.4 Indirect competition to the market…………..……..…….……………..……24 Table 4.5 Estimated marketing budget………………..…..…………………….…..…..24 Table 5.1 Financing……………………………………….…………………………....25 Table 5.2 Summary of financial ratios…………………...…………..………………….26 Table 5.3 Summary of financial results……………………………...……….………….26 Table 5.4 Sensitivity analysis…………………………………….…………..………….28

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Saskatchewan Organic Meat Market__________________________________________ 1.0 Introduction Saskatchewan Organic Meat Market is a one of a kind supplier of strictly Saskatchewan produced organic beef and pork. The beef products available are steak, roasts and ground meat. The pork products include pork chops, hams, and roasts. The animals will be raised and slaughtered at Pine View Farms. Guidelines set by the Organic Crop and Improvement Association (OCIA) will be followed by Pine View Farms and the Market to ensure the meat is pure organic and free of any contaminations.

The demand for organic meat is increasing due to a number of food safety scares, health issues, and the need for a traceable product. Saskatchewan Organic Meat Market will have the capacity to ease the consumer’s apprehension regarding the meat they will consume.

Saskatchewan has the potential to increase organic meat production due to its ideal environment and land availability. With effective marketing, the demand for organic meat will increase throughout the world, providing an excellent opportunity for Saskatchewan.

1.1 Mission Statement “The Saskatchewan Organic Meat Market will provide a healthy, fresh, safe, chemical free, and traceable meat product that originates from one Saskatchewan organic livestock location”

1.2 Goals & Objectives • • • • • To promote the Saskatchewan organic livestock industry Establish a reliable clientele Provide a quality well recognized product Become recognized by organic consumers Generate at least 20% return on equity

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Saskatchewan Organic Meat Market__________________________________________

1.3 Project Benefits • • • The Saskatchewan Organic Meat Market will benefit Saskatchewan organic livestock producers by giving them a market to sell their beef and pork. Consumers will be provided with a high quality, safe, and traceable product Promotes the Saskatchewan organic industry by providing information on the benefits of organic products

2.0 Operations Plan

2.1 Location The Saskatchewan Organic Meat Market will be located on #1 3414 8th east in the city of Saskatoon, SK. This location was selected due to the steady flow of traffic, proximity to the Centre at Circle & 8th Mall, and ease of consumer access. The chosen building is optimum for the purpose of the Market because it is 2400 sq ft. enabling ideal freezer/cooler space with adequate consumer floor space. The location can be seen on the map found below.

Figure 2.1 Proposed site location for the Saskatchewan Organic Meat Market

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Saskatchewan Organic Meat Market__________________________________________

2.2. Floor plan

Figure 2.2 Proposed floor plan for the Saskatchewan Organic Meat Market

The store will be set up based on requirements for the butcher’s equipment and freezer/cooler space. The exact floor plan will be determined once installation of the freezers and coolers is completed by a refrigeration specialist. This specialist will be consulted regarding proper power outlets and ventilation considerations. The floor plan has been designed to get optimum consumer viewing while still maintaining a user friendly environment for the employees. A large portion of the building space will be used for major equipment including a 14’ x 22’ walk-in freeze, 14’ x 22’ walk-in cooler, coffin freezer, deli cooler, and 8’ x 30” cutting table. The above diagram depicts the projected lay out of the Saskatchewan Organic Meat Market.
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Saskatchewan Organic Meat Market__________________________________________

2.3 Work Plan and Flow of Work

Figure 2.3 Flow of work diagram • Organic meat will be purchased and transported to the Saskatchewan Organic Meat Market from Pine View Farms located at Osler, SK. (Approximately 26.2 km north of Saskatoon) All of the organic meat will be brought into the store as eviscerated carcasses. • The in-store butcher will be responsible for cutting the beef and pork sides to customer specifications and expected consumer demands. Beef cuts available will include roasts, steaks, and ground beef. The available pork products will include pork roasts, hams, and pork chops. • All beef and pork products will be available both fresh and frozen.

2.4 Organic Slaughter and Processing Guidelines All organic slaughtering and processing plants need to be certified by an organic certifying agency. The agency the Saskatchewan Organic Meat Market has selected to work with is OCIA (Organic Crop Improvement Association). A number of people in the organic industry presently are certified with OCIA including Bouvry Exports in Fort MacLeod, Alberta. Bouvry Exports is federally inspected and slaughters and processes both organic and non-organic beef.
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Saskatchewan Organic Meat Market__________________________________________

Guidelines to be followed at the Market are outlined in the OCIA International Certification Standards, which became effective on July 21, 2003 (ocia.org, 2003).

After certification is received the facility is inspected annually by an OCIA auditor. The auditor ensures that all documentation is up to date. Documentation includes clean-down logs for all handling equipment, storage facilities, and transportation containers. Cleaning dates, cleaning methods, location or bin/container numbers, brand name and source of any material used must be provided.

Cleaning of the equipment must not leave a residue and if it does it must be rinsed thoroughly. The cleaners must appear on the list of approved cleaners in the OCIA standards. The water used must be tested for nitrates, mercury, lead, and iron and must confirm that there is no contamination from pesticides. Any pesticides used at the facility must be approved by the OCIA. It is imperative that the organic meat is kept free of contamination from non-organic products, pollution, and substances prohibited by the OCIA.

Storage records must be maintained identifying the source of product, date and amount of product in/out, lot number, scale ticket, invoices for incoming or outgoing product, transportation method and name, and destination of product removed. Transportation records must provide the name of the product, declaration of organic status, lot number or demonstration of ability to track, owner of the product, amount of product shipped, clean truck documentation, buyer of product and location of product loading and unloading.

2.5 Average Business Cycle (Week) The average business week at the Saskatchewan Organic Meat Market will see the manager monitoring daily sales to evaluate the progress of the business. The manager will be responsible for the weekly books, organizing the week schedule, and providing a

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Saskatchewan Organic Meat Market__________________________________________ positive work environment. The butcher will evaluate the potential consumer demand for the upcoming week based on the previous week’s sales. The butcher will be responsible for allocating fresh meat cuts as needed throughout the week. On a daily basis the butcher will cut fresh meat for display purposes and to meet consumer preferences. It is understood that there will be slight seasonal variance in the demand for certain cuts and types of meat. Minor adjustments will be made in the type and number of cuts stocked in the store to compensate for these changes.

2.6 Capital Budget

Table 2.1 Building capital costs for lease agreement basis (2400 sq. ft. space) Description Base price Occupancy price Combined price Total lease price (1yr.) GST and PST (1yr.) Total Lease price (1 yr.) Total Lease price (2 yr.) Total Lease price (3 yr.) Total Lease price (4 yr.) Total Lease price (5 yr.) Estimated Cost ($) ~$12-$14 per sq. ft. ~$10-$12 per sq. ft. $25 per sq. ft. $5000 per month $55000 $7150 $62,150 $63,393 $64,661 $65,954 $67,273 Source of prices Century 21 Dome Realty Century 21 Dome Realty Century 21 Dome Realty Century 21 Dome Realty

Note: 5 year lease with 1 month free per year. Lease payments are inflated by 2% per year.

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Saskatchewan Organic Meat Market__________________________________________

Table 2.2 Equipment capital costs Type of Equipment Walk in Freezer 14’x 22’ Walk in Cooler 14’x 22’ Installation of freezer/cooler Coffin Freezer (installed) Deli Cooler Cryvac (chamber model) 8’x 30” cutting table Cutting board materials Grinder Tenderizer Printer/scale Smoke house Mixer Over-wrap machine Slicer Office/Staff Room Supplies Display/Information Shelf Cashier Equipment Total cost of equipment before taxes Total cost of equipment after taxes Estimated Cost ($) $22,000 $21,000 $51,600 $6200 $8000 $5000 Source of prices Frontier Refrigeration Frontier Refrigeration Frontier Refrigeration Frontier Refrigeration Frontier Refrigeration Atlas Cutlery & Butcher Suppliers

$540 Atlas Cutlery & Butcher Suppliers $500 Atlas Cutlery & Butcher Suppliers $2800 Atlas Cutlery & Butcher Suppliers $2500 Atlas Cutlery & Butcher Suppliers $3000 Atlas Cutlery & Butcher Suppliers $6000 Atlas Cutlery & Butcher Suppliers $1700 Atlas Cutlery & Butcher Suppliers $550 Atlas Cutlery & Butcher Suppliers $900 Atlas Cutlery & Butcher Suppliers $7000 Atlas Cutlery & Butcher Suppliers $500 Atlas Cutlery & Butcher Suppliers $650 Atlas Cutlery & Butcher Suppliers $140,440 $158,697

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Saskatchewan Organic Meat Market__________________________________________ Table 2.3 Working capital Description Cash Inventories Total Net Working Capital Table 2.4 Capital budget summary Description Equipment Net Working Capital Total Capital Required Table 2.5 Manufacturing overhead for year 1 Variable Manufacturing Overhead Costs Maintenance TOTAL VARIABLE OVERHEAD Fixed Manufacturing Overhead Costs Building Lease (year) Natural Gas Capital Cost Allowance Electricity TOTAL FIXED OVERHEAD TOTAL MANUFACTURING OVERHEAD Table 2.6 Cost of goods manufactured Cost of Goods Sold Beg Finished Goods Inv Cost of Goods Manufactured Goods Available for Sale End Finished Goods Inventory Cost of Goods Sold

Estimated Cost $ 0

$4,131 $4,131

Estimated Cost $158,697 $4,131 $162,828

$500 $500

$62,150 $1,800 $19,945 $37,279 $121,174 $121,674

$396,766 $396,766 $ 4,131 $ 392,598

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Saskatchewan Organic Meat Market__________________________________________ 2.7 Cost of Sales Beginning Finished Goods Inventory + cost of manufacturing = Costs of goods Available for Sale – Ending Finished Goods Inventory = Cost of Sales Ending Finished Goods Inventory = $4,131 (Amount of meat in the store at any given time) $396,766 – $4,131= $392,635 The cost of manufacturing includes direct materials purchased, direct labor costs, and manufacturing overhead. Included in the manufacturing overhead are fixed and variable costs. The variable costs include maintenance and freight charges from Pine View Farms. The fixed costs include the lease, natural gas, capital cost allowance, and electricity.

2.8 Operating Expenses The initial costs to the Saskatchewan Organic Meat Market are three fold. Space, equipment/personnel and product supply are all very critical to this operation. The location of the Market will provide optimum window space and exposure. The cost for leasing space depends on the location; the Market was able to secure a five year lease costing $62,150 per year plus taxes. The Market received a bonus of a five month free lease applied one month free per year from the realtor at Century 21 Dome Realty. The Saskatchewan Organic Meat Market will purchased all the required equipment to run a successful operation.

The Market will not have an accounts receivable because payments for the products will be made at the time of the purchase. There will be no accounts payable as all purchases will be paid for at the time of purchase.

3.0 Human Resources

3.1 Organizational Structure The Saskatchewan Organic Meat Market will be run as a corporation with the shareholders electing a board of directors. The board of directors will consist of three

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Saskatchewan Organic Meat Market__________________________________________ organic industry representatives who may include organic producers, local abattoir owners, or prominent organic association members. It will be the responsibility of the board of directors to select a store manager. An in-store butcher and one part-time employee will be hired by the manager.

Shareholders

Executive Directors 3 Organic Industry Rep’s

Manager / Meat Specialist Butcher Part-Time Customer Personnel

Figure 3.1 Organizational structure

3.2 Job Descriptions

Executive Directors: The board of directors will be responsible for the selection and hiring of a store manager. It will be the responsibility of the executive directors to provide the manager with a direction and vision of the company. The board of directors will also assist with the decision making process regarding the production levels of the store.

Manager:

It will be the manager’s responsibility to report back to the board of directors

on a quarterly basis to discuss the performance of the Saskatchewan Organic Meat Market. The manager will also then be responsible for the hiring and overseeing of a full time butcher and one part time customer personnel. Included in the manager duties will be arranging for the delivery of meat, ordering the proper amount of meat and
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Saskatchewan Organic Meat Market__________________________________________ maintaining positive relations with employees and customers, and ensuring a smooth operating market. The manager will receive a salary wage of $45,000 and a 2% increase per year.

Butcher: The butcher will be responsible primarily for the cutting of meat, organization of freezers, overall viewing area for consumers, and maintaining public relations. This

butcher will also supply information to the manager as to how much meat and supplies they are going to require, and when and what type of cuts are doing the best in the Market. The butcher will receive a salary wage of $40,000 and 2% increase per year.

Part time customer personnel: The customer personnel will be responsible to work the cashier, aid in any questions that consumers may have and generally help maintain the public relations the Market has with their consumers. The part-time customer personnel will receive an hourly wage of $7.50 with a $0.25 increase per year to a maximum of $9.00.

See Table 3.1 for the cost of labor over 5 years.

3.3 Mentoring and Guidance The success of the Saskatchewan Organic Meat Market will rely on the sharing of knowledge among the employees. This will provide consistent and quality customer service. Employees will be hired based on previous experience; however guidance will be provided to increase their knowledge in the meat industry. There will be no extra costs incurred by the Market for the provided mentoring. The manager will be required to have management experience and be well versed and knowledgeable in the meat industry. The butcher will have a certificate in meat handling and preparation. All employees will receive Canadian Pension Plan, Employment Insurance, and holiday pay.

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Saskatchewan Organic Meat Market__________________________________________

Table 3.1 Cost of labor over 5 years
Manager Benefits Paid CPP (4.95%) EI (2.4%) Total Benefits Butcher Benefits Paid CPP (4.95%) EI (2.4%) Total Benefits Part Time Personnel CPP (4.95%) EI (2.4%) Holiday Pay @ 5.76% Total PT Benefits Workers Comp @ $2.33 per $100 Salary Total Benefits Paid CPP EI Holiday Pay Workers Comp @ 2.33 per $100 Salary TOTAL BENEFITS PAID TOTAL SALARY & BENEFITS PAID $ $ $ $ $ 4,044 3,891 415 83 8,432 $ $ $ $ $ 4,139 3,891 429 84 8,542 $ $ $ $ $ 4,239 3,891 442 85 8,657 $ $ $ $ $ 4,339 3,891 456 86 8,772 $ $ $ $ $ 4,438 3,891 470 87 8,886 $ $ $ $ 183 363 415 961 $ $ $ $ 195 363 429 986 $ $ $ $ 206 363 442 1,012 $ $ $ $ 219 363 456 1,039 $ $ $ $ 231 363 470 1,064 $ $ $ 1,806 2,016 3,822 $ $ $ 1,846 2,016 3,862 $ $ $ 1,887 2,016 3,903 $ $ $ 1,928 2,016 3,944 $ $ $ 1,970 2,016 3,985 $ $ $ 2,055 1,512 3,566 $ $ $ 2,098 1,512 3,610 $ $ $ 2,145 1,512 3,657 $ $ $ 2,191 1,512 3,703 $ $ $ 2,237 1,512 3,749 2004 2005 2006 2007 2008

$

2,148

$

2,193

$

2,239

$

2,286

$

2,334

$

100,632

$

102,682

$

104,771

$

106,894

$

109,052

4.0 Marketing Plan

4.1 Organic Livestock Market Overview The organic industry has grown significantly due to an increased concern in food safety, health issues, and the consumer’s desire to know where their food comes from. The Saskatchewan organic livestock industry is growing and has the potential to continue to grow. Presently there are 50 organic livestock producers in Saskatchewan.

Saskatchewan has the environment and the space for expansion, which is important

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Saskatchewan Organic Meat Market__________________________________________ because Canada expects to increase their organic sales by 10% by 2010. (Saskatchewan Agrivision Corporation, 2002)

If the demand for organic meat does increase, producers will have an incentive to increase their production. Natural meat producers may find it feasible to become

certified organic producers. There are strict guidelines that need to be followed in order to become a certified organic producer. At this time natural livestock producers do not feel there is a large enough demand to make certification worth while. If Saskatchewan can continue to penetrate the organic market throughout Canada and the world with its organic livestock products, producers would make the appropriate changes in order to meet the organic certification standards. This increase in organic livestock production would increase the need for organic meat slaughtering and processing plants, as well as retail stores.

Presently, Saskatchewan organic producers do their own slaughtering, processing and retailing, from the farm gate. Some organic chicken producers have to ship their animals outside of the province to get slaughtered and processed because of a lack of organically certified facilities in this province. The facilities in Saskatchewan that do this type of slaughtering and processing must be federally inspected in order for the products to be exported out of Saskatchewan and Canada. Federal inspection is missing from many facilities.

4.2 The Marketing Mix (4 P’s)

4.2.1 Product The Saskatchewan Organic Meat Market will provide consumers with organically raised and processed beef and pork. These animals consume feed that was grown without the use of pesticides and chemical fertilizers. The land in which the feed is grown has been free of pesticides and genetically modified organisms (GMO’s) for a minimum of 3 years. No antibiotics are used on the animals at any time. The farm that produces the organic livestock is verified and inspected by an accredited certifying body to insure all
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Saskatchewan Organic Meat Market__________________________________________ organic guidelines are followed. Detailed and audited documentation must be kept of all practices and movement of meat in order to trace the meat back to the farm of origin. The organic producer must keep up to date with processing and handling protocol. The organic farm monitors water and soil quality at all times to insure it is free of all harmful contaminants.

Organic livestock slaughter and processing plants must also be certified by an organic certifying agency, who will audit them once a year. The audit consists of insuring adequate documentation of all processes and movement of the meat. The meat must be kept free of contamination from non-organic meat as well as pesticides used throughout the facility.

4.2.2 Service The Saskatchewan Organic Meat Market provides consumers with a safe, healthy, and traceable organic product. This gives consumers the peace of mind that their families are consuming chemical free meat that was produced, slaughtered and processed at one location. The in-store butcher will be available to cut meat according to consumer specifications. All Saskatchewan Organic Meat Market employees will be qualified to provide superior and knowledgeable service to their customers. The Market will make organic meat available to consumers at a more convenient location. The Market’s

location allows consumers to purchase their meat without leaving the city. The market will educate consumers on the benefits of organic products providing an alternative to healthy eating and a healthy lifestyle.

4.2.3 Target Market Organic meat is a premium product that is not consumed by the majority of meat eaters in Saskatoon. The people that do consume it, can afford it, and recognize the benefits involved in the production of these animals. The Saskatchewan Organic Meat Market will target the consumers that can afford to buy organic products. There is also the consumers that make it a priority to be able to afford organic meat because of personal beliefs and motivations. If the high income meat consumers already consume organic
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Saskatchewan Organic Meat Market__________________________________________ meat the Saskatchewan Organic Meat Market provides the products they want, in the cuts they want, at a convenient location. An effective promotional campaign will have to be put in place to convince the traditional meat consumer to purchase organic meat. In Saskatoon 50% of households make over $53,000 a year and the highest 10% are making over $160,000. (Statistics Canada, 2003) In order to purchase the products, consumers must be made aware of the market and all the benefits of purchasing organic products. In these high income households, the Saskatchewan Organic Meat Market will promote the organic meat to the adults. They will be making the food purchasing decisions for themselves and their children. Based on the Saskatoon demographic profile and Canadian meat consumption rates, a target market was selected. The following table demonstrates the projected organic meat consumption for the Saskatoon area and the percent of market share that the Saskatchewan Organic Meat market hopes to capture.

Table 4.1 Estimated market share and meat consumption Type of Meat Total # of organic animals consumed per week 6.58 25.84 % of market share the Market hopes to capture 30% 15% # of organic animals ordered per week 2 4 # of organic animals ordered per year 104 208

Beef Pork

Using the Saskatoon demographic profile and the Canadian meat consumption rates (CanFax, 2003), a meat consumption rate for Saskatoon was derived (Community Profile, 1996). The organic meat consumer percentage was used to derive the Saskatoon organic meat consumption (6.58 beef, 25.84 pork carcasses per week). The Saskatchewan

Organic Meat Market hopes to capture 30% of the beef market and 15% of the pork market. Therefore, arriving at a value of 2 beef and 4 pork carcasses delivered to the Market per week.

4.2.4 Pricing The Saskatchewan Organic Meat Market is a price maker. Premium pricing for organic products will be implemented in the Market.

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Saskatchewan Organic Meat Market__________________________________________

The meat will be purchased from Pine View Farms. Purchase prices were adjusted 50% above the average non-organic beef and pork carcass prices. The selling price was also adjusted 50% above the average retail selling prices of non-organic beef and pork cuts. Table 4.2 Purchase and sale price Product Purchase Price ($/lb) Beef $2.01 Roasts Steaks Ground Beef Pork $1.88 Pork Chops Ham Roasts 4.2.5 Promotion Two types of promotions must be implemented in order to reach the target market. One type has to inform the organic consumers about the Saskatchewan Organic Meat Market. By informing organic consumers, they will begin to purchase from the Market rather than their previous supplier. The second type is to convince the high income consumers of the benefits of organic products, so they may begin consuming organic meat. Selling price ($/lb.) $ $ $ $ $ $ 8.39 10.49 4.49 7.49 4.34 7.04

External Promotion Saskatchewan Organic Meat Market will promote it’s products at natural lifestyle trade fairs in surrounding areas. Ads will be placed in Saskatchewan organic magazines and other publications relating to healthy living. Radio advertising and most importantly internet marketing will be extensively useful in getting the Saskatchewan Organic Meat Market name and products in the eye of the consumer. Consumer’s word of mouth will be an important promotional tool. Brochures will also be available at the market as well as other select locations visited by the consumers. The Market will promote their

products to organizations for steak nights and other occasions including weddings, large business meetings, and house parties.

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Saskatchewan Organic Meat Market__________________________________________

Internal Promotion Cooking demos and taste testing will occur regularly at the Market. An information center consisting of brochures and an educated staff will help educate the public on organic meat products. Appealing window displays will be present at the Saskatchewan Organic Meat Market. Posters of Pine View Farms will be posted at various locations through out the Market. Cooler displays will consist of appetizing, fresh, red meat, with samples of cooked meat for tasting. There will be an opportunity for consumers to visit Pine View Farms to observe the animals in their natural, clean, and open environment. Group trips will be organized and promotion barbeques will be held at this location. They will have the opportunity to tour the farm and interact with the animals by participating in feeding and caring for them. Customers will be given the opportunity to meet and become acquainted with Kevin and Melanie Boldt at Pine View Farms, developing a beneficial relationship.

4.3 SWOT Analysis

4.3.1 Strengths The demand for organic products is increasing in the wealthier countries. The

Saskatchewan Organic Meat Market has many strengths including providing a new product available at the retail level. There are no other exclusively organic meat stores in Saskatchewan so the Market would be a leader in this area. The market also serves as an information center, educating the public about organic production and products. The Market will employ educated staff to provide consumers with peace of mind about the products they are buying. The staff will be knowledgeable in all aspects of the organic industry. Saskatchewan Organic Meat Market is located at a convenient location, making it easy to find for first time customers.

4.3.2 Weaknesses The most important weakness of the market could be due to the premium price demanded for the organic meat resulting in a limited consumer demand. There are limited ventures
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Saskatchewan Organic Meat Market__________________________________________ that use the Market’s by-products which include carcass bones. Those that could use byproducts require the market to pay a fee in order for the products to be disposed of.

4.3.3 Opportunities People in Saskatoon who already consuming organic meat have to drive to the farm gate to purchase it. The Saskatchewan Organic Meat Market provides a quality product at a convenient location. The benefits of organic products speak for themselves as food safety and healthy lifestyle issues have been a growing concern. Organic meat products free the consumer of these concerns. The meat at the market is all produced by Pine View Farms, providing a consumer product with traceability and reassurance.

Potential opportunities for the Saskatchewan Organic Meat Market include the retail of other Saskatchewan organic products. The Market could also open other locations in Canada.

There is opportunity for new businesses like the Market to be eligible for government grants and funding. Canadian Adaptation and Rural Development in Saskatchewan (CARDS) and Agriculture Development Fund are possible grants. This would ease the start up costs associated with the introduction of the Saskatchewan Organic Meat Market.

4.3.4 Threats A large percentage of Saskatoon’s population does not currently consume organic products. The people who are currently consuming organic meat have reliable and trustworthy producers that they purchase from, and may be unwilling to switch to a new supplier. Consumers may be uneducated about the benefits that are associated with

organic products.

Competition such as natural producers, currently offer a quality product at a lower price. This will pose a threat to the success of the Saskatchewan Organic Meat Market. The costs associated with the start up of this market could be detrimental in the long run if consumers are slow to buy the products.
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Saskatchewan Organic Meat Market__________________________________________ 4.4 Competition Currently there are no organic meat shops in the city of Saskatoon. A few producers sell organic meat at their farm gate. Within the city there are some stores that sell a few select cuts. These stores include Steep Hill Co-op and Boryski’s Butcher Block. Indirect competition poses a threat to the Market as it will be very difficult to persuade those who currently eat traditional meat to begin to purchase from the Saskatchewan Organic Meat Market. Stores including M&M Meat Shop, Prairie Meats, and grocery stores such as Costco and IGA, will create indirect competition for the Saskatchewan Organic Meat Market.

It is expected that an increase in organic meat consumption will result in a rise in competition. An increase in competition will result from a rising number of producers and therefore increasing the opportunity to sell organic meat. Since the Saskatchewan Organic Meat Market would be established before an increase in competition occurs they would already occupy a significant percentage of the market share.

The following tables give detailed information for each business competing with the Saskatchewan Organic Meat Market.

Table 4.3 Direct competition to the Market Saskatchewan Organic Meat Market Direct Competitors Business Strengths Weaknesses Steep Hill Co-op 730 Broadway Ave. • • • Existing clientele base Location high income consumer base as well as some student consumers • • • Very little organic meat selection Co-op structure difficult to understand, staff consists of members which may lack in knowledge of organic products small variety of organic products Natural meat – grass fed beef coming from 4 different farmer which may alter consistency

Boryski’s Butcher Block 2210 Miller Ave. & 8th Street

• • •

Specialized meat production knowledgeable experienced staff good location

• •

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Saskatchewan Organic Meat Market__________________________________________ Table 4.4 Indirect competition to the Market Saskatchewan Organic Meat Market Indirect Competition Business Prairie Meats 2326 Miller Ave. & 8th St M&M Meat Shops 3322 8th St E & Lawson Heights Mall Costco 115 Marquis Dr. IGA, Safeway, etc. Located throughout Saskatoon Strengths • • • • • • • Weaknesses Specialized in meat • Higher prices for a production traditional product Diversified products • Don’t do their own processing prepared products variety of location High quality meats • No personal service large quantities for cheaper Convenience - everyone • Limited traceability of the has to go to the grocery products store

Table 4.5 Estimated marketing budget Promotional Activity: Paper & Printing Publications & Magazines Website Trade Show • • Trade Show Booth Trade Show Supplies & Expenses $500 $3000 $1500 $500 $10000 $1000 $2000 $1500 Estimated Expense:

Radio Spots Taste Tests & Demos Total Marketing Expense

5.0 Financial Plan To meet capital expenditures in year 1 and continue business activities, $217,000 long term debt and shareholder’s equity is required. Saskatchewan Organic Meat Market will receive government grants from CARDS and Agriculture Development Fund and the remainder will come from shareholders or a bank loan.

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Saskatchewan Organic Meat Market__________________________________________ Table 5.1 Financing Long term debt Shareholder’s Equity Total Financing $42,000 $175,000 $217,000

5.1 Loan Amortization The market will get a bank loan for $42,000 with an interest rate of 8% and will be paid back in 10 years. The payments will be $6,259 per year.

5.2 Dividends Dividends will not be paid out until 2006. At this time the cash balance greater than $100,000 will be distributed to the shareholders.

5.3 Inflation All wages, materials purchased, and other expenses will increase with an inflation rate of 2% per year for the10 year projection.

5.4 Ratio Analysis Liquidity ratios were not calculated as part of the evaluation into the financial performance of the business. This is due to the fact that liquidity ratios take into account current liabilities that the operation holds. The Market does not hold any current

liabilities as the business will pay for the meat at time of delivery and therefore liquidity ratios do not apply.

The inventory turnover in the high nineties indicates that fewer inventories are being held for long periods of time. This is a result of proficient inventory management.

Leverage ratios which are calculated by total liabilities over total assets, or total liabilities over total equities are an indicator as to how a business is able to make fixed debt payments. The low debt ratios from the time of business implementation and throughout

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Saskatchewan Organic Meat Market__________________________________________ the 10 year plan indicate that the business is financed mainly by shareholder equity and pose a low financial risk to any financial institution.

Financial performance of the Saskatchewan Organic Meat Market can be evaluated through the profitability ratios shown below in table 5.2. The ratios show that the business is profitable and performance is at a desired level for overall profit margin and return on equity.

Table 5.2 Summary of financial ratios
2005 Activity and Operating Ratios Inventory Turnover Total Asset Turnover Operating Expenses Total Operating Expense/Sales Interest Expense/Sales Leverage Ratios Debt Ratio Debt to Equity Profitability Ratios Gross Profit Margin Net Profit Margin Return on Total Assets Return on Equity 97.98 1.57 2007 95.54 2.09 2009 95.17 2.29 2011 95.49 2.41 2013 194.55 2.47

11.72% 0.56%

11.18% 0.43%

10.64% 0.31%

10.13% 0.18%

9.62% 0.06%

10.08% 11.22%

10.02% 11.13%

7.29% 7.86%

3.82% 3.97%

0.00% 0.00%

13.65% 12.68% 19.87% 22.09%

18.73% 17.39% 36.33% 40.38%

22.11% 20.54% 47.07% 50.77%

24.93% 23.15% 55.85% 58.06%

27.35% 25.41% 62.76% 62.76%

5.5 Summary of financial Results Table 5.3 Summary of financial results
2004 Total Revenue Cost of Goods Sold Gross Margin Total Expenses Income Before Taxes Income Taxes Net Income(Loss) $ 537,741 $ 392,635 $ 145,106 $ 64,518 $ $ $ 80,588 5,738 74,850 2005 $ 558,719 $ 416,945 $ 141,774 $ 65,482 $ $ $ 76,292 5,432 70,860 2006 $ 580,582 $ 417,151 $ 163,431 $ 66,453 $ $ $ 96,978 6,905 90,073 2007 $ 603,368 $ 422,952 $ 180,416 $ 67,427 $ 112,989 $ 8,045 $ 104,944 2008 $ 627,118 $ 430,065 $ 197,053 $ 68,404 $ 128,650 $ 9,160 $ 119,490

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Saskatchewan Organic Meat Market__________________________________________
2009 Total Revenue $ 651,875 Cost of Goods Sold $ 438,335 Gross Margin $ 213,540 Total Expenses $ 69,384 Income Before Taxes $ 144,157 Income Taxes $ 10,264 Net Income(Loss) $ 133,893 Net Present Value (NPV) $ $ $ $ $ $ $ 2010 677,683 447,638 230,045 70,363 159,682 11,369 148,312 2011 704,588 457,619 246,969 71,343 175,626 12,505 163,122 2012 732,639 468,483 264,156 72,320 191,836 13,659 178,177 2013 761,886 480,183 281,703 73,292 208,411 14,839 193,572

$ $ $ $ $ $ $

$ $ $ $ $ $ $

$ $ $ $ $ $ $

Internal Rate of Return on Equity Investment External Rate of Return on Equity Investment

$ 383,829 72% 39%

5.6 Breakeven Analysis In order to insure that the Saskatchewan Organic Meat Market is a feasible business it is important to look closely at the cost associated with running the Market. It is important to understand how sensitive the IRR and cash balance are to changes in the Markets critical variables. A break-even analysis (Table 5.4) was prepared to determine the critical percent change in selling prices and the volume of meat purchased/sold to result in a 0% IRR or negative cash balance. The selling price of meat is one the most important critical variables to consider. A 21.5% decrease in the selling price of all meat cuts will create a 0% IRR. A slightly negative cash balance is created when the selling prices are decreased by an additional .5% (22%). Since a large percent decrease in price is required to achieve 0% IRR and negative cash balance, the Saskatchewan Organic Meat Market is a sustainable operation.

Another essential variable in the feasibility of the Market is the volume of beef and pork purchase/sold. The quantity of beef purchased/sold can be decreased by 20,500 lb and pork by 8,200 lbs to result in 0% IRR. A slightly negative cash balance is created when the quantity of beef purchased/sold is decreased by 22, 500 lb and pork by 9,000 lb. The Saskatchewan Organic Meat Market can withstand a substantial decrease in the amount of meat purchased/sold before an IRR of 0% or a negative cash balance is created.

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Saskatchewan Organic Meat Market__________________________________________ Table 5.4 Breakeven Analysis
Break-Even Analysis Percent Change in Selling Price 22% 21.5% Decrease Decrease

Variable Selling prices for beef roasts steak ground meat Selling prices for pork pork chops hams roasts RESULTING IRR RESULTING CASH BALANCE (lowest cash balance in 10 year period)

Base price ($/lb)

$ $ $ $ $ $

8.39 10.49 4.49 7.49 4.34 7.04 72% 143,887.00

$ $ $ $ $ $

6.59 8.23 3.52 5.88 3.41 5.53 0% 15,561.00

$ $ $ $ $ $

6.54 8.18 3.50 5.84 3.39 5.49 -6% (363)

$

$

Base Quantity (lb) Volume Meat Purchased beef pork Volume Meat Available for Sale beef pork RESULTING IRR RESULTING CASH BALANCE (lowest cash balance in 10 year period) 71,841 37,440 59,176 23,213 72% 144268

Decrease in Volume Purchased/Sold (lb) 20,500 8,200 20,500 8,200 0% (9496) 22,500 9,000 22,500 9,000 -10% (670)

6.0 Conclusion The financial analysis shows that the Saskatchewan Organic Meat Market is a feasible operation that has potential to develop into a substantial business opportunity. The success of the market hinges on capturing the target organic meat consumption levels and establishing consumer loyalty. Through analysis of the base case financial scenario an IRR of 72% was achieved. The Saskatchewan Organic Meat Market was deemed a feasible operation based on the selling price of products and the quantity of meat purchased/sold. The organic industry has tremendous opportunity with rising consumer health concerns, therefore increasing the potential for the Saskatchewan Organic Meat Market.
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Saskatchewan Organic Meat Market__________________________________________ 7.0 References

1. Anne Cooney, Professional Research Associate, Ag Economics University of Saskatchewan. Who are Organic Consumers? SAFRR Seminar, Melfort SK. February, 2003. 2. Bouvry Exports: Martin Conrad. Fort MacLeod, AB 3. CanFax, 2003 www.canfax.ca 4. CBC News Inflation Rate Eases to 2%. Last updated Tuesday, September 23, 2003. www.cbc.ca/stories/2003/09/23/inflation_0300923 5. Correction Service of Canada, Community Profile 1996. http://www.csc-scc.gc.ca/text/rsrch/community/esaskatoon96.pdf) 6. Cost of debit machine 15721 http://www.1nbcard.com/#5 7. Human Resources Development Canada www.sk.hrdc.ag.ca/lmi/wages/census/occs/ 8. OCIA.org. International Certification Standards, Revised March, 2003 www.ocia.org 9. Pine View Farms: Kevin & Melanie Boldt, Osler, SK 10. Safeway “Weekly Specials” Flyer www.safeway.com 11. Sask Energy http://www.saskenergy.com/rates/currentrates.htm 12. Saskatchewan Agrivision Corporation, The Organic Agriculture Industry. June 2002. www.agrivision.sk.ca 13. South Valley Winery Business Plan 2002 COMM 492.3 Agribusiness Venture Management Prepared by: Kyle Gross, Glenn Houser, Andrew Jackson, Carol Luca. 14. Staples. Cost of cash registers http://www.staples.ca/products/catalog/ 14. Statistics Canada, Selected Income Statistics for Individual Families and Households, 1996 Census.
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Saskatchewan Organic Meat Market__________________________________________ http://www.statcan.ca/english/Pgdb/Famil6/h.htm 15. University of Kentucky. College of Agriculture www.tysonfoodsinc.com/IR/publications/factbook/factbook01/p4.pdf 16. University of Toronto. Human Resources Department-payroll. http//:www.utoronto.ca/hrhome/cpp_ei03.html 17. The Western Producer, December 11, 2003

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Saskatchewan Organic Meat Market__________________________________________ 8.0 Appendix A

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