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Human Resources Plan


  • pg 1
									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.

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River View Orchards

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

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
19931. Currently, data illustrates that the small fruit sector in Saskatchewan has expanded to over
910 acres1. 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 degree-
days (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 U-
pick 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.

    Saskatchewan Agriculture and Food website
    Robin D‟Arcy‟s Thesis (D‟Arcy 2000)

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River View Orchards

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                                                              10           10        15
Raspberry                 65         65          80          80         80          N/A        60
(Producing)               35         35          65          70         60          N/A        50
Saskatoon                 175        225        240         350         462         400        535
(Producing)               120        150        215         255         224         250        395
Strawberry                315        350        350         380         340         250        190
(Producing)               250        260        250         295         245         200        155
Other                                                                   198         N/A        30
(Producing)                                                             111         N/A        20
Source: Trimension, 1999.3

 All of the graphs and much of the background information have been obtained from Robin D‟Arcy‟s
Thesis (D‟Arcy 2000)

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River View Orchards

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

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

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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 $18,0004 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

    In conversation with the RM of Rudy

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River View Orchards


                        Cantaloupe                                            Saskatoon
                        Raspberries                                                 Apples


    Office                                              Shed
                                  Parking Lot

Main Access Road
Figure 2.1 The Site Plan for River View Orchards

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River View Orchards

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 foot5. 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

Table 2.1 Land and Building Costs
Land Costs                            18,000
Building Costs                        66,000
Total Land & Building Costs           84,000

    Advance Construction

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River View Orchards

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

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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

                          Years Before First Fruits        Years Before Max. Production
Strawberries                               1                                3

 Raspberries                               3                                5

Saskatoon Berries                          3                                6

Cantaloupe                                 1                                5

Apples                                     4                                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

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be fertilized, as the result is a longer length of time for the trees to reach maturity and produce
fruit7. The exception to this rule is if pale leaves or weak growth is observed.

2.3.3 Desired Crop Varieties

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 2o C and below 30o C. Day neutral varieties also have superior fruit
quality and higher yields than the typical June-bearing varieties8.

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.

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

  In conversation with Outlook United Grain Grower‟s
  In conversation with Sunny Hills Nursery, Nipawin

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will also grow a variety called Boyne. Boyne is known to be winter hardy, and ripen early –mid
season10. 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

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.

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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.

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 water12.

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 mulch13. 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 cool11

Leaf-cutter bees are essential for the pollination of cantaloupe14. 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 $10015.

   In conversation with Jackie Bantel, University of Saskatchewan
   In conversation with Early‟s Farm and Garden Centre
   In conversation with PlastiTech, Quebec
   In conversation with Oliver Green

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                  12
River View Orchards

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

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.

     In conversation with Albert Robertson, U of S apiarist
     In conversation with Bill King

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                 13
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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)

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

Year 4  plant strawberries and cantaloupe
         harvest strawberries, cantaloupe, raspberries, Saskatoon berries, and apples (5% of
        max yield)

Years 5 & 6  plant strawberries and cantaloupe
         increasing harvests of all cultivars

Year 7  plant strawberries and cantaloupe
         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.

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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 $ 33,41417. 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.

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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

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.

     price based on Saskatchewan Irrigation Development Centre

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2.6 Equipment Expenses

To complete the various field management activities certain machinery and implements are
required. A half-tonne truck with a topper ($30,00018) is required for transporting produce around
River View and to the farmer‟s markets in Saskatoon. An ATV “Gator” ($8,00019) 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 ($3,00021) and mulch layer ($2,50014). Irrigation is the most
expensive piece of equipment at $70,00015. 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
$70,00022. 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 $3,00023 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 orchard24. 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

   Auto Trader website
   John Deere website
   In correspondence with Micromaster Air Assist
   In conversation with Oliver Green
   Tony Whelan, Rain Bird International, Inc.
   Saskatchewan Irrigation Development Centre

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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 negligible8.

Table 2.4 Initial Equipment Costs for River View Orchards

River View’s Equipment                             Estimated Cost in Dollars
Tractor                                                       21,637
Seeder                                                         3,000
Mulch Layer                                                    2,500
Rotor-tiller                                                   4,637
ATV                                                            8,000
Drip Irrigation                                               70,000
Fence                                                        355,500
Cooler                                                         3,190
Cultivator                                                       773
Lawn Mower                                                     2,936
Sprayer                                                        3,000
Truck                                                         30,000
Miscellaneous                                                 20,000
TOTAL COST                                                   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


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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                      Year 1        Year 5        Year 10        Year 15       Year 20
Cash                                   84,018        10,987       567,443       1,145,050     1,791,476
Accounts Receivable                      3,795       10,479         1,383          3,557         4,567
Inventory                                  467        1,405            184           216           260
Account Payables                         3,156            575          143           168           197
Total Net Working Capital              85,124        22,296       568,867       1,148,655     1,796,106

Table 2.6 Capital Budget Summary

                                  Year 1         Year 3         Year 10         Year 15       Year 20
Land                                18,000                -               -               -              -
Buildings                             6,000        60,000
Equipment                          525,172                        56,850          49,019         70,932
Total                              549,172         60,000         56,850          49,019         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:

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River View Orchards

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

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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.

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River View Orchards

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

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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


                               Contract 1                  Contract 2

                 Seasonal Employees                           Seasonal Employees

Figure 3.1 River View Orchard’s Line of Authority

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River View Orchards

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                        Manager       Contract 1    Contract 2    Seasonal (10)    Total
Annual wage                      37,000          15,200        15,200          51,200     118,600
EI (3.36%)                        1,243            511           511            1,721       3,986
CPP (3.9%)                        1,443            593           593            1,997       4,626
Worker’s Comp (2%)                 740             304           304            1,024       2,372
Holiday Pay (3/52)                      -          877           877            2,954       4,708
Total Cost                       40,426          17,485        17,485          58,896     134,292

Year 2                        Manager       Contract 1    Contract 2    Seasonal (15)    Total
Annual wage                      38,221          15,702        15,702          79,334     148,959
EI (3.36%)                        1,284            528           528            2,666       5,006
CPP (3.9%)                        1,491            613           613            3,094       5,811
Worker’s Comp (2%)                 764             314           314            1,587        2979
Holiday Pay (3/52)                      -          906           906            4,577        6389
Total Cost                       41,760          18,063        18,063          91,258     169,144

Year 3                        Manager       Contract 1    Contract 2    Seasonal (20)    Total
Annual wage                      39,482          16,220        16,220         109,270     181,192
EI (3.36%)                        1,327            545           545            3,672       6,089
CPP (3.9%)                        1,540            633           633            4,262       7,068
Worker’s Comp (2%)                 790             325           325            2,186       3,626
Holiday Pay (3/52)                      -          936           936            6,304       8,176
Total Cost                       43,139          18,659        18,659         125,694     206,151

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River View Orchards

Year 4                    Manager        Contract 1     Contract 2     Seasonal (20)    Total
Annual wage                    40,785         16,755          16,755          112,876   187,171
EI (3.36%)                      1,370            563            563             3,793     6,289
CPP (3.9%)                      1,591            654            654             4,402     7,301
Worker’s Comp (2%)                816            335            335             2,258      3744
Holiday Pay (3/52)                   -           967            967             6,512      8446
Total Cost                     44,562         19,274          19,274          129,841   212,951

Year 5                    Manager        Contract 1     Contract 2     Seasonal (20)    Total
Annual wage                    42,131         17,308          17,308          116,601   292,641
EI (3.36%)                      1,416            582            582             3,918     9,834
CPP (3.9%)                      1,643            675            675             4,548    11,414
Worker’s Comp (2%)                843            346            346             2,332     5,853
Holiday Pay (3/52)                   -           999            999             6,727    14,453
Total Cost                     46,033         19,910          19,910          134,126   334,195

Year 10                   Manager        Contract 1     Contract 2     Seasonal (20)    Total
Annual wage                    49,557         20,359          20,359          137,152   344,220
EI (3.36%)                      1,665            684            684             4,608    11,565
CPP (3.9%)                      1,933            794            794             5,349    13,425
Worker’s Comp (2%)                991            407            407             2,743     6,884
Holiday Pay (3/52)                   -         1,175           1,175            7,913    17,001
Total Cost                     54,146         23,419          23,419          157,765   393,095

Year 15                   Manager        Contract 1     Contract 2     Seasonal (20)    Total
Annual wage                    58,292         47,849          47,849          161,326   428,793
EI (3.36%)                      1,959          1,608           1,608            5,421    14,409
CPP (3.9%)                      2,273          1,866           1,866            6,292    16,723
Worker’s Comp (2%)              1,166            957            957             3,227     8,577
Holiday Pay (3/52)                   -         2,761           2,761            9,307    21,375
Total Cost                     63,690         55,041        185,573           185,573   489,877

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan               25
River View Orchards

Year 20                    Manager         Contract 1      Contract 2     Seasonal (20)       Total
Annual wage                     68,566          28,168          28,168           189,761       476,256
EI (3.36%)                       2,304             945             945             6,376        16,001
CPP (3.9%)                       2,674           1,099           1,099             7,401        18,575
Worker’s Comp (2%)               1,371             563             563             3,795         9,524
Holiday Pay (3/52)                    -          1,625           1,625            10,948        23,521
Total Cost                      74,915          32,400         218,281           218,281       543,877

3.6 Shareholders’ Agreement

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.

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River View Orchards

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            Area(acres)
Saskatoons               450
Strawberries             190
Raspberries               45
Apples                    39
Cantaloupe                 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.

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River View Orchards

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

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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 demand26. 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.

     In conversation with a grower at the Saskatoon Farmers‟ Market
     In conversation with Oliver Green, 2000

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River View Orchards

One problem is that the rural area around Outlook is fairly small consisting of a population of
about 25,000 people27. 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 standards28.

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

   Derived from adding the populations of towns, villages, and RMs in the radius around Outlook. From the
1996 Saskatchewan Census.
   In conversation with a buyer at Western Grocers, Saskatoon, 2000

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                      30
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.

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River View Orchards

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          Y20
Saskatoons                   4.41        5.34         5.88         6.90          8.10
Cantaloupe                   0.88        1.07         1.17         1.38          1.62
Strawberries                 3.75        4.54         5.00         5.87          6.89
Raspberries                  5.51        6.68         7.35         8.62         10.12
Apples                       1.87        2.27         2.49         2.93          3.43
Saskatoons                     -      24,705       24,705       24,705      24,705
Cantaloupe                25,402     127,010      127,010      127,010     127,010
Strawberries               6,352      20,410       20,410       20,410      20,410
Raspberries                    -      15,880       15,880       15,880      15,880
Apples                         -       8,555        8,555        8,555       8,555
Saskatoons                     -     131,997      145,289      170,484     200,111
Cantaloupe                22,354     135,413      149,050      174,897     205,756
Strawberries              23,820      92,729      102,067      119,766     140,625
Raspberries                    -     106,009      116,684      136,919     160,706
Apples                         -      19,382       21,334       25,034      29,344
Total Revenues            46,174     485,530      534,424      627,100     736,542
Net Income:             (248,874)    127,580      153,707      166,692     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.

  The information in the chart has been compiled from many sources. Harvey Clarke (SIDC), Bill King
(Outlook producer), and Western Grocers.

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                     32
River View Orchards

                                             Total Revenue









               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

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.

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                       33
River View Orchards

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.

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River View Orchards

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


   Billboards                                 Saskatoon


            River View Orchards
                                             15    Kenaston



                                                           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

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                35
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

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                   36
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                          4,922
Buses – Regina                             5,564
Buses – Moose Jaw                          5,136
Brochures                                  1,281
Billboards                                 2,996
Radio Ads                                  3,360
Newspaper – Star Phoenix                   3,108
Newspaper – Western Producer               2,335
Total                                     28,702

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River View Orchards

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.

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River View Orchards

Table 5.1 Revenue Estimates for River View Orchard.

                    Year           Total Revenue
                             1      $     46,174
                             7      $    485,530
                            10      $    534,424
                            15      $    627,100
                            20      $    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.

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River View Orchards

Table 5.2 Summary of Financial Performance

                                          Y1            Y7      Y10     Y15     Y20
Sales Revenue                                  46,174    485,530 534,424 627,100 736,541

Direct Materials                            38,721        49,683    54,766     64,419    75,773
Direct Labour                               93,864       185,613   204,602    240,664   283,082
Total Overhead                              64,900        54,423    46,007     41,681    45,193
Total Cost of Goods Manufactured           197,485       289,719   305,375    346,764   404,048

Total Expenses                             102,242       126,384   131,552    137,371   156,957
Total Costs                                299,727       416,103   436,927    484,135   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 equipment30. 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   Year 2   Year 3
            Long-term Debt              250,000
            New Common Shares           600,000  180,000  180,000
            Total Financing             850,000  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

     In conversation with Bill Brown

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River View Orchards

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                   Y1            Y5            Y10           Y15           Y20
 Production Ratios
 Production Labour/Sales                 203.3%         41.6%         38.3%         38.4%         38.4%
 Production OH/Sales                     140.6%         16.7%          8.6%          6.6%          6.1%
 Debt Ratio                               41.6%         60.2%         20.3%          0.5%          0.4%
 Debt to Equity                           71.1%        151.5%         25.5%          0.5%          0.4%
 Profitability Ratios
 Gross Profit Margin                  -327.7%          30.9%          42.9%         44.7%         45.1%
 Net Profit Margin                    -549.1%           1.6%          18.2%         18.0%         18.8%
 Return on Total Assets                -42.8%           1.9%          14.5%         10.0%          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.

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan                         41
River View Orchards

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

 Expected Output
 Year 7       Yield(kg/acre) Total Output
 Saskatoons            1,647        24,705
 Cantaloupe           12,701       127,010
 Strawberries          2,041        20,410
 Raspberries           1,588        15,880
 Apples                1,711         8,555
 Net Income           69,427
 Expected Prices
 Year 7       Price($/kg)
 Saskatoons             5.34
 Cantaloupe             1.07
 Strawberries           4.54
 Raspberries            6.68
 Apples                 2.27
 Net Income           69,427
 Expected number of summer students
 Year 7       # of students
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.

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River View Orchards

Table 5.6 Breakeven When Yield of All Crops Decreases Equally

 Year 7       Yield(kg/acre) Total Output
 Saskatoons           1,412         21,180
 Cantaloupe          10,885        108,550
 Strawberries         1,749         17,490
 Raspberries          1,361         13,610
 Apples               1,466          7,330
 Net Income                -

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         Yield(kg/acre) Total Output
 Cantaloupe             6,189         61,890
 Net Income                  -

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         Yield(kg/acre) Total Output
 Saskatoons               781         11,715
 Net Income                  -

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)

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River View Orchards

Table 5.9 Breakeven by Reducing Prices by Equal Amounts

 Year 7       Price($/kg)
 Saskatoons            4.52
 Cantaloupe            0.92
 Strawberries          3.88
 Raspberries           5.70
 Apples                1.95
 Net Income              -

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 twenty-
nine, 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

                 Yield(kg/acre) Total Output
 Saskatoons              1,383         20,745
 Cantaloupe             10,669        106,690
 Strawberries            1,714         17,140
 Raspberries             1,270         12,700
 Apples                  1,711          8,555
 IRR                          -

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

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.

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River View Orchards

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.

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River View Orchards

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

    Storey, G.G. 1998. Central Marketing Requirements for the Development of the
    Saskatchewan Small Fruit Industry. Department of Agricultural Economics, University of

    Saskatchewan Agriculture and Food

   Saskatchewan Agriculture and Food

    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.

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan            46
River View Orchards

    In conversation with Oliver Green. Outlook, Saskatchewan.

    RM of Rudy. Outlook, Saskatchewan.

    Advance Construction. Saskatoon, Saskatchewan.

    United Grain Grower‟s. Outlook, Saskatchewan.

    Sunny Hills Nursery. Nipawin, Saskatchewan.

     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.

     John Deere website.

     Micromaster Air Assist. Correspondence by email

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan              47
River View Orchards

                                        APPENDIX A
                             FINANCIAL PROJECTIONS

Comm 492.3 College of Commerce/College of Agriculture, University of Saskatchewan   48

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