Model business plan

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Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Greenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan

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Model Business Plan for the Investment Program on the Construction of Model Business Plan for the Investment Program on the Construction of Model Business Plan for the Investment Program on the Construction of Model Business Plan for the Investment Program on the Construction of

6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit

Copyright © Armenian Harvest Promotion Center www.ahpc.am

Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Program on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan


6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit

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Program on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 ha Greenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan


6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit 6 ha Greenhouse in the Vicinity of Noragavit district of Yerevandistrict of Yerevandistrict of Yerevandistrict of Yerevan

2012

2012

Երևանի ջերմատնային գոտու ծրագրի

Copyright

Model Business Plan for the Investment Program on the Construction of 6 ha Model Business Plan for the Investment Program on the Construction of 6 ha Model Business Plan for the Investment Program on the Construction of 6 ha Model Business Plan for the Investment Program on the Construction of 6 ha Greenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan

The Investment Program on the Construction and Development of Greenhouses in the Vicinity of Yerevan has been approved by the Government and is implemented by the Armenian Harvest Promotion

Model Model Model Model Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on

the Construction of 6 ha Greenhouse in the Vicinity the Construction of 6 ha Greenhouse in the Vicinity the Construction of 6 ha Greenhouse in the Vicinity the Construction of 6 ha Greenhouse in the Vicinity

of of of of Noragavit district of YerevanNoragavit district of YerevanNoragavit district of YerevanNoragavit district of Yerevan

ծրագրի ներդրումների կատարման աջակցման



The Investment Program on the Construction and Development of Greenhouses in the Vicinity of

Yerevan has been approved by the Government and is implemented by the Armenian Harvest Promotion Centre

Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on


Noragavit district of YerevanNoragavit district of YerevanNoragavit district of YerevanNoragavit district of Yerevan

աջակցման մեխանիզմները

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The Investment Program on the Construction and Development of Greenhouses in the Vicinity of Yerevan has been approved by the Government and is implemented by the Armenian Harvest Promotion

Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on Business Plan for the Investment Program on


Noragavit district of YerevanNoragavit district of YerevanNoragavit district of YerevanNoragavit district of Yerevan


Copyright


ContentsContentsContentsContents 1. Preface ................................................................

2. Program Overview ................................

3. Marketing ................................................................

3.1. Target Market Research ................................

3.2. Marketing Mix (4P)................................

3.2.1. Product: Tomato ................................

3.2.2. Price-Pricing ................................

3.2.3. Distribution: Product Realization Channels. Sales

3.2.4. Promotion ................................

4. Production Planning ................................

4.1. Selection of the Greenhouse Construction Site

4.2. Greenhouse Equipment ................................

4.3. Production technology ................................

4.4. Manpower for Production ................................

4.5. Timeframes for Implementing the Program

5. Investment Planning ................................

5.1. Value of investment ................................

5.2. Financing Methods, Terms and Sources

6. Financial Planning ................................

6.1. Basic Data on the Program ................................

6.2. The main assumptions for doing the calculations

6.3. Sales Forecast and Income Planning

6.4. Cost Planning ................................

6.5. Income Calculation ................................

6.6. Tax System................................

6.7. Income Statement ................................

6.8. Cash Flow Statement (thousand USD

7. Evaluation of the Program Effectiveness

7.1. Methodology for Evaluating the Program Effectiveness

7.2. Evaluation of Program Effectiveness

8. Evaluation of risks and means to mitigate them




................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

Distribution: Product Realization Channels. Sales Networks ................................................................

................................................................................................................................

................................................................................................................................

reenhouse Construction Site ................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

Timeframes for Implementing the Program ................................................................................................

................................................................................................................................

................................................................................................................................

ancing Methods, Terms and Sources ................................................................................................

................................................................................................................................

................................................................................................................................

The main assumptions for doing the calculations ................................................................

Sales Forecast and Income Planning ................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

................................................................................................................................

ousand USD) ................................................................................................

Evaluation of the Program Effectiveness ................................................................................................

Methodology for Evaluating the Program Effectiveness ................................................................

Evaluation of Program Effectiveness ................................................................................................

Evaluation of risks and means to mitigate them................................................................................................


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In the recent years, the average annual volume of vegetable crop production in Armenia

has made up 800 000 tons, which is approximately 250kg per capita. This is quite a good

Nevertheless, due to climatic conditions, crop production in Armenia is highly

seasonal in nature. The development and expansion of state

measure for mitigating the seasonal fluct

competitiveness both in domestic and foreign markets, as well as for reducing the import

volumes of crop production in the country.

For the purpose of developing and enhancing state

the Armenian Harvest Promotion Centre CJSC has developed the Investment Program on the

Construction and Development of Greenhouses in the Vicinity of Noragavit District of Yerevan,

which has been approved by the Government of the Republic o

The program is developed based on the climate data in the vicinity of Noragavit district of

Yerevan, as well as on the study and analysis on communal infrastructure and the Yerevan TPP

resources. While developing the program, the comparative adv

number of sunny days, the length of daylight, the availability of agricultural lands and water

resources, as well as rather competitive tariffs of electric energy and gas have been taken into

consideration.

The program assumes constructing 50ha state

the vicinity of Noragavit district within three years.

greenhouses, the positions of the existing maintenance facilities, as well as the position

to be constructed, we anticipate dividing the land area into 9 separate lots each with 5

area. The lots will be alienated to investors on installment plan, who will construct and operate

the greenhouses within the period of 1

The implementation of the program will give the opportunity to improve the efficiency of

crop production and make it year

domestic market, as well as to create large amounts of products for expo

On the assumption of the sizes of the lots in the vicinity of Noragavit district and the

international experience in the area of greenhouse construction, according to which the




1.1.1.1. PrefacePrefacePrefacePreface In the recent years, the average annual volume of vegetable crop production in Armenia

has made up 800 000 tons, which is approximately 250kg per capita. This is quite a good

, due to climatic conditions, crop production in Armenia is highly

nature. The development and expansion of state-of-the-art greenhouses is an effective

measure for mitigating the seasonal fluctuations of crop production in Armenia, increasing the

domestic and foreign markets, as well as for reducing the import

volumes of crop production in the country.

For the purpose of developing and enhancing state-of-the-art greenhou



which has been approved by the Government of the Republic of Armenia.



While developing the program, the comparative advantages of Armenia, such as the



es constructing 50ha state-of-the-art greenhouses on 70ha of land in

the vicinity of Noragavit district within three years. On the assumption of the optimum sizes of

greenhouses, the positions of the existing maintenance facilities, as well as the position

to be constructed, we anticipate dividing the land area into 9 separate lots each with 5


the greenhouses within the period of 1-3 years.


crop production and make it year-round, to ensure the availability of the crop products in the

domestic market, as well as to create large amounts of products for export.




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In the recent years, the average annual volume of vegetable crop production in Armenia

has made up 800 000 tons, which is approximately 250kg per capita. This is quite a good figure.

, due to climatic conditions, crop production in Armenia is highly

art greenhouses is an effective

uations of crop production in Armenia, increasing the

domestic and foreign markets, as well as for reducing the import

art greenhouses in Armenia,





antages of Armenia, such as the



art greenhouses on 70ha of land in

On the assumption of the optimum sizes of

greenhouses, the positions of the existing maintenance facilities, as well as the positions of those

to be constructed, we anticipate dividing the land area into 9 separate lots each with 5-11 ha of



round, to ensure the availability of the crop products in the




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optimum size of the greenhouses is 4

developed a business plan for the construction and operation of 6 ha greenhouse.

In the business plan we've chosen tomato as a crop, and the Russian Federation

sales markets based on its climate conditions

According to the business plan, we anticipate constructing the 6 ha greenhouse through 6

phases. Nevertheless, on the assumption of the current amount of financial resources

the investment, the program may be implemented stepwise

hectares.




size of the greenhouses is 4-6 ha, the Armenian Harvest Promotion


In the business plan we've chosen tomato as a crop, and the Russian Federation

sales markets based on its climate conditions are considered to be a large scale importing country.


eless, on the assumption of the current amount of financial resources

the investment, the program may be implemented stepwise within three years, starting from 1


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6 ha, the Armenian Harvest Promotion Centre has


In the business plan we've chosen tomato as a crop, and the Russian Federation -as its

cale importing country.


eless, on the assumption of the current amount of financial resources required for

three years, starting from 1-2


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The business plan aims at evaluating tomato production in the greenhouse, situated in the

vicinity of Noragavit district of Yerevan, studying its realization and evaluating its effectiveness.

Program initiation

Planning horizon

Currency

Exchange rate (USD/ AMD)

Land area

Greenhouse area

Yield

Cost price

Average realization price (ex work)

Long-term loan interest (%)

Greenhouse EquipmentGreenhouse EquipmentGreenhouse EquipmentGreenhouse Equipment

The program assumes using the following modern technological solutions and

constructing state-of-the-art greenhouses.


systems for constructing state

� Vertical and Horisontal Screening system

� Drip irrigation system;

� UV disinfection system

� Condensation water harvesting

� Automatic heating system;

� CO2 dosing system;

� High pressure fogging system

� Ventilation system;

� Microclimate computer

ProductProductProductProduct

We anticipate growing tomatoes in the whole area of the greenhouse. 6 ha greenhouse is

capable to produce 3500 tones of tomato per year, and, in case of using assimilation lighting, the

productivity may increase by approximately 20%.




2.2.2.2. Program OverviewProgram OverviewProgram OverviewProgram Overview The business plan aims at evaluating tomato production in the greenhouse, situated in the

Noragavit district of Yerevan, studying its realization and evaluating its effectiveness.

Basic DataBasic DataBasic DataBasic Data

From the moment of financing

55

0,81-0,88

Average realization price (ex work) 1,2


art greenhouses.


systems for constructing state-of-the-art greenhouses.

Vertical and Horisontal Screening system

Drip irrigation system;

disinfection system;

Condensation water harvesting and reusing system;

Automatic heating system;

;

High pressure fogging system;

;

omputer control system.

tomatoes in the whole area of the greenhouse. 6 ha greenhouse is


productivity may increase by approximately 20%.


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The business plan aims at evaluating tomato production in the greenhouse, situated in the

Noragavit district of Yerevan, studying its realization and evaluating its effectiveness.

From the moment of financing

8 years

USD

390

6,5 ha

5,8 ha

55-60 kg/m2

0,88 USD/ kg

1,2 USD/kg

10%

The program assumes using the following modern technological solutions and systems for


tomatoes in the whole area of the greenhouse. 6 ha greenhouse is



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Production TechnologyProduction TechnologyProduction TechnologyProduction Technology

From agronomic and financial viewpoints, it is expedient t

September, because in this case, due to the seasonality factor

from January till May, when the price of tomato reaches its peak.

PricingPricingPricingPricing

On the assumption of production

price of 1 kg tomato set directly by the producer is 1,2 USD. In case of transporting the tomato to

Moscow, the price of tomato will increase by 0,28

expenses, and the final price will make

Market PotentialMarket PotentialMarket PotentialMarket Potential

Considerable positive developments have been recorded in vegetable, in particular tomato’s

consumption volumes in the Russian Federation, which is not harmonious with

greenhouse production in the RF. Recently,

tomato import volumes have increase

production in the RF makes the RF tomato market attractive

Product Realization Product Realization Product Realization Product Realization

In the first stage of activities, we anticipate organizing the realization of the produce through

specialized exporting organizations, as well as through cooperat

large retail networks.




agronomic and financial viewpoints, it is expedient to start tomato production

due to the seasonality factor, the heaviest crop is got in the period

when the price of tomato reaches its peak.

production data and the RF market research results, the

directly by the producer is 1,2 USD. In case of transporting the tomato to

Moscow, the price of tomato will increase by 0,28 USD per kilo due to transportation and other

and the final price will make up 1,48 USD.


consumption volumes in the Russian Federation, which is not harmonious with

. Recently, tomato market volume has made up 852 mln USD

increased. The significant difference between consumption and

production in the RF makes the RF tomato market attractive to tomato exporting countries.

of activities, we anticipate organizing the realization of the produce through

specialized exporting organizations, as well as through cooperating with Russian


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o start tomato production in

heaviest crop is got in the period

market research results, the realization

directly by the producer is 1,2 USD. In case of transporting the tomato to

transportation and other


consumption volumes in the Russian Federation, which is not harmonious with the development of

de up 852 mln USD, while

. The significant difference between consumption and

to tomato exporting countries.

of activities, we anticipate organizing the realization of the produce through

ussian wholesalers and


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Capital investmentsCapital investmentsCapital investmentsCapital investments

10, 64 mln USD investment is needed in order to implement the program on the construction

of 5,8 ha greenhouse on 6,5 ha land area, the

for building the greenhouse and for technical

purchase of land (7%), obtaining the right to use the infrastruc

replenishment of working capital (7,1%)

Program FinanceProgram FinanceProgram FinanceProgram Finance

We anticipate implementing

EvaluationEvaluationEvaluationEvaluation CriteriaCriteriaCriteriaCriteria for Program Effectivenessfor Program Effectivenessfor Program Effectivenessfor Program Effectiveness

In the result of calculations the following data have been received for the evaluation of the

program effectiveness:

Data

Payback period Discounted payback period

Profit margin for the first 6 years

Profit margin starting from the 7

ROE (return on investment)/

Net present value (NPV) Internal rate of return (IRR)

Profitability Index (PI)




mln USD investment is needed in order to implement the program on the construction

of 5,8 ha greenhouse on 6,5 ha land area, the major part of which (approximately

for technical equipment. The rest of the amount is needed for

(7%), obtaining the right to use the infrastructures (3,2%) as well as for

replenishment of working capital (7,1%).

We anticipate implementing the program through borrowings (80%) and

for Program Effectivenessfor Program Effectivenessfor Program Effectivenessfor Program Effectiveness


Value

4,97

6,77

Profit margin for the first 6 years 39,60%

Profit margin starting from the 7th year 54,08%

eturn on investment)/ 19,42%

9 368 547,91 21,95%

1,91


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mln USD investment is needed in order to implement the program on the construction

imately 82,7%) is needed

amount is needed for

tures (3,2%) as well as for the

through borrowings (80%) and own equity (20%).


Unit

year

year

%

%

%

USD

%


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3.1.3.1.3.1.3.1.

Crop production is considered to be one of the key branches of agriculture. Vegetables is

one of the most important and

grown both in open field and on the protected ground Protected ground means heated and

unheated glass, polycarbonate and polyethylene greenhouse, sp

protected area, established for the purpose of growing crops in any way. Today, protected

ground production is actively developing by covering larger areas. China is considered to be the

leading country in the world by its

allocated for this purpose. Based on the areas of protected ground, some of the leading countries

are presented below.

As you can see, in terms of the areas allocated for the purpose of protected ground

protection, the RF comes after a series of countries, including those located in warm climate

zones and taking advantage of open

located in the warm climate zone, 52 000 ha land is allocated for protected ground production,

while in Russia only 2100 ha land is allocated for this purpose. As a result, the volumes of

consumption and growing in Russia considerably dif

mainly ensured through imported vegetables.

falls to tomato. On the assumption of the

Belarus

Poland

Morocco

Italy

Japan

200

2100

6300

8500

Land area allocated to protected ground by countries /ha/Land area allocated to protected ground by countries /ha/Land area allocated to protected ground by countries /ha/Land area allocated to protected ground by countries /ha/




3.3.3.3. MarketingMarketingMarketingMarketing

3.1.3.1.3.1.3.1. Target Market ResearchTarget Market ResearchTarget Market ResearchTarget Market Research


one of the most important and irreplaceable components of the human diet. Vegetables are


unheated glass, polycarbonate and polyethylene greenhouse, spring greenhouses, as well as the



leading country in the world by its large protected ground areas, where 1




zones and taking advantage of open-field crops for longer period. For example,



consumption and growing in Russia considerably differ from each other

mainly ensured through imported vegetables. The major part of vegetables imported into the RF

falls to tomato. On the assumption of the aforementioned factors and in the result of the

6300

8500

10000

10000

20000

41000

42000



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components of the human diet. Vegetables are


ring greenhouses, as well as the



large protected ground areas, where 1 700 000 ha land is




field crops for longer period. For example, Spain, which is



each other, and consumption is

The major part of vegetables imported into the RF

aforementioned factors and in the result of the

52000



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program’s financial calculations

export market for tomato.

• The Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato Market

Since 2005, sustainable

market along with the increase in the

market made up 852 mln USD in 2010.

The RF tomato market structure is observed by

the following two factors:

� By the growing type: grown in

� By the country where it’s grown: grown in the RF and import

On the assumption of climate data, local

only during the period from July till November.

produce is available, the imported tomato’s share

nevertheless, it makes up 50% of the market.

protected ground is consumed. During

market, which constitutes over

months one can meet only imported tomatoes

Below please find the share of

tomato market on an annual basis

9%

91%

Structure of the RF tomato market by producersStructure of the RF tomato market by producersStructure of the RF tomato market by producersStructure of the RF tomato market by producers




program’s financial calculations and studies, the RF tomato’s market is being observed as an

The Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato MarketThe Volume and Structure of the RF Tomato Market

growth has been recorded in the volumes

increase in the volume of global food. The total volume of the RF tomato

market made up 852 mln USD in 2010.

structure is observed by dividing the market

growing type: grown in an open field and on a protected ground

country where it’s grown: grown in the RF and imported.

On the assumption of climate data, local open-field products are available in the market

only during the period from July till November. During the season, when the local open

available, the imported tomato’s share in the market de

nevertheless, it makes up 50% of the market. During the rest of the year the produce grown

protected ground is consumed. During off-season months, imported tomato prevails in the

over 90% of the market during those months. During the winter

months one can meet only imported tomatoes almost in all shops.

the share of local tomato grown on the protected ground

on an annual basis.

Ռուսական փակ գրունտում

Հողի եվ ներմուծվող

Structure of the RF tomato market by producersStructure of the RF tomato market by producersStructure of the RF tomato market by producersStructure of the RF tomato market by producers

Tomato grown on the Russian protected ground

Open field grown and imported tomato


10 | Page


and studies, the RF tomato’s market is being observed as an

growth has been recorded in the volumes of tomato in the RF

food. The total volume of the RF tomato

dividing the market in accordance with

protected ground;

available in the market

when the local open-field

in the market decreases dramatically,

the rest of the year the produce grown on a

tomato prevails in the

90% of the market during those months. During the winter

protected ground in the Russian

գրունտում աճեցրածTomato grown on the Russian protected ground

Open field grown and imported tomato


Copyright


• ImportImportImportImport

According to the data provided by the RF

vegetable was imported into Russia by foreign suppliers

first 9 months of 2011. The figures demonstrate that import volumes in overall vegetable market

tend to increase.

Tomato is one of the largely imported vegetables. T

RF made up 766 622 000 USD and

dynamics have been recorded in the RF during the period from 2007

Moreover, over 50% of the imported tomato is imported from Turkey.

Below please find the structure of imported tomato

477784

623085

458210

657454

2007 2008

Import dynamics of tomato 2007Import dynamics of tomato 2007Import dynamics of tomato 2007Import dynamics of tomato 2007

52%

12%

11%

6%

6%

4%4%

2%1%

Tomato import structure by countries for Tomato import structure by countries for Tomato import structure by countries for Tomato import structure by countries for

2011 2011 2011 2011 Թուրքիա - 379020,9

Ուկրաինա - 83381,9

Չինաստան - 76945,97

Մարոկո - 43512,87

Ադրբեջան - 43220,28

Իսպանիա - 30192,12

Հոլանդիա - 30055,84

Բելգիա - 17028,07

Իսրայել - 9422,2

Մակեդոնիայի

Այլ - 7987տ.

Turkey-379020.9 t

Ukraine-83381.9t

China-76945.97t

Morocco-43512.87t

Azerbaijan

Spain-30192.12t

Netherlands

Belgium-17028.07t

Israel-9422.2t

Macedonia

Other-7987t




According to the data provided by the RF Federal Customs Services

Russia by foreign suppliers in 2010 and 3,4 mln tonnes


Tomato is one of the largely imported vegetables. Total import volume

and, accordingly, 696 890 tonnes in 2010.

been recorded in the RF during the period from 2007-2010:

over 50% of the imported tomato is imported from Turkey.

he structure of imported tomato by countries /in tonnes

642184

766622

657454691943 696890

2009 2010

Import dynamics of tomato 2007Import dynamics of tomato 2007Import dynamics of tomato 2007Import dynamics of tomato 2007----2010201020102010

dynamics/in USD

Tomato import structure by countries for Tomato import structure by countries for Tomato import structure by countries for Tomato import structure by countries for

379020,9տ.

83381,9տ.

76945,97տ.

43512,87տ.

43220,28տ.

30192,12տ.

30055,84տ.

17028,07տ.

9422,2տ.

Մակեդոնիայի Հանրապետություն - 3968,2տ

379020.9 t

83381.9t

76945.97t

43512.87t

Azerbaijan-433220.28t

30192.12t

Netherlands-30055.84t

17028.07t

9422.2t

Macedonia-3968.2t

7987t

$1.11

$0.54

$1.21

$1.42

$0.75

Tomato prices in 2011 by importing countriesTomato prices in 2011 by importing countriesTomato prices in 2011 by importing countriesTomato prices in 2011 by importing countries

Tur

key

Ukr

aine

Chi

na

Mor

occo

Aze

rbai

jan


11 | Page


Customs Services, 3mln tonnes of

and 3,4 mln tonnes – during the


otal import volume of tomato in the

The following import

:

over 50% of the imported tomato is imported from Turkey.

/in tonnes/.

Tomatos import

dynamics/in USD/

Tomato import

dynamics /in

tonnes/

$0.75

$1.55$1.38 $1.36

$2.10

$1.01

Tomato prices in 2011 by importing countriesTomato prices in 2011 by importing countriesTomato prices in 2011 by importing countriesTomato prices in 2011 by importing countries

Aze

rbai

jan

Spai

n

Net

herl

ands

Bel

gium

Isra

el

Mac

edon

ia


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• Tomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and Importers

Both the volumes and prices of world food

Tomato prices in the Russian market have also increased, despite

conditioned by specific factors and situations.

tomato during the period from 2007

As you can see, imported tomato’s price is lower than the price of the tomato produced in

the territory of the Russian Federation. Despite additional transport expenses and 15% import

taxes (customs duty), producers from Turkey, China and several other cou

shops cheaper tomato than local greenhouses do. In the result of which, during off

months the Russian tomato market is full of imported product.

Russian tomato is conditioned by unfavorable clima

of the greenhouses, as well as by expensiveness of the cost price components. Due to unfavorable

climate conditions and poor technical equipment

Importer price per Importer price per Importer price per Importer price per 1 1 1 1 kilo of tomatokilo of tomatokilo of tomatokilo of tomato

2007200720072007

2008200820082008

2009200920092009

2010201020102010

TurkeyTurkeyTurkeyTurkey $0,9 $1,0 $1,0 $1,1

ChinaChinaChinaChina $1,0 $1,0 $1,0 $1,0

Uzbekistan Uzbekistan Uzbekistan Uzbekistan $1,9 $1,0 $0,7 $1,1

The NetherlandsThe NetherlandsThe NetherlandsThe Netherlands $1,5 $0,8 $0,8 $1,4

MoroccoMoroccoMoroccoMorocco $1,1 $1,0 $1,1 $1,3

SpainSpainSpainSpain $1,2 $1,1 $1,2 $1,4

IsraelIsraelIsraelIsrael $2,2 $1,4 $1,3 $1,7

All the countriesAll the countriesAll the countriesAll the countries $1,04 $0,95 $0,93 $1,10

Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/

2007

2008

2009

2010

$1,50

$1,76

$1,56

$1,79




Tomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and ImportersTomato Prices Offered by Producers and Importers

Both the volumes and prices of world food market have increased during the last decade.

Tomato prices in the Russian market have also increased, despite

factors and situations. Below please find changes in the price of

ring the period from 2007-2011 by importing countries:



taxes (customs duty), producers from Turkey, China and several other cou

cheaper tomato than local greenhouses do. In the result of which, during off

months the Russian tomato market is full of imported product. The non-competitive price of the

Russian tomato is conditioned by unfavorable climate conditions, the low level of development


climate conditions and poor technical equipment, the RF agricultural producers

$1.50$1.76

2007 2008 2009

Tomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian Producers

$1.04$0.95 $0.93

2007 2008 2009

Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007kilo of tomatokilo of tomatokilo of tomatokilo of tomato

2010201020102010

2011201120112011

$1,1

$1.1

$1,0

$1.21

$1,1

$1.38

$1,4

$1.53

$1,3

$1.42

$1,4

$1.55

$1,7

$2.10

$1,10

$1.25

Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/Dynamics of the RF local tomato prices /kg/

2011

$2,22


12 | Page


have increased during the last decade.

some short declines

Below please find changes in the price of imported



taxes (customs duty), producers from Turkey, China and several other countries offer Russian

cheaper tomato than local greenhouses do. In the result of which, during off-season

competitive price of the

te conditions, the low level of development


, the RF agricultural producers consume more

$1.56$1.79

$2.22

2009 2010 2011

Tomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian ProducersTomato Price Dynamics of Russian Producers////kgkgkgkg

$0.93$1.10

$1.25

2009 2010 2011

Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007Price Dynamics of Imported Tomato 2007----2011 2011 2011 2011


Copyright


resources for heating and assimilation

produced vegetable.

According to estimations of specialists, based on the aforementioned factors, climate

conditions and the vegetables’ volume of consumption, the RF will not be

scale tomato imports during the upcoming decade. As a seasonal product, tomato’s price differs

both in terms of producing country and seasonality. The highest tomato price offered both by

producer and importer is recorded in the period

the period from July till November, when open

Geographical factor has its impact on tomato

district of the RF for the tomato grown on the protected ground is considered to be

Federal District, where the average tomato price offered by a producer in 2010 made up 4,5$ ,

RF tomato producer’s prices by monthsRF tomato producer’s prices by monthsRF tomato producer’s prices by monthsRF tomato producer’s prices by months

2010201020102010 2011201120112011

JanuaryJanuaryJanuaryJanuary $1,79 $2,79

FebruaryFebruaryFebruaryFebruary $2,33 $3,12

MarchMarchMarchMarch $2,50 $3,19

AprilAprilAprilApril $2,55 $3,13

MayMayMayMay $2,60 $2,88

JuneJuneJuneJune $0,95 $2,70

JulyJulyJulyJuly $0,90 $1,97

AugustAugustAugustAugust $0,70 $1,62

SeptemberSeptemberSeptemberSeptember $1,28 $1,15

OctoberOctoberOctoberOctober $1,59 $1,03

NovemberNovemberNovemberNovember $1,91 $1,22

DecemberDecemberDecemberDecember $2,37 $1,81

Imported tomato prices per Imported tomato prices per Imported tomato prices per Imported tomato prices per kilo (by months)kilo (by months)kilo (by months)kilo (by months)

Tomato’s import volume Tomato’s import volume Tomato’s import volume Tomato’s import volume

2009 2010 2009

January $1,11 $1,18 32131

February $1,08 $1,16 39984

March $1,08 $1,18 55836

April $1,08 $1,18 76462

May $1,08 $1,13 127262

June $0,66 $0,88 147736

July $0,63 $0,89 49812

August $0,65 $0,85 23463

September $0,65 $0,81 19710

October $0,63 $0,79 ∗ 22989

November $1,11 $1,38 ∗ 46229

December $1,14 $1,42 ∗ 54056




assimilation lighting, which considerably increases the cost price of the


conditions and the vegetables’ volume of consumption, the RF will not be



producer and importer is recorded in the period from February till May, and the lower price

the period from July till November, when open-field crop is available in the market.

Geographical factor has its impact on tomato price also. For instance, the most expensive

district of the RF for the tomato grown on the protected ground is considered to be

District, where the average tomato price offered by a producer in 2010 made up 4,5$ ,

RF tomato producer’s prices by monthsRF tomato producer’s prices by monthsRF tomato producer’s prices by monthsRF tomato producer’s prices by months

2012201220122012

$2.21

$2.35

$ 2.46

$ 2.57

Tomato’s import volume Tomato’s import volume Tomato’s import volume Tomato’s import volume by months by months by months by months

////tonestonestonestones/ / / /

2009 2010

32131 33285

39984 42071

55836 61635

76462 88051

127262 140944

147736 137711

49812 30526

23463 17536

19710 28612

22989 33476∗

46229 66952∗

54056 78397∗

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian

Producers Producers Producers Producers

Jan

ua

ry

Fe

bru

ary

Ma

rch

Ap

ril

Ma

y

Jun

e

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Jan

ua

ry

Feb

rua

ry

Ma

rch

Ap

ril

Ma

y

Jun

e

July

Au

gu

st

Sep

tem

be

r

Oct

ob

er

No

vem

be

r

De

cem

be

r

Price and quantity of imported tomato by Price and quantity of imported tomato by Price and quantity of imported tomato by Price and quantity of imported tomato by

monthsmonthsmonthsmonths


13 | Page


lighting, which considerably increases the cost price of the


conditions and the vegetables’ volume of consumption, the RF will not be able to avoid large-



from February till May, and the lower price – in

field crop is available in the market.

also. For instance, the most expensive

district of the RF for the tomato grown on the protected ground is considered to be Eastern

District, where the average tomato price offered by a producer in 2010 made up 4,5$ ,

Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian Monthly Tomato Prices Offered by Russian

Producers Producers Producers Producers

Jun

e

July

Au

gu

st

Se

pte

mb

er

Oct

ob

er

No

vem

be

r

De

cem

be

r

-10000

10000

30000

50000

70000

90000

110000

130000

150000

De

cem

be

r

Price and quantity of imported tomato by Price and quantity of imported tomato by Price and quantity of imported tomato by Price and quantity of imported tomato by

monthsmonthsmonthsmonths

Price of imported

tomato in 2009

Price of imported

tomato in 2010

The quantity of

imported tomato in

2009

The quantity of

imported tomato in

2010


Copyright


and the cheapest district is Southern Federal

during the main period.

• Market PotentialMarket PotentialMarket PotentialMarket Potential

According to the studies of nutritionists of the “Scientific Research Institute of Food”

order to take the needed annual dose of vitamins

per year, 13 kg of which, based on climate conditions, falls to off

vegetable is grown in greenhouses. During the mentioned period, the

tonnes of vegetable. While, according to the data provided by Growth Technology

(“Технологии Роста”) Company, totally 560 000

local protected ground within the period from 2009

vegetable is not consumed. While, in the Central District and Moscow 7 kg protected ground

vegetable is consumed per capita, in the total area of the RF it makes only 4,3 kg.

Vegetable consumption in the consumer basket dur

According to the studies conducted by Growth Technology Company, the main reasons for

consuming small amounts during off

� Extremely high prices

� Suspicious origin of imported vegetable

� Deficit of high

Nevertheless, it must be mentioned that the

changed during the last few years to the benefit of the development of the sector, and, today, the

consumer is ready to spend more money from his/her pocket for vegetable consumption, than 10

years ago. The modern “Healthy food” tendency, the world propaganda of nutritionists, the close

relations with pro-western civilization promotes increase in the share of vegetable in the

citizens' everyday diet.

• The RF Greenhouse SectorThe RF Greenhouse SectorThe RF Greenhouse SectorThe RF Greenhouse Sector

The RF greenhouse sector has declined dramatically during the last two decades. During

the Soviet era the RF greenhouses covered 4700 ha territory, and in the beginning of 2012




Southern Federal District, where the producer’s price made up 1,6 $

According to the studies of nutritionists of the “Scientific Research Institute of Food”

order to take the needed annual dose of vitamins, a RF resident must consume 87.6

of which, based on climate conditions, falls to off-season

grown in greenhouses. During the mentioned period, the RF resident

es of vegetable. While, according to the data provided by Growth Technology

ompany, totally 560 000-570 000 tonnes of vegetable was grown on the

local protected ground within the period from 2009-2011. However, the mentioned volume of



Vegetable consumption in the consumer basket during off-season months is minimized.


consuming small amounts during off-season months are as follows:

Extremely high prices;

Suspicious origin of imported vegetable;

high quality products in retail shops.

Nevertheless, it must be mentioned that the RF vegetable's consumer behavior has been

years to the benefit of the development of the sector, and, today, the

more money from his/her pocket for vegetable consumption, than 10


western civilization promotes increase in the share of vegetable in the

The RF Greenhouse SectorThe RF Greenhouse SectorThe RF Greenhouse SectorThe RF Greenhouse Sector


the Soviet era the RF greenhouses covered 4700 ha territory, and in the beginning of 2012


14 | Page


District, where the producer’s price made up 1,6 $

According to the studies of nutritionists of the “Scientific Research Institute of Food”, in

consume 87.6 kg vegetable

season period, i.e. when

RF residents need 1,9 mln

es of vegetable. While, according to the data provided by Growth Technology

570 000 tonnes of vegetable was grown on the

owever, the mentioned volume of



season months is minimized.


consumer behavior has been

years to the benefit of the development of the sector, and, today, the

more money from his/her pocket for vegetable consumption, than 10


western civilization promotes increase in the share of vegetable in the


the Soviet era the RF greenhouses covered 4700 ha territory, and in the beginning of 2012-


Copyright


approximately 2000 ha. Every

technical equipment which make

demand and decrease in the volume of local greenhouse produce has resulted in more increase in

the import volumes during the last

is full of imported product, and, in case of tomato

According to official data published, the annual import volumes of tomato exceed 700

thousand USD. In specialists' opinion, the actual volumes exceed the presented data two

Since 2000, some positive developments ha

construction. They were mainly conditioned not by the construction of

re-equipment of the existing greenhouses.

Thus, during off-season months the demand for vegetable

positive development of the RF greenhouse sector. The greenhouse product deficit is

compensated by imported product

According to the sector’s specialists, import of several vegetables, in particular, tomato,

pepper and eggplant, has never been possible to completely exchange with Russian product

because they require long vegetation period for which

lighting expenses are required. Therefore, during several months, for instance, during the period

from December till May, it is impossible to avoid large scale vegetable import volumes.

Today, 200 greenhouses operat

major part of which is located in Central (33%) and Povolzhye (22%) districts.

The main vegetables grown in the RF greenhouses

In the RF only 5% of the protected




approximately 2000 ha. Every year, 70-100 ha greenhouses stop working

makes their product non-competitive. The increase in consumer

and decrease in the volume of local greenhouse produce has resulted in more increase in

mes during the last few years. Therefore, the whole vegetable and flower market

is full of imported product, and, in case of tomato, the imported product constitutes 90%.

According to official data published, the annual import volumes of tomato exceed 700

opinion, the actual volumes exceed the presented data two

Since 2000, some positive developments have been recorded in the area of greenhouse

mainly conditioned not by the construction of new greenhouses, but by

the existing greenhouses.

season months the demand for vegetable is not

of the RF greenhouse sector. The greenhouse product deficit is

imported products.


has never been possible to completely exchange with Russian product

require long vegetation period for which considerable heating and assimilation

. Therefore, during several months, for instance, during the period


Today, 200 greenhouses operate in the territory of the RF with 6


The main vegetables grown in the RF greenhouses are cucumber (60%) and tomato (35%).

In the RF only 5% of the protected ground is allocated for growing the rest of crops.


15 | Page


100 ha greenhouses stop working because of poor

competitive. The increase in consumer

and decrease in the volume of local greenhouse produce has resulted in more increase in

vegetable and flower market

the imported product constitutes 90%.

According to official data published, the annual import volumes of tomato exceed 700 000,0

opinion, the actual volumes exceed the presented data two-fold.

been recorded in the area of greenhouse

new greenhouses, but by

not combined with the

of the RF greenhouse sector. The greenhouse product deficit is


has never been possible to completely exchange with Russian products,

considerable heating and assimilation

. Therefore, during several months, for instance, during the period


e in the territory of the RF with 6-10 ha land area, the


cucumber (60%) and tomato (35%).

ground is allocated for growing the rest of crops.


Copyright


3.2.1.3.2.1.3.2.1.3.2.1. ProductProductProductProduct: T: T: T: Tomatoomatoomatoomato

According to the data provided by the Food and Agriculture Organization

UN, on the assumption of the production and sales volumes, tomato is considered to be

widely used vegetable. World tomato production

to the protected ground.

TomatoTomatoTomatoTomato (Solanum lycopersicum)(Solanum lycopersicum)(Solanum lycopersicum)(Solanum lycopersicum)

one of the most widely used and highest value vegeta

differ from each other both in taste, appearance, quality and price. The implementation of the

program assumes growing highly productive, durab

tasty tomato in a 6ha greenhouse area situated in the vicinity of Noragavit district

3.2.2.3.2.2.3.2.2.3.2.2. PricePricePricePrice----PricingPricingPricingPricing

Pricing is consiered to be the most important component of Marketing Mix, because the

selected price defines both the program’s

product. Therefore, pricing requires a responsible approach and must be based on the following

factors:

� Fixed and variable costs;

� Competitors’ price;

� Objectives of the organization;

� Strategic approach;

� Solvency level of the target group.

In the result of combining all these aforementioned factors and, taking into account the

fact that the product, as well as the qualitative features of the product, the company adopts

specific pricing policy and forms specific pricing policy.

� Fixed and variable costs are presented in the financial part of business plan.

� Competitors’ price –

Russian market, therefore the competitive price of the RF tomato market is being

observed. Taking into c




3.2.3.2.3.2.3.2. Marketing MixMarketing MixMarketing MixMarketing Mix (4(4(4(4PPPP))))

According to the data provided by the Food and Agriculture Organization

production and sales volumes, tomato is considered to be

vegetable. World tomato production covers 4 mln ha land area,

(Solanum lycopersicum)(Solanum lycopersicum)(Solanum lycopersicum)(Solanum lycopersicum) is a crop from Solanaceae family and is c

one of the most widely used and highest value vegetables. There are thousand sorts of it, which


program assumes growing highly productive, durable, non-cracking, disease

tasty tomato in a 6ha greenhouse area situated in the vicinity of Noragavit district


selected price defines both the program’s percentage of profit and the competittiveness of the

efore, pricing requires a responsible approach and must be based on the following

Fixed and variable costs;

Competitors’ price;

Objectives of the organization;

Strategic approach;

Solvency level of the target group.



specific pricing policy and forms specific pricing policy.

iable costs are presented in the financial part of business plan.

the tomato, which is going to be grown will be exported into the


observed. Taking into consideration the structural features of the RF tomato market,


16 | Page


According to the data provided by the Food and Agriculture Organization (FAO) of the

production and sales volumes, tomato is considered to be the most

4 mln ha land area, 60% of which falls

is a crop from Solanaceae family and is considered to be

bles. There are thousand sorts of it, which


cracking, disease-resistant and very

tasty tomato in a 6ha greenhouse area situated in the vicinity of Noragavit district.


and the competittiveness of the

efore, pricing requires a responsible approach and must be based on the following



iable costs are presented in the financial part of business plan.

the tomato, which is going to be grown will be exported into the


onsideration the structural features of the RF tomato market,


Copyright


the countries importing tomato to the RF and others will be considered direct

competitors for the tomato exported from Armenia into Russia, because over 90% of

the tomato available in the market

Hence, let us observe the realization prices set by large

off-season months, including customs duty and transportation costs. The off

by importers is being observed, because the program assumes exporting tomato during off

months and offers an appropriate price.

Thus, as the program offers off

have been calculated in order to compare with t

statistics of the previous years, the annual average and seasonal importer prices differ by 11%.

Most of the large-scale tomato importing countries pay 15% customs duty (the CIS countries are

exempt from customs duties), which was also included into calculations.

Importing countryImporting countryImporting countryImporting country Average annual Average annual Average annual Average annual

price of tomato price of tomato price of tomato price of tomato

per per per per

Turkey

Ukraine

China

Morocco

Azerbaijan Spain

Netherlands

Belgium

Israel Macedonia

Other

Average import price

The Ukraine and Azerbaijan mainly import open field tomato into Russia during the

season, therefore, annual average price makes up 1 $. In January, 2012, the Ukraine imported






the tomato available in the market during off-season months falls to imported tomato.

Hence, let us observe the realization prices set by large-scale importing countries during

season months, including customs duty and transportation costs. The off

being observed, because the program assumes exporting tomato during off

months and offers an appropriate price.

Thus, as the program offers off-season price, the importers prices for off

been calculated in order to compare with those of importing countries. According to the


scale tomato importing countries pay 15% customs duty (the CIS countries are

s duties), which was also included into calculations.

Average annual Average annual Average annual Average annual

price of tomato price of tomato price of tomato price of tomato

per per per per 1 kilo1 kilo1 kilo1 kilo

Tomato price per Tomato price per Tomato price per Tomato price per

1 kilo throughout 1 kilo throughout 1 kilo throughout 1 kilo throughout

offoffoffoff----season monthsseason monthsseason monthsseason months

((((annual averageannual averageannual averageannual average + + + +

11%)11%)11%)11%)

Tomato price per 1 kilo Tomato price per 1 kilo Tomato price per 1 kilo Tomato price per 1 kilo

throughout throughout throughout throughout

customs duty (customs duty (customs duty (customs duty (

1111 2222 $1,11 $1,23

$0,54 $0,60

$1,21 $1,33

$1,42 $1,58

$0,75 $0,83

$1,55 $1,72

$1,38 $1,53

$1,36 $1,51

$2,10 $2,33

$1,01 $1,12

$1,33 $1,48

$1,25 $1,39




17 | Page




season months falls to imported tomato.

scale importing countries during

season months, including customs duty and transportation costs. The off-season price offered

being observed, because the program assumes exporting tomato during off-season

season price, the importers prices for off-season months

hose of importing countries. According to the


scale tomato importing countries pay 15% customs duty (the CIS countries are

Tomato price per 1 kilo Tomato price per 1 kilo Tomato price per 1 kilo Tomato price per 1 kilo

throughout throughout throughout throughout offoffoffoff----season season season season

monthsmonthsmonthsmonths , including , including , including , including

customs duty (customs duty (customs duty (customs duty (columncolumncolumncolumn 2 + 2 + 2 + 2 +

15%)15%)15%)15%)

3333 $1,38

$0,60

$1,48

$1,73

$0,83

$1,87

$1,68

$1,66

$2,48

$1,27

$1,63

$1,54




Copyright


small amounts of tomato at 4,05$ per kilo. That means during off

these countries is not competitive because the level of greenhouse activity in the mentioned

countries is low.

Despite the share of Turkish tomato in the RF market consumer basket, it as a low quality

product with suspicious origin. Turkey and

In terms of quality, Israel, Spain, the Netherlands and other European countries offer

better products, nevertheless, they offer 1.5

Hence, it is possible to divide the RF imported tomato by

qualitative features and wholesaler realization price:

1. Tomato imported during the season

2. Low quality tomato –max. 1.5$

3. High quality tomato– 1.5

The implementation of the program assumes exporting tomato from

market, which will be equal to the tomato offered by the European countries in terms of quality

standards.

In the result of financial calculations and market research, the annual average price for

the tomato produced in the territory of

Moscow city, RF will cost 0.28 USD/kilo. The realization price set by the Russian wholesalers

will make up 1.48 USD. Therefore, the program will offer low price/high quality combination,

which is an important precondition for the product competitiveness as well as for entering the

market. The high quality of the product is conditioned by favorable climate conditions, the

number of sunny days, the intensity of solar radiation, water quality and other fact

high quality crop.

� The program objectives and strategic approach comply with the realization price in

the RF territory, which has been approved by the program, because the program objectives and

strategy assume large-scale imports for which

� The level of solvency for the target group. Moscow has been chosen as a target

market in the RF, taking into account the solvency of its population, because, in terms of income




small amounts of tomato at 4,05$ per kilo. That means during off-season months th



product with suspicious origin. Turkey and China offer 1,5$ per 1 kilo of tomato.


better products, nevertheless, they offer 1.5-2.5$ per kilo of tomato.

Hence, it is possible to divide the RF imported tomato by 3 categories in accordance with

qualitative features and wholesaler realization price:

Tomato imported during the season – max. 1$

max. 1.5$

1.5-2.5$

The implementation of the program assumes exporting tomato from



the tomato produced in the territory of Armenia, is defined 1.20 USD/kilo. 1.20 USD/kilo. 1.20 USD/kilo. 1.20 USD/kilo.



ortant precondition for the product competitiveness as well as for entering the


number of sunny days, the intensity of solar radiation, water quality and other fact

program objectives and strategic approach comply with the realization price in


scale imports for which a competitive price is needed.

The level of solvency for the target group. Moscow has been chosen as a target



18 | Page


season months the produce of



China offer 1,5$ per 1 kilo of tomato.


3 categories in accordance with

The implementation of the program assumes exporting tomato from Armenia into the RF



1.20 USD/kilo. 1.20 USD/kilo. 1.20 USD/kilo. 1.20 USD/kilo. Transportation to



ortant precondition for the product competitiveness as well as for entering the


number of sunny days, the intensity of solar radiation, water quality and other factors needed for

program objectives and strategic approach comply with the realization price in


a competitive price is needed.

The level of solvency for the target group. Moscow has been chosen as a target



Copyright


per capita, it is the leader in the RF and, acco

in Moscow.

3.2.3.3.2.3.3.2.3.3.2.3. Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales

The program assumes realizing large volumes of tomato in the RF market and, in the first

phase of activity, it anticipates

realization through cooperating with wholesalers and retailers. Therefore, the cooperation is

going to be both with large sales networks, i.e. wholesalers and with the leading supermarkets in

the observed market. As soon as the produce adopts in the Russian market, we can move to

direct distribution channels.

3.2.4.3.2.4.3.2.4.3.2.4. PromotionPromotionPromotionPromotion

There are several approved promotion methods, such as ads, PR, sales promotion,

individual sale, targeted marketing, internet market

The mentioned promotion means can be ineffective for promoting tomato, because they

can be quite expensive to attract the whole target market and they can promote the competitors’

product also.

Thus, a specific orientation is needed for selecting the

possible to observe 3 variants of promotion:

1. To promote the consumption of tomato

competitor’s product. On the one hand, we have a large “tomato consuming” target group,

which requires large investments to attract it. On the other hand, tomato consumer has

an approved amount of sorts and dose of tomato to consume which requires global

approaches to influence them.

2. Promoting Armenian tomato, which can be done through propagan

be to raise the reputation of the Armenian harvest, which will directly promote increase

in sales volumes. It is effective, but requires large

3. To promote the brand -

which is to be introduced be the Armenian Harvest Promotion Centre implementing the




per capita, it is the leader in the RF and, according to statistical data, income per capita is $1500

Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales Distribution: Product Realization Channels. Sales NNNNetworksetworksetworksetworks


phase of activity, it anticipates organizing indirect distribution, i.e. organizing product



served market. As soon as the produce adopts in the Russian market, we can move to


individual sale, targeted marketing, internet marketing.



Thus, a specific orientation is needed for selecting the subject of promotion. In is case, it is

possible to observe 3 variants of promotion:

To promote the consumption of tomato- in this case meanwhile we also promote the


ich requires large investments to attract it. On the other hand, tomato consumer has


approaches to influence them.

Promoting Armenian tomato, which can be done through propagan


in sales volumes. It is effective, but requires large-scale investments.

- in this case tomato is presented under a pan



19 | Page


rding to statistical data, income per capita is $1500

etworksetworksetworksetworks


organizing indirect distribution, i.e. organizing product



served market. As soon as the produce adopts in the Russian market, we can move to




subject of promotion. In is case, it is

in this case meanwhile we also promote the


ich requires large investments to attract it. On the other hand, tomato consumer has


Promoting Armenian tomato, which can be done through propaganda-The main goal will


scale investments.

in this case tomato is presented under a pan-Armenian brand,



Copyright


program. Under the brand, the agricultural products with appropriate qualification can be

introduced in foreign and domestic markets by any producers.





introduced in foreign and domestic markets by any producers.


20 | Page




Copyright


4.4.4.4.

4.1.4.1.4.1.4.1. Selection of the Selection of the Selection of the Selection of the

Selection of the area in the vicinity of Noragavit district as greenhouse construction site

was conditioned by availability of the Yerevan TPP's thermal resources and

appropriate lands, as well as convenience of the site to construct centralized infrastructures.

The availability of the centralized system of the main infrastructures will enable the

investors to avoid rather sophisticated, time and

energy, water and gas supply, as well as for water discharge.

construction of the main supply infrastructure for the greenhouse zone will allow the investors

to compensate the most part of the thermal energy generation cost.

TPP's thermal energy will promote the stability of the TPP's product consumption, on the one

hand, and the investors will benefit from more affordable supply, on the other. Consequently,

the product cost price will decrease; and the level of profitability and the product

competitiveness will increase. The aforementioned factors will positively influence on the price

of the investments’ payback period also.

4.2.4.2.4.2.4.2.

State-of-the-art greenhouses are at least 4 m high glass or polycarbonate steel frame

structures with their heating, screening, blacking out, assimilation lighting (or without this), drip

irrigation, modern automatic electric and computer climate control systems, as well

supporting operation and maintenance (cool storage, sorting, packaging, etc.) facilities for

hydroponic and soil-based crop production:

According to the leading greenhouse producing companies with 10 years of experience in

the field the price for 1 m2 greenhouse fluctuates between 140 and 200 USD depending on the

level of technical equipment applied.




4.4.4.4. Production PlanningProduction PlanningProduction PlanningProduction Planning

Selection of the Selection of the Selection of the Selection of the GGGGreenhouse Construction Sitereenhouse Construction Sitereenhouse Construction Sitereenhouse Construction Site


was conditioned by availability of the Yerevan TPP's thermal resources and



investors to avoid rather sophisticated, time and resource consuming solutions for electric

energy, water and gas supply, as well as for water discharge. As to the heat supply, the


f the thermal energy generation cost. Meanwhile, the use of the



roduct cost price will decrease; and the level of profitability and the product

The aforementioned factors will positively influence on the price

of the investments’ payback period also.

4.2.4.2.4.2.4.2. Greenhouse EquipmentGreenhouse EquipmentGreenhouse EquipmentGreenhouse Equipment

greenhouses are at least 4 m high glass or polycarbonate steel frame


irrigation, modern automatic electric and computer climate control systems, as well


based crop production:


for 1 m2 greenhouse fluctuates between 140 and 200 USD depending on the

level of technical equipment applied.


21 | Page


reenhouse Construction Sitereenhouse Construction Sitereenhouse Construction Sitereenhouse Construction Site


was conditioned by availability of the Yerevan TPP's thermal resources and availability of



resource consuming solutions for electric

As to the heat supply, the


Meanwhile, the use of the



roduct cost price will decrease; and the level of profitability and the product

The aforementioned factors will positively influence on the price

greenhouses are at least 4 m high glass or polycarbonate steel frame


irrigation, modern automatic electric and computer climate control systems, as well as with their



for 1 m2 greenhouse fluctuates between 140 and 200 USD depending on the


Copyright


Under the program the greenhouses will be equipped with the following main

technologies and systems:

• Vertical and horizontal screening system;

• Drip irrigation system;

• UV disinfection system;

• Condensation water harvesting

• Automat heating system;

• CO2 dosing system;

• High pressure fogging system;

• Ventilation system;

• Microclimate computer control system.

Tomato will be grown in hydroponic method under the control of central automatic

system.

The first crop is harvested in 2 months after planting the seedling. The productivity of the

tomato fluctuates between 1.5-10 kg/m2 depending on the season.

From agronomic and financial viewpoints, production of tomato is expedient to start in

September, because in this case due to seasonality factor the highest crop is got during the period


During the first year (2012) the crop is harvested only in November and December.

Below please find monthly product volumes, since the 2nd year of operation.

MonthMonthMonthMonth

JanuaryJanuaryJanuaryJanuary

FebruaryFebruaryFebruaryFebruary

MarchMarchMarchMarch





Vertical and horizontal screening system;

Condensation water harvesting and reusing system;

Automat heating system;

High pressure fogging system;

Microclimate computer control system.

4.3.4.3.4.3.4.3. Production technologyProduction technologyProduction technologyProduction technology



10 kg/m2 depending on the season.

omic and financial viewpoints, production of tomato is expedient to start in



rst year (2012) the crop is harvested only in November and December.


Tomato Production by monthsTomato Production by monthsTomato Production by monthsTomato Production by months

Production (kg/m2)/Production (kg/m2)/Production (kg/m2)/Production (kg/m2)/

SeasonSeasonSeasonSeason

ality factorality factorality factorality factor

2013201320132013

11,0% 6,05

12,0% 6,60

14,0% 7,70


22 | Page





omic and financial viewpoints, production of tomato is expedient to start in


rst year (2012) the crop is harvested only in November and December.


Production (kg/m2)/Production (kg/m2)/Production (kg/m2)/Production (kg/m2)/

2014201420142014

2015201520152015

6,05 6,60

6,60 7,20

7,70 8,40


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AprilAprilAprilApril

MayMayMayMay

JuneJuneJuneJune

JulyJulyJulyJuly

AugustAugustAugustAugust

SeptemberSeptemberSeptemberSeptember

OctoberOctoberOctoberOctober

NovemberNovemberNovemberNovember

DecemberDecemberDecemberDecember

Total production Total production Total production Total production from unitfrom unitfrom unitfrom unit/ (kg/m/ (kg/m/ (kg/m/ (kg/m

Total tomato production (kg/year)/Total tomato production (kg/year)/Total tomato production (kg/year)/Total tomato production (kg/year)/

4.4.4.4.4.4.4.4.

The normal operation of a 6 ha greenhouse requires 105 employees

employees and 90 workers. The major part of the works is automated and controlled by the

central system.

Exept the key manpower, we anticipate inviting a Dutch master growing specialist for

providing consultation on tomato

PositionPositionPositionPosition

Director/Production manager/Director/Production manager/Director/Production manager/Director/Production manager/

Deputy manager (supply, sales)Deputy manager (supply, sales)Deputy manager (supply, sales)Deputy manager (supply, sales)

Financial manager /Chief accountantFinancial manager /Chief accountantFinancial manager /Chief accountantFinancial manager /Chief accountant

Accountant Accountant Accountant Accountant

Agronomist Agronomist Agronomist Agronomist

Crop protection specialistCrop protection specialistCrop protection specialistCrop protection specialist

EngineerEngineerEngineerEngineer

Computer system specialistComputer system specialistComputer system specialistComputer system specialist

Heating system specialistHeating system specialistHeating system specialistHeating system specialist

ElectricianElectricianElectricianElectrician

PlumberPlumberPlumberPlumber

GuardGuardGuardGuard




15,0% 8,25

16,0% 8,80

18,0% 9,90

3,0% 1,65

0,0% 0,00

0,0% 0,00

0,0% 0,00

3,0% 1,65

8,0% 4,40

/ (kg/m/ (kg/m/ (kg/m/ (kg/m2222)/ )/ )/ )/ 100,0% 55,00 55,00

Total tomato production (kg/year)/Total tomato production (kg/year)/Total tomato production (kg/year)/Total tomato production (kg/year)/ 3 223 000 3 223

4.4.4.4.4.4.4.4. ManpowerManpowerManpowerManpower for Productionfor Productionfor Productionfor Production

The normal operation of a 6 ha greenhouse requires 105 employees

The major part of the works is automated and controlled by the


providing consultation on tomato growing techniques.

Number of Number of Number of Number of

employeesemployeesemployeesemployees

FullFullFullFull monthly salary monthly salary monthly salary monthly salary per personper personper personper person ((((USDUSDUSDUSD

Director/Production manager/Director/Production manager/Director/Production manager/Director/Production manager/ 1 2 190

Deputy manager (supply, sales)Deputy manager (supply, sales)Deputy manager (supply, sales)Deputy manager (supply, sales) 1 1 651

Financial manager /Chief accountantFinancial manager /Chief accountantFinancial manager /Chief accountantFinancial manager /Chief accountant 1 1 517

1 574

1 1 382

1 1 382

1 1 382

1 1 382

1 1 382

1 709

1 709

4 246


23 | Page


8,25 9,00

8,80 9,60

9,90 10,80

1,65 1,80

0,00 0,00

0,00 0,00

0,00 0,00

1,65 1,80

4,40 4,80

55,00 60,00

3 223 000 3 516 000

The normal operation of a 6 ha greenhouse requires 105 employees – 15 administrative

The major part of the works is automated and controlled by the


monthly salary monthly salary monthly salary monthly salary USDUSDUSDUSD))))

Total annual Total annual Total annual Total annual salarysalarysalarysalary ((((USDUSDUSDUSD))))

2 190 26 277

1 651 19 815

1 517 18 200

6 892

1 382 16 585

1 382 16 585

1 382 16 585

1 382 16 585

1 382 16 585

8 508

8 508

11 815


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Dutch master grower (following Dutch master grower (following Dutch master grower (following Dutch master grower (following

Total fixed salaryTotal fixed salaryTotal fixed salaryTotal fixed salary

WorkersWorkersWorkersWorkers

Total variable salaryTotal variable salaryTotal variable salaryTotal variable salary

Total salary costsTotal salary costsTotal salary costsTotal salary costs

4.5. Timeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the Program

We anticipate starting greenhouse construction from the moment of financing. According

to Dutch and other foreign greenhouse construction companies, construction of a 6 ha state

the-art takes 4-8 months depending on the number of factors.

The first crop is harvested 2 months after planting seedlings.




Dutch master grower (following Dutch master grower (following Dutch master grower (following Dutch master grower (following years)years)years)years)

15151515 14 50614 50614 50614 506

90 330

90909090 330330330330

105105105105 14 83614 83614 83614 836

Timeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the Program


to Dutch and other foreign greenhouse construction companies, construction of a 6 ha state

8 months depending on the number of factors.

p is harvested 2 months after planting seedlings.


24 | Page


21 000

14 50614 50614 50614 506 203 938203 938203 938203 938

356 289

356 289356 289356 289356 289

14 83614 83614 83614 836 560560560560 8888

Timeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the ProgramTimeframes for Implementing the Program


to Dutch and other foreign greenhouse construction companies, construction of a 6 ha state-of-


Copyright


5.5.5.5.

On the assumption of the average prices set by a number of greenhouse producing and

supplying companies, the amount of investment

depending on the level of technical equipment adopted.

10, 64 mln USD investment is needed in order to implement the program on the

construction of 5,8 ha greenhouse on 6,5 ha land area, the major part of which (approximately

82,7%) is needed for building the greenhouse and for technical equipment. The rest of the

amount is needed for purchase of land (7%), obtaining the right to use the infrastructures (3,2%)

as well as for the replenishment of working capital (7,1%).

Screening system

6%

Irrigation system

11%

Other systems and

equipment

13%

Replanishment of




5.5.5.5. Investment PlanningInvestment PlanningInvestment PlanningInvestment Planning

5.1.5.1.5.1.5.1. Value of investmentValue of investmentValue of investmentValue of investment


supplying companies, the amount of investment fluctuates between 140

depending on the level of technical equipment adopted.

mln USD investment is needed in order to implement the program on the




as well as for the replenishment of working capital (7,1%).

Land

7%

Right to use

infrastructures

3%

Greenhouse

consrtuctions(including

glass)

35%

Heating

system(including CO2

unit)

18%

Other systems and

Replanishment of

working capital

7%

Investment structureInvestment structureInvestment structureInvestment structure


25 | Page



fluctuates between 140-200 USD per 1m2

mln USD investment is needed in order to implement the program on the




consrtuctions(including


Copyright


Description

Land acquisitionLand acquisitionLand acquisitionLand acquisition

The right to use infrastructuresThe right to use infrastructuresThe right to use infrastructuresThe right to use infrastructures

Greenhouse Greenhouse Greenhouse Greenhouse constructions(including glassconstructions(including glassconstructions(including glassconstructions(including glass

Heating system (including CO2 system)Heating system (including CO2 system)Heating system (including CO2 system)Heating system (including CO2 system)

Screening systemScreening systemScreening systemScreening system

Irrigation systemIrrigation systemIrrigation systemIrrigation system

Other systems and equipmentOther systems and equipmentOther systems and equipmentOther systems and equipment

Replenishment of working capitalReplenishment of working capitalReplenishment of working capitalReplenishment of working capital

Total investmentTotal investmentTotal investmentTotal investment

During the first few years of operation approximately 760 000 USD will be required for

the replenishment of working capital.

The major part of current expenses includes the VAT paid to suppliers for the obtained

products, long-term loan interest expenses, variable and fixed labour costs, as well as expenses for

obtaining planting materials.

5.2.5.2.5.2.5.2. Financing Methods, Terms and SourFinancing Methods, Terms and SourFinancing Methods, Terms and SourFinancing Methods, Terms and Sour

• Through Armenian banks

institutions of greenhouse producing (or supplying) countries on the amount equal to the

equities of the greenhouse producers. For receiving the aforementioned foreign loans, insurance

will be required by the same countries’ insurance companies.

• Accomplishment of the greenhouse construction by foreign greenhouse constructers

through financial leasing.

• Lending up to 80% of the price of the investment program through Armenian banks in

the condition to ensure 20% of the program value through the investors’ own equity.




InvestmentsInvestmentsInvestmentsInvestments

Description Price [USD

743 333,3

The right to use infrastructuresThe right to use infrastructuresThe right to use infrastructuresThe right to use infrastructures 337 500,0

constructions(including glassconstructions(including glassconstructions(including glassconstructions(including glass 3 690 901,4

Heating system (including CO2 system)Heating system (including CO2 system)Heating system (including CO2 system)Heating system (including CO2 system) 1 894 435,2

637 965,2

1 136 599,4

Other systems and equipmentOther systems and equipmentOther systems and equipmentOther systems and equipment 1 436 765,2

Replenishment of working capitalReplenishment of working capitalReplenishment of working capitalReplenishment of working capital 760 000

10 637 499,710 637 499,710 637 499,710 637 499,7

Replenishment of Working CapitalReplenishment of Working CapitalReplenishment of Working CapitalReplenishment of Working Capital


the replenishment of working capital.


term loan interest expenses, variable and fixed labour costs, as well as expenses for

Financing Methods, Terms and SourFinancing Methods, Terms and SourFinancing Methods, Terms and SourFinancing Methods, Terms and Sourcescescesces

Through Armenian banks receiving rather accessible long-term loans from the financial



required by the same countries’ insurance companies.

Accomplishment of the greenhouse construction by foreign greenhouse constructers

Lending up to 80% of the price of the investment program through Armenian banks in

ion to ensure 20% of the program value through the investors’ own equity.


26 | Page


USD] Share in the

overall amount of

investment

7,0%

3,2%

34,7%

17,8%

6,0%

10,7%

13,5%

7,1%

10 637 499,710 637 499,710 637 499,710 637 499,7 100%100%100%100%



term loan interest expenses, variable and fixed labour costs, as well as expenses for

cescescesces

term loans from the financial



Accomplishment of the greenhouse construction by foreign greenhouse constructers

Lending up to 80% of the price of the investment program through Armenian banks in

ion to ensure 20% of the program value through the investors’ own equity.


Copyright


6.6.6.6.

6.1.6.1.6.1.6.1.

The following financial calculations have been made for a 5,8 ha greenhouse constructed

in a 6,5 ha land area.

Project initiationProject initiationProject initiationProject initiation

Planning horizon

Currency

Exchange rate USD / AMD

Long-term loan interest (%)

6.2.6.2.6.2.6.2. The main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculations

In order to calculate and evaluate the effectiveness of

some index systems.

The financial analysis of the programs aims at evaluating its profitability. It’s necessary to

persuade that investing financial resources in the program is more profitable than an alternative

utilization of the resources. Alternative options can be as follows:

• To refuse to participate in the program

anything.

• To Use the financial resources in order to receive guaranteed average income (e.g. from a

bank deposit).

At least the 2 aforementioned alternative variants should be taken into consideration

when carrying out financial analysis.

Discount Discount Discount Discount RateRateRateRate

As a discount factor, we have considered the waited average capital cost (WACC). The

formula of the WACC is as follows:




6.6.6.6. Financial PlanningFinancial PlanningFinancial PlanningFinancial Planning

6.1.6.1.6.1.6.1. BBBBasic asic asic asic DDDDataataataata on the Programon the Programon the Programon the Program


from from from from the moment of financingthe moment of financingthe moment of financingthe moment of financing

8 Years

USD

/ AMD 390

nterest (%) 10%

The main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculations

In order to calculate and evaluate the effectiveness of an investment plan, specialists use



ion of the resources. Alternative options can be as follows:

To refuse to participate in the program – in this case the investor does not lose or receive

To Use the financial resources in order to receive guaranteed average income (e.g. from a


when carrying out financial analysis.


formula of the WACC is as follows:


27 | Page



the moment of financingthe moment of financingthe moment of financingthe moment of financing

Years

USD

390

10%

The main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculationsThe main assumptions for doing the calculations

investment plan, specialists use



in this case the investor does not lose or receive

To Use the financial resources in order to receive guaranteed average income (e.g. from a




Copyright


Whereby:

��

�� %�

��

�� %�

� � ��

As the program is going to be implemented through 80% borrowings and 20%

equity, wd and wc will make 0,8 and 0,2

equals to 10%. Usually it is used in the formula of the WACC after imposing taxes on variable

assets, nevertheless, taking into account that income tax will not be

activities, under the program we use

In case of not investing financial resources in the program, the money can be deposited in

a bank. This fact should be taken into account when calculating the WACC. Consequently, the

cost of equity – ��, is considered as average annual interest rate (7%)

Hence,

6.3.6.3.6.3.6.3. Sales Forecast and Income PlanningSales Forecast and Income PlanningSales Forecast and Income PlanningSales Forecast and Income Planning

6.05 6.607.70

Monthly Tomato Production kg/mMonthly Tomato Production kg/mMonthly Tomato Production kg/mMonthly Tomato Production kg/m

Jan

ua

ry

Feb

rua

ry

Ma

rch

Ap

ril




!"## � !$%&�' ( )� * +,!-

��

��

As the program is going to be implemented through 80% borrowings and 20%

equity, wd and wc will make 0,8 and 0,2 accordingly. rd is the long-term loan interest and


assets, nevertheless, taking into account that income tax will not be

program we use instead of .



, is considered as average annual interest rate (7%) available

WACC= 0.8*10%+0.2*7%= 9.4%WACC= 0.8*10%+0.2*7%= 9.4%WACC= 0.8*10%+0.2*7%= 9.4%WACC= 0.8*10%+0.2*7%= 9.4%

Sales Forecast and Income PlanningSales Forecast and Income PlanningSales Forecast and Income PlanningSales Forecast and Income Planning

8.25 8.809.90

1.650.00

Monthly Tomato Production kg/mMonthly Tomato Production kg/mMonthly Tomato Production kg/mMonthly Tomato Production kg/m2 2 2 2 for 2013for 2013for 2013for 2013

Ma

y

Jun

e

July

Au

gu

st


28 | Page


As the program is going to be implemented through 80% borrowings and 20% own

term loan interest and


assets, nevertheless, taking into account that income tax will not be imposed during the



available in the Republic.

0.00 0.001.65

4.40

for 2013for 2013for 2013for 2013

Sep

tem

be

r

Oct

ob

er

No

vem

be

r

De

cem

be

r


Copyright


In terms of 1m the monthly profitability of tomato

depending on the seasonality factor. The lowest crop is got in the period from July till November,

and the highest crop in the period from May till June.

Taking into consideration Armenia’s climate conditions and the assessm

specialists, the productivity of tomato has been calculated 55 kg/m

kg/m2 since the second year.

In the result of market research and financial calculations, the average annual realization

price set by the producer (ex work), was 1,2 USA.

Tomato production, sales revenue and net profit on an annual basisTomato production, sales revenue and net profit on an annual basisTomato production, sales revenue and net profit on an annual basisTomato production, sales revenue and net profit on an annual basis

UnitUnitUnitUnit 2012201220122012

ProductionProductionProductionProduction tonnes 355

Sales Sales Sales Sales

revenuerevenuerevenuerevenue

thousand

USD/kg

425

Net profitNet profitNet profitNet profit -

Gross expenditure for the tomato grown in the

costs and 64% -total fixed costs.




In terms of 1m the monthly profitability of tomato fluctuates between 1.5

on the seasonality factor. The lowest crop is got in the period from July till November,

and the highest crop in the period from May till June.

Taking into consideration Armenia’s climate conditions and the assessm

specialists, the productivity of tomato has been calculated 55 kg/m2 for the first year and 60


er (ex work), was 1,2 USA.


2012201220122012 2013201320132013 2014201420142014 2015201520152015 2016201620162016 2017201720172017

355 3223 3223 3516 3516 3516

425 3868 3868 4219 4219 4219

-353 1103 1343 1904 2112 2279

6.4. Cost6.4. Cost6.4. Cost6.4. Cost PlanningPlanningPlanningPlanning

Gross expenditure for the tomato grown in the greenhouse is as follows: 36

total fixed costs.

Total fixed

costs

36%Total

variable

costs

64%

Structure of Total Tomato CostsStructure of Total Tomato CostsStructure of Total Tomato CostsStructure of Total Tomato Costs


29 | Page


fluctuates between 1.5-10 kg/m2

on the seasonality factor. The lowest crop is got in the period from July till November,

Taking into consideration Armenia’s climate conditions and the assessments of Dutch

for the first year and 60



2018201820182018 2019201920192019 TOMATO TOMATO TOMATO TOMATO

2020202020202020

3516 3516 3516

4219 4219 4219

2288 2283 2276

greenhouse is as follows: 36% -variable


Copyright


Variable costs include costs for heating

obtaining planting material (15%)

Variable costs, thousand USD

Unit costUnit costUnit costUnit cost

((((USDUSDUSDUSD////mmmmPlant materialPlant materialPlant materialPlant material 2,94

SubstrateSubstrateSubstrateSubstrate 0,70

Crop protectionCrop protectionCrop protectionCrop protection 1,54

WaterWaterWaterWater 0,17

Fertilizer applicationFertilizer applicationFertilizer applicationFertilizer application 1,40

Heating 5,72

ElectricityElectricityElectricityElectricity 1,18

(Cool) storage 0,25

Variable salaryVariable salaryVariable salaryVariable salary 6,08

Other variable CostsOther variable CostsOther variable CostsOther variable Costs 0,82

Total variable costsTotal variable costsTotal variable costsTotal variable costs 20,8120,8120,8120,81

5%

1%

29%

4%




Variable costs include costs for heating (27%), variable labour (28,8%),

%).


mmmm2222))))

2012 2013 2014 2015 2016

172,28 172,28 172,28 172,28 172,28

41,02 41,02 41,02 41,02 41,02

15,04 90,24 90,24 90,24 90,24

1,70 10,20 10,20 10,20 10,20

13,67 82,04 82,04 82,04 82,04

55,91 335,45 335,45 335,45 335,45

11,52 69,10 69,10 69,10 69,10

0,00 14,65 14,65 14,65 14,65

59,38 356,29 356,29 356,29 356,29

10,90 47,93 47,93 47,93 47,93

381,4381,4381,4381,4 1215,71215,71215,71215,7 1215,71215,71215,71215,7 1215,71215,71215,71215,7 1215,71215,71215,71215,7

15% 4%

7%

1%7%

27%

4%

Variable Costs' StructureVariable Costs' StructureVariable Costs' StructureVariable Costs' StructureՏնկանյութ

Սուբստրատ

Բերքի

Ջուր

Պարարտանյութի

օգտագործում

Ջեռուցում

Էլեկտրաէներգիա

Պահեստավորում

Փոփոխուն

Այլ

Planting material

Rockwool

Crop protection

Water

Fertilizer application

Heating

Electric energy

Cool storage

Variable salary

Other variable costs


30 | Page


%), as well as costs for

2017 2018 2019 2020

172,28 172,28 172,28 172,28

41,02 41,02 41,02 41,02

90,24 90,24 90,24 90,24

10,20 10,20 10,20 10,20

82,04 82,04 82,04 82,04

335,45 335,45 335,45 335,45

69,10 69,10 69,10 69,10

14,65 14,65 14,65 14,65

356,29 356,29 356,29 356,29

47,93 47,93 47,93 47,93

1215,71215,71215,71215,7 1215,71215,71215,71215,7 1215,71215,71215,71215,7 1215,71215,71215,71215,7

Տնկանյութ

Սուբստրատ

Բերքի պաշտպանություն

Ջուր

Պարարտանյութի

օգտագործում

Ջեռուցում

Էլեկտրաէներգիա

Պահեստավորում/պաղեցում

Փոփոխուն աշխատավարձ

Այլ փոփոխուն ծախսեր

Planting material

Rockwool

Crop protection

Water

Fertilizer application

Heating

Electric energy

Cool storage

Variable salary



Copyright


Fixed costs include depreciation costs

costs (7%) and office costs (4%).

Depreciation has been calculated in accordance with straight line

without considering salvage value. Maintenance

of annual depreciation allocations.

Maintenance costs for the first two years have been calculated accordingly

depreciation costs. And after that it is assumed that maintenance costs will increas

annually.

Fixed costsFixed costsFixed costsFixed costs, , , , thousand USDthousand USDthousand USDthousand USD


(USD(USD(USD(USD/ / / /

mmmm2222))))

2012201220122012

Fixed salaryFixed salaryFixed salaryFixed salary 3,5

Office costsOffice costsOffice costsOffice costs 0,5

MaintenanceMaintenanceMaintenanceMaintenance 2,3

DepreciationDepreciationDepreciationDepreciation 6,7

Other fixed costsOther fixed costsOther fixed costsOther fixed costs 0,3

Total Total Total Total 13,1 113,19

Depreciation

55%




Fixed costs include depreciation costs (55%), fixed salary fund (3

.

Depreciation has been calculated in accordance with straight line

without considering salvage value. Maintenance costs have been calculated based on the amount

of annual depreciation allocations.

Maintenance costs for the first two years have been calculated accordingly

depreciation costs. And after that it is assumed that maintenance costs will increas

thousand USDthousand USDthousand USDthousand USD

2012201220122012 2013201320132013 2014201420142014 2015201520152015 2016201620162016 2017201720172017

96,97 262,94 203,94 203,94 203,94 203,94

14,01 28,01 28,01 28,01 28,01 28,01

0,00 19,07 38,13 41,95 46,14 50,75

0,00 389,76 389,76 389,76 389,76 389,76

2,22 14,00 13,20 13,27 13,36 13,45

113,19 713,77 673,04 676,93 681,21 685,91

Fixed Salary

32%

Office costs

Maintenance

7%

Depreciation

55%

Other fixed costs

2%

Fixed Costs' StructureFixed Costs' StructureFixed Costs' StructureFixed Costs' Structure


31 | Page


(31,72%), maintenance

Depreciation has been calculated in accordance with straight line depreciation method,

costs have been calculated based on the amount

Maintenance costs for the first two years have been calculated accordingly 5% and 10% of

depreciation costs. And after that it is assumed that maintenance costs will increase by 10%

2017201720172017 2018201820182018 2019201920192019 2020202020202020

203,94 203,94 203,94 203,94

28,01 28,01 28,01 28,01

50,75 55,83 61,41 67,55

389,76 389,76 389,76 389,76

13,45 13,55 13,66 13,79

685,91 691,09 696,79 703,05

Office costs

4%


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Unit costsUnit costsUnit costsUnit costs

Total Variable costs per unit

Heating

Variable salary

Planting material


Total fixed costs per unitTotal fixed costs per unitTotal fixed costs per unitTotal fixed costs per unit

Maintenance

Depreciation

Other fixed costs

Total production costs per unit

Loan intereset

TotalTotalTotalTotal

In the major part of the self

conditioned by the fact that 80%

repayment, the self-coast of tomato will make 0,83

approximately 31% and will make up 0,57 USD.

Other fixed costs

9%

Interest on loan

31%




6.5.6.5.6.5.6.5. Income CalculationIncome CalculationIncome CalculationIncome Calculation

USDUSDUSDUSD////mmmm2222

USDUSDUSDUSD / / / / kkkkg/g/g/g/

1111stststst year year year year

20,81 0,38

5,72 0,10

6,08 0,11

2,94 0,05

6,06 0,33

13,12 0,24

2,25 0,04

6,65 0,12

4,22 0,08

33,92 0,62

15,58 0,28

49,50 0,90

In the major part of the self-cost structure falls to the interest expenses (3

80% of investments are financed through borrowings

coast of tomato will make 0,83 USD, in3 years it will

and will make up 0,57 USD.

Heating

12%

Maintenance

4%

Depreciation

14%

Income StructureIncome StructureIncome StructureIncome Structure


32 | Page


USDUSDUSDUSD / / / / kg/kg/kg/kg/

2222ndndndnd yearyearyearyear

USDUSDUSDUSD / / / / kg/ kg/ kg/ kg/

3333d d d d yearyearyearyear

0,38 0,35

0,10 0,10

0,11 0,10

0,05 0,05

0,33 0,10

0,24 0,22

0,04 0,04

0,12 0,11

0,08 0,07

0,62 0,57

0,28 0,26

0,90 0,83

structure falls to the interest expenses (31%), which is

borrowings. After full loan

USD, in3 years it will decrease by

Variable Salary

12%

Planting material

6%


12%


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Profit tax Profit tax Profit tax Profit tax - According to the RF law on “Profit tax”, tax payers producing agricultural

products are exempt from Profit tax in terms of income from the realization of their agricultural

product, in particular root crops, vegetables and melon crops, as well as protected ground

produce. Consequently, under the program, the income from the realization of the greenhouse

product is not subject of profit tax.

VATVATVATVAT – As for VAT payers, according to the RA Law on the Va

payment deadlines for the VAT calculated by the customs offices for specific products defined by

the same law are postponed for three years after customs declaration, in case if the customs value

of the products exceeds 300 mln AMD.

Consequently, the deadline for paying the VAT of the imported goods and equipment

required for the construction of the greenhouses under the program is postponed for 3 years.

According to the RA Law on the Value Added Tax zero tariffs are applied in terms of

products exported out of the RA customs border under the customs regime of "export for free

circulation".

As under the program we anticipate, will be exported, thus the VAT paid to the suppliers

and for import, is full subject to return.

Customs dutyCustoms dutyCustoms dutyCustoms duty – according to the RA legislation

the equipment needed for greenhouse construction, and for the rest 80%

envisiged.

Income statement (annual/ USD) 2012201220122012 Sales from tomatoes 425,44 3 867,60

Tomatoes Production Variable costs

381,42 1 219,21

Marginal profit 44,01 2 648,39

Fixed costs 113,19




6.6.6.6.6.6.6.6. Tax Tax Tax Tax SSSSystemystemystemystem

According to the RF law on “Profit tax”, tax payers producing agricultural


root crops, vegetables and melon crops, as well as protected ground


product is not subject of profit tax.

As for VAT payers, according to the RA Law on the Va



of the products exceeds 300 mln AMD.

sequently, the deadline for paying the VAT of the imported goods and equipment


According to the RA Law on the Value Added Tax zero tariffs are applied in terms of



and for import, is full subject to return.

according to the RA legislation, 10% customs duty is imposed for 20% of

the equipment needed for greenhouse construction, and for the rest 80%

6.7.6.7.6.7.6.7. Income StatementIncome StatementIncome StatementIncome Statement

Income statement (annual/ USD)

2013201320132013 2014201420142014 2015201520152015 2016201620162016 2017201720172017 3 867,60 3 867,6 4219,20 4219,20 4219,20

1 219,21 1 219,21 1219,21 1219,21 1219,21

2 648,39 2 648,39 2999,99 2999,99 2999,99

713,77 673,04 676,93 681,21 685,91


33 | Page


According to the RF law on “Profit tax”, tax payers producing agricultural


root crops, vegetables and melon crops, as well as protected ground


As for VAT payers, according to the RA Law on the Value Added Tax, the



sequently, the deadline for paying the VAT of the imported goods and equipment


According to the RA Law on the Value Added Tax zero tariffs are applied in terms of the



10% customs duty is imposed for 20% of

the equipment needed for greenhouse construction, and for the rest 80% - 0% customs duty is

2018201820182018 2019201920192019 2020202020202020 4219,20 4219,20 4219,20 4219,20

1219,21 1219,21 1219,21 1219,21

999,99 2999,99 2999,99 2999,99

691,09 696,79 703,05


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Selling expenses -

Earnings before interest and taxes

(69,18) 1 914,10

Long term loan interest expense

283,67

Earnings before taxes (352,85) 1 103,03

Income tax -

Net profit

(352,85) 1 103,03




20,51 20,51 20,51 20,51 20,51

1 914,10 1 954,84 2302,55 2298,27 2293,56

811,07 611,53 398,78 186,71 14,77

1 103,03 1 343,30 1903,76 2111,55 2278,80

- - - - -

1 103,03

1 343,30

1903,76

2111,55

2278,80


34 | Page


20,51 20,51 20,51

2293,56 2288,39 2282,69 2276,43

- - -

2278,80 2288,39 2282,69 2276,43

- - -

2278,80

2288,39

2282,69

2276,43

35


6.8.6.8.6.8.6.8.

2012201220122012

OPERATING ACTIVITIESOPERATING ACTIVITIESOPERATING ACTIVITIESOPERATING ACTIVITIES

Net income (352,8)

Depreciation and amortization -

Increase (decrease) in non-interest bearing current liabilities

-

Increase in other operating activities (VAT) 85,1

Decrease/ increase in accounts receivable

Decrease in other operating activities (VAT) (490,5)

Net cash flow from operating activitiesNet cash flow from operating activitiesNet cash flow from operating activitiesNet cash flow from operating activities (758,3)

INVESTING ACTIVITIESINVESTING ACTIVITIESINVESTING ACTIVITIESINVESTING ACTIVITIES

Cash outflow from investing activity (9877,5)

Other cash flows from investing activities

Net cash flows from investing activitiesNet cash flows from investing activitiesNet cash flows from investing activitiesNet cash flows from investing activities (9 877,5)

FINANCING ACTIVITIESFINANCING ACTIVITIESFINANCING ACTIVITIESFINANCING ACTIVITIES

Increase (decrease) in long term loans/ 8 510,0

Common stock 2 127,5

Dividends paid

Other cash flows from financing activities/

Net cash flows from financing activitiesNet cash flows from financing activitiesNet cash flows from financing activitiesNet cash flows from financing activities 10637,5

Net Net Net Net change in cashchange in cashchange in cashchange in cash 1,7

Cash at the beginning of the year -

Closing cash balanceClosing cash balanceClosing cash balanceClosing cash balance

1,7


Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Program on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 ha Greenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan

Cash Flow StatementCash Flow StatementCash Flow StatementCash Flow Statement (th(th(th(thousand USDousand USDousand USDousand USD))))

2012201220122012 2013201320132013 2014201420142014 2015201520152015 2016201620162016 2017201720172017

(352,8) 1103,0 1 343,3 1 903,8 2 111,6 2 278,8

389,8 389,8 389,8 389,8 389,8

- - - - -

184,8 188,5 189,2 190,1 191,0

405,4 - -

(490,5) (184,8) (188,5) (189,2) (190,1) (191,0)

(758,3) 1 898,2 1 733,1 2 293,5 2 501,3 2 668,6

(9877,5)

(9 877,5)

8 510,0 (1418,3) (2127,5) (2 127,5) (2 127,5) (709,2)

2 127,5

10637,5 (1418,3) (2127,5) (2 127,5) (2 127,5) (709,2)

479,9 (394,4) 166,0 373,8 1 959,4

1,7 481,6 87,2 253,2 627,0

481,6 87,2 253,2 627,0 2 586,4

35 | Էջ

2018201820182018 2019201920192019 2020202020202020

2 288,4 2 282,7 2 276,4

389,8 389,8 389,8

- - -

192,1 193,2 194,5

- - -

(192,1) (193,2) (194,5)

2 678,1 2 672,5 2 666,2

- - -

- - -

2 678,1 2 672,5 2 666,2

2 586,4 5 264,5 7 937,0

5 264,5 7 937,0 10603,2

36

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7.7.7.7. Evaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program Effectiveness

7.1. 7.1. 7.1. 7.1. Methodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program Effectiveness

The following indices have been considered for the evaluation of the program

effectiveness:

• Net Present Value (NPV

• Internal Rate of Return (

• Payback Period;

• Discounted Payback Period

• Profitability Index .

Net Present Value (NPV)Net Present Value (NPV)Net Present Value (NPV)Net Present Value (NPV)

calculated through the following formula:

./0 � 12ₒ *�1

*��5��

Whereby:

CF =Cash Flows

�611 � �� 7��

NPV has been calculated on the basis of

construction of the greenhouse.

and capital expenditures. It is assumed that

the greenhouse at book value.

Internal Rate of Return (IRR) Internal Rate of Return (IRR) Internal Rate of Return (IRR) Internal Rate of Return (IRR)

equal to zero. In case if the IRR exceeds the WACC, the program is considered to be profitable.

Payback periodPayback periodPayback periodPayback period - The length of time required to recover the


Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Model Business Plan for the Investment Program on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan

Evaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program Effectiveness

Methodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program Effectiveness


NPV);

Rate of Return (IRR);

eriod;

Net Present Value (NPV)Net Present Value (NPV)Net Present Value (NPV)Net Present Value (NPV) – is the net present value of financial resources, which has been

calculated through the following formula:

128

�1 *�611�8*

129

�1 *�611�9*⋯*

12

�1 *�611

��5��;��

�1 *�611�<

�7�� 1 ( �� * ��

has been calculated on the basis of free cash flows expected within 8 years after the

construction of the greenhouse. Free cash flows are the difference between operating cash flows

It is assumed that in the end of the 8th year it will be possible to sell

Internal Rate of Return (IRR) Internal Rate of Return (IRR) Internal Rate of Return (IRR) Internal Rate of Return (IRR) – is the inner rate, in case of which the NPV is considered

to zero. In case if the IRR exceeds the WACC, the program is considered to be profitable.

The length of time required to recover the cost of an investment

36 | Էջ

Program on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 haProgram on the Construction of 6 ha Greenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of YerevanGreenhouse in the Vicinity of Noragavit district of Yerevan

Evaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program EffectivenessEvaluation of the Program Effectiveness

Methodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program EffectivenessMethodology for Evaluating the Program Effectiveness


is the net present value of financial resources, which has been

12<

�611�<

��

flows expected within 8 years after the

Free cash flows are the difference between operating cash flows

it will be possible to sell

is the inner rate, in case of which the NPV is considered

to zero. In case if the IRR exceeds the WACC, the program is considered to be profitable.

cost of an investment.


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Discounted Payback periodDiscounted Payback periodDiscounted Payback periodDiscounted Payback period

investment and the amount of time it will take to recover the cost. A discounted payback period

formula takes into account the time value of t

Profitability IndexProfitability IndexProfitability IndexProfitability Index - An index that attempts to identify the relationship between the costs

and benefits of a proposed project through the use of a ratio calculated as:

Any value lower than 1.0 would indicate that the project's PV is less than

investment.

Return on Equity (ROE)Return on Equity (ROE)Return on Equity (ROE)Return on Equity (ROE)

shareholders equity. Return on equity

much profit a company generates

ROE is expressed as a percentage and calculated as:

7.2. 7.2. 7.2. 7.2. Evaluation of Program EffectivenessEvaluation of Program EffectivenessEvaluation of Program EffectivenessEvaluation of Program Effectiveness

In the result of calculations the following data have been received on the program

effectiveness:

Payback PeriodPayback PeriodPayback PeriodPayback Period

Discounted Payback Period

Profit margin for the first 6 years

Profit margin starting from the 7th year

Return on Equity (ROE)

Net Present Value (NPV)

Internal Rate of Return(IRR)

Profitability Index (PI)




Discounted Payback periodDiscounted Payback periodDiscounted Payback periodDiscounted Payback period---- A normal payback period formula just uses the initial cost of


formula takes into account the time value of the money

An index that attempts to identify the relationship between the costs


Any value lower than 1.0 would indicate that the project's PV is less than

Return on Equity (ROE)Return on Equity (ROE)Return on Equity (ROE)Return on Equity (ROE) - The amount of net income returned

Return on equity measures a corporation's profitability

profit a company generates with the money shareholders

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's Equity

Evaluation of Program EffectivenessEvaluation of Program EffectivenessEvaluation of Program EffectivenessEvaluation of Program Effectiveness


4,974,974,974,97

6,77

39,60%

Profit margin starting from the 7th year 54,08%

Return on Equity (ROE) 19,42%

9 368 547,91

21,95%

1,91


37 | Page


A normal payback period formula just uses the initial cost of


An index that attempts to identify the relationship between the costs


Any value lower than 1.0 would indicate that the project's PV is less than the initial

returned as a percentage of

measures a corporation's profitability by revealing how

with the money shareholders have invested.

Return on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's EquityReturn on Equity = Net Income/Shareholder's Equity


YearYearYearYear

Year

%

%

%

9 368 547,91 USD

%


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8.8.8.8. Evaluation of risks and meansEvaluation of risks and meansEvaluation of risks and meansEvaluation of risks and means

There are a series of risks in the greenhouse construction and operation business under

the program, which should be taken into consideration and take respective measures for their

mitigation.

Risk Description Risk Description Risk Description Risk Description

Less crop yield than it was planned




Evaluation of risks and meansEvaluation of risks and meansEvaluation of risks and meansEvaluation of risks and means to mitigate themto mitigate themto mitigate themto mitigate them



Risk Description Risk Description Risk Description Risk Description Measures and Comments to Measures and Comments to Measures and Comments to Measures and Comments to

planned The calculations are based on the

productivity index offered by greenhouse producers

which is often guaranteed by greenhouse

constructors, and, during the first two years of

operation, the entire tomato

organized under the control of

specialists, who will also provide professional

consultation.

On top of that, the crop yield of experienced

European greenhouses exceeds the index of our

calculations by 50%.


38 | Page


to mitigate themto mitigate themto mitigate themto mitigate them



Measures and Comments to Measures and Comments to Measures and Comments to Measures and Comments to Mitigate RisksMitigate RisksMitigate RisksMitigate Risks

The calculations are based on the average

offered by greenhouse producers,

often guaranteed by greenhouse

during the first two years of

re tomato production will be

organized under the control of Western European

also provide professional

On top of that, the crop yield of experienced Western

greenhouses exceeds the index of our


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Risks of transporting the product to export

market

Limited number of export markets

Lack of skilled human resources

(agronomists)




Risks of transporting the product to export The risk is conditioned by the fact that

transportation from Armenia to the RF

organized through the territory of Georgia

Lars checkpoint). Besides, due to a series of

economic, political) factors the mentioned route

sometimes does not work

ensure unimpeded freight transportation, we

anticipate developing and using alternative

transportation routes.

Besides the aforementioned water and land

transportation routes, we anticipate organizing air

transportation.

The development of the new transportation routes

will strengthen the reliability of the freight

transportation and will lead to increase in

competitiveness, decrease in transportation expenses

and mitigation of the unilateral dependence on the

Georgian side.

Limited number of export markets During the first few years

exporting the produce to the RF and several CIS

countries.

As the quality of the produc

international standards and criteria, in order to

mitigate the risk of dependence on the limited

number of export markets, during the upcoming years

of operation special measures will be undertaken for

exporting the products into European

the Middle East.

Lack of skilled human resources During the first few year

production process will organized under the control

of Western European specialists

to provide high quality

organizing trainings for our local specialists.

On top of that, in cooperation with the State

University of Armenia we are going to organize

education of high quality agronomists

for the existing specialists abroad.


39 | Page


The risk is conditioned by the fact that freight

from Armenia to the RF is mostly

hrough the territory of Georgia (Upper

Besides, due to a series of (weather,

factors the mentioned route

t work unimpeded. In order to

freight transportation, we

anticipate developing and using alternative

Besides the aforementioned water and land

transportation routes, we anticipate organizing air

The development of the new transportation routes

will strengthen the reliability of the freight

transportation and will lead to increase in

competitiveness, decrease in transportation expenses

and mitigation of the unilateral dependence on the

of operation, we anticipate

exporting the produce to the RF and several CIS

products will comply with

international standards and criteria, in order to

mitigate the risk of dependence on the limited

, during the upcoming years

of operation special measures will be undertaken for

into European countries and

years of operation, the entire

will organized under the control

specialists, and, later, in order

personnel we anticipate

for our local specialists.

On top of that, in cooperation with the State Agrarian

we are going to organize

quality agronomists and trainings

for the existing specialists abroad.


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40 | Page


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