CUTO EnterprisesCUTO EnterprisesBusiness PlanBusiness Plan
C. Baillargeon, K. Ivey, C. Mardell & C. Baillargeon, K. Ivey, C. Mardell & K.TempletonK.Templeton
Comm 492.3Comm 492.3
• Greenhouse industry in SaskatchewanGreenhouse industry in Saskatchewan– relatively smallrelatively small– marketing problems:marketing problems:
• economies of scaleeconomies of scale
• consistencyconsistency
– other problemsother problems• climatic conditionsclimatic conditions
• location of growerslocation of growers
Industry OverviewIndustry Overview
Mission StatementMission Statement
“The aim of CUTO Enterprises is to establish a profitable agri-business venture while facilitating the establishment of an infrastructure to expand the greenhouse vegetable industry in Saskatchewan.”
The Marketing Mix
• Products and Services
• Pricing
• Promotion
• Place
Products & Services• Product:
– Greenhouse grown cucumbers and tomatoes
• Service:– A central marketing arm for the greenhouse
growers of Saskatchewan
Pricing
• Product price based on contract with wholesaler– calculated using a weighted average price index
• Distributor fee– producer paid fee for service
Promotion
• Product promotion– promote an above standard premium quality
product
• Service promotion– provide grower information seminars– provide ease of production
Place• Wholesale market in Saskatchewan
• Produce is sold FOB Saskatoon
STP• Segmentation
– Provide a premium quality product that is higher than regulation standards
– Provide a niche product• vine-ripened tomatoes
• Targeting– Main target is the wholesale distributors
• Positioning– competitive advantage over local market
Competitive Analysis
• Main competition exists outside of Saskatchewan– Alberta, British Columbia, USA, Mexico, etc.
• Competition exists with substitute products
Marketing Strategy
• Product Strategy– present an above standard premium quality
product to the wholesalers
• Service Strategy– combine grower production to capture benefits
of accessing wholesale market– provide ease of production– provide an excellent information source
Marketing Strategy
• Investment Strategy– profitable business that allows future expansion
in the greenhouse industry
Revenues and Expenses
• Projected Revenues
2001 2005 2010Gross Margin 595,252$ 646,392$ 775,230$
• Marketing Expenses- $20,000/year
Location
• Selection Factors– Market Accessibility– Supply of Fresh Produce– Services and Utilities
Saskatoon
• Western Grocers and Federated Co-op
• South Saskatchewan River
• Central Saskatchewan
• Natural Gas, Power, Telephone, Infrastructure
1323 Fletcher Road1323 Fletcher Road
Park-ing
Fletcher R
oad
CUCUTO BUILDING
CUTOCUTOCUTO
UL
P
Site PlanSite Plan
Expansion
Area N
Floor Plan100’ 100’
25’175’
70’
C
T
FC
FT
PP
RM
WM
F/I
A
F
GM
WR
20’
FL
Unload/Load Docks
Site and Building Costs• Land $ 134,000• Building $ 750,000• Tomato Grading Line $ 678,000• Cucumber Grading Line $ 77,405• Office Supplies & Furnishings $ 15,825• Fork Lift, Pallet Jacks & Pallets $ 11,229• Electrical & Natural Gas Installation $ 60,000
TOTAL $ 1,726,860
Average Business Year
• Operate March through October– Due to:
• higher energy costs
• decreased production
• Busy Season – End of May until the beginning of August
Average Business Year
• Full-Time Staff Remains on in Off-Season– Grower Seminars– Prospective Grower Contacts– Market Exploration
• Industry Seminars
– Product Diversification Studies– Season Reviews
Strategy
• CUTO is a corporation owned by growers and local investors.
• Goal: to maintain a healthy and enjoyable work environment.
• Employees will clearly understand their specific roles and duties in CUTO.
Organizational Structure
MAINTENANCEQUALITY CONTROLLER
25 PART-TIME EMPLOYEES
BOARD OF DIRECTORS
FACILITY SUPERVISOR
BOOKKEEPER
GENERAL MANAGER
Expansion of Personnel
• No expansion in first 5 years.• However, if production and number of growers
increase, CUTO will adapt to ensure sufficient service.
• Re-evaluation of market and CUTO’s position will occur in 5 years.
• Possibility of new full-time employee after year 5.
Financing Budget Assumptions
• ‘class A’ voting shares = $750,000 equity
• $1,000,000 debt financing @ 9.0%
• Dividend Policy: year end cash balance > $175,000
• Production: 20 acres of cucumbers & 20 acres of
tomatoes
2001 2005 2010Revenues 14,602,192 15,805,882 17,450,971COGS 14,006,939 15,159,490 16,675,741Gross Profit 595,252$ 646,392$ 775,230$ Expenses 443,199 451,735 457,325Income Before Taxes 152,053$ 194,657$ 317,905$ Income Taxes 32,114 41,112 79,781NET INCOME 119,940$ 153,546$ 238,124$
Net Cash Flow to Equity 233,335$ 7,050$ 7,875$
Expected Return on Equity Investment (IRR) = 23.6%
Summary of Financial Results
Sensitivity Analysis
• Distributor Fees @ $0.34/kg tomatoes & $0.07/cucumber
Distributor Fees @ $0.34/kg. tomatoes & $0.07/cucumber
-10.0%
-1.8%
7.4%
15.8%
23.6%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
12 14 16 18 20
Acres
IRR
Why CUTO?• Market Penetration
– expansion of the SK greenhouse industry
• Lower Producer Packaging & Marketing Costs per unit
• CUTO’s high quality standards – producer focus on quality
• Invaluable information source • Dividends
Acknowledgments
• Glen Sweetman - Sask. Ag & Food
• Bill Brown & Marv Painter - U. of S.
• B.C. Hot House Growers Association
• Supplier Contacts
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