From the Root Up

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From the Root Up

• A Herbal Processing Company

Jeff Mathieson Doug Senko Trevor Schoenroth
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Location

• Wilkie, Saskatchewan
• Crop District 7B
• Dk. Brown/Black Soil Zone
• Average yearly precipitation is 368.4 mm
• Rural Setting

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Our Mission Statement
We will strive to be a company that helps the
producer accomplish his/her production goals, by
providing a market for their product. We intend
to help the farmer in all areas of production to
ensure the best quality for our buyers. By
providing an opportunity to diversify, we feel
this will improve the local economy.
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Operations Overview

• Contract farmers to grow herbal crops that can be
  harvested mechanically at a large scale.
• 6 ac. of each six crops
• Must be in relatively close proximity
• Market and dry their product and provide rental
  equipment to lower there input costs
• Offer agronomic expertise

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Crops

• Fireweed
• St. Johns Wort and root
• American Arnica
• Dandelion Root
• Stinging Nettle
• Red Clover

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Operations

• 6 farmers _at_ 36 acres each
• seed and production contracts
• primary processing of raw material

• Find buyers who want to buy larger volumes
• Strive to give quality as well as quantity
• Set up long term buyer

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Flow Diagram

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Rental Equipment

• Providing all necessary equipment to produce and
  harvest herbs
• only real equipment needed is tractor (75hp)
• no capital commitment is needed from the farmer
• Total Cost 120,000

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Processing Equipment

• Primary processing
• dryers, sifter, de-stemmer
• Mostly used to keep price down
• Large capacity calls for higher number of units
• Total Cost 812,945.00

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Yard Plan
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Office Plan
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Personnel
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Plant Manager/Agronomist

• BSA in Agriculture
• Production contracts
• Crop scouting
• Seed delivery

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Plant Manager/Agronomist(contd)

• Crop protection advice
• Quality and Quantity Control
• Possess strong management skills
• Oversee all plant operations
• 50,000

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Marketing Strategist

• B.Comm in marketing
• Making large and small repeat buyer contacts
• Keep up with market demand
• 40,000

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Direct Labour

• Plant Manager
• Full Time
• Farm mechanical experience
• Preferred SIAST training but not required
• Strong leadership skills
• 36,000

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Direct Labour Staff

• Secretary
• Full time wage employee
• 24,000
• Plant Worker
• Part time wage employee
• Work during busy season
• WHIMIS and First Aid Training
• 2,000/month

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Goal and Objectives

• Short Term
• develop a market for six products

• Medium Term
• more production contracts

• Long Term
• other specialty crop contracts
• hire more employees with growth

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Fireweed (Epilobium angustifolium)

• Native to North America
• found in disturbed areas, especially with
  occurrence of fire.
• Used primarily for cosmetics
• Also medicine and food
• Anti-inflammatory, anti-irritant.
• Parts used arials and root
• encapsulated, pill, tea

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St. Johns Wort(Hypericum perforatum)

• Native to temperate and tropical regions of the
  world
• perennial herb
• used as antiseptic, general healing properties
• encapsulated and also used in a tea form

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American Arnica(Arnica montana)

• Perennial herb
• harvested for roots and flowers
• Uses
• tincture used for external application to
  sprains, bruises where skin is not broken
• epilepsy
• if applied to scalp will make hair grow
• used in an oil form

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Dandelion Root(Taraxcum officinale)

• Native to Canada
• perennial
• harvested for the root, dried and roasted
• brewed for coffee (new product, Starbucks)
• Uses
• cleanses blood stream and liver
• increases production of bile
• improves function of kidneys, pancreas, spleen
  and stomach

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Stinging Nettle(Urtica dioica)

• Found throughout N S America, namely Alaska.
• Whole plant harvested
• Used for medicine, food, cosmetics
• Chronic diarrhea, chronic eczema, can prevent
  scurvy
• care must be taken when handling nettle as sharp
  spines on leaves and stems have been known to
  cause paralysis

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Red Clover(Trifolium pratense)

• Biennial native to N. America
• Bronchitis, cough, eczema, boils, acne
• Taken internally, respiratory problems -
  particularly whooping cough.
• Externally, chronic skin conditions such as
  eczema and psoriasis.
• Red Clover contains isoflavone compounds
• cancer, including breast and prostate cancer

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The Market
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Global Market
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Saskatchewan Market

• 50 companies in Saskatchewan
• Estimated total sales in 1998 between 40 and 50
  million
• Majority struggling to launch product.
• No company in Saskatchewan is presently offering
  the service that we are going too.
• Many producers are doing it as a diversification
  of their farm

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Target Markets

• 70 of Canadian manufacturers import ingredients
  to complete production
• 43 of these claim 100 of ingredients are
  imported

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Trends

• Technological
• advances ensure more efficient field scale
  production now and in the future
• Social
• 81 growth in use of alternative medicines in the
  past 5 years
• 146 growth among Canadians aged 18-34
• Environmental
• conscious consumers demand for organic products
  may force us from conventional methods to Organic
  production

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Competition

• Smaller companies specializing in single products
• Minor
• MD Growers, production of St. Johns Wort
• Elk Run Botanicals, production of St. Johns Wort
• Mid Northern Growers, milling of Red Clover
• Major
• Altex Processing, marketing of raw to final
  product

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Customers

• Farmers
• approach growers with production contracts,
  expertise in agronomics
• provide rental of specialized equipment
• value added pricing for products
• Manufacturers
• large volume
• consistent product
• high standards

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Product Pricing

• Price to manufacturers will be market based
• in this scenario we will be a price taker

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Price to Farmer

• Price set to farmer will be a combination of
  market based and cost based approach
• As volume of product taken in increases, cost of
  processing may go down allowing us to give a
  higher price to the farmer
• As market value rises price to farmer will rise

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Promotions

• Phone sales
• contact manufacturers, informing of available
  product
• internet sales, post inventories on electronic
  billboards
• trade shows and conferences

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SWOT
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Financial Plan
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Capital Needed
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Sources of Funding

• Debt Financing
• 2 sources
• Bank Loan
• Agri-Food Equity Fund

• Agri-Food Equity Fund
• 524,191
• Variable Rate based on business success

• Total Capital 1,671,191
• 76 Equity Financing
• 24 Debt Financing

• Equity Financing
• 50 class A common shares
• 18,940 per share
• Voting rights, entitled to dividends

• Bank Loan
• 200,000
• 8 interest

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Dividend Policy

• Any cash on hand over 100,000
• Shareholders will receive dividends after first
  year

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Summary of Financial Results

• Net Present Value 282,003
• Expected Rate of Return (IRR)
• 32.4

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Ratios

• Debt Ratio
• diminishes to nothing

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Sensitivity
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Break Even Analysis
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Summary

• Risky Investment
• 32.4 return
• Dividends paid starting second year
• Sensitivity
• Yield vary by 40
• Price vary by 40
• Sound Community Investment