Saskatchewan Organic Meat Market

Kim Minogue Kim Mclean Kristin Nemeth Kari Henderson

Project Set up

 Proposed by Simon Weseen M.Sc. and Gary G. Storey P. Ag. who currently work in the Department of Agricultural Economics  Research the possibility of setting up a strictly Saskatchewan organic meat market

Mission Statement

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

Goals & Objectives

 Promote Saskatchewan organic livestock industry  Establish reliable clientele  Provide a quality, well-recognized product  Become know to all organic consumers

Project Benefits

 Provide a market for SK organic livestock producer’s products  Provide high quality, safe and traceable product  Provide information for benefits of organic products

Location - #1- 3414 8

th

Street

Floor Lay Out

   Spacious area for workers and equipment Adequate retail area Flow of carcasses

Flow of Work

Pine View Farms - Osler, SK Fresh Meat Cooler Butcher Frozen Cuts Consumers Consumers

Organic Slaughtering and Processing Guidelines

    Slaughter facility must be certified by organic certifying agency (OCIA) Facilities inspected annually by an auditor to ensure up-to-date documents (Storage, cleaning and transporting records, etc.) Cleaning must not leave residues on equipment. – – Cleaners approved by OCIA Water must be tested to meet standards It is imperative that the meat stays free from contamination

Capital Budget

   Equipment Net Working Capital Cash, inventories Total Capital Required $159,000 $ 76,281 $234,987

Organizational Structure

Shareholders

Executive Directors 3 Organic Industry Rep’s Butcher Manager / Meat Specialist Part-Time Customer Personnel

Organizational Structure

 Run as a corporation  Shareholders appoint board of directors  Manager will be selected by the board of directors  Manager will then be in charge of a full-time butcher and one part-time customer personnel

Job Descriptions

   Manager – – – – Hiring and overseeing employees Ordering proper amounts of meat Ensuring smooth operation Maintain positive employee and customer relations Butcher – – Cutting appropriate quantities and types of meat Assisting with customer relations Part-time personnel – – Provide customer service Promote organic products

Employees

    Employee wages – Manager $45,000 – – Butcher $40,000 Part-time $7.50/hour The salaries will increase 2% yearly with a $0.25/hr yearly raise for the part time employee Benefits include EI, CPP, and workers compensation (holiday pay for part-time wage) Will be hired based on experience and the butcher will be responsible for providing any additional training

Direct Labor & Benefits

Full-Time Labour Manager Butcher Part-Time Labour Customer Personnel $ 7,200 $ 7,440 Benefits for Employees Full-Time Part-Time Workers Compensation

TOTAL DIRECT LABOUR & BENEFITS 2004 2005

$ 45,000 $ 45,900 $ 40,000 $ 40,800 $ 7388 $ 7472 $ 961 $ 986 $ 2,148 $ 2,193 $ 100,632 $ 102,682

2006

$ 46,818 $ 41,616 $ 7,680 $ 7560 $ 1012 $ 2,239 $ 104,771

2007

$ 47,754 $ 42,448 $ 7,920

2008

$ 48,709 $ 43,297 $ 8,160 $ 7647 $ 1039 $ 2,286 $ 106,894 $ 7734 $ 1064 $ 2,334 $ 109,052

Market Overview

 Growing demand for organic meat  Saskatchewan has potential to meet this demand  Incentive to become registered organic livestock producers  The need for federally inspected organic slaughtering and processing plants

SWOT Analysis

  Strengths – Only exclusively organic meat market in Saskatchewan – Provide a high quality product at a convenient location – – Able to educate the public about organic products Weaknesses – Educated staff available to answer all questions and provide you with the benefits of consuming organic meat Organic meat is sold at a premium – – Limited profitability for by-products (bone carcass) Limited consumer demand

SWOT Analysis

 Opportunities – – Meat is provided at a convenient location Organic meat frees consumers of food safety and healthy lifestyle concerns – – – Products produced by Pine View Farms provide a consumer product with traceability and reassurance The market has the potential to expand into other organic products Eligible for grants and funding (CARDS and Agriculture development fund)

SWOT Analysis

 Threats – People who do consume organic meat purchase it from reliable and trust worthy producer – Natural producers have a quality product at a lower price – Limited number of consumers in Saskatoon and surrounding area

Marketing Mix

 Product – Organically raised and processed beef and pork – Animals consume feed free of pesticides, chemical fertilizers, and GMO’s – Organic livestock is verified and inspected by an accredited certifying body

Marketing Mix

 Service – Gives consumers the peace of mind regarding the meat they are consuming – – – Location is more convenient compared to the farm gate Butcher will cut meat according to customer specifications The market will educate consumers on the benefits of organic products

Marketing Mix

 Target Market – Consumers that can afford to buy and those who make it a priority to buy – High income households in Saskatoon – Adults responsible for making purchasing decisions for themselves and their children

Estimated Market Share & Meat Consumption

Type of Meat

Beef

Total # of organic animals consumed per week

6.58

% of market share the Market hopes to capture

30% Pork 25.84

15%

# of organic animals ordered per week

2 4

# of organic animals ordered per year

104 208   Canadian meat consumer rates per capita and applied to Saskatoon Organic consumer percentage to derive the above numbers

Marketing Mix

 Pricing – The Saskatchewan Organic Meat Market is a price maker – – – The premium meat will be marked up 30% from natural prices Beef (prices per pound) – Ground $3.42

- Roast $8.40

- Steak $12.00

Pork (prices per pound) – Chops $5.10

- Ham $4.37

- Roast $3.54

Marketing Mix

 Promotion – Two Types – inform organic consumers about store – – - convince current traditional meat consumers to change to organic meat External promotion – trade shows, websites, radio ads, magazine and publications all dealing with healthy living and/or organic products Internal promotion – cooking demos, taste tests, in-store brochures and displays

Direct Competition

Saskatchewan Organic Meat Market Direct Competitors Business Steep Hill Co-op 730 Broadway Ave.

Boryski’s Butcher Block 2210 Miller Ave. & Broadway Ave.

Strengths

 Existing clientele base  Location  high income consumer base as well as some student consumers  production  Specialized meat knowledgeable experienced staff  good location

Weaknesses

 Very little organic meat selection  Co-op structure difficult to understand,  staff consists of members which may lack in knowledge of organic products  small variety of organic products  Natural meat – grass fed beef coming from 4 different farmer which may alter consistency

Indirect Competition

Saskatchewan Organic Meat Market Indirect Competition Business Prairie Meats 2326 Miller Ave. & 8 th Heights Mall Costco 115 Marquis Dr.

IGA, Safeway, etc.

Located throughout Saskatoon St M&M Meat Shops 3322 8 th St E & Lawson Strengths

 Specialized in meat production  Diversified products  prepared products  variety of location  High quality meats  large quantities for cheaper  Convenience - everyone has to go to the grocery store

Weaknesses

 Higher prices for a traditional product  processing   Don’t do their own No personal service Limited traceability of the products

Marketing Budget

Promotional Activity:

Paper & Printing Publications & Magazines Website Trade Show  Trade Show Booth  Trade Show Supplies & Expenses Radio Spots Taste Tests & Demos

Total Marketing Expenses Estimated Expense:

$1000 $2000 $1500 $500 $3000 $1500 $500

$10000

Financial Results

Total Revenue Cost of Goods Sold Gross Margin Total Expenses Income Before Taxes

Income Taxes

Net Income (Loss) 2004

$ 475,863

2006

$ 514,533

2008

$ 556,576

2010

$ 602,296

2012

$ 652,024 $ 367,382 $ 108,481 $ 15,952 $ 487,293 $ 27,241 $ 15,978 $ 502,129 $ 54,447 $ 15,945 $ 521,151 $ 81,144 $ 15,839 $ 92,529 $ 3,655 $ 11,262 $ $ 38,502 $ $ 65,305 $ $ 85,941 $ 10,962 $ 35,761  Internal Rate of Return – 39% $ 60,655 $ 543,155 $ 108,870 $ 15,646 $ 93,223 $ $ 86,586

Sensitivity Analysis

 Conducted for quantity purchased, selling and purchasing price  Most sensitive variable – – Quantity of beef purchased Selling prices of all pork cuts – Purchase price of beef

Best/Worst Case Analysis

Average Revenue Average Materials Purchase Price Worst

75% 120%

Base

100% 100%

Best

150% 75%

Average Revenue Average Materials Purchase Price

$ 428,647 $ 384,248 $ 571,530 $320,207 $ 857,295 $240,155

Conclusions

 Feasibility will depend on consumer support  Could be a viable enterprise in larger centers with a higher number of organic consumers

Questions and Comments?