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UBC Farm: Plans for Sustainable Organic Growth Jhaveri, Rushab; Fraser-Marinoske, Jordanna; Dench, Marc; Wu, Yang; Keswani, Vijay Dec 5, 2005

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U B C F a r m  Plan for Sustainable Organic Growth Team #15 Marc Dench Jordanna Fraser-Marinoske Rushab Jhaveri Vijay Keswani Yang Wu Monday, December 5, 2005  We would like to take this opportunity to express our sincere gratitude and appreciation toward all those people who have helped us throughout the development of this business plan.  We would like to acknowledge the following people for their help and cooperation.  Mark Bomford, Program Coordinator, UBC Farm Brenda Sawada, SEEDS Coordinator, UBC Sustainability Office Roxana Quinde, UBC Faculty of Land and Food Systems  EXECUTIVE SUMMARY UBC Farm is a 15 acre organic farm located on UBC’s South Campus. UBC Farm needs to develop a commercially sustainable business model to ensure its long term survival as this area under threat of housing development from 2012. This business plan provides a medium term vision for UBC Farm and a short-term action plan to increase the Farm’s commercial viability by leveraging clear sustainable competitive advantages within a rapidly growing, attractive market sector.  Proposition The proposition is to invest in the development of UBC Farm’s infrastructure and productive capacity to create a self sustaining organic farm and a world leading educational centre by 2010. This is achieved by: Increasing the farmed area from the current three acres to eight Enhancing the product range to include processed foods such as smoothies Increasing awareness of UBC Farm and developing new channels to market Enhancing on site facilities to enable academic and commercial services  Attractiveness and Sustainable Competitive Advantage UBC Farm benefits from a unique location and association with the UBC brand. When these inimitable assets are combined with the growing market demand for organic produce and the growing local population, it is clear that the proposition to develop UBC Farm reflects the right products at the right place at the right time. Furthermore, this plan supports UBC’s objective to be a leader in sustainability and academic excellence.  Financial Summary UBC Farm currently relies on grant funding of approximately $100,000 to cover net annual losses. The business plan requires investment of $200,000 in new equipment and infrastructure which results in an increase in the area farmed and the yield per acre to generate a positive surplus in 2010 following which grant funding will no longer be a necessity. The investment generates a positive NPV of $194,000.  Social Values UBC Farm is about much more than the bottom line financial return. It generates significant social value through the promotion of healthy and sustainable lifestyle in the local community and via school academic programs. In addition, UBC Farm encourages and supports research projects that benefit British Columbia’s and Canada’s organic industry.  Future Opportunities There are many sources of revenues that are not included in the financial analysis, but that represent attractive commercial opportunities. These include establishing an international academic program and the hosting of events.  Risks The key risks of the plan are the realisation of the operational efficiencies as the farmed area increases in size and the risk of crop failures through uncontrollable factors such as weather and disease. A sensitivity analysis has been performed to quantify the impact of these risks.  TABLE OF CONTENTS 1.  UBC FARM OVERVIEW.................................................................................................................................1  2.  PROPOSITION..................................................................................................................................................2 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7.  3.  MARKET ANALYSIS.......................................................................................................................................5 3.1. 3.2. 3.3. 3.4. 3.5.  4.  OBJECTIVES AND TARGETS ..........................................................................................................................8 TARGET MARKET AND POSITIONING ............................................................................................................9 THE MARKETING MIX ..................................................................................................................................9 IMPLEMENTATION .....................................................................................................................................10  OPERATIONAL STRATEGY .......................................................................................................................11 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7.  6.  MARKET OVERVIEW ...................................................................................................................................5 IDENTIFICATION OF CUSTOMERS .................................................................................................................5 MARKET SIZE, ANALYSIS AND FORECAST ....................................................................................................6 INDUSTRY ANALYSIS AND FORECAST ..........................................................................................................6 COMPETITOR ANALYSIS ..............................................................................................................................7  MARKETING STRATEGY .............................................................................................................................8 4.1. 4.2. 4.3. 4.4.  5.  VISION.........................................................................................................................................................2 COMMERCIAL AND SOCIAL VALUE PROPOSITION .......................................................................................2 PRODUCT AND SERVICE MODEL ..................................................................................................................3 MARKET GARDEN .......................................................................................................................................3 PROCESSED FOODS ......................................................................................................................................3 FUTURE OPPORTUNITIES ..............................................................................................................................4 UBC FARM’S COMPETITIVE ADVANTAGES ..................................................................................................4  OVERVIEW OF CURRENT OPERATIONS .......................................................................................................11 ORGANIC FARMING ...................................................................................................................................11 INCREASING UBC FARM’S PRODUCTIVE CAPACITY ..................................................................................12 INCREASING UBC FARM’S REVENUE PER ACRE ........................................................................................12 OPERATIONAL EFFICIENCY ........................................................................................................................13 MANAGEMENT TEAM AND HR OPERATIONS .............................................................................................14 UBC OPERATING ENVIRONMENT & CONSTRAINTS ..................................................................................14  FINANCIAL ANALYSIS................................................................................................................................15 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. 6.7.  CURRENT FINANCIAL POSITION .................................................................................................................15 INVESTMENT PLAN ....................................................................................................................................15 KEY FINANCIAL DRIVERS...........................................................................................................................16 SUMMARY INCOME STATEMENT ...............................................................................................................16 CASH FLOW AND INVESTMENT APPRAISAL................................................................................................17 SENSITIVITY ANALYSIS .............................................................................................................................18 FUNDING ...................................................................................................................................................18  7.  CRITICAL RISKS...........................................................................................................................................19  8.  SOCIAL IMPACT ANALYSIS ......................................................................................................................20 8.1. 8.2.  SOCIALLY RESPONSIBLE OPERATIONS .......................................................................................................20 SOCIAL BENEFITS ......................................................................................................................................20  REFERENCES ............................................................................................................................................................ I APPENDIX I – INTERNATIONAL PROGRAM (SUMMARY) ........................................................................... I APPENDIX II – EVENTS & SERVICES ................................................................................................................II APPENDIX III – TARGET MARKET .................................................................................................................. III  TABLE OF CONTENTS CONTINUED APPENDIX IV – PORTER’S FIVE FORCES - INDUSTRY ANALYSIS ......................................................... IV APPENDIX V – ORGANISATIONAL STRUCTURE ...........................................................................................V APPENDIX VI – CUSTOMER MARKET SURVEY ........................................................................................... VI APPENDIX VII – MARKET SURVEY ................................................................................................................VII APPENDIX VIII – MARKETING MIX ................................................................................................................ IX APPENDIX IX –ORGANIC FARMING OPERATIONS ......................................................................................X APPENDIX X – OPERATIONS: REVENUE PER ACRE................................................................................... XI APPENDIX XI– INVESTMENT SCHEDULE.....................................................................................................XII APPENDIX XIII - MARKET GARDEN INCOME STATEMENT................................................................. XIV APPENDIX XIV - MARKET GARDEN – PRODUCTION ECONOMICS......................................................XV  1. UBC FARM OVERVIEW UBC Farm is a 15 acre teaching, research, and community Farm located to the South of the main University of British Columbia campus. The Farm is a student-driven initiative with an ultimate goal to retain and re-create UBC’s existing Farm and forest lands into an internationally significant centre for sustainable agriculture, forestry and food systems. UBC’s first Farm was established for agricultural research by the Faculty of Agriculture around 1915 and was located just west of the Chemistry building along what is now West Mall. Between the 1950s and 1980s, most of UBC’s mid-campus was occupied by agricultural facilities, and by the mid-70’s, the Farm moved from mid-campus to its current location. The Farm initiative started in 2000 and has progressively developed with small incremental projects on an annual basis. Responsibility for the operations of UBC Farm now lies with the Faculty of Land and Food Systems. As such all aspects of the Farms operations and financing have to be considered in the context of UBC’s requirements and constraints. Today the UBC Farm is faced the prospect of being displaced forever. In 1997, in an effort to reduce commuter traffic, the university pledged to double the number of on-campus residents through construction of more residential housing. The land the Farm currently occupies is therefore escalating in value, and the Farm is challenged with showing itself to the university administration as a practical and sustainable use of land. This threat has prompted the faculty to create a long-term vision for the land as a centre of instruction, learning and research excellence that integrates principles of organic production and sustainability, and adds to the quality of life of the local community.  1  2. PROPOSITION This section outlines the vision and objectives of the business plan, and details the competitive advantages that support UBC Farm’s long term success. 2.1. Vision To invest in the development of UBC Farm’s infrastructure to create a step change in the productivity and commercial viability of UBC Farm, and to ensure its long term viability as part of the South Campus community. The proposed business model is based on the development of a robust, self-sustaining organic farming capability that demonstrates both diversity of produce and strong commercial and community attributes. The key steps to achieve this are: Goal  Key drivers  Increased Output  Investment in new farming equipment Recruitment of full time Farm manager Increased productive land in use and efficiency  Increased Sales  Increased awareness of UBC Farm New product and channel development  Social & Community Value  Investment in Farm infrastructure Development of international academic program (future opportunity)  2.2. Commercial and Social Value Proposition This investment creates multiple sources of value. These include, increased revenue yield per acre farmed from the sale of higher margin processed produce, and the potential to leverage increased venue awareness and the popularity of organic farming to generate revenues through the hosting of events and academic programming. UBC Farm is far more than just a commercial asset; it is a unique academic and community asset that generates social value through school educational tours, community programmes and ongoing academic research. UBC Farm’s vision is closely aligned with UBC’s overall vision as expressed in Trek 2010. It helps UBC to realise the following goals: 2  …… by offering new programs that meet the needs of communities…throughout BC, UBC will also develop more opportunities for local communities to make use of UBC facilities and contribute actively to learning and research (UBC Trek 2010, Greenpaper) …… Develop the University Town as a model of an engaged, sustainable community (UBC Trek 2010, Greenpaper)  UBC Farm  diagram. The heart of the operation is UBC Farm itself.  Organic Production Centre  From this core a number of products and services are es ic s v nt er e S Ev &  supported:  Pr Ac o ad gr em am ic me s  UBC Farm’s operating model is summarised in this  M G ar a r ke de t n  Pr o Fo ces o se ds d  2.3. Product and Service Model  2.4. Market Garden UBC Farm’s Market Garden grows produce for retail purposes. Several types of vegetables, fruits and prepared foods are provided, with more available from local organic producers if required. Produce is mainly sold at the Saturday market held at the UBC Farm and through on-campus locations such as Sage Bistro, and Sprouts, as well as in other local restaurants. As demand for produce exceeds supply the business plan proposition is to invest in increasing the productive capacity of the farm’s useable land, and to establish the Market Garden as a local community destination. 2.5. Processed Foods To increase the revenue yielded from fresh produce, the proposition is to sell fruit in processed form. There is significant room for profit when the cost of processing is compared  3  with the price at which these products can be sold. There are many products that can be produced such as smoothies, preserves, and ice cream. The plan is to start with smoothies because the production process is the simplest, the cost of equipment is low and there is existing demand. 2.6. Future opportunities There are many other sources of revenues that are not included in the business plan financial analysis, but represent attractive commercial opportunities once UBC Farm has become commercially sustainable in its core activity. These include: International Academic Program – UBC Farm is ideally placed to host a program targeted at government officials and students seeking knowledge of organic methods and the commercial side of organic farming (Appendix I provides more detail on this opportunity) Events - UBC Farm has the potential to earn revenues as an event facility. For example, hosting team building cooking classes. (Appendix II provides more details on this opportunity) 2.7. UBC Farm’s competitive advantages UBC Farm enjoys sustainable competitive advantages. It is positioned as the only working organic farm in Vancouver proper. It is affiliated with the UBC Brand that Vancouver area residents recognize and typically support. It is located close to the University village and the University Endowment Lands, which are rapidly growing. The farm is also in close proximity to other organically conscience neighbourhoods such as West Point Grey, Kitsilano, Kerrisdale and Dunbar.  4  3. MARKET ANALYSIS This section talks about the Market and Industry analysis for the Organic Farm industry and the competitive advantages of UBC Farm with respect to other farms in the industry. 3.1. Market Overview Organic farming is a growing trend in North America. Organic food is increasingly considered to an important aspect of healthy living. The U.S. Organic Center, based on their research on organic foods concluded that, on average, organically grown food has 30% more antioxidant levels (helpful for reducing risks to various diseases) than non organically grown products (Benbrook). This relates to health and lifestyle conscience people driving up the demand for organic foods. The market growth rate for organic products in Canada is 15% per annum. Almost 71% of Canadians have tried organic food once, out of which 40% regularly purchase organic food regularly (more than 2 times per year). Organic purchasers are characterized by higher education, health and nutrition conscience, lower price sensitive and come from all income brackets (Cunningham, 2001). 3.2. Identification of Customers The chart in Appendix III-A highlights that the market is driven by both customers above 35 years of age and health conscious individuals of the younger generation. In terms of education, the more educated the person, the more likely is he or she to purchase organic foods. In addition, the higher concentrations of organic food consumers are found in the income brackets of $20,000 to $40,000.  5  3.3. Market size, analysis and forecast It is estimated that in the overall target market (UBC, Dunbar and Kitsilano) the percentage of people buying organic food several times a year will increase from 27% in 2006 to 44% in 2010. Appendix III B gives a graphical representation of the growth trends for the target locations. In addition, the development of housing for 4000 residents in South Campus increases the size of UBC Farm’s target market. (Szeto, 2005) 3.4. Industry analysis and forecast Industry Characteristics Organic food refers to food grown under specific environmental friendly production methods, which include avoiding synthetic chemicals, promoting soil health and biodiversity. The organic foods industry is in the growth stage of its life cycle. Currently organic foods represent a relatively small portion of all farm products. An increasing focus on healthy eating, concerns about food safety and a desire by an aging population to prevent disease are all factors will enhance the growth of the industry in the future. The organic foods industry is currently believed to be non-cyclical. The industry is characterised by a large number of small producers. Industry Competitiveness/Attractiveness Please refer Appendix IV for a detailed analysis of Porter’s five forces which talk about the industry attractiveness of the organic farm industry. They are briefly discussed below. Barriers to entry: The barrier to entry to organic food industry is relatively higher than the conventional food industry. The requirements and regulations for organic land are high.  6  Intensity of Rivalry: Due to the entry of big companies into the market, competition in the industry has intensified. The typical way of operation for these large new comers is purchasing established brands rather than developing their own products. Substitution threat: The major substitution to organic foods is the conventional foods. Although switching costs are low, health conscious people reduce the substitution risk. Suppliers: The major suppliers for the organic food industry are the provider of seeds, tools and equipment. The supplier concentration is low, thus keeping the purchase cost low for farmers relative to total costs in the industry. The bargaining power of the suppliers is very low. Buyers: For Canadians the most important factor in choosing food is taste, while the least important factor is price. In addition most Canadians are willing to pay a premium price (up to 10% extra) for healthier organic foods. (Cunningham, 2001) 3.5. Competitor Analysis Although there are numerous organic farms and three farmer’s markets in the greater Vancouver area, UBC Farm is the only organic farm in an area described by the Organic Consumer Association’s website as “…one of the most lucrative as well as competitive in Canada.” (Wong, 2005). This could mean that the competition might increase which necessitates UBC farm to be prepared for more intense competition in the future.  7  4. MARKETING STRATEGY The marketing strategy section of the business plan details the target market, marketing activities and resources required to achieve the targeted sales objectives of increasing awareness, visits to the farm on a weekly basis, increased commercial purchases and other “offfarm” sales. 4.1. Objectives and targets The overall objectives of the marketing strategy are to: Increase awareness of UBC Farm within the target market Develop and exploit new channels to reach the target customers Promote the new value added processed products This is achieved through the recruitment of an additional marketing co-ordinator (see Appendix V for Organisational Structure) to develop sales channels and a small increase in marketing expenditure to build awareness within the target market. The table below summarises the key objectives and targets for UBC Farm’s marketing activity. These targets represent key success factors for the overall business plan.  Visitors to the farm (average weekly)  2005 300  2006 400  2008 600  2010 900  UBC Farm awareness (in target market) - on Campus - off Campus  73% 33%  75% 35%  75% 40%  75% 45%  Restaurants purchasing direct  3  5  8  10  Proportion of 'off-farm' sales  25%  30%  40%  50%  UBC Farm awareness figures based on market research found in Appendix VII and interviews with Mark Bomford, Program Coordinator at UBC Farm.  8  4.2. Target market and positioning There are several dimensions to segment the target market by. The market is largely restricted by geographic region to the population of UBC Campus, University Endowment Lands, West Point Grey and Dunbar. Within this population an appropriate way to segment is by Farm Visitors and Non-Visiting Farm Consumers. This segmentation encapsulates different needs and behaviours that can be addressed by distinct marketing mixes. Market research (Appendix VII) suggested that the Visitor/Non-Visitor segmentation basis is a simpler and more effective way to target the market than segmenting by other dimensions such as student/nonstudent, resident/non-resident and other demographic bases. The attitudes and behaviours of these segments are as follows. UBC Farm is part of a weekly routine, a social event. They tend to come with family and friends and spend time at the farm to wander Farm Visitor  around the trails and garden. ►  Value the sense of community and the organic, healthy lifestyle Close association with the UBC Farm brand Value healthy lifestyle, fresh and tasty local produce  Non Visitor►  UBC brand association (rather than UBC Farm brand) Large proportion of this group are students and on-Campus (nonresidents)  4.3. The marketing mix The table found in Appendix VIII summarises the key elements of the marketing mix for each target segment. There are two elements that are critical to the overall success.  9  Increasing the overall awareness of UBC Farm, its location and opening time. Our market research identified a lack of awareness of UBC Farm in off-campus residents, and that many that are aware of UBC Farm were unsure of its location. (Appendix VII) Developing new sales channels to get UBC Farm produce to the non-visitor segment, such as pre-paid weekly delivery of produce which has proved interesting to some area residents. 4.4. Implementation The marketing plan requires an additional part time student employee to take responsibility for developing and supporting new sales channels. This will free up the existing marketing co-ordinator to develop awareness of UBC Farm. Implementation of the marketing plan requires careful management to ensure that the growth in demand is balanced with the availability of supply. Significant increases in supply are not projected until the 2007 season, therefore the increase in marketing campaign spending is not projected to commence until the end of the 2006 season. UBC Farm’s reporting will be expanded to track the marketing objectives to ensure that the increased investment in marketing is delivering the target objectives, and that the targeted objectives are resulting in appropriately increased sales. Further, to keep abreast of market trends and customer opinion, it is recommended that UBC Farm continue to gather customer feedback through regular surveys and continuous market research. The information gathered will act as a check against the validity of the current marketing plan and help in the creation of future plans.  10  5. OPERATIONAL STRATEGY The plan is to increase the UBC Farm’s productive area from the current three acres to eight and to increase the average income per acre through a combination of higher yielding product, lower wastage and increased efficiency. 5.1. Overview of current operations UBC Farm currently produces over forty types of produce, including a wide variety of seasonal vegetables as well as fruits, herbs and flowers. In recent year eggs and prepared salad mix have been added to the range require new operational processes to be adopted. UBC Farm uses basic farming equipment to assist with production, relying heavily on labour. Produce are currently planted in three acres of cultivated land as well as two large greenhouses. Production is only in the summer season, from the beginning of May until October. It does not produce any winter vegetables. Although not currently ‘Certified Organic’, UBC Farm uses organic methods mimicking the function and structure of a natural ecosystem. 5.2. Organic farming Compared to mainstream production methods, organic fruits and vegetables have inferior yields. However, the price commanded by majority of organic produce is generally higher. Overall, the yield and price combinations show that approximately half of the organic crops generate higher revenue per acre as than for conventional methods (see Appendix IX). Organic Certification Currently there is no official certification in Canada for organic food labelling. However, the voluntary Canadian Organic Standard is being developed by the Canadian General Standards Board. The draft of this coming organic regulation states basic requirement for the process of organic food that UBC Farm will need to comply with (see Appendix IX). 11  5.3. Increasing UBC Farm’s productive capacity UBC Farm has 15 Acres of which three are currently farmed. The plan is to increase the area used for production to eight acres over a five year period as shown below. On average it takes at least one year to bring land into production as it has to be prepared for the specific crops that are to be grown. The chart includes this lag:  8  25,000  7 Acres  30,000  6 5  20,000 15,000  4 3 2  10,000  Revenue Per Acre  Acres Farmed and Revenue per Acre  9  5,000  1 0  0 2005  2006  2007  2008  2009  2010  5.4. Increasing UBC Farm’s revenue per acre There are three key operational practices to increase the revenue per acre from UBC Farm, the production of processed produce, season extension and yield management. Processed produce Processed produce like preserves, smoothies and ice cream add value and boost revenues. Appendix X details the additional profit available from processed produce relative to standard fresh produce. Every different processed product requires investment in different machines.  Fruits  Processing Machines and processes  Preserves, Ice Cream, Smoothies etc.  12  Market research (Appendix VII) indicated that UBC students preferred smoothies to other processed goods therefore we initially concentrate on producing smoothies. Smoothies are made by mixing fresh or frozen fruits with milk.  Fruits + Milk + Sugar  Blender (Blend till smooth)  Pour into container  Serve fresh and delicious Smoothies  Season Extension Average annual revenue per acre can be increased by extending the time that land is productive by starting the seasons earlier through better winter preparation and establishing a winter crop. Yield Management As the land farmed increases UBC Farm will have more opportunity to grow crops purely for revenue purposes. Currently with only three acres farmed, and a mandate to produce a diversity of produce, the Farm cannot easily allocate areas just to produce large amounts of a crop for the sole purpose that it generates a higher revenue yield. 5.5. Operational efficiency A key driver of profitability is the amount of labour required to successfully manage the farmed area. To realise operating efficiencies requires the recruitment of a full time, experienced farm manager. This will maximise the overall yield from the available space and increase the productivity of existing workers. The investment in a new utility tractor will also improve operational efficiency and reduce the average variable cost per acre.  13  5.6. Management Team and HR Operations Please see Appendix V for a detailed organisational structure chart. Farm-workers - Industry Experience & Education UBC Farm employs students for the running of day-to-day operations. As the facility is primarily designed to be educational, this is one of the ways in which students gain hands-on agricultural experience. Students are also encouraged to create and execute new projects that add both to their learning and to the Farm’s production. UBC Farm has a policy of paying students a higher wage than the average farm labourer. Farm Manager The business plan requires a professional farm manager to be hired to support the existing team. Not only would a professional manager improve UBC Farm’s efficiency, they would also enhance the educational experience, thus further elevating the Farm’s academic reputation. 5.7. UBC Operating Environment & Constraints UBC Farm is subject to the same constraints and regulations as other parts of the university. Whilst Farm management are free to make day to day operating decisions more significant decisions require escalation to the UBC Farm Advisory Committee and potentially higher up through the UBC administration meaning that bigger decisions or investments can take a significant amount of time to finalise.  14  6. FINANCIAL ANALYSIS This section contains information on the required investment, the return from that investment, financial sensitivities, and social value generation. It also identifies the cash flow funding requirements on an annual basis. 6.1. Current financial position In the year to March 2006 UBC Farm will generate revenues of $55,000 with expenditure of $155,000 resulting in a net deficit of $100,000 that has been covered by grant funding and individual and corporate donations. Without the proposed investment plan, the annual deficit is expected to remain at or around this level. 6.2. Investment Plan To support a step-change in the commercial self-sustainability of UBC Farm a number of capital items have been identified for investment, including general items such as a utility tractor ($50,000) and farm truck ($40,000) and a number of project specific investments such as a Smoothie machine and a chicken shed. To support the community and academic objectives of UBC Farm, investment has been included for a new portable classroom unit and the removal of the exiting dilapidated unit. A full investment schedule is provided in Appendix XI.  15  6.3. Key financial drivers Income - The primary sources of revenue and the drivers behind each source are: UBC Farm generates revenues through multiple channels (Market Garden, Retail, Direct, Restaurants) and through the sale of both Fresh and Processed product. Key drivers of this revenue stream are: Quantity – total volume of produce available for sale, driven by  Farm Produce  ►  the number of productive acres in use and number of weeks per year of use Price – rises with increased mix of processed foods and increased average yield through production of more high value produce (e.g. strawberries, eggs, micro-greens)  Academic/ Community ►  Academic and Community activities generate income based on a small fee. e.g. $5 per pupil. This activity is part of the social and community objective of UBC Farm.  Expenditure - Excluding depreciation, UBC Farm’s main expenditures are employee costs and associated benefits and expenses. These are both (semi) fixed and variable in nature: Fixed –include the Program Co-ordinator, the new post of Farm Manager, Market garden co-ordinator, Marketing co-ordinator(s) and Outreach Program co-ordinator Variable– Farm workers are employed ‘in season’ and vary with the number of acres of land used for production Other costs - marketing, office administration and Market Garden expenses 6.4. Summary Income Statement There is a lag between the initial investment and increase in revenues and moving into a positive net surplus position. This is primarily due to the long lead time between preparing the farm land for production and the land actually becoming productive. The investment in 2006 16  and 2007 will start to impact the results from 2008 when the benefit of increased output and production efficiencies becomes apparent. (Please refer to Appendix XII and XIII for details.) Income Statement Revenue Market Garden (Fresh and Processed) Education & Community Net Income by segment Market Garden (Fresh and Processed) Education & Community Shared Overhead Net Surplus/(Deficit)  2005  2006  2007  2008  2009  2010  46,828 5,578 52,406  61,100 6,000 67,100  107,400 8,000 115,400  150,000 10,000 160,000  189,100 10,000 199,100  252,000 10,000 262,000  (20,561) (14,062) (34,623) 64,980 (99,603)  (52,173) (13,640) (65,813) 72,329 (138,141)  (17,109) (11,640) (28,749) 83,043 (111,792)  17,482 (9,640) 7,842 83,043 (75,201)  46,449 (9,640) 36,809 83,043 (46,234)  99,215 (9,640) 89,575 83,043 6,532  6.5. Cash Flow and Investment appraisal The cash flows assume a continued level of grant funding up to the point where UBC Farm starts to generate a net surplus in 2010. Cash Flow Cash flow from: Operations Investment Financing (Grants/Donations) Net Cash Flow  2005 (99,603) (99,603) 105,730 6,127  2006 (123,149) (124,500) (247,649) 110,000 (137,649)  2007  2008  2009  (91,085) (54,494) (25,527) (40,000) (131,085) (54,494) (25,527) 110,000 110,000 110,000 (21,085) 55,506 84,473  2010 27,239 27,239 27,239  Investment Appraisal Discount Rate NPV  8% 193,728  The net present value of the proposed investment is $194,000. This is based on a discount rate of 8% for UBC projects. The actual cost of capital for UBC is not publicly available. However, UBC does receive preferential rates on debt therefore 8% is considered a conservative rate. The cash flow after 2010 has been included in the NPV analysis as perpetuity with no further growth. The NPV analysis above does not include a valuation of the social benefit generated through UBC Farm’s academic, community and research activities, as discussed in section 8. 17  6.6. Sensitivity Analysis All of analysis above comes from the expectation based on the currently available information. To valuate the possible risks, a sensitivity analysis is also made as below. Criterions including productive acre and crop yield are considered.  Event/Scenario  2006  Impact on Surplus/(Deficit) 2007 2008 2009  2010  1 productive acre less per year  -  (19,800)  (23,000)  (25,300)  (25,000)  50% less crop yield in a year (2007)  -  (49,500)  -  -  -  No worker efficiency realized  -  (3,228)  (4,842)  (6,455)  (8,069)  More processed in sales mix  -  4,500  12,000  23,100  40,000  (9,000)  (18,000)  (23,100)  (40,000)  No Processed sales  (5,100)  6.7. Funding The vision for UBC Farm requires $200,000 capital investment. The farm is still growing and hence does not have the sufficient reserves to fund its own capital expenditure. Funding can be acquired from the following: UBC Grants or Loan: UBC grants have kept the farm alive to date, with an average $50,000 grant per annum. A loan or grant or a combination are the most feasible option to fund the required investment. A loan by UBC could be structured for an appropriate duration. Banks and other financial institutions: There is a growing trend for banks and financial institutions to fund corporate social responsibility related sustainable projects. However, they typically require collateral against which they grant the loan. Venture Capital: VCs generally ask for a stake in the project as part of the deal. As UBC Farm is the property of UBC this limits this option. Another drawback is the fact that the VC normally withdraws their money from the project fairly quickly for instance in 3 years.  18  7. CRITICAL RISKS No business is risk free, but the key to success in any business is to make business and strategic decisions taking into consideration the risks. Few of the risks that our plan is susceptible to are as follows: Organic market decline: There is always the risk of a decline in demand for organic foods. This reduction in demand will directly affect UBC farm’s sales and revenue (especially direct sales and sales through farmers market). Soil degradation and exhaustion: Soil degradation reduces the ability to produce higher yield per acre and in turn the overall produce level. However, at the UBC farm this risk is reduced by producing produce organically. Crop failure: There may be crop failures due to larvae such as wire worm. These failures can have a devastating effect on UBC Farm’s produce. There have been instances when farms have lost their total produce to “crop pests.” This is a high risk for organic farms, who avoid using pesticides. Land usage for housing: The UBC farm is located strategically near the UBC main campus near grocery stores and student population. There is always a threat from construction companies who want to make residential buildings in place of the farm. Decline of UBC brand: The UBC farm is directly connected to the brand image of UBC. A decrease in UBC brand image will have negative impacts on the farm. UBC bureaucracy: The farm is a part of UBC. Hence, to get permission regarding any major decisions about the farm (reconstruction or investments for instance) the authorization of the UBC board is required. This can very well be a hindrance in terms of slow decisions, expansion or reconstruction 19  8. SOCIAL IMPACT ANALYSIS The core focus of the farm revolves around community involvement, enrichment and providing healthy food. The Farm does not focus only on profit maximization but rather on the triple bottom line. This is exhibited by operating the school programs at a deficit and paying students above the standard farm labourer wage. (Community enhancement rather than profit maximization). 8.1. Socially responsible operations The processed foods (smoothies) manufacturing and sales will involve minimal packaging, waste minimization and reusable methods. Organic farming by default does not use harmful chemicals, which in itself is an environmentally beneficial activity. UBC Farm aims to be a “Zero Footprint” operation. 8.2. Social Benefits The Social Marginal Benefit to society obtained from the educational programs, such as the Community and Schools Program and the Community Urban Agriculture Program, is higher than the Private Marginal Benefit to UBC farm. The majority of benefits arising from the existence of the UBC Farm are difficult to measure. The increase in the value of the surrounding residential properties as a result of a vibrant, thriving farm, and the health benefits derived from the promotion of a healthy lifestyle focussing on the consumption of organic foods are difficult to quantify. Also difficult to place a value on are the benefits that university itself derives by hosting a facility as unique as an urban farm.  20  REFERENCES References Benbrook, Charles, The Organic Center, Growing Healthier Food -- Increasing Antioxidant Levels through Organic Farming and Food Processing, retrieved date 25th November, 2005 from http://www.lohas.com/journal/food.html The Canadian Organic Standard (draft January 2005) Cunningham, Rosalie. (2001). The organic consumer profile. Retrieved on November 25, 2005 from http://sherlock.bib.umontreal.ca/STAR/crepuq/sac2002/pdf/Organic%20consumer.pdf Future Shop. (2005). Appliance Pricing. Retrieved November 24, 2005, from http://www.futureshop.ca Lazurus, Chris; Urban Agriculture: Join The Revolution; accessed 25 November 2005 http://www.newvillage.net/Journal/Issue2/2urbanagriculture.html Parsons, William. (2002), Organic fruit and vegetable production: Is it for you?, retrieved date 25th November, 2005 from http://www.statcan.ca/english/freepub/21-004-XIE/21-004XIE02009.pdf Szeto, Eric. November 2005, The Ubyssey, GVRD approves South Campus plans, Retrieved date 4th December, 2005 from http://www.ubyssey.bc.ca/20051109/article.shtml?<!--1->News/1gvrd.html TUPC website, July 2005, Headcount enrolment by level and degree program (Nov1), retrieved date 25th November, 2005 from http://www.tupc.bc.ca/facts_figures/pdf/tupc3.3.pdf TUPC website, March 2005, Faculty Age Distributor, retrieved date 25th November, 2005 from http://www.tupc.bc.ca/facts_figures/pdf/tupc6.2.pdf Vancouver website, 2001a, Community Statistics Census Data, retrieved date 25th November, http://www.vancouver.ca/commsvcs/Census2001/WestPointGrey03.pdf Vancouver website, 2001b, Community Statistics Census Data, retrieved date 25th November, from http://www.vancouver.ca/commsvcs/Census2001/Dunbar03.pdf Wong, Craig. (2005). Organic Food Booming in Canada. Retrieved on December 3, 2005 from http://www.organicconsumers.org/organic/canada100405.cfm www.statcan.ca  i  Interviews with: Mark Bomford, Program Coordinator, UBC Farm Dr. Tim Durrance, Professor and Director, Faculty of Agricultural Sciences Brenda Sawada, SEEDS Coordinator, UBC Sustainability Office Dr. Brent Skura, Program Director, Global Resource Systems, Faculty of Land and Food Systems Dr, Roxana Verdini, UBC Faculty of Land and Food Systems  UBC Farm documents and material: UBC. (2005). UBC Farm History. Retrieved November 25, 2005, from http://www.landfood.ubc.ca/ubcfarm/history.php UBC Annual Report 2004 http://www.finance.ubc.ca/documents/financial_statements/200405/notes_for_statements_2005.pdf UBC Farm Business Plan. LFC at UBC Farm. December 2002. UBC Farm Research and Education Symposium; April 1st 2005; various documents at www.certifiedorganic.bc.ca/infonews/reports/UBC_FRES.htm UBC Farm Working Budget 2005/2006 UBC (2004). Trek 2010 Greenpaper. Retrieved November 21, 2005, from www.trek2000.ubc.ca/greenpaper.html UBC (2005). Trek 2010 Vision. Retrieved November 21, 2005, from www.trek2000.ubc.ca/index.html  ii  APPENDIX I – INTERNATIONAL PROGRAM (SUMMARY) Overview A four week program for government officials and students worldwide who want an in-depth knowledge of organic methods and the commercial side of organic farming. Rationale Growth of Organic consumption is increasing the demand for related education As one of a small number of commercial and academic Organic farms, UBC is uniquely placed to offer the program Existing relationships with Korean universities/government agencies provides a good start point for marketing the program Marketing costs for the program will be relatively low as it is possible to utilise students course work activities to investigate new markets and existing UBC relationships to promote the program globally Financial Summary The program generates course fees estimated at $750 per attendee per week based on prior experience and rates at competing institutions1. The table shows an illustrative income statement for the program (this data is not included within this business plan’s projections). Program Metrics  2006  Number of courses  2007  2008  2009  2010  1  1  3  4  5  Attendees per program  10  15  15  15  15  Course price per week  750  750  750  750  750  2006 Income  30,000  2007 45,000  2008 135,000  2009 180,000  2010 225,000  Fixed Costs - Professor - Marketing & Admin  11,000  11,000  11,000  11,000  11,000  5,000  10,000  10,000  10,000  10,000  10,000  15,000  45,000  60,000  75,000  4,000  6,000  18,000  24,000  30,000  Variable costs - Materials & Admin - Accommodation Total Expenditure  30,000  Surplus/(Deficit)  -  42,000  84,000  105,000  126,000  3,000  51,000  75,000  99,000  Marketing costs for the program will be relatively low as it is possible to utilise student’s course work activities to investigate new markets and existing UBC relationships to promote the program globally  1  Competitors include: University of California (Santa Cruz) and University of Victoria (Vancouver Island)  i  APPENDIX II – EVENTS & SERVICES Overview By offering itself as a venue for events and services, the Farm can achieve incremental revenue with little recurring expenditure. Description Although the Farm is in a beautiful location, its current buildings can not be called picturesque. Thus, in order to expand into the event market, a new and beautiful farm facility needs to be constructed which constitutes significant expenditure. However, there is one area that can be rapidly converted to provide income. Pacific Adventure Learning (PAL), a corporate team building company that already operates UBC’s Ropes Course, is interested in combining this activity with team cooking classes at the UBC Farm. A setup, involving enough facilities for a class of twenty people, can be created at minimal cost in the existing facility. It is suggested that PAL should be charged $50 per person for the facilities and the organic foods produced by the farm, for a total of $1000 per full session. PAL will be responsible for providing their own team-building instructor. The cost of converting the current space only entails the purchase of two complete sets of new, top-end appliances. Allowing $10,000 for each set, plus another $5000 for miscellaneous kitchen items, brings the total to $25,000. This cost can be recovered after only 25 full classes. PAL originally approached the UBC Farm to ask if the kitchen facilities could be made available. Thus, if the facility could be created, there is already one interested customer. It would be the only kitchen classroom in the vicinity of the ropes course, providing an ideal situation for both parties.  ii  APPENDIX III – TARGET MARKET  APPENDIX III-A: CONSUMER PROFILE  APPENDIX III-B: TARGET MARKET  Canadian Organic Consumer Profile  Target Market Growth  Non Organic Consumers Several Times Organic Consumers  60000  45.0%  40.0% Education  50000  Income  40000  Population  30.0%  25.0%  20.0%  30000 51.0% 45.8%  20000 41.1%  15.0% 36.8% 33.0%  10.0%  10000  5.0% 0  0.0%  Consumer Characteristics  Regular  0K  >8 0K  K  -8  -6  2007  2008 UBC  2009  2010  19.0%  21.0%  25.3% 29.2%  33.7%  2006  2007  2008  2010  2009  Point Grey  19.5% 2006  22.5% 25.8% 2007  2008  29.8% 34.2%  2009  2010  Dunbar - Southlands  Location and Year  60  K 40  K  -4  0K  0K  0k <2 20  to r  U ni v  pe ra Se  e  C  C ol  le g  ol  S H s  to r  Sc ho  Hi gh  Le s  55 +  pe ra Se  55 to  40  Source: Stats Canada  45  34  to  to  35  25  to  24  2006  18  Percentage of Canadian Population  Age 35.0%  Several  Once-Twice  Source: (Rosalie Cunningham, 2001) Regular – Regularly buy organic food (Heavy Buyers). Several – Buyers who buy organic food several times a year (Light Buyers). Once-Twice – Buyers who buy organic food once or twice a year.  Source: (Cunningham, 2001), (Vancouver website, 2001a), (Vancouver website, 2001b), (TUPC website, July 2005), (TUPC website, March 2005). There is some approximation in the data as population trends are project depending on 1996-2001 data. Organic consumer growth data is for Canada which has been used to predict for the locations above. Please Note: The above graph does not show the growth in the South Campus Area where housing for approximately 4000 residents will be built  iii  APPENDIX IV – PORTER’S FIVE FORCES - INDUSTRY ANALYSIS  Original diagram taken from class slides by Tony Boardman, content provided by authors  iv  APPENDIX V – ORGANISATIONAL STRUCTURE Advisory Board Program Coordinator Professional Farm Manager Volunteers, Interns, Students Market Garden Coordinator Garden Worker 1 Garden Worker 2 Garden Worker 3 Garden Worker n Marketing Coordinator Student Marketing Assistant Outreach and Education Coordinator Schools Leader Schools Leader  v  APPENDIX VI – CUSTOMER MARKET SURVEY In summer 2005 UBC Farm conducted an online survey of 94 of its customer base who have provided email addresses for regular updates.  Summary of selected results: Geo-demographics 80% of UBC Farm customers are between 26 and 60 years of age 26% reside in the are of UBC, UEL and West Point Grey 54% live in other parts if Vancouver 54% of customers have a current affiliation with UBC (students, teaching, staff0  Purchasing behaviour – importance of key aspects High importance  Average importance  Freshness  Convenience  Locally grown (BC, UBC, lower  Choice  mainland)  ‘Certified Organic’  Organic  UBC Farm - Perceptions Excels at  Potential improvements  High Quality produce  Variety  Reasonable prices  Market overall  Customer services  UBC Farm – Future development areas Open longer, more often Increase diversity of produce Grow more Invite other vendors BUT not other vendors with processed goods  vi  APPENDIX VII – MARKET SURVEY The following questions were asked of randomly chosen individuals on the UBC Campus and in the Point Grey area, and the responses received shown in a graphical format. The sample size was 92 individuals, and the information was used to get a feel for overall market awareness and perception, based on the following key questions.  Awareness of UBC Farm’s existence and location: Are you aware that UBC has a Farm? Do you know where the farm is located? Do you know where you can go to purchase UBC Farm food? Do you know that the farm holds a weekly Saturday market in the spring and summer?  Awareness of UBC Farm by Students and Local Area Residents 100% 90%  Pecent of "Yes" Responses  80% 70% 60% 50% 40% 30% 20% 10% 0% Aware that Farm exists  Undergraduate  Know where Farm is Questions from Survey (Section 2) Masters  PhD  All Students  Know about Saturday market  Area residents  vii  APPENDIX VII – MARKET SURVEY (CONTINUED) Preference for organic foods and willingness to pay: Do you prefer to consume organic foods? Are you willing to pay more for organic foods? Assuming the cost to be the same, would you choose UBC Farm organic foods over other organic foods? Would you pay more for UBC Farm organic foods? Organic Food Consumption 100% 90%  Percent of "Yes" Responses  80% 70% 60% 50% 40% 30% 20% 10% 0% Prefer organic foods  Will pay more for organic Would choose UBC Farm foods food over others Questions from Survey (Section 3) Undergraduate  Masters  PhD  All Students  Would pay more for UBC Farm food  Area residents  Interest in processed foods: What product, made from organic foods, would you be most likely to purchase on campus? Preserves, 12%  Ice Cream, 23%  Smoothies, 65%  viii  APPENDIX VIII – MARKETING MIX  Activity & Targets Build UBC Farm location and brand awareness, increase number of weekly visitors,  Farm Visitor 3  NonVisitor  Promotion  through: -  Inclusion on UBC Campus tours and higher visibility on campus map.  -  Establish relationships with the on-campus home developers to be included within their sales promotion materials.  -  Undertake a start of season leaflet drop to UEL and West Point Grey  -  Improve and enhance signage on campus and Marine Drive  -  Continue positive press coverage and PR activity. 3  Development of new on and off campus channels -  Establish partnership with SPUDs, a Vancouver based organic produce delivery  Channels  operation -  Expand the number of local restaurants supplied  -  Develop existing direct box delivery program to include on-campus self-catered residences and other UEL, West Point Grey residences  -  Increase number of on-campus outlets – for example: Thunderbirds games for  Product  Smoothies As productive land capacity increases, crop planting can become more market driven. For  3  3  3  example, Micro-greens currently have high demand (and price) and therefore 2006 production should increase. Pricing will continue to reflect the average organic prices in stores such as Capers and  Pricing  3  Choices. Processed produce (e.g. smoothies, preserves) prices will be based on market rate. Market research (Appendix VII) indicates an increased willingness to pay for organic produce but not an increased willingness to pay extra for organic produce from UBC Farm.  ix  APPENDIX IX –ORGANIC FARMING OPERATIONS Organic Yield Summary Examples of comparison of fruit and vegetable produced with organic vs. conventional methods. Canada 2000/2001  Vegetable / Fruit Beets Carrots Tomatoes Apples Pears Strawberries  Change in Yield Vs Price Organic Organic Yield (%) Price (%) -56 229 -40 236 -23 66 -21 73 22 62 -9 -1  Gross Return per acre Organic Conventional ($) ($) 3,600 2,500 5,400 2,700 6,300 4,800 4,000 3,000 6,400 3,300 4,000 4,700  Source: William Parsons, September 2002  Organic Certification Requirements 1.  Production units should not be alternated. Switching between organic and non-organic produce is not allowable.  2.  “Buffer Zones must be established if there is any concern that contamination could occur, as air and water may carry contaminants.”  3.  “Crops grown in the buffer zones must be considered as non-organically grown products.”  4.  “Measures shall be taken to minimize risks from neighboring areas, including spray drift and exposure to or contact with prohibited substances.”  5.  “Soil erosion shall be controlled by good management practices such as appropriate cultivation practices, reduced tillage, planned water drainage and other controls in accordance with the soil type, local conditions and crop.”  (The Canadian Organic Standard, 2005)  x  APPENDIX X – OPERATIONS: REVENUE PER ACRE Processed produce The analysis below (Cost/Volumes/Profits) gives a clear picture of the increased profitability of processed produce compared to ‘raw’ produce.  Value addition per kilo of strawberry * Selling Produce  Selling Smoothies Estimate  VC > 50%  FC > 50%  Sales  $4.50  $12.00  $12.00  $12.00  Variable costs  $1.00  $2.00  $3.00  $2.00  Contribution Margin  $3.50  $10.00  $9.00  $10.00  Fixed Costs  $1.00  $3.00  $3.00  $4.50  Net Income  $2.50  $7.00  $6.00  $5.50  The figures above are estimates of the costs and sales involved  Breakeven revenue per acre analysis The table below shows the total fixed costs and the variable cost per acre under production. The analysis then shows the effective number of acres that need to be in production to breakeven for different levels of ‘revenue per acre’. The orange shaded area shows were the revenue per acre is at the upper end for BC organic producers. These levels are achievable with the production of the higher margin processed produce. Break even workings (2007 Base year) Total Fixed 146,249 Variable Costs/per acre 10,118 Revenue per acre Contribution margin per acre Breakeven Acres  17,000 6,882  19,000 8,882  21,000 10,882  23,000 12,882  25,000 14,882  27,000 16,882  29,000 18,882  21  16  13  11  10  9  8  xi  APPENDIX XI– INVESTMENT SCHEDULE  Item  Purchase  Cost  Depreciation Life*  Depreciation Charge pa  Portable Unit  2006  67,000  10  6,700  Tractor (utility) Truck Smoothie machine Chicken Shed Refridgerated Trolley  2006 2007 2006 2006 2006  50,000 40,000 3,000 3,500 1,000 164,500  7 7 5 10 5  7,143 5,714 600 350 200  * Depreciation rates based on UBC accounting policy (UBC Annual Report)  Assumptions and basis for certain calculations: Portable unit cost - average of two quotations (from Mark Bomford - UBC farm coordinator and ATCO Structures) Tractor (utility), truck, smoothie machine, chicken shed, refrigerated trolley costs based on market research and interview with Mark Bomford - UBC farm coordinator. Depreciation method used - straight line depreciation method based on UBC depreciation policy from http://www.finance.ubc.ca/documents/financial_statements/2004-05/notes_for_statements_2005.pdf  xii  APPENDIX XII – SUMMARY INCOME STATEMENT Consolidated Income Statement to 2010  Revenues  2007  2008  2009  2010  Market Garden (Produce)  2005 46,828  2006 61,100  107,400  150,000  189,100  252,000  Education & Community  5,578  6,000  8,000  10,000  10,000  10,000  52,406  67,100  115,400  160,000  199,100  262,000  67,389  113,273  124,509  132,518  142,651  152,785  Direct Costs Market Garden (produce) Education & Community  19,640  19,640  19,640  19,640  19,640  19,640  87,029  132,913  144,149  152,158  162,291  172,425  Program Co-ordinator  33,134  33,134  33,134  33,134  33,134  33,134  Marketing and Projects  23,330  15,686  20,686  20,686  20,686  20,686  8,516  8,516  8,516  8,516  8,516  8,516  0  14,993  20,707  20,707  20,707  20,707  64,980 72,329 83,043 (99,603) (138,141) (111,792)  83,043 (75,201)  83,043 (46,234)  83,043 6,532  55,000  55,000  55,000  General overhead costs  Operating Expense Depreciation Shared Overhead Surplus/(Deficit) Grant Funding UBC Grant Funding  51,653  Donations and Grants  54,077  55,000  55,000  55,000  55,000  55,000  6,127  (28,141)  (1,792)  34,799  63,766  116,532  Overall Surplus/(Loss)  55,000  55,000  A more detailed income statement for the Market Garden follows in Appendix XII.  xiii  APPENDIX XIII - MARKET GARDEN INCOME STATEMENT Market Garden – detailed income statement Income  2005  2006  2007  2008  2009  2010  Market Sales - fresh produce  35,250  32,130  52,650  61,200  71,995  80,000  2,350  4,590  12,150  20,400  32,725  48,000  Direct sales - fresh produce Restaurant sales - fresh prod Total Fresh produce  9,228  9,180  16,200  20,400  26,180  32,000  46,828  45,900  81,000  102,000  130,900  160,000  Processed goods  -  10,200  18,000  36,000  46,200  80,000  Farmers Market Income  -  5,000  8,400  12,000  12,000  12,000  46,828  61,100  107,400  150,000  189,100  252,000  53,490  97,500  102,000  106,500  113,000  119,500  Total Income Direct Costs Staff Costs Other costs (seeds etc)  9,683  9,683  16,138  19,366  22,594  25,821  Benefits (12%)  7,294  11,700  12,240  12,780  13,560  14,340  Wage subsidy  (3,078)  (5,610)  (5,869)  Total Costs  67,389  113,273  124,509  Net Income  (20,561)  (52,173)  (17,109)  2005  2006  2007  (6,128) 132,518  (6,502) 142,651  17,482  46,449  2008  2009  (6,876) 152,785 99,215  Employee Schedule Employees Number - Co-ordinator - Full-Time Farm Manager - Farm worker Cost pa - Market Garden Co-ordinator - Farm Manager - Farm worker Total Costs in year  1.0 0.0 3.0 25,715 9,000 53,490  1.0 1.0 3.5 30,000 36,000 9,000 97,500  1.0 1.0 4.0 30,000 36,000 9,000 102,000  1.0 1.0 4.5 30,000 36,000 9,000 106,500  2010  1.0 1.0 5.0 30,000 38,000 9,000 113,000  1.0 1.0 5.5 30,000 40,000 9,000 119,500  Assumptions and basis for certain calculations * The 2005 data is based on information from the UBC Farm budget and other financials, and from interviews with Mark Bomford (coordinator at UBC farm) unless otherwise specified. * Total fresh produce and processed food revenue derived from calculations in "Land used for production" statements as shown in Appendix XIV.  xiv  APPENDIX XIV - MARKET GARDEN Acres Farmed and Revenue per Acre  30,000  8  25,000  7  20,000  Acres  6 5  15,000  4  10,000  3 2  Revenue Per Acre  9  5,000  1 0  0  2005  2006  2007  2008  2009  2010  PRODUCTION ECONOMICS  Productive Acres Farm Workers Workers / Acre Revenue / Acre Total Base Revenue Base revenue to processed produce Net: Fresh produce revenue Net: Processed Produce revenue Total 'produce revenues' % of output processed  2005  2006  2007  3 3 1.00 16,000 48,000 0 48,000 48,000  3 3.5 1.17 17,000 51,000 (5,100) 45,900 10,200 56,100  5 4 0.80 18,000 90,000 (9,000) 81,000 18,000 99,000  2008 6 4.5 0.75 20,000 120,000 (18,000) 102,000 36,000 138,000  2009 7 5 0.71 22,000 154,000 (23,100) 130,900 46,200 177,100  2010 8 5.5 0.69 25,000 200,000 (40,000) 160,000 80,000 240,000  10%  10%  15%  15%  20%  Assumptions and basis for certain calculations: * All of the 2005 information is based on Interview with Mark Bomford (coordinator at UBC farm) and UBC farm financials unless otherwise specified. * Efficiency level for workers increases per acre from 2007 onwards as a result of new equipment, professional farm management, and general economies of scale * Land used for production increases as efficiency increases and as the farm increases its activity level * Revenue generated from processed foods is twice of its production costs (based on market research and survey).  xv  

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