Based on emplace data from 16 Flannels Industrial and service companies this paper presents a…
Lauren Floral Ltd CMA
ELF will be a responsible corporate citizen in its interactions tit customers, suppliers, the environment, and the surrounding community. Mandate: Expand operations to sustain the livelihood of three families. Opportunities for Expansion a nearby vegetable greenhouse 00 Double the size of current operations and change crops 00 Open a country florist and garden centre 00 Purchase a nearby vegetable greenhouse 00 Convert to tomatoes 00 Diversify the floral capacity Target Salaries: 3 families $170,000 Outcome The Main Issues… 0 Declining prices, rising costs, profit squeeze! Economies of scale -commodity business Single product focus Flat market sector, intense competition Staff retention Advanced knowledge and skills required Ontario Follicular Exports Greenhouse Vegetables However, There’s a Rainbow!
More profitable product categories with greater growth opportunities 00 Proximity to large markets in Canada and North Eastern US 00 New consumer trends showing benefit of flowers, gardening and fresh vegetables 00 Relationship with florists 00 Availability of government programs to support agriculture 00 Family “equity’ and succession planning 00 Good existing infrastructure “Sales trends document the accelerating growth and widespread acceptance of quality Ontario greenhouse vegetable produce….
There are still untapped opportunities for market development in States along north-south trade and transportation corridors… ” Ontario Greenhouse Vegetable Markets in the United Sates, Niagara Economic Development Corporation, 2005 Increasing changes in consumer preferences Emphasis on innovation & technology: 00 Integrated pest management practices 00 Technologies to reduce costs Vegetable variety is the spice of life! Greenhouse tomatoes command higher retail prices than jugular field tomatoes, tomatoes big export crop 00 Marketing of vegetables is done through the Ontario Greenhouse Vegetable Growers (COVE).
Option 1: Buy Alders grow Tomatoes Cons: Lack of experience in Tomato production 00 Production lag – operating loss in 2009 00 Price of land – based on rest. Development 00 Management capacity 00 No pricing power Option 1: Buy Alderman’s Greenhouse Operation pros: Leverage – existing customers, scale of combined operations 00 Diversify – largest crop with high export, multiuse, and buy local potential Proximity – ease of integration 0 Risk mitigation – alternate exit strategy 00 Depreciated asset profitable – IN 2012 of $60,000 ROI of 3. 7% 00 High Capital cost – increased risk 00 Increased debt $1. 2 million 00 Increased equity $0. Million 00 Production lag – operating loss in 2009 00 Price of land – based on rest. Development 00 Larger scale – management capacity Option 2: Double Greenhouse & Diversify 00 Increased scale 00 Increase margins (lower production costs) 00 Some automation (efficiency) 00 Diversify cool crops – lower heating cost 00 Increased market potential cash flow in 2009 (late) 0 Existing customers and Diversify 00 No Expertise – production risk Need Gregg (ownership / bonus) 00 Operating loss 2009 – $209,000 00 Margins 00 Higher High marketing / sales costs capital costs debt of $1 ,KICK 00 Increased equity of $761 K ROI of X% 00 Not profitable.
Option 3: Garden Centre Downstream Diversification Higher margins Total investment $1 million No retail experience – large product selection 00 Competing against existing some customers 00 Lowest option operating profit – $ASK 00 Dependence on outside expertise Recommendation: cut production of roses by 50% 0 Add cut flowers & hanging baskets 00 Buy Alderman’s Greenhouse Operation 00 Grow Tomatoes Summary… 0 Consistent with Mission and Strategy 00 Market share increase 00 New Product Lines in Growing Segments 00 Expand Channels 00 Surpass Financial Thresholds 00 Implantable 00 Exit Strategy Financing Requirements Alders Operator Land Greenhouses Buildings Equipment Total purchase price Other Costs Automata sorter Delivery van 2009 Start up costs Marriageable Amount 240,000 Mortgage 705,000 750,000 Down payment 185,000 90,000 Financing Required Equipment ‘d