Business Plan

Carolinny Sprouts Ltd.
Business Plan
Introduction
Humans have been eating sprouts for centuries. Sprouts were even found in the Holy
Bible.
A British doctor, to cure and prevent the spread of scurvy, introduced this
vegetable to the western world in the eighteenth century. In the past ten years the
consumption of sprouts has increased in North America, Europe and Australia. An
increasing demand for sprouts has caused opportunity for producers to expand existing
sprout operations, or start up new ones.
1.1
The young business of Carolinny Sprouts began a sprout operation on August 25, 1997. The
husband and wife team from Prince Albert, Carolyn and Randy Pilling, put their entrepreneurial
skills to work and came up with, Carolinny Sprouts. This new business was a perfect reflection
of its innovative owners past histories. Randy had 20 years of experience in the retail food chain.
Being the manager of the produce department for I.G.A. allowed Randy the opportunity of seeing
first hand the market needs. The other partner, Carolyn, had valuable experience in the restaurant
and food industry, which gave her good insight into the food-serving sector. They work as a
team, with Randy taking care of the production and manufacturing of the sprouts, and Carolyn
taking care of ordering supplies and customer service. Together, Carolyn and Randy are trying to
find their place within the sprout industry.
1.2
Current Study Objectives
The purpose of this proposal is to find innovative ways for Carolinny Sprouts to expand its
operation. Suggestions are developed for different ways to market the product, ways to cut
operation costs, different forms of human resource management, and ways to finance the
operation. To do this the following questions are addressed:
How can this business cut their costs?
Where is the most feasible place for expansion?
What are some inventive ways to market this product?
College of Commerce & College of Agriculture, University of Saskatchewan
Carolinny Sprouts Ltd. Business Plan
1.3
Industry Overview
Sprout production is not a widely exploited business. There is very little information available
with regarding national production or consumption.
However, it is known that sprout
consumption is on the rise as is health concerns and sprouts are synonymous with good health.
The most recent development is the discovery that broccoli is very high in anti-cancer agents.
Carolinny Sprouts is based out of Prince Albert and has only two major competitors, Chinese
Universal and Living Foods. Recently, salmonella has threatened the existence of many sprout
producers including Carolinnys competition.
To make Carolinny Sprouts even more appealing to the health advocates, they have become the
only Canadian sprouter to be officially deemed organic by the OCIA (Organic Crop Improvement
Association).
Operations Plan
2.1
Sprout Production
In a given year, Carolinny Sprouts Ltd. will produce 141,500 kilograms of organic sprouts. The
process in producing nine different varieties of sprouts involves the germination of seed with the
use of special sprouting equipment. The products and by-products of the sprouting process are
highly nutritious sprouts, water and ungerminated seed.
2.1.1
Sprout Production Process
1. Seed Inventory
2. Seed Weighing
4. Tray Spouter
8. Sorting
3. Seed Germination
5. Rotary Drum
Sprouter
7. Drying
6. Washing
9. Packaging
10. Wholesale
Inventory
Figure 2.1: Processing Diagram
11. Restaurant
Inventory
12. Shipping
A Description of each step in Figure 2.1 follows.
1. The sprout production process begins with the receiving of the seed inventory. The seed used
is purchased from Mumms Sprouting Seeds in Parkside, Saskatchewan. After receiving the
seed, it is placed directly into the freezer to ensure that no parasites can contaminate the
inventory.
2. Seed weighing is basically the measuring of seed to meet each batch recipe.
3. After the batches are weighed, the seed is washed and set aside to soak. The seed is soaked in
a hot water and food grade hydrogen peroxide solution for a couple of hours. The hydrogen
peroxide solution is used to deactivate microbial pathogens while preserving seed viability,
germination, and vigour (U.S. Food and Drug Administration 1999). After soaking, the seeds
are rinsed and left to germinate for two days. Over the two days, the pails are watered from
time to time to keep the germinating seed damp.
Figure 2.2: Seed Germination Pails

4. The seed then goes from the germination pail to either a tray sprouter or the rotary sprouters,
depending on the variety. The tray sprouter will be used mainly for the larger sized seeds
such as peas, lentils, and sunflowers. Growing trays are filled and inserted into the growing
chamber of the sprouter. The length of time that the seed is kept in the sprouter is dependent
on the variety.
Figure 2.3: Tray Sprouter

5. The rotary sprouters are used for the smaller seeds like alfalfa, clover, onion, broccoli, and
radish. The seed is placed in the growing drums after they have germinated. An added
feature of the rotary system is its ability to germinate and sprout the seed all in the same
system. But with this operation, seed will be germinated before placing it in the sprouter, in
order to increase production potential.
Figure 2.4: Roto Tech Sprouter

Source: International Specialty Supply Company - Green Sprout Equipment
6. When the sprouts have finished their growing cycle they are removed from the growing
chambers.
The next step involves washing the sprouts by hand.
Washing the sprouts
removes seed coats and ungerminated seed. Removing the waste seed helps reduce the
chance of pathogen growth, increases the shelf life and improves the overall quality of the
sprout.
Figure 2.5: Sprout Washing
7. Another important aspect to the shelf life of sprouts is how dry you can get the product.
Drying involves the removal of excess water, while keeping the sprouts relatively moist.
Figure 2.6: Cyclone Centrifuge Drying System

Source: International Specialty Supply Company Bean Sprout Equipment
8 & 9. After the sprouts are dried they are then sorted into separate varieties and packaged
according to their market destination. Sprouts going to the wholesale market are placed in
plastic clam shells, while sprouts intended for the restaurant market are packaged in plastic
bags.
Figure 2.7: Restaurant and Wholesale Packaging

Source: Carolinny Sprouts Ltd.
10 & 11. In order to preserve the quality and shelf life of the finished product, the sprouts are
immediately placed into a cooler. The temperature range that the cooler must maintain is 1 to
3C.
12. The final stage of the sprout operation is the transportation of the finished goods. The
sprouts are shipped via a local transport company for out of town locations, and the local
markets are serviced by Carolinnys own delivery van.
2.1.2
Growing Schedule
The growing schedule will be dependent upon the quantity demanded of each variety. The
sprouting cycle is different for each variety of sprout. The growing cycles for each variety of
sprout is shown in table 2.1.
Table 2.1: Sprouting Cycle
Variety
Growing Days
Peas
9.5
Sunflower
12.5
Alfalfa/Clover
5.5
Onion
7
Lentils
3
Radish
4
Broccoli
4
For each variety the growing cycle begins with two days of the germination process. After
germination the sprouts finish their growing cycle in the sprouters. The growing cycles are
dependent on the growth characteristics of the variety, with some being faster than others.
2.2
Building and Location
The site chosen to locate the business expansion is the City of Saskatoon. The reason for
choosing Saskatoon is its central market location and its accessibility to other major centres.
Within Saskatoon Carolinny will obtain a 929.03 m 2 warehouse, which will be completely
insulated and have a loading dock at the rear. Since location of the warehouse is only dependent
upon the utility and transportation needs of the business, it can be located in a low cost area.
ICR Ashford Commercial Real Estate estimated a lease for this size of building to be
$1000,000/year. The lease would include a rent of $48.44/m 2 and an occupancy charge of
$16.15/m2. The proposed building floor plan can be seen in Figure 2.8.
Office Space
3.6x3.6-m
Seed
Freezer
Germination
Table
Seed
Weighing and
Testing
Sorting and Packaging

Tables
Rotary Drum Sprouters

Centrifuge
Dryer
Wash Sinks
Tray Sprouters
Packing
Supplies
Storage
Water
Storage
Tanks
9m x 9m
Cooler
Loading/Unloading
Bay
Figure 2.8: Business Floor Plan
Loading
Dock
2.3
Equipment Required for Sprout Production
This section will outline the major equipment and supplies needed for the operation of this
business.
2.3.1
Seed Freezer
Seed storage plays an integral role in the sanitation of our sprouting process. The area that the
seed is kept in should be clean and free of rodents to maintain the sanitation of the seed. The
seeds must be kept in a cold and dry area, to preserve the vigour and germination of the seed. We
have chosen to use a 3.66 x 3.66-m freezer to store our seed in. The freezer is already owned by
the company and is presently being used as a cooler to store finished sprouts. We believe that we
can dismantle the cooler and move it from Prince Albert to Saskatoon for a cost of $600 1.
2.3.2
Weigh Scales
Weigh scales will be needed for two steps of the production process: batch preparation and sprout
packaging. In both steps a scale will need to be accurate to the first decimal position. A digital
scale of this accuracy will cost about $190 from Itin Scale Co.
Figure 2.9: Ohaus CS-5000 Balance

Source: Itin Scales Co.
2.3.3
Germination Supplies
The germination process involves the use of pails, screens and bungie cords. The seed is placed
in the pail and a screen is placed over the top to strain out the water (see Figure 2.2). The total
cost of germination supplies was found to be $1,242.
Estimate from Carolinny Sprouts Ltd.
10
Table 2.2: Germination Supplies Cost

Source
Pails
HomeDepot
Screens
Reids Home Hardware
Bungie Cords
Home Depot
2.3.4
Cost/unit
$3.39/pail
$1.23/ft2
$1.45/cord
# of Units
300
112.5
60
Total Cost ($)

1,017
138
87
1,242
Tray Sprouter
The tray sprouters are used mainly for the growing of the larger seeds, but they also have the
capability of growing all types of sprouts. The sprouter that Carolinny Sprouts uses is one of
their own designs (see Figure 2.3). The homebuilt model has been used over the last couple of
years and has proven to be efficient and reliable. The capacity of each tray sprouter is 90
kg/batch. Tray sprouters consist mainly of a shelving unit that holds special growing trays. The
trays have holes in the bottom to allow water to pass through them. Each shelf in the sprouter has
misting nozzles that waters the trays on a pre-set schedule. The tray sprouters are built by a local
carpenter and cost $2,828 dollars each to build. Carolinny Sprouts presently runs ten of these
sprouters and will be purchasing another five for a cost of $14,140. Along with purchasing the
sprouters 1500 growing trays will be needed at a total cost of $1,350. Tray spouters can be
purchased from suppliers in the United States. Manufactured spouters were found to have added
features, but the high price tag out weighed their benefits. Installation of the tray sprouters
involves connecting them to a water and power supply. The costs are covered in the utilities
section.
2.3.5
Rotary Drum Sprouter
We have chosen to use a rotary style sprouter to grow our smaller sized seeds. A rotary drum
system offers higher capacity, ease of use and lower labour requirements over a tray sprouting
system. The drawbacks of using this system are its high capital cost and water consumption.
Other bonuses to the rotary sprouter are its ability to wash, soak, pre-sprout and grow the seed in
one easy step.
In future expansions, the rotary system would be used specifically for the
germination process and the sprouting would be done by tray sprouters. The cost of a Roto Tech
sprouter (see Figure 2.4) from International Specialty Supplies is $14,500/unit (including
shipping). We are planning on purchasing four of these sprouters at a total capital cost of $58,000.
The production capacity for a single rotary sprouter is 272 kg/batch. Installation of the Roto Tech
11
sprouters involves the connection to a water and power supply. Again, the costs are covered in the
utilities section.
2.3.6
Sinks and Tables
Washing sprouts involves the use of large sinks. The sinks are stainless steel with a capacity of
133 L. The reason for using stainless steel over plastic sinks, are that stainless steel are more
durable and sanitary. Carolinny Sprouts presently owns a number of plastic sinks, but will be
purchasing an additional ten stainless steel sinks at a total cost of $8,000 from Westburne
Plumbing. Tables are needed for germinating, washing and sorting spouts. The tables will be
0.9-m x 2.4-m with a laminate surface for ease of cleaning. Ten heavy-duty working tables will
be purchased for a total cost of $3,000 from Office Depot.
2.3.7
Centrifuge Dryer
To dry the sprouts after washing, the Cyclone Centrifuge system is used (see Figure 2.6) offered
by International Specialty Supplies. The present process used is sink drying the sprouts, which
takes 12 hours. A Centrifuge dryer has the capability of drying 22.68 kg of sprouts in 30 seconds,
which is a notable decrease in drying time. The cost of purchasing the Cyclone Centrifuge is
$10,600, including shipping.
2.3.8
Cooler
A 9.14-m x 9.14-m cooler will be used in storing the finished sprouts before shipment. The
cooler will have two entrances, one for sprouts going in and the other for sprouts going out. The
cooler will maintain a temperature range of 1 to 3C. Western Refrigeration & Butcher Supplies
Ltd. estimated the cost of this cooler to be $18,645 (installed).
2.3.9
Water Storage System
A water storage system is needed to ensure a constant water supply. In the event of a water line
break in the city system, we would have enough water in storage to keep the operation running
for a couple of days. Along with being a safety feature, water storage is needed to ensure
constant water temperature.
The sprouting process is sensitive to fluctuations in water
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temperature. The optimum water temperature for growing sprouts is about 15C. To maintain
this temperature a water chiller will be installed to cool the water as it is being used. The water
chiller will be purchased from Rite-Temp manufacturing, at a cost of $35,000. The storage system
would consist of three 4,921 L plastic tanks for a total capacity of 14,763 L. The total cost of
adding water storage is $1,620 from Flaman Stores.
Figure 2.10: Water Storage System

Source: Flaman Stores and Temp-Rite Manufacturing
2.3.10 Miscellaneous Equipment

Other equipment needed for the operation of the business include a delivery van, pallet jack, and
an office computer. For local deliveries of sprouts to restaurants and wholesalers, we will
purchase a used 1-ton cube van for a cost of $8,000 from Northtown Motors Ltd. A pallet jack is
needed for loading outgoing sprout shipments and unloading incoming supplies. The cost of a
used ride on pallet jack with a capacity of 1360 kg is $2500 from Industrial Truck Service Ltd. A
budget of $1,200 has also been set aside to purchase a computer to meet the needs of the office.
2.4
Plant Sanitation
Carolinny Sprouts takes pride in delivering a high quality and safe product. To ensure a safe
product, Carolinny will implement a sanitation program in their operation.
Employee hygiene will play an important role in the sanitation of the working area. The workers
will be asked to wash their hands before handling the sprouts and equipment. Coffee and lunch
13
breaks will take place outside of the working area, as this will ensure that incoming food will not
contaminate the production line.
The cleaning schedule for the working area will be scheduled as follows:
Tables and sinks will be cleaned at the end of every day.
Growing trays and germination pails will be cleaned after every use.
The growing chambers of the tray sprouter will go through a thorough cleaning
once a week.
The rotary drum sprouter will be cleaned at the end of each batch cycle.
The floors of the cooler and working area will be cleaned every three days.
In each of the above situations a bleach and water solution will be used to clean the item,
followed by double rinsing to ensure that the surface is free of any chemicals. Since Carolinny
Sprouts is an organic producer the production surfaces need to be free of any non-organic
substance to maintain their organic status.
2.5
HACCP Program
Carolinny Sprouts is presently going through the motions of obtaining their HACCP 2 status.
HACCP helps to eliminate all harmful contamination in the food supply. To ensure safer food, the
HACCP system is designed to 1) conduct biological, chemical and physical hazard analysis; 2)
identify preventive measures and critical control points; 3) establish critical limits; 4) monitor
critical control points; 5) establish corrective action when deviations occur; and 6) establish a
record-keeping system and verification procedure. The use of the HACCP program will allow
Carolinny Sprouts to supply a safer and higher quality sprout to their consumers. The cost of
implementing such a program is $2,4003 for the first year and $600 for each of the following.
2.6
Sprouting Seed
The seed supplier is Mumms Spouting Seeds of Parkside, Saskatcehwan. The Organic Crop
Improvement Association (OCIA) certifies that the seed supplier is organic. Mumms Sprouting
2
3
HACCP - Hazard Analysis and Critical Control Points

Estimate by Carolinny Sprouts Ltd.
14
Seeds tests all lots of their seed for Salmonella and E. Coli to reduce the risk of any contaminated
seeds being sprouted. A Canadian government certified lab tests the seed. The samples are
sprouted for three days and then pathogen tests are run on all the aspects of the sprouting process.
Seed purchases will be made on a monthly basis. Orders will be placed a week before seed is
needed, to ensure that supply will be available. Total cost of seed on a monthly basis is $8,068.
Table 2.3: Average Monthly Seed Purchases
Seed
Seed Purchase (kg)
Alfalfa
505.87
Clover
121.18
Radish
189.17
Onion
3.54
Broccoli
79.27
Sunflower
86.67
Pea
606.79
Lentil
340.91
2.7
Cost ($/kg)
5.99
3.55
4.20
41.60
29.95
2.47
0.81
1.72
Total Cost ($/month)
Cost ($)
3,030
430
795
147
2,374
214
492
586
8,068
Utilities Set-up and Consumption
The connections for natural gas, power, water and sewage are already made, since we are leasing
a pre-existing building.
2.7.1
Water
A plumber is needed to connect the sprouters, sinks and water storage to the city water and
sewage systems. The cost of plumbing was estimated to be $30,000 4. The water consumption of
the sprouting process is calculated to be around 2,800,000 L annually, at a total cost of $1,075.
2.7.2
Power
An Electrician is needed to make the power connections to all the equipment, including the two
refrigeration units. The cost of making these connections is estimated to be $10,000 4. The annual
power consumption of the facility is calculated to be 72,120 Kwh at a total cost of $5,654.
4
Estimate by Carolinny Sprouts Ltd.
15
2.7.3
Natural Gas
Assuming that the building was previously heated with natural gas, there wont be any added
expense in natural gas hook-ups.
Natural gas consumption will only be from heating the
building. Saskenergy was contacted for an estimate on gas consumption for a 929 m 2 building.
The estimated annual consumption was found to be 15,793 m3 or an annual cost of $4,200.
2.8
Packaging
Carolinny Sprouts utilises two types of packaging to meet the needs of two different markets.
The restaurant market is a bulk consumer and their needs are met with using a plastic bag that
holds 680 g. The total cost of packaging, including the cardboard box that holds three bags, is
$0.20/kg of sprouts. The wholesale or retail consumers prefer their sprouts in small plastic
clamshells. The clamshells offer more protection and better ventilation, allowing the consumer to
keep the sprouts for longer periods. Simple plastic clamshells hold 120 g of sprouts and are
packed in cases of 12. The cost of packaging for the wholesale industry was found to be $1.02/kg
of sprout. The higher cost of packaging for the wholesale market is due to the demand for a
durable container. The total cost of packaging for a given year is estimated by International
Specialty Supply to be $3,363 for the restaurant market and $127,780 for the wholesale market.
2.9
Transportation
Carolinny will use either their own delivery van or a local transport firm for the transportation of
finished goods. Carolinny has used a local transport firm for the last couple of years and they
have proven to be quite reliable. The cost of transporting the sprouts is based on a per pallet
charge. The per pallet cost is estimated to be $60 5, assuming all shipments go to Calgary. Pallet
costs will be $4.75/pallet from Earthwise Pallet Recyclers Ltd. An average pallet holds 110 cases
of sprouts. The annual cost of shipping sprouts is calculated to be $41,652.
2.10
Cost of Goods Manufactured and Unit Cost of Production
Estimated by Carolinny Sprouts Ltd.
16
The cost of goods manufactured is derived from direct materials, direct labour and manufacturing
overhead costs. Table 2.4 shows the costs of goods manufactured and the unit cost of production
for a set of years.
Table 2.4: Cost of Goods Manufactured and Unit Cost of Production
Quantity Produced (Kg)
Direct Materials Used
Direct Labour & Benefits Used
Manufacturing Overhead
Cost of Goods Manufactured
Expenses
Total Cost
Unit Cost of Production/Kg
2001
141,519
96,949
198,086
209,490
494,434
262,210
756,644
5.35
2002
141,519
100,119
204,563
232,119
536,156
263,404
799,560
5.65
2006
141,519
113,871
232,661
237,109
583,357
299,584
882,941
6.24
2011
141,519
133,747
273,272
265,718
672,339
351,876
1,024,215
7.24
2021
141,519
184,513
376,996
360,452
921,380
485,436
1,406,816
9.94
2.11 Capital Budget

The capital cost of expansion is found to be $205,552. The breakdown of all purchases can be
seen in Table 2.5. The cost of leasing the building will be $100,000 a year.
17
Table 2.5: Capital Expenditures

Type of Equipment
Tray Sprouter
Rotary Drum Sprouter
Cooler 9.14mx9.14m
Centrifuge Dryer
Germination Supplies
Tables
Stainless Steel Sinks
Pallet Jack
Delivery Truck
Growing Trays
Computer
Water tanks
Water Chiller
Weigh Scales
Plumbing
Electrical
Installation
Total
Cost of Equipment ($)

14,140
58,000
16,500
10,600
1,242
3,000
8,000
2,500
8,000
1,350
1,200
1,620
35,000
1,400
30,000
10,000
3,000
205,552
2.12 Production Capacity

The estimated total production capacity of the sprouting facility is calculated to be 4,000 kg/week
at maximum production. At start up, Carolinny Sprouts will be running at 68% of their total
production potential, with a weekly output of 2,700 kg. The excess capacity will allow room for
future market expansions and the ability to deal with scheduling conflicts.
3
3.1
Marketing Plan
Mission Statement
To grow sprouts free from chemicals or bacteria by purchasing organically grown seed and
adhering to the OCIA standards for organic foods. Then to service and supply wholesalers,
retailers, and restaurant owners in the Prairie Provinces and to inform all people of the nutritional
benefits of eating sprouts.
18
3.2
Past Performance
Carolinny Sprouts has supplied sprouts throughout Saskatchewan for the past three years. They
market their sprouts through Sobeys warehouse, which supplies all Garden Market IGAs, Food
Towns, and Thrifty Stores in Alberta, Saskatchewan and parts of Manitoba. Sprouts are also
supplied to many other retailers in the Prince Albert area such as the Co-op, Hunts Fine Foods,
Steep Hill Co-op (Saskatoon), and Life Wise Health Food Store (St. Brieux). Carolinny also
produces sprouts for restaurants in the Prince Albert area as well. Some of these restaurants
supplied are Diggers, Amys on 2nd, PA Family Restaurant, Country Kitchen, Prince Albert Inn,
The Marlboro Inn, Choices/Choices, Mr. Submarine, Freckles, and the Victoria Union Hospital.
There are 200-300 cases per week going to Sobeys, and another 300 cases to stores and
restaurants around Prince Albert. Talks with Safeway, IGA, Quappell Valley Wholesale and the
produce buyer from Federated Co-op have led to the start of possible business relationships.
3.3
The Market
The market for sprouts in Saskatchewan is hard to target because it is a relatively new and
unexplored market. There are no surveys or information gathered on production or consumption
of sprouts but it can be assumed that as people eat healthier, they will consume more sprouts.
People are becoming more health conscious and are looking for healthier foods to consume. This
trend towards healthier eating doesnt mean that everyone will start eating sprouts, but it is
expected that the consumption of sprouts will increase. The largest section of the Baby boomers
will be turning 50 over the next 10 years pushing healthy eating to an all time high, according to a
survey published by the American Diabetic Association (Eat Right 2000).
3.4
Competition
Carolinny Sprouts Ltd. operates in a market place that has two main competitors. The one
competitor is Chinese Universal, which is based out of Winnipeg, Manitoba.
The other
competitor is Living Foods, based out of Camrose, Alberta. Living Foods has been growing
sprouts since 1981 and supplies sprouts from Ontario to British Columbia. They supply mainly to
I.G.A., Safeway and Coop, under the names of Sunsprout, Sprouts Alive and Living Foods. In
19
recent years Living Foods has come under scrutiny for producing sprouts tainted with Salmonella
bacteria. The source of the bacteria had been linked to a batch of suspect seed used to produce the
sprout products (Candian Food Inspection Agency 1999). This Salmonella outbreak caused an
abrupt decline in sprout sales. In turn, it scarred the industry reputation, along with the image of
Living Foods.
The downturn for Living Foods made room for Carolinny Sprouts to enter the wholesale market.
The other two producers only grew non-organic alfalfa/clover sprouts, and a deli mix leaving the
market open for Carolinnys variety of organic sprouts. Not only does Carolinny offer a variety
to the customer, but they also take pride in delivering the best quality of product in the market
place.
If a new competitor were to arise in the industry, it would not be an easy task for him/her to get
established. Carolinny Sprouts have become well established with providing an excellent product
that the consumers are happy with. There is also a mentality of trust, with the thought of
salmonella poisoning on peoples minds. Carolinny Sprouts has assured that they have taken
every precaution for the production of salmonella free sprouts.
3.5
Customer
The main consumer of this product is the Saskatchewan population, but before it gets to them, it
first goes through a wholesaler, a retailer or a restaurant/cafeteria. For Carolinny, the wholesaler
that is being supplied is Sobeys. Carolinny provides 200-300 cases of sprouts each week to
Sobeys who then distributes them to several different grocery chains. In some cases, Carolinny
works directly with the retailer who wants to stock their shelves with Carolinnys sprouts. Other
customers include businesses involved in the preparation of food, such as restaurants and
cafeterias.
One motivation for the businesses in Prince Albert to purchase sprouts from Carolinny is the fact
that they are supporting the local community. For out of area customers, they will buy Carolinny
Sprouts, because they want a product that meets their concerns for health and food safety.
20
3.6
Target Markets
Carolinny Sprouts target market is the Prairie Provinces. There are wholesalers, retailers and
restaurants that have yet to try Carolinnys sprouts.
These potential customers offer the
possibility for Carolinny Sprouts to expand.

Carolinny is not the only sprout producer in Saskatchewan, but was able to get into the market
due to Living Foods salmonella outbreak. This opened a door for Carolinny to step in and take
away some of the business from Living Foods. There are other suppliers of sprouts in the Prairie
Provinces, but none can claim to be organic like Carolinny Sprouts. Carolinny Sprouts is a
family run business, which values good service and quality.
The key to Carolinny expanding their share of the market is to get out and meet the people in the
business of wholesale, retail and restaurant industries. These potential customers need to be
aware that Carolinny has a wide variety of sprouts that offer incredible taste and nutrition. They
also need to be aware of the organic quality of Carolinny Sprouts. Once customers get a hold of
the information, Carolinny can potentially grab a large section of the market. Carolinny Sprouts
has become established in the marketplace with having a good reputation and a large wholesaler
on contract.
These are the two key elements in becoming the largest and most trusted sprout
producer in the Prairie Provinces.

3.7
Product
Sprouts are the most concentrated natural source of vitamins, minerals, enzymes, and amino acids
known (Apna Doctor 2000). When the seed goes through the sprout stage it converts all of the
energy to the nutrients that are listed above. Consumption of these sprouts passes the nutrients
on to the consumer.
Carolinny Sprouts uses only organic seed, which is certified by Organic Crop Improvement
Association (OCIA). There are also many other safeguards that Carolinny Sprouts has in place to
ensure the safety of the sprouts being supplied. Carolinny Spouts biggest selling point is the
varieties they have to offer their customers. Some are sold as a mix to achieve the best taste and
nutrition. Currently, Carolinny Sprouts offers nine different varieties.
They also use the
21
nutritional value of their sprouts, as an incentive to attract health conscious people.
The
following are a list of the varieties and their nutritional values for each kind of sprout:
1. Alfalfa/Clover Mix which is packaged in 120g containers and 680g bags
Alfalfa sprouts contain the following:
Vitamin A- for healthy skin.
Vitamin K- helps the blood to clot properly.
Vitamin U- aid for peptic ulcers.
7 enzymes:
- Protease- helps digest protein.
- Coagulase, Emulsin and Perxidase- directly helps the
blood.
- Amylase and Invertase- conversion of starches and sugars
- Lipase- Fat- splitting.
- Chlorophyll- cleans, deodorises and fights infection.
Alfalfa sprouts also are known to contain trace elements like calcium, potassium,
magnesium, iron and phosphorus. They are also said to help those suffering with
kidney and bladder problems as well as arthritis.
Alfalfa is also high in protein. Beef has a protein content of 16.5%. Alfalfa
sprouts contain 18.9% protein. Clover is made up of 30% protein and contains
vitamins A, B, C, and E. It is also known to contain calcium, magnesium,
potassium, iron, and zinc.
2. Radish sprouts are sold in 115g containers.
Radish sprouts contain almost 40 times the amount of vitamins that a mature
radish contains. These sprouts contain 29 times the amount of vitamin C and 4
times the amount of vitamin A than milk.
3. Radish mix sold in 120g containers. Consists of alfalfa, clover, radish and lentil
sprouts.
4. Pure Broccoli sprouts are packaged in 120g containers.
Broccoli has been shown to contain a cancer fighting chemoprotective compound

called sulforaphane. It has also been proved that broccoli sprouts contain 20 to
50 times the amount of sulforaphane found in mature broccoli heads.
5. Broccoli mix is sold in 120g containers. It consists of alfalfa, clover and broccoli.
22
6. Onion mix is packaged in 120g containers. It consists of onion, clover and alfalfa.
7. Pea shoot sprouts are sold in 88g containers and in 680g bags.
8. Sunflower sprouts are sold in 88g containers and in 680g bags.
Sunflower seeds are rich in fats and the finest source of omega 6. By allowing
the seed to germinate, these fats are micellized into a more easily digestible
water-soluble fatty acid. Sunflower sprouts have 4% protein.
9. Lentil sprouts packaged in 184g containers and in 1.25 kg bags.

Lentil sprouts are 25% protein and contain vitamins A, B, C, E. Lentils are also
known to contain iron, calcium and phosphorus.
3.8
3.8.1
Sales and Profit Objectives

Sales Objectives
Carolinny Sprouts objective is to increase sales by 5% each year until the plant reaches maximum
capacity. The increase in sales will happen because of aggressive marketing and through the
excellent reputation that Carolinny Sprouts has out in the market.
Table 3.1 shows a 5% increase in sales up until the year 2011 when maximum production is
reached. Past this point there is a 0% increase in sales.
23
Table 3.1: Quantity of Sales

Quantity of Sales (Kg)
Wholesale Alfalfa Sprouts
Wholesale Radish Sprouts
Wholesale Radish Mix
Wholesale Onion Mix
Wholesale Pure Broccoli
Wholesale Broccoli Mix
Wholesale Sunflower
Wholesale Pea
Wholesale Lentils
Restaurant Alfalfa Sprouts
Restaurant Radish Sprouts
Restaurant Radish Mix
Restaurant Onion Mix
Restaurant Pure Broccoli
Restaurant Broccoli Mix
Restaurant Sunflower
Restaurant Pea
Restaurant Lentil
2001
54,664
9,160
5,139
8,491
6,026
20,029
6,444
8,998
6,037
9,020
746
1,936
1,050
1,199
632
908
1,039
2002
54,664
9,160
5,139
8,491
6,026
20,029
6,444
8,998
6,037
9,020
746
1,936
1,050
1,199
632
908
1,039
2006
54,664
9,160
5,139
8,491
6,026
20,029
6,444
8,998
6,037
9,020
746
1,936
1,050
1,199
632
908
1,039
2011
54,664
9,160
5,139
8,491
6,026
20,029
6,444
8,998
6,037
9,020
746
1,936
1,050
1,199
632
908
1,039
2021
54,664
9,160
5,139
8,491
6,026
20,029
6,444
8,998
6,037
9,020
746
1,936
1,050
1,199
632
908
1,039
Total Wholesale
Total Restaurant
124,989
16,530
124,989
16,530
124,989
16,530
124,989
16,530
124,989
16,530
Total Quantity
141,519
141,519
141,519
141,519
141,519
3.8.2
Profit Objectives
Carolinny Sprouts profit objective is to keep production costs low and increase sales by 0% each
year. The price of sprouts increases at a rate of inflation, 3.27% per year.
24
Table 3.2: Expected Sales Revenue

Sales Revenue ($)
2001
265,667
57,252
24,977
Wholesale Onion Mix
53,069
45,193
125,183
Wholesale Sunflower
48,327
Wholesale Pea
67,487
Wholesale Lentils
26,623
33,105
4,111
9,256
Restaurant Onion Mix
9,261
5,730
4,177
Restaurant Pea
5,005
Restaurant Lentil
8,652
2002
274,355
59,124
25,794
54,805
46,670
129,277
49,908
69,694
27,493
34,187
4,246
9,559
9,564
5,917
4,314
5,168
8,935
2006
312,039
67,245
29,337
62,332
53,081
147,034
56,763
79,267
31,270
38,883
4,829
10,871
10,877
6,730
4,907
5,878
10,163
2011
366,505
78,983
34,457
73,212
62,346
172,698
6,671
93,103
36,728
45,670
5,672
12,796
12,776
7,904
5,763
6,904
11,937
2021
505,617
108,962
47,536
101,001
86,010
238,248
91,977
128,441
50,669
63,005
70,825
17,616
17,625
10,905
7,950
9,525
16,467
Total Revenue Wholesale

Total Revenue Restaurant
713,778
79,297
819,009
81,890
931,505
93,138
1,094,098
109,395
1,509,377
150,917
Total Revenue
793,075
900,898
1,024,643
1,203,492
1,660,295
3.9
Channels of Distribution
Sprouts need to be kept refrigerated to keep the shelf life as long as possible. Thus, a refrigerated
truck is needed for shipments that are out of town. However, for shorter runs, a van will work
just fine. At the moment Carolinny hires a truck and driver for shipments that are outside of
Prince Albert. With a move into Saskatoon and the purchase of a van, Carolinny Sprouts can
make a lot of deliveries on its own.
To service the wholesaler, Carolinny Sprouts will use a combination of the following:
1) Use a transport company and pay a freight charge to deliver a shipment of sprouts to
the wholesaler on a specific day each week.
2) Buy a truck and deliver directly to the wholesaler.
25
3) Make use of the wholesalers trucks that are making deliveries to grocery stores in
Saskatoon because the truck will make a trip back to the wholesaler empty. This
method works well because it cuts the cost of the wholesaler driving an empty truck
and would not be to expensive to Carolinny.
3.10
Pricing Policy
The price of Carolinny Sprouts is higher than that of its competitors, which is offset by having a
higher quality product and being that it is organic. For these reasons, Carolinny Sprouts can
charge a higher price and still keep their share of the market. The selling price of sprouts is only
assumed to increase with inflation.
Table 3.3: Selling Prices of Sprouts
Selling Prices ($ per Kg)
2001
4.86
6.25
4.86
Wholesale Onion Mix
6.25
7.50
6.25
Wholesale Sunflower
7.50
Wholesale Pea
7.50
Wholesale Lentils
4.41
3.67
5.51
4.78
Restaurant Onion mix
4.78
8.82
4.78
6.61
Restaurant Pea
5.51
Restaurant Lentil
8.33
3.11
2002
5.02
6.45
5.02
6.45
7.75
6.45
7.75
7.75
4.55
3.79
5.69
4.94
4.94
9.11
4.94
6.83
5.69
8.60
2006
5.71
7.34
5.71
7.34
8.81
7.34
8.81
8.81
5.18
4.31
6.47
5.61
5.61
10.36
5.61
7.76
6.47
9.78
2011
6.70
8.62
6.70
8.62
10.35
8.62
10.35
10.35
6.08
5.06
7.60
6.59
6.59
12.17
6.59
9.12
7.60
11.49
2021
9.25
11.89
9.25
11.89
14.27
11.89
14.27
14.27
8.39
6.98
10.49
9.10
9.10
16.79
9.10
12.58
10.49
15.85
Markets/Product/Service Mix
It is the goal of Carolinny sprouts to dominate the sprout industry in the Prairie Provinces and
possibly move into BC, the eastern provinces and northern United States. Living Foods would
26
have lots of trouble meeting Carolinnys organic quality because they have a bad reputation with
the salmonella being found in their sprouts.
3.12 Selling and Advertising
Carolinny Sprouts ultimate goal is to have every man, woman and child in Saskatchewan,
Manitoba, and Alberta eating their sprouts. This could be accomplished by selling to every
grocery store in the Prairie Provinces. However, this would be impossible to do, but it would be
possible to supply wholesalers, who would, in turn, supply grocery stores with Carolinny Sprouts
product.
By servicing the wholesaler, Carolinny can supply everyone 365 days a year with sprouts. Most
of the people who do not like the taste of sprouts have only tried alfalfa sprouts, which are very
bland and they assume that all sprouts taste the same. To contest these negative views towards
sprouts, Carolinny Sprouts has been actively promoting their sprouts through demos where the
sceptics can taste the other varieties for themselves. These demos teach and inform people on the
health benefits of eating sprouts.
Carolinny Sprouts guarantees their product by offering to replace any sprouts that may go bad
during shipping.
However, once in the hands of the wholesaler the product is no longer
guaranteed. Sprouts are a perishable product, so there is the danger of over-ordering, which will
cause the leftovers to go bad. This is the wholesalers liability and not Carolinny Sprouts.
Carolinny labels all their products with French and English, as well as highlighting the fact on
every label that their product is truly organic. They emphasise that Carolinny Sprouts are
organically grown from organic seed pre-washed. This selling point really grabs all that are
interested in an organic product. Every bag of sprouts sold has a recipe attached to the back that
uses Carolinny Sprouts as the main ingredient. Carolinny Sprouts logo is also placed centre on
all labels and bags, so that it becomes a recognisable symbol of health and quality, plus it
increases the potential of becoming a household name.
Carolinny also believes that one of the best ways to gain customer approval is to carry the name
of the corporate store right on the packaging. For example, by placing IGAs logo on the sprouts,
27
it immediately gives the consumers a sense of security knowing that it must be a good product.
This guarantees sales for all the stores under that banner.
In store demos has also proved useful for Carolinny. This not only promotes the variety and
tastes of sprouts, but it helps increase sales. This type of advertising does not impact Carolinny
directly, but the more that the wholesaler is able to turnover, the more that they will order from
Carolinny.
Carolinny is also starting a draw for a jacket with the
Carolinny Sprouts emblem on the back. Every customer
who samples Carolinny Sprouts can enter to win the jacket.
Giving the consumer a chance to win something through
demos will increase the amount of consumers trying the
different
kinds
of
sprouts
as
well
as
encourage
some
impulse
buying.
Focusing on advertising to the wholesaler, retailer and restaurant owners is the best advertising
strategy. Through advertising in two magazines, The Western Grocer Magazine as well as the
Manitoba/Saskatchewan Restaurant News, Carolinny Sprouts is able to get their name out to
other potential buyers who normally would not know about Carolinny Sprouts.
Carolinny Sprouts participation in trade shows will have a large impact on the retail and
restaurant industries. Every wholesaler organises trade shows for promoting new products and
future promotions. Saskatchewan Food Processors Association holds a Saskatchewan Made
trade show every year, which showcases products made in Saskatchewan. By emphasising that
Carolinny Sprouts product is produced from organic seed and is organically grown, as well as
promoting a healthier lifestyle, Carolinny Sprouts should be very attractive to consumers.
3.13 Marketing Plan Budget
In 2001, we expect the marketing expense to be $3,154 6. This expense will include demos,
advertising and prizes.
6
Estimated from Carolinny Sprouts Ltd.
28
Demos alone have the biggest expense attached to it. Randy and Carolyn Pilling the owners of
Carolinny Sprouts do the demos themselves but often have to travel extensively and stay a few
nights.
The jacket costs approximately $100. By having a contract with a wholesaler, Carolinny could
take $.01 per container and put it towards a jacket. So for every 1000 cases, a jacket could be
given away.
Human Resource Plan
For Carolinny Sprouts to be successful as a business, a team atmosphere must be maintained.

Every employee is given a responsibility that he/she is expected to fulfill. This involves a great
deal of trust on behalf of both the employer and the employee. This trust creates a working
atmosphere where all employees feel that they are being treated as equals, which is important in
establishing job satisfaction and employee motivation. The friendly environment allows for
improved communication between employees and management, which is the driving-force
behind the Carolinny Sprouts business.
4.1
4.1.1
Job Descriptions
Co-Presidents
The co-presidents of Carolinny Sprouts are Randy and Carolyn Pilling. This husband and wife
team is the foundation of the company who has put in many hours of hard work and dedication to
get their small enterprise into the larger market. As co-presidents, they oversee the whole
organisations internal workings, as well as both having an overall understanding of how the
business operates.
4.1.2
Plant Manager
29
The plant manager is the supervisor of all plant employees, hiring, firing, and training. A
background in management is essential, as well as communication and organisational skills. This
plant manager oversees all the activities of the plant itself, and is responsible for seed scheduling,
product manufacturing, product processing, seed testing, and shipping and receiving of goods.
Inventory checks are done at the end of each week. Currently, the plant manager also assists the
office manager. With expansion, the assistant business manager will take over assisting the office
manager so that the plant manager can focus solely on the plant operations.
4.1.3
Assistant Plant Manager
The assistant plant manager works closely with the plant manager, keeping up to date on types of
seed, quality of seed and production of the overall everyday operations including the overseeing
of all daily cleaning and sanitation procedures.
4.1.4
Office Manager
The office manager must have a formal education or experience in business administration.
He/she will be in charge of all financial records, and all clerical duties, which includes ordering
all of the manufacturing stock and supplies. The office/accounting manager will be responsible
for all the accounting, payroll and customer relations. Currently, the office manager is also the
assistant plant manager, which will change with the expansion.
4.1.5
Assistant Office Manager
The assistant office manager is in charge of assisting the office manager in the everyday
office/clerical duties. Currently, the assistant office manager is the plant manager. This will
change with the expansion by the introduction of the assistant business manager.
4.1.6
Assistant Business Manager
The assistant business manager position will not come into effect until the fifth year of the
expansion. This position will require some sort of business background as well as experience in
sales. He/she will need basic knowledge of all the office and plant operations (through training),
and will be the main on the road demo personnel. This will include doing demonstrations
30
across Saskatchewan to all major stores several times throughout the year, as well as assisting
with other in-store personnel. This position will also take some of the workload off of the plant
and administrative manager positions.
4.1.7
General Labourers
Duties for this position include the cleaning of sinks and floor, and putting stickers on bagged
products. Helping with bagging and packing of the finished product will also be required.
Carolinny Sprouts feel that this is an excellent opportunity to hire an under-appreciated source of
labour; people who are physically or mentally challenged.
4.2
Training Programs
The main type of training that Carolinny Sprouts will use for their employees is on the job
training, since there is not an official course on sprout education. However, due to the type of
general labour required, Carolinny Sprouts has the opportunity to hire mentally and physically
challenged people.
Training for this labour is possible, through meeting with Kinsmen
representatives. For the physically challenged, they must have full use of their upper bodies in
order to assist with the bagging and packaging of sprouts.
4.3
Planned New Positions
With the expansion of Carolinny Sprouts, the company plans to expand their number of
employees from five full-time workers to 12 full-time workers in order to fill their production
capacity. One of the new positions that will be created is the assistant business manager. A
description of this position can be found above. The company will also increase the amount of
full-time general labourers as needed.
4.4
Organisational Structure
The following figures are a comparison between the current organisational structure of Carolinny
Sprouts and the proposed organisational structure under an expansion. One major change in the
organisational structure with the expansion is that an assistant business manager will replace the
assistant office manager position. This is done in speculation that the assistant business manager
31
will assist both the plant manager as well as the administrative manager in their everyday
activities. This person will also do a great deal of the travelling to market the product in stores
and exhibitions.
The number of general labourers will increase from three to six people, as well as six part-time
employees and one summer student will be hired along with the expansion.
Co-Presidents
Randy & Carolyn
Pilling
Plant Manager
- Randy Pilling

- Carolyn Pilling
Office Manager
- Carolyn Pilling
Assistant Office Manager

- Randy Pilling
General Labourers
- Full Time (3)
Figure 4.1: Illustration of Carolinny Sprouts Current Organisational Structure
32
Co-Presidents
Randy & Carolyn
Pilling
Plant Manager
-Randy Pilling
Office Manager
-Carolyn Pilling
Assistant Business Manager
General Labourers
Full Time (3)
Part Time (6)
Summer Student (1)
Figure 4.2: Illustration of Carolinny Sprouts Organisational Structure with Expansion
4.5
4.5.1
Present and Future Costs of Employees

General Benefits
Table 4.1 represents the proposed employee benefits for Carolinny Sprouts:
Table 4.1: Proposed Employee Benefits
Benefits for Wage Earning Employees
Employment Insurance
Canada Pension Plan
Holiday Pay
Workers Compensation
Medical, Dental, Optical
Amount
3.4%
3.9%
5.8%
2.9%
$400/year
Benefits for Salary Employees

Employment Insurance
Canada Pension Plan
Workers Compensation
Medical, Dental, Optical
3.4%
3.9%
2.9%
$800/year
33
4.5.2
Salary Employees
The salary employees at Carolinny Sprouts will consist of an office/accounts manager, an

assistant office manager, a plant manager, and an assistant plant manager. Salaries will increase
along with the expected inflation of 3.27% for all employees (Bank of Canada 2000). The
assistant business manager position will not come into effect until the year 2004. Table 4.2
illustrates a five-year projection of salary costs for Carolinny Sprouts.
Table 4.2: Five-year Projection of Salary Earners
Office
Assistant
Year 2001
Manager
Business
Manager
Annual Wage
$37,000
EI (3.4%)
$1,258
CPP (3.9%)
$1,443
Workers Comp
$1,073
Med./Dental/Opt.
$800
Total Cost
$41,574
Office
Assistant
Year 2002
Manager
Business
Manager
Annual Wage
$38,210
EI(3.4%)
$1,299
CPP(3.9%)
$1,490
Workers Comp
$1,108
Med./Dental/Opt.
$800
Total Cost
$42,907
Office
Assistant
Year 2003
Manager
Business
Manager
Annual Wage
$39,459
EI(3.4%)
$1,342
CPP(3.9%)
$1,539
Workers Comp
$1,144
Med./Dental/Opt.
$800
Total Cost
$44,284
-
Plant
Manager
Assistant
Plant Manager
$37,000
$1,258
$1,443
$1,073
$800
$41,574
Plant
Manager
$25,000
$850
$975
$725
$800
$28,350
Assistant
Plant Manager
$38,210
$1,299
$1,490
$1,108
$800
$42,907
Plant
Manager
$25,818
$878
$1,007
$749
$800
$29,251
Assistant
Plant Manager
$39,459
$1,342
$1,539
$1,144
$800
$44,284
$26,662
$906
$1,040
$773
$800
$30,181
34
Table 4.2 Contd: Five-year Projection of Salary Earners

Office
Assistant
Year 2004
Manager
Business
Manager
Annual Wage
$40,750
EI(3.4%)
$1,385
CPP(3.9%)
$1,589
Workers Comp
$1,182
Med./Dental/Opt.
$800
Total Cost
$45,706
Office
Assistant
Year 2005
Manager
Business
Manager
Annual Wage
$42,082
$25,000
EI(3.4%)
$1,431
$850
CPP(3.9%)
$1,641
$975
Workers Comp
$1,220
$725
Med./Dental/Opt.
$800
$800
Total Cost
$47,175
$28,350
4.5.3
Plant
Manager
Assistant
Plant Manager
$40,750
$1,385
$1,589
$1,182
$800
$45,706
Plant
Manager
$27,534
$936
$1,074
$798
$800
$31,142
Assistant
Plant Manager
$42,082
$1,431
$1,641
$1,220
$800
$47,175
$28,434
$976
$1,109
$825
$800
$32,134
Wage Labourers
The wage labourers will consist of the general labourers. Wage earning employees wages will
increase along with the expected inflation of 3.27% for all employees.
Wage earners will be paid on an hourly basis, where in one week, a minimum of 40 hours of
labour per worker is required. It is considered that in one year, one full-time labour will work
2000 hours (250 days times 8 hours a day). It should be noted that two part-time labour workers
will work 2000 hours in a year, therefore, one part-time worker works 1000 hours per year. A
summer student is assumed to only work 352 hours per year (44 days times 8 hours a day). Table
4.3 shows the amount earned by one labourer per year.
35
Table 4.3: Five-year Projection of Wage Earners

Year 2001
Full Time
Annual Wage
$20,000
EI(3.4%)
$680
CPP(3.9%)
$780
Workers Comp.
$580
Holiday Pay (5.8%)
$1,160
Total Cost
$23,200
Part Time
$8,000
$272
$312
$232
$464
$9,280
Summer Student
$2,464
$84
$96
$71
$143
$2,858
Year 2002
Annual Wage
EI(3.4%)
CPP(3.9%)
Workers Comp.
Holiday Pay (5.8%)
Total Cost
Full Time
$20,654
$702
$806
$599
$1,198
$23,959
Part Time
$8,262
$281
$322
$240
$479
$9,584
Summer Student
$2,545
$87
$99
$74
$148
$2,952
Year 2003
Annual Wage
EI(3.4%)
CPP(3.9%)
Workers Comp.
Holiday Pay (5.8%)
Total Cost
Full Time
$21,329
$725
$832
$619
$1,237
$24,742
Part Time
$8,532
$290
$333
$247
$495
$9,897
Summer Student
$2,628
$89
$102
$76
$152
$3,048
Year 2004
Annual Wage
EI(3.4%)
CPP(3.9%)
Workers Comp.
Holiday Pay (5.8%)
Total Cost
Full Time
$22,027
$749
$859
$639
$1,278
$25,551
Part Time
$8,811
$300
$344
$256
$511
$10,221
Summer Student
$2,714
$92
$106
$79
$157
$3,148
Year 2005
Annual Wage
EI(3.4%)
CPP(3.9%)
Workers Comp.
Holiday Pay (5.8%)
Total Cost
Full Time
$22,747
$773
$887
$660
$1,319
$26,387
Part Time
$9,099
$309
$355
$264
$528
$10,555
Summer Student
$2,802
$95
$109
$81
$163
$3,250
36
Financial Plan
The financial plan for Carolinny Sprouts is an important part of this business plan, since the
finances for the expansion could make or break this company. Carolinny Sprouts is currently a
corporation with two shareholders, Carolyn and Randy Pilling. Financing could come from a
number of options: bank loans, government loans, or shareholders equity. Before considering
financing options, one has to consider the costs of expansion for the equipment, the warehouse,
and other assets. The financial plan was developed under two assumptions. The first assumption
was that leasing of the warehouse was more desirable than purchasing it. The reason for this is
because the company would not be owners of the asset if they ever went bankrupt, and the lease
had a higher internal rate of return compared to the buy option. The other assumption was that
financing would consist of a mixture of equity and debt.
5.1
Capital and Financial Budget
In order for Carolinny Sprouts to meet its financial obligations, $288,784 in financing will be
required.
Table 5.1: Capital and Financing Budget
Capital Cost
Equipment
Electrical
Installation
Plumbing
Working Capital
Total
$162,552
$10,000
$3,000
$30,000
$205,552
$83,232
$288,784
Financing Budget
Agri-Food Equity Fund
Shareholders Equity
Total
$120,000
$168,784
$288,784
In Table 5.1, the shareholders will put up 58% of the total financing. The above table represents
the financial mix assuming that Carolinny Sprouts will lease the warehouse. The terms of the
lease are as follows:
Annual lease payment equal to $100,000
37
5.2
Lease will increase by inflation

Loan Amortisation
The loan will come from the Agri-Food Equity Fund. A total of $120,000 will be loaned for eight
years with a 16% interest rate. The debt payment is constant over the eight years.
Table 5.2
shows the amortisation of the loan.

Table 5.2: Long Term Debt Amortisation
2001
2002
2003
2004
2005
2006
2007
2008
Beginning
$111,573 $101,798 $90,459 $77,305 $62,047 $44,348 $23,81
Balance
6
Addition
$120,000
Interest
$19,200 $17,852 $16,288 $14,473 $12,369 $9,928 $7,096 $3,811
Debt Payment
$27,627 $27,627 $27,627 $27,627 $27,627 $27,627 $27,627 $27,62
7
Ending Balance $111,573 $101,798 $90,459 $77,305 $62,047 $44,348 $23,816
-
5.3
Dividend Policy
The dividend policy for Carolinny Sprouts indicates that the shareholders will receive dividends
when the companies cash flow is above $50,000. Table 5.3 displays the future dividends for
Carolinny Sprouts.
Table 5.3: Dividends for Carolinny Sprouts
2001
2002
2006
Dividends
$6,464
$105,993
5.4
2011
$138,969
2016
$161,251
2021
$185,037
Economic Forecast
A planning horizon of 20 years has been used with an inflation rate of 3.27%. This inflation rate
has been used to derive the base case projections. A conservative approach was taken when
calculating the growth in sales, which is dependent on consumer demand. Sales revenue is set to
grow at inflation per year.
38
5.5
Working Capital
The following working capital assumptions were used.

Table 5.4: Working Capital Requirements
Average Days
Accounts Receivable
Sprout Inventory
Accounts Payable
Total Net Working Capital
5.6
Year 2002 Level
30
5
30
Year 2021
Level
$136,463
$18,439
$15,145
$139,757
$74,046
$10,736
$8,218
$76,565
Summary of Financial Results
Table 5.5 lists a number of financial ratios for a five-year period. Ratio definitions can be found
in appendix B.
Table 5.5: Summary of Financial Results
Year
2001
2002
2006
Sales
$793,075
$900,898
$1,024,643
COGS
$494,434
$536,156
$583,357
Gross Profit $298,641
$364,742
$441,285
Expenses
$262,610
$263,404
$299,584
Net Income
Before
$36,031
$101,338
$141,701
Taxes
Income Tax
$7,610
$21,403
$29,927
Net Income
$28,421
$79,936
$111,774
Net Cash
Flow to
$56,464
$147,912
$156,574
Equity
Net Present Value (NPV)
Expected Rate of return on Equity Investment
(IRR)
5.7
2011
$1,203,492
$672,339
$531,153
$351,876
2016
$1,413,560
$785,545
$628,015
$413,296
2021
$1,660,295
$921,380
$738,915
$485,436
$179,277
$214,719
$253,479
$37,863
$141,414
$46,927
$167,793
$59,268
$194,211
$193,197
$215,660
$240,322
$544,773
52%
Financial Analysis
A number of variables have been ranked based on their level of importance for Carolinny Sprouts
to achieve success. Table 5.6 ranks these variables with:
The number 1 being critical for success and feasibility
39
The number 2 being not as critical for financial performance

The number 3 being of minor importance
Table 5.6: Critical Success Variables
Variable
Selling Price
Cost of Seed
Quantity of Sales
Variable cost per Kg of Sprouts
Interest Rates
Fixed Costs
5.8
Level of Importance (1,2,3)

1
1
1
3
3
3
Sensitivity Analysis
Table 5.7 contains several scenarios. These scenarios show the sensitivity of the NPV and the
IRR to changes in the critical variables.
Table 5.7: Sensitivity Analysis (15% Discount Rate)
Scenario #1: Growth in Selling Price of Sprouts
Base Case
+3.27%
Worst Case
0%
Best Case
+20%
Scenario #2: Growth in Cost of Seed
Base Case
+3.27%
Worst Case
+10%
Best Case
0%
Scenario #3: Growth in Quantity of Sales
Base Case
0%
Worst Case
-2.5%
Best Case7
5%
Scenario #4: Growth in Fixed Costs
Base Case
3.27%
Worst Case
+10%
Best Case
-10%
Scenario #5: Growth in Variable Costs
Base Case
3.27%
Worst Case
+10%
Best Case
-10%
Scenario #6: Growth in Cost of Goods Sold
Base Case
3.27%
Worst Case
+10%
Best Case
-10%
7
NPV
$544,773
$(448,714)
$13,031,308
NPV
$544,773
$197,095
$637,694
NPV
$544,773
$(111,110)
$1,691,303
NPV
$544,773
$527,340
$562,173
NPV
$544,773
$392,250
$694,089
NPV
$544,773
$246,782
$831,524
IRR
52%
-Infinity
111%
IRR
52%
45%
55%
IRR
52%
-Infinity
74%
IRR
52%
51%
54%
IRR
52%
42%
63%
IRR
52%
31%
74%
5% growth for first 10 years for the quantity of sales- plant capacity
40
Scenario #7: Growth in Wages and Salaries

Base Case
3.27%
Worst Case
+10%
Best Case
-10%
5.9
NPV
$544,773
$361,597
$723,329
IRR
52%
39%
65%
Break-even Analysis
The break-even analysis will measure the relationship between sales volume and profitability for
Carolinny Sprouts. The break-even analysis will look at the year 2002 instead of the year 2001,
because the year 2001 is the start up year, and an analysis of this year would be inaccurate for this
case.
5.9.1
Quantity of Sprout Sales
A break-even analysis for the quantity of sprout sales for Carolinny Sprouts is illustrated in Table
5.8, with respect to cash flows to shareholders, net income, and NPV. The base case is 141,519
kg of sprout sales.
Table 5.8: Average Break-even of Quantity of Sprout Sales
Break-even
Break-even % Decrease of Base Case
Cash Flow
Net Income
NPV
5.9.2
106,847kg
122,697kg
119,584kg
24.5%
13.3%
15.5%
Cost of Sprouts Seed
The following table shows the break-even cost of sprout seed. This cost of sprouts is a weightedaverage cost and the base case is $4.31/kg.
Table 5.9: Average Break-even of Cost of Sprout Seed
Break-even
Break-even % Increase of Base Case
Cash Flow
Net Income
NPV
5.9.3
$8.50/kg
$8.68/kg
$8.38/kg
97.5%
101.5%
94.5%
Price of Spouts Charged
41
Table 5.10 shows the break-even price of sprouts, which Carolinny can charge. This price is a
weighted-average price and the base case is $5.79/kg.
Table 5.10: Average Break-even of Sprout Price Charged
Break-even
Break-even % Decrease of Base Case
Cash Flow
Net Income
NPV
$5.14/kg
$5.13/kg
$5.17/kg
11.2%
11.3%
10.6%
The break-even analysis shows that the NPV is very sensitive to changes in the quantity of sprout
sales, the cost of sprout seed, and the selling price of the sprouts.
5.10 Scenario Analysis
At expansion, Carolinny Sprouts production will be 2,721 kg of sprouts per week. This is the
base case. The best case will assume a 5% increase in sales per year, which will increase the
production by the same amount. The worst case will be 2,653 kg of sprouts per week. The
selling price is varied from the inflation rate up to plus 5% and down to 0%. Variable costs and
fixed costs are adjusted up and down by 10%. Table 5.11 shows how the variables will adjust to
determine the base, worst, and best case scenarios.
Table 5.11: Scenario Analysis
Variable
Base Case
Selling Price
$5.79/kg
Cost of Seed
$4.31/kg
Quantity of Sales
141,519kg
Fixed Cost
$52,329
Variable Cost
$179,790
Cost of Goods Sold
$536,801
Wages and Salaries
$278,275
Worst Case
$5.60/kg
$4.59/kg
137,981kg
$57,562
$197,769
$589,772
$306,103
Best Case
$6.72/kg
$4.17/kg
148,595 kg
$47,096
$161,811
$482,540
$250,448
By using the variables from table 5.11, one can derive the best and worst case financial results as
shown in table 5.12.
Table 5.12: Net Present Value (15% Discount Rate) and Internal Rate of Return
Scenario
NPV
IRR
Average Annual Cash
Average Annual Net
42
Base Case
Worst Case
Best Case
$544,773
$(2,188,803)
$27,425,667
Flows
$139,515
$(623,885)
$12,848,131
52%
-Infinity
151%
Income
$136,483
$(632,775)
$13,186,461
5.11 Summary
Summary of Financial Statements for Carolinny Sprouts' Expansion

1,000,000
900,000
800,000
700,000
Gross Margin
Dollars
600,000
Cash Flow
500,000
Cost of Goods Sold
400,000
Net Income
300,000
200,000
100,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2016 2021
Year
Figure 5.1: Summary of Financial Statements for Carolinny Sprouts Expansion
Future Considerations
In the future, some of the aspects that Carolinny Sprouts may consider are:
Future expansion, both local and regional;
Achieve a larger market;
Technology and equipment;
Government regulations on seed treatment;
And patent on their sprouts or equipment.
43
Carolinny Sprouts has the option of further expansions. In creating the building layout, it was
strategically designed so that future expansion would be a possible. There was left over floor
room in which more equipment could be brought in to increase the maximum production
capacity.
In the future, Carolinny Sprouts could possibly reach markets that are currently unattainable
because of their location. They could do this by expanding into different regions of Canada,
specifically the eastern provinces. By moving into these provinces, they would face a larger
consumer market due to the populations of the larger urban centers.
Currently, Carolinny Sprouts is using homebuilt equipment. With the expansion, purchasing
manufactured equipment will become a possibility in the future.
As far as technology is
concerned, it is always changing. In the future there may be some new sprouting technologies
that Carolinny Sprouts may be able to adopt. As well, they may work towards inventing some
technology that would revolutionise the way sprouts are produced.
Currently, there are no government regulations on seed treatment in Canada. However, in the
United States, the regulation for sprouting seeds is that they have to be soaked in a water and
bleach solution. If this regulation came to Canada, it would take away from Carolinny Sprouts
organic status, which is one of their main marketing tools.
Putting a patent on Carolinny Sprouts products or their equipment is another aspect that can be
considered. Currently, Caroliny Sprouts have designed and are using their own tray sprouters and
cooler. They could possibly look at putting a patent on the design of their tray sprouters. The
John Hopkins University School of Medicine in the United States is looking at patenting a
broccoli sprout growing process, as broccoli has been linked to the fight against cancer.
Carolinny Sprouts may consider patenting their sprout growing processes as well as their sprout
mix recipes.
44
Summary of Business Plan
The expansion of Carolinny Sprouts will involve numerous capital expenditures, changes in
human resource management and the increase in marketing intensity.
Capital expenditures will involve the purchase of additional sprouting equipment and the various
assets needed to operate a large scale sprouting facility. Along with purchasing new equipment,
Carolinny Sprouts will lease a larger warehouse located in Saskatoon, Saskatchewan. Setting up
the new facility will involve installation costs for plumbing, electrical and equipment. Total
capital costs associated to this expansion are found to be $205,552.
An increase in size will result in a shift to a larger workforce for the facility. Carolinny Sprouts
will need to hire more general labourers, both full-time and part-time. The current management
will need help in managing the greater number of labourers and the increased amount of
production. In total, they will hire an additional three full-time, six part-time and one summer
student, on top of what they already have. For an increase in management they will hire two
assistants, one to assist the office manager and another to assist the production manager.
Marketing intensity will accompany the increase in production, and the corresponding increase in
sales. A higher sales volume will be achieved by contacting more wholesalers and getting the
message out to more consumers on what Carolinny Sprouts has to offer.
We feel that this expansion is a viable opportunity for Carolinny Sprouts to increase their market
share in the sprouting industry.
45
References and Contacts
American Diabetic Association. 2000. Nutrition and You: Trends 2000.

http://www.eatright.org/pr/2000/trends2000.html . 12/11/00.
Apna Doctor. 2000. Sprouts for Optimum Nutrition.
http://www.apnadoctor.com/naturopathymain/naturopathy/sprouts_main.htm. 12/05/00.
Bank of Canada. 2000. Inflation Calculator.
http://www.bankofcanada.ca/en/inflation_calc.htm. 12/05/00.
Canadian Food Inspection Agency. 1999. Health Hazard Alert Alfalfa Sprouts May
Contain Salmonella Bacteria Amendment. www.cfiaacia.agr.ca/english/corpaffr/foodrecalls/19991001e.shtml. 12/05/00.
Canadian Food Inspection Agency. 1999. Microbiological Safety Evaluations and
Recommendations on Sprouted Seeds.
http://vm.cfsan.fda.gov/~mow/sprouts2.html#prevent. 12/05/00.
U. S. Food and Drug Administration. 1999. Microbiological Safety Evaluations and
Recommendations on Sprouted Seeds.
http://vm.cfsan.fda.gov/~mow/sprouts2.html#prevent. 25/11/00.
Randy and Carolyn Pilling
R.R. 2, Site 4, Comp 94,
Prince Albert, SK, S6V 5P9
Phone: (306) 763-9223
Fax: (306) 763-9224
The Sproutpeople
311 South Main St.
Viroqua, Wisconsin USA
Toll Free: 877-777-6887 (877-SPROUTS)
Fax: (608) 637-6520
http://www.sproutpeople.com/ safe.html
Mumm's Sprouting Seeds
Hazelridge Farm
Parkside, Saskatchewan
Phone: (306) 747- 2935
Fax: (306) 747-3618
http://www.sprouting.com/homesprouting.htm
46
International Specialty Supply

820 East 20th Street
Cookeville, Tennessee USA
Phone: 931-526-1106
Fax: 931-526-8338
http://www.ucbd.com/iss/sprouts.htm
Barry Mayes
Email: barry@sproutnet.com
Saskatchewan Agriculture and Food
Glen Sweetman
Greenhouse & Nursery Crops-Prov. Specialist
Regina, Saskatchewan
Phone: (306) 787-6606
Email: GSweetman@agr.gov.sk.ca
The Agri-Food Equity Fund (AFEF)
Dave Gabruch
Branch Manager
Saskatoon, Saskatchewan
Phone: (306) 933-7682
Email: dgabruch@agr.gov.sk.ca
SaskEnergy
http://www.saskenergy.com/
Rite-Temp Manufacturing
Rogers, Arkansas USA
Phone: 1-800-462-3120
Email: Chillers@RiteTemp.com
http://www.ritetemp.com/water_chiller.htm
ICR Ashford Commercial Real Estate Services
Phone: (306) 933-2929
http://www.icr-ashford.com/oldindex.html
47
Organic Crop Improvement Association (OCIA)

Lincoln, New England USA
Phone: (402) 477-2323
Email: info@ocia.org
http://www.ocia.org/
Itin Scale Co.
Brooklyn, New York USA
Phone: (718) 336-5900
Email: sales@itinscales.com
http://www.itinscales.com/
Flaman Sales Ltd.
Phone: (306) 934-2121
Home Depot
Phone: (306) 651-6250
Reids Home Hardware
Phone: (306) 374-5515
Westburne Plumbing
Phone: (306) 933-1033
Earthwise Pallet Recyclers Ltd.
Phone: (306) 931-3700
Northtown Motors Ltd.
Phone: (306) 668-2020
Industrial Truck Service Ltd.
Phone: (306) 242-7333
Office Depot
Phone: (306) 664-9191
Western Refrigeration & Butcher Supplies Ltd.
Phone: (306) 956-3090
48
APPENDIX 1
FINANCIAL PROJECTIONS
49

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Carolinny Sprouts Ltd.

Carolinny Sprouts Ltd.

Current Study Objectives

How can this business cut their costs?

Where is the most feasible place for expansion?

What are some inventive ways to market this product?

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

However, it is known that sprout

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Sprout Production Process

Figure 2.1: Processing Diagram

A Description of each step in Figure 2.1 follows.

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Figure 2.2: Seed Germination Pails

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Figure 2.3: Tray Sprouter

Figure 2.4: Roto Tech Sprouter

The next step involves washing the sprouts by hand.

Washing the sprouts

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Figure 2.5: Sprout Washing

Figure 2.6: Cyclone Centrifuge Drying System

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Figure 2.7: Restaurant and Wholesale Packaging

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Building and Location

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Sorting and Packaging

Rotary Drum Sprouters

Figure 2.8: Business Floor Plan

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Equipment Required for Sprout Production

Figure 2.9: Ohaus CS-5000 Balance

Estimate from Carolinny Sprouts Ltd.

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Table 2.2: Germination Supplies Cost

Total Cost ($)

Rotary Drum Sprouter

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Sinks and Tables

Water Storage System

The sprouting process is sensitive to fluctuations in water

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Figure 2.10: Water Storage System

2.3.10 Miscellaneous Equipment

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan

Tables and sinks will be cleaned at the end of every day.

HACCP - Hazard Analysis and Critical Control Points

College of Commerce & College of Agriculture, University of Saskatchewan

Carolinny Sprouts Ltd. Business Plan