Cucumber farm - GroSpace 2024 Recovery

Comprehensive Business Plan: Cucumber Farm with Established Success

Franchise fee R20m

Executive Summary:

This business plan outlines the strategy and financial projections for a highly successful cucumber farm with a proven track record of success. The farm generates annual revenue of R9,104,904 with a profit of R3,510,821. It is professionally managed with optimized systems and has been operating for 35 years, successfully transitioning beyond the startup phase. The farm has a refrigeration and packing plant on-site, 47 boreholes, and a contract for water supply from an underground lake. The cucumbers are grown in hydroponic systems using pine shavings as the substrate, composted post-harvest. The farm’s cucumbers are sold to Freshmark and general customers at the JHB Fresh Market. This farm produces an average of 53 000 cucumbers weekly. There are opportunities to improve performance and drive revenue to R17 million annually. Current Profitability is 36.8% of revenue.

Mission and Vision:

Our mission is to provide fresh, high-quality cucumbers to customers while maintaining sustainable farming practices. We aim to be a leader in the cucumber farming industry, delivering superior products and exceptional customer service.

Products and Services:

The farm specializes in cultivating high-quality English cucumbers. The cucumbers are grown in hydroponic systems using pine shavings as the substrate, promoting sustainable practices and producing fresh and healthy produce. The farm offers refrigeration and packing facilities on-site, ensuring that cucumbers are delivered to customers at peak freshness.

Market Analysis:

The cucumber market is thriving, with a growing demand for locally grown produce. The farm’s established reputation and relationship with customers like Freshmark(Checkers) provide a competitive advantage for market penetration and distribution. Restaurants and retail distributors buy cucumbers to sell locally to consumers. The market can comfortably consume an average of 50 000 cucumbers from this farm on a weekly basis. Weekly averages change depending on the season. Prices are inversely proportional to the production volume which is linked to season. The price of cucumber averages out at R6.50 per cucumber with a range between R2.50 and R18 between summer highs and winter lows. The local market consumes cucumber according to the seasons where the consumption of cucumber increases during summer and decreases during winter. Export opportunities to neighbouring countries further enhance market potential.

Competitive Advantage:

The farm holds a competitive edge due to its professional management, efficient farming systems, and a 35-year track record of success. The on-site refrigeration and packing plant streamline operations, ensuring premium-quality produce. Infrastructure on the farm is well established and time tested for success. The packing machine can handle 3,000 cucumbers per hour. The farm implements sustainable practices and focuses on customer satisfaction.

Marketing and Sales Strategy:

The farm will continue to build and maintain strong relationships with current customers while exploring new market opportunities. Leveraging digital marketing channels, participating in local events, and implementing a customer loyalty program will expand the customer base. The farm supplies the local fresh markets in Johannesburg and Pretoria along with a standing agreement with Checkers’ Freshmark. GroSpace will issue a contract for offtake for the entire supply from the farm at a fixed rate with annual increases.

Operations and Management:

The farm operates efficiently with optimized hydroponic systems, ensuring consistent cucumber production. The professional management team, along with skilled laborers, is committed to maintaining the farm’s success. The team is well-trained to manage pests and diseases effectively and to maximize plant health. Cucumber is relatively low risk compared to other crops when farmed under poly tunnels and using sterile pine shavings as a growing medium.

Financial Projections:

Based on historical performance, the farm is projected to generate annual revenue of R9,104,904, with a net profit of R3,510,821. These projections consider market conditions, production capacity, and potential risks. The farm maintains audited financial records, ensuring transparency and accurate reporting. By implementing smart schedules the farm has a capacity of producing R16 995 875 in annual revenue. Currently the farm is running at an efficiency of 52%. This is due to a few factors including lazy marketing, management expansion into another farm(lack of focus), old methods and techniques, poor planting schedule. By adopting the following changes the farm could see an 86,67% increase in production with everything considered at maximum production.

Growth Opportunities:

The farm has numerous growth opportunities, including expanding production capacity, exploring new markets and distribution channels, and introducing value-added products. There is potential to increase profitability by producing seedlings internally through grafting, and offering training facilities to others, capitalising on the cost-saving benefits.
The farm can focus on planting according to a schedule to maintain year round production. 4 different planting schedules have been considered. An all-in-all-out approach is best for production volumes and revenue.

Risk Mitigation:

The farm is proactive in managing risks, such as weed control, potential fusarium wilt disease, and wildlife threats. The farm has contingency plans for addressing power outages and securing reliable water sources. Additionally, the farm maintains a secure poison and fertilizer room and practices safe disposal methods.

Conclusion:

This comprehensive business plan outlines the strategies and financial projections for a well-established cucumber farm with a history of success. With professional management, optimized systems, and sustainable practices, the farm is well-positioned to capitalize on market opportunities and continue its trajectory of growth and profitability. By maintaining a focus on quality, customer satisfaction, and innovation, the farm will continue to thrive in the low-competitive cucumber farming industry.

Chat on WhatsApp

Additional Notes 1:

Strengths:

On-site refrigeration and packing plant provide convenience and efficiency.
The truck has a capacity of 10 tons, allowing for efficient transportation of cucumbers.
Cucumbers are packed directly into the truck, ensuring freshness.
Strict temperature control is maintained, with cucumbers never allowed to fall below 9-10 degrees Celsius.
Harvest per plant is tracked, with a capacity of 41 836 plants and a yield of 23-25 cucumbers per plant.
Maximum yield of 30 cucumbers per plant, indicating potential for increased productivity.
Hydroponic setup using pine shavings in plastic bags for cucumber growth.
Post-harvest, the pine shavings are composted, contributing to sustainable farming practices.
Opportunity for improvement exists in implementing a recirculating water system.
Daily management of electrical conductivity (EC) and pH levels simplifies crop maintenance.
The farm has 14 poly tunnels for controlled growing conditions.
Planting for August aligns with peak prices in the market.
Current customers include Freshmark and general customers at the JHB Fresh Market.
The packing machine has a capacity of 3,000 cucumbers per hour.
The machine requires simple annual maintenance and replacement parts can be sourced from Bearing Man.
Working hours are from 07:30 to 16:00.
Any bent cucumbers are given to the staff, minimizing waste.
A hoist jack is used to load cucumbers into the truck, ensuring safe handling.

Challenges and Opportunities:

The recent use of Asmanex to kill weeds led to unintended negative effects on plant health, posing a threat to the farm’s success. It is crucial to run trials and carefully assess the impact of any chemicals before widespread application.
Sugar should be applied to the affected area to assist in vine recovery.
The cucumber plants are sexed to focus on fruit production. Laborers should remove small fruit if there is a larger fruit nearby on the same vine, ensuring proper growth and development of the larger fruit.
Laborers should also remove small leafy shoots, directing the plant’s energy towards fruit production.

By addressing these challenges and capitalizing on the farm’s strengths, the business can enhance productivity, maintain product quality, and ensure long-term success in the cucumber farming industry.

Additional Information 2:

Financial Records:

The farm maintains accurate audited financial records using an established system called Dexter, ensuring transparency and reliable financial reporting. The farm is being sold out of a group of companies. The farm has no individual financial records. These should be generated during the due diligence period over 12 months.

Water Supply:

The farm has a total of 47 boreholes, with 4-5 boreholes producing an output of 5000 liters each.
A contract with a neighboring farmer, Clint, provides access to a borehole drilled into the Magalies Fault, which taps into an underground lake/aquifer. This borehole has an impressive output of 28000 liters per hour.
The cucumber farm has entered into a 40-year contract to pay for the electricity required to pump the water, with the water itself being provided free of charge. The pumping costs R3200 monthly. This should be replaced with a solar pump which costs R15 000, which will ensure unlimited supply and the Capex will be paid off in 5 months of usage.
The farmer pumps water for 2 hours a day, receiving a net output of 20000 liters per hour after accounting for losses.

Water Quality and Disease Mitigation:

The water sourced from the boreholes is generally pure, with the exception of the presence of Fusarium bacteria.
Fusarium wilt disease caused by Fusarium oxysporum and F. solani is a significant threat to cucumber production. However, this is mitigated by grafting the cucumber onto a pumpkin rootstock during the seedling stage.
The farm procures professionally produced seedlings from Multiplant, a company with a strong reputation and positive customer reviews. The farmer currently pays R11 per seedling and a total of R 1 196 509,60 annually for seedlings. This activity could be completed in-house. This is an opportunity for a saving of R 1 196 509,60 annually.
There is an opportunity to consider sending internal staff members for training in grafting techniques or establish a training facility to offer grafting training to interested individuals. This would result in cost savings, as producing seedlings internally costs approximately 50% less than purchasing them from Multiplant.

Change Management and Staff:

A 12-month change management period is planned, during which the current management and staff will remain in place to ensure continuity and a smooth transition should GroSpace choose to replace management, training will be obligatory aligned with a Standard Operating Procedure document.
The farm has a low turnover rate among its laborers, with an average of 10 years of employment. The current staff compliment totals 31 farm labourers who live on the farm in informal housing.
The tractor and trailer currently on the farm will be retained for ongoing operations.

Delivery and Transportation:

The farm requires one 10-ton refrigerated truck for delivery twice a week to the two markets in Gauteng.
Deliveries are made in the evening, after 17:00, ensuring that the harvested cucumbers reach the markets in a timely manner.

By leveraging the reliable water supply, mitigating disease risks, maintaining an experienced workforce, and ensuring efficient delivery to markets, the cucumber farm can capitalize on its strengths and opportunities while addressing potential threats.

Additional Notes 3:

Vine Growth and Production Cycle:

Cucumber vines grow up to the wire and then grow down again. The best production is achieved when the plants grow upwards, so consider implementing a chain and hook system to lower the vine for optimal growth.
Each vine has a cycle of 12-14 cucumbers on the way up. Another 12-14 cucumbers are produced on the way down.
A vine has a production cycle of 20 weeks from planting, with a harvest duration of 16 weeks in summer and 14 weeks in winter.
Harvesting starts approximately 4 weeks after planting in summer and 6 weeks after planting in winter. Planting schedules should consider this and plant in early autumn to cover the winter months without delay.

Grafting and Structures:

Grafting is done at a 45-degree angle and secured with clips. Ensuring the alignment of internal tubes is essential for successful grafting.
The farm’s structures have an average lifespan of 5-6 years and are refurbished only when damaged. Insurance recommends every 6 months. This is an unrealistic rate.
The structures have proven resilience against hail damage.

Heating and Temperature Control:

Cucumbers thrive when temperatures do not drop below 12 degrees Celsius. Winter temperatures on the farm reach around 11 degrees Celsius. Inside the tunnels when the boiler is pumping hot water through the hot pipes. An alternative improvement is the use of gas geysers that pump water around the houses. Consider producing biogas on the property to save R360 000 annually on electricity bills. The Bio gas can also be utilised to heat the tunnels during winter.
There is an opportunity to add heating pipes to each row of cucumbers to enhance temperature control. Currently, only every second row is heated due to capital expenditure considerations.
In the event of cold temperatures, the boiler should be started 2 hours prior to the dip, ensuring that the tunnels are adequately heated.
The boiler runs on main power, and the farm has a backup generator of 350KVa in case of power line issues. The farm has not experienced power cuts during winter. For some reason it is not cut during load shedding.

Irrigation and Water Management:

The farm utilizes 8 liters per hour drippers for irrigation, with automatic stations that can be easily programmed.
In summer, the cucumbers receive water 12-14 times daily for 3-4 minutes, excluding watering at night when the plants “sleep”. In winter, they receive water 8 times daily.
Maintenance of the irrigation system is carried out by one staff member who ensures that each vine receives adequate watering. It is easy to identify if a vine is not receiving water as the plant quickly loses turgidity. The vine droops.
The farm has three pump stations, and the total land area is 24 hectares, with smuts vinger grass as an additional income for the franchisee.

Poly Tunnels and Maintenance:

Maintenance of the poly tunnels is straightforward, involving the use of clips, staples, and poly plastic strips.
Risks include birds entering the tunnels and eating blossoms, as well as vervet monkeys accessing the tunnels when waste products are improperly disposed of. Effective disposal methods should be implemented to mitigate these risks.
The boiler tank is positioned 1 meter higher than the top poly tunnel, allowing water to flow through the system using gravity.

Nutrient Mixing and System Maintenance:

The farm has a simple nutrient mixing plant that combines hydrogen peroxide and hydroflow. The system is valued at approximately R800,000 and works well with minimal maintenance.
Pumps are the highest maintenance component of the system, and the automatic switch should be replaced annually.
The farm has a secure poison room and fertilizer room.

Farm Lease and Fusarium Issue:

The farm is being leased as a productive farm with stock, ensuring income from week 1 after the transfer.
There is currently a fusarium issue on the farm. However, it is anticipated that the issue will be resolved by the time the farm is purchased, and production will return to full capacity.

By addressing vine growth techniques, implementing proper temperature control, maintaining irrigation systems, ensuring efficient poly tunnel maintenance, and addressing potential risks, the farm can maximize production, optimize plant health, and maintain a successful operation.

Additional Notes 4:

Water Quality and Agreement:

The water sourced for the farm is considered pure.
Once the lease is finalized, the water pumping cost will be at the cost of the franchisee, with a monthly reading on the electricity. Preferably the system will be changed into a solar powered system.
Alternatively, a filter system may be needed for the water on the property.

Poly Tunnel Structure and Maintenance:

Round roofs are preferred over A-frame roofs due to lower wear and tear on the poly tunnels.
The height of the poly tunnel is crucial for maintaining the vines and high-quality fruit. During this process, leaves from the lower vine should be removed.
A list of suppliers will be shared during the due diligence process to ensure access to necessary resources.

Planting and Seedling Phase:

The planting program is followed as provided to the seedling supplier.
Micro netting is used during the seedling phase to keep insects out.

Weed Control and Humidity:

Weeds should be cleared every two weeks to maintain a clean growing environment.
When the plants reach the wire in the poly tunnels, a humidity level of around 95% is expected. Humidity can be managed using curtains, as cucumbers thrive in high humidity conditions.

Nutrient Management and Flushing:

If the electrical conductivity (EC) of the soil is too high, the system should be flushed with water to remove excess fertilizer.
The farm has not conducted trials on pesticides. This was an issue that the farm management has learnt from.

Labour and Management:

The current management is happy to stay.
During periods of high production in summer, additional informal staff (1-2 individuals) are required to assist with pruning.
Farming wages have increased by 9.5% this year, and to maintain salaries, the workday has been shortened by one hour. However, this has affected productivity.
The farm manager must have the skills to effectively work with the staff.

Additional Features and Opportunities:

The farm has potential to farm cannabis, and if pursued, improved security measures such as an electric perimeter fence would be necessary.
A building on the property can be converted into a small cottage with essential amenities.
Structures are in place to store tractors, providing convenient storage and organization. These structures could be used to house free range chickens that could range on the compost heaps.

Additional Farming Activities:

The farmer engages in contract farming for grains, being paid to plant, spray, and harvest.
The farm has approximately 1000 tons of compost available.

Water Supply and Dam:

The farm has a zinc dam with a capacity of 48,000 litres and two 10,000-liter tanks that provide a gravity feed to the system.
Air pipes are recommended along the water pipes to prevent vacuum formation.

Property and Neighborhood:

There is a significant amount of building sand under the property.
The farmer’s neighbor, Clint, who provides water, may consider selling the property if the right price is offered.

Wood Shavings and Composting:

After every harvest, the wood shavings are disposed of, and new shavings are used. The bags are cleaned and disinfected with hydrogen peroxide.
The shavings are passively processed into rich compost, which can be bagged and sold in bulk.
The ash produced from the boiler can be used to replace lime for the fields or in road construction by adding cement to the ash byproduct. Bricks can also be made on site by adding sand and cement to the ash by product.

Potential for Expansion and Cannabis Farming:

The property has 21.8 hectares of land suitable for potential expansion or alternative use such as growing cannabis.
Net houses could be considered for this land where smitsvinger grass is currently grown.
Luxury mushrooms can also be considered as a high yielding commodity.

Farm house and office space:

The house on the farm has spacious accommodations, including three bathrooms, five bedrooms, an island-style kitchen, a lounge, a large main bedroom with an en-suite bathroom and dressing area, and garages that can hold up to four vehicles.
The office space is sufficient for two administrative personnel, one major and one personal assistant.

Due Diligence and Management Transition:

Visit the farm daily for 1-2 months for training and assessment purposes.
The demand for management jobs is high, allowing for the selection of suitable staff.