Sample Business Plan

4.Offshore Organic Competition

MA`O will directly compete with offshore farms at Kokua but our broader sales strategy is to sell through farmer’s markets, where imported products are prohibited. The growth of local-only farmer’s markets will help to insulate MA`O from offshore competition. Nevertheless, offshore farms capture 90% of our market, so it is critical to understand who they are. Two of the largest are:

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  Earthbound Farms, is one of the largest certified organic producers in the U.S., comprising 24,000 acres in California and Mexico. Earthbound grows a wide range of field crops but currently only the salad mixes are sold in Hawai`i through conventional supermarkets and large retailers (Costco, Safeway, Star Market, Foodland) and at natural foods stores (Down to Earth’s three O`ahu locations). Their products are excellent, but like other imported items, suffer from short shelf life.
  
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  Cal-Organic Farms, is an organic division of Grimmway Enterprises, Inc., a grower of conventional product. They distribute carrots, chard, green onion, kale and many herbs to all of Hawai`i’s natural food stores and conventional supermarkets. Their product quality is average to high. Kokua has complained that their shelf life is less than MA`O grown produce, and Kokua has preferred to purchase MA`O produce over Cal-Organics, when available (this has included kale, chard, and green onions).
  

5.Farming in Hawai`i

If the market for organic fruits and vegetables has so much potential for growth, why aren’t more conventional farmers shifting to organic production, and why are there so few new farmers entering this sector? There are multiple factors, which converge to make entering organic production very difficult. On O`ahu inflated land valuations make it extremely costly to secure land for either organic or conventional farming. The average cost of an acre of undeveloped farmland in Wai`anae is now over $80,000,^xxix while the median sales price of a home on O`ahu is over $500,000.<sup>xxx</sup> Concurrently, there is considerable pressure from urban development for more land. The Kunia Plain, once O`ahu’s largest sugar growing area, is being encroached by housing developments. Most new farmers enter the market via leased land, with the market rate being $125 per acre per month. Leasing, however, can be problematic as landowners have preferred short-term leases because of the potential to rezone land from agriculture to urban for housing development. Even O`ahu’s largest growers, Jefts Farms and Aloun Farms, have large portions of their land in short-term leases, some less than 5-years.<sup>xxxi</sup>
Best practice organic agriculture requires an investment in soil building/conditioning, which means income-generation does not start until late in year one of an operation, at the earliest. Also, there should be periods where fields are left fallow and cover crops are planted, as this improves soil quality. Again, this increases the time out of production. Most growth in the local organic agriculture sector has occurred on the neighbor islands, especially the Big Island of Hawai`i, where land is cheaper.
Other reasons why there are few local organic farms, as suggested in supporting letters from Ms. Joan Namkoong and Mr. David Cole, include limited local technical expertise in organic agriculture and a lack of coordinated support amongst agricultural sectors and agriculture supporters. Hawai`i is transitioning out of plantation agriculture and there is limited entrepreneurial capacity amongst new growers. David Cole, the current Maui Land and Pine CEO, and former CEO of NaviSoft Inc., and former president of AOL's New Enterprises Group, states in his support letter that:

“The transition away from the plantation model has been difficult because the farm industry has been slow to adapt to the new environment, there have been few market makers to match local producers with consumers and there is a lack of capital available to pioneering entrepreneurs.”

In 1996, Mr. Cole acquired Sunnyside Farms, a 500-acre Virginia farm. He re-launched Sunnyside as a certified organic supplier of gourmet quality fresh produce and meats. What makes the MA`O venture especially unique is that it is on the cusp of being a “market maker” and “pioneering entrepreneur” while being a non-profit social enterprise.

6.Customer Profile

In the initial phase of market development, five sales locations with uniquely different core customers have been tested: (1) farmer’s markets at different business locations where MA`O was the exclusive vender (including health clinics); (2) a low-medium end Wai`anae grocery store; (3) a high-end farmer’s market; (4) a high-end health food cooperative grocery outlet; and (5) a high-end gourmet restaurant in Honolulu. An overview of how these locations have evolved into clear segments can be seen in the following table:

Customer Segments	Buyer Behavior	Needs (perceived)	Alternatives	Competitive Advantages
High End (tourist “foodies”)	Looking for a “native” and “local experience” Want to try something new	High quality Good looks and taste Exotic, unique choices Authentic, local, native	Restaurants / cafés Conventional vendors Grocery / health food stores	Fresh and locally grown Organic Youth and products (taro, mangos) “native” and “local” therefore authentic
High End (local, “foodies”)	Looking for fresh, local grown, organic Increasing social consciousness when buying	Demands high quality product, freshness, appearance, and taste for repeat business	Health food stores Other market vendors Restaurants, cafes	Fresh and locally grown Organic Diversity of offerings compared to other market growers Youth and social mission of WCRC
Low-Moderate (local/ Hawaiian)	Makes necessary food purchases, need to spread their food dollars	Bang for the buck Food that tastes/looks good Food they like	Local grocery store Prepared foods Fast food and restaurants Conventionally grown foods	Recognize youth growers Have been instructed to buy foods by health care providers MA’O produce looks better, has different selection Pricing comparable to local conventional retail items but with a marketable edge
Retailers	Products in high demand and/or trendy Want to make a mark-up on re-sale	Competitive price Top quality and appearance Organic fills new niche	Other local and non-local organic producers Conventional producers	Local and organic often yields superior quality Product availability and cost to ship/store imported product
Restaurants	Products in high demand and/or trendy Freshness and reliable source	Competitive price Top quality and appearance Fresh, local, organic	Other local and non-local organic producers Conventional producers	Local and organic often yields superior quality Product availability and cost to ship/store imported product Social mission