LET’S OUR
TA L K
e e ff o C A BOUT
CA PABI L I T I E S A ND O PP O RTUNITIES
roasting
WE S E E K TO B U Y T H E B E ST CO F F E E B E A NS , WE L L C ULT I VAT E D, WEL L P ROC E SS ED, WE L L S E L E C T E D F ROM DI F F E R ENT L A NDS A ND R E G I ONS TO HAVE A HI GH R A NG E O F F L AVO R P RO F I L ES .
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Roasting is just one little step within the long journey from grain to cup but its one of the most important as far as its influence in the final flavor. We specialize ourselves in roasting each grain in the most appropriate form, extracting its qualities and attributes, obtaining coffees that stand out for its flavor and aroma, adequate acidity, excellent body and perfect balance. We guaranty freshness and quality in our coffee because we roast it everyday.
A RE WE ? A Guatemalan brand born in 2004 with the promise to create coffee houses dedicated to offer the best premium coffee, in an environment welcoming for people who know how to enjoy. An enterprise working to offer in our country the best Guatemalan coffee for Guatemalans, designed to cross borders with our coffee and our value proposition. OUR MISSION l Provide restorative experiences to our clients, pampering their 6 senses within our stores and always around an excellent cup of coffee. OUR VISION l Loyal costumers one cup at a time. ÂżHow do we describe ourselves? EXPERIENCE l To restore the mind and body along with a cup of coffee. SPACE l We try to create a unique atmosphere that pampers our clients six senses.
SERVICE AND
QUALITY We serve with kindness, professionalism and dedication to our clients the best coffee and coffee based drinks according to their preference as well as light gourmet foods that accompany the best coffee at a competitive price.
INNOVATION Its in our DNA, a fundamental part of our essence. Being constantly innovators in everything we are and do.
COUNT R I E S T HAT COF FE E B E A N S A R E P UR C HASED FROM
BRAZIL ETHIOPIA
3 5
GUATEMALA INDONESIA
2 4 1
COLOMBIA
TO INCREASE TH E PRICE OF COFFEE
TO RE TA I LE RS.
G ROW TH 40 FREE STANDING LOCATIONS
STORE FRONT LOCATIONS
35 30 25
KIOSK AUTOCAFE LOCATIONS
KIOSK PEDESTRIAN
20
LOCATIONS
15
TOTAL LOCATIONS
10 5 2004
2006
2010
2014
2015
2016
background
G UAT E MA L A N CO FFE E
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In the last 5 years, Guatemalan coffee production was reduced from 4.8 million bags to 3.4 million bags. In the same period, production cost increased more than four times from the 80´s to the present time. There are a thousands of hectares of land that can only be used for coffee production. Without a sustainable market development strategy and plan, it will not be possible to finance the production in these lands. This will leave over 150k people without a job. International customers have positioned Guatemalan coffee, as a premium origin.
OUR GROUP HAS PROVEN ABIL ITY TO SUPPLY DE MANDING CUSTOME RS, FROM THE FARM TO THE CU P.
Our group
HAS PROVEN ABILITY TO SUPPLY DEMANDING CUSTOMERS, FROM THE FARM TO THE CUP:
WE GROW CO F F E E B E A NS WI TH TH E BE ST AGR I CULTUR A L P R AC T I C E S , S OC I A L A ND E NVI ROME NTA L R E SP ONSA BI L I TY.
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We have been coffee growers for over 50 years and in some farms even more. We produce around 80,000 sacks of green coffee a year.
Our farms and exporting partners have been sending coffee to the international market for over 30 years. We work very closley with them and some of the partners in this venture hold shares in some of this companies.
BEEN G N Y I L P SUP S N I A H C L IK E STARB UC KS WIT H OUR CO F F E E FO R OVE R 35 Y E A R S WI T H NO QUAL IT Y O LO G I ST I C S P ROBL E MAS AT A L L .
Objectives
CA P T UR E COF FEE MAR KE T P ROJ E CT E D G ROW TH BY SE RVING R E TA I L E RS A ROUND T H E GLOBE THROU GH A S U STA I NA B L E P ROD U C TION AND COMME RCI A L P L AT FO RM .
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Achieve 4 to 5 million pounds of roasted coffee volume in the next 5 years.
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Increase coffee price by 30% in the next 5 years.
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Capture incremental margin by participating in the roasting business.
Plan
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Establish a North American entity dedicated to the promotion, development, production and sales of Guatemalan coffee directly to retailers. Acquire existing roasting facilities throughout the US and Canada to start selling Guatemalan coffee.
E STA BL ISH AL L IAN C ES WI T H L A RG E CO F FE E STA K E HOL DE R S AND C U STOME RS , S U CH AS B UNN AND 7- EL EVEN , TO ACCE L E RAT E MA RK ET PENETR ATION .
Corporate Social
Responsibility
Education
Health
Growth
Motivation
Donations
Recreation
Coffee farms Project
INVESTMENT IN COFFEE FARMS IN GUATEMALA
OBJECTIVES •
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To maintain the importance of coffee production in the rural areas of Guatemala, where investment is needed. To be able to continuously provide quality coffee to the specialty market in the long run. To underline the importance of the long term contract and continue the commercial model with prices according to the present conditions. To be able to operate poorly managed, unprofitable farms that are on sale and use their infrastructure before it deteriorates from lack of maintenance. Obtain fresh equity to do the investments necessary to establish the operation. To change the business model of coffee farms to guarantee the future of the coffee industry in Guatemala.
C URRENT SITUATION OF THE COFFEE INDUSTRY 1. High altitude coffee farms are in financial trouble because of the lack of productivity. 2. Volatility of the coffee futures market discourages the long term investments that are required in coffee. 3. Coffee farmers cannot cover the cost of production because of mandatory increase in labor cost and incremental use of expensive fungicides to control coffee rust and other diseases 4. Aging plantations are not being replanted because of the high investment required.
Youn ger gen erat ion s don ´t wan t to man a ge th e fa r ms and wor k in th e ru ra l area s. Th ere is a su ccession probl em th at is very worriso me for the indus tr y.
PLAN 1. Find ideal farms with: - The required altitude and good soils, - Good infrastructure, - Production potential, and - Appropriate location. 2. Get long term contracts with companies that are in the specialty coffee market that will make it possible to get financial loans from banks , reduce the volatility of the futures markets and secure the financial sustainability of the Project. 3. Get equity from investors for the purchase and operation of the farms.
POT ENT IA L 1. Finca La Esperanza. (19 caballerías, 25 manzanas). 877 hectares, 950-1700 msnm. Pochuta, Chimaltenango. 2. Finca Nueva California. (14 caballerías) 630 hectares, 950-1250 msnm. Pochuta, Chimaltenango. 3. San Carlos Miramar. (5 caballerías). 225 hectares 1100-1350 msnm. Pochuta, Chimaltenango. 4. Santa Margarita. (25 caballerías). 1125 hectares, 1100-1600 msnm. Acatenango, Chimaltenango.
L A ESPE R A NZ A
SAN CARLOS M IRA MA R
NUEVA CA L IFO RNIA
CO FFEE PRODUCTION
FINANCIAL ANALYSIS • The
following charts use Monte Carlo Simulation techniques with thousands of iterations to produce most-likely results and related probability measurements.
• Measurement
is focused on Free Cash Flow to the Firm (FCFF), and Free Cash Flow to Equity (FCFE)
• Stochastic
variables used in the analysis are shown in following table
VARIAB LE S U S E D IN MONT E CA R LO SIM UL ATION (@ RI SK SO F T WA RE ) • Extraordinary Events (droughts, high winds, tropical
VARIABLES STOCHASTIC
storms) 1 every 5 years • Impact of extraordinary events on harvest efficiency
ratios. 20%-30%-40% • Total active land area. 1000 hectaresLand area under
renovation. 4.5%-5.5% • Land area under pruning / trimming 35%-40% • Percentage of immature/green coffee grain 8%-12% • qq Pergamino production per unit of land area 25 -
40 • Production Efficiency Ratio Maduro:Pergamino 4.65-
4.70 – 5.0. (5.0 when extraordinary events occur)
• Production Efficiency Ratio Pergamino:Oro
1.22-1.25-1.35 (1.35 when extraordinary events occur) • Contract Size in qq – SBUX 60%- 80% -100% • Price per qq – SBUX 215- 225- 235 • COGS $3,200/ ha • Operation Costs as % of Sales 10-12% • Working Capital as % of Sales 8%-10%-13% • Exchange Rate 7.5, 7.70, 8.30
UNDE RLY ING •
Appraisal is done using a 12% WACC (in USD)
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Working Capital is estimated at 10% of Sales
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Initial CAPEX at approximately $1,000 per Ha. Land acquisition and seeding/farming costs at $3,500 and $6,500 per Ha, respectively. Maintenance CAPEX estimated at $50,000 per year Following charts show FCFF estimations, discounted at WACC to calculate a Net Present Value (NPV) and IRR for a 10-period horizon: - With Contracts - Without Contracts
CONC LU SI ON S • Coffee Farming is similar to other industries with high operating leverage (e.g. Airlines, Steel
Industry, etc). Thus, high fixed costs make it imperative to have high production levels and hedged prices. • When revenues depend on International Commodity Prices (KC), current business model for coffee farmer does not appear to be sustainable. • New investments are financially unviable under traditional investment decision criteria, current
business model and international commodity prices. • However, under a model of long-term contracts, new investments are profitable and would allow
the coffee farmer to foresee for the medium and long term to produce and deliver Premium quality coffee in adequate quantities.
CON C LU S I ON • Long term contracts are the key for the viability of an investment in
coffee farms. • Proven new technologies and production systems for higher
productivity need to be implemented to secure the financial success of a project like this. • Guatemala has the human and technological capacity to succeed in
such a project. • With projects like this, coffee farms will be a driving force for
development of rural areas in Guatemala, where it is badly needed.
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