Building Up a Complete Apple Orchard and Cold Storage on 50 Ha

Opportunity Snapshot

  • Country: Serbia Serbia
  • Industry: Agriculture
  • Stage: Start-up
  • Investment size: $4,300,000 / min. $3,500,000
  • Type of investment: Debt

Investment Opportunity

We want to build up an apple orchard on 50 ha of land in Serbia, and we are looking for investment in the form of a business loan.

We want to lift the modern apple orchard and in order to do this we need to buy a plot of 57 hectares that is I to IV class. On the part of the plot in an area of 50 hectares, we would plant two-year old apple seedlings of highest quality. We intend to build a modern orchard based on the famous Italian Sud-Tirol technology. The orchard would be planted densely, 3900 to 4000 plants being planted per hectare. The entire orchard would be equipped with the irrigation and supplemental feeding system and anti-ice protection. So equipped, the orchard has full protection for the production on the field so that this kind of orchard will reach full crop in the fifth year and yield 80 tons per 1 hectare. Thanks to this protection more than 85% fruit is I class and that class achieves the highest price in the market.

On this parcel a contemporary cold storage would also be built that will work by ULO technology. The cold storage will be able to store 1500 tons of apples. This kind of storage with ULO technology provides the ability to store apples for up to 250-300 days. A major indicator of the importance of preserving apples in cold storage is that purchase price of apples 1st class in the season is 0,40 EUR per kilogram and the purchase price of apples out of season is 0.60 EUR per kilo. The main feature of the cold storage with a low percentage of oxygen (ULO cold storage) is to defend the apples that go direct to the chamber without additional chemical processing. During storage of apples atmospheric content of cold storage adapts to the needs of apples.

Our goal is to successfully plant an orchard and lead it to the full crop to give 80 tons of apples per hectare. Modern and intensive apple production involves a large initial investment, but quickly returns invested due to high returns and make huge profits. Because that we want to plant certified quality two year old apple trees. Also, due to the excellent climatic conditions that Vojvodina has the organization of orchards by latest technology can enable the achievement of high and stable yield and produced world-famous apple varieties Jonagold, Golden Delicious, Red Delicious and Granny Smith. The main characteristics of the fruit from the region where the moderate climate and soil quality, a very high percentage of sugar, which gives it exceptional sweetness and a nice flavor that is appealing to everyone. The taste is what separates fruits from Serbia fruit from neighboring countries.

To achieve our goal we have decided that we would use for our orchard the best quality two year old apple seedlings from Italy and that we would take all protection measures and irrigation so that we get the best quality apple. In order to have the best possible care and feeding of our plants we hired a well-known expert in the cultivation of apples (which has over 30 years of experiences in apple orchards) to help us with setting up the entire orchard and then to help us with growing apples.

Competitive Advantage

Russia with which our country has favorable trade relations offers a huge potential for marketing of quality apples and other fruits from Serbia. According to the Russian Customs Service in 2011 Russia imported 1954000 tons of apples. There are more than clear indications of the potential of the Russian market. Regarding competition from European countries, our big advantage is that an agreement on duty-free trading is signed between Serbia and Russia. So our goods are imported into Russia duty-free and therefore our apples are favorable for the Russian market. Our main advantage over the competition is the quality and taste of the fruits from Serbia. Also, the way we take care of our crops and fruit orchards by using the latest technology is giving us the advantage of great quality and quantity of fruit, and of course another advantage is that there is no customs import of our products to Russia.

Rationale for the deal

Apple ranks first in the world in production of continental fruits, and first place in the use- value of fresh fruit. So high place in world production is the result of great adaptive skills that have apples. In all the developed fruit growing countries, great attention is paid to the production of high quality apples, mechanization, use of modern technology for storage of fruits and packaging. Certainly the quality of the fruit prerequisite of successful marketing .Problem of marketing is practically solved with 80-90 % if these fruits are attractively packaged and stored until final placement. The organized systems of production and marketing through various associations, cooperatives and large wholesale markets, it is definitely easier because of the concentration of capital. On the other hand, the Eastern markets (Russia, Ukraine) became very interesting for our apples, and we should not neglect the western markets, especially as in this plantation planned introduction of new varieties, which are very cherished. In order to projections of future trends in the market in this part of the business plan will explain how conditional growth in demand and what is the position of investors in the market. The market is mainly the Russian market, as well as the territory of the Republic of Serbia, Bosnia and Herzegovina, Croatia, and Montenegro.

Prospective buyers are, in addition to buyers from the Russian market, also a big supermarket chains that are located on the territory of Serbia, Croatia, Bosnia and Herzegovina, Slovenia and Montenegro. Based on our research, there has been a serious market potential. We already have buyer from Russia whom is ready to sign contract with us for the purchase of the entire genus of apples in the next 5 years.

Use of financing

The requested funding is needed for building up a complete apple orchard on 50 ha of land. This apple orchard would have complete protection of trees, irrigation system and cold storage with capacity of 1500 tons of apples.

Opportunity for the investor

I need investor for this project. I can pay back the loan within 6-7 years. The interest rate that I can offer is up to 7.5 %.

Profit for this business has a very positive value from the second year on. It accounts for 56% of total revenue in the second year, 61% in the third year, 65% in the fourth, and 66% in the fifth year.

Net present value is positive and amounts to 958.368 EUR

I would like to return the loan or investment in annual installments.

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