Mega Organic Dairy Project

To produce and process organic milk profitably and sustainably on CHOFU Farm by satisfying market needs within the Kiev & Kharkov areas of the Ukraine through branded premium quality products (liquid milk and milk-powder), by expanding and diversifying the current cereal farm into larger dairy farm, with new milk processing facilities.

This project will start as soon as the full or partial financing is secured.

There is a distinct niche in the Ukraine milk market for premium organic milk, due to great dissatisfaction with the quality and image of the present supplies, some of which are often adulterated. CHOFU plans to convert, diversify and expand a conventional 3,200ha cereal farm to organic milk production over a five year period so as to capitalise on current and future market demand within the Ukraine. The farm is in Kharkov Oblast, located about 220 kilometres east of Kiev, on a 12 to 15 year -term lease, with an option to renew when the current lease expires, and options to expand to up to 30,000ha.

Where?

There is a distinct niche in the Ukraine milk market for premium organic milk, due to great dissatisfaction with the quality and image of the present supplies, some of which are often adulterated. CHOFU plans to convert, diversify and expand a conventional 3,200ha cereal farm to organic milk production over a five year period so as to capitalise on current and future market demand within the Ukraine. The farm is in Kharkov Oblast, located about 220 kilometres east of Kiev, on a 12 to 15 year -term lease, with an option to renew when the current lease expires, and options to expand to up to 30,000ha.
How?

A combination of low-cost entry, sustainable and low-cost production, and high-tech breeding & disease prevention practices, driven by consumer-market needs, & led by a “Western” trained & experienced management team will give branded premium market prices and thus sustainable profits and competitive advantage to CHOFU.

When?

The commencement can be immediate, as the current farm 3,200 hectare farm is available, and more land-leases are optional as required. There is a 3 year “window of opportunity”, due to WTO regulations, to start and build up milk production and processing facilities, and to develop premium milk-brands that earns loyalty from the target market consumers.

Why?

The purpose is develop an operational enterprise that generates high profits sustainably, by filling the consumer-market needs of middle- and upper-class Ukrainians, through quality premium branded products (68% of dairy needs of Ukrainian consumers is imported) that avoid the normal high volatility in “commodity agricultural products”, giving competitive advantage to Chofu Ltd. The establishment of a company that adds value and builds worth for its shareholders/ owners and is poised to grow organically, if/ when opportunities arise, is a linked aim.

• The Funds are to be spent on purchase of cows & breeding stock, milking plant & equipment, farm-machinery & -buildings, working capital, with a contingency fund.


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• Security can include the some title property, long-term land- lease, chattel mortgages on cattle, liens on machinery, plant and equipment (all liquid in financial and physical sense), and to a value of 70% of borrowing/ debt in Year 1, rising to 130% at end of borrowing period.

• The Repayment Strategy : All government subsidies, which are not included in the Financial Projections due to the current problematic state of the Ukrainian national government finances, can be transferred as and when they are received.; structured interest and capital repayments from the start of Year3, thus reducing Borrower’s exposure over time. Cash-flow projections indicate that 12- 20% ROI are easily achievable.

Ethnoproduct and some other smaller entities in Ukraine and imported organic milk. Market share unknown.
Of course the model can be replicated, as long as the investor has enough finances to start similar production.

Chofu Ltd will differentiate among other producers by quality of the products. The project leaders are experiences and certified organic farmers from Ireland and Ukraine. The company will operate in the premium segment of the market, which will secure good margins.

Business plan as well as financial projections and cashflows are available upon request. Please contact us at maksdm@gmail.com.

The expected ‘Return on Investment’ that takes all risks including, financial, currency, operational and management risks, bearing in mind alternative- or business opportunity -costs, was the main criterion. NPV, DCF and IRR analysis re-enforced the findings of the ROI methodology. The expected terminal value of the Project at Year 5 of each €I ml will yield a figure of Euro1.97 million, an ROI of 12%.

5.1.1 Market Risks include entry-costs for new entrants e.g. if it is easy to become a dairy supplier and current profit levels are high, then the market becomes flooded, price falls, and CHOFU profitability goes down. The trend though is the opposite, and supply has remained static or fallen each year since 1990, mostly because of lack of capital and business know-how. However, CHOFU will be supplying a niche within the overall milk-market, and will be more price-maker with a differentiated product, not a price-taker as are close to 100% of current competitors. This gives CHOFU a distinctive competitive advantage.

5.1.2. Ukrainian milk prices are usually 30 to 50% higher than the EU level. In the case of eventual membership of the EU by possibly 2016 or so, the differentiation of CHFOFU’S Organic milk will allow for top-end market premiums, safeguarding revenues and market positioning.

5.1.3. Initiated as a market-driven company, the marketing knowledge of CHOFU will be the guide to all other functions, and thus help to reduce market risk by being aware of food-market trends.