Building the Leading Organic Produce Company

OGO: TSX-V
Building the Leading
Organic Produce Company
May 2016
Photo: Organic French-Bean crop field - Monjas, Jalapa, Guatemala
Disclaimer
This presentation contains certain forward-looking statements which may not be based on historical fact, including without limitation, statements regarding Organto Foods Inc.’s
("Organto") expectations in respect of its business strategy, plans for future growth and expansion, access to capital, management expectations and events or developments that
Organto expects to take place in the future. All statements, other than statements of historical facts, are forward-looking information and statements. The words “believe”,
“expect”, “anticipate”, “contemplate”, “target”, “intends”, “continue”, “budget”, “estimate”, “may”, “will”, and similar expressions identify forward-looking information and
statements.
In addition to the forward-looking information and statements noted above, this presentation includes those that relate to the ability to raise additional capital and complete
future financings, capital expenditures and costs, the expected growth in the organic food industry and the ability of Organto to successfully execute its growth strategy. Such
growth strategy includes acquiring additional land, acquiring or building additional greenhouses, potential acquisitions of assets or companies, and increasing capacity of existing
facilities, among other plans discussed in this presentation.
Such forward-looking information and statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Organto as of the
date of such information and statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors
could cause actual results to differ materially from those projected in the forward-looking information and statements. Such factors include, but are not limited to, the inability
of Organto to generate sufficient revenues or raise sufficient funds to carry out its business plan, changes in government legislation, taxation, controls, regulations and political or
economic developments in Guatemala, risks associated with farming activities generally, compliance with importation and exportation laws of various countries, significant
fluctuation in food prices, including the risk of obtaining necessary licenses and permits, inability to identify, negotiate and complete a potential acquisition for any reason, ability
to retain key employees, and general economic conditions. Many of these uncertainties and contingencies could affect Organto’s actual performance and could cause actual
performance to differ materially from those expressed or implied in any forward-looking information and statements made by, or on behalf of, Organto. Readers are cautioned
that forward-looking information and statements are not guarantees of future performance. There can be no assurance that such information and statements will prove to be
accurate and actual results and future events could differ materially from those acknowledged in such information and statements.
Organto disclaims any intention or obligation to update or revise any forward-looking information and statements whether as a result of new information, future events or
otherwise, except to the extent required by applicable laws.
2016-03-17
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Organto seeks to be the leading,
vertically-integrated branded organic
fresh produce company in the world by
2018
3
More than 85 years
combined experience
in the natural and
organic food industry.
Fund expansion in
fastest growing
Social Balanced and
Responsible
Company
seeking to change the
produce industry
segment of consumer
sector.
4
Industry Analysis
Strong Industry Fundamentals
-
The natural and organics industry has been growing at over 15% per annum over the past 10
years
-
It is projected to continue to grow at over 14% per annum over the next 5 years
-
The organics segment is growing at over 5x the conventional segment
-
The organic fruit and vegetable segment has been growing at over 12-13% per annum and has
reached close to US$15 billion in the United States
-
Industry is fragmented with many small producers producing specialty products in
unorganized and unprofessional manner (source of acquisitions)
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Industry Analysis
Strong Industry Fundamentals
-
Sourcing of fresh organic products year
round has become major issue for retailers
and distributors
- Consistent, stable producers are
rewarded with larger market share
-
Difficulty of obtaining or converting
conventional land to organic land has
exacerbated the problem of supply
- Minimum of three years
-
Uneconomical greenhouses built in areas
that are too expensive to construct or
operate
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Current Products – Exotic Vegetables
Organto strives to be the largest provider of organic, branded exotic vegetables
in the world by 2018
Sugar Snaps
Romanesco
Cauliflower
Snow Peas
Haricot Verts
Broccoli Florets
Baby Carrots
Baby Broccoli
Brussels
Sprouts
Broccoli Crowns
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Clients
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Organto Global Locations
Amsterdam, Holland
Vancouver, Canada
Sales, Distribution & Importing
Corporate Headquarters
Miami, Florida
Patzún, Guatemala
Plant & Greenhouses
Sales, Importing & Logistics
Monjas, Guatemala
Organic Farm & Greenhouses
General Roca, Argentina
Organic Farm & Plant
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Advancements
Organto has made substantial changes to the business since the signing of the
merger in May 2015
Organic
Farmland
Organic
Greenhouses
• Acquired 53 hectare farm in Monjas, Guatemala
• Added additional organic farmland near Monjas
• Hired Andres Pullin to oversee entire operations in Guatemala
• Drilled deep water well
• Acquired 3.2 hectare organic greenhouse in Jalapa
• Purchased additional 1.5 hectare organic greenhouse in Patzun
• Hired Cristian Marin to manage greenhouse operation
• Built separate storage facility
• Drilled deep water well
• Added to operations and plant management team
Plant
Improvements • Improved reporting and accountability
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Vertically Integrated Model
Our ability to control and operate more of the chain allows us to
offer a more consistent product at more competitive prices
Farming &
Greenhouses
• Organic Greenhouses
• Organic Farmland
• Sub-Contracted Growers
Packing &
Processing
Importing &
Distribution
• Company-Owned Plant
in Patzún, Guatemala
• Organto B.V.
(Amsterdam)
• Organic & Conventional
Plant
• Organto U.S.A.
(Miami, FL)
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Vertically Integrated - Strategy
Farm to Table: Better quality at more competitive prices
Farming Operations
-
Approximately 50 hectares of certified organic production
5 Hectares of Organic Greenhouses (3.2 hectares currently certified)
Close relations with indigenous farming communities
Packing & Processing Plant
-
Certified organic processing plant
Employing over 190 workers (all indigenous) in plant
Experienced team with over 50 years working in processing/packing plants
Importing & Distribution
-
Organto BV – Dutch company responsible for European market
Organto USA – U.S. company responsible for U.S./North American market
Better information and additional margin for company
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Analysis of Vertical Integration – Risk vs Reward
Risk
Risk (Analysis)
Working Capital
Rewards
Farming
(Company Owned)
High
Main risk is loss of
production (8-12 week
cycles)
Moderate/High
High
(40%-60% GM)
Farming
(Sub-Contracted)
Low
Main risk is not
delivering into sales
contracts
Low/Moderate
None
Packing & Processing
Moderate
Risk of logistics and
product loss due to
operational
inefficiencies
Moderate/High
Moderate
(25%-35% GM)
Importing
Low
Not delivering into sales
contracts because of
lack of quality product
Low/None
Low
(8%-12% GM)
Distribution
Low
Very low. No risk except
for strikes, fuel prices,
etc.
Low/None
Low
(6%-8% GM)
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Management
+85 years of combined
experience in farming, packing,
distribution and retail segments
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Organic certification at Monjas, Jalapa, Guatemala
Current Management Team
Peter Gianulis - Chief Executive Officer
• 20+ years of experience in consumer sector, particularly in the natural products and organic food industry. Invested in and
advised more than 20 companies in the sector including Whole Foods, Hain Celestial, Wild Oats, SunOpta, and UNIFI.
• Founder of Carrelton Asset Management, an asset management and PE firm specializing in small and micro-cap
companies with the mandate to invest in the natural product, consumer, and mining sectors.
• MBA from Cornell University in International Business with a B.A. in Quantitative Economics from UCSD
Andrés Barresi - Chief Operating Officer
• 20+ years experience in agricultural and food industries for conventional and organic operations.
• Consultant with McKinsey and partner at Hermes Management Consulting, with over 25 years of experience working in
Latin America.
• MBA from Cornell University in Operations and Strategy with a BS in Industrial Engineering from University of Buenos Aires.
Marcus Meurs - Founder & Chief Marketing Officer
• Dynamic Dutch entrepreneur with more than 25 years of experience in the global conventional & organic food industry.
• Founder of Pure Nature Organics and it’s “Pure Nature” brand in 2003 and grew the company to +$35 million in sales. Pure
Nature was acquired by SunOpta in 2009.
• Vast experience in managing all facets of an international food company : Operations, Processing, Logstics, Pricing, Sales
Strategies, Product Development and Packaging, among others.
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• MBA from European University in International Management with a BBA and BIS from EU Antwerp
Recent Key Addition
Rients van der Wal - Managing Director – Europe
• Rients brings over 15 years of experience in the produce and organic food industry.
• Previously worked with Total Produce in Amsterdam and is in charge of our importing and distribution business (Organto
B.V.) in Europe based in Amsterdam.
• Prior to joining Organto and Total Produce, he managed operations for numerous production and farming companies.
• Joined Organto in October 2015.
Andres Pullin – Regional Manager – Guatemala
• Strong knowledge of local Guatemala farming and plant operations.
• Responsible for all facets of operations including organic farming, community relations and packing plant.
• Family with long-history of organic farming in Guatemala – Organic coffee plantations.
Wesley Cornell– Director of Research & Development
• Responsible for research & development of organic farming and relationships with agricultural universities
• Development of organic farming programs and protocols for all farms and cooperatives
• Graduate (Cum Laude) at Cornell University Natural and Agricultural Resource Management
Gabriel Leal – Local Finance Head – Guatemala
• Over 10 years of experience working in local Guatemalan finance operations.
• Previous financial accountant to CapGemini Business Services in Guatemala.
• Strong knowledge of designing and implementing internal financial control systems.
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Operational Team in Guatemala
Organto team in Guatemala has grown to over 200 employees with strong
leadership
Andres Barresi
COO
Wes Cornell
Head of Organic
R&D
Andres Pullin
Regional Manager
Hector Cruz
Plant Manager
Norberto Patal
Head of Farming
Christian Marin
Head of
Greenhouses
Gabriel Leal
Local Finance Head
Raul Jimenez
Quality Control
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Socially Conscious
Business Practices
Corporate Social Responsibility Is
Organto (H30)
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Harvested organic French-Bean - Monjas, Jalapa, Guatemala
Socially Conscious Business Practices
Commitment to communities and employees
Establish Key Partnerships with
leading universities to train employees
and members of the community on best
practices in organic farming.
Develop Social Programs
for employees.
Free Meals for employees.
Provide Medical Service for
employees on a weekly basis through
charity foundations.
Formalize employment contracts
vs sub-contracting (industry standard).
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Engagement
Fully immersed in the communities where we operate.
Government Relations
- Ministry of Agriculture, Livestock and Food
- Funcef, Doctors without Borders, Manos de Sur
Community Relations
- Non-Governmental Organizations (NGOs)
- Indigenous Communities
Key Stakeholders
- Employees
- Growing Associations (Q’Anil, etc.)
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Associations and Certifications
Our strategy is to partner with some of the leading associations and
certifications in the world:
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Farming & Greenhouse Operations
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Organto greenhouse operation - Guatemala
Industry Leadership
State of the art processing and production plant
-
Ability to process 20 million lbs/annum of product
Planned expansion to double capacity and separate organics
Certified organic land in Guatemala
-
Currently 50 hectares of organically-certified open field farms
2016 plan to add additional 100 hectares of certified organic farmland
Market-leading organic greenhouses
-
Allow for on-going production throughout the seasons
Sustainable & Organic
Cluster strategy of 4-6 hectares for operational & cost efficiency
On-site testing lab & facility for product verification (to be operational in 2Q16)
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Plant Operations – Improvements & Efficiency
Increased operating platform with redesign – in progress
-
Created easier work flow in plant with more operating efficiency
Implemented new protocols for hygiene and cold-chain process
Completed new mechanized well with filter system
Built enclosed “bodega” for improved storage and sanitation
2016-2017 Business Plan for Expansion & Protocols
-
Plan expansion to add additional 300-400 m2 cold storage and separate areas
for organic processing
Open up two new loading bays for finished product
Installation of new sanitation system for entering employees
Built enclosed “bodega” for improved storage and sanitation
Adding new raw product washing system for more automation and greater
efficiency
Processing plant, Patzún, Guatemala 24
Greenhouse Structure
Pump
Cluster Monjas
GH
GH
GH
GH
GH
GH
Greenhouses for 2017
- Goal: 15 hectares in total by
the end of 2016
Waterwell
GH
GH
GH
GH
GH
GH
Waterwell
Cluster – To Be Funded
Pump
Pump
Cluster Patzún
GH
GH
GH
GH
GH
GH
Waterwell
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Organic Greenhouses – Year Round Efficiency
Guatemala Ideal Location for Greenhouse Construction
-
Mild climate allows for inexpensive systems to be constructed without use of artificial heating and
cooling systems
Lack of natural disasters allow for efficiency in construction (reduced building costs)
Year round growing ideal for vegetables
High Value-Added Products Allow for Quick Return on Capital
-
Ability to get 3.7-4.5 turns (i.e. harvests) per year on greenhouse grown products (versus
2.7-3.0 for open-field organic farming)
Organically-certified products grown in organic grow bags (i.e. organic soil)
Payback period of less than 18 months with average gross margins of 50-60%
More efficient and predictable growing cycles and yields (15%-25% higher per harvest
versus open-field farming)
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Corporate Strategy
Growing “Organically” and Strategic
Initiatives
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Organic French-Bean crop field - Monjas, Jalapa, Guatemala
Strategic Initiatives
Organto intends on revolutionizing the produce industry
Branding & Packaging
-
Introduction of branded sub-family of products
Innovative new packaging design
Increase Company-Owned Organic Farming
-
Complete organic farming build-out in Guatemala (additional 100 hectares of open field farming
plus add 10-15 hectares of organic greenhouses by 2017
Seeking opportunities for additional organic land
Working with well-known Argentine farming group for new organic initiative
Social Balance
-
Re-Education of organic farming techniques to indigenous communities
Team-Up with other local groups working with indigenous groups
Integrate with foundations and social groups to provide services
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Innovative Packaging
Introduction of innovative and sustainable packaging for branded products
Aesthetically “pleasing”
-
Historically been “after-thought” in produce industry
Innovative new packaging design
Environmentally friendly
-
Working with advanced packing companies to develop new packaging that better represents our
values and philosophies
“Organic” consumers demanding more responsible behaviour
Food Safety
-
Retailers requiring growers and companies to protect the food chain
Challenge is allowing consumers to “feel,” “touch,” “smell” their products
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Financial Information
72 million shares outstanding in Organto
-
Approximately 70% held by insiders subject to lock-up period (up to 3 years)
Last financing C$1.5 million at C$0.20 per share completed in July 2015
Profitable existing operations in Guatemala
-
Profitable operations in Guatemala
Targeting over 25%-28% in gross margins for 2017
Ability to grow sales by over 100% in 2016
CAPEX vs Working Capital
-
Current working capital lines in place – look to expand debt facilities
Future sales growth will require additional CAPEX and Working Capital
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Contact Information
Panos “Peter” Gianulis
Marcus Meurs
President & CEO
Head of Sales & Distribution
+1 786 252 4948
+1 305 496 4487
panos@organto.com
marcus@organto.com
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Organto Foods Inc.
1548 Brickell Avenue
Miami, FL 33129
USA
Organto Foods Inc.
1090 Hamilton St
Vancouver, BC V6B 2R9
Canada
+1 786 252-4948
panos@organto.com
+1 888 818-1364
info@organto.com