Monthly Updates / February 13, 2018

Monthly Update 2/13/2018: Fruit Logistica and Beyond

CEO Update  02 – 13 – 2018

Greetings to all! I hope your 2018 has been as productive as ours has been thus far! I’m writing this week’s update with a new perspective and from the other side of the world… Berlin! The team is on a road trip to Fruit Logistica, which is the largest European produce expo. What an event! This is our first time coming to the show and, in case you are wondering what Berlin is like in the dead of winter, let me just say, bring nothing but fur jackets, scarves, and thermal underwear!

This week has been packed full of meetings with retailers, wholesalers, and processors to formalize relationships for both Pietrasanta’s coconut and Panama Golden Pineapple fruit sales. Having had this event on our calendar for quite a while, we are more than pleased with the market pricing and validation from buyers around the globe for both pineapples and coconuts. It is quite a sight to be at the enormous Messe event hall packed with traders and growers from all over the world negotiating deals. The hall is stunning and filled with over 200,000 people for three full days of networking, deal-making, and planning. Having wrapped up this week, my feeling of excitement for our business model has now hit an all-time high! The lack of access to this market is mind-blowing and the old school way of trading is ripe for disruption! There is virtually no one looking at this business through our lenses and, I am no tech genius, but I feel like Jeff Bezos walking the halls of a retail convention in the 1990s!

Fruit Logistica 2018

Throughout the last week, we had meetings with distributors from China, Spain, Panama, Holland, Germany, France, and the UK! The reception was excellent and our investment model has fascinated even the most seasoned buyers. Francis Vergara, who is responsible for commercial pineapple sales for our Panama project was also in attendance and has been locking up deals on next year’s production all week long.

Francis is the daughter of Edna Vergara and has been handling company sales for the last six years. I personally sat in on meetings with Dutch and German buyers, and what I heard left me with an extremely positive sentiment.

Not only are people thrilled that “La Dona” is getting back into the business, they are thrilled to have a reliable source of Panamanian pineapple production. The cold weather during October and November in Costa Rica has disrupted the market and many buyers are looking for an alternative source that can produce year round without spontaneous fruiting. This can be a challenge for buyers and our plantation provides a great diversification opportunity. Many firms have expressed interest in purchasing the remaining shares in the project to secure the supply from Panama. We will be meeting with several firms next week to discuss the purchase of the remainder of shares in the PGP Project. If you are thinking of buying shares of this opportunity, do not waste any time, very likely to be gone soon!

Coconuts have also been a hot topic at this week’s show. We have been meeting with Thai producers and processors to gauge the global pricing and markets in Europe. As we suspected, shaved organic green coconuts are selling for more that we projected in the financial models. FOB (Free on Board) prices are averaging $11.50 USD per box of nine organic coconuts, which works out to $1.27 USD per nut. With an average cost of $0.2 USD in boxing, transport to port, and peeling, we would be netting $1.07 per nut! Keep in mind that our financial models for GP II, LLC are currently assuming a cost of $0.5 USD per coconut! Fresh Green Nuts will represent approximately 30-40% of our production and, if markets maintain this price, we could be looking at substantial increases in revenue as well as valuation. The other interesting fact that we discovered is a strong desire for shorter shipping routes to European markets, especially for fresh coconuts. This is primarily due to the effect on flavor changes over time. The average transit time from Thailand to Spain is 4 weeks and to Rotterdam is 5 weeks. Meanwhile, the transit from Colombia to Spain and to Rotterdam takes between 2-3 weeks, which can provide both lower shipping costs and fresher products!
It was also very encouraging to see that two of the last three winners of the annual innovation awards at the show have been coconut products: the 2016 Genuine Coconut Drink and the 2018 Pook Toasted Coconut Chips.

During our trip, we also found time to meet with the German trade desk to discuss the import of teak, we discovered that there is a large demand for teak decking and furniture material in the country. Therefore, the Germans will be visiting our sawmill in Colombia upon completion later this year and, if all goes well, we will be registered in the database as a recommended Colombian supplier of hardwood. This will give us access to matchmaking events and buyer networks throughout Germany. Remember that our price projections are based on local Colombian prices. Thus, once we input export pricing, our revenues on teak sales could increase by 30-50%! Do not forget this is now included as part of GP II, LLC.

Before departing towards Germany, we had the chance to zip over to Panama to view the status of the Golden Pineapple project and things are moving along very nicely. This year, Panama has had a delayed summer season and the rains lasted into mid-January. However, Paul and the team have been working overtime to stay on schedule with the existing plantings and it is amazing to see the transformation of many sections of the farm. The entire property has been cleaned and the seeding has been done in this year’s sections. Moving forward, we will be planting between 3-5 hectares per month to end up with a total of 52.5 hectares of total plantings in 2018. This represents six hectares more than what we had originally planned, which should yield excess production and revenues. During this trip, I was accompanied by Chuck Chrimes, Peter Kern, and prospective investors.

In case you missed our latest webinar live from Fruit Logistica in Berlin; please click on the link above to review the recorded version.

On the road in the US

Likewise, during the week of January 21, Oscar and I hit the road to Scottsdale, Arizona to present for the second consecutive year at Financial Fest. There, we were greeted by returning investors and attendees from 2016, who were anxious to hear about our progress.
Dax and Oscar with investors in Arizona
Dax and Oscar with investors in Arizona
Catching up with GPll & PGP investors in AZ.

Pietrasanta

Meanwhile, Pietrasanta has been flush with activity, including the construction of the water reservoirs, the completion of the timber processing facility, the three-phase power installation, the arrival of the final 8000 coconut seeds, and the implementation of the teak inventory management system. We are approaching the halfway point of the dry season and, so far, we are on track to complete all projects on time. The cattle operation is also beginning to ramp back up after getting some much-needed rest and we purchased approximately 300 animals with an average weight of 240 kilos. The rotational system is being modified a bit due to the reduction of land and, thus, we plan to revise our projections for 2018. We had originally planned to lease property adjacent to the farm in order to keep cattle production high, but the delays in project funding and the cost/benefit ratio of the timber processing facility have forced us to first complete the timber processing mill before scaling up the cattle operation. This decision will also give us the opportunity to begin harvesting the teak plantation ahead of schedule, which will produce additional revenue.
Coconuts and teak and Ganaderia Pietrasanta
Coconuts and teak and Ganaderia Pietrasanta
Lastly, the timber mill is in full planning mode. Even though the original property identified failed to reach an agreeable price on the acquisition, we have reached a verbal agreement with our second option and we are in the process of completing the contracts. In order to keep costs low, we will be leasing for the first 3 years, but have a 5-year option on purchase.
Sawmill production Ganaderia Pietrasanta
Sawmill production Ganaderia Pietrasanta
Pietrasanta (Colombia) Sawmill Implementation 2018
I expect that we will be breaking ground on construction in March and that the project will be completed within 6-7 months, which will still put us ahead of schedule for full production in Q4.
Meanwhile, the coconut trees are exceeding everyone’s expectations in growth, as we have trees that have now reached 8-9 feet having only been in the ground for 10 months! The irrigation system is now complete for the first 150 hectares and has been successfully tested with a temporary diesel pump. Once the three-phase power system and reservoir are complete, we will switch over to an electric pump, which is much more cost-efficient. We have also officially registered the coconut nursery under the name “Eden de la Vida”, which translates to Eden of Life. This is the first certified coconut nursery in the country and it is a very big deal, not only for export capabilities, but also for expansion plans. Our plan is to offer growth plans for other coconut entrepreneurs, in which we will sell them coconuts with a contract to purchase all of the supply at a set futures price. This creates an additional revenue stream, develops the Colombian coconut market, and allows us to control the market price in the future. We are already receiving requests for seed supply and expect to see revenue in late 2019.
Until next time!