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The Farm

Introduction

We are two young entrepreneurs - Luca and Yanik Costa – with the goal of building a coffee farm in Zambia. We have acquired a 770-hectare farm in the North of Zambia, near the Mt. Sunzu. For this reason, we call this project Mt. Sunzu Coffee Estate. 


Coffee is cultivated on the 300 most fertile hectares. As this region in Zambia is known for its aromatic coffee, we grow high quality Arabica cultures and sell the beans directly to Europe. 


Over the last few months, we negotiated the terms of purchase with the owner, confirmed with Zambian lawyers that the seller does indeed own the land, that the land is only registered once and the process of transferring ownership, as well as prepared the business plan presented herein. 


The business plan was developed by Yanik Costa following best practices and is backed by conservative assumptions based on agronomic knowledge of Luca Costa and local experts as well as publicly available information. In our projects we are supported by experienced mentors from the backgrounds in business management, entrepreneurship and tropical agriculture with knowledge and advice. 


We are pleased to introduce ourselves and the business plan of Mt. Sunzu Coffee Estate. 

Advisory Board

A journey this big and this long should not be started without good preparation. 

We benefit from a wealth of experience from our network of mentors working as entrepreneurs, business leaders and in tropical agriculture. 

Who are our advisors

Investment Proposal - Mt. Sunzu Coffee Estate

Coffee Production

An outline about our production of single-estate specialty arabica coffee on the Mt. Sunzu Coffee Estate.

Coffee Production

Financial Plan

Facts and figures, investment volume, payback time, interest rates and dividends. All about numbers.

Financial Plan

Investor Relations

What are we offering our investors? What are the exit strategies? Read more about our investor relations.

Investor Relations

Risks

What risks are we facing? What can we do about it?

Read more

Advisory Board

We benefit from a welath of experience from our network of mentors and colaborations.

Advisory Board

The Founders

Who are the founders? Find out abut their backgrounds and motivation.

The Founders

Coffee Production

Projet Description

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On the 770-hectare Mt. Sunzu Coffee Estate, we will cultivate high-quality Arabica coffee. On 300 hectares we work hand in hand with nature, use best agricultural practices, promote high biodiversity and the application of beneficial organisms, and integrate compensation areas into the production. The 470 remaining hectares form an ecological compensation area for the preservation of the natural flora and fauna. 


Specialty coffee achieves higher and more stable prices compared to regular coffee. The coffee price on the world markets is subject to fluctuations. However, these fluctuations affect specialty coffee far less than mass production. Our smaller production batches and direct marketing help us to differentiate ourselves and reduce the price pressure of the volatile global market. 


Thanks to our wide experience and education, we are well suited to this project. Our team consists of Luca Costa (MSc in Agriculture ETHZ) with experience in the implementation of commercial plantations in Africa and Yanik Costa (CFA, Master of Arts in Business Administration UZH) with experience in business planning. We are supported by a local manager with  a MSc in Agriculture ,ETHZ and experience in managing coffee plantations. Additionally, we benefit from a wealth of experience from our network of mentors working as entrepreneurs and in tropical agriculture. 

Zambia - A Coffee Country!

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In the past, Zambia enjoyed above-average economic growth. This was driven by the high copper prices of the last decades. In 2015 and 2016, the growth rate declined in line with the decline in global copper prices. Zambia’s Economy remained stable nevertheless. 


The Zambian government encourages investment in commercialized and scalable agriculture. The reason for this is that currently only 14% of Zambia’s agricultural land of approximately 42 million hectares is cultivated.

    

Additionally, Zambia seeks to reduce its dependency on the mining sector. Zambia holds about 40% of all water resources belonging to the Southern Africa Development Community (SADC) and owns therefore ample resources for the development of agricultural activities.  


Although Zambia exports a small volume of coffee, the country enjoys a reputation for specialty coffee. The region, where the Mt. Sunzu Coffee Estate is located, offers ideal conditions regarding soil quality, precipitation and temperature for the cultivation of coffee. 

Coffee Cultivation

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We plant  different varieties of coffee under local leguminous trees. The coffee varieties used are resistant to the fungal diseases Coffee Leaf Rust (CLR) and the Coffee Berry Disease (CBD), therefore protecting the environment by avoiding extensive use of phytosanitary measures. To increase biodiversity, we plant different types of local shade trees. 


Maintenance of the plantation includes work such as pruning, irrigation, fertilizing and plant sanitary measures. The maintenance of the coffee plant begins directly after planting and increases sharply with incipient production. 


One to two irrigation sessions after the rainy season promote the optimal ripening of coffee cherries. The weight and quality of coffee beans are increasing under an irrigation regime. The irrigation is adjusted according to the length of the rainy season, the soil moisture and the stage of development of the coffee cherries. 


Phytosanitary measures are preventive and curative actions to reduce damage to the crop by weeds, pests and diseases. We use integrated pest management (IPM). This means that we reduce diseases and pests through the use of biological, biotechnical, plant breeding and cultivation and cultural measures. Chemical plant protection is considered only as a last resort. 


To ensure the highest quality of coffee, we will selectively harvest the coffee by hand using the picking method. This allows the harvest of exclusively ripe coffee cherries and ensures a maximum yield per hectare.  

Marketing

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This distinction between commercial coffee and specialty coffee is crucial for the marketing and the pricing of coffee. In the years 2016 to 2018, the median price for green specialty coffees was USD 6.61 per kg. In the same time period the coffee price of commercial coffee eroded from USD 4.5 to USD 2 per kg, showing a huge difference between the volatile and low pricing world coffee market and the stable and high pricing specialty coffee market.


The marketing assumptions are given by the 2018 Specialty Coffee Transaction Guide by Emory University, Atlanta. These baseline prices are confirmed by the Zambian Coffee Growers Association, and were crosschecked with price bands by the trading houses Neumann Kaffee Gruppe and InterAmerican Coffee. 

The coffee is graded according to cupping system of the Specialty Coffee Association (SCA). The Mt. Sunzu Coffee Estate produces coffee that reach the specialty coffee grade (80 points and more). The conservative assumptions of minimal specialty coffee grades of 80 to 82 points is made.


Given the size of the Mt. Sunzu Coffee Estate and the applied production system, it is aimed to market a large part of the coffee directly in Switzerland. By selling to Swiss roasting companies, we have the opportunity to negotiate the price directly and move beyond the price ranges set by the world coffee market. We established contacts with various Swiss coffee traders and roaster, who already signaled interest in our coffee beans.


In terms of marketing opportunities, the trade policy of importing countries plays a crucial role. The various agreements with the United Nations, the European Union and Switzerland greatly simplifies the unrestricted import of Zambian coffee.

Financial Plan

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We generate positive cash flows in the fourth year of production to be returned to our investors. In the eight year of operations, cumulative cash flows equal the initial investments. Based on past experience, we produce high quality grade coffee fetching attractive prices. 

The quality of the coffee depends on the variety, the production site, production method and processing. Coffee prices in Zambia are generally higher than the world market price due to the high coffee quality. The medium-term goal is the direct export of high-quality coffee to coffee roasters (Microlots). This would lead to significantly higher prices and revenues.


The first year is used to develop the farm. The next years are needed to raise the coffee plants. In the fourth year, coffee can be harvested, and positive earnings and cash flows are generated.


The IRR (internal rate of return) is a financial analysis tool and corresponds to the theoretical annual interest rate of an investment. The simulation of cash flows over 20 years leads to an expected IRR of 25.0%. This IRR only reflects the total cash flows of the Mt. Sunzu Coffee Estate generated from operations – i.e. no exit payment is considered. Additionally, the IRR of 25.0% is based on the implicit assumption that 100% of the farm is financed with equity. Should the opportunity arise to finance part of the project through debt (with interest rates lower than 25.0%), the IRR for equity investors would increase. 


The business plan was developed by Yanik Costa following best practices and is backed by conservative assumptions based on agronomic knowledge of Luca Costa as well as publicly available information. In our projects we are supported by experienced mentors from the backgrounds in business management, entrepreneurship and tropical agriculture with knowledge and advice. 

Touch base with us for further information about the financial plan!

Investor Relations

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Co-Owner of the Estate

Coffee production requires a long-term commitment. Our farm needs financial support for the build-up period. The first opportunity to harvest and the first yields are expected in the fourth year. For this reason, we are looking for partners with a long-term horizon who are willing to take this journey with us. 


Bank financing and development loans are only attainable at high interest rates from local banks. However, the use of debt capital could optimize the potential return for all involved equity investors. If there are any options through our future partners, we are happy to discuss them. 


We give our partners the opportunity to participate up to 50 percent in the coffee farm. The remaining 50 percent of the company reflects the preparatory work up to the acquisition of the farm and the analysis of the local situation, as well as the work done during the build-up period of the farm.

Exit Strategy

The value added of Mt. Sunzu Coffee Estate will benefit our investors. This can be achieved either through dividends, share buybacks or an exit, and will be based on the needs and wants of our investors. We propose the following three models: 

  • Investors are indefinitely associated with the Mt. Sunzu Coffee Estate and receive an annual dividend on their equity investments. Based on the estimated cash flows of Mt. Sunzu Coffee Estate, a yearly dividend distribution of approximately 40% of the invested capital is planned after the start-up phase. 
  • Investors want to withdraw from their long-term investment in Mt. Sunzu Coffee Estate. Share buybacks over several years provide investors with a slow but steady exit opportunity from the Mt. Sunzu Coffee Estate and an attractive return on investment. 
  • If our investors wish to provide venture capital for the development of the Mt. Sunzu Coffee Estate without being tied long-term, they can sell their shares in the Mt. Sunzu Coffee Estate after the build-up period is completed to strategic investors who invest in developed agricultural investments. 

Risks

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Political Risk

According to the British Foreign & Commonwealth Office, Zambia is a politically stable country. The World Bank assesses Zambia's regulatory quality and rule of law to be good. Corruption is declining and has no significant impact on business activities. Consequently, the likelihood of political unrest and expropriation is considered negligible. 

Price Volatility

Coffee price volatility on the global markets has been high in the past. The resulting price fluctuations led to the coffee crisis in 2001, with the lowest coffee prices ever recorded. Since the coffee crisis, a steady upward trend in prices is observed.

    

The International Coffee Organization (ICO) signed an agreement in 2007. The intention was to regulate the price of coffee not through quotas, but through the implementation of quality improvement measures in producing countries and through improved marketing strategies in the consumer countries. 


However, fluctuating coffee prices are still to be expected in the future. Production costs in Zambia are below the production costs in Brazil – which is the largest producer of coffee beans globally. Brazilian production prices are therefore considered a floor for global coffee prices, and through our competitive cost advantage in Zambia, we can always ensure our profitability. Additionally, Zambian coffee is well positioned in the international market, due to intensive marketing by the Zambian Coffee Growers Association (ZCGA). In recent years, Zambian coffee has always fetched prices that were well above average Arabica coffee prices. 


The production of specialty coffee decreases the risks of negative price fluctuations on global coffee exchanges. Specialty coffee cannot be considered a homogenous commodity and prices differ greatly between different countries, qualities and production methods. Zambian specialty coffee faces a great demand, which has exceeded supply in recent years. The demand for specialty coffee is growing strongly in Europe as well. These observed trends ensure reliable sales opportunities.

Climate Change and Meteorological Events

In Zambia, extreme weather events such as floods, droughts and heavy rain have already been observed and might increase in intensity and frequency. These major events have a strong impact in the southern and western parts of the country. The northern region is nestled between mountains and hills and the risk of flooding is therefore low. The most likely risk is an increase in precipitation-weak years.  


These changes do not impact the Mt. Sunzu Coffee Estate negatively in the long-term. Climate change in our region should lead to an increase in precipitation.


Although the topographical features of the Mt. Sunzu Coffee Estate are well suited for enough rainfall, we cannot exclude the chance of a dry season in the future. We are mitigating the negative impact of too little rainfall on yields by using an irrigation system and by planting the coffee under shade trees. 

Advisory Board and Cooperations

Johann Dähler

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Swiss entrepreneur Johann Dähler has been working as a farmer in the Ivory Coast for almost 40 years. His pioneering spirit helped Johann and his wife Jolanda to successfully establish and operate pineapple plantations in the Ivory Coast for more than 20 years. Today, he also works in Costa Rica and Brazil, where he operates, pineapple, rubber, cocoa and agroforestry plantations.     

 

Johann Dähler was the mentor of Luca Costa when he worked on his plantations - and stayed a mentor even after Luca left. Today, Johann Dähler promotes and supports our project. He is convinced that we will write a success story. 

Till Bossert

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Till Bossert and his business partner have been running the successful SME Herchenbach GmbH near Cologne since 2015. After training as a graduate industrial engineer and many years of experience in strategy consulting, he set up his own business in 2013 together with his business partner. Yanik Costa supported this entrepreneurial duo from 2013 to 2015 in the search for a suitable company to acquire. Till Bossert shared his experience in corporate governance, strategy and fundraising with Yanik. He advises the Mt. Sunzu Coffee Estate as a mentor on administrative and legal matters. 

Joachim Milz

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The agronomist Dr.rer.agr. Joachim Milz works as director of the company Ecotop, which offers agricultural advisory services. Joachim Milz has worked in tropical countries for over 30 years. He promotes sustainable agriculture and pushes it forward through his consulting firm. As part of his consulting activities for Fredy's Plantation in the Ivory Coast, Luca Costa got to know Joachim's approach to farming. Luca has applied some of Joachim’s principles the Mt. Sunzu Coffee Estate plantation design. Among other things, the coffee is cultivated under shade trees in an agroforestry system and biological pest control is used to reduce insect damage. Soil fertility is increased by a high turnover of organic matter.

Andermatt Biocontrol

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Andermatt Biocontrol combines existing solutions and consulting activities; and develops advanced biological crop protection products for Swiss and international agriculture. 


The Mt. Sunzu Estate partners with Andermatt Biocontrol and its Zambian subsidiary Madumbi Sustainable Agriculture. Together with Andermatt Biocontrol, we will set up research plots on which we are looking for biological solutions in coffee cultivation. Through these field trials we generate value, contribute knowledge and hope to be able to make commercial agriculture more ecological. Andermatt Biocontrol can count on a reliable partner in Zambia and we will be at the forefront of new biological crop protection products. 

InterAmerican Coffee

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Since InterAmerican Coffee was founded in the year 2000, it has been an importer and trader of finest specialty coffee of selected estates and producers from all over the globe. Due to a close and long-lasting collaboration with the coffee producers, they can maintain a stable and high coffee quality. The coffee quality is assed along the whole supply chain. It starts at the farm level, to the shipping until the coffee is tested in the meeting rooms and laboratories of InterAmerican Coffee. 

 

The Mt. Sunzu Coffee Estate is in close contact with the head of procurement of InterAmerican Coffee. Together we are working towards a shared marketing concept. InterAmerican Coffee singed a letter of intent with the Mt. Sunzu Coffee Estate.

World Coffee Research

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The World Coffee Research (WCR) has a vision to provide coffee farmers with coffee varieties adapted to their location and knowledge of modern cultivation methods. The WCR wants to bring this toolbox to all production countries to ensure the availability of high-quality coffee in the future and in all parts of the world. The WCR’s projects and collaborations are designed to improve producers' living standards, output and knowledge. 


The Mt. Sunzu Coffee Estate has initiated a research collaboration with the WCR on genetic diversity and coffee varieties. We can benefit from a variety of freely accessible plant material, whereas the WCR can rely on a technically competent and reliable partner to test-grow their newly developed species. 

The Founders

Luca Costa

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My experience in farm management will support the Mt. Sunzu Coffee Estate with a sound strategy and business structure. 

Full Biography

Yanik Costa

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My skills in accounting, business planning and my experience regarding legal topics supplement the team perfectly. 

Full Biography