Into the Black with Blueberries: To Buy or Not to Buy-A Business Case Analysis Study

INTRODUCTION In 1994, Steve and Kay Smith, aged 39 and 37, respectively, purchased a 2.26-acre tract of property that would become Whippoorwill Blueberries Farm in 2002. Originally part of a larger, thirteen-acre mini-horse farm, the property had been subdivided by the previous owner into three smaller tracts, and the Smiths' tract included a house, two horse stables, and a corral. They bought the property thinking it would be a nice place for their six-year-old son to play outdoor sports with his friends. Their son, however, did not develop an interest in outdoor sports, and for many years the acreage around the house remained fallow, requiring labor to keep the grass mowed and actually costing money in terms of annual property taxes. The Farm Idea A short distance from the Smiths' property, Dr. John Miller (now deceased) owned Miller Blueberry Farm, a five-acre property operating with 1200 mature blueberry bushes. Dr. Miller, an expert on blueberries, worked for the Agriculture Department at the University of Georgia. In 1999, Kay began visiting Dr. Miller's farm to pick blueberries, and she spent some of her time there chatting with him about his business. Their conversations inspired her to propose the idea of starting up a blueberry farm to Steve. Farm Evolution The Smiths decided to become agribusiness entrepreneurs in 2002 for several reasons. Dr. Miller advised Kay that blueberries were an ideal crop for northeast Georgia's soil and climate, providing annual crops potentially for more than thirty years. Kay found that a growing number of studies were touting blueberries as an excellent antioxidant, combating free radicals and inflammation in brain tissue (Azar, 2001), preventing cancer, and improving cognition and motor skills (Underwood, 2002, Wedge et al., 2001). As a result, the public's awareness of the benefits of eating blueberries was increasing, creating a growing demand for the product in the health food market. An added benefit was their proximity to Dr. Miller, who volunteered to act as their mentor as they learned how to grow blueberries. He told them that blueberries were an "environmentally friendly" crop, which appealed to Kay's "nurture by nature" instincts, and Steve was enthusiastic about providing his own labor to generate an additional source of income. The Smiths would also be able to put their unused acreage (approximately two acres) into the county's Farm Conservation Use plan, decreasing their tax rate. The Smiths made a list of startup costs, which included grading and clearing the two acres, purchasing blueberry sprigs (immature bushes planted over two years) and an irrigation system, renting an auger to dig the holes for the sprigs, and miscellaneous labor expenses (e.g., digging, raking). The well that came with their property was a 360-foot drilled well providing a more than adequate water supply to irrigate the blueberries. Table 1 shows a summary of the initial investment costs, which were very reasonable because the Smiths already owned the land. Along with most consumers, the Smiths did not realize that there would be dozens of varieties of blueberries to choose from when purchasing the sprigs. Dr. Miller recommended that they plant only the early varieties, which would ripen at the beginning of the summer, during early June through early July, when the weather was more likely to be cooler and people would be enthusiastic about picking blueberries. For cross-pollination purposes, Dr. Miller further recommended that they plant four different varieties that would grow well in the soil in their area. He told them that insects, primarily bees, would cross-pollinate from one variety to the next Austin blueberries tend to be tarter, grittier, and smaller. Brightwell and Climax blueberries offered tastes, textures, and sizes between the more extreme features of Premier and Austin. In December 2002, the Smiths purchased 130 three-year-old sprigs per variety, totaling 520 sprigs (260 sprigs per acre) to plant on two of their 2. …