Some very exciting developments this month, plus some negative developments which need to be turned to our advantage.  Our Plantations Director, Dwitra J Ariana, has resigned and we are working on the return of his shareholding.  Our expectations on his expertise proved misplaced, but fortunately we always have back up plans and the company has developed novel, effective ways of growing vanilla.   I say novel, but I am sure somewhere, others are enjoying the same success!  We will report further when negotiations are completed, but rest assured it will be beneficial for all shareholders.

Phase 1

An interesting development.  Many vines are flowering early, and we are discovering why the season doesn’t really start until September.  The flowers don’t like dew in this cold weather!  This is the turn of our year, and it starts to get warmer and wetter, which the vanilla appreciates.  We are not worried about losing early flowers.  One vine will produce up to a thousand flowers, and you must not pollinate more than 50%, or you kill the vine.  If you only pollinate 25%, you get better quality beans.  These percentages are variable on the health of the vine.  We are experimenting with foliar feed to see if this will produce better beans.  We know that direct fertiliser kills the vine.  We like syntropic agriculture, which is permaculture on steroids, where you don’t allow bare earth.  In the tropics, bare earth is sterilised by the sun.  So far, we have found the best ground cover to be fern, with the added bonus it can be sold for salads.  That, and the trees, do benefit from fertiliser, but very sparing and far from the vines.  We also do a lot of chop and drop.

Replacing the Gliciridia is not an overnight job.  It will take a long time, years, and we are busy planting new trees.  The replacement trees are not readily available, and we are planting them amongst the Gliciridia which are allowed to die off as they grow.  The rotting Gliciridia of course provide additional biomass for the soil.  The first and most common replacement is Moringa, allowing us to develop Moringa tea and Moringa & Vanilla tea.  This is because the Moringa is easy to grow, like the Butternut.  All these trees are best grown from seed, including Avocado which takes years to grow!  So, we are patient in developing these.  At the same time, we are working out the best pattern of trees, Tumpang Sari.  We hope to have more than a dozen varieties growing together, in our opinion the best method for plantations.  We have set up a nursery for these trees.

We are concluding negotiations on a new garden, as we need to start new gardens with the new methods.  The trees in the second part of Garden 5, almost the new method from scratch, are amazing, although we still have the odd vine that is less than successful and we don’t know why.  We intend to do a deal with the university to arrange students to study them.

We need to rearrange the Gardens, but area, which we shall do shortly.

Phase 2

This has more than made up for the shortfall in production caused by weather and improper methods.  We have acquired more than 1.5 tons of vanilla at a low price, and our own harvest is not yet complete.  Although the price is low, it is still better than many, and in many parts of Indonesia they have no buyers.  The trouble is, we can buy from those areas but the shipping to Bali is expensive.  Java and Lombok are easy, but from further afield more difficult.  We need to establish buying depots in the vanilla growing areas, but that’s for next year.

Phase 3

All the farmers from whom we are buying green beans will become cooperative farmers, this is the first stage.  We have about 30 suppliers at present and lots of interest for future years.

Phase 4

We now have over 200kg of dried beans ready for sale, with an estimated value of over 1 billion rupiah, about USD 75,000, and plenty more in production.

Our extract is wonderful, although we are getting slightly variable content as we still lack a laboratory.  Nevertheless, it is so strong, it is better than anything else we have seen on the market.  We are about to start selling it in atomisers, 20 and 30ml each.  First sales groups indicate a willingness to pay Rp 150,000 for one of these bottles, which can be used as perfume, mosquito repellent and condiment.  However, we do need BPOM, which is like an FDA qualification, before we can sell it as extract for bakeries.  This will take at the very least 3 months, possibly 6.  We already have 50kg of low-grade vanilla that can become over 250 litres of extract worth over 1.3 billion rupiah – and we have lots more to come, at least another 300kg.

The really exciting thing about this is we can make our extract from dried vanilla bought from farmers as well (we can’t sell these beans because of quality issues).  There is lots of this around, as the farmers are drying those beans they cannot sell.

We are working on packaging, which is the key to success.  Better to be patient and get it right, rather than rush out and sell the vanilla because we need the income to keep you shareholders happy 😊

I don’t want to be too precise about finances here, but extract is so exciting.  It quadruples the value of the vanilla and the market is so much larger.  Good to remember that Indonesian beans are exported for foreign companies to make extract, and this is so inline with our greater goals, to improve life not just for the farmers but the community.

Phase 5

We do have a verbal agreement to turn our warehouse into a factory with an Australian firm, sharing the facilities.  Finer details being worked out.  They also want our procurement supply chain.

Lobsters

The new breeding facility has passed the first test, and we have a new system to prevent the lobsters moving from pond to pond.  We are entering the breeding season now, and building up numbers while still having enough large ones for the café.

Blue Lotus.

Testing whether we can grow from seed, and beginning to harvest minute quantities.

Vanilla Syrup

All our supply is going into syrup for the Café and into vanilla paste, which is syrup, extract and vanilla powder mixed together.

Agarwood and Oud Oil

This is very much on the back burner.

The Royal Spice Café

Our vision is for a chain of Cafes throughout Indonesia and South East Asia, which will also serve as the primary outlet for high grade beans.  We cannot possibly run this operation with our existing staff, but we may have found the right manager for this operation who shares our vision.  Naturally, RSG will not own the entire operation, but it will have a large shareholding.

Investment

Investment for August was Rp 171,814,280 making a total of all investment Rp 11,485,549,850.

Financial Outlook

Our financial expectations have been based on the information we had at the time.  This information is now far more complete.  On the one hand, thanks to the Tonga volcano, we are a year behind, and our results this year are consistent with our ambitions for last year.  On the other, our progress with creating associate farmers means that we will exceed the forecast crop for next year.  Further, in the beginning we made no attempt to include profits from extract, and we can now see that this will be the biggest profit centre and the largest market.  Finally, with the failure to sell the projected 30,000 shares and Dwitra returning 25,000 shares to the company, it means that the profits will be divided through dividends to a much smaller group of investors, less than 35,000 dividend bearing shares, meaning the returns will be greater.  We have come so far on so little investment that we think we need very little more to make your investment as a shareholder more lucrative than anticipated.  The vanilla business is an excellent business, especially when we are making final product.  Well, I guess that implies we should start a bakery, but I think that is a step too far!

This month, we shall be redoing our financial projections, creating a sales team focused on selling the extract to end users and solving our testing problems.

You see, extract is traditionally graded on the amount of vanilla per litre of alcohol.  This is a nonsense if you don't know the vanillin content of the vanilla.  We need to test the vanilla going in – we may assume that it is 2.5% or more, but we need to know!  And we need to test the extract on the other side.  When we do that, we shall be able to acquire BPOM license, which is akin to FDA, and start selling in quantity to factories of processed food.

Will we pay a dividend next year?  This depends entirely on our success in selling extract and also on how quickly we get in enough investment to finish the factory.  We may well be able to borrow this money now, as it is a much smaller sum, and we have assets in the form of vanilla to borrow against.

Rex Sumner