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Keep Apples in the Family

June 30, 2012
By: Ed Clark, Top Producer Business and Issues Editor
Keep Apples in the Family
  
 
 

This orchard hones in on profit centers to grow for the next generation

Given the number of innovative changes Minnetonka Orchards has undergone since its inception in 1976, it comes as no surprise that the Schaper family is putting together a creative plan
to keep the orchard in the family.

Lowell and Phyllis Schaper have pruned and trimmed their business plan like they have their thousands of apple trees in Minnetrista, Minn. The result is a fruitful and long-term plan that will benefit the next generation that owns the orchard.

Business Evolution. The Schapers brought the property in 1971 and spent five years figuring out what to do with it. They considered other enterprises, including subdividing it for housing tracts. "But we realized that we didn’t want to look down on other houses," Lowell says.

They tried growing hay, but discarded that idea because they had no livestock. They finally decided that growing apples would be the best use of the land. To fund the purchase of the trees, the Schapers used their own savings and income from Lowell’s job as a commercial pilot. "It started out as a hobby and sort of got out of control," he says.

From 1976 to 1982, Lowell had two full-time jobs: the orchard and being a pilot for Braniff Airlines. The latter ended when Braniff went bankrupt, though he flew for other airlines until the late 1990s.

Initially, Minnetonka Orchards’ growth was modest, planting several hundred trees per year and starting with the McIntosh, Cortland, Haralson, Paula Red, Honeygold and Regent varieties.
It hasn’t always been easy, and sometimes the Schapers contemplated getting out of the apple
business altogether. "In the early ’80s, we had a severe winter and lost a lot of trees," Lowell says. "But we made the decision to replant. We had invested so much at that point. It kind of pulls you in."

Refining Profit Centers. Throughout the years, the orchard has radically changed, from one that just grows apples to one that emphasizes fun and has up to 5,000 visitors per day on weekends from the neighboring 2.5 million–person metropolitan area. The Schapers learned that about half of the visitors, who pay a $4 entry fee, want to pick their own fruit. They now charge $18 per peck for pick-your-own, which comes to about $1.80 per pound.

But apple picking is only one of the Schapers’ profit centers. They also have a 5,000-sq.-ft. tent for weddings, hold hayrides and sell donuts, hot dogs, locally grown maple syrup and a variety of apple products such as caramel apples, cider, apple pies and apple crisp.

Lowell estimates that at present, apples provide 25% of Minnetonka Orchards’ profits. The other major profit centers are weddings, the retail barn, school tours and sales of pumpkins (which the orchard does not grow).

One reason the Schapers are so innovative in developing new profit centers is that they want to bring more family members into the operation. The plan by is to transfer shares of their multi-thousand-tree apple orchard bit by bit.

"We will sell some to our son Craig and daughter-in-law Michele, and gift some, but we want to be fair to two other sons and a daughter who are not as interested in the business," Lowell says. "We are working with our attorney to gift some shares."

The Schapers have created Minne-tonka Orchards Inc., a corporation that represents the value of the equipment and which Craig and Michele will ultimately own. But at some point, the owner of Minnetonka Orchards will need control of the land and the trees.

"We still have some issues to work out, but we’re working with an attorney and estate planners in the Twin Cities," Lowell says.

The Schapers are transitioning their son and daughter-in-law into the operation through a series of baby steps.

The plan is for Michele, who is in charge of sales, to begin being paid a salary. Right now, she telecommutes for a Tacoma, Wash., company for which she does grant writing.

Craig will work with his father on the orchard side of the business and continue to work as a structural engineer, so he will have two jobs for a while, just like Lowell did. Currently, Craig works full-time for a Seattle company and commutes to Minnesota on weekends to work on the orchard. Eventually, he hopes to land an engineering job in Minneapolis or St. Paul, which will make it easier for him to work full-time in the orchard.

"As far as salary and compensation go, we will have to evaluate it down the road," Michele says. "We are working hard with little or no pay for the time being to help the family business carry on and because we love it."

More With Less. Because the orchard is in the greater Twin Cities area—in fact, it is in Hennepin County, the same county as Minnea-polis—adding more land is virtually impossible, so the Schapers have to squeeze more profit out of their existing land base.

Lowell says the Minnetrista community is not facing severe urban sprawl pressure, despite being so close to Minneapolis. That’s because of strict zoning laws that require a 10-acre minimum piece of property. The Schapers have 40 acres, but some of that is wetland and some is wooded, so they have only 12 acres for apples. They also have quite a large parking area, a necessity for weekend visitors during the fall.

They have discarded the concept of selling to wholesale apple buyers. "They expect your top-grade apples and pay only half the price," Lowell says. "Why not just sell for retail on the farm? It’s better yet if customers pick their own. Today, 40% to 50% of apples sold are you-pick."

One innovation the orchard recently started using is WatchDog Weather, a small, sophisticated unit that reads temperature, humidity and rainfall every 15 minutes for 45 days. During apple-growing season, it is placed in the orchard.

"We download results into a computer. That information, in turn, is compared with insect models so we can decide when to spray in the spring. It has helped us reduce spraying as part of our integrated pest management system," Lowell says.

A few visitors ask if the apples are organic or not, but when they are told about the Schapers’ integrated pest management system (IPM), they seem satisfied, Michele says.

"There is no such thing as an organic apple [in the Midwest]," Lowell adds. "We’re not going the organic route. IPM is as close as we can get."


New Life for Old Grapes?

One profit center Craig Schaper is implementing and managing on his own is a grape-growing and eventual wine business. Last year, he planted Marquette grapes, a cold-hardy grape developed by the University of Minnesota that allows the Midwest to produce wines that rival some West Coast red wines in quality. He also planted La Crescent, a University of Minnesota–developed white wine grape in a Germanic style similar to Vignoles or Riesling.

At present, Craig and Michele are starting the grape and wine business by using their own money. "As things grow, we will have to seek out bank loans. It takes a lot of money to start a business," Michele says. With interest rates low and banks with plenty of cash to lend, their timing just might be right.

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FEATURED IN: Legacy Project - Legacy Project 2012 Report

 
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