Vineyard or olive garden: an

investment decision
Yasir Riaz and Iqra Abdullah

Introduction Yasir Riaz and

Iqra Abdullah are both
Bashir Khan had always lived in the Kallar Kahar region of Pakistan and owned 15 acres of based at the Department of
land. He cultivated only two crops, wheat and millet. He grew wheat from October to March Business Studies, Namal
and millet from April to September. Khan recently visited an old friend, living in the nearby University, Mianwali,
village of Chakwal, who was enjoying substantial returns from his fruit farming business. Pakistan.
After much consideration, Khan decided to start fruit farming after harvesting wheat in April
2021. Bashir Khan’s friend suggested growing grapes while the government was promoting
the cultivation of olives in the Potohar region. However, Bashir Khan had apprehension
about the fruit farming business. He decided to focus on one fruit planting at a time. To
choose the most viable option, Bashir Khan had to analyse the feasibility of a grape orchard
and an olive garden.

Background
Bashir Khan was a 45-year-old farmer born in the Kallar Kahar region of Pakistan (Exhibit 1
shows a map of Pakistan highlighting the area discussed in this case). His family had been
engaged in the farming business for generations. Khan had one younger brother named
Hameed Khan, who lived in Lahore with his family. Khan studied till matriculation at a nearby
school. After matriculation, he started helping his father in his farming business. He
inherited ten acres of land after his father’s death, of which eight acres were not cultivatable.
Khan purchased another five acres of land and cultivated peanuts and chickpeas in the
hopes of increasing his revenue. However, because of a lack of expertise and low profit
margins, he shifted back to growing the traditional crops of wheat and millet. On average,
Khan yielded 40 maunds per acre from wheat and 25 maunds per acre from millet [1]. He
earned PKR 78,000/acre (US$501.77/acre) from wheat [2] and PKR 47,500/acre (US
$303.61/acre) from millet [3]. Although the government announced a minimum support
price for wheat each year (PKR 1,950/maund for 2021), the government did not offer such
support for millet producers. On the open market, millet was selling at PKR 1,900/maund.
The Kallar Kahar region is a famous recreational spot in Pakistan with natural landscapes
and historical sites. The property value of the Kallar Kahar region increased manyfold
because of infrastructural development, particularly the Lahore–Islamabad motorway
connecting Kallar Kahar to the main cities. Khan’s father owned a small 10 marla [4] plot of
Disclaimer. This case is written
land in Kallar Kahar city centre. With the increased prices in the area, the land’s value solely for educational purposes
reached PKR 12m (US$78,201.37). At various times, Khan had suggested that his brother and is not intended to represent
successful or unsuccessful
Hameed Khan sell the land, which was lying idle, and they could invest the money in a managerial decision-making.
profitable business. However, Hameed Khan did not agree to sell the land, but proposed to The authors may have
disguised names; financial and
give Bashir Khan his share, which was PKR 6m (US$39,100.68), so Hameed Khan could other recognizable information
keep the whole 10 marla of land. to protect confidentiality.

DOI 10.1108/EEMCS-09-2021-0293 VOL. 12 NO. 2 2022, pp. 1-26, © Emerald Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 After receiving his share from his brother, Khan was actively looking for investment
opportunities when he met his childhood friend, Sajjad Ali. Ali was settled in Talagang,
another tehsil of the Chakwal district, along with his family. Ali showed Khan his vineyard,
where he grew multiple varieties of grapes. Ali told Khan that he obtained reasonable
market rates for his products and planned to acquire more land to expand his vineyard.
While walking through the vineyard, Khan tried to acquire more complete information about
the grape varieties, the planting process, the investment required and the market for the
grapes. Khan decided to collect more information about the grape planting process from
additional sources.
A week later, Khan met his neighbour, Samiullah Malik, who had recently visited the
National Olive Festival arranged by the Barani Research Agriculture Institute (BARI) in
Chakwal. Malik informed Khan that the government was promoting olive cultivation as the
soil of the Potohar region was suitable and olives could be easily planted on uncultivatable
land. BARI provided sapling olive plants free of cost to farmers in the Potohar region.
Furthermore, drip irrigation was 70% subsidized for olive cultivators. The government
provided technical services and free olive oil extraction facilities to olive farmers. One
advantage of planting olives was that mixed farming was possible, meaning other crops
could be planted alongside the olives on the same land. He explained that olives could give
promising returns in a few years of planting. Malik and a few other farmers in the region had
decided to plant olives on their land. After listening to Malik, the choice between farming
olives and setting up a vineyard bewildered Khan. He had a decision to make, whether to
plant olives or grow grapes on his land.

Olive planting in Pakistan

The olive plant was first cultivated in Pakistan in 1986 by the Pakistan Agriculture and
Research Council (PARC) under an Italian project called the Fruit, Vegetable and Olive
Project, funded by the Government of Italy. Under this programme, farmers were given
training in processing, cultivation and pest control. In Pakistan, there were many wild
varieties of olive plants such as Olea cuspidata and Olea europea (PARC, 2015). PARC
started many campaigns for olive cultivation in the northeastern (Potohar) and southwestern
(Balochistan) parts of the country. Furthermore, in Khyber Pakhtunkhwa (KP/KPK), regions
such as Karak, Swat, Bannu and Malakand were also suitable for olive cultivation. A total of
2.4 million olive plants were planted under a five-year project plan. BARI distributed and
planted more than 473,265 olive plants in Potohar region (Punjab Agriculture Department,
2017). In the past few years, there had been an upward trend in olive cultivation in Pakistan,
with noteworthy initiatives taken by the government and a 4.13% decrease in the import of
olive products in 2020. Furthermore, Pakistan exported olive by-products and oil worth
$17,968 in 2020 (Ahmed, 2021). The main olive products consumed in Pakistan were oil
and pickles. Olive oil can be classified according to its extraction quality, with extra virgin
olive oil used for salads and raw use, virgin or cooking oil preferred for cooking or sauteing,
pure oil used for massage, skin, hair, etc., and finally pomace olive oil recommended for
high heat cooking.

Process of olive planting

Various products are made from olives, such as oil, pickles, jam and sweets. The most
profitable product of olives is olive oil, which, apart for cooking, is also used in medicine, the
textile industry, cosmetic preparation and food preservation. Olive plants are best suited for
rocky land with a soil pH of 5.5–6.5 and a high gravel content. The olive plant takes five
years to become a fruit-bearing tree, so farmers have to invest pre-operating costs in the
first four years. Olive trees then give fruit for hundreds of years. A mature tree can give from
20 to 40 kg of fruit per year. Ten kilos of top-quality olive fruit can produce approximately 3 L
of edible oil. Olive plants should be pruned in December or January. For olive trees to bear

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fruit at their full capacity, day temperatures have to remain below 25˚C in May and June. In
winter, if the temperature drops to 5˚C –7˚C, olive plants could die. Olive trees are planted
in the spring and fall. If there is no frost, the fall is the best season for planting olives. Olive is
a hard tree, and requires timely irrigation twice a year. In the Barani area, the average
annual rainfall is 400–500 mm. Plants must be irrigated twice or thrice a year if there is no
rain. For the preparation of olive oil, olives are harvested in October when they become
purplish. The olives are crushed mechanically to produce oil. The production process for
olives is provided in Exhibit 2.

Grape production in Pakistan

In 2018, Pakistan cultivated grapes on 15,302 hectares of land with an annual productivity
of 64,317 tonnes. The majority of the grape crop in Pakistan was cultivated in Balochistan.
Other warmer areas of Pakistan such as Rahim Yar Khan, Multan and Bahawalpur also grew
grapes on a large scale. However, Balochistan contributed 98% of the total national
productivity of grapes. Certain regions of Punjab with medium rainfall, such as the Potohar
districts of Chakwal, Rawalpindi, Khushab, Attock and Jehlum, were suitable for grape
production on a commercial scale. Grapes can be grown in a cold and dry climate at high
altitude. Soil which is a sandy loam with low water-holding capacity is most suitable for
grape planting.

Process of grapes production

The cultivation of various varieties of seedless grapes takes three years from planting to first
fruiting. Several varieties of seedless grapes such as Narc Black, Sultana, Cardinal and
Thompson are available in the market (Small and Medium Enterprises Development
Authority, 2018). After land preparation and sowing of seeds, it takes around three years for
the grape tree to bear fruit, and the fruit-bearing life of a grape tree is 10–12 years. The
production capacity of grape trees is 5,850 kg/acre, including the wastage in the first three
years. A model grape farm of 15 acres, with a capacity of 9,750 plants, would be capable of
producing 87,750 kg of grapes per year. Each grape tree is expected to produce about
9 kg of grapes. After implementation, the proposed model would result in fruit-bearing trees
in the third year. It would yield 20% of the fruit in the third year, 50% in the fourth year, 80%
in the fifth year and 100% afterwards. As shown in Exhibit 3, the land for planting is
prepared through harrowing, deep ploughing and levelling. The soil is fertilized with green
manure at least 60 days before planting. One week before planting, the seedbed is
prepared for sowing seeds. A structure for holding the vines can be made of wire and
bamboo or concrete. After the selection and sowing of plants, regular monitoring and
proper care is required, including regular watering and chemical application. Fruit-bearing
plants are harvested carefully and classified and packed as required.

Financial data for feasibility analysis

A distant relative of Khan, Omar Khayam, suggested that Khan conduct a feasibility
analysis for both investment options so he could better predict the returns on his
investment. Khayam had a bachelor’s in commerce with an accounting major and worked
as an assistant accountant in a firm. Khan asked Khayam to help him with the feasibility
analysis. Khan shared the following information with Khayam, collected from several
sources.

Initial investment
The initial investment included the basic infrastructure, furniture and farm development.
Both the grape and olive farms required some identical development. For instance, both

VOL. 12 NO. 2 2022 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 3

 required warehouses for fruit packaging and storage (700 square feet), raw material
storage (200 square feet) and a labour house of 300 square feet. The labour house included
a small bedroom, kitchen and bathroom. The construction cost was PKR 1,200 per square
foot (where 1 US$ = 153.45 PKR). The furniture requirement included ten chairs (PKR 2,000
each), a table (PKR 8,000) and a filing cabinet (PKR 8,000 each). The farm development
items were different for each type of farm. The grape farm required concrete pillars and
steel wires or pipes to support the grapevines. It required 200 pillars per acre, and each
pillar cost PKR 900, as well as 4,000 wires (PKR 150 each). For irrigation, Khan needed a
tube well and a drip irrigation system that cost PKR 400,000 and PKR 850,000, respectively.
However, the government promoted olive farming in the Potohar region and offered a 70%
subsidy on the drip irrigation system. Considering the high costs of the drip irrigation
system and his limited funds, Khan decided to install the drip irrigation system for the olive
farm only, which also required a water reservoir at the cost of PKR 200,000. He also
decided to purchase a weighing scale (PKR 10,000) for fruit packaging.
Further farm developments included planting and manuring of the fruit saplings.
Approximately 650 (110) grape (olive) saplings per acre were recommended. The setting
provided an ideal space with exposure to sunlight that would be helpful for the growth and
productivity of the plants. Khan needed 9,750 (1,650) grape (olive) saplings for 15 acres.
The cost of each sapling was PKR 50 (100) for grapes (olives); however, the government
offered a 100% price subsidy on olives to promote olive farming in the region. The cost of pit
digging and filling (i.e. planting) per sapling was PKR 4. The pre-operating costs included
the initial manuring and irrigation to prepare the land for planting, requiring 2 tons of animal
manure (PKR 6,000 per ton) and an irrigation cost of PKR 25,000. Khan kept PKR 200,000 in
cash for future use. The breakdown of the initial investment is given in Exhibit 4.

Annual expenses
Annual expenses included routine and periodic operational expenses (see Exhibit 5). Khan
told Khayam that he preferred organic farming. Khan was fond of green farming and
intended to use natural fertilizers while avoiding chemicals. Grapes require, on average, 2
tons of green manure per acre and a minimum of 2 kg of chemical fertilizer to maintain the
recommended levels of nitrogen, potassium and phosphorus in the soil. The fertilizers cost
around PKR 500 per kg and the green manure cost PKR 6,000 per ton. Khan also had to
arrange for a pesticide spray to reduce the risk of fungal or insect attacks and plant
diseases.
Khan estimated the annual cost of irrigation to be PKR 25,000. He expected the monthly
operational expenses of the farm to be: communication expenses of PKR 3,000 per month;
office expenses of PKR 10,000 per month; and electricity expenses of PKR 5,000 per
month. Once the fruits were harvested, Khan would have to pack and transport them to the
sellers. The packaging cost was PKR 50 per 10 kg box. Grapes were expected to give their
first harvest in the third year. Being close to several other farms, Khan would have the
advantage of cooperating with other farmers in terms of transportation, with charges as low
as PKR 2 per kg. In the case of olives, the expenses such as fertilizer and green manure,
irrigation, packaging, pesticides, labour, a supervisor, communication, electricity and
general office expenses remained the same.
Apart from these expenses, Khan assumed a 10% depreciation rate on furniture and
fixtures, 10% on office equipment and 5% on buildings and infrastructure. He also assumed
a 20% amortization rate on the pre-operational cost.

Labour requirements
Khan’s friend recommended he hire a full-time, experienced farm manager who had
sufficient knowledge to manage a farm of this size. He would also need at least one

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permanent worker. The estimated monthly salaries were PKR 25,000 for the manager and
PKR 18,000 for the worker. He would also need to hire six temporary workers for a minimum
period of 60 days (during cultivation, pruning and harvesting) and estimated he would pay
them PKR 15,000 per month (see Exhibit 6).

Revenue
The sales price for the grapes and olives was PKR 100 and PKR 180 per kg, respectively.
The grapes would give their first yield in the third year, while the olives in the fifth year. The
grapes yielded 20% of their full production in the third year, 50% in the fourth year, 80% in
the fifth year and 100% afterwards. Olives would start producing in the fifth year, yielding
60%, with a 10% increment every year till the eighth year. The yield should touch 95% in the
ninth year and 100% in the tenth year. The grapes and olives would have an average life of
11 and 100 years, respectively. The plant replacement cost for grapes was PKR 60 and for
olives PKR 75, including the price of saplings and pit digging and filling. Khan assumed a
10% average inflation rate in the following years. Exhibit 6 sums up revenue-related
assumptions.

Way forward
Khan collected all the financial information for the cultivation process of olives and grapes,
Keywords:
including its pros and cons, from multiple sources. He provided this information to Khayam
Financial management,
for the feasibility analysis. Khayam, who also had access to Khan’s past financial records, Capital investment,
estimated Khan’s rate of return to be 20%. Khan had to decide between olive and grape Small businesses,
farming as an investment opportunity to fulfil his long-standing ambition. Financial analysis

Notes
1. 1 maund = 40 kg.
2. Earning on wheat per acre = price per maund  yield per acre = PKR 1950/maund  40 maunds/
acre= PKR 78,000/acre.
3. Earning on millet per acre = price per maund  yield per acre = PKR 1900/maund  25 maunds/
acre= PKR 47,500/acre.
4. 1 marla = 272.25 square feet.
5. For a detailed discussion of the uses, preferences, theories, characteristics, contexts and
methodology of capital budgeting techniques, see Sureka et al. (2021).

References
Ahmed, K. (2021). Pakistan focuses on the domestic cultivation of olives to bring down import bills. Arab
News. Retrieved from https://arab.news/855qd

Ahmed, T., Kanwal, R., Hassan, M., Ayub, N., Scholz, M., & McMinn, W. (2010). Coagulation and
disinfection in water treatment using Moringa. Proceedings of the institution of civil engineers – Water
management, 163(8), 381-388. doi: 10.1680/wama.900080.

Punjab Agriculture Department (2017). Pre-Feasibility study: Olive oil extraction units, Lahore:
Government of Punjab. Retrieved from www.agripunjab.gov.pk/system/files/5%20-%20Olive%
20Processing%20Unit.pdf

PARC (2015). History of olive in Pakistan, Lahore: Pakistan Agricultural Research Council. Retrieved from
www.parc.gov.pk/index.php/en/olive-history-of-olive-in-pakistan
Small and Medium Enterprises Development Authority (2018). Pre-Feasibility study grape farm, Lahore:
Ministry of Industries & Production, Government of Pakistan (PREF-No 120).

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 Exhibit 1. Map of Pakistan highlighting key areas of Potohar region

Figure E1

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Exhibit 2. Production process flow of olives

Figure E2

Land Arrangemens

Plant Selecon

Soil Preparaon

Graing

Yielding

Classificaon

Treatment using
Brine Soluon

Packaging of
Olives

Exhibit 3. Production process flow of grapes

Figure E3

Land Preparaon

Soil Ferlizaon

Selecon of
Plants

Plant Mulching

Farm Structuring

Plants Protecon

Furits Harvesng

Grading/
Packaging

VOL. 12 NO. 2 2022 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 7

 Exhibit 4. Initial investment

Table E1
Description Grapes Olives

Building and infrastructure requirements

Packaging and storage room 700 sq. ft. 700 sq. ft.
Labour house 300 sq. ft. 300 sq. ft.
Storeroom for fertilizer, etc. 200 sq. ft. 200 sq. ft.
Construction cost (per sq. ft.) Rs. 1,200 Rs. 1,200
Furniture and fixture requirement
Chair/Sofa @ Rs. 2,000 each 10 10
Tables @ Rs. 8,000 each 1 1
Filing cabinets @ Rs. 8,000 each 2 2
Farm development
Concrete pillars (espalier) per acre 200 –
Cost of each pillar (espalier) Rs. 900 –
Number of steel wires/pipes 4000 –
Cost of each wire/pipes Rs. 150 –
Tube well cost Rs. 400,000 Rs. 400,000
Drip irrigation system Rs. 850,000
Subsidy on drip irrigation system 0% 70%
Water reservoir Rs. 200,000
Weighing scale Rs. 10,000 Rs. 10,000
Total number of saplings 9,750 1,650
Cost of each sapling Rs. 50 Rs. 100
Subsidy on saplings 0% 100%
Pit digging and filling cost (Rs. 4 per unit) 39,000 6,600
Pre-operating costs
Manure per acre 2 ton 2 ton
Cost of manure per ton Rs. 6,000 Rs. 6,000
Cost of irrigation per acre Rs. 25,000 Rs. 25,000
Working capital
Cash Rs. 200,000 Rs. 200,000

Note: US$1 = 153.45 PKR

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Exhibit 5. Annual operational costs

Table E2
Description Grapes Olive

Fertilizer per acre 2 kg 2 kg

Cost of fertilizer per KG Rs. 500 Rs. 500
Manure per acre 2 ton 2 ton
Cost of manure per ton Rs. 6,000 Rs. 6,000
Cost of irrigation per acre Rs. 25,000 Rs. 25,000
Cost of pesticide spray per acre Rs. 5,000 Rs. 5,000
Packaging cost of each 10 kg box Rs. 50 Rs. 50
Transportation cost (Rs. 2/kg in collaboration with other farmers) Rs. 2 Rs. 2
Farm manager for 12 months 1 1
Farm manager monthly salary Rs. 25,000 Rs. 25,000
Permanent workers required for 12 months 1 1
Per month salary of permanent worker Rs. 18,000 Rs. 18,000
Temporary workers required for 2 months 6 6
Temporary workers monthly salary Rs. 15,000 Rs. 15,000
Communication expenses (per month) Rs. 3,000 Rs. 3,000
Office expenses (per year) Rs. 10,000 Rs. 10,000
Electricity expense (per month) Rs. 5,000 Rs. 5,000
Note:  US$1 = 153.45 PKR

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 Exhibit 6. Basic assumptions

Table E3
Description Grapes Olives

Area of the farm (in acres) 15 15

No of saplings per acre 650 110
Average life of the plant (years) 11 100
Replacement cost per plant (in Rs.) 60 75
Fruit production/plant (in kg) 9 30
Fruit production/acre (in kg) 5,850 3,300
Days operational/year 330 330
Investor required rate of return 20% 20%
Sale price per kg (in Rs.) 100 180
Year 0–2 production 0% 0%
Year 3 production 20% 0%
Year 4 production 50% 0%
Year 5 production 80% 60%
Year 6 production 100% 70%
Year 7 production 100% 80%
Year 8 production 100% 90%
Year 9 production 100% 95%
Year 10 production 100% 100%
Inflation rate 10% 10%
Depreciation method Straight line
Depreciation rate 10% on furniture and fixtures
10% on office equipment
5% on building
Amortization rate 20% on pre-operating cost
Note:  US$1 = 153.45 PKR

Corresponding author
Yasir Riaz can be contacted at: yasir.riaz@namal.edu.pk

PAGE 10 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 12 NO. 2 2022