Suri end product seminar by Julienne

Arriving

Al with Joe and Adam from Openherd.com checking who is watching the event on line.

Pre auction meeting with our helpers and consignors

Julie from Snowmass and Julienne

The onsite pen sale bidding results monitor

Lunch

Some of the barn huacayas in the pen sale.

The future is in good hands!

Que pasa.....what's up?

Fall is here and gone! We had alpacas wandering the pastures adorned in oak leaves looking like Halloween monsters. Now they are playing in the mud! Since our auction in Sept. it's been bloody crazy. And we actually thought things might get a little easier after the four or five months of our lives dedicated over summer to trying to pull off the Pucara Premium Reserve event.

Yeah I know its been a while since we sent out a newsletter! We put this Newsletter up Nov 5, didn't hear from anyone and so have edited again this month adding some really important info in the last paragraphs to save doing a new newsletter. The main reason not doing an Sept-October newsletter being the aftermath of the auction and the second reason being Jude going home to Australia for three weeks to judge the Australian National Alpaca Show and to catch up with her family who are still grieving her mother's passing. I couldn’t go because we were too short handed. Putting on the Premium Reserve was a huge cash drain for us and so straight after the auction we laid off three of our field workers, two who were employed two months before the event to help us get the farm ready. We also put our manager back to three days. It was all about economic reasoning! But it made me a little busier outside thus with a little less time for the office.

While the financial rewards were disappointing, for reasons you'll see below The Pucara Premium Reserve Auction and Pen Sale that we held labor Day weekend was seen in the industry as a huge success. We actually had people sending emails and letters saying it was the best event staged in the industry in about four or five years. They were saying it was like “the good old days”. People loved the seminars, raved about the food, spoke highly of the venue and applauded the quality of the animals in the event. So I guess we impressed someone. In fact we attracted 300 plus people from over 30 different states. Now if you asked me if it was financially worth it right now I’d declare it a failure. Not only for Jude and I but for some of  the consignors, like you folks, who had alpacas in the auction or pen sale. It was not a disaster but disappointing. There are several levels to this summation so bear with me.

Jude and I spent months getting the place ready and crafting a marketing campaign of emails, print, online advertising, calendar advertising, RSVP cards and a fantastic catalog that cost $30,000 to design, print and mail to 4,500 people. The two of us spent three weeks constructing a dedicated website at www.pucarapremiumreserve.com . I spent hours instructing consignors how to market the event and they did a good job. We had seminar speakers who were awesome…experts in their field….Julienne Gelber from Australia who developed suri cloth that her haute couture manufacturing contacts in Italy raved about…and we featured Julie Skinner from Snowmass Alpacas who has not talked publicly for fifteen years. Friends from here in town sang folk tunes during lunch and Sam went from table to table just before the auction singing opera…it was powerful! Then the bag pipers lit the place up in honor of Jude’s mom who was Scottish. The crowd was amped.The attending folks consumed $15,000 of food and grog! We did our best to set the scene for an energetic event. Our retirement fund took a big hit!

Generally speaking, alpaca auctions are long, drawn-out affairs with 80-90 lots and frankly, people have gotten tired of that format. The Premium Reserve format was a bit different in that we had a relatively small number of true auction lots, 32 lots, with big named breeders and highly sought-after pedigrees in order to bring in the crowd. In addition, we had a large pen sale which included a number of barn animals. We believed this was the best way to attract attention, get backsides on seats and give us a chance to sell barn animals to active buyers in a hands-on fashion. Traditionally auctions tend to appeal to those willing to fork up for big purchases and were almost non-inclusive for existing or potential breeders with lesser budgets. We wanted a big crowd, energy and the event being inclusive of everyone.

First of all the auction went well. People raved about our auctioneer. We used a new team who were dynamic. I ranted and BS'ed on the microphone introducing animals and these guys went to town making the auction a fun deal. We had six lots that did not sell but we averaged $16,520.83 for the lots that did sell. Up until that auction I think it was the highest average achieved at auction in the industry for 18 months. These were mostly multiple times ribbon winners from ours and other breeders 2010 show teams. Its way under what was being achieved three and four years ago BUT these are different times. As mentioned above there were no Barn alpacas in the auction. There were some in the pen sale.

Now that’s where things got sloppy! Some of those did sell. Your next invoices/statements will reflect that. The auction ran early afternoon until about 3.30-4.pm Then the pen sale animals were up for bidding on Openherd.com who did a fantastic job for us not only televising the auction but running the online auction of the pen sale. Well that’s until it got prematurely stopped! At about 5.30pm I think the website listed the bidding as finished due to some technical glitch. Now nearly all the online bidders who were not attending the auction, and there were several, thought that was that, and being frustrated, many logged off.  Adam and Joe from Openherd.com FREAKED (they were at the event manning their PC’s running the whole thing) They fixed it very quickly and sent out an email immediately to all those that were on line bidding…all a bit late if you were not logged onto your PC after the close down. Anyway several bidders did come back. Then another 30 minutes or so later it happened again. You will be proud of me. I did not kill anyone. At this stage bidding had closed on about 20 lots…there were 40 to go. More panic. Mayhem etc etc but we lost a lot of bidders. This problem affected Jude and I big time or our consignors  like you guys because we were mostly in the last 40 lots. I placed our animals in the last 40 lots  so we would get more bidding time. I did not realize some technical little gremlin would pee on our party. The guys at Openherd.com got the program going again and we managed to sell a few more with people who were in attendance at the auction and to people who stayed on their PC’s via the openherd.com website. But yes, it affected sales big time.

Meanwhile everyone else in attendance on farm were having a great time drinking copious amounts of Kahuna Blue cocktails (the Pucara version of the Blue Motorcycle) eating a delicious banquet and dancing to a really cool Beatles covers band. Jude and I meanwhile looked at one another wondering how the hell we were gunna pay for it all!

In the end we sold 23 of the 61 pen sale animals at about an $8,000 average which seems to be the "new normal" for alpaca breeding stock these days for average to good quality sold off farm, if you can get people to visit!! Anyway it was a minor miracle considering the above schemozzle. But wait, I have not finished! It should have been several more lots. We had a hoax online bidder. A woman from Georgia purchased several lots that she defaulted on! Her name is Christine Gutterman.Yep, listed the alpacas straight away on her website trying to sell them but meanwhile never paid us a dime. According to Celebrity Sales who run most other alpaca auctions this has only ever happened once before. This is also a reason why its taken so long to get back to you because we and our attorneys were not sure of the legalities. But wait! The same woman did this to three other alpaca auctions in all defrauding us as a group of 24 or more alpaca sales. You might think a warning would go out but it took a few weeks for the auction houses to realize they were not getting a check thus no one could warn anyone else. Needless to say she has chosen her fate. One of the alpaca farms who lost sales is owned by the daughter of the bloke who invented the co-axial cable. He’s got a dollar or two. One of the other farm owners owns the power company who supplies most of your power over there. The third farm is owned by a good friend in Oregon and business man who specializes in winning lawsuits. The woman is in deep doo doo but it doesn’t help us at all. She has no money! Yep Jude and I look at one another and say, why us?

It's been our earnest desire to sell barn animals and produce much needed cash for all of us so we left nothing to chance and put our all into this event. Financially Jude and I cleared our dedicated expenses for the auction such as food, alcohol, entertainment, marketing, commissions to the auctioneer, rental for tables, stage, curtains, internet satellite connection, sound sytem engineer and equipment, phone system, Openherd.com fee, event photographer, on and on it goes, but got no where near paying for all the one off infrastructure we put into place for the event. The event cost us about $90,000, the one off infrastructure about $100,000. That included the new barn to store all our stuff from the old barn that hosted the auction. All the improvements to the old barn, new wiring, lighting, satellite for internet, painting, insulation, and 20,000sq feet of asphalt floor. New pens, cleaning up the place, new fences and two extra workers for about three months…all that stuff. We will get a dribble of money over the next three years on time payments being made on sold auction animals to help cover that. IF WE DO IT NEXT YEAR??? at least we won't have those expenses. But everyone really did rave about the event and want it again. We were getting calls from those that didn’t attend trying to make sure that we have it again next year!!!! We are also getting calls from very respected farms for us to consign some big hitter stud males next year. But really, so what!!! We will only do that if it helps ceate the environment to help us sell "on farm" alpacas.

So would we do this again? Maybe, if we can stay out of bankruptcy! That is a tongue in cheek comment, needless to say, our retirement funds suffer again. There is nothing left. As we say at home, "we took a punt" and it wasn't quite the result we had in mind. We talk daily about this. We generally think we missed a huge opportunity because of things that we could not control. We achieved what we set out to. Technology and one idiot let us down. There is a strange irony to this hoax bidder however. If the technology in the online pen sale had not failed a second time this hoax would have purchased many more lots. We also learnt heaps about cutting expenses and  being more aggressive with having more Pucara International and barn animals in the auction. The big thing that we achieved is many many more breeders are impressed with us, our farm and that we gave to take.

There is some good news coming out of the technology glitch. Openherd.com sponsored a Pucara Premium Reserve Thanksgiving on line auction that started Nov 14, 2010 and closed the following Sunday. We had several Barn alpacas included. A couple of barn alpacas sold. We sold a couple of our own and the good thing is that it created a bit of ongoing business. Here is a link http://www.openherd.com/auctions/pucara-premium-reserve-thx/ .

It does appear that the last few auctions are starting to defy the downward trends of the last two years. Our auction, The Snowmass Auction, The Parade of Champions, The Magical Farm Auction and The Double O Good auctions fared better than previous year averages. But they are the exception. Not by much but it did not recede. The reality is that these auctions, owned or run by a handful of breeders are faring better than the rest of the industry. Their alpacas are branded and marketed as the best. They do well at shows and are mostly prominent breeders who keep their image out there. The Catch 22 for many of the other breeders is that they are pulling back, attending less shows, not buying breedings or alpacas of superior quality that will get them into the upper echelons of sales because they have been affected more than most by the recession. In response they have dropped their prices to levels depending on their desperation. Now having said that the above auctions represent about 500 plus alpacas.Having attended them all or watched on line I can vouch that at least 60% of the buyers were new breeders or smaller breeders seizing good buying opportunity.

What am I waffling about here? I guess I am trying to inform/educate your expectations. There are top end buyers and there are buyers seeking opportunity. And there are many breeders retreating even though new breeders join the industry. Many of them are selling animals at very low prices, from $1000 to $5000. There seems to be a middle at about $6-9,000 for alpacas of good merit and well marketed, then there are similar quality from well branded farms that are identified as the best breeders that sell at $10-$15,000. Then there are the big hitters. Over the last 12 months the top auctions averaged around $16-18,000 the rare occasion of individual animals selling as high as $90-100k. One alpaca in Feb. at Snowmass Alpacas auction sold for $675,000 After that auction they sold two half shares of males for $250,000 each!!!!

Right now on farm sales are not faring any better here although there is more inquiry than what we have seen in some time. Not much but its there. A precedent is building again in pricing perhaps as a result of the auctions. We have dropped the prices of all of our sales animals to compete and to try and at least get sales at lower price points to cover expenses. Other farms are telling me they are seeing more interest. It has been really quiet here over the last several months but I am seeing a bit more traffic to the website and we are getting a few more calls. But with millions out of work, the tax laws in limbo, a divided congress and generally weak economic growth, the number of buyers in the market when we started this venture are just not there today. So, we're trying some new things to attract potential buyers. We are purchasing a software system with Openherd.com that enables us to have our own online auctions and we’ll take advantage of that now the Thanksgiving online auction gave us some success.

Also very soon I should have our new blog up along with an opt-in newsletter. Its called "SPIT OFF"!!! APPARENTLY, and I say that with full disclosure of having no idea if it is a worthy task, but all the new rage is following blogs and keeping clients and potential updated with news and things of interest to create communication for sales. I’ll give it a burl for a six months and see what happens. Last week we tried buying priority sponsored key word links on Google through an optimization company. For instance the word “alpaca” cost $600 for the month. We also purchased the word “alpacas” to dominate it for a while. Every time the word alpaca/s is searched on the internet on the results page a sponsored link appears at the top of the page often with a pink highlight background for Pucara International which they then can click on to go to our website. The word alpaca is supposed to get on average 348,000 searches in a month over the whole USA. We are theoretically on many of those search pages, 11,000 according to a report I get. One percent of them click through to our website. Its early but the results so far are a marginal increase in traffic to our website. Nothing ventured nothing gained.

Now the main reason for editing the newsletter apart from trying to get you up to date ( and we were hoping you were all watching what we were doing through the Premium Reserve auction website) is that Jude and I were very keen to arrange face to face meetings. It isn’t that we were not before, but the tyranny of distance and our schedule just would not allow it. We tried to initiate this back just before the PPR event but got nowhere with it. When I originally posted this newsletter a month ago we thought we could get over to the right hand side of the country before Christmas, but thats now impossible. Jude has consultancy or judging work every weekend going into early January. We know you have outlaid financially for the barns with very little return as of this date, apart from some very lucrative tax concessions,and I have to emphasize this happened for reasons way beyond our control. Jude and I, as well as Tim and Anita made huge financial commitments to acquiring the right stud males, providing infrastructure and staff for the care of the animals plus have spent a huge amount of money and time in marketing for us all. The carrying cost and work involved in managing the animals is on-going 24/7. With reduced cash flow, we have had to take on more of the hands on animals management due to the staff reductions mentioned above. So its not rewarding you and its meaning loss of income and more work for us. But I emphasize we want this to work for everyone. Naturally despite not being able to travel soon to you we need to know everyone’s thoughts and we’ll be guided by your decision of how to proceed forward.

I have an idea that will help you all. It will mean in the future you will have no more costs by giving us an increased ownership in the Barn alpacas. If you agree, from that date on, there will be no more expenses billed to you. Any current unpaid bills will be covered firstly by future sales before you will share in the pro-rata split of sale proceeds . This means if you are up to date you will share in the sale proceeds pro-rata of your share directly from any sale of your particular barn alpacas in the future. If you are behind it means past outstanding amounts will have to be covered by the sales. Pucara will get an increased ownership of alpacas managed at Pucara's farm and the same for animals at Tim's where he will get increased ownership of the animals boarded there. I don't think it would be worth our while if we didn't get a 50% share. This way the herd can continue to grow and you have no costs and we get some compensation for all the care and breeding. It will be a hardship for Jude, Tim and I because we will have to pay for everything into the future but hopefully you'll agree that giving us an increased ownership will compensate us for that. We think its a perfect answer for you.You will have no more costs, at all! It's quite possibly hardship for us! Hopefully the economy will continue to slowly recover and we all get the chance to bounce back. The alternative solution for the barns may be very ugly. The alternative…a wholesale auction. That is the last thing I want. Prices will be crap. You’ll be angry and we’ll be broke! I am dead set against it. I will refuse to have anything to do with it. Financially it will be bad for all of us and it will reflect badly on Pucara and the industry. Ultimately that is your call.

Now I will send an email to everyone in Barn Two and Barn Three independently of this newsletter. I will also call everyone. Hopefully I have new email addresses or phone numbers if you have changed them. We held back on the Nov. invoicing because two auction animals were hanging in the air with slow deposit payment. We will send them this week. Jude and I would really like your immediate attention to the idea above because it gives us direction and if done quickly will mean you have less invoicing.

Well, we’re still positive about the industry. We have to be. We have to make it work. Its our only source of income. I have spent the last month reducing overheads, reviewing our marketing and getting alpacas off the property that are not paying their way (mostly gelding quality males). Whilst the above Barn solution is going to be added stress to us I we think its extremely generous and an immediate ease on you all. You do well, we do well and vice versa. The perception of the PPR in the market place plus a little recent activity helps qualify that hope, and besides, maybe we can prove hard work makes good luck!