9. grape juice

8/3/2019 9. Grape Juice

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GRAPE JUICE


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TABLE OF CONTENTS

I. Executive Summary

II. Sales and Marketing

2.1 Product Description

2.2 Competitor

2.3 Location

2.4 Market Area

2.5 Main Customers

2.6 Total Demand

2.7 Market Share

2.8 Selling Price

2.9 Sales Forecast

2.10 Promotional Measures

2.11 Marketing Strategy

2.12 Marketing Budget

III. Production

3.1 Production Process

3.2 Fixed Capital3.3 Life of Fixed Capital

3.4 Maintenance and Repair

3.5 Source of Equipment

3.6 Planned Capacity

3.7 Future Capacity

3.8 Terms and Conditions of Purchase of Equipment

3.9Factory Locaton and Layout

3.10 Raw Material Needed

3.11 Costs of Raw Material

3.12 Raw Material Availability

3.13 Labour

3.14 Costs of Labour

3.15 Labour Availability

3.16 Labour Productivity

3.17 Factory overhead Expenses

3.18 Production Costs

IV.Organization and Management


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4.1 Form of Business

4.2Organizational Structure

4.3 Business Experience and Qualification of the entrepreneur

4.4 Pre-Operating Activities

4.5 Pre-Operating Expenses

4.6 Office Equipment

4.7 Administrative Expenses

V. Financial Plan

5.1 Project Cost

5.2 Financing Plan and Loan Requirement

5.3 Security for Loan

5.4 Profit and loss Statement

5.5 Cash Flow Statement

5.6 Balance Sheet

5.7 Loan Repayment Schedule

5.8 Break Even Point (BEP)5.9 Return on Investment (ROI)

5.10 Financial Analysis


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I. EXECUTIVE SUMMARY

The project can create employment for 40 persons. In addition to supply of the domestic needs,

the project will generate Birr 72.04 thousand in terms of tax revenue. The establishment of suchfactory will have a foreign exchange saving effect to the country by substituting the current

imports.

This profile envisages the establishment of a plant for the production of grape juice with a

capacity of 100 tones per annum.

The present demand for the proposed product is estimated at 110.44 tones per annum. The

demand is expected to reach at 263.7 tones by the year 2015. .

The plant will create employment opportunities for 40 persons.

The total investment requirement is estimated at Birr 5.87 million, out of which Birr 2.55 million

is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 12.46% and a net present

value (NPV) of Birr 1.37 million discounted at 8.5 %.

II. Sales and Marketing

2.1. Product Description

Grape juice is sweetened and preserved non alcoholic beverage extracted by squeezing or

crushing grape, an edible, sweet, juicy fruit or berries that grows on a woody grape vines. Grape

fruit and the juice consists of water 89.2%, food energy 172 kJ., proteins 0.5 g., fat 0.1g.,

carbohydrates 9.8g., and ash, calcium, phosphorous, iron, sodium, potassium, vitamin A,

thiamin, riboflavin, niacin and ascorbic acid in small amount. Grape used to make juices must

have a pronounced flavor combined with high acidity and moderate sugar content. The major

consumers of the grape juice are house holds, supermarkets, hotels and restaurants, hospitals and

for export.

Processing of fruit juice should comply with Ethiopian Standard (ES 360:2001). The raw

materials, additives and the processing procedures should be selected as per the Standard.


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2.2. Competitors

In brief this type of product by its very nature is new in Ethiopian markets. However it can beview as a perfect substitute for the aforementioned exemplary beverages, in this respect it

would have indirect competitors product in the market. But this product, by its very nature

would have especial feature scientifically proven benefits besides its content of nicotine thatwould be addition to users. As we have tried to mention some of its chemical content it

would be beneficiaries for users and it can simply found and manufactured in the country so

that it would cost effective and competitive.

2.3. Location

This plant that would produce the product possibly located in Addis Ababacity Administration. The place is selected because it is an ideal place for the competitiveness

of the product. Addis Ababa as early developed city in the country its infrastructure more

than enough power wise, road wise and also others. Furthermore, the city is at almost equalkms from to ports Djibouti and Barbara. the future infrastructure like rail ways would shorten

the market at center of the country and to the port tremendously.

2.4. Market Area

Since the plant that could produce the product located around the Addis Ababa the market area

would be proposed national as well as international market. The frequent and the amount users ofgrape juice found in significant number in central country and eastern part of the country, namely

Dire Dawa city and the surrounding would one large perhaps the significant one in the country.

This is because when we look at the users of grape juice in this area would consume it. Thisproduct would shorten their consumption of their time much more even doesnt require one since

it can be consumed easily while working their jobs. The other market niche in the country would

be eastern part of the country and its surrounding this area put second because of its very naturethe consumer of grape juice would use much time even they use it for time taking recreation.

However they are much more consumer of it in quantity, therefore the product would be

definitely consumed at a larger amount. While we are focusing mainly not solely on these are butthe product would also go to every part of the country, the main concern would an international

market especially middle east and south east Africa for a while but later on it would expand the

market area in the world. Mainly these are got the focus at the first stage were because there are a

number of beverage consumer even the grape as it is.

2.5. Main Customers

The main consumer of this product as a bundle, before its processed limited to adultsbecause its considered as a drug by majority of the population. However as the bundle of

grape processed as per the content of its nicotine the product would target at all age group

and sexes. As we have tried to mention in the above section proposed customers in themarket area would be all age group, however the main and significant one are adults of all

sex. These customers initially reached through retailers of the grape bundle since the product

is new by its very nature should be sold in line with existing unprocessed one. Later on it can


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be sold as whole seller as well as retailer when the product is known to the customers very

well.

2.6. Total Demand

This product is new by its very nature, therefore projection of the demand would be difficult.

But we would take the substitute of the product like Pineapple juice and would try to narrate

the demand of the product as unprocessed bundle. Only in Addis Ababa city alone there

would be more than hundred tones of grape consumed, these would go triple in the other partof the country. The amount of consumption in the middle-east and south-east Africa would

be most probably goes beyond all these because the product is exported from here in a

significant amount beside the grape bundle. We would try to over view the demand of thePine apple juice in the country to see the demand trend of the substitute of the product.

Mass consumption of processed and packed juice is not widely accustomed by the Ethiopian

population. This could be mainly due to the availability of fresh fruits at a comparativelylow price and none a viability of locally processed and packed juices at a reasonable price.

However, few high income households currently buy expensive fruit juices imported from

aboard.On the other hand when urbanization expands, purchasing power of the population increasesand change in the consumption habit occurs there will be a growing demand for processed

and packed juice. Moreover, there will be a good export market in neighboring countries and

the Middle East since it is desired by the population.With respect to past supply all derives from import since there is no grape juice canning plant

in the country. Table 3.1 depicts the import of canned grape juice in the past five years

(1999-2003).

Table 1.1 IMPORT OF GRAPE JUICE (KG)

Year Import

1999 15450

2000 14812

2001 40532

2002 22134

2003 19827

2004 27946

Total 140701

Average 23450

Source: - Ethiopian Customs Authority.

The data on import of grape juice does not show any trend and hence it is characterized withsignificant fluctuation. For example, the imported quantity during the years 1999 and 2000

which was about 15,000 kg has shown a sharp increase in 2001 i.e 40532 kg. This does not

stay long and declined to 22, 134 kg and 19827 kg by the years 2002 and 2003. Again the

import figure has rise to about 28 thousand kg in 1994. In general, however, the domesticconsumption (import) of grape juice in the country on the average has increased from about


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15,000 kg in the years 1999-2000 to 27,609 during 2001 -2004. Therefore, if the product to

be introduced is competitive in price and quality and proper promotion is worked out thelocal market is expected to absorb twice of the average level of import doing 2001-2003.

Hence, the current effective demand that would be expected in the local market is about

55,220kg. Assuming the same amount of grape juice will be exported to the neighboring and

Middle East countries the total effective demand is estimated at 110,440 kg.

2.7. Market Share

While looking for the products market share we would again go back to the amount utilized as a

bundle of grape, since we have tried to put the amount of grape bundles consumed the productwould not meant to substitute all the unprocessed one by the processed one but at least it would

share considerable market share. Since the consumption of grape by its nature is time taking andimpacts the works of the consumer significantly. The innovative product would tremendously

reduce the time wasted by consuming the product. Therefore it would contribute not only byreducing the time of consumption but also through providing extra energy and power that would

increase the efficiency of the workers throughout their concerned professionals.

Projected Demand

As urbanization expands and income rises there is a shift towards more expensive foods suchas fruit juices. In the major cities of Ethiopia such as Dire-Dawa, Addis Ababa, Nazareth

and the like there are number of high and middle income groups who can afford to buy more

expensive food products such as canned grape juice if the product is made available in themarket.The above situation leads to the conclusion that the future demand for grape juice is mainly a

function of urbanization, income, price and change in the consumption habit of the

population. Moreover, if the product is supplied in competitive price and quality the exportpotential in neighboring countries and the Middle East is very high. Therefore, considering

all the above factors, demand for fruit juice is forecasted to grow at the average of 10% per

annum. Accordingly, as shown in Table 3.2 the demand ranges from 135325 kg in 2008 to263710 kg by the year 2015.

Table 1.1 PROJECT DEMAND FOR GRAPE JUICE (KG)

Year Projected Demand

2006 110,440

2007 123,023

2008 135,325

2009 148,858

2010 163,744


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2011 180,118

2012 198,130

2013 217,943

2014 239,737

2015 263,710

Past Supply and Present Demand

Mass consumption of processed and packed juice is not widely accustomed by the Ethiopian

population. This could be mainly due to the availability of fresh fruits at a comparatively low

price and non a viability of locally processed and packed juices at a reasonable price. However,

few high income households currently buy expensive fruit juices imported from aboard.

On the other hand when urbanization expands, purchasing power of the population increases and

change in the consumption habit occurs there will be a growing demand for processed and

packed juice. Moreover, there will be a good export market in neighboring countries and the

Middle East since it is desired by the population.

With respect to past supply all derives from import since there is no grape juice canning plant inthe country. Table 3.1 depicts the import of canned grape juice in the past five years (1999-

2003).

Table 1.2

IMPORT OF GRAPE JUICE (KG)

Year Import

1999 154502000 14812

2001 40532

2002 22134

2003 19827

2004 27946

Total 140701

Average 23450


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Source:- Ethiopian Customs Authority.

The data on import of grape juice does not show any trend and hence it is characterized with

significant fluctuation. For example, the imported quantity during the years 1999 and 2000

which was about 15,000 kg has shown a sharp increase in 2001 i.e 40532 kg. This does not stay

long and declined to 22, 134 kg and 19827 kg by the years 2002 and 2003. Again the import

figure has rise to about 28 thousand kg in 1994. In general, however, the domestic consumption

(import) of grape juice in the country on the average has increased from about 15,000 kg in the

years 1999-2000 to 27,609 during 2001 -2004. Therefore, if the product to be introduced is

competitive in price and quality and proper promotion is worked out the local market is expected

to absorb twice of the average level of import doing 2001-2003. Hence, the current effective

demand that would be expected in the local market is about 55,220kg. Assuming the same

amount of grape juice will be exported to the neighboring and Middle East countries the total

effective demand is estimated at 110,440 kg.

2.8. Selling Price

The current selling price of grape juice ranges from Birr 15-20 per litter. Taking this price as a

reference and allowing margin for wholesalers and retailers, a factory-gate price of Birr per 18

per litter is proposed for the envisaged project.The existing food and beverage distributors /whole sellers and supermarkets could be used as an

outlet for the product.

2.9. Sales Forecast

2.10. Promotional Measures

2.11. Marketing Strategy

2.12. Marketing Budget

III. Production3.1 Production Process

The most important steps involved in processing juices are:

- Selection and preparation of fruits,

- Extraction of juice,

- Straining, filtration and clarification, and


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- Preservation.

The best juice is extracted from freshly picked, sound and suitable varieties, when these fruits

shall be properly selected. The selected fruits will be washed by rotary brusher to remove soil

and dirt from the grove. Before processing stems and leaves need to be removed from the fruit.

Juice from fresh fruits is extracted by crushing and pressing.

Different methods are used to separate suspended matter in the juice which is caused by broken

fruit, tissue, seed and skin, and various gums, peptic substances and proteins in colloidal

suspension. These impurities can be removed by filtration. Sometimes centrifugation method is

applied.

After the juice becomes free from suspended impurities, refrigeration and pasteurization at 90c

for 30 seconds be conducted for preserving the juice extracted. Finally, the pasteurized juiceshall be cooled, filled, labeled and dispatched.

3.2 Fixed Capital

Machinery and Equipment

The list of machinery and equipment of the project is indicated in Table 5.1. The total cost of

machinery and equipment is estimated at Birr 2.5 million, out of which Birr 2 million is required

in foreign currency.

Table 5.1

LIST OF MACHINERY AND EQUIPMENT

Sr. No. Item description Qty.

1. Receiving line and bins Set

2. Inspection, washing, sizing Set

3. Rasper 1

4. Juice extractor 1

5. Finisher 1

6. Pasteurizer 1

7. Filler and sealer 1

8. Cooling machine 1


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9. Labeller 1

10. Centrifuge 1

11. Vessels (with 2 pumps) Set

12. Boiler 1

13. Conveying unit 1

14. Laboratory equipment Set

Land, Building and Civil works

The total land requirement of the project is about 2500m2, out of which built-up area is 1500m2.

The total construction cost of building assuming a construction rate of Birr 1500 per m2 is

estimated at Birr 2.25 million . The lease value of land, at the rate of 9.78 Birr / m 2, and for 80

years of land holding, is Birr 24,450 . The total cost of building and civil works is about Birr

2,274,450.

3.3 Life of Fixed Capital

Fixed Asset Life Annual Depreciation

Machinery 10 Years 10%

Building 20 Years 5%

Furniture 5 Year 20%

Vehicle 7 Years 15%

3.4 Maintenance and Repair

Maintenance service and spare parts are available locally. Since the machinery

and equipment spare parts the supplier company is available within a country,

the machinery and equipment spare parts will be

3.5 Source of Equipment

The machinery and equipment required by the envisaged project can be obtained from the

following companies specialized in manufacture of machinery for juice production

1. Pomejuice and products,

11, Bayajapur, post-pimpal kothetal,

Satana, Nasik, Mahaashtra,

India 423204,

Tel -91-2555-242625.

2. Vicent corporation


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2810E, 5th Avenue

Tampa, FL 33605

United states

Phone: (813) 248-2650

E-mail: Sharon@vicent corp.com

3.6 Planned Capacity

3.7 Future Capacity

3.8 Terms and Conditions of Purchase of Equipment

3.9 Factory Position and Layout

For its proximity to raw material, rural area of the provisional administration at a site where the

near to the plantation of grape is proposed as a location for the envisaged grape juice plant.

3.10 Raw Material Needed

According to Ethiopian Standard, ES 360:2001, fruits used for canning shall be sufficiently

ripe, fresh, wholesome and sound, free from traces of spoilage, insects, parts of insects and

foreign matters. The additives shall be clean and shall not be harmful to human health.

The principal raw materials, additives and packing material required by the project are

indicated in Table 4.1. The major raw material, grape fruit can be grown in the region or

sourced from neighboring regions. The total cost of raw material is estimated at Birr 556.5

thousand.
mailto:Sharon@vicentmailto:Sharon@vicent


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Grape Fruits

Sugar

3.11 Costs of Raw MaterialRAW & AUXILIARY MATERIALS REQUIREMENT AND COST

(AT FULL CAPACITY)

Sr.

No.

Raw & Auxiliary Material Unit of

Measure

Qty. Cost (000 Birr)

FC LC Total

1. Grape Fruits Tons 170 - 425 425

2. Sugar Kg 1,000 - 6.5 6.5

3. Plastic bottles (food grade) pcs 100,00

0

- 50 50

5. Plastic sheet (for shrink

wrapping) Tons 5 - 75 75

Grand Total 556.5 556.5

3.12 Raw Material Availability

3.13 Labour

Direct Labour

Indrect Labour

Type of employee No. needed

Laborers 15

Store keeper 1

chemist 2

Operators 6

Mechanic 1

Production Head 1

Marketing Officer 1

Purchaser 1


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Type of employee No. needed

General Manager 1

Secretary 1

Accountant 1

Personnel 1

Cashier 1

Electrician 1Driver 2

Guards 4

3.14 Costs of Labour

MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr.

No.

Description Req.

No.

Monthly

Salary (Birr)

Annual Salary

(Birr)

1. General Manager 1 2,500 30,000

2. Secretary 1 700 8,400

3. Marketing Officer 1 1,400 16,800

4. Purchaser 1 1,200 14,400

5. Accountant 1 1,400 16,800

6 Personnel 1 1,400 16,800

7. Cashier 1 500 6,000

8. Production Head 1 1600 19,200

9. chemist 2 1,800 16,800

10. Mechanic 1 900 10,80011. Electrician 1 900 10,800

12. Store keeper 1 600 7,200

13. Driver 2 900 10,800

14. Operators 6 3600 43,200

15. Laborers 15 4500 54,000

16. Guards 4 1,200 10,800

Sub-Total 40 25,100 301,200

Benefits (20% BS) 5,020 60,240

Grand Total 30,120 361,440

3.15 Labour Availability

3.16 Labour Productivity

3.17 Factory overhead Expenses

3.18 Production Costs


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The annual production cost at full operation capacity is estimated at Birr 1.96 million (see Table

7.2). The material and utility cost accounts for 42.47 per cent, while repair and maintenance

take 3.83 per cent of the production cost.

* N.B

Table 7.2

ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %

Raw Material and Inputs 556.5 28.39

Utilities 275.83 14.07

Maintenance and repair 75.0 3.83

Labour direct 180.72 9.22

Factory overheads * 60.24 3.07

Administration Costs** 120.48 6.15

Total Operating Costs 1268.69 64.73

Depreciation 442.22 22.56

Cost of Finance 248.97 12.70

Total Production Cost 1959.88 100

4 Organization and Management

4.8 Form of Business

4.9 Organizational Structure4.10 Business Experience and Qualification of the entrepreneur

4.11 Pre-Operating Activities

4.12 Pre-Operating Expenses

Pre-production expenditure includes interest during construction (Birr 296.44 thousand)

training (Birr 10 thousand) and (Birr120 thousand) costs of registration, licensingand formation of the company including legal fees, commissioning expenses, etc .


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4.13 Office Equipment

4.14 Administrative Expenses

5 Financial Plan

5.11 Project Cost

5.12

The total investment cost of the project including working capital is estimated at about birr 5.87

million, of which 27.21 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

Table 7.1

INITIAL INVESTMENT COST

5.13 Financing Plan and Loan Requirement

5.14 Security for Loan

5.15 Profit and loss Statement

5.16 Cash Flow Statement

5.17 Balance Sheet

5.18 Loan Repayment Schedule

The investment cost and income statement projection are used to project the pay-back period.

The projects initial investment will be fully recovered within 7 years.

5.19 Break Even Point (BEP)

Sr.

No. Cost Items

Total Cost

(000 Birr)

1. Land lease value 24.45

2. Building and Civil Work 2250.0

3. Plant Machinery and Equipment 2500.0

4. Office Furniture and Equipment 75.0

5. Vehicle 450.0

6. Pre-production Expenditure* 426.44

7. Working Capital 146.43

Total Investment cost 5872.32

Foreign Share 27.21


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The break-even point of the project including cost of finance when it starts to operate at full

capacity ( year 3) is estimated by using income statement projection.

BE = Fixed Cost = 60 %

Sales Variable Cost

5.20 Return on Investment (ROI)

5.21 Financial Analysis

The financial analysis of the grape juice project is based on the data presented in the previous

chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity

70 % loan

Tax holidays 3 years

Bank interest 8%

Discount cash flow 8.5%

Accounts receivable 30 days

Raw material local 60days

Work in progress 2 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

B. PLNAT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity


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The proposed annual processing capacity of the envisaged plant is 100 tonnes grape juice, based

on 300 working days a year and a single shift of 8 hours per day. The capacity can be increased

by increasing the number of working hours per day.

2. Production Programme

The production programme is indicated in Table 3.3. At the initial stage of the production, the

plant requires some years to penetrate into the market and develop skill in production.

Therefore, in the first and second year of production, the capacity utilization rate will be 60%

and 85%, respectively. In third year and thereafter, full capacity (100%) production shall be

attained.

Table 3.3

PRODUCTION PROGRAMME

Sr.

No.

Product Production Year

2007 2008 2009-2016

1. grape juice (Tonnes) 60 85 100

2. Capacity utilization (%) 60 85 100

IV. MATERIALS AND INPUTS

B. UTILITIES

The major utilities of the envisaged project are electricity, furnace oil and water. The annual

consumption and cost of utilities is indicated in Table 4.2.

Table 4.2

ANNUAL UTILITIES REQUIREMENT AND COST

Sr.

No.

Utility Unit of

Measure

Qty. Unit

cost

Total

cost

1 Electricity kWh 120,000 0.4736 56,832

2 Water m3 6,000 3.10 18,600

3 Furnace Lt. 60,000 3.34 200,400

Total 275,832


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VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The envisaged project requires 40 work force. The list of manpower for the envisaged project is

indicated in Table 6.1. The annual cost of labour including fringe benefits is estimated at Birr

361.440 thousand.

Table 6.1

B. TRAINING REQUIREMENT

The training of production head, quality control chemists, electrician and mechanic will take

part for about two weeks by the supplier of machinery during erection. Machine operators shall

be trained by in-house staff before commissioning. The cost of training is estimated at Birr

10,000.


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1. Profitability

According to the projected income statement, the project will start generating profit in the second

year of operation. Important ratios such as profit to total sales, net profit to equity (Return on

equity) and net profit plus interest on total investment (return on total investment) show an

increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is viable.

* Factory overhead cost includes salaries and wages of supervisors, insurance of factory

workers social costs on salaries of direct labour etc.

** Administrative cost includes salaries and wages, insurance, social costs, materials and

services used by administrative staff etc.

4. Internal Rate of Return and Net Present Value


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Based on the cash flow statement, the calculated IRR of the project is 12.46 % and the net

present value at 8.5% discount rate is Birr 1.37 million.

9. grape juice

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