PROFILE ON GRAPE JUICE
Prepared by: Ashenafi Kejela
Email ashambo2017@[Link]
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TABLE OF CONTENTS
PAGE
I. SUMMARY 9 -3
II. PRODUCT DESCRIPTION & APPLICATION 9-3
III. MARKET STUDY AND PLANT CAPACITY 9-4
A. MARKET STUDY 9-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 9-6
IV. MATERIALS AND INPUTS 9-7
A. RAW & AUXILIARY MATERIALS 9-7
B. UTILITIES 9-8
V. TECHNOLOGY & ENGINEERING 9-9
A. TECHNOLOGY 9-9
B. ENGINEERING 9 - 10
VI. MANPOWER & TRAINING REQUIREMENT 9 - 11
A. MANPOWER REQUIREMENT 9 - 11
B. TRAINING REQUIREMENT 9 - 12
VII. FINANCIAL ANLYSIS 9 - 13
A. TOTAL INITIAL INVESTMENT COST 9 - 13
B. PRODUCTION COST 9 - 14
C. FINANCIAL EVALUATION 9 - 15
D. ECONOMIC BENEFITS 19 - 16
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I. SUMMARY
This profile envisages the establishment of a plant for the production of grape juice with a
capacity of 100 tonnes per annum.
The present demand for the proposed product is estimated at 110.44 tonnes per annum. The
demand is expected to reach at 263.7 tonnes 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. PRODUCT DESCRIPTION AND APPLICATION
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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III. MARKET STUDY AND PLANT CAPACITY
A. MARKET STUDY
1. 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 in
the country. Table 3.1 depicts the import of canned grape juice in the past five years (1999-
2003).
Table 3.1
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.
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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. Projected Demand
As urbanization expands and income rises there is a shift towards more expensive foods such as
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 the market.
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 export potential 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 to 263710 kg by
the year 2015.
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Table 3.2
PROJECT DEMAND FOR GRAPE JUICE (KG)
Year Projected Demand
2006 110,440
2007 123,023
2008 135,325
2009 148,858
2010 163,744
2011 180,118
2012 198,130
2013 217,943
2014 239,737
2015 263,710
3. Pricing and Distribution
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.
B. PLNAT CAPACITY AND PRODUCTION PROGRAMME
1. Plant Capacity
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.
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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. Product Production Year
No. 2007 2008 2009-2016
1. grape juice (Tonnes) 60 85 100
2. Capacity utilization (%) 60 85 100
IV. MATERIALS AND INPUTS
A. RAW & AUXILIARY MATERIALS
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.
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Table 4.1
RAW & AUXILIARY MATERIALS REQUIREMENT AND COST
(AT FULL CAPACITY)
Sr. Raw & Auxiliary Material Unit of Qty. Cost (‘000 Birr)
No. Measure 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 100,000 - 50 50
5. Plastic sheet (for shrink
wrapping) Tons 5 - 75 75
Grand Total 556.5 556.5
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. Utility Unit of Qty. Unit Total
No. Measure cost 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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V. TECHNOLOGY AND ENGINEERING
A. TECHNOLOGY
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
- 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 90ºc
for 30 seconds be conducted for preserving the juice extracted. Finally, the pasteurized juice
shall be cooled, filled, labeled and dispatched.
2. Source of Technology
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.
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2. Vicent corporation
2810E, 5th Avenue
Tampa, FL 33605
United states
Phone: (813) 248-2650
E-mail: Sharon@vicent [Link]
B. ENGINEERING
1. 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. Item description Qty.
No.
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
9. Labeller 1
10. Centrifuge 1
11. Vessels (with 2 pumps) Set
12. Boiler 1
13. Conveying unit 1
14. Laboratory equipment Set
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2. Land, Building and Civil works
The total land requirement of the project is about 2500m 2, out of which built-up area is 1500m 2.
The total construction cost of building assuming a construction rate of Birr 1500 per m 2 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. Proposed Location and Site
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.
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.
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Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr. Description Req. Monthly Annual Salary
No. No. Salary (Birr) (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 10,800
11. 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
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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VII. 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
A. TOTAL INITIAL INVESTMENT COST
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.
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Table 7.1
INITIAL INVESTMENT COST
Sr. Total Cost
No. Cost Items (‘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
B. PRODUCTION COST
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 Pre-production expenditure includes interest during construction (Birr 296.44
thousand) training (Birr 10 thousand ) and (Birr120 thousand) costs of registration,
licensing and formation of the company including legal fees, commissioning expenses, etc .
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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
C. FINANCIAL EVALUATION
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.
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2. Break-even Analysis
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
3. Pay-Back Period
The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 7 years.
4. Internal Rate of Return and Net Present Value
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.
D. ECONOMIC BENEFITS
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 such
factory will have a foreign exchange saving effect to the country by substituting the current
imports.
