COMMUNITY BASED LIVELIHOOD RECOVERY PROGRAM (CBLRP)

FOR THE EARTHQUAKE AFFECTED AREAS OF NWFP and AJK

CBLRP-UNIDO

INVESTMENT OPPORTUNITY PROFILE

FOR
A FRUIT JUICE PROCESSING PLANT
IN
NWFP

SEPTEMBER 2007

SUBMITTED TO
AYESHA KHAN
CHIEF TECHNICAL ADVISOR
Community Based Livelihood Recovery Program (CBLRP)
United National industrial Development Organization (UNIDO)

BY
Sardar Shahid Farid
Chartered Accountant

Disclaimer

All material included in this document is based on data/information gathered from various sources and certain assumption.
Due care and diligence has been taken to compile this document. The document may contain human, mechanical error or non
accuracy of the information at the source. No liability for error, or omission or unintentional misrepresentation will be
accepted. We reserve the right to make correction and changes wherever desired in this document or its subsequent versions.
1. PROJECT EXECUTIVE SUMMARY

1.1 PROJECT BRIEF

To setup a plant for the manufacture of fruit juice from fruit pulp in Manshera, NWFP. The
factory will purchase fruit pulp which will be processed into juice and packaged in 250ml tetra
pack containers for sale in local, regional and national markets.
The fruit juice industry coupled with the beverage industry is considered to be one of the
largest industrial sectors in Pakistan. It has grown at a steady rate of close to 6% per annum
over the last 5 years and trends indicate that this growth will continue. Moreover there are no
known major local competitors, and local production is expected to provide the plant with a
distinct cost advantage.
The initial produce planned is Apple, Orange, and Guava fruit juices. Later on more juices of
more fruits and/or fruit blends can be added.. The rated plant capacity is 30,000 liters of juice
per day with an estimated total capital cost of the project is PKR 127, 000,000. The main raw
materials required are fruit pulp, treated water, sugar, citric acid, fruit flavors and preservatives
all of which are readily available. The project will employ at least 33 personnel directly
besides creating numerous job opportunities both on farm and off farm in the local areas. The
estimated project completion time is 12 months both for the civil works and installation of the
manufacturing plant itself.

1.2 FINANCIAL SUMMARY

• Sales Rs 271Million
• Gross Profit Margin 33%
• Net Profit Margin 08%
• Internal Rate of Return 21%
• Net Present Value 10%

Foreign collaboration sought Joint – Venture Management expertise

Loan Technical expertise
Market access Marketing expertise
Sub contracting Technology transfer
Buy – back arrangement Joint R&D
Equipment purchase Other :-

Studies Available Feasibility study Project description

Other Specify

Date: 25th October 2007

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2. PROJECT RATIONALE

Fruit juices are produced and consumed for their refreshing character and nutritional qualities.
With increasing trend toward healthy and natural food and beverage products and the especial
appreciation of NWFP fruits both locally and nationally as well as this project has a ready
market for quality fruit juices.

The fruit juice industry coupled with beverage industry is considered to be one of the largest
industrial sectors in Pakistan. The installed capacity of fruit juice production in Pakistan is
around 400,000 Mt. according to the EAC-2003 report. The improvement in the economic
affairs of Pakistan over the last few years, the government’s positive measures towards
expansion of the industrial sector, revision of the duty structures and exemption from excise
duty (especially for fruit juices), etc. are factors which are likely to further reinforce the
development of the industrial sector.

The people are keen on local economic development of their area and very supportive of the
farsighted investor willing to benefit from the opportunities available.

The technology and machinery for this investment opportunity are readily available at a very
reasonable cost. Furthermore, as the proposed location does not have a production unit in the
vicinity this provides an ideal opportunity for the keen investor. Besides having the
comparative advantage of being the major producers of fruit and ready availability of the
major raw material, i.e. fruit pulp, the proposed locations of Manshera and Abbottabad have
the necessary infrastructure such as roads, electricity and telecommunications available for the
project. Manshera can be considered the California of Pakistan because all types of fruits such
as temperate, tropical and sub tropical are produced. Although cheap labor is locally available
they may have to be trained both in production and quality control for efficient running of the
plant.

The major cost, however, of this industry will be in packaging and marketing of the product
which is a single line product. It will not be easy possible to increase or diversify its product
line.

3. MARKET OPPORTUNITY

The demand for juices has grown at 27.7% over the last 5 years. This growth seems set to
continue driven by population growth, increased purchasing power and the increased
fissionability of juice as a consumer beverage. Global markets have witnessed a rise in the
demand for fruit juices and other natural products as health consciousness has increased. This
trend indicates a bright future for an already growing market in Pakistan as well as of the area
specified. Major Fruit of Manshera are Apple, Pear, Apricot, Walnut, Plum and Cherry. Area
under fruit cultivation is 14460 hectares.

General market trends indicate that the NWFP consumers respond more to price and quality of
the juice rather than to brand name loyalty. With a sound marketing strategy and a little
advertising the proposed local produce can capture approximately 45% of the market share.

There are no known major competitors producing in the target areas and competition in
expected to come primarily from imports from outside the region

4. Business Plan

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 The project identified is the setting up of a plant to manufacture fruit juices from fruit pulp. It
is suggested that in the initial phase the project focus on 4 types of juice; apple, guava, orange
and mix fruit juice blend. The factory may later introduce new juice types / blends. These
juices can be sold both locally in the adjoining areas of NWFP, Murree and Islamabad and
further south in the country as high quality fresh fruit juice from the North of the country that
is known for its rich natural resource and delectable fruits.

4.1 Product sales (information supporting these figures readily available)

Capacity Utilization (%) 100%
Daily Production of Fruit Juices 120,000 (Packs of 250 ml / Day)
Annual Production 37,440,000 Packs of 250 ml
Sales Price / Tray (Guava) Rs: 182 / Tray
Sales Price / Tray (Apple) Rs: 182 / Tray
Sales Price / Tray (Orange) Rs: 182 / Tray
Sales Price / Tray (Blended) Rs: 182 / Tray
Sale Revenue (Rs.) Rs: 271,370,738
Sales Price growth rate 10% per Year

4.2 Raw Material Requirement

Raw material required for manufacturing fruit juice are fruit pulp, citric acid, food color, sugar,
preservatives and fruit flavors. All raw materials are easily available in the local market,
however, fruit pulp is considered to be the principal component of the high quality fruit juice,
therefore, its continuous and within the required quantity availability will need sound advance
planning.

. Prices for the fruit pulp have been collected from the market and are given below1:
Fruits Purchasing price Units

Guava pulp Rs. 25 Kg

Apple pulp Rs. 35 Kg
Orange pulp Rs. 30 Kg
Water Rs 1.5 per tray of 24, 250 ml packs
Citric acid+ Flavor+ Preservative Rs 5 per tray of 24, 250 ml packs
Sugar Rs 27 Kg
Packing Material Rs 50 per tray of 24, 250 ml packs

Other Raw Material

The ratio and utilization of other raw material depends on what percentage of pure juice the
unit is going to produce; however, following are the main ingredients which will be required
for the juice production proposed for this pre-feasibility:

• Treated Water 80%

• Fruit Pulp 4%
• Sugar 10%-16%
• Citric Acid do
• Fruit Flavor do
• Preservative do

Packaging Material

1
(Price quoted above are subjected to the volume and payment terms)

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 Packaging of processed foods has always been critical to decide, since health and safety
matters have been of prime concern to all consumers who go for preserved food stuff. Fruit
juice, being in liquid and drinkable form could be harmful for consumers’ health because of
high probability of microbial growth and little shelf life. That is the primary reason why ‘tetra
pack’ packaging got enormous popularity vis-à-vis other packaging materials i.e. tin pack,
aluminum laminate pouch pack, glass bottles and plastic bottles.

4.3 PRODUCT MANUFACTURING PROCESS

Fruit juice production procedures involved in fruit juice manufacturing depend on what type of
the juice the unit is going to make. For the purpose of this study, we propose the 4% token
juice drink of Citrus fruit (Orange), Apple and Guava.

Fruit Juice - Production Process Flow

Preparation process of juices involves the following steps:-

i. Boiling of fruit pulp

ii. Pulp Storage in Tank
iii. Sugar Hopper
iv. Pulp and ingredients mixing
v. Syrup Storage in Tank
vi. Juice Preparation
vii. Juice Storage Tank
viii. Filling and Packaging
ix. Cooling and Storage

4.4 Distribution / Marketing Channels

4
 A typical distribution setup in fruit juice business involves the following hierarchy starting
from the manufacturer to the consumer.

The distribution and retail margin is around 15% to 20% for the fruit juice industry which is
relatively higher than the other consumer goods due to the strong competition.

4.5 Human Resource Requirement

A total 33 persons will be required to handle the business operations of a fruit juice
manufacturing unit. The business unit will work on one shift basis. Technical staff with
relevant experience is sufficient to look after specific tasks at the plant while trained staff will
be required for operating production plant and packaging machine. Total approximate
manpower required for the business operations along with the respective salaries are given in
the table below:
Staff Title No of Persons Monthly Salary Annual Salary
Production Staff (Factory)
1. Business Unit Manager/Owner 1 100,000 1,200,000
2. Factory Manager (Technical Manager) 1 50,000 600,000
3. Processing Supervisor 1 30,000 360,000
4. Production Supervisor 1 30,000 360,000
5. Electrician 2 (@ 8,000) 16,000 192,000
6. Chemist 1 15,000 180,000
7. Skilled Workers 5(@ 10,000) 50,000 600,000
8. Helpers 8(@ 5,000) 40,000 480,000

Total Factory Staff 20 331,000 3,972,000

General Administration/ Selling & Distribution Staff
9. Selling & Distribution Incharge* 1 40,000 480,000
10. Selling & Distribution Officer* 2(@20,000) 40000 480,000
11. Accountant/Cashier 1 15,000 180,000
12. Store Keeper 1 7,000 84,000
13. Purchase Officer 2 (@ 8,000) 16,000 192,000
14. Guard/Chowkidar 4(@5,000) 20,000 240,000
15. Driver 2 (@ 5,000) 10,000 120,000
Total G A /S & D Staff 13 148,000 1,776,000

TOTAL 33 479,000 5,748,000

4.6 Project Financials

4.6.1 Operational Data

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 The proposed project will have a capacity to produce 5000 trays of 24 packs in 250ml tetra
pack servings of fruit juice daily with annual capacity of 1,560,000 trays assuming 312
working days in a year. The juice specifications and other details would be as follows.

Proposed Capacity
Product Name Production Assumption Juice Criteria No. of Trays produced / Day (Year 1)
Guava Juice 15% Token Juice 750
Apple Juice 50% Token Juice 2,500
Orange Juice 20% Token Juice 1,000
Juice Blend 15% Token Juice 750

The plant will be operated at 80% capacity utilization for 8 hours a day in the beginning;
however, a 10% annual increase in capacity utilization is assumed. Expansion to a higher
capacity can be considered later and will mainly be dictated by the level of business
performance.

Year1 Year 2 Year 3 Year 4 Year 5

Product Qt Trays Qt Trays Qt Trays Qt Trays Qt Trays
Guava Juice 220,272 247,728 234,000 234,000 234,000
Apple Juice 734,136 825,882 780,000 780,000 780,000
Orange Juice 293,592 330,353 312,000 312,000 312,000
Juice Blend - - 234,000 234,000 234,000
Total 1,248,000 1,403,963 1,560,000 1,560,000 1,560,000

4.6.2 Fixed Cost

The investment in the fixed assets is given below

Project Investments Rupees
Land (1 acre @ 2,400,000 per acre) 2,400,000
Construction 15,545,000
Plant & Machinery 84,080,000
Furniture & Fixtures & Office Equipment 1,221,000
Vehicles 2,000,000
Pre-Operating Costs 2,000,000
Total Fixed Assets 108,346,000

4.6.3 Working Capital

The investment required in the initial working capital is given below

First three months salaries 1,437,000

First three months utilities 810,000
Misc expenses ,000,000
Inventories three months(Excluding Packing) 6,218,176
Cash requirements 10,500,000
Initial Working Capital 18,965,176

4.6.4 Overheads

Following Overheads are assumed to occur in the first year of production.

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Expense Year amount
Utilities 3,240,000
Depreciation 10,284,600
Maintenance 1,261,600
Selling and Distribution 16,282,244
Miscellaneous 1,000,000
TOTAL 32,068,444