8.

PROFILE ON DEHAYDRATED FRUIT AND

VEGITABLES
 8-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 8 -3

II. PRODUCT DESCRIPTION & APPLICATION 8-3

III. MARKET STUDY AND PLANT CAPACITY 8-4

A. MARKET STUDY 8-4
B. PLANT CAPACITY & PRODUCTION PROGRAMME 8-6

IV. MATERIALS AND INPUTS 8-7

A. RAW MATERIALS 8-7
B. AUXILIARY MATERIALS 8-7
C. UTILITIES 8-8

V. TECHNOLOGY & ENGINEERING 8-9

A. TECHNOLOGY 8-9
B. ENGINEERING 8-9

VI. MANPOWER & TRAINING REQUIREMENT 8 - 11

A. MANPOWER REQUIREMENT 8 - 11
B. TRAINING REQUIREMENT 8 - 12

VII. FINANCIAL ANLYSIS 8 - 13

A. TOTAL INITIAL INVESTMENT COST 8 - 13
B. PRODUCTION COST 8 - 14
C. FINANCIAL EVALUATION 8 - 15
D. ECONOMIC BENEFITS 8 - 16
 8-3

I. SUMMARY

This profile envisages the establishment of dehydrated fruit and vegetables producing plant
with a capacity of 1,000 tonnes per annum.

The present demand for the proposed product is estimated at 1,000 tonnes per annum. The
demand is expected to reach at 2578 tonnes by the year 2020.

The plant will create employment opportunities for 30 persons.

The total investment requirement is estimated at Birr 8.54 million, out of which Birr 5.5 million
is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 16% and a net present
value (NPV) of Birr 3.97 million discounted at 8.5 %.

II PRODUCT DESCRIPTION AND APPLICATION

Dehydrated fruits and vegetables are canned fruits and vegetable whose moisture content
removed to a level where micro-organisms may not be able to grow and spoil it. The drying
process is done in closed chamber by mechanical means under controlled temperature and
humidity conditions so that the product continues to remain attractive, nutritious, tasty and
conforms to sanitary requirements. Dehydrated fruits and vegetables are further processed and
filled into tin -cans which are seamed and sterilized for the purpose of long term preservation.
Canning also adds taste in addition to extending the shelf-life of the otherwise perishable food.
It would, thus, make the food available long time after it is harvested and becomes available for
export and for local market.

The fruits and vegetables envisaged for canning in the present project are banana, mangoes,
papaya etc. from fruit and tomatoes, onion, potatoes, pepper, etc. from vegetables .
 8-4

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

Since the industrial processing of fruits and vegetables entails an increase in cost which raises
the price beyond the purchasing power of most of the population, consumption is
predominantly in fresh form as harvested. The availability of fruits in abundance, at relatively
low price, thus means that only a few high income households currently consume imported
dehydrated fruits and vegetables. Local dehydration and packaging of fruits and vegetables
will, hence, attract a good market only if it is competitive enough in price and quality as
compared to fresh fruit which dominates the market.

Since there is no plant engaged in the dehydration of fruits and vegetables in the country, all of
the supply originates from overseas. The common ones are such items as dried dates, nuts,
grapes and pine apples. Table 3.1 shows the import of dehydrated fruits and vegetables in the
past.
Table 3.1
IMPORT OF DEHYDRATED FRUITS & VEGITABLES (TONNES)

Year Imported Quantity

1995 266
1996 106
1997 628
1998 805
1999 641
2000 871
2001 927
2002 910
2003 823
2004 1,076

Source: Customs and Excise Tax Authority, External Trade Statistics, Annual Issues.

Table 3.1 shows: that there is an increasing trend in import of dehydrated fruits and vegetables.
Imports have increased at an annual average growth of 16.8 % over the period covered by the
 8-5
data set (1995-2004). If this growth rate is assumed to be maintained, the present level of
import would amount about 1500 tonnes. The average import level during the most recent
three years (2002-2004) was, however, 936 tonnes. Hence, the present effective demand for
dehydrated fruits could be safely estimated to be in the order of 1000 tonnes per annum.

2. Projected Demand

As income rises and urbanization increases, accompanied by changing consumption habits, a

shift towards processed and conveniently available food is bound to occur. In the major cities
of Ethiopia there are substantial numbers of inhabitants who may have the preference as well as
purchasing power for food items like dehydrated fruits and vegetables.

However, as mentioned earlier, this potential market could be realized only if the price is
reasonable as compared to fresh fruit, and the quality is comparable to imported substitutes.
The future demand for dehydrated fruits is thus contingent upon income, price and change in
consumption habit of the population, particularly the urban population.

Having considered all those factors impinging on demand for modern processed food items,
demand for dehydrated fruits and vegetables is forecasted to grow at the average growth of the
national economy during the recent past, i.e 7% per annum (see Table 3.2).

Table 3.2
PROJECTED DEMAND FOR DEHYDRATED FRUITS & VEGETABLES
2000-2020
 8-6

Projected Demand
Year
(tonnes)
2006 1000
2007 1070
2008 1145
2009 1225
2010 1311
2011 1402
2012 1501
2013 1606
2014 1718
2015 1838
2016 1967
2017 2105
2018 2252
2019 2410
2020 2578
3. Pricing and Distribution

The current selling price of most dehydrated fruits is about Birr 16 per kilogram. Taking this
price as a reference, and allowing a 40% margin for whole salers and retailers, an ex-factory
price of Birr 10 per Kilogram is proposed for the envisaged factory.

An appropriate distribution channel for the product would be one which begins with
wholesalers, who in turn ensure efficient distribution through the existing retail channels.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

The capacity of the envisaged dehydrated fruits and vegetables plant is proposed to be 1000
tones annually by taking into consideration the market study and minimum economics of scale.
The plant will operate 8 hours a day, in a single shift, and for 250 days a year. Production can
be increased by operating the plant in double and triple shifts.

2. Production Programme
 8-7
Considering the time required to gain plant operation experience and market penetration, it is
anticipated that the plant would start production at 75% of its capacity and would reach at 85%
during the second year, and 100% during the third and subsequent years of its operation. The
detailed production programme is depicted in Table 3.3.
Table 3.3
PRODUCTION PROGRAMME

Year 1 2 3-10
Capacity utilization (%) 75 85 100
Production (Ton) 750 850 1000

IV. MATERIALS AND INPUTS

A. RAW MATERIALS

The major raw materials required for the manufacture of dehydrated fruits and vegetables are
fresh fruits and vegetables. Proper maturity and the degree of freshness are very important
aspects that determine the quality of the product. It means that the fruits and vegetables to be
dehydrated have to be fresh and clean.

Out of the annual quantity, fruits constitute about 60%, and the rest 40% are vegetables
(tomato, potatoes, onions, pepper etc). Various types of fruits like mangoes, papaya, banana,
grapes, etc. can be processed. The potential source of raw materials will be the commercial
farms to be established in the near future as well as small farmers or out growers in the DDPA
and neighboring regions. The total annual cost raw materials and auxiliary raw materials when
the plant run at its full capacity is estimated at Birr 5,002,870.

Table 4.1
RAW MATERIALS REQUIREMENT & COST
 8-8
Sr. Unit Cost
No. Description Qty. (Tons) Price (Birr)
(Birr)
1 Fruits 706 2500 1,765,000
2 Vegetables (tomato, potatoes, onion, 421 2500 1,052,500
pepper etc.)
Total 2,817,500

B. AUXILIARY MATERIALS

Auxiliary materials required for the production of dehydrated fruits and vegetables include
preservatives such as salt, vinegar and tin cans (1000 ml and 500 ml). For the purpose of this
study, the proportion of these cans is 50%.

Table 4.2
AUXILIARY MATERIALS REQUIREMENT & COST

Sr. Unit price Cost Total

No. Description Qty (Birr) (Birr)
1. Sugar (Tons) 50 6,500 325,000
2. Salt (Tons) 10 1,000 10,000
3. Tin can (1000 ml) 500,100 1.50 750,150
4. Tin can ( 500 ml) 1,000,200 1.10 1,100,220
Grand Total - - 2,185,370

C. UTILITIES

The utilities required by the plant are electricity, water and fuel-oil for its operation. Annual
requirement of utilities at full operation capacity of the plant is given in Table 4.3. The total
annual cost of auxiliaries is estimated at Birr 870,360.

Table 4.3
UTILITIES REQUIREMENTS & COST
 8-9

Sr. Description Qty. Unit Price Cost Total

No. (Birr) (Birr)
1. Electricity (kWh) 100,000 0.4736 47,360
2. Water (m3) 50,000 3.10 155,000
3. Fuel oil (lt.) 200,000 3.34 668,000
Grand Total - - 870,360

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Production Process

There are several commercial dehydration processes. But in most modern dehydrators forced
draught is the main principle. To get a good dehydrated product, forced draught dryers are most
effective because the temperature and humidity can carefully be controlled. Since fruits and
vegetables are different, require different preparation and condition as temperature, humidity
and time for dehydration. But the general process of dehydration of fruits and vegetables
involves sorting, cleaning and washing, peeling, cutting, drying, filling into cans, seaming, and
pasteurization.

2. Source of Technology

The technology of production of dehydrated fruits and vegetables is available in many

developed and developing countries like UK, Italy, Holland, Germany, China and India.
Address of technology supplier is given below.
 8 - 10
a) GOENKA'S GROUP OF INDUSTRIES
Tel: 27671754, 27672401
Fax: 91-11-27671754
E-mail: goenkasgroup@trade-india.com
360,NANIWALA BAGH,BEHIND AAKASH
CENEMA, AADPUR, DELHI-110033

B. ENGINEERING

1. Machinery and Equipment

The list of machinery and equipment required for the production of dehydrated fruits and
vegetables and estimated cost is given in Table 5.1 below. The total cost of machinery and
equipment is estimated at Birr 5.5 million, out of which Birr 4.675 million is in foreign
currency.

Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT
FOR DEHYDRATED FRUITS & VEGETABLES PRODUCTION PLANT

Sr
No. Description Qty.
1 Washing tank 1
2 Preparation table with aluminum top 1
3 Empty can conveyor 1
4 Table for balance 1
5 Peeling machine 1
6 Pricking machine 1
7 Slicing machine 1
8 Cross flow dehydrator complete with two trolleys 1
and 96 trays
9 Bin dryer 1
10 Tray 1
 8 - 11
11 Can assembling table 1
12 Steamer 1
13 Drainer 1
14 Can supplying table 1
15 Rotary filler 3
16 Vacuum Seamer 1
17 Vacuum pump 1
18 Laboratory equipment set
19 Steam boiler 1

2. Land, Building and Civil Works

The total land requirement is estimated at 1500 m2, of this the area to be covered by factory
building, warehouses, offices and other utility building will be in the order of 700 m2.

Land lease value in the region at a rate of Birr 9.78 per m2 per year & for 80 years land holding
will be Birr 14,670. Considering a unit cost of construction to be Birr 1500 per m2, the cost of
building and civil works will be Birr 1,050,000.

Thus, the total investment cost for land, building and civil works is estimated at Birr 1,064,670.

3. Proposed Location

Proximity to raw material is very important for dehydrated fruits and vegetables processing
plant. The availability of infrastructures like electricity, water, and road that are necessary for
the smooth operation of the plant, in addition to the raw material availability makes Dire Dawa
appropriate location.

VI. MANPOWER AND TRAINING REQUIREMENTS

A. MANPOWER REQUIREMENT
 8 - 12
The envisaged plant will have the employment capacity of 30 persons. The details of
manpower requirement for the plant and annual labour cost is shown a Table 6.1 below. The
total annual cost of man power is estimated at Birr 305,200 including fringe benefits.
 8 - 13
Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr. Description Req. Monthly Annual Salary

No. No. Salary (Birr)
(Birr)
1 Plant manager 1 2500 30,000
2 Industrial biologist 1 1200 14,400
3 Production and technic manager 1 1,800 21,600
4 Accountant 2 1800 21,600
5 Purchaser/sales man 1 900 10,800
6 Store keeper 1 500 6,000
7 Production supervisor 1 1200 14,400
8 Chemist 2 1800 21,600
9 Personnel 1 900 10,800
10 Machine operators 6 2,400 28,800
11 Assistant operators 4 1800 21,600
12 Technicians 2 1200 14,400
13 Clerks 2 900 10,800
14 Secretary 2 1400 16,800
15 Guard 3 900 10,800
Sub –total 30 21,200 254,400
Employee benefit (20% BS) 50,800
Grand Total 305,200

B. TRAINING REQUIREMENT

The industrial biologist, chemists, production supervisor, machine operators and technicians
need two weeks on-the-job training by the technology supplier during erection &
commissioning. Training
 8 - 14
VII. FINANCIAL ANALYSIS

The financial analysis of the dehydrated fruit and vegetable 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 8.54
million, of which 23.49 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 8 - 15

Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1. Land lease value 14.67
2. Building and Civil Work 1050.0
3. Plant Machinery and Equipment 5500.0
4. Office Furniture and Equipment 75.0
5. Vehicle 225.0
6. Pre-production Expenditure* 549.54
7. Working Capital 1127.46
Total Investment cost 8541.67
Foreign Share 23.49

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 7.34 million (see
Table 7.2). The material and utility cost accounts for 79.96 per cent, while repair and
maintenance take 1.36 per cent of the production cost.

* N.B Pre-production expenditure includes interest during construction ( Birr 399.54

thousand ) training (Birr20 thousand ) and (Birr130 thousand) costs of
registration, licensing and formation of the company including legal fees,
commissioning expenses, etc.
 8 - 16

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %

Raw Material and Inputs 5002.87 68.11

Utilities 870.36 11.85
Maintenance and repair 100.00 1.36
Labour direct 152.64 2.08
Factory overheads * 50.8 0.69
Administration Costs** 101.76 1.39
Total Operating Costs 6278.43 85.47
Depreciation 685.73 9.34
Cost of Finance 381.19 5.19
Total Production Cost 7345.35 100

C. FINANCIAL EVALUATION

1. Profitability

According to the projected income statement, the project will start generating profit in the first
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.
 8 - 17

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 = 36 %
Sales – Variable Cost

3. PayBack 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 6 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 16 % and the net
present value at 8.5% discount rate is Birr 3.97 million.

D. ECONOMIC BENEFITS

The project can create employment for 30 persons. In addition to supply of the domestic
needs, the project will generate Birr 0.196 million 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.