DAKI COFEE

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Contents
Executive Summary.....................................................................................................................................2
1.1 The Business......................................................................................................................................2
1.2 Background information....................................................................................................................2
2. PRODUCT DESCRIPTION AND APPLICATION............................................................................................2
2.1 Definition of the Commodity.............................................................................................................3
2.2 Product Classification........................................................................................................................3
2.2.1 Roasted Coffee................................................................................................................................3
2.2.2 Roasted Coffee Based on Decaffeination Process...........................................................................4
2.2.4 Instant Coffee Based on Form of Product.......................................................................................4
3. MARKET STUDY AND PLANT CAPACITY....................................................................................................4
3.1. MARKET STUDY.................................................................................................................................4
3.2 Supply of Major Raw material...........................................................................................................5
3.2.1 Supply of Green Coffee beans.........................................................................................................5
3.2 Projected Demand.................................................................................................................................5
4. Pricing and Distribution...........................................................................................................................6
4.1 PLANT CAPACITY AND PRODUCTION PROGRAMME..........................................................................6
4.2. Production Programme.................................................................................................................6
5. MATERIALS AND INPUTS.........................................................................................................................7
A. RAW AND AUXILIARY MATERIALS........................................................................................................7
B. UTILITIES..............................................................................................................................................8
5. TECHNOLOGY AND ENGINEERING...........................................................................................................8
A. TECHNOLOGY......................................................................................................................................8
B. ENGINEERING......................................................................................................................................9
6. MANPOWER AND TRAINING REQUIREMENT.........................................................................................10
A. MANPOWER REQUIREMENT.............................................................................................................10
B. TRAINING REQUIREMENT..................................................................................................................10
7. FINANCIAL ANALYSIS.............................................................................................................................11

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Executive Summary
1.1 The Business

DAKI Coffee is trade-registered company licensed to operate in roast and export of coffee.
Already engaged roasting business, it owned two roasting and one grinding machines. However,
to employ the machines at full capacity, a workshop is imperative which the company is highly
in need of. At the current capacity, the company sources beans legally-bound from target
market perspective. The coffee roasting business registered as Ethio-Chaka Trading plc and will
be located in Ethiopia, Addis Ababa City, Lemi Kura sub-city, commonly known as Yeka
Abado area. Roasting Company will small-batch roast only the finest, top grade beans from
around the country. The business will be managed by qualified person who is a professional in
the sector.

This profile envisages the establishment of a plant for the production of 288 tons of roasted,
grounded and packed coffee per annum. The project will create employment for about 37
persons. The total investment cost of the project is estimated at Birr 10 million, out of which Birr
8 million is required for plant and machinery. The project is financially viable with an internal
rate of return (IRR) of 21% and a net present value (NPV) of Birr 1.46 million, discounted at
10.5%.

1.2 Background information

Project name
DAKI Coffee
Adress
Addis Ababa city,
Lemikura sub city,
Woreda 13
Type of business
Agriculture and Agro-processing
Legal Form of Business
Partnership
Status of the Company
Existing
Tin: 0060755324
Trade registration number: AA/LK/14/6/3630641/2014
Trade license number: YK/AA/14/672/51810461/2011
Trade license number: YK/ADISM/14/707/4413459/2015

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 Trade license number: YK/ADISM/14/707/4413288/2015
Paid-up Capital: 3,500
Total Capital Employed: 600,000.00
Required Investment: 4,000,000.00

2. PRODUCT DESCRIPTION AND APPLICATION

Coffee is a common name for any of a genus of trees of the madder or bedstraw family, and
also for their seeds (beans) and for the beverage brewed from them. The Arabicas and
Robustas are the two major types of commercial coffee. In order to meet wide consumer
appeal, coffee liquor is extracted from properly ground coffee beans that are expertly roasted
from properly sorted green coffee. The principal physiological effects of coffee are due to
caffeine, an alkaloid that acts as a mild stimulant. Depending upon the granular size and
heterogeneity of the particles size, there are two distinct categories of ground coffee. The first
category is made up of uniform particles of average size from which small powdery particles
have been separated. The second category of brewed coffee consists of grounds made up of
particles of various sizes of, which up to 50 per cent are of very small size.

2.1 Definition of the Commodity

Coffee Bean:
It is the seed of the coffea plant which is harvested, processed, and roasted to produce coffee.

Arabica Bean:
It is one of the two main types of coffee beans which is generally considered to be of higher
quality and used in specialty coffee. Grown at higher altitude and with more complex flavor
profile, it has most wide popularity across the globe.

 Roasted coffee:
It is a coffee that made through roasting of green coffee beans and the roasting coffee
transforms the chemical and physical properties of green coffee beans into roasted coffee
products.

 Ground coffee:
It is coffee which has been prepared for brewing by being crushed or ground or it is coffee beans
that have been ground up into a little sand like powder.

 Instant coffee:
Instant coffee also called soluble coffee, coffee crystals, and coffee powder, is a beverage derived
from brewed coffee beans that enables people to quickly prepare hot coffee by adding hot water to
the powder or crystals and stirring. Instant coffee is commercially prepared by either freeze-
drying or spray drying, after which it can be rehydrated. Instant coffee in a concentrated liquid
form is also manufactured.

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2.2 Product Classification
2.2.1 Roasted Coffee

Based on Degree of Darkness Roasted coffee can be classified into the following types based
on their degree of darkness.

 Light Roast: has light brown color. This roast is generally preferred for milder coffee
varieties. There will be no oil on the surface of these beans because they are not roasted long
enough for the oils to break through to the surface.

 Medium Roast: is medium brown in color with a stronger flavor and a non-oily surface. This
roast is often referred to as the American roast because it is generally preferred in the United
States.

 Medium-Dark Roast: This roast is rich with dark color with some oil on the surface and with a
slight bitter sweet after taste.

 Dark/French Roast: Are shiny black beans with oily surface and a pronounced bitterness.
The darker the roast, the less acidity will be found in the coffee beverage. Maximum aroma and
flavor, is generally found at the lighter end of the dark range. At the darkest end of the dark
range, coffee has lost all of its acidity and has a distinctly burnt flavor.

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2.2.2 Roasted Coffee Based on Decaffeination Process

 Decaffeinated coffee is coffee that has gone through a process of decaffeination to

remove the caffeine. However, decaf coffee is not entirely caffeine free.

 Non – Decaffeinated coffee is when green coffee bean is roasted without removing the
caffeine from it. This roasted coffee is alternatively called caffeinated roasted coffee.

2.2.3 Ground Coffee based on Degree of Fineness

Based on degree of fineness, ground coffee can be classified as follows;

 Coarse ground coffee: It is a ground coffee that has very coarse particles and is not fine.

 Medium-coarse ground Coffee: It is a ground coffee that has medium sized particles similar
in texture to coarse sand. It is slightly fine than coarse ground coffee.

 Medium fine ground coffee: It is medium-fine particles similar in texture to the grains of sand
and finer than coarse and medium coarse ground coffee.

 Fine ground coffee: It is fine particles similar in texture to confectioner’s sugar. Even though it
is less fine than very fine ground coffee, it is finer than other ground coffee.

 Very fine ground coffee: It is very fine particles similar in texture to baking flour. This is the
finest form of ground coffee which easily soluble during brewing.

2.2.4 Instant Coffee Based on Form of Product

 Instant Coffee Powder: It is an instant coffee type that is found in powder form. It is a
fine form of coffee which can easily be dissolved when poured to heated water.

 Instant Coffee Granular: It is an instant coffee prepared in the form of granules. It is

reminiscent of powder instant coffee; it can easily be dissolved when poured to boiled water.

 Concentrated Liquid Instant Coffee: It is an instant coffee that is available in concentrated

form for the market. However, this form of instant coffee is not famous as powder and granular
but there may be few producers of it on the world. Regarding its solubility, since it is in liquid
form, it is a piece of cake to be dissolved in the hot or cold water.

3. MARKET STUDY AND PLANT CAPACITY

3.1. MARKET STUDY

Coffee is served at least once in a day in most of Ethiopian households. The coffee ceremony at
home is more cultural than the mare need of drinking coffee. Roasting coffee is a craft by itself
taken seriously by every household. Accordingly in Ethiopia as coffee is usually made at
home, the official statistics on milled coffee does not represent the total supply of packed or
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milled coffee. In the near future households may began to buy packed (milled) coffee. However,
the associated cultural impacts of the coffee ceremony will remain in fact for a long time making
households out of the target market for packed coffee

3.2 Supply of Major Raw material

3.2.1 Supply of Green Coffee beans

Ethiopia, which is considered as coffee’s birthplace, produces Arabica coffee for both the
domestic use and international markets. Coffee which is supplied and traded in the local market
usually has lower quality, mainly comprised of coffee originally meant for the export market but
rejected for failing to meet the Ethiopian Commodities Exchange (ECX)’s quality standards.
Ethiopia produces coffee Arabica with unique nature of coffee which has preferred variety and
Tests that is highly demanded by both domestic and international markets the target market for
packed coffee.

Table 1: Domestic Coffee Production

Years Production (Thousand 60-Kilogram Bags) ‘000

2015/16 5,300
2016/17 6,943
2017/18 7,055
2018/19 7,350
2019/20 7,475
2020/21 8,150

Source: USDA Foreign Agricultural Service’s World Coffee Markets and Trade Report, June 2022

3.2 Projected Demand

The demand for packed coffee (roasted ground and packed) is directly related with number of
coffee serving bars. Literally bar means "house of coffee" or "buna bet" in Amharic indicating
the formation of such a business as directly dependent on milled coffee. Hotels, restaurants and
clubs also provide coffee to the public using packed coffee. Urbanization is another factor for the
growth in demand for packed coffee. However, the most determining factor is growth in the
service industry particularly in bars, hotels and restaurants.

Table 2: Urban population (2022-2026)

Year Total Population

2022 23,886,000
2023 24,901,000
2024 25,960,000
2025 27,051,000
2026 28,170,000

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Source: CSA report on “Population Projection of Ethiopia for All Regions at Wereda Level

Target Market

Coffee is served at least once in most of Ethiopian households. The coffee ceremony at
home is more cultural than the mare need of drinking coffee. Roasting coffee is a craft
by itself taken seriously by every household.
Accordingly in Ethiopia as coffee is usually made at home, the official statistics on
consumed coffee does not represent the total supply of packed one. Indeed, now a days, the demand
for the latter is rising.
However, the associated cultural impacts of the coffee ceremony will remain in fact for a long time
which makes households out of the target market.
The target market is coffee lovers of all ages in various suburbs in Ethiopia and the neighborhoods.
The location has a population of 336,962 with a median age of 33 years (Australian Bureau of
Statistics, 2016). About 75% of Australians drink no less than one cup of coffee from a café
(Lee, 2022), so the size of the target market in Blacktown suburbs is 252,722 persons. The
business aims to serve 20% of the people of Blacktown in the first year, for a total of 50,544
customers.1
Targeted customer base
Targeted customers in a coffee products and service company can be three types:
1. Drip coffee drinkers – daily customers are mainly students and business workers. This
type of customer prioritizes price over quality; therefore, coffee express can primarily
target them by lowering their prices and being a low-cost leader (Lee, et al., 2018).
2. Coffee shop lovers – This kind of customer loves to spend time in coffee shops and
outlets. Coffee express needs to decorate their outlets so that the coffee shop lover prefers
to sit there. Over the years, many coffee outlets let customers work, chat, conduct
meetings, free Wi-Fi, and other accommodation to retain the customers (Woldoff, et al.,
2013).
1 See appendix for calculations.
3. Speciality coffee drinkers – speciality customers are a kind of premium customers who
love special types of coffee like latte, cappuccino, etc.; they can also pay the extra price
for that unique taste. Customized coffee and other speciality coffee that Coffee Express
may offer will target this type of customer.
4. Whole bean customer – According to research, 23% of customers in Australia ordered
whole coffee beans (Lee, 2022). This market is also growing, so Coffee Express should
also focus on this niche market segment.

Table 3. PROJECTED DEMAND FOR ROASTED, GROUND AND PACKED COFFEE

(TONNES)

Years Projected Unsatisfied

Demand Demand
2015 499 200
2016 519 221

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 2017 540 243
2018 562 266
2019 584 290
2020 607 315
2021 632 341
2022 657 368
2023 683 388
2024 711 409
2025 739 431
2026 768 462

4. Pricing and Distribution

The price of roasted, ground and packed coffee at Addis Ababa is Birr 350 per kg. The proposed
price for the project understudy is Birr 350 per kg. Distribution of the product should be handled
by door to door van delivery to bars and restaurants in order to attract permanent customers.

4.1 PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity Based on the market study, the production capacity of the envisaged plant is
288 tonnes of roasted, ground and packed coffee.

4.2. Production Programme

The annual production programe is formulated on the basis of the market forecast and selected
plant capacity. It is assumed that the plant will achieve 70% and 85% capacity utilization rate in
the first and second year, respectively. Full capacity will be reached in the third year and
onwards. The production programme for total roasted, ground and packed coffee is shown in
Table 3.4.

Table 4. ANNUAL PRODUCTION PROGRAMME

Sr.no Description Year 1 Year 2 Year3

1 Roasted ground and 201Ton 244.8Ton 288Ton
packed coffee, tons

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 2 Capacity utilization 70 85 100
rate, %

5. MATERIALS AND INPUTS

A.RAW AND AUXILIARY MATERIALS

The principal raw material required by the plant is clean green coffee. During roasting process
the green coffee beans lose weight due to evaporation of water. The extreme limits of the weight
loss termed as “a loss in the fire” are between 14 and 23 per cent of the initial weight of coffee
beans. Elimination of the silver skin of coffee beans that amounts from 0.2% to 0.4% and the
release of certain volatile elements also occurs during roasting.

Taking the above mentioned weight loss into account, the annual requirement for green coffee at
100 per cent capacity utilization rate is estimated to be 288 tonnes +(0.22 x 288 tonnes) = 351.36
tonnes). Annual cost of green coffee at a rate of 158,000 per tonne first grade coffee will amount
to Birr 55,514,880. The major auxiliary materials in the production of roasted, ground and
packed coffee comprise packing materials of various type and quality. The packing materials to
be used by the plant are paper bag, corrugated paper box with carton panel, and gumming paper.
The proposed package sizes of printed paper bag for packing of roasted and ground coffee are
500 gm, 1000 gm and 1,500 gm which are planned to constitute 35%, 50% and 15% of the total
roasted and ground coffee respectively.

The estimated annual requirement for printed paper bag at 100 per cent capacity utilization rate
and the corresponding cost estimates are given in Table 5.

Total
Roasted Allowance
paking Ground Paper bag for
gram Coffee Requirement Damage Total Total
size(mg) (kg) (pcs) (0.5%) Requirement unit price price
1 2 3=2*1000/1 4 5=4+3
500 100,800 201600 201.6 201801.6 7.33 738864
1000 144,000 144000 144 144144 8.55 1231200
1500 43,200 28800 28.8 28828.8 10 432000
grand
total 288,000 2,402,064

The estimated annual requirement for corrugated paper box and panel at 100 per cent capacity
utilization rate, the optimum corrugated paper box sizes for each package size and cost estimates
are given in Table 6

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 Specific
Volume
of Number Annual
productfilled of Roasted Unit Total
Package paper Paper Weight of Ground Cost Cost
Size of bag bag Product Coffee Birr/ Birr/
Paper (m3 per box per output box box
bag (gm) /package) (pc) box (kg) (kg) box panel (panel) (panel)
1 2 3 4 5 6 7 8 9
500 8.55*10'4 20 10 100,800 10080 10080 12.5 126000
1000 1.61*10'3 15 15 144,000 9600 9600 25 240000
1500 2.41*10'3 10 15 43,200 2880 2880 37.5 108000
grand total 474000

The estimated annual requirement for gumming paper and respective cost estimates at 100 per
cent capacity utilization rate are given in Table 7.

Annual Estimated
Requirement Length per Annual
for Roll Requirement
Corrugated of for Unit
Package Size of Paper Gumming Gumming (Cost) Total Cost
Paper bag (gm) box (pc) Paper (m) Paper (roll) Birr/roll (Birr )
500 3290 18 156 35 5460
1000 3134 18 187 35 6545
1500 94 18 25 35 875
grand total 12880
B.UTILITIES

The major utility required by the plant is electricity. Annual electric consumption of the plant at
100 per cent capacity utilization rate is estimated at 96,000 kWh and the estimated cost at the
rate of Birr 0.4736 per kWh will amount to Birr 45,000. Potable water will be required for
personal use and quality control laboratory. Annual water requirement is estimated to be 150
cubic meter. Annual cost of water at the rate of Birr 2.00 per cubic meter amounts to Birr 300.

5. TECHNOLOGY AND ENGINEERING

A.TECHNOLOGY

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 Production Process Coffee processing involves three distinct operations, viz roasting, grinding
and packing. Clean coffee, prior to roasting is blended in desired proportions. The aromatic
qualities of coffee only become apparent once the beans have been exposed to high temperatures
during pyrolysis or roasting. Experts place the roasting zone between 180o C and 240oC the
optimum temperature being between 210oC and 230 oC. Above this temperature, over-roasting
begins. In general, four principal groups of reactions occur during roasting: dehydration (deprive
of moisture), hydrolysis (breaking down of water molecules in hydrogen and oxygen elements),
desmolysis and catalysis (for aiding the speeding up of chemical process).

The roasting process normally lasts for between 12 and 15 minutes. In slow roasting techniques,
it requires about 25 minutes. While roasting gives coffee its taste and aroma, it also changes the
bean in certain ways. The beans lose weight due to evaporation of water from the green coffee.
About 0.2- 0.4 percent silver skin is also eliminated due to roasting. Roasting induces the
endosperm to increasing volume due to the formation and expansion of gas between 180oC and
220oC.This is manifested in a volumetric increase of about 50 to 80 percent, the extremes being
between 30 and 100 percent. The bean becomes porous and crumbles when pressure is applied.
The minerals in coffee do not change noticeably during roasting , but their relative content
increases when the water and volatile organic components disappear. When the desired colour is
reached, the coffee is discharged into the cooling bin where it is cooled upto room temperature.
The major post-roasting operations comprise sorting, coating or glazing, blending, packing and
beverage preparing. The roasted coffee is sometimes sorted to eliminate beans that are pale (too
light) or charred (too dark). Coffee beans are blended after roasting if there is too great a
variation in type. Roasted coffees rapidly lose their flavour and aroma. In order to avoid this,
sufficiently airtight packaging should be used which can preserve the qualities of the coffee for a
longer period of time.

B.ENGINEERING

Machinery and Equipment The total cost of machinery and equipment is estimated at Birr
8500,000 total cost will be required in foreign currency. Detailed list of machinery and
equipment and their cost estimates are given in Table 8

no Description Qty. Unit cost Total cost

1 A. Machinery and 1
Equipment Coffee
Roaster
2 Coffee Mixer 1
3 Coffee Grinder 2
4 Automatic Packing m/c 1
5 generator 1
Grand total 8,500,000.00

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6. MANPOWER AND TRAINING REQUIREMENT
A.MANPOWER REQUIREMENT

The coffee roasting, grinding & packing plant will create job opportunities for 37 persons. The
proposed manpower requirement and the estimated annual labour cost including fringe benefits
is given in Table 9.

Sr.No. Description Reqired no Monthly Annual

Salary (Birr Salary (Birr)

1 General Manager 1 12,000 144,000

2 secretary 1 4000 48000
3 Quality controller 1 10000 120,000
4 Finance and 1 10,000 120,000
administrative
5 Production and 1 12000 144000
Technical Head
6 Personnel and 1 10000 120000
General Service
7 Accountant 1 8000 96,000
8 Cashier 2 6000 144000
9 Sales Clerk 2 6000 144000
10 Production 1 12000 144,000
Supervisor
11 Machine Operator 2 10000 240,000
12 Electrician 2 10000 240000
13 mechanic 2 10000 240,000
14 Store Keeper 2 5000 60,000
15 Store Keeper 2 5000 60,000
16 Guard 4 4000 192,000
17 Others 11 100,000

B.TRAINING REQUIREMENT

The quality controller and production supervisor should be given on-the-job training for a
duration of one month by experts of the supplier of the machinery and equipment. The three
machine operators should also obtain a 15 days on –the – job training on how to operate the
equipment and handle the inputs. The estimated training cost is Birr 18,563.

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7. FINANCIAL ANALYSIS
The financial analysis of the coffee roasting, grinding & packing project is based on the
data presented in the previous chapters and the following assumptions:-

Machinery

procurement period 1 year

Source of finance 2 0 % equity 80 % loan

Tax holidays 3 years Bank interest 11.5%

Discounted cash flow 10.5%

Repair and maintenance 5 % of the total plant and machinery

Accounts receivable 30 days Raw material, local 30 days

Work in progress 2 days finished products 30 days Cash in hand 5 days

Accounts payable 30 days

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