Table of Contents

EXECUTIVE SUMMARY........................................................................................................................2

1. Introduction...........................................................................................................................................3

1.1. General background......................................................................................................................3

1.2. Profile of the Promoter..................................................................................................................5

1.3. Objective of the project..................................................................................................................6

1.4. The significance of the project......................................................................................................7

1.5. The Project location.......................................................................................................................8

2. DESCRIPTION OF THE PROJECT.....................................................................................................9

3. MARKET ASSESSMENT...................................................................................................................12

3.1. Past Supply and Present Demand.............................................................................................12

3.2. Projected Demand.......................................................................................................................15

3.3. Market prospects.........................................................................................................................16

3.4. Market share.................................................................................................................................16

3.5. Marketing strategy and Promotion...........................................................................................17

3.6. Positioning Statement..................................................................................................................19

3.6. Competition..................................................................................................................................20

3.7. Pricing...........................................................................................................................................20

3.8. Plant capacity and production program...................................................................................20

4. TECHNICAL STUDY.........................................................................................................................22

4.1. Raw materials and Input.............................................................................................................22

4.2. Technology...................................................................................................................................23

4.3. Production process......................................................................................................................24

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 4.4. Utilities..........................................................................................................................................26

4.5. Machinery and Equipments.......................................................................................................26

4.6. Building and Civil Work.............................................................................................................28

5. ORGANIZATION AND MANAGEMENT.....................................................................................30

5.1. Organizational Structure.............................................................................................................30

5.2. Man power requirement.............................................................................................................32

6. FINANCIAL REQUIRMENT AND ANALYSIS.............................................................................34

6.1. Fixed investment..........................................................................................................................34

6.2. Operating Expense at full Capacity...........................................................................................37

7. FINANCIAL ANALYSIS...............................................................................................................39

7.1. Underlying Assumption.............................................................................................................39

7.2. Project Capital & Sources of Finance.........................................................................................40

7.3. Bank loan Repayment Schedule.................................................................................................41

7.4. Depreciation Schedule.................................................................................................................42

7.5. Revenue schedule........................................................................................................................42

7.6. Financial Statement.....................................................................................................................43

7.7. Financial evaluation....................................................................................................................45

8. FUTURE DEVELOPMENT............................................................................................................46

9. ENVIRONMENTAL IMPACT OF THE PROJECT.....................................................................47

1
EXECUTIVE SUMMARY
1. Project Name Bottled Water Manufacturing Plant
2. Project owner Mrs. Genet Abebe
3. Nationality Ethiopian
4. Project location Oromia National Regional State, Oromia Special Zone
Surrounding Finfine, Sebeta Hasaw District
5. Project composition Different size clear and safe bottled water
6. Premises required 10,000M2
7. Total initial capital The total capital requirement of the project is Birr 99,837,894.2
of which 29,951,368.26 ( 30%) is owner’s equity while the
remaining 69,886,525.94 ( 70%) is financed through bank loan

8. Employment The total manpower required for the plant will be 335
employees at full capacity of which:
 Permanent workers 128:Skilled – 95 &Unskilled 33
 Temporary workers 207 :Skilled 7 & Unskilled 200

9. Market share 70% for domestic market and 30% for export

10. Plant capacity 25,000,000.00 liters of bottled water per year

11. Technology Treating, filling and capping, labeling, rapping etc

12. Raw material Ground water, polyethylene terephtalate (PET) bottles proof
caps, labels, polypropylene rolls and, disinfectant and other
13. Benefits of the Supply of quality drinking water, source of revenue,
project for the employment opportunity, foreign currency generation,
region/country improvement of life quality , technology transfer etc

2
1. Introduction

1.1. General background

Ethiopia is a country endowed with significant growth potential. Despite the potential

the country’s economy has been characterized by stagnant, at best steady economic

growth, until the demise of the socialist oriented military regime. Under the current

government, it took Ethiopia only two decades of economic metamorphism to exhibited

sustained double digit economic growth.

The impressive economic growth and sound macroeconomic stability are made possible

by fundamental changes in political and economic system, mature economic

management and ongoing partnership with external donors and investors as well.

Ethiopia has been made peace and stable through establishment of federal system of

government and parliamentary democracy. Simultaneously there was the general shift

from command economy to market economy. Macroeconomic stability has been

secured by a careful sequencing and implementation of economic reforms coupled with

tight fiscal and monetary policy. This may includes deregulation of domestic price

control, liberalization of foreign trade, privatization of public enterprises, promulgation

of liberalized investment laws, and the like. On top this, investment incentives and

investment property protection have also granted to both domestic and foreign

investors.

3
The conducive economic and political condition created by the government boosted the

confidence of private investors and inspire them to invest in different sector of the

economy. As such, the coordinated effort of public and private sectors has putted the

country on the truck of fast and sustainable economic growth. The fast and dynamic

economic growth requires a balanced growth of all sectors i.e., agricultural,

manufacturing and service sectors, in order to bring about significant economic and

social structural change.

In this regard, the government has been excreting unprecedented effort to bring about

economic structural transformation. The stretched GTP is the case in point. GTP aspire

industry to take the leading role in the economy. To this effect, a strong but careful

emphasis has given to bridge the missing link among various sectors of the economy in

general and manufacturing sector in particular. Attributable to this effort, the

manufacturing sector has shown significant growth.

Inspired by prevailing fertile ground for investment, the owner of the envisage water

bottling Plant is planned to invest Oromia National Regional State, Oromia Special

Zone Surrounding Finfine, Sebeta Hasaw District. This project study is undertaken to

check the marketing and financial feasibility of the project and the result of the study is

viable for the owners to start the project at the proposed area.

1.2. Profile of the Promoter

4
The promoter of the project, Mrs. Genet Abebe, is an Ethiopian has been investing in different

economic sectors in Ethiopia. She is highly passionate by government’s call for Ethiopian

investors that, through their skill and finance help their country fulfill the Socio - economic

transformation and benefited from their engagement. The promoter has very well

understanding of government’s policies and strategies and highly convinced that the planed

project will enable here share the country’s burden of fighting poverty and reducing

unemployment.

The feasibility of the project has been carefully assessed and the promoter is confident that it

will be a total success. The promoter is also extremely optimistic and determinant to model the

new ways of practicing modern production and marketing while meeting the growing demand

for bottled water. Hence, the promoter expected to get the necessary support from the regional

and local government to make the project operational.

1.3. Objective of the project

As part of business enterprises the project is planned with the objective of generating

income to the promoters. However, it is also have the following objectives to:

 Produce quality and affordable bottled water

 Contribute for life quality and social development of the citizen

 Develop local technology by bringing expatriate technical advisers and create the

base for development of the industry

 Create large causal and permanent employment opportunity

 Generate foreign exchange through the sale of its products in the export markets
5
  Generate income to the government in the forms of income and business taxes

1.4. The significance of the project

The envisaged project deemed to add to the economic development of the nation in

general and zone and town in specific with following ways:

A. Supply of safe water

It is a very target of the plant to help the life quality of the citizen by producing and

supplying safe water

B. Source of employment

Developmental and democratic government of Ethiopia has been implementing pro -

poor polices and strategies which ultimately aimed at ensuring the benefits of the

citizen. The government is working hard on tackling the problem of unemployment

either through creating self-employment or employment in other organization. Most of

mega projects financed by the government are labor intensive creating employment

opportunity for millions of citizens. Despite the effort, unemployment still remains the

pressing issues particularly in urban area. Hence, the project is a labor intensive and

will directly hire 335 citizens in permanent and temporary employment.

C. Source of government revenue

6
To redistribute income, the government collects different forms of tax from different

business undertakings and individuals. Among the different forms of taxes, business

income taxes, payroll income tax and VAT are the major one. Therefore the project will

generate revenue for town and regional government.

D. Stimulate local and National economy

The plan has positive externality in the zone that will encourage economic movement of

local economy. The plant also uses national raw materials, bottling materials from local

factories. There will be relationship and transactions among different actors.

E. Benefit for the local community

The project tries to secure local community’s sense of ownership. To this end, it will

engage in different development activities on the surrounding areas that benefit the

community in many ways than one.

1.5. The Project location

The planed project will be established in Oromia Regional State, Oromia Special Zone
Surrounding Finfine, Sebeta Hasaw District, were industrial sector is flourishing from
time to time. The town has easy access to the fundamental utilities and other facilities
required for industrial area such as; developed infrastructure, dependable pull of labor
force, treated water supply, electric power access to telephone line and easy access for
transportation and market outline.

Moreover, the Regional Government has been undertaking various measures that help
boost the growth of investment endeavors in the area by allotting land, and providing

7
efficient municipal service. The location of the plant should be at a place where the
workers conveniently commute or take up their lording in view of the fact that the plant
is operated sixteen hours a day.

Attributable to the cumulative effects of the aforementioned factors and its proximity to
the capital Addis, where the majority of financial transaction of the country take place,
the location and project site of the venture believed suitable.

The total project site/plot area required has been assessed in accordance with the
effective space requirement of the plant machinery and the overall duties and activities
that will be carried out by the project as per the standard set by the manufacture of the
plant machinery.

One of the crucial factors, which determine the implementation and overall success of
any project, is the acquisition of land, its location, its relative size and cost of
acquisition. In determination of the required size of the project area, these all
parameters have been assessed and it is found to be suitable.

2. DESCRIPTION OF THE PROJECT

The envisage project intends to manufacture and sell bottled water. The product shall

be of high quality standard so as to ensure consumers’ satisfaction and meet all the

customers' requirements.

8
Bottled water has become a safer alternative to other sources of water such as tap water.

Bottled water usage has increased even in countries where clean tap water is present.

This may be attributed to consumers disliking the taste of tap water or its organ

oleptics. Another contributing factor to this phenomenon could the association of the

use of bottled water with social status. Consumers tend to choose bottled water due to

health related reasons. In communities that experience problems with their tap water,

bottled water consumption is significantly higher.

Some surveys “found that bottled water, far from being an alternative to tap water,

seems to be mostly consumed as a substitute for alcoholic and traditional soft drinks –

the exception being when water contamination presents serious health risks and the

trust in the tap water company is highly eroded. Another explanation for the rise in

popularity of bottled water is alternative explanation is that “the consumption of ‘pure’

and ‘natural’ bottled water in degraded environments may represent a symbolic

purging behavior.” Many low-income families avoid drinking tap water because they

fear it may cause sickness.

Bottled water can be classified in several categories. Some of the more common types of

bottled water are listed below:

Artesian water: This is water that originates from a confined aquifer that has been

tapped and in which the water level stands at some height above the top of the aquifer.

9
Groundwater: This type of water is from an underground source that is under a

pressure equal to or greater than atmospheric pressure.

Mineral water: Mineral water contains at least 250 parts per million total dissolved

solids (TDS). It comes from a source tapped at one or more bore holes or spring, and

originates from a geologically and physically protected underground water source. No

minerals may be added to this water.

Purified water: This type of water has been produced by distillation, deionization,

reverse osmosis, or other suitable processes. Purified water may also be referred to as

"demineralized water". It meets the definition of "purified water" in the United States

Pharmacopoeia.

Sparkling water: Sparkling water contains the same amount of carbon dioxide that it

had at emergence from the source. The carbon dioxide may be removed and

replenished after treatment.

Spring water: This type of water comes from an underground formation from which

water flows naturally to the Earth's surface.

Sterile water: This type of water meets the requirements under "sterility tests" in the

United States Pharmacopoeia.

10
Well water: Well water is taken from a hole tapping, etc. This hole may be bored,

drilled, or otherwise constructed in the ground.

However, according to Quality and Standard Authority of Ethiopia (QSAE),

industrially processed and bottled water can be classified into two major groups:

bottled drinking water (ES597:2001) and mineral water (ES 621:2001). The former is

further classified in to carbonated “sparkling” natural water and non-carbonated “still”

natural water. If water has been made after possible treatment, effervescent by addition

of carbon dioxide then it is called carbonated natural water. Non-carbonated water is by

nature and after possible treatment does not contain free CO 2, in excess of the amount

necessary to keep dissolved the hydrogen carbonates salts that are present in the water.

In this study, the non-carbonated “still” natural water has been considered

3. MARKET ASSESSMENT
The market study crew of the project has tried to access relevant, up to date and time

series data about bottled water in Ethiopia, so as to come up with the comprehensive

market assessment. However, the assessment has been undertaken amidst the existing

limited data about the product.

11
3.1. Past Supply and Present Demand

The country’s requirement for purified water is met through domestic production and

imports. The following table shows the supply of the product from domestic production

and imports during 1997-2006. During the period under reference, domestic production,

imports and total supply averaged at 404,950 hectoliters, 789 hectoliters and 405,740

hectoliters, respectively. Thus, domestic production, on the average, accounted for 99.8

percent of the total supply of purified water in the domestic market, revealing the

relatively limited share of imports (0.20%) in the total supply of the product.

Table -Supply of Purified Water (Hectoliters)

Year Domestic Import Total Market Share (%)

Production
Supply Domestic Imports
Production

12
1997 374,257 2,498 376,755 99.34 0.66

1998 390,068 967 391,035 99.75 0.25

1999 421,307 953 422,260 99.77 0.23

2000 399,763 1,007 400,770 99.75 0.25

2001 395,451 571 396,022 99.86 0.14

2002 394,632 198 394,830 99.95 0.05

2003 432,600 224 432,824 99.95 0.05

2004 398,844 47 398,891 99.99 0.01

2005 394,303 723 395,026 99.82 0.18

2006 448,279 704 448,983 99.84 0.16

Average 404,950 789 405,740 99.80 0.20

During the period 1997-2006, the maximum total supply (apparent consumption) of

purified water was 448,983 hectoliters in the year 2006, while a minimum of 376,755

hectoliters was registered in year 1997. In the remaining years, apparent consumption

was fluctuating between these two extremes quantities. The mean of the total supply

was 405,740 hectoliters and the average growth rate during the period under reference

was 2%.

Accordingly, due to the fluctuating nature of the products total supply, it appears more

appropriate to consider the average of the last four years of the period under reference

(2003 – 2006) which was 418,931 hectoliters as the effective demand for the product for

13
the year 2007. In estimating the present (2008) effective demand for the product, since

the consumption of purified water is associated with the urban population, the demand

for the product is assumed to grow at the rate of 4% which corresponds to the annual

growth rate of urbanization in the Country.

Accordingly, the present effective demand for purified water is, thus, estimated at

435,688 hectoliters.

3.2. Projected Demand

The future demand for purified water is a function of income, urban population growth

and growth of catering and recreational establishments. Accordingly, the demand for

purified water is forecasted to grow at a rate of 4% which is equivalent to the growth

rate of urban population. Moreover, assuming that existing domestic producers will

maintain their current production (year 2006) for the future, the unsatisfied demand for

the product is depicted in the following table.

Table - Projected Demand for Purified Water (Hectoliter)

Year Projected Existing Unsatisfied

Demand Factories Demand
2009 453,116 453,116 4,837

2010 471,240 471,240 22,961

2011 490,090 448,279 41,811

14
2012 509,694 448,279 61,415

2013 530,081 448,279 81,802

2014 551,285 448,279 103,006

2015 573,336 448,279 125,057

2016 596,269 448,279 147,990

2017 620,120 448,279 171,841

2018 644,925 448,279 196,646

2019 670,722 448,279 222,443

2020 697,551 448,279 249,272

3.3. Market prospects

The demand and supply analysis for the products conducted above showed that there

exist large market gap in Ethiopian market. Hence, the envisioned factory will be

successful by entering in to this market.

3.4. Market share

The envisioned project will supply 70% of its products for domestic market and 30% of

its product for export in its initial years and continuous to increase international market

share in the future.

15
3.5. Marketing strategy and Promotion
The promotion strategy shall initially revolve around informing customers of the

projects existence, the products it produce, and how to order them. The intention will be

to highlight the following key benefits of ordering products instead of competitors,

including:

 Its lower production costs which will convert to lower order prices.

 Quality products able to compete with the top brands.

 Faster order fulfillment times.

The firm intends to be well known by all its stakeholders in particular wholesalers and

distributors. Hence it shall leverage its presence using introductory letters, brochures

and other sales literature. The firm intends to spread the word about its business

through the following:

a. Personal Selling. Undoubtedly customer solicitation face-to-face will be its

most powerful form of promotion mainly due to the fact that its products are

mainly ordered by distributors, organizations and institutions. Its flexibility will

enable it to give its customers concise details of what it has to offer and the

benefits of using its products. Another important determinant in utilizing

personal selling is the fact that it is relatively new on the market. As such

potential customers/clients will to a certain degree be skeptical towards its

products and their efficacy.

16
 b. Advertising. The firm intends to undertake adequate advertising of its name

and products it offer. This is to instill awareness and knowledge of its existence

in the market place, which hopefully shall convert into market share. A constant

look out will be made of any special editions in the local newspapers, which

may provide an opportunity to advertise its products and business name.

c. Direct Marketing. This will be used to a limited extent in the form of

telemarketing and informing potential customers and obtaining referrals where

possible. In the case of telemarketing it will involve targeting potential

customers of its products and informing them of its existence. It may then

arrange for an appointment with the respective decision-maker/order-maker,

with the intention being to encourage them to order its products.

d. Events. The firm intends to attend trade shows and exhibitions to increase

awareness of its products and services. These events will also enable to interact

with potential clients who may decide to order products.

Products shall initially be mainly sold through personal selling and referral business,

with relationships and customer experience being, by far, the most important factor.

Relationships in this regard means establishment of links with the various wholesalers,

organizations and institutions which often order or require products for their

customers. Invariably the experience a customer has with its products will go a long

way toward influencing the intermediary to continue to order the products, and

17
whether they should refer their friends to order products. To this end the firm intends

to ensure provide a standard product with superior qualities.

3.6. Positioning Statement

We intend to position ourselves as a desirable alternative source of high quality and

safe bottled water. This shall be undertaken through use of high quality raw materials

and production processes so as to ensure the efficient delivery of quality products. The

product strategy will also be based on quality, combined with making the product

easily available to the customers. An important competitive edge will be our assembly

strategy, which will be based on good quality, such that production and delivery are

not only a pleasure, but also a feature that enhances the sense of quality and perception

by clients. Our faster delivery, relative to our imprinting counterparts, will also serve as

an important competitive advantage on the market.

Through our lower prices, made possible by reduced local delivery charges, we intend

to attract a large portion of the market, both directly and indirectly through referrals.

3.6. Competition

The envisage project has diversified marketing strategies that could enable it cope-up

with the different competitors in the market. Moreover it will frequently conduct

competitors research which focuses on, the weaknesses, the different competitor’s

18
strategies, the techniques they use in rendering product, their customer handing

methods, and others,

3.7. Pricing

The pricing strategy will be done by conducting market research and by assessing the

competitors’ price and customers’ income level. The plant will use penetration strategy

to introduce the products and to attract the customers. The price of the products is

determined primarily by what customers are willing to pay that the company is offering

and the price of competitors. For this matter the existing retail price of in the market is

assessed for comparative analysis and the firm settled the lower price.

Accordingly, the current retail price of domestically produced purified water is Birr 20

per/two liter pack, 15 birr/ one liter pack and 10 birr/ half a liter pack . Allowing 30

per cent for wholesale and retail margin, the factory-gate price for the product of the

envisaged plant is estimated at Birr 14, 11.5, and 7 per pack respectively.

3.8. Plant capacity and production program

3.8.1. Plant capacity

The annual production capacity of the envisaged plant is determined to be 4,800

hectoliter, based on 300 working days per annum and 8 hours per day. In this study, the

size of the plastic bottle is assumed to be 0.5 liters ,1 liters and 2 liters. Actually, these

are the most popular and favored sizes. The half liter size is more commonly used in

19
organization and institute while one liter and two liter size are most often used by

individual customers and households and getting more popular than half liter.

Therefore, proportion of production shall be 20 %, 40% and 40% of half, one and two

liter respectively.

3.8.2. Production program

At the initial stage of production period the plant may require some year to capture a

significant market share of products. The plant may start production at 60% and 80% of

its capacity in the first and second year of production, respectively. Full production

shall be attained in the third year and then after. The proposed production program

indicated in the following table.

Products Unit Year

    1 2 3 and above
Capacity utilization (%) 60 80 100
Two liter Pcs 6,000,000.00 8,000,000.00 10,000,000.00
One liter Pcs 6,000,000.00 8,000,000.00 10,000,000.00
Half liter Pcs 3,000,000.00 4,000,000.00 5,000,000.00
Total   15,000,000.00 20,000,000.00 25,000,000.00

20
4. TECHNICAL STUDY

4.1. Raw materials and Input

The source of raw water for the proposed project is ground water, which is abundantly

available in the Sebeta Hawas District. Raw water shall be supplied from a deep-well

near the processing plant.

The major auxiliary materials are polyethylene terephtalate (PET) bottles with pilfer

proof caps, labels, polypropylene rolls and different chemicals required to sanitation,

disinfection and other purposes. PET bottles shall be imported in performs and

preheated and blown to final sizes. Caustic soda and Common salt is locally available

21
while the other raw materials will be imported. The annual requirement (at full

capacity) of raw & auxiliary materials is indicated in the following table;

Raw & Auxiliary Materials Requirement

S.No. Description Unit Annual

Requirement
1 PET Pre form ( 2 lt) Pcs 10,200,000
2 PET Pre form ( 1 lt) Pcs 10,200,000
2 PET Pre form ( 0.5 lt) Pcs 5,100,000
3 Label Pcs 25,500,000
4 Polypropylene for wrapping bottles Pcs 25,500,000
5 Caustic Soda Roles 10,026
6 Dive rite Deformer kg 120
7 Common salt kg 20,500
8 Brill tak kg 1300
9 Filter candle kg 2500
10 Glue kg 300
11 Hydrochloric Acid kg 10500
12 Hypochlorite kg 8300
13 Largo Medicated kg 10,000

22
14 P3 special kg 3000
15 P3 stabilon kg 4760
16 P3 Ferisol kg 200
17 Porcelain ring kg 145
18 Silica Gel kg 110
19 Sulphuric Acid kg 50
20 Filter paper Pcs 300
21 Manganese Greensand kg 600
22 Everite lt 738

4.2. Technology

Technology is also the necessary factors that need due consideration during machinery

and equipment selection. The proposed project is planned to utilize appropriate

technology that are cheap and easy to acquire, lower power consumers, reasonable size,

enable to produce best quality products and easily adaptable. In addition proper

monitoring and follow up will be made during construction and production process. In

this study the various technological options available in the market have not yet

considered despite their influence on capital lay out and recurrent costs.

4.3. Production process

The process aims to guarantee the highest safety standards for drinking water and

ensure a taste that is in accordance with consumer preference . The processing

technologies of mineral water are more or less similar. The major difference arises from

the type of bottles, glass or plastic. The glass bottles are normally reused, about 6 to 7

times before they are discarded.

23
The type of plastic used for bottle making is known as polyethylene terephtalate (PET).

They are thin and shatter-proof containers, with glass-like transparence and exceptional

strength which results in increased safety.

Each type of bottling has its own advantages and drawbacks. The glass bottles, for

example, are heavier, i.e., costly to transports, are brittle and have danger of breakage

and need be washed thoroughly. On the other hand, they are reusable. Therefore, it has

lower production cost. The PET bottles have some drawbacks such as relatively high

production cost and larger factory floor area for their manufacturing. However, they are

lighter in weight and thus cheaper for transportation less damaged while filling and

easy for handling. Therefore, either of the alternatives can be used based on the

preference of the project owner. In this study the plastic bottle has been considered.

The production and bottling of purified water in PET bottles involves processes like

raw water storage and treatment, filling and capping, labeling and wrapping. The major

operation in water storage and treatment unit include water color removal, raw water

pumping and storage, chemical dosage, filtration using different types of filters,

ultraviolet water disinfection ozone generation with recirculation system.

24
Fig – Production flow chart

After proper water treatment, the PET bottles are automatically conveyed and

transferred to the rinsing rotor where they are subject to rinsing jets. Then the bottles

are transferred to the filling and capping rotors. After labeling and sealing, bottles are

transferred to the discharge conveyor, as indicated below

Fig – Discharge conveyer

4.4. Utilities

25
Electric power, water, telephone line and paved road are the utilities required for textile

and garment factory. Detail is indicated in the production cost estimate section of this

document

4.5. Machinery and Equipment

The following are the list of necessary machineries and equipment for the envisioned

water bottling factory:

Table: Machinery & Equipment Requirement

S.No. Description Qty

1 Water Treatment
1.1 Feed Tank 1
1.2 Feed Pump 1
1.3 Multi-Media Filter 1
1.4 Cartridge Filter 1
1.5 Middle Tank 1
1.6 Middle Pump 1
1.7 Fine Filter 1
1.8 Micro Filter 1
1.9 Final Tank 1
1.10 Final Pump 1
1.11 Ozon System Set
1.12 Pipes, valves and accessories Set
1.13 Control Equipment Set
26
2 Filling, Capping, and Packing Unit
2.1 Rinser, Filter, and capper (with accessories) Set
2.2 Light checking box 2
2.3 Caps sterilizing cabinet 2
2.4 Shrink labeling machine 1
2.5 Inkjet printer 1
2.6 Conveyor with motor and extension Set
2.7 Label inserting table 1
2.8 Air compressor 3
3 PET stretch Blow Molding Unit
3.1 Stretch blow moldings with 2 high pressure air compressor Set
air receiving tank, 2 air filters, air drier, spare parts and tool
3.2 Mould, ½ lt PET bottle 1
3.3 Mould, 1 lt PET bottle 1
4 Caps Production line
4.1 Injection Machine 1
3.2 Auto loader 1
3.3 Mould for caps 1
Total

4.6. Building and Civil Work

4.6.1. Premise required and land use plan

The total land required for the envisage water bottling factory is 12,520 M2. . This

include built up are, free spaces, buffer zone internal road, greenery and parking among

other. The detail is indicated in the following table.

Table - Premises required and land uses plan

SN Description Land requirement (M2)

1. Production hall and workshop

1.1. Production Hall 3,000
1.2. Laboratory 600

27
1.3. Inspection room 400
Total production hall and workshop 4,000
2. Warehouse
2.1. Raw material store 1000
2.2. Finished product store 1000
Total store 2000
3. Administration and general building
3.1. Administrative building, 500
3.2. Workers cafe and lounge 500
3.3. Assembly hall 500
 3.4. Shop and showroom 100
3.5.       Waste Accumulation area 500
3.6.   Gourd houses(two) 40
3.7   Generator house 50
3.8 Green area, internal road, and parking 1810
  Total 10,000

4.6.2. Design and Engendering

The envisage water bottling factory comprises stock of different components to be

executed at different phases of the project life. These activities include: design and

construction of various buildings (workshops) importing of machineries and other raw

materials import of product transporting medium vehicle.

4.6.3. Plant lay out and construction works

The construction of the building are planned to accommodate production workshops,

stores, showrooms, shops, administrative offices and other utility requirements as well.

In general the building must be capable of being kept clean and provision should be

made for keeping the sewerages drained out properly and room temperature is attained

28
to keep healthy environment. In most environments, equipment should be totally

enclosed in a light structure: where the climate is suitable. In addition the loading and

offloading areas together with incoming and outgoing roads are proposed to be paved

to ensure a clean environment around the project site. The site will be encircled by a

chin linked fence fastened to concrete posts.

The project construction is designed by professional engineers and construction will be

done under close supervision and collaboration of the engineers.

5. ORGANIZATION AND MANAGEMENT

5.1. Organizational Structure

Business activities needs well established system in order to be competitive and become

profitable. The envisage project will have its own autonomy and legal entity to execute

its objectives. Organizational structure of the project is designed by including all the

necessary personnel under the right division. Structurally it will have three main units;

production & technical unit, marketing & sales unit and administration & finance units

under the office of general manager.

29
At the top of the organizational structure, there will be manager with the responsibility

of supervising the overall activity of the plant. The production & technical unit is

responsible for operational and technical aspects of production, maintenance and safety

of the plant. The marketing unit is responsible for procurement of row material and

sales activities. The administration and finance unit is responsible for controlling and

guiding personnel, for administering the buildings and controlling all financial

accounts.

Depending up on the nature of the center and the amount of work to be performed;

there exist auxiliary units under the general manger. Employees under each unit will be

supervised by the department head that is accountable for the general manger. General

manger is appointed by the owner

General Manager

Executive Secretary

Production & Technical Marketing Department Admin & Finance

Department
Department

Production Unit HRM & General Service

Sales & Distribution
30
 Market promotion

Finance team
Quality Control

Fig -1- Organizational Structure of the envisage project

5.2. Man power requirement

The smooth & efficient operation of the factory presupposes adequate number of

qualified and experienced manpower. The manpower component of the factory will

include the general manager, unit managers and skillful technicians to control the

production lines, operators and other supporting stuffs.

The company will use efficient trained staffs in the area of marketing to be competitive

supplier of bottled water in the market. The opportunities of being serviced by well

skilled professionals will enable the company to evaluate the internal weakness and

strength of the company and help cope up with the dynamics of the market situation.

The total manpower required for the plant will be 335 employees

 Permanent workers 128

o Skilled - 95
o Unskilled 33
 Temporary workers 107

31
 o Skilled 7
o Unskilled 200

Table: Man power requirement

Position Qualification Req No.

Permanent    
General manager MSC/MSC industrial engineering 1
Production manager BSC in chemical engineering 1
Quality controller BSC in chemistry 1
Machine operator BSC in BSC in industrial engineering 15
Assistant operator 10 + 3 in general machine 10
Public affairs BA in mgt/leadership/ PSIR, 1
Marketing head BA in marketing management 1
Administration & finance head BA in accounting, economics 1
Finance head BA in Accounting 1
Personnel head BA in mgt/ leadership 1
Accountant BA in accounting 3
Sales 10+3 sales man ship 5
Secretary Diploma in sectarian science 3
Cashier 10+2 in bookkeeping 5
Clerk 10 completed 2

32
Store keeper 10+3 in store and logistics 5
Driver 10 completed 20
Assistant driver Basic 10
Office boy/girl 10 completed 3
Cleaner & laundry Unskilled 30
Security Basic 6
Gardner Unskilled 3
Total permanent 128
Temporary  
Mechanic Diploma/10+2 in general mechanics 4
Electrician 10+2 in general electricity 2
Plumber man 10 + 3 in plumbering 1
Wage workers Unskilled 200
Total temporary   207
  Total   335

6. FINANCIAL REQUIRMENT AND ANALYSIS

6.1. Fixed investment

6.1.1. Building & Construction and Land

SN Description Land  Unit price  Total price

requirement
(M2)
1 Production hall and workshop      
 1.1. Production Hall 3,000.00 6,000.00  
 1.2 Laboratory 600 6,000.00  
 1.3 Inspection room 400 6,000.00  
  Total production hall and 4,000.00 6,000.00 24,000,000.00
workshop
 2 Warehouse      
 2.1 Raw material store 1,000.00 4,800.00  
 2.2 Finished product store 1,000.00 4,800.00  
  Total store 2,000.00 4,800.00 9,600,000.00
 3 Administration and general      

33
 building
3.1. Administrative building, 500 5,500.00 2,750,000.00
3.2. Workers cafe and lounge 500 5,500.00 2,750,000.00
3.3. Assembly hall 500 5,500.00 2,750,000.00
 3.4. Shop and showroom 100 5,500.00 550,000.00
3.5.       Waste Accumulation area 500 2,800.00 1,400,000.00
3.6.   Gourd houses(two) 40 4,000.00 160,000.00
3.7   Generator house 50 4,000.00 200,000.00
3.8 Green area, internal road, parking 1810 1000 1,810,000.00
 4 Design and supervision     500,000.00
 5 Fences     2,000,000.00
 6 Site dvt and utility & installation     709375

  Total 10,000.00   49,179,375.00

6.1.2. Machinery and Equipment

Most of the water bottling machine and equipment are imported from abroad. There are

about 28 production machine and equipment required for production. The cost of

required machineries and equipment described in section 4.5 of this document is

estimated to be birr 25,650,956.

6.1.4. Office equipment

SN Description Mea Qty Unit Total cost

sure cost in in Birr
ment birr
1 Tables
1.1 Imported high quality Managerial tables Unit 1 10,000 10,000
1.2 Managerial table Unit 5 13,000 65,000
1.3 Secretarial table Unit 1 8000 8,000
1.4 Office table Unit 30 5000 150,000
2 Chair 0

34
2.1 Imported, high back, high quality managerial chair Unit 1 10,000 10,000
2.2 High back managerial chair Unit 4 6000 24,000
2.3 Office chair Unit 70 900 63,000
2.4 Secretarial chairs Unit 1 1500 1500
2.5 Guest chairs Unit 20 1000 20,000
3 Computer with chairs Unit 8 15,000 120,000
4 Shelf Unit 6 4,500 27,000
5 Filing cabinets Unit 6 1,500 6000
6 Fax & Telephone machine Unit 4 1,200 4,800
7 Carpet and Curtain LS 200,000
8 Other equipment 105,000
Total 814,300

6.1.5. Vehicle
SN Description Qty Unit cost Total cost Remark

1 ISUZU truck 1 1,700,000 1,700,000 Duty free

3 Pick up(4WD) 1 2,200,000 2,200,000 Duty free

Total 2 3,900,000

6.1.6. Initial working capital

The initial working capital is estimated to 9,462,091

SN Description Total cost in

Br.

1 Promotion and advertisement 1,500,000

2 Project proposal study 15,000
3 Environmental impact assessment 20,000
4 Staff capacity building 200,000
5 Licensing fee and other processing 20,000

35
 Total 1,755,000

6.2. Operating Expense at full Capacity

6.2.1. Raw material and input

The annual requirement (at full capacity) of raw & auxiliary materials is indicated in the

section 4.1 of this document. The estimated cost of this material is Birr 220,945,273/

annum at full capacity.

6.2.2. Salary Expense

Monthly
Position Qualification Req No. Yearly salary
salary
Permanent        
General manager MSC/MSC industrial eng 1 20,000 240,000.00
Production manager BSC in chemical engineering 1 15,000 180,000.00
Quality controller BSC in chemistry 1 10,000 120,000.00
Machine operator BSC in industrial eng 15 6,000 1,080,000.00
Assistant operator 10 + 3 in general machine 10 5,800 696,000.00
Public affairs BA in mgt/leadership/ PSIR, 1 6,000 72,000.00
Marketing head BA in marketing management 1 6,000 72,000.00
Administration head BA in accounting, economics 1 6,000 72,000.00
Finance head BA in Accounting 1 6,000 72,000.00
Personnel head BA in mgt/ leadership 1 6,000 72,000.00
Accountant BA in accounting 3 6,000 216,000.00
Sales 10+3 sales man ship 5 2,800 168,000.00
Secretary Diploma in sectarian science 3 2,800 100,800.00
Cashier 10+2 in bookkeeping 5 2,800 168,000.00
Clerk 10 completed 2 2,800 67,200.00
Store keeper 10+3 in store and logistics 5 2,800 168,000.00
Driver 10 completed 20 2,800 672,000.00
Assistant driver Basic 10 2,800 336,000.00
Office boy/girl 10 completed 3 2100 75,600.00
Cleaner & laundry Unskilled 30 2100 756,000.00
Security Basic 6 2100 151,200.00
Gardner Unskilled 3 2100 75,600.00
Total permanent   128   0.00

36
 Temporary       0.00
Mechanic Diploma/10+2 in l mechanics 4 3,200 153,600.00
Electrician 10+2 in general electricity 2 3,200 76,800.00
Plumber man 10 + 3 in plumbering 1 3,200 38,400.00
Wage workers Unskilled 100 60/day 3,600,000.00
Total temporary   107   0.00
  Total   235   9,499,200
Benefits 20%       1,899,840
Grand total       11,399,040

6.2.3. Other Operating expenses

SN Description Remark Annual cost in
br
1. Stationeries 10,000 per month 120,000
2. Detergents Br 3500 per month 45,000
3. Telephone, fax and postal Br 3000 per month 36,000
4. Uniforms 350 * 200 br 70,000
5. Electricity 0.45 * 350000KW per year 157, 500
6. Water 1.5 * 5000m3 per year 7500
7. Fuel 21,000 lit * 17 per year 357,000
8. Property insurance 1% of fixed investment cost 998,378.942

9. Audit & legal fee Br 4000 per month 48000

10. Spare parts Lump sum 200,000
11. Repair and maintenance 2% of the fixed cost 1,996,757.8
12. Oil and lubricant 10% of fuel cost 35,700
13. Miscellaneous expense Br. 10,000 per months 120,000
Total 3,763,336.742

37
6.3. Initial investment capital
The initial investment capital of the proposed factory is estimated to be birr 99,837,894.2

Total initial investment capital

SN Description Cost birr

1 Land, building & construction 49,179,375.00

2 Machines & Equipments 25,650,956.00

3 Vehicles 3,900,000

4 Office Equipment 814,300

  Total fixed investment cost 79,544,631

5 Initial working capital 9,462,091
6 Pre service expense 1,755,000
  Total 90,761,722
  Contingency (5%) 9,076,172.2
  Total initial investment cost 99,837,894.2

38
7. FINANCIAL ANALYSIS

7.1. Underlying Assumption

The financial analysis of the water bottling plant is based on the data provided in the
preceding sections and the assumption indicated in the following table.

TL Description Rate

1. Depreciation

Building 5%

Machinery and equipment 10%

Vehicle 20%

Office Equipments 10%

2. Financing and Operation cost

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Revenue increased by 4% after 3 years

Salary and wages increased by 3% after 3 years

Operating costs increased by 2% after 3 years

Raw material increase by 3% after 3 years

3 Leasing and interest rate

Bank interest rate 14%

Lease period 60%

39
 Lease payment 18.75/m2

Lease payment period 40%

7.2. Project Capital & Sources of Finance

The source of fund to finance the project is promoter’s equity and bank loan. The loan is
expected to be obtained from one of the local lending institutions. Since the project is
expected to take some times to repay all its debts, the bank loan is assumed to be
obtained on long term credit basis. Taking the financial position of the promoters into
account, equity contribution and bank loan to finance the total investment outlays of the
project are assumed to be 30% and 70% respectively. See the table below

Table – Sources of finance

SN Description Percentage share Amount

Owners Share 30% 29,951,368.26

Bank Loan 70% 69,886,525.94
Total 100% 99,837,894.2

7.3. Bank loan Repayment Schedule

Principal Total annual Remaining
Year Interest (14%)
Payment Payment in ETB Balance

0       69,886,525.94
1 6,988,652.6 9,784,113.6 16,772,766.2 62,897,873.3
2 6,988,652.6 8,805,702.3 15,794,354.9 55,909,220.7
3 6,988,652.6 7,827,290.9 14,815,943.5 48,920,568.1
4 6,988,652.6 6,848,879.5 13,837,532.1 41,931,915.5
5 6,988,652.6 5,870,468.2 12,859,120.8 34,943,262.9
6 6,988,652.6 4,892,056.8 11,880,709.4 27,954,610.3
7 6,988,652.6 3,913,645.4 10,902,298.0 20,965,957.7
8 6,988,652.6 2,935,234.1 9,923,886.7 13,977,305.1
9 6,988,652.6 1,956,822.7 8,945,475.3 6,988,652.5
10 6,988,652.6 978,411.4 7,967,064.0 (0.1)
40
7.4. Depreciation Schedule

Original Value Depreciation Depreciation per

SN Description
in Birr rate in % year in Birr
1 Land, building & construction 49,179,375.00 5
2,458,968.8
2 Machines & Equipment 25,650,956.00 10
2,565,095.6
3 Vehicles 3,900,000 20
780,000.0
4 Office Equipment 814,300 10
81,430.0
  Total    
5,885,494.4

7.5. Revenue schedule

The project generates its revenue from the sale of the products supplied to the local
community and export market. The project will supply about 30% of its products to
export market. However, for the purpose of this study local average sale price is
considered. Accordingly, the following table shows revenue generation schedule of
the project.

Table - Revenue generation schedule

Products Unit Year

    1 2 3 and above
Capacity
(%) 60 80 100
utilization
Two liter Pcs 84,000,000.00 112,000,000.00 140,000,000.00
One liter Pcs 69,000,000.00 92,000,000.00 115,000,000.00
Half liter Pcs 21,000,000.00 28,000,000.00 35,000,000.00
Total   174,000,000 232,000,000 290,000,000.00

41
7.6. Financial Statement

7.6.1. Income loss/statement

Revenue Year 1 Year 2 Year 3 and after
Sales Income 174,000,000 232,000,000 290,000,000.00
132,567,163. 176,756,218. 220,945,273.
Purchase of raw material
8 4 0
41,432,836. 55,243,781. 69,054,727.
Gross profit
2 6 0
Expenses  
- -
6,839,424 9,119,232. 11,399,040.
Salary Expense
.0 0 0
2,258,002 3,010,669. 3,763,336
Other Operating Expenses
.0 4 .7
Land, building & construction 2,458,968 2,458,968. 2,458,968
depreciation .8 8 .8
Building machines & 2,565,095 2,565,095. 2,565,095
Equipment depreciation .6 6 .6
780,000 780,000 780,000
Vehicle depreciation
.0 .0 .0
81,430 81,430 81,430
Office Equipment depreciation
.0 .0 .0
9,784,113 8,805,702. 4,402,851
interest Expense
.6 3 .2
2,73 2,734 2,73
Lease payment
4.4 .4 4.4
24,769,768. 26,823,832. 25,453,456.
Total Expense
4 5 7
16,663,067.7 28,419,949.1 43,601,270.3
Profit before Tax
7 3 3
13,080,381.1
Tax (30%)    
0
16,663,067.7 28,419,949.1 30,520,889.2
Net profit
7 3 3

42
7.6.2. Cash flow Statement

Year Year 0 Year 1 Year 2 Year 3 and after

Equity Capital 29,951,368.26      
Loan principal 69,886,525.94      
Net sale 174,000,000 232,000,000 290,000,000.00
Total Cash in flow 99,837,894.20 174,000,000 232,000,000 290,000,000.00
Cash payment        
Purchase of raw 132,567,163.8 176,756,218.4 220,945,273.0
 
materials 0 0 0
6,839,424. 9,119,232.0 11,399,040.0
Salary Expense -
00 0 0
79,544,631.0
Investment      
0
1,755,000.0
Pre operating Expense      
0
2,258,002. 3,010,669.4 3,763,336.7
Other operating Cost  
00 0 0
16,772,766.2 15,794,354.9 11,391,503.7
Loan repayment  
0 0 5
2,734. 2,734. 2,734.
Lease payment -
38 38 38
13,080,381.1
Tax payment - - -
0
Total payment
81,299,631.00 158,440,090.38 204,683,209.08 260,582,268.93
Net cash flow
18,538,263.20 15,559,909.62 27,316,790.92 29,417,731.07
34,098,172.8 61,414,963.7 90,832,694.8
Cumulative cash flow  
2 4 1

43
7.7. Financial evaluation

7.7.1. Profitability

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

1st 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 lifetime of the project. The income

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

7.7.2. Break - Even Analysis

Break - even analysis establish relationship between operation costs and revenues. More

importantly it indicates the level at which costs and revenue are in equilibrium.

Accordingly the break - even point of the project including cost of finance when it starts

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

7.7.3. Pay-Back periods

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

period. Accordingly the project initial investment will be fully recovered in less than 5

years of operation.

44
8. FUTURE DEVELOPMENT

In today’s dynamic and hypercompetitive business environment firms must change in

order to survive and prosper. In such innovative and changing environment, supper

strategies become lame, efficient ways of production become wasteful, if they could not

go with the order of the day. Operating in such environment therefore, the factory will

have an expansion phase depending on the condition of the industry character

particularly in producing the profile itself by installing the plant. In this regard, the

envisioned project will expand its capacity to include the bottling of other related

products.

45
9. ENVIRONMENTAL IMPACT OF THE PROJECT

In recent years environmental issues has swollen enough to assume pressing national

and international agendas. Government of Ethiopia has device policies, rules and

regulations regarding environmental impacts of projects. According this policy projects

to be implemented in the country should not cause environmental and social harms.

The environmental and social impacts associated to the project should be avoided if

possible or mitigated through various mitigation methods.

In connection to this, the proposed factory, will undertake a separate details of

environmental and social impact assessment together with its mitigation method.

46