PROJECT CAPACITY AND RATIONALE
1.5.1 Basis/Rationale
In recommending the plant capacity we have considered the following main factors:
Current and future demand for the products in the local market.
Trend of imports by the local market, which is not more, then 2%2
of the total
juice consumed locally.
Availability of raw materials (fruit pulp) and the seasonal supply.
The need to have a medium sized but manageable fruit juice processing plant.
Discussions with the industry experts and entrepreneurs
2 Based on the discussions with the industry experts, entrepreneurs
Pre-Feasibility Report Fruit Juice Manufacturing
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December, 2016
1.5.2 Plant Capacity
The proposed project will have a capacity to produce 7,560 liters (around 1259 trays of
24 packs in 250ml tetra pack servings) of fruit juice daily and the juice specifications and
other details would be as follows:
Product Name Juice Term Fruit
Pulp/Juice
Juice
Criteria
No. of Trays
Produced / Day
Guava Juice Fruit Juice
Drink
Containing
17% Juice
Low in
Juice 315
Mango Juice Fruit Juice
Drink
Containing
17% Juice
Low in
Juice 944
The plant will be operated at 70% capacity utilization for 12 hours a day in the beginning;
however, a 5% annual increase in capacity utilization is assumed with a cap of 90%.
Expansion to a higher capacity can be considered later and will mainly be dictated by the
level of business performance.
1.5.3 Raw Material Sourcing –
Backward Integration
To support the production operations, continuous supply of fruit pulp plays a key role for
the success in the fruit juice business. Therefore, it is proposed for the fruit juice
manufacturer to finalize the buying deal with the pulp processor six months prior to the
commencement of the production operations.
1.6 PROJECT INVESTMENT
Total cost of the project is estimated at around Rs. 26.85 million. The working capital
requirement is around Rs 11.9 million and the rest will be the fixed capital. It has been
estimated that the proposed business will need to inject around Rs. 5 million to meet
requirements i.e. contingency cash for initial stages and to finance the receivables. For
this purpose a provision of Rs. 5 million has been included in the working capital.
1.7 PROPOSED PRODUCT MIX
For the purpose of this feasibility, the product mix is assumed to be as follows:
S.
No. Fruit Product
Name Product Specification Packaging Quantity Selling
Price (Rs.)
1 Guava Guava
Drink
Guava Pulp 17%, Treated
Water, Sugar, Citric Acid,
Natural Guava Flavor,
Color and Preservatives
Tetra pak
250 ml 20
2 Mango Mango
Drink
Mango Pulp 17%, Treated
Water, Sugar, Citric Acid,
Natural Mango Flavor,
Color and Preservatives
250 ml 20
Pre-Feasibility Report Fruit Juice Manufacturing
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December, 2016
Around 70% of the total fruit juice market is accounted for by 250ml tetra pack servings
while the rest 30% includes 500ml and 1000ml packs. This shows significant
convenience (from consumer’s perspective) and high sales frequency in 250ml package
category. Based on this market situation, it could be observed that the entrepreneur
should focus more on small serving packs rather than one liter or other serving sizes.
Since a 100 percent juice or puree product is impractical especially in the case of
fleshy/pulpy fruits i.e. mango, to convert them into consumable drink, dilution with other
juices and/or water and sweeteners is required. Therefore we have proposed the product
mix as presented in the table above. It is expected to be practically workable and
financially viable for an entrant in the fruit juice business. Another reason for proposing
the above product mix is that high quality 100% pure juices would cover the
manufacturing cost only if provided in big size serving packs i.e. one liter or 1 ½ liter or
bulk supply to contract customers and mass availability of fruit pulp is ensured, which is
a difficult task for a new starter.
In the context of the aforesaid, it is suggested that a new entrant should consider the
100% pure juice production once the first course is complete and understanding of the
typical business demographics, export market as well as contemporary fruit juice
business skill is developed.
1.8 RECOMMENDED PROJECT PARAMETERS
Capacity Human Resource Technology/Machi
nery
Location
70% Capacity
Utilisation
19 Both Local and
Foreign
Major Cities
Financial Summary
Project Cost IRR NPV Payback Period Cost of Capital
(Wacc)
Rs. 26.85 million 36% 28,910,581 3.56 17.50
1.9 PROPOSED LOCATION
Location to setup a fruit juice-processing unit largely depends on the continuous (and at
reasonable price) availability of raw material; however, factors like availability of
manpower, utilities and easy market access should also be carefully assessed.
Most of the existing fruit juice units are being operated in Lahore, Bahawalpur, Karachi,
Hyderabad, Hattar (NWFP), Loralai, and Sargodha. For citrus fruits Sargodha is the best
location; and NWFP or Balochistan are preferred locations for setting up processing units
for apple, apricot, pear, grape and pomegranate. Province wise proposed locations are
provided below:
Pre-Feasibility Report Fruit Juice Manufacturing
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December, 2016
Punjab - Lahore, Sargodha, Gujranwala
Sindh – Hyderabad, Karachi
NWFP - Malakand or Hattar Industrial State
Balochistan - Loralai
Southern belt from Hyderabad to Sahiwal is supposed to be the potential area for fruit
juice business. During the discussions with the industry experts, it was observed that in
this region on average, daily fruit juice consumption is estimated at more then 15,000
trays (one tray comprises of 24 packs of 250ml). High population density and growth
rate, people belonging to lower and middle income groups (but with income levels
sufficient to buy small serving packs); easy availability of skilled labor and established
agriculture and fruit farming base coupled with easy access to other facilities like water
and utilities make this region fit for starting fruit juice business.
1.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS
Fruit Juice Business is highly dependent on the trade margins given to the distributors
and retailers; however, following additional factors are considered as important for
success:
1.10.1 Backward Integration
Frequent and continuous availability of quality fruit pulp is a prerequisite for Fruit Juice
Business. It is the only way to integrate operations from fruit orchards to pulp processing
to juice making and packing. Integrated and earlier pulp supply arrangements with pulp
producers and suppliers would be critical in business success.
1.10.2 Product Quality
Quality should be emphasized at each step right from the beginning to the marketing of
the product. Over the years, an image of high quality products should be cultivated.
1.10.3 Distribution Network
Distribution network should be given extra emphasis. Market share could be gained by
enhancing retailer and distributor margins. Normally distribution and retailer margins in
fruit juice business are from 15 to 20%.
1.11 PRODUCT MARKETING AND EXISTING COMPETITION
1.11.1 Existing Competition
Imported fruit juices are not more than 2% of the total quantity consumed locally; and are
generally available on those departmental stores, hotels, and foodstuff specialty shops
almost reserved for high income groups. Therefore, imported juices are not considered as
direct or indirect competitors
