Wet Coffee Processing Business Plan

PROJECT PROPOSAL FOR WET COFFEE PROCESSING PLANT.
PROJECT PROPOSAL FOR WET COFFEE PROCESSING PLANT
PROJECT OWNER: KOYACHEW ADEM
PROJECT LOCATION: TUMA TESO KEBELE, GERA DISTRICT, JIMMA ZONE,

OROMIA REGIONAL STATE
MARCH, 2020
Table of Content Pages
1. Executive summary....................................................................................................................1§
2. Product description and application...............................................................................................2§
2.1. The significance of the project.............................................................................................4§
2.2. Project location..................................................................................................................4§
2.3. Project objectives...............................................................................................................5§
3. MARKET STUDY.....................................................................................................................6§
4.2. Plant capacity and production program..............................................................................10§
2. Production Program.........................................................................................................10§
4.3. Technical Study.................................................................................................................10§
4.2.1. Material and inputs........................................................................................................10§
4.3. Engineering...............................................................................................................12§
4.3.1. Source of Technology.....................................................................................................12§
4.4. Land use plan...................................................................................................................12§
5. FINANCIAL REQUIREMENT AND ANALYSIS....................................................................................13§
5.1. Fixed Capital.....................................................................................................................13§
5.2. Working Capital................................................................................................................15§
5.2.1. Operating Expense at full Capacity...........................................................................15§
5.2.1 Operating Expense...................................................................................................16§
5.2.2.Pre-Service Expense.................................................................................................16§
5.2.3. Summary of investment cost...................................................................................17§
5.3. Financial analysis and Statements......................................................................................17§
II
5.3.1. Underlying Assumption...........................................................................................17§
5.3.2. Sources of Fund......................................................................................................18§
5.3.3. Depreciation Schedule............................................................................................18§
5.4. Financial Statement..........................................................................................................19§
5.4.1. Income/ loss statement..........................................................................................19§
5.4.2. Cash flow Statement...............................................................................................20§
5.5. Financial analysis..............................................................................................................21§
6. Environmental impact of the project............................................................................................22§
LISTS OF TABLE
Table 1.Project Profile.....................................................................................................................III§

Table 2. Annual production program................................................................................................10§
Table 3.Raw materials of the project................................................................................................11§
Table 4. Annual Utilities Requirement and Estimated Cost ................................................................12§
Table 5. Land use plan....................................................................................................................12§
Table 6. Land development, buildings and Construction ....................................................................13§
Table 7. Machinery and Equipment.................................................................................................14§
Table 8. Office Equipments..............................................................................................................14§
Table 9 Man power requirement and annual estimated cost .............................................................15§
Table 10. Operating Expense...........................................................................................................16§
Table 11. Pre-Service Expense.........................................................................................................16§
Table 12. Summary of Total initial investment cost...........................................................................17§
Table 13. Sources of Fund...............................................................................................................18§
Table 14. Depreciation Schedule......................................................................................................18§
Table 15. Bank Repayment schedule................................................................................................18§
Table 16. Wet coffee processing income/loss statement...................................................................19§
Table 17. Cash flow Statement........................................................................................................20§
III
Table 1.Project Profile
1 Project name Wet coffee processing
2 Project owner Koyachew Adem
3 Nationality Ethiopian
4 Project location Tuma Teso kebele, Gera district Jimma Zone, Oromia regional state
5 Project composition Wet coffee processing

6 Premises required 2.3 hectares
7 Initial investment A total investment of the project is estimated to be birr 1,540,229.90.
cost From this 20%(308,045.98)Birr will be covered by the promoter of
the project while the rest 80 % (1,232,183.92birr) will be covered by
financial institutions.
8 Employment At full capacity the farm will hire a total of Workers 54 labor force.
opportunity From the total employee 4 are permanent and 50 temporary or
seasonal
9 Technology Recycling water
10 Market share 100% for export
11 Benefits of the Source of income ,employment, value add in agricultural sector,
project foreign currency earning and transformation of agricultural
technology etc
IV
1. Executive summary
Wet coffee processing project is among few projects which increase the productivity and quality
of coffee production in Ethiopia, by introducing modern wet coffee processing technology in the
sector economy.
The proposed project is owned by Koyachew Adem aiming at planting Wet Coffee Processing
machine in Gera District, Tuma Teso kebele. The total investment capital requirement for the
proposed project is estimated to 1,540,229.90 million out of this 80% covered by Bank loan and
20% from owner’s equity. The present demand for the proposed project is estimated at 80 ton per
annum and it is projected to reach at 180 tones by the year 2023.
The proposed project will earn 1,407,161.86 profit in its first year by exporting 80 tons of coffee
been of establishment. The proposed project will create 4 permanent and 50 causal job
opportunities for the local people. The total area of land required for the project establishment is
2.3 ha.
The proposed wet Coffee processing project will target economic advantage and is thus striving
to achieve the planned benefits from wet coffee processing industry by giving due emphasis to
high quality of coffee bean.
1.2. Introduction
Coffee is one of the most important traded commodities in the world. The sector’s trade structure
and performance have large development and poverty implications, given the high concentration
of production by smallholders in poor developing countries. Coffee’s global value chains are
quickly transforming because of shifts in demands and an increasing emphasis on product
differentiation in importing countries (Ponte 2002; Daviron and Ponte 2005).
Ethiopia is endowed with a good production environment for growing coffee with a combination
of appropriate altitude, temperature, rainfall, soil type, and pH. Ethiopia is the center of origin for
Coffea arabica. The country possesses a diverse genetic base for this Arabica coffee with
considerable heterogeneity. Ethiopia produces a range of distinctive Arabica coffees and has
considerable potential to sell a large number of specialty coffees (Nure, 2008). Little of the
lower-value Robusta coffee is produced in Ethiopia, being better suited for production in lower
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altitude equatorial climates. Coffee production in Ethiopia is almost exclusively situated in the
two regions of Oromia and the Southern Nations, Nationalities, and People Regions (SNNPR) in
the south and west of the country
Smallholder farmers produce 95 percent of Ethiopia’s coffee (Tefera and Tefera, 2013). It is
produced under several types of production systems, including forest, semi-forest, garden, and
plantation coffee (Tulu, 2008). Forest coffee is grown in the wild under natural forest cover and
is gathered by farmers from trees with minor tree maintenance. Semi-forest coffee is also grown
in forest conditions, but there is some limited maintenance by farmers, mostly annual weeding.
This type of coffee has clearly delineated boundaries of ownership, although the trees usually are
located away from agricultural plots.
Garden coffee is defined as coffee from trees planted by farmers in the vicinity of their
residences. It is often intercropped with other crops or trees. Plantation coffee is grown on large
commercial farms, private as well as state farms. Modern production practices – such as
irrigation, modern input use, mulching, stumping, and pruning - are often applied in this case.
While reliable recent statistics are lacking, it is estimated that these different production systems
make up about 10, 35, 50, and 5 percent, respectively, of total coffee production in the country
(Kufa, 2012).
There have been significant domestic policy reforms in the last decade that affected the structure
and performance of the coffee export sector. First, from December 2008 onwards it became
mandatory for private traders to sell their coffee through the Ethiopian Commodity Exchange
(ECX), a new modern commodity exchange. ECX trades standard coffee contracts, based on a
warehouse receipt system, with standard parameters for coffee grades, transaction size, payment,
and delivery. The first level quality control is decentralized and undertaken in nine liquoring and
inspection units in major production areas. The establishment of the ECX has led to important
changes in the structure of the coffee value chain (Gabre-Madhin, 2012)
2. Product description and application

Ethiopia is probably the original source of Arabica coffee. Estimates of production today 'vary
from some 10,000 to 20,000 tons per annum. In Ethiopia about 60% of coffee production is
harvested from wild coffee growing in western Ethiopia, with an additional 30-35% coming from
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small plots around dwellings, principally in Sidamo Province, and the remainder from
plantations in Kaffa Province. While the intrinsic quality of Ethiopian coffee is good, the low but
slowly improving standards of harvesting and subsequent handling result in low prices for much
of it.
Wet coffee Hauling plant is a facility highly demanded by coffee producers’ area to enhance
coffee quality to properly address taste and preference of customers. It overcomes quality
deterioration due to hand, picking and manual hauling that has been practiced since longer time
in the area. The service improves the speed at which coffee output is processed that significantly
raises the quantity of milled coffee to be supplied to the central market. In this regards, local
traders and transporters ill gain an opportunity to find a bulk of milled and packed fresh coffee to
be offered to the central market.
A coffee cherry generally contains 2 coffee beans, each covered by a parchment skin, and
surrounded by a layer of pulp beneath the outer cherry skin. About 45% of Ethiopia's coffee is
processed by wet processing methods, following which the outer and parchment skins are
removed in one milling process. Washed coffee is produced by mechanically separating the outer
skin and much of the pulp from ripe coffee beans by means of a simple machine (pulper) with
the aid of running water. After the remaining mucilage is broken down by fermentation and
washed off, the resulting bean is dried, following which the parchment skin is removed by
milling. The washing process provides a means for controlling quality since unsuitable cherry
can be more easily identified and rejected when the cherry is ripe than after it has been sun dried.
Washed coffee production requires adequate water supply, the availability of feeder roads (since
it is necessary to bring the ripe coffee beans to the washing station quickly before they spoil),
and suitable varieties of coffee.
The plant will be established on an area of 2.3 ha that will be utilized based on the land use plan
of the project. Basically, the project will comprises of machinery house/ shade, paved field to
Wet/ aeration coffee cherry, warehouse with proper ventilation and storage structure, office,
guard house, lagon, fermentation tanks and other relevant structures that are believed to augment
coffee quality.
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2.1. The significance of the project

The envisaged project deemed to add to the economic development of the nation in general and
zone and district in specific with following ways:
A. Source of Revenue
As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, payroll income tax and VAT are collected from undertaking business activities. Therefore,
the project will serve as sources of revenue for the district as well as for the region.
B. Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 4 individuals in permanent and 50 casual workers.
2.2. Project location

Gera district extends astronomically located between 70 27’ and 70 55’ north latitudes and 360
01’ to 36024’ east longitudes. It is bordered by Seka chekorsa in East,Gomma in north Guma and
setema in north west and sigimo in west from oromia and SNNP regional state in south direction.
It is situated in north extreme of Gomma and zone .Because of Geographical location the district
near to largest market center of Gomma district which has a great advantage for accessing local
product to the market and creates idea condition for provision of demanded commodity to the
local communities.
The total surface area of the district is 1443.4 square kilometer. The district was divided in to 31
kebeles from this 29 kebeles are peasant association accounted and 2 kebeles are urban centers.
Chira is the capital town of the district. The population of peasant association accounted 147411
and cover 95% of total population and the rest 7791 of covers 5% the population is urban
dwellers.
Gera is one of 20 district of the zone found at south west of the country located at south west
direction on 93 km away from capital town of Jimma zone. The project site is only about 33km
away from the district’s town(Cira).
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2.3. Project objectives

The project is basically planned to be established with an objective of generating profit for the
promoter by producing of washed coffee bean. However, its initiations will benefits the public by
planning its significant part in solving the existing social and economic problems. In this respect
the project is aimed to promote the following objectives:-
 Supplying high quality of coffee bean to the world market and earning foreign currency to
the country.
 To provide value adding service to the area by using coffee as primary product
 Provide direct and indirect employment to working labor force,
 Facilitate the transfer of improved technologies and bases for the national industrial
development.
 Increase government revenue through the different forms of taxes to facilitate social
economic developments.
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3. MARKET STUDY
3.1. Market Analysis
Coffee is the largest commodity market in Ethiopia has remained the largest producer of coffee
in the world for two centuries. Imports of Arabica coffee in the United States have increased
ninety-four percent in the past five years and consumption of coffee within Ethiopia has seen
similar increases. In addition, demand for green coffee is above the market clearing level, and
market price and crop yield estimates are at an all time high. The increase in the number of
independent specialty roasters in the world has contributed to and is an indicator of the increased
demand for coffee. Within the larger coffee market is our target market is the specialty coffee
bean. These discerning customers want the highest quality coffee beans. They serve the growing
"gourmet" coffee market and are represented by large American companies like Starbucks and
thousands of smaller specialty roasters. The Arabica bean is considered to be the best in the
world and as such, the demand for Arabica beans is high on the specialty roaster market.
Specialty roasters are willing to pay more for Arabica beans and attempt to distinguish
themselves via the characteristics of the bean they use i.e. the location in which it was grown,
farming methods, bean size, etc. The final consumer is relatively price insensitive if the coffee is
good, has won awards, or is compatible with a popular trend. We estimate that specialty roasting
in the U.S. alone is a ($USD) one billion market.
3.1.1. Local Market

a) Overview of the Performance of the Local Coffee Sub Sector Ethiopia is endowed with a
good production environment for growing coffee with a combination of appropriate altitude,
temperature, rainfall, soil type and pH. Ethiopia is the center of origin for Coffee Arabica. The
country possesses a diverse genetic base for Arabica coffee with considerable heterogeneity.
Ethiopia produces a range of distinctive Arabica coffees and has considerable potential to
produce number of specialty coffees. There are four types of production systems in Ethiopia,
forest coffee, semi- forest coffee, garden coffee and plantation coffee. During the period 2004—
2013, the land area cropped by coffee shows a significant growth; increasing from 232,439
hectare to 528,751 hectares, registering an average annual growth rate of 10.17%. Local
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production of coffee also exhibits a substantial growth increasing from 225,362 tons in year 2001
to 373,941 in the year 2012, registering an average annual growth rate of 5.44%. During the
period 2000-2013, the maximum export of coffee from Ethiopia was 211,981 tons in 2010, while
the minimum was 89,220 tons in 2001; however during the period under consideration, on
average, the country was exporting about 155,785 tons of coffee per annum. During the period
under consideration (2000-2013), export of coffee has registered an average annual growth rate
of 6.25%. In terms of value, export of coffee has increased from Birr 2.09 billion in 2000 to Birr
11.39 billion in 2013, registering an average annual growth rate of 20.39%. Although coffee is
still the dominant foreign exchange earner to the Ethiopian economy, considering the unique
natural endowment and the special varieties of coffee produced in the country, which are highly
valued by importing countries, it can be concluded that the country is not benefiting from its
coffee resource potential. For example, during the period 2009- 2013, the average unit value of
coffee exported by Switzerland is higher by nearly 10 fold as compared to the average unit value
of coffee exported from Ethiopia. In fact, West European countries are not producers of coffee
but they have specialized in import of the green coffee from developing countries where the
resource is available and then processing the product (value adding) and re-exporting.
Accordingly, in order to fully exploit the country‘s coffee resource potential, developing local
value addition capability is indispensable.
b) Past Supply Trend
The local demand for roasted and milled coffee is supplied through local production and import.
On the other hand the local market for decaffeinated coffee; extracts and concentrates of coffee
and soluble or instant coffee is largely met through import. The finding on the trend in the past
supply of the products under consideration is summarized below.
Decaffeinated Green Coffee
Ethiopia produces a small amount of decaffeinated green coffee; which is exclusively targeted at
export market. On the other hand, the country imports insignificant amount of the product.
During the period 2002—2007, the average annual import was about 1.47 tons valued at Birr
29,997. However, during the recent six years (2008--2013), import of decaffeinated green coffee
has increased to7.15 tons in average per annum; valued at Birr 794,335.
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Demand Projection
Urbanization and income are found to be the major determinants of the future demand for value
added coffee products. Hence, a growth rate of 5%, which is slightly higher than the urban
population growth rate and much lower than income growth rate, is taken to forecast the future
demand. Accordingly, the local demand for decaffeinated green coffee is projected to increase
from 10.24 tons in 2015 to 13.07 tons and 16.69 tons by the years 2020 and 2025, respectively.
Moreover, by year 2030 the demand is projected to reach at 21.30 tons. The local demand for
non decaffeinated roasted and milled coffee is projected to increase from 3,126 tons in 2015 to
3,990 tons, 5,092 tons and 6,499 tons by the years 2020, 2025 and 2030 respectively. Likewise,
the demand for decaffeinated roasted and milled coffee is projected to increase from 11.27 tons
in 2015 to 14.38 tons, 18.36 tons and 23.43 tons by the years 2020, 2025 and 2030, respectively.
The local demand for instant coffee is projected to increase from 13.17 tons in 2015 to 16.81
tons and 21.46 tons by the years 2020 and 2025 respectively. Moreover, by year 2030 the
demand is projected to reach 27.39 tons. Similarly, the local demand for coffee extracts and
consecrates is projected to increase from 12.12 tons in 2015 to 15.46 tons, 19.73 tons and 25.19
tons by the years 2020, 2025 and 2030, respectively.
3.1.2. Export Market

a) Trend in Global Import and Export
During the period 2008-2012, global production of coffee has increased from 7.71 million tons to
9 million tons. The major coffee producers in the world are Brazil on average accounting for
37% of the total world production followed by Vietnam (15%), Indonesia (7%) and Columbia
(6%). Ethiopia is ranked fifth with an average share of 4%. Global total export of coffee (in all
forms), during the period 2004--2013, has increased from 5.7 million tons valued at 9.17 billion
USD to 8.18 million tons valued at 28.61 billion USD, registering an average annual growth rate
of about 4.15% and 15.27% in terms of volume and value, respectively. During the period 2004--
2013, Brazil followed by Vietnam, Colombia and Germany were the leading exporters of coffee.
Decaffeinated Green Coffee in Global export of decaffeinated green coffee has increased from
168,058 tons in 2004 valued at USD 347.93 million to 240,447 tons in 2013 valued at Birr
914.16 million, registering an average annual growth rate of 4.37% and 13.82% in terms of
volume and value, respectively. Germany followed by Mexico, Spain, Canada and France are the
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leading decaffeinated green coffee exporters. USA is the leading importer of decaffeinated green
coffee. During the period 2004—2013, USA on average, accounts for 58.91% of the total global
import of decaffeinated green coffee. The other major importers of the product include: Spain,
Italy and Belgium
3.2. Marketing strategy and plant capacity
a. Company Summary
The proposed wet Coffee processing plant will be a new establishment that drives from a motive
of experienced role model farmer to bring wet coffee processing plant and producing high
quality products to local and international markets. Its corporate governance philosophy will end
over to exceed regulatory and legal requirements by adopting several voluntary practices aimed
at a high level of business ethics, effective supervision, and enhancement of value for all
stakeholders.
b. Marketing Implementation Analysis
The main focus will be in reaching the new markets of the nation and of neighboring and other
African (Anglo, Arab and Franco-phone), Asia Pacific and the Middle East countries. It will also
be concerned about the competition from other firms. An advantage the company has is the
widely differentiated product range that it will develop. Producing high quality of coffee bean
helps us in getting an ease of penetrating the new markets. Human resource is one of the most
important aspects in this plan. We would always like to make sure that it has highly motivated
staff as this is directly proportional to good production both in the qualitative and quantitative
aspects.
It is planned to do this by coming up with schemes of rewarding the employees. It will also make
sure the personnel are the best in terms of product know-how and it is ready to carry out frequent
training towards this end.
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4. PRODUCT DESCRIPTION AND PLANT CAPACITY
4.1. Product description
The wet method involves use of several water in stages most whereby stages. This ripe cherries
method involves fully-washed conventional are transformed into wet parchment processing,
coffee under water red until cherries in the mucilage are pulped, is degraded fermented.
Fermentation period so that in it most can be easily washed cases varies from temperature 12 of
to 48 hours the locality
The Stages in wet processing
I. Selective picking of cherries:
Coffee cherries tor wet processing should cherries be mature have adequate and fully ripe. Since
Ripe cherries had adequately pulped and mucilage which facilitate pulping. Cherries in mixed
stages of maturity would cause pulping and fermentation which have problems, series ot negative
consequences for the quality
II. Sorting: of the product.
The first operation in coffee processing following picking the is sorting the purpose of which is
to remove undesirable objects such as leaves, twigs, stones, as well as diseased or pest infected,
immature, over ripe and dry cherries. Undersized cherries which would escape pulping are also
removed and processed by dry method, and may be used for own consumption. Use clean
material such as canvas, drying trays or mesh wire beds; cherries should not come into contact
with the soil during sorting.
III. Checking and adjusting the pulper:
Checking and making the necessary adjustment to the pulping machinery is a crucial activity
prior to pulping. Pulpers are adjustable to be able to pulp different size of cherries. Perform test
run with sample cherries and do adjustment of the machine based on the beans or passage of
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many un pulped cherries together with the pulped ones. Adjustment is normally done three times
during the processing season: at the beginning, middle and end season. The pulper should be
kept in clean and good mechanical order.
IV. Pulping:
Pulping is the mechanical removal from the cherry of the to produce red outer parchment skin
and pulp coffee. the cherry This to release is performed the parchment by squeezing coffee the
lubrncation out of the pulp, from and the facilitated mucilage formed by between the But over-
npe pulp in and cherries, the parchment. the mucilage layer is dried cherries, it is not fully up,
while in the developed. Green So, pulping under both conditions large number will in result of
damaged beans due to lack of adequate mucilage. Pulping done via a stream is of water which
helps the cherries to be fed to the pulper. The water also facilitates separation of the parchment
coffee and the pulp.
V. Drying parchment
Freshly harvested and pulped coffee has high moisture content. For example, after the parchment
coffee has been washed and drained, It will have a moisture content of 50-65%. Drying is thus
the process of reducing the moisture content of this product down to 10-11.5%. Drying of pulped
coffee is a critical operation and is done with care, as coffee of excellent origin can lose its
quality if drying is not done properly. Under-drying causes rapid fading of bean color while
over-drying leads to unnecessary weight losses and quality degradation. At 10.5% moisture
content the parchment is fully dry and safe for storage. At this moisture content and 60% relative
humidity, the coffee suffers no quality losses if properly stored.
VI. Procedure in drying parchment coffee:
Drying is being done on raised beds to allow aeration and avoid getting into contact with soi.
Drying of parchment can be categorized into two: skin drying and final drying. During skin
drying, clean portable hand trays (of 2xI m) made of 4 mm mesh wire nailed on wooden frames
are used. Pulped/ washed parchment is thinly spread over the tray (maximum 3 cm to give l0 kg/
m) to promote thorough drainage of moisture and skin drying. Frequently str, and remove pulps,
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un pulped and any defective beans, since all these are clearly seen at this stage. At this stage, all
the moisture adhering to parchment is removed and the skin dries.
VII. Determine proper dryness of coffee.
When the back side of the bean is dark and the remaining part is green, its moisture content is
estimated to be 10-13%. Fully dry coffee will attain light blue green color and hard to break A
this stage the moisture content is about 10-11.5%. It is also possible to test the degree of dryness
of the beans by biting them.
4.2. Plant capacity and production program

1. Plant Capacity
Based on the outcome of the market study and considering the minimum economic scale of
production, the envisaged plant will have a capacity of 80 tons of washed coffee per annum at
full capacity. This capacity will be attained by working a single shift of 8 hours per day and 90
working days per year.
2. Production Program
With an assumption that enough time during the initial stage will be required for market
penetration and technical skill development, the envisaged plant will start production at 80%
of its rated capacity which will grow to 90% in the second year. Full capacity will be reached
in the third year and onwards. Details of the annual production program are shown in the
following Table
Table 2. Annual production program
Sr. Description Unit of Production Year

No. Measure 1st 2nd 3rd &
Onwards
1 Washed coffee ton 80 90 100
2 Capacity % 80 90 100
utilization rate
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4.3. Technical Study
4.2.1. Material and inputs
A. Raw and auxiliary materials

The principal raw material required by the Hauling plant is clean Wet coffee which is going to be
obtained from the local coffee grower farmers, local traders and merchant engaged in coffee
production. The local community will serve as out growers to the project and maintain their
clientele to the project.
Table 3.Raw materials of the project
Red Coffee
Price for purchasing price Total Kg
year red Coffee 1Kg purchased
1 15,700,000.00 20 785000
2 16,000,000.00 20 800000
3 16,500,000.00 20 825000
4 17,000,000.00 20 850000
5 17,500,000.00 20 875000
The major auxiliary Materials in the production of washed coffee is comprise packing materials
of various type and size. The packing materials to be used by the plant are sacks bag. The
proposed package sizes of sacks bag for packing of coffee are 50kg. The estimated annual
requirement for bag at 100% capacity utilization rate and the corresponding cost estimates are
given in below table. Bag of required size, quality and desired number of colors can be available
from local private factories on an order basis
Type Unit Price/unit Quantity total

50 kg packing size No 80 4000 320,000
Bed Wire meter 100 100 10000
Weighting scale no 1 25,000 25,000
B. Utilities
Electric power and water are the only power and utilities required for the envisaged plant. The
annual requirement for power and utilities at full capacity production of the plant and the total
estimated costs are shown in Table.
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Table 4. Annual Utilities Requirement and Estimated Cost
Sr. Description Unit of Required Unit

No. Measure Qty Price, Cost, ('000 Birr)
F.C. L.C. Total
Birr/Unit
1 Electric power kWh 12,000 0.5778 69.34 69.34
2 Water m3 150 10.00 1.50 1.50
Total 70.84 70.84
4.3. Engineering
1. Machinery and Equipment
The plant machinery and equipment required for the envisaged plant is wet coffee processing
machine. List of machinery and equipment to be acquired for the project and the estimated costs
are given in section 5
4.3.1. Source of Technology

Even though, the promoter is expected to assess the different potential suppliers of the envisaged
technology for while a company based in Ethiopia will be among potential client to avail the
intended technology.
4.4. Land use plan

The major portion of the plot will be allocated to plant erecting, warehouse and shade with open
space to work comfortably. Accordingly, the land use plan is presented in the table below.
Table 5. Land use plan
S/N Description Area(m2) %

1 Factory house 14000 67
2 Warehouse 6000 17
3 Shade and open space 1600 8
4 Office 200 3
5 Green area 1200 5
Total 23,000 100
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5. FINANCIAL REQUIREMENT AND ANALYSIS

The financial resource is a prime resource for undertaking any activities. Hence for
implementing the project is a total of 1,540,229.9.ETB is required. From this 20% 308,045.98
birr will be covered by the promoter of the project while the rest 80% 1,232,183.92 birr will be
covered through loan from bank at the prevailing interest rate. Therefore the said amount of
finance is needed for undertaking the following.
5.1. Fixed Capital

A. Land development, buildings and Construction
The total land area required for coffee washing plant is 23,000m 2. The cost of buildings and
construction is estimated at 222,500 detailed financial requirement presented in the following
table.
Table 6. Land development, buildings and Construction
A. Land, Building & Construction

S.N Description of works Total Cost in birr
1 Building construction 200,000.00
2 Site Development 5,000.00
3 Design and supervision 10,000.00
st
4 1 Year land lease & (10%)
down payment 7500
Total 222,500.00
B. Machinery and Equipment
The total cost of machinery and equipment is estimated at 485,000.00 birr.
Table 7. Machinery and Equipment
B. Machineries and Equipments
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SN Description Measurement Qty Unit cost in Birr Total cost

in Birr.
1 Coffee processing Unit 1 300,000.00 300,000.00
machine
2 sacks bag Unit 500 80.00 40,000.00
3 Wire for bed meter 100 100.00 10,000.00
preparation
Generater unit 1 80,000.00 80,000.00
4 weighting scale Unit 1 25,000.00 25,000.00
9 (Security Equipment) Unit 1 30,000.00 30,000.00
Total 485,000.00
C. Office Equipments
Table 8. Office Equipments
SN Description Measurement Qty Unit cost in Total cost in

birr Birr
1 Office table with chair Unit 7 3,000.00 21,000.00
2 Shelf Unit 1 4,500.00 4,500.00
3 Filing cabinets Unit 1 3,500.00 3,500.00
4 Guest chairs Unit 1 2000 2,000.00
5 Fax & Telephone Unit 1 2,500.00 2,500.00
machine
Total 33,500.00
5.2. Working Capital
5.2.1. Operating Expense at full Capacity

a. salary Expense
The Wet coffee Hauling plant will create job opportunity for more than 54 labour force. From
the total employee 4 are permanent and 50 are causal workers that are planned to be drawn from
local community. Accordingly from permanent workers 1 are female and 3 are male employee.
The proposed manpower requirement and the estimated annual labour cost including fringe
benefits is presented in the table below.
16
Table 9 Man power requirement and annual estimated cost
a. salary Expense
SN Position No Qualification Monthly salary Annual salary

in Birr in Birr
6 Coffee processing 1 Level III in 4500 30,000
operator Accounting
6 Marketing 1 Diploma in 2000 24,000
accounting
7 Guards/Security 2 Basic 1000 12,000
Total 4 66,000
Benefit (20%) 13,200
Grand Total 79,200
5.2.1 Operating Expense

Table 10. Operating Expense
SN List of Items Annual List of Items Annual Assumptions

cost in cost in birr Used
birr
1 Cost for red coffee red coffee 400,000.00
purchasing purchasing
2 Stationery supplies 1 Stationery supplies 1,000.00 83.3 br/month
3 Promotional Cost 2 Promotional Cost 15,000.00 Lump sum
annual cost
4 Property Insurance 3 Property Insurance 84,009.00 1% of the
building
5 Electric 7 Electric 12,000.00 20000KWH By
consumption consumption Br.0.4736
6 Fuel 8 Fuel 20,000.00 3000 lit per year
by Br. 21
17
7 Oil & Iubricants 9 Oil & Iubricants 2,000.00 10% of fuel cost
8 Telephone & fax 10 Telephone & fax 2,000.00 166 per month
9 Repair expense 11 Repair expense 4,000.00 2% of building

cost
10 Miscellaneous costs 12 Miscellaneous costs 20,000.00 1666.6 per
month
Total 13 Total 560,009.00
5.2.2.Pre-Service Expense
Table 11. Pre-Service Expense
SN Description Cost in birr

1 Project proposal & 20,000.00
EIA
2 Licensing fee and
others
Total 20,000.00
5.2.3. Summary of investment cost

The total initial investment cost of the project including working capital is estimated at Birr 1.5
million. The major breakdown of the total initial investment cost is shown in Table
Table 12. Summary of Total initial investment cost
SN Description Cost in Birr

1 Land, building & construction 222,500.00
2 machines & Equipments 485,000.00
3 Vehicle 0.00
4 Office Equipment 33,500.00
Total fixed investment cost 741,000.00
6 Salary expense 79,200.00
7 Operation Expense 560,009.00
8 Pre service Expense 20,000.00
Total Working capital 659,209.00
Sub total 1,400,209.00
11 Contingency (10%) 140,020.90
Total initial investment capital 1,540,229.90
18
5.3. Financial analysis and Statements
5.3.1. Underlying Assumption

The financial analysis of the Coffee plantation farming is based on the data provided in the
preceding sections and the following assumptions.
A. construction and finance

-construction period 1 Years
-source of finance 20% equity and 80 loan
-Bank interest rate 10%
B. depreciation Building 10%

-Building machincry and equipment 10%
-Office Equipments 10%
5.3.2. Sources of Fund

The source of fund to finance the project is planned to be from two sources. These are
promoter’s equty 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 obtain 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 20% and 80% respectively. Accordingly, the total financial
requirement from the two sources will be
Table 13. Sources of Fund
Owners equity
20% 308,045.98
Bank loan 80% 1,232,183.92
Total 100% 1,540,229.90
5.3.3. Depreciation Schedule
Table 14. Depreciation Schedule
SN Description Original Depreciation Depreciation

Value in Birr rate in % per year in Birr
1 Construction and Building 222,500.00 10 22,250.00
2 Bldg. machines & 485,000.00 10 48,500.00
19
Equipments
3 Vehicle 0.00 5 0.00
4 Office Equipment 33,500.00 10 3,350.00
Total 741,000.00 74,100.00
5.3.4. Bank Repayment schedule
Table 15. Bank Repayment schedule
Total annual
intrest Payment in year ending
year Principal payment rate(8.5%) ETB balance
0 1232183.92
1 123218.392 104735.6332 227954.0252 1108965.528
2 123218.392 94262.06988 217480.4619 985747.136
3 123218.392 83788.50656 207006.8986 862528.744
4 123218.392 73314.94324 196533.3352 739310.352
5 123218.392 62841.37992 186059.7719 616091.96
6 123218.392 52367.8166 175586.2086 492873.568
7 123218.392 41894.25328 165112.6453 369655.176
8 123218.392 31420.68996 154639.082 246436.784
9 123218.392 20947.12664 144165.5186 123218.392
10 10473.56332 0
20
5.4. Financial Statement
5.4.1. Income/ loss statement

Project revenue and production costs are listed and compared to see whether the project generate
profits or not. Starting from first year of the project operation, the project will generate a
reasonable amount of net profit for the owners throughout its life period. Profit and loss
statement shows that the project will generate net profit of ETB 199,258.76 in the first year and
increase to ETB 1,351,753.24 in the fourth year of the project life and hence it is found to be
profitable.
Table 16. Wet coffee processing income/loss statement
Revenue Year 1 Year 2 Year 3 year 4 and after
Coffee sell 1,105,000.00 1,666,000.00 2,040,000.00 2,720,000.00

Expenses
Salary Expense 79,200.00 79,200.00 79,200.00 79,200.00
Operating Expenses 560,009.00 560,009.00 560,009.00 560,009.00
Deprecation Bld. 74,100.00 74,100.00 74,100.00 74,100.00
Machineries ,Equiq
& vehicle
Interest Expense3 104,735.63 94,262.07 83,788.51 73,314.94
Lease payment4 2,300.00 2,300.00 2,300.00 2,300.00
Total Expense 820,344.63 809,871.07 799,397.51 788,923.94
Profit before Tax 284,655.37 856,128.93 1,240,602.49 1,931,076.06
Tax (30%) 85,396.61 256,838.68 372,180.75 579322.817
Net profit 199,258.76 599,290.25 868,421.75 1,351,753.24
5.4.2. Cash flow Statement

Table 17. Cash flow Statement
Year Year 0 Year 1 Year 2 Year 3 year 4

Equity Capital 462068.97
Loan principal 1078160.93
21
Net sale 0 1,105,000.00 1,666,000.00 2,040,000.00 2,720,000.00

Total Cash in flow 1,540,230 1,105,000.00 1,666,000.00 2,040,000.00 2,720,000.00
Cash payment
Salary Expense 0 79,200.00 79,200.00 79,200.00 79,200.00
Investment 741,000 0 0 0 0
Pre operating 20,000 0 0 0 0
Expense
Operating Cost 0 560,009.00 560,009.00 560,009.00 560,009.00
Loan repayment 0 227,954.03 217,480.46 207,006.90 196,533.34
Lease payment 0 2,300.00 2,300.00 2,300.00 2,300.00
Tax payment 0 85,396.61 256,838.68 372,180.75 579,322.82
Total payment 761,000.00 875,659.64 1,036,628.14 1,141,496.65 1,338,165.15
Cash surplus/ deficit 779,229.90 229,340.36 629,371.86 898,503.35 1,381,834.85
Cumulative cash 317,160.93 229,340.36 629,371.86 898,503.35 1,381,834.85
flow
5.5. Financial analysis

i. Profitability
According to the projected income statement, the building will start generating profit in the 2 nd
year of operation. Important ration 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 as
increasing trend during the lifetime of the project. The income statement and the other indicators
of profitability show that the project is viable.
6. Environmental impact of the project

The coffee processing industry is one of the major agro-based industries contributing
significantly to national income of a country. Coffee effluents are the main source of organic
pollution in environment where intensive coffee processing is practiced without appropriate by
product management systems. Environments that are exposed to the effluents generated from
coffee processing plants show change in terms of its physical, biological and chemical behavior
(JARC and EIARC, 2007).
The EIA of the project activities was determined by identifying the environmental aspects and
then undertaking an environmental risk assessment to determine the significant environmental
22
aspects. The environmental impact assessment has included all phases of the project namely
construction phase and operational phase.
The positive impact of the project is:-
 Generation of employment opportunity

 Source income for the government through business income tax
 Income generation for the promoter
Negative impact of the project
The project has the following negative impacts:
a) Noise and Dust emission during Construction

There are some noises during the construction due to the construction operation and the company
will use construct the construction during the day time. Again there is the emission of dust which
will be mitigated by sprinkling water on the service.
b) Problem on workers on construction

During construction and operation there are some problems that will materialize on workers.
These are: damage on operation by using machines, construction materials and others. To
mitigate such impact the company will provide safety insurance and safety equipment’s.
c) Swages during operation
During operation there are some solid and liquid wastes emitting from the factory and will be
mitigated by using modern recycling technology, concrete construction of lagoon, EM
technology etc..
d) Liquid wastes
The wet coffee processing has needed more water consumption during this phase. The source of
this water is stream located in the area. The processing of this method is follow the following
procedure that discharges the wastewater at each step that will affects the environment. The most
impact is odour and stagnant water leads to different communicable diseases. Generation of
liquid wastes from coffee beans, coat released from coffee processing industry It is anticipated
23
that the water used at the facility for the AD will be cycled within the process and minimal
amount of water will level the site.
e) Solid waste
The bulk of the solid waste generated during the operation of the plant will consist of coffee
pulping during the process. Waste receptacles will be placed at strategic points to discourage
littering. The incineration method is very appropriate to control solid wastes.
The plant will be erected in such a ways that its adverse effects to the society and environment
are adequately managed. Basically, the project shall be ideal to the environment. To attest
environmental soundness of the project, it requires carrying out the project implication to the
environment and society around. Hence, the promoter is expected to produce ESIA that
elaborates the project environmental viability and associated mitigation measures to sustainable
operate the Wet coffee Hauling plant and provided the envisaged services to the society's
satisfaction
24
Annex 1. Sales Revenue

Description Project year
1 2 3 4 5 6 7 8 9 10
Coffee sell 1,105,000 1,666,000 2,040,000 2,720,000 3,757,000 3,774,000 3,825,000 3,859,000 3,876,000 3,910,000
Kg 8500 11900 13600 17000 22100 22200 22500 22700 22800 23000
unit price 130 140 150 160 170 170 170 170 170 170
Annex 2. operating cost

Operating years of the project
Description 1 2 3 4 5 6 7 8 9 10
A. Direct cost
Raw Material Cost 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009
Sub-total 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009
Total Direct cost 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009 560,009
B. Indirect cost
 Wages and Salary 79,200 79,200 79,200 79,200 79,200 79,200 79,200 79,200 79,200 79,200
 Repair and 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00
Maintenance
 Property 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00 84,009.00
Insurance
 Utility 0 0 0 0 0 0 0 0 0 0
 Land lease 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300
 Advertising and 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
Promotion
 Miscellaneous 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00 20,000.00
Expense
 199,509.00
Total operating cost 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518
25
Annex.3 income statement

Operating years of the project
Description 1 2 3 4 5 6 7 8 9 10
Sales Revenue
1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,774,000 3,825,000 3,859,000 3,876,000 3,910,000
Less: Operating cost 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518
Income before 345,482 906,482 1,280,482 2,997,482 2,997,482 3,014,482 3,065,482 3,099,482 3,116,482 3,150,482
Depreciation and
interest
Less: interest 104,735.63 94,262.07 83,788.51 73,314.94 62,841.38 52,367.82 41,894.25 31,420.69 20,947.13 10473.56332
Income before 240,746 812,220 1,196,693 2,924,167 2,934,641 2,962,114 3,023,588 3,068,061 3,095,535 3,140,008
Depreciation
Less: Depreciation 0 0 74,100 74,100 74,100 74,100 74,100 74,100 74,100 74,100
Profit /Loss Before 240,746 812,220 1,196,693 2,924,167 2,934,641 2,962,114 3,023,588 3,068,061 3,095,535 3,140,008
Tax
Less: Tax (30%) 72,223.91 243,665.98 359,008.05 877,250.12 880,392.19 888,634.26 907,076.32 920,418.39 928,660.46 942,002.53
Net Profit or Loss 168,522.46 568,553.95 837,685.45 2,046,916.94 2,054,248.43 2,073,479.93 2,116,511.42 2,147,642.92 2,166,874.41 2,198,005.91
After Tax
26
Annex 4. discounted cash flow

Investmen
Project Life years
Description t Year
0 1 2 3 4 5 6 7 8 9 10
INFLOW
Net sales
0 1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,825,000 3,859,000 3,859,000 3,859,000 3,859,000
revenue
TOTAL
0 1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,825,000 3,859,000 3,859,000 3,859,000 3,859,000
INFLOWS
OUTFLOW

S
Investment
741,000
cost - - - - - - - - - -
Operating
0 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518
cost
Income tax 0 72,224 243,666 359,008 877,250 880,392 888,634 907,076 920,418 928,660 942,003
TOTAL
OUTFLOW 741,000 831,742 1,003,184 1,118,526 1,636,768 1,639,910 1,648,152 1,666,594 1,679,936 1,688,178 1,701,521
S
NET CASH 741,000.0 273,258.0 662,816.0 921,473.9 2,120,231.8 2,117,089.8 2,176,847.7 2,192,405.6 2,179,063.6 2,170,821.5 2,157,479.4
FLOW 0 9 2 5 8 1 4 8 1 4 7
NET PRESENT VALUE (NPV) 54,439,417.00
INTERNAL RATE OF RETURN (IRR) 34.13%
DISCOUNTED PAYBACK PERIOD (DPBP) 3.9years
27
Annex 5 undiscounted cash flow

Project Years
Investment
Year Operating years
Description 0 1 2 3 4 5 6 7 8 9 10
INFLFOWS
Inflow Funds
Own Equity 308,046
Long-term Loan 1,232,184 0 0
Inflow Operations 1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,825,000 3,859,000 3,859,000 3,859,000 3,859,000
Sales revenue 0 1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,825,000 3,859,000 3,859,000 3,859,000 3,859,000
TOTAL INFLOWS 1,540,230 1,105,000 1,666,000 2,040,000 3,757,000 3,757,000 3,825,000 3,859,000 3,859,000 3,859,000 3,859,000
OUTFLOWS
Investment cost 741,000 0 0 0 0 0 0 0 0 0 0
Operating cost 0 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518 759,518
Financing Cost
· Principal 0 0 0 0 123,218 123,218 123,218 123,218 123,218 123,218 123,218
·Interest 0 104,736 94,262 83,789 73,315 880,392 52,368 41,894 31,421 20,947 10,474
Income Tax 0 72,224 243,666 359,008 877,250 62,841 888,634 907,076 920,418 928,660 942,003
TOTAL
OUTFLOWS 741,000 936,478 1,097,446 1,202,315 1,833,301 1,825,970 1,823,738 1,831,707 1,834,575 1,832,344 1,835,212
NET CASH FLOW 0 168,522 568,554 837,685 1,923,699 1,931,030 2,001,262 2,027,293 2,024,425 2,026,656 2,023,788
BEGINNING
CASH BALANCE 0 0 168,522 737,076 1,574,762 3,498,460 5,429,490 7,430,752 9,458,045 11,482,470 13,509,126
ENDING CASH
BALANCE 0 168,522 737,076 1,574,762 3,498,460 5,429,490 7,430,752 9,458,045 11,482,470 13,509,126 15,532,913
28

Wet Coffee Processing Business Plan

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PROJECT PROPOSAL FOR WET COFFEE PROCESSING PLANT.

PROJECT PROPOSAL FOR WET COFFEE PROCESSING PLANT

PROJECT OWNER: KOYACHEW ADEM

PROJECT LOCATION: TUMA TESO KEBELE, GERA DISTRICT, JIMMA ZONE,

Table of Content Pages

2. Product description and application...............................................................................................2§

2.1. The significance of the project.............................................................................................4§

2.2. Project location..................................................................................................................4§

2.3. Project objectives...............................................................................................................5§

4.2. Plant capacity and production program..............................................................................10§

4.3. Technical Study.................................................................................................................10§

4.2.1. Material and inputs........................................................................................................10§

4.3.1. Source of Technology.....................................................................................................12§

4.4. Land use plan...................................................................................................................12§

5. FINANCIAL REQUIREMENT AND ANALYSIS....................................................................................13§

5.1. Fixed Capital.....................................................................................................................13§

5.2. Working Capital................................................................................................................15§

5.2.1. Operating Expense at full Capacity...........................................................................15§

5.2.1 Operating Expense...................................................................................................16§

5.2.3. Summary of investment cost...................................................................................17§

5.3. Financial analysis and Statements......................................................................................17§

5.3.1. Underlying Assumption...........................................................................................17§

5.3.2. Sources of Fund......................................................................................................18§

5.3.3. Depreciation Schedule............................................................................................18§

5.4. Financial Statement..........................................................................................................19§

5.4.1. Income/ loss statement..........................................................................................19§

5.4.2. Cash flow Statement...............................................................................................20§

5.5. Financial analysis..............................................................................................................21§

6. Environmental impact of the project............................................................................................22§

Table 1.Project Profile.....................................................................................................................III§

Table 1.Project Profile

1 Project name Wet coffee processing

2 Project owner Koyachew Adem

5 Project composition Wet coffee processing

2. Product description and application

2.1. The significance of the project

2.2. Project location

2.3. Project objectives

 Provide direct and indirect employment to working labor force,

3.1.1. Local Market

b) Past Supply Trend

Decaffeinated Green Coffee

3.1.2. Export Market

3.2. Marketing strategy and plant capacity

b. Marketing Implementation Analysis

4. PRODUCT DESCRIPTION AND PLANT CAPACITY

4.1. Product description

The Stages in wet processing

I. Selective picking of cherries:

II. Sorting: of the product.

III. Checking and adjusting the pulper:

VI. Procedure in drying parchment coffee:

VII. Determine proper dryness of coffee.

4.2. Plant capacity and production program

Sr. Description Unit of Production Year

4.3. Technical Study

4.2.1. Material and inputs

A. Raw and auxiliary materials

Table 3.Raw materials of the project

Type Unit Price/unit Quantity total

Table 4. Annual Utilities Requirement and Estimated Cost

Sr. Description Unit of Required Unit