GENET ABEBE DRY COFFEE PROCESSING AND

MARKETING BUSINESS PLAN

Consultant: Yoya Development consultancy and training Plc(09-11-38-48-33)

Owner :- W/r Genet Abebe

Prepared By: abrham Astatike, Tel + 251917825825

July, 2023
 CONTENTS
List of Tables ........................................................................................................................ 4
1. EXECTIVE SUMMARY..................................................................................................... 5
1.1. PURPOSE OF THE business Plan ............................................................................. 5
1.2. Objectives............................................................................................................... 5
1.3. Mission and Vision ................................................................................................. 6
1.4. Keys to Success ...................................................................................................... 6
2. Business Background .................................................................................................... 8
2.1. DESCRIPTION OF THE PROJECT .............................................................................. 8
2.2. COMPANY / APPLICANT ......................................................................................... 8
2.3. BUSINESS OBJECTIVES ............................................................................................ 9
3. PRODUCTS AND SERVICES .......................................................................................... 10
3.1. Definition of Products .......................................................................................... 10
3.2. Application ........................................................................................................... 10
3.3. Dry Coffee/Green Bean ........................................................................................ 10
3.4. Product Quality .................................................................................................... 10
3.4.1. Standards....................................................................................................... 11
3.4.2. Future Products ............................................................................................. 11
4. MARKET STUDY ........................................................................................................... 12
MARKET STUDAY ANALYSIS ............................................................................................... 12
4.1. World Market Facts and Trends .......................................................................... 12
4.2. ETHIOPIA Coffee market Facts and Trends .......................................................... 13
4.3. PAST SUPPLY AND PRESENT DEMAND ANALYSIS ................................................ 13
4.3.1. GREEN COFFEE DEMANED AND SUPPLY ....................................................... 13
4.3.2. THE MARKET PROSPECT (DEMAND – SUPPLY GAP) ..................................... 14
4.4. COFFEE MARKET ACTORS .................................................................................... 16
4.5. MARKET Competition........................................................................................... 16
4.6. PRICING AND SALES ANALYSIS ............................................................................. 16
4.6.1. PRICE for input and out put (የ ...................................................................... 16
4.7. Market distrbution ............................................................................................... 17
4.8. MARKETING STRAT .............................................................................................. 18
5. OPERATIONAL PLAN.................................................................................................... 19
5.1. PEODUCTION APPLICATION ................................................................................. 19
5.1.1. LOCATION OF THE PROJECT AREA ................................................................ 19

2
 5.1.2. PRODUCTION ................................................................................................. 19
5.1.3. Dry coffee processing .................................................................................... 19
5.1.4. PRODUCTION PLAN ....................................................................................... 20
5.2. Fixed ASSET (collateral) ........................................................................................ 20
5.3. Raw material and input REQUIREMENT .............................................................. 21
5.3.1. Procurement of Raw Material....................................................................... 21
5.4. AUXILIRY MATERIALS ........................................................................................... 21
5.5. Credit and Borrowing System .............................................................................. 22
5.6. OPERATING ACTIVITIES ........................................................................................ 22
6. HUMAN RESOURCE REQUIREMENT ........................................................................... 23
6.1. Project Man Power and Management................................................................. 23
6.2. Labor Requirements ............................................................................................. 23
7. FINANCIAL STUDY AND ANALYSIS............................................................................... 25
7.1. Introduction ......................................................................................................... 25
7.2. FINANCIAL KEY ASSUMPTIONS ............................................................................ 25
7.2.1. REVENUE PROJECTIONS AND ASSUMPTIONS ............................................... 26
7.3. FINANCIAL PLAN AND WORKING CAPITAL REQUIREMENTS ............................... 26
7.4. FINANCIAL VIAITYBIL ............................................................................................ 27
7.4.1. INCOME STATEMENT .................................................................................... 27
7.4.2. CASH FLOW AND BALANCE SHEET ................................................................ 28
7.5. FINANCIAL EVALUATION ...................................................................................... 29
7.5.1. PROFITABILITY ............................................................................................... 29
7.5.2. Business RATIOS (NPV,IRR) ........................................................................... 29
7.5.3. Risk and Uncertainty ..................................................................................... 29
7.5.4. Loan Repayment............................................................................................ 30
8. SUMMARY AND CONCLUSIONS .................................................................................. 31

3
 List of Tables
Table 4-1 World Green Coffee Export Demand and Supply in (“000”) Tones ............................................ 12

Table 4-2 Total Dry green coffee exported shared and annual growth rate (%). ........................................ 13

Table 4-3 Projection Ethiopia Export Coffee (tones) .................................................................................. 14

Table 4-4 Green Bean Coffee Demined and sappily gap (in tons) .............................................................. 15

Table 4-5 Price Forecasting for the Project................................................................................................. 17

Table 4-6: Table showing periods of supply of green coffee for market .................................................... 17

Table 5-1 Project Production Plan .............................................................................................................. 20

Table 5-2 Fixed Asset Dry coffee processing Project .................................................................................. 20

Table 5-3: Raw Material Requirement and its Cost ................................................................... 21

Table 5-4: Auxiliary Material Cost of the Project ........................................................................ 21

Table 5-5: DRY coffee Processing and Marketing Calendar .................................................... 22

Table 6-1: Man Power, Qualification, Esperance &Corresponding Cost ............................ 23

Table 6-2: Causal Labor for Dry-coffee processing cost .............................................................. 24

Table 7-1 GENERAL ASSUMPTION .............................................................................................................. 25

Table 7-2 : Gross Annual Revenue .............................................................................................................. 26

Table 7-3: Estimation of Total Working Capital Requirement of the Project ............................................. 27

Table 7-4: Project Income statement ......................................................................................................... 27

Table 7-5: Loan repayment schedule .......................................................................................................... 30

4
1. EXECTIVE SUMMARY
1.1. PURPOSE OF THE BUSINESS PLAN
This business plan will show how a total working capital of this year(2016) only
ETB 4,000,000 could yield net profits in excess of ETB 1.8 million the cost
and net profit increased over a three term period in a year, and average
yearly sales of ETB, 1,800,000 while maintaining adequate levels of liquidity.

The purpose of this plan is to financing new loan secure the business commercial
bank of Ethiopia to cover the 2016 coffee cropping year dry coffee processing
start-up costs. Dry Coffee Processing and marketing is a Genet Abebe Dry
cherry Processing & Marketing start-up business dedicated to Supply
excellent quality Dry Green bean coffee to the national market, in a manner that
generates fair and equitable returns for present and future owners, and superior
value to our customers. We specialize in creating and offering a high quality
grade coffee.

In the last year has experienced explosive growth over the past cropping
seasons. Over a 21,205 kg dry cherry were purchasing and processing selling to
the ECX market. National businesses are slowly catching up with this new
opportunity. We are opening a new dry cherry business and delivery service that
will focus on the local coffee producer’s area.
Currently, the working capital is expanding from our intended location in the
Sheko woreda coffee grower’s area. Dry Coffee Processing and marketing will
offer a better product, at a reasonable price, and will deliver it on time to the
customer's at national market. The project total loan requirements are Birr 4
million birr. From total working capital cost the raw material cost cover 3,778,250
(94%) and the rest auxiliary materials and administration cost is 221,750 birr.
The working capital 100% is covered by CBE financing.

1.2. OBJECTIVES
 To offer our customers excellent dry cherry market services, at a
reasonable price, and provides outstanding customer experience,
measured by minimum 3 term sales growth, and customer complaints less
than 1 percent.
 To generate positive cash flow from operations, and at least 25 percent net
profits to sales.

5
1.3. MISSION AND VISION
Dry Coffee Processing and Marketing mission is to offer at national market of the
coffee exporters the high quality grade coffee. We are committed to providing the
product value that our customers expect.
Our vision is to become the first 10 top dry coffees supplier in local area, and a
respected company - as measured by our customers, our employees, and the
community we live in.
Our values are critical to our success. They are the strong foundation of Dry
Coffee Processing and marketing, define who we are, and set us apart from our
competitors. They underlie our vision of the future. These values include:
 Performance excellence. We act like responsible owners, always
seeking to meet or exceed expectations.
 Teamwork. We act as a team, committed to each other, and bound by
trust and loyalty dry coffee supply management,
 Integrity. We treat one another, and all our stakeholders with dignity and
respect.
 Honesty, ethical behavior, and integrity are fundamental characteristics of
our business conduct.

1.4. KEYS TO SUCCESS

Our keys to success are:
 Excellent product that will build and maintain customer loyalty.
 A business location that will assure high company visibility and a high
flow of customers.
 Proven management ability to successfully run a similar business.
Our commitment to continuous improvement and total quality services

1.5 Summary of Operation Loan Requirement

Name of the Project Unit Genet Abebe Dry cherry Processing &
Marketing
Nature of business Clean Green Coffee Production
Planned Capital expenditure
Location Bench Sheko Zone, Sheko Woreda
Working Capital Requirement 4,000,000
For Cost of sales 3,778,250.00
Administrative Cost 221,750.00
Loan Ration 100% Bank
Project Products
Clean Green Bean 20,669
6
Sorted Coffee/ 1,556
Expected Financial Results(Viability)
Gross Sales Revenue( million 7,054,757
birr)
Net Profit & Loss in birr 1,816,330
Net profit Margine 25.75%
Internal Ret Of Return
FIRR before Tax 204%
FIRR after Tax 143%
Net Present Value After Tax 1,510,237
payback periods 1

7
2.BUSINESS BACKGROUND

2.1. DESCRIPTION OF THE PROJECT

Dry Coffee Processing and marketing is a new coffee supplying started in the Bench Sheko
Zone, Sheko district Sheko town of southwest Ethiopia regional, the project is a Genet Abebe
Dry Coffee Processing & Marketing business managed by W/r Genet Abebe.

W/r Genet Abebe, Manager of Dry Coffee Processing and Marketing, she has three years’
experience in the hospitality of coffee industry. She successfully conducted a Dry Coffee supply
business in Southwest Ethiopia, which they sold for a handsome profit at the previous years the
nation market.

Her focus is to meet or exceed the customer expectations for an exceptional quality Dry coffee
that is served to be taken out or delivered quickly, and in a friendly manner. The company will
serve a local area with several coffee growers, and a rapidly coffee growing inhabitant. The
company's location is very favorable, providing high visibility and a large flow of customers.

Dry Coffee Processing Industry's prices will not beat the competition. We are aware that we
cannot compete on price only. That is why we prefer to focus on assessing customer
expectations, and our core competencies, decide which expectations we can reasonably meet,
then make sure to constantly exceed them wholeheartedly. Thus, we will be able to maintain and
increase the level of customer satisfaction, as a strong foundation for future growth.

The entire Dry coffee process will be conducted through five main coffee exporters direct market
that have excellent references in the national market, and we can choose to be one of their
participating suppliers. In this way, we are able to save on delivery costs and logistics. In
addition, delivery transport for coffee farmers will use company vehicles, so the business will
have to provide delivery vehicles for coffee supply farmers.

2.2. COMPANY / APPLICANT

Name of Owner: W/r. Genet Abebe
Tel: +251917825825
Project type: Capital Expansion Project
8
Business legal status: Sole Property.
Products: High Quality Green Coffee and Sorting

Purpose of the project: This profile envisages the strengthening of a

commercial industry for processing of high standard of coffee product to by
collecting coffee from surrounding farmers for national market through ECX
and vertical integration.

2.3. BUSINESS OBJECTIVES

 The business objectives of the envisaged project is profitable processing
of Coffee and marketing the product for national market via ECX and
vertical integration market
 As a business firm one of objective of the project is to earn reasonable
income from the demand supply gap exists in the sector in the
International and National Market

9
3. PRODUCTS AND SERVICES
3.1. DEFINITION OF PRODUCTS
According to wikipedia.com, Dry Green Coffee beans after hulling, basis for
most trade in coffee; raw material for roasting.

3.2. APPLICATION
The project intends to start its production by dry coffee processing. Dry
processing refers to methods where the fruit is either dried directly or is
disrupted, but the seeds not separated from the fruit tissues, then immediately
dried. The dry process involves drying of the whole cherry until the green bean
inside separates from the outer layers. The outer layers are then removed by
hulling. Therefore, the dry process is applied to this project based on the
intended product type.

3.3. DRY COFFEE/GREEN BEAN

Dry Coffee/Green Bean is produced by the dry process, the ripe red cherry
collected and coffee beans (coffee cherries) are dried in the skin with a special
drying technic after which the skin is removed to produce the green beans or
the coffee market. Due to the fact that European countries drink more high
quality coffee, quality standards for coffee will be more stringent in Europe the
project will fetch high price. While price was the main business factor for this
project, than bulk market, quality is the most important criterion in the market
and price premiums are offered for high quality coffees.

3.4. PRODUCT QUALITY

The project is intended to produce quality coffee. Coffee quality depends on a
combination of many factors, including the botanical characteristics of the
variety grown, topographical conditions, weather conditions, and the care
taken during growing, harvesting, processing, storage, export preparation and
transport. Coffee must be suitable for human consumption and not contain

10
foreign matter such as moulds and live pests. In addition, the coffee exporter
must comply to the contract description with the coffee buyer and the coffee
quality must be uniform for the entire shipment. Moreover, solid business
reputations of the exporter and the trust from the buyer are sustained by
improving the quality or at least complying with coffee buyers’ expectations.
Therefore, this envisaged project offer to produce high quality coffee.

3.4.1. Standards
The project will offered in order to reduce the glut of coffee market in the short
run and increase the overall coffee quality in the long run. However, the project
product fulfill the International Coffee Organization has put in place Resolution
407 of February 2002. The resolution lays out the coffee quality improvement
program. Under that resolution, minimum grading standards and maximum
moisture content for coffee exports are explained (ICO, 2002).

3.4.2. Future Products

This envisage project currently offered to production of high standard Dry green
coffee bean and for the future involved in value added products include
roasted, soluble and instant coffee for export to world by applying good
industrial management and value added technology.

11
4. MARKET STUDY
MARKET STUDAY ANALYSIS

4.1. WORLD MARKET FACTS AND TRENDS

The demand for green coffee is dependent on those products which are using
quality coffee for consumption. The demand for green coffee is directly related
with number of coffee beverage company and world consumption. Urbanization
is also another factor for the growth in demand for green coffee. However, the
most determining factor is growth in the service industry particularly in
beverage industry. The gross world export of trade is presented in Table 6.
During the period 2013-2022, the cumulative average growth rate of 10% and
7% in terms of green coffee world import and export (supply) respectively.

This project has planned to invest in the area of the Dry coffee agro-processing
sector, which played a significant role in the area of a national market to fulfill
the country export gap and, there for, this investment business plan of the
project was visible.

Table 4-1 World Green Coffee Export Demand and Supply in (“000”) Tones
Consuming
Year World Demand World Supply
2015 93171 58510
2016 95013 59183
2017 92653 56703
2018 96115 60874
2019 96574 61225
2020 98547 60571
2021 101130 62813
Average Growth Rate 10% 7%
Source: Foreign Agricultural Service/USDA office of Global Analysis December 2020

12
4.2. ETHIOPIA COFFEE MARKET FACTS AND TRENDS

Arabica growing countries green bean coffee exports to the world. However, the
utilization of the sub sector’s potential for generation of export earnings for the
national income at large. Before the period of 2020 the export of green coffee
have in general been showing increasing trend in volume and value terms. /See
table 4.2 below/. During the period 2016-2020, the cumulative average growth
rate of 7% of Dry of green coffee.

Table 4-2 Total Dry green coffee exported shared and annual growth rate (%).
Sr.No Coffee Year Volume in tone GR (%) Value In USD GR(%)
1 2016 198,500.90 722,042,652.19
2 2017 225,667.67 14% 882,473,754.48 22%
3 2018 238,465.55 6% 838,152,167.00 -5%
4 2019 249,764.42 5% 862,977,049.85 3%
5 2020 270,835.12 8% 874,213,043.17 1%
Total 1,164,233.66 33% 4,059,858,666.70 21%
Average 232,846.73 7% 811,971,733.34 4%
Source: Annual Report of CTA (2020)

4.3. PAST SUPPLY AND PRESENT DEMAND ANALYSIS

4.3.1. GREEN COFFEE DEMANED AND SUPPLY

The demand for green coffee is dependent on those products which are using
quality coffee for consumption. The demand for green coffee is directly related
with number of coffee beverage company and world high quality coffee
consumption. Urbanization is also another factor for the growth in demand for
green coffee. However, the most determining factor is growth in the service
industry particularly in beverage industry. The gross world export of trade is
presented in table 4.3. To determine the present effective demand for green
coffee bean, the average country export level of fifth years (2016 -2020) which
was 232,846.73 tons has been taken as a base for projected demand
estimation of envisaged project.

13
It is assumed that the average supply during the period of analyses
approximates current (2016-2020) export for green coffee bean. Hence, the
present demand has been taken as a base to estimate the future ten year
demand at the exported to be growth by 7% growth rate (table below). For the
information of the past supplied and demand present below table 4-3.

Table 4-3 Projection Ethiopia Export Coffee (tones)

Projected Supply Demand

National Export of green Bean
Year Coffee(Tons)
2016-2023 Average Base year 232,847
2024 249,146
2025 266,586
2026 285,247
2027 305,215
2028 326,580
2029 349,440
2030 373,901
2031 400,074
2032 428,079
2033 458,045
2034 490,108
Source: Consultant Analysis Results

4.3.2. THE MARKET PROSPECT (DEMAND – SUPPLY GAP)

The interaction of demand supply is summarized in table 10 below through demand – supply gap
of green coffee demand and supplied are calculated as shown for world import/demand and
supply base year is 2019, 101,130 tons and 62,813 tons respectively and is shown above table 6.
Table 9 is also Demand – supply gap (tons), Source: Consultant Analysis Results. The Demand –
Supply analysis shows that there is a wide range of supply that enables this upcoming project to
sale its produce without any problem

14
The present demand- supply gap for the proposed product is estimated at 50,453 tons green
coffee and the demand- supply gap to reach at 170,152 tons green coffee from the year 2024 to
2033 respectively. Ethiopia Green coffee beans consumed become increased by the world
beverage industry because, the peculiar nature of diverse coffee diverse, by considering this
future opportunity the country world supply demand share is grow from by 10%.

Based on this, the national coffee demand was calculated for the next 10 years as shown in the
following table 4-4.

Table 4-4 Green Bean Coffee Demined and sappily gap (in tons)

Demined -Supply Gap(000 tons)

World D World World Ethiopia Expected
year Demand supply Gap Export Demand
2019 101,130 62,813 38,317 249,764
2020 111,243 67,210 44,033 270,835
2024 122,367 71,915 50,453 249,146
2025 134,604 76,949 57,655 266,586
2026 148,064 82,335 65,729 285,247
2027 162,871 88,098 74,772 305,215
2028 179,158 94,265 84,893 326,580
2029 197,074 100,864 96,210 349,440
2030 216,781 107,924 108,857 373,901
2031 238,459 115,479 122,980 400,074
2032 262,305 123,563 138,742 428,079
2033 288,536 132,212 156,324 458,045
2034 311,619 141,467 170,152 490,108
Source: Consultant Analysis Results

As shown in the above table 9, the demand-supply gap analysis indicates that demand of green
coffee bean exceeds that of supplies. The export demand is promising with the countries those
are currently have strong interest on Ethiopian green coffee bean in the world market like
Japan, South Africa, Saudi Arabia, Scandinavian Countries, Russian Federation, Algeria,
Ukraine, Korea, Republic, Australia Serbia and China.

15
4.4. COFFEE MARKET ACTORS
The Coffee Marketing actors include coffee producers, coffee cooperative
association private traders and enterprises, the producers supply to the
primary market one to buy and coffee supplier deliver coffee to auction and the
exporters’ coffee buy from auction and export it. Policies now allow private
traders to compete with coffee direct export and by vertical integration with
exporters. As a result the number of private actors has dramatically increased.
However, at the time of this business plan writing, domestic traders still sell
their coffee at auction, some are directly to exporters. However, this project is
planed their Dry coffee products direct to sell to the national market though
ECX and vertical integration.

4.5. MARKET COMPETITION

There are other coffee producing associations and private investors in the
project area and elsewhere who would like to enter into the wet coffee market
business. Some of them are in geographical conditions that can produce a
higher quality coffee than this envisaged project business. Coffee producing
associations fetch high prices and premiums on wet coffee market and paid
dividend for the producers this is attractive for coffee farmers to supply coffee
fruit to coffee association, but to supply dry green coffee to this project mightn’t
be a threat.
However the project is planned to avoid this compotators effect by being able to
produce a high quality coffee taste, this will attract consumers and lead to the
long-term customers’ relation between the project and coffee buyers.

4.6. PRICING AND SALES ANALYSIS

4.6.1. PRICE for input and out put (የ

The prices for input and output are used as of current prices obtained from
local and international market. Price of coffee as is mainly influenced by the
export market and domestic supply of the crops. Current Buying and selling
16
 price of Dry coffeee in local markets is Birr 85/1kg and 5500/17kg
respectively. Currently the project cost assuming processing like facilities
deorecation, transportation, labour, other utility, and admistrative
expenducher costs, is assumed for the project. For the detailed information the
first year price is reveled below the table 4-5.

Table 4-5 Price Forecasting for the Project

Buying and Selling Price unit year One

Dry coffee cherry buying price ETB/Kg 85
Selling price
Green coffee yield ETB/17Kg 5500
Sort coffee ETB/17Kg 2500

4.7. MARKET DISTRBUTION

For this envisaged project the raw material purchased from the project area of
local primary market for processing. The supply of dry cherry coffee availability
depend on through coffee supplied period and the price of dry cherry initially
set by the regional Coffee and Tea Authority and then go through negotiation
with producers. The final product of Dry coffee supplied to the national coffee
market center ECX according to the Ethiopia commodity exchange regulation
and qualifying and verified of the origin of beans for price and buyers and
sellers under one roof negotiated the price and if the price reach an agreement
goods are sale brought chaos systems.

For this project seasonal availability calendar of the Dry coffee supply for
national market was planned below table 4-6.

Table 4-6: Table showing periods of supply of green coffee for market
Products Months
Jan Feb Mar Apr May Jun Jul Aug. Sep Oct Nov Dec
Dry coffee

17
The supply period of Dry green coffee products is from January to August in
the coffee seasons.

4.8. MARKETING STRAT

For this envisaged project marketing strategy is adopted a quality based DRY
coffee production is an advantage. The focus is on selling a high quality Dry
parchment coffee satisfy for customers of the buyers and reduce the
competition threat with other coffee suppliers. It will also capture the higher
price of the market will providing, hence increasing of the returns of the
project. The promoter’s aims to keep first buyers with whom it has established
market networks. Moreover, the project seeks to grow by expanding the sales to
other new buyers. The size of the new buyers provides in increasing its output.
The strategy was essential to overcome this threat by building a high level of
customer satisfaction.

In addition the creation of a strong trust with coffee buyers will enable the
project to gain competitiveness in the market place. The strategy in spend a
certain amount of time on promotion activities, pricing the products correctly
and distributing timely to the customers effectively and efficiently enhanced
price of the products. The following paragraphs set out four action strategies
the project could implement:
 Control of purchasing of high quality Dry coffee cherries
 Increase the market share in the coffee market channels
 Develop an internal training system for good processing practice
 Diversify into other coffee products by value adding

18
5. OPERATIONAL PLAN
5.1. PEODUCTION APPLICATION
5.1.1. LOCATION OF THE PROJECT AREA
The coffee processing project is located in South west Ethiopia Regional State,
Bench-Sheko Zone, Sheko woreda, in sheko town. Sheko woreda is located
south west of Aman town about 17 km. The specific location of the project is
Weregu located at a distance of 30 kms from Bench-Sheko Zone town Aman,
10 km from Sheko werda town and 570 Kms from Addis Ababa. Sheko woreda
consists of 24 peasant associations which sheko town is one area the project
is located. The project has a location advantage as Bench-Sheko Zone, Sheko
woreda is very ideal for the development of grown coffee. The locality receives
rainfall for about seven to eight months in a year as well as the micro & macro
climatic conditions are suitable for coffee plantation.
Sheko woreda is known for its coffee production it can be used to supply the
coffee for exporter market with a large quantity of coffee for export. Hence,
there was hot economic activity and trade in the area. Coffee has been grown in
Sheko woreda for many years and the farmers have been harvesting high
quality coffee known as “Spices”, which has been fetching premium price in
the world market.

5.1.2. PRODUCTION
The investor is planning to invest on the production of high quality green
coffee. The project is in line with government interest and policy which focuses
on market oriented Dry coffee production modern processing technology as its
immediate objective. The quality of Dry coffee supply to the ECX and vertical
integration market is based on daily, weekly and monthly price reference.

5.1.3. Dry coffee processing

Dry processing refers to methods where the fruit is either dried directly or is
disrupted, but the seeds not separated from the fruit tissues, then immediately
19
dried. Dry coffee processing required to dried coffee cherry in order to stabilise
it and preserve quality. In dry processing the whole cherry is dried with or
without some preceding selection/separation step The drying coffee processing
system consist the following processing are Feed Hopper, Pre-cleaner,
Aspiration Channel, Unhulled Separator, Smout Peeler Polisher, Dustless
Catador, Cylindrical Grader, Dens metric Table, Storage Bin, Colour Sorter,
Picking Table, Bagging, Fan and Cyclone.

5.1.4. PRODUCTION PLAN

The annual production programme is formulated on the basis of the market
forecast. It is assumed that the project will start operation at a higher
production season to allow time for market penetration and skill development
of workers. The project volume is shown as below table 5-1 for dry coffee
production plan. The detail of production programme is as shown below in the table.

Table 5-1 Project Production Plan

Description Unit 2016

FROM DRY MILL
Total Annual Required dry cherry kg 44,450
Clean coffee 50% 20,669
Sorting Coffee 0.75% 1,556

5.2. FIXED ASSET (COLLATERAL)

For the purpose of this business plan we are assuming that the fixed asset that
is related to collateral value described below the table as shown.
Table 5-2 Fixed Asset Dry coffee processing Project

Fixed Asset Total cost

Residential house 4,000,000
Weight Scale 25,000
total asset 4,025,000

20
 5.3. RAW MATERIAL AND INPUT REQUIREMENT

5.3.1. Procurement of Raw Material

Bench-shek0 zone in general and the project area in particular is an ideal
geographic area for coffee bean production. The natural and social factors at
the project site have demonstrated the technical feasibility of the project. The
quality of coffee in that vicinity falls under Bench Coffee category, which is
highly demanded for its flavor and aroma on international market.

However, there is a potential principal raw material supply for our dry coffee
processing. During the dry coffee processing, the dry coffee fruit conversion
rate to clean green bean coffee 50% by weight.

Taking the above mentioned weight loss into account; the annual requirement
for dry cherry coffee at 100 per cent capacity utilization rate is estimated and
for the detailed information showed below the table 5-3

Table 5-3: Raw Material Requirement and its Cost

Raw material Description Unit 2016

Total Annual Required dry cherry for Dry-Mill kg 44,450
dry Cherry Coffee birr/kg Birr 85
Total price per year in birr Birr 3,778,250.00

5.4. AUXILIRY MATERIALS

The major auxiliary materials in the production of Dry green bean coffee
comprise packing materials of 100 kg packing of sisal jute sack. The proposed
project at 100% production capacity package materials cost is planned 45,675
birr annually. For more detailed information show below table 5-4.
Table 5-4: Auxiliary Material Cost of the Project

Production term
Description Qt
Single Price Term 1 to 3
Raw material Of Dry Cherry
21
 Jut bag 60kg/sacks 261 175 45,675
Sub-Total cost 45,675

Sub-Total cost 45,675

5.5. CREDIT AND BORROWING SYSTEM

As indicated in the business plan the short-term loan requirement of the
project is estimated at Birr 4,000,000 . The Comercial Bank of Ethiopia will
provide 100% of the production finance plan at an annual interest rate of
11.5% to be repaid on a period of 1 year on the end of the year.

5.6. OPERATING ACTIVITIES

During the implementation period, the different activities likely to be
undertaken have been classified as follows on the basis of activities category
and schedule in twelve months period as shown in the activity shown at table
5-5 below.

Table 5-5: DRY coffee Processing and Marketing Calendar

MONTHS
ACTIVITIES Ju Aug Sep Oct Nov Dec Jan Feb Apr Mar May Jun
Marketing Center Renewed

Drying Bed Renewed

weight Scale Cheek Up

Competence Card Renewed

Receipt Document

Raw Material Purchasing

Coffee/Dry Coffee Hulling

Dry Green Coffee Supply to ECX

and Vertical integration

22
6. HUMAN RESOURCE REQUIREMENT
6.1. PROJECT MAN POWER AND MANAGEMENT
The project shall have 5 permanent and 262 casual labor employees for dry-
coffee production with different responsibilities. The firm controls and
supervises the overall activity of the project at times while the operation and
management of the dry-production will be entrusted to qualified and well
experienced manager. All staff members of the project are accountable to the
manager who is assigned by the project owners to manage the overall activities
of the project. A junior accountant will be responsible to keep all the financial
transactions of the project, control cash and stock movements of the coffee
processing and prepare up to-date financial reports. The purchaser will handle
all the payments and minor purchases of the project. The storekeeper will be
responsible to systematically record and keep the input and outputs of the
project. Skilled man powers and casual laborers shall be recruited from project
area.
Table 6-1: Man Power, Qualification, Esperance &Corresponding Cost

Project staff Qty Monthly salary Annual Salary (ETB)

Manager 1 3000 18,000
Accountant 1 2,500 15,000
Marketing & sales
purchaser 1 2000 12,000
Store man 1 2000 12,000
Guard 1 1500 9,000
Total 5 66,000

6.2. LABOR REQUIREMENTS

Labor requirements for the envisaged dry coffee has been formulated in
accordance with crop growing periods considering the successive processing
operations from site preparation to processing. Labor requirements of the

23
processing vary depending on the type of activities prevailing in a particular
time the maximum number of labor required for dry coffee defect separation
(pickers). The daily wage varies according to the types of operations which are
in the range of 30- 40 birr/day.
Table 6-2: Causal Labor for Dry-coffee processing cost

Description unit Production years

2016
Casual Labor for Drying, picker and MD/Day 262
packing
Casual Labor price Birr/day/Lab 40
Total Casual Labor cost ( Birr/Year) 10,480

24
7. FINANCIAL STUDY AND ANALYSIS

7.1. INTRODUCTION
With the imbalance between supply and demand in the global coffee market
coupled with a High level of commercial coffee prices, there is much interest
among private operators to invest in dry coffee supplying in Ethiopia. The dry
processing and supplying are a necessary investment to produce a fully sun
Dry coffee which is sold in the coffee national market though ECX and vertical
integration at better prices. This chapter will assess the financial feasibility of
w/r Genet Abebe dry coffee supplier and marketing, using the dry-mill coffee
processing as a business’s feasibility study.

7.2. FINANCIAL KEY ASSUMPTIONS

The project cost estimates for the proposed sun dry green coffee processing and
supplying have been formulated on the basis of discussions with owners. The
projections cover the cost of working capital for follow-up of the project.
Assumptions regarding Production/Operating cost for the existing Genet Abebe
dry coffee supplier and marketing, however, specific assumptions relating to
individual cost components are given as under.
Table 7-1 GENERAL ASSUMPTION
Operating Expenses for the project and there basis are taken as follows
Description Basis Basis
Bank interest 11.5% 11.5%
Discounted cash flow 10% 10%
Source of finance 100% loan
ECONOMIC ASSUMPTIONS
Material price growth rate 5%
Wage Growth Rate 5%
Tax rate 30%

25
EXPENSE
Salaries Expenses As per salary estimations
Administrations expense 6% of Sales
Production 99% of Sales

7.2.1. REVENUE PROJECTIONS AND ASSUMPTIONS

General Assumptions
- Green Bean Coffee 50% from total Dry coffee cherry
- Sorting Coffee 0.75 % from the total cheery
- Cattator coffee 0.5 % from the total cheery
- Floater coffee for sale 65% of the total processed
- Sales Price increase 5% per term(for the next 3 term supplying)

Table 7-2 : Gross Annual Revenue

Production years Units Y-1

Finished Product Assumption
Clean Green Coffee(High Grade) Kg 20,669
Sorting Coffee(Law Grade) kg 1,556

Sales Price ( Birr/17kg)

clean Green Selling price Birr/17kg 5500
Sorting Selling price birr/17 kg 2500

Revenue determination
clean Green Coffee(1st Grade) Birr/year 6,687,110
Sorting Birr/year 367,647
total REVEVENU Birr/year 7,054,757

7.3. FINANCIAL PLAN AND WORKING CAPITAL REQUIREMENTS

Production costs include the costs of direct raw material, Auxiliary material
and package Transport Cost for Raw material& Product in marketing, Salary
and wage for Production Staffs (direct labor), overheads, auxiliary material and
package. This envisaged project is pursuing loans for working capitals in order to
26
raise the capital required. The company’s is also negotiating loan facility with its bank
to obtain Dry green bean coffee production for supplying marketing credit. For the
detailed breakdown information is show below table 7-3.

Table 7-3: Estimation of Total Working Capital Requirement of the Project

Description Working capital Financial Source
Raw Material Cost Total Cost CBE
Dry Coffee cherries cost 3,778,250.00 3,778,250.00
Jute Bag 45,675.00 45,675.00
Sub-total 3,823,925.00 3,823,925.00
Overhead Expense -
Labour Cost 10,480.00 10,480.00
Transport for Dry Cherry Collection Cost & shipment 20,000.00 20,000.00
Dry Cherry Processing Cost 52,400.00 52,400.00
Miscellaneous expense 27,195.00 27,195.00
Salary 66,000.00 66,000.00
Sub-total 176,075.00 176,075.00

Total Working Capital Cost 4,000,000.00

Financing By CBE (100%) 4,000,000.00

7.4. FINANCIAL VIAITYBIL

7.4.1. INCOME STATEMENT

It may be seen from the profitability estimates that the unit would earn a net
profit after taxation of birr 1.8 million during 2016 crop season. On the above
basis, there is adequate generation of funds out of the processing operation to
service the repayment of term loan and interest liabilities, as also to meet
additional requirement of margin money for working capital in the second and
subsequent terms. The detail information is given below table 7-4.

Table 7-4: Project Income statement

Profit and Loss Project Year

27
 2016
Gross revenue 7,054,757
Raw Material cost
Dry Coffee cherries cost 3,778,250
Jute Bag 45,675
Sub-total 3,823,925

Gross profit 3,230,832

Overhead Expense
Labour Cost 10,480
Transport for Dry Cherry Collection Cost & shipment 20,000
Dry Cherry Processing Cost 52,400
Miscellaneous expense 27,195
Salary 66,000
Total of Adm and Selling Exp 176,075

Earnings before interest and taxes 3,054,757

Less interest expense 460,000
Community development ( 3%) 0
Pre-tax income 2,594,757
Taxes 30% 778,427
Net income 1,816,330
Gross Profit Margin 46%
Net profit Margin 25.75%

7.4.2. CASH FLOW AND BALANCE SHEET

The cash end balance clearly shows that the accumulated or free cash fund is
sufficient to finance the expansion activities, strengthen the Dry coffee
production and invest on the establishment of other services. Therefore this
project is expecting a healthy growth in net worth and a healthy financial
position. We do not project any real trouble meeting our debt obligations, as
long as we achieve our specific objectives.

28
7.5. FINANCIAL EVALUATION

7.5.1. PROFITABILITY
The profit and loss statement of the projection for the life of the project is
shown above in table 7-4. The profit and loss statement shows that in in this
project: first term of the project life a profit of Birr 1,816,330 will be
generated. This continues to grow at an increasing rate and reaches at: the
next three term marketing.

7.5.2. Business RATIOS (NPV,IRR)

NET PRESENT VALUE (NPV)

The NPV is calculated by subtracting the present value of all the costs incurred
for the project from the present value of the stream of benefits. As the project
shows which resulting NPV value is greater than zero; implies that the
project is acceptable (profitable).

INTERNAL RATE OF RETURN

Based on the cash flow statement on the project that is calculated IRR of the
project is 204% before tax and 143% after tax and the net present value at 10
% discount rate is Birr 2.211 million and Birr 1.510 million before and after tax
respectively. The internal rate of return is calculated as the rate of discount
which equates the present worth of the costs and benefits streams.

PAY BACK PERIOD

The pay- back period would be much less in case calculated on the basis of
profit before tax. Therefore, the investment cost and income statement
projection are used to project the pay-back period works out to one years on
the basis of profit after tax.

7.5.3. Risk and Uncertainty

29
The following risks and uncertain incidents that might affect the project could
occur during operating period of the project. If the global economic crisis and
inflation is prolonged and intensified, it will affect the project cost benefits
analysis. Besides, it may also affect the production cost and both inland and
offshore markets. Due to the price fluctuation the producer discourage results
the supply of raw material of dry cherry coffee will be problems of efficiency of
green coffee production. Unforeseen natural calamity such as crop failure due
to draught or long period of rain will be a problem of dry coffee processing.

7.5.4. Loan Repayment

The principal loan shall be repaid every year, starting on, 2024 & ending on,
20224, whereby repayment will be made in 1 annual installment.

The loan repayment period is simply defined as the period (i.e. the number of
years) required paying the principal and interest of the original business cost
throughout the one project life. The business result obtained reveals that the
business is financially viable and has a healthy cash flow forecast. The
outcome of the financial analysis reveals that: based on the following
repayment schedule the annual payment was described on the base of bellow
the given table 7-5 bellows throughout the one year project period.

Table 7-5: Loan repayment schedule

Year Amount of Principal Instalment Interest Total
Outstanding due Payable at 11.5% Amount
2016 4,000,000 4,000,000 460,000 4,460,000
Total 4,000,000 460,000 4,460,000.0

30
8. SUMMARY AND CONCLUSIONS
Results of the financial appraisal show that investing in coffee processing and
marketing is profitable. These findings are encouraging and can be used as
guidelines for this investors planning to produce for the high quality coffee
markets. The major task will be to get financial resources to set up the required
raw materials to produce it. The task for these investors will be to find what
mechanisms will link them to coffee growers so that they can deliver coffee
cherries to the primary market. Another challenge will be to offer attractive
prices to farmers that are competitive compared to prices offered by other
private and coffee growers’ associations, leaving at the same time a reasonable
profit level for their operation. It is, however, questionable how a high quality
coffee will be obtained when the investors cannot monitor the production stage
of the coffee cherries and where there are no quality standards of raw coffee.

However, based on the framework set out in this business study the following
conclusions were made regarding the feasibility of proposed Dry green coffee
production.

 A market opportunity was identified for the domestic sales and export
market. The demand and export trend confirms the products are
marketable
 The analysis on financial feasibility of the proposed business plan
revealed that based on the assumptions made, the owner is profitable.
This business plan is to have a healthy cash flow and is viable over short
term. The positive financial feasibility is, however, dependent on stable
inflation and macro-economic conditions. Based on the framework set
out in this business plan where feasibility is assessed in three core areas,
it can be concluded that the proposed green coffee production business
plan is feasible. The results of the study, however, are heavily dependent
upon the assumptions made during the planning and other operating
environments (political, environmental and economic conditions) remain
relatively stable

31
32