Tomato Souce and Ketchhup

7/30/2019 Tomato Souce and Ketchhup

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283 . PROFILE ON PRODUCTION OF TOMATO

SAUCE AND KETCHUP


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TABLE OF CONTENTS

PAGE

I. SUMMARY 283 - 3

II. PRODUCT DESCRIPTION & APPLICATION 283 - 3

III. MARKET STUDY AND PLANT CAPACITY 283 - 4

A. MARKET STUDY 283 - 4

B. PLANT CAPACITY & PRODUCTION PROGRAMME 283 - 6

IV. RAW MATERIALS AND INPUTS 283 - 7

A. RAW & AUXILIARY MATERIALS 283 - 7

B. UTILITIES 283 - 8

V. TECHNOLOGY & ENGINEERING 283 - 8

A. TECHNOLOGY 283 - 8

B. ENGINEERING 283 - 10

VI. MANPOWER & TRAINING REQUIREMENT 283 - 11

A. MANPOWER REQUIREMENT 283 - 11

B. TRAINING REQUIREMENT 283 - 12

VII. FINANCIAL ANLYSIS 283 - 13

A. TOTAL INITIAL INVESTMENT COST 283 - 13

B. PRODUCTION COST 283 - 14

C. FINANCIAL EVALUATION 283 - 15

D. ECONOMIC BENEFITS 283 - 16


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I. SUMMARY

This profile envisages the establishment of a plant for the production of tomato souce and

ketchup with a capacity of 600 tonnes per annum.

The present demand for the proposed product is estimated at 522 tonnes per annum. The

demand is expected to reach at 850 tonnes by the year 2017.

The plant will create employment opportunities for 31 persons.

The total investment requirement is estimated at Birr 11.05 million, out of which Birr 7.04

million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 24 % and a net

present value (NPV) of Birr 7.16 million, discounted at 8.5%.

II. PRODUCT DESCRIPTION AND APPLICATION

Tomato ketchup and souce are produced by processing fresh tomato which is clean and

wholesome. With some additives, they have high acidity taste and rich flavor. To prepare

tomato ketchup and sauce, it should be ascertained that the tomatoes used are clean

wholesome tomatoes of intense red colours. Tomato ketchup and sauce are consumed by

households, restaurants, hotels and institutions like hospitals, schools, etc.

Processing of tomato ketchup and sauce mainly depends on the availability of a large and

stable supply of fresh, quality tomato and the availability of a vast supply of water.


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III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past supply and present Demand

Tomatoes are one of the most widely grown and commercially important vegetable crops and

are valuable sources of food minerals and vitamins, particularly vitamins A and C. In

addition, studies have shown that people who eat large amounts of tomatoes or tomato

products may be at a lower risk of some kinds of cancer, especially cancer of the prostate

gland, lung, and stomach.

Tomato ketchups and sauces are produced by processing fresh tomatoes and hot fruits.

Processed and canned tomato sauces and ketchups are consumed by urban households,

restaurants, hotels, hospitals and the like. The demand for tomato sauce and ketchup is

mainly met through import (See table 3.1.)

Table 3.1

IMPORT OF TOMATO SAUSE & KETCHUP(TONNES)

Year Import

2000 81.2

2001 57.5

2002 234.7

2003 521.3

2004 477.7

2005 841.5

2006 248.1

Source:- Customs Authority.


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As could be seen from Table 3.1, import of tomato souse and ketchup has been generally

rising. During the period 2000-2001 the annual average level of import was about 69 tons

and increased to annual average of about 378 by the year 2002 and 2003. During the recent

three years i.e. 2004-2006 the annual average import has reached to a level of about 522 tons.

Since import has been generally showing an increasing trend the 522 tons, which is the

average of the recent three years import, has been taken as the current effective demand.

2. Projected Demand

Demand for processed and canned tomato sauce and ketchup is mainly influenced by

urbanization, income and change in the consumption habit of the population. Urban

population growth in Ethiopia is about 4% while GDP in the last few years has been growingby more the 7%. As income rises and urbanizations grows there is a shift towards more

expensive but conveniently packed foods. Considering the above factors demand for tomato

souses and Ketchups is forecasted to grow by 5% per annum (See Table 3.2)

Table 3.2

FORECASTED DEMAND FOR TOMATO SOUSE & KETCHUP(TONNES)

Year Forecast

2008 548

2009 575

2010 604

2011 634

2012 666

2013 699

2014 734

2015 771

2016 810

2017 850


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3. Pricing and Distribution

A factory gate price of Birr 15 per kilogram is proposed as a factory gate price. Experienced

wholesalers in food staffs can be appointed to distribute the product.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

Based on the market study, the envisaged plant will have a capacity of producing 600 tonnes

of tomato ketchup and sauce per annum, out of which 150 tonnes will be tomato ketchup and

450 tonnes tomato sauce. A capacity of 2 tones per day is considered on the basis of singleshifts of 8 hours per day and 300 working days per annum. This capacity can be increased by

increasing the number of shifts per day.

2. Production Programme

Table 3.3 shows the production programme of the envisaged project. At the initial stage of

production, the plant may require some years to penetrate into the local and export market.

Therefore, in the first and second year of production, the capacity utilization rate will be 75%

and 85%, respectively. From the third year onwards, 100% capacity production shall be

attained.

Table 3.3

PRODUCTION PROGRAMME

Production Year

Product Unit 2008 2009 2010-2018

Tomato Ketchup and Sauce Tone 450 510 600

Capacity utilization Rate % 75 85 100


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IV. MATERIALS AND INPUTS

A. RAW AND AUXILIARY MATERIAL

The basic raw material required by the processing plant is fresh tomato. Since the quality of

the sauce and ketchup that is produced will be determined largely by the quality of the

tomato used as raw material, great importance is attached to tomato cultivation itself.

Auxiliary materials required by the plant and which are added to impart good taste consist of

salt, sugar, vinegar, spices, and other ingredients. The raw and auxiliary materials

requirements of the envisaged project at 100% capacity utilization are indicated in Table 4.1

below.Table 4.1

ANNUAL AUXILIARY MATERIALS REQUIREMENT

AND ESTIMATED COST

Sr.

No Description Unit Total

Cost

(Birr)

1 Fresh Tomato Tonnes 2500 3,125,000

2 Salt Kg 12.204 14.65

3 Sugar Kg 37.83 208.10

4 Vinegar Kg 15.504 224.80

5 Spices Kg 4.374 769.80

6 Others Kg 3.522 550.30

7 Glass bottles Pcs 375,000 375,000

8 Cans Pcs 1,125,000 1,406,250

9 Cartons Pcs 62,696 50,156.80

Grand Total 4,958,174


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Thus, the total annual cost of raw and auxiliary materials at full capacity production will be

Birr 4,958,174. The bottles and all other auxiliary materials can be procured locally, except

laminated cans which have to be imported.

B. UTILITIES

Utilities required by the plant consist of electricity, water and fuel oil for boiler. The total

annual requirement at 100% capacity utilization rate and the estimated costs are given in

Table 4.2 below. The annual expenditure on utilities will, therefore, be Birr 252,563.

Table 4.2

ANNUAL UTILITIES REQUIREMENT AND COST

Sr.

No.Description Unit Quantity

Cost

(Birr)

1 Electricity KWh 17,152 8,113

2 Water M3

5,100 28,050

3 Fuel oil Liter 40,000 216,400

Total 252,563

V . TECHNOLOGY & ENGINEERING

A. TECHNOLOGY

1. Production Process

The major operations involved are:

Washing:-The fresh tomato transported to the plant will be cleaned by washing in water.To accomplish this task, a special washing technique has been developed that allows for the

preservation of the fresh, natural qualities of ripened tomato.


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Crushing: - Washed tomato is crushed into tomato pulp (Juice) which is strained andfiltered.

Concentration: - after crushing the filtered tomato pulp becomes preheated andconcentrated to about one-third of its original volume by means of a continuous

concentrator, for which a boiler plant is used. Since the concentration would be achieved

in a very short time, a special technical know-how shall be employed. Instantaneous

concentration is necessary since; otherwise, heating the tomato pulp would cause oxidation

giving it a dark- reddish disagreeable color, as opposed to the color of natural tomato.

Homogenization:-Concentrated tomato pulp (juice) is homogenized.

Flavoring: - Salt, sugar, spices, vinegar & other ingredients are added in the seasoningroom to give it the flavor associated with tomato sauce & tomato ketchup.

Bottling/canning:-The products are then filled into bottles and cans.

Packing and dispatching: - Then the products will be packed and dispatched.

There are various recipes employed for producing tomato ketchup and sauce. The recipe

applied for tomato ketchup shows a considerable variation from the recipe used to produce

tomato sauce. For production of tomato ketchup, spices are added to the vinegar and cooked

at about 85oC, covered in a dried kettle for about 2-3 hours. Onion, garlic and paprika are

then added directly to the ketchup.

2. Source of Technology

Machinery & equipment as well as technology required by the envisaged plant can be

obtained from abroad.

The addresses of a firm that can be a source of technology supplier are given below.


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1. Frelgmdires International,Maharastera, Mumbai - 400 013, India.

Fax; + (91)-(22)-24944108/22186046/22187756.

2. Process Machinery and Equipments Private Ltd,144, Ashutosh Mukerjee Road,

Flat No. 7,

Calcutta-25 (W.B).

B. ENGINEERING

1. Machinery and equipment

The list of machineries and equipments required by the envisaged plant is indicated in Table

5.1. The total cost of machinery is estimated at Birr 7,064,312, of which Birr 5,221,446 is

required in foreign currency.

Table 5.1

LIST OF MACHINERY AND EQUIPMENT

Sr. Description Qty.

No.

1 Tomato charging m/c 1 set

2 Tomato washing and sorting m/c 1

3 Continuous concentrator 1

4 Filter 1

5 Homogenizer 1

6 Seasoning mixer 1

7 Bottling m/c 2

8 Cooler 1

9 Labeler 1

10 Packing m/c 1

11 Water treatment facility 1set

12 Boiler 1

13 Other auxiliary equipment 1 set


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2. Land, Building & Civil Works

Total land requirement is estimated at 2,000 m2. The total built-up area is estimated to be

800 m2. This includes production hall, finished products and raw materials stores, offices

and social facilities and open spaces. The total cost of buildings and civil work at a unit cost

rate of Birr 2300 per m2, is estimated at Birr 1,840,000. The total land lease cost, at the rate

of Birr 0.7 per m2

for a period of 80 years of land holding, is estimated at Birr 112,000. The

total land lease cost is assumed to be paid in advance.

3. Proposed location

The envisaged plant should be located in areas where fresh tomato can be abundantlysupplied and infrastructure and market is available. Taking this in to consideration, Arba

Minch zuria and Bench woredas, which are found in Gamo Gofa and Benchmaji zones

respectively can be the possible locations for the project.

From the above two woredas, Arba Minch Town, the capital of Arba Minch Zuria woreda, is

selected to be the location of the proposed project.

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The plant requires both skilled and unskilled labour to carry out production activities.

Indirect manpower will be engaged in carrying out administrative activities. The total

manpower requirement together with monthly and annual salaries is presented in Table 6.1.

The envisaged project requires a total of 31workforce.


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Table 6.1

MANPOWER REQUIREMENT AND LABOUR COST

Salary (Birr)Sr.

No.

Description Req.

No. Monthly Annual

A. Administration

1 Plant Manager 1 2,800 33,600

2 Secretary 1 800 9,600

3 Accountant 1 900 10,800

4 Salesman 1 600 7,200

5 Personnel 1 600 7,200

6 Clerks 2 600 7,200

7 General Services 4 800 9,600

Sub-Total 11 7,100 85,200

B. Production

1 Production Supervisor 1 1,200 14,400

2 Technicians 2 1,200 14,400

3 operators 3 1,500 18,000

4 Labourers 12 2,400 28,8005 Chemists 2 1,900 22,800

Sub-Total 20 8,200 98,400

Total 31 15,300 183,600

Workers Benefits

(20% of basic salary)3,060 36,720

Grand Total 18,360 220,320

B. TRAINING REQUIREMENT

One technologist should be given a one month on- the-job training in Merti Processing Plant

during erection & commissioning period. The cost of such training is estimated at Birr

15,000.


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VII. FINANCIAL ANALYSIS

The financial analysis of the tomato sauce and ketchup project is based on the data presented

in the previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity

70 % loan

Tax holidays 3 years

Bank interest 8%

Discount cash flow 8.5%

Accounts receivable 30 daysRaw material local 30days

Raw material, import 90days

Work in progress 3 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 11.05

million, of which 38 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.


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Table 7.1

INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (000 Birr)

1 Land lease value 112

2 Building and Civil Work 1,840.00

3 Plant Machinery and Equipment 7,046.31

4 Office Furniture and Equipment 150

5 Vehicle 650

6 Pre-production Expenditure* 325.00

7 Working Capital 927.69

Total Investment cost 11,051.0

Foreign Share 38

* N.B Pre-production expenditure includes interest during construction ( Birr 125

thousand ) training (Birr 15 thousand ) and Birr 185 thousand costs of registration,

licensing and formation of the company including legal fees, commissioning expenses, etc.

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 6.60 million (see

Table 7.2). The material and utility cost accounts for 78.93 per cent, while repair and

maintenance take 1.21 per cent of the production cost.


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Table 7.2

ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %

Raw Material and Inputs4,958.17 75.10

Utilities252.56 3.83

Maintenance and repair80 1.21

Labour direct102.24 1.55

Factory overheads42.6 0.65

Administration Costs68.16 1.03

Total Operating Costs 5,503.73 83.37

Depreciation981.63 14.87

Cost of Finance116.35 1.76

Total Production Cost 6,601.71 100

C. FINANCIAL EVALUATION

1. Profitability

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

first year of operation. Important ratios such as profit to total sales, net profit to equity

(Return on equity) and net profit plus interest on total investment (return on total

investment) show an increasing trend during the life-time of the project.

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


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2. Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full

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

BE = Fixed Cost = 28 %

Sales Variable Cost

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.The projects initial investment will be fully recovered within 4 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 24 % and the net

present value at 8.5% discount rate is Birr 7.16 million.

D. ECONOMIC BENEFITS

The project can create employment for 31 persons. In addition to supply of the domestic

needs, the project will generate Birr 5.43 million in terms of tax revenue. The establishment

of such factory will have a foreign exchange saving effect to the country by substituting the

current imports.

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Tomato Souce and Ketchhup