Iraq Fruit Juice Project


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Proposed investment concept for Inma Agribusiness Program, Iraq. Project under contract with Agland Investment Services, Inc.

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Iraq Fruit Juice Project

  1. 1.   Inma Agribusiness Program Pre-feasibility Study for Fruit Juice Production in Iraq Agland Investment Services Inc. with the Louis Berger Group Baghdad, November 2011
  2. 2. Introduction This presentation is based on a Study Report covering the same subject material. The presentation summarizes only the main issues arising and the Findings related to a “model” fruit processing facility. The model is NOT a design for a factory, neither does it provide a formal financial feasibility statement – the ROI shown is purely indicative and in the real world highly dependent on location and operational factors. The purpose of the model is to provide an analytical structure for the initial “proof of concept”. The main background elements and major Findings of the work are reported in the Study document. The work was undertaken in Baghdad and Erbil in November 2011 over a period of 25 work days for the Inma ( Ar. Growth ) Agribusiness Program with USAID funding (1). 1 1. Consultant Agribusiness Specialist: Geoffrey Quartermaine Bastin , FoodWorks Co. Ltd. via Agland Investment Services Inc. and the Louis Berger Group.
  3. 3. The commercial success of a fruit juice processing facility depends on: 1. Continuous availability of cheap raw material (collection and pre-processing at the farm level) – click here for a Crop Calendar 2. Availability and cost of other inputs (mainly sugar and clean water) 3. Cost and continuity of electricity supply 4. Sales – product price point and an efficient distribution infrastructure, including a cool chain for fresh juices and juices in non-aseptic packaging. 5. Competition from large-scale juice makers and imports.   Major Success Factors 2
  4. 4. Possible Market Demand and Market Channels 3 Click here for more photos of juices available in Iraq Local juice bar Erbil supermarket World market for juices will grow 5% to 2015 with growth from China and Russia leading. 100% juices hold their own in Western countries, but nectars and juice drinks are preferred in the developing world. Juice demand in Iraq will be driven by population growth (doubles 29 years), youth demographic and improved incomes . <ul><li>Retail marketing channels include: </li></ul><ul><li>Local juice bars </li></ul><ul><li>Small grocery stores </li></ul><ul><li>Larger supermarkets and malls </li></ul>Iraq imports a wide variety of juices via trading companies like the Khudaira Group. Imports are from Iran, Turkey, Cyprus, Syria, India and from some European countries (e.g., Austria, Hungary). Click here for price information
  5. 5.   Fresh Fruit Supply Grapes – 150-200,000 tons; mainly table grapes; this variety – “Awilka” – considered best for juicing Pomegranates – 100- 120,000 tons. Maybe 25,000 tons for processing. Apples – 35-40,000 tons in remote areas of the north Citrus – 140,000 tons Other fruits – pears, peaches, plums. All small, scattered amounts in total 38.000 tons. Click here for a table of Iraq’s fruit production 4
  6. 6.   Major Fruits Location 5
  7. 7.   Example: Collapse of Fruit Production Source: FAOStat 2011 6
  8. 8.   Click for list of operations 7 Click for actual photos
  9. 9. Production Model Analysis <ul><li>Capital investment: Equipment and civil works $1. 8 myn ; working capital is $630,000. Contingencies might add another $500,000 for a total of $ 3 million </li></ul><ul><li>ROI (FIRR): 19% - note this is a snapshot of one set of possible numbers. </li></ul><ul><li>Pay back period: by Year 4 to 5 – rather long for Iraqi investors </li></ul><ul><li>Break-even: at 67% of capacity usage (full capacity 100 work days/year), 2 shifts/day. Such a high break-even point for capacity raises concerns. </li></ul><ul><li>Click here for Financial Analysis and here for Capital Costs </li></ul><ul><li>Fresh fruit raw material: 12 tons/shift or 2,400 tons/work season </li></ul><ul><li>Product: 1 million liters 100% fruit juice and 3.7 million liters of juice drink (10% pulp) </li></ul><ul><li>Click here for Input-Output Analysis </li></ul><ul><li>Product price point: $1.26/liter 100% juice (IDR 1,467); $0.84/liter fruit juice drink (IDR 933) </li></ul><ul><li>Average cost of all goods/unit sold: $0.73 (IDR 851) </li></ul><ul><li>Click here for Sales and Revenue Analysis </li></ul>8
  10. 10. Operational Feasibility 1. Raw materials – not yet decided. Collection, transport and pricing may be an major constraint. 2. Plant location – not yet decided; probably in the north but depends on choice of fruit for processing. 3. Buildings – need “food safe” and HACCP qualified – click to see the Layout 4. Equipment – choice of supplier and suppliers ability to install and commission plus train staff in Iraq – click to see an Equipment Schedule 4 . Packaging – click to see the Options 5. Power and water sources – grid with 200 kVA generator; water needs to be clean (cleaning may impose additional costs); HVAC is essential. 6. Staffing – there are scale economies related to management; this model may be top heavy – click here for a Staffing Schedule . 7. Waste disposal – effluent process water will require treatment. 8. Sales - sales channel will depend on location and product mix. 9
  11. 11. <ul><li>Two kinds of standards must be distinguished: - Product standards - that relate to the characteristics that the goods posses, including size, shape, appearance, chemical residues. - Process standards - that relate to the way and place in which the products are manufactured and packaged . In particular hygiene standards are of exceptional importance in the Iraq context as a new producer. Click here for more on Quality Attributes   </li></ul>Food Safety and Quality 10
  12. 12. Commercial Feasibility 11 <ul><li>Depends on the ability of a local producer to compete with: </li></ul><ul><li>Locally produced , fresh chilled and sweetened juice at local juice bars retailing for IDR 250-750/glass </li></ul><ul><li>Imported cheap juice drinks retailing for on average IDR 1,000/liter </li></ul><ul><li>The former has minimal investment and production costs and a very flexible production process – batch production as required and fruit are available. </li></ul><ul><li>The latter is produced by established companies with large scale economies and international marketing. </li></ul><ul><li>A small-scale factory would have to establish a brand, earn back its capital and carry its overhead on a small volume of output. It will be a “price-taker” in a highly competitive and possibly unfair market. </li></ul><ul><li>Click here for examples of products currently available in Iraq </li></ul>
  13. 13.   Outstanding Questions Objective for the project – so far this is undefined. Is it (1) to provide value-added to fresh fruit, or (2) to create a secondary market for a surplus or (3) to make a profit for an investor? Click here for other reasons to turn fruit to juice . Investor – needs to be identified. This will determine location. Questions arise about business strategies in Iraq that may not favor long-term investment in processing, cost of capital is a related issue. Fresh fruit – (1) What kind of fruit is to be used as raw material; (2) Is there sufficient fruit in the designated location; (3) where is the location? Choice of process – a model factory layout has been provided but juice processing offers many different configurations. A choice must be made between a fresh juice, a concentrate or aseptic pulp. Market demand and channels – remains uncertain as does the pricing strategy. Marketing margins in Iraq are high and retail prices are LOW. The ex-factory price presents a challenge for a small-scale operation. 12
  14. 14. Next Steps <ul><li>The Study so far has begun to answer some questions and indicates that in principl e a fruit juice factory could be viable, albeit with a relatively modest ROI. </li></ul><ul><li>It is suggested that in a second phase Inma undertakes the following next steps: </li></ul><ul><li>Investor Workshop – to present the Findings of the Study so far and to seek a private sector partner; </li></ul><ul><li>Based on that partnership, undertake site-specific research to answer questions raised so far; </li></ul><ul><li>Inma could then (assuming a positive answer) undertake a detailed design for the factory for the investor and facilitate implementation. </li></ul>13
  15. 15.   End of Presentation Thank you for your time Return to Title slide
  16. 16.   Background Slides These slides are hyperlinked to the main text and are provided for completeness and to supplement the main findings.
  17. 17. Delicate, soft fruits cannot be kept intact over long periods and tend to degrade before or at harvesting. Juicing is the logical alternative. Culls of orchards represent a sensible, technically and economically valid utilization strategy for less than perfect fruit. Blends of juices with other products allows other marketable products. Modern processing, packaging, ingredient technology and distribution systems ensure safe, stable and appealing juice and beverage products in a convenient, economical form far from the raw material source or season. For consumers juices can be consumed more conveniently than whole fruits. Fluid food products, including juices are easier to process, to heat, cool, freeze, standardize, transport, etc., than solid foods or fluids containing particulates. Thus processing efficiency, safety and quality norms are easier to meet. Reasons for Juicing Fruits Return to main slide B1
  18. 18.   Summary Fresh Fruit Production Source: FAOStat 2011 Note: These data might exclude production for Kurdistan. In addition 2009 was a drought year. Return to main slide B2 Fruit type Previous peak production 2009 reported production Pomegranate Not available 100,000 Dates 2000 - 932,000t 507,002 Citrus 2002 – 400,000t 138,488 Grapes 1990 – 455,000t 194,000 Apples 1999 – 93,000 36,576 Pears 2003 – 25,000t 12,489 Apricots 1990 – 33,000 18,339 Peaches/nectarines 1986 – 30,000 16,878 Plums 1990 – 35,000 2,910 TOTAL 2009 1,026,682
  19. 19. Crop calendar Return to main slide B3
  20. 20. Selection of Juice Products Currently Available in Iraq Return to main slide B4 Item Origin Fruit Size/package Price         IDR US$ Juice bar Erbil Grape Cup/200ml 500 0.43 Juice bar Erbil Pomegranate Cup/200ml 750 0.64 Sunich - juice Iran Grape 200 ml carton 250 0.21 Sunich - nectar Iran Various 1 liter carton 1,300 1.11 Sunich - 100% Juice Iran Various 1 liter carton 1,850 1.59 Tata (200 ml) - juice India Various 200ml sachet 250 0.21 Fontana - juice Cyprus Orange 1 liter carton 1,750 1.50 Pinar - nectar Turkey Peach, Apple 1 liter carton 1,750 1.50 Dimes Classic - nectar Turkey Peach 1 liter carton 1,500 1.29 Akmina (Danone) Turkey Various 250 ml bottle 400 0.34 Bravo (Rauch) - 100% Juice Austria Peach 1.5 liter carton 5,500 4.71 Happy Day (Rauch) - 100% Juice Austria Orange 1.5 liter carton 5,500 4.71
  21. 21. Prices Return to main slide B5
  22. 22.   Fruit Processing Unit Operations Return to main slide B6 Unit Operation Result Mass transfer Fruit delivered, dry cleaned Extraction Washed Separation Sized, graded Separation Peeled, cored and deseed Size reduction Crushed, comminuted Pressure application Juice extracted Separation Solids screened Deaeration Oxygen removed Centrifugation Solids separated Filtration Clarification Fluid flow Juice transferred, pumped Heat transfer Enzymes inactivated, juice pasteurized and cooled Concentration/evaporation Volume reduction, stability Mass transfer Packaging, shipping
  23. 23.   Summary Input – Output Analysis Source: Consultant’s Excel Model Return to main slide B7 Inputs Intermediate output per day Final output/day     Juice Oil Pulp 100% Juice Fruit Juice drink kg and liters Fruit: 12,000.00 5,082 92.19 1,729     Oil: 92.19     5,174   Sugar: 172.85         Water: 16,420.97         18,322
  24. 24.   Return to main slide Click here for actual factory photos Or…. B8
  25. 25.   Source: Consultant’s Excel Model Capital Costs Return to main slide B9 Item US$ Main Process Equipment 817,000 Ancillary Equipment 255,000 Office Equipment 21,105 Building and civil works 695,000 TOTAL 1,788,105
  26. 26.   Equipment Schedule Main items Return to main slide B10 Slope Regulated Elevator Washing Unit Sorting Unit Extractor Finisher Decanter De-aerator Pasteurizer Cooling Unit Mixing Tank Packaging Unit
  27. 27.   Financial Cash Flow Analysis FIRR: 19% Pay-back in 4-5 years Return to main slide Source: Consultant’s Excel Model B11
  28. 28.   Source: Consultant’s Excel Model Return to main slide Sales and Revenue B12 Total Product Quantity Liters 100% Juice 1,034,809 Fruit juice drink   3,664,468 Sales     100% Fruit Juice I liter packs 517,404   250 ml packs 2,069,618 Fruit Juice Drink I liter packs 1,832,234   250 ml packs 7,328,936 REVENUE   US$ 100% Juice 1,300,531 Fruit juice drink   3,070,296 TOTAL (US$)   4,370,827
  29. 29.   Staffing Schedule Return to main slide B13 Designation Number of persons Management Factory general manager Process manager (Engineer) QC manager (Food) HR manager Sales manager Accountant 1 1 1 1 1 1 Skilled and clerical staff Secretary Accounts clerk Food/QC and laboratory technician Process supervisor Maintenance and process technician Storekeeper 2 1 1 1 1 1 Process and unskilled Process line workers Cleaners Security Cafeteria workers Drivers 20 4 4 3 2
  30. 30.   Packaging Options Return to main slide Click here for actual photos B14 Container Comments Glass Traditional, inert, visible Tin Can Rugged, reasonably inert Paperboard/plastic laminate Refrigerated storage, easily resealed PET Rugged, reasonably inert, visible Plastic/metal laminate pouch Aseptic, inert, light weight Bulk - plastic, metal Shipping and long term storage Paperboard/foil/plastic laminate Aseptic, inert, light weight
  31. 31.   Quality Attributes Return to main slide B15 Attribute Rationale Soluble solids (ºBrix) Defines juice strength Titratable acidity and pH Defines acid balance Colour Visual appeal Freedom from defects- decay, insects/damage, mechanical injury, etc Aesthetics, susceptibility to spoilage and contamination Maturity Optimum quality Size, shape and uniformity Ease of juicing Flavour Defines quality Absence of pathogens, chemicals and extraneous matter Defines safety Low microbial load Quality, shelf life
  32. 32.   In order to safeguard the product quality, the fruit is only delivered and processed using harvest bins. This process gives the possibility to handle the fruit maintaining its integrity, without juice loss and in the best hygienic conditions. Fruit Delivery B16
  33. 33.   All fruit handling, from the delivery to the selection, is done on the conveyor belt without using water. This prevents microorganism proliferation and the fruit microbial contamination, which is usually caused by water during handling. Input Conveyor
  34. 34.   After the selection stage there is a high pressure machine that washes and cleans all of the fruit . Washing B17
  35. 35. The fruit then goes into the pressing machines which process it into pulp, juice or puree. Up-to-date technologies give the opportunity to obtain very dense fruit puree Extraction B18
  36. 36.   The product is subjected only to a single pasteurization process before the aseptic packaging, this guarantees unaltered organoleptic fruit characteristics. Preservation and Packaging B19
  37. 37. 3 and 5 liter cartons. Shelf life: 1 year 108 cartons per pallet  Packaging Options B20
  38. 38.   Open-headed metallic drums with aseptic bags of 200 liters or double polyethylene sacks according to client’s needs. 4 drums per pallet. Total weight per pallet approximately 850kg Return to main slide B21
  39. 39. JUICE IN IRAQ Return to main slide B22
  40. 40.   END For more information and a copy of the Main Study Report and Findings please contact the Inma Agribusiness Program