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Tomato and fruit concentrate production facility

Opportunity Description: This opportunity aims to add value to local crops by producing concentrates suitable for export to food processing industries in the Gulf and Europe. The crops in focus are tomatoes and mangoes mainly, because of their local abundance and seasonality.
Initially the focus was on tomatoes, which was highlighted as a crop that is widely cultivated yet undergoes little processing locally. The opportunity is to establish a local facility that can take advantage of that supply and produce value-added products such as concentrates, purees and pastes.
Mangoes were later selected as a suitable secondary crop to offset seasonal price volatility in tomatoes during the summer months. This way the facility operates on locally sourced crops only; tomatoes during the winter and mangoes during the summer, using the same technology for both.
PRODUCT: Product A: tomato concentrate
Product B: mango concentrate
Sector: Sustainable Agriculture and Food Processing
Market: Food Processing Industries - Export
Initial Investment Required: EGP 32m
Details Available: Pre-feasibility Study
Market Potential: The markets to target could be Saudi Arabia, United Arab Emirates, Jordan and Sudan, since they rank top as export markets for these products already, yet Egypt holds a low market share.
Target market size expected to be USD 31m.
Year 1 revenues for this facility are expected be around USD 4 million, with a net margin of 7%, at 50% operational capacity. This improves by Year 5 to USD 10 million, with a net margin of 10%, at 91% operational capacity.
Supply: If the facility is operating at 100% capacity, it will consume the following amounts of crop per year, based on their respective yields:
20,000 tons of tomato, yield of 14%, producing 2,857 tons of product.
6,000 tons of mango, yield of 40%, producing 2,400 tons of product.
Process: The production line for manufacturing tomato and mango concentrates uses industry standard technology that is well-established and mature. The line can be manufactured (stainless steel structures etc.) and assembled (components such as gauges, motors etc.) entirely locally. The production process consists mainly of the following steps:
1. Receiving raw material
2. Washing
3. Sorting
4. Chopping /Destoning
5. Breaking
6. Centrifuging
7. Holding Tank
8. Evaporation
9. Sterilizing
10. Aseptic Packaging
Human Resources: Position # of Staff
Management
CEO 1
Production - Permanent
Plant Manager 1
Quality Control 2
Hall Supervisors 2
Engineering 1
Workers 4
Production – Seasonal
10 workers x 2 seasons 20
Sales, General and Administration
Procurement 2
Sales Manager 1
Sales 2
Marketing 2
Finance & Accounting 2
HR Manager 1
Maintenance 4
Security 2
Total 47
Financial: Capital Expenditure Requirements EGP 17m
Working Capital Requirements for 3 months EGP 15m
Minimum Investment Required EGP 32m
Internal Rate of Return 31%
Simple Payback 4.4 yrs
Profitability Index 1.76
Risk: Yield/conversion ratios – due to low yields in tomatoes, the business model is more sensitive to notorious price volatility throughout the season. Relying on tomatoes from the Delta during the summer can render plant operation unfeasible, hence mangoes were selected as secondary feedstock.
Farmers are mainly smallholders and difficult to group together under a single bulk forward contract. Wholesale traders can provide access to 20% extra supply of low-grade tomato, which is discarded for being unsuitable for fresh food markets – however, it is suitable for tomato processing plants, and can be sourced for even lower prices
IMPACT: Economic - Value added to local crops such as tomato and mango is quite significant. Based on this study’s assumptions, before deducting other COGS (cost of goods sold) and overheads:
• 7 kg of tomatoes cost EGP 14, to produce 1 kg of concentrate selling at EGP 20 – that is 30% value added to the crop.
• 2.5 kg of mangoes cost EGP 22.5, to produce 1 kg of concentrate selling at EGP 35 – that is 36% value added to the crop.
Social - Direct jobs created by this facility will include 27 permanent plant staff plus another 20-30 seasonal workers. Indirect jobs created will be mainly in logistics, marketing and distribution, and increased dedicated farming to supply the plant over time.
Environmental – Decreased losses of fresh produce, specifically tomatoes, during transportation over long distances to processing in other regions, as well as poor post-harvest handling, which are around 25-30% and can exceed 60% in the case of tomatoes.