283 .

PROFILE ON PRODUCTION OF TOMATO

SAUCE AND KETCHUP

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TABLE OF CONTENTS

PAGE

I.

SUMMARY

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II.

PRODUCT DESCRIPTION & APPLICATION

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III.

MARKET STUDY AND PLANT CAPACITY

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A. MARKET STUDY

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B. PLANT CAPACITY & PRODUCTION PROGRAMME

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RAW MATERIALS AND INPUTS

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A. RAW & AUXILIARY MATERIALS

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B. UTILITIES

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TECHNOLOGY & ENGINEERING

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A. TECHNOLOGY

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B. ENGINEERING

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MANPOWER & TRAINING REQUIREMENT

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A. MANPOWER REQUIREMENT

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B. TRAINING REQUIREMENT

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FINANCIAL ANLYSIS

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A. TOTAL INITIAL INVESTMENT COST

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B. PRODUCTION COST

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C. FINANCIAL EVALUATION

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D. ECONOMIC BENEFITS

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IV.

V.

VI.

VII.

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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 growing
by 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 single
shifts 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

Cost
Description

Unit

Total

(Birr)

Tonnes

2500

3,125,000

Fresh Tomato

Salt

Kg

12.204

14.65

Sugar

Kg

37.83

208.10

Vinegar

Kg

15.504

224.80

Spices

Kg

4.374

769.80

Others

Kg

3.522

550.30

Glass bottles

Pcs

375,000

375,000

Cans

Pcs

1,125,000

1,406,250

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.

Cost

Description

Unit

Quantity

Electricity

KWh

17,152

8,113

Water

M3

5,100

28,050

Fuel oil

Liter

40,000

216,400

No.

Total

V.

TECHNOLOGY & ENGINEERING

A.

TECHNOLOGY

1.

Production Process

(Birr)

252,563

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 and

filtered.
Concentration: - after crushing the filtered tomato pulp becomes preheated and

concentrated 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 seasoning

room 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.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13

Description
Tomato charging m/c
Tomato washing and sorting m/c
Continuous concentrator
Filter
Homogenizer
Seasoning mixer
Bottling m/c
Cooler
Labeler
Packing m/c
Water treatment facility
Boiler
Other auxiliary equipment

Qty.
1 set
1
1
1
1
1
2
1
1
1
1set
1
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 abundantly
supplied 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

Sr.

Description

No.

Req.

Salary (Birr)

No.

Monthly

Annual

A. Administration
1

Plant Manager

2,800

33,600

Secretary

800

9,600

Accountant

900

10,800

Salesman

600

7,200

Personnel

600

7,200

Clerks

600

7,200

General Services

800

9,600

Sub-Total

11

7,100

85,200

B. Production
1

Production Supervisor

1,200

14,400

Technicians

1,200

14,400

operators

1,500

18,000

Labourers

12

2,400

28,800

Chemists

1,900

22,800

Sub-Total

20

8,200

98,400

Total

31

15,300

183,600

3,060

36,720

18,360

220,320

Workers Benefits
(20% of basic salary)
Grand Total

B.

TRAINING REQUIREMENT

One technologist should be given a one month on- the-job training in Merti Processing Plant
during erection & commissioning period.
15,000.

The cost of such training is estimated at Birr

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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
Bank interest

3 years
8%

Discount cash flow

8.5%

Accounts receivable

30 days

Raw 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)

Land lease value

Building and Civil Work

1,840.00

Plant Machinery and Equipment

7,046.31

Office Furniture and Equipment

150

Vehicle

650

Pre-production Expenditure*

325.00

Working Capital

927.69

Total Investment cost

112

11,051.0

Foreign Share

N.B

38

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
Raw Material and Inputs
Utilities

Cost

4,958.17

75.10

252.56

3.83

80

1.21

102.24

1.55

42.6

0.65

68.16

1.03

5,503.73

83.37

981.63

14.87

116.35
6,601.71

1.76
100

Maintenance and repair

Labour direct
Factory overheads
Administration Costs
Total Operating Costs
Depreciation
Cost of Finance
Total Production Cost

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.