CHEFS & TAVERNS LIMITED

A FRUIT JUICE PROCESSING INVESTMENT OPPORTUNITY

April, 2013

CONTENT

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Chef and Tarverns Analysis of Nigerian Juice Industry

Business Concept Product Concept

- Overview

- Regulatory Process

- Content Research

- Brand, Design & Packaging

Financial Summary (Highlights) SWOT Analysis

Business Strategy Organogram

Factory Layout

Market/Industry Analysis Production

Typical Operation

- Global Market Raw material Supply & Product distribution

- Nigeria Financial Projections

Beverage Industry - Profit & Loss Forecast

Nigerian Population - Balance Sheet Forecast

Population Segmentation (Beverage Market) - Cash Flow Forecast

Flavored Ready-To-Drink Milk - Assumptions

Juice Nectar & Still Drinks (JNSD) Offer for subscription

- 2011 to 2012

- Growth (2011-2012 & 2012-2015)

Evolution of Juice Blends & Nectars

Opportunities

- Dairy Products

- JNSDs

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Chefs & Taverns

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Chefs & Taverns Limited (“CAT”) is a new entrant into fruit juice processing from concentrates and will boast of a variety of flavours such as Orange, Pineapple, Apple and/or other mixtures in volume of 200ml. CAT is entering the fruit juice processing business with a total capital (project cost) of =N=625,000,000 (Six Hundred and Twenty-Five Million Naira).

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BUSINESS CONCEPT

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Fruit juices are produced from raw fruits. It can be classified broadly into two, namely, juicy and pulpy fruits.  Juicy fruits include: orange, lemon, lime, tangerine, tangelo, pumelo, and so on while pulpy fruits include pineapple, mango, pawpaw, banana, cashew, guava, breadfruits, avocado pear and so on.  Fruits are grown abundantly in many parts of Nigeria but most of these fruits are lost after harvesting.  The quality of the fruit juices are also not consistent. In addition, consistent supply cannot also be ascertained. As such, CAT’s fruit processing plant will be fully dependent on imported fruit concentrates predominantly from Europe and South Africa.

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There is enormous demand for fruit juices in Nigeria.  Fruit juices are served at occasions such as, wedding, burial, house warming, seminars, workshops, and more importantly consumed by kids as a nutritional item. 

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The national demand for fruit juices is estimated at 550million litres, while current supply is estimated to be 90% (i.e. 495million litres). With this, there exist an unmet demand of 10% (i.e. 55million litres) justified by an average annual grow rate of 8% due to increase in population and shift in economic class.

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CAT intends to produce 5million litres (i.e. 25million packs of 200ml) annually at maximum capacity with just one full processing line. This represents approximately 9% of the 10% unmet demand. Whilst, CAT’s production represent approximately 1% of the estimated demand.

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BUSINESS CONCEPT

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With children and young adults accounting for above 43% of the population, the emergence of the middle class, the existing gap between the demand and supply of fruit juices, opportunities to produce for the deep-in-pyramid of the economic class ladder as well as possible improvement in fruit juice processing, there is potentials in the juice market to tap into.

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The market is characterized by less flavours, opportunities to bridge consumption gap through product segmentation and less competition within few segments of the market.

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Some of the popular brands of fruit juices in Nigerian markets depending on segmentation are:

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• Frutta, 5 Alive, Chivita, Fumman, Dansa, Fan Juice, Chi, Ceres.
• Others are Edge, Lloyd’s fruit squeeze, Dudu, Cway natural drink, etc. 

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The common packaging used are Tetra Paks, cans, bottles (plastic and glass) and pouches.  

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FINANCIAL SUMMARY

�PROJECT COSTS:

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FINANCIAL SUMMARY:�KEY RATIOS

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BUSINESS STRATEGY

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Vision Statement

 To be a leading fruit juice processors in Nigeria.

Mission Statement 

To continuously generate wealth for stakeholders through the processing of quality products for her customers.

Strategic Goals

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Growth – The company shall continue to expand her market given the country’s population size and market size.

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Manpower development – The company will continue to develop its manpower and upgrade existing equipments to modern technology, in order to reduce loss and wastages.

Trade Name – The company will register its trade name in the Nigerian market.

Market Share – The company has a goal of significantly gaining and increasing its market share to become one of the leading fruit juice processors in Nigeria.

Profitability – The company intends to strive to be profitable by second to third year of operation.

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MARKET/INDUSTRY ANALYSIS:�GLOBAL MARKET

Over the years, juices have garnered sufficient amount of attention as a healthy drink when compared to soft drinks. Mirroring the fact, per capita consumption of juices exhibited robust growth over the past few years while carbonated beverages gained by a modest percentage. Additionally, aerated soft drinks are also being replaced by sparkling juices, which are free from high fructose corn syrup and contain only natural sugars. The marketplace is presently witnessing the influx of juice brands which apart from being economical are fortified with vitamins and minerals, are low in calories compared to soft drinks.

Apart from natural and healthy ingredients, products are also being tagged as premium or organic, in order to generate higher sales volumes. With three decades of history, the fruit juice sector is still considered a young industry. Growth in the industry is mainly driven by imports and exports. The fruit juice market value is about twice as much as the tea segment and the sales of fruit juices are also towering over the entire cola segment sales. The phenomenal growth rate in the segment is attracting a lot of new entrants.

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Private label juices are capturing the market in both shelf-stable and refrigerated juice subcategories. This is primarily due to the proactive approach to packaging trends, quality and flavor adopted by private label companies. In shelf stable category, private labels continue to witness robust growth across various bottled juice categories.

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MARKET/INDUSTRY ANALYSIS:�GLOBAL MARKET

Going forward, it is estimated that the trend in favor of healthy eating, high quality products with novel tastes, and growing acceptance of fruit juices as part of mealtimes would continue to drive growth in the fruit juice market. While health concerns are expected to spike the demand for super fruit juices, safety and environmental concerns would spearhead innovation and new product development in the areas related to organic and 100% natural juice segment.

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Europe represents the single largest regional market, as stated by the new research report on Fruits and Vegetable Juices. Asia-Pacific is forecast to emerge as the region holding significant growth potential at a CAGR of 6.3% over the analysis period 2009-2017. Fruit Juices constitutes the largest product category, amassing a gigantic share of the global market, strengthened by sustained demand from chilled ready to serve juice segment. The market is also forecast to race ahead at the overall highest compounded annual growth rate through 2017.

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Growing economies, such as China, India and Nigeria, present lucrative opportunities in terms of potential consumers. Producers are aggressively promoting and expanding their operations into these countries, localizing their products to reflect tastes and preferences of specific demographic and regional consumer groups. Per capita consumption is expected to increase as juice becomes more popular in these countries.

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Present scenario of Chinese beverage industry includes moderate production levels, imported manufacturing technology due to backward local technology, and scope for foreign entry. In the face of all this, the market for beverages in China is poised for positive growth.

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MARKET/INDUSTRY ANALYSIS:�NIGERIA

The juice market in Nigeria has witnessed a tremendous growth since 2002 when the Obasanjo Administration placed a ban on the importation of packaged juice into the country. Consequently, more producers have entered the scene and wider markets are being reached. Interestingly, this growth in the juice market seemed to defy the poor performance indices the Nigerian economy has been recording.

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In 2002, Coca-Cola Nigeria Plc invested over $200million on its local plant producing 5alive brand of fruit juice. In 2006, Dangote Group established Dansa Food Limited to produce Dansa brand of fruit juice. Also in 2012, SCOA invested about $8.5million to produce Tropic ice brand of fruit juice.

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Nigerian fruit juice market is growing tremendously as Nigerians consume large quantity of relatively low-priced sugared beverages. The industry is estimated to have an annual market demand/size in excess of N110billion. Based on this, CAT will have a 10 year average turnover of approximately N1.5billion which represents 1.4% of the market share. This is based on maintaining only one line over the same period.

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The industry has experienced a growth of over 60% over the last five years in spite of the nation’s economic condition. Clearly, this industry seems to have a lot of potentials as demand is now been pushed by local suppliers.

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MARKET/INDUSTRY ANALYSIS:�NIGERIA

Nigerian fruit juice industry boasts of a spectrum of flavours ranging from orange, pineapple, mango, lemon, blackberry, grape amongst others.

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However, in spite of the huge success of this industry and its potential, it is estimated that Nigeria spends over $1 billion on importation of fruit juice concentrates representing 95% of fruit juice concentrates in the hands of local fruit juice producers as this evidences a demand-supply gap in the industry.

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Given the nature of fruit, a considerable amount of fruits are lost after harvest due to inadequate infrastructure and capacity for storage and preservation. It was estimated that one-third of agricultural outputs inclusive of fruits are lost post harvest.

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Benue State acclaimed as the food basket of the nation has 17 out of its 23 local governments producing oranges in commercial quantities. An estimate however, has it that over 70% of the oranges are lost every year on the farm stressing the need for efforts to be geared towards curtailing post harvest losses.

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As a way of bridging the demand-supply gap as well as conserving foreign exchange earnings whilst boosting the growth of the industry, in 2012, Teragro Limited took a backward integration step as it inaugurated its strategically-established Teragro Fruit Concentrate plant in Makurdi, Benue state in a bid to cushion the effect of heavy importation of fruit juice concentrates and further aid the growth of the industry.

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MARKET/INDUSTRY ANALYSIS:�NIGERIA

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Despite the availability of fruits, imported concentrates still represents a huge source of raw materials for juice processing. This is mainly due to quality, consistency and value derivation.

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In a research report, it was indicated that there are many brands of juice in the Nigerian market but of all these brands, the most popular ones are Dansa, 5alive, Chivita, and Fumman. Other brands include Nature Fresh, Fruit Squeeze, Dudu etc. However, the research was limited to the major brands. The findings revealed Chivita as the juice market leader and the brand with the least complaints from consumers, while Dansa recorded the lowest customer preference, as well as the highest level of complaints.

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In the attempt to test demand for brands through stocking, the first interest was to identify which of the brands were sold by sellers. The findings showed that 29% of the respondents sold 5Alive, and this made it the most sold. Chivita followed closely behind with 26%, Dansa made the third position with 20%, Fumman with 19% while other juice brands shared the remaining 6% market share. See the table below:

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MARKET/INDUSTRY ANALYSIS:�NIGERIA

The flavours focused on were Orange, Pineapple, Mango, and Apple. �Of all the flavours in the market, Orange and Pineapple flavours are the most preferred flavours by consumers as 32% and 29% of the traders claimed that customers prefer Orange and Pineapple flavours respectively. Together, they claimed over 60% of the market. Apple came a distant third with 18% followed by other flavours with 16%. Mango was agreed to be the least flavour bought by consumers coming last with a very low 3%.

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In the juice market, the wholesaler are the most important agents in the chain of distribution. Over 70% of the traders got their supplies from the wholesalers. About 20% got their supplies directly from the manufacturers while the remaining 10% got supplies from retailers.

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From the forgoing, it is immediately clear that competition in the juice market is very high with just four brands claiming 94% of the entire volume of juice sold.

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Having chosen 5Alive and Chivita as their prime brands—in response to demand, traders believed that the reason for these choices is the quality that consumers associate with the different brands. Specifically, 50% of them strongly believed that the quality of a brand is the major reason why consumers buy that brand.

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The taste of a brand is also a significant factor to consider as 36% of the traders believed. This therefore made Taste the second driver of sales in the juice market. Other reasons like the reputation of individual brand as well as advertisement took the third place with 9% while price came last with 3%.

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CAT’s flavour-focus is on apple, orange pineapple to derive mixed fruit products based on the three choices gaining more prominence and growth.

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BEVERAGE INDUSTRY:�NIGERIA

The Nigerian beverage market is dimensioned along the lines of alcoholic drinks, juices and nectars, soft drinks, tea and coffee-based drinks, energy and sport drinks amongst others.

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BEVERAGE INDUSTRY:�NIGERIA

There exist an opportunity for the Juice, Nectar & Still Drink (JNSD) and the Liquid Dairy Product (LDP) markets in Sub-Saharan Africa as their growth rates significantly lag by about 30% and 35% when compared to global statistics respectively. This indicates that there is a sufficient room for growth within that market space in a fast growing economy like Nigeria, China, India etc.

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NIGERIAN POPULATION

Nigeria’s population has seen a steady growth in children and young kids over the past few years. This segment of the population account for about 43% of the population.

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With Nigeria’s middle class growing trend, it is expected that this will drive the economy, thus a positive outlook for the beverage industry.

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NIGERIAN POPULATION SEGMENTATION:�BEVERAGE INDUSTRY

Market segmentation for beverages (juice, nectar and still drinks inclusive) is patterned along the lines of the attractive and active section of the population. There exist a huge market for beverages and allied products given the emergence of the middle class of the economy as well as the population of the emergent consumer groups of children and young adults and its envisaged growth in years to come.

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0-19

20-44

45-70

BEVERAGE INDUSTRY:�FLAVOURED READY-TO-DRINK (RTD) MILK

MARKET SHARE & WEIGHTED DISTRIBUTION OF TOP BRANDS DOWN THE PYRAMID

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BBStar and Bobo are the major competition within the 210ml-200ml market space of Flavored Ready-To-Drink (RTD) milk garnering 15.5% and 11.2% of the segment’s market share respectively.

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Other products in this segment as shown above are Viju, NutriMilk and Hollandia with market shares of 63.3%, 6.6% and 0.2% respectively.

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The retail market price for BBStar and Bobo is =N= 50 a piece.

JNSD 2011-2012�

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Nectar and Fruit/flavored drinks account for 82% of the all JNSD whilst juices, Tea-based sport and energy drinks account for the rest (i.e. 18%). Between 2011-2012 in terms of consumption, Energy drinks, Sport drinks and Tea-based drinks grew by 12%, 22% and 25% respectively. Also within the JNSD category, Juices grew by 7% whilst Nectars and Still drinks grew by 11% and 12% respectively.

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CAT, however, intends to operate within the JNSD but with major focus on nectar, fruit/flavored still drinks (NSD). From the graph above, it is evidenced that there is a huge consumption within the NSD space.

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JNSD GROWTH 2011-2012 & 2012-2015 �

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It is estimated that over the period of 2012-2015, consumption of juices, nectars, still drinks is expected to surge to 3.3 million litres, 164 million litres, 182.5 million litres respectively.

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The likes of energy, sport and tea-based drinks are estimated to have 70.8 million litres, 1.1 million litres and 5.1 million litres respectively.

�EVOLUTION OF JUICE BLENDS AND NECTARS �

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In the Nigerian juice market, consumers’ preferences lean toward orange, pineapple and apple flavours. Orange, pineapple and apple flavours are reputed to have 32%, 29% and 18% of the market share in terms of flavour preference.

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Demand for mixed fruit blend and citrus has been on the rise as local juice processors have been taken advantage of the growth. The market can boast of mixed juices and nectars such as orange/apple, orange/peach, orange/pineapple, and citrus juices and blended citrus juices.

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CAT juice processing intends to focus on apple, orange, pineapple based drinks to arrive at a mixed flavour with special vitamins and minerals targeted for kids consumption, other features inclusive as the market for mixed fruits shows a healthy potential for growth.

�EVOLUTION OF JUICE BLENDS AND NECTARS �

Yet to be taken advantage of in fruit juice processing is the infusion of special minerals and special vitamins for fortification and addition of more nutritional value. Most juices/nectars are imbued with common vitamins.

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Though mixed fruit blend are currently trending in the market, but there are no proper and clear-cut product segmentation for juices and nectars.

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Opportunities lie in miniaturization for kids and young teenagers (i.e. production in 200ml-250ml), fortification with special vitamins and minerals, introduction of more mixed juices and citruses such as fruit & milk.

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�OPPORTUNITIES FOR DAIRY PRODUCTS�

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It is obvious that there exist an opportunity to produce drinks for children within the middle class segment of the economy mostly especially in the form of lunch drinks as the middle class continues to emerge.

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Also along the line of deep-in-pyramid segment of the economy, there is a great room to push a competing product into this segment as there exist a huge population and there are little players within this segment. Present products with the target price range and market segment are BBStar and BoBo which are within the Ready-to-Drink (RTD) Milk category.

�OPPORTUNITIES FOR JNSDs�

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Opportunities in the upper segment are in the form of possible extension of flavours as well as products targeted towards children in this segment as there seems to be none.

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The deep-in-pyramid with its huge population, seems to have the greatest opportunities to tap into as there is an apparent room to produce more affordable JNSDs for both the young teenagers and children in this segment.

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With the opportunities presented above, CAT’s strategy is to produce a quality driven and tasty nectar, fruit and flavored still drinks with major focus on the lower end of the pyramid to meet children/young teenagers nectar, still drink needs.

ANALYSIS OF NIGERIAN JUICE INDUSTRY

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As it is shown here, it is CAT’s priority to commence with quality positioned products enclosed in Tetra Pak with straws in 200ml sizes as well as to focus on developing products with unique taste. CAT’s main priorities are quality and taste as this are key drivers of sale.

CAT intends to focus its production on orange, apple and pineapple base whilst leverage on the 21% as shown here to produce mixed fruits.

PRODUCT CONCEPT:�OVERVIEW

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CAT products will be in the range of Orange Flavour, Pineapple Flavour , Apple Flavour and/or Other Mixtures.

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The production cost per product of CAT are estimated as follows:

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The estimated factory selling price for each flavour of 200ml is put at N36.25 in the first year of production with subsequent increase of 6% per annum. The low entry price is aimed at achieving a reasonable percentage of the market in its first year of production whilst making financially reasonable margin of profit.

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• The fruit Juice will be introduced at N36.25 for all flavours in 200ml each during the first year of operation with a 6% increase in subsequent years for each year.
• Grass-root promotional campaign will be done in schools, populated areas, market places amongst others .
• Heavy targeted advertisement working with an experienced media agency.

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PRODUCT CONCEPT:�REGULATORY PROCESS

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The manufacturing and importation of drugs, food and other related products are under the regulatory purview of the National Agency for Food and Drug Administration and Control (NAFDAC).

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According to NAFDAC, the processing/manufacturing and importation of fruit juice and nectar is regulated by Fruit Juice and Nectar Regulations 2005.

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Summarily, the regulations provide for the following:

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• Registration of manufactured, imported, exported advertised and distributed fruit juices and nectar products.
• Approval for the use of non-nutritive sweeteners and other addictives.
• Approval for composition and properties of fruit juices and nectars.
• Labeling according to the Pre-packaged food (Labeling) Regulations 2005.
• Branding of fruit juices and nectars
• Raw materials for fruits and nectars including their ingredients

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PRODUCT CONCEPT:�CONTENT RESEARCH

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Working in partnership with Tetra Pak International Product Research Centre, CAT will develop a tasteful NSD with Apple, Orange and Pineapple base from its collection of internationally researched products.

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Chefs & Taverns Limited

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Cardboard Tetra Pak Packaging

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Tetra Pak International Product Design Centre

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Quality and Tasty Nectar, Still Drink with Orange, Pineapple and Apple Base

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PRODUCT CONCEPT:�BRAND, DESIGN & PACKAGING

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DESIGN

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It is intended that in the conceptualization of the design which includes drawings, CAT will work with Tetra Pak’s design team to come up with a galvanizing and attractive design.

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CAT can also consult local designers (i.e. designers for other brands) as alternative to the option stated above. It is however also advisable to work with Tetra Pak given their involvement in designs for international brands as well as the branding standard held by them.

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BRAND

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The following have been suggested out of a quest for attractive and catchy names and they are in exhaustive. However, they are suggested pending brand name discovery.

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• CAT
• PARROT
• BUDGIES

The name when ratified shall be trademarked for CAT to reserve all rights and benefit attached to such.

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PACKAGING

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The following are the package available for 200ml products.

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TETRA BRIK

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Tetra Brik is a simple, smart solution for chilled beverages such as pasteurised milk and live-culture products like yoghurts. It makes life easier for everyone. It’s cost-efficient for you to produce and process. The shape makes it easy to stack and consumers will find that its basic functions and features offer a lot of value.

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KEY BENEFITS

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Extremely cost efficient

Good value for consumers

Easy to stack

Wide choice of openings and closures from basic to very high functionality

Low use of resources

Great also for thick dairy products, such as yoghurt

Easy to stack in chilled cabinets and at home

PRODUCT CONCEPT:�BRAND, DESIGN & PACKAGING

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TETRA FINO ASEPTIC

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Tetra Fino Aseptic is simple, cost-effective carton package that keeps products fresh. It’s a perfect packaging solution for conversion of loose milk. Friendly, safe and natural, this pillow shaped package has a tough seal and offers superior aseptic technologies guaranteed to keep products safe for a long time – everywhere.

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KEY BENEFITS

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Attracts families looking for value at a low-cost

Keeps product safe and fresh even under harsh conditions

Large flat area and flexo printing for great branding possibilities or photographic printing on uncoated packaging material

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TETRA CLASSIC ASEPTIC

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Tetra Classic Aseptic presents a friendly, distinctive face to the world. You can print on all sides to achieve a look that appeals to your target market. With a range of sizes and openings, Tetra Classic Aseptic caters to wide array of applications. Whether it’s a single portion of sauce ingredient for the chef in you or a kid’s size share of juice or milk, Tetra Classic Aseptic is easy to pour, easy to drink from and equally stable on the kitchen counter and the school desk.

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KEY BENEFITS

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Fun, unique shape appeals to consumers

Single-serve package promotes impulse purchases

Low investment cost, high-quality solution

High-speed filling machine for efficient production

Volumes

PRODUCT CONCEPT:�BRAND, DESIGN & PACKAGING

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TETRA WEDGE ASEPTIC

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Tetra Wedge Aseptic is for brands that want to attract tweens. It gets your product noticed. It builds loyalty. And it is affordable. The playful design is an excellent choice for young favourites; juice, nectars and still drinks, as well as tea and milk drinks.

125 ml and 200 ml

Cool and convenient with straw

Cost-effective production in Tetra Pak A1

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KEY BENEFITS

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Unique design appeals to younger target market

Distinctive volume impression

Large front panel for enhancing your brand

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TETRA BRIK ASEPTIC

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Tetra Brik Aseptic is the best-selling carton package range for liquid beverages in the world. It offers distribution and storage at ambient temperatures, without the need of preservatives, while protecting the nutritional value of the packed product. Its design makes it one of the most efficient carriers of beverages. No unnecessary material, weight or space, just a simple brick-shaped package, the easiest shape to stack and store. At home or on-the-go, it is perfect in places where the chilled chain is limited.

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KEY BENEFITS

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Extremely cost efficient

Good value for consumers

Easy to stack and store

Wide choice of openings and closures from basic to very high functionality

PRODUCT CONCEPT:�BRAND, DESIGN & PACKAGING

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TETRA PRISMA ASEPTIC

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The Tetra Prisma Aseptic package activates your senses. Its unique 8-sided shape and firm packaging material infuse your brand with a trendy image. Whether you want to introduce a new product or strengthen an existing one, Tetra Prisma Aseptic packages are designed to build up your brand while giving you new distribution and business opportunities.

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KEY BENEFITS

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Unique 8-sided shape with metallised and non–metallised printing options

Great grip and robustness makes it perfect for on-the-go products

Brand Builder: an ambassador for various brands gracing a variety of occasions and events

MACHINE CONFIGURATION - PACKAGING

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Having highlighted portfolio of packaging for products within the 200ml range,. However, the choice of packaging in based on the type and configuration of the Tetra Pak A3 Compact Flex.

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In view of the machine, the products can be packaged in Tetra Brik Aseptic and Tetra Prisma Aseptic. Thus for CAT, the packaging shall be in Tetra Brik Aseptic or Tetra Prisma Aseptic.

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TETRA BRIK ASEPTIC: MARKET OPPROTUNITIES

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Besides milk and juice, Tetra Brik Aseptic packaging suits a wide

range of beverages, for example, nectars, creams, still drinks (such as cold teas), soy or tomato-based products and even wines. A variety of shapes will make your product stand out on the shelf.

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TETRA PRISMA ASEPTIC: MARKET OPPROTUNITIES

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Tetra Prisma Aseptic is perfect for a wide variety of products including fruit juices, iced tea, hi-protein products, energy drinks, meal replacements and milk beverages that are flavoured or enriched. Available in volumes from 125 ml portion packs to 1-litre family packs, there’s a size to quench every thirst.

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SWOT ANALYSIS

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PROPOSED ORGANOGRAM

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�FACTORY LAYOUT�

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In designing the factory, Tetra Pak will help in mapping out the layout of the factory,, product taste and all the way to the installation of machine and other ancillary works.

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It is proposed that for the establishment of the factory, a maximum of one (1) acre of land will be acquired in an affordable location that will give economic advantages. To be built on the land will be the production plant which will support all production activities whilst withstanding effects of operations such as heavy vibration and also stand the test of time.

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Also to be built are two (2) cold rooms and a warehouse which will double as a shelter for pre-production items and post-production items. Operational offices and other relevant buildings will be provided cheaply so as to ensure efficient, smooth and flawless operations. It is expected that the land will be maximized to accommodate for future expansion.

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PRODUCTION:�OPERATING STRATEGY

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Capacity Utilization

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CAT will be established and installed with a maximum production capacity of 9000 packs per hour with 24 hours of daily operation (3 shifts of 8 hours each).

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It is proposed that 8 hours (one shift )of daily operation will be expended in the first year whilst this in the second year, 20 hours (two and half shifts) and is estimated to be spent . In the third year, it is expected that the machines will be run at full capacity of 24 hours daily.

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It is also envisaged that operation will be carried out based on twenty-five (25) operating days in a month to allow for planned and unplanned events such as maintenance and machine downtime. Thus, operational for three hundred days (300) operating days in a year.

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Functional Lines of Tetra Pak A3 Compact Flex

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PRODUCTION:�OPERATING STRATEGY

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• Processing Line – This comprises;

Mixing Tanks

Mixing units

Sterilizers/Pasteurizers

Homogenizers

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Sources of Raw materials

CAT’s major raw material in fruit juice processing is the concentrates. In order to manage and tap the procurement-side synergies, fruit juice concentrates will be sourced directly from producers under contractual growing agreements.

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Also, to compensate for vegetation-related variations in harvests from various growing areas, concentrates will be sought for globally from new suppliers and regions so as to reduce possible stock out and ensure that only the best quality fruit juices are produced.

Technical Details of Facilities and Maintenance

Competencies:

Opportunity driven and dynamic management: The company will ensure that it has competent management preferably led by an expatriate that can quickly and precisely identify market shortcomings and leverage them as business opportunities.

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PRODUCTION:�OPERATING STRATEGY

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• Customer-centric approach: The Company will be customer focused and friendly and will do everything possible to meet and satisfy their customers’ refreshment and nutritional needs .

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• Good technical know-how: The Company aims to boast of competent technical personnel to make the day to day running of the business smooth and create value for customers.

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• Customer base: With a population of more than 160million, Nigeria’s young and adult individuals account for (<15) 44% and (15 – 64) 53% of the population. CAT’s targets are mostly young kids, teenagers within the age bracket of 0-14 years who yearn for fruit juices for nutritional and refreshment values.

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Nigeria Age Distribution:

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PRODUCTION:�Tetra Pak A3 Compact Flex

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Tetra Pak A3 Compact Flex is the filling machine for Tetra Brik Aseptic, and Tetra Prisma Aseptic packages. It is designed for flexibility to easily change between different package volumes and shapes

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Main Benefits

Flexibility: easy conversion between different family package shapes and sizes. Easy adaptation to many different closures.

Complete line offer.

Optimized line interaction thanks to innovative line automation.

High food safety.

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�PRODUCTION:�PASTEURIZATION�

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Beverage pasteurization is the heat-treatment to eliminate micro-organisms present and to ensure the desired shelf life for the beverage. The carefully designed pasteurization process safeguards flavours and nutrients in the beverage product.

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The pasteurization conditions are chosen for each beverage based on its specific properties. The temperature ranges from 85°C for juices to 138°C for Asian teas and the holding times typically vary between 5 and 30  seconds.

�PRODUCTION:�PASTEURIZATION�

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For beverages that are packaged aseptically and do not require refrigeration, it is necessary that aseptic conditions are secured throughout the process, preventing any recontamination of the pasteurised product. Other pasteurization systems are designed for cold-filling, where the hygienically filled beverage is distributed in the cold chain, or for hot-filling of beverages to be shipped at ambient conditions.

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Tetra Pak’s pasteurisation systems are designed for high energy recovery and minimal product waste that ensure low operating costs and maximum protection of the environment. The flexibility to handle a wide range of beverages in the same pasteurisation system, allows producers to respond quickly to new market needs.

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�PRODUCTION:�MIXING�

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Tetra Almix is used for dissolving sweeteners, powders and liquid flavours to form a sugar solution. The module easily dissolves aspartame, altoextrines and other, similar, difficult powders. It can also be used for mixing liquid concentrates and water. 

�PRODUCTION:�ASEPTIC TREAMENT�

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Beverages are heat-treated to eliminate the microorganisms that would otherwise spoil the product during storage.  The thermal process for products of high acidity is called pasteurization. For beverages that are packaged aseptically and do not require refrigeration,  it is necessary that aseptic conditions are secured throughout the process, excluding any recontamination of the pasteurised product.

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The carefully designed process safeguards flavours and nutrients in the product. For each beverage the optimal heat treatment is selected based on its specific properties. The temperature ranges from 85°C for juices to 138°C for Asian teas and the holding times typically vary between 5 and 30 seconds.

�PRODUCTION:�ALBLEND�

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Tetra Alblend in-line blenders offer high accuracy and precision, as well as outstanding efficiency and an absolute minimum of product loss. Tetra Alblend is a blending machine for beverages.��Tetra Alblend is available as a stand-alone unit or as a part of a production solution, including Tetra Therm Aseptic Drink pasteurizer, for exceptional cost-efficiency, food safety, consistent product quality and low environmental impact.

�PRODUCTION:�ASEPTIC TREATMENT�

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Tetra Pak pasteurization systems are designed for high energy recovery and minimal product waste, two factors  that ensure low operating costs as well as maximum protection of the environment. 

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Aseptic systems that can handle a wide range of beverages, of different viscosities and pulp contents, offer producers high flexibility in  meeting current and future demands in the rapidly evolving beverage market.

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PRODUCTION:�HOMOGENIZATION

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Efficient homogenization is essential for the product quality of many beverages.

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In cloudy juices the pulp sediment is reduced and the mouth-feel, colour and appearance is enhanced.

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Homogenization causes disruption of particles in a suspension. It is often used in beverages to reduce sedimentation, to increase viscosity or to create a better texture.

PRODUCTION:�TYPICAL OPERATION

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Once the juice concentrate are taken delivery of, they are moved to the cold room for further freezing to the required temperature to keep quality.

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The Tetra Pak machines are used in processing, filling and packaging of the products whilst they are checked for composition, ingredients and quality in respect of stipulated standards for regulatory purpose.

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The products are packaged based on the configurations of the machine and they are subsequently moved to the cold warehouse for required temperature before being moved to the market for sale.

RAW MATERIAL SUPPLY & PRODUCT DISTRIBUTION

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RAW MATERIAL SUPPLY

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To provide against possible stock out and to allow for lead time, four (4) month stock of fruit concentrates will be held in the cold room. This will allow for the delivery of juice concentrates to the plant barring unforeseen contingencies.

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PRODUCTION DISTRIBUTION

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The distribution of the products will be through a contract agent who will be saddled with the responsibility of ensuring that the products are channeled to every nook and cranny.

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Part of the agents’ responsibility is to coordinate the activities of distribution handlers. It is currently proposed that 20-25 distribution handlers will operate within 4 operational regions.

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More importantly, the movement of the products will be done through an outsourced and dedicated haulage firm.

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FINANCIAL PROJECTIONS:�PROFIT AND LOSS FORECAST

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FINANCIAL PROJECTIONS:�BALANCE SHEET FORECAST

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FINANCIAL PROJECTIONS:�CASHFLOW FORECAST

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FINANCIAL PROJECTIONS:�ASSUMPTIONS

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The basis and key assumptions used in the preparation of the projected financial statements are set out below:

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General/Economic Assumptions

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• With the reduction in inflationary pressure due to the decrease experienced within the 1^st quarter of 2013 which was majorly due to restoration of fuel subsidy to some degree and the fizzled effect of last year’s flood disaster. We expect that inflation over the projection period will average around 8.6% with CBN’s efforts to maintain a single digit inflation rate.

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• The value of Nigerian Naira to the US dollar and Euro is expected to N160 and N210. We expect that the value of Euro will remain stable as it continue to struggle with its recession and deficits.

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• The Monetary Policy Rate (MPR) is still pegged at 12% to continue to act as a quantitative easing measure against inflation.

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• The Gross Domestic Product (GDP) expanded 6.6% in the 1^st quarter of 2013 with a projected rate of 7% by Nigerian Bureau of Statistics (NBS). We expect GDP to average 6% worst case over the projection period. Company Income Tax and Education Tax were pegged at 30% and 2%.

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• The company plans to pay out a minimum of 60% of its Profit After Tax as dividend to shareholders starting from year 3 and for the rest of the projection period.

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FINANCIAL PROJECTIONS:�ASSUMPTIONS

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Production Assumptions

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• The machine has a capacity to produce 9000 packs per hr for 24hrs (3 shifts) in a day and with a capacity to produce 25,000,000 packs per year.

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• It is estimated that operations will be carried out for 25days in a month (i.e. 300days a year). CAT intends to process flavors such as orange, pineapple Apple based mixtures. The products are in 200ml sizes.

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• However, due to first time production and to allow for reasonable amount of learning curve and wastages, it is estimated that the production in year 1 will be 8,333,333 packs/year and 27,778 packs/day which represents 33% of machine capacity (i.e. 1 shift). The cost of 1 tonne of concentrate is estimated to be $1000 each for each flavor type. The packaging cost for 200ml size is 51.34 Euros per 1000 packs (inclusive of delivery and clearing charges).

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• Hence, average estimated cost of concentrate per pack is N6.4 plus packaging cost of N10.78/pack.

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• Production is expected to reach 83% of machine capacity (i.e. 2 ½ shifts) in year 2 with 100% capacity utilization from year 3 -10.

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Revenue Assumptions

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• It is estimated that 90% of packs produced (i.e. 7,500,000 packs) will be sold in year 1. The remaining 10% (i.e. 83,333 packs) is expected to be for free samples and some wastages. Sales for the �remaining periods is expected to be 95% of production whilst allowing for normal losses.

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• Sales prices for each flavor to contract agents is put at N36.25 and they are expected to grow by N5 each year through the projection period.

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FINANCIAL PROJECTIONS:�ASSUMPTIONS

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Financing Assumptions

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• The proposed project will be financed by 75% equity at a cost of 26.6% and 25% debt at a cost of 22%. The debt is a 5 year tenor facility with a 1 year moratorium for principal repayment.

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• Based on the financial forecast, it is estimated that in year 10 Tetra Pak machine having being fully depreciated will be purchased at a cost of N550million. A 5-Year debt of N220million will be raised to part-finance the purchase.

THE OFFER

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CHEFS AND TAVERNS LIMITED

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Hereby offer

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Nigerian International Securities Limited and its Partner/Associate Firms�

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some or all of the balance27.5% shareholding in Chefs and Taverns Limited for

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N225,000,000

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