Mineral Water Production - FV PDF

MINERAL
WATER
PRODUCTION
MINERAL WATER PRODUCTION 2017
Abbreviations and Definitions
Short Form Elaboration

KL / kl Kilo litre
km Kilo metre
KVA, kva Kilo Volt Ampere
kw Kilo watt
Lacs, lakh 100,000
m, M Metre
mio Million
mm Milli metre
MoEA Ministry of Economic Affairs of the Royal Government of Bhutan
Nu Ngultrum (Currency Unit of Bhutan)
pa Per annum
PET Polyalkylene Terepthalate
S.No., Sr. No. Serial Number
sq m Square metre
TDS Total Dissolved Solids (measure of the mineral content of water)
1 Complied by: iBEST Consultancy Services, 2017

1 Executive Summary
This report is a detailed feasibility study on the Mineral Water Production in Bhutan. Bhutan has
the potential to produce mineral water domestically as the major raw material, water, is available
in plenty. This water is available from the numerous snow and rain fed streams that abound in
the country, as well as from a large number of natural springs. The water from such natural
springs universally commands the highest price as packaged natural mineral water.
Mineral water consumption has grown exponentially over the past years. This growth is due to
the efforts of many corporations to promote the need to drink "healthy" mineral water rather than
packaged drinking water.
The report presents in detail the justification of the project, market analysis of Mineral Water,
resources required, and technology used, plant location, cost presentation and financial analysis.
(i) Justification of the Project: A large amount of Mineral water is imported every year in
Bhutan for households, official use, Hotel and for event management. Water, the principal raw
material for Mineral water, is available in Bhutan.
(ii) Market Analysis: Water is extensively used in Bhutan for industrial purpose, official use
and in households as well. There is a great scope of producing Mineral water in Bhutan with
the availability of raw material and to overcome export brands such as Parle’s Bisleri, Coca-
Cola's Kinley and PepsiCo's Aquafina. They are priced in the range of Rs. 10 - Rs. 20 a litre
in Bhutan.
(iii)Resources required: The main raw material for production of Mineral Water is water. Apart
from this, the unit requires electricity, which is also easily available in Bhutan.
(iv) Technology required: The business required high capacity technologies. However technical
details have been provided along with necessary financial analysis.
(v) Plant Location: As per the research on detailed Feasibility Report on Mineral Water
Project in Bhutan under MoEA , the selected plant location are shown blow in the table:
Table 1: Selected Plant Location
Ranking Location Score Dzongkhag
1 Demola Bridge 74.8 S/J
2 Demola (Marthang) 72.3 S/J
3 25 km Milestone N of Samdrup Jongkhar 70.7 S/J
Town
4 Eusuna 70.0 Paro
5 Aipoly Top Spring 69.1 Sarpang
(Source: Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA,
Department of Small and Cottage Industries, Ministry of Economic Affairs)

The Project is justified by the proven quality of the spring water for being classed as ‘Natural
Mineral Water’ - a valuable resource without optimal utilization. It is also justified by the high
ranking.
(vi) Cost Presentation and Financial Analysis:
Table 2: Project Summary
No. of Shift: Two (6 hours per shift ) per day
Working Days in Year: 320
Source of Financing Financial Institute @ 12%
Fixed Cost 4114751
Working Capital 213442
Total Investment Cost 4328193
Break Event Point (BEP) 432632
Return On Investment (ROI) 15%
Pay Back Period 2 Years and 0 Month

TABLE OF CONTENTS
Abbreviations and Definitions ......................................................................................................................... 1
1 Executive Summary ..................................................................................................................................... 2
1.1 Business Model Canvassing ............................................................................................................. 6
2 Justification of the Project ......................................................................................................................... 7
2.1 The need for the project.................................................................................................................... 7
2.2 Competition Analysis ......................................................................................................................... 7
3 Market Analysis............................................................................................................................................. 7
3.1 Structure of the industry .................................................................................................................. 8
3.2 Demand vs. Supply .............................................................................................................................. 8
3.3 Pricing & Marketing Strategies ................................................................................................... 10
3.4 Competitiveness of the project.................................................................................................... 11
3.5 SWOT ANALYSIS ............................................................................................................................... 11
3.6 Special attributes desired by target customers .................................................................... 11
3.7 Packaging & Transportation ........................................................................................................ 12
3.8 Assessment of Comparative Advantage ................................................................................... 12
4 Resources ..................................................................................................................................................... 12
4.1 Sources of inputs including water.............................................................................................. 12
4.2 Comparative analysis of critical inputs/ success factor .................................................... 13
4.3 Sources of raw Material ................................................................................................................. 13
4.4 Assess the availability of manpower & skills ......................................................................... 13
4.5 Assess the need for the skill development.............................................................................. 13
5 The Plant ....................................................................................................................................................... 14
5.1 Choice of technology ....................................................................................................................... 14
Manufacturing process ................................................................................................................................... 14
5.2 Source of technology ....................................................................................................................... 15
5.3 Rate of Consumption of power, fuel, utilities & consumables......................................... 16
5.4 Raw Material Consumption .......................................................................................................... 16
5.5 Man power requirement and organization chart ................................................................ 16
6 Plant Location & Infrastructure with layout ................................................................................... 17

6.1 Raw Material Availability .............................................................................................................. 17

6.2 Availability of Electricity ............................................................................................................... 17
6.3 Availability of Land and transportation facilities ................................................................ 17
6.4 Communication Facilities .............................................................................................................. 17
7 Financial Analysis...................................................................................................................................... 18
7.1 Total Project Capital Costs ............................................................................................................ 18
7.2 Working Capital Costs..................................................................................................................... 19
7.3 Cost of Production per unit........................................................................................................... 19
7.4 Human Resource cost ..................................................................................................................... 20
7.5 Project Profit and Loss Statement.............................................................................................. 21
7.6 Projected Cash Flow Statement .................................................................................................. 21
7.7 Projected Balance sheet statement............................................................................................ 22
7.8 Financial Ratio Analysis ................................................................................................................. 23
7.8.1 Interest on Loan ....................................................................................................................... 23
7.8.2 Break Even Point ...................................................................................................................... 23
7.8.3 Return on Investment ............................................................................................................ 24
7.8.4 Net Present Value and Internal Rate of Return ............................................................ 24
8 Final Finding and Recommendation .................................................................................................. 24
8.1 Conclusion ........................................................................................................................................... 24
References ............................................................................................................................................................ 25
Annexure ............................................................................................................................................................... 26

1.1 Business Model Canvassing

Key Partners Key Activities Value Customer Customer
Propositions Relationship Segments
 REDCL  Production of
 Bank Mineral water  Quality of Delivering the  Wholesaler
 Loden mineral products promptly  Retailer
Foundation Water at according to the  Consumer
 Self-Funding reasonable demand, offering
price certain percentage
of discount during
bulk purchase
Key resource Channels
 Water  Website,
 PET Bottle  Social Media
 Word-of-
Mouth(Offline)
Cost structure Revenue Streams
 Staff salary  Selling and supplying the finished

 wages for part time workers products to different groups of customers.

2 Justification of the Project
2.1 The need for the project

 There is no commercial utilization at present of the natural mineral water of Bhutan,
while the worldwide demand for it is increasing rapidly.
 There is no significant industry in selected Dzongkhag, at present, in this range of
investment.
 The site has high visual publicity since it is on the main air – road link to highway and
with the rest of the world.
 The setting up of the project will generate revenues for the state.
2.2 Competition Analysis

At present there are five competitors for the proposed business within Bhutan that is:
 Bhutan Argo Industries Limited, Thimphu, Mountain Spring Water

 Bhutan Milk and Agro Private limited Chukha Phuntsholing,
 Bhutan Himalaya,
 Kurjey Drupchu, Bumthang
 VEEN Water, Samtse.
 Selchu Mineral Water, Place name
3 Market Analysis
Due to the increase in awareness brought about by advertising, consumers have started
demanding for mineral water and are ready to pay the higher prices mineral water commands
over ordinary drinking water. Market analysis of major world market reveals that ‘Made in
Bhutan’ Mineral water can find ready markets in Japan, South Korea, Taiwan, Thailand,
Indonesia, Bangladesh and India.
Bhutan Agro being government’s project they have big and advanced mineral water plant and
they are able to capture the market. Bhutan milk and Agro Private limited is also having its share
in the market. Therefore, under the loan ceiling of BTN 1,500,000 it’s very much difficult to
purchase the mineral water plant and the necessary miscellaneous fixed assets. The minimum
amount required just to buy the simple mineral water plant is BTN 40,000,000 and moreover it
requires huge number of skilled workers to run the plants.
Therefore, it would not be possible to penetrate the market because almost half of the market is
covered by Bhutan agro and moreover figure 1 shows that, there is also Multi National Company
Coca-Cola's ‘Kinley’ mineral water is covering the Bhutanese market and having tough
competition with Bhutan Agro mineral water.

Figure 1: Market share of Packaged Drinking Water

Market Share Packaged Drinking Water
PepsiCo Other
G.C.Beverage 10 % 9%
12 %
Kinley
35 %
Bisleri
34 %
Kinley Bisleri G.C.Beverage PepsiCo Other
3.1 Structure of the industry

The Key Stakeholders
For Bhutan, marketing system for mineral water production can be said to comprise of following
stakeholders:
Importers: The person or firm that imports PET Bottles from other countries.
Wholesaler: Intermediary entity in the distribution channel that buys large quantity of Mineral
water from the manufacturers and resells it to retailers.
Retailers: Businesses that buy mineral water from wholesalers and sell it to end users.
End Users: End users are those who buy mineral water from retailers and are the consumers.
3.2 Demand vs. Supply

The mineral water consumers believe that natural mineral waters have medicinal or other health
properties and the long term demand supply positions becomes more market and segment driven
with brand and segments playing a bigger role in consumer’s choice of water.
The demand for purified water becomes more during summer season. As the drinking water is
dirty and if such water is consumed, the body suffers from water borne diseases. Due to this, it
has become imperative to process and bottle safe potable water for the mankind in prevailing
conditions. The other factors such as the health effect of specific minerals, place or origin of

water, packaging and brand perception attached with water purity, will play major roles in
creating the demand from consumers.
The table 3 shows the gap between demand and supply of mineral water. The product is widely
accepted in offices, restaurants and hotels, airport, bus stands, schools and hospitals and even in
house-holds. So there is good scope for establishing the mineral water production in the country.
Table 3: Demand & Supply of Mineral water
Year Demand Supply Total Demand Supply
(Million Domestic Supply Import % Million Gap
Litre) litre per %
% Million litre% Million litre Million litre
per year per year year per year
2005-06 180.00 5.00 9 1.00 1.80 6.00 10.80 94.00 169.20
2006-07 201.60 4.96 10 1.50 3.02 6.46 13.02 93.54 188.58
2007-08 225.79 5.31 12 2.00 4.52 7.31 16.52 92.69 209.28
2008-09 252.89 5.14 13 2.00 5.06 7.14 18.06 92.86 234.83
2009-10 283.23 5.30 15 2.50 7.08 7.80 22.08 92.20 261.15
2010-11 317.22 5.04 16 2.50 7.93 7.54 23.93 92.46 293.29
Table 4: Total Mineral Water Production & Supply Trend – Bhutan
Production Capacity: 36 million Litre per year
Year Production Production Expected Domestic Expected Export to other
Capacity (million litre Export to Consumption Countries
(%) per year) India (Excluding India)
st
1 60 21.60 13.00 0.80 7.80
nd
2 70 25.20 13.50 0.80 10.90
rd
3 80 28.80 15.00 0.95 12.85
4th 80 28.80 15.00 0.95 12.85
th
5 80 28.80 16.00 0.95 11.85
th
6 80 28.80 16.00 0.95 11.85
th
7 80 28.80 16.00 0.95 11.68

Figure 2: Total Mineral Water Production & Supply Trend – Bhutan

Production
million litre per
year
M Projected export
in
30.00
er to India
al
W 25.00
at
er 20.00
Domestic
M
illi
Consumption
15.00
on
lit
10.00
re Projected export to
5.00 other countries
0.00 (Excluded India)
1 2 3 4 5 6 7
Years
3.3 Pricing & Marketing Strategies

The quality of the product, its price and its brand image are the basic issues for consumers.
It often occurs that the consumer buying a product because it is satisfied with it does not
change his preference even when its price increases. The table 5 shows the cost of items and
selling price.
Table 5: Cost of items
S. No. Costing Items (One Litre) Cost (Rs.)
1 Cap Cost 0.25

2 Bottle Cost 1.25-2.25
3 Treatment Cost 0.10-0.25
4 Label Cost 0.15-0.25
5 Carton Cost 0.50
6 Transportation Cost 0.10-0.25
7 Other (tape and cases) 0.25
8 Total Cost (Excluding Labor, Marketing and Tax) 2.60-4.00
Selling Price 10.00-20.00

3.4 Competitiveness of the project

The project advocates setting up a production unit of mineral water. The mineral water produced
from this proposed unit would compete against imported supplies. The unit aspires to deliver
quality products at prices that are in keeping with the market. It is therefore expected that there
would be a demand pull at the customer end which can be further strengthened through
innovative promotional strategies. The demand pull is estimated to be significant ensuring
lowering of costs through economies of scale.
3.5 SWOT ANALYSIS

STRENGTH WEAKNESS
 Accessibility to the target markets  Inadequate fund to set up the business
 Takes advantage of new technologies  Inadequate technical expertise
 Unique benefits not offered by competitors
OPPORTUNITY THREAT
 Current trends towards illness prevention  Existing, well- recognized competition in
and cautions and protective parenting the marketplace
 Growing market demand for mineral  No brand recognition, no public awareness
drinking water or notoriety
 Large, international markets available
The SWOT analysis of Mineral Water Production:

Part of what is going to count as positives for Mineral Water Production Company is the vast
experience of our management team. The product is accessibility to the target markets which will
help in promotion of the business. The large national distribution network and the excellent
customer service count as a strong strength for the business. A major weakness is being new
mineral water Production Company and not having the financial capacity to set up the business.
The inadequate technical expertise with the advance technologies is also a major weakness to the
company. It is the fact that almost every individual from all over the world can afford mineral
water and they drink it regularly. As a result of that, we did feasibility studies so as to position
the business to take advantage of the existing market for mineral water and also to create own
new market. The major threat is the existence of well recognized competition in the market
place. Another threat is the arrival of a new bottled water production company in same location.
3.6 Special attributes desired by target customers

In general customers would prefer the following:
 High Quality Graded Mineral Water
 They would prefer an affordable price
 Ready availability and Nutritional Value of the mineral water

3.7 Packaging & Transportation

Bottled water is sold in a variety of packages such as 500 ml bottles, one litre bottles and even
20 to 50 litre bulk water packs. Method of packaging has adopted based upon safety of the
products, their hygiene and their undamaged delivery to the end user. The bottle packaging
design is kept so as to withstand the rough handling and jerks during transportation over rough
terrain. A factor of safety has been built into the carton construction by providing higher wall
thickness.
To ensure greater protection in cardboard cartons (five ply) have been selected for packaging 12
bottles, against the option of shrink wrapping, with due consideration being given to
international standards of packaging. For indigenous consignments dispatch by truck, simple
stacking of the cartons will be done within the truck body enclosure. At present Bhutan Agro
Industrial Limited is exploring markets in South East Asia.
3.8 Assessment of Comparative Advantage

In Bhutan, the Mineral water will not attract any production and/or sales tax and the raw
material import from India or other countries, of PET bottles and caps, PVC labels, cartons,
shrink film etc. will not be subject to import duties. There is a further advantage of Bhutan over
India in terms of excise duty and electricity tariff.
4 Resources
The major inputs to the project are Technological Inputs, Water, Power, Raw Material,
Consumables and Human Resource. These inputs are detailed in the following pages with regard
to their availability, required quantities, costs and the comparative analysis of certain critical
inputs.
4.1 Sources of inputs including water

 Water
The water suitable for classification as ‘Natural Mineral Water to IS: 13428:2000’ is available at
the location at a flow rate of 30 litres per minute, which is sufficient to enable commercial
exploitation to the extent of 25 litres per minute.
 Power
The total load is estimated at 200kva and the total power consumption costs are estimated at Nu.
6.50 Lacs per annum, based on the cost of Nu. 1.45 Per unit (kwh). Sufficient electrical power is
available at a short lead distance in the area.

4.2 Comparative analysis of critical inputs/ success factor
 Technological Inputs - The technology for this project is well established with advance
system. Technological inputs are required on certain processes, for which special precautions
have been dictated by international standards.
 Electric power - All the machinery requires power for its operation. Economy in transformer
and cabling costs would be achieved if the power were made available at 11 kv. The total
power consumption costs are estimated at Nu. 6.50 Lacs per annum, based on the cost of Nu.
1.45 per unit (kwh).
 Skilled worker: having skilled workers in the company will help in minimization of wastage
and maximization of profit.
4.3 Sources of raw Material

The main resource for the business is Water. The water suitable is for classification as ‘Natural
Mineral Water to IS: 13428:2000’ and it is available at the location where flow rate is 30 litres
per minute, which is sufficient to enable commercial exploitation to the extent of 25 litres per
minute.
The another main raw material required is PET bottles and this will be imported from India along
with bottle caps, adhesive stickers and packaging materials. Cartons may be developed
progressively in Bhutan. Details of raw materials are given in annexure.
4.4 Assess the availability of manpower & skills

The organization required to have a trained and disciplined team, skilled in multi-tasking and
capable of high productivity. The experience level required is highest at the management levels
and skilled labour categories, and reduces progressively through the ranks to the unskilled levels.
The availability of both skilled and unskilled labour can be hired from India.
4.5 Assess the need for the skill development

The skill development programs envisage exposure to industry best practices, hygiene, quality
management practices. Training is a continuous process and its importance cannot be
overemphasized. As the workforce is mostly unskilled, there is a need to develop their skills
according to the need of the industry. Workshops or on-site short term trainings may be
organized by the expertise on such field to impress upon the plant team, the importance of
quality, systematic operation, improvements in bottling practice. Training may also be organized
at the technical institutes in Bhutan or India.

5 The Plant
5.1 Choice of technology
Manufacturing process
Raw water is purified by passing it through sand filter and Activated carbon filter. Excess
hardness is reduced by softener and the softened water is passed through micron filters to make it
sparkling clear. To make it bacteria free water is passed through ultraviolet light radiation.
Packing of the water is done by Bottling System comprising of the facilities of Bottling system
comprising of the facilities of Bottle rinsing, Filling and capping, bottled mineral water is packed
in the cartons.
Figure 3: Manufacturing process of Mineral water
Raw water to be processed is collected in tanks. A known quantity is pumped into the above tank
where the water is dozed with alum for coagulation with heavy metals or insoluble matters. The
water after coagulation is allowed to settle for an hour. The water is then passed through sand
filters for trapping of undisclosed impurities. The water after sand filtrations is passed through
Carbon filters for removal of odor, color and also for de-chlorination. It is then passed through
series of micro fillers comprising 5 micron, 1 micron and 0.4 micron filter followed by
ultraviolet disinfection system for terminal disinfection. Packing is done in PET bottles of 1 litre
capacity through an automatic rinsing, filling, and capping machine fitted with an Ozone
generator. The bottles after capping are shrink wrapped (Optional) and packedin corrugated
boxes of one dozen each.
5.2 Source of technology

Plant and machine supplier:
 SS Source Feed Pipe
1. SAW Pipes Ltd.
Jindal centre 12, Bhikaji Cama Place,New Delhi -110066, India
Tel: 91-011-26188340-50
Fax: 91- 011- 41659169
Email: info@jindalsteel.com
 HDPE Pipes
Jyoti Polyvinyl Limited
Mr. Rahul Jain
33-B Anand Nagar Society, B.P.C. Road
Baroda-390005, Gujarat
Tel: 0265-22333953, 2333885
Fax: 0265-2335954
 Water Treatment Plant

Environmental Products (India) Pvt Ltd
Mr.R. S. Nair (Managing Director)
160/3 Rajani House, Opp. Don Bosco High School, L.T.Road,
Borivili (W) Mumbai -400091
Tel: +91 22 28333601
Fax: + 91 22 28331506
Email: epipl@mtnl.net.in
Website: www.epipl.com
 Bottle Preform Injection Moulding Machines

Ferromatik Milacron India Limited
Northern Region Office: 209/29, Link Road Lajpat Nagar-III,
New Delhi-110 024
Tel: +9111 29839102, 29839188,
Fax: +9111 29832065
Email: ferromatic@eth.net
Website: www.milacronindia.com
 PET Blow Moulding Machine

ARTEK Enterprises Pvt. Ltd. (Ranasons)
Mr.Kishore Mengnani
505 Madhuban Building, 55 Nehru Place,New Delhi-110 019
Tel: +9111-51618378 / 79, 26484672-73

Fax: +9111-26216934
E-mail: arteke@vsnl.com
 Rinser-Filler –Capper Machine
Gujarat Ion Exchange and Chemicals Ltd.
Mr Vyomesh Patel(Managing Director)
T-14, Balaji Center, Opp. Gurukul Tower
Drive-In Road, Memnagar, Ahmedabad – 380052
Gujarat, India
 Marking Machine
ERP Marketing Pvt. Ltd.
Mr. A.K.Gupta
17, 1st Fl, Purohitji ka Bagh,M.I.Road ,Jaipur – 302001
Mobile: +91 9829019029
Telefax: +91141 2362477
5.3 Rate of Consumption of power, fuel, utilities & consumables

 Power Consumption - For this project about 225 KVA (180KW) connections will be
required. Depending on the requirements of equipment to be installed in the facility, single-
phase or three-phase service may need to be installed by the power company.
 Water Consumption - The water requirement for cleaning and washing will be approximately
10,000 liters per day based on the processing capacity of the plant. Water is mostly required
for washing and also in various unit operations during processing.
5.4 Raw Material Consumption

The main consumables are laboratory chemicals, oils, lubricants and machine consumables such
as water filter elements and ultra-violet lamps, workmen’s clothing and miscellaneous cleaning
and office supplies. These requirements will be sourced from equipment suppliers and existing
local channels.
5.5 Man power requirement and organization chart

A total strength of 23 heads is envisaged at the full two shift operation of the plant. Local labour
will be available for the plant from surrounding villages and skilled labour will initially be
required from India to train them. Staffing requirements will be met by Bhutanese, but senior
management and marketing executives may be recruited from India.

6 Plant Location & Infrastructure with layout

The location of a plant is determined on the basis of proximity to raw materials, availability of
infrastructure and distance to market outlets.
6.1 Raw Material Availability

Other than the water itself, the only raw material inputs are for its packaging in bottles.
The other items are more economically bought out from manufacturers in India who specialize in
this work.
6.2 Availability of Electricity

Electricity is readily available from the grid. Incidentally, Mongar dzongkhag has a hydro power
plant on the Kurichhu River.
6.3 Availability of Land and transportation facilities

It is proposed to lease 2,500 sq m of land at the location below the spring for setting up the
Treatment Plant at a location. Public transport is available for employees but charter
arrangements may be worked out with public bus companies to suit the factory shift timings.
6.4 Communication Facilities

Bhutan Telecom Limited, Tashi InfoComm Limited, Samden Tech and Drukcom are the four
Internet Service Providers (ISPs) in the country. Bhutan Telecom Limited is the sole provider of
fixed-line telecommunication services while cellular mobile services are provided by Bhutan
Telecom Limited and Tashi InfoComm Limited. With the exception of Bhutan Telecom, all
other ISPs are private sector ventures.

7 Financial Analysis
7.1 Total Project Capital Costs

Table 7: Project Capital Costs
Forex. Domestic
PARTICULARS Total Cost
Component Component
Land ( lease) 2500 Sq.Meters/ 27,001 Sq.ft 27,001
Total
Plant & Machinery

Raw Water Storage Tank 1 42,250
Transfer pump 1 50,000
Cartridge filter 4 40,000
UV Light 1 4,000
Ozone Recirculation Tank and Pump 1 1,500
Mineral water filling machine 1 550,000
Bottle Washer 1 63,000
Sand Filter 1 45,000
Labelling Machine 1 65,000
Optional( Wrapping Machine Packing) 1 126,000
Automatic Capping Line 1 550,000
Softner 1 120,000
Chemical and Microlab Setup 1 250,000
Total 1,906,750 1,906,750
Vehicle (Two Delivery van) 1,300,000 1,300,000

Miscellaneous Fixed Assets:
Computer 5 125,000
Office Furniture: 627,500
Stationary 3,500
workers Uniforms 15,500
Electrical Fittings 7,000
Signboard 2,500
Total Cost 781,000 781,000
Preliminary Expenses 100,000 100,000
Total Project Startup Cost 4,114,751

7.2 Working Capital Costs

Table 8: Working Capital Costs
WORKING CAPITAL
Particulars Monthly Yearly
Advertising 3,000 36,000
Delivery Expenses 1,500 18,000
Inventory Purchases 192,842 2,314,100
Miscellaneous 2,000 24,000
Rent or Lease 13,500 162,000
Utilities & Telephone 600 7,200
Total 213,442 2,561,300
7.3 Cost of Production per unit

Table 9: Cost of Production per unit
Year 1 Year 2 Year 3 Year 4 Year 5

Total Units 600,000 630,000 661,500 694,575 729,304
Cost of Production 247,200 259,560 272,538 286,165 300,473
Unit Cost of Production 0.41 0.41 0.41 0.41 0.41

Estimated cost of one litre mineral water of Bhutan:
Table 10: Costing item
S. No. Costing Items(One Litre) Cost (Nu.)

1 PET Bottle 1.76
2 Corrugated Boxes 0.71
3 Cap Cost 0.25
4 Body Label 0.45
5 Shrink Holographic Cap Seals 0.19
6 BOPP Tape Roll 0.03
7 Consumables 0.17
8 Utilities 0.15
9 Wages & Salaries Incl. Benefits 1.00
10 Factory Overheads 0.15
11 Administrative Expenses 0.07
12 Interest & Depreciation 0.95
13 Selling & Distribution Expenses 0.67
14 Freight Cost 0.67
Total Unit Cost of Production 7.22
Ex-works Price 9.00
Selling Price Nu. 10/- to Nu. 20/-
7.4 Human Resource cost

The manpower is a critical input for the success of the project. The quality of the human resource
contributes the most to the success of the organization and there is need for recruiting the best for
the project, particularly in the initial stages. There is no problem visualized in recruiting
personnel from India with the requisite experience in water treatment and bottling operations.
This may be done through advertising for the positions in both Bhutanese and Indian media.

7.5 Project Profit and Loss Statement

Table 11: P&L A/c
INCOME STATETMENT PROJECTION FOR 5 YEARS

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Revenue 7,200,000 7,560,000 7,938,000 8,334,900 8,751,645
Cost of Goods Sold 2,344,100 2,461,300 2,584,375 2,713,629 2,849,265
Gross Profit / (Loss) 4,855,900 5,098,700 5,353,625 5,621,271 5,902,380
Expenses 2,561,300 2,689,360 2,823,838 2,965,065 3,113,273

Net Operating Income / (Loss) 2,294,600 2,409,340 2,529,787 2,656,206 2,789,107
30% BIT On NOI 688,380 722,802 758,936 796,862 836,732
Net Income / (Loss) after BIT 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375
7.6 Projected Cash Flow Statement

Table 12: Cash Flow Statement
Projected Cash Flow Statement

Beginning Cash 14,172,74 19,542,57
4,852,142 9,722,782
Balance 4 9
Accts. Rec.
720,000 756,000 793,800 833,490 875,165
Collections
Loan Proceeds 4,328,193
Sales & Receipts 6,480,000 6,804,000 6,480,000 7,501,410 7,876,481
Other:
Total Cash
11,528,193 7,560,000 7,273,800 8,334,900 8,751,645
Inflows
Available Cash 12,412,14 16,996,58 22,507,64 28,294,22
11,528,193
Balance 2 2 4 4
Advertising 36,000 37,800 39,690 41,675 43,758
Bank Service
- - - - -
Charges
Credit Card Fees
Delivery 18,000 18,900 19,845 20,837 21,879
Inventory
2,314,100 2,429,800 2,551,300 2,678,900 2,812,800
Purchases
Miscellaneous 24,000 25,200 26,460 27,783 29,172
Rent or Lease 162,000 170,100 178,605 187,535 196,912

Utilities &
7,200 7,560 7,938 8,335 8,752
Telephone
Other: - - - - -
Subtotal 2,561,300 2,689,360 2,823,838 2,965,065 3,113,273
Other Cash
Capital Purchases 4,114,751
Out Flows:
Subtotal 4,114,751 - - - -
Total Cash
6,676,051 2,689,360 2,823,838 2,965,065 3,113,273
Outflows
Ending Cash 14,172,74 19,542,57 25,180,95
4,852,142 9,722,782
Balance 4 9 1
7.7 Projected Balance sheet statement

Table 13: Balance Sheet Statement
Projected Balance Sheet For 5 Years

Assets
Cash & Bank 4,852,142 9,722,782 14,172,744 19,542,579 25,180,951
Accounts Receivable 720,000 756,000 793,800 833,490 875,165
Prepaid Expenses 770,001
Other Current Assets
Total Current Assets 6,342,143 10,478,782 14,966,544 20,376,069 26,056,115
Net Fixed Assets 2,843,038 2,453,825 2,064,613 1,675,400 1,286,188

Other Assets
Total Assets 9,185,180 12,932,607 17,031,156 22,051,469 27,342,303
Liabilities & Capital
Accounts Payable 4,116,406 8,649,153 13,529,028 19,326,486 25,389,928
Total Current Liabilities 4,116,406 8,649,153 13,529,028 19,326,486 25,389,928
Long-Term Notes Payable 3,462,554 2,596,916 1,731,277 865,639 (0)

Total Long-Term
3,462,554 2,596,916 1,731,277 865,639 (0)
Liabilities
Total Liabilities 7,578,960 11,246,069 15,260,305 20,192,125 25,389,928
Owner's Equity - - - -
Net Profit 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375
Total Capital 1,606,220 1,686,538 1,770,851 1,859,344 1,952,375
Total Liabilities &

9,185,180 12,932,607 17,031,156 22,051,469 27,342,303
Capital

7.8 Financial Ratio Analysis
7.8.1 Interest on Loan

Table 14: Interest on Loan

Interest 483,213 397,971 301,917 193,682 71,720
Loan Principle 672,126 757,369 853,422 961,657 1,083,619
Loan Balance 3,656,067 2,898,698 2,045,276 1,083,619 0
EMI 1,155,339 1,155,339 1,155,339 1,155,339 1,155,339
7.8.2 Break Even Point

Table 15: BEP
Unit Unit Cost

Time Unit Start Unit Price Total Fixed Costs
Increment Variable
Month - 50,000 13 4 3,344,750
BREAK EVEN X BREAK EVEN Y LABEL

432,632 5,191,584 break even unit =432632
BREAK EVEN ANALYSIS

Sales Fixed Total Cost break even unit =355095
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
-
- 100,000 200,000 300,000 400,000 500,000 600,000
Units

7.8.3 Return on Investment

Table 16: ROI
RETURN ON INVESTMENT
Service Year 1 Year 2 Year 3 Year 4 Year 5
1 Litre Bottled (1000 ml) 40% 105% 110% 116% 121%
Half litre (500 ml) 27% 70% 73% 77% 81%
Total ROI 66% 175% 183% 193% 202%
7.8.4 Net Present Value and Internal Rate of Return

Table 17: NPV & IRR
Net Present Value (NPV) 14,925,130

Internal Rate of Return (IRR) 109%
8 Final Finding and Recommendation

There is no adverse impact on the environment. However, an environment management plan is to
be cast integrally with the Quality Management System for the plant, to ensure that there is no
carelessness in management of wastes. There is a considerable improvement in the socio-
economic environment, due to generation of direct employment of 23 persons as well as indirect
employment for several more for provision of support services for the plant.
8.1 Conclusion
With rapid urbanizations and industrialization in the country, the risk of contamination of water
sources is very high. To ensure that the general public has access to safe drinking water; the
water bottling line will set up. The bottling line equipped with batteries of filters, micro filters,
Ultra filtration and Ozonation and online testing equipment renders water safe for drinking.
Currently more than half of the market is covered by Bhutan Agro Industries Limited where they
are distributing their products everywhere. Bhutan Agro being government’s project they have
big and advanced mineral water plant and they are able to capture the market. Bhutan milk and
Agro Private limited is also having its share in the market.
Therefore, under the loan ceiling of BTN 1,500,000 it’s very much difficult to purchase the
mineral water plant and the necessary miscellaneous fixed assets to start up the mineral water
production. The minimum amount required just to buy the simple mineral water plant is BTN
40,000,000 and moreover it requires huge number of skilled workers to run the plants. Therefore,
it would not be possible to penetrate the market because almost half of the market is covered by
Bhutan agro and also Multi National Company Coca-Cola's ‘Kinley’ mineral water is covering
the Bhutanese market and having tough competition of mineral water in the market.

References
 Small industries service institute. 2003. Packaged drinking water/Mineral water.
Kolkata - 35 (w. B.)
 Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA.
Department of Industry the Department of Industry, Ministry of Economic Affairs of the
Royal Government of Bhutan
 Detailed Feasibility Report on Mineral Water Project – Bhutan Report A: DEMOLA.
Department of Industry the Department of Industry, Ministry of Economic Affairs of the
Royal Government of Bhutan
 www.allibaba.com
 www.indiamart.com

Annexure
Different sources across Bhutan have been tested and they were ranked as follows:
SL. Dzongkhag Survey

Location Rank Remarks
No. Ref. No.
I Thimphu 1 Thrinleygang Excluded as advised
Rejected due to habitation near the
2 Goenchhu (Goenekha)
source
II Punakha 3 Lobesa 15
4 Koma Tshachhu 18
III Wangdue 5 Tiki Zampa 9
Phodrang
6 Rakhe Zam Rejected due to foul smell/taste
7 Basachhu Rejected due to habitation
IV Paro 8 Eusuna, Chuzom Paro Road 4
Rejected due to insufficient flow
9 Shari Village
from source
10 Nemi Zampa (Below Dzong) Rejected due to habitation
11 Below Taktshang Rejected due to low TDS
Rejected due to habitation near the
12 Jangtoena Village
source
V Samtse 13 Bhotedhara 11
14 Chengmari – Dhapper 10
Rejected due to low
15 Chengmari Village
TDS/habitation
16 Kuchidiana Rejected (river water)
Rejected due to low TDS and
17 Panidhara
habitation near the source
18 Darankhola Rejected due to low TDS
19 Hungay Village
VI Sarpang 20 Simsar Pokhari, Noon Pani 13
21 Kami Khola
22 Jigmecholing village, Surey 16 Rejected in chem. analysis
23 Box Cutting 14
24 Gelephu Tshachhu Rejected due to foul smell/taste

25 Activated Charcoal Factory
insufficient flow from source
26 Aipoly Upper Source 5
27 Aipoly Lower Source 8

S. Dzongkhag Survey
Location Rank Remarks
No. Ref. No.
VII Samdrup Rejected due to insufficient flow from
28 Ngelong
Jongkhar source
29 Ngelang Chiloo 12
30 30/1 Culvert Lamsarong 7
31 25 km N of SJ Town 3
Rejected due to insufficient flow from
32 Marthang 0
source
33 Marthang Bridge 6
34 Demola 2
35 Demola Bridge 1
VIII Chhukha 36 C Adit of Tala Power Station 17
(Source: Detailed Feasibility Report on Mineral Water Project – Bhutan Report B: EUSUNA.
Department of Industry the Department of Industry, Ministry of Economic Affairs of the Royal
Government of Bhutan)
TOTAL OPERATIONAL EXPENDITURES
Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Advertising 36,000 37,800 39,690 41,675 43,758
Delivery Expenses 18,000 18,900 19,845 20,837 21,879
Health Insurance
Inventory 2,314,100 2,429,800 2,551,300 2,678,900 2,812,800
Purchases
Miscellaneous 24,000 25,200 26,460 27,783 29,172
Rent or Lease 180,000 189,000 198,450 208,373 218,791
Utilities & 6,000 6,300 6,615 6,946 7,293
Telephone
Total Expenses 2,578,100 2,707,000 2,842,360 2,984,513 3,133,694

Misc. Fixed Assets

Sl. No. Particulars Units Cost Amount
1 Office Furniture
a Writing Table 10 3,500 35,000
b Wooden Chair 30 2,500 75,000
c File Rack 4 3,000 12,000
d Telephone 2 3,250 6,500
e Computer with Accessories 7 25,000 175,000
f Laptop 2 32,000 64,000
h Lab Instruments 1 200,000 200,000
i Fire Fighting Equipments ( set) 1 60,000 60,000
Total 627,500
2 Workers Uniforms
a Apron 25 350 8,750
b Primeway Rubber Hand Gloves 30 100 3,000
c Safty halmet 25 150 3,750
Total 15,500
Grand Total 643,000

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MINERAL

Abbreviations and Definitions

Short Form Elaboration

1 Complied by: iBEST Consultancy Services, 2017

2 Complied by: iBEST Consultancy Services, 2017

(vi) Cost Presentation and Financial Analysis:

Table 2: Project Summary

No. of Shift: Two (6 hours per shift ) per day

Working Days in Year: 320

Source of Financing Financial Institute @ 12%

Fixed Cost 4114751

Working Capital 213442

Total Investment Cost 4328193

Break Event Point (BEP) 432632

Return On Investment (ROI) 15%

Pay Back Period 2 Years and 0 Month

3 Complied by: iBEST Consultancy Services, 2017

4 Complied by: iBEST Consultancy Services, 2017

6.1 Raw Material Availability .............................................................................................................. 17

5 Complied by: iBEST Consultancy Services, 2017

1.1 Business Model Canvassing

Key resource Channels

Cost structure Revenue Streams

 Staff salary  Selling and supplying the finished

6 Complied by: iBEST Consultancy Services, 2017

2 Justification of the Project

2.1 The need for the project

2.2 Competition Analysis

 Bhutan Argo Industries Limited, Thimphu, Mountain Spring Water

7 Complied by: iBEST Consultancy Services, 2017

Figure 1: Market share of Packaged Drinking Water

Kinley Bisleri G.C.Beverage PepsiCo Other

3.1 Structure of the industry

3.2 Demand vs. Supply

8 Complied by: iBEST Consultancy Services, 2017

9 Complied by: iBEST Consultancy Services, 2017

Figure 2: Total Mineral Water Production & Supply Trend – Bhutan

3.3 Pricing & Marketing Strategies

Table 5: Cost of items

S. No. Costing Items (One Litre) Cost (Rs.)

1 Cap Cost 0.25

10 Complied by: iBEST Consultancy Services, 2017

3.4 Competitiveness of the project

3.5 SWOT ANALYSIS

The SWOT analysis of Mineral Water Production:

3.6 Special attributes desired by target customers

 High Quality Graded Mineral Water

 They would prefer an affordable price

 Ready availability and Nutritional Value of the mineral water

11 Complied by: iBEST Consultancy Services, 2017

3.7 Packaging & Transportation

3.8 Assessment of Comparative Advantage

4.1 Sources of inputs including water

12 Complied by: iBEST Consultancy Services, 2017

4.2 Comparative analysis of critical inputs/ success factor

4.3 Sources of raw Material

4.4 Assess the availability of manpower & skills

4.5 Assess the need for the skill development

13 Complied by: iBEST Consultancy Services, 2017

5.1 Choice of technology

Figure 3: Manufacturing process of Mineral water

5.2 Source of technology

 Water Treatment Plant