READY-TO-SERVE BEVERAGES

1.0 INTRODUCTION
A variety of soft drinks are presently available in the market but majority of them are
synthetic carbonated drinks. But gradually there is a distinct shift towards fruit juice based
beverages and many brands like Frooty, Maaza, Treetop, Volfruit etc. are available in the
market. These established brands have created awareness in the mind of consumers and a
new unit can encash on this trend.

2.0 PRODUCT
2.1 Applications
Beverages are very popular across the country and people from all age groups drink either
hot or cold beverages regularly. Aerated soft drinks, still beverages made from fruit juice/pulp
and soda water are the cold drinks. Fruit juice based beverages can be manufactured in
many preferred locations like HP, Uttaranchal, UP, the North-East region, Karnataka,
Maharashtra and so on.

2.2 Availability of Technology & Compliances

CFTRI, Mysore, has developed the process know-how. Compliance under the FPO & PFA Act
is compulsory.

3.0 MARKET POTENTIAL

3.1 Demand and Supply
Many established brands as stated above have created awareness amongst the consumers and
many of them have started switching over to fruit juice based beverages from the aerated
beverages. Large companies and brands are popular in urban areas.

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 3.2 Marketing Strategy
Established brands would need quite some time to penetrate the vast and scattered market.
This activity can be started in towns and small cities on a small scale so that products
become price competitive. During winter, the demand would go down but otherwise, rest of
the 8-9 months would witness steady demand.

4.0 MANUFACTURING PROCESS

The process of manufacture is simple and standardised. Preserved fruit pulps, sugar syrup,
citric acid, preservatives, colours and flavours are blended according to the formulation,
homogenised and bottled. The bottles are processed in retorts and cooled.

5.0 CAPITAL INPUTS

5.1 Land & Building
A readymade shed of around 100 sq.mtrs. with adjacent washing area can accommodate the
machines. Cost of such a shed is assumed to be Rs. 2.50 lacs.

5.2 Machinery
Annual rated capacity of 2.5 lac ltrs with around 10-12 hours working everyday and 300
working days world require following machines:
(Rs. in lacs)
Particulars Qty Amount
Homogeniser (200 kgs Cap) 1 0.75
SS Steam-jacketted Kettle 1 0.65
Bottle Washing & Filling Machine 1 0.60
Retort 1 0.75
Crown Corking Machine 2 0.30
Mixing Tanks 4 0.40
Baby Boiler (100 kgs Cap) 1 0.80
Total 4.25

5.3 Miscellaneous Assets

Other support assets like SS vessels, fruit-crates, weighing scale, working tables etc. would
cost around Rs. 1.00 lac.

5.4 Utilities
Power requirement shall be 15 kW whereas LDO shall be needed for boiler. Water required
for washing of fruits and potable and sanitation purposes shall be around 15,000 ltrs. every
day.

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 5.5 Raw and Packing Materials
The all-important raw material shall be good quality preserved fruit pulp of different fruits
for which prior arrangements are advisable. Other items like sugar, citric acid, preservatives,
colours, flavours etc. shall be available locally. Good quality food grade plastic bottles and
crates shall be the packing materials.

6.0 MANPOWER REQUIREMENTS

Particulars No Monthly Total Monthly
Salary (Rs.) Salary (Rs.)
Skilled Workers 2 2,500 5,000
Unskilled Workers 1 1,750 1,750
Helpers 5 1,500 7,500
Salesman 1 2,500 2,500
Total 16,750

7.0 TENTATIVE IMPLEMENTATION SCHEDULE

Activity Period (in months)
Application and sanction of loan 2
Site selection and commencement of civil work 1
Completion of civil work and placement of
orders for machinery 4
Erection, installation and trial runs 1

8.0 DETAILS OF THE PROPOSED PROJECT

8.1 Land and Building
A readymade shed with adjoining washing area would cost Rs. 2.50 lacs as stated before.

8.2 Machinery
Total cost of machinery is estimated to be Rs.4.25 lacs, as explained earlier.

8.3 Miscellaneous Assets

A provision of Rs. 1 lac would take care of other supporting assets.

8.4 Preliminary and Pre-Operative Expenses

An amount of Rs. 1.50 lacs would be adequate towards pre-production expenses.

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 8.5 Working Capital Requirement
At 60% capacity utilisation in the first year, the working capital needs would be as under:
(Rs. in lacs)
Particulars Period Margin Total Bank Promoters
Stock of Raw and ½ Month 30% 1.40 1.00 0.40
Packing Materials
Stock of Finished Goods ½ Month 25% 2.00 1.50 0.50
Receivables ½ Month 25% 2.50 1.90 0.60
Working Expenses 1 Month 100% 0.45 -- 0.45
Total 6.35 4.40 1.95

8.6 Cost of the Project and Means of Financing (Rs. in lacs)

Items Amount
Land and Building 2.50
Plant and Machinery 4.25
Miscellaneous Assets 1.00
Preliminary and Pre-operative Expenses 1.50
Contingencies @ 10% on building
and machinery 0.70
Working Capital Margin 1.95
Total 11.90
Means of Finance
Promoter's Contribution 3.50
Term Loan from Bank/FI 8.40
Total 11.90
Debt Equity Ratio 2.40 : 1
Promoters Contribution 29%

Financial assistance in the form of grant is available from the Ministry of Food Processing
Industries, Govt. of India, towards expenditure on technical civil works and plant and
machinery for eligible projects subject to certain terms and conditions.

9.0 PROFITABILITY CALCULATIONS

9.1 Production Capacity and Build-up
As against the rated capacity of 2.50 lacs ltrs. every year, actual utilisation in the first year
is assumed to be 60% and thereafter it is limited to 75%.

9.2 Sales Revenue at 100%

Considering selling price of Rs. 40/ltr; the annual sale at 100% would be Rs. 100.00 lacs.

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9.3 Raw and Packing Materials Required at 100%
(Rs. in lacs)
Product Qty Rate/Ton Value
(Tonnes) (Rs.)
Assorted Fruit Pulp 70 40,000 28.00
Sugar, preservatives,
flavours, colours etc. -- -- 12.00
Packing Material @ Rs.7/Ltr. -- -- 17.50
Total 57.50

9.4 Utilities
Annual cost of utilities at 100% capacity utilisation would be Rs.4.50 lacs .

9.5 Selling Expenses

A provision of 22.5% of sales every year would take care of selling commission, transportation
and advertisement in local media or hoarding etc.

9.6 Interest
Interest on term loan of Rs.11.90 lacs is calculated @ 12% per annum assuming complete
repayment in 4 years including a moratorium period of 1 year whereas on working capital
from bank, it is calculated @ 14% per annum.

9.7 Depreciation
It is calculated on WDV basis @ 10% on building and 20% on machinery and miscellaneous
assets.

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10.0 PROJECTED PROFITABILITY
(Rs. in lacs)
No Particulars 1st Year 2nd Year
A Installed Capacity ---- 2.5 lac ltrs ----
Capacity Utilisation 60% 75%
Sales Realisation 60.00 75.00
B. Cost of Production
Raw and Packing Materials 34.50 43.10
Utilities 2.70 3.40
Salaries 2.01 2.35
Stores and Spares 0.36 0.48
Repairs and Maintenance 0.42 0.54
Selling Expenses @ 22.5% 13.50 15.90
Administrative Expenses 0.72 0.90
Total 54.21 66.67
C. Profit Before Interest & Depreciation 5.73 8.33
Interest on Term Loan 1.44 1.07
Interest on Working Capital 0.62 0.77
Depreciation 1.30 1.07
Profit Before Tax 2.37 5.42
Income-tax @ 20% 0.47 1.08
Profit After Tax 1.90 4.34
Cash Accrual 3.20 5.41
Repayment of Term Loan -- 4.00

11.0 BREAK-EVEN POINT ANALYSIS (Rs. in lacs)

No. Particulars Amount
A Sales 75.00
B Variable Cost
Raw and Packing Materials 43.10
Utilities (70%) 1.83
Salaries (70%) 1.41
Stores and Spares 0.36
Selling Expenses (70%) 11.20
Administrative Expenses (50%) 0.45
Interest on working capital 0.77 59.12
C Contribution 15.88
D Fixed Cost 9.87
E Break Even Point (D ÷ C) 62%

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12.0 [A] LEVERAGES
Financial leverage:
= EBIT/EBT
= 7.25 ÷ 5.42
= 1.34

Operating Leverage
= Contribution/EBT
= 15.88 ÷ 5.42
= 2.92

Degree of Total Leverage

= FL/OL
= 1.34 ÷ 2.92
= 0.46

[B] Debt Service Coverage Ratio

(Rs. in lacs)
Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr
Cash Accruals 3.20 5.41 5.79 6.17
Interest on Term Loan 1.44 1.07 0.58 0.34
Total (A) 4.64 6.48 6.37 6.51
Interest on Term Loan 1.44 1.07 0.58 0.34
Repayment of Term Loan -- 3.90 4.00 4.00
Total (B) 1.44 4.97 4.58 4.34
DSCR (A) ÷ (B) 3.56 1.39 1.59 1.78
Average DSCR -------------------------- 1.89 ----------------------

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 [C] Internal Rate of Return (IRR)
Cost of the project is Rs. 11.90 lacs.
(Rs. in lacs)
Year Cash 16% 18% 20% 24% 28% 32%
Accruals
1 3.20 2.76 2.71 2.67 2.58 2.50 2.43
2 5.41 4.02 3.88 3.75 3.52 3.30 3.11
3 5.79 3.71 3.53 3.35 3.03 2.76 2.52
4 6.17 3.41 3.18 2.97 2.61 2.30 2.03
5 6.54 3.11 2.86 2.63 2.23 1.90 1.64
27.11 17.01 16.16 15.37 13.97 12.76 11.73

The IRR is around 30%.

Some of the machinery suppliers are

1. Raylons Metal Works, PB No 17426, JB Nagar, Andheri (E), Mumbai 400 059
2. Techno equipments, 31 Parekh Street, Girgaon, Mumbai 400 004
3. Kalpana Boilers, 18 Kailash Park, LBS Marg, Ghatkopar (W), Mumbai 400 036
4. Europack Machines (I) Pvt Ltd, 52 Bindal Estate, Sakinaka, Mumbai 400 072
Tel. No.: 28526477, 28502151
5. Container Industries, C-299, Ghatkopar Indl Estate, 72 LBS Marg, Ghatkopar,
Mumbai 400 080

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