Investment Opportunity in Dried Fruits in the Valley of the S

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Investment Opportunity in Dried Fruits in the
Valley of the São Francisco River
INTEGRATED SUSTAINABLE BUSINESS PROJECT
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Project Team

• PRESIDENT OF THE REPUBLIC
  MINISTER OF NATIONAL INTEGRATION
• Luiz Inácio Lula da Silva
  Geddel Vieira Lima
• CODEVASF DIRECTORY
• President Orlando Cezar da Costa Castro
• Cabinet Chief Manoel Geraldo Dayrell
• Director of the area of Integrated Development
  and Infra-Structure Clementino Souza Coelho
• Executive Secretary José Eduardo Borella
• Director of the area of Irrigation Companies
  Management Raimundo Deusdará Filho
• Executive Secretary Frederico Calazans Machado
• Director of the Area of Hydrografic Basins
  Revitalization Jonas Paulo de Oliveira Neres

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Agenda

• Introduction
• Business Model
• Profitability Analysis
• Irrigation Projects (CODEVASF)

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INTRODUCTION

• Project Description
• The project is a governmental initiative, aiming
  to attract investments to the Valley of the São
  Francisco River (web pagehttp//www.fundace.org.b
  r/pins).
• PENSA
• Agribusiness Intelligence Center. PENSA
  researchers are responsible for the business
  models proposition, economic and marketing
  analysis and for interacting with potential
  investors tailoring the analysis to their
  particular needs (web page http//www.pensa.org.b
  r).
• CODEVASF
• São Francisco and Parnaíba Development Company,
  which the mission is to develop economically and
  socially the Valley of the São Francisco and
  Parnaíba Rivers (web page http//www.codevasf.go
  v.br).

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Dried Fruit Global Exports
Source FAO
From 2000 to 2004, the dried fruit exports growth
was 27, corresponding to an increase of over 79
thousand tons.
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Why investing in Dried Fruits in the Valley of
the São Francisco River?

• Shorter production cycles
• Reduced problems with crop plagues and diseases
• High yields with irrigation
• São Francisco River has a high quality water for
  irrigation
• Climate conditions favor product standardization
• Land availability
• Growing demand

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Introductory Concepts on Dried Fruits

• Product Dried fruit or Dehydrated. Fruit with
  reduced content of water
• Process Drying
• Partial dehydration of a whole mature fruit or
  pieces of it, towards 15 to 3 of humidity.
• This process may be undertaken with the use of
  sun light, gas, wood or electricity.

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Dehydrated Fruit
There is a need for a Dehydrating plant.
Image Fruit arriving at the plant.
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Dehydrated Fruit

• Washing and Peeling

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Dehydrated Fruit

• Cutting

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Dehydrated Fruit

• Dehydration

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Drying Process

• Dehydration using specific equipment. It may be
  used an osmotic process.

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Dried Fruit

• Packing

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Drying Process

• Using sun light for fruit drying.

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Drying Process

• Liofilization

FIGURE Liofilization equipments
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Raisings

• There is a need for a processing plant
• Process
• Cutting the steam
• Washing
• Drying
• Adding Oil

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Dehydration Advantages

• For the product
• It limits microorganisms growth
• It limits darkening
• It limits perishing

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Dehydration Advantages

• For the grower
• It adds value to products that would be discarded
  otherwise
• It decreases transportation costs
• It allows business diversification
• It expands stocking possibilities.

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Dehydration Advantages

• For the retailer
• New and differentiated product
• It is a healthy product
• It has a longer shelf life.

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Market

• Functional food (teas)
• Cosmetics (soaps)
• Food
• Soups
• Bakery
• Candies
• Cereal bars
• Breakfast

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Raisins

• Other countries
• Raisins, table grapes, vinegar, wine
• Bakery imports 1,500 ton/year
• Brazil imports 6,000 ton/year

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Business Model

• Strategies for the Anchor Company
• Vertically Integrated Agricultural Production
• Vertically Coordinated Agricultural Production

C O N S U M E R S
Own Production
Retail
Anchor Company
Foodservice
Vertically coordinated growers
Industries
Public Irrigation Project with Private Management
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Players Role Definition
Fruit Grower Anchor Company (processing plant) Buyers
Fruit production to the anchor company as contracted Use of fruits out of quality standards for in natura exports Buying fruits according to established contract Responsible for the fruit transport from the grower to the plant Responsible for dehydrating and processing the fruit Contracts for buying the dried fruits Aid for maintaining dried fruit standards
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Different Alternatives for Implementing the
Business Model

• Different strategies for the anchor company to
  obtain raw material
• Own discarded fruits
• Own discarded fruits Growers discarded fruits
• Diversification of supplying sources
• Vertically integrated grape production for
  raisins
• Strategies related to implement the processing
  utilities
• Dehydrated fruit (with or without the osmotic
  drying process)
• Fruit Liofilization (with or without pulp
  production in cubs)
• Raisins

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Different Alternatives for Implementing the
Business Model

• Strategies for selling the dried fruits
• Selling in bulks for food industry or
  wholesaling
• Selling in bulks for another dehydration fruit
  firm
• Selling in ready-to-eat convenient packs (with or
  without private branding)

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Raisins

• Grapes used for drying purposes
• Discarded grapes from exportation
• For an anchor company to produce 10 ton per day
  of grapes
• 10 discarded 1 ton/day
• Efficiency 25 250 kg of raisins / day
• Minimum production suggested for implementing a
  plant is 100 tons/year.

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Business Model Assumptions

• Processing Capacity 6,000 kg/day
• Annual working days 300
• Annual processing capacity 1,800,000.00
• Annual production 324,000.00
• Fruits Mango, Raisings, Banana, and Guava
• Average efficiency rate is 18
• Fruit price Agrianual price list
• By products value not included (animal food and
  organic natural fertilizing)
• Raisins are not dried at sun light
• Sales in bulks and in packages
• Gas energy for drying process

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Benefits for the Social and Economic Development

• Tax generation
• For 20 years R 4,318,444.65
• Job generation
• Processing plant 60 direct jobs
• Agricultural production 1510 direct jobs
• Other benefits
• Business diversification for the region
• Utilization of discarded fruits from exporting
• Introduction of new technologies to the region

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Raw Material Composition and Fruit Costs
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Operation Plan
Operations Plan Operations Plan Operations Plan Operations Plan Operations Plan
Yields Yields      
Process efficiency () Process efficiency ()   18.00
annual production annual production   324,000.00  
Operation plan Product Destination () Unit Volume Quantity with packaging
Product description Product Destination () kg Volume Quantity with packaging
Mango (20Kg) 25.00 20,000 81,000.00 4,050.00
Banana (20Kg) 25.00 20,000 81,000.00 4,050.00
Raisins (20Kg) 20.00 20,000 64,800.00 3,240.00
Guava (20kg) 8.00 20,000 25,920.00 1,296.00
Mango (0,05kg) 7.00 0.050 22,680.00 453,600.00
Banana (0,05kg) 7.00 0.050 22,680.00 453,600.00
Raisins (0,50 Kg) 5.00 0.050 16,200.00 324,000.00
Guava (0,05kg) 3.00 0.050 9,720.00 194,400.00
TOTAL 100.00   324,000.00  
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Investment

ITEM Facilities Equipments Working Capital TOTAL
Start up investment (R) 1,766,178.75 1,194,879.34 273,652.37 3,234,710.46
Credit limit fund raising () 80.00 80.00 100.00
Own Resources (R) 353,235.75 238,975.87 - 592,211.62
Loan (R) 1,412,943.00 955,903.47 273,652.37 2,642,498.84
Grace period (years) 0.50 0.50 0.50  
Amortization length (years) 7.50 7.50 7.50  
Total length (year) 8.00 8.00 8.00  
Rebate () 50.00 50.00 50.00  
Total Interest rate () 9.75 9.75 9.75  
Monthly interest rate 1.0077830 1.0077830 1.0077830  
Interest rate according to payment frequency 1.0077830 1.0077830 1.0077830
Number of payments 90 90 90  
Loan payments (R) (22,935.66) (15,516.75) (4,442.07) (42,894.48)
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Cost Analysis
Total Production Cost Total Production Cost Total Production Cost
COST TOTAL (R) Average cost (R/kg)
Operating costs 2,665,204.13 8.23
Fixed costs 1,018,215.09 3.14
Production Cost 3,683,419.23 11.37
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Annual Revenues

Packaging Volume Selling Price FOB (R/unity) Total (R) Cost(R/unity) Profit(R/unity)
Mango (20Kg) 4,050.00 200.00 810,000.00 167.31 32.69
Banana (20Kg) 4,050.00 180.00 729,000.00 150.58 29.42
Raisings (20Kg) 3,240.00 160.00 518,400.00 133.85 26.15
Guava (20kg) 1,296.00 200.00 259,200.00 167.31 32.69
Mango (0,05kg) 453,600.00 1.60 725,760.00 1.34 0.26
Banana (0,05kg) 453,600.00 1.60 725,760.00 1.34 0.26
Raisins (0,50 Kg) 324,000,00 1.00 324,000.00 0.84 0.16
Guava (0,05kg) 194,400.00 1.60 311,040.00 1.34 0.26
  Total Revenue (R) Total Revenue (R) 4,403,160.00    
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Financial Analysis
Financial Index  
IRR 21.89
Pay pack 4.01 years
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Financial Analysis
Cash Flow
Source PENSA Petrolina Juazeiro region is
chosen for the financial analysis.
Exchange Rate 1 US R 1.85
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Responsible Team

• CODEVASF
• Director of the area of Integrated Development
  and Infra-Structure
• Clementino de Souza Coelho
• Board Assistant of the area of Integrated
  Development and Infra-Structure
• Alvane Ribeiro Soares
• First Secretary of the area of Integrated
  Development and Infra-Structure
• Guilherme Almeida Gonçalves de Oliveira
• PENSA
• Coordinator Prof. Dr. Marcos Fava Neves
• Executive Manager of the Project Luciano Thomé e
  Castro
• Executive Manager of the Project Ricardo Messias
  Rossi
• Executive Assistant of the Project Vinicius
  Mazza da Silva
• Executive Assistant of the Project Marina
  Darahem Mafud
• Technical Team
• Responsible Researcher Eduardo Eugênio Spers
• Contributor Gabriela Fernandes Begiato

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INTEGRATED AND SUSTAINABLE AGRIBUSINESS PROJECTS
For further Information E-mail
pins_at_fundace.org.br Mail Address Av. Pres.
Vargas, 2001- Conj. 143/144, Jardim
AméricaRibeirão Preto - SP - CEP
14.020-260Tel. [phone]