FEASIBILITY STUDY REPORT 2022

FEASIBILITY STUDY REPORT

FOR
SPRING WATER PURIFICATION AND BOTTLING PROJECT

PROJECT NAME: ………LONG-LIVE SPRING WATER PURIFICATION AND BOTTLING

PROJECT LOCATION: ……OROMIA REGIONAL STATE, WEST GUJI ZONE

BULEHORA WOREDA, GERBA-ANO KEBELE

PROMOTER/OWNER: …….

SEPTEMBER, 2022

ADDIS ABABA

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TABLE OF CONTENTS

I. EXECUTIVE SUMMARY……………………………………………………3

II. BACKGROUND………………………………………………………….........5

III. MARKET ANALYSIS……………………………………………………....10

IV. TECHNICAL STUDY…………………………………………………….....21

V. ORGANIZATION AND MANAGEMENT………………………………...34

VI. FINANCIAL AND ECONOMIC ANALYSIS……………………………...36

VII. ANNEXES……………………………………………………………………40

 ANNEX-I: Capital Investment Detailed Break-Down

 ANNEX-II: Direct and Indirect Production Cost Detail
 ANNEX-III: Working Capital Determination Detail
 ANNEX-IV: Loan Amortization Detail and Repayment Schedule
 ANNEX-V: Production Capacity and Projected Revenue
 ANNEX-VI: Projected Financial Statements
 ANNEX-VII: Projected Financial Ratios and Investment Parameters
 ANNEX-VIII: Pro-Forma Invoices for Full line Machineries
 ANNEX-IX: Consulting Firm’s Legal Documents

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I. EXCUTIVE SUMMARY
1.1 Description of the Project
Long-Live Spring Water Bottling is an Ethiopian owned company that registered and legally established as
a Sole-Proprietorship Company in 2010 E.C. Although the purpose of conducting this Feasibility study is
to ensure that implementation of an envisaged activity on Spring Water Bottling Project, previously the
promoter has been actively participating on several trading operations in Ethiopia, which includes: Supply of
Clean Coffee Been to the market, Construction Contracting and so on. However, by considering the current fast
and dynamic economic growth of Ethiopia especially in urban area, the firm has deeply understood and
inspired to engage in what the market necessitates for equivalent growth of manufacturing sector as well as
strongly motivated to engage in the food and beverage industry mainly by having specific focus on natural
water bottling with modern production technology and unique products branding for the market.

1.2 Amount of Financing Required

The Primary objective of Long-Live Spring Water Bottling project this feasibility study document is to
Secure ETB 65,000,000 bank credit facility for planned implementation, partially to cover cost of project’s
capital investment and partially to fulfill the working capital requirement of financial investment that in
turn enables the business to create a capacity for proper implementation of intended project.

1.3 Project Brief

Basically, the founder of the company has modern business personality who wisely working with local
Government agencies, Private Traders, Financial Service providers, etc. Thus, considering his ample
experience from the provision of different Services and trading business operations for many years in
Ethiopia, Mr. ABC is inspired to establish the envisaged spring water purification and bottling project in
Ethiopia, Specifically in Oromia Regional State, West-Guji Zone, Bulehora Woreda. With this project
feasibility study, Long-Live Water Bottling has intended to manufacture varied range of best international
quality purified drinking water of different bottle sizes (i.e., 20-Litters, 5-Ltr, 2-Ltr, 1-Ltr, 0.5-Ltr and 0.25-
Ltr) with annual production capacity of 240,000 Hectoliters at 100% utilization rate.

1.4 Market Prospect

Despite minor fluctuations in the consumption demand for purified bottled water products over the years, it
is showing an increasing trend. The untouched Ethiopian market for bottled water product doesn’t have
sufficient industry players as compared to population growth and urbanization nationwide. From the data
of preceding Years (given in later paragraphs), it can be predictable that the future demand will be
increasing, as a result production capacities is needed to be increased to meet the supply-demand gap.
Strategically, the envisage project (Long-Live Spring Water) will work on basic marketing mixes, like,
manufacturing quality products, using strategic product promotion, set competitive price and using on-time
delivery systems. Thus, considering the all facts with limited supply situation and increasing usage
demand, it is definite to conclude the envisaged company will not face market problems.

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1.5 Technical Feasibility

The company’s strategy on top of all things is to become customer focused product delivery. As one part the
business line on production of bottled water in different types and sizes as well as operating on demand is to
consolidate its good customer by making timely deliveries, hiring the best professionals and having a
competitive pricing structure. In this regard, the activities of envisaged Long-Live Water Bottling project is in
Oromia Regional State, West-Guji Zone, Bulehora Woreda, Gerba (Kebele) Town, within the vicinity where all
required infrastructure and construction developments have been availed on the project owned compound.

1.6 Financial Viability

Based on financial analysis conducted, the company’s total financial cost on the full line water bottling
investment is estimated to be ETB 86,126,356, out of which bank loan facility is expected for about ETB
65,000,000. In addition, by making a deep analysis on financial aspects, the finding shows that every financial
projection is going to be attractive. Accordingly, net profit from envisaged project implementation will be ETB
32,677,899; ETB 44,200,826; ETB 55,542,415; ETB 62,429,524; ETB 71,838,375; ETB 82,601,442; ETB
94,497,790; ETB 102,725,250; ETB 111,446,783; and ETB 120,672,102.

On the other hand, the projected cash flow of the business shows that the project would generate positive
net cash flows throughout the operation years which indicates ETB 4,381,274; ETB 45,130,237; ETB
56,471,844; ETB 67,680,363; ETB 74,497,274; ETB 84,481,173; ETB 95,442,261; ETB 107,676,159; ETB
116,412,345; ETB 125,851,205; and ETB 136,046,620; During Year-0; 1st, 2nd, 3rd, 4th; 5th; 6th; 7th; 8th; 9th
and 10th years respectively. While computing investment decision parameters based on the discounted cash
flow statement, the calculated IRR before and after Tax as well as the net present value (NPV) discounted
at 17.5% are all attractive and acceptable. Accordingly, the NPV discounted at said rate is ETB 67.23
Million; whereas, the internal rate of return (IRR) before and after tax will be 46% and 75% respectively.
The investment cost and income statement projection are used to project the pay-back period. Hence, the
project's initial investment will be fully recovered within three (3) years.

1.7 Economic Benefits

The project can create employment for 44 persons. In addition to supply of the domestic needs, the project will
generate a sum of ETB 230.75 Million in terms of tax revenue during 10 year of its operational life. The
establishment of such factory will have a foreign exchange saving effect to the country by substituting the
current imports.
1.8 Conclusions and Recommendations
During conducting this feasibility study, the rationale behind main assumptions has been proposed based
on previous trends, future estimates and current scenarios including policy frame-works. Hence, the
underlying project implementation with new production technology has reliable positive impacts on the
overall development of the country in many aspects. Besides, all assumptions and forecast reveals that the
business operation is liquid and will be capable of discharging its financial liabilities with no difficulty.
Thus, it is highly recommended and worth to finance and work with such profitable investment activities.

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II. BACKGROUND INFORMATION

2.1 INTRODUCTION

Water is one of the most important of all natural resources known on the earth. It is mainly used for drinking
purposes which come from the surface and underground water sources. According to Global Research Report
on the availability of Pure Water for human consumption, (Dec. 2021), about 97% water exists in the oceans
which are not suitable for drinking purpose and 3% is fresh water. Of the 3% fresh water 2.97% is comprised of
glaciers and ice caps and remaining little portion of 0.3% are available as a surface and ground water for human
use. High quality water is required for drinking purposes for better health. Fresh-water is already the limited
resource in many parts of the world. In the next century, it will become even more limited due to increased
population, urbanization and climate changes. The safety of drinking water might be affected by various
contaminants which include chemical, physical and microbiological contaminants which can cause serious health
problems to human. Moreover, human beings depend on water for almost every developmental activity. Because of
its importance, the pattern of human settlement throughout the history has often been determined by its availability.

Most of the diseases in developing countries are caused by the consumption of contaminated water. The people
living in developing countries lack access to clean water due to environmental pollution. The safety of drinking
water is affected by various contamination of drinking water with chemical, microbiological and anthropogenic
activities. The chemical contaminants in potable water include: some heavy metals, non-metals, disinfection by-
products, nitrate, nitrite, pesticides, and sulfate. Water quality parameters are the physical, chemical, and
biological characteristics of water in association to the set of standards. Safe water is to say that drinking water
need to be free from pathogenic organisms, toxic substances, an overdose of minerals and organic materials as
well as it should be pleasant (free from color, turbidity, odor and taste). Water quality parameters provide
important information about the health of a water body. Besides, these parameters are used to find out the
quality of water for drinking purpose.

The quality of water is the degree of its pot-ability and is determined by the level of physicochemical, microbial
and heavy metals (which include suspended and dissolved substances in the water, the degree of alkalinity (pH),
temperature, appearance in term of color, taste, odor and the presence of non-desirable micro-organisms). Water
for domestic purposes should therefore be free from these substances in order to prevent waterborne diseases.
World Health Organization (WHO) publishes guidelines for drinking water quality, which many countries use
as the basis to establish their own national standards. The guidelines represent a scientific assessment of the risks
to health from biological and chemical constituents of drinking water.

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In order to protect health, people turn to consume bottled water and spend a lot of money to buy bottled water
and drinking with the assumption that the bottled water is clean and safe than boiled water. The non-arrival of
useful water for consumers, presence of odors and unpleasant taste in the water supplied by municipal, believe
of consumers on the impact of medical and therapeutic bottled water gives a sense of height of the social level in
addition to the promotion of media for the consumers. Thus, having these facts in mind, the underlying project
promoter has inspired to establish the project entitled “Long-Live Spring Water Purification and Bottling
Factory”, which intended to produce and supply pure water with top quality standard.

2.2 BRIEF ABOUT THE COMPANY

2.2.1 Legal Foundation
The underlying investment project is Spring Water Bottling Company registered under Commercial Code
of Ethiopia and established in 2010 E.C. having the following Legal Foundation to be functional:

 Company Name: …..............Long-Live Spring Water

 Company Address: ….….....Oromia Region, West-Guji Zone, Bulehora Wor., Gerba Town
 Investment Sector: ………...Food and Beverage Industry
 Project Status: ……………..New Formation
 Project Type :……………....Spring Water Purification and Bottling Project
 Legal Formation: …………..Sole-Proprietorship Company

2.2.2 Investment Summary and Ownership

The underlying investment on Spring Water Bottling Project is registered under Commercial Code of
Ethiopia and established in 2010 E.C., legally as Sole-Proprietorship Company by an individual Ethiopian
citizen entrepreneur having registered capital of ETB 20,000,000 during licensing and securing the
investment permit. In this regard, the founder of the company, Mr. ABC is an Ethiopian business minded at
the middle age of life and educated person having modern business personality who wisely working with
local Government agencies, Private Traders, Financial Service providers, etc.

Thus, considering his ample experience from the provision of different Services and trading business operations
for many years in Ethiopia, Mr. ABC is inspired to establish the envisaged spring water purification and
bottling project in Ethiopia, Specifically in Oromia Regional State, West-Guji Zone, Bulehora Woreda. With
this project feasibility study, Long-Live Water Bottling has intended to manufacture varied range of best

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international quality purified drinking water of different bottle sizes (i.e., 20-Litters, 5-Ltr, 2-Ltr, 1-Ltr, 0.5-Ltr
and 0.25-Ltr) with annual production capacity of 240,000 Hectoliters at 100% utilization rate.

2.3 VISION, MISSION AND STRATEGY

2.3.1 Mission Statement

The underlying project mission is to provide high quality, healthy and affordable drinking water to our
customers. It brings natural bottled mineral water, rich in minerals that benefit the body and increase vitality
having trust and mutual respect to all the relationships by continually improving the quality and process of its
product. It focuses on natural well-being and encourages a life style that is environmentally friendly manner and
to ensure the delivery of clients‟ need centric focused purified water that enhances the quality of healthy
life among the society through:
 Strategic Business Development and Research Works
 Attracting and retaining skilled employees
 Creating and maintaining partnership on the basis of mutual benefits.
 Taking care of natural environment

2.3.2 Project Vision

Long-Live Water Bottling project aimed at becoming the leading natural mineral water producers in Ethiopia
and the whole of Africa. Long-Live Spring Water envisions expanding regionally in the field of beverage
industry and developing a strong base of key customers. By establishing intended Purified Water Bottling
project, it has strategically planned to become a leading company among top rated industry players in the market.

2.3.3 Strategy in Place

The intension of „Long-Live Spring Water Bottling is to offer the highest quality product to all of its
customers, by realizing the quality, authenticity and tradition associated to insure great quality of entire
product and services. To achieve the ultimate success, it has to be resolved upon a set of strategies and
executing these strategies by translating directly into the ability to serve the company‟s vision and mission.

Furthermore, it is believed that company‟s success can be attained through a team of professionals who
have extensive work experience in the industry. Thus, as planned to be the leading firm of high class
standard, it is strategically envisioned to:

 Produce leading quality items with 100% Environmentally-Friendly nature

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 Produce quality purified bottled water using company’s primary sources, which enables it to
undertake sustained production activities with cost effective manner.
 Long-Live Spring Water aims to revolutionize and modernize the understanding of making
water products as best as ever before by other competitors’.
 The project will implement quality management system to satisfy its customers, meet demands
and produce great quality items for all round sectors.
 Develop echo-friendly working environment with communities residing centrally as well as at
regional states in Ethiopia.

2.4 PROJECT OBJECTIVES

Having this Feasibility Study, the Primary objective of envisaged company is to Secure ETB 65,000,000 bank
credit facility for activities related to implementation of intended water bottling project, partially to cover
capital investment cost and partially to fulfill the working capital need upon start-up activities. Hence, by
securing such financing, it creates a capacity to fully engage on manufacturing process specifically:

 To actively operate on the production of items with high quality at commercial scale.
 To embark on a sustainable plan of products for the national and international market,
 To become a leader among its rivals possessing similar products
 To take a part in sector development through being import substitution role player of all the time
 To generate sustainable income for the company itself, which potentially to be used for further
investment activities

2.5 KEY SUCESSESS FACTORS

2.5.1 Macro level Successes
 Access to credit provision at comparative interest rate as compared to the RoI.
 Attractive investment policy and other packages for private sector development;
 Continuous increment in household income and associated increase of expenditure patterns;
 Availability of the required skilled man-power and other resources to run every business.

2.5.2 Sector Level key Successes

 Availability of the required infrastructure;
 Availability of market for the intended Purified Drinking Water Bottling Project;
 Government incentive and encouragement for manufacturing sector development.
2.5.3 Firm level successes factors
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 Strategic business areas of special focuses for industry type businesses where others are
relatively lesser available;
 Well trained and motivated personnel
 Long years of pertinent work experience of company promoters;
 Well established business management capability with plenty of good-will as well as
social acceptances that the promoters earned so far.

2.6 PRODUCTS DESCRIPTION AND APPLICATION

According to Quality and Standard Authority of Ethiopia (QSAE), industrially processed and bottled
water can be classified into two major groups: bottled drinking water (ES 597:2001) and mineral water
(ES 621:2001). The former is further classified into carbonated “sparkling” natural water and non-
carbonated “still” natural water. If water has been made after possible treatment, effervescent by addition
of carbon dioxide then it is called carbonated natural water. Non-carbonated water is by nature and after
possible treatment does not contain free CO2, in excess of the amount necessary to keep dissolved the
hydrogen carbonates salts that are present in the water.

As stated above, Long-Live Spring Water Bottling project considered the non-carbonated “still” natural
water produces with wide-range of products packaging/bottling size and labeling standards on 20-Litters
(5-Galon), 5-Ltr, 2-Ltr, 1-Ltr, 0.5-Ltr and 0.25-Ltr) with annual production capacity of 240,000 Hectoliters
at 100% utilization rate.

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