Sample Business Plan: Fruit Juice Factory in Nigeria

In this sample business plan we are going to examine the viability and profitability of a fruit juice production factory in Nigeria. What are the opportunities for investors and new entrants into this business and what are the likely challenges anyone investing into this venture likely face. This as well as a breakdown on the startup costs and a sample financial projection for the first year is explored in this article.

Introduction: What is a Fruit Juice Factory?

A fruit juice factory is a business venture that specializes in extracting juice from natural fruits harvested from farms, processing and packaging them into drinkable beverages for consumer use. This venture unlike many other beverage factories depend almost totally on naturally existing raw materials and minimal chemical additives but it must contend with low shelf life of its products and rising cost of doing business. Among other factors is huge capital outlay required for setting up a production plant in Nigeria.

What Market Opportunities Exist for Fruit Juice Factories in Nigeria?

Nigeria has a large consumer market for beverages. At least 120 million people consume not less than 1 liter of non-alcoholic beverages per week (carbonated fizzy drinks, Choco drinks, kunu, zobo, tea, coffee and other flavor colored drinks). That is about 6.2 billion liters of beverages of which fruit juices account for 550 million liters and local factories produce a mere 135 million liters per annum.

Roughly 25% of fruit juice locally consumed is produced by local factories while 75% is imported (statistics provided by the Raw Material and Research Development Council). This figure is conservative and is limited to only the formal sector.

The average price of fruit juice beverage per liter is 300 naira at retail value which makes this market to be worth at least 166 billion naira in size excluding informal fruit juice producers. The number of local players in this market is very limited due to high entry requirement. The main competitors combined control less than 20% of the entire market which means if anyone with the resources to mass produce affordably and distribute efficiently such a person can achieve monopoly status within 5 years.

Some Fruit Juice Market Opportunities at a glance

• Raw materials for fruit juice production in Nigeria is very cheap and in abundant supply
• Key market regions are within reach of raw material sources which means factories can be within close reach of both raw material sources and target customers which is good for operating costs
• Market demand is easier to estimate and forecast compared to most other finished goods production ventures in Nigeria
• There is limited product differentiation among existing players with the exception of Chivita that easily stands out with its range of products

What is the Demand Level of Fruit Juice like in Nigeria?

The yearly demand of 550 million liters for fruit juice in Nigeria by at least 22 million consumers is driven by several factors;

• A lot of people spend huge amount of money yearly hosting different events such as; conventions, workshops, seminars, parties, wedding receptions, anniversary get together among other social gatherings. Fruit juices feature high on the list of  
• Increasing awareness about the harmful effects of fizzy drinks on health and body weight has led to a sudden increase in demand for fruit juices which are the more expensive option but for people conscious about weight loss, diabetes, obesity and other similar ailments
• Growing demand by parents for school feeding services. Many private schools serve lunch to their pupils and fruit juices feature prominently in their menu
• Ready source of refreshment by busy corporate employees especially during lunch breaks

As well as other social and economic factors not explored here but available on request by email: paulonwueme@gmail.com

What are the Present and Future Trends of this business?

The future of the fruit juice market in Nigeria is guaranteed to keep rising as more individuals and groups acquire increased discretionary income. Policy direction of the Nigerian government is in support of home grown feeding solutions, Nigerian consumers are also becoming more receptive to made in Nigeria products as imported alternatives become more expensive for them. 

What are some Challenges of Setting up a Fruit Juice Factory in Nigeria?

There are 12 major challenges with running a fruit juice factory in Nigeria. I will only outline 5 in this blog posts as follows;

• Stiff competition. This makes adjusting prices upwards very difficult even when it is necessary.
• Low profit margin due to rising operating costs but limited price control from producers
• Brand loyalty is hard to achieve in a market where there are several substitutes of equal quality competing at similar price ranges
• Distribution challenges such as high costs and delays to other market regions are common due to poor road transport infrastructure
• Consumers have control over pricing in this market. A slight increase in prices will be met with protest buying from consumers who will purchase the cheaper alternative

How Profitable is a Fruit Juice Factory in Nigeria?

The fruit juice factory is a profitable business venture if it is done on a large scale involving production of at least 200,000 of liters daily with an efficient distribution and logistics system in place. At medium scale, it can be very tough running such a business profitably in Nigeria especially if you are unable to determine your own distribution and logistics system. So investing in this business is a long term project more suitable for large scale investors. It is even more profitable if you own your raw material source i.e fruit plantation

How much does it Cost to Setup a Fruit Juice Factory in Nigeria?

A minimum of 822 million naira is required to establish a 100,000 liter per day processing factory with delivery vans, production line, depots, factory building, 1.5 year running expenses, marketing budget and other operational set up costs. This is a business that cannot be reasonably run on a small scale or medium scale given the harsh operating environment.

Startup Costs in Naira
Raw materials/Inventory	30,000,000
Factory building and offices	120,000,000
Production line	230,000,000
Logistics Vans and Trucks	93,000,000
Warehousing, storage and depot setup	72,000,000
Other Vehicles and equipment	60,000,000
Office supplies	9,600,000
Office furniture, interior decorations, appliances and gadgets	3,800,000
ICT (SaaS, PCs, telecoms, CCTV system, ERM, projectors etc)	5,600,000
Generating set	15,000,000
Contingency	61,000,000
Miscellaneous	13,000,000
Working capital	60,000,000
6 months salaries	28,800,000
Licensing fees, consultancy, dues and registration	12,000,000
Marketing	9,000,000
Total	822,800,000

What is the Return on Investment from a Fruit Juice Factory?

An investment of 900 million assuming the factory can achieve yearly sales of 2,700,000,000 based on 60,000 liter daily sales for 300 days in a year at an assumed factory price of 150 naira per liter and 5% markup should yield 135 million naira in net profit in the first year. That means ROI is 15% and payback period is 6 to 7 years.  

Are you interested in setting up a fruit juice factory in Nigeria and need a bankable business plan written for you? Give me a call: 0803 206 4106 or email me on: paulonwueme@gmail.com to have one prepared for you.

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