engineering economy studies on the production of non-alcoholic beverages from some tropical crops

7/29/2019 Engineering Economy Studies on the Production of Non-Alcoholic Beverages From Some Tropical Crops

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P e r g a m o nPlh S0166-4972(97)00045-X

T e c h n o v a t i o n , 1 7 ( 1 1 /1 2 ) ( 1 9 9 7 ) 7 1 5 - 7 2 1 1 9 9 7 E l s e v i e r S c i e n c e L td

A ll f i g h t s r e s e r v e d . P r in t e d i n G r e a t B r i t a in0 1 6 6 - 4 9 7 2 / 9 7 $ 1 7 . 0 0 + 0 . 0 0

E n g in e e r in g e c o n o m y s t u d i e s o n t h ep r o d u c t io n o f n o n - a lc o h o l icb e v e r a g e s f r o m s o m e t r o p i c a l

c r o p sM . O . I l o r i a n d I . A . I r e f i nT e c h n o l o g y P l a n n i n g & D e v e l o p m e n t U n i t , O b a f e m i A w o l o w o U n i v e r s i t y , I l e - I f e , N i g e r i a

A . A . A d e n i y iInternat ional Breweries plc , I lesa, Nigeria

A b s t r a c tAn e ng ine e r ing e c onom ic a s s e s sm e n t w as c ar r i e d ou t on the p r oduc t ion o fnon-a lcohol ic beverages fro m some tropical crops (breadfruit , potato ,p lan ta in a nd s w e e t c as s av a) . The p r oduc t ion had e ar l i e r be e n e s tab l is he d ina prev ious s tudy in our laboratory .

A s m a l l - sc a le p r oduc t ion p lan t w as p r opos e d fo r the c om m e r c ia lexploi ta t ion o f the research resul ts . The fac i l i t ies fo r the prod uct ionte c hno logy w e r e ide n ti f ie d and the i r c os t e s tim a te s w e r e ob ta ine d f r ome qu ipm e n t f abr i c a to r s an d s upp l ie r s. The e c onom ic s tudy s how e d pos i t i v e ne tp r e s e n t v a lue s (N PV) a t 75% and 100% c apac i t y u t i l i s a t ion . Th i s i nd ic a te sthat the research resul t may lea d to a successfu l innova t ion i f appropr ia tefund ing , m ana ge m e n t and bus ine s s s tr a t e gy a r e e m p loy e d fo r i t s e xp lo i ta t ion . 1997 Elsev ier Sc ience Ltd . Al l r ights reserved.

1 . I N T R O D U C T I O NBeverages , e spec ia l ly bee r and non-a l cohol i c d r inks ,a re consumed in l a rge quant i t i e s i n N ige r i a . Thecount ry re l i ed on the impor t a t ion of ba r l ey ma l t fo rbeve rage produc t ion pr io r t o the 1986 s t ruc tura la d j u s tm e n t p r o g r a m m e ( S A P ) , w h i c h p l a c e d a b a n o nth i s impor t a t ion and forced the beve rage indus t ry tolook inward for a l t e rna t ive raw mate r i a l s . A t p resen tthe beve rage indus t ry , i nc lud ing the brewer i e s , uses

sorghum (ma l t ed and unmal t ed) and/or ma ize a s100% subs t i t u t e fo r beve rag e produc t ion ( I lo r i, 1991) .O the r c rops w hich a re cheape r sources of ca rbo-hydra t e such a s b readf ru i t , p l an ta in , po ta to and swee tc a s s a v a were used a s pa r t i a l subs t i t u t e s fo r ma l t edsorghum in the produc t ion of beve rages ( I lo r i and I re-f in , 1996) . The SSV3 sorghum va r i e ty , acc l a imed tobe m ost su i t ab le for beve rag e produc t ion ( I lo r i, 1991) ,w a s u se d a s a so u r c e o f e n d o g e n o u s e n z y m e s f o r b e v -e rage produc t ion .

TechnMlionVd. 1/NoM]/12 715


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M .O . I l o r i e t a L

T h e y i e l d s o f m a l t d r i n k s a m p l e s w e r e s i g n i f ic a n t l y( p < 0 . 0 5 ) l o w e r t h a n t h a t o f th e c o m m e r c i a l s a m p l eu s e d a s a r e f e r e n c e . H o w e v e r , t h e o r i g i n a l g r a v i t y ,t o t a l s u g a r a n d v i s c o s i t i e s o f t h e c o m m e r c i a l d r i n kw e r e t h e s a m e a s t h o s e o f t h e p o t a t o - a n d c a s s a v a -b a s e d s a m p l e s , a n d l o w e r th a n t h o s e o f b r e a d f r u i t -a n d p l a n t a i n - b a s e d d r i n k s . S i m i l a r l y , s e n s o r y e v a l u -a t i o n s h o w e d n o s i g n i f i c a n t d i f f e r e n c e b e t w e e n t h el a b o r a t o r y m a l t s a m p l e s ( p o t a t o - a n d p l a n t a i n - b a s e dd r i n k s ) a n d t h e c o m m e r c i a l m a l t d r i n k i n t e r m s o ff l a v o u r . H o w e v e r , t h e r a w f l a v o u r s o f b r e a d f r u i t a n dc a s s a v a w e r e s l i g h t ly n o t i c e d i n t h e i r p r o d u c ts . A l l t h es a m p l e s w e r e a d j u d g e d a c c e p t a b l e i n t e r m s o f o v e r a l lq u a l i ty . A l l t h e p a n e l i s ts w h o t o o k p a r t in t h e o r g a n o -l e p t i c t e s t i n d i c a t e d t h e i r w i l l i n g n e s s t o b u y t h e p r o -d u c t s i f a ll w e r e a v a i l a b l e i n t h e m a r k e t ( I l o r i a n dIref in , 1996) .

T h e r e i s t h e n e e d t o e s t a b l i s h t h e e c o n o m i cv i a b i l i t y o f t h i s t e c h n i c a l l y f e a s i b l e p r o j e c t b e f o r ec o m m i t ti n g r e s o u r c e s t o i t s c o m m e r c i a l i s a t io n . H e n c et h i s s t u d y w a s d e s i g n e d t o a c c o m p l i s h t h i s t a s k .

2 . E N G IN E E R IN G C O N O M I CA S S E S S M E N TT h e p u r p o s e o f e n g i n e e r in g e c o n o m i c a n a l ys i s i s

t o e s t a b l i s h t h a t a t e c h n i c a l l y f e a s i b l e p r o j e c t i s a l s oe c o n o m i c a l l y v i a b l e . T h e r e s u l t o f t h e a n a l y s i s p l u ss o m e o t h e r c o n s i d e r a t i o n s w i l l a s s i s t a n i n t e r e s t e de n t r e p r e n e u r in m a k i n g a d e c i s i o n w h e t h e r o r n o t t oc o m m i t h i s s c a r c e r e s o u r c e s t o t h e p r o j e c t .

A s m a l l - s c a l e p r o d u c t i o n l e v e l w a s p r o p o s e d f o rt h e c o m m e r c i a l m a n u f a c t u r e o f t h e m a l t d ri n ks . T h ef a c i l i t i e s f o r t h e p r o c e s s t e c h n o l o g y w e r e i d e n t i f i e da n d t h e i r c o s t e s t i m a t e s w e r e o b t a i n e d f r o m e q u i p -m e n t f a b r i c a t o r s a n d s u p p l i e r s . T h e o p e r a t i n g c o s t s( e q u i p m e n t r u n n i n g , m a i n t e n a n c e a n d r e p a i r s a n d l a b -o u r c o s t s ) w e r e e s t i m a t e d . T h e e q u i p m e n t r u n n i n gc o s t is m a d e u p o f e n e r g y , l u b r i c a t i o n a n d w a t e re x p e n s e s . T h e g r a d i e n t s e r i e s m o d e l w a s u s e d t o e s t i -m a t e t h e a n n u a l m a i n t e n a n c e c o s t o v e r th e l i f e c y c l e( n ) o f t h e p r o j e c t. I n t h e m o d e l , t h e m a i n t e n a n c e c o s to f t h e m i c r o b r e w e r y w a s a s s u m e d t o b e A~ i n t h e fi r sty e a r a n d G m o r e d o l l a r s f o r e a c h a d d i t i o n a l y e a r u n ti lt h e e n d o f t h e 1 0 t h y e a r . T h e p r e s e n t w o r t h c o s t ( P W c )o f m a i n t e n a n c e w a s f i r st e s t i m a t e d a n d t h e r e a f t e r c o n -v e r t e d t o a n n u a l w o r t h c o s t ( A W e ) , u s i n g t h ee x p r e s s i o n s

P W c = A l ( A / P , i , n ) + G ( P / G , i ,n )A W e = P W c ( A / P , i , n )

w h e r e i = t h e m i n i m u m a t t r a c t iv e r a t e o f r e t u r n( M A R R ) a n d t h e f a c t o r s ( P / A , i, n ) , ( P / G , i, n ) a n d

( A / P , i , n ) ( D e G a r m o e t a l . , 1 9 7 9 ; D e l a M a r e , 1 9 9 0 )w e r e o b t a i n e d f r o m t h e i n t e r e s t ta b l e . A l a n d G w e r ee s t i m a t e d a s $ 6 0 9 8 . 0 0 a n d $ 2 4 3 9 . 0 0 r e s p e c t i v e l y f o rt h e p l a n t o p e r a t i n g a t f u l l c a p a c i t y .

T h e m a r k e t p r ic e s o f t h e f o o d c r o p s a n d o t h e ri n p u t s w e r e u s e d t o e s t im a t e t h e c o s t o f t h e r a wm a t e r ia l s. T h e n u m b e r o f e m p l o y e e s r e q u ir e d f o r t h ee n t e r p r i s e a t v a r i o u s c a p a c i t y u t i l i s a t i o n s w e r e e v a l u -a t e d a n d t h e i r w a g e s e s t i m a t e d o n t h e b a s i s o f e x p e r i -e n c e , q u a l i f i c a t i o n s a n d t h e l a b o u r m a r k e t . A l l e s t i -m a t e s w e r e m a d e i n t h e l o c a l c u r r e n c y ( n a i r a ) a n dt h e n c o n v e r t e d t o U S d o l l a r s ( $ ) b e c a u s e o f t h e i ns t a -b i l i t y o f t h e n a i r a . At p re sen t $ 1 = 8 2 n a i r a .

S a l e s o f t h e d r i n k s a n d t h e s a l v a g e v a l u e s a t t h ee n d o f t h e p r o j e c t l i f e w i l l g e n e r a t e r e v e n u e f o r t h ee n t e r p r i s e . T h e s a l e s w e r e c a l c u l a t e d o n t h e b a s i s o ft h e p l an t s ' cap ac i t i e s .

T h e n e t p r e s e n t v a l u e ( N P V ) m o d e l w a s e m p l o y e dt o d e t e r m i n e t h e p r o f i t a b i l it y o f t h e p r o j e c t b e f o r e t a x .T h e N P V o f a s e r i e s o f c a s h f l o w s r e f e r s t o t h e e q u iv -a l e n c e o f a s i n g l e s u m o f m o n e y t o b e r e c e i v e d o rd i sb u r sed a t t = 0 i f a l l f u tu re r ece ip t s an d d i sb u r se -m e n t s o v e r t i m e a r e p r o p e r l y d i s c o u n t e d t o t h e p r e s e n tt i m e a n d t h e n s u m m e d a l g e b r a i c a l l y . T h e m o d e l i ss p e c i f i e d ( A u a n d A u , 1 9 8 3 ) as :

?l 12

N P V = ~ A t e ( 1 + i ) " = ~ A , ~ ( P / F , i , n )t = 0 t = 0

w h e r e A , ~ = t h e n e t c a s h f l o w f o r p r o j e c t x a t y e a r t( t = 0 , 1 , 2 . . . . n ) , i an d n a r e as sp ec i f i ed ab o v e , an d( P / F , i , n ) w a s a l s o o b t a i n e d f r o m t h e i n t e r e s t t a b l e .T h e N P V a s e x p r e s s e d a b o v e is b a s e d o n t he c o n c e p to f e q u i v a l e n t w o r t h o f a l l t h e c a s h f l o w s r e l a t i v e t os o m e b a s e , a b e g i n n i n g p o i n t i n t i m e , c a l l e d t h ep r e s e n t . T h a t i s , a l l c a s h i n f l o w s a n d o u t f l o w s a r e d i s -c o u n t e d t o t h e b a s e p o i n t a t a n i n te r e s t r a t e ( i% ) w h i c hi s t h e M A R R ( D e G a r m o e t a l . , 1 9 7 9 ) .

T h e M A R R i s u s u a l l y c h o s e n t o m a x i m i s e t h ee c o n o m i c w e l l b e i n g o f a n o r g a n i s a t i o n s u b j e c t t o t h ef o l l o w i n g c o n s i d e r a t i o n s ( D e G a r m o e t a l . , 1979) : t h e a m o u n t o f m o n e y a v a i l a b le f o r i n v e s tm e n t , a n d

t h e s o u r c e a n d c o s t o f th e s e f u n d s ; t h e n u m b e r o f g o o d p r o j e c t s a v a i la b l e f o r i n v e s t -

m e n t , a n d t h e t h e i r p u r p o s e ; t h e a m o u n t o f p e r c e i v e d ri s k th a t is a s s o c i a t e d w i t h

i n v e s t m e n t o p p o r t u n i t i e s a v a i l a b l e t o t h e f i r m , a n dt h e p r o j e c t e d c o s t o f a d m i n i s t r a t in g t h e p r o j e c t o v e ra s h o r t p l a n n i n g h o r i z o n v e r s u s a l o n g p l a n n i n gh o r i z o n ;

7 1 6 T e d m v a l m nV o L 1 7 N e s 1 1 / ) 2


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E n g i n e e r in g e c o n o m y s t u d i e s o n n o n - a l c o h o l i c b e v e r a g e s p r o d u c t io n

t h e t y p e o f o r g a n i s a t i o n i n v o l v e d ( p u b li c o r c o m -p e t i t i v e i n d u s t r y ) . P r i v a t e c o m p e t i t i v e i n d u s t r i e sf r e q u e n t l y e m p l o y t h e o p p o r t u n i t y c o s t v i e w p o i n tt o w a r d s c h o o s i n g M A R R .

I n t h i s s t u d y , t h e o p p o r t u n i t y c o s t v i e w p o i n t w a se m p l o y e d t o c h o o s e t h e M A R R o f 1 5 % , w h i c h i s th ep r e s e n t b a n k s a v i n g s i n t e r e s t r a t e .

T h e N P V m e t h o d h a s b e e n u s e d i n th e e c o n o m i ca n a l y s i s o f v a r i o u s e n g i n e e r i n g a n d t e c h n i c a l p r o j e c t s.R a i d e r e t a l . ( 1 9 8 3 ) u s e d t h i s m e t h o d i n a n e c o n o m i ca n a l y s i s o f u s i n g a n a e r o p l a n e v i a l e a s e - b a c k , o w n e r -s h i P o r r e n ta l a r r a n g e m e n t . T h e c o s t c u r v e s o f v a r i o u sa l t e r n a t iv e s w i t h r e s p e c t t o p e r c e n t a g e o f b u s i n e s s a n dt o t a l u s e w e r e o b t a i n e d f o r c o m p a r i s o n . I t h a s a l s ob e e n u s e d t o s t u d y t h e e c o n o m i c v i a b i l i t y o f a r a d i -o l o g y d e p a r t m e n t ( S u l i v a n a n d T h u e s a b , 1 9 75 ) a n dp r o d u c t i o n o f e t h a n o l f r o m b r e a d f r u i t a n d c a s s a v a v i ap l a n t e n z y m e a n d a c i d h y d r o l y s i s ( Il o ri et a l . , 1996a) .A p a r t f r o m N P V , t h e o t h er b a s ic m e t h o d s o f e n g i n-e e r i n g e c o n o m y c o m m o n l y u s e d a r e b r i e f l y d i s -c u s s e d b e l o w .

2 . 1 N e t fu t u r e v a lu e (N F V )T h e N F V o f a t i m e s e r i e s o f c a s h f l o w s r e f e r s t o

t h e e q u i v a l e n c e o f a s i n g l e s u m o f m o n e y t o b er e c e i v e d o r d i s b u r s e d a t s o m e f u t u r e t i m e t = n i fa l l r e c e i p t s a n d d i s b u r s e m e n t s o v e r t i m e a r e p r o p e r l yc o m p o u n d e d t o t h a t f u t u r e p o i n t i n t i m e a n ds u m m e d a l g e b ra i c al l y .

F o r a g i v e n s e r i e s o f n e t c a s h f l o w s A ,.~ f o r a p r o j e c tx o v e r a p l a n n i n g h o r i z o n o f n y e a r s, a n d a g i v e nv a l u e o f M A R R a s p r e v i o u s l y d ef i n ed , t h e n e t f u tu r ew o r t h m o d e l o f t h e s e r ie s i s g i v e n b y ( A u a n d A u ,1983):

n n

N F V = ~ ] A ,.~ (1 + i ) " = ~ ] A, .~(F/P , i ,n )t = 0 t = 0

T h e N F V i s e x a c t l y c o m p a r a b l e t o N P V e x c e p t t h a ta l l c a s h i n f l o w s a n d o u t f l o w s a r e c o m p o u n d e d f o r -w a r d t o a r e f e r e n c e p o i n t i n t i m e c a l l e d t h e f u t u r e( D e G a r m o e t a l . , 1 9 7 9 ) . T h e p r o j e c t i s w o r t h w h i l ee c o n o m i c a l l y i f N F V --> 0

2 2 A n n u a lw o r t h ( A W )T h e a n n u a l w o r t h o f a p r o j e c t i s i t s a n n u a l e q u i v a l -

e n t r e c e i p t s , m i n u s a n n u a l e q u i v a l e n t e x p e n s e s , l e s s

i t s a n n u a l e q u i v a l e n t c a p i t a l r e c o v e r y . T h e c a p i t a lr e c o v e r y c o s t f o r a p r o j e c t i s t h e e q u i v a l e n t u n i f o r mc o s t s o f t h e c a p i t a l i n v e s t e d , w h i c h i n c l u d ed e p r e c i a t i o n a n d i n t e r e s t o n t h e i n v e s t e d c a p i t a l( D e G a r m o e t a l . , 1 9 7 9 ) . T h e p r o j e c t i s e c o n o m i c a l l ya t t rac t ive i f A W --> 0 .

2 . 3 I n t e r n a l r a t e o f r e t u r n ( IR R ) m e t h o dT h e I R R m e t h o d s o l v e s f o r t h e i n t e r e s t r a t e t h a t

e q u a t e s t h e e q u i v a l e n c e o f c a s h i n f l o w s t o t h e e q u i v -a l e n t w o r t h o f c a s h o u t f l o w s . T h e e q u i v a l e n t w o r t hm a y b e c o m p u t e d b y u s i n g a n y o f t h e t h re e m e t h o d sd e s c r i b e d a b o v e . U s i n g t h e p r e s e n t w o r t h f o r m u l a t i o n ,t h e I R R i s t h e i ' % a t w h i c h

n nRk(P/F,i'%,k) = ~ Ek(e/F,i'%,k)

k = 0 k = 0w h e r e R k = n e t r e c e i p t o r s a v i n g s f o r t h e k t h y e a r , E k= n e t e x p e n d i t u r e , i n c l u d i n g i n v e s t m e n t s , f o r t h e k t hy e a r , a n d n = a s p r e v i o u s l y d e f i n e d .

T h e p r o j e c t i n q u e s t i o n i s a c c e p t a b l e a s l o n g a s i '----- M AR R, o the rwise i t i s no t (D eG arm o e t a l . , 1979).T h i s m e t h o d i s t h e m o s t w i d e l y u se d . T h e e c o n o m i cf e a s i b i l i t y o f u s i n g s o r g h u m m a l t f o r b e e r b r e w i n gw i t h o u t t h e u s e o f e x t e r n a l e n z y m e s h a s b e e n e s t a b -l i s h e d u s i n g t h e I R R m e t h o d ( I l o r i e t a l . , 1996b) .H o w e v e r , t h e r i g o u r o f t h e c o m p u t a t i o n a n d t h e p o s s i -b i l i t y o f m u l t i p l e r a t e s o f r e t u r n a r e t h e m a j o r p i t f a l l so f t h i s m e t h o d .

2 . 4 E x t e r n a l a te o f r a t u m ( E R R ) m e t h o dT h e E R R m e t h o d t a k e s i n t o a c c o u n t t h e e x t e r n a l

i n t e r e s t r a t e ( e % ) a t w h i c h t h e n e t c a s h f l o w s g e n e r -a t e d b y a p r o j e c t o v e r i t s l i f e c a n b e r e i n v e s t e d o u t s i d et h e f i r m . I n g e n e r a l , a l l c a s h o u t f l o w s a r e d i s c o u n t e dt o t h e p r e s e n t a t e % p e r c o m p o u n d i n g p e r i o d w h i l ea l l c a s h i n f l o w s a r e c o m p o u n d e d t o a p e r i o d n a t e % .T h e E R R i s t h e n t h e i n t e r e s t r a t e t h a t e s t a b l i s h e se q u i v a l e n c e b e t w e e n t h e t w o q u a n t i t i e s . M a t h e m a t -i c a l l y , E R R i s t h e i n t e r e s t r a t e ( i % ) a t w h i c h

nE k ( P I F , e % , k ) (F / P , i % , n )

k = 0n

= ~ R k ( P I F , e % , n - k )k = 0

w h e r e R k = e x c e s s o f r e c e i p t o v e r e x p e n d i t u r e i n p e r -

T o d m e v ~ k n # . 1 7 k ] l / J 2 7 1 7


4/7

M .O . I l o r i e f a l .

io d k , Ek = ex cess o f ex p en d i tu r e o v er r ece ip t in p e r -io d k , n = p r o jec t l i f e , an d E = ex te r n a l r e in v es tmen tr a te p e r p e r io d .

T h e p r o j e c t i s a c c e p t a b l e i f i % - > M A R R . T h emeth o d , u n l ik e I RR, i s eas ie r to so lv e an d i s n o t su b -j e c t t o m u l t i p l e r a te s o f r e t u r n ( D e G a r m o e t a l . , 1979;D e l a M a r e , 1 9 9 0 ) . O t h e r m e t h o d s w h i c h a r e c o m -m o n l y a p p l i e d i n e n g i n e e r i n g e c o n o m y s t u d i e s a r eb en ef i t - co s t r a t io ( r a t io o f d i sco u n ted b en ef i t s to th ed i s c o u n t e d c o s t w i t h r e f e r e n c e t o t h e s a m e p o i n t i nt i m e ) a n d p a y b a c k p e r i o d .

N P V i s u s u a l l y p r e f e r r e d b y i n v e s t o r s b e c a u s e o fi t s e a s y c o m p u t a t i o n a n d t h e p i t fa l l s o f o t h e r m e t h o d s(FMI, 1989, Au and Au, 1983) .

3 , R E S U L T S N D D IS C U S S I O NTab le 1 co n ta in s th e l i s t o f f ac i l it i e s an d o th e r i t emsr e q u i re d f o r a s s e m b l i n g t h e m a l t d r i n k p l a n t a t s m a l l

en te r p r i se l ev e l . Th e p r o cess f lo w d iag r am i s a l sos h o w n i n F i g . 1 . T h e e n d o g e n o u s e n z y m e s i n t h em a l t e d s o r g h u m a r e e x t ra c t e d i n t h e m a s h t u n a f t e r ap r o t e i n r e s t a n d p u m p e d i n t o t h e w o r t k e t t l e . T h er e s i d u a l m a l t g r i t s i n t h e m a s h t u n a r e m i x e d w i t hw a t e r , c o o k e d f o r 1 0 m i n a n d t h e n c o o l e d d o w n t oa b o u t 4 5 C b y a d d i n g a l i tt l e q u a n t i t y o f c o l d w a t e r.T h e r e a f t e r , t h e m a s h i s m i x e d w i t h t h e a d j u n c t a n dTA B L E 1. Fa c i l i t i e s a n d c i v i l s t r u c t u r e s f o r t h e m i c r o b r e w e r y

I t e m D e s c r i p t io n Q t y C o s t ( U S $ )

1 M a s h t u n a n d a s s e s s o r i e s , 1 0 h i 12 La n t e r t u n , 1 2 h l 13 M a s h f i l te r 14 Wo r t k e t t l e , 1 8 h l 15 Wh i r l p o o l a n d a c c e s s o r i e s , 1 2 h l 16 H e a t e x c h a n g e r 17 H o l d i n g t a n k 28 F i l t r a t i o n u n i t 19 B o t t l i n g s t a t i o n 1

1 0 P i p e w o r k1 1 Em p t y b o t t l e s 1 0 0 01 2 S t e e p i n g t a n k ( p l a s t ic ) , 5 0 0 ! 31 3 C a b i n e t d r y e r 21 4 O i l h e a t e r p u m p ( t e m p . c o n t r o l) 11 5 Fu e l t a n k , 1 0 0 0 11 6 G e n e r a t o r , 1 0 0 k V A1 7 B o r e h o l e1 8 W a t e r t a n k , 1 0 0 0 0 11 9 G r i n d e r2 0 P i c k - u p v a n2 1 C o l d r o o m2 2 S o r g h u m g e r m i n a t i n g r o o m2 3 F a c t o r y h o u s i n g / o ff i c e s2 4 L a n d ( 4 p l o ts )

Su b - t o t a lI n c i d e n t a l

T o t a l

4 3 4 8 . 7 85 825.617 9 2 6 . 8 34 1 2 6 . 8 33 6 2 1 . 9 56 0 9 7 . 5 66 2 6 8 . 2 93 0 4 8 . 7 86 0 9 7 . 5 63 6 5 8 . 5 46 3 0 4 . 8 8

2 9 2 . 6 84 4 5 1 . 2 21 0 7 3 . 1 7

1 1 2 1 . 9 51 1 4 6 3 4 . 1 51 2 4 3 9 . 0 21 9 7 5 . 6 11 1 8 2 9 2 . 6 81 3 6 5 8 . 5 41 3 6 5 8 . 5 41 2 4 3 9 . 0 2

1 8 2 9 2 . 6 84 8 7 8 . 0 5

1 0 8 6 7 . 0 75 4 3 . 0 4

1 3 9 1 6 0 . 0 0

th e t emp er a tu r e i s r a i sed to th e g e la t in i sa t io n temp er a -t u r e o f t h e a d j u n c t . A l i t t l e q u a n t i t y o f t h e e n z y m el i q u o r is a d d e d t o a v o i d t h e f o r m a t i o n o f l u m p s . T h em a s h i s t h e n c o o l e d d o w n t o a b o u t 6 0 C , t h e e n z y m el iq u o r in th e w o r t k e t t l e i s p u mp ed in to i t , an d mash -in g p r o cesses f o l lo w . A f te r co mp le te sacch ar i f i ca t io n ,th e w o r t i s t r an s f e r r ed to th e w o r t k e t t l e f o r co n cen -t r a t i o n a n d b l e n d i n g w i t h s u g a r s y r u p , c a r a m e l a n do th er in g r ed ien ts to g iv e th e mal t d r in k . Th e mal td r in k i s th en sen t in to th e w h i r lp o o l , w h ich i s an o p env esse l in w h ich a cen t r i f u g a l e f f ec t i s c r ea ted b y th etan g en t ia l in t r o d u c t io n o f th e l iq u id in to th e v esse l( f o r f u r th e r c la r i f i ca t io n ) ; th e p a r t i a l ly c la r i f i ed mal td r in k i s th en t r an s f e r r ed to th e h ea t ex ch an g er ( f o rco o l in g ) , h o ld in g tan k , f i l t r a t io n u n i t , f in a l p r o d u c ttan k an d f in a l ly to th e b o t t l in g s ta t io n .

Th e b o t t l in g s ta t io n i s p r o p o sed to b e o p er a tedm a n u a l l y . T h i s w i l l i n v o l v e m a n u a l w a s h i n g o fb o t t l e s , f i l l in g , p as teu r i s in g , l ab e l l in g an d c r a t in g .S o m e d e g r e e o f m e c h a n i s a t i o n c o u l d b e i n t r o d u c e d toi n c r e a s e e f f i c i e n c y at a n a d d i t i o n a l c o s t. M o s t o f t h ef ac i l i t i e s w i l l b e f ab r ica ted lo ca l ly , an d an o i l h ea te ri s e x p e c t e d t o s u p p l y h e a t t o t h e m a s h t u n a n d w o r tket t le .

T h e p l a n t h a s a p r o d u c t i o n c a p a c i t y o f 1 0 h l p e rb r e w , a n d w i l l o p t i m a l l y p r o d u c e f o u r b r e w s p e rw eek , w h ich w i l l am o u n t to 1 9 2 0 h l ( 2 6 6 6 7 c r a tes )p e r y e a r an d g en er a te a b o u t $ 1 1 7 0 7 3 ( 9 .6 m i l l io nn a i r a ) p e r an n u m f o r th e 1 0 - y ea r p r o jec t l i fe ( Tab le 2 ) .

Th e cap i ta l in v es tm en t ($ 1 5 3 1 9 4 .4 4 ) i s ma d e u p o fp r e - p r o d u c t io n , f ab r ica t io n an d in s ta l l a t io n ex p en ses .T h e a n n u a l o p e r a t i n g c o s t i n c l u d i n g l a b o u r , m a i n t e -n a n c e , r a w m a t e r i a ls a n d e q u i p m e n t r u n n i n g e x p e n s e sw as es t im a ted as $ 6 1 8 1 8 .7 5 . Th e r aw mate r ia lr e q u i r e m e n t s f o r t h e b r e w e r y v a r y s l i g h t l y , d e p e n d i n go n t h e t y p e o f a d j u n c t u s e d ( T a b l e 3 ) . T h i s c o u l d b ea t t r ib u ted to th e v a r ia t io n s in th e y ie ld s o f th e mal td r i n k s o b t a i n e d f r o m t h e a d j u n c ts . T h e m a r k e t p r i c e so f t h e r a w m a t e r i a l s ( T a b l e 4 ) w e r e u s e d i n e s t i m a t i n gt h e c o s t o f r a w m a t e r i a l s f o r e a c h m a l t d r i n k t y p e( Tab le 3 ) . I t i s a l so as su med th a t 0 .5 % p lan ta in f lo u rw i l l a l so b e u sed f o r th e p r o d u c t io n o f b r ead f r u i t - ,c a s s a v a - a n d p o t a t o - b a s e d d r i n k s t o e n h a n c e f o a mf o r m a t i o n a n d s t a b i l i t y . T h e m i c r o b r e w e r y w i l lr e q u i r e e i g h t s k i l l e d w o r k e r s ( o n e p r o d u c t i o n m a n -ag er , o n e tech n ic ian an d f o u r o p er a to r s , p lu s tw os a l e s m e n ) a n d 2 3 u n s k i l l e d w o r k e r s . T h e i r w a g e s w i l la m o u n t t o $ 7 3 0 0 0 0 p e r a n n u m . T h e e q u i p m e n t r u n -n i n g c o s t , m a i n t e n a n c e a n d s a l es p r o m o t i o n e x p e n s e sw e r e e s t i m a t e d a s $ 1 5 4 7 7 . 0 7 , $ 1 4 3 5 1 . 3 4 a n d$ 7 3 1 7 .0 7 r esp ec t iv e ly . P r o d u c t io n r a tes o f tw o an dt h r e e b r e w s p e r w e e k ( c a p a c i t i e s A a n d Br e s p e c t i v e l y ) w e r e a l s o c o n s i d e r e d , a n d t h e i r a n n u a l

7 1 8 T e d m w a iM V e l.1 7 N e s U J l 2


5/7

E n g i n e e r i n g e c o n o m y s t u d i e s o n n o n - a lc o h o l ic b e v e r a g e s p r o d u c S o n

B r e a d f r u i tP o t a t oC a s s a v a o rP l a i n t a i nf l o u r p l u sS o r g h u m m a l t

B r e w w a t e r

F i l l i n g /C r o w n i n gP a s t e u r i z i n gL a b e l l i n gC r a t i n g

?

M a s h T u n

B o t t l i n gs t a t i o n

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K E Y @

I

! 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1M a s h F i l t e r

W o r t K e t t l e

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P u m p r ~ O u t l e t v a v l eFig. 1. Process f low diagram for beverage product ion from som e t ropical crops a t smal l enterprise level .

,)

TA BLE 2. Cash flow (US$) for the rnicrobreweryCa pa c i t y A Ca pa c i t y B Ca pa c i t y C

Investment:Cap aci ty investm ent 139 160.00 139 160.00 139 160.00Reproduction expens es 14 034.44 14 034.44 14 034.44Sub-total 153 194.44 153 194.44 153 194.44Ann ual disbursement:Raw materia ls 6 979.48 10 469.21 13 958.95Equip ment runnin g cost 9 494.63 12 381.66 15 477.07Mainten ance 8 610.80 11 481.07 14 351.34Labou r 6 964.30 8 571.44 10 714.30Sales prom otion 3 658.54 5 487.80 7 317.07Sub-total 35 707.75 48 391.17 61 818.75Revenue:Sales of mal t 58 536.59 87 804.88 117 073.17Salvag e value 18 292.68 12 195.12 10 975.61NPV - 29 193.19 56 099.00 138 703.79aVaries depending on the mal t type (Table 5)

estimated operating costs and revenue are stated inTable 2.The profitability analysis (Table 2) shows negativeNPV when the plant is operated at two brews (20 hl)per week. This implies that production at this level,

especially for potato-based malt drink, is not profit-

able. However, if the plant is operated at 30 or 40 hlper week (capacities B and C respectively), it willgenerate positive NPV before tax--an indication thatthe brewery will make profits at 75 and 100%capacity utilisations. Similarly, production of othermalt types (breadfruit-, cassava- and plantain-basedbeverages) from this plant will also be profitable(Table 5).

The Federal Government of Nigeria has put inplace a package of incentives to promote the estab-lishment of such enterprises. These incentivesinclude, among others, tax holiday on corporateincome. The relief covers a non-renewable period offive years for pioneer businesses and seven years forsuch businesses located in economically disadvan-taged areas. There is also tax relief for research anddevelopment (R&D). Up to 140% of expenses are taxdeductible on R&D on local raw materials. Where theR&D is long term it will be regarded as capital expen-diture and written of f against profit. After the holiday,the company will pay corporate tax of 40%. Thereare also industrial development banks set up at Fed-eral and State levels to offe r specialised services suchas provision of soft loans and advances to small,

7 1 9


6/7

M . O . I l o r i e t a L

T A BL E 3 . Qua n t i t i e s a nd c os t s o f a nnua l r a w ma te r i a l s r e qu i r e d by the mic r obr e we r y a t f u l l c a pa c i ty u t i l is a t ionI npu t /Cos t Be ve r a ge type

P o ta to - ba s e d Ca s s a va - b a s e d Br e a df r u i t - ba s e d P la n ta in - ba s e dS o r g h u m / a d j u n c t ( t o n n es )~ 4 0 . 8 6 4 1 . 2 8 4 1 . 9 2 4 2 . 6 6S uga r ( tonne s ) 4 .65 4 .76 4 .65 4 .65Ho p pelle ts (kg) 12.80 12.90 12.80 12.90Enz ym es ( l i tres) 8.18 16.62 12.58 12.80Ra w ma te r i a l s c os t s ( US $) 13 958 .95 13 461 ,54 12 327 .00 20 075 .12

~ Ra t io o f s o r gh um m a l t to a d junc t i s 2 :3 .

T A B L E 4 . M a r k e t p ri c e o f t h e r a w m a t e r i a lsR a w m a t e r i al C o s t ( U S $ )

M a l t e d s o r g h u m 3 3 5 . 4 0 t o n n eP o ta to 182 .93 tonneCa s s a va 146 .34 tonne 'B r e a df r u i t 97 .56 tonneP la n ta in 243 .91 tonne JS u g a r 7 . 9 k gHops pe l l e t s e nz ym e 16 .93 l it r e

T AB L E 5. NP V of the va r ious be ve r a ge s a t 100% c a pa c i ty u t i l i s a t ion

M a l t d r i n k t y p e N P VP ota to - ba s e d 138 703 .29Ca s s a va - ba s e d 139 692 .45Br e a df r u i t - ba s e d 201 705 .71P la n ta in - ba s e d 105 078 .94

medium and l a rge companies in concess iona ry t e rms(FMI, 1986).

4 . C O N C L U S IO NThis s tudy and the ea r l i e r one have conf i rmed tha t

the produc t ion of ma l t d r inks f rom non-convent iona linput s such a s sorghum mal t , b readf ru i t , po ta to andswee t cassava i s t echnica l ly and econ om ica l ly v i ab le .Wi th the incen t ives h igh l igh ted abo ve , ava i l ab i li t y o ffunding and appl i ca tion of appropr ia t e man ageme ntand bus iness s t ra t egy , t he re sea rch re su l t s can bet ransla ted into a successful innovat ion.

5 . A C K N O W L E D G E M E N TThe authors are grateful to the Internat ional Foun-da t ion for Sc ience ( IFS) , Sweden , fo r p rov id ing thegrant for this project .

R E F E R E N C E SAu, T. and Au, T.P. (1983) Engineering economics

for capital investment analysis. Al lyn and Bacon ,B o s t o n , M A .De l a Mare , R .F . (1990) Manufacturing Economics.

Technologica l Management Consul t an t s , Brad-ford.

DeGarmo, E .P . , Canada , J .R . and Sul ivan , W.G.(1979) Engineering Economy, 6th edi t ion. Mac-mil lan, N ew York.Federa l Min i s t ry of Indus t ry (FMI) (1986) Industrialpolicy of Nigeria. Abuja , Nigeria .I lo r i , M. O . (1991) Use of sorghum for bee r b rewingin Nigeria. Technovation 11, 27-37 .

I lor i , M.O. and Iref in, I .A. (1996) Development ofnon-a l cohol i c beve rages f rom some t rop ica lc rops . Submi t t ed for publ i ca t ion to the Maste rB r e w e r s A sso c i at io n o f t h e A m e r i c as ( M B A A ) - -Technical Quarterly.

I lor i , M. O. , Layokun, S . K. , Idowu, A. O. and Solo-mon, B. O . (1996a) Economics of sma l l - sca l ee thanol p roduc t ion f rom breadf ru i t and cassavavia p l an t enzyme and ac id hydro lys i s . MBAATechnical Quarterly 33, 39-43 .

Ilori , M. O., Makinwa, E. A. and Irefin, I. A. (1996b)Ind igenous t echnologica l capabi l i t y deve lopmentin the brewing indust ry in Nigeria : An engineer-ing eco nom ic a ssessm ent and po l i cy impl i ca tions .Foo d R eview International 12, 4.

Raider , M. C. , Wagner, B. R. and Remer, D. S . (1983)Cost model for using an a i rplant via lease-back,ownersh ip or ren ta l a r rangement s- - -case s tudy .Engineering Economist 28, 101-130 .

Sul ivan, W. C. and Thuesab, G. J . (1975) A costeva lua t ion mode l fo r rad io logy depa r tment .Engineering Economist 27, 95-100 .

M . O . I l o r i O b t a i n e d t h e d e g r e es o f B S c i nC h e m i s t r y a n d M S c i n F o o d S c i e n c e a n dT e c h n o l o g y i n 1 9 7 9 a n d 1 9 8 3 r e s p e c t iv e l yf r o m t h e U n i v e r s i t y o f l fe ( n o w O b a f e m iA w o l o w o U n i v e r s i t y ) , I l e - I f e , N i g e r i a . H i sP h D i n F o o d T e c h n o l o g y w a s o b t a i ne d f r o mt h e U n i v e r s i t y o f I b a d a n , N i g e r i a . H e i s aS e n i o r R e s e a r c h F e l l o w a n d A c t i n g D i r e c t o ro f th e T e c h n o l o g y P l a n n i n g a n d D e v e l o p -m e n t U n i t , a p o s t g r a d u a t e d e p a r t m e n t w h i c hr u n s M S c a n d P h D p r o j e c t s in t e c h n o l o g ym a n a g e m e n t . H i s r e s e a r c h i n t e r e s t i s i n th e . . . . . . . . . .

72 0 Todmva lion oL17k U/J2


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E n g i n e e r i n g e c o n o m y s t u d i e s o n n o n - a lc o h o l ic b e v e r a g e s p r o d u , :l J o n

a rea o f R & D an d i n n o v a t i o n m an ag em en t , s tr a t eg ic m an ag em en t o ft ech n o l o g y , an d fo o d p ro ces s i n g .

I .A . I r e f l n i s a R es ea r ch F e l l o w a t t h e T ech -n o l o g y P l a n n in g a n d D e v e l o p m e n t U n i t o fO b a f e m i A w o l o w o U n i v e r si t y , I le - l fe , N i g -e r i a . H e r ece i v ed h i s B S c i n F o o d S c i en cean d T ech n o l o g y f ro m t h e U n i v e r s i t y o f N i g -e r i a , N s u k k a , an d h i s M S c i n T ech n o l o g yP o l i cy an d P l an n i n g f ro m O b afem iA w o l o w o U n i v e r s i ty . I n 1 9 8 2 h e j o i n edA f r i can B rew e r i e s L i m i t ed , I b ad an , N i g e r ia ,an d ro s e t o t h e p o s t o f Q u a l i t y C o n t ro l an dD ev e l o p m en t M an ag e r . S i n ce 1 9 9 4 h e h asb een w i t h t h e T ech n o l o g y P l an n i n g an dD ev e l o p m en t U n i t o f O b a fem i A w o l o w o U n i v e r s i ty . H i s cu r r en t i n t e r-e s t s i n c l u d e fo o d p o l i cy , ap p l i ca ti o n o f t e ch n o l o g y m an ag em en t t e ch -n i q u es t o f o o d p ro ces s i n g an d t ech n o l o g y , an d s m a l l en t e rp r i s e d ev e l -o p m en t .

A .A . A d en i y i i s a 4 2 -y ea r -o l d N i g e r i an w h og a i n ed h i s B S c B i o ch em i s t ry d eg ree a t t h eU n i v e r s i t y o f I l e - l f e , N i g e r i a ( n o w O b afem iA w o l o w o U n i v e r s i t y ) in 1 9 7 6 . H e w o rk edb r i e f l y a s a F o o d an d D ru g s In s p ec t i n gO f f i ce r w i t h t h e N i g e r i a F ed e ra l M i n i s t ry o fH ea l t h , F o o d an d D ru g s A d m i n i s t r a t i o nb e t w een 1 9 77 an d 1 9 7 9 b e fo re j o i n i n g In t e r -n a t i o n a l B rew er i e s , I l e s h a , N i g e r i a , a s at r a i n e e b r e w e r . H e h a d u n d e r g o n e p r o - !f e s s i o n a l b r ew er ' s t r a i n i n g a t D o em en ' s ! ! ! i i / ! ! ~ i i ! iT ech n i k u m , G ra f e l f i n g , Wes t G e rm an y , i n1 9 82 an d 1 9 8 3, cu l m i n a t i n g i n t h e B r ew m as t e r ' s C e r t i f ic a t e i nD ec em b e r 1 9 8 7. H e o cc u p i ed v a r i o u s t ech n i ca l m an ag em en t p o s it i o n sa t I n t e rn a t io n a l B rew e r i e s an d i s cu r r en t l y th e A s s i s t an t G en e ra l M a n -ag e r (T ech n i ca l ) , a p o s i t i o n h e h as o ccu p i ed s i n ce J u l y 1 9 9 0 . H e i sp r e s en t l y ab o u t t o c6 m p l e t e an M S c p ro g ram m e i n t ech n o l o g y m an -ag em en t a t t h e T ech n o l o g y P l an n i n g an d D ev e l o p m en t U n i t , O b a fem iA w o l o w o U n i v e r si ty .

T e d m o v a l k n e l .1 7 k n I U ) 2 7 2 1

engineering economy studies on the production of non-alcoholic beverages from some tropical crops

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