PREPARED BY: John R. Wald Company, Inc. Huntingdon, PA 16652 September 2002
TABLE OF CONTENTS
I.
Overview / Executive Summary
II.
Potential Products / Markets
III.
Operational Data A. B. C. D.
IV.
Facility Requirements Typical Equipment List Flow Diagram Staff/Labor Requirements
Feasibility Analysis
I.
Overview / Executive Summary
Coffee is an annual $18 billion industry in the United States alone. This represents an average consumption of over two cups of coffee per day, every day of the year, for every adult resident. This amounts to nearly 13 pounds of coffee per year for every adult resident. The scope of the industry described in this prospectus would begin with procurement of green coffee beans and proceed through roasting, grinding and packaging and is readily scalable from a relatively small 100,000 pounds per year facility to 500,000 pounds or more per year. The smallest of these facilities requires about 500 sq.ft. of total floor space for storage and processing. Higher production requirements would need correspondingly greater floor space. Proposed production process for this industry includes numerous state of the art features such as a thermal fume oxidizer, microprocessor controlled roast profile system, and nitrogen gas flushing for ground coffee packaging. These technologies are designed to provide a consistently high quality product in an environmentally responsible manner. While the primary product to be offered would be ground coffee, roasted beans could also be offered. For those who are considering purchase of roasted beans to eliminate an in-house roasting process, one important consideration is that while green beans can retain freshness for up to six months, roasted beans begin to loose freshness after only about seven days in open storage. Presently, a world surplus of coffee beans has driven down the selling price of ground coffee. However, this also means coffee bean prices are reduced and careful shopping for green beans can ensure a good profit. Although the market for ground coffee is mature and stable, preferential state contracts for correctional industry made products should be readily attainable. Considering only a state’s inmate population, a state such as Alaska with a relatively low inmate population of 4,200 would still consume 55,000 pounds of coffee per year. Pennsylvania’s inmate population of approximately 37,000 represents about 480,000 pounds of coffee per year!
II.
Potential Products / Markets
A. Products 1. Ground Roasted Coffee 2. Roasted Coffee Beans B. Markets 1. Department of Corrections a. State, Local, City Facilities 2. Schools a. College b. University c. Public 3. State Agencies 4. Other State's Department of Corrections III.
Operational Data A. Facility Requirements 1. Space Requirements a. Production space b. Raw material c. Finished Goods
Small 400 sq.ft 50 sq.ft. 50 sq.ft.
Mid-Large 2-3000 sq.ft. 200 sq.ft. 200 sq.ft.
2. Utility Requirements a. Electricity i. 220VAC, single and 3 phase ii. 110 VAC single phase b. Natural Gas or LPG i. 2 psi minimum ii. 400,000 BTU/hr for small facility iii. 1.75 MMBTU/hr or more for mid to large facility c. Compressed air system (mid to large facilities) i. Air compressor ii. Air dryer iii. Filtration d. Safety and Environmental Concerns i. Thermal oxidizer system associated with roaster should eliminate concerns relative to exhaust emissions
B. Typical Equipment List Small Scale Roasting Roaster / Cooler Afterburner
Grinding
Grinder
Packaging
Weigh / Fill Unit Gas Flush / Bag Sealer
Support
Mid-Large Scale Loading System Roaster / Cooler Afterburner Destoner Roast Profile Control Elevator/Diverter Grinder(s) Feed System(s) Weigh / Fill Unit(s) Gas Flush/Bag Sealer(s) Testing Lab Air Compressor Material Handling
C. Flow Diagram Small Scale
Mid-Large Scale
GREEN BEAN RECEIVING
GREEN BEAN RECEIVING
ROASTER/COOLER
LOADING SYSTEM
GRINDING
ROASTER/COOLER
Roasted Beans
DESTONER PACKAGING ELEVATOR/DIVERTER
Roasted Beans
GRINDING
PACKAGING
D. Staff/Labor Requirements 1. Three (3) inmates and a Foreman for small scale operation. At this small scale, other industry activities should be planned to more efficiently utilize facilities and foreman. 2. Twelve (12) inmates, plus a Supervisor and Foreman for larger scale operation, depending on size.
IV.
FEASIBLITY ANALYSIS - COFFEE Rev. 9-13-02
Based on buying green beans, roasting, grinding, and packaging in 5# bags, 4 to a box
ANNUAL PROFIT/LOSS
SCENARIO ONE (Small facility)
SCENARIO TWO (Mid to Large facility)
Production Requirement, #/yr Green Bean Price per pound Selling price per pound Gross Annual Sales
100,000 $0.75 $2.00 $200,000.00
400,000 $0.75 $2.00 $800,000.00
Budget Cost, Installed Equipment
$120,000.00
$300,000.00
Less Cost of Good Sold: Direct Materials: Green Beans Shrinkage Loss Bags for shipping Boxes for Shipping Total Direct Materials:
$75,000.00 $12,000.00 $2,100.00 $4,900.00 $94,000.00
$300,000.00 $48,000.00 $8,400.00 $19,600.00 $376,000.00
$4,500.00 $5,000.00 $9,500.00
$18,000.00 $20,000.00 $38,000.00
Miscellaneous Direct: Direct Inmate Labor Freight Costs Total Miscellaneous Direct:
Total Cost of Goods Sold: $103,500.00 Gross Profit
$414,000.00
$96,500.00
$386,000.00
Indirect Cost: Fixed Burden: Supervisor (1) Foreman (1)
$0.00
$58,480.00
$48,969.00 $0.00
$48,969.00 $0.00
G&A Total Fixed Burden:
$18,000.00
$36,000.00
$66,969.00
$143,449.00
Electricity Process Heating
$2,009.07
$5,332.00
$1,033.33
$5,121.48
Total Utilities:
$3,042.40
$10,453.48
Indirect Materials
$500.00
$2,000.00
Equipment (over 10 years)
$12,000.00
$30,000.00
Utilities:
Miscellaneous:
Cleaning & Maintenance Total Miscellanous: Total Indirect Cost: Net Profit (Loss) Net Profit/Gross Sales
$800.00
$960.00
$13,300.00
$32,960.00
$83,311.40
$186,862.48
$13,188.60
$199,137.52
6.59%
24.89%