BUSINESS PLAN

SEMELI HONEY PRODUCTION AND PROCESS-

ING PROJECT ESTABLISMENT

AFAR
Ethiopia

MARCH, 2023

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TABLE OF CONTENTS

PAGE

I. SUMMARY............................................................................................................................................. I

1 INTRODUCTION................................................................................................................................. 4

1.1. Background of the Ethiopian wheat import export industries..................................................4

1.2 FORM OF THE BUSINESS AND BACKGROUND..............................................................6

2 HUMAN RESOURCE AND MANAGEMENT................................................................................... 8

2.1 STAFFING AND MANPOWER REQUIRMENTS.................................................................8

2.2 ORGANIZATIONAL STRUCTURE.......................................................................................9

3 MARKETING STRATEGY............................................................................................................... 10

3.1 MARKETING OBJECTIVES.................................................................................................10

3.2 PRODUCT DESCRIPTION....................................................................................................10

3.3 TARGET CUSTOMERS.........................................................................................................12

3.4 PLACE/ DISTRIBUTION STRATEGY.................................................................................12

3.5 PRICING STRATEGY............................................................................................................12

3.6 PROMOTION STRATEGY....................................................................................................13

3.7 SUPPLIES...............................................................................................................................13

4 FINANCIAL PLANNING................................................................................................................... 14

4.1 Total initial investment cost.....................................................................................................14

4.2 Production cost.........................................................................................................................15
4.3 Financial evaluation 15

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I. SUMMARY

In the past twenty and plus years Ethiopia has shown an encouraging private investment in all
areas of economic and social activities. The private sector has been motivated by free market ori-
ented economic policy on the government.

To stimulate private investment, the government amended the investment proclamation sev-
eral times which resulted in booming of investment in all sectors of the economy. However,
Ethiopia has given greater attention to external (export) trade policies than any other prevailing
economic policy. Accordingly, a number of incentives have been put in place like: Duties on all
exports are now removed, a financial credit support system (Export Guarantee, pre and post ship-
ment loans) to the export are structured etc.

Considering the attractive investment climate, SEMELI has decided to establish honey pro-
duction and processing business for export purpose in Ethiopia, Oromia Region, Jimma zone.

The annual honey production of Ethiopia is estimated to be 45,300 metric tons which makes
the country rank first honey- producing country in Africa and ninth in the world.

In 2019 Ethiopia exported 153 tonnes of natural honey. For 2019 alone, the demand for
Ethiopia natural honey (processed category) has surged, with a change of 24.39 pc compared to
the year 2018. Between 2017 and 2019, natural honey's exports went down by -69.4% earning
Ethiopia US$0.63m for the year 2019.

In 2022, the approximate price range for Ethiopia Natural Honey is between US$ 4.1 and US$
2.54 per kilogram or between US$ 1.86 and US$ 1.15 per pound(lb).

Thus, in order to help the country to achieve the sated plan, SEMELI has planed to establish a
bee farm for the production of honey with the capacity of 500 tonnes per annum and establish a
plant for the processing of honey with a capacity of 500 tonnes per annum.

The plant will create employment opportunities for 25 persons.

The total investment requirement is estimated at about Birr 6.51 million, out of which Birr 3
million is required for plant and machinery.

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 The project is financially viable with an internal rate of return (IRR) of 17 % and a net present
value (NPV) of Birr 2.65 million discounted at 8.5%.

In order to honor the sales contract the PLC has in its hand and realize its sales plan, additional
working capital is needed since it is difficult to solve through internal financing only. Therefore,
Semeli Trading PLC is approaching the bank to secure a pre-shipment facility of Birr 20million
and birr 4 million in the form overdraft loan.

The projected profit and loss statement indicates that the business is profitable throughout the
projection period. At the first year of projection, the PLC will generate a net profit of Birr 7.6
million and reaches to Birr 16.3 million at the end of the fifth year of the projection.

The projected cash flow statement indicates that at the initial year of the projection the busi-
ness will generate net positive cash balance of Birr 7.6 million. This is expected to reach to a net
cash balance of Birr 59.6 million at the end of year five. This shows that the PLC will have a
healthy liquidity position and will not face cash shortage throughout the projected periods. More-
over, it is an assurance to the bank that the PLC will discharge the necessary repayments as
agreed.

Last but not least, the firm would like to assure Awash Bank to effectively utilize and repay
100% of its loans as per the agreed repayment schedules (please see the attached financial pro-
jections that include- Income Statement, cash flows, and repayments schedule for detail).

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 1 Introduction

1.1. Background of the Ethiopian honey import export industries

Beekeeping is a very long standing and deep rooted household activity in Ethiopia. Ethiopia has
a huge potential for beekeeping production because of its endowment with diversity in climate
and vegetation resources for beekeeping. According to different sources, the annual honey pro-
duction potential of the country is estimated to be 500,000 tones of honey and 50,000 tones of
bees wax.

Out of the total honey produced, roughly 80% is utilized for local brewing called Tej (honey
wine) with the balance being sold either as table honey in the domestic market or to the export
market. This amount of honey produced when it is translated into per capita honey consumption
using the current 100,000,000 population, is not more than 0.53 kg/head which is very small as
compared to the potential.

The demand for honey and other bee products as food and medicine for mankind has been in ex-
istence since time immemorial. On the other hand, even though high value is attached to other
bee products like propolis, venom, royal jelly and pollen, their use by developing countries is
very limited even not in existence in the case of Ethiopia. Ethiopia unlike most of her peers is
potentially blessed with honey and beeswax. But the benefit from the subsector in terms of do-
mestic supply and export market is very poor and totally limited to honey and beeswax. This is
mainly attributed to lack of mandatory standards resulting in adulteration and other fraud; limited
products for the market; poor market infrastructure and linkage; limited technical know how cou-
pled with lack of inputs and technology; absence of laboratory facilities for residue monitoring;
illegal export of honey across the boarders; too general extension service etc.

appropriate infrastructure should be in place for marketing and quality control, strong network
between producers and buyers should be established, dependable by-laws and enforcing mecha-
nism from the government side should be in place along the honey value chain, capacity building
of both producers and processors, commercialization of the sector to be competitive in the global
market and standardization of the products and food safety requirements should be properly ad-
dressed.

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 Ethiopia's top export markets for natural honey are Norway, Sweden, United Kingdom (UK), US
and Israel.
COUNTRY 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Norway 60 121 278 428 268 205 160 103 21 129

Sweden 0 1 1 33

United 17 31 63 54 45 42 54 44 21 21
Kingdom
(UK)
US 1 1 0 0 0 22 0 1 1 3
Israel 0 1 1 2 1 1 1
Yemen 8 6 28 33 55 15 6 2 2 0
South Africa 1 0
Bahrain 0 1 0
Saudi Ara- 13 22 21 8 9 3 2 3 0
bia
Germany 20 0 20 21 86 84 43 62 0

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 1.2 FORM OF THE BUSINESS AND BACKGROUND
SEMELI is engages in producing honey and wax for various market segments around the
world. The company base in Afar, Ethiopia. SEMELI has a vision to be one of the highly compet-
itive and respected honey exporters in Ethiopian. The company is being run and staffed with
qualified and experienced experts and employees in area of honey business industry.
SEMELI also strongly complies with strict adherence to the following highest standards of val-
ues:
 Commitment: We strictly work on the highest attention for quality and satisfaction of our
clients by providing premium quality honey.
 On time Delivery: We always ship the honey that our buyer’s has sampled and dedicated to
our customers’ schedules and on timely bases of shipment.
 Sustainability: We work in all our capacity to provide sustainable service and establish long
term business relationship with our buyer’s.
Honey as well as honeycomb is the key hive yields which remain widely used for dissimilar
drive all over the nation.

To date, the Honeys of Ethiopia network includes the four Presidia (Wenchi volcano honey,
Tigray white honey, Rira honey and Bore honey) , Wolisso, Shalala, Horde, Getche, Badogo,
Wondo and Wassarà.

Each honey has different characteristics, reflecting the unique environment, climate and flora of
their places of origin.

The race is alike to A.m bandassii situated on sub humid vital highland of the area. Beekeeping
delivers unlike part in Ethiopia in universal besides in Afar Gewane Weredas area, Afar Region,
Ethiopia in actual meanwhile honey and hive harvests are vital basis of diet and pay; it generates
work occasion besides saves the atmosphere in equilibrium finished fertilization. Yet of the vast
latent of beekeeping and honey bee vegetation, beekeeping has not been entirely oppressed and
endorsed in the weredas. While bee keeping applies are broadly accepted and have great finan-
cial worth predominantly in Gewane woredas Afar Region, Ethiopia , its possible and restraints is
not healthy recognized and investigated available so far. There are no papers in respect to bee
keeping workout and trials in Gewane woredas, Gebiresu Zone, Afar Region, Ethiopia. As an out-
come, this survey was expected to assess the overall opinions regarding the latent and restrictions

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of bee keeping exercise in Gewane Wereda Afar Region, Ethiopia. Consequently evaluating the
present repetition of beekeeping allow one to recognize the latent and restraints for beekeeping,
and availing relevant evidence is supposed to assistance advance experts and investigators who
habit the evidence made for interference drive or type well-versed results. Consequently, the
general neutral of the revision was to evaluate the production system and limitations of bee keep-
ing performs and its management in Gewane Weredas area.
Even though Ethiopia is already the leading African country in honey production, there is still
room for growth. SEMELI project sets the country firmly on the path to achieving honey produc-
tion self-sufficiency by 2025, reducing dependence on expensive imports, boosting the economy,
and creating thousands of jobs and business opportunities.
Thus, to satisfy this unmet demand, SEMELI has a plan to establish honey farm in Gewane
Weredasarea.

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 2 HUMAN RESOURCE AND MANAGEMENT

2.1 STAFFING AND MANPOWER REQUIRMENTS

The proposed project will require 57 employees of whom 47 are direct production workers and
10 are administrative workers. The annual labour cost of the project is estimated to be Birr
257,680. When we see the organizational structure and the human resource, it is simple and orga-
nized in such a way that enable the firm to operate successfully. Thus, at the top of the organiza-
tion, the plc is ran by the General Manager Ato SEMELI MOHAMED , he is responsible and in
charge of planning, organizing, leading, controlling the overall operations and financial perfor-
mance of the business.
In addition to that, the firm is striving to ensure that the hired and the to be hired employees
are qualified, hardworking, creative, customer centric and are ready to work to help the firm to
build a prosperous business that will benefit all our shareholders, partners and esteemed cus-
tomers.
Therefore, in addition to the General Manager, The management team of the PLC is composed
of Bee Farm Managers, Plant manager, Finance and Admintrative Manager, human resources
manager, Operators-mechanics and Marketing Manager. The table shows number of positions by
job title and monthly and yearly salary provided for each job title. However, the firm will hire
temporary and daily labors as the demand arises.
Sr Position Qualification Quantity Monthly Annual
. Salary Per Total Salary
No.
1 General Manager 1 20,000 240,000

2 Bee Farm Manager 1

3 Plant manager
3 Marketing Manager. 1
4 Finance and Admintrative 3
Manager
5 human resources manager 6
6 Health officer 1 15,000 180,000
3 Secretary 1 15,000 180,000

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 4 Accountant 1 15,000 180,000

5 Cashier 1 5,000 60,000

6 Sales persons for 7, 500 90,000

business
7 Purchaser 1 4,500 54,000

8 Store keeper 2 7,500 180,000

9 Guard 1 7,500 90,000

10 Operators-mechanics 1 4,500 54,000

Production workers
Total 12 1,40400

2.2 ORGANIZATIONAL STRUCTURE

Structuring is an internal arrangement of an organization to achieve the optimum arrangement
of functions among many possible alternatives. In order to make the structure efficient and cost
effective there are a number of management principles and logical parameters by which the
process of structuring should be governed. In the current competitive business environment the
business needs a simple functional structure that can respond and adapt to rapidly changing mar-
ket conditions. The organizational structure of the business is pictorially shown below.

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 Organizational structure of SEMELI Honey production and processing

General Manager

Finance and Admintrative Production Manager Processing Manager

Manager

3 MARKETING STRATEGY
Marketing strategy is a set of controllable and tactical marketing tools that the Company
blends to sell its services and products as per the response it wants in the target market. Market-
ing strategy includes, but not limited to the best possible mix of; the quality of the service/prod-
uct, the price of the products and the promotional activities. A combination of these elements af-
fects the ultimate revenue generation success of the business of the trading.
SEMELI plans to enter the market with its 100% pure honey by targeting the business to busi-
ness market. This will be done by supplying honey to an existing and reputed honey packer
through whom the product will enter the market. This will lead to a reduction in the marketing
costs at the initial stages and also minimize the risk of entering the new market

3.1 MARKETING OBJECTIVES

The following are the major objectives of the business:
 Provide better quality and increasing market share by offering competitive price as per cus-
tomer demands
 Increase sales substantially in the first full year of operation and the years to come.
 Establish strategic relationships with 5-10 with current and future principal importers of
Ethiopian honey who are found in various parts of the world through our outstanding, guar-
anteed product quality, personal service, and efficient delivery.

3.2 PRODUCT DESCRIPTION

There are by far more different and unique flavor profiles to be found in Ethiopia than in
any other honey producing country. This is thanks to the incredible geographical, genotypic,
and temperature variety within this ancient country. We will be one of the leading exporters of
Ethiopian honey from different origins with variety of flavors.

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 Every spoonful of honey contains 82 grams of high carbohydrates or 27 percent of the daily
value. It has no vitamin but compensates this with a total of 304 calories per a hundred grams.
It also has no fat content, which is why honey is good for fighting cholesterol.

Honey controls various diseases due to its low fat and undiluted quality. Though very high
in sugar, studies have found that honey lowers serum triglycerides in blood. This means that
the glucose actually goes down rather than up. It is therefore a weight loss remedy. Because of
its multiple plant nectar composition that bees collect from various plants, honey prevents al -
lergies. Consuming the liquid gold makes a person who has been allergic to a food from a cer -
tain plant cease to be so. This is because the pollen of the offending plant composes the same
honey. The body reacts by accepting the food in the future.
Our workers harvest honey under phytosanitary and protective conditions. Each worker
wears head to foot PPE and special gloves for handling beehives. The first step involves
smoking the beehive area to release the bees from inside. They then use crow bars to open the
hives, followed by a spray of food-friendly gas to ward off any remaining of these beneficial
insects. They then uncap the wax comb using sharp tools.
The extraction process, which involves the placement of a collecting drum beneath an ex -
tractor. We use the hand-cranked extraction equipment to ensure the honey is only mechani -
cally produced. Each worker cranks the machine round to extract the thick liquid off the wax.
We also use cheesecloths to seal off any clinging wax from the crystal brown honey. This can
also be an adjustable width mesh that keeps off the larger materials, including impurities and
wax. The viscous honey then flows gently through the mesh or cheesecloth into the collecting
drum beneath the extractor.
We also process any remaining honey and wax in high quality water-bath apparatus. This
refers to an indirect heating equipment that bring the moisture levels in the product to less
than 17 percent. Our processing follows the same routine as the above only that the honey is
cleaned throughly from the wax. Usually we melt the thick remaining by-products to produce
beeswax. This is used in a number of industries.
We pack the processed honey in crystal clear honey pots made of glass. We start with 1.2
ounces bottles that come with cork lids for enhancing the freshness of the product. We also
have large corked bottles of over 16.9 ounces. Each package is wrapped carefully in po -

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eryethelene lined cartons before shipment. If you like we also provide scooping bamboo
spoons with the package made of recycled timber from the highlands of Ethiopia.
We store honey at temperatures between 10 and 20°C. This keeps the honey bright golden
with no hints of dark tints that come only when temperatures go above or below that level. We
transport the honey under the same conditions in our special transportation trucks.

3.3 TARGET CUSTOMERS

Our target customers are the principal importers of Ethiopian honey besides to the local mar-
ket customers. In this market the major expectations customers have about the products they pur-
chase are:
 Fair price
 Quality product (size, color, shape and dryness etc)
 On time delivery- For ordered products.

3.4 PLACE/ DISTRIBUTION STRATEGY

According to the resource potential study of the region, the production and processing area is
identified in Jimma zone, Horro Weredas, Kellem Wollega area, Oromia Regio is selected and
recommended to be the location of the envisaged plant
All of the honey produced and processes for export will be transported via rail and/or truck
from Ethiopia to the port of Djibouti. From the port it will be then shipped, in foot containers, to
the destination port specified by the importer. Distribution charges are assumed by either parties
as detailed in the sales contract.

3.5 PRICING STRATEGY

In 2022, the approximate price range for Ethiopia Natural Honey is between US$ 4.1 and US$
2.54 per kilogram or between US$ 1.86 and US$ 1.15 per pound(lb).
The price in Ethiopian Birr is ETB 171.9 per kg. The average price for a tonne is US$ 4098.04
in Dire Dawa and Addis Ababa.

Ethiopia's import price for natural honey in 2019 was US$6.80 per kilogram.

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 The import market largely determines the price of export honey in most of the cases. How-
ever, since we adheres to higher quality standards, the price of our honey will be fair enough and
slightly greater than the market average.
In addition to that, the business sets and will continue to set its prices on the basis of the fol-
lowing two strategies:
1. Production process pricing strategy by which price of a product is determined by consider-
ing
 investment Cost
 Production cost
 Tax and
 Profit Margin and
2. Based on what the competitor is charging
Once the price of a product is determined, it will be cataloged and discounts will be given to
key customers to encourage negotiation for large purchases, long term clients or prompt pay-
ment.

3.6 PROMOTION STRATEGY

Relationships are key to success in the export business. As a result Personal selling will re-
main our most important means of promotion. In addition to personal selling, the business is go-
ing to explore all available means to promote itself. The business will implement the following
types of promotion and advertising:
 Designing a responsive and dynamic website that will provide potential customers with all
the relevant information about the business and its products to customers.
 Direct mail in the form of personal letters will also be used to communicate with existing
and potential clients.
 Distribute Flyers and Business cards
 Place adverts on both print and electronic media platforms
 Leverage on the internet and social media platforms like; Facebook, Twitter, You tube and
Linked In etc to promote the products and the brand of the plc.

3.7 SUPPLIES
It is available on the market as table honey and also as a food ingredient, for example in
sweets such as liquorice or in bakery products. Beeswax, another produce of honey bees, is used

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in cosmetic products like lip balms. But because the bee population is decreasing globally, there
aren’t sufficient honey supplies to meet European demand.

European companies are looking for honey supplies elsewhere, a great opportunity for honey
suppliers in developing countries, such as Ethiopia. Ethiopia has a strong tradition of producing
and consuming honey. Honey is used in honey wine (or “Tej”), a national drink. But the country
was not on the map of European importers. The quality of Ethiopian honey was too low, and the
level of entrepreneurship was limited.
To supplies our product for the export of high quality and certified honey will be sources
trough working with the world best known importers of honey which are found in different parts
of the world.

4 FINANCIAL PLANNING
Projections are made based on reasonable assumptions. Based on these assumptions, a com-
plete set of financial projections are provided in this section. These projections include initial in-
vestment cost, production cost, financial evaluation schedule. The projections are prepared on an
annual basis.

4.1 Total initial investment cost

The total investment cost of the project including working capital is estimated at Birr 6.51 mil-
lion, of which 36 per cent will be required in foreign currency.
S/n Cost item Total cost

1 Land lease value 48.0

2 Building and Civil Work 750.0
3 Plant Machinery and 3,000.0
Equipment
4 Office Furniture and 100.0
Equipment
5 Vehicle 250.0
6 Pre-production 390.9

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 Expenditure*
7 Working Capital 1,973.1
Total Investment cost 6,512.0
Foreign Share 36

4.2 Production cost

The annual production cost at full operation capacity is estimated at Birr 11.13 million The ma-
terial and utility cost accounts for 91.81 per cent, while repair and maintenance take 1.02 per
cent of the production cost.
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items Cost %

Raw Material and Inputs 8,850.08 79.49

Utilities 1372.5 12.33
Maintenance and repair 113.65 1.02
Labour direct 78.84 0.71
26.28 0.24
Factory overheads
Administration Costs 52.56 0.47
Total Operating Costs 10,493.91 94.25
Depreciation 429.9 3.86
Cost of Finance 210.43 1.89
Total Production Cost 11,134.24 100

4.3 Financial evaluation

1. Profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on eq-

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uity) and net profit plus interest on total investment (return on total investment) show an increas-
ing trend during the life-time of the project. The income statement and the other indicators of
profitability show that the project is viable.

2. Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at full ca-
pacity ( year 3) is estimated by using income statement projection.
BE = Fixed Cost / Sales – Variable Cost = 52 %

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered within 6 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 17 % and the net present
value at 8.5% discount rate is Birr 2.65 million.

D. ECONOMIC BENEFITS
The project can create employment for 75 persons. In addition to supply of the domestic needs,
the project will generate Birr 1.8 million in terms of tax revenue.

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