Production and Supply of Chicken Products
EXECUTIVE SUMMARY
Currently, over 90% of processed chicken products are imported frozen from Europe and Brazil. As a result of this, the Ministry of Food and Agriculture (MoFA) of Ghana has, as one of its major policies, to increase domestic production and reduce the importation of poultry products. The size of the Ghanaian market is estimated to be about 300,000 metric tons per annum with only about 50,000 metric tons produced locally.
Tradezone International Foods Limited (TIF) is desirous of setting up a vertically integrated commercial broiler raising and processing plant, located on two (2) sites in the Akuapem area of the Eastern Region of Ghana. The plant will have a maximum capacity of 200,000 dressed broilers per week to help close up the identified deficit between national production and consumption. TIF recognizes importers of these processed low-cost chicken products as its main competitors.
TIF intends to compete against the importers of chicken by selling at competitive prices (taking into consideration the cost factors of production, overheads, contingencies, market trends and demand), and emphasizing the freshness and tastiness of its products, and highlighting its superior customer service.
TIF’s production system will consist of a broiler breeder farm, a hatchery, broiler grow out farms, a processing plant, and a feed mill. To support the feed mill and the farms, a veterinary and nutrition laboratory will be established. The company will implement the project over three (3) phases (years) with the following bird per annum targets:
- Three (3) million in the first year,
- Six (6) million in the second year, and
- Twelve (12) million in the third year.
TIF has assembled together a formidable board and management team with long and diverse experience and qualifications in poultry farming, agribusiness, nutrition, meat processing, accounting, business administration, human resource management, marketing and land economy to deliver the project. The four (4) top executives have a combined senior leadership experience of more than seventy (70) years.
The marketing objective of TIF is to grow its market share to 10% of the national market by end of third year of its operation. TIF intends to achieve this through employing good poultry farming practices, good branding and positioning of the company, good advertising, good distribution set up, good customer relations and highlighting the company’s cutting-edge technology, excellent poultry farming practices that will enable the provision of non-stop and reliable supply of its products.
An environmental and social impact assessment (ESIA) for the project has been carried out by the Environmental Protection Agency (EPA) at the project sites, and TIF has been issued with a certificate to that effect. Owners of the company took into consideration the following factors before choosing the sites for the farms: the topography, setbacks (how far the sites are from residences, schools, churches, public areas, streams, etc), proximity to raw materials, utilities (electricity and water), litter utilisation, and roads.
Implementation of this project does not conflict with any legal requirements in Ghana, and all legal and regulatory requirements, (such as land title acquisition, building permits, company registration and incorporation, environmental impact assessment) have been dealt with. Therefore, the project is acceptable in accordance with the laws of Ghana.
The total loan amount needed is €114.328 Million to be disbursed in three (3) tranches:
- Phase 1 - €60.510 million – at the beginning of the project
- Phase 2 - €29.036 million – 12 months after commencement of operations
- Phase 3 - €24.781million – 24 months after commencement of operations
The government of Ghana’s policy direction on poultry, and the general macro- economic climate are good for this project. The government is eager to generate jobs to help alleviate poverty in Ghana, and has therefore launched a program called, “one district, one factory” which aims at supporting investors to establish economic projects in the districts.
The NPV and IRR for this project as calculated on the spreadsheet in Appendix G is €99.719 million and 25% respectively. Since the NPV is positive and the IRR is higher than the rate of return, the project is considered as viable and attractive.