Profitability Analysis Overview for Certified Arabica Coffee Seed Production to Seed Entrepreneurs in Ethiopia

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Introduction
Coffee (CoffeaarabicaL.) is the most important crop, and one of the most enjoyed beverages throughout the world.As a result several hundred millions of people in the world drink coffee.It is one of the leading commodities in the international trade, and currently generates revenue of about US$ 14 billion annually for the producing countries.More than 80 countries, including Ethiopia cultivate coffee that exported for more than 165 countries worldwide providing a livelihood for 100 million people around the world [10].
In Ethiopia, coffee is one of the major and leading export items.Ethiopia is currently producing an estimated9.8 million bags that would rank the country as the fifth largest coffee producer in the world [9].Apparently, coffee is at the center of Ethiopian culture and economy, contributing to 35% of the country's foreign currency earnings.It accounts for 10% of the gross domestic product, and supports the livelihoods of around 25% of the population of Ethiopia in one way or another [8].
Ethiopia is both the center of origin and diversification of C. arabica L. [4,5,7].The crop spreads widely from the riverbank of Gambella plain (550 m.a.s.l) stretching to the central and Eastern highlands of the country, where it exists in the great range of types within species [3].Due to this fact that Ethiopia is enormous genetic variability, that offers great potential for improvement of the crop.Despite its great importance, the average national productivity is very low (about 6.91 quintals per hectare (average of two consecutive years, 2014/15 to 2015/16)) as compared to the average productivity of the world and other major coffee producing countries [6].This is attributed to shortage of improved varieties, diseases, insect pests, drought, and poor management [1].Among many reasons that limited coffee productivity improvement, shortage of pure line and hybrid varieties is the major one [2,4,11].Intensive efforts have been made by Jimma Agricultural Research Center (JARC) to boast coffee productivity in the country.Over the last 50 years, 42 coffee varieties, out of which thirty-five pure lines and sevenhybrids released for various major coffee growing agro-ecologies of the country [12].
Although many factors hampered production and yield per unit area, the major factors contributing to such low coffee yield include predominant use of unimproved local coffee landraces, as well as conventional husbandry and processing practices, which in turn seriously hampers the overall national coffee production and productivity of the smallholder coffee farmers in the country.The Ethiopian framers used local coffee seeds and production is not as much increase as Ethiopia is the center of origin.To increase coffee production and productivity of the country and to export high and quality coffee to the world market using improved variety with good husbandry is mandatory.Then the incomes of individual increase and as a whole the country economy fasten rapidly.
The objectives of the Green Gold Certified Arabica coffee seed enterprise (GGCACSE) are: 1. To provide certified and quality coffee seed to the Ethiopian coffee growing farmers and private and governmental sectors, which produce coffee in the country according to agro ecological zones.2. To alleviate the current low supply of breeder and certified coffee seed by different sectors, and to produce enough amount of certified seed based on the requirements.3. To aware the coffee growing farmers and different growers about the importance of using certified coffee seed and performing appropriate agronomic and cultural practices in their production.Generally, the business improves the livelihood of coffee growers, and increases the country economy.

Name of the Business
The business will be known as "The Green Gold Certified Arabicacoffee seed enterprise (GGCACSE)".

Mission Statement
To provide, high yielding, disease resistant, pure, viable and quality coffee seed services to the small coffee growing farmers, NGO's and other private and governmental sectors, they work on coffee production surrounding the major coffee growing areas of the country.The business focus to provide certified coffee seed services and give emphasis on skills development how to grow coffee to produce a maximum production.The skill and experience sharing approach to different sectors starting from sowing and nursery management up to the end of coffee processing stages, i.e. harvesting, processing and packing until they export or transmit to exporter.Then, the farmers and different coffee growing sectors grow the quality coffee seed and produce high yielding, disease resistance and a quality coffee and provide a superiority coffee production service to the local and international markets.After this, the income of the individual farmers, private, governmental sectors and as a whole the country revenue will be increase rapidly.

Ownership of the Business
The business will be started as private limited company with two stakeholders, Mr. Xand Mr. Y.Mr. X is coffee breeder and pathologies, and Mr. Yis coffee agronomist in their profession.Each of the stakeholders will own about 50% of the issued stocks and equal to their individual paid-in capital.The formal character and agreement will be accordance with the law of the Ethiopian country and drawn up governing rules by the GGCACSE owners.

Types of Business and Product or Service
The purpose of the GGCACSEis to provideCertified and a quality coffee seed to the Ethiopian coffee growing farmers, NGO's that works on coffee plantation, governmental coffee plantation sectors located in different parts of the country, specially to the south west, southern and south east parts of the Ethiopia, which are the major coffee producing areas in the country.The business runs through using good yielding, quality and disease resistant coffee varieties by the research.Most of the Ethiopian farmers used forest coffee or local seeds with no or little coffee management practices, and why the production of the country is very low.In this private enterprise planned to plantimproved coffee seeds on fieldby maintaining its purity and supply for different stakeholders as a certified coffee seed.

History of the Business
The business has no any history but there is research center and limited coffee seed enterprise that provide coffee seed, but the amount of production and the quality of service is low andas compared to the demand of the country.As we know, most of the Ethiopian coffee production is holding on the small coffee growers, those farmers used forest and semi-forest production system.As a result, the production capacity is about 6 to 7qt/ha at average in the national production [6,13].This is low production as compared to the capacity of the released varieties in the research and the potential of the country.By contributing a certified coffee seeds to the farmers and different coffee growing sectors, the forest and semi-forest production system will be changed into modern plantation system.Then, the coffee production of the country increases in sustainable way.The twoowners have experience and knowledge on coffeeproduction, processing and management.Mr. X has more than 5-years of research experience in coffee breeding and pathology; Mr. Y has 3-years of experience in coffee agronomy and administrative experience.Therefore, Mr. Ywill manage the administrative duties of the company.

Location and Hours of Operation
The proposed business location will be at Jimma, Ethiopia, currently, land is owned by the government and we propose to the government toprovide them the land for coffee seed production.The business hours will be from 8:00 a.m. to 5 p.m. Monday to Saturday.The company willbe closed every Sunday, New Year's Day, Charismas, Thanks giving and Easter.

Revenues and Accounting
Revenues will generate by providing reliable and quality seedservices to the Ethiopian farmers, private and governmental coffee producing sectors.For the beginning of three years of the enterprise no need of an accountant, but when the production start to produce accountant will be employee for the preparation of business financial statements and taxes.

Legal
The business will be in compliance regarding the rules and regulations ofthe certified seed agency, and the Ethiopian agricultural policy.The owners will obtain the requiredoperating licenses issued by the certified seed agency of Ethiopia and from Jimma city trade and industry office.The law of land administration office will provide contractual agreements and other legal services.

Current Proposal
As the need for GGCACSE services Mr. X and Mr. Y have a total of birr 500,000 each of them contribute birr250,000 toinvest in this project (in cash and bank saving).They need additional financing businessfrom bank loans birr 500,000 for 15 years loan period to acquisition of equipment, a total birr 1,000,000 will be require to run the business.

Target Market
The proposed GGCACSE is targeting coffee growing farmers who are motive to change their production and productivity.The ideal customers are highly interested to use certified coffee seed to produce the maximum production through their effort.The second target market consists of various coffee growers such as NGO's, governmental sectors, other private sectors and coffee growing enterprises.The final business group that the GGCACSE is targeting will becertified coffee seed shop owners.

Product
The product of the business will be based on four agroecological zone of Ethiopia, which are major coffee production areas.These are; 1) Harar specialty coffee, which produced in the eastern highlands at altitudes of 1,510 to 2,120 m.a.s.l. 2) Wollega (Nekemt) specialty coffee known for its fruity taste has medium-to-bold sized beans and a greenish-brownish color.3) Limu specialty coffee produced at an altitude from 1,400 to 2,020 meters above sea level.The beans of this origin are greenish-bluish in color and mostly round in shape, and have a medium-sized.4) Sidama/Yirgacheffee coffee specialty; it produced in southern parts of Ethiopia at altitudes of between 1,400 to 2,200 meters above sea level.We will be use Varieties released from research, which are high yielding, disease resistant and quality to produce certified coffee seed.

Production Volumes
The amount of certified coffee seed production with good management and the necessary inputs will be 10qt/ha or 1000kg/ha.It will be determine that for the proposed coffee seed production startsin year four with total amount production 20,000kg in20ha of land and increase as the enterprise builds its reputation and customerbase.However, the production of seeds will be reached up to 50ha of land with 50,000kg certified coffee seed production as shown in table 1. CP means coffee plantation in hectare of land Tot.Prod.=total production per variety; Year1 up to year3 the coffee trees have found in seedling stage, i.e. no income generates during these period.

Processing Storage and Packing
During processing, each varietyprocessed with different machine or through careful cleaning of the machine.In addition to this, during drying the seed will be maintain with Seed Entrepreneurs in Ethiopia optimum sun light, specially protect from high sun radiation during the day time until the moisture percentage reached 11.5%.The type of stores will be cold room to longevity its viability and germination percentage.The germination percentage and viability is essential features to attract customers.Production of the faithful varieties without genetic constitution loss will be supply to the customers.Packing material will be attractive and its working materials will not be heat absorbance so the temperature inside the sack not to be aggravate.

Market Analysis
Coffee growing areas of Ethiopia is rapidly going up due to expansion of smallholder farmers and many coffee sectors and investors.This shows that coffee production become more increasingly from the previous time.So, those individuals, sectors and investor require large amount of certified coffee seed.GGCASE specifically targets the smallholder farmers, NGO's, investors and governmental coffee production sectors located in different coffee growing areas of Ethiopia.

Distributionand Sales Strategy
The first and most preferred certified coffee seed-marketing channel is direct sales to customers.The second marketing channel consists of direct sales to in-state retailers.Wholesalers permit and operate as an in-house distributor selling certified coffee seed directly to individuals.An advantage of selling directly to retail outlets is higher margins, self-representation, and the ability to develop a relationship with retail customers.The third marketing channel involves selling to distributors.Distributors are necessary for reaching seeds to individual farmers located throughout the nation.

Price
The proposed certified coffee seed will adopt a moderate price with high quality strategy.Prestige pricing will be used to inform customers of the high quality product being sold.The following table 2showed the proposed retail onekilogram prices for the certified coffee seed.The Prices will determine by looking at competitor's prices and through discussions with the GGCACSE Committee.

Comparative Competitor Analysis
Now, there is one coffee seed multiplier and distributor well known in the country; i.e., Jimma Agricultural Research Center (JARC) that offers direct competition.Some NGO'S also produce seeds for themselves but they do not supply for others.

Marketing Plan
GGCACSE will be promoted in various local media.Clients might be alreadybeginning promotion by word of mouth after the first product.Formal advertising planned to begin six months before thecompany is scheduled to start giving production.
Promotion They may use a combination of advertising, personal selling, sales promotion, newspaper, media, public relations, and direct marketing tools to communicate with current and prospective customers.Promotion activities will be targeted at both end consumers and middlemen.End consumer promotion events will be intended to bring customers to the market.Events targeting intermediaries will focus on building relationships and reestablishing contact.A large focus of the promotion campaign will be developing good public relations among customers and the community.A significant percentage of certified coffee seed will be used for promotional purposes.

ManagementPlan
Mr. X will be responsible for the overall operation of the GGCACSE service.He has experience with repairs and light construction projects, while, Mr. Y will be responsible for account and administration ofthe company for the first three years.The selection and retention of employees, as well as the expenditure of funds willbe jointly shared.

Leadership / Entrepreneurial Team
The business owners will need recruit, train and quality employee for the enterprise.They acquire well experience in coffee planting, management, processing, and so on.There is accessible labor around the area for daily activities.Most of the workers will be temporarily and contract employee due to the seasonal nature of the business as shown in tables 4, 5 and 6.However, even if some workers will be in contract way they stay in company throughout the year.Those employees will be accountant and other service providers.The employees will be paid according to their educational background and the company profit.Additionally, the payment will be considered with the other governmental sectors and NGO'S.

Operational Plan
The enterprise will be accomplishing different activities according to the seasonal distribution as shown in table 7.

Financial Plan
The financial projections will be based on three-year expenditure of580,000 ETB.During theFourth years of production expense will be birr 654,000 ETB and thefifth, sixth and the consecutiveyears of operationcosts will be 1,100,000 ETB and1,352,000 ETB, respectively, itcovers from coffee seed.The first three successive years, there is no production service because the coffee plants take 3-4 years to give yield.So, during this time only expenditure and there isno revenue or income.This project will give the corporation a gross profit of 2,200,000 ETB,3,300,000 ETB and 5,500,000 ETBand net income profit of 546,582 ETB, 769,096 ETB and 1,912,153 ETB in the fourth, fifth, six and consecutive production year, respectively.Initial enrollment is expected to be 20, increasing 40-50by the successive year of production.The employments perform the activities of coffee plant management, harvesting, transport, processing, packing and selling.Each enrollment has its own work descriptions and they perform other tasks according to the workloadand the condition.

Table 1 .
Annual certified coffee seed Production Volumes for each agro ecological coffee growing zones (kg).

Table 5 .
Full time Personnel Requirements & Expenses.

Table 8 .
Sources and uses of cash.