1.

Executive Summary

Abol coffee prepares Arabica coffee beans grown in Ethiopia for exportation to American
specialty roasters and sells to wholesalers on the Ethiopian market. We will expand production
capacity from 72,000/60kg bags per year to 120-160,000/60kg per year. Our coffee stands out
from that of the competition. We prepare the top five percent, in terms of quality standards, of all
Arabica beans on the market. Our customers seek this product as it provides them with a point of
differentiation to specialty roasters. In the past six years, demand for our coffee has exceeded the
amount we are able to supply and we have been forced to refuse requests for larger shipments.

We predict growth of thirty percent in the first year with sales exceeding expectations. In year
three the plant will run at maximum capacity and based on the current price of coffee we expect
excellent profits. We have positive indicators from current importers that the additional amount
of beans will be sold.

Our keys to success are:

1. Establishing and maintaining working relationships and contractual agreements with

American importers and Brazilian coffee brokers and wholesalers.
2. Bringing the new facility to maximum production within three years of operation.
3. Increasing our profit margin with the use of improved technology in the new facility.
4. Effectively communicating to current and potential customers, through targeted efforts,
our position as a differentiated provider of the highest quality Arabica beans in the world.

1.1 Mission

Abol Coffee seeks to serve coffee importers and enthusiasts by exceeding minimum acceptable
quality standards and by providing the highest quality product at the lowest possible price. We
value our relationships with current and future customers and hope to communicate our
appreciation to them through our outstanding, guaranteed product quality, personal service, and
efficient delivery. Our commitment to our customers and the country of Ethiopian will be
reflected through honest and responsible business.

1.2 Keys to Success

The keys to success for Abol Coffee are:

 Establishing and maintaining working relationships and contractual agreements with

American importers and Ethiopian coffee brokers and wholesalers.
 Bringing the new facility to maximum production within three years of operation.
 Increasing our profit margin with the use of improved technology in the new facility.
 Effectively communicating, to current and potential customers, our position as a
differentiated provider of the highest quality Arabica beans in the world.
 2.Company Summary

Abol Coffee buys and prepares raw coffee in parchment, or coffee in its post-
harvest stage. The finished product, Arabica coffee beans are packaged in 60kg
sacks and sold on the U.S. and Ethiopian market. Our customers are primarily
American importers and Ethiopian wholesalers who provide high-quality beans to
the specialty roasting market.

 2.1 Company Ownership

Abol Coffee is a private, family owned preparer and exporter of Ethiopian -grown,
Arabica coffee beans. It is owned and operated by Abel Mamo and his sons, Yared
Abel ,and Surafel Abel.

 2.2 Company History

Abol Coffee is in its sixth year of operation. The current plant has been in operation for
15 years and for 12 of those years was managed Abel Mamo. who was then an employee
of the former owner, Café Peace. Since the plant was purchased, Abol Coffee maintained
maximum production and sales. It is currently operating at maximum capacity.

2.3 Company Locations and Facilities

Abol Coffee main warehouse and office is located Jimma . The warehouse has the capacity to
prepare approximately 6,000 60kg bags of exportable coffee beans. The proposed new
warehouse and preparation facility site is also located in Jimma. The new facility will be 3.500m 2
and will have 30 selecting machines with capacity to prepare 40,000 bags for exportation and
80,000 bags for storage. The proposed facility will also handle shipping.

Past performance

1996 1997 1998

Sales $16,262,532 $17,304,066 $18,345,600
Gross Margin $2,439,380 $2,630,218 $2,814,215
Gross Margin % 15.00% 15.20% 15.34%
Operating Expenses $12,196,899 $12,631,968 $13,346,424
Inventory Turnover 12.00 12.00 12.00
3.Products
Abol Coffee deal exclusively in green coffee, grown in the south states of Ethiopia and one-
hundred percent Arabica. Beans in parchment are purchased directly from growers and are de-
husked and packaged into 60kg sacks in the Abol Coffee plant. The final product is suitable for
sale and exportation.

3.1 Competitive Comparison

In order to differentiate our product, coffee, which is a commodity, from the product offering of
competitors, all beans are guaranteed fresh and are shipped within seven days of preparation. In
addition all beans are sorted at ninety-five percent screen 18 and above compared to the industry
standard ninety percent screen of 17 and above. The beans shipped by Abol Coffee are therefore
larger than most and are guaranteed fresh. In addition, all of the farms from which Abol Coffee
purchases coffee adhere to environmentally sound farming practices and avoid the use of
pesticides and chemicals in crop production.

There are approximately ten competitors who offer a product similar to ours. Our research
indicates that with the additional capacity we would become one of the top four, in terms of
quantity, providers. We have the advantage of established distribution channels and reputation.
In addition, improvements to our marketing efforts will further separate us from the larger
market and from our close competitors

3.3 Sourcing

Both the existing and the proposed facilities are ideally located in Jimma, in the state of
Oromiya. Oromiya is the largest coffee producing state in Ethiopia and beans produced in the
region are of the highest quality. With additional financing, we would be able to buy larger
volumes at lower prices. We now buy from one or more of six private growers or grower
cooperatives. Contracts are secured six months in advance of harvest.

4.Market Analysis Summary

Coffee is the second largest commodity market next to oil and Ethiopia has remained the largest
producer of coffee in the world. Imports of Arabica coffee in the United States have increased
ninety-four percent in the past five years and consumption of coffee within Ethiopia has seen
similar increases. In addition, demand for coffee is above the market clearing level, and market
price and crop yield estimates are at an all time high.

The increase in the number of independent specialty roasters in the United States and Ethiopia
has contributed to and is an indicator of the increased demand for coffee. Within the larger
coffee market is our target market is the specialty roaster. These discerning customers want the
highest quality coffee beans. They serve the growing "gourmet" coffee market and are
represented by large American companies like Starbucks and thousands of smaller specialty
roasters. The Arabica bean is considered to be the best in the world and as such, the demand for
Arabica beans is high on the specialty roaster market. Specialty roasters are willing to pay more
for Arabica beans and attempt to distinguish themselves via the characteristics of the bean they
use i.e. the location in which it was grown, farming methods, bean size, etc. The final consumer
is relatively price insensitive if the coffee is good, has won awards, or is compatible with a
popular trend. We estimate that specialty roasting in the U.S. alone is a ($USD) one-billion
market.

4.1 Competition and Buying Patterns

 The purchase decision for our customer is based on trust in our process and bean
selection. We have established relationships with our customers which extend beyond
that of the buyer/seller. The Abol Coffee label means that the product has been chosen
and prepared with the highest quality standards in mind. Our beans are priced up to nine
percent higher than similar products. Our customers are willing to pay more for our
product because they are familiar with us and trust in the quality of our beans. This is the
result of their success in the marketplace with our product.

4.2Distribution Patterns

 All of the coffee produced for exportation by Abol Coffee and approximately eighty-five
percent of all coffee produced for exportation in Ethiopia is shipped from Addis Ababa.
Prepared coffee is shipped via rail and/or truck from the Abol Coffee plant in Jimma to
Addis Ababa. Distribution charges are assumed by Abol Coffee up to the arrival of the
shipments in Miami whereupon importers assume responsibility, as detailed in contract,
of the shipment and additional distribution charges.

5.3.2 Distribution Strategy

Distribution is one of the greatest challenges faced by Abol Coffee . The distribution system of
Ethiopia is largely outdated and inefficient. Moreover, taxes, specifically excise taxes are high.
Distribution costs for internal sales are absorbed by the customer but distribution costs for
exports are absorbed by us. Increasing the volume of our exports makes us eligible to receive
reduced fees and helps ensure that trucks and cars are running at maximum capacity.

5.3.3 Marketing Programs

Our most important marketing program is an increase in personal selling combined with targeted
direct mail and print advertising. Abel Mamo will be responsible, with a budget of 35,000 The
program is intended to establish contractual agreements with 10 additional importers, increase
brand awareness of our product in the United States, and communicate our position as a provider
of the highest quality Arabica beans on the market.

Another key marketing program is the development of a sophisticated Website. The goal of this
program is to increase our presence on the world wide web and provide additional means of
communication and customer data collection. The website will cost ($BRL) 125,000.

5.3.5 Pricing Strategy

Because Abol Coffee adheres to higher quality standards, the price of our coffee is slightly
higher (four to nine percent) than the market average. The import market largely determines the
price of imported coffee in the United States. Beans that do not meet Abol Coffee quality
standards are resold on the Brazilian market at the current market price. coffee, on the import
market, now sells for US$ 213.56/60kg bag. According to Abol Coffee pricing strategy, Abol
coffee would sell for approximately US$ 224/60kg bag. Importers have to this point been willing
to pay the additional cost.

5.4 Sales Strategy

Abol Coffee strategy focuses first on meeting the increased demand from importers with whom
we have established relationships for larger orders. These importers are critical to our ability to
acquire additional accounts on both the East and West coasts of the United States without having
to spend a great deal on sales efforts. Secondly we will focus on increasing the volume, while
maintaining the percentage of sales, of beans sold to the internal Ethiopian market. When we
have reached maximum sales to existing channels we can then shift the majority of our focus to
securing additional import accounts.

Management Summary
Abol Coffee management consists of four full-time employees. Additional assistance is acquired
on a part-time basis and/or through the use of consultants, specifically in legal matters. Detailed
descriptions are found in the following section.

Financial Plan
We want to finance growth through a combination of long-term debt and cash flow. Purchase of
the larger facility and equipment will require approximately eighty percent debt financing.
Additional technology will be primarily financed with cash-flow. Inventory turnover must
remain at or above four or we run the risk of backing up orders and jeopardizing our freshness
guarantees. We have had no problems with accounts receivable and we expect to maintain our
collection days at 30 with thirty percent of sales on credit.

In addition, we must achieve gross margins of thirty-five percent and hold operating costs no
more than sixty-five percent of sales.

Break-even Analysis

The break-even analysis shows that Abol Coffee has sufficient sales strength to remain viable.
Our per month break-even point projections are detailed in the following table and chart.

Break-even Analysis

Monthly Units Break-even 2,049

Monthly Revenue Break-even $537,078
Assumptions:
Average Per-Unit Revenue $262.08
Average Per-Unit Variable $212.00
Cost
Estimated Monthly Fixed Cost $102,629

Important Assumptions

Important assumptions for this plan are found in the following table. These assumptions largely
determine the financial plan and require that we secure additional financing.

General Assumptions

1999 2000 2001

Plan Month 1 2 3
Current Interest Rate 14.00% 14.00% 14.00%
Long-term Interest 9.00% 9.00% 9.00%
Rate
Tax Rate 47.00% 47.00% 47.00%
Other 0 0 0

7.4 Projected Profit and Loss

We expect to close the first year of production in the new facility with quite exemplary ($BRL)
sales and to increase our sales in the second and third years. Net earnings will be above
industry average ($BRL).

Pro
Forma
Profit and
Loss
1999 2000 2001
Sales $26,260,41 $33,021,60 $46,126,400
6 0
Direct $21,242,40 $26,712,00 $37,312,000
Cost of 0 0
Sales
Productio $300,396 $316,884 $331,912
n Payroll
Other $300,000 $345,000 $410,000
Costs of
Sales
Total Cost $21,842,79 $27,373,88 $38,053,912
of Sales 6 4

Total Sales and Marketing Expenses $414,492 $342,150 $354,021

Sales and Marketing % 1.58% 1.04% 0.77%
General and Administrative Expenses
General and Administrative Payroll $119,400 $130,228 $173,377
Marketing/Promotion $0 $0 $0
Depreciation $216,000 $216,000 $216,000
Leased Equipment $50,400 $50,400 $50,400
Utilities $36,000 $36,000 $36,000
Insurance $72,000 $75,000 $78,000
Rent $305,250 $300,000 $300,000
Payroll Taxes $0 $0 $0
Other General and Administrative $0 $0 $0
Expenses
Total General and Administrative $799,050 $807,628 $853,777