Food Factory Feasibility Study: What Investors Should Check Before Committing Capital
A feasibility study is usually arithmetically correct and commercially fragile. The model works; the assumptions underneath it have not been defended. For an investor, the useful question is not whether the study balances but which three assumptions decide the outcome and how much evidence supports them. In food manufacturing those are almost always demand realism, achieved utilisation and true operating cost at that utilisation. Everything else is detail around those three.
11 minute read
What this covers
- The three assumptions that decide the return
- Capacity sizing and ramp-up realism
- Capex completeness and contingency
- Operating cost at actual utilisation
- How to phase capital to protect optionality
Detail
Demand realism
Volume assumptions in feasibility studies are frequently built from market size and share ambition rather than from committed channels. Ask what is contracted, what is indicated, and what is aspiration. Then test the ramp: listing cycles, distributor onboarding, registration timelines and seasonality all delay revenue in ways models rarely show. A six-month ramp delay is often more damaging than a ten percent capex overrun.
Capacity sizing and utilisation
Studies typically size for the growth case and model cost at high utilisation. Real plants run below nameplate because of changeovers, cleaning, maintenance, short runs and labour. Recalculate cost per unit at the utilisation the business is likely to achieve in year one and year two. If the case only works above eighty-five percent utilisation, it is not a business case; it is a bet on flawless execution.
Capex completeness
The common omissions are consistent: utilities upgrades, effluent treatment, incoming services, spares packages, installation and commissioning support, laboratory equipment, IT and control systems, training, working capital at start-up and the cost of running a plant below capacity for two years. A capex line without these is not conservative; it is incomplete.
Operating cost reality
Labour cost should follow a shift structure and a crew plan, not a percentage. Utilities should follow load, not revenue. Maintenance should reflect the equipment selected. Waste, giveaway and rework should be included at realistic levels for a new operation rather than at the standards of a mature one. New plants perform worse than mature plants for at least a year, and the model should say so.
Phasing and decision structure
The strongest recommendation in most feasibility reviews is to phase. Build the envelope, install proven capacity, define triggers for phase two, and keep the decision reversible for as long as possible. Alongside that, define the decision structure: what evidence is needed, who decides, and which gates the project must pass before the next tranche of capital is released.
Questions worth answering internally
If these cannot be answered with evidence, the decision is not yet ready.
- Which three assumptions decide this return?
- What happens to unit cost at seventy percent utilisation?
- What is missing from this capex, not what is in it?
- How long is the ramp, and who has committed volume?
- What can we defer without stranding the design?
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