Tarlton Beetroot Business Plan — Phase 3: Processing Optionality

The unfunded processing option beyond the Series A, what it would require and why it is deliberately excluded.

Section 32 of 37

Phase 3: Processing Optionality

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Three value-add routes costed. Two destroy value. The third is attractive but depends on export markets the Company has no ability to access at Year 5.

Business plans in this sector routinely assert that processing captures more value than fresh sales. Modelled properly, from packaging, labour, energy, effluent and quality-assurance build-ups rather than from an assumed margin, that assertion is false for two of the three obvious routes. None of them is funded at Series A and none contributes to the valuation in Section 29. They are set out here as optionality with an honest price attached.

Figure 1. Phase 3 route comparison: capital, EBITDA and return.

Table 57 Phase 3 route assessment

Route	Capex	Revenue	EBITDA	Margin	IRR
Cooked, vacuum-packed retail beetroot	R16.5m	R24.0m	R0.88m	3.7%	-8.0%
Not-from-concentrate beetroot juice	R11.8m	R19.0m	R-2.22m	-11.7%	n.m.
Dried beetroot powder and colourant	R6.9m	R11.9m	R1.61m	13.5%	21.9%

Net present value: cooked retail negative R11.7 million; juice negative R19.4 million; powder positive R2.1 million. Only the powder route clears the 15.4 per cent cost of capital.

Table 58 Why each route succeeds or fails

Route	Assessment
Cooked, vacuum-packed retail beetroot	The most commercially familiar route and the worst investment of the three at scale. A 3.7 per cent EBITDA margin does not support R16.5 million of capital. Cooking, peeling and vacuum packing is labour and energy intensive, yields 70 per cent, and the finished product competes against established brands with listing fees and promotional expectations the Company cannot fund.
Not-from-concentrate juice	Value-destroying at every point tested. A 62 per cent yield on a low-value input, a cold chain requirement, a short shelf life and a category dominated by well-capitalised beverage businesses. EBITDA is negative before any marketing spend. This route should be dismissed rather than deferred.
Dried powder and natural colourant	The only route that works, and it works because the economics are different in kind: an 11 per cent yield on cheap input converted into a R115 per kilogram product with a two-year shelf life, no cold chain and low logistics cost per rand of value. At R6.9 million of capital it is also the cheapest. The difficulty is that the natural colourant market is largely an export and industrial ingredient market, requiring food-grade certification the Company would not hold and buyer relationships it would have to build from nothing.

Recommendation

No Phase 3 capital should be committed at Series A. The powder route should be revisited in Year 5 only if export or industrial ingredient offtake can be contracted in advance. The juice route should be closed permanently. Investors should assign zero value to Phase 3 in their underwriting, as this plan does.