Calculating amortization and return on investment in blueberry packing line

In recent years, the European blueberry market has been experiencing dynamic growth, presenting both challenges and new opportunities for producers. The increasing demand, expected to reach up to 95 thousand tons of blueberries annually within the next 5 years, calls for efficient packing solutions to meet the growing market needs. The decision to invest in professional sorting and packing equipment requires consideration of financial factors, including the return on investment in blueberry packing line.

Investing in a blueberry packing line: today’s expenses, tomorrow’s profits 

Our clients often express concern about the high costs associated with purchasing fruit and vegetable packing lines. It is a fact that such equipment is not cheap, especially when considering the latest high-end solutions that guarantee high accuracy and efficiency. Many potential clients are discouraged from investing in a blueberry packing line, focusing solely on the price of the machine. Such a simplified way of thinking does not provide a complete picture of the situation and can indeed miss the chance to develop the business and increase earnings. 

When considering a line for packing and sorting fruits and vegetables, two points on the timeline must be taken into account — where we are today and where we could be in 3 or 5 years. Such an outlook changes the perspective of investing in a machine for blueberries completely. 

Economics recap — what is ROI? 

Every investment involves deferred benefits. This is true for investing in one’s own skills (better job prospects), photovoltaics (lower electricity bills), or equipment such as a lawn mowing robot (less time spent on gardening). Today you spend money, hoping to achieve even more benefits in the future (higher revenues, time savings, lower fees, etc.). That’s why investing cannot be limited to the question: How much does it cost? The nature of investment requires finding answers to other questions: How much will I earn from this? When will the expenses pay off? What else will I gain from this investment? How will this blueberry machine increase the value of my company? 

Importantly, such questions demand precise, concrete answers, preferably expressed in numbers or at least consulted with an expert or another entrepreneur who has already implemented similar projects. Unclear or wrong answers may lead to failed projects, resulting in long-term losses. 

Accounting, finance, and economics theory provide us with a range of tools to estimate the profitability of investments. Many of them require substantial knowledge, formulas, or spreadsheets. This is a task for professionals. While not every fruit and vegetable grower needs to be a financier, everyone should know what ROI is and how to calculate it. 

“Every time we invest in a new machine, we expect the money spent to pay off. However, I’m not referring to the colloquial phrase meaning hope or wishful thinking. We should calculate our expectations, that is, express them in numbers, to minimise the risk of investment. Depending on the chosen indicator, we can see how much we will “earn” on a given investment or how long it will take for the invested money to pay off. Presenting expectations in numbers helps make better decisions and motivates us to enter into a specific investment” – comments Jacek Ryba, CFO of Milbor. 

ROI (Return on Investment) is one of the basic indicators of investment profitability in a given device, rental property, training, advertising campaign, etc. In our case, ROI will determine the profitability of implementing machines for packing and sorting blueberries. It is calculated using a simple formula: 

ROI = (investment profit – investment cost / investment cost) * 100% 

ROI is expressed in percentage. The higher the ROI, the more profitable the investment. A negative result, on the other hand, means a loss for the entrepreneur. 

Despite some limitations, ROI is a popular profitability indicator for investments and a good starting point for deeper analysis. Why do you need to calculate the return on investment in blueberry packing line? Calculating ROI allows for a quick analysis of how purchasing a particular blueberry machine will impact the operation and profits of the company. By using ROI, we can also compare the profitability of machines with different efficiencies and examine how automation compares to manual fruit packing and sorting. 

Return on investment timeframe 

Another popular way to estimate the profitability of a particular venture is to calculate how long it will take for the profits generated by the machine to cover its purchase cost. In colloquial terms, it is often said that a particular piece of equipment will pay for itself in X years. In this text, we avoid this term, as it introduces some semantic confusion with amortization in accounting and financial terms. 

Let’s use an example. Investing in a 12-head weigher will reduce the packaging workforce by 20 positions and increase production efficiency by 100%. As a result, the company’s profit will double, and the money saved by not paying 20 employees will remain in the owner’s wallet. Both categories can be easily expressed in cash and treated as benefits of the investment. Calculating the return time on investment in a blueberry packing line or other fruit requires identifying when the financial benefits generated after implementing the investment will equal the entire cost incurred for the improvement. The shorter the return time on investment, the better. This way, we can also calculate the profitability of a blueberry packing line. 

Milbor’s years of experience and over 200 completed automation projects allow us to state that the average return time on investment in fruit or vegetable sorting and packing equipment usually occurs within 2 or 3 seasons. 

What is needed to estimate the profitability of a blueberry packing line? 

Here are the data points worth considering when calculating the return on investment in the blueberry packing line: 

1. Production efficiency of the new sorting and packing line for blueberries vs. the efficiency of the current solution; 
2. Weighing accuracy — the higher, the less money lost due to overweight; 
3. Continuity of work of the new machine vs. the number of hours spent on forced downtime of the current solution (e.g., shortage of workers, maintenance, and repair of old machines); 
4. Number of people needed to operate the new machine vs. the number of workers needed to operate the current solution; 
5. Costs associated with recruiting employees; 
6. Costs associated with financing the purchase of a new machine (e.g., commission and loan installments for purchasing the machine); 
7. Service costs of the new line vs. current service costs; 
8. Possible subsidies for purchasing a new machine or revenues from the sale of the current device. 

Return on investment in blueberry packing line. Does it pay off? 

An exact profitability calculation is practically impossible because such an analysis should take into account factors that we do not yet know (future fruit prices, inflation rate, energy costs, minimum wage level, etc.). However, the decision to invest in a blueberry packing line should be based on data and tailored to the needs of your company. A simplified estimation of investment profits, for example using the ROI and return time indicators described above, can be the basis for answering whether it is worth investing in blueberry machines. 

We invite you to familiarise yourself with our prepared calculation examples, which show how to approach calculating the profitability of investing in automation. Calculations will be sent to the email addresses of all interested readers after completing the form attached above in the text. We are convinced that this will be a valuable material for people considering investing in automation, helping them estimate the profitability of a blueberry packing line. 

On the other hand, if you already know that automating the sorting and packing of blueberries or other fruits and vegetables will be beneficial for you and you are looking for a reliable business partner who will help you through all stages of the investment, please fill out the form below. In response, a Milbor advisor will soon contact you to introduce our holistic approach to automation in the fruit and vegetable sector.