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Dried Food Processing Market Development Unlocking Opportunity to Change Lives 1 from.

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Presentation on theme: "Dried Food Processing Market Development Unlocking Opportunity to Change Lives 1 from."— Presentation transcript:

1 Dried Food Processing Market Development Unlocking Opportunity to Change Lives 1 from

2 BACKGROUND Underlying Problems Cheetahs Investment Approach Concept Description 2

3 Underlying Problems: 4 Halves of the Have-Nots 3 Solution: A food processor that turns harvest losses to an advantage

4 Cheetahs Investment Strategy 4 Integrated Development Equation: ideq New Opportunity

5 Concept Summary Solar-based drying is oldest processing technology Simple, reliable food safety, culturally familiar, and low cost storage New drying technology allows opportunity for scale Provides life changing impact in rural villages 5

6 INVESTMENT APPROACH Introduction and Summary 6

7 Mission Why Increase food security, decrease hunger and malnutrition, and create opportunity for poor families… How by enabling large scale drying of local foods through value-added management into markets of value… What through further processing, product development, certifications, marketing and distribution… Who based on a supply chain sourcing these dried foods from local village groups. 7

8 Grass Roots Development Led by partner NGOs including MUVI, fintrac, Cheetah, Africare, Care, Concern and others Formation or leverage of existing farmer cooperatives, womens groups, savings associations, etc. Concept introductions, capacity building (programmatic or financial support) Improved agronomy Group based not individual management Distribution of Technology and Capacity Building Led by Reservoir with program support from SUA and NGOs Contract manufacture and distribution of solar dryers. Distribution through local franchisee shops Training materials and training leadership on dryer use, food processing, and food safety Processing & Sales Led by new startup named Sunborn Foods Contract purchasing of dried food from farmer groups Processing, packaging, marketing and sales of dried foods 8 Three Value Chain Components

9 Business Model 1.Contract with food drying groups to purchase their outputs 2.Partner with distributor of dryers (Reservoir) and NGOs to connect with village based food drying groups 3.Establish food processing factory using simple and affordable processing technologies to reduce investment requirements in early years 9

10 Approach Be a leading processor and marketer of solar dried foods. 1.Leverage distributed solar capacity of 1000s of village based dryers 2.Provide capacity building in technology including food science, recipes, and food safety 3.Purchase village dried fruits and vegetables providing reliable, guaranteed market 4.Provide processing, marketing and distribution of dried food products 10

11 Strategies 1.Produce high quality, highly nutritious and safe products 2.Keep processing model simple and low-cost 3.Obtain various certifications 4.Where appropriate, mill products into usable flours, teas and herbs 5.Markets: snacks, local packaged foods, ingredient to other product manufacturers, special attention on unique flour products 11

12 MARKETING The Four Ps of Marketing: Product Price Place Promotion 12

13 Pay attention to the 4 Ps! Distribution systems lacking: –Identify wholesale opportunities –Be product friendly to informal sector –Create multilayer distribution with profit for every layer Biggest impediment to success is scale: market is big but local producers are small (is reason why imports are prevalent) so plan to achieve scale Be wary of preference for cultural sensitization and conduct aggressive customer focused marketing Competition is international – is needed quality level Start local; export markets are difficult to meet standards and expensive to support 13 Avoiding Common Local Marketing Mistakes

14 PRODUCT: Foods Able to be Dried Potatoes Cassava Bananas Sweet Potatoes Other Staples Tomatoes Mangos Pineapples Apples Pears Other Fruits Pumpkins Carrots Onions Garlic Hot and other Peppers Other Vegetables Spinach Rosemary Other Herbs and Leaves Hibiscus Lemon Grass Tea Leaves Ground Nuts Cocoa Vanilla Meat And much more! 14

15 PRODUCT: Dried Foods Currently Available in Scale: FLAVORS 15 Potatoes Cassava Bananas Sweet Potatoes Other Staples Tomatoes Mangos Pineapples Apples Pears Other Fruits Pumpkins Carrots Onions Garlic Hot and other Peppers Other Vegetables Spinach Rosemary Other Herbs and Leaves Hibiscus Lemon Grass Tea Leaves Ground Nuts Cocoa Vanilla Meat And much more!

16 PRODUCT: Large Scale Food Processing 16 Typical Food Factories: –Expensive Packaging –Ship water weight (expensive) +Massive scale possible in central location +Compete processing in minutes to hours +Energy intensive Food Drying: +Cheap packaging +Cheap shipping –Difficult to take to scale centrally –Complete processing in hours to days –Energy efficient New Dryer design overcomes these problems by outsourcing to villages so NEW PRODUCT OPPORTUNITIES

17 PRODUCT: Tomatoes & Onions are Priority (General Situation) New dryer design allows for widespread village use – enabling drying of tomatoes and onions for first time Tomatoes and onions (flavorings) have highest local demand differential Flavorings most successful drying application across all food commodities Tomatoes (plus onions, garlic) largest flavoring ingredients: ketchup, sauces, ingredients used 17

18 70% of tomato production is in Iringa Plus large Iringa crops of onions and garlic MUVI has organized and registered 5600 tomato farmers (and growing) Fintrac has local presence and expertise in tomatoes Cheetahs Reservoir and Sunborn Foods to begin operations in Iringa 18 PRODUCT: Tomatoes & Onions are Priority (Specific Situation)

19 CONFIDENTIAL PRODUCT Tomatoes: Major New Product Opportunity Launch tomato flavorings in a dried form (as is common to flavorings) Compete through substantially lower processing costs and seasonal demand differential Launch powdered ketchup, chili sauces, and plain tomato flour IMPORTANT: Apparent risks are in execution not market opportunity 19

20 PRODUCT: Not Only Tomatoes Farmers can use dryers for a wide variety of products to expand opportunity, increase income, improve food security Sunborn needs broader product line to leverage factory investment in tomato off-season 20 Fruit based snack foods considered 2 nd largest opportunity: massive harvest losses, high demand differential, high profit margins, widespread crop availability, matches snack food input purchasing pattern Potatoes and cassava 3rd: large local market size, significant post harvest losses, growing demand for potatoes, use as ingredient in other foods Weaning foods, nutrition improvement solutions are next based on NGO distribution support

21 PLACE: Start Local 1.Start with local markets – in the companys own region 2.When successful expand in concentric rings 3.Buyers in big cities require scale and high quality – avoid until prepared 4.Go to East African nations next 5.Western nations last – they have difficult standards and expensive sales process 21 Why think about exports when local demand is high, malnutrition prevalent and food is being imported? (Only reason is that western markets have distribution structures.) Real need is local so start local. It gives opportunity to go to scale and improve quality.

22 PLACE: Key Local Buyers Many of the buyers are already defined by the PRODUCT component of the Marketing Plan. However: the following are the key segments: Snack foods to local shops and casual vendors through the company and distributors to be identified Bulk flavorings to wholesale processors (already in communication with Tropical Heat) Midsized packages to Supermarkets and restaurants Experiment with daily use packaging for rural areas Bulk to NGOs using for nutritional supplements 22

23 PRICE: Local Situation Be aware of price sensitivity to pricing thresholds (like 500 and 1000 shillings for snack foods) Consider buyers who purchase a days supply, especially in rural areas Processed foods have fixed prices even if inputs are varying in cost seasonally Be ready to serve a multilayered distribution system with profit for every tier 23

24 PRICE: Demand Price Survey 24 Tomatoes (and Onions) win!

25 PRICE: Possible False Assumption 25 With every processed food (except maize) we can demonstrate that the market price has little to do with the plenty to scarce differential. PROCESSING IS NOT BEING USED AS STORAGE TO OVERCOME THE PLENTY TO SCARCE PRICE DIFFERENTIAL OF UNPROCESSED FOODS.)

26 PRICE: Processing Margins Survey 26 Conclusions: High gross margins available for all intensively processed foods (80-95%) Only maize is seasonally adjusted Many inputs are bought in plenty season and then processed through the year Oil processing is impacted by large amount of imports (60%)

27 PROMOTION: Usual Methods The usual promotional methods will be used: Western quality logos (and near western grade packaging except in small packs) Sales people with face-to-face contact Sample packs and sidewalk tasting promotions Advertising but linked to measurable performance results 27

28 BUSINESS PLAN Competitive Analysis Partnerships Staffing Risk Analysis Plan Milestones Financial Data 28

29 Village Outsourcing Changes Lives Higher income of villagers through processing value-add and higher prices for crops Brings value to harvest losses, including undersized or excess crops Improves local food security by preserving food from season of plenty to season of scarcity Creates income opportunities for women beyond farming Assists vulnerable children and HIV+ people with improved nutrition 29 If it pays it stays

30 Village Outsourcing Changes Food Enables solar drying: a green solution that has marketing value and reduces processing costs Shifts value downstream: increasing the income of villagers and reduces labor processing costs Simplifies and reduces shipping and packaging across the value chain, including from the farm UNLOCKS OPPORTUNITIES FOR NEW PRODUCTS 30 New Product Development Opportunities

31 Existing dried food processors are small, of limited capacity, and unsophisticated marketing Traditional processers (e.g. tomato paste canning) have high costs of capital, operations, and packaging Competitive Advantages for Business Model Distributed Resources Capital investment, labor, energy savings, and SCALE of 1,000s of villagers Diverse Products Wide variety of available raw foods expands product line Local climates Effective for food drying 31

32 Key Partnerships Reservoir Distributor of high-efficiency food dryer NGOs Leverage existing formed groups, including possible group finance, support of field costs (interested partners include MUVI, fintrac, Africare, Care, Concern, etc.) Finance Local banks (TIB) provides finance of input cash flow needs SUA Provides technical advice on training manual, food safety, etc. Partners In Food Solutions General Mills food scientists provide expert assistance. 32

33 Shared Success Reservoir needs guaranteed market to arrange for finance and drive dryer sales Sunborn needs dryer sales to provide dried foods for processing 33

34 Tomatoes: Going to Scale 1. Reservoir and Sunborn go to scale together 2. Start with local markets 3. Farmers sell fresh produce on own & dry excess (harvest losses) for separate sale 4. Pearl and NGO partners help farmers increase farm production over time 5. Over time farmers add drying capacity & shift use for dry – based on opportunity 6. Dried goods have increased market distribution time 34

35 CEO (Cheetah in Yr. 1) Marketing (Volunteers Managed by Cheetah Yr. 1) Food Science and Product Development (Assisted by SUA) Assistant (Year 2) Sales and Distribution Manager Field Sales Person (Year 2) Factory Operations Manager Factory Workers 1 (Yr 1), 5 (Yr 2), 13 (Yr 3) Field Management: Input Procurement Field Liaison (Year 2) Accounting (Outsourced to Cheetah indefinitely) 35 Staffing Cheetah holds down initial costs by outsourcing services in early stage companies

36 Year 1 Plan Milestones 1.Select factory site, procure equipment, install, and begin operations 2.Contract with local groups to supply inputs; by end of year 1 engage with at least 2000 drying entrepreneurs 3.Obtain food safety certifications 4.Test market target products and develop starting product offering 5.Establish relationships with at least three major wholesale buyers 6.Find distribution channels for snack foods 7.By end of year 1, recruit CEO preferably with investment 36

37 Years 2-3 Plan Milestones 1.Expand production and trial new products for possible product line expansion 2.Partner with NGOs to offer elsewhere 3.Consider export potential 37

38 ProductionYear 1Year 2Year 3 Number of Farmers Yr End 4931,7733,309 Monthly Avg Number of Farmers2531,1052,672 Raw kilos dried146,246613,3291,716,637 Dried kilos output14,62561,333171,664 Raw Kilos/Farmer/In Year Raw Kilos/Day Farmer Estimated Annual Income USD 1,445 1,387 1,606 Forecast Production Dependencies



41 Investment Sources and Uses Sources of Cash USD Donor Funded30,000 Outside Investors150,000 Local Investors50,000 Total Investment At Start230,000 Input Cash Flow Loan in Yrs 2 & 3300,000 Uses of Cash Capital Expenses80,000 Startup Running Costs120,000 Input Cash Flow300,000

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