Transcript Secura

Market outlook
Jesus Benavides
Alex Rall
David Salamon
Jose Torbay
01.17.2008
1
Agenda
1
- Introduction
2
- Overview of Moringa Oil
3
- Potential Markets
 - Opportunities & Risks
4
- Strategic Recommendations
 - Tasks & Challenges
5
- Socioeconomic Benefits
6
-Q&A
2
Introduction
Who we are
Team of MBA students from MIT Sloan:
- Jesus Benavides (Mexico)
- Alex Rall (Germany)
- David Salamon (France)
- Jose Torbay (Venezuela)
What we are doing
Studying the viability of global commercialization of Moringa oil
- Examining potential markets
- Putting together the foundation for a realistic marketing strategy
3
Overview of
Moringa
4
Overview of Moringa
What is Moringa?
• Moringa – Malunggay – Horseradish – Drumstick
• Easily grown in the Philippines
• 2 harvests every year
• Very high oil content (40%)
What is Moringa Oil?
• The oil is extracted from the seed through relatively
simple processes
• Vegetable Oil that can be used for many industries
(Cooking- Food Processing- Cosmetics – Biofuels- others)
• Low trans fatty; High content of beneficial fatty acids
•Comparable to premium vegetable oils like Olive Oil
5
Current Use of Moringa
No mass scale production
•Oil as a based for shampoo in low scales
•Food supplement – fortification
•Some Specialty Creams (cosmetics)
•Specialty “Energy” drinks
6
Possible Uses for Moringa
Leaves:
Nutrition and Medicine
Nutrition • Disease Prevention • Ointment •
Alley Cropping • Fertilizer • Erosion Control •
Water Purification • Cosmetics • Textile
Printing • Insecticide • Fungicide • Lubricants •
Tanning Leather • Dye • Fiber Products •
Fences • Ornamentation & Shade • Wind
Barrier • Cane Juice Clarifier • Honey
Production & Clarifier • Condiment • Cooking
Oil • Food • Traditional medicine: Anemia •
Anxiety • Asthma • Blackheads • Blood
impurities • Blood pressure • Bronchitis •
Catarrh • Chest congestion • Cholera • Colitis •
Conjunctivitis • Cough • Diabetes • Diarrhea •
Dropsy • Dysentery • Eye and ear infections •
Fever • Glandular swelling • Gonorrhea •
Headaches • Hysteria • Intestinal worms •
Jaundice • Lactation • Malaria • Pain in joints •
Pimples • Pregnancy • Psoriasis • Respiratory
disorders • Scurvy • Semen deficiency • Skin
infections • Sore throat • Sores • Sprain •
Stomach ulcers • Tuberculosis • Tumor •
Urinary disorders • Wounds • Biodiesel
Trees:
Alley Cropping Erosion Control
Flowers:
Medicine
Pods:
Nutrition Medicine
Roots:
Medicine
Seeds:
Water Purifier-Medicine-Oil
Gum:
Medicine
Bark:
Medicine
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Moringa Value Contributors
Moringa Seeds
Moringa
Leaves
8
Moringa Value Chain
Moringa
Seeds
Moringa
Oil
Moringa
Meal
Moringa
Leaves
•Cooking Oil  Commercial & Industrial
•Cosmetics
 Emollients
•Personal Care  Bath soaps
•Perfumery
•Industrial Oil  Biodiesel – Oleochemical
Shortenings
•Lubricants
Animal Feeds
Water Treatment
Nutritional supplements
Food Fortification
Note however 100ha would saturate the market
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Potential
Markets
Food consumption/processing
High-end/Cosmetics
Industrial/Biofuel
10
Food consumption/processing
Market Overview
- EU growing at a CAGR of 7.3% and US at 3.5% over 2003-2006 period
- Limited domestic production capacity necessitates increased imports
- Prices per liter for comparable oils higher than expected price of Moringa
- Gap being formed for vegetable oils in this market due to shift to biodiesels
20
Overall Vegetable Oil Use for Food Consumption (MMT)
2003
10
2004
2005
0
European Union
United States
2006
Market Risks
- Technological advances (e.g.: other types of biomass replacing vegetable oils)
- If biodiesel market does not pick up, this market will be saturated
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Food consumption/processing
Moringa Oil - Pros
- Dietary benefits  responds to increased health consciousness in US/EU, low
in trans fatty acids
- Long product shelf life due to fatty acid content
- Relative cost advantage
Moringa Oil - Cons
- Would most likely require the use of a process to remove the nutty flavor/smell
- Acceptability of the market may require large marketing investment
- Food processing companies incur a significant switching cost
- Requires FDA/EFSA approval (may take time or not pass)
12
High-end/Cosmetics
Market Overview
- Acceptability for new products higher than in food industry
- High margins
- Variety of applications
- High potential in certain key markets (such as the UK)
- Broad range of customers  reduced impact of dropout from one customer
- Growing segment in EU and US
Market Risks
- Short product lifecycle
- Hypes/fads common and difficult to sustain
- Reputations difficult to build and negative reputations last for long periods
13
High-end/Cosmetics
Moringa Oil - Pros
- Chemical composition and physical properties ideally
suited for the high end market
- High oleic acid content  good emollient
- Nutritional benefits  ideal particularly for dietary
supplements
- Cost advantage over main competitors such as Sunflower
oil or Olive oil
- Lower price sensitivity of potential clients than in other
markets
Moringa Oil - Cons
- Very extensive testing is required
- Requires FDA approval
-Government help is needed e.g. for conduction of
clinical test
14
Industrial/Biofuel
Market Overview
- Biodiesel production, growing between 30% and 50% from 2006 onward, is
expected to reach 12B liters by 2010 and 37B liters by 2016 [RNCOS, 2006]
- One of the main drivers of the price increases in vegetable oils and shifts of oils
from other uses
Market Risks
- High volatility of energy prices
- Complex interrelations between alternative/competing energy sources
- Regulations quickly changing (unpredictability of US government programs)
- Potential price pressure from new entrants
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Industrial/Biofuel
Moringa Oil - Pros
- Low iodine value (better than diesel)
- Low cetane (ignition) number (better than both coconut fat and diesel)
- Cost is comparable to alternatives (e.g.: Soybean oil)
- Could potentially obtain carbon credits in future, which would further enhance
value of planting Moringa
Moringa Oil - Cons
- Not fully tested (CO, HC, NOx emissions)
- Existing capacity does not match the huge volume of demand
- Use in surfactants not ideal due to lack of C-12 carbon chains
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Sustainable business
Geographic Advantages
- Lower transportation costs (due to regional proximity)
- Shorter transportation times
- Economic advantages from producing in the Philippines
Market outlook
- Economic trends  increasing market prices  stable/increasing revenues
- Long term nature of contracts  reduced competitive pressure
- Importance of reliability of supply  sustainable business relationships
- Nature of industry based on relationships  moving now is important

- Time is crucial; Need to act now
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Prices increasing
Oil Price for Major Vegetable Oils ,[$/metric ton]
1400
1200
Soybean
Cottonseed
Sunseed
Peanut
Palm
Canola
Coconut
Corn
1000
800
600
400
200
0
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
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Strategic
Recommendations
19
Scarcity of resources and time pressure
necessitates focused market approach
- Negative marginal output with increasing number of tasks
Output
1
Number of tasks
2

First-mover market
-Temporary gap in the worldwide vegetable oil supply
- Difficult break up of long-term contracts
- Commodity product  difficult differentiation
 Aggressive market strategy required
- Focus on leading position in one core market/industry
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Market Outlook
Assessment of market attractiveness
leads to a 3-phase market entry strategy
High End/
Cosmetics
1
2
Biofuel
1 Aggressive entry
into Biofuels
Food
3
Consumption
Surfactants
Food
Processing
Lubricants
2 Progression to
High End market
3 Applications in
Food industries
Unattractive
Suitability of Moringa Oil
Socioeconomic
benefits
21
Market Entry Strategy: Phase 1
Tasks
Aggressive
entry into
biodiesel
market
Challenges
1. Fill value chain
- Launch production program
- Establish client contacts
- Timeliness/Speed
- Overcome interdependence of
supply & client base
2. Ramp up
- Cultivation of Moringa
- Delivery of first lots
- Satisfaction of volumes
- Coordinated and quick cultivation of
plants
- Establish stable supply chain
3. Establish long term relations
- Preempt the competition
- Build brand recognition
- Creation of spare capacity
- Guarantee of supply stability
- Contain organizational growth
4. Cement market position
- Expand client base
- Maintain stability of prices on
the production side
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Market Entry Strategy: Phases 2 & 3
Tasks
Progression
into High
End market
and Food
industry
Challenges
1. Leverage brand recognition
- Build upon reputation
- Find relations in new industries
- Maintain supply chain stability
- Deal with complexity of serving
different customer types
2. Diversify product portfolio
- Invest in R&D
- Create new product brands
- Requires the right marketing mix
(4 P’s and 5 C’s)
3. Differentiate via branding
- Invest in marketing initiatives
- Disconnect from the initial
perceptions that may have formed
- Setting different price points
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Socioeconomic
Benefits
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Socioeconomic Benefits
Moringa Oil production
Employment
Extraction Facilities
Earned Income Vs.
Opportunity Costs
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Employment
Farmers partners and employers
- Planting season
- One time only
- Harvest season
- Twice a year
- Lasts for one month
- Significant job creation in the example of the biofuel market:
# of jobs created by farmers during each season
Market Share
5%
10%
15%
Planting*
16,667
33,333
50,000
Harvesting
100,000
200,000
300,000
* Planting employment will be only in the first year
Assuming a Biofuel market of 16 billion liters per year by 2010
** 20 persons harvest 1 ha in 3 days
Others
- Employment will impact other functions such as:
Truck drivers, Port operators, others
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Earned Income Vs. Opportunity Costs
Earned Income by Farmers
- Significant increase in income earned by rural population especially farmers
- Helps fight poverty in rural areas
- Assumption: Ten hectares per farmer
Expected Annual Income (PHP) per Farmer (land owner)
Year
1
3
4
Revenue
2,000,000
3,000,000
4,000,000
Expected National Impact in the Philippines
Market Share
5%
10%
15%
USD entering (mm)
514
1,028
1,542
Overall income to farmers (PHP mm)
18,000
36,000
54,000
Opportunity Costs
- Most of the land needed is not being used
- Planting corn, a farmer would earn 1,440,000 PHP per year
- Planting coconut, a farmer would earn 814,000 PHP per year
- In addition, the meal of Moringa seeds used for animal feeding (from the
residual during the extraction process)
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Extraction Facilities
Investment
- An investment of 250 million PHP per extraction facility is needed
- A minimum of 1000 ha per facility is required for profitability
- Maximum capacity of facilities can be expanded at a marginal investment
as more hectares are added
- Estimation of 30 extraction facilities by the end of 2010
Employment
- The labor force per plant is estimated at 100 employees
-By 2010 around 3,000 employees are expected (30 manufacturing sites)
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Recommended Government Actions
1
- Marketing campaign
2
- Planting materials
3
- Infrastructure (e.g.: roads network)
4
- Clinical tests
5
- Educational materials (e.g.: pamphlets)
6
- Access to credit for farmers
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Summary
1
- Attractive markets for Moringa oil exist
2
- Aggressive and focused strategy required
 - Biofuel Industry
 - High End/Cosmetics industry, Food consumption/processing markets
3
- Results in significant positive side-effects
30
Q&A
31
Appendix
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