Proposed Business Plan on Marketing of sachet honey for Beekeeping Extension society-Zaria-Nigeria
BUSINESS PLAN ON PACKAGING OF HONEY IN SACHETS
FOR
THE BEEKEEPING EXTENSION SOCIETY
7/12/2010
Contact person:
Idris Muhammad Barau (CEO)
P.O.Box 577,
Shika post Office
Shika-Zaria
Kaduna-State
Nigeria
Office:
C/o Kaduna State Agricultural Development Project,
Opposite General Post office PZ,
Sabon-gari Zaria
Mobile: 8034501061
E-mail:
Skype: idrisbee
CONTENTS
0. EXECUTIVE SUMMARY……………………………………………………………… 2
1. The Business ………………………………………………………………………………… 5
3 Market structure and analysis…………………………………………………………. 9
5. Processing and packaging process………………………………….…………………. 11
6. Supply of raw material(s) ……………………………………………………………... 11
7. Company structure & management…………………………………………………….12
8. SWOT analysis………………………………………………………………………. 13
9. Strategy on product price ……………………………………………...... 13
10.Financial projections ...... 14
11. Projections on quantities of honey...... 14
12. Equipment needs...... 15
0. EXECUTIVE SUMMARY
Rationale: With the global economic current down trend in almost all industries, agriculture is still the backbone industry in any developing nation. Nigeria has one of the best conditions in terms of weather, and vegetation for the development of honey production as part of agriculture.
Despite Nigeria’s favorable agro-ecology for honey production, the level of honey production is still very low. The low honey productivity is as a result of the neglect of the beekeeping sector, most especially by the government.
In Nigeria, marketing of agriculture products is the most serious problem in agricultural development projects that are developed for poverty alleviation. Understanding and developing the markets for such projects is critical to the sustainability of the programs. While there are ready international markets for bee products such as honey and beeswax,
Considering his meager salary and the declining trend of civil servants after retirement, in 1996, Idris Muhammad Barau, a trained agricultural extension worker, saw the need to develop a business for himself.
To develop a successful business that would never go through any economic downtrend was the target. Taking into consideration Nigeria’s 150 million populations and the high demand for pure honey, Idris concluded that the business of honey production was ultimate.
To have enough honey for marketing as an individual was not possible based factors that would make it almost impossible to achieve. Also lack of funds was a hindrance.
To overcome these challenges, the way out was to either directly or indirectly engage farmers as out growers in the business. To put these into reality, Idris founded the Beekeeping Extension Society as a non-profit beekeeping development entity based in Zaria in Kaduna state.
Developing farmer’s production capacities: In order to establish and develop the local beekeepers production potentials, the Beekeeping Extension Society has from 2001 to 2010 received technical assistance from more than 10 International Beekeeping experts who served as volunteers through Winrock International, USAID, and Partners For development and Bees Abroad UK charity.
For the establishment of production bee farms and for capacity building of the participating farmers, the Beekeeping Extension Society, to date (2010) has received more than $130,000 from International donor agencies.
Presently, the Beekeeping Extension Society has trained and supplied 1,500 traditional beekeepers in Kaduna state. The beekeepers have increased their combined honey production levels from about 6,000 litres per annum to between 35,000-40,000.
The business: It is eminent that the Beekeeping Extension society cannot forever continue to relay on donor agencies for financial support in order to continue and expand its work for the expanding practicing Beekeepers.
In 2008, the Beekeeping Extension Society approached the Partners For development for a loan; the purpose was for the BES to buy off its beekeepers honey for sale.
The Partners for development was able to approve only N2 million as a soft loan. The limitation was because the BES as a non-profit entity lacked collaterals for receiving loans. The PFD considered the Beekeeping Extension societies credibility in approving the loan
Profits realized from the loan were meagre. This was attributed to the fact that competition from lager scale honey packers who at the same time operate as honey market middlemen hindered the BES into making good returns.
In order to solve the challenge, the Beekeeping Extension Society plans to metamorphose into becoming a Social Development Enterprise through developing a new product in the form of small affordable sachets of 20 grams.
The project is aimed to be achieved through establishing a centralized honey collection, processing, packaging and marketing centre.
The centre would buy off honey from beekeepers for processing and packaging. This would be the first (1st) of its type in Nigeria.
To start off on the transformation process with the development of a baseline survey on the viability of sachet honey packaging as a business, the Beekeeping Extension Society requested for volunteer support from Winrock International. In there response they sent in Professor Connie (see appendix 2 & 3 for report).Positive results of her survey necessitated Winrock to send in a second volunteer , whose assignment was to develop a business plan based on earlier financials (see appendix 4) worked out by the Beekeeping Extension Society.
Financial implications:
Based on the second Winrock volunteers results (report not yet received by BES but see draft appendix 9), and initial baseline survey carried out by the BES on sachet honey sales in thirty five communities in Kaduna state (see appendix 1), using the Profit and Loss Account Template/Tool from www. Businessballs.com, we have deduced that the business will require a start off capital of N11, 995,245 ($79,968.3) .This amounts will be used in purchasing all required equipments and other components that will produce 20grams honey in sachets.
With aggressive Guerrilla Marketing strategies (see www.gmarketing.com) .From our projections, the initial startup capital of N11, 995,245 ($79,968.3) will in the first three (3) months of operation be utilized to produce 582,750 sachets of honey.
It’s expected that from the total sales of N20, 396,250 realized (see appendix 7 year 1A), the balance after deduction of working capital for ten (10) months will be utilized in producing 1,983,710 sachets of honey. If sold, it will be expected that N11, 376,958 would be realized as profit before tax (see appendix 7 year 1B).
For the second year projections, if overhead costs are doubled, but production cost and selling price remain constant, it will be expected that N26, 943,444 would be realized as profit before tax.
Duplicating the second (2nd) year to project 3rd -5th years will show that the initial capital of N11, 995,245 would be paid back in the 3rd year even if the interest rate would be 20%.
1. THE BUSINESS
1.1 Business history
In Nigeria Beekeeping is practiced traditionally as a secondary activity in order to obtain honey for its medicinal value and as a way to supplement family income. To keep bees, the traditional beekeepers use cylindrical straw hives plastered with cow dung. Because they are not aware of the presence and importance of six (6) other bee by-products apart from honey for their use, they throw these by products during honey harvesting or processing.
To harvest honey, they use torched corn stalks due to lack of awareness on the use of protective gears for protection against bee stings,. Fire sparks resulting from the torched corn stalks kills bees and adulterate the honey with ash, cow dung and other impurities.
Sometimes , they employ the use of poisonous chemicals to kill bees for little quantities of honey ,not knowing that residues of the chemicals remains in the honey and killing of the bees reduces the bee population.
Most importantly, the traditional beekeepers are not aware of the importance of the honey bees as the most important agents in crop pollination.
The traditional beekeepers produce low quality honey due to lack of awareness of the existence of modern beekeeping technology.
To Nigerians, honey has very high value both from the religious (Islam & Christianity) and traditional point. It is believed that a spoonful (10mls) daily dose of honey protects the body from disease invasion. Honey is usually offered to traditional rulers as a mark of respect by their followers.
Due to these facts, the amount of honey harvested by the traditional beekeepers is never enough to satisfy the market demands.
From 2001 to 2010 the BES has involved 1,500 beekeepers in its projects in Kaduna state as its base. The beekeepers have increased their combined honey production levels from about 6,000 litres per annum to 35,000- 40,000.
Positive impact resulting from the above the tremendous increase in honey yields of the trained beekeepers gave the BES the opportunity it was targeting in transforming into a social enterprise for the purpose of serving as a source for a better market for the beekeepers honey and to provide more equipment for honey production. For this reason, the Beekeeping Extension Society (BES) approached Partners for Development (www.pfd.org) for financial support.
In 2008, the Partners for development was able to approve only N2 million as a soft loan. The limitation was because the BES as a non-profit entity lacked collaterals for receiving loans. The PFD considered the Beekeeping Extension societies credibility in approving the loan.
The purpose for the loan was to purchase off bulk honey for marketing from the trained beekeepers. At the end, the profit margin was too meagre to meet the target aimed for its purpose.
1.2 Business model and market research
In order to make profit from sales of honey, the BES saw the need to develop an entirely new product for the Nigeria honey consumers. The new product should be affordable to all facets of the society. After serious brain storming, the BES came up with the idea to package honey in 20 gram sachets. To develop a business, the Beekeeping Extension society is to source for loan or involve investors.
Without a baseline survey, to back our claims, our desire to develop the sachet packaged honey would not be achieved. As a volunteer organization, we must rely on other donor organizations to conduct the survey or sent in an expert volunteer.
These challenge necessitated the BES to approach Winrock International (www.winrock.org) for further technical support through their Farmer to Farmer volunteer assistance programme.
Winrock International responded by sending in (May 14 – June 3, 2010) Professor Constance L. Falk ( ) of the New Mexico State University department of Agricultural Economics and Agricultural Business. Her assignment was to do a baseline survey for the viability of developing sachet honey for marketing Result of her report indicated very high prospect (see reports attached). As a follow up to her visit and to develop the BES idea further another volunteer, Mr Chris Grace ( ) was sent in august of 2011. His assignment was to work with the BES in developing a business plan (no report submitted yet) from earlier business financial projections submitted by the BES.
From the three (3) results from the two volunteers and the BES, it could clearly be seen that the sachet honey business is a viable venture.
1.3 Birth of the Beekeeping Extension Society & its capabilities
In Nigeria, Beekeeping is a neglected agricultural enterprise sector due to lack of awareness of its importance and fear of bee stings.
In 1996, Idris Mohammed Barau, an agricultural extension worker with the Kaduna State Agricultural Development Project saw the need to develop the potentials of the Nigerian beekeeping into becoming an industry in order to make it into a viable business and to have the farmers to participate both as stakeholders and out growers.
Like any business, there has to be funds readily available in order to be established. To begin the process of sourcing for funds for the development of farmers capacities on modern beekeeping technology and for the supply of demonstration equipment, Idris ,founded and established the Beekeeping Extension Society as a not for profit organization in 2001.
To run and operate, the BES has two (2) office staff with backgrounds in agricultural extension and beekeeping.Others supporting are twenty one volunteers in 21 communities of Kaduna state.The volunteers have been trained both as beekeepers and in agricultural business by the Partners for Development through the assistance of the World Banks Business Development Services .The training adopted, was throuh the use of the USAID-Markets approach of the Nigerian Agricultural Enterprise Curriculum (NAEC).
The primary objective of Beekeeping Extension society is to extend the concepts of modern beekeeping to the traditional beekeepers in order for them to increase their incomes.
The BES intends to transform into a Social Development Enterprise through development of a centralized honey collection, processing, packaging and marketing outfit that will have its member beekeepers as out growers.
From its establishment in 2001, the Beekeeping Extension Society has received funding of over $130,000 .Also eight (8) international volunteers in form of technical assistance were received from Winrock international & Bees Abroad a United Kingdom charity organization.
The grants received were utilized in the training of local beekeepers and supplying them with modern beekeeping production equipment in order for them to increase their honey production attain quality and generate income.
The Beekeeping Extension Society is in collaborations with the following international organizations:
§ The Small West African Grants Program of the African Union sponsored by the United States Agency for International Development (USAID).
§ Canadian International Development Agency (CIDA).
§ Development Cooperation of Ireland (DCI).
§ Food and Agriculture Organization (FAO)
§ International Fund for Agricultural Development(IFAD)
§ Partners for Development.
§ French Social Development Fund (SDF).
§ Rome 1 % Fund for Development.
§ Winrock international
§ Bees Abroad a United Kingdom charity
Presently, in Nigeria, the Beekeeping Extension Society is the only beekeeping organization with high technical skills in beekeeping and beekeeping technology transfer.This can clearly be seen in a certificate of proficiency in beekeeping ,presented by the British Beekeepers Association to Idris Muhammad Barau ( founder of BES).
The ultimate goal of establishment of the Beekeeping Extension Society is establish a beekeeping enterprise that would have acomplete beekeeping valu chain.The enterprise would be owned by the trained Beekeepers of the BES