Tag Archives: Markets

The Rising Cost of Ingredients

As food processors, our raw material costs are normally a large fraction of our total cost of production.

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There is no arguing the fact that the cost of many raw materials are rising. The reasons for these are numerous including the:

  • changeable weather experienced world wide
  • the increase in the crude oil price and therefore the cost of transport
  • the effect of biofuels on the availability of cereals and oil seeds
  • the effect of biofuels on land allocation – ie land previously used for ingredients being allocated to biofuel crop production

The question is what can the food processor do about this? In a theoretical way we could:

  • increase our price, but we also need to think how that effects our customers
  • look for cheaper ingredients or change ingredients but then need to think of what that will do to our quality
  • change our production to higher value added, high margin products
  • increase our material yield figures by reducing our losses

    As I say that’s all very theoretical – I would be interested to hear from you (email me here) with your thoughts and experience.

Projects to Enterprises-2

I have spoken a few times about some of the projects that are run in food processing by development organisations. The objective is often to produce entrepreneurs from the unemployed poor.

In my experience this seldom works as it takes more than a process, some equipment and a few training programmes, to produce people who can successfully run a financially sustainable enterprise.

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This photo, which I came across while organising my photos as part of my change from PCs to an Apple Macbook – a justifiable and enjoyable change by the way.

The project was set up to process local fruit into juice and jam as a means of creating jobs utilising local resources.

Compare the stock of sugar on the left of the photo with the production of jam and juice on the shelves! The project was run by bright people who had been on business courses but with 10 staff they were unable to sell their product (it wasn’t that they were out of stock because of overwhelming demand) and were spoilt by free supply (oversupply) of raw material by the developer which took any business like actions out of the project.

Projects to Enterprises

The co-operative was “changing projects into business enterprises, make more profits so people can get more money and change there living”.

This was, this morning as I was watching Ulimo, a magazine for emerging farmers in South Africa. The statement was by Sandile Adam the Project Leader of the Uitenhage & Dispatch Development Initiative.

This is what I was alluding to in my blog of 06/12/2007, where I referred to West African Projects which were unable to make a real difference.

I had personal experience of a similar thing when I started out looking at small business in South Africa in the early 1990s.

An obvious opportunity for small business was small scale (100s of loaves a day) bakeries. At the time most standard white and brown bread was baked in large regional bakeries, which delivered into the rural areas, sometimes as infrequently as every second day. These deliveries were to a very large number of local shops selling tens of loaves a day over very poor roads. Demand in these areas for bread and rice was low because of its high cost compared to the staple which is mealie meal.

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We worked with a supplier of flour to develop a breadmix that took the technology out of the baking – ie the mix was adjusted to account for the particular bread flour characteristics, meaning that baking was a “bag of ingredients plus a bucked of water” process. Appropriate ovens were bought or built and some 20 projects established. The supplier of the mix implemented and managed the projects using one of the company’s master bakers.

I was involved in the set up of some of the early bakeries and facilitated an approach where an appropriate entrepreneur was established in business through the “offices” of the community’s development activities. At one particular bakery we were confronted by a different approach – the group preferred to share, the “salary” that was affordable by the business, between 24 bakers, rather than the 3 that the business model proposed. This was so that at least “everyone would get something”.

What was interesting, was that over the months I was able to compare these two models of running a bakery. The entrepreneurial one succeeded as the entrepreneur was able to put real effort into the activity. He did this because his “income” was directly related to what he did. It was also true that he had a sales point through his rural shop. In the group approach the “bakers” enjoyed the few dollars they earned and the comradeship of the bakery. They were not prepared to put an effort in to growing sales at they neither saw a real reward for effort nor a threat of loss of income for inactivity. This was because changes in the very small income were effectively insignificant. The small income was also not able to make a any real difference to their lives.

The project did not succeed in setting up large numbers of bakeries because of a change in the industry with the deregulation of baking leading to a boom in small urban bakeries. Also, as has been revealed lately, prices were controlled and manipulated by the large bakers giving the small baker of standard bread little opportunity.

Maputaland Tree Butcheries

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The once common tree butchery of Maputaland have all but vanished for non technical reasons. I plan to investigate it a bit and see if there is a basis for new business. I would appreciate any feedback or ideas from anyone interested.

At the time that I was working on palm wine preservation in Maputaland, I sometimes ate at the local tree butcheries and was always interested in how they operated,

Cattle were slaughtered occasionally in response to the demand to ensure that meat was not stored for long periods. Slaughtering was done by hanging the carcass from a tree and carefully removing the innards intact. these were separated into usable and waste material and the waste buried.

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Passersby either made a meal of the meat which was braaied (the South African term for barbecue) on the spot or bought to take home.

What was noticeable about the meat was the deeper yellow colour of the fat, the fact that it was tougher and tastier than the meat from the supermarket and that it was sometimes still warm!
The tree butcheries were evaluated microbiologically to understand their impact on consumer health. It was found that the meat matched that from a modern microbiologically, but that the animal health issues were not addressed according to modern standards. It was concluded that the main contribute to the hygiene at the tree butcheries was the periods when slaughtering did not take place which broke microbial build up and the simple cleanliness practices.

The tree butcheries no longer exist, apparently due mainly to police interventions aimed at controlling stock theft that became rife in the mid nineties.

I believe an attempt should be made to re look at this enterprise which created jobs and a market for cattle, to try and design a new business model matching the current situation

Introducing SAFPP 2.0

Some of you maybe remember the old SAFPP site which is shown above. I am now finished working at the CSIR and one of the things I intend doing is establishing a web based information source for the food processing community in Africa.

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I have many ideas for things that I think could be useful, which I would like to try. But I need feedback to be sure I am doing useful things so please email me with comments, criticisms and suggestions.

Its going to be informal and constantly changing, so no “under construction” messages and maybe some “not perfect” English, but hopefully useful information.

Already happening are:

  • publishing food based enterprise opportunities
  • Africa Agribusiness Issues blog
  • access to the old SAFPP site
  • Some of the things I am planning to cover:

  • food processing information resources
  • biofuels and their link to food
  • the food market and food products
  • system to collect and share supplier information
  • country contacts information