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Moringa (Malunggay) Oil Market Outlook by MIT Sloan. More info on www.youmanitas.com

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Moringa Oil outlook.

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Moringa (Malunggay) Oil Market Outlook by MIT Sloan. More info on www.youmanitas.com Moringa (Malunggay) Oil Market Outlook by MIT Sloan. More info on www.youmanitas.com Presentation Transcript

  • Market outlook Jesus Benavides Alex Rall David Salamon Jose Torbay 01.17.2008
  • Agenda 1 2 3  4 5 6 - Introduction - Overview of Moringa Oil - Potential Markets - Opportunities & Risks - Strategic Recommendations - Socioeconomic Benefits - Q & A  - Tasks & Challenges
    • Team of MBA students from MIT Sloan:
    • Jesus Benavides (Mexico)
    • Alex Rall (Germany)
    • David Salamon (France)
    • Jose Torbay (Venezuela)
    Who we are Introduction
    • Studying the viability of global commercialization of Moringa oil
    • Examining potential markets
    • Putting together the foundation for a realistic marketing strategy
    What we are doing
  • Overview of Moringa
    • Moringa – Malunggay – Horseradish – Drumstick
    • Easily grown in the Philippines
    • 2 harvests every year
    • Very high oil content (40%)
    What is Moringa? Overview of Moringa
    • 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
    What is Moringa Oil?
  • Current Use of Moringa
    • Oil as a based for shampoo in low scales
    • Food supplement – fortification
    • Some Specialty Creams (cosmetics)
    • Specialty “Energy” drinks
    No mass scale production
  • Possible Uses for Moringa 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 Leaves: Nutrition and Medicine Trees: Alley Cropping Erosion Control Flowers: Medicine Pods: Nutrition Medicine Roots : Medicine Seeds : Water Purifier-Medicine-Oil Gum : Medicine Bark : Medicine
  • Moringa Seeds Moringa Leaves Moringa Value Contributors
  • Animal Feeds Water Treatment
    • Cooking Oil  Commercial & Industrial
    • Cosmetics  Emollients
    • Personal Care  Bath soaps
    • Perfumery
    • Industrial Oil  Biodiesel – Oleochemical Shortenings
    • Lubricants
    Moringa Oil Moringa Meal Moringa Seeds Moringa Leaves Nutritional supplements Food Fortification Note however 100ha would saturate the market Moringa Value Chain
  • Potential Markets Food consumption/processing High-end/Cosmetics Industrial/Biofuel
    • 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
    Market Overview Food consumption/processing Overall Vegetable Oil Use for Food Consumption (MMT)
    • Technological advances (e.g.: other types of biomass replacing vegetable oils)
    • If biodiesel market does not pick up, this market will be saturated
    Market Risks
    • 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)
    Moringa Oil - Cons Food consumption/processing
    • 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 - Pros
    • 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 Overview
    • Short product lifecycle
    • Hypes/fads common and difficult to sustain
    • Reputations difficult to build and negative reputations last for long periods
    Market Risks High-end/Cosmetics
    • Very extensive testing is required
    • Requires FDA approval
    • Government help is needed e.g. for conduction of clinical test
    Moringa Oil - Cons High-end/Cosmetics
    • 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 - Pros
    • 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 Overview Industrial/Biofuel
    • 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
    Market Risks
    • Not fully tested (CO, HC, NO x emissions)
    • Existing capacity does not match the huge volume of demand
    • Use in surfactants not ideal due to lack of C-12 carbon chains
    Industrial/Biofuel
    • 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 - Pros Moringa Oil - Cons
    • Lower transportation costs (due to regional proximity)
    • Shorter transportation times
    • Economic advantages from producing in the Philippines
    Geographic Advantages
    • 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
    Market outlook Sustainable business
    • Time is crucial; Need to act now
  • Prices increasing
  • Strategic Recommendations
  • Scarcity of resources and time pressure necessitates focused market approach
    • Negative marginal output with increasing number of tasks
    1 Number of tasks Output
    • 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
    2
    • Focus on leading position in one core market/industry
  • Assessment of market attractiveness leads to a 3-phase market entry strategy Suitability of Moringa Oil Market Outlook Socioeconomic benefits High End/ Cosmetics Surfactants Lubricants 1 2 3 1 2 3 Aggressive entry into Biofuels Progression to High End market Applications in Food industries Unattractive Biofuel Food Processing Food Consumption
  • Aggressive entry into biodiesel market Market Entry Strategy: Phase 1
    • 1. Fill value chain
    • Launch production program
    • Establish client contacts
    Tasks Challenges
    • Timeliness/Speed
    • Overcome interdependence of supply & client base
    • 2. Ramp up
    • Cultivation of Moringa
    • Delivery of first lots
    • 3. Establish long term relations
    • Preempt the competition
    • Build brand recognition
    • 4. Cement market position
    • Expand client base
    • Satisfaction of volumes
    • Coordinated and quick cultivation of plants
    • Establish stable supply chain
    • Creation of spare capacity
    • Guarantee of supply stability
    • Contain organizational growth
    • Maintain stability of prices on the production side
  • Progression into High End market and Food industry Market Entry Strategy: Phases 2 & 3
    • 1. Leverage brand recognition
    • Build upon reputation
    • Find relations in new industries
    Tasks Challenges
    • Maintain supply chain stability
    • Deal with complexity of serving different customer types
    • 2. Diversify product portfolio
    • Invest in R&D
    • Create new product brands
    • 3. Differentiate via branding
    • Invest in marketing initiatives
    • Requires the right marketing mix (4 P’s and 5 C’s)
    • Disconnect from the initial perceptions that may have formed
    • Setting different price points
  • Socioeconomic Benefits
  • Moringa Oil production Socioeconomic Benefits Earned Income Vs. Opportunity Costs Extraction Facilities Employment
    • Planting season
      • One time only
    • Harvest season
      • Twice a year
      • Lasts for one month
    • Significant job creation in the example of the biofuel market:
    Farmers partners and employers Employment
    • Employment will impact other functions such as:
      • Truck drivers, Port operators, others
    Others * 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 # 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
    • Significant increase in income earned by rural population especially farmers
    • Helps fight poverty in rural areas
    • Assumption: Ten hectares per farmer
    Earned Income by Farmers Earned Income Vs. 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)
    Opportunity Costs 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
    • 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
    Investment Extraction Facilities
    • The labor force per plant is estimated at 100 employees
    • By 2010 around 3,000 employees are expected (30 manufacturing sites)
    Employment
  • Recommended Government Actions 1 2 - Marketing campaign - Planting materials 3 - Infrastructure (e.g.: roads network) 4 - Clinical tests 5 - Educational materials (e.g.: pamphlets) 6 - Access to credit for farmers
  • Summary 1 2  - Attractive markets for Moringa oil exist - Aggressive and focused strategy required - Biofuel Industry 3 - Results in significant positive side-effects  - High End/Cosmetics industry, Food consumption/processing markets
  • Q&A
  • Appendix