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

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

  1. 1. Market outlook Jesus Benavides Alex Rall David Salamon Jose Torbay 01.17.2008
  2. 2. Agenda 1 2 3  4 5 6 - Introduction - Overview of Moringa Oil - Potential Markets - Opportunities & Risks - Strategic Recommendations - Socioeconomic Benefits - Q & A  - Tasks & Challenges
  3. 3. <ul><li>Team of MBA students from MIT Sloan: </li></ul><ul><li>Jesus Benavides (Mexico) </li></ul><ul><li>Alex Rall (Germany) </li></ul><ul><li>David Salamon (France) </li></ul><ul><li>Jose Torbay (Venezuela) </li></ul>Who we are Introduction <ul><li>Studying the viability of global commercialization of Moringa oil </li></ul><ul><li>Examining potential markets </li></ul><ul><li>Putting together the foundation for a realistic marketing strategy </li></ul>What we are doing
  4. 4. Overview of Moringa
  5. 5. <ul><li>Moringa – Malunggay – Horseradish – Drumstick </li></ul><ul><li>Easily grown in the Philippines </li></ul><ul><li>2 harvests every year </li></ul><ul><li>Very high oil content (40%) </li></ul>What is Moringa? Overview of Moringa <ul><li>The oil is extracted from the seed through relatively </li></ul><ul><li>simple processes </li></ul><ul><li>Vegetable Oil that can be used for many industries </li></ul><ul><li>(Cooking- Food Processing- Cosmetics – Biofuels- others) </li></ul><ul><li>Low trans fatty; High content of beneficial fatty acids </li></ul><ul><li>Comparable to premium vegetable oils like Olive Oil </li></ul>What is Moringa Oil?
  6. 6. Current Use of Moringa <ul><li>Oil as a based for shampoo in low scales </li></ul><ul><li>Food supplement – fortification </li></ul><ul><li>Some Specialty Creams (cosmetics) </li></ul><ul><li>Specialty “Energy” drinks </li></ul>No mass scale production
  7. 7. 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
  8. 8. Moringa Seeds Moringa Leaves Moringa Value Contributors
  9. 9. Animal Feeds Water Treatment <ul><li>Cooking Oil  Commercial & Industrial </li></ul><ul><li>Cosmetics  Emollients </li></ul><ul><li>Personal Care  Bath soaps </li></ul><ul><li>Perfumery </li></ul><ul><li>Industrial Oil  Biodiesel – Oleochemical Shortenings </li></ul><ul><li>Lubricants </li></ul>Moringa Oil Moringa Meal Moringa Seeds Moringa Leaves Nutritional supplements Food Fortification Note however 100ha would saturate the market Moringa Value Chain
  10. 10. Potential Markets Food consumption/processing High-end/Cosmetics Industrial/Biofuel
  11. 11. <ul><li>EU growing at a CAGR of 7.3% and US at 3.5% over 2003-2006 period </li></ul><ul><li>Limited domestic production capacity necessitates increased imports </li></ul><ul><li>Prices per liter for comparable oils higher than expected price of Moringa </li></ul><ul><li>Gap being formed for vegetable oils in this market due to shift to biodiesels </li></ul>Market Overview Food consumption/processing Overall Vegetable Oil Use for Food Consumption (MMT) <ul><li>Technological advances (e.g.: other types of biomass replacing vegetable oils) </li></ul><ul><li>If biodiesel market does not pick up, this market will be saturated </li></ul>Market Risks
  12. 12. <ul><li>Would most likely require the use of a process to remove the nutty flavor/smell </li></ul><ul><li>Acceptability of the market may require large marketing investment </li></ul><ul><li>Food processing companies incur a significant switching cost </li></ul><ul><li>Requires FDA/EFSA approval (may take time or not pass) </li></ul>Moringa Oil - Cons Food consumption/processing <ul><li>Dietary benefits  responds to increased health consciousness in US/EU, low in trans fatty acids </li></ul><ul><li>Long product shelf life due to fatty acid content </li></ul><ul><li>Relative cost advantage </li></ul>Moringa Oil - Pros
  13. 13. <ul><li>Acceptability for new products higher than in food industry </li></ul><ul><li>High margins </li></ul><ul><li>Variety of applications </li></ul><ul><li>High potential in certain key markets (such as the UK) </li></ul><ul><li>Broad range of customers  reduced impact of dropout from one customer </li></ul><ul><li>Growing segment in EU and US </li></ul>Market Overview <ul><li>Short product lifecycle </li></ul><ul><li>Hypes/fads common and difficult to sustain </li></ul><ul><li>Reputations difficult to build and negative reputations last for long periods </li></ul>Market Risks High-end/Cosmetics
  14. 14. <ul><li>Very extensive testing is required </li></ul><ul><li>Requires FDA approval </li></ul><ul><li>Government help is needed e.g. for conduction of clinical test </li></ul>Moringa Oil - Cons High-end/Cosmetics <ul><li>Chemical composition and physical properties ideally suited for the high end market </li></ul><ul><ul><li>High oleic acid content  good emollient </li></ul></ul><ul><ul><li>Nutritional benefits  ideal particularly for dietary supplements </li></ul></ul><ul><li>Cost advantage over main competitors such as Sunflower oil or Olive oil </li></ul><ul><li>Lower price sensitivity of potential clients than in other markets </li></ul>Moringa Oil - Pros
  15. 15. <ul><li>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] </li></ul><ul><li>One of the main drivers of the price increases in vegetable oils and shifts of oils from other uses </li></ul>Market Overview Industrial/Biofuel <ul><li>High volatility of energy prices </li></ul><ul><li>Complex interrelations between alternative/competing energy sources </li></ul><ul><li>Regulations quickly changing (unpredictability of US government programs) </li></ul><ul><li>Potential price pressure from new entrants </li></ul>Market Risks
  16. 16. <ul><li>Not fully tested (CO, HC, NO x emissions) </li></ul><ul><li>Existing capacity does not match the huge volume of demand </li></ul><ul><li>Use in surfactants not ideal due to lack of C-12 carbon chains </li></ul>Industrial/Biofuel <ul><li>Low iodine value (better than diesel) </li></ul><ul><li>Low cetane (ignition) number (better than both coconut fat and diesel) </li></ul><ul><li>Cost is comparable to alternatives (e.g.: Soybean oil) </li></ul><ul><li>Could potentially obtain carbon credits in future, which would further enhance value of planting Moringa </li></ul>Moringa Oil - Pros Moringa Oil - Cons
  17. 17. <ul><li>Lower transportation costs (due to regional proximity) </li></ul><ul><li>Shorter transportation times </li></ul><ul><li>Economic advantages from producing in the Philippines </li></ul>Geographic Advantages <ul><li>Economic trends  increasing market prices  stable/increasing revenues </li></ul><ul><li>Long term nature of contracts  reduced competitive pressure </li></ul><ul><li>Importance of reliability of supply  sustainable business relationships </li></ul><ul><li>Nature of industry based on relationships  moving now is important </li></ul>Market outlook Sustainable business <ul><li>Time is crucial; Need to act now </li></ul>
  18. 18. Prices increasing
  19. 19. Strategic Recommendations
  20. 20. Scarcity of resources and time pressure necessitates focused market approach <ul><li>Negative marginal output with increasing number of tasks </li></ul>1 Number of tasks Output <ul><li>First-mover market </li></ul><ul><li>Temporary gap in the worldwide vegetable oil supply </li></ul><ul><li>Difficult break up of long-term contracts </li></ul><ul><li>Commodity product  difficult differentiation </li></ul><ul><li> Aggressive market strategy required </li></ul>2 <ul><li>Focus on leading position in one core market/industry </li></ul>
  21. 21. 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
  22. 22. Aggressive entry into biodiesel market Market Entry Strategy: Phase 1 <ul><li>1. Fill value chain </li></ul><ul><li>Launch production program </li></ul><ul><li>Establish client contacts </li></ul>Tasks Challenges <ul><li>Timeliness/Speed </li></ul><ul><li>Overcome interdependence of supply & client base </li></ul><ul><li>2. Ramp up </li></ul><ul><li>Cultivation of Moringa </li></ul><ul><li>Delivery of first lots </li></ul><ul><li>3. Establish long term relations </li></ul><ul><li>Preempt the competition </li></ul><ul><li>Build brand recognition </li></ul><ul><li>4. Cement market position </li></ul><ul><li>Expand client base </li></ul><ul><li>Satisfaction of volumes </li></ul><ul><li>Coordinated and quick cultivation of plants </li></ul><ul><li>Establish stable supply chain </li></ul><ul><li>Creation of spare capacity </li></ul><ul><li>Guarantee of supply stability </li></ul><ul><li>Contain organizational growth </li></ul><ul><li>Maintain stability of prices on the production side </li></ul>
  23. 23. Progression into High End market and Food industry Market Entry Strategy: Phases 2 & 3 <ul><li>1. Leverage brand recognition </li></ul><ul><li>Build upon reputation </li></ul><ul><li>Find relations in new industries </li></ul>Tasks Challenges <ul><li>Maintain supply chain stability </li></ul><ul><li>Deal with complexity of serving different customer types </li></ul><ul><li>2. Diversify product portfolio </li></ul><ul><li>Invest in R&D </li></ul><ul><li>Create new product brands </li></ul><ul><li>3. Differentiate via branding </li></ul><ul><li>Invest in marketing initiatives </li></ul><ul><li>Requires the right marketing mix (4 P’s and 5 C’s) </li></ul><ul><li>Disconnect from the initial perceptions that may have formed </li></ul><ul><li>Setting different price points </li></ul>
  24. 24. Socioeconomic Benefits
  25. 25. Moringa Oil production Socioeconomic Benefits Earned Income Vs. Opportunity Costs Extraction Facilities Employment
  26. 26. <ul><li>Planting season </li></ul><ul><ul><li>One time only </li></ul></ul><ul><li>Harvest season </li></ul><ul><ul><li>Twice a year </li></ul></ul><ul><ul><li>Lasts for one month </li></ul></ul><ul><li>Significant job creation in the example of the biofuel market: </li></ul>Farmers partners and employers Employment <ul><li>Employment will impact other functions such as: </li></ul><ul><ul><li>Truck drivers, Port operators, others </li></ul></ul>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
  27. 27. <ul><li>Significant increase in income earned by rural population especially farmers </li></ul><ul><li>Helps fight poverty in rural areas </li></ul><ul><li>Assumption: Ten hectares per farmer </li></ul>Earned Income by Farmers Earned Income Vs. Opportunity Costs <ul><li>Most of the land needed is not being used </li></ul><ul><li>Planting corn, a farmer would earn 1,440,000 PHP per year </li></ul><ul><li>Planting coconut, a farmer would earn 814,000 PHP per year </li></ul><ul><li>In addition, the meal of Moringa seeds used for animal feeding (from the residual during the extraction process) </li></ul>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
  28. 28. <ul><li>An investment of 250 million PHP per extraction facility is needed </li></ul><ul><ul><li>A minimum of 1000 ha per facility is required for profitability </li></ul></ul><ul><ul><li>Maximum capacity of facilities can be expanded at a marginal investment as more hectares are added </li></ul></ul><ul><li>Estimation of 30 extraction facilities by the end of 2010 </li></ul>Investment Extraction Facilities <ul><li>The labor force per plant is estimated at 100 employees </li></ul><ul><li>By 2010 around 3,000 employees are expected (30 manufacturing sites) </li></ul>Employment
  29. 29. 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
  30. 30. 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
  31. 31. Q&A
  32. 32. Appendix

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