El
Castillo del Cacao
Business Plan 2005-2007
Text: Harm van Oudenhoven
Finance:
Maurits de Koning
Matagalpa,
Nicaragua
La
Esperanza, Honduras
April 2005
Executive summary
Our Aims:
1: To make the best chocolate in Central America.
2: To make chocolate available and affordable to all sectors of society
3: To create a sound business that can assist in poverty eradication
and be an example to others.
4: To show that environmental conservation can be consistent with
economic development.
El Castillo del Cacao (the Cacao Castle) is a new commercial initiative
in the department of Matagalpa, Nicaragua. It aims to create a viablemarket
chain using local resources and produce value added products bringing these to
customers all over Central America. Our
main product is chocolate and we sell bonbons, praline chocolates and chocolate
bars. In the future we hope to develop
and market other products that can be combined with chocolates or sold
separately: dried fruits, nuts, spices and liqueurs.
El Castillo del Cacao has three investors. Total investments for product development, marketing trial and
legalization as of May 1st, 2005 totalled $9,000-. Our first sales
started on 1st of February 2005 and currently sell for $400- a
month. In one years time we estimate monthly sales to reach $1500-$2000-. It is
our strategy to start small and with high quality and grow steadily.
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El Castillo del
Cacao “Chocolate con Almendras”
Our
first Chocolate Bar filled with Roasted Almonds and sealed in air tight
packaging. First sales started in February 2005. |
Our aim is to establish a sustainable commercial enterprise will give a
positive contribution to the fight against poverty and an example of
environmentally sound production generating direct and indirect income for
input suppliers, service providers and selling points as well as employment
As an actor in the private sector, with development one of our main
motivations, we hope to contribute,
albeit modestly, to achieving the UN millennium development goals and assist in
Nicaragua’s National Development Plan. We will work towards: The Eradication of
Extreme Poverty and Hunger (by creating employment), to Promote Gender Equality
and Empower Women (by employing a high percentage of women under good working
conditions), to Ensure Environmental
Sustainability (by promoting organic and forest products) and to Develop a
Global Partnership for Development (though being an active partner in fair
trade and environmental organisations).
(United Nations Millennium Goals
1,3,7,8)
In this starting phase we employ 2 women for 4 days a week in chocolate
manufacture and 3 men for 6 days a week in construction (extension of work
area).
Our Future Perspective for 2006: 7 to 9 permanent employees: 5 in production, 2 in IT and administration, 1 to 2 in construction. A $1000- dollar a week turnover should be attainable within 2 years. Internships will also be welcome especially if complemented with a small working budget from our own or other sources. We hope to establish excellent links with organic and “fair trade certified” cacao producers and chain actors (like Max Havelaar, Fair Trade Organisation, Transfair International etc.). For years Nicaragua has been known for its high quality Arabica coffee and it has the potential to become famous for its Chocolate and Cacao.
I.
Introduction
Context and
Country Profile
Nicaragua is a low-income country with the second lowest annual per
capita income of Latin America estimated at $455. This general figure hides the great disparity of income
distribution, one of the highest in the world. 50% of the population earns only
14.5 % of the gross national product (GDP) while the richest 10 % earns 45% of
GDP. (UNDP Development
Report 2004)
Unemployment is estimated at 22% plus considerable
underemployment. The country has made progress toward macroeconomic stability
over the past few years, but Nicaragua will continue to be dependent on
international aid and debt relief under the Heavily Indebted Poor Countries
(HIPC) initiative. Donors have made aid conditional on the openness of
government financial operation, poverty alleviation, and human rights. A
three-year poverty reduction and growth plan, agreed to with the IMF in
December 2002, guides economic policy. In 2004 imports totalled 2.022 million
dollars, exports 755.6 million dollars. The national trade deficit is a major
economic concern (Central Bank of Nicaragua www.bcn.gob.ni)
Nicaragua has 5.1 million inhabitants and even with substantial
emigration its population is growing at one of the highest rates in Latin
America at 2.7 % per annum. This
increases educational problems with the average level of education being only
five years, even less in the rural areas. 29.5 % of men and 28.5 % of women are
illiterate. In rural areas the figures are 46.6% and 45.9% respectively (UNICEF
2002).
|
El
Toro: Matagalpa. (As seen from our
house) A forest 10 years ago is
eroding fast. It was burned 3 times in 4 months. Proper investment could
recuperate the vegetation of the mountain and its valleys. |
Nicaragua is also a food deficit country. In 1999 the minimum salary in
the agricultural sector covered only 32 % of the costs of the basic food
basket. Chronic malnutrition affects 1 out of 4 children under 5. Infant
mortality rates are amongst the highest in the region: 50 per 1000 births.
Maternal death rates are between 125-200 per 100,000 births. General
malnutrition rates, which are related to income level and food access,
reinforce the picture of poverty data.
Matagalpa, our area of investment, has a level of chronic malnutrition
of 30.2 % (WFP
Country Programme 2004).
A large percentage of the rural population survives through subsistence
agriculture using traditional agricultural techniques with low yield production
of basic grains and pulses. There is little farm management experience, are
many financial constraints and high post harvest losses due to inadequate
storage facilities and little know how of post-harvesting practices. During the
dry season fires scourge the area, burning not only pasturelands but also
forests and protected areas. Education in environmental practices is severely
lacking.
Of the 28 worst disasters that took place in Latin America between 1972
and 2001, nine occurred in Nicaragua. Four were climatic, three were caused by
earthquakes and volcanic eruptions and two resulted from civil conflict.
Droughts and floods and hurricanes have had the most direct effect on the rural
poor. The recurrent nature of these effects makes it difficult for the country
and its population to recover from one event before another strikes. Matagalpa,
our work area, lies outside the earthquake zone, but droughts are common.
However, signs of improvement in both the economy and government are
being felt, albeit mostly in the capital Managua and for the richest sectors of
society. The economy is growing at one of the highest rates in Latin America.
An unprecedented economic freedom is motivating people to start businesses.
Foreigners are encouraged to invest and are allowed to own businesses without
local partners, can buy houses and land as well as receive permanent resident
permits. Nicaragua is also
aggressively pursuing fiscal decentralization. This process is an opportunity
to enhance the quality of local services and is part of the democratisation
process of Nicaraguan society (World
Bank 2004). It remains to be seen if this growth will also affect the rural
poor, who up until now see little of the benefits.
Nicaragua is an exporter of coffee, bananas,
sugarcane, cotton, rice, corn, tobacco, sesame, soya, beans, beef, veal, pork,
poultry and dairy products worth $632 mil. (http://www.state.gov/r/pa/ei/bgn/1850.htm)
It is noted that cacao, even though
originating in this region, is not listed amongst major export items. Cacao
export is estimated at only 822 tones in 2004
(INTA, Nicaragua Institute for Agriculture Technology).
Matagalpa is a mountain town with a relatively large
city centre that grew through the production of coffee. Low coffee prices in
recent years hit the economy hard, but last year´s coffee price hike gave a
short boost to its citizens. Situated
at 640 meters above sea level surrounded by mountains, Matagalpa is one of the
few cities where people from Managua can escape the heat. The department hosts
a number of nature reserves that include the Selva Negra (2000 acres of high tropical
rain forest) and Esperanza Verde (www.fincaesperanzaverde.org),
which won the Smithsonian Magazine Sustainable Tourism Award for 2004. All over
the department there are prime forest areas.
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One finds a large variety of Orchids and bromeliads,
many bird species and larger mammals such as the Sloth and Howler Monkeys. Matagalpa
has significant potential for tourism.
(www.matagalpatours.com)
Although primarily a coffee producing area, a small
number of cattle ranchers produce high quality milk and meat. However, it is
clear that Matagalpa has potential to produce much more. Bamboo grows wild and
there is no processing of this material into furniture or building material. A
still existing leatherwork sector that produces boots and saddles could be a
significant source of income if exports are realized. There are numerous fruits
unknown even in Managua that grow here in abundance i.e. Naranjia, Granadillas,
and Pitaya.
Other business ideas could easily root, including
many of the very good business plans presented by other competitors in the Bid Challenge. A professional sawmill
could significantly raise the standard of wood for furniture and decrease waste
within the industry. Mushroom cultivation is virtually unknown in Nicaragua
while waste products of all types are easily available. Solar energy for
lighting, cooking and refrigeration would all find a ready market.
El Castillo del Cacao cannot fill all the voids nor
solve all the problems mentioned above. It is hoped that we can make a small
difference in the fight against poverty and, furthermore, by way of our
innovative actions, encourage others to invest in new ideas and provide a
much-needed stimulus to this part of the world.
II. Market Overview
1. Market Description and Size.
The existing market of chocolate in Nicaragua is minute. Even in the
capital, that has ample shopping malls, many large supermarkets and speciality
shops, high quality chocolate, chocolate sweets and bonbons are not available.
On sale are the standard Nestle and chocolate bar varieties such as Mars,
Snickers, Crunchy and M&Ms. A few supermarkets import fancy but low quality
“bonbons” that have little to do with real chocolate.
Through our trials it became clear that demand was great with people
asking to bring more chocolate next time. Small orders started coming in for
private consumption, coffee mornings and parties. The word has quickly spread
that we are producing a fine product.
Therefore, a substantial empty niche market exists that is waiting to
be filled. The establishment of a good
customer base will require a determined effort to explore proper sales
locations, the development of appropriate products and a clear and determined
marketing effort on the part of ourselves.
We aim to approach the following potential clients as we increase
production and reach legal status.
1/ Shops, restaurants and supermarkets in Matagalpa
2/ High-end restaurants in Managua.
3/ Luxury hotels that have a large foreign clientele. Both for their
coffee bars, but also in the gift shops.
4/ The larger supermarket chains: La Union, La
Colonia.
5/ Pricesmart: Membership
shopping and large wholesaler of local and imported goods.
6/ Flor de Caña: Largest
producer of Rum (one of our ingredients) and very big distributor in the
Central American Region.
7/ Hiper Paiz:
Honduras, Guatemala, El Savador Supermarket chain. (AHOLD). They have approached us to enquire possibilities to produce their brand
name, but they would also respect our diversity production.
8/ Airport and souvenir shops at major tourist
locations.
9/ The United States Nicaraguan Immigrant
market:
A World Bank report states that around 70 percent of
immigrants consume products from their country of origin: tortillas, coffee,
rum, tamales, and sweets, among others. The volume of nostalgic
products exported to the United States from various countries of Latin
America has come to represent some 10 percent of total exports. This is a very
good market to explore and has been proven to function well as entry point into
the general US market.
2. Target Group and Region
This chocolate
will first aim at the high-end market. A large foreign expatriate community and
rich Nicaraguans are currently the main consumers of chocolate. Most foreigners
bring chocolate from their home countries and it is often on the wish list.
Local Nicaraguans are fond of sweets and have expressed their satisfaction in
the product. Chocolate is a growing gift item. High-end restaurants have
expressed their interest in the product, for their customers as well as for
sale in their shops that sell organic and small producer products.
In Nicaragua it is tentatively proven that El Castillo del Cacao will
be a success if it adheres to its current quality and price. Effort will be put
into the development of a cheaper variety to make the product available to a
larger public. This most likely will require a higher content of sugar. This is
however not of concern as Nicaraguans are; as are most Central Americans, sugar
lovers. All Central American countries are large-scale sugar cane producers and
sugar is a substantial part in local diets. Use of organic sugars or unrefined
molasses will be promoted and advice on toothbrushing will be printed on the
labels.
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del Cacao Chocolate Seleccionada ¨Chocolate
selected by her¨ Different types of bonbons, with coffee, nuts and sugared fruits. Close to the cacao source and with many recipes for excellent chocolate, we hope to please all customers. |
Internationally there is a growing market for specialist chocolates
with similar small-scale initiatives from developing countries. Examples can be
found in London, Paris and New York.
Please see this article for a proven example from Senegal. http://news.bbc.co.uk/1/hi/business/3935769.stm.
It should also be mentioned that our chocolate does not undergo the
extended refining process
carried out by the large chocolate manufactures. Although no figures are
available it can be assumed that our unrefined chocolate has a much higher
content of vitamins, anti-oxidants and essential oils than refined chocolate
products. This can be a serious advantage in the health food market.
The Momotombo Chocolate Factory
Besides great taste, public
relations and design are strengths of this brand. |
3. Competition and Context
Since three months
one other competitor that produces a soft chocolate bar has established a
market in similar luxury stores in Managua. This is Mombotombo Chocolate. It
also uses traditional means to produce a good and presentable chocolate. This
enterprise started in similar conditions and social-environmental ideas as El
Castillo del Cacao and we also share the same development stage. Contact has
been made with the owner, a Nicaraguan writer and designer with international
background, 29 years old, to see if we can cooperate on certain fronts.
Mombotombo is a
different chocolate in texture, taste and presentation and therefore poses no
“threat” to our market.
Suggestions are to
look into communal advertisements in local newspapers promoting both our
chocolates, small refrigerated display cases that carry both brands and
campaigns during “chocolate holidays” i.e. Easter and Valentines.
El Castillo has a
larger investment portfolio and we believe that our contacts with suppliers of
cacao and larger buyers extend the current reach of the competitor. Momotombo
has excellent design and presentation ideas and has entry into entertainment
sectors of the local market. Chocolate is a
variety product: to let multiple brands flow along the same channels has always presented
mutual profit (see the Amsterdam canals, The Netherlands as example).
III. The Product
1. Short Description of Product
El Castillo del Cacao currently offers two different products:
1. The Chocolate Almond bar. This is a serious bar of
chocolate with a strong lasting taste.
2. Chocolate Sellecionada “chocolate selected by her” a collection
of different bonbons consisting of
- La Trufa
Pecana: Large chocolates rolled in powdered cocoa with a strong coffee taste
and crushed pecan nuts inside.
- The RonBon: A large toasted
almond on top of a cushion of rum enhanced dark chocolate
- ChocoMania: Slices of chocolate filled to the brim with roasted
peanuts.
- ChocoBalaz: Little balls of
pure but sweet chocolate you can just pop into your mouth.
Our products are unique in Nicaragua. The taste of all 5 products is
very good and incredibly long lasting, beating any imported product multi-fold.
Because of the thrill it produces, we are currently developing a range of rum
based products and aim to have at least 12 tested varieties by the end of 2005.
This will help us make a commercial connection with Flor de Caña (Nicaraguan
Rum producer).
|
Internationally seen, one of our major advantages is our
proximity to the source of cacao. Some
of the world’s best cacao comes from the lower mountain ranges of central
Nicaragua. The variety, Criollo,
is renowned for its special bitter taste much admired amongst chocolate lovers
around the world. Due to lack of infrastructure, export is only marginally
developed.
We use cacao
harvested and fermented only weeks before it is roasted and pressed into
chocolate liquor. This chocolate liquor is not processed any further as it is
done in all western chocolate producers and therefore maintains the unique
flavours of the original cacao. Instead
we use it directly to make our bars and sweets, ensuring a very colourful and
fulfilling chocolate experience.
Within Nicaragua we are only scratching the surface of the potential
market. Due to our small production capacity at the moment we have only
approached a few outlets.
2. Location and Infrastructure
Our pilot area consists of Matagalpa town and a few organic food based restaurants in Managua.
Infrastructure is basic. From cacao to chocolate we are the supply
chain. There are food distributors of all sizes and Matagalpa is not far from
the Central American Highway leading to Honduras and El Salvador.
A small local cacao market exists. Cacao is used to make candy and a
local chocolate-ground maize drink at home and industrially. It is exported in
small quantities. There are a few NGOs and cooperations that can supply a
number of containers of cacao.
Dr. Noel Pallais Checa,
the Director General of INTA (Nicaragua Institute for Agriculture
Technology) estimates the area in production with cacao at 7000 hectares. Cacao export is estimated at only 822 tones in 2004. The INTA is now
starting to promote cacao production for the benefit of small farmers and the
environment. (http://www.chocolateandcocoa.org/Library/Research/usda_September_2004.asp)
An estimated 2000 small producers (30-100kg each) produce in the target
area of El Castillo del Cacao. Cacaonica, an association of 722 cacao growers
is active in our area. 520 members are with organic certification. Last year
Cacaonica exported 208 tonnes of organic cacao to Germany, The Netherlands, The
United States and El Salvador. Potentially is has the ability to deliver twice
this amount and it is interested to deliver straight to our production site. It
is supported by Bioland and Pro Mundo Humano, two German donors. We aim to make
Cacaonica our main supplier of cacao.
The current supply of cacao will meet our demand for the coming
years. With view to growth of the cacao
sector, more producers are necessary. It is hoped that increased prices, a
secure market (partly provided by ourselves) and technical assistance of the
INTA and other NGOs will encourage farmers to grow more and supply cacao on a
regular basis.
A main obstacle to proper chocolate distribution is the lack of
refrigeration. Because we do not use added preservatives, without cool
conditions the chocolate is accessible to moulds. Our current preservation
rates are:
Chocolate Bar: With airtight (non-vacuum) aluminium packing
Refrigerated: 8 weeks with slight hardening of chocolate.
Outside fridge: 10 days at 24, 4 days at 43 degrees Celsius
(can be improved through vacuum pack and co2 gas)
Selected chocolate: with semi airtight see through plastic (with
ribbon).
Refrigerated: 6 weeks with slight hardening of chocolate. Chocolate
becomes more bitter afterwards
Outside of fridge: 3-4 days at 24 degrees, 1 hot afternoon at 43
degrees Celsius.
A step to improve the infrastructure for our product it to develop or
buy non-expensive cooling cases using small solar panels. Store and restaurant
owners are wary of the rising electricity price rises (10-15% a year). Besides saving on electricity, risks of
power failure are minimal. “Keeping
Chocolate Cool ®” may serve as an example for the solar cooling industry in
general. Some extra financing and providing an internship for technical master
students in this field would not be in vain.
3. Development Stage
Research and development of new tastes and qualities will always remain
an essential part of the business. In the short term the inclusion of fresh
milk creams and dried fruits is a priority.
However there are endless combinations to be tried and perfected.
A major effort will be put into finding local suppliers for all
ingredients. Currently 75 % of the nuts used are imported. A short term goal to
lower this to 50% with the introduction of cashew based recipes and looking for
other, so far, unknown, traditional nut types. Furthermore, we will look into
finding suppliers of local dried fruits for use in chocolate sweets. A fruit
dryer will be installed to try out new varieties. A recent experiment with a
variety of rum-based fruit preserves, used to fill chocolates, has created an
unexpected by-product of rum with fruit flavour.
For large-scale production it will be interesting to research more into
the use of wey, currently a waste product of the Nicaraguan milk industry, into
the chocolate. This is common practice in the worldwide chocolate industry.
It is the intention to seek technical advice whenever possible, be it
through internships or through specially acquired expertise. Advice will be
sought for the development of the product itself and also for reaching
international production standards.
Before any attempt at export is made we will aim to gain international certification of the product, quality of the ingredients, hygiene standards and packing quality. For this, when finance is available, international expertise will be sought though organisations such as PUM and other business development service organisations.
4. Positioning and Protection
El Castillo del Cacao has its own secret recipes. This will ensure some
level of protection of the product. However, if we are successful, other
chocolate producers are certainly expected to enter the market. Thus the best
chance for preserving competitiveness is through client satisfaction, constant
improvement, diversification and competitive pricing.
All registration processes will be followed to ensure legal recognition
of the product name and trademark. This includes publication of all product
names in the official government paper ¨La Gaceta¨
Establishing personal links with customers (supermarkets and
restaurants) will also ensure a measure of protection against encroachment on our
terrain.
IV. Marketing and Sales Strategy
1 Sales
Restaurants and specialty shops
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“Chocolate Seleccionada” Roasted Almonds
on a bed of Rum enhanced dark chocolate El Castillo del Cacao wishes to compete
on the market with taste and quality, not necessarily with quantity. |
Starting at a mere 5 kilos a week in our first few weeks we now sell
approximately 20 kg a week ($200) at three locations. This figure will rise as we are approaching other outlets that
are more frequented by foreigners and rich Nicaraguans ( the site of one of our
clients: www.olaverde.info). We aim to
reach 40 kilos a week ($400- in sales) by the end of May with a total of 6
sales outlets selling our product.
These figures should increase
further as we develop more variety and our product becomes known around
Nicaragua. If these targets are not
reached, more effort will be put into seeking other outlets and restaurants. One major improvement will be our
development of refrigerated presentation cabinets, enabling sellers to present
the product with style and under proper cooling conditions.
Supermarkets
With legal conditions fulfilled we will be able to approach the larger
supermarkets. Sales will comprise mostly of chocolate bars until proper cooled
sales presentation boxes can be installed. This will take some investment and
development. Another alternative is to add natural preservatives (still to be
identified) to increase shelf life. Under the right conditions we expect to
sell 400 bars a week ($500-) in 4-6 supermarkets by the end of the year.
Movie theatres
We aim to develop a special snack chocolate bar for movie
theatres. Smaller and filled with
peanuts and raisins, the bar should compete with more expensive Mars and
Snicker bars. We aim to sell 400 bars a month in theatres within one year.
Gift shops in Hotels
With special packing and luxury presentation we will enter the gift
shop market. No sales target has been
set for this product but with exclusive designs of local artists and selections
of our chocolates we aim to attract tourists and Nicaraguan travellers who wish
to bring special Nicaraguan gifts to friends and family abroad.
Airport
The Airport has numerous shops were travellers spend their last cordobas on gifts to bring along. Offering a selection of chocolates in attractive packaging is currently under discussion with one of the businesses with an outlet in the tax free area.
Gas Stations
Most gas stations in Nicaragua are associated with fast food outlet
chains. Most products, especially
sweets and chocolates, are imported brands.
With a good established production base we will aim to distribute
chocolate bars through this network. No foreseen sales figures can be given at
this time.
Export
As mentioned earlier we have plans to export to surrounding countries
to the larger supermarket chains, one of which has already contacted us. When we reach sufficient capacity in
production we will provide potential customers with price quotes and a selection
of available products. The Nicaraguan immigrant market in the United States
will most likely be our first entry onto the US market.
2. Distribution Channels and Networks
For the preliminary phase we will do all deliveries personally on a
weekly basis. This is cost effective as it is combined with other activities
i.e. meetings, purchases and other errands that are necessary in the
capital. This “personal touch” is however proving very important in
receiving customer feedback: essential for further product development.
A network of “chocolate friends” is slowly expanding that can bring the product further into other parts of the country. One such connection is currently delivering a shipment of Almond Chocolate bars to the beach resort of San Juan del Sur on a bi-weekly basis. We expect more of such connections to develop over time. This distribution system, albeit somewhat unstructured, is extremely valuable in this preliminary sales stage, with financial resources still very limited. When finances are sufficient we will invest in a small vehicle with a refrigeration unit.
In the longer term a very important development is the offer of a local
distributor to introduce and distribute our product to all major supermarket
chains in Managua once all legal requirements are in place. They are also very
interested in promoting baking chocolate (our basic unprocessed product) onto
the market for the larger baking industry.
This idea can significantly increase our turnover. Samples will be
provided for distribution in the coming weeks.
With increased sales it will be necessary to look for other good
distributor systems especially if we aim to cover other departments and
neighbouring countries. The United States has a large Nicaraguan immigrant
population and it may be easy to establish a market here. Once the business is
in full swing we will approach Casa Pellas.
This is the largest private company in Nicaragua and amongst others, the
producer of Flor de Caña, the best rum
in Central America. We plan to introduce a range of rum based chocolates and
include the trademark Flor de Caña on our ingredient list. We hope to interest
Casa Pellas in developing a commercial relationship with our company. If a
satisfactory agreement can be made, distribution in whole Central America will
be assured.
3. Marketing and Communication
Our best marketing strategy so far has been the production of a high quality product. News has spread by word of mouth faster than expected. Customers who have purchased the product elsewhere have called our number to see if they can get larger quantities at the source. This includes the Hiper Paiz, a huge Guatemalan supermarket chain with presence in Honduras, El Salvador and Guatemala.
Making available free chocolates to key persons, such as the wife of the ambassador, has made the whole Dutch community aware of the product. During a yearly regional meeting of SNV Netherlands, a whole selection was presented, distributed freely and received enthusiastically, giving brand awareness throughout the organisation. We plan similar actions in other organisations and embassies.
The construction of the production area in the style of a middle age castle is also providing ample subject for discussion and the first tourists have come up to see the structure. It is currently small, but has the hallmarks of a true fortified castle with battlements and embrasures. It is proving to be very popular with children. The building also has a rainwater harvesting system and a roof designed for sun drying of cocoa seeds as well as a terrace with an amazing view over the city.
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Choco Balaz a ¨Chocolate
Seleccionada” Little pure chocolate balls to pop into your mouth.
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Our web sites www.thecacaocastle.com and www.elcastillodelcacao.com are under development. All our products will be presented with full description and order possibilities. Links to other chocolate sites will be inserted to make this an informative site for any interested chocolate lover. Further links to marketing organisations, alternative products and new ideas will be available.
Other marketing strategies are under consideration; these include advertisements before strategic holidays such as Christmas, Valentines Day and Easter. Small pamphlets explaining more about cacao and chocolate can be presented next to the product. Collectible cards, posters and a whole range of artisan packaging are expected to be brought onto the market in the future, catering to a whole range of customers, from the casual consumer to those looking for interesting gifts for loved ones and friends.
In general free samples are given to stores that sell the chocolate so that customers can try before buying. This has shown direct results at all locations.
4. Price Breakdown.
With slight variations total production costs of the major chocolate
products are as follows:
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For 100kg of Chocolate |
Total Costs |
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Mix 1 |
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Cacao
Liquor |
$192.30 |
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Sugar |
$19.67 |
|
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Powdered Milk |
$77.80 |
|
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Nuts |
$102.71 |
|
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Milk |
$6.12 |
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|
|
|
|
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Total costs for 100 kg |
$398.60 |
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Sales Price for 100kg. $1000 |
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It costs an average $3.99 to produce 1 kilo of Chocolate Bars and
Selected Bonbons. Including packing and
labour the estimate is $4.65 a kilo. We
sell at $10 – wholesale. It is estimated that production costs will go down as
we find substitutes for imported nuts and milk powder.
With are looking forward to the introduction of Chocolate Candy.
Chocolate sweets or toffees recently developed are cheaper to produce using
unrefined brown sugar. We can increase sugar content bringing down production
costs significantly: at $.50 a kilo, sugar is our cheapest ingredient. Full
cost calculations for mass production are being made.
Estimated production is 20-25 kg per day per person. Wage for our chocolate workers is set at $7-
per day, compared to the average $3-4- a day wage for semi-skilled labour.
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Don Castillón Roasting and processing cacao is done at the supplier of cacao paste. Costs will go down and quality will improve with proper installation
of processing machines.
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V. Financial Aspects
1. Financial Plan
In the first month of production we sold 10 kilos a week through the
three outlets contacted and 5 kilos a week to private customers. This figure is
rising as customers become aware of the
product and return for more.
Our maximum production at this point is 40 kg a week. We aim to sell
this amount on a weekly basis by the end of May. Current restraints are,
production at supplier, construction at our facility and our legal status.
A significant boost to production will be the installation of the cocoa processor at our partner’s location. Chocolate paste production is then expected to rise to 25-50 kg a day, signifying a production maximum of 100 kg of chocolate a day at our location. Growth will coincide with the legalization of the company and increase in the market.
There are three major investment periods. Current Investment for the
trial has been $4500- A further $4500 is now being invested in the extension of
the production facility and purchasing of essential equipment. In the following 6 months, $2000- will be
spent on marketing and legal fees. If
we win the Bid Prize the 20,000 Euro will give a significant boost and
confidence to the company. Use of these funds is described in the financial template
attached.
2. Investment plan
Phase 1: October 2004-March 2005
Trial and product development: Total investment cost $4,500. Completed
with positive results
Phase II: April 2005-June2005
Legalization, expansion of work area, purchase of new production items:
$4,500
Phase III: July 2005-June 2006
Inputs
US $2,000- Private
Euro 20,000/ US $25,000 (Bid or Loan)
Improvement
of work area, changing room and bathroom. Repair of access road. Office and
administration upgraded. Printing unit established. Proper warehouse facilities
at Castle and at Supplier. Installation of mechanical roaster at supplier.
Excellent kitchen facilities. Establishment of ample cacao stock during harvest
season. Recruitment of 4 additional staff for kitchen and 2 part time for
administration, web and IT and label printing. Part time driver, guard.
Acquiring proper cooled transportation vehicle is an option.
See financial template
for more details.
3. Share of own contribution
Currently my personal share of the investment is US $5,000 from savings. In my own time I initiated the first trial and marketing phase to prove to others the commercial potential of this product. Seeing the items on offer and the reactions of customers, two other investors have come forward and invested $6,000- at this time.
Development costs are not calculated here but are estimated at 2 months
full time.
VI. Development Impact
1. Economic Development effects
El Castillo del Cacao aims to have an influence in the whole production
chain of cacao and chocolate: from the small-scale cocoa grower to the
enthusiastic chocolate lover. We are
now positioned in the middle and as we expand we hope to create a network that
will encompass all aspects necessary for a top quality product. As we link up
with farmer groups and NGOs we will provide them a direct outlet for their
harvested product. Working with a cacao roaster and chocolate paste producer,
we will invest to improve production capacity and product quality. In El Castillo we will produce, pack and
introduce a previously unknown product to the market. From our customers we
will collect feedback to improve and streamline our chocolate collection.
|
a ¨Chocolate Seleccionada¨. Chocolate Rolls filled with peanuts. Chocolate can be
combined with many local ingredients; dried fruits nuts, rum etc. |
El Castillo del Cacao is already creating jobs. In the kitchen two ladies work 3 days a week and this is expected to rise significantly when sales increase. Both these ladies are single mothers of 2 and 4 children respectively. Recruiting single mothers will always be a priority in order to assist this vulnerable and large sector of society. Four day work weeks (well paid) are envisaged so that mothers will be able to spend time at home as well. Part time recruitment of teenage mothers for 3 days a week is also an option so that they may have time to follow a formal eduction in their free time. Chocolate Momotombo has a group ownership agreement with the two women working there fulltime.
The construction of the kitchen area and current extension is giving employment to three men, six days a week. Suppliers of building materials are also benefiting from this small financial injection into the community.
At the supplier of chocolate paste there has been a significant growth
in employment for two ladies working in roasting, peeling and pressing the
cocoa beans. Here we witness an
increase from 1 day a month to 4 days a week in employment. Currently we
are at the very beginning of our production capacity. As we grow, more people
will be hired and trained to assist in the production and packing of the
product.
We also foresee the need to establish a commercial Internet site and
this will require a (part time) system manager. For administration, a
bookkeeper will be hired to complete all official tax forms and keep
administration up to legal standards.
The management team is made up of three men. We will, therefore, require outside expertise for gender analysis
of management and the production process.
2. Social Implications
Matagalpa is renown for its coffee production. Although the price has recovered
to some extent, the coffee price has suffered severely in the last few years.
This has produced a negative connotation amongst people in Nicaragua, who now
relate coffee to bankruptcies, financial difficulties and unemployment.
Chocolate (with a nice cup of coffee) can give a positive impact in how people see Matagalpa in the future. Already we see that Matagalpinos enjoy the fact that chocolate is now produced in their town and many encourage the business with positive feedback. Some have taken chocolate to relatives and friends in Managua as a gift from Matagalpa. We purposely print “made in Matagalpa, Nicaragua” to complement any such sentiment.
In the long run cacao and chocolate may encourage more people to visit
Matagalpa. The town lies in the hills and the surrounding mountains give an
escape of the heat of Managua. When our production centre grows we may make it
accessible for visitors, giving one more tourist attraction to the town.
3. Environmental Implications
Cocoa is a forest product. It needs forest cover and humid conditions
to prosper. The cocoa tree produces all
year round with one peak-harvesting season. Cacao in Nicaragua grows amongst
other productive plants, including coffee, and for small farmers is one of his
or her additional sources of income. In
this combination it is an excellent crop for analogue forestry,
integrated farming and perma-culture.
The continuing coffee crisis, affecting large and small farmers, is
having a negative impact in the environment. With only the most dynamic
producers keeping their head above water, many smaller producers are falling
back to survival practices. There is a noticeable regression toward primitive
agriculture that consists of slash and burning on hillsides, followed by the
sowing of corn and beans. The crops
depend on rainwater for irrigation and harvests are small. During the rainy season rivers are dark
brown with eroded soils and erosion gullies are a common
sight.
Increased prices for cacao can help slow this deterioration. Cacao
needs three to four years to produce and is not an immediate solution to
poverty, but a higher price can motivate farmers to conserve the areas that
they have and look towards the future with positive perspective.
For El Castillo del Cacao higher cacao prices are not necessarily an
unwelcome development. Derk Norde of Fair
Ventures was quick to point out that higher prices lead to an increased
supply potential. I thank him for this remark! It is an actual fact, when
buying from small farmers directly; a higher price for quality should always be
initiated immediately to ensure supply. “Money motivates” (be it a crude
comment).
VII. Management and Organisation
1. Management Team
The
three partners that currently finance the business will form the management
team.
.
Harm van Oudenhoven (Dutch) Matagalpa, Nicaragua: Experience
with small-scale business development including three private enterprises in
the Netherlands and Sri Lanka. Excellent reporting skills and identification of
alternative production methods. Will manage day to day running of business as
well as initial set up. CV
Milton Fernández Vargas (Chilean),
Matagalpa , 15 years in Nicaragua. Long-term
consultancy experience. In charge of legal terms under which El Castillo del
Cacao will operate. Has good links with owners of food distributors and
supermarkets. Currently employed as SNV
advisor “economic tools for environmental governance”. We never meet during SNV office hours! CV
Maurits the Koning (Dutch), La Esperanza, Honduras.
Experience with development of community based enterprise in El Salvador and
Honduras as well as experience in commercial banks in the Netherlands (ING
Bank). Currently employed as advisor in financial services for SNV Netherlands.
He advises the business plan’s financial aspects and its cash flow statements.
In future he will be responsible for the Honduras and El Salvador markets and
eventual replication of production facilities in Honduras and El Salvador. CV
We will constantly remain on the outlook for individuals that can bring in new ideas and investments into the enterprise. Our thoughts go out to providing internship spaces to students involved in food processing and conservation. Expert advice will be sought to bring the enterprise up to international standard.
2. Legal Status
The business will be registered as required by Nicaraguan Law under the
name El Castillo del Cacao. The process for full legalization requires
approximately 2 months and will start in April 2005. The legalisation process
requires the writing of a social constitution, authenticated by a lawyer,
registration at the Chamber of Commerce to obtain a Commercial Registration
Number. This is followed by registration at the town hall.
Parallel to this process is the sanitary inspection of the premises and
the receipt of an official Health Certificate.
To protect the company name and logo our Trade Mark will be registered
and published in “La Gaceta”, the legal publication of the State. We will further request a Green Certificate
signifying that our production is ecologically sound and opening the way
for the certified organic market.
3. Partners
There are two main partners that will play a key role in the supply
chain. Cacaonica will provide the major part of organic cacao, guaranteeing
quality and environmental sustainability. The second is Sr. Guillermo
Castillón. He runs a small cacao roasting and processing plant and is currently
installing new processing machinery. Sr. Castillón has experience with cacao
and chocolate through extensive study and practice. In the past he has
conducted studies for the European Union on the availability of cacao in the
region.
We will aim to invest in the processing plant to improve the working
space, needed molds and other working materials. In the longer
term this section my also be brought up to international standard and
incorporated into a legal association with El Castillo del Cacao.
Other potential strategic partners have been identified but have, so
far, not been approached, as we have not reached enough volume to make any
commitments. However possibilities
exist to make formal arrangements with NGOs, women’s groups, small farmer
organisations that produce one or more of the needed ingredients needed for a
pure organic chocolate production.
Producers of organic dairy products, organic cacao, fruit and nut
producers are all present in Nicaragua. With production in full swing, a
network of such producers will be essential if we wish to remain on the forefront
of excellent quality chocolate production.
Any selection of partners will follow specified criteria that adhere to
our own norms and values including: a high standard of product quality and a
commitment and proven record to deliver , equal or extended employment
opportunities for women especially single mothers and an environmentally
sustainable production system.
|
A thousand stones to build a castle. Currently under construction: a rounded tower (on
the left) to serve as an enlarged kitchen area and storage. Photo: 22nd
of April, 2005. Matagalpa, Nicaragua |
VIII. Strategy
1. Milestones
In the next 2 years we hope to reach the following Milestones.
1: Within 3 months (still without prize money) Legalization of the
business and sustainable production of current varieties without hands on
management. Staff should be trained sufficiently to allow absence of day-to-day
manager.
2: Within 8 months (with prize money) much improved standard in
packing and shelf life of the product. First sales to major supermarkets. A
link with a number of Film theatres to sell chocolate during the remake of Charlie and the Chocolate
Factory out in December 2005. Chocolate alphabet: a first in Nicaragua!
3: Within 1 year: Established sales points in at least 8 high
end restaurants and coffee houses with our own refrigerated display cases. A
collection of at least 12 varieties of chocolates. Chocolate Easter Eggs and
Bunnies at all locations.
4: Within 16 months: First Export to Honduras and El Salvador. 4
different well conservable chocolate bars of excellent quality
5: Within 2 years: International standard certification for
export beyond Central America and first contacts in Europe with exclusive
chocolate sellers. For sale at “de Chocolade
Fabriek” or “The Chocolate Factory” to be opened in Amsterdam at the end of
2006.
2. Requirements for success and Risk
Factors
For the business to be a success it needs dedication and a growing
variety of products with different tastes and presentation. As stated before,
constant new ideas will be sought and new products developed and tested to keep
the enterprise dynamic and on the forefront of chocolate production in
Nicaragua and in the Region.
A major risk to the business is failure of the electricity grid. With our products in cold storage, a cut of
more than 24 hours during the warm season can mean disaster. As we do not use
preservatives in our chocolate, mould growth has been noticed on chocolate
after 72 hours outside the refrigerated unit.
With the prize money one of our first investments will be in solar
panels and battery back-ups. Water is also a scarce resource. Efforts will be
made to conserve water and re-use drainage for irrigation.
Another risk is large-scale buyers of cocoa suddenly entering the
market and depleting our resource. With more capital, stocks of cocoa seeds
will be created at the production site (the castle) and at our partners. A
higher price is not necessarily of concern as in the long term this will lead
to more supply.
A further risk pertains to staff. AIDS is still relatively uncommon in
Nicaragua, let alone Matagalpa. However, my own experience in Ethiopia has
shown me that preventive measures are essential if we wish to guard against HIV
and AIDS and subsequent loss of trained personnel. Information will be made
available to all staff regarding HIV/AIDS and included in any hygiene training
provided.
In the past Nicaragua has been hit by earthquakes, hurricanes, droughts
and different sorts of animal plagues.
Any of these could also affect our business. In order to keep risks to a
minimum we will always insure our property, maintain a high standard of safety
in our buildings and deposit sufficient savings in order to prevent any such
occurrence harming the business beyond repair.
3. References
Reference Person 1
Carla
Fjeld
Owner and Founder of Ola Verde www.olaverde.info
an organic oriented restaurant based in Managua, Nicaragua. One of the first to
sell our chocolate and can give feedback on quality and presentation of the
product.
Mrs. Fjeld is a nutrition specialist with extended international
experience.
Contact info: Telephone:
00-505-270-3048
e-mail:
olaverde@ibw.com.ni
Reference Person 2
Warner
ten Kate
First Secretary Netherlands Embassy Kampala, Uganda. An economist and good friend. Knows of my networking and organisational
capacities.
Contact info: Telphone: 00-256-(0)77-766553
e-mail: warner-ten.kate@minbuza.nl
Adriaan Loeff
Director FACET
Knows me from person to person interview for the Bid Challenge in April 2005, Managua, Nicaragua.
See other references attached to my
personal cv.