How to start a food processing business?
by Dayo Akadiri
Food processing is the preparation of food items from one or more ingredients to produce a consumable food that is either eaten directly like fried cocoyam or added to cooked meals like ketchup. Processed food can be seld to consumers both locally and abroad. There are different set of food products that can be processed from. Example are baking bread, chocolate, fruit juice processing, cashew nut processing, fried food, and manufacturing of an ice block.
The processing of the food items is usually processed by machines, some of which are deep fryers, some cutters, some crushers and grinders etc. the kind of machine you need will depend on the type of food processing you wanted to do.
To begin, you have to understand thoroughly the business landscape of whichever food processing faction you chose by carrying out a market research. You have to formulate a schedule; where you mark the time when your ingredients will be arriving. How many hour it will take you to process it, and how many hour it will take to hit the shelves.
It’s very crucial to know the level of demand for the process foods you are intending to produce.
It can be a little difficult for small and medium sized enterprises to compete with the major processing food manufacturers who produce on a large scale and keep their unit costs low. Considering to produce a specialty food range for a local or regional market consumption rather than trying to break into a very competitive national market. Have a good look at your place you are planning to set up your own processing foods company to see if they already sell similar products to the ones you propose to manufacture. Think about how your products will compete with the competitor. Carry out research on the strength and weakness of the competitor that you can explore to make your own product better.
If you already identified a gap in the market that you can fill. For example, you might be planning to produce a traditional, local specialty that you will market through mart, farm shops, road side hawker and supply to the restaurant trade.
Whatever the product ranges you are considering, producing a sample of your product for a test will be helpful. Approaching an individual’s (such as retailers and buyers) and wholesalers which might be interested in selling your products. If you take a stand at a major food and drink exhibition you can have a privilege to show your product ranges to buyers from both the Nigeria and abroad. Discuss with them the price of the products and draw their attention to special features listed below:
• only local ingredients –
• traditional recipes
• wheat-free, dairy or gluten-free
• vegetarian or vegan
• low sodium/low fat/low sugar
• no preservatives or
• artificial colourings/flavourings
When you are showing your samples to prospective customers for product test, you can use the opportunity to discuss the following below:
• the minimum value or volume that applies to orders
• how frequently you can deliver
• how much business they might be prepared to put your way
• whether you would accept the return of unsold products which have reached the end of their shelf life
You could also ask them:
• their overall opinion of your product ranges
• what they think of your pricing and terms
• probe them for any suggestions for improvements or enhancements to your product ranges
Your market research will help you to identify the following:
• whether your products will be accepted in the market
• the price that will give you edge
• how much your prospective customers are willing to pay for your product.
To forcast your annual sales income, you can decide how many customers you are likely to have and how much each of they are willing to spend.
Establish your customer profile
Your potential customer base will depend on which sector of the market you are targeting and might include:
Major Types of Processed Food Products
Oil products – e.g. coconut oil, palm oil
Liquid products – e.g. fruit drinks, processed milk.
Fried foods – e.g. potato chips, plantain chips, etc.
Powdered foods – e.g. flour, spices.
Snack foods – e.g. popcorn, chocolate, cashew nut.
Smaller food manufacturers generally supply a local or regional market although a few also cater for the export market.
The Nigeria Export Processing Zones Authority (NEPZA), Nigeria Export Promotion Council and Nigeria Export-Import Bank (NEXIM) they can provide help and guidance to you in the processing food sector.
If you producing high quality, specialty food products you will have to find a network of wholesalers, retailers and final consumer who target a specific type of customer.
Special offers and discounts
Have it in mind that your larger potential customers in particular will want sizeable discounts from you.
To encourage your customers you can offer early settlement discounts if customers pay their bills promptly.
You can also offer your customers one of the following:
• free delivery
• free products for in-store promotions
• point-of-sale material and display racks
• three-for-two type promo offers
Monitor your discounts and special offers you do give to be sure that they’re working for you. After all, these types of promotion may encourage extra sales, but they will also have effect on the amount of profit you make on each sale.
What to produce
The range of process food products you manufacture will rely to on your target market. For instance, you might decide to produce process food items for the consumer market, which you can distribute via retailers, wholesalers, catering outlets or direct to the consumer through your own e-commerce website, and retail outlet. Or you might have it in plan to develop a range of products specifically for use by other food processing manufacturers in their product ranges. These might be, for instance, sauces to be incorporated into ready-prepared meals.
You might be planning to produce process food for the mass market, in case your processes are likely to be highly automated and you will be producing in large quantities. If this is the case you will definitely needs to invest in sophisticated packaging equipment to wrap, bottle products easily, and remain in optimum condition.
Whichever production strategy you are planning to use, there are some things to consider such as:
• Your staff. If you want to set up in a rural area, how would you be able to recruit enough competent employee? How do you intend to keep them motivated so that your productivity remains high
• How confidence are you that you will meet delivery targets? What plans do you put in place to cover unplanned stoppages like operator absences, machinery breakdowns, and defective problems?
• How do you intend to keep your wastage to a minimum
• What plan do you put in place that your products will be consistently high quality?
Categorization of Food Processing Businesses
Industrial business, it could be categorized into three;
Small Scale: Some process food items could be processed easily such as snacks and cake. Note that the food processing businesses you could do small scale, their material are readily available. It doesn’t need heavy machinery to produce and it is easily sold to consumers. Some good examples are the plantain chips, coconut chips, groundnut and potato chips.
Medium Scale: processing food items that cannot be produce simply by stirring, frying or boiling in a big pot are considered to be medium scale. This is a processing that cannot be handle by kitchen setting, where the food item is not easily processed and it might need some serious machines. An example of such is ice cream production business. You provide for a large consumer audience, perhaps by selling to supermarkets, mini mart, grocery and road side hawker
Large Scale: To really process a food item that would be enough for export which must meet international food standards, you have to opt for a large scale production of the food item.
List of Required Items
Generally, all the food processing businesses share a common list in terms of what they need to start up the business
Machines and equipment They include grinders, boilers, deep fryers, cutters, mixers and so on. Some may require serious expertise before being operated.
Food items This is the food that is being processed and the ingredients that go with it.
Staff Hire people to help you handle the work especially someone with previous experience similar business.
Processing plant This is in on large scale processing. Where the food product is being processed.
Packaging The food product usually determine what kind of packaging suits it best, some are best packed in cartons while in others nylon bags are fine. Packaging also determine how consumer will view your product.
The following are required from the Applicants
Submit all documents for registration and application letter in accordance with the issued guidelines at first instance for any of the service to be rendered by NAFDAC.
Provide NAFDAC with the relevant information and description of the facility for inspection where it relates to registration and importation of NAFDAC regulated products.
Provide samples of the products to be registered when notified by NAFDAC for laboratory analysis.
Ensure all payments are made as at when due.
Ensure all documents are complete and with the appropriate description to prevent unnecessary delays.
Registration of food product not more than 90 days from acceptance of application.
Registration of drug product not more than 120 days from acceptance of application.
Variation of product registration takes not more than 60 days
A client is mandated to comply with Compliance Directive (CD) within 7 days of issuance.
Note failure to comply with any CD issued by NAFDAC may be a basis for cancellation of the application and all delays of the client will not be counted within the 90 days for registration.
Summary of Registration processes with timelines
1. Submission of Application – 0 days
2. Document Verification – 10 days
3. Facility Inspection/Sampling – 10 days for Food, 20 days for Drugs
4. Laboratory Analysis – 30 days for Food, 40 days for Drugs
5. Final Vetting – 10 days
6. Approval Meeting/Issuance of NAFDAC registration Number(Certificate of registration) – 20 days
Getting your price right is the most important aspect. You must be certain that the mark-up is enough to cover all other expenses on your cost of production and profit margin
It’s also advisable to allocate some future income to invest in new equipment and technology. It will also help to upgrade your labour-saving equipment to help you to reduce your unit costs.
Your largest expenditure should be on raw materials and staff cost not on over-head cost
To follow up your level of performance you could regularly look at the relationship between your raw materials costs and your turnover, and your direct labour costs and your turnover.
Always have it in mind that if you plan to sell to both trade customers (such as retailers) and members of the public trade discount is highly recommended retail price.
Distribution and Exportation
When you have a finished product, give it a test run during your market research. If your product tastes great you are good to go and if there is anything to add or subtract then you must continue to tweak it until it is perfected before you can consider it product ready for market.
You can distribute your product to local shops and plazas around you, by engaging the shop owners directly. Exporting is a big deal, but now with the having your own website you can sell to abroad you can also easily advertise your product free in wholesale websites and connect with buyers from all over the world..
Although you still follow the export regulations and acquire an export license for your goods leaving the country and pay the required tax such as export duties, and also know the food regulation and standard of the country so that your goods will not be confiscated.
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