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AFRICABIZ VOL 1- ISSUE : 31
NOVEMBER 15 - DECEMBER 14, 2001
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Editor: Dr. Bienvenu-Magloire Quenum
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A WORD FROM THE EDITOR


Dear visitor and international investor,


We warmly welcome you, if this is your first visit to Africabiz Online - The ultimate newsletter on trading and investing in 49 sub-Saharan African countries. If you are a regular and faithful reader, welcome back.

If you are a regular and faithful reader, welcome back.

We, at AFRICABIZ Online, continue our series on Sorghum with the introduction to a small scale / pilot plant to producing sorghum beer. The level of investment needed is low as below exposed in the Business Opportunities in Africa' section.

A small entrepreneur has, with this venture, an opening to enter the brewery industry with a production (sorghum beer) which has a ready market in most African countries as explained in the delivery dedicated to Sorghum As A Income Building Power For An African Community.

The very small output (2,400 liters or 3,200 / 750 ml bottles) of sorghum beer will help sizing up the market versus established brands of European beer and soft drinks.

The advantage of promoting sorghum beer production in any African country is linked to the fact that cereal crops (sorghum and corn) cultivation will be boosted; contrary to European beer production which main raw material - barley - is imported.

Click here to review Contributor's Guidelines. Your contribution is welcome.


Many thanks for dropping by and see you here on December 15, 2001.

Dr. B.M. Quenum
Editor of AFRICABIZ
Contact Dr. Bienvenu-Magloire Quenum

BUSINESS OPPORTUNITIES IN AFRICA


SORGHUM: AN INCOME BUILDING POWER FOR AN AFRICAN COMMUNITY.

PART II: SORGHUM BEER PRODUCTION/SMALL SCALE / PILOT PLANT

- Several business opportunities - component parts of the Integrated Developing Scheme described in Africans, Stop Being Poor! are listed in following table.

a- SHEA BUTTER (Issues 5, 6, 7, 11, 12, 13)
b- BLUE GOLD (Issues 14, 15, 16, 17, 18, 19)
c- FREEZE-DRIED PAPAIN (Issues 20, 21, 22)
d- KENAF (Issues 23, 24)
e- VEGETABLE OIL (Issues 25, 26, 27 and 28)
f- CEREALS (Issue 30)

Our last delivery was dedicated to an introduction to Sorghum; a "Life saver" according to a Chinese saying. We stated also, due to the several interesting industrial transformations / possibilities offered by sorghum, that "any African country which is really serious about boosting up its economy should consider diversification into Sorghum development".

In this issue of AFRICABIZ we consider a business opportunity based on the production of sorghum beer on a small scale / pilot plant basis.

Sorghum beer is a popular traditional beverage in many sub-Saharan African countries. It is home made in country sides and consumed by rural and cities dwellers alike. However, since quite 40 years it had been more or less outclassed - in cities - by imported or locally industrially made European barley / lager beer.

- Therefore a good industrially made sorghum beer, tasty as home made one, has a ready market throughout the entire African continent - a tremendous business opportunity to to establishing sorghum beer as a competitive product against European lager beer.

The technology exists; and the only problem for an entrepreneur interested to entering the business of sorghum beer is the size of the potential market in his country.

To size up the market in any African country where the production of industrially made sorghum beer doeses not exist yet (only Zambia, Zimbabwe, Botswana and South Africa are current producers,) an interested entrepreneur should start with a small scale / pilot plant.

-EXCELLENT NUTRITIONAL COMPONENTS

Existing proprietary technology (Zambia, Zimbabwe and South Africa) is based on a mixture of sorghum and corn (in a proportion of 1 part of sorghum for 7.2 parts of corn) and other ingredients such as sugar, lactic acid, barm/brewer yeast and molasses/golden syrup. The final product have a very low alcohol content and several other nutrients - which make it a drink suitable for every people from teenagers to adults - as shown in the Chemical Composition table below: (based on raw materials listed here)

Chemical Composition of Sorghum Beer
Components Quantities
pH 3.4 - 3.8
Alcohol 4% maximum
Insoluble particles 4.5%
Nitrogen 0.1 (average)
Acid content (lactic) 0.3 - 0.4%
Thiamin 120 mg per 100 ml (average)
Riboflavin 90 mg per 100 ml (average)
Nicotinic acid 400 mg per 100 ml (average)
Ascorbic acid 0.06 mg per 100 ml (average)
Calorific value 370 mg per 100 ml (average)
Iron content 1.0 - 2.0 mg per liter of solution.

- SMALL SCALE/PILOT PLANT CAPACITY

A pilot/small scale plant could be established with an output (at full capacity) of 2,400 liter of sorghum beer per day (3,200 bottles of 750 ml) capable of generating substantial revenues and profits - a very small percentage of the beverage market compared to the average production level achieved by most European lager beer plants operating throughout the continent: 40, 000 to 2,500,000 liters per day.

For 300 days per year / one shift the pilot plant at full capacity will produce 720,000 liters per year of sorghum beer or 960,000 bottles of 750 ml. In case the market reacts positively, the establishment of a second shift of workers will help doubling the output.

- RAW MATERIAL TO PRODUCING 720,000 LITERS PER YEAR

In table below are listed raw materials necessary to producing the pilot plant's yearly output of 720,000 liters of sorghum beer and 65 tons of wastes suitable for animal feed.

Raw materials Quantities
Sugar 5,760 Kg
Corn 41,472 Kg
Sorghum 9,216 Kg
Lactic acid 1,958 liters
Golden syrup 288 liters
Brewer's yeast 3,780 Kg
Purified water 807,000 liters

Workforce - management included - is estimated at 15 people. The selling price - off plant / to distributors - of a bottle of 750 ml will be something in the range of 20 cents; and final selling price to consumer 26 cents (compared to other soft drinks and European beer pricing ranging from 32 to 56 cents for bottles of 50 ml); and the selling price of the wastes US $ 66 per metric tons.

Based on all indications above outlined we have the following Gross Profit table:

Items
Amount (US$)
INVESTMENT

Main equipment; storage tank; packaging, vehicle etc.

120,000

Preliminary expenses (technical assistance to set up the pilot plant; business plan; etc.)

75,000

Operational funds (3 months)
13,749
Total investment
208,749
TURNOVER
960,000 (bottles) x .20 US $
192,000
65 (metric tons of wastes) x 66 US $
4,290
Total Turnover
196,290
OPERATING COSTS

Total Salaries

8,500

Other Operating Costs
140,850
Total Operating Costs
149,350
GROSS PROFIT

Total Gross Profit

46,940

Please do notice that results above exposed are based on one shift operating system.

Of course above calculation of the Gross Profit is a rough estimate which will need to be refined with a comprehensive business plan taking into account many other operating parameters (precise distribution cost, utilities cost, taxes and duties of the country in which the pilot / small scale plant will be setup, the determination of the precise Break Even Point. Etc.).

- A GOOD MARKETING PLAN AND A DYNAMIC DISTRIBUTION NETWORK IS NECESSARY

The main "hindrance" to achieving the profit level above outlined concerns the stability of the product. Product should be sold out within 24 hours following the bottling. Final distributors / sellers to consumers cannot store the bottle or packing for more than 24 hours as the fermentation of sorghum beer manufactured with ingredients (here exposed) is not completed when the product is packaged, and continues the more the bottle or packing is shaken; followed by a deterioration of the product - after 48 hours - into a mixture of alcohol and rancid fine particles . More research need to be performed to find a suitable stabilizing agent capable of stopping the fermentation process as soon as the product is packaged.

However, due to the small amount of sorghum beer's bottles (3,200 daily) produced compared to the huge quantities of other soft drinks and beer available on most African countries markets as here exposed, the manufacturer could easily sell its entire daily production. He simply needs to establish a good marketing plan combined with a unbroken cooling chain and accurate selection of selling points (where there is important gathering of people: railways station, inter-cities' transportation boarding stations, schools, stadiums. African marketplace, beaches. Etc.).

- PROFIT MARGIN IS EXTREMELY GOOD

Gross Profit's calculation above outlined is based on full capacity production which obviously cannot be achieved during the first operating year. The first three operating months' daily output will certainly not reach the targeted 2,400 liters level. Nevertheless it is good to take notice of the fact that the estimated Break Even Point is really low (16.52 % of the production at full capacity. That is to say 960,000 bottles x 16.52 % = 158,652 bottles or 50 days' production) and the profit margin could be increased with a second shift. A full and comprehensive Business Plan will give a better evaluation of the Break Even point.
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