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OPPORTUNITIES IN SHEA BUTTER BUSINESS IN NIGERIA; SETTING UP A SHEA BUTTER PLANT

Nigeria need to invest more in a high technological and mechanized shea butter processing plant to satisfy the demand for shea butter. Shea is very much a self-contained industry, which could scale very quickly with investment in processing machinery and skills training.



 

INTRODUCTION

There are many agro commodities to invest your capital but one stand out product will always be Shea butter. A large market exists for shea butter world-wide, particularly as it is organically produced. Shea butter is in high demand and is a wonderful product. It has high prospect and sells well in the international market. Opportunities exist in its production value chain producing on a small, medium and on a larger scale to meet the growing demand.

The raw material is sheanut. It is available in abundant quantities and qualities and will be made available for production. Depending on the proposed location of your production plant, you will be sure of readily available raw material. One will be sure it is closer to the shea producing states of Oyo, Kwara, Kogi, Niger and Kebbi State.

A shea nut gathering point should be set up in each of the shea sourcing area. There should be a central warehouse and office in each shea area, where the shea nuts will be harvested and stored temporarily. Harvesting of the shea nuts will be coordinated from this office. The women cooperatives collect shea nuts, and bring the collected shea nuts to a central point/office. Small trucks will be transporting the shea nuts from the central point to the central warehouse in the shea zone where it will be stored temporarily before it will be conveyed by larger trucks to the production factory.

 

THE OPPORTUNITIES

There is a growing interest in butter from Nigeria for use as ingredients in the cosmetics, pharmaceutical and confectionary industries, yet the commodity is in limited supply as much of it is processed by local women through crude and labour intensive means. Investment in the processing of the butter in large volume will not only be profitable, but will also create a feel factor for government support as it is also an avenue for employment for its teeming youths.

The strong interest in the product by cosmetic companies is due to growing demand for a more natural product that is perfect for skin. 10% of the world demand is by the cosmetic companies in the US and European Countries. 90% of world demand is by the chocolate and confectioneries industry. The European Union allows up to 5% sheabutter to be included in its confectioneries and if US lift ban on using Cocoa butter alternatives as expected, then consumption in this sector will also increase.

The commercial interest in shea centres on its use as a substitute for Cocoa due to high cocoa prices in the market. On the flip side, the demand for certified shea butter is essential, especially if you factor in the availability of good quality product that companies and buyers are searching for.

Looking at the size of the market. The market size is huge. The global market for confectionery products is about $200 billion while that of cosmetics and toiletries ingredients is estimated at about $40 billion in 2016. One will have to follow daily the major players in the shea butter, chocolate and cosmetics industry, respond to trend to keep ahead of its competitors.

Asia is also an important growth market for CBEs as most Asian countries do not have any regulations against using CBEs in chocolate. Together, Western Europe and Asia consume about two thirds of global CBE production(2/3) (66%). World chocolate consumption is increasing overall, especially in the growing economies of Latin America and Eastern Europe where disposable incomes and population are rising. Despite the relative maturity of the Western European market, chocolate consumption is still strong.

Another income stream is the Shea cake. Shea cake is a residue from the production of shea butter. It has economic value. It can be used as a raw material for bricks and it is demanded oversea for use as a niche input to high end production of animal feeds.

 

THE PROBLEM

There is more demand for Shea butter than is currently produced. Rural-based women from time immemorial has been using manual traditional methods to process about 60% of all the crude butter produced in Nigeria at a relatively low extraction rate of about 25%. Currently, the production of Shea butter are often done manually in semi industrial and small 100% industrial scale in Nigeria. One constraint to shea production in West Africa is quality issues. Because West Africa has not enough factories to produce a high grade quality of Shea butter, the opportunities in export is yet to be adequately tapped.

There are specific quality of shea butter needed in the international market and it is of ultimate concern to buyers. Buyers want to know the Iodine number, acid and free fatty acid number and other parameters of the shea butter he want to import. The African entrepreneur has too little access to financing for trade and investment, hence 80% of the Shea butter production is done in Europe and Asia by multinational companies.

Shea Tree grows only in West Africa and lesser extent in Central Africa, and nowhere else in the world with Nigeria a leading producer of the raw material (Shea nut). Nigeria produces about 500, 000 Tons of Shea nut annually. On the business side, Nigeria can compete favourable with the established industries in Europe and America. The disadvantage of processing Shea Nuts into Shea Butter in Europe or Asia is the transport costs because the raw material can only be gotten in Africa. To produce 1 kg of Shea Butter, you need 2.2 kg Shea Nuts, so as you understand, it is much cheaper to produce Shea Butter in Nigeria with easy access to the raw material. Staff costs here are also lower.

 

 THE SOLUTION

Nigeria need to invest more in a high technological and mechanized shea butter processing plant to satisfy the demand for sheabutter. Shea is very much a self-contained industry, which could scale very quickly with investment in processing machinery and skills training.

From research, 50tons per day processing plant could be set up in any industrial zone in the country, with relatively extraction rate of 40% and if the oil content of 40-50%, 50tons input sheanut would yield 20 tons of shea butter per day, 500 tons per month and about 6000 tons in a year which could further refined to satisfy the need of the market. Shea cake is another derivative of shea butter processing with economic benefit. It is also demanded by foreign buyers.

On the financial level, there is potential for a quick and higher return on investment. About $3.6 million will be invested on the project with a breakeven point in earnings before the end of the second year and profit over 90%. Earnings before taxes, depreciation and amortization (EBTDA) is a positive and investors can expect dividend from their investment in the subsequent years.

 

REQUIREMENTS/PROCESSING METHODS

To process Shea butter, one would need to have the capital to procure raw materials, equipment and machineries, put in place necessary facilities to aid production and ensure provision of paper documents such as the feasibility analysis providing necessary guidance on the project.

But know that if you are going to exploit a Shea Butter plant with specially developed machines, you need managers with a technical background; those with several years of experience in the industrial production of Shea Butter. More insight will be provided to you on this in the detailed feasibility analysis of this project.

On the production process, you got to choose either the refined, raw and cold press processing methods. But I want you to know this about sheabutter, the adopted processing method determine the quality and quantity of your output sheabutter. The refined shea butter has become one of the popular and common sheabutter in the market. It is white, odourless and hard in texture because during the refining process, it is subjected to extreme heat which changes it’s state and ensures it has a longer shelf life. Refiners will use hexane to strip it of its colour and nutty fragrance. This is necessary if one wants to use Shea Butter without all the variation in appearance and odour.

Chemicals used will include Alkali, Phosphorus and bleaching earth. Alkali requirement is by range value of 1.6-2.2 per 1 ton oil, Phosphorus 0.5-1.0kg per ton oil and bleaching earth 3-20 depending on the colour requirement per ton oil. Generally, chemical consumption used will depend on the acid value of the crude sheabutter extract.

The raw production method produces Shea Butter of light beige to a more creamy yellow. It is smooth to the touch, absorbs easily and sometimes has a roasted fragrance to it. Interest in Raw Shea Butter is having a well deserved resurgence. The result of the production process is a miraculous beauty, anti aging and therapeutic lotion that is naturally high in vitamin A and E, has more antioxidant than Green Tea and boast of six different essential fatty acids. It’s high nutrient content makes Raw Shea Butter useful for everything from hair care to reducing wrinkles.

The latter is a new way which is gaining popularity. It is the Cold pressed. Cold Pressed Shea Butter produces a final product that is lighter in Shea Scent and Colour but still as nutritive.

Cold pressing involves extracting oil and nutrients from the Shea Nut using an expeller press or something similar. An expeller press is a machine that puts a great amount of pressure on oil bearing materials like olives, coconuts and in this case Shea. Heavy friction and continuous pressure releases oil from the Shea and the oil seeps through small openings that do not allow solid shea fibers to enter.

Although cold pressing does not extract every last trace oil in the same way that raw processing does, the process does cut 3-5 hours off the extraction time. The result is somewhat similar to refined Shea Butter, but no chemicals or synthetics are used.

 


INVEST NOW

The mechanized equipment needed for the production line can be easily sourced and installed by the equipment manufacturer who have proven track record in oil machinery production and installation. Because of their long experience, they have achieved economics of scale to carry out any of this project in cost effective manner.

Also available are Consultants who specializes on quality issues. He will ensure product quality are never compromised. Output shea butter from the production line will be sampled, tested, inspected and certified by SGS. An SGS is a world commodity certification company. Its standard is an international standard and quality consultant will ensure certification of the output shea butter.

One can start mechanized shea butter production on a small scale and grow over time to medium and large scale level. 5 metric tons per day capacity plant can yield about 2 tons sheabutter. 10 tons capacity yields 4 tons sheabutter, 20 tons yields about 8 tons sheabutter while 50 tons will produce 20 tons daily of sheabutter.

The time to invest in mechanized shea butter production is now. And overtime, the investor will rationalized its production system or received sufficient orders to exploit economics of scale within their plants and gain higher competitive edge. One is assured that with the renewed demand for Cocoa Butter Equivalent in the International market, government ever willing support for agriculture which is a non Oil commodity and advances in Information and Communication Technology which has facilitated trade world over, investing in a high technological mechanized Shea butter plant will be a viable idea and a wise investment.         

Your future policy should be to expand. When your Shea Butter Plant functioned relatively optimal, it will make economic sense to expand the operation by building similar factory in other states or neighboring country where sheanut is in abundant. For marketing purposes, there will be need to open sales offices in major cities in Nigeria and if possible in Europe, Asia and America. This will facilitate a good contact with your major customers. The aim should be that within 10 years, a large chunk of the Shea butter market will be in your hands. In the long term, It should be a multi national and should create a good number of Jobs.

With these and many more, the time to invest in shea butter processing plant which is a low risk, responsible investment is now.

Intending Shea butter Investors on this Project can be assisted in setting up this venture as a small scale, medium or large mechanized scale level. Comprehensive feasibility study and business plan on this project is available. Call 07033097160 for more information.





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