Lympho Productos - Mozambique

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Limpho Produtos Alimentarios

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Agribusiness Entrepreneurship

Limpho Produtos Alimentarios Lda.

CONTACT INFORMATION Machava, Mozambique

A Peanut Entrepreneur Struggles to Meet Customer Demand

+258866420075

Xikhabamanteiganutritiva@gmail.com

Octavio Muchanga, Founder and Managing Director, Mozambique

THE BUSINESS Limpho Produtos Alimentarios Lda. is a small family business, located just a few miles outside of Maputo that produces peanut butter and other peanut-based products such as cakes, roasted peanuts and peanut powder for the local market . Octavio Muchanga, the business founder, is a victim of his own success: customers now demand more supply than he can produce.

Octavio Muchanga founded his business at the beginning of 2011, when he decided to leave his work in the mines of South Africa to become an agribusiness entrepreneur in his own country. Mr. Octavio realized that many farmers in Mozambique were producing peanuts, but that no one was processing them. This motivated him to use his engineering skills to design and build his own roasting machine and begin roasting peanuts.

Shortly after, he acquired additional machinery to produce peanut butter and package it for sale to local markets. For the packaging, Mr. Octavio buys plastic jars from a local company, and a friend helped out with the design of the brand’s label. The whole production process, including filling and labeling of the jars, is done by himself and his family members.

Xikhaba Manteiga de Amendoim, the official brand name of Mr. Octavio’s peanut butter, is an all-natural product, and its product price is only half of what imported peanut butter costs.

ECONOMIC IMPACT FULL TIME EMPLOYEES:

4 family members PART TIME EMPLOYEES:

5 women for sales and marketing activities Buys from more than 40 small farmers, mostly women Annual turnover: USD19,710

However, Mr. Octavio is struggling to improve the quality of his peanut butter and to utilize the price-competitive advantage to successfully position and promote his product in the market. This is most obvious when considering that Limpho Produtos Alimentarios is far from reaching its full production capacity, which is 50kg/hour. In fact, Mr. Octavio does not produce more than 50kg/week because he cannot afford to buy more raw materials due to limited earnings. In terms of sales, Mr. Octavio sells 100% of his production to local markets (110-112 jars per week; 450g per jar), which shows that there is considerable growth potential for sales.

Mr. Octavio and his family have put all their skills, energy and knowledge to the creation and development of the business, but have now reached a point where they will need external assistance in order to be able to upscale their small family business into a more professional and profitable enterprise that could give employment to a larger number of people and benefit more local farmers as raw material suppliers.

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THE MARKET OPPORTUNITY According to Mr. Octavio, imported peanut butter is currently available to about 40% of the population of Mozambique, especially to those that live in urban areas where supermarkets operate. Additionally, peanut butter is used as part of food assistance programs to undernourished children and chronically food-insecure families. The government and various donors distribute peanut butter imported from Europe in affected areas, and it is also used as one of the main ingredients in many food aid products. Given this situation, Mr. Octavio sees two target markets for his product.

The first one is conventional retail sales: Mr. Octavio would like to sell larger amounts of his peanut butter to little stores and supermarkets in urban areas. In addition, Mr. Octavio would like to sell Xikhaba Manteiga de Amendoim especially in rural areas to low-income population, as his peanut butter is an affordable and nutritious product. However, although the business is competitive in price, it would have to improve the quality of the product and the packaging in order to be fully able to compete with imported peanut butter.

The second market opportunity is with the government and donor community: Limpho Produtos Alimentarios could offer peanut butter produced in Mozambique for food assistance programs, thus replacing imports from Europe. For this market that currently covers seven provinces of Mozambique, Mr. Octavio would like to diversify his product palette and to improve product quality in order to meet the special demand of food aid. This means to offer different sizes for different target populations, starting from sachets of 50g to bigger jars of 450g, and also to offer enriched products specialized for the needs of undernourished children.

Although the opportunity is there, the business faces a number of challenges that prevent it from successfully positioning the product in these target markets.

THE CHALLENGES ACCESS TO MARKETS Mr. Octavio does not have a clear business plan and distribution strategy. At the moment, Limpho Produtos Alimentarios sells its products only to small local markets close to where the production facility is based.

The peanut butter is sold to individuals by five parttime vendors. The business has no other distribution channels and no selling contracts with bigger stores. In order to reach the low-income population in urban as well as rural areas, a distribution and marketing strategy for both segments has to be in place. Due to a lack of technical knowledge and financial restraints, the business has not conducted a market analysis to define its strategy. In addition, the staff’s lack in sales and marketing skills, a limited sales infrastructure and production limits caused by a lack of business capital make business development more complicated.

ACCESS TO FINANCE In order to grow his business and increase production, Mr. Octavio would need financing that allows him to buy more raw material as well as additional technical equipment, such as bigger roasting and peeling machines, or a milling and packaging machine. He would also like to increase the physical production space, and to include an office in the production facilities in order to become more professional.

If he had access to adequate financing, he would be able to produce 50kg of peanut butter per hour in the short term and thus increase income considerably. Mr. Octavio has approached private banks, government institutions and the donor community in Mozambique, but has not been able to receive financial support. It is difficult, he says, because as the food processing sector in Mozambique is in its initial stages, financial institutions are risk-averse and prefer to give loans for food importers instead of food processors.

Also, the government has no financing programs in place for this sector, and the donor community focuses on technical assistance.

ACCESS TO TECHNOLOGY AND KNOW-HOW Both quantity and quality of production is a challenge that needs to be addressed so that the business can prosper. Mr. Octavio would like to work with farmers to improve the quality of peanuts in order to produce higher quality peanut butter, but lacks the technological resources and knowledge to do so. Also, in order to be able to sell the peanut butter to the donor community for food aid products, he would need to meet international quality standards and diversify his product palette. Peanut butter used for food assistance has to meet certain quality standards in terms of nutrient matters, and is usually enriched with additional nutrients such as milk powder or soy. The packaging would also have to become more professional. At the moment, the business does not have the technological possibilities to improve either the quality of the peanut butter or the packaging.

Another related challenge lies in the monitoring of the product quality. Currently, Mr. Octavio sends samples of his peanut butter to the only laboratory in Maputo that does quality analysis. This implies high costs and waiting times for the business. The laboratory also only provides the results of the analysis, but does not give recommendations or technical assistance on how to improve the product. Although the business has no major problems with quality issues such as aflotoxin, a toxin produced by fungal growths on peanuts, Mr. Octavio is in need of better and quicker technological support.

ACCESS TO MORE AND BETTER QUALITY RAW MATERIAL The business currently relies on about 40 individual smallholder farmers that provide peanuts for the production.

Mr. Octavio would like to work with more farmers and assist them in creating cooperatives, in order to strengthen the value chain to make the raw material production more efficient, and to obtain higher quality peanuts, but he lacks the resources and the technical knowledge to do so.

POTENTIAL BENEFITS OF AN AIC For Octavio Machanga, the establishment of an Agribusiness Innovation Center in Mozambique would be an important step forward in helping him to overcome the key barriers for growing and expanding his business. Currently, there are only few institutions in the country that provide limited assistance to agro processors, and an AIC would address a huge demand in the sector.

MR. OCTAVIO’S HOPE IS TO BE ABLE TO BENEFIT ESPECIALLY FROM TECHNICAL ASSISTANCE AND CAPACITY BUILDING... ...to make the production process more efficient and professional, through improved equipment, packaging, and a professional back office ...to support and professionalize efforts to get access to finance, through coaching and assistance in a professional presentation, as well as through networking and back-up of the business with infoDev brand ...to assist in getting access to markets, through conducting a professional market analysis and help elaborating a business plan, and sales and marketing strategy ...to increase marketing and sales skills, through training of sales staff ...to help strengthen the value chain to get more and higher quality raw material, through capacity building of small farmers ...to increase technological know-how and improve product quality, through providing a professional services for testing and analysis ...to meet international quality standards, both in terms of product and packaging

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