Nigeria Market Entry Strategy Somebody’s Mother’s Chocolate Sauce, LLC
Export opportunity for ginger and cocoa
Somebody’s Mother’s Chocolate Sauce, LLC is manufacturer and processor of cocoa located in Houston, TX with gross annual sales of approximately $700,000 per year (Manta, 2010). The fluctuating costs of cocoa and the introduction of a have prompted the company to seek export opportunities in Nigeria to vertically integrate its sources of cocoa and for ginger to expansion of its . The company also plans to sell some of the cocoa beans and ginger wholesale for a profit to other chocolate processors in its local and regional market. In the long-term the Company may explore producing its chocolate sauce in Nigeria for export to European markets.
B. Entry Mode
Somebody’s Mother’s Chocolate Sauce, LLC (the “Company”) is new to the international market and believes the most successful avenue to begin exporting is hiring a local agent in Nigeria to negotiate with local producers. This is advantageous because an agent in Nigeria who knows the local customs, regulations, and producers has the contacts and can create the agreements necessary to obtain the sources of cocoa beans and ginger. The Company has selected His Mercy Exporters & Investment operating out of Lagos, Nigeria to facilitate the export process (Alibaba, 2010). Lagos is located on a port making it easier for the transportation of the products to the United States.
As a developing country, personal ties and patience are important for successful business activity in Nigeria (ICON, 2007). The Nigerian market offers significant opportunities for U.S. exporters but a clear road map and a well thought-out business strategy are required (ICON, 2007. Nigeria is the largest market in Sub-Saharan Africa, but has a cash-based economy (ICON, 2007). In Nigeria, most transactions are paid for in (Naira) cash and credit instruments, such as credit cards are in their early stages of use (ICON, 2007). The Company will need to set up a bank account in Nigeria to trade in cash with its agent.
The government in Nigeria is working to improve the economy, but the downside to operating through an agent and in Nigeria is the political unrest prominent in the region and the possibility of a supply interruption (“Thousands,” 2010).
The forecasts for cocoa production are excellent with a 26% growth expected through 2014, driven by increased government investment, greater commercialization, strong global cocoa prices and efforts to develop the cocoa processing sector (“Research and Markets,” 2010).
Ginger is a more stable market then cocoa and produced mainly for export. Nigeria’s production of ginger in 2005 was estimated at 110,000 metric tons with 10% for local consumption as fresh ginger and 90% dried primarily for the export markets (, n.d.).
Cocoa bean prices fluctuate with the seasonal demand for chocolate, but most recently cocoa beans were selling for $2,789.00 a ton (International Cocoa, 2010). Ginger can be obtained through the export company for $264.00 for 44 pounds (Alibaba, 2010). Shipping and handling costs have been estimated at $500.00 per ton on the cocoa and $.20 per pound on the ginger. The Company will package the cocoa beans and ginger unprocessed for sale to other chocolate companies. To cover costs and make a 20% profit the Company plans to sell the cocoa beans for $2.00 a pound and the ginger for $7.44 a pound.
The significant cost savings of purchasing cocoa directly will allow the Company to reduce the cost of its chocolate sauce by 10% and still make a profit while making its product more competitive.
The fluctuating price of cocoa is a concern for pricing of the product, however by entering into futures contracts the risk of wide fluctuations in pricing can be minimized. A cocoa futures contract is a commitment to make or to take delivery of a specific quantity and quality of cocoa beans at a predetermined place and time in the future (International Cocoa, 2010). All contract terms are standardized and set in advance. As a result, cocoa futures contracts are interchangeable, except for delivery time (International Cocoa, 2010).
The Company will market its cocoa bean and ginger wholesale supply to other chocolate producers through paid ads, direct mail, press releases and trade shows. The Company also expects to be able to obtain significant referral-based sales from existing contacts in the chocolate market. The Company will promote its international trade with Nigeria and its investment in the Nigerian market as a positive impact on the local economy there.
The Company plans on processing the cocoa and ginger for use in a that it will introduce through its website, paid ads, promotional store ads and product placement and direct mail.
Alibaba.com (2010). His Mercy Exporters & Investment. Retrieved December 03, 2010 from: http://www.alibaba.com/member/ng110369470.html
ICON Group International (2007, June). Executive Report on Strategies in Nigeria. Retrieved December 03, 2010 from: http://www.researchandmarkets.com/reportinfo.asp?report_id=603074
International Cocoa Organization (2010, December 3). ICOO Daily Prices of Cocoa Beans. Retrieved December 03, 2010 from: http://www.icco.org/statistics/daily_prices.aspx
Manta (2010, June 15). Somebody’s Mother’s Chocolate Sauces, LLC. Retrieved December 03, 2010 from: http://www.manta.com/c/mtvkdm3/somebody-s-mother-s-chocolate-sauce-llc
Nigerian Embassy (n.d.). Produce of Nigeria. Retrieved December 03, 2010 from: http://www.nigeriaembassy.cn/eco/PRODUCE%20OF%20NIGERIA.htm
“Research and Markets: Nigeria Agribusiness Report Q4 2010.” Benzinga.com. Accretive Capital LLC dba Benzinga.com. 2010. Retrieved December 03, 2010 from HighBeam Research: http://www.highbeam.com/doc/1G1-237166216.html
“Thousands of people have died in the past few years in communal rivalry in Nigeria which gained independence from Britain 50 years ago yesterday.” Belfast Telegraph. Independent News & Media. 2010. Retrieved December 03, 2010 from HighBeam Research: http://www.highbeam.com/doc/1P2-26012713.html