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close this bookGuidelines for small-scale fruit and vegetable processors. (FAO Agricultural Services Bulletin - 127) (1997)
close this folderPart 2 - Processing for sale
View the document2.1. Introduction
Open this folder and view contents2.2. Selecting products and production methods
Open this folder and view contents2.3. Conducting a feasibility study
Open this folder and view contents2.4. Legal aspects
Open this folder and view contents2.5. Establishing production facilities
Open this folder and view contents2.6. Contracts with suppliers and retailers
Open this folder and view contents2.7. Managing production and quality assurance
Open this folder and view contents2.8. Marketing
Open this folder and view contents2.9. Record keeping

2.1. Introduction

Interest in small scale food processing as a means of enterprise creation in developing countries has increased substantially in recent years, as a result of a number of factors. These include:

· greater promotion of private sector micro- and small-scale enterprises by national and international development agencies, to help increase incomes and employment opportunities in both rural and urban areas

· development of tastes for non-traditional foods, especially in major urban centres

· a desire by national governments to both increase export opportunities and foreign exchange earnings and to develop national manufacturing capacities

· increased food surpluses in some countries that require preservation and processing as a consequence of successful agricultural interventions or development programmes

· an increasing pride in locally produced products that can effectively compete with imported goods.

However, successful fruit and vegetable processing enterprises require more than the skills that are needed for home processing, described in Part 1. Whereas in home or village processing, the consumers and processors know each other and can give feedback on the quality or perceived value of a processed food, in formal food processing businesses the producers usually do not know who eats their food or what their customers think of the products. Similarly the customers have no direct link to the individuals who have produced their food and there are thus very limited opportunities for feedback between processors and consumers. As a result, processors have to learn new skills in developing attractive packaging and in marketing and selling (Section 2.8.3) if they are to successfully find customers.

Additionally, consumers expect to find the same food in every pack, having a uniform quality, every time that they buy a product. Producers must therefore control their process to produce uniformity and consistency in their products, and to do this they must learn new skills in quality assurance. There are also other problems that are associated with operating any enterprise that need to be addressed by aspiring entrepreneurs: for example legal aspects such as registration of the business, payment of taxes, employment conditions and business planning. These issues are discussed further in Sections 2.4-2.8 of this Part of the book.

For those who set out to earn their main income from fruit and vegetable processing, there are special problems which make this type of business different from most others:

· many raw materials are highly perishable and will spoil quickly after harvest unless they are processed quickly

· many fruits and vegetables are also highly seasonal which means that the business can only operate for part of the year, unless crops are either part-processed for intermediate storage, or a succession of crops is processed throughout the year (Figure 3)

· seasonably also affects the cashflow in an enterprise, as most raw materials have to be bought during a relatively short harvest period

· yields of fruit and vegetables are subject to considerable variation according to the weather, especially the rainfall patterns, and plant diseases. This can result in an unpredictable supply and large variations in prices for raw materials, which makes business planning more difficult (Section 2.7.1)

· some processed foods also have a seasonal demand (for festivals, ceremonies etc.) which further complicates planning and cashflow of a business

· even after processing, some fruit and vegetable products have a limited shelf-life and distribution and sales methods must therefore be organized so that customers receive products in the required amounts before they spoil

· processing must be done to high standards of hygiene and production control to avoid the risk of harming or even killing customers by allowing contamination of the products by foreign materials or the growth of food poisoning micro-organisms.

Fruit and vegetable processing as a business is therefore a more complex activity than processing at home. Although it is true that most people can be trained to make high quality products, it is misleading to say that a person who is able to make a good product at home can then become a successful entrepreneur. Many (possibly most) small scale food processors start by working from home, but their ultimate success is dependent on a number of factors, including their planning and business skills, their creative flair to produce products that have a demand and are different from those of competitors and their determination to succeed.

Characteristically, successful entrepreneurs see food processing as their main source of income. They may take out a loan to buy specialized equipment or secure working capital and they develop business and marketing skills to expand and diversify their enterprise. A questionnaire about the entrepreneurial characteristics that are required to successfully develop a small fruit and vegetable processing business is given in Appendix II.

Figure 3. - Example of a seasonality chart for fruits and vegetables

There are different definitions of micro- and small-scale enterprises and in this book, the following are used:

A micro-enterprise is one in which the owner works each day to manage the business and produce food. The number of workers is less than 10, the total investment does not exceed $20,000 and annual sales are less than $12,000.

A small scale enterprise is one in which the owners may work at the processing unit or employ a manager. The number of workers is less than 20, the total investment does not exceed $50,000 and annual sales are less than $25,000 (average for African countries).

The different skills required by producers to successfully operate a small enterprise and earn a family income are described in this Part of the book. The availability of services (electricity, clean water, gas, servicing and maintenance skills and facilities etc.) obviously vary between different countries and even between regions of the same country. Similarly the amount of money available to invest and opportunities for obtaining credit also vary considerably. It is therefore not possible to describe precise conditions under which any business can be successful, but where appropriate, guidelines are given on the types of activity and investments that have made other small fruit and vegetable processing enterprises successful.

Figure 4. - Products from a successful fruit processor (Courtesy of Midway Technology)

The criteria that need to be taken into account when deciding which technologies to use are complex and inter-related but are likely to include the following:

· technical effectiveness (will the equipment do the job required at the indicated scale of production)

· relative costs for both purchase and maintenance of equipment and any ancillary services required

· operating costs and overall financial profitability

· health and safety measures in the process

· conformity with existing administrative or production conditions

· training and skill levels required for operation and maintenance

· environmental impact, such as pollution of air or local waterways.

However, these factors are not simply a checklist and each will have a different weighting in different circumstances. There can be no simple solution to the difficult task of assessing all factors in a particular situation and making the ‘best-fit’ from the available solutions.

In every proposed development, the general principle when starting a business, having decided which product to make, is as follows: conduct market research and produce a draft feasibility study. If the business appears to be profitable, produce a business plan, obtain credit where necessary and register the business with taxation and local government authorities. Then establish production facilities, develop contracts or agreements with suppliers and customers and manage the routine production of the products. Continually review and update business plans to take account of the actions of competitors or changing markets.

The Sections below follow this sequence, starting with a description of product characteristics and production methods for a range of fruit and vegetable products, to assist potential entrepreneurs in deciding which products to make. These are summarized in Figure 5.

Figure 5. - Summary of processes for selected fruit and vegetable products (numbers refer to sections of this chapter in which details are given)