IS COMMERCIAL GARRI PROCESSING BUSINESS NOT PROFITABLE?

It is seemingly inexplicable that the more the commercial garri processors lament that the business is not profitable, this is the more new entrants are running into it. This is perhaps because of the comparative low barrier of entry into the business in terms of set up requirements and cost or because of the wrong perception that one cannot go wrong in such a business because it is a food that enjoys wide patronages across regions and social classes among Nigerians both home and abroad.

Commercial Garri Processing business is one area of Cassava value addition that has witnessed most volume of business entry and exit in the past ten years. Interestingly, the volume of garri in the market and its consumption keep increasing year in, year out. Of course, the volume stability of this important food product in the market can only be attributed to the sustaining effort of the local cottage processors spread across villages in Nigeria, who have been consistent in production regardless of the obvious losses they made each year. The large numbers and wide spread of these locals, who sell garri below its real economic cost had over the years watered down efforts of commercial processors in pricing garri appropriately in the market.

This is the usual way that expenses on manual garri processing goes. The cost below details processing of 6 tons of Cassava tubers into 20 bags of white garri (ie 22 custard rubbers per bag);

# Cassava tuber - 6 tons @ 20k = 120k
# Loading+Transportation = 50k
# Peeling = 12k
# Diesel = 6.4k
# Petrol (water) - 1k
# Operator & Assistant (grating) - 5k
# Pressing (labour) - 3.5k
# Pulverizing (labour) - 2k
# Firewood - 15k
# Manual frying (labour) - 41.6k
# Sieving & Bagging - 3k

Total - N259,500

From the costing of above, there is a clear indication that heavy cost of manual frying (including cost of firewood used) is one major burden that makes garri processing non profitable in many cases. The combined cost of manual frying and firewood used on that production of 20 bags of garri amount to N56,600; which is around 22% of the total cost. Landing cost of Cassava tuber is another cost center to really look at. The main burden in this case is the additional cost of transportation expended that makes the entire landing cost jumped from 120k to 170k. These are the two major cost areas that do not make garri Processing business profitable.

With the expenses above, the direct cost per bag is already N12,975. This is far above the ex factory price that attracts bulk buyers from the city market. Regardless of quality of the garri, the bulk buyers always look for garri that is sold for between N10,500 and N11,500. Of course, most of garri presently sold in this category are of inferior quality. So, if as a Commercial processor, one is able to maintain a selling price of around N12,500 to N13,000 for his own quality garri, it will definitely attract the interest of the bulk buyers. For this business to be sustainable, commercial processors need volume production and bulk sales that will make the factory to be running consistently. Irrespective of the brand equity of the branded packaged garri sold into supermarkets and A - stores, commercial processors need to attract bulk buyers to keep his business running. The challenge is therefore on how the commercial processors will significantly reduce the heavy cost of raw material and that of the manual frying operation.

Firstly, on the raw material supply, efforts need to be made to keep the landing cost of Cassava tubers as low as possible. No matter how expensive Cassava is at any time, the landing cost of the Cassava tuber must not be allowed to cross beyond 50% of the targeted sales revenue of the finished garri. For instance in this case, if one is targeting selling to the bulk buyers say at the maximum price of N12,500. The targeted revenue on the 20 bags of garri is N250,000 and 50% of this is equal to N125,000. This means that the total landing cost of the 6 tons of tuber used for this Production should not be more than N125,000 which is at a price of N20,800 per ton. This is just within the supply range for Cassava tuber in Oke Ogun part of Oyo state. This is one of the reasons it seems to be so difficult for people manufacturing garri in Ogun state to be able to compete in price with garri coming from Oyo state.

This is the reason why we always say that unlike Fufu producers, commercial garri processors cannot afford to procure Cassava tubers through third party at a supply price. He cannot also go to rural markets and buy Cassava like the Fufu producers. He must seek to always buy directly from farmers and if possible through the locals who already know the standard measurements that give them more buying advantages. NOT ALWAYS WITH THE USE OF TONNAGE. If it must be weighed at all, the farm price per ton must be around N18,000 to N19,000. And by the time he adds his transportation cost, the total landing cost should be in the range of N21,000 per ton max.

This is difficult I must confess but it not unachievable. Apart from the fact that it is a must to locate the garri factory within a farm area to reduce transportation cost, one also need to have good knowledge of buying yet to be harvested Cassava on the farm. Better still, you have a dedicated competent person handling this area for you. In all, commercial processors need to make efforts to cultivate cassava tuber worth minimum of 30-35% of his annual factory demand possibly at the maximum rate of N120,000 to cultivate an acre from beginning to harvesting. It is possible.

The second most important cost center to really work on is the cost of frying. It is only in few areas or locations that manual frying favours Commercial Garri Processors. This is not about operating the business in a farm area, it is just about availability of large numbers of manual fryers. It is only In such locations where the cost of manual frying is very cheap that a commercial processor can afford to engage in manual frying profitably. In many areas, the situation is as stated in the costing above, which automatically brings the business to a complete loss. The only alternative in a situation like this is the usage of mechanical fryer. With a mechanical fryer of 400-500kg capacity per day, it will take just two days to produce the 20 bags of garri. The labour cost for both the machine operator and his assistant for the two days is N6000. Total petrol consumption is about 30 liters(ie N6000) and firewood usage will be down by half because of the single feeding area. All this will amount to a total frying cost of N19,500. This is against the N56,600 for combine cost of labour and firewood in case of manual frying (as stated in the costing above). This automatically brings the total cost per bag of garri down to N11,120 against N12,975 in the case of manual frying. With the usage of this mechanical fryer (with 5hp petrol engine), one can conveniently sell a bag of garri to the bulk buyers at N12,000 regardless of the associated transportation cost on the landing cost of Cassava tubers.

And this is not just about the usage of any type of mechanical fryer. Apart from the fact that good quality of the finished garri is essential, the profitability in this case is a matter of machine efficiency. Particularly, it is the usage of petrol engine that makes the process productive in this case. Profitability would have been difficult if the engine is powered directly or indirectly with diesel engine or diesel generator. What this means is that conscious effort must be made to manage the cost of the value addition.

If these two important areas are properly managed, it will not be difficult to operate a Commercial Garri Processing Business profitably. In addition to this, we also need to take care of all leakage areas. Attention must be paid to selling of Cassava peels and garri lumps generated instead of gifting them away. They are part of the factory outputs and must be used to aurgument costs as much as possible. The revenue realized from selling of peels in this case would be enough to settle payment of manual peelers. And the amount gotten from selling of lumps can conveniently pay for the labour cost incurred on Sieving and bagging.

Truly, Garri Processing Business is not a child's play. But the challenges there are not unsurmountable. It is just about the entry and operational approach like I always say.

God no go shame us.

Kazeem Lamidi

https:///2348100975775

Pafetkazzy:


IS COMMERCIAL GARRI PROCESSING BUSINESS NOT PROFITABLE?

It is seemingly inexplicable that the more the commercial garri processors lament that the business is not profitable, this is the more new entrants are running into it. This is perhaps because of the comparative low barrier of entry into the business in terms of set up requirements and cost or because of the wrong perception that one cannot go wrong in such a business because it is a food that enjoys wide patronages across regions and social classes among Nigerians both home and abroad....

God no go shame us.

Kazeem Lamidi

https:///2348100975775

Good analysis my brother. Have an idea of the price of a mechanical garri fryer?