Are you interested in the agro-allied or food processing sector? Do you need a sample palm oil processing business plan template? Then here’s an in-depth guide on how to start a palm oil processing company. Though very lucrative, the palm oil business is commonly overlooked. Palm oil is the most consumed edible oil worldwide, as it is a popular food ingredient in Africa and some parts of Asia (such as in Malaysia and Indonesia).
Table of Content
- Why You should invest in starting a palm oil processing plant
- Why do many people prefer palm oil to other oils? Here are the reasons:
- Six Challenges of starting a palm oil processing business
Why You should invest in starting a palm oil processing plant
Palm oil is in greatest demand in West Africa, where it is used in almost every home for cooking and few other purposes. But in spite of this, the region produces less than 5% of the palm oil produced worldwide. Malaysia and Indonesia are the world’s largest producers and exporters of the commodity.
And West Africa is one of their biggest export markets because countries in the region are not producing enough palm oil to meet the demands of their local markets. Presently, the global palm oil market is worth hundreds of millions of dollars, and it only keeps growing. You can make a lot of money by tapping into this lucrative market. There are many opportunities in palm oil production for interested entrepreneurs.
But before I go into further details, I would like to tell you more about this commodity and why it is highly preferred for cooking and other uses. (I am assuming that you didn’t know anything about palm oil before now. I’m sorry if you already did).
Palm oil is a red viscous oil extracted from the outer covering of the palm kernel fruit. It has its origin in West Africa and has been produced and consumed in the region for centuries. It didn’t become popular in Malaysia, Indonesia, and few other countries in the Far East until a couple a decade back.
Why do many people prefer palm oil to other oils? Here are the reasons:
- Palm oil has relatively long shelf life when compared to other edible oils. With good storage facilities in place, palm oil can be stored for up to one year without its quality dwindling down.
- Palm oil is a very good source of Vitamin E, which promotes skin health and improves its immunity to infections. It also enhances vision and prevents eye-related diseases.
- Palm oil is totally free of cholesterol and low-density lipoproteins. These are the culprits behind many cases of hypertension and other health problems, and they are present in some other edible oils.
- Palm oil is relatively cheap when compared to other edible oils.
In addition to the above, palm oil is used for a number of industrial purposes such as in the production of ice cream, margarine, creams, soaps, vitamin supplements, and so on. With the above in mind, let’s now discuss the various business opportunities in palm oil production.
There are many ways to make money from palm oil, depending on how much capital you have. If you have little capital, you can buy and sell palm oil in bulk quantities. But if you have huge capital, you can start a palm oil processing company or a palm kernel extraction plant, which is by far the most lucrative palm oil business. If you are interested in setting up a palm oil processing company, the following are the steps you need to take.
Starting a Palm Oil Processing Company – Sample Business Plan Template
Since you won’t be selling to consumers directly, it won’t be necessary to site your processing plant near a nearby market. You should be more concerned with being closer to palm plantations or areas with an abundance of palm trees.
However, if you can be situated closer to both the plantations and marketplace; it will be an added advantage for you. Secondly, your location should be free of unnecessary human and animal movements; yet very accessible for vehicles. This is best because there should be high level of hygiene around your plant.
2. Get the necessary equipment
In the past, palm oil was processed in “oil pots” made in the ground. The processing then involved rubbing and squeezing the palm kernel fruits until the oil was extracted. However, this old method is very wasteful, as it leaves some significant amount of oil left on the kernel fruits that could have been converted into more palm oil.
But nowadays, machines are used to process palm oil. This modern method is more hygienic, and it helps to extract all the palm oil on kernel fruits without leaving any quantity to waste. You should also know that most machines for processing palm oil can be imported or fabricated locally at a cheaper rate. Examples of equipments necessary for palm oil processing business
- Palm Fruit Stripper
- Nut Fiber Separator
- Pounding Machine
- Mechanical Screw Press
- Barrels or surface tanks for storage purposes
3. Setup your processing plant
You may need to seek the services of professionals to help construct the needed infrastructure and also install the processing machines.
4. Hire people to work with you
You will need to hire someone who would operate the palm oil processing machine. If you are planning to have more than one machine, then you would need to hire an operator for each machine. You would also need to hire other employees, such as a security personnel, administrative staff, and so on.
5. Create market awareness
Approach prospective marketers and encourage them to buy from your company. One smart way to retain them for a long term is to offer high quality palm oil at discounted prices. You should also encourage your customers to tell others about your business.
In addition, you can also establish a retail outlet to sell your palm oil. If you decide to go this route, you can create a Competitive Advantage by branding your gallons and fortifying your palm oil with vitamin A.
Six Challenges of starting a palm oil processing business
- It is capital intensive
- It is also management intensive
- Getting an optimal location with all the needed amenities is quite difficult.
- There is every possibility that your palm oil processing will be situated in a remote area, so as to be close to the source of supply (plantation farms). So you should expect some difficulties transporting the bunches of palm fruits from the farm to the processing plant. The same problem may also be faced when transporting the processed palm oil from the plan to the marketplace.
- Because of your remote location, there is every possibility that you won’t have access to power supply. So you would have to provide your own power supply using generators. This will invariably increase your operating cost.
- For you to be in steady operation, you will need a consistent supply of raw materials (palm fruits) and this can prove quite a challenge especially during the scarcity period. A good way to tackle this problem is to have your own plantation farm or better still, increase your storage capacity. This will enable have a steady supply of palm oil to sell to your customer during the scarcity period.