This paper outlines a market entry strategy for Somebody's Mother's Chocolate Sauce, LLC, a Houston-based chocolate manufacturer seeking to vertically integrate its supply chain by sourcing cocoa and ginger directly from Nigeria. The paper covers the company's rationale for entering the Nigerian market, its choice of a local export agent in Lagos, pricing structures for cocoa beans and ginger, the use of futures contracts to manage price volatility, and a promotional plan targeting wholesale buyers and retail consumers. The strategy also addresses challenges such as Nigeria's cash-based economy and political instability, while noting strong projected growth in cocoa production through 2014.
Somebody's Mother's Chocolate Sauce, LLC is a 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 new ginger-based product have prompted the company to seek export opportunities in Nigeria in order to vertically integrate its sources of cocoa and ginger, and to expand its chocolate sauce sales. 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.
Somebody's Mother's Chocolate Sauce, LLC (the "Company") is new to the international market and believes the most successful avenue for beginning to export is hiring a local agent in Nigeria to negotiate with local producers. This is advantageous because an agent who knows local customs, regulations, and producers has the contacts and can create the agreements necessary to secure 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 transportation of products to the United States more accessible.
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 operates largely as a cash-based economy (ICON, 2007). Most transactions are paid for in Naira cash, and credit instruments such as credit cards are still 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 a downside to operating through an agent in Nigeria is the political unrest prominent in the region and the possibility of supply interruptions ("Thousands," 2010).
Forecasts for cocoa production are excellent, with 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 than cocoa and is produced mainly for export. Nigeria's production of ginger in 2005 was estimated at 110,000 metric tons, with approximately 10% consumed locally as fresh ginger and 90% dried primarily for export markets (Nigerian Embassy, n.d.).
"Commodity pricing, margins, and futures contract risk management"
"B2B wholesale and retail channels for new product"
"Cited sources supporting market entry analysis"
You’re 48% through this paper. Sign up to read the remaining 3 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.