Africa Business News: Entrepreneurs. Investments. Banking & Finance. Emerging Markets. Start-Ups
Tuesday, 12 November 2013
Nigeria: Investing in Leather and Shoe Polish Production
When thinking of any investment to make in the area of small and medium scale industries, it is advisable to consider those projects that have local raw materials. Production of shoe polish falls into the category of projects that have all the required raw materials locally.
Introduction Shoes are worn not only for the protection of feet but also as an expression of fashion. Shoe polish is an essential consumable product usually applied for the purpose of retaining and improving on the good looks of shoes, as well as protecting them from harsh weather. This practice enhances their longevity.
Not only shoes but also all leather (natural and imitation) need constant application of polish and this comes in different colours. In the not too distant past, leather polish was locally made from a mixture of carton black (from kerosene lanterns), vegetable oil and kerosene.
This mixture has been tremendously improved upon by adding silicon to improved spread and permeability. And in spite of the fact that some local manufacturing or marketing companies exist in the country, the bulk of the leather polish used locally is imported from U.K, Italy, China, Poland, Hong Kong, etc. Being a vital consumable with daily universal, domestic and industrial uses, the demand for polish has increased recently due to increase in population, urbanisation and social awareness of the health needs for shoes.
The harsh economic situation whereby prices of commodities have risen to the point where the ability to buy new commodities (shoes and other leather materials inclusive) has been whittled down considerably, hence the need to maintain, rejuvenate and prolong the old ones someone has by constantly polishing them.
Most popular colours in polish consumption are black, brown and oxblood. Neutral (petroleum jelly) polish which caters for suede and other multi-coloured leather materials is also in high demand. The polish available in the market is still very expensive and the ban on its importation has also helped to push up the prices. The positive effect of this ban, however, is the challenge to Nigerian manufacturers to seize the opportunity to get into its production.
Market Potential The market potentials for shoe and other leather polished is very encouraging. A recent survey showed that about 40 per cent of Nigeria's estimated 100 million people wear shoes, sandals etc regularly and each averagely consumes 200ml per annum. This translates to a total national demand of 8,000 metric tonnes. This is quite a sizeable market and could be bigger. This is demonstrated by the array of leather and shoe polish consumers such as:
The uniformed corps (Army, Police, Navy, Air force, Immigration, Civil defence, Fire Service, Security companies, Traffic Wardens etc), School children and students from elementary schools to higher institutions of learning, private establishments, individuals, civil servants and Sellers of second hand leather materials and roadside cobblers.
Leather polish consumption is therefore not limited by age, culture or religious considerations. The supply-demand gap created can be reduced so as to also reduce the current high price of polish by establishing production outfits.
And to penetrate the market smoothly the prospective promoter has to produce good quality polish which he can distribute through wholesalers in large urban market throughout the country and ECOWAS sub-regional market, departmental stores, convenient stores within growing localities, promoters own staff and small-time hawkers and retailers. It is expected that regular publicity will create awareness and increase sales, profitability and market share.
Raw Materials All the raw materials needed for leather polish production can be obtained locally. High quality paraffin wax which forms 25% of the base production ingredients is not produced in Nigeria. The paraffin wax produced by KRPC Ltd, Kaduna needs further refining to convert it to the required high quality. Carbon black for the production of black polish comes from the petrol-chemicals plant at Warri. One can alternatively produce carbon black himself.
All the other remaining inputs are obtainable from companies selling chemicals around. These inputs include bodying agents, lustre agents for shining property, solvents, colorants and other additives. Packing materials can be tin or plastic containers while packaging cartons will be made of cardboard paper.
Machinery and Equipment Needed equipment, machinery and accessories for the production of leather materials polish include the following:- Grinding machine, Melting equipment (wax melting pans), Mixing and compounding stainless steel vessels, Scrappers Filling machines Accessories, weighing scales, buckets, mugs etc All the above equipment and accessories can be sourced locally and therefore procurement does not involve foreign exchange. The writer will assist in procuring and installing the required machines. The plant in mind can produce 1, 000 metric tonnes of polish per annum working a single shift of 8 hours per day and for 250 days in a year.
Production Technology Production could be manual or mechanical and this flows from the level of sophistication, production capacity anticipated and financial ability of the promoters. Whatever the size, the process involves the following: Weighing out the required quantities of raw materials; Grinding properly the weighed out inputs; Blending the mixture to ensure homogeneity and good quality, Filling and scraping; Packaging and storage for sale; The right quantity of lustre and drying agents must be added. The former determines the shine while the latter determine the time the applied polish on any surface will stay before it dries.
Labour Requirement The staff required will be made up of 11 workers on a cottage or small scale. The number and calibre of staff should be consistent with level of operation.
Location The location of the factory should depend on accessibility to raw materials and labour, proximity to large urban market, availability of the basic infrastructural facilities (water, electricity, good access roads etc) and other non-economic considerations. A three-bedroom accommodation or its equivalent is enough for a start.
Estimated Project Cost The total estimated cost of establishing a leather materials polish will depend on the scale of operation and type of equipment to be employed but will generally include the following on a small scale.
Financial Projections (N'000) Equipment & Machinery 1,450 Space (variable) 250 Working capital 2,000 Utilities 500 Pre-investments 100 Contingencies 200 Total 4, 500
Viability Generally, interviews with manufacturers and review of available literature show that return on sales and investment are around 50 per cent and 340 per cent respectively while the break-even point is around 10 per cent. This is no doubt a viable project that has much to recommend it for implementation.