Establishing Briquette Production Factory - Himalayan Naturals

February 8, 2013

Sushil Gyawali Managing Director, Himalayan Naturals Pvt. Ltd. Chyasal-9, Lalitpur

Beehive Bio-Briquette in Nepal

Product image: Coming from rural communities and forest shrub thus helps earning of rural people and conserve forest Good for use in houses for baby massage, heating and barbeque Necessary substitute of LPG because of fuel crisis (also) and wood charcoal in longer term because of policies on forest conservation

Beehive Bio-Briquette in Nepal

Introduction Himalayan Naturals

Leader in shaping modern briquette industry in Nepal Only company having complete setup for commercial level

marketing of the product

Unique company modality as well as industry positioning -

matching with the Nepali briquette consumers expectation Company modality to partner with community enterprises on production and organizing whole value chain for everyones benefit Overall strategies on branding, advertising, market segmentation and distribution channel

Introduction..
Initiated in 2007 (as a NGO - ANSAB initiative), established

commercial company in 2009

Mission: explore rewarding market for community produced

natural products while engaging into entire value chain for improved product quality and organized production
Deals with other community products also Himalayan Briquette,

Himalayan Ginger Candy, Himalayan Broom Grass, Rosemarry Tea and local Fruit Juices

Present
# Though turnover not big, doubling every year (Recently expanding sales outside Kathmandu valley)
- last year sales only US $150,000 [350,000 pieces (140MT)], this year exceeds US$300,000 [700,000 pieces (300MT)]

#Current demand (including new segments, market expansion and import substitute) 5 times of existing business, [requires product development and marketing] #Existing energy crisis creating demand for additional quantity

Past
Completion of ANSAB program Himalayan Naturals
Situation: - Increasing prospect on market - But limited community capacity to capture the potential

We increased investment /efforts

Extensive activities on higher production, QA/QC, branding, advertising, networking, distribution channel, market expansion

ANSAB program on briquette production and marketing

- Activities on developing community enterprise - market promotion

Community based briquette enterprises

Himalayan Naturals for organizing quality production, marketing, stock, technology, stove

Before Himalayan Naturals/ANSAB

# Almost No bee-hive briquette in the market and not any organized producers # Only limited to development/govt. program to support rural people

Himalayan Naturals-Modality
- Product design, R&D, QA/QC, identify producers, develop their capacity, setup factory and support continued operation - Technology upgrade, fabricate, Repair - Stove Production - Create distribution channel, distribute products - Marketing, branding - Manage legal aspect

Himalayan Naturals

Community based production Enterprises

- Product briquette - Bring together CF, workers

CFUGs
Poor & Women Subgroups

- Management of raw materials

- Staff/shareholders of community enterprises - Working on piece rate

Districts where Himalayan Naturals Partners are located

- 21 enterprises in 11 districts in contact

- Over 500 retail outlets, 4 dealers

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Production at community Enterprise

Issues, challenges and opportunities

Opportunities
Great potential for as a source of alternative energy
Also promote social justice and environmental sustainability

Issues
community enterprises = capacity constraints for production

and upgrading constrains to target bigger market Young chain fragile

- Needs own production facility to maintain position in the industry, without that - risk to design new product or expand market, advertise heavily or introduce in new segments to achieve growth potentials

Sustainability of raw material from forest base

Further investment required to

Set up new production unit modern equipment,

also uses agri. raw material, different type of products, higher efficiency
Investment on product design, upgrade and

standardize (briquettes, pellet, stoves and accessories)

Maintain larger stocks targeting winter

Develop and expand market

Further investment required to.

Two channel of supply & two type of product

community (QA/QC, shorting, grading, packaging, raw materials management) as well as own production unit Advantage on marketing stories Different quality because of raw materials and production process Satisfaction of supporting people and conserving environment Seeking grants and getting support from government

Investment Estimate
A total of about US $500,000 (includes the costs for

infrastructure, machineries, various cost in R&D, production, marketing, personnel, travel, rental, communication)
Himalayan Naturals investment equivalent to US$150,000 US $ 350,000 is now required as grant or soft loan to

develop a green and fair bio-briquette value chain in Nepal

Investment Area

Market development/ expansion 35%

New Production Unit 45%

Organize community production, Quality Control, Raw material sustainability 20%

Highlight of Financial Analysis (detail data: from year 1)

Name of Business: Himalayan Briquette Factory Sales Target Qty. Briquette-Full size (piece) Briquette-Half size (piece) Pellet (kg)
Initial capital Investment from Himalayan Naturals Grant/Loan

Fixed Capital
Fixed assets Marketing Promotion Pre-operating cost Annual Working Cost (AWC) Raw materials cost (1st year) Variable labor cost (1st year) Other variable cost (1st year) Annual Fixed Cost (AFC) (1st year) Total sales revenue (1st year) Return on Investment (ROI) Breakeven Point (BEP)

USD 328,862 USD 204,118 USD 104,765 USD 18,529 USD 161,459 USD 361,698 USD 280,200 USD 165,396 USD 100,118 USD 1,194,616 27.0% 34% 3.70 Year

480,000

1,080,000 1,125,000
USD 503,888 USD 152,941

USD 350,947

Payback Period (PBP)

Internal Rate of Return (IRR)

16.46%

Raw materials

(9) Dryer

Thank you