I am researching a project for first year at uni and was wondering if i could get a little help ..
we were asked to pitch a business idea in front of investors( classmates) and since it was just easter and i could not find a vegan easter egg anywhere in berlin( vegan capital of germany) without nuts, as my son has allergies to milk and nuts.. in fact the only vegan egg i could find did have traces of nuts but costed 7 euros per 100g.. that was way too much :(
i decided to open a vegan allergen free chocolate factory producing relatively affordable products for children..
1....how much could it roughly cost to set up a factory to produce milk chocolate on a relatively medium to large scale.. so just machinery , not as big as kit kat but enough to cover a vegan market and to ship to major cities in germany
2.... i have a 23g minni bar i am hoping to sell at 60 cents wholesale price what could i reasonable expect the costs in producing this minni bar would be? largest reasonable profit margin possable
thanks so much for taking the time to help me as i have searched the web and it feels like i bit off a bit more than i can chew.. also if anyone does want to make nut free dairy free chocolate... there does seem to be a huge gap in the market here in germany..
You’re right; you have taken a pretty big bite! I don’t know how much time you have to complete this, but I hope it’s at least another few weeks! Anyway, while reading your post a few questions and thoughts came to me. Maybe they will be helpful.
1) You said you wanted a vegan Easter egg because your son is allergic to milk. As I’m sure you know however, dairy-free and vegan are not the same thing. If you go vegan, you’ll likely be dealing with other complications. For example, you won’t be able to use numerous food additives and/or stabilizers that you might want to use, such as gelatins, lactic acid, lecithin, beeswax, shellac, etc. And yes, there are vegan replacements for many of these items, but they can be difficult to find and will usually increase your product cost. Why not just remove the dairy? Wouldn’t that be simpler? Or do you specifically want your product to be vegan? If you do want a vegan product that’s fine, but make sure you are clear on what the specific goal is, because the production of vegan products is more complicated than dairy-free products, and vegans are not exactly known for their sense of humor about these things.
2) You say that you want to sell a 23-gram bar for 60 cents, but then state that you have no idea what it would cost to produce each bar. Which means that you are deciding on a price before you know your costs. And yet you want “the largest profit margin possible”. Ian, how do you expect to control your profit margins if you create a selling price before you even know your costs? This is not how it works. FIRST you figure out your costs. Product cost. Labor cost. Other overhead costs. Then you figure out how much each unit costs you. Then you determine your margin. THEN you price. And leave some buffer room, because you’ll be lucky if your numbers actually work out to be as accurate as you hoped.
3) You say that you want “relatively affordable products for children.” Why? Children don’t care about price, because children don’t have money. They either get money from their parents, or their parents just buy it for them. In my opinion you should not be focusing on making your products inexpensive. You should be focusing on making them high quality. Why? Well first of all, parents typically focus on saving money with the regular day-to-day things. Easter eggs and other chocolates are “treats”, and parents are far less price-sensitive when purchasing them.
Secondly, you’re making a specialty product, which means your costs will be greater and your pool of customers smaller. There’s a reason that one vegan egg you found cost 7 euros. Just because the price was too much for you, that doesn’t mean it’s too much.
And finally, you are making a product for children with allergies. Parents need to trust you. Which means you need to communicate high quality. Low prices typically communicate the opposite, which means your messaging and pricing will be working at cross-purposes. While it might not seem intuitive, I think it’s likely that in the market you’re looking to enter, low prices would probably hurt you more than help you.
4) Speaking of your market, how big is it? And by that I don’t mean how many people live in Berlin. How many people in Berlin suffer from nut allergies? In the US, it’s about 1%. Is it the same where you live? How many people in Berlin are vegans? In the US it’s about 2.5%, although that number is “self-reported”. Can you sustain a business when you start out by eliminating 98%-99% of your potential market? I don’t know. Maybe. But you want to think about how you’ll make that work.
5) Also, you said that you could hardly find any vegan Easter eggs in Berlin, and you could not find a single vegan Easter egg in all of Berlin without nuts. If Berlin really is the vegan capital of Germany, and nobody is trying to sell a vegan Easter egg, what does that tell you? Do you think that this means that you are the first person to think of this? Or is it possible that the companies who already make Easter eggs have researched this and determined that the market is too small to be worth it? In other words, is this a market that is under served, or a market that doesn’t really exist? This strikes me as something you would want to figure out before you build a factory.
6) You also stated that you could not find an Easter egg without nuts. Why? Setting aside the vegan issues, is this because there is a tradition in Germany (or Berlin) to make Easter eggs in a very specific way? If so, this could add another non-trivial complicating factor. You might be able to market to non-vegans and people without nut allergies if they think that your product is “pure” and of high quality. But if removing nuts from your Easter eggs makes them non-traditional in a society that places high value on the traditional aspects of such a product, you’re going to have a significantly more difficult time selling these to anyone outside of your 1% or 2%.
Final thoughts – You appear to be doing a few important things backwards. You are determining your final price before you even know your costs, and you are wondering how much it would cost to build a factory before you even know if anyone wants your product.
You live in a city that only sells blue widgets, and you want to sell red widgets. Do you really think that an investor’s first question will be, “how much does the factory cost?” If I were an investor, I would want you to tell me what your product idea is and why people are going to want it. I would want to know that, first and foremost, you spent your time researching the product and the market. Then we could talk about operational details.
How much does it cost to build a factory that makes square tires? I don’t know. Does it matter?
All that having been said, I would not think in terms of a factory for this product until the demand is shown to exist. If I were doing this, I would a small to medium-sized workshop selling in your area alone. If that works out you could expand later. Clay and others here have a lot more experience, and will probably have a better idea of costs, but I would think you could buy the equipment for a small chocolate workshop (depending on what you want to make – you were not entirely clear on that point) for €50,000 - €75,000. And if you don’t want or need to actually make the chocolate, you could reduce that quite a bit.
The complicating factor for expansion of course is that the equipment you buy is based on the quantity you are looking to produce. How much product would you need to make to sell in major cities throughout German? Exactly what type of products are you going to be making? Without knowing that, it’s impossible to properly decide which equipment to buy. Other costs would depend on whether you wanted a brick and mortar retail presence as opposed to e-commerce, how much marketing you wanted to do, how much legal you need, startup taxes and fees imposed by your local and national governments, initial capital outlays for inventory, etc.
we really don't need to go to so much detail just an estimate that sounds feasible.
We have concentrated on vegan and allergen free as they are very combinable and broaden our horizon.
I believe the market is a lot larger than you think and their are people out there , research suggests 7 to 10 % of children suffer from allergies, the most common being milk egg soy and nuts.. their are plenty of vegan chocolates out there but still few holiday goodies.. vegans tend to love nuts and thats why it is hard to find chocolates that dont say may contain traces of nuts.
as i said to our competition they do seem to be doing well at least in other countries, Moo Free is an example that started in the uk, now supplies to 12 different countries, they started for the same reason as i, but just for vegans, in 2010.. four years later they are selling in all leading retail outlets an amount of 65 000 easter eggs and their numbers are doubling each year.. they also do slabs and chocolate bars.. their is also a very popular vegan chocolate producecr in berlin and their products are flying off the shelves..
Why don't big retailers stock vegan chocolate?
This i cant understand.. dont they know that vegan people eat chocolate too?
One might say that they believe the market isn't big enough, but if i walk into any big retailer i will be able to buy vegan yogurt. this i find strange for two reasons
eat soya yogurt target vegans
soya yogurt is perishable so must be sold fast..
vegans eat chocolate too and chocolate is not as fragile as yogurt..
and with regards to price we do compete against brands that dont mind using nuts, which most people can eat and taste nice.. and vegan and allergy children would not experience a chocolate easter and christmass in the same quantity or any other chocolate quantity for that matter solely because of price.. if you take the average kid and how much chocolate he eats and a vegan kid you will see a big difference in quantity.. and we believe this is because of the price..
our products would be a 23g bar and a 150 gram bar as well as easter and xmass goodies..
we are not wanting to go from been to bar, but will be making the product out of cocoa powder and butter..
I have started a little bit backwards i know , but thats because i am not able to find out how much everything will cost, i must rely on the product prices of my competition..
i do not have to give a business plan but an oral pitch outlining some of the most important numbers
thank you very much for the comments so far i will be sharing it with my group... its so nice to get a point of veiw from someone in the business of chocolate.