1. Market outlook Jesus Benavides Alex Rall David Salamon Jose Torbay 01.17.2008 1

2. Agenda 2 1 2 3  4 5 6 - Introduction - Overview of Moringa Oil - Potential Markets - Opportunities & Risks - Strategic Recommendations - Socioeconomic Benefits - Q & A  - Tasks & Challenges

3. Team of MBA students from MIT Sloan: - Jesus Benavides (Mexico) - Alex Rall (Germany) - David Salamon (France) - Jose Torbay (Venezuela) Who we are Introduction 3 Studying the viability of global commercialization of Moringa oil - Examining potential markets - Putting together the foundation for a realistic marketing strategy What we are doing

4. Overview of Moringa 4

5. Moringa – Malunggay – Horseradish – Drumstick Easily grown in the Philippines 2 harvests every year Very high oil content (40%) What is Moringa? Overview of Moringa The oil is extracted from the seed through relatively simple processes Vegetable Oil that can be used for many industries (Cooking- Food Processing- Cosmetics – Biofuels- others) Low trans fatty; High content of beneficial fatty acids Comparable to premium vegetable oils like Olive Oil What is Moringa Oil? 5

6. Current Use of Moringa Oil as a based for shampoo in low scales Food supplement – fortification Some Specialty Creams (cosmetics) Specialty “Energy” drinks No mass scale production 6

7. Possible Uses for Moringa Nutrition Disease Prevention Ointment Alley Cropping Fertilizer Erosion Control Water Purification Cosmetics Textile Printing Insecticide Fungicide Lubricants Tanning Leather Dye Fiber Products Fences Ornamentation & Shade Wind Barrier Cane Juice Clarifier Honey Production & Clarifier Condiment Cooking Oil Food Traditional medicine: Anemia Anxiety Asthma Blackheads Blood impurities Blood pressure Bronchitis Catarrh Chest congestion Cholera Colitis Conjunctivitis Cough Diabetes Diarrhea Dropsy Dysentery Eye and ear infections Fever Glandular swelling Gonorrhea Headaches Hysteria Intestinal worms Jaundice Lactation Malaria Pain in joints Pimples Pregnancy Psoriasis Respiratory disorders Scurvy Semen deficiency Skin infections Sore throat Sores Sprain Stomach ulcers Tuberculosis Tumor Urinary disorders Wounds Biodiesel Leaves: Nutrition and Medicine Trees: Alley Cropping Erosion Control Flowers: Medicine Pods: Nutrition Medicine Roots: Medicine Seeds: Water Purifier-Medicine-Oil Gum: Medicine Bark: Medicine 7

8. Moringa Seeds Moringa Leaves Moringa Value Contributors 8

9. Animal Feeds Water Treatment Cooking Oil  Commercial & Industrial Cosmetics  Emollients Personal Care  Bath soaps Perfumery Industrial Oil  Biodiesel – Oleochemical Shortenings Lubricants Moringa Oil Moringa Meal Moringa Seeds Moringa Leaves Nutritional supplements Food Fortification Note however 100ha would saturate the market Moringa Value Chain 9

10. Potential Markets 10 Food consumption/processing High-end/Cosmetics Industrial/Biofuel

11. - EU growing at a CAGR of 7.3% and US at 3.5% over 2003-2006 period - Limited domestic production capacity necessitates increased imports - Prices per liter for comparable oils higher than expected price of Moringa - Gap being formed for vegetable oils in this market due to shift to biodiesels Market Overview Food consumption/processing Overall Vegetable Oil Use for Food Consumption (MMT) - Technological advances (e.g.: other types of biomass replacing vegetable oils) - If biodiesel market does not pick up, this market will be saturated Market Risks 11

12. - Would most likely require the use of a process to remove the nutty flavor/smell - Acceptability of the market may require large marketing investment - Food processing companies incur a significant switching cost - Requires FDA/EFSA approval (may take time or not pass) Moringa Oil - Cons Food consumption/processing - Dietary benefits  responds to increased health consciousness in US/EU, low in trans fatty acids - Long product shelf life due to fatty acid content - Relative cost advantage Moringa Oil - Pros 12

13. - Acceptability for new products higher than in food industry - High margins - Variety of applications - High potential in certain key markets (such as the UK) - Broad range of customers  reduced impact of dropout from one customer - Growing segment in EU and US Market Overview - Short product lifecycle - Hypes/fads common and difficult to sustain - Reputations difficult to build and negative reputations last for long periods Market Risks 13 High-end/Cosmetics

14. - Very extensive testing is required - Requires FDA approval -Government help is needed e.g. for conduction of clinical test Moringa Oil - Cons High-end/Cosmetics - Chemical composition and physical properties ideally suited for the high end market - High oleic acid content  good emollient - Nutritional benefits  ideal particularly for dietary supplements - Cost advantage over main competitors such as Sunflower oil or Olive oil - Lower price sensitivity of potential clients than in other markets Moringa Oil - Pros 14

15. - Biodiesel production, growing between 30% and 50% from 2006 onward, is expected to reach 12B liters by 2010 and 37B liters by 2016 [RNCOS, 2006] - One of the main drivers of the price increases in vegetable oils and shifts of oils from other uses Market Overview Industrial/Biofuel - High volatility of energy prices - Complex interrelations between alternative/competing energy sources - Regulations quickly changing (unpredictability of US government programs) - Potential price pressure from new entrants Market Risks 15

16. - Not fully tested (CO, HC, NO x emissions) - Existing capacity does not match the huge volume of demand - Use in surfactants not ideal due to lack of C-12 carbon chains Industrial/Biofuel - Low iodine value (better than diesel) - Low cetane (ignition) number (better than both coconut fat and diesel) - Cost is comparable to alternatives (e.g.: Soybean oil) - Could potentially obtain carbon credits in future, which would further enhance value of planting Moringa Moringa Oil - Pros Moringa Oil - Cons 16

17. - Lower transportation costs (due to regional proximity) - Shorter transportation times - Economic advantages from producing in the Philippines Geographic Advantages - Economic trends  increasing market prices  stable/increasing revenues - Long term nature of contracts  reduced competitive pressure - Importance of reliability of supply  sustainable business relationships - Nature of industry based on relationships  moving now is important Market outlook Sustainable business 17 - Time is crucial; Need to act now 

18. Prices increasing 18

19. Strategic Recommendations 19

20. Scarcity of resources and time pressure necessitates focused market approach - Negative marginal output with increasing number of tasks 1 Number of tasks Output First-mover market -Temporary gap in the worldwide vegetable oil supply - Difficult break up of long-term contracts - Commodity product  difficult differentiation  Aggressive market strategy required 2 - Focus on leading position in one core market/industry  20

21. Assessment of market attractiveness leads to a 3-phase market entry strategy Suitability of Moringa Oil Market Outlook 21 Socioeconomic benefits Biofuel Food Processing Food Consumption High End/ Cosmetics Surfactants Lubricants 1 2 3 1 2 3 Aggressive entry into Biofuels Progression to High End market Applications in Food industries Unattractive

22. Aggressive entry into biodiesel market Market Entry Strategy: Phase 1 1. Fill value chain - Launch production program - Establish client contacts Tasks 22 Challenges - Timeliness/Speed - Overcome interdependence of supply & client base 2. Ramp up - Cultivation of Moringa - Delivery of first lots 3. Establish long term relations - Preempt the competition - Build brand recognition 4. Cement market position - Expand client base - Satisfaction of volumes - Coordinated and quick cultivation of plants - Establish stable supply chain - Creation of spare capacity - Guarantee of supply stability - Contain organizational growth - Maintain stability of prices on the production side

23. Progression into High End market and Food industry Market Entry Strategy: Phases 2 & 3 1. Leverage brand recognition - Build upon reputation - Find relations in new industries Tasks 23 Challenges - Maintain supply chain stability - Deal with complexity of serving different customer types 2. Diversify product portfolio - Invest in R&D - Create new product brands 3. Differentiate via branding - Invest in marketing initiatives - Requires the right marketing mix (4 P’s and 5 C’s) - Disconnect from the initial perceptions that may have formed - Setting different price points

24. Socioeconomic Benefits 24

25. Moringa Oil production Socioeconomic Benefits 25 Earned Income Vs. Opportunity Costs Extraction FacilitiesEmployment

26. - Planting season - One time only - Harvest season - Twice a year - Lasts for one month - Significant job creation in the example of the biofuel market: Farmers partners and employers Employment 26 - Employment will impact other functions such as: Truck drivers, Port operators, others Others * Planting employment will be only in the first year Assuming a Biofuel market of 16 billion liters per year by 2010 ** 20 persons harvest 1 ha in 3 days # of jobs created by farmers during each season Market Share5%10%15% Planting*16,66733,33350,000 Harvesting100,000200,000300,000 26

27. - Significant increase in income earned by rural population especially farmers - Helps fight poverty in rural areas - Assumption: Ten hectares per farmer Earned Income by Farmers Earned Income Vs. Opportunity Costs 27 - Most of the land needed is not being used - Planting corn, a farmer would earn 1,440,000 PHP per year - Planting coconut, a farmer would earn 814,000 PHP per year - In addition, the meal of Moringa seeds used for animal feeding (from the residual during the extraction process) Opportunity Costs Expected Annual Income (PHP) per Farmer (land owner) Year134 Revenue2,000,0003,000,0004,000,000 Expected National Impact in the Philippines Market Share5%10%15% USD entering (mm)5141,0281,542 Overall income to farmers (PHP mm)18,00036,00054,000 27

28. - An investment of 250 million PHP per extraction facility is needed - A minimum of 1000 ha per facility is required for profitability - Maximum capacity of facilities can be expanded at a marginal investment as more hectares are added - Estimation of 30 extraction facilities by the end of 2010 Investment 28 Extraction Facilities - The labor force per plant is estimated at 100 employees -By 2010 around 3,000 employees are expected (30 manufacturing sites) Employment 28

29. 29 Recommended Government Actions 1 2 - Marketing campaign - Planting materials 3 - Infrastructure (e.g.: roads network) 4 - Clinical tests 5 - Educational materials (e.g.: pamphlets) 6 - Access to credit for farmers 29

30. 30 Summary 1 2  - Attractive markets for Moringa oil exist - Aggressive and focused strategy required - Biofuel Industry 3 - Results in significant positive side-effects  - High End/Cosmetics industry, Food consumption/processing markets 30

31. Q&A 31

32. Appendix 32