Commercialisation of Cookstoves

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Introduction

A large-scale, successful and sustainable market in improved cookstoves can only function where there are sufficient qualified entrepreneurs and premises to serve and develop the stove market without any reliance on subsidies. The principle that promotion and scaling up of improved cookstoves should follow an essentially commercial approach is one of the main lessons learnt from numerous stove projects supported by GTZ HERA. Initial (partial) subsidies may be necessary during an introductory phase to establish stove production, but they should be limited in time and scale.

Experience has shown that many stove producers lack basic commercial skills, and/or technical shortcomings. Such problems can be overcome by appropriate training, visits to successful manufacturers, and more specific training approaches that are developed according to each entrepreneur’s needs.

Stove training programmes – the Tanzanian experience A project supported by GTZ in Tanzania ‘Promotion of Renewable Energy’ has shown that the combination of both technical skill training and business training is highly effective. Technical courses demonstrate improved stove building techniques, whilst business training focuses mainly on supporting trainees to develop their own basic business plans. Without such support, stove producers have no means to improve their technical and / or entrepreneurial shortcomings. They may not be aware that they need additional training to produce high quality stoves, and they may need help in finding out where to get advice and support. In these situations, a stove project can play a decisive role. This project has developed a training module for the janja stove; a stove that is based on the rocket stove principle and is constructed using either cement or clay. The training model comprises simple, easy to understand experiments to demonstrate improved stove production techniques. The curriculum was used in several training courses. Further findings from the training courses, such as the need for proper selection of trainees, can be found in the training curriculum (See: Janja stove training curriculum).

Business management

Developing business skills
Most producers have very limited (or no) knowledge of the design and function of business plans. Many find it difficult, for example, to make realistic price/profit calculations. Other entrepreneurs do not know how to calculate the price for services, or perhaps are not aware of the necessity of considering the cost of services as a key component in business calculations. For some, the difference between profit and turnover may be unclear.

Knowing how to develop a business plan is extremely helpful for any entrepreneur, be it the owner of a small workshop, or the manager of a medium-size stove factory. The business plan is the most essential document for launching, expanding and managing any successful business. The business plan describes what the business is expected to do, how and where it will be done, and how the business will be financed and managed.

For producers who require access to (bank) credit, a sound business plan is imperative for raising capital and capturing the interest of investors. Lenders and investors require a business plan to evaluate their risks, and to assure them that they will get a fair return on their investment.

A good business plan accomplishes the following:

• Draws a clear picture of the business objectives and goals.
• Provides a thorough overview of the business.
• Presents the strategy and the financial data supporting it.
• Shows the potential strengths and weaknesses of the business.
• Gives a timeline of events and financial milestones against which actual results can be compared.
• Gives prospective partners and investors a means of determining whether the business warrants their interest—and their money.

For further details on how to develop a business plan, which elements are obligatory etc. see REED toolkit, a Handbook for Energy Entrepreneurs, published by UNEP in 2003.
Download at: http://www.areed.org/training/toolkit/index.htm

Business plans can be very detailed and elaborate, or contain only basic information. The very minimum that needs to go into a simple business plan for stove producers should include:

• price for services
• basic sales strategies
• availability and costs of raw materials
• strategies to mitigate possible challenges
• target monthly sales.                                                                                                                                                                                                          
• (Janja Stove - Business Training Curriculum by Lars Velten)

Additional areas where stove producers often need support are bookkeeping and business dialogue techniques, such as how to deal with customers, convincing arguments etc.

To meet these needs (which are regularly encountered in many developing countries), so called ‘Entrepreneurship Development Programs (EDPs)’ were developed in India to promote small and medium size enterprises by providing tailor-made training. GTZ has further developed this approach through its CEFE concept, ‘Competency based Economies through Formation of Enterprise’. CEFE aims to reinforce enterprise skills using participatory and active learning approaches. (www.cefe.net ).

CEFE courses offer comprehensive training modules that use an action-oriented approach and learning through experience. This develops and enhances business management skills and personal competence. It is a highly adaptable concept designed as much for people with low educational backgrounds as for academics (as experiences working with street children have shown). The course’s overall objective is to improve entrepreneurial performance through guided self-analysis, by stimulating a business mentality, and through building up business competence.

Project staff have found these courses to be an excellent complement to technical skills training. They are very useful in preparing interested producers for setting up their own stove businesses, and they reinforce and enhance the management skills of stove entrepreneurs. CEFE courses offer solid instruction complemented by clear methodological guidelines that can be adapted to each participant’s needs and requirements.

Ensuring stove quality and acceptability
To develop a successful stove business it is vital to have a stove with several desirable product attributes. The stove should be efficient, adapted to local needs, habits and tastes, affordable, clean burning and convenient for cooking. The development of a stove business can be accelerated by supplying a variety of different types/sizes of stoves which can satisfy the needs of a wide range of customers. Developing stove models that meet the criteria mentioned above is an ambitious task.

Meeting customers’ needs To develop well-accepted and popular stoves, producers have to look at their customers’ needs, habits and preferences. People tend to be quite conservative in their cooking habits, and will only change if producers provide something they perceive as better. Thus stove producers need to be sensitive to people’s preferences, and to be willing to respond with changes to stove design if changes in cooking patterns occur.

Despite years of experience, stove producers often do not have the specific skills needed to produce high quality stoves. Projects fill this gap by providing appropriate training. Modules have been developed and implemented, and these need to be adapted to the local conditions. (For more detailed information see Chapter 3).

To have a stove that meets various customer criteria is a challenge. It is at least as important for a sustainable stove business to supply the market with stoves that are of a consistently good quality and which comply with given quality standards. Project support is usually needed to develop schemes that include, for example, quality control mechanisms, certification schemes, and warranties. As a first step, the Tanzanian project handed out a certificate to each trainee who had the proven skills to build quality stoves without supervision.

The active involvement of local partners, government representatives, and private institutions right from the beginning is essential as it gives these groups an opportunity to learn and, eventually, to be able to design such schemes themselves - a necessary prerequisite for taking over total ownership at the end of the project.

Developing political and economic frameworks
Stove producers and retailers need to understand and comply with the relevant rules and regulations governing their businesses. Often they are not fully aware of the existing political and economic frameworks. This is particularly true for those working in rural areas. However, when setting up and running a business, it is essential to know about legal, tax and duty regulations. It is helpful for the business to be aware of government support structures; access to business promotion and service structures, financing and credit mechanisms, global and/or regional infrastructural conditions/obstacles etc.

Projects can support new entrepreneurs by increasing access to information through working with the media, and by introducing or developing organisational structures that promote information sharing between producers, retailers and producer groups.

Key points in business development and training Projects supporting and promoting the development of improved stove businesses need to: Identify reliable and interested producers who have the potential to run a business that can supply current and future market demand for stoves, and who have the facilities and workshops for scaling up. Assess the strengths and weaknesses of such producers, and identify their training needs. Locate organisations and institutions that can fill training gaps, and support local and regional organisations that could offer qualified training. Enable stove producers to attend local training institutions In countries where reliable and partially qualified partners already exist, the projects should focus on training measures to further qualify partners and institutions The training courses found to be the most critical comprise: Business management courses; particularly those providing support in developing business plans Manufacture of quality stoves Compliance with the laws and financial structures of a country, and how to put these structures to good advantage Marketing skills

Marketing stoves

Marketing is defined as getting the right product (in this case a stove), of the right quality to the target users in the right quantity, and at the right price in the right place at the right time and with each business person in the marketing chain making a fair profit. This calculation should not include those involved in the stove project, only those running the business.

Marketing tools and strategies
All cookstove projects need to have a robust marketing component as part of their strategy Projects can assist through:

• Training of producers in marketing
• identification of products and the best ways to sell them
• workshops on public sensitization strategies
• the use of public events for exhibitions
• developing strategies, with the producers, to address different types of customer

 

Product, Price, Place, and Promotion The classic marketing approach involves the 4Ps Product, Price, Place, and Promotion. Recently this number has been increased (up to 10 P’s) to include among others People, Processes, Packaging and so on. (www.wikipedia.org) However, this paper refers to the classical model of 4 P’s, because it is still the most widely used one. As a general rule, marketing includes all the activities that lead to increased profitable sales. At the core of marketing strategies are the so-called ‘4 Ps‘ that are the four main pillars of the marketing mix. These include the identification and development of new Products, at an appropriate Price, through distribution channels and selling in the right Places, supported by Promotion.

The ‘4 Ps’ of marketing
Product:
This ‘P’ includes the range of products, their quality, the product design, branding, packaging and accompanying services. These key factors should be considered:

• Design and type of improved stove has to meet customer’s needs – fixed or portable stoves; single pot or two pot stoves etc.
• Stoves need to comply with quality standards that have to be made known to the purchaser
• Improved stoves need to have a good reputation: to be known as durable and easy to handle
• Improved stoves have to be attractive for the market, thus they should have status, style, and other desirable product attributes

Price:
To make a profit, the price has to include all the costs associated with producing and selling the item, and still have a profit margin. To get the profit launched it may be necessary for the price to be a ‘special offer’, or have a low margin until the product is established within the market. The price may include interest if credit is offered.

Getting the price right The cost of manufacture and its associated profit margin needs to be calculated accurately for each stage of the market chain. Although affordability is important, low cost should not be associated with low quality under any circumstances. Higher prices may make goods more saleable if they are associated with better quality in the minds of some consumers. Payment in instalments can be an option (with clearly defined pay back rates).

Place:
Planning the location of manufacture, sales and distribution is important:

• Locating workshops close to either raw material supplies or sales outlets will reduce transport costs.
• Sales outlets should be easily accessible and well publicised.
• Sites should be sought out for exhibitions and demonstrations.
• Stove marketing is most promising in areas with severe fuel wood scarcity

Promotion

What is promotion? Promotion describes any advertising or awareness-raising tactics or activities that serve to attract customers and inform them of products and services.

• Promotion includes communication strategies and developing a brand image (a corporate design encompassing key information regarding the product). Promotion is mainly through advertisements, personal sales by producers, involvement of celebrities, participation at fairs and exhibitions, public events and public relations.

Marketing research and strategy

Baseline market research
The development of a marketing strategy starts by identifying a viable market and its potential. Baseline market research should include:

• Type of stove needed
• Market size, domestic fuel types, prices and uses
• Production capacity of producers
• Supplies of raw material
• Supply chain analysis on existing stoves (from raw material providers through to final retailers)
• Consumer analysis (behaviour, attitudes, traditions), consumer aspirations
• Likely changes affecting the market: Seasonal changes in fuel (e.g. bought wood prior to harvest, and residues post-harvest); improved income when cash crops are harvested; other seasonal financial commitments, including school fees
• Possibilities for integrating stove enterprises into existing ‘traditional’ production and marketing systems, such as pottery-making, metalworking, and local sales outlets

Product promotion – proven strategies

A high quality, user friendly and affordable stove does not automatically translate into high volume sales. Large-scale dissemination of such a stove is much more likely to be achieved with professionally designed and implemented marketing campaigns.

Promotional strategies and product marketing
Promotional strategies are at the core of any product marketing. Over the years, projects by GTZ and other organisations have contributed substantially to this activity by initiating, developing and testing promotional strategies. Experience has shown that:

• Strategies need to be selected and adapted to meet local conditions and the target group(s) in each locality.
• Some promotion may need to be repeated at intervals to have a substantial impact.
• Budgets need to be subdivided for each promotional activity.
• The involvement of extension services should always be included in promotion.

Advertising
Marketing strategies should include short, memorable, crisp brand names, and eye-catching logos to raise the profile of the stove and make it a popular commodity that users are willing to purchase.

Product marketing can make use of advertising through a range of media (Figure 2.3a)) using memorable slogans, and colourful images (particularly for those who do not read), to highlight key messages.

File:Marketing2.JPG

Figure 2.3a) Promotion can use a range of media

Campaigns and demonstrations
Campaigns and demonstrations can help to familiarise people with the benefits of a new stove. Such activities might include:

• Public campaigns to highlight the advantages of improved cookstoves in local languages. When working with a community, it is more important to highlight stove economy than the global environment
• Theatre groups to enact key messages through entertaining dance, song and sketches
• Cooking demonstrations to show the potential of improved cookstoves and encouraging discussion during the demonstrations to allow the sales person to understand the potential customers’ needs and expectations
• Cooking competitions at local markets are great fun and create a relaxed atmosphere!

Educational institutions
Educational institutions can play a significant role in sensitising people to the benefits of improved cookstoves. Some of the measures described in this section should be initiated during a project; usually such measures require project support:

• Development of a household energy curriculum (see: Solar cooker guideline for teacher training).
• Integration of biomass energy courses into higher educational institutions, particularly as part of basic health and hygiene training courses.
• Use of improved cookstoves in school kitchens, teacher training centres, and health centres

Branding and logos
Logos were carefully developed by individual projects with support from GTZ, as part of each stove type’s branding exercise. Some examples are illustrated in Figure 4.2. To place a product successfully in the market it must have a well-selected brand name, which is short, easy to remember, easy to pronounce and easy to associate with the product. An appropriate brand name creates a link between the consumer and the product and affects the way the consumer relates to that product. Part of the branding exercise should be the creation of a unique logo, giving a visual reminder of the product. It is better to avoid having the name of the project organisation on the logo as it may lead people to expect subsidies. Besides, logos should support businesses, not projects. The figure below gives a set of examples from recent projects.

Stove logos and their meanings

Rocket stove A well known example from the Programme for Biomass Energy Conservation (ProBEC) of GTZ is the rocket stove logo:
Roumdé stove An example from the FAFASO- Project run by GTZ in Burkina Faso, which promotes improved stoves: Roumdé means the preferred wife. The slogan is: use a roumdé and you become a roumdé (the preferred wife)
Gyapa stove An example from a Ghanaian EnterpriseWorks stove project – the Gyapa stove (gyapa means good fire)
Jiiko stove An example from Rwanda is a Jiiko stove logo with a slogan that means ‘cooking without waste’ in the local language

Key points for a marketing strategy The results of baseline market research provide the basis for a marketing strategy to: Estimate price/profit margins at each stage of the market chain (see Price chain Ethiopia, page 16 in the presentation). Assist the development of a retail network . Develop packages for specific market segments. Develop promotional materials and raise the business profile through selected commercial media and locally appropriate advertising approaches, such as the use of celebrities to promote the stoves, theatre and dance etc.

Additional information resources

Marketing Strategies for Micro and Small Enterprises in Ethiopia
Addis Ababa 2/2004, Published by the Ethiopian Business Development Services Network – EBDSN
This clearly structured comprehensive manual describes and analyses all main aspects of successful marketing. It was developed in Ethiopia and is set within an Ethiopian context, although many mechanisms and strategies are generally applicable as the examples of useful strategies are not usually region-specific, nor does it refer to any specific products.

The manual deals with micro- and small enterprises. It looks at typical problems with which entrepreneurs may be confronted. Useful steps are given for confronting these issues and developing strategies to meet the needs of the market.

Throughout the manual, the main findings are summarized in concise statements, and useful checklists are given at the end of some of the chapters. There is a particularly helpful section providing strategies of how to operate successfully in a competitive market.

Further information on marketing in Ethiopia: http://www.bds-ethiopia.net/marketing.html

Training Modules for Small and Medium Enterprises (SMEs)

Business Development Services (BDS) Forum 2007/2008
This manual consists of seven training modules for entrepreneurs. You can take the whole series for a one week training, or take one module for a one day training or even take a specific chapter for a specific target group. Instead of training, the modules can also be used for business consultancy on the spot.
About 70-80% of the contents are general while 20-30% are country-specific, thus more concrete for users.
Further information at: http://www.bds-forum.net/training-modules/index.htm#new

English version
Module 1: Steps of Business Implementation
Module 2: Marketing and Market Research
Module 3: Accounting and Cost Calculation
Module 4: Business Registration and legal Issues
Module 5: Financing your Business
Module 6: How to write a Business Plan
Module 7: International Trade Promotion

French version
Objectif et Utilisation des Modules

Module 1: Les cycles de Création et de Gestion d'Entreprise
Module 2: Stratégies de Marketing et Etude de Marché
Module 3: Comptabilité et Calcul de Coûts
Module 4: Procédures administratives de Création d'Entreprise
Module 5: Guide d'Accès au Financement
Module 6: Comment élaborer un Plan d'Affaires
Module 7: Promotion du Commerce International

Practical Answers to Poverty - Marketing training manual

Hellen N. Owala, ITDG 2003 (Intermediate Technology Development Group Eastern Africa)
This is a very concise and comprehensive manual. Target groups are small scale entrepreneurs who wish to improve their businesses through better marketing.
The book comprises eleven sessions that are clearly structured as follows:

• Objectives
• Methodologies
• Training materials needed
• Preparation required
• Approximate time needed
• Conclusions

The notes for the facilitator are very clear and extremely pragmatic.

Experience Exchange on Marketing of GTZ Household Energy Interventions
Report - Addis Ababa 22 – 26 Jan. 2007
The objective of this workshop was to discuss and analyse marketing strategies for stoves. Particular emphasis is given to aspects of marketing using the ‘4 Ps’. The workshop content focussed on the Ethiopian situation; however, various examples are from different GTZ projects in Africa and are applicable to many developing countries. Very helpful examples of price chains are explained.

The main marketing tools were divided into three subgroups:

• Experience tools: Lessons learnt
• Information tools: Selling slogans and repayment strategies
• Promotional tools; Public relations strategies

Training Module for the Marketing of CHITEZO MBAULA – Malawi
This short module is targeted at extension workers, stove producers and village authorities. It is useful as an introduction as it gives a condensed overview of the topic.

Commercialisation des Foyers Améliores
This is a condensed PowerPoint presentation on the main findings from a marketing study conducted by the FAFASO Project in Burkina Faso.

Curriculum component: solar energy/solar cooking for teacher training colleges in Afghanistan
Guideline developed by Barbara Clasen for GTZ/BEPA the Basic Education Project Afghanistan, June 2007
The main purpose of this guideline is to enable teachers to tackle the topic of solar cooking in a didactic and methodologic way for any given group.

Commercialising large-scale cookstove dissemination

Involving partners
Supporting large-scale dissemination is too large a task to be accomplished by a single project team. Strong and organised partners are needed, who know both the country and its people very well, allowing the project to act as a facilitator. Involvement with other organisations, such as NGOs, the private sector, or governmental bodies, is a precondition for achieving sustainable access to household energy for large numbers of people.

The next figure illustrates fields and sectors where cooking energy could be incorporated into the activities of sectors other than energy. Other possibilities, related to achieving some of the MDGs, are discussed in Chapter 1.

File:Jetzt.JPG
Health, forestry and food are all linked to household energy. Source: GTZ ProBEC.

Working with other NGOs
To link improved household energy with other sectors, the engagement of NGOs operating in these sectors is necessary. Depending on their portfolio, these NGOs will either take responsibility across a whole range of activities, or will complement those provided by the original project team.

It is a good idea to use the structures and connections of grassroots organisations and extension services for activities such as training, awareness raising, and stove dissemination. The relationships forged by GTZ with local NGOs in Uganda were very positive and the NGOs knew ‘their’ villages very well.

The Programme for Biomass Energy Conservation (ProBEC) in Malawi covers almost every district in the country through its close links with several NGOs from a range of sectors, including health, nutrition, and environment. Trained by GTZ project staff members, these NGOs train producers, and raise awareness within their own communities. Without its partners, the project would reach far fewer households, and have a much smaller geographic presence in Malawi. However, the NGOs involved in the project should endorse a market driven approach, and should not distribute stoves as gifts.

Donors and institutions as customers
Donors such as the United Nations Children's Fund (UNICEF), the World Food Program (WFP) or international NGOs supporting school feeding programmes are potential customers for stoves.

Institutional stoves can be highly efficient, and their very high savings potential means that institutions (both public and private) spend less on wood fuel, and, for instance, school children spend less time collecting firewood, so more time can be spent in education. Canteens in institutions such as schools, hospitals or prisons benefit from energy saving stoves. A cost-benefit analysis in Malawi has shown that the use of Institutional Rocket Stoves is profitable in a wide range of institutions.

Institutional rocket stoves in Malawi An orphanage that prepares two meals a day in a 100 litre pot saves 680 US$ yearly on firewood expenditures. If a 200 litre stove is used twice a day throughout the whole year the net benefit during the stove’s four-year life is 4235 US$. Depending on cooking frequency and size, the price for a stove has been paid off after three to nine months. Due to reduced firewood costs canteens save up to 40% on their catering budget (see CBA Malawi Costs and Benefits of Institutional Stoves or http://www.gtz.de/en/themen/umwelt-infrastruktur/energie/20674.htm)

Cooperation with Ministries of Education can further help selling stoves and may offer the opportunity to incorporate household energy into curricula. For example, testing sites at Ethiopian schools offer students and teachers the option of learning more about cooking energy and the dangers involved from smoke inhalation. Programmes for improved housing are potential partners if they provide access to stoves to their beneficiaries.

For these initiatives to happen, organisations must be informed about the project and the technology options the producers offer. When the product is launched, it may be necessary to create links between these institutions and the stove producers, and facilitate communication through meetings and workshops.

Experience in Malawi has shown that even if stoves are bought ‘off the counter’ from the producer, training sessions for the purchasers should be part of the package. Correct stove use is crucial for fuel savings, and for the longevity of the device; this leads to happy customers and successful producers. Voluntary staff often does the cooking at social institutions such as orphanages. They may well have no experience of fuel-efficient stoves and will benefit from on-site training on how to use the stove properly. This training can be done either by the project itself or by the institution. In the longer term it is better for the institution itself to be trained by the project, so that it can train its own staff in the future.

Industries as customers and development partners
Large companies catering for their workers usually cook several hundreds or even thousands of meals every day – often on traditional stoves. Using a fuel efficient cooking technology is very cost effective in such circumstances, and the savings can cover the cost of the stove very quickly. Experience in Malawi has shown that canteens in tea estates or sugar plantations can reduce their fuelwood consumption to 10% of the quantity used on an open fire (a 90% reduction). Companies such as these may be willing to act as development partners by agreeing to test different models in their canteens.

Many companies provide their staff with housing and other services. Access to energy can be incorporated into corporate social responsibility (CSR) initiatives through public/private partnerships (PPP) or similar types of cooperation. Ideally this is a win-win situation. Risks and costs of research and development, and the cost of improving the house through improved technologies, can be shared between the project and the industry. The agricultural industry (sugar, tea, tobacco) has shown particular interest in CSR activities that involve access to clean, efficient energy, as their corporate social responsibility actions can enable them to achieve a fair trade label.

(See: ProBEC presentation ‘Institutional Stoves’ with experiences from Malawi)

Support from government
Government support is very valuable for large-scale dissemination of efficient stoves. It may come in the form of extension services, policies or campaigns. Other ways in which governments can be involved through policy action are described in Chapter 10 (forthcoming).

Stoves for a better life The campaign ‘Stoves for a better life’ run by the Bolivian government aims at providing 100 000 households with clean energy for smoke-free cooking by 2010. A network has been built incorporating all the organisations and institutions working in this field in Bolivia. http://www.hedon.info/goto.php/871/news.htm

For additional information see REED toolkit: A handbook of Energy entreprenuers for Rural Energy Enterprise Development provided by UNEP

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