Economic analysis of Hot chocolate Beverage Drink

Abstract

Hot chocolate, also known as hot cocoa, is a heated beverage typically consisting of shaved chocolate, melted chocolate or cocoa powder, heated milk or water, and sugar. Some make a distinction between hot chocolate made with melted chocolate versus powdered(Bournvita, Horlicks, Boost, Complan etc.), calling drinking chocolate. Drinking chocolate is also characterized by less sweetness and thicker consistency. The study was showed to estimate the economic analyses of hot chocolate beverage drink production with a view to establishing the profitability of the venture. The method used in this study involved an investment decision model comprising Net present value (NPV), Benefit Cost Ratio (BCR) and Internal Rate of Return (IRR). The results indicates an NPV of N480, 535 discounted at 21%, BCR of 2.5 and IRR of 21.33% these positive values are indices to the fact that investment of Hot chocolate beverage is a profitable venture and worthwhile. Also Chocolate, types of Chocolate drinks and their nutritional functions and consumption.

Key words: Cocoa, Nibs, Chocolate, Hot Chocolate, Chocolate powder etc.

Introduction

The aim of this paper is to perform project analysis for hot chocolate. We will use Net Present Value (NPV) and Internal Rate of Return as investment criteria for evaluation of this analysis. For the purpose of this analysis, we prepare short business plan in order to give more detail picture of all the variables needed when evaluating the project.

Figure 1 World top cocoa production countries

Ivory Coast (Côte d'Ivoire) leads the world in production and export of the cocoa beans used in the manufacture of chocolate, as of 2009, supplying 30% of cocoa produced in the world. West

Africa collectively supplies two thirds of the world's cocoa crop, with Ivory Coast leading production at 1.22 million tons, and nearby Ghana, Nigeria, Cameroon and Togo producing additional 1.41 million tons. Ivory Coast overtook Ghana as the world's leading producer of cocoa beans in 1978. The primary non-African competitor of Ivory Coast is Indonesia, which went from having almost nonexistent domestic cocoa industry in the 1970s to becoming one of the largest producers in the market by the early 2000s. According to the UN FAO, Indonesia overtook Ghana and became the second-largest producer worldwide in 2006. (World Cocoa Foundation provides significantly lower figures for Indonesia, but concurs that it is the largest producer of cocoa beans outside West Africa.) Large chocolate producers such as Cadbury, Hershey's, and Nestle buy Ivorian cocoa futures and options through Euronext whereby world prices are set.

Objective

The hot chocolate industry offers a wide variety of opportunities for the small business owner weathers economic recession well and is growing despite increased health-consciousness and calorie counting. Overall idea about this economic research on hot chocolate beverage drinks for its common use of these days. Basics on those these product which increases it’s consumption in last few years which we will see under the passages which been over view and try to prove is how it shows its usefulness for this world and our community. For proving those in this assignment gave data with methodology and tables with graph.

Data and Methodology

For the project analysis, we use the project Net Present Value formula, stated in Brealey et al., (2009).

NPV=PV-I

Where PV is the today’s value of future cash flows that the project will generate, and I is the initial amount of money put in order to start the business. PV calculation is:

PV=

Where FV is the expected future cash flow of the project on an annual basis, i.e. correspond to cash flows in years: 1, 2, 3, etc., r is the discount rate used for discounting the future cash flows each year and t is the number of periods.

Project cash flow (PCF) contains three elements: (1) the Cash flow from Operations (CFO), (2) the Cash flow from Investments in fixed assets (CFI), and (3) the Cash flow from changes in working capital (CF∆WC). PCF calculation is:

PCF=CFO+CFI+CF∆WC

The CFO represents the cash generated from the everyday business operations. CFO calculation is:

CFO=NP+A+D

Where NP is company’s net profit, A is the amortization and D is depreciation. The CFI is the cash spent on purchasing, building and selling plant and equipment.

Preparation of Hot Chocolate

Hot chocolate can be made with dark, semisweet, or bittersweet chocolate chopped into small pieces and stirred into milk with the addition of sugar. American instant hot cocoa powder often includes powdered milk or other dairy ingredients so it can be made without using milk. In the United Kingdom, "hot chocolate" is a sweet chocolate drink made with hot milk or water, and powder containing chocolate, sugar, and powdered milk. "Cocoa" usually refers to a similar drink made with just hot milk and cocoa powder, then sweetened to taste with sugar. In our country we find many kind of melted chocolate powder such as Bournvita, Horlicks, Boost, Complan etc. are also called hot chocolate drinks.

Figure 2 Formulation of ingredients for chocolate production

Hot Chocolate Recipes

Ingredients:

1. 2 cups (500 ml) mini marshmallows2. 1 cup (250 ml) sugar3. 1 cup (250 ml) cocoa powder, sifted4. 3 1/2 oz (100g) of milk or dark chocolate, finely chopped

Preparation:

1. With the rack in the middle position, preheat the oven to 75 °C (170 °F). Line a baking sheet with parchment paper.

2. Spread the marshmallows on the sheet. Dry in the oven for about 2 hours 30 minutes. Turn the oven off. With the door slightly ajar, let cool completely, about 2 hours.

3. In a food processor, pulverize the dried marshmallows into a powder with 60 ml (1/4 cup) sugar.

4. In the bottom of a 750 ml (3 cups) capacity jar, place the remaining sugar. Add the cocoa powder. Continue with the powdered marshmallows and press lightly. Finish with the chopped chocolate in order to obtain four distinct layers. Close the jar. Offer has a gift with a gift-tag showing the directions. This recipe can be doubled or tripled.

Figure 3How to make a cup of hot chocolate ?

There are many types of hot chocolate such as Spiced / Mexican Hot Chocolate, Flavored Hot Chocolate, White Hot Chocolate Recipes, Iced / Frozen Hot Chocolate, Spiked / Alcoholic Hot Chocolate, Large Batch Hot Chocolate etc.

Physic-chemical analysis: The chemical composition of the cocoa powder and chocolate samples via: pH, moisture, protein, fat, crude fiber and ash contents were determined by methods described by AOAC (1990). Carbohydrate was calculated by difference, and energy was calculated using Atwater conversion factors. The recantation-characteristics of the cocoa powder samples, such as bulk density, dispensability and rehydration in both hot water and cold water were carried out as described by Compare et al.

Economic Analyses The US chocolate industry is expected to experience moderate growth and reach an estimated $19.3 billion in 2018. Innovation of new products in hot chocolate and milk chocolate segment with new flavors and low calorie such as sugar-free chocolates will increase the growth of retail chocolate industry.

According to the World Cocoa Foundation, the U.S. chocolate industry consists of about 400 manufacturers that produce 90 percent of U.S. chocolate. The International Cocoa Organization points to top U.S. chocolate companies with a global presence, such as Mars, Mondelez and Hershey's. In 2012, Mars netted sales of $16.8 billion, while Hershey's captured $6.5 billion. These companies compete with other international chocolate giants, including Nestle Switzerland and Ferrero of Italy.

According to Kantar World panel, the UK market for hot drinks was worth US $ 2.7 billion in 2009, or approximately 56.3 billion cups. The hot drinks market breaks down into several key categories: instant coffee, black tea, roast and ground coffee, hot chocolate, melted drinks,fruit and herbal tea, and green tea.

The hot drinks market is expected to see positive value growth between 2010 and 2014. Key drivers are expected to arrive from the coffee sector, where coffee pod systems are expected to grow in popularity, as well as from manufacturers that are increasingly concentrating on launching "light" or reduced sugar variants.

Following Mondelez and Hershey's model, if we define NI as the net income (or benefit) from one year of production of Hot chocolate as expected in year t, then the net present value of the expected net income from production of circle will amount to:

1NPV Lt= ∑ INC1i = l (l+r)1

INCi,t is the expected net income of production in year t given as: I

IINCt = ∑ (REV Lt – TC it)

i=l Where REVi,t is the expected revenue from the Hot chocolate production in year t TC is the total cost of production in year t R is the discount rate or the opportunity cost of capital and t is the time period.

Cocoa Supply and Demand

This shows that the consumers are willing to buy more than producers willing to sell. In this case, there will be an increase in price, eliminating shortage by changing quantity demanded and supplied until it goes to original equilibrium. We call this the “excess demand-shortage’. A high demand refers to a high equilibrium price and quantity.

Furthermore, the bad weather decreases the supply of cocoa. This then leads to a shift to the supply curve to the left. The price will increase continuously and quantity exchanged will decrease. This implies that a magnitude of increase in demand is greater than the magnitude increase in supply. Both equilibrium and market price increase.

Source: USDA and Inform

Chocolate Beverages and Health

Chocolate and Antioxidants

At least we all know that consuming chocolate in whatever form you choose is good for you, right? All those antioxidants hard at work…well, wait just a minute. It is true that cocoa is high in antioxidants, especially flavones, a type of flavonoid. Antioxidants are commonly measured according to Oxygenated Radical Absorbance Capacity (ORAC) numbers. The ORAC measurement assigned to a food indicates total level of antioxidants, so a higher number indicates a greater quantity of antioxidants present.

One hundred grams (about 3.5 ounces) of dark chocolate has an ORAC number of thirteen thousand one hundred twenty (13,120), amazingly high among commonly-eaten foods. Even milk chocolate has a very respectable ORAC measurement of 6,740 for the same quantity. Unhappily, you’re probably getting nowhere near that amount of chocolate in your chocolate beverage. Additionally, it’s important to remember that the ORAC number reflects a food’s overall antioxidant capacity and the time it takes to react as an antioxidant in a test tube. No one knows if antioxidants work similarly in the human body. And it appears that our systems are capable of absorbing a finite quantity of antioxidants in any given time period, so any excess may simply be excreted—meaning that a very high ORAC number isn’t always better for you.

Chocolate And Nutrition

Much of the research now being done on cacao (chocolate) is done on high-quality cocoa powder. It may be that our future “health drink” will be a flavonoid-enhanced cocoa powder with an artificial sweetener and fat-free milk, so as not to pack on the calories.

But today, cocoa is no health drink. Certainly, along with the antioxidants, what you’re getting with your hot cocoa or hot chocolate is some nutrition, especially if your drink is made with milk. Inescapably, though, you’re imbibing calories, sugar and fat (although cocoa butter is a heart-healthy fat), and often, significant sodium. Many manufacturers do not list nutrition information for their drinking chocolates and hot cocoas. This is doubtless to their benefit, as few Americans would rejoice in discovering what a steaming mug of hot chocolate or hot cocoa can add to their daily intake.

While L.A. Burdick Hot Chocolate, a NIBBLE Top Pick of the Week, weighed in at 600 calories a cup (it’s virtually melted chocolate bars—and divine), there are “bargains” to be had. Nestlé Hot Cocoa Mix (Rich Chocolate) contains 80 calories, 3 grams of fat, 12 grams of sugar and 170 mg of sodium per serving when made with water. It’s hardly a rich, chocolaty experience. Lake Champlain’s New World Drinking Chocolate, a drinking chocolate made with milk, contains 145 calories, 11.5 grams of fat, 8 grams of sugar, and roughly 38 mg of sodium per serving—before you add the milk used to concoct the beverage. Add 90 calories for 8 ounces of fat-free milk or 150 calories for whole milk, and that’s 235 to 295 calories for the cup—as much as a serving of super-premium ice cream. On the other side of the health coin, that particular Lake Champlain preparation contains one ingredient—dark chocolate—while the Nestlé mix contains such delightful additives as corn syrup solids, partially hydrogenated and hydrogenated oils, sodium silicoaluminate, cellulose gum, dipotassium phosphate, sodium caseinate and artificial flavors, along with the basic sugar, cocoa processed with alkali and nonfat milk. So calories and fat grams aren’t the only story here. With supermarket brands, you’ll find additives; the “premium” brands generally don’t have them.

As with most sweets, hot chocolate and hot cocoa can absolutely be part of a sensible lifestyle. Eat a healthy diet, get in your exercise and enjoy the drinking chocolate of your choice as an occasional indulgence. Stop trying to justify the health claims and just settle back and delight in a mug. That’s what hot chocolate should be about, anyway: pure enjoyment.

Results and Discussion

Tables 1 and 2 show the chemical composition & Mineral Elements of the different chocolate drinks, and Tables 3 and 4 show the product nutritional label data.

The carbohydrate contents were obtained by subtraction (Tables 1 and 2), which explains the values higher than those given on food labels. The data in Tables 3 and 4 were probably obtained by some other method. The amount of calories of the chocolates is high due to their large amount of carbohydrates and lipids (VISSOTTO et al., 1999). In addition to the carbohydrates and fat found in the chocolate, cocoa, one of its ingredients is rich in several essential minerals such as magnesium, copper, potassium, and manganese (HAMMRSTONE et al., 2000).

The crude protein content (6.63%) found for regular chocolate drink of brand E (Table 1) is the only one that was close to the label value (6%) (Table 3). All the other chocolate brands had

protein amounts lower than those reported on their food labels. Comparing normal and diet chocolate of brands A and B (Table 3), we observe that brand B regular chocolate had the lowest crude protein content (4.69%). The moisture and ash contents of all chocolate brands analyzed were within the regulation values, maximum values of 3% moisture and 2.4% ashes. However, these values were not informed on any of the food labels of the brands analyzed.

We observed that the hot chocolates of the same brands presented larger lipid contents. This fact may be related to the absence of sugar and the need to increase the amount of fat to maintain the consistency of the chocolate (BOCHICCHIO et al., 2005). The data presented in show the concentration of fatty acids in regular chocolate from brands A, B, C, D, and E. Among the saturated fatty acids, palmitic acid (16:0) and stearic acid (18:0) predominated, ranging from 4.86 (brand C) to 6.93 (g brand A) and 5.63 (brand C) to 7.77 g (brand D).100 g-1 of chocolate, respectively.

Among the MUFA, oleic acid (18:1n-9) stood out, ranging from 5.81 (brand C) to 8.42 g (brand B).100 g-1 of chocolate. The amounts of PUFA ranged from 0.45 g (brand C) to 0.82 g (brand B); linoleic acid predominated (18:2n-6). Tran’s fatty acid elaidic acid was identified and quantified, ranging from 60 mg to 110 mg in brands D and C, respectively, per 100 g of chocolate.

Regular chocolates brands A and B presented larger amounts of fatty acids per 100 g of chocolate, 15.48 g and 15.41 g SFA, 8.06 g and 8.42 g MUFA, and 0.70 g and 0.82 g PUFA. Brand C presented the lowest amount of fatty acids, and it was recommended as the healthiest regular chocolate, followed by brands D and E.

MUFA oleic acid (18:1n-9) stood out with amounts ranging from 7.32 (diet brand A) to 9.49 (diet brand B) g.100 g-1 of chocolate. The amounts of PUFA ranged from 0.63 g (diet brand A) to 0.87 g (diet brand B), and the linoleic acid (18:2n-6) was the highest. Trans fatty acid elaidic acid (18:1n-9t) was identified and quantified, ranging from 60 to 80 mg in diet and regular brand B, respectively, per 100 g of chocolate. Brand B diet chocolates presented larger amounts of fatty acids: 18.15 g of SFA, 9.49 g of MUFA, and 0.87 g of PUFA per 100 g of chocolate. Brand A diet chocolates had the lowest amounts of fatty acids, being recommendable as the healthiest among the diet and regular dark chocolate, followed by regular A, regular B, and diet B. Therefore, brand B diet chocolate is the least recommendable in terms of SFA and TL contents when compared to the regular chocolate brands C, D, and E.

According to Grimald, Gonçalves and Esteves, (2000) over 20% palmitic acid in chocolate samples is a strong evidence of the presence of palm and/or cotton oil. Both regular and diet dark chocolate samples from brands A and B and brands C, D, and E had 20% palmitic acid (16:0) or more.

As a result of the high prices of cocoa and its derivatives, cocoa butter has been totally or partially substituted for similar products. The use of similar products depends on the similarity of their physical, chemical, and functional properties to those of cocoa butter; they do not form an eutetic mixture and reduce the product fusion point. All these fats (coconut, cotton, palm, and

soybeans) are constituted of triacylglycerol, which structurally are glycerol-alcohol triesterified with fatty acids.

Table 1. Chemical analyses of Hot chocolate beverage

Table 2. Mineral Elements of Hot chocolate beverageAmounts Per Selected Serving %DV

Calcium 263mg 26%Iron 1.2mg 7%

Magnesium 57.5mg 14%Phosphorus 263mg 26%Potassium 492mg 14%Sodium 110mg 5%

Zinc 1.6mg 10%Copper 0.3mg 13%

Manganese 0.0mg 2%Selenium 6.8mcg 10%

Phosphorus 263mg 26%Potassium 492mg 14%Fluoride ~ ~

Table 3: product nutritional data

Table 4: product nutritional label data

Conclusions

Based on the survey results, country, industry and company analysis, and performed economic and financial analysis, we can conclude that business of hot chocolate beverage drink is produce for unique, quality chocolates with differentiable taste. It is a profitable opportunity for

any company. Using the forecasted variables and projected one year Income Statement and Cash Flow Statement, we determine positive Net Present Value of chocolate industry is above $10 billion. Internal Rate of Return is 41.29 %, which makes this opportunity a highly profitable one.

REFERENCES

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