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Selling chilled drinks  and its huge business opportunities

Apr 29, 2023

May 16, 2023House keeperBusiness0

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Chilled drinks business that people tend to look down on is now very lucrative, especially due to the intense heat wave being experienced in the metropolitan areas coupled with the current low power supply situation across the country. ADEOLA AKINBOBOLA, writes.

A booming business

The high demand for chilled drinks such as Coke, Fanta, Malts and others has created a booming business opportunity in cities, towns and villages across the country.

A trader, Madam Aisha Owoeye in an interview with Business Starter explained that compared to before, the sale of chilled drinks has increased due to insufficient power supply in her area to boost her business.

According to her, she now makes a sale of N20, 000 profit monthly, adding that it is a business whose returns on investment (ROI) is highly guaranteed.

She said this means one can make returns on their investment in a reasonably short time after starting-up a chill drinks business, especially during the peak period.

Consumption of chill drinks

On the consumption of chilled drinks, Madam Owoeye said she lives in a very hot environment and so "we consume lots of liquid/drinks. Except on medical grounds, every Nigerian would prefer cold drinks to warm drinks any time, any day.

"People who run businesses that deal on drinks will attest to the fact that customers will always demand for chilled drinks and when you can give them chilled drinks at every point, then you will be their first port of call as long as drinks is concerned.

She said though in some parts of Abuja , some drink dealers still lament lack power as not all them can afford to run generators endlessly adding that with the epileptic power supply and high cost of fuel in the country, it is next to impossible to achieve this feat without extra exorbitant running costs which may likely put an entrepreneur out of business; hence they need ice-blocks to cool to get their drinks chilled.

Meeting the demand for ice block

Madam Aisha said she has a 15-tonne ice block making machine. When running at full capacity, it can produce fifteen 50kg sacks of cylindrical ice cubes in an hour.

While she is happy with the customers they have secured, the demand is nowhere near enough to exhaust the capacity of the machine. "At the moment we are not even running it for five full hours to meet the demand. In future, we might look at expanding and installing a 20-tonne machine, but not yet."

She said has a delivery van, which it uses to deliver drinks to its customers using Igloo coolers. "We don't yet have a refrigerated truck for deliveries. The coolers we currently use are sufficient as the chill drinks lasts up to three days."

"For the moment, we are trying to capture as much of the Lagos market as possible," she notes. "We have had customers asking when we will expand to Kaduna or Nasarawa, but the market here is not yet saturated."

She believes this move will likely come only in three to five years as it would mean that a separate factory would have to be set up to serve as a hub for deliveries.

"I am looking at Nasarrawa because they don't have any ice factories there. They produce only the long ice blocks, so there is opportunity to sell chilled drinks there.

Sales channels and being available 24/7

Most of her orders and sales come from Instagram followers via direct messages or WhatsApp.

"I keep telling people, ice drinks is like the life of the party. You can't have a lounge or a club and serve warm drinks. We often get last-minute emergency calls when the ice runs out of drinks.

"We’ve always advertised that we are open and available 24/7. I have orders still coming in at 01:00 and then I can be chatting to another customer at 05:00," she says.

Diversification on the cards

"There is a general consumer trend towards healthier living and eating, as well as exercising," she said.

This is a space where she feels the brand is poised to gain more customers if it expands its product offering. However, it won't simply without iced drinks.

"We are currently looking at bottled alkaline water under the same brand name. I think this is a good opportunity," she reveals and adds that in future, she may consider entering the lounge or restaurant sector with an offering of its own.

Business Opportunities In chilled drinks Production Business In Nigeria

1). Sale And Distribution Of chilled drinks.

A lot of small-scale restaurants cannot afford to buy a generator or a fridge, and they also need to offer chilled refreshments to their customers. Ice block sellers are their go-to for their chilled drink needs.

Thanks to the erratic power supply, restaurants and eateries resort to the use of ice cubes to keep their drinks chilled, particularly all through the afternoon.

This creates opportunities, not just for the producers but also for the distributors of ice cubes. In addition to distributors, ice cube production and distribution requires the services of skilled drivers also.

2). Producing drinks with ice block maker

An ice block maker is a mechanical device used to solidify water packs into blocks. The ice block production business operates primarily on the ice block maker, which makes chilled drinks a very lucrative business all across the world.

FG plans additional 20% excise tax on soft drinks

Following the introduction of an earlier N10 per litre ad-valorem excise tax regime, an industry study shows a revenue decline of eight per cent and 10 per cent between June and August 2022 as a direct result of the tax regime implementation, and the decline is projected t hit -25 per cent by the end of the year, if not reviewed.

This excludes the cost of write-offs of products produced, excised but not sold. With the introduction of the proposed additional 20 per cent ad-valorem tax, the collapse of the soft drink market may be imminent.

Workers lay off

As it stands, industry sources revealed that the manufacturers are grappling with issues in their operations, a development that would lead to workers layoff, and possible shutdown of plants amidst other multiplier effects on the entire already staggering economy.

According to recent research by Proshare, a financial information news service firm, with the N10 per litre levy alone, the industry would lose revenue of N1.9 trillion in five years which may result in a 39.5 per cent decline in different government taxes such as personal income tax (PIT), corporate income tax (CIT) and value-added tax (VAT).

The belief in the industry is that the ad-valorem proposal is a negative one. The absence of tax incomes in subsequent years will destroy the first-year gains in the government's tax incomes.

The loss of companies’ revenues and profits is bound to lead to a reversal of foreign direct investment (FDI) and a fall in production and sales.

It was gathered that one of the large carbonated soft drink producers has placed a hold on its intended added local investment of 500m Euros for 2023 in anticipation of the proposed additional 20 per cent ad-valorem tax regime.

This disturbing development has continued to generate reactions from analysts and market watchers, who predicted that a bottle of soft drinks may go as high as N600 per bottle while a bottle of beer may be sold for as high as N1,000 in the coming months.

Therefore, it was not surprising that the accompanying reaction that greeted the displeasure by the sectoral group recently assumed the status of a volcanic eruption, as the sectoral heads cried out over the harsh N10 per litre ad-valorem tax regime they are struggling with and wondered how they will cope with the proposed additional 20 per cent excise tax the federal government is planning to introduce, which may spell doom for the industry.

Facts and benefits of ice block to preserve drinks

Ice blocks are convenient to use

Using ice blocks to preserve foods is better, as it doesn't affect the food itself but only coats it like a frost.

Ice blocks make a cheaper alternative to buying a fuel generator for your home or business.

You can do the business from anywhere (from the comfort of your home or a shop).

A booming business Business Starter Consumption of chill drinks Meeting the demand for ice block Sales channels and being available 24/7 Diversification on the cards Business Opportunities In chilled drinks Production Business In Nigeria FG plans additional 20% excise tax on soft drinks Workers lay off Facts and benefits of ice block to preserve drinks Ice blocks are convenient to use