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 (Cte 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 its 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 todays 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 (CFWC). PCF calculation is:
PCF=CFO+CFI+CFWC

The CFO represents the cash generated from the everyday business operations. CFO calculation
is:
CFO=NP+A+D
Where NP is companys 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.
3.
4.

2 cups (500 ml) mini marshmallows

1 cup (250 ml) sugar
1 cup (250 ml) cocoa powder, sifted
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= INC
1i = l (l+r)1

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

I
INCt = (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 workwell, 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, youre probably getting nowhere near that amount of chocolate

in your chocolate beverage. Additionally, its important to remember that the ORAC
number reflects a foods 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 excretedmeaning that a very high ORAC number
isnt 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 youre
getting with your hot cocoa or hot chocolate is some nutrition, especially if your drink is
made with milk. Inescapably, though, youre 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 (its virtually melted chocolate barsand divine), there are bargains to
be had. Nestl 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. Its hardly a
rich, chocolaty experience. Lake Champlains 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 servingbefore 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 thats 235 to 295 calories for the cupas much as a serving of super-premium ice
cream.
On the other side of the health coin, that particular Lake Champlain preparation contains
one ingredientdark chocolatewhile the Nestl 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 arent the only story here. With supermarket brands, youll find
additives; the premium brands generally dont 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. Thats 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). Trans 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, Gonalves 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 beverage

Amounts Per Selected Serving
Calcium
263mg
Iron
1.2mg
Magnesium
57.5mg
Phosphorus
263mg
Potassium
492mg
Sodium
110mg
Zinc
1.6mg
Copper
0.3mg
Manganese
0.0mg
Selenium
6.8mcg

%DV
26%
7%
14%
26%
14%
5%
10%
13%
2%
10%

Phosphorus
Potassium
Fluoride

263mg
492mg
~
Table 3: product nutritional data

Table 4: product nutritional label data

26%
14%
~

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.

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