Understanding Fermentation Economics: Key Market Considerations

 
Fermentation  Economics
 
The following points are to be considered
in studying the fermentation economy :
 
1.  Market Potential :
 
-  
The requirement for the commercially
successful fermentation process is the
ability to produce high yield of
fermentation product 
so that the
product must be sold so as to recover
costs along with an acceptable profit.
 
 
-  In order to sell the product, there
must be a 
demand or market for the
product.
 
-  Two Possibilities  : 
A Market for the
product may be already exist
,
because same or similar product have
been sold by others.  
Or Market to be
established 
for a newly discovered
fermentation product.
 
 
-  If market is already exist, then there
will be competition for the production
and sale of the product.
 
-  Fermentation industry newly entering
in market must be able to produce the
product cheaply enough so that it can
be sold at or at slightly less than the
going price.
 
-  In short the fermentation process and
product must be able to compete on an
economically sound basis with similar
product already in the market.
 
 
-  Generally 
fermentation product
never sold directly to the public
. It
may be sold directly to another
industry , that chemically transforms
the fermentation product before sale
to the public.
 
-  This do not encounter the additional
cost of advertising, packaging and
distribution to retail outlets which
market the products directly to the
public.
 
 
-  Additional considerations apply to
market potential include :  
the price
charged for a fermentation product
can be no greater than that which
the market will bear.
 
-  Product that has no competition in
open market is not commercially
feasible if the price is too great for
public acceptance.
 
 
-  
Foreign sales  also present additional
market potential 
for fermentation
products but must be determined first
whether a market is actually exist for the
product or not.
 
 2.  Fermentation and Product Recovery
Costs :
 
The economic position of a fermentation
product is 
closely associated with cost of
its  production and distribution.
 
 
 
Following sources of cost can be
considered :
 
Medium Constituents :
 
-  
Competitive position and potential
profits from fermentation product are
closely tied to the costs of the various
components of the production medium.
 
-  
A single 
high cost medium component
for the production medium can dictate
the selling price for the product, so 
low-
cost substitute
 should be find for
replacement of such component
.
 
 
-  Some media require pretreatment to
make them acceptable for microbial growth
or product accumulation will also add in
cost of medium.
 
-  The adjustment of pH requires acid or
alkali will also contribute little cost to the
expense of a medium.
 
-  A medium that has a tendency to foam
during aeration and agitation can provide
additional cost because of lower aeration
potential.
 
-  A medium that makes fermentation
product recovery difficult also adds overall
fermentation costs.
 
 
Labor Cost :
 
-  
Labor cost apply to 
both technical
and nontechnical trained personnel
.
 
-  
All labor must be considered,
includes labor associated with handling
of cultures, inoculums, production,
product recovery and purification,
maintenance of product sterility,
packaging, steam production,
equipment maintenance and cleaning,
administration and so forth.
 
 
-  Labor cost may very from
fermentation to fermentation, and
they may be greater for fermentations
requiring prolonged incubation period.
 
Fermentation Incubation Period  :
 
-  
Short incubation period
fermentations usually are less costly
and it allows a greater turnover of
fermentation equipment.
 
 
-  
Fermentations requiring long
incubation periods provide additional
requirements and costs of labor and
present greater potential for
contamination.
 
Contamination and Sterilization  :
 
-
  Contamination at  more than a minimal
level always presents additional costs,
since most fermentations do not survive
serious contamination and medium must
be discarded.
 
 
-  Moderate contamination seriously
affect the yield.
 
-  Fermentations in which foaming is a
problem, incubation period is long in
which fermentation M.O competes
poorly with contaminants for
nutrients and the product is easily
degraded or chemically changed by
contaminating organisms.
 
-  Some fermentations are also more
sensitive to phage.
 
 
-  Fermentations employing M.O
genetically unstable may encounter
costs similar to those for
contaminated fermentations.
 
Yields and Product Recovery :
 
-  
The ability of a fermentation to
produce high yields and to allow good
product recovery is a prime
consideration in fermentation
economics.
 
 -  Yields and product recovery must
be considered to gather.
 
 
Product Purity  :
 
-  Fermentation products are marketed at
various levels of purity.
 
-  The purity level required for marketing a
fermentation product has a profound effect
on the cost associated with that product.
 
-  Complicated purification process may
leads to considerable loss of fermentation
product in each steps of purification
process.
 
-  A high yield is of little value if the product
can not be properly recovered for sale.
 
 
Overhead Expenses :
 
-  
This  expenses include  rent, taxes,
insurance, light, heat, accounting and
other office expenses, depreciation and
so forth.
 
- 
This  expenses  must be considered in
the total cost of a fermentation
product, but they are not tied  to or do
not fluctuate to any extent with a
particular fermentation.
 
 
Waste Disposal  :
 
-  Disposal of fermentation wastes
into streams, rivers or other bodies of
water is no longer permissible.
 
-  Certain fermentation utilizing
pathogens as the fermentation
organism , where waste also require
additional expense of sterilization
before discarding.
 
 
-  Fermentation waste include waste
from the actual fermentation waste
from recovery processes, as well as
cleaning and cooling waters.
 
-  Recovery of economically valuable
by-product  from a fermentation
improves the overall cost and profit
picture of fermentation.
 
 
Research Costs  :
 
-  The cost picture of fermentation process
also include research that discovered and
developed the process as well as the
research required for the maintenance of a
competitive commercial position for the
process.
 
Capital Expenditure :
 
-  A newly developed fermentation may
require  an outlay of capital before
commercial production can be undertaken.
 
-  Capital expenditure is associated with
fermentation equipment and facilities.
 
 
Patent Position :
 
-  A sound patent position for a fermentation
process and product markedly influences the
profit picture.
 
- A sound patent position allows that price
charged for a fermentation product be as
high as the market will bear and that
extensive commercial competition will not
be encountered.
 
-  A good patent position provides greater
potential for the recovery of costs and
obtaining of an acceptable profit.
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Studying the fermentation economy involves assessing market potential, competition, cost recovery, and distribution strategies. Market demand, competition, production costs, and potential profits are crucial factors to consider for successful commercial fermentation processes. Foreign sales can offer additional market opportunities, but pricing and market acceptance are key considerations. The economic viability of fermentation products depends on their production and distribution costs in a competitive market.


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  1. Fermentation Economics The following points are to be considered in studying the fermentation economy : 1. Market Potential : - The requirement for the commercially successful fermentation process is the ability to produce high yield of fermentation product so that the product must be sold so as to recover costs along with an acceptable profit.

  2. - In order to sell the product, there must be a demand or market for the product. - Two Possibilities : A Market for the product may be already exist, because same or similar product have been sold by others. Or Market to be established for a newly discovered fermentation product.

  3. - If market is already exist, then there will be competition for the production and sale of the product. - Fermentation industry newly entering in market must be able to produce the product cheaply enough so that it can be sold at or at slightly less than the going price. - In short the fermentation process and product must be able to compete on an economically sound basis with similar product already in the market.

  4. - Generally fermentation product never sold directly to the public. It may be sold directly to another industry , that chemically transforms the fermentation product before sale to the public. - This do not encounter the additional cost of advertising, packaging and distribution to retail outlets which market the products directly to the public.

  5. - Additional considerations apply to market potential include : the price charged for a fermentation product can be no greater than that which the market will bear. - Product that has no competition in open market is not commercially feasible if the price is too great for public acceptance.

  6. - Foreign sales also present additional market potential for fermentation products but must be determined first whether a market is actually exist for the product or not. 2. Fermentation and Product Recovery Costs : The economic position of a fermentation product is closely associated with cost of its production and distribution.

  7. Following sources of cost can be considered : Medium Constituents : - Competitive position and potential profits from fermentation product are closely tied to the costs of the various components of the production medium. - A single high cost medium component for the production medium can dictate the selling price for the product, so low- cost substitute should be find for replacement of such component.

  8. - Some media require pretreatment to make them acceptable for microbial growth or product accumulation will also add in cost of medium. - The adjustment of pH requires acid or alkali will also contribute little cost to the expense of a medium. - A medium that has a tendency to foam during aeration and agitation can provide additional cost because of lower aeration potential. - A medium that makes fermentation product recovery difficult also adds overall fermentation costs.

  9. Labor Cost : - Labor cost apply to both technical and nontechnical trained personnel. - All labor must be considered, includes labor associated with handling of cultures, inoculums, production, product recovery and purification, maintenance of product sterility, packaging, steam production, equipment maintenance and cleaning, administration and so forth.

  10. - Labor cost may very from fermentation to fermentation, and they may be greater for fermentations requiring prolonged incubation period. Fermentation Incubation Period : - Short incubation period fermentations usually are less costly and it allows a greater turnover of fermentation equipment.

  11. - Fermentations requiring long incubation periods provide additional requirements and costs of labor and present greater potential for contamination. Contamination and Sterilization : - Contamination at more than a minimal level always presents additional costs, since most fermentations do not survive serious contamination and medium must be discarded.

  12. - Moderate contamination seriously affect the yield. - Fermentations in which foaming is a problem, incubation period is long in which fermentation M.O competes poorly with contaminants for nutrients and the product is easily degraded or chemically changed by contaminating organisms. - Some fermentations are also more sensitive to phage.

  13. - Fermentations employing M.O genetically unstable may encounter costs similar to those for contaminated fermentations. Yields and Product Recovery : - The ability of a fermentation to produce high yields and to allow good product recovery is a prime consideration in fermentation economics. - Yields and product recovery must be considered to gather.

  14. Product Purity : - Fermentation products are marketed at various levels of purity. - The purity level required for marketing a fermentation product has a profound effect on the cost associated with that product. - Complicated purification process may leads to considerable loss of fermentation product in each steps of purification process. - A high yield is of little value if the product can not be properly recovered for sale.

  15. Overhead Expenses : - This expenses include rent, taxes, insurance, light, heat, accounting and other office expenses, depreciation and so forth. - This expenses must be considered in the total cost of a fermentation product, but they are not tied to or do not fluctuate to any extent with a particular fermentation.

  16. Waste Disposal : - Disposal of fermentation wastes into streams, rivers or other bodies of water is no longer permissible. - Certain fermentation utilizing pathogens as the fermentation organism , where waste also require additional expense of sterilization before discarding.

  17. - Fermentation waste include waste from the actual fermentation waste from recovery processes, as well as cleaning and cooling waters. - Recovery of economically valuable by-product from a fermentation improves the overall cost and profit picture of fermentation.

  18. Research Costs : - The cost picture of fermentation process also include research that discovered and developed the process as well as the research required for the maintenance of a competitive commercial position for the process. Capital Expenditure : - A newly developed fermentation may require an outlay of capital before commercial production can be undertaken. - Capital expenditure is associated with fermentation equipment and facilities.

  19. Patent Position : - A sound patent position for a fermentation process and product markedly influences the profit picture. - A sound patent position allows that price charged for a fermentation product be as high as the market will bear and that extensive commercial competition will not be encountered. - A good patent position provides greater potential for the recovery of costs and obtaining of an acceptable profit.

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