Dr. Nerlita M. Manalili

Managing directorNEXUS Agribusiness SolutionsVega Center, College, Los Banos, Laguna

Background and Process of the Study Industry Situationer The Primary concern Emerging Products Selected Cases Constraints and Potentials Possible entry points Strengthened positions in the Coco chain Validation of Identified Options: built Scenarios Concluding Remark

Done In preparation for a Regional Knowledge Sharing workshop on enhancing farmers’ market power in the value chain in Asia (AFA’s initiative)

About successful (and promising) cases of

marketing arrangements in a commodity chain

Focus on selected coconut value chain in Quezon ( the intention is one that will later on be

applied/adopted or out scaled in the near future)

1. Coconut oil (Crude and Refined)2. Banana (fresh)3. Tuna4. Pineapple & Pineapple Products5. Dessicated Coconut6. Tobacco (manufactured)7. Seaweed and Carageenan8. Centrifugal sugar9. Milk and Cream Products10. Fertilizer (Manufactured)

Philippines - 2nd largest producer in volume & value

Quezon Province Accounts for more than half of the region’s coconut produce

Coconut Farmers, biggest in Poverty Group

Coconut Farmers Form The Biggest Poverty Group

Coconut Farmers Form The Biggest Poverty Group

In spite of contribution to GVA and In spite of contribution to GVA and Agricultural trade:Agricultural trade:In spite of contribution to GVA and In spite of contribution to GVA and Agricultural trade:Agricultural trade:

Income From Copra is P900-P1000 per hectare/month

Income From Copra is P900-P1000 per hectare/month

With 2 Hectare Ave. per Family of six, Income per month is P2,000

With 2 Hectare Ave. per Family of six, Income per month is P2,000

Source: Dr Justino Arboleda

Coco SugarCoco WaterYoung coconut (Buko)Coco FiberOthers (sugar from shell)

92.78 percent increase in 2011 exports volume of coco sap sugar with 70,000 kilograms (km) compared with 36,310 km in 2010.

Tremendous leap of 224.20 percent increase in exports volume from a low of 11,200 km in 2009 compared with 2010 figures.

“Exports was driven by global health concerns specifically diabetes and obesity,” the PCA Administrator bared. The World Health Organization (WHO), 2011 statistics revealed that 346 million people are diabetic worldwide.

Coco sap sugar has a low glycemic index (GI) of 35 compared to regular cane sugar, thus it can be recommended for diabetics (FNRI, DOST).

Exported to 11 countries namely: Japan, USA, Middle East, Korea, Hongkong, Norway, Canada, Switzerland, France, Australia, and New Zealand. Among these countries, USA ranked as the number one exporter (PCA).

second biggest non-traditional export USD1.445 million from sale of 1,450,129 liters.

United States was major destination controlling 969,164 liters or 66.8% of total business (PCA)

Said to be cost effective in bigger scale of operation

Need to be processed immediately to avoid spoilage

Coco husk as goldmine – Philippines produces 15 billion nuts a year,

meaning also 15 billion coconut husks. Only a very small portion of this is processed

into something of value. In fact the Philippines exports only about 4,500 metric tons of coconut coir a year.

Kerala, India earns $600 million a year from different products out of coconut husk.

PCA

Largest Farm Waste in the Philippines8 Billion Husks are burned or thrown away3 Billion Husks Used as Fuel to make Copra

Source: Dr Justino Arboleda

a new kind of coconut sugar can be extracted from the shell of mature coconut? It looks unimaginable but the fact is that a P2-billion company has been set up at the DADC Economic Zone in Sta. Cruz, Davao del Sur, to produce the novel product.

The company is called CJ Toyota Tsu Sho Philippines, Inc., said to be a joint venture of Japan’s biggest car company and a Korean partner. The company has a huge processing facility that was inaugurated about a couple of months ago.

The product is called Xylose coco sugar and is said to be for export to Japan and Korea. The product comes in very fine powder form that is immaculate white. It is very sweet and is said to be used for the manufacture of toothpaste, chewing gum and possibly other products that need sweetener.

Source: Zac SarianAgri Plain talk

Coco sugar backyard ( Armida Monghe) commercial (Pasiolco Agri VenturesYoung coconutPeter Paul Phils CorpCoco WonderCoco Coir (husks)l

Armida MongheCoco Sugar ProducerLopez, Quezon

Rosauro MongheCoco Wine (Tuba) ProducerLopez, Quezon

Coco Wine

20 gallons of coco wine per week

sold at P180/gallon

P3,600/week;P14,400 per month gross income

Coco sugar

2 gallons coconut sap = 1 kilo coco sugar

Sold at P250/kilo (produce 4 times a week

P1,000/week; P4,000 per

month gross income

P10, 000.00 annual rent for 65 coconut trees, producing only wine before, now coco sugar is also produced.

Sap gathered in the evening Sap gathered at 6 a.m.

Pascioclo Agri VenturesMaureen Pasciolco , OwnerTiaong, Quezon

Lopez Tiaong

Production trial & error procedural- own /contract out 4-5 hrs cooking 6hrs -10 hrs cooking

Selling price P250/kilo selling price P280n -320/kilo

Ordinary plastic packaging specialized packaging no brand branded

What Account

for difference

s

Market Knowledge/

Info

Technical know how

Packaging

Production cost ??? Production cost < 190/kilo

Non Quezon Producer/Whole

salerOrganic, package sizes local, export

market

Limited market there is market

Mark

et tie

–

up

Supply

arrangem

ent

initial investment of P1.42 million.

annual net profit of P201, 762.48.

◦ Based on the projected 10-year income statement and cash flow, before financing

◦income is realized at first year of operation

◦ initial investment fully recovered in 3.64 years.

Source: PCAARRD

UGMA URBAN Poor

Selling price P12 20-25 (22,5)

No of Pcs 2,000 2,000

Revenue P24,000 P 45,000

Cost bukoP 6-9 = 7.5

15,000 P 24,000

Hauling

transpo (elf – 7,000pcs) 8,500

Hauler.driver 850.00

Storage P1.00/nut 2,000

ConcernsHigh Reject - Improper selection of young coconut - (training needed)Appropriate tool

StorageShort supply (specially with rejects)

High transpo cost(maximize load/trip

Mark

et tie

–

up

Only S

upply

arrangem

ent

Have buying stations with accredited farmer supplier per station

Usually sourcing coconuts from Catanuan, Calauag, Padre burgos, Bondoc Peninsula & Lopez

Have one coop currently supplying the Co. (could be a future possibility

No Mark

et tie

–up

More

of s

alarie

d

emplo

yees

Private Enterprise Working with a group of small farmers and local workers in the provinces.

built small Processing Facilities in Provinces of Luzon, Visayas and Mindanao providing livelihood to small farmers and local workers.

We implement sustainability-oriented on organic farming, quality and farm productivity improvement. Some percentage of sales are given back to the farmers as incentives in form of organic fertilizer, coconut and cacao seedlings in order them to plant more and some are provided with monetary incentives to promote continues organic farming activity.

More of salaried employees (not cooperative)

No Mark

et tie

–up

More

of s

alarie

d

emplo

yees

Source: Juliet Escasa, Hagakhakin Gumaca

Utilizing coco waste for fiber

Income from Labor:

P1.50 /coi about 20-30 pcs/day

P550 /10 meter net, 2 persons in a day P275/person/day

Technology AvailableQuality Standards

Oven Type Drier - produce white hygienic copra (Copra) P200,000 – 250,000 investment 250 kg/day capacity(C/o Coco wonder)

Ohmic heating method - pasteurization of Coco water(coco water) P2.3 million budget alloted in

2013 for laboratory scale research on a pre-processing method for coconut water to minimize production loses due to fermentation &

mishandling.Coco Sap Sugar - Hands- on Training offered by Pasiolco Agri venturesCoco fiber - Dr. Justino Arboleda of Bicol offering technical assistance

Classification Specification TolerancePremium (superior quality)

Cream to light yellow

Moisture content is <4%

5.0%

Class I (good quality) Light brown to brown

Moisture content is not >4%

10.0%

Class II Includes the coconut sap sugar that did not qualify as Class I and premium but satisfied the minimum requirements of the product standards

10.0%

In terms of activities

To improve on his current segment as chain participant

To add more activities and move to other chain segments

(if within their competencies)

Vertical integration

In terms of coordination & management

To participate in decision process

In setting norms and standards

Through innovation

Horizontal Integration33

34

Integrationof post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with modification by NMM)

1

2

3

4

Chain activity integrator

Integrationof post-farm activities

no

participation in chain

Management

CHAIN (CO-) OWNER

Chain Participant

CHAIN Partner

Source: Regoverning Market (with enhancements by Manalili)

Know more about improvingFarming systems and qualityOf product (to have betterChance at the market and Get better prices)

NEXUS Agribusiness Solutions

Enhance qualityAdd value and Process products

Chain co owner

Chain partner

Cooperatrive businessProduct developmentBranding, marketing

Farmer study groups Specialized activity/Knowledge & Negotiation Skills get to influence chain decisions Specialization

in farm production

participatingIn chain management

ObjectivesObjectives StrategiesStrategies Entry PointsEntry Points Identified Identified MarketMarket

SC ModelSC Model

1.Chain 1.Chain OptimizationOptimization

Increase capacity to Increase capacity to comply with standards comply with standards to ensure qualityto ensure quality Continuous farmers’ Continuous farmers’ trainingtraining Farmers’ Farmers’ Commitment to adhere Commitment to adhere to good agricultural to good agricultural PracticesPractices

Sustain farmers Sustain farmers education and education and value formation value formation through NGOs through NGOs collaborative collaborative assistance to assistance to farmer groups farmer groups

Modern Modern retailers (like retailers (like supermarkets supermarkets hypermarkets, hypermarkets, groceries, groceries, specialty specialty shops) shops)

Coco SugarCoco Sugar

Pasiolco Agri Pasiolco Agri VenturesVentures

Coco fiberCoco fiber

Dr. ArboledaDr. Arboleda

2.Integral Chain 2.Integral Chain CareCare

Meet grade/certification Meet grade/certification requirements (organic) requirements (organic) QualityQuality of international of international standardsstandards

Organic Organic CertificationCertification

Continuous Continuous quality quality upgradingupgrading

Quality - user-Quality - user-recognized recognized

Modern Modern RetailersRetailers

Export marketsExport markets

Coco WonderCoco Wonder

Pasiolco Agri Pasiolco Agri VenturesVentures

Coco fiberCoco fiber

Dr. ArboledaDr. Arboleda

3.Chain 3.Chain DifferentiationDifferentiation

Premium Positioning Premium Positioning

New marketing New marketing conceptsconcepts

E- commerceE- commerce

Agency sellingAgency selling

Well Well differentiateddifferentiated

Product/product Product/product delivery systemdelivery system

InternationalInternational

MarketsMarkets

InstitutionalInstitutional

MarketsMarkets

Coco wonderCoco wonder

Coconut houseCoconut house

Ugma-Urban Ugma-Urban poor modelpoor model

Sample Action Plan: Redesign Option for CoconutSample Action Plan: Redesign Option for Coconut

Specializing in Farm production

Integration of Post Farm activities

No participation active participant

Source: Regoverning Market (with enhancements by Manalili)

Copra Whole Nut

Farm gate - traders - market municipal Lucena

Current Current with changes Entirely new scenario

oProduct enhancement• Explore new methods - of Cooking copra (standard coco drier PCA, DOST DTI) - processing coco milk centrifugal - of trading (copra,buko,•Product development-Sauce, Juice, sapal--coconut virgin oil -Ubod ( program plantingoTraining & extension needed

o intercropping • ginger, gabi, • rambutann, lanzonesoLivestock raising• Ruminants, goat, • native pigs, chicken(ideas not materializing)

oCoco Life• coco levyhildren don’t want to Go into farming, need toLook for other Alternatives, or makeCoconut farming viable

Other than current livelihood what other initiatives do you need to further improve on your situation o small processing plant

per barangayo Village based mftngoDomestically sold new coco products -coco milk - coco sauce (copra rejects) - nata de coco, jamo stable selling of buko skills devt (identificatn)oAgham sa PagniiniyogoCertify indiginous KnowledgeoShellane like fuel prod(Technical training)

How do you see your Community5 years from now?(other issues)

SCENARIO BUILDING

FGD Questions & Outputs

Questions Asked

Manalili 2002

your Current products (Major, secondary?How are they soldBrought to market

Any other activities(production, mktg)That you wish to doWith your coconut?What stops you fromDoing so?

Concluding Insights

No existing marketing arrangements (beyond the usual arms length buyer seller relationship were observed in the coconut commodity chain, given the selected cases studied. though there are a number of promising buyer – farmer supplier relationship if given proper impetus for development, (brokering-in, guidance, collective marketing, enabled environment