BIBLIOGRAPHY DIAZ, JESSICA C. ...
BIBLIOGRAPHY
DIAZ, JESSICA C. APRIL 2013. Supply Chain Mapping of Virgin Coconut Oil
Produced in Daganas, Catarman, Northern Samar. Benguet State University, La Trinidad,
Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
The research was conducted to document the flow of virgin coconut oil produced
in Catarman, Northern Samar.
The major market outlets of the producers were the consumers of Northern Samar
and nearby municipalities and are exported to USA supplied to Filipino Americans.
Respondents of the study were the VCO producers and the local buyers of the product.
Production of virgin coconut oil was is traditional. There were only two processors
of virgin coconut oil. Processors were also coconut farmers and produced their own raw
materials. Average production per week was 1-2 liter but could be increased if there were
orders. Virgin coconut oil was sold at Php. 180 per 350 ml bottle and USD 50 if sold in
the USA.
The product flow of VCO processors was very simple because there were no
intermediaries or middlemen involved. Producers sell directly to consumers. Consumers
bought the product for food supplement, for body massage and as a beauty products.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Problems encountered by producers included the difficulty of manual production,
limited production, high cost of raw materials and limited market outlet.
It is recommended that producers should improve production technology,
packaging materials and products should be labeled to expand market.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
INTRODUCTION
Rationale
The virgin coconut oil (VCO) is considered a non-traditional but highly priced
commodity among the hundreds of product lines of coconut. It is an income boosting
enterprise and is currently gaining popularity both in local and international markets. It is
very much sought after and has established a niche market of its own as a functional food
for human consumption because of its various health benefits claims. Since it is extracted
from fresh and mature nuts and not from dried coconut meat (copra) it has astounding
health and nutritional benefits. Based on the records, the trend of world demand for virgin
coconut oil is rapidly increasing and production in the country is similarly coping up with
this new expansion in the export arena. Moreover, increasing local consumption was also
recorded based on local production and sales volumes reported by VCO producers to PCA.
This industry was also proven profitable and promising as a low investment micro
enterprise with high market demand. Thus, with virgin coconut oil becoming a promising
export commodity, more and more VCO producers and traders have emerged like
mushrooms everywhere in the country. This income generating enterprise can improve
farm incomes by 5-8 folds over the traditional copra or sale of fresh nuts (Juliano, 2007).
Coconut oil production process is basically very different compared to the way
commercial coconut oil is processed. The latter is extracted from copra or the dried coconut
meat and is then refined, bleached and deodorized. Such coconut oil is usually used for
cooking purposes. In the case of VCO the oil is extracted purely from fresh meat without
any harsh heat or chemical treatment (hence the name “virgin”). With the popularity of the
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
VCO, improvement in processing, product development and utilization in the production
of high-end products were made possible within a short duration. Innovation in labelling
and packaging for the discerning consumers was offered by most producers. VCO is now
available not only in bottle, but also in jars, soft gel capsules and as flavoured VCO in
different tastes. Many high-end products like massage oils, lotions, balms, creams, and
soaps made with VCO base are also available.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
REVIEW OF LITERATURE
Production Status
According to Kotler (1989) a product is something that is viewed as capable of
satisfying a want. A want is described as stated of felt deprivation in a person. This
deprivation produces discomfort. The want energizes the person and puts him into an active
state and gives him direction. The person will perceive certain things outside of himself
that would satisfy his wants. Kotler also mentioned that product is anything that can be
offered to market for attention, acquisition, use or consumption that might satisfy a need
or want.
The Philippines is keeping its lead in VCO production over Indonesia which could
be a competitor in the world market. However, considering that our country is ahead in this
technology, we have a competitive edge with foreign investors interested to venture in this
industry. At present, a production capacity of 2,931 mt was reported to PCA (2005) and
according to absolutely no heat coconut oil Producers, Inc. (ACOPI), their members have
the capacity to produce 50,000 L of VCO with the cold process technology (Juliano,
2007).
With the increasing numbers of producers’ venturing in this business, the industry
might be competition with the traditional products for stable supply of suitable nuts. The
country is still considered as number one exporter of traditional coconut oil and other
coconut products. It is also considered second in the world in terms of areas planted to
coconut (3.1 M hectares), and despite this, a shortage in supply of nuts is an expected
problem in the industry. With the increasing demand for VCO, the need for more raw
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
materials will eventually result in abrupt reduction of nut supply to oil millers and
desiccated coconut (DC) plants. Furthermore, it also noted that most of the new VCO plants
have emerge in locations where oil mills and DC plants are already located. Based on
records of registered VCO plants (PCA, 2006) about 27.52% were established in Region
VIII (Eastern Visayas), 18.9% in Southern Luzon (Region VI-A) and followed by Bicol
(Region V) with 10.9% VCO producers (Table 1) there are only 40 VCO producers who
are registered with BFAD mostly based on National Capital Region and Southern Luzon.
Opportunities
As a result of its increasing demand in niche market, many have ventured into virgin
coconut oil production, mostly on a small scale. As such, more jobs generated and the nut
requirements of the VCO plants improve the farm income of the coconut farmers.
However, pricing of nuts should be regulated to ensure that the farmers will be benefited.
With the increasing demand of the VCO in the domestic and international market, the
declining status of the coconut industry changes its trend and started to gain economic
advantage. For the farmer, the uncertain and wavering income from coconuts was
stabilized through the increasing demand for nut supply. Enhance by the boom of VCO,
which shows signs of becoming more interested in planting coconuts.
Other than the consumption of VCO as food supplement, its utilization in the
production of health and high-end and natural products is a plus factor to be competitive in
the niche market. Soaps, lotions, massage oil; beauty creams and lipsticks are some of the
VCO-based products that are already available in the market.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Marketing and Demand of Virgin Coconut Oil
As cited by Miranda (1983), marketing is the process in society by which the
demand structure for economics goods and services is anticipated and enlarge and satisfied
trough the conception, promotion, exchange and physical distribution of goods and
services. Marketing is where the customers is and it is the customers who in the end decides
the fate of the business.
Entrepreneurs have been urged to venture into the virgin coconut oil industry due
to the high demand from local and overseas markets. Deputy Agriculture and Agro-based
Industries Minister Datuk Wira Johari Baharum, in making the call, said the prices of virgin
coconut oil in the local market were currently high at between RM 40 and RM1 50 per
kilogram. "This situation (high prices) has attracted the attention of many local
entrepreneurs, especially those planting coconuts to produce the oil," he told reporters after
opening a modified virgin coconut oil (MVCO) plant at Pasir Gudang in Johor Baru on
Saturday. The plant costs RM3million and its MVCO product is the result of cooperation
between WawasanTebrauSdnBhd and Malaysian Agricultural Research and Development
Institute (Mardi). Johari said the prices of virgin coconut oil produced in Malaysia were
not competitive when compared to those of the Philippines and Indonesia because their
raw material and labor costs were much lower. As a result, he said, Mardi has started work
to increase the value of virgin coconut oil by producing MVCO to enable local
entrepreneurs to be more competitive in the international market. In addition, the
production of virgin coconut oil and MVCO will be given priority in agriculture to make
the cultivation of coconut trees more attractive, he added. Research by Mardi showed that
MVCO can destroy bacteria and fungus simultaneously, does not contain steroid and is
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
rich in Vitamin E as well as being easy to penetrate the skin in helping the body to get rid
of impurities. Mardi director-general Datuk Dr Abdul Shukor Abdul Rahman said it was
aware of the potential of virgin coconut oil and started research on the product in 2006.
"Mardi carried out further studies to produce MVCO which is free from anti-microbes. It
has high marketing potential because of its various uses and nutritious quality said-
Bernamas.
The rise in demand, both local and international, of Virgin coconut oil had become
so great that a lot of people now are into this kind of business. Coconut tree is so abundant
in the provinces that produce coconuts all year round, so there will never be a shortage for
raw materials.
Export Performance
The Philippines still ranks as number one in the global market of vegetable oil and
similarly with VCO, the country is the top exporter among coconut- growing countries.
Thus, the quality of VCO has to be sustained to protect the industry. To realize this, quality
standards and good manufacturing process have to be strictly implemented in order to
conform to the domestic and internationally accepted products standards for VCO.
The Philippine Coconut Authority (PCA) recorded VCO exports from 1.80 to 475
mt from 2001-2005 with a mean value FOB US$ 857,457(Table 1). In 2005, a total volume
of 475 mt equivalent to FOB US$1,612,323 (PCA, 2006) was exported to major countries,
in particularly to the United States.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
METHODOLOGY
Locale and Time of the Study
The study was conducted in Daganas, Catarman, Samar (production area) and in
areas where virgin coconut oil is supplied or marketed particularly in Catarman, Samar.
The study was conducted on December 2012 to January 2013.
Respondent of the Study
The respondents of the study were the producers of virgin coconut oil, and the
consumers or buyers of the product.
Data Gathering Procedure
Personal interview with the producers was done in collecting the data and other
relevant information needed. An interview schedule was used as the research instrument
used in the study. At least one supply chain was followed from production to consumption.
Data Gathered
The data gathered included the product, payment and information flow of VCO,
actors in the supply chain, cost of production and marketing.
Data Analysis
The data gathered were tabulated and interpreted according to the objectives of the
study. Data were analyse using frequency analysis, and supply chain mapping.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
RESULTS AND DISCUSSION
Virgin Coconut Oil Production in Catarman, Samar
In Catarman, Samar, Virgin Coconut Oil (VCO) production is being introduced as
one livelihood activity in the area. Major crop grown in Catarman, Samar is coconut and
is one of the major producers of copra, a raw material for the production of cooking oil.
With the research in product developments for coconut, the production of VCO is one of
output of research. In VCO the oil is extracted purely from fresh coconut meat without
any harsh heat or chemical treatment (hence the name “virgin”).
The introduction/promotion of this product is due to the health benefits in the
consumption of VCO as food supplement and as cure for some illnesses. Health benefits
include; hair care, skin care, stress relief, maintaining cholesterol levels, weight loss,
increased immunity, proper digestion and metabolism, relief from kidney problems, heart
diseases, high blood pressure, diabetes, HIV and cancer, dental care, and bone strength.
These benefits of coconut oil can be attributed to the presence of lauric acid, capric acid
and caprylic acid, and its properties such as antimicrobial, antioxidant, antifungal,
antibacterial, soothing (www.organicfacts.net).
Because of these benefits, the Philippine Coconut Authority (PCA) introduced this
livelihood to coconut production areas like Samar. VCO production in Catarman, Samar
started in July, 2009 and still a continuing livelihood activity up to present.
Production is done through traditional method with no sophisticated machines or
equipment used. Production coupled with the promotion of VCO for food supplements, as
for beauty products had created demand of the products in the area. The increasing demand
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
for virgin coconut oil is because consumer believed that the said product can cure their
illness.
Producers and Buyers of VCO
There are only two producers in Catarman, Samar, who process and sell VCO, Mr.
Jaime Espina and Mrs. Elna Susing. There were also a few household who process coconut
oil /VCO but for own consumption, consumed more as cooking oil and also for health
purpose like for massaging. Thus, only the two producers were considered as respondents
of the study. There were no traders identified or involved in the study, because, these
producers sell directly to the end user of the products through their own store in the area.
Persons involved in the supply chain of VCO include the farmers who are also the
producer or processor of VCO and consumers.
Farmer. Individual who have coconut trees, they may own the farm they cultivate
or are tenants. Farmers supply coconut to the producers/processors of VCO. The farmer
also process and sell copra. This is the major source of income of coconut farmers in the
study area. In this research the farmers considered where those who supply the processors.
Producers/processors. Refers to individuals who processed VCO. These producers
are also coconut farmers and process their own coconut produce and sell directly to the
consumer or end user of the VCO. In this study there were only two VCO processors in
Catarman, Samar that are producing for commercial, however, these two are not registered
with BFAD. Based on records of registered VCO plants (PCA, 2006) about 27.52% were
established in Region VIII (Eastern Visayas), 18.9% in Southern Luzon (Region VI-A) and
followed by Bicol (Region V) with 10.9% VCO producers. There are only 40 VCO
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
producers who are registered with BFAD mostly based on National Capital Region and
Southern Luzon.
Consumer. Refer to the end users of VCO. In the study, these are the individuals
who buy VCO and used as food supplement or for massage and for hair care and other uses
of the product.
Profile of Producers/Processors and Consumers
Table 2 presents the profile of the respondents (processors and consumers) as to
their age, educational attainment and occupation.
Age. The two processors belonged to the age bracket of 36-50 years old and 51-65
years old. Nineteen of the consumers were within the age bracket of 36-50, seven were
between the age bracket of 21-35 years old, 2 were in the age bracket of 20 and below, one
is in the age bracket of 51-65 years and one in age bracket of 66 and above. The result
implies that more of the older respondents (36 -50) and above uses VCO products, maybe
for food supplement and cure some illnesses. The younger ones maybe uses the product
for beauty purposes.
Educational attainment. As shown in Table 1, processors have reached elementary
level. For the consumer respondents, nine (30%) of the respondents are elementary, seven
(23%) are high school and fourteen (47%) are college. Result shows that the processors
had reached the elementary level and majority of the consumers had formal education and
have even finished a degree.
Occupation. The table shows that the two VCO processors were also engaged in
farming and one is engaged in business, where he get orders of VCO from buyers in United
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
States of America and let his workers in Samar produce VCO and deliver to US.
The table also shows that ten (33%) of the consumer respondents are into farming,
eight of them were government employees, four were into business, only one is a laborer,
three were students, two were housekeepers and two were private employees.
Frequency and Reason of Consumers
for Buying VCO
Table 3 shows information on the frequency of purchase and reason for buying
VCO product by the consumers. Most (97%) of the consumer respondents mentioned that
they buy VCO as they need the product. There is one respondent who buy VCO every
month.
All the respondents buy VCO products for health purposes such for medicine for
some illness such as hypertension, proper digestion and metabolism, diabetes and other
illnesses. Thus, 47% of the respondents uses the product as medicine, 40% uses as food
supplement and 13% uses the product for beautification purposes as for skin and hair care.
Production Practices
VCO production in Catarman employs still the traditional method of producing
coconut oil, that is why according the processors processing takes them a longer time as
compared with processors in Los Banos, Laguna who uses machines in the processing.
Table 4 shows the production practices as to reasons for VCO processing, source of raw
materials and volume and frequency in processing.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The research was conducted to determine the flow of virgin coconut oil produced
in Catarman, Northern, Samar.
The market outlets of the producers were the consumers of Northern Samar and are
exported in USA where most of the buyers are Filipino American Citizens.
Respondents of the study were the producers and the local buyers of the product.
Processors produce the virgin coconut oil using tradition/manual method in
processing virgin coconut oil. The processors are also coconut farmers and produce their
own raw materials. Production volume depends on the order, average production per week
is estimated at 1-2 liters per week and is sold at Php 180 per 350 ml. Packaging material
used is the 350 ml transparent plastic bottle. The product flow of VCO processors is very
simple because there are no intermediaries or middlemen involved. Producers sell directly
to consumers.
Problems encountered in production were the following: it is difficult to produce
virgin oil, limited production and high cost of raw materials. In terms of marketing, the
problem is the limited market outlet for their product.
For the consumers, they buy VCO because of the health and beauty benefits that
could be derived from the product, as food supplement and to cure some illnesses.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Conclusions
There were only two VCO processors and production practice is still traditional
done manually, thus, production is limited and market outlet is also limited. Product flow
is simple because no middlemen involved, this is due to the limited output, thus, processors
also do not have the courage to expand market. The processors are not also accredited by
BFAD, thus also one of the reason why they do not have the confident to expand market
to other areas outside Visaya. Products do not have label, thus do not have trade name
which is a way to promote the product.
Recommendations
Producers should improve the production technology used in the production of
virgin coconut oil produced in Catarman, Northern Samar. To improve efficiency of
production increasing production per week, new technology should be employed.
Continuous product innovation should be done to make the product more
marketable, improve handling and packaging to make it more attractive to consumer like
putting labels, thus the need to register the product and also in order to expand the market
of the product.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
LITERATURE CITED
DRABENSTOTT, T. 1999. “Purchasing and Supply Management.”USA, South Western
College Publishing. P. 56.
JULIANO, B. O (ed). 2007. Virgin Coconut Oil: State of the Art. Proceeding of the NAST
Symposium held in Manila on February 7, 2007. National Academy of Science and
Technology Philippines Manila, P. 136
EHOW MEDIA, 2011. “What is the Importance of Supply Chain Management”. Retrieved
October 30, 2011.From www://ehow.com/how-to.Html.
KOTLER P. 1989. Marketing Management (Analysis, Planning and Control). P. 5.
MCGRAW, H. 2002. “What is Supply Chain Management?” Retrieved October 3, 2011.
From highered.mcgraw-hill.com/sites/dl/free/007298239x/4502
MIRANDA, G. S. 1983. Basic Marketing.L&G Business hoose, Philippines. Pp. 2-5.
OMTA, S. 2001. “Proceedings the sixth International Conference on Chain and Network
Management in Agribusiness and the Food Industry”.
RICHARDSON, T. G. 2004. “Supply Chain Management”. Retrieved October 30,
2011.From www.witiger.com.
TAGARINO, L.N. and J.M. SIM.2009.”Supply Chain Improvement for Fresh Vegetables
in Selected areas in Luzon”. Pp. 5-9.
SIJSES, S. 2004. “Dynamics in the Chain and Networks.” Wageningen Academic
Publishers. Pp. 118-123.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
DIAZ, JESSICA C. APRIL 2013. Supply Chain Mapping of Virgin Coconut Oil
Produced in Daganas, Catarman, Northern Samar. Benguet State University, La Trinidad,
Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
The research was conducted to document the flow of virgin coconut oil produced
in Catarman, Northern Samar.
The major market outlets of the producers were the consumers of Northern Samar
and nearby municipalities and are exported to USA supplied to Filipino Americans.
Respondents of the study were the VCO producers and the local buyers of the product.
Production of virgin coconut oil was is traditional. There were only two processors
of virgin coconut oil. Processors were also coconut farmers and produced their own raw
materials. Average production per week was 1-2 liter but could be increased if there were
orders. Virgin coconut oil was sold at Php. 180 per 350 ml bottle and USD 50 if sold in
the USA.
The product flow of VCO processors was very simple because there were no
intermediaries or middlemen involved. Producers sell directly to consumers. Consumers
bought the product for food supplement, for body massage and as a beauty products.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Problems encountered by producers included the difficulty of manual production,
limited production, high cost of raw materials and limited market outlet.
It is recommended that producers should improve production technology,
packaging materials and products should be labeled to expand market.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
INTRODUCTION
Rationale
The virgin coconut oil (VCO) is considered a non-traditional but highly priced
commodity among the hundreds of product lines of coconut. It is an income boosting
enterprise and is currently gaining popularity both in local and international markets. It is
very much sought after and has established a niche market of its own as a functional food
for human consumption because of its various health benefits claims. Since it is extracted
from fresh and mature nuts and not from dried coconut meat (copra) it has astounding
health and nutritional benefits. Based on the records, the trend of world demand for virgin
coconut oil is rapidly increasing and production in the country is similarly coping up with
this new expansion in the export arena. Moreover, increasing local consumption was also
recorded based on local production and sales volumes reported by VCO producers to PCA.
This industry was also proven profitable and promising as a low investment micro
enterprise with high market demand. Thus, with virgin coconut oil becoming a promising
export commodity, more and more VCO producers and traders have emerged like
mushrooms everywhere in the country. This income generating enterprise can improve
farm incomes by 5-8 folds over the traditional copra or sale of fresh nuts (Juliano, 2007).
Coconut oil production process is basically very different compared to the way
commercial coconut oil is processed. The latter is extracted from copra or the dried coconut
meat and is then refined, bleached and deodorized. Such coconut oil is usually used for
cooking purposes. In the case of VCO the oil is extracted purely from fresh meat without
any harsh heat or chemical treatment (hence the name “virgin”). With the popularity of the
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
VCO, improvement in processing, product development and utilization in the production
of high-end products were made possible within a short duration. Innovation in labelling
and packaging for the discerning consumers was offered by most producers. VCO is now
available not only in bottle, but also in jars, soft gel capsules and as flavoured VCO in
different tastes. Many high-end products like massage oils, lotions, balms, creams, and
soaps made with VCO base are also available.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
REVIEW OF LITERATURE
Production Status
According to Kotler (1989) a product is something that is viewed as capable of
satisfying a want. A want is described as stated of felt deprivation in a person. This
deprivation produces discomfort. The want energizes the person and puts him into an active
state and gives him direction. The person will perceive certain things outside of himself
that would satisfy his wants. Kotler also mentioned that product is anything that can be
offered to market for attention, acquisition, use or consumption that might satisfy a need
or want.
The Philippines is keeping its lead in VCO production over Indonesia which could
be a competitor in the world market. However, considering that our country is ahead in this
technology, we have a competitive edge with foreign investors interested to venture in this
industry. At present, a production capacity of 2,931 mt was reported to PCA (2005) and
according to absolutely no heat coconut oil Producers, Inc. (ACOPI), their members have
the capacity to produce 50,000 L of VCO with the cold process technology (Juliano,
2007).
With the increasing numbers of producers’ venturing in this business, the industry
might be competition with the traditional products for stable supply of suitable nuts. The
country is still considered as number one exporter of traditional coconut oil and other
coconut products. It is also considered second in the world in terms of areas planted to
coconut (3.1 M hectares), and despite this, a shortage in supply of nuts is an expected
problem in the industry. With the increasing demand for VCO, the need for more raw
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
materials will eventually result in abrupt reduction of nut supply to oil millers and
desiccated coconut (DC) plants. Furthermore, it also noted that most of the new VCO plants
have emerge in locations where oil mills and DC plants are already located. Based on
records of registered VCO plants (PCA, 2006) about 27.52% were established in Region
VIII (Eastern Visayas), 18.9% in Southern Luzon (Region VI-A) and followed by Bicol
(Region V) with 10.9% VCO producers (Table 1) there are only 40 VCO producers who
are registered with BFAD mostly based on National Capital Region and Southern Luzon.
Opportunities
As a result of its increasing demand in niche market, many have ventured into virgin
coconut oil production, mostly on a small scale. As such, more jobs generated and the nut
requirements of the VCO plants improve the farm income of the coconut farmers.
However, pricing of nuts should be regulated to ensure that the farmers will be benefited.
With the increasing demand of the VCO in the domestic and international market, the
declining status of the coconut industry changes its trend and started to gain economic
advantage. For the farmer, the uncertain and wavering income from coconuts was
stabilized through the increasing demand for nut supply. Enhance by the boom of VCO,
which shows signs of becoming more interested in planting coconuts.
Other than the consumption of VCO as food supplement, its utilization in the
production of health and high-end and natural products is a plus factor to be competitive in
the niche market. Soaps, lotions, massage oil; beauty creams and lipsticks are some of the
VCO-based products that are already available in the market.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Marketing and Demand of Virgin Coconut Oil
As cited by Miranda (1983), marketing is the process in society by which the
demand structure for economics goods and services is anticipated and enlarge and satisfied
trough the conception, promotion, exchange and physical distribution of goods and
services. Marketing is where the customers is and it is the customers who in the end decides
the fate of the business.
Entrepreneurs have been urged to venture into the virgin coconut oil industry due
to the high demand from local and overseas markets. Deputy Agriculture and Agro-based
Industries Minister Datuk Wira Johari Baharum, in making the call, said the prices of virgin
coconut oil in the local market were currently high at between RM 40 and RM1 50 per
kilogram. "This situation (high prices) has attracted the attention of many local
entrepreneurs, especially those planting coconuts to produce the oil," he told reporters after
opening a modified virgin coconut oil (MVCO) plant at Pasir Gudang in Johor Baru on
Saturday. The plant costs RM3million and its MVCO product is the result of cooperation
between WawasanTebrauSdnBhd and Malaysian Agricultural Research and Development
Institute (Mardi). Johari said the prices of virgin coconut oil produced in Malaysia were
not competitive when compared to those of the Philippines and Indonesia because their
raw material and labor costs were much lower. As a result, he said, Mardi has started work
to increase the value of virgin coconut oil by producing MVCO to enable local
entrepreneurs to be more competitive in the international market. In addition, the
production of virgin coconut oil and MVCO will be given priority in agriculture to make
the cultivation of coconut trees more attractive, he added. Research by Mardi showed that
MVCO can destroy bacteria and fungus simultaneously, does not contain steroid and is
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
rich in Vitamin E as well as being easy to penetrate the skin in helping the body to get rid
of impurities. Mardi director-general Datuk Dr Abdul Shukor Abdul Rahman said it was
aware of the potential of virgin coconut oil and started research on the product in 2006.
"Mardi carried out further studies to produce MVCO which is free from anti-microbes. It
has high marketing potential because of its various uses and nutritious quality said-
Bernamas.
The rise in demand, both local and international, of Virgin coconut oil had become
so great that a lot of people now are into this kind of business. Coconut tree is so abundant
in the provinces that produce coconuts all year round, so there will never be a shortage for
raw materials.
Export Performance
The Philippines still ranks as number one in the global market of vegetable oil and
similarly with VCO, the country is the top exporter among coconut- growing countries.
Thus, the quality of VCO has to be sustained to protect the industry. To realize this, quality
standards and good manufacturing process have to be strictly implemented in order to
conform to the domestic and internationally accepted products standards for VCO.
The Philippine Coconut Authority (PCA) recorded VCO exports from 1.80 to 475
mt from 2001-2005 with a mean value FOB US$ 857,457(Table 1). In 2005, a total volume
of 475 mt equivalent to FOB US$1,612,323 (PCA, 2006) was exported to major countries,
in particularly to the United States.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
METHODOLOGY
Locale and Time of the Study
The study was conducted in Daganas, Catarman, Samar (production area) and in
areas where virgin coconut oil is supplied or marketed particularly in Catarman, Samar.
The study was conducted on December 2012 to January 2013.
Respondent of the Study
The respondents of the study were the producers of virgin coconut oil, and the
consumers or buyers of the product.
Data Gathering Procedure
Personal interview with the producers was done in collecting the data and other
relevant information needed. An interview schedule was used as the research instrument
used in the study. At least one supply chain was followed from production to consumption.
Data Gathered
The data gathered included the product, payment and information flow of VCO,
actors in the supply chain, cost of production and marketing.
Data Analysis
The data gathered were tabulated and interpreted according to the objectives of the
study. Data were analyse using frequency analysis, and supply chain mapping.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
RESULTS AND DISCUSSION
Virgin Coconut Oil Production in Catarman, Samar
In Catarman, Samar, Virgin Coconut Oil (VCO) production is being introduced as
one livelihood activity in the area. Major crop grown in Catarman, Samar is coconut and
is one of the major producers of copra, a raw material for the production of cooking oil.
With the research in product developments for coconut, the production of VCO is one of
output of research. In VCO the oil is extracted purely from fresh coconut meat without
any harsh heat or chemical treatment (hence the name “virgin”).
The introduction/promotion of this product is due to the health benefits in the
consumption of VCO as food supplement and as cure for some illnesses. Health benefits
include; hair care, skin care, stress relief, maintaining cholesterol levels, weight loss,
increased immunity, proper digestion and metabolism, relief from kidney problems, heart
diseases, high blood pressure, diabetes, HIV and cancer, dental care, and bone strength.
These benefits of coconut oil can be attributed to the presence of lauric acid, capric acid
and caprylic acid, and its properties such as antimicrobial, antioxidant, antifungal,
antibacterial, soothing (www.organicfacts.net).
Because of these benefits, the Philippine Coconut Authority (PCA) introduced this
livelihood to coconut production areas like Samar. VCO production in Catarman, Samar
started in July, 2009 and still a continuing livelihood activity up to present.
Production is done through traditional method with no sophisticated machines or
equipment used. Production coupled with the promotion of VCO for food supplements, as
for beauty products had created demand of the products in the area. The increasing demand
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
for virgin coconut oil is because consumer believed that the said product can cure their
illness.
Producers and Buyers of VCO
There are only two producers in Catarman, Samar, who process and sell VCO, Mr.
Jaime Espina and Mrs. Elna Susing. There were also a few household who process coconut
oil /VCO but for own consumption, consumed more as cooking oil and also for health
purpose like for massaging. Thus, only the two producers were considered as respondents
of the study. There were no traders identified or involved in the study, because, these
producers sell directly to the end user of the products through their own store in the area.
Persons involved in the supply chain of VCO include the farmers who are also the
producer or processor of VCO and consumers.
Farmer. Individual who have coconut trees, they may own the farm they cultivate
or are tenants. Farmers supply coconut to the producers/processors of VCO. The farmer
also process and sell copra. This is the major source of income of coconut farmers in the
study area. In this research the farmers considered where those who supply the processors.
Producers/processors. Refers to individuals who processed VCO. These producers
are also coconut farmers and process their own coconut produce and sell directly to the
consumer or end user of the VCO. In this study there were only two VCO processors in
Catarman, Samar that are producing for commercial, however, these two are not registered
with BFAD. Based on records of registered VCO plants (PCA, 2006) about 27.52% were
established in Region VIII (Eastern Visayas), 18.9% in Southern Luzon (Region VI-A) and
followed by Bicol (Region V) with 10.9% VCO producers. There are only 40 VCO
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
producers who are registered with BFAD mostly based on National Capital Region and
Southern Luzon.
Consumer. Refer to the end users of VCO. In the study, these are the individuals
who buy VCO and used as food supplement or for massage and for hair care and other uses
of the product.
Profile of Producers/Processors and Consumers
Table 2 presents the profile of the respondents (processors and consumers) as to
their age, educational attainment and occupation.
Age. The two processors belonged to the age bracket of 36-50 years old and 51-65
years old. Nineteen of the consumers were within the age bracket of 36-50, seven were
between the age bracket of 21-35 years old, 2 were in the age bracket of 20 and below, one
is in the age bracket of 51-65 years and one in age bracket of 66 and above. The result
implies that more of the older respondents (36 -50) and above uses VCO products, maybe
for food supplement and cure some illnesses. The younger ones maybe uses the product
for beauty purposes.
Educational attainment. As shown in Table 1, processors have reached elementary
level. For the consumer respondents, nine (30%) of the respondents are elementary, seven
(23%) are high school and fourteen (47%) are college. Result shows that the processors
had reached the elementary level and majority of the consumers had formal education and
have even finished a degree.
Occupation. The table shows that the two VCO processors were also engaged in
farming and one is engaged in business, where he get orders of VCO from buyers in United
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
States of America and let his workers in Samar produce VCO and deliver to US.
The table also shows that ten (33%) of the consumer respondents are into farming,
eight of them were government employees, four were into business, only one is a laborer,
three were students, two were housekeepers and two were private employees.
Frequency and Reason of Consumers
for Buying VCO
Table 3 shows information on the frequency of purchase and reason for buying
VCO product by the consumers. Most (97%) of the consumer respondents mentioned that
they buy VCO as they need the product. There is one respondent who buy VCO every
month.
All the respondents buy VCO products for health purposes such for medicine for
some illness such as hypertension, proper digestion and metabolism, diabetes and other
illnesses. Thus, 47% of the respondents uses the product as medicine, 40% uses as food
supplement and 13% uses the product for beautification purposes as for skin and hair care.
Production Practices
VCO production in Catarman employs still the traditional method of producing
coconut oil, that is why according the processors processing takes them a longer time as
compared with processors in Los Banos, Laguna who uses machines in the processing.
Table 4 shows the production practices as to reasons for VCO processing, source of raw
materials and volume and frequency in processing.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The research was conducted to determine the flow of virgin coconut oil produced
in Catarman, Northern, Samar.
The market outlets of the producers were the consumers of Northern Samar and are
exported in USA where most of the buyers are Filipino American Citizens.
Respondents of the study were the producers and the local buyers of the product.
Processors produce the virgin coconut oil using tradition/manual method in
processing virgin coconut oil. The processors are also coconut farmers and produce their
own raw materials. Production volume depends on the order, average production per week
is estimated at 1-2 liters per week and is sold at Php 180 per 350 ml. Packaging material
used is the 350 ml transparent plastic bottle. The product flow of VCO processors is very
simple because there are no intermediaries or middlemen involved. Producers sell directly
to consumers.
Problems encountered in production were the following: it is difficult to produce
virgin oil, limited production and high cost of raw materials. In terms of marketing, the
problem is the limited market outlet for their product.
For the consumers, they buy VCO because of the health and beauty benefits that
could be derived from the product, as food supplement and to cure some illnesses.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
Conclusions
There were only two VCO processors and production practice is still traditional
done manually, thus, production is limited and market outlet is also limited. Product flow
is simple because no middlemen involved, this is due to the limited output, thus, processors
also do not have the courage to expand market. The processors are not also accredited by
BFAD, thus also one of the reason why they do not have the confident to expand market
to other areas outside Visaya. Products do not have label, thus do not have trade name
which is a way to promote the product.
Recommendations
Producers should improve the production technology used in the production of
virgin coconut oil produced in Catarman, Northern Samar. To improve efficiency of
production increasing production per week, new technology should be employed.
Continuous product innovation should be done to make the product more
marketable, improve handling and packaging to make it more attractive to consumer like
putting labels, thus the need to register the product and also in order to expand the market
of the product.
Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013
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Supply Chain Mapping of Virgin Coconut Oil Produced in Daganas, Catarman, Northern
Samar | DIAZ, JESSICA C. APRIL 2013