Bernardo M. Villegas
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A Dream Project in Leyte (Part 2)

             The Babatngon Project could be the ultimate game changer for the coconut industry in the region of Leyte, significantly contributing to reducing poverty in the entire Eastern Visayas region, which includes the equally impoverished island of Samar.  This project, if properly implemented, can channel the untapped market potentials of the agro-food industry in the entire region directly into the global setting.  The project will certainly create sustainable employment opportunities and will empower the farmers in the region.  It can also transform the production of low-value copra  for  regional oil mills into high-value and export-grade coconut products, thus helping to increase exponentially the earning capacity of farmers.  Beyond the coconut products, farmers will be taught how to plant other intercropped items for the expressed purpose of supplying the Babatngon processing plant with equally high-value vegetable and fruit products.  The introduction of intercropping is necessary because most of the standing coconut trees are senile and will stop bearing fruits in the near future.  Replanting hybrid coconut trees, in conjunction with intercropping with fast-growing fruits and vegetable, can provide sustainable income for the farmers and their families for the next three to four generations.

            More than 600 employees will enjoy a pay scale approximately 20% higher than the surrounding factories in the area can offer. Additionally, payments to local farmers, fabricators, support services, transport services, etc., will spur positive economic activity that will benefit more than 6,000 people directly in the region.           Almost $6 million additional local working capital will be spent in the region every 3 months, thus stimulating consumption spending in the region for all types of consumer products and services.  As an upstream effect, the construction of farm to market roads, ports, bridges, barges and other infrastructures can be justified financially.

            Like a few other integrated coconut processing projects in Mindanao and Palawan, the Babatngon project will efficiently use the full mass-balance of the coconut by utilizing all portions of this traditional product, including the husk, shell, meat and water, then converting them into high-value consumer goods.  Coconut water has been dubbed as the next battleground for two of the biggest beverage companies in the world, Coca-Cola and Pepsi.  As was reported in the Atlanta Business Chronicle, these two global companies are projecting coconut water sales worldwide to reach $7 billion from its current $1.5 billion.  This implies a current annual growth rate of 36 %.  In addition, coconut processing plants that currently process both ready-to-drink (RTD) through “high-quality” aseptic fillers and concentrated syrup, are sold out years in advance. Vita-Coco has expressed that they are currently 600,000 liters short of RTD water for current demand of their China expansion alone.  Pepsi, Coke and medium-sized brand owners are attempting to contract high-quality water from all available sources.    The RTD water will be packed directly for final consumers and for  foodservice outlets alike.

            On the other hand, coconut meat will create coconut milk based non-dairy alternative beverages, such as coconut creamer, non-dairy beverages, yogurt, kefir, fermented drinks and more.  Coconut milk and cream are sold out years in advance by most major processing facilities. Brands, both domestic and global, will find it very difficult to source high-quality consistent supply from the current processors.  In fact, currently, there are only about 21 facilities worldwide that can process 300 metric tons per day or more of de-husked coconuts.  With the worldwide demand for water and cream as described above, the current demand would require 43 such facilities worldwide, and would still not account for the increase of demand from current levels to those of 5 years from now.

            As more and more emerging markets like the Philippines transition from low-middle income to upper-middle income economies (as the Philippines is forecasted to do in the next two to three years), there will be an exponential increase in the demand for vegetable and fruit products which will replace carbohydrates in the typical food basket of households.  Already, the Philippines is suffering from very high inflation mainly because of very high prices of such food items as garlic, onions, tomatoes and other vegetables.  Globally, the fruit and vegetable juice market size was estimated at USD $ 131.62 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of 6.3% from 2022 to 2030.  A rise in consumption of fruit juices, changes in consumer tastes, adoption of healthier diets, and the advent of cold-pressed juices, are behind the acceleration of the growth in demand for fruits and vegetables.  COVID-19 has had a direct and indirect effect on the demand for high value fruits and vegetables.   Fresh fruits, for example, are the most expensive food items in U.S. households, accounting for 36% of the market.  These constitute one of the fastest growing segments in the beverages category, partly owing to increasing health concerns among the consumers.

            Then there is the derivative product called activated carbon which is in short supply worldwide.  Carbon is produced by incinerating coconut charcoal made from the coconut shell.  In the past three years, FOB price of the shell had increased from about two pesos per kilo to about 6 pesos, a 300% increase.  Coconut shell is also being used in the domestic market in order to burn in old boiler systems not equipped to handle coal (Php 2.50/kg).  Similarly coconut husk is experiencing a strong demand.  Barely 3 years ago, decorticated or shredded husk price was bout 50 centavos per kilo, today the product is selling for over 4 pesos, a whopping 800 % increase.  The demand is coming mostly from the Middle East for coco matting and agri-peat.  The builders from all over the world are seeking coconut fiber as a sustainable product to produce wall board and similar housing products.  There is no question that the demand for all coconut products will continue to grow at an accelerated rate as new technology discovers more high-value uses for the coconut in the food, energy, health and housing sectors.  Truly, it was no exaggeration when someone called the coconut the “Tree of Life.” The Babatgnon project, despite certain high risks described above, merit the study of potential investors who are looking for high profits (that will compensate for the high risks) and who, at the same time have the mindset of a social entrepreneur who wants to directly contribute to a social problem (reducing poverty) by means of a profitable business venture.     Those investors, especially from the Eastern Visayas region, who want more information about this “Dream Project in Leyte” may contact Mr. Dan Baron at his email address dbaron@nuagriasia.com.  For comments, my email address is bernardo.villlegas@uap.asia