Bernardo M. Villegas
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Large Scale Investments in Agribusiness (Part 2)

             To ensure the successful replication of the nucleus estate model that Lionheart Farms has to offer to those who would like to invest in large-scale coconut farming in five other regions of the Philippines, it is necessary that  facilities and resources of this Palawan-based agribusiness corporation be transformed into a sort of a training institute to supply the necessary expertise, trained manpower and even the needed seedlings that will be used to jump start at least five other 20,000-hectare nucleus estates. It is providential that because of its successful implementation of the nucleus estate model in Rizal, Palawan, a good number of cooperating institutions have already strengthened the position of Lionheart Farms as a potential training hub.  These institutions are the USAID, the TESDA, the municipal government of Rizal, Palawan, the provincial government of Palawan, the Dagatan Agri-tech School of Batangas and the University of Asia and the Pacific and its in-house think tank the Center for Research and Communication (CRC).  I am sure many other institutions will follow suit.  Already a very elaborate business case has been written about Lionheart Farms by the faculty of the Harvard Business School for use in the HBS famous MBA and other executive education programs.

            For potential investors in the envisioned five first replications of the model, it would be useful to be as familiar as possible with the detailed operations of Lionheart Farms. Those contemplating investing in this large-scale agribusiness venture must be fully aware of the very demanding technical and management steps needed for success.  There must be attention to the smallest details, which unfortunately is not yet inherent to Filipino culture, as it is in many of our East Asian neighbors benefiting from the Confucian tradition.   As we can read in the Wikipedia coverage of this social enterprise, its product starts its journey in the nursery with sowing of high yielding coconut variety seed nuts.  They are overlooked and cared for by the nursery team using irrigation systems and bio-organic fertilizers.  When the seed nuts have germinated and reached the seedling state, they are carefully watched until it could be determined that they are mature enough for planting.  Planting is done in a three-by-three pattern to take advantage of the root nutrient-sharing capabilities a coconut palm possesses.  By sharing excess nutrients, a more stable and quick growth is ensured.

            All initiatives are taken to guarantee increased health and growth of the plants, such as ensuring more water and sufficient supply of nutrients.  Lionheart Farms produces its own fertilizers from scratch, using only natural ingredients such as manure, rice hull, molasses and a variety of biowaste and bio-materials.  All fertilizers are based on the natural farming methods and recipes for fertilizer production.  During a record month, more than 600 tons of granular bio-organic fertilizer were produced. 

            In addition to bio-yield, there is bio-defence which covers all initiatives taken to naturally control or fight off pests and diseases harmful to the health and growth of the palms.  Among these diseases or pests are brontispa longissimi, the Rhino beetle and bud rot.  At its laboratory, the natural enemy of Brontispa Longissima named Tetrastichus Brontispae, is cultured.  This is a black parasitic wasp that lays its eggs in the pupa stage of Brontispa Longissima, essentially killing it before it can hatch by feeding on the pupa.  There are other simpler bio-defence initiatives such as trap building to capture Rhino beetles, one of which can singlehandedly kill a whole palm.  Bud rot is fatal and must be contained immediately. It has to be removed and  disposed of once detected so as to  avoid its spread.

            A very important process is the harvesting of the coconut flower, which is done many times a day.  The tappers are well trained in the traditional methods of tapping, spiced with constant small innovations.  Tapping is a crucial point in the production process going from soil to shelf.  Doing it the proper way ensures the food grade quality and higher yields.  The coconut flower is opened up for tapping by slicing a thin layer.  The sap then drips into a collection container.  Once the containers are filled, the sap is stabilized in-field to ensure fermentation does not occur.  The tappers then test the sap for different properties and send it to the factory through the daily delivery system.

            No efforts are spared in assuring the quality of the products.  The Quality Assurance Department is responsible for inspecting all incoming and outgoing products in the factory.  The first priority is Food Safety.  All the incoming raw materials, coconut flower sap, packaging materials and chemicals or supplies, and the outgoing products such as coconut flower syrup, coconut sugar, and coconut flower water are thoroughly inspected by the Quality Department.  The Quality Analysts and Quality Inspectors confirm specifications through standard sampling methods, conducting analysis and evaluation by visuals and organoleptic measurement tests. 

            The Quality Department is also responsible for identifying rejects and initiate requests for return of unacceptable materials with complete records and documents.  The monitoring of the proper implementation of all sanitation standard operating procedures and the corresponding specifications required are also under this department.  They provide feedback on areas that need improvement and monitor implementation corrections.  They communicate across the organization with all levels of operational management to ensure that they meet the goals and objectives of the company.

            Then comes the Production Department which is responsible for all the operations involved in processing the company’s products.  Using the received coconut sap from the harvest operations, the people in this department patterned themselves to properly apply world’s best practices that enhance the operations to make quality and food-safe products.    The raw coconut sap is processed, using a state of the art equipment developed and maintained by the Maintenance Department, the support system of the Production Department.   They create and establish a well-organized system to maintain all the machines, tools and equipment to ensure a good running condition that will conform to the demands of the customers.

            Since the coconut flower sap is a very versatile raw material, there are almost unlimited possibilities of tweaking the method of tapping and the processing methods so that there can be multiple versions of the same product.  There is an ongoing process of bringing to the market the best coconut flower sap products without any way compromising on healthiness, sustainability and traceability.  To illustrate, there can be coconut flower water with passion fruit, ginger and yuzu, either still or sparkling.

            Because the different stages from farming to processing require very specific skills among the workers, numerous training programs have been developed to make sure that the workers are equipped and qualified for the task they are undertaking.  Long before the cry today for upskilling, reskilling and retooling was heard, Lionheart Farms was already giving the highest priority to these aspects of human resource development, without waiting for the formal educational system to come out with the appropriate skilled workers.  The training programs include the different farming techniques, tapping methods, first aid, administrative work, workplace safety and many other practical skills relevant to one stage or anoer of the farming and manufacturing processes.  Innovating the way things are done, evaluating if things could be done differently, is constantly an ongoing process. No detail is too small, thus inculcating in the workers attention to little things, oftentimes not part of local culture.  Examples are how many millimeters to slice the flower when tapping, should carabaos haul fertilizer and plant material to areas tractors cannot reach,  continuous testing of different methods  and recipes of applying fertilizers to guarantee the greatest efficiency possible.  There is also increased use of software, drones and automated drip irrigation to streamline processes and to give the workers the necessary time to focus on the next task ahead. 

            Given the detailed description of the operations of Lionheart Farms, it stands to reason that this most successful attempt to adapt the nucleus estate model to the coconut industry in the Philippines can serve as the on-the-job training institution for the five corporate coconut farms that are being envisioned in five different regions under the Sustainable Transformation Program of the Coconut Industry  to be considered as among the  capital-intensive projects to be funded by the modified Maharlika Investment Fund.           It also struck me as a coincidence that the farm-to-factory process described above corresponds to the strategic directions for the entire agricultural sector recommended by the team of former Secretary of Agriculture William Dar in their Transition Report:  consolidation, diversification, digitalization, and industrialization.

            It should also be pointed out that the proposed transformation plan should not depend on the vertical integration (from farm to the finished manufactured products) in all the five proposed locations.  Not all should completely replicate the Lionheart Farm model, which precisely should be a training center and producer of seedlings for the other corporate farms.   In order to scale to the level of a national and industry wide transformation, some of these proposed 20,000-hectare projects and future ones should partner with the existing industry of coconut oil millers and other coconut processors.  Not all of them should aspire to be as integrated as Lionheart Farms.  To be continued