defining competitiveness in the philippines’ cacao industry
TRANSCRIPT
Josephine V. Ramos Chairperson, Cacao Industry Development Sub-Committee, DA/PCAF
Industry Roadmaps and AEC Gameplan: Roadmap Localization for Competitiveness 12 May 2016 Hotel Roma, Tuguegarao City
Defining Competitiveness in the Philippines’ Cacao Industry
The Top Ten Global Confectionery Companies that
Manufacture Some Form of Chocolate, by Net
Confectionery Sales Value in 2015
Reference:
Candy Industry, January 2016
* This includes production of non-confectionery items
Company Net Sales 2015 (US$ millions)
Mars Inc (USA) 18,400
Mondelēz International (USA) 16,691
Nestlé SA (Switzerland) 11,041
Ferrero Group (Luxembourg / Italy) 9,757
Meiji Co Ltd (Japan) 8,461*
Hershey Co (USA) 7,422
Chocoladenfabriken Lindt & Sprüngli AG (Switzerland)
4,171
Arcor (Argentina) 3,000
Ezaki Glico Co Ltd (Japan) 2,611*
Yildiz Holding (Turkey) 2,144
Cacao Grindings: World Projections, 2008-2019
3,000
3,200
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
20
08
/09
20
09
/10
20
10
/11
20
11
/12
20
12
/13
20
13
/14
20
14
/15
20
15
/16
20
16
/17
20
17
/18
20
18
/19
tho
usa
nd
to
n
Year
Source: ICCO, “The World Cocoa Economy: Past and Present”, January 16, 2014
Cocoa grindings will increase to 4.6 M MT by 2019
Cacao: World Production Projections, 2008-2019
3,000
3,200
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
20
12/1
3
20
13/1
4
20
14/1
5
20
15/1
6
20
16/1
7
20
17/1
8
20
18/1
9
tho
usa
nd
to
ns
Year Source: ICCO, “The World Cocoa Economy: Past and Present”, January 16, 2014
World production will increase to almost 4.6 M MT by 2019
Cacao Prices: Annual Average Projections, 2008-2019
2,000
2,200
2,400
2,600
2,800
3,000
3,200
3,400
3,600
20
08/0
9
20
09/1
0
20
10/1
1
20
11/1
2
20
12/1
3
20
13/1
4
20
14/1
5
20
15/1
6
20
16/1
7
20
17/1
8
20
18/1
9
US$/t
on
(co
nst
an
t)
Year Source: ICCO, “The World Cocoa Economy: Past and Present”, January 16, 2014
Cacao prices will rebound to$ 3,200/T by 2019
Cacao is the main raw material for chocolate production, it has no other substitute.
• Sustainability, Standard, and Certification are key trends in cacao consumption and supply sources
• Consumers are paying more attention to the source and farming practices of cacao producers.
• Single sourcing, dark chocolate and understanding the health message of flavanols in cocoa are current trends.
• The consumers' overall health concerns points to platforms and research that are centered around healthy chocolates. This includes new recipes made with herbs and spices, such as rosemary, thyme, chili and lemongrass, reduced sugar, and chocolate containing stevia
• Demand for food safety assurance
CACAO Industry in the
Philippines
Long tradition of cacao production, primarily, for own-consumption
As Business Undertaking… •Spaniard named Jose Maria Antonio
Pueo set up a chocolate factory in Intramuros, Manila in the late 1930s. His chocolate was made the old fashioned way up to present.
•Serg’s Chocolates was established in late 1940s by a Filipino-Chinese Family.
Investments
• The 1950’s saw investments in processing facilities for cacao and chocolates manufacturing.
• In the mid-1950, a National Coffee and Cacao Development Program was launched, and the Philippine Coffee & Cacao Institute was organized. This was a special project of the Philippines (through Department of Agriculture & Natural Resources) and the United States of America (through the USAID).
1970s To Early 1980s – Rapid Growth In Commercial Production • The late 1970’s toward early 1980’s saw
establishments of commercial scale cocoa plantations in Mindanao. The Philippine government provided tax incentives for investments in cacao growing. Private investments flourished including for research activities and facilities.
• The Coconut Based Farming Systems in the early 1980s ushered in small scale cacao production as one of intercrops in coconut farms
Late 1980s and 1990s onwards: Rapid Decline in production
• Production declined from about 20,000 mt to 6,000 mt
=> local production barely equates 20% of the supply
needed by local processors in beans equivalent
• WHY such a change in performance?
Agrarian reform 1988 (plantation to smallholder production)
International cocoa prices declined, input costs increased
Lack of support services (research, extension), credit
Cocoa pod borer (CPB)
Lack of post-harvest facilities and market chains for quality product
Slowed-down or Closures in domestic cacao processing operations (high costs of power & sugar, labor issues)
Rebuilding the Industry
•What conditions have changed?
International cacao prices increased since year 2000
Technical assistance for production, seedlings, CPB control Post harvest & marketing support schemes
Why expect a “turnaround”?
• Cacao production expansion is recognized to provide significant contribution to poverty alleviation & sustainable agriculture
• Achievements and lessons learned from past programs can be capitalized to escalate upgrading and expansion
• Farmers’ expressed willingness for equitable growth and development
• Supportive institutions and policies . Cacao is now included in the pipeline of support for priority high-value commercial crops
• Good germplasm collection that is at par with the world’s best materials
• No new land conversion. Utilizing barely 5% of existing mono-cropped coconut farms could contribute significantly to national economic growth
• Recognized capability to supply good quality fermented beans to the global market which pays premium for quality beans
• Expanding domestic demand, and growing opportunities in creating rural enterprises for cacao products processing
Production, area, and yield (Phil), 2005-2014
Source :BAS
0.40
0.42
0.44
0.46
0.48
0.50
0.52
0.54
0.56
0.00
2000.00
4000.00
6000.00
8000.00
10000.00
12000.00
14000.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Area
Volume (MT)
Yield (T/ha)
Item Amount in US$
Total Imports 2014 102.3 M
Cocoa Beans 1.7 M
Cocoa Powder 44.8 M Cocoa Butter 0.53 M Chocolate 54.6 M
Total Exports 2014 24.3 M Cocoa Beans 4.5 M
Cocoa Powder 2.2 M
Cocoa Butter 4.3 M Chocolate 13.3 M
Philippine Cacao Trade Performance, 2014
Source: NSO
PHILIPPINE NATIONAL STANDARD FOR CACAO BEANS
PNS/BAFPS 104:2011 ICS 67.020
Cacao Production Targets Item 2016 2017 2018 2019 2020 2021 2022
Per Capita Consumption (Kg) 0.55 0.61 0.68 0.77 0.86 0.96 1.07
Local Demand (MT) at 0.5 kg/capita 55782 56755 57727 58698 59665 60629 61592
Local Demand (MT) at increasing per capita consumption 61188 69574 79084 89867 102085 115930 131615
Production (MT) from existing 6118 6496 6896 7322 7774 8253 8762
Imports (MT), Projected @ 0.5kg/capita 49663 50259 50831 51376 51891 52376 52829
Yield (T/ha) 0.59 0.63 0.69 0.75 0.82 0.89 0.98
Present area (ha), PSA 12035 12035 12035 12035 12035 12035 12035
Area re: PLGU R11 (ha) 22353 22353 22353 22353 22353 22353 22353
Pdn Volume re:DTI data on area (MT) 13110 14148 15402 16748 18286 19999 21940
Supply Gap @ 0.5 per capita cons 42671 42607 42325 41950 41378 40630 39651
Target area (ha), Industry Roadmap 14423 31152 40412 40412 40412
Total area (ha) 42868 74020 114433 154845 195257 195257 195257
Production Volume (MT) 13110 15671 22053 36316 60875 94187 134226
Self-sufficiency at 0.5kg/capita cos 23.50 27.61 38.20 61.87 102.03 155.35 217.93
Export volume (MT) 1210 33558 72634
Export value @ $2800/MT,USD M 3.39 93.96 203.38
Source: draft National Cacao Roadmap, Intet-Agency Convergence April 2016
REGION
No. of Planting Materials to be Procured for 2016
CACAO RUBBER
CAR 200,000 -
I 117,500 -
II 100,000 -
III 199,900 -
IVA 247,500 -
IVB 325,000 225,310
V 425,000 -
VI 352,000 -
VII 275,000 -
VIII 369,330 -
Business Opportunities in the Cacao Beans Value Chain
INPUTS
PRODUCTION
POST HARVEST PROCESSING
fermentation, drying, sorting/grading, packing, storage
TRANSPORT/ SHIPPING,
SELLING/MARKETING
To produce cacao beans, the farmers need these inputs: • Production loans • Seedlings, planting materials • Fertilizers, agri-chemicals • Botanical pesticides, organic fertilizers • Farm tools (pruning shears/saw, etc), pod sleeves • Farmers’, farm family or paid workers’ labor • Technology & extension services • Harvesting & pod breaking tools, wet beans collecting containers To convert the beans harvest into dried form: • Fermentation & drying facilities • Sorting & grading tools & equipment • Packaging materials • Storage facilities, warehouse To sell either wet or dried beans, • Market & price information • Transport facilities , or selling arrangements (pick up or delivered)
Issues on QUALITY Many farmers are aware that fermented beans are better, however, with less attractive financial incentives to take on added costs including labor, and to pull off immediate income as the fermentation process takes between five to six days plus several more days for drying, they generally do not ferment the beans. Another quality issue is related to sorting beans. The most commonly available grade of beans from farmers is all-in which involves minimal if any sorting, due in part to finding a market for ‘sub-standard’ beans.
Business Opportunities arising from quality issue: Investments in wet beans buying, operation of community fermentation and drying centers..
ENABLING ENVIRONMENT
Market related Technology
adoption &
upgrading
Skills devt &
extension services
Enabling policies
Large, growing local
and foreign markets
& Good prices
Available suitable
lands for expanded
production,
technology/ GAP
and good clones
Core of Technology
Facilitators
Extension services
provided in projects,
both local & foreign
funded
LGUs support for cacao;
Coconut Intercropping
Program
Development projects of
different govt agencies
supportive of cacao.
Foreign assisted development
projects for cacao
Modules of post
harvest cum buying
centers
Designs and
materials are
replicated and
improved
Contract growing
schemes
Plant now pay later
schemes for
planting materials &
inputs
Packaged extension
services with
contract growing
schemes
GFIs could cater to contract
growing schemes
Cacao is more than a delicious
concoction of frothy chocolate beverage or mouthwatering confection. It is more than the sum of interesting phytochemicals. To many Filipinos, cacao spells heritage, a connections with people and events in the past.
• Demand is increasing rapidly, e.g. Asia, Middle East • We need to increase production in an environmentally sustainable way (reduced inputs, reduced footprint). • New and improved planting material is a major factor, and a critical part of the solution, optimized by good agricultural practices. • Good quality, locally adapted planting material are continuously required, whatever country, region or farming system.
THINK OUT OF THE BOX
STAND OUT. BE THE PURPLE COW. BE SPECIALTY.
At least 100,000 MT quality
cacao beans by year 2025
100,000 farmers getting additional incomes between
PhP60,000 to PhP80,000 per
hectare
At least 50 million cacao trees producing 2.0 kg dried beans equivalent
per tree
Additional export earnings of at least
USD300million
Can we ‘hit’ these in 10 years?
Year 2025
Thank You
DIOS TI AGNGINA