1. LJRS Nata de Coco Production
Rogel T. Gantuangco
Dole Philippines
2. I. INTRODUCTION
Nata de coco is a chewy, translucent, traditional Philippine dessert which is coconut gel-
product from coconut milk by bacterial fermentation-prepared. It is high in fiber, good for the
digestive system, and it is low in calories and contains no cholesterol. In 1992, this dessert was
introduced to Japan through its use in diet foods enjoyed by young girls. Moreover, "Japanese
believed it protects the body against colon cancer," and it became "a boon for slimmers". Its peak
moment of popularity in Japan occurred in 1993. Nata de coco could be found everywhere at that
time. Many companies manufacturing nata de coco rivaled each other for new nata de coco
products.
This paper will establish the details involved in the production, marketing and the overall
performance of the nata de coco product of LJRS Food Processing – a small-scale business
enterprise involved in a nata de coco production. The brand aims to increase its sales in the local
market excluding its already stable production for Dole Philippines Inc. demand.
The brand also wants to expand its distribution channel. Currently, the brand is sold only
in two supermarket in General Santos City and in the Polomolok Public market. Ironically, LJRS
brand is not available in groceries in Polomolok; it is dominated by competitors from as far as
Laguna. If successful, the brand will launch another variants, another products like kaong and
other similar products.
II. GENERAL BUSINESS CONDITION
The Philippine coconut industry is optimistic that coconut exports will grow further in
markets where the Philippines has preferential trade agreements with, according to the United
Coconut Associations of the Philippines (UCAP), a confederation of associations and
organizations involved in the various activities of the Philippine coconut industry.
Industry reports show that exports of coconut products have been consistently rising with
an average growth rate of 8% over the period of 2007-2010. In 2010, total exports of coconut
reached US$1.6B and accounted for 20 percent of world market share, the highest among key
sectors identified in the Philippine Export Development Plan (PEDP).
In 2010, 21.3% of Philippine coconut exports revenue went to markets where the
Philippines has free trade agreements with, namely ASEAN, China, Korea, Japan, Australia and
New Zealand. In the first quarter of 2011, the Philippine coconut shell charcoal exports to Japan
has already accounted for 60.7 percent of total market share while total glycerin exports
accounted for 69.8 percent, both figures based on volume.
This is a remarkable increase over 2010's total market share in Japan of 57.5 percent and
56.8 percent respectively. The same growth trends are also apparent for the volume of
oleochemicals in markets such as China (from 31.5 percent in 2010 to 39.6 percent in the Q1 of
2011) and Korea (from 4.3 percent to 12.4 percent for the same period). Sixty eight out of 79
provinces in the Philippines are coconut areas, with 3.6 M hectares or 26 percent of total
agricultural land planted with coconut trees. More than 50% of total Philippine supply of
coconuts is sourced from Mindanao.
Philippine coconut product exports consist of coconut oil, desiccated coconut, copra
meal, oleochemicals, virgin coconut oil, coconut shell charcoal, activated carbon, glycerin, soap,
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3. nata de coco, coconut milk powder, alkanolamide, shampoo, liquid coconut milk, macapuno and
coconut water, among others.
For nata de coco, the industry flourished in Laguna, Batangas, Quezon, Iloilo, Cagayan
de Oro, Cavite and many other places in the Philippines. Through the years, nata de coco enjoys
the fair share of the local and international market but it was only during the last couple of years
that nata de coco had a surprising boom in the export market.
III. The Business Unit
LJRS Food Processing is a family-owned small-scale enterprise started about 10 years ago.
It started as a contract grower of Dole Philippines, Inc. as a supplier-grower of nata de
coco. The periodic production is solely based on the demand provided by the company;
production planning is based on this projected demand.
Currently, the brand has 16 workers involved in the production, packaging and delivery
of the finished product. The brand utilized the resources from relatives and neighbors. For raw
materials, the brand bought grated coconut coconut. The sugar and glacial acetic acid, supplied
by the son-in-law, is being bought at Php1860 per 50-kilogram and Php1860 per 30-liters,
respectively
Two years ago, the family-owner saw an opportunity in expanding to the local market
(neighboring town and cities) through processing those nata de coco cubes and slabs that
did not pass the quality requirements of Dole. This new scheme generated additional
income for the business from the rejections that previously was sold at a lower price in the
neighborhood. LJRS able to produced nata de coco in bottle in 8, 12, and 24 ounce
displayed in the supermarket shelf in one mall in General Santos. It also produced nata de
coco in plastic pouch and in ordinary plastic in the wet space in the mall’s supermarket.
However, there was no specific planning as to how much to produce and where to market
the finished product. The production for the market outside Dole is solely based on the
rejects that was accumulated. It does not consider producing more from the prime
produced. It was also tied up with the contract in a specific mall; it cannot display in other
malls in General Santos with the same product label. Moreover, the volume of delivery just
relies on the purchasing order sent by this mall. The owner doesn’t have the specific data
on the market demand and trends.
IV. The Product
Nata de coco is a chewy, translucent, traditional Philippine dessert which is "coconut gel-
product from coconut water by bacterial fermentation-prepared”. In 1993, the Philippines saw a
boom in the demand of this product in Japan. During that time, Japanese people, especially
young considered nata de coco a popular dessert, however, its popularity declined because their
interest moved to another trendy dessert (Bank Indonesia, 2011).
3
4. Moreover, nata de coco still has its integrity as a dessert in the Philippines and it still has
its market share for the local market. However, it is not a prime commodity of the Filipinos.
When situation arise, nata de coco is the least to purchase.
With nata de coco product, coconut farmers continuously earn a stable income. Besides
from coconut milk sale, farmers and local dwellers can also get extra income from salary they
earn from nata de coco companies. In other words, households get a lot of benefit from the
existence of nata de coco business, not only because of salary aspect but also more
fundamentally because of improvement of employment in the region. LJRS presently has 40
workers involved in the production and packaging of nata de coco items. Farmers have become
coconut milk suppliers.
V. Product Costing and Pricing
DOLE Philippines, Inc. offers a stable rate on the nata de coco supply. LJRS enjoyed this
scheme. However, the price given by Dole is not as flexible as the price of the raw
materials. When the prices of raw materials fluctuate, the owner takes the blow.
For its product outside Dole, the strategy is to price the items a few cents lower than the
competitors. However, in the future, the owner will review this practice in pricing.
Accordingly, consumers might view their product as substandard to others because of the
lower price.
The computation below show the estimated investment cost considering the cost of
utensils, packaging materials and the cost of raw materials or ingredients.
Estimated Investment Cost (based in 2009 prices)
A. Estimated Cost of Utensils
Weighing scale 199.75
1 straining cloth 25.00
Stainless/enamel kettle 800.00
Fermenting basin or Jar (@Php61.75/basin x 30/hr x 8 hrs) 14,820.00
Total 15,844.75
B. Estimated Cost of Packaging Materials
Sterilized glass jar with cap - P12.94 12.94
Cap sealer (100 pcs/P25.00) – 0.25 0.25
Total 13.19
C. Estimated Cost of Raw Materials/Ingredients
1. Nata de Coco grower
1 kilo fresh coconut, grated 51
400 ml of glacial acetic acid 108
2 kgs of refined sugar 71.5
24 liters tap water (Hauling) 2.86
2 liters nata starter 41.67
Total for 1 kilo raw nata de coco 275.03
2. In Heavy Syrup
3/4 kg. refiner sugar 26.81
0.1% citric acid 0.99
Total for 1 kilo raw nata de coco 27.8
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5. Computations on the next page show the estimated product cost with the following
assumptions:
• For every 10 days, the average harvest of Nata de Coco is 20 kilos.
• Nata de Coco production is twice a month, totaling 4 working days/month for the
production of Nata de Coco grower (2 working days) and Nata do Coco in heavy syrup (2
working days).
A. Direct Cost
Raw materials/ingredients 4,799.52
Packaging material 12,372.22
Labor cost (P382/day x 4 days) 1,528.00
Total Direct Cost 18,699.74
B. Indirect Cost
Water (P220 consumption/22 days x 4 days) 40.00
LPG (P500/22 days x 4 days) 90.92
Contingency cost (10% of Direct Cost) 1,476.41
Total Indirect Direct Cost 1,607.33
C. Production Cost
A+B (production cost of approximately 938 bottles) 20,307.07
D. Product Pricing
Production cost per 12 oz. bottle 21.65
20% mark-up of the Production Cost 4.33
Suggested Market Price 25.98
Market Price per 12 oz. bottle: from P28.75 to P36
Currently, LJRS has no pricing strategy. The owner just based the price on its
competitors. Current price for its products is considerably lower than its competitors. For the 8
oz. variant, for example, LJRS is lower by 16% against its nearest competitor.
VI. The Market and Marketing Channel
LJRS enjoyed a stable demand from its growing-contract with DOLE Philippines, Inc.
The production planning is based on the demand data supplied by the company. It does not incur
additional cost for over-production and/or under-production. And for the other market (outside
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6. Dole), the production is also based on the purchasing order sent by the mall. It only delivered
what is ordered to them.
However, as mentioned above, nata de coco, is not a prime commodity of the Filipinos.
This product is popular during holidays and gatherings, but not part of their daily consumption.
But aside from the stable order from Dole, the owner does not engaged in any market study
about the demand and trends of this product.
In its mall display, the owner rent a shelf space in the supermarket section for the bottled
nata de coco. In addition, it also has a space in the wet section. It only incurred additional cost
for one worker involved in stock replenishment. This worker then gives feedback as to the
situation of the shelf space.
For the raw materials needed, LJRS owner tapped its relative as a supplier. For the grated
coconut, the suppliers were the in-laws of the owner at Php32 per kilo. For the sugar and glacial
acetic acid, the supplier is the son-in-law. And for the nitrate-free water, it is provided free-of-
charge from DOLE Philippines, Inc.
VII. Competitors
Within General Santos City and Polomolok, LJRS have three competitors: Tita Ely’s, CDO
and Genrev, also the owner of the Smartbuy brand. Smartbuy brand is of low-quality, low-price
product of Genrev and is the closest competitor in terms of price with LJRS.
LJRS only caters KCC and Gaisano Mall and Polomolok Public Market. Their
competitor, on the other hand, has a dispersed area of distribution. On pricing, to have a
competitive advantage, LJRS lowered its price against the competitors. See below the
distribution channel of LJRS and its competitors.
Price comparative on different variants.
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7. Supermarkets Groceries Public market
Producer
Pol. GSC Pol. GSC Pol. GSC
LJRS X X
CDO X X X
Tita Ely’s X X X
Genrev X X X
Samrtbuy X X X
Distribution channel of LJRS and its competitors.
VIII. Financial Performance
In 2011, the income from the volume delivered to Dole comprised 80% of the brand’s net
income. Only 20% of its earnings came from outside market. The brand aims to increase its sales
in the local market excluding its already stable production for Dole Philippines Inc. demand.
IX. References
Bank Indonesia. Lending Model Information System for Small-Scale Enterprises.
http://www.bi.go.id/sipuk/en/?id=4&no=52306&idrb=46501. 12/26/2011.
Coconut Gel (Nata De Coco). Retrieved from http://www.dti.gov.ph/dti/index.php?p=705, July
20, 2012
EntrePinoys Atbp. Starting a Business in Nata de Coco Production.
http://www.mixph.com/2010/08/starting-a-business-in-nata-de-coco-production.htm.
Nata de Coco Boom and the Philippines. Retrieved from
http://www1.american.edu/ted/coconut.htm#W4. 12/22/2011
Nata de Coco Production in the Philippines.
http://www.affordablecebu.com/load/food/nata_de_coco_production_in_the_philippines/
8-1-0-1426#ixzz1mQVhG7mE. 12/26/2011.
PCIERD – DOST. Government to help improve the Nata De Coco Industry.
http://202.90.141.226/news/natanews.htm. 01/06/2012.
PCIERD – DOST. Philippine Council for Industry and Energy Research and Development.
Retrieved online at http://202.90.141.226/news/natanews.htm
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8. United Coconut Associations of the Philippines, Inc. ( UCAP ). Performance of the RP’s Top
Non-Traditional Coco Exports in November 2007. Retrived from
http://www.ucap.org.ph/022108.htm#wk08nw2
What is Nata de Coco? http://www.affordablecebu.com/load/food/nata_de_coco
_production_in_the_philippines/8-1-0-1426#ixzz1mQVhG7mE
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9. 7. SWOT Analysis
The coconut industry despite being tagged by some as a “sunset” industry is still thriving
with full of potentials but beset by many weaknesses. There is availability of good clones and
technologies with established marketing system, export facilities, and processing plants.
However, the industry has a basic supply and quality problem given the minimal areas planted to
good clones, senile trees, lack of fertilization, plantings in marginal lands and lack of good
drying facilities at the field level.
There are many things going for the industry since the crop has many product
possibilities with multiple stakeholders. The traditional products from coconut have been added
with opportunities in several value added products like virgin coconut oil, geotextiles,
oleochemicals, and alternative fuel. 5- 23
While the country is the largest exporter of coconut products, it is still a price taker given
the competition from the other vegetable oilseeds. This puts pressure on farm prices and incomes
as most farms do not practice intercropping thus the reliance on coconut for their livelihood.
Table 5.3.3. COCONUT INDUSTRY: SWOT Analysis
STRENGTHS WEAKNESSES
Inputs
1. Availability of good clones 1. Only 1% of the areas are planted with clones
2. No irrigation system in coconut areas
Farm Production
2. Favorable climate in most areas 3. Senile trees (30% of stands)
3. Availability of technologies 4. Only 1% of the farms apply fertilizers
4. Unique lauric structure of coconut oil
5. Plantings in marginal lands
6. Intercropping in only 30% of the land
Logistics
5. Established marketing system 7. High assembly/freight costs due to poor roads
a and fragmented, small holdings
6. Export facilities 8. Multi-layered marketing channels
9. Scattered/unclustered ports mean
costly ocean freight.
Milling
7. Presence of many mills 10. Underutilized mills/old technologies
8. Presence of refiners 11. Underutilized refineries
12. Shortage of raw materials
13. High assembly costs
14. Low quality copra
15. Scattered factories mean costly local
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10. freight
Other Value Adding
9. Many product possibilities 16. Cost of raw materials
Institutions
10. Multi-stakeholders 17. Frequent changes in DA/PCA
leadership
11. Organized industry associations 18. Lack of program support; too
dependent on coco levy resolution
19. Politization of management over
coco levy companies
OPPORTUNITIES THREATS
1. Stable and growing export and 1. Poor global image in supply reliability
domestic markets
2. Good prospects for value added 2. Perception of government inaction
products (VCO, geotextiles, etc)
3. Alternative fuel (coconut methyl 3. Competition from other tropical oils
4. Development of rapeseed and cuphea 4. Low domestic oil consumption vis a
with high lauric content vis growing population
5. Renewable source of vegeoil
based applications vs depleting
mineral oil reserves
5. Zero Asean tariff/ GATT without
promised safety nets in place
6. More stringent sanitary and phytosanitary
(SPS) standards
7. Unregulated cutting of trees
Source: CFA-UA&P
5-
EntrePinoys Atbp. Starting a Business in Nata de Coco Production.
http://www.mixph.com/2010/08/starting-a-business-in-nata-de-coco-production.html
United Coconut Associations of the Philippines, Inc. ( UCAP ). Performance of the RP’s Top
Non-Traditional Coco Exports in November 2007. Retrived from
http://www.ucap.org.ph/022108.htm#wk08nw2
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