The Coconut Global Value Chain
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The document discusses the global coconut value chain, highlighting market trends, opportunities, and the need for public-private alliances to foster sustainable industry growth. It details regional coconut production, processing, and export trends, alongside challenges such as weak industrial organization and inadequate market information. The paper emphasizes the importance of stakeholder coordination, upgrading strategies, and innovative financing to enhance competitiveness and promote inclusivity in the coconut industry.
The Coconut Global Value Chain
- 1. Coconut Global Value Chain Regional Stakeholder Meeting, Georgetown, Guyana Ajmal Abdulsamad Duke University Center on Globalization, Governance and Competitiveness April, 2016
- 2. 2 Overview • Global Value Chain Analysis? • Global Market Trends & Opportunities • Emerging Regional Value Chains • Public-Private Alliance to Foster Inclusive and Sustainable Industry Growth
- 3. 3 Why Global Value Chain Analysis? • Industry development strategies need to be informed by a global and local perspective • Global market trends, firm strategies & buyer requirements • Local industry capabilities • Value chain stakeholders need strategic alignment and coordination, particularly, in combining private investment and policy action • Stakeholders champion upgrading strategies that promote inclusive and sustainable value chain growth
- 4. Coconut Value Chain, Global Market Trends & Opportunities
- 5. 5 Coconut Value Chain: Input-Output Structure Coconut Kernel •Household consumption •Baking, alternative dairy, and confectionery industries •Cosmetics •Personal care •Pharmaceuticals •Detergents •Local fresh water •Pasteurized & packaged coconut water (sports & natural drinks) Inputs Production Primary Processing Advanced Processing Manufacturing End Market Coconut husk Coconut shell Dried Kernel Copra •Virgin coconut oil •Desiccated coconut •Coconut milk & cream Oleochemical (Fatty Acids, Fatty Alcohols, Glycerin) Mature Coconuts Processed & packaged coconut water & various flavors De-husked nuts Crude coconut oil RBD coconut oil Bottled coconut water Coconut coir & pith •Natural fiber composites •Geotextile products •Horticulture •Construction •Automotive Charcoal & activated carbon Air & water filtration Land Water Seedlings Agrochemicals Biodiesel Copra Cake Institutions: 1) Country Level: Coconut Board/Authority/Associations; Coconut Research Institutes; Ministries of Agriculture; Ministry of Trade & Industry; and Bureaus of Standards 2) Regional/Global Level: Asia Pacific Coconut Community; and Coconut Genetic Resources Network Research & Development Legend: Coconuts-food chain Coconuts-chemicals chain Coconuts-’sports drink’ chain Coconut-coir Chain Coconut-activated carbon chain By-products Tender Coconuts Finance
- 6. 6 Global Market Trends: Coconut Products No longer a vegetable oil commodity •RBD coconut oil: stagnation 3-4MMT, market share from12% to just below 3% Niche market: • ‘naturalness’ in cosmetics, personal care, and detergent markets • Competing only with palm kernel oil •Virgin Coconut Oil: • Scale independent • Favorable environmental and health profile • Premium price Global Market Share: Nine Major Vegetable Oils (1960-2010) Source: APCC, Frost & Sullivan
- 7. 7 Global Market Trends: Coconut Products (Cont’d) • Marketing strategy of lead firms boosted consumer awareness and demand for coconut products • Coconut water • US$1.36 billion in 2014 • 25% per year growth to US$4 billion in 2019 • Pepsi (Kero Coco, O.N.E, Tropicana Coco Quench), Coca-Cola (Zico), & Vita Coco • Alternative dairy (almond, soy, & coconuts) • US$1.98 billion in 2014 • 18% per year growth to US$6.27 billion in 2021 • WhiteWave Foods Inc., Blue Diamond Growers Inc., Living Harvest Foods Inc. • Other products: coconut sugar, flour, etc.
- 8. 8 • Activated carbon and coir/natural fiber from coconut shells and husks • Coconut shell – activated carbon market • regulation of air emissions (mercury) • US$ 2.35 billion in 2015 • 10% growth to US$3.92 billion in 2019 • Coconut husk • Geotextile, horticulture & composite materials • 10-15% of potential enters commercial markets mainly from India and Sri Lanka • One lead firm, Scotts Miracle Gro, annually utilizes US$108 million coir in its global operations The automotive industry has utilized natural fiber-based composite materials for interior applications YOY: year on year Source: Frost & Sullivan Global Market Trends: Coconut Products (Cont’d)
- 9. Firms and Value Chain Governance
- 10. 10 Lead Firms and Governance: Brand Manufacturers Cosmetics, Personal & Home Care, Pharmaceuticals Firm HQ Annual Sale U.S. 83 France 30 U.K. 64 U.S. 17 Germany 8 Packaged Food Firm HQ Annual Sale Switzerlan d 100 U.S. 34 U.S. 67 U.K. 64 France 26 Beverages (Health & Wellness) Firm HQ Annual Sale U.S. 46 U.S. 67 Switzerlan d 100 France 26 Austria 6 Note: 2014 sale figures in US$ billion • Multiple business segments, focused on sustainability initiatives, naturally-derived ingredients, not an exclusive focus on ingredient certification • Mondelez International, launched in 2012, a 10-year commitment US$400 million program that finances sustainability partnerships. In India, it supported intercropping in coconut plantations, working with 100,000 coconut farmers in four states
- 11. 11 Lead Firms and Governance: Brand Manufacturers Firm HQ Annual Sale Industry (Brand) U.S. 2,500 Packaged Food (LouAna) U.S. 2,150 Packaged Food (Spectrum) U.S. 1,000 Packaged Food & Beverage (Goya) U.S. 250 Coconut Water, Coconut Oil (VitaCoco) U.S. 90 Coconut Oil (nutiva) U.S. 9 Packaged Food & Beverages (COCOZIA, EPICUREX) U.S 1.2 Personal Care (Oxy) U.S. N/A Nutraceutical (Nature’s Way) Note: 2014 sale figures in US$ million Source: Euromonitor, PrivCo, OneSource
- 12. 12 Lead Firms & Governance: Standards & Certifications •ISO 22000 (under revision) is a complete food safety and quality management system incorporating the elements of prerequisite programs (Good Manufacturing Practice (GMP), Sanitation Standard Operating Procedure (SSOP), & HACCP and the quality management system. **BASF, Cargill and GIZ partnership since 2011 introduced the world’s first ‘Rainforest Alliance certified’ copra produced in the Philippines. Specialty Industry Codes of Practice (Brand manufacturers & traders) Mandatory Public Regulation: Food Safety Management System •Hazard Analysis & Critical Control Points (HACCP) •ISO 22000 FSMS* •(Codex International) •Sustainable Sourcing Strategies •Corporate Social Responsibility Programs •Organic •Fairtrade •Rainforest Alliance** •Mandatory (public) and voluntary (private) Standards for coconut food products •Consumer demand for non-GMO products is driving certification
- 13. Emerging Regional Value Chain
- 14. 14 Emerging Regional Coconut Value Chain Non-oil Merchandize Exports, Nine Caribbean Countries Production Primary Processing Advanced Processing Manufacturing End Market Refined Coconut Oil Markets: St. Lucia (US$1.14 million); Jamaica (US$1.53 million); Antigua and Barbuda, Dominica, St. Vincent and the Grenadines Markets: United States, and Dominican Republic (< 10%) Trinidad refines coconut oil and exports under different business relations to the countries in the region (US$2.7 million export in 2014) Dominican Republic processes coconuts into grated, cream and milk Guyana Supplied approximately US$6 million coconuts and products to Dominican Republic, Trinidad, and other countries in the region
- 15. 15 Growth Outcome 8,320 13,481 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 2008 2014 ThousandUS$ Intra-regional Extra-regional Desiccated coconut/kernel Products HS Code: 080111 62% 28 4,905 237 1,642 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2008 2014 ThousandUS$ Intra-regional Extra-regional 174 folds 6,547 De-husked Coconuts HS Code: 080119 Industry Level: • Export growth of semi-processed and brand manufactured coconut products • Including, coconut water & virgin coconut oil • Growing interest in domestic and foreign investment • Vertical integration – large commercial farms Household Producer Level: • Average farmgate prices have progressively increased more than tripling 7 folds 1,507 2,821 192 173 - 500 1,000 1,500 2,000 2,500 3,000 3,500 2008 2014 ThousandUS$ Intra-regional Extra-regional Refined RBD Coconut Oil & Fractions HS Code: 151319 87% -10%
- 16. 16 Emerging Regional Value Chain: Constraints to Investment and Growth Liner Shipping Connectivity Index, Caribbean Countries and World Average, 2014 • International transport costs • Comparative advantage in liner shipping connectivity • Shipping a 20-foot container from Miami to the Caribbean countries costs lower than from the Dominican Republic • High cross-border trade costs (customs & document prep., terminal handling) • Small scale & limited size and scope of related R&D activities • Staffing and research infrastructure • Scale inefficiencies • Higher R&D spending per Ag. GDP or farmer, but still very small at aggregate level • Absence of a regional quality control system for agricultural health and food safety • Tiered approach – CRSOQ and national bureaus • Compliance voluntary • Market access regulatory changes in the U.S. Determinants of Intl. Transport Costs: •Size of the economy •Trade imbalance •The capacity and efficient management of port infra. •Type and value of traded goods •Level of competition in shipping services •The geographic distance
- 17. 17 In-country Main Constraints • Better leverage capabilities of CARDI & regional universities • Domestic seedling supply is either non-existent or at best the waitlist takes years to access the desired number and variety of seedlings • Risk of lethal yellowing, red ring, red palm mite prevail across the region although with some variations • Tailored financial services to smallholder farmers is a common challenge across the countries. Access Planting Material & Services • A predominantly fragmented industry structure (weak value chain linkages) and smallholder dominated farming system • High transaction costs and scale inefficiencies in delivery of key services –market information, technical extension, quality control and finance • Weak standardization and certification of the non-traditional products • Small structure and weak end-market presence limits flow of consumer market information to the local industry stakeholders and feed into the weak market intelligence and export promotion. Weak Industrial organization Lack of Statistics & legacy of ‘copra oil’ era • Unavailability of reliable industry statistics about the plantations, age-profile, production capacity, and trade is a major source of investment risk • Despite its rising contribution to the agricultural GDP of the target countries, coconut industry does not have priority policy support.
- 18. 18 Options for Upgrading and Market Frontiers Products Markets & Capabilities Small Islands States Continental Caribbean Regional Hubs Countries RBD Oil & Fractions Country/Regional Markets Scale & Capital Intensive Market linkages & connectivity Human capital (chemical industry) Trinidad & Tobago (Regional Market) Virgin Coconut Oil Country (small) & global markets Processing scale independent Food safety & quality control reg. Market linkages & connectivity Alternative Dairy & Desiccated Global markets Medium/large scale Food safety & quality control reg. Cold chain infrastructure Market linkages & connectivity Dominican Republic (Extra-Regional Markets) Coconut Water Country/Regional/Global Markets Scale independent Cold chain infra. (packaging) Food safety & quality control reg. Market linkages, connectivity Jamaica (Extra- Regional Markets) Husk Products Export–horticulture (volume and stable supply of husks) Guyana Dominican Republic Shell Products Scale & capital intensive Small-scale/country Scale-independent /Regional Industrial scale/global markets
- 19. 19 Realizing Potential Opportunities: Public-Private Alliances Alliances of Firms & Producers National Stakeholder Platform Regional Public- Private Task Force Global Lead Firm Engagement • Promote Intercropping, Interplanting, and/or Replanting to enhance productivity • Strengthen Supply Chain Coordination & Leadership • Facilitate National Stakeholder Platform • Strengthen Value Chain Coordination & Leadership • Increase Seedling Supply & Technical Services • Introduce Innovative Financing Models • Finance Catalytic Interventions to Incentivize Business Partnerships for Product Development, and Improved Packaging, Quality Compliance, & Market Promotion Activities • Facilitate Public-Private Task Force to Spearhead Joint Action at the Regional Level • Strengthen Value Chain Coordination & Leadership • Facilitate Regional Collaboration on R&D and Seedling Supply • Facilitate Regional Collaboration on Quality Control Infrastructure for Agricultural Health and Food Safety • Facilitate mainstreaming of Procedures and Documentation at Customs • Facilitate Targeted Partnership with Sustainability Programs of Global Lead Firms • Facilitate Lead Firm Engagement for Targeted Market Promotion Activities Focused on Coconut Products
- 20. 20 Realizing Potential Opportunities Share risk and resources Build size and presence Develop new competencies Reach new markets Add value to customers Enhance reputation Security of supply •The level of local industry’s strategic alignment determines inclusive and sustainable growth •A Learning industry will be a major driver of competitiveness •It is not the largest, or most well- positioned, that will succeed, it is the one most responsive to change Need for Collaborative Partnership Across the Value Chain
- 21. 21 Ajmal Abdulsamad E-mail: ajmal.abdulsamad@duke.edu Center on Globalization, Governance and Competitiveness Duke University Thank You