Chapter11
Region 4A: Fruits Industry Cluster
11.1Overview of the Industry
11.1.1Situationer
11.1.1.1The fruits industry in the Philippines
Agriculture posted a 0.37 percent growth in 2009. The year on year gains in the first three quarters of the year did not offset the huge production losses incurred during the fourth quarter of the year. Except for crops, all the subsectors managed to post some output increments. At current prices, agriculture grossed P1.2 trillion, representing a 2.18 percent increase from the 2008 level. The crops subsector which contributed 46.80percent to total agricultural output registered a 1.42 percent decrease in production. This was largely attributed to the weather disturbances that hit the country, particularly during the fourth quarter of 2009.
Crop production was valued at P632.0 billion at current prices in 2009.
The fruit industry plays an important role in the upliftment of the Philippine economy.
The fruit sector has been earning revenues for the country for several years and up to the present. The three most important fruits that contribute greatly to the economy are banana, pineapple and mango. They contribute about 90 percent of the total volume of production and only 10 percent is contributed by other fruits.The fruit export in 2009 was 1,278,606metric tons valued at US$ 363,187,000. As well, the Philippines imported 427,799 metric tons of fresh fruits (pineapple) worth US$ 77,972.
Volume of production
In 2009, agricultural production inched up by 0.37 percent. The series of weather disturbances particularly during the fourth quarter of 2009 slowed down the sector’s performance during this year.
Though some agricultural corps suffered, like rice, bananawas a gainer with output increment of 3.74 percent. There were reports of increased area harvested and bearing hills in the Visayas and Mindanao regions and bigger bunches and fruit sizes harvested in ARMM and Western Visayas. In addition,increase in production was due to better crop management and absence of major weather disturbances in Camarines Sur while banana farms in CALABARZON reported better quality of fruits.
Table 11.1 Banana, Mango and Pineapple: Volume of Production by Region, 2009
(In ‘000 metric tons)
Region/Crop / Banana / % Share / Pineapple / % Share / Mango / % SharePhilippines / 4,557.853 / 100.00 / 1,056.702 / 100.00 / 667.286 / 100.00
CAR / 13.225 / 0.29 / 0.500 / 0.05 / 3.738 / 0.56
Ilocos Region / 21.855 / 0.48 / 0.114 / 0.01 / 290.492 / 43.53
CagayanValley / 255.816 / 5.61 / 20.877 / 1.98 / 37.551 / 5.63
Central Luzon / 26.640 / 0.58 / 1.166 / 0.11 / 58.393 / 8.75
CALABARZON / 57.637 / 1.26 / 69.884 / 6.61 / 42.381 / 6.35
MIMAROPA / 92.614 / 2.03 / 0.168 / 0.02 / 8.103 / 1.21
Bicol Region / 30.733 / 0.67 / 58.043 / 5.49 / 0.355 / 0.05
Western Visayas / 179.945 / 3.95 / 8.919 / 0.84 / 40.610 / 6.09
Central Visayas / 109.827 / 2.41 / 3.150 / 0.30 / 44.263 / 6.63
Eastern Visayas / 134.842 / 2.96 / 6.079 / 0.58 / 0.468 / 0.07
ZamboangaPeninsula / 92.877 / 2.04 / 1.392 / 0.13 / 34.173 / 5.12
Northern Mindanao / 793.854 / 17.42 / 429.129 / 40.61 / 18.379 / 2.75
Davao Region / 1,947.782 / 42.73 / 15.316 / 1.45 / 27.636 / 4.14
SOCCSKSARGEN / 501.829 / 11.01 / 439.015 / 41.55 / 48.554 / 7.28
CARAGA / 103.171 / 2.26 / 2.480 / 0.23 / 7.511 / 1.13
ARMM / 195.204 / 4.28 / 0.472 / 0.04 / 3.410 / 0.51
Source:Bureau of Agricultural Statistics, Partial data: January-June 2009.
For banana, the top five producing regions are: Davao (42.73 percent), Northern Mindanao (17.42 percent), SOCSKSARGEN (11.01 percent), CagayanValley (5.61 percent), and ARMM (4.28 percent).
For pineapple the top five producing regions are: SOCSKSARGEN (41.55 percent), Northern Mindanao (40.61 percent), CALABARZON (6.61 percent), Bicol (5.49 percent), and Davao (1.45 percent).
For mango, the top five producing regions are: Ilocos (43.53 percent), Central Luzon (8.75 percent), SOCSKSARGEN (7.28 percent), Central Visayas (6.63 percent), and CALABARZON (6.35 percent).
Of the 16 regions, only SOCSKSARGEN has been in the top five fruits producing regions for banana, mango and pineapple production.
Table 11.2 Crops: Value of Production, Philippines, 2008-2009 (In million pesos)
Crops / 2007 / 2008 / 2009Palay / 182,052.53 / 234,072.46 / 238,353.57
Corn / 65,887.27 / 75,864.12 / 76,952.29
Coconut / 59,708.79 / 80,121.14 / 64,663.12
Sugarcane / 28,905.89 / 33,783.75 / 29,906.86
Banana / 58,300.91 / 75,321.67 / 88,867.88
Pineapple / 9,860.49 / 11,112.98 / 8,521.81
Mango / 17,385.99 / 19,881.38 / 18,114.31
Coffee / 5,495.96 / 6,217.98 / 5,528.91
Others / 84,677.12 / 95,182.86 / 101,124.92
Source: Bureau of Agricultural Statistics
Value of production
In 2009, the gross value of output in the agriculture sector amounted to P1.2 trillion at current prices. The gross value of crop production was estimated at P632.0 billion,
Pineapple production, however, went down by 1.35 percent during the year. Crop shifting to banana and poor maintenance of the crop were reported in SOCCSKSARGEN. In Ilocos region, reduced planting materials were noted. Other contributing factors to the decline were high cost of inputs in Bicol and smaller fruit sizes in CARAGA and ZamboangaPeninsula.
Mangoproduction also slid further by 12.77 percent in 2009. Gross value of mango production was down by 8.89 percent due to decreased production. In Ilocos region, trees were toppled down by typhoon Emong and flowering of young fruits was aborted because of typhoon Pepeng. Too much rains also adversely affected the mango trees in their flowering stage in Central Luzon, Bicol, Western and Central Visayas and CARAGA regions.
Prices of mango and banana went up by 4.45 and 13.73 percent, respectively.
The fruit industry is just a small portion of the Philippine agriculture’s crops subsector, and is concentrated mainly in Mindanao except for mango which is also found in abundance in Calabarzon, Region 1 and Central Luzon.
The Department of Agriculture records as of 2009 show volume of production for banana, mango and pineapple per region, thus:
Area planted
In the first semester of 2009, the total area planted to banana was 438,451 hectares; for mango it was 185,411 hectares and for pineapple it was 58,425 hectares. The total area planted to banana, and pineapple has been increasing, though not significantly.Area planted to mango, however, decreased slightly from 2008 to 2009.
Table 11.3 Area Planted to Fruit Crops,Philippines, January-June2009 (In hectares)
Crop / 2007 / 2008 / 2009Banana / 426,604 / 434,601 / 438,451
Mango / 179,666 / 185,411 / 184,412
Pineapple / 51,066 / 57,524 / 58,425
Calamansi / 20,179 / 20,825 / 20,844
Durian / 14,902 / 18,480 / 18,480
Source:Bureau of Agricultural Statistics
Prices
Likewise, in the first semester of 2009, the average wholesale price of banana lacatan variety was 20.37 pesos per kilo. This was 6.67 pesos below the retail price and 8.80 pesos above the farm price. For the saba variety the farm and retail prices did not change significantly in the first semester of 2009 compared to the same period in 2008. The average wholesale price of saba or cardaba variety was 10 pesos per kilo.
Exports
Banana products generated US$ 216.2 million in export earnings for the first semester of 2009. This was lower by 8.13 percent compared to 2008.
Mango products generated US$ 23.5 million in export earnings. This was 1.84 percent lower than the US$24 million of 2008.
Exports of pineapple amounted to US$123.5 million. This represented additional export earnings of US$4.1 million compared to 2008.
Table 11.4 Quantity and value of exports by product form and country of destination, Philippines,
January-June 2008 – 2009 (Quantity in metric tons, FOB values in ‘000 US$)
Product Form/ Destination / 2008 / 2009Quantity / FOB Value / Quantity / FOB Value
Banana / 1,149,869 / 235,334 / 1,003,465 / 216,204
Fresh / 1,131,599 / 211.426 / 987,368 / 198,173
Japan* / 546,204 / 110,082 / 559,568 / 120,202
Others / 585,396 / 101,343 / 427,799 / 77,972
Processed / 18,269 / 23,908 / 16,097 / 18,031
USA / 3,037 / 3,924 / 2,585 / 2,896
Others / 15,233 / 19,984 / 13,511 / 15,134
Pineapple / 286,583 / 119,402 / 254,579 / 123,459
Fresh / 150,687 / 31,939 / 125,668 / 29,167
Japan * / 112,910 / 24,307 / 85,334 / 20,035
Others / 37,777 / 7,632 / 40,335 / 9,132
Processed / 135,896 / 87,463 / 128,911 / 94,292
USA / 82,875 / 50,569 / 82,617 / 56,801
Others / 53,021 / 36,894 / 46,293 / 37,491
Mango / 19,923 / 23,966 / 20,562 / 23,524
Fresh / 12,925 / 12,368 / 12,839 / 10,723
Japan* / 2,922 / 6,817 / 2,979 / 6,224
Others / 10,032 / 5,551 / 9,860 / 4,498
Processed / 6,969 / 11,958 / 7,722 / 12,802
USA / 1,685 / 2,940 / 3,386 / 4,413
Others / 5,283 / 8,658 / 4,337 / 8,389
Source: Bureau of Agricultural Statistics *Excludes Okinawa
Imports
In the first half of 2009, the Philippines imported more than US$3,000 worth of processed banana products. This was 80.37 percent lower than the importation in 2008. Imports of processed mango products jumped from US17,000 in 2008 to US$66,000 in 2009. Pineapple imports also went up from US$654,000 in 2008 to US$1.05 million in 2009.
The Philippines is still a net exporter of processed banana, mango and pineapple as shown in the table below.
Table 11.5 Quantity and value of imports, Philippines,January-June 2008-2009
(Quantity in metric tons, FOB values in ’000 US$)
Product Form / 2008 / 2009Quantity / FOB Value / Quantity / FOB Value
Banana, Processed / 1,149,869 / 235,334 / 1,003,465 / 216,204
Mango, Processed / 1,131,599 / 211.426 / 987,368 / 198,173
Pineapple / 546,204 / 110,082 / 559,568 / 120,202
Fresh / 585,396 / 101,343 / 427,799 / 77,972
Processed / 18,269 / 23,908 / 16,097 / 18,031
Source: Bureau of Agricultural Statistics
The Department of Agriculture (DA) has identified several measures it believes would further propel the industry forward, and support the industry’s aim of enhancing its capacity to produce quality productsat improved levels of efficiency. [2]
Unfortunately, processing capabilities poses a problem compared to domestic fruit farming, which may ultimately prove to be the biggest constraint to the progress of the processed fruit sector. The high price of feeds is hitting farmers hard. Fruit growersare especially worried that local production may be unable to compete with imports from Japanand other countries. Low tariffs on imports from these countries only serve to worsen the threat.
The majority of fruits in the Philippinesare still raised in small-scale backyard farms. For the Philippine fruit value chain to reach its full potential, the number and size of commercial farms will need to increase.
11.1.1.2The fruit industry in Region 4A
The fruit industry in Region 4A is an industry subsector participated in by micro to large-scale farmers and composed of several sub sectors. The major fruits and corresponding production volume for 2008 are shown in Table 11.6.
The fruit industry potentials are vast as the region is abundant in the production of crops mainly due to the typhoon-free climate and favorable conditions of the region. Region 4A has a mixture of industry and agriculture. Cavite, the top producer of fruits is highly industrialized where a reputable processor, KLT exists. The existence of agricultural lands, albeit getting smaller, further assures the continuous supply of a good percentage of raw materials for processed fruit industries.
Fruit growing in Region 4A is exclusive to local investors. A number of fruit growers operate in the region, mostly concentrated in Cavite.
The fruit industry is not a major sector within the crops industry, although theagriculture industry, which supports it, is considered much more significant.There are few key players, although there are many small-farm growers, who may not have the benefit of mechanized operations because of cost requirements. The fruit growers in Calabarzon are all SMEs: approximately 92 percent micro, 6 percent small, and 2 percent medium.
Thefruit industry in Region 4A is positioned as an ordinary product. There are three major fruit producing areas in Region 4A, these are: Cavite, Batangas and Quezon, as shown in the table below.
Table 11.6Production Volume of Fruits, Region 4A, 2008(In ‘000 metric tons)
Province / Banana / Pineapple / MangoCavite / 25,912.61 / 72,807.63 / 5,354.36
Laguna / 16,696 / 12,018.18 / 502.22
Batangas / 33,100.67 / 57.03 / 26,731.55
Rizal / 3,301.21 / 557.51 / 1,145.52
Quezon / 27,354.42 / 727.8 / 7,153.21
Total (Region 4A) / 105,365.79 / 86,168.15 / 40,886.86
Source: Bureau of Agricultural Statistics
KLT Fruits
A significant player in the fruit sector in Cavite is KLT Fruits. KLT Fruits, which stands for the surnames of the owners Kiao, Lao, and Tia, started in 1985 with its fruit processing plant in Alabang. It was then transferred to its current location in First Cavite Industrial Estate (FCIE), Cavite in 1992, with the intention of focusing on pineapples as the company’s main processed product. KLT Fruits, however, encountered difficulties in getting quality pineapples despite the seemingly strategic location. Tagaytay was producing inadequate quantities of pineapples and the imported pineapples from Davao always arrive with bruises due to distance or overripe due to travel time. They processed pineapples for 2 years, from 1992-1994, before shifting their focus to mangoes as their main processed product. Aside from mangoes and pineapples, KLT Fruits also processes passion fruits (yellow variety), guyabanos (soursop), calamansi (Philippine lime), dalandan (Philippine orange), papaya (hawaiian variety), ube (purple yam), and guavas. From these fruits they produce pure tropical fruit purees and concentrates in quantity denominations of 25 kilo containers up to 225 kilo drums.
Ms. Nora Neypes,a B.S. Chemical Engineering graduate working as the manager of the Quality Assurance Department of KLT Fruits, proudly asserts that KLT Fruits is ISO 22000- 2005 and HACCP certified and holds yearly evaluation to ascertain the quality of their products and processes.
Don Roberto’s Winery Corporation
Don Roberto’s sweet mango (yellow) wine was formally launched on Dec. 2, 2001.
A year before it was launched, however, Mr. Castañeda, the owner/president of the corporation started his research on the viability of yellow mango for wine production. In 2002, Don Roberto’s again went into research, this time in the viability of green mangoes for wine production.
Equipped with a recipe for mango wine and backed by the researches done on the fruit wines, Mr. Castañeda still thought that his knowledge in wine business is still not enough so he went to the U.S to study wine making. He also went to Europe to observe their wine industries as well as study about the western way of wine making. By the time he went home to the Philippines he realized that indeed, the Philippines has the best mangoes in the world which could be used for the best mango wine in the world.
The target market of mango wine produced by Don Roberto’s is the A-B market. Mangoes are sourced not only from the province but also from Zambales, Bataan, Mindoro, Batangas, Bicol, the Visayas and Cagayan de Oro. When the fruit is in season in Calabarzon or in Luzon, Mr. Castañeda uses the mangoes from Luzon; when it is not in season in Luzon, then mangoes coming from Visayas and Mindanao are used. This way, the company never runs out of mangoes to be used in production.
At first plastic bottles were used but then customers kept on asking for glass containers. For this reason, Mr. Castañeda started using his own designed hand blown bottle containers produced by Kimbell Packaging Inc., with a secondary plastic packaging to give the products a classy style. His wines are packaged in 750ml bottle containers and are put in a box with 12 bottles each.
Significance of the fruit industry
The government sector (DTI and the Provincial Agriculturist Office) sees the Cavite fruits industry as significant since it contributes to employment generation. DTI Provincial Director Noly Guevara, however, observes that “Cavite is a net importer of fruit products except coffee.” This, he opined is due to the fact that Cavite’s fruit production is less than its fruit consumption, thus the need to import.”
11.1.2Value chain and sub-sectors
11.1.2.1General value chain of the fruit industry in the Philippines
Figure 11.1 shows the general value chain of the fruit industry. It includes several players: (1) seedlings/plant material suppliers, (2) growers, (3) chemicals suppliers, (4) processors, (5) metal works, (6) warehouse and cold storage, (7) truckers and (8) wholesalers/distributors.
11.1.2.2Value chain of the fruit industry in Cavite
Figure 11.2 shows the values chain of the fruit industry in Cavite.
Destination of produce
According to the Office of the Provincial Agriculturist (OPA) Lorna Cron, 60-70 percent of the locally produced fruits in Cavite are Manila-bound once they are harvested; 20 percent goes to the local market; 5 percent goes to local supermarkets and another 5 percent are consumed by the growers themselves. This point of view is also shared by the interviewed officers of the existing industry associations who also own farms.
Figure 11.1 Fruit Industry Value Chain, General
Figure 11.2 Fruit Industry Value Chain, Cavite
When the local fruit farmers harvest their farm products, the usual route of these fruits are Divisoria, Manila markets like in Pasig, Binondo and Cavite markets like Tanza, Silang Dasmarinas, and Tagaytay. Mr.Donato Alegre, a farm owner has a rule of thumb for his farm and this is also followed by the association he chairs, the Mendez Farmers Association. When he sells his produce, if it is abundant, it is brought to Manila supermarkets because they command a higher price. If the produce, however, is in short supply, then it is just sold to the local markets.
This way, they do not have to incur additional transportation costs. Problems arise when the produce is low since it can not adequately supply the local consumption. When this happens, fruits are imported from Manila’s Divisoria market. In the case of Mrs.Leonora Purificacion, the owner of Puri Farms as well as the Vice-Chair of the Batas Multi-Purpose Cooperative, the market for her pineapple fruit juice which is just a backyard production, is usually the University of Santo Tomas in Manila where she has already made contacts with a canteen owner to sell her fruit juice.
There are times when the Department of Trade and Industry or the Department of Agriculture would hold trade fairs, and during these times, Cavite fruits are put on display for sale.
None of the fruit growers are into export. Don Roberto’s winery, however, tried exporting once but had to stop since the feedback it got was that the market did not like wine in plastic bottles, which it was then using when it exported its wine.
11.1.2.3Support industries
Support industries like plant nurseries, seedlings, chemicals/fertilizers, farm implements, packing and packaging materials such as carton boxes, wooden crates and pallets, trucking services, “bagsakan” centers and cold storage facilities are available in the region.
11.1.2.4Support agencies
Department of Agriculture
The Department of Agriculture is the principal government agency that is responsible for the promotion of agricultural development and growth through increased productivity. Some of the major services being done by the department are: devising plans for proper utilization of resources, managing these resources and conducting research work on crops and fertilizers. Responsible for boosting the income of farmers as well as reducing the incidence of poverty in the rural sector as stipulated in the government’s Medium Term Development Plan.
Department of Science and Technology-Region 4A
DOST CALABARZON, through its S&T centers, the Tanauan Packaging Service Center (TPSC), and the Packaging Research and DevelopmentCenter of the Philippines (DOST-PRDCP), developed for 22 firms packaging and labeling system appropriate for each product. These include: 6 firms in Laguna for cookies/pastries, meat products, pickled vegetables, and tropical fruit wine; 4 firms in Cavite, Batangas, and Quezon or a total of 12 firms for juices, cookies/pastries, meat products, pickled vegetables, and tropical fruit wine; and 3 firms in Rizal for noodles, dairy products and tea.
PSTC-Batangas facilitated the establishment of TPSC in 2006 under the auspices of the Local Government of Tanauan City and Senator Ramon Magsaysay Jr. Together with DOST-PRDCP, it assisted the center in acquiring processing and packaging equipment to enable it to provide, among others, labeling services, toll packaging for native delicacies, supply in low volumes of packaging materials, and consultancy services. TPSC has since developed technical competency on food safety, specifically on good manufacturing practices, label designing, shelf-life studies and nutritive analysis (DOST Calabarzon).