Buko juice economics: Using our coconut

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NATURAL PACKAGING . Coconut vendors in Lucena City expect brisk business after President Aquino noted after his arrival from the US on Friday that fit-conscious Americans are going cuckoo over coco water. DELFIN MALLARI JR./INQUIRER SOUTHERN LUZON

Mesmerized by the coconut juice craze sweeping the American market (mostly coming from other coconut-producing countries), President Aquino is encouraging Philippine companies to cash in on the fad.

The coconut industry, particularly representatives of the poorest farmers, are not exactly jumping for joy.  It is not hard to understand why, if we just spend a little time going a little  deeper than the surface of the economics of the coconut inbdustry.

But first a sound bite from the buko (young coconut) vendor that plies the streets with his cart (always a good place to start).  An enterprising television news channel had the journalist’s nose for news to seek out the vendor’s opinion on the President’s Aha! Moment, which is really the opinion that counts here. The vendor, speaking in Filipino, said he worried that exporting buko juice would drive up the cost of his buko from P10 to P15 apiece.

The beauty of street economics is that it is easy to understand—and is normally right on the button.  The poor man knows how much every peso is worth, for he can literally feel it in his gut.

It grows on trees

Now, for the more elaborate economics.  Joey Faustino, executive director of the  Coconut Industry Reform (COIR) Movement, says it is doubtful if the investments will benefit the “impoverished millions of coconut farmers and their families that comprise a third of the Filipino population.”

While on a working visit to the United States last week, President Aquino announced that two US companies—Pepsi Cola and Vita Coco—were planning some $15 million in new investments in the coconut industry to meet a growing international demand for coconut water.

The impact of the coconut industry on Filipino lives is staggering.  Fully a third of the population derives income from the industry. More than a fourth of the country’s total agricultural lands (or some 3.37 million hectares) are planted to coconuts, according to industry figures.

In Quezon province alone, some 304,000 farmer-families till 388,664 hectares of coconut lands. There are over 3.4 million farmer-families who depend on coconut.  Its effect on consumer purchasing power is so pervasive that San Miguel Corporation tracks farm gate prices to forecast beer sales.

When the harvest is good and prices are high, farmers consume more beer, considered a premium drink in the rural areas (not buko juice).  When prices are low, farmers shift down to gin, rum, or local spirits like lambanog, which is fermented from—you guessed it!—the sap of the coconut tree.

Economics of scarcity

The reason the industry is not overjoyed over the President’s good news is that there is actually a lack of coconuts to meet demand.  I know of at least one cooking oil company scrounging for raw material for its refineries, which are operating at less than efficient capacities.

The raw material is needed not only for making cooking oil, for which we can hardly supply international demand. Coconut also provides the raw material for dessicated coconut (coconut milk) and, more profitably, coco sugar, which is healthier than cane sugar, especially for diabetics.

Coco sugar will yield P14,000 per hectare per month, while dessicated coconut yields P8,000 and coconut oil (from copra) about the same, according to industry sources.

Economies of scale

Converting the land to palm oil may yield P12,000, but a minimum size of 25 hectares is needed to generate the economies of scale to operate a palm oil refinery efficiently, compared to an average five hectares for a coconut farm to be viable.

All told, the country does not have enough coconut trees to supply current demand for its products.  And because it takes anywhere from three to five years for trees to be really productive, the solution is to plant more trees now, not to sell more buko juice, industry sources say.

The story is told that while a sweltering Napoleon was marching his armies to conquer more territory for the French empire, he noted that his troops could cover more ground if the Romans had thought of planting more trees along the roads that led to Rome.  In the shade, Napoleon mused, the troops could march longer.  A lieutenant protested: “But, my general, it will take years to grow those trees!”

Replied Napoleon: “In that case then, we better begin planting now.”

Buko juice economics requires that first of all we must know how to use our coconut.

(The author is chief executive of his own management consulting firm. E-mail mibc2006@gmail,com.)

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  • http://www.facebook.com/incognitojud Rey F. Quisumbing

    Main reason we have shortages is because the coconut tree planted for
    copra is also the same tree where the fresh buko or young nuts are
    taken. Same thing   for the tuba and cocosugar. Now is it not about time
    that we should realize that there are certain coconut varieties for
    specific purposes?
    If the objective is copra production then plant
    the coconut variety good for this purpose. If for the fresh buko, why
    not opt for the sweetwater variety? We have this variety and its early
    maturing. For tuba or cocosugar, then plant the variety that gives you a
    lot of tuba per day/tree. Those who want to know more, just email me at
    rey_quisumbing@yahoo.com 

  • Fred Santos

    A whole “Buko” in it’s shell is being sold here in the States for $0.99 each, coming from Thailand.
    Buko water or Juice is also sold here in aluminum cans packaged in different sizes mostly coming from Thailand also. Price is ranging from $0.79 to $1.39/can depending on the size of the can.
    Vita Coco is sold in  Tetra packs with 2 sizes and they are the most expensive for as much as $1.79 for the small one and $4.70 for the large one. Vita Coco is available on most health stores catering to Americans and the Thailand Buko juice is available on Asian Groceries, but very seldom seen in American stores. Philippines have their own version of canned Buko Juice called “Lipa Buko Juice”. They should work this out to be exported here in the States and be available for all consumers. This is where Pnoy should come in and help this company be able to increase production and help local farmers to sell their juice to them. This will enable “Lipa Buko Juice” to export Buko Juice all over the world, especially US and Europe.

    • http://www.facebook.com/incognitojud Rey F. Quisumbing

      Hi Fred,
      Our existing buko are not of uniform size and the water is not as sweet as the Thailand variety that we happen to have. Why go USA na bankrupt na? Why not consider Mainland China or Korea and Japan, then Middle East? If we can just sell 1 buko per year per Chinaman, this is 1.3 billion nuts at PhP 30.00/piece is PhP 39 billion. What if they buy once a month?
      Main reason we cant sell our fresh coconuts there is because our variety is inferior to Thailand but we have similar variety now in our farm planted 10 years ago and now full bearing. Please email me at rey_quisumbing@yahoo.com and I will explain further. Regards

  • http://pulse.yahoo.com/_MTYSEV6H7OPKQLJCUHIQN5WDZI Amega Amigo

    this is definitely economics at work….

  • http://pulse.yahoo.com/_5STEU22AD7YRHQSB6RE56ZDSYA J

    A vendor of buko juice probably make a profit of Peso20/liter but only sells 10liters/day.
    Here comes a foreign company which may profit only Peso10/liter BUT they process hundreds of thousands of liters per month. But with the packaging profit may go up perhaps 10X.
    See the diference?
    So if we plant more coconut or any fruit trees and as locals we do the processing and packaging then income go up as well as profit.
    Where are our coco-nuts went?
    We are nuts giving the raw materials to foreigners and we have only peanuts!

    • http://pinoysmartlife.com teejay

      pasensya na po pero sana nag Filipino na lang po kayo. ang hirap pong intindihin ung sinabi ninyo. 3 beses ko pang binasa bago ko naintindihan.

      • http://pulse.yahoo.com/_MTYSEV6H7OPKQLJCUHIQN5WDZI Amega Amigo

        my god. 

  • Mary Lou Dela Cruz

    I like to focus on the health giving properties of food that is derived from coconut….given a choice us Filipinos should go for the juice and not the sodas, buko ice cream and ice drops(fr coconut) and not the ice cream prepared from powder milk which has undergone unnatural processes thus not really good for health. Given that we shall have coconut for our domestic use…GO FOR THE COCONUT AS THE BETTER CHOICE FOR GOOD HEALTH.

  • Anonymous

    Somebody needs to use his coconut more before shouting his “aha” moment straight away.

  • http://www.facebook.com/profile.php?id=100000085858903 Rizaldy Alejo

    itigil ang land convertion at magtanim ng magtanim.

  • Anonymous

    then we should start planting now…

  • Anonymous

    What do they do with the coconut juice or water when they process the coco fruit into coco oil? I believe
    they just discard this as a waste material. So to collect all these coco juice to supply the unexpected
    demand will be economically viable for the coco industry while waiting for more coco trees to grow.   

  • Anonymous

    we have to plant coconut as soon as possible. it is the tree of life and all parts of it are useful. 

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