PRE-FEASIBILITY

STUDY
DESICCATED COCONUT

KF NUTRIFOODS
DAVAO DEL SUR, PHILIPPINES
KF Nutrifoods, June 25, 2012

Page 1

KF Nutrifoods
TABLE OF CONTENTS
experience in
INTRODUCTION
processed foods
USES AND APPLICATIONS
manufacturing
since
PRODUCT
DEFINITION AND PROPERTIES
1997. MARKET SURVEY WITH FUTURE ASPECTS
World coconut industry
Desiccated coconut demand
Coconut market supply
Current risk of tightening market supply
World market analysis and price analysis
The Need
Commercial interest strongly aligned to industry interests
World coconut market value
Desiccated
coconut markets
Production plant
is
Present
manufacturers in region XI
planned to be
located
Manufacturers of desiccated coconut in the Philippines
in Davao Del Sur
Examples of Best Practice at Company Level
region, Philippines
Major processing routes of coconut kernel products
TECHNICAL ASPECT
PROCESS OF MANUFACTURE
POLLUTION CONTROL
BASIS AND PRESUMPTIONS
FINANCIAL ASPECTS
PRODUCT EXPANSION PLAN
MACHINERY SUPPLIERS

INTRODUCTION

PCA 2011 reports an

export average of
140,000 MT/yr. in
desiccated coconut.

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KF Nutrifoods have been in the export and manufacturing

industry of banana products since 1997. With a growing demand and
interest in developing other forms of products aside from banana chips
product line, the company intends to engage in desiccated coconut
production as part of its processed foods product line.
The company is not relatively new to the coconut industries
and its products. Its sister company, GCF Multiproducts is currently
engaged in developing coconut charcoal briquettes and granulated
coco charcoal for exports. Hence, with the expertise and experience
with processed foods and with the understanding of the coconut
industry, KF Nutrifoods eyes to venture into producing desiccated
coconut products to be exported worldwide.
For a brief background, KF Nutrifoods is situated in Padada,
Davao del Sur where 65% of the total land area is planted with
coconuts. In 2010, Davao Del Sur region produced 842,342 MT of

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coconuts (Bureau of Agricultural Statistics, 2010) as copra as their

main produce and the coconut shells and husk serving as by
products. Alongside with GCF Multiproducts, the company started
helping the coconut farmers improve the utilization of their coconut
products by developing new products for export market which
includes coconut charcoal briquettes, granulated coconut charcoal,
coconut peat and coconut fiber.

Uses for desiccated

coconut are unlimited
as the product varies
in confectionery and
baking applications.

KF Nutrifoods will
venture in high value
products as it plans to
diversify its products

The intended advancement of diversification of KF

nuntrifoods products is based on the world market demand for
coconut products. Asian and Pacific Coconut Community (APCCSEC),
an intergovernmental organization organized in 1969 under the
aegis of the United Nations Economic and Social Commission for Asia
and the Pacific, reiterated in their report on their current prices of
coconut products in Asia that Philippines has a higher price
($1944/MT) than the other top coconut product exporters of
desiccated coconut namely: Indonesia ($1500/MT) and Sri Lanka
($1457/MT).
On the national level, based on Philippine Coconut Authority
2011 report, Philippines export an average of 140,000 MT/year in
desiccated coconut and UNCTAD (United Nations Conference on
Trade and Development) reports a global production of an average
between 180 290,000 tonnes annually which indicated that
desiccated coconut is a well-established product dominated by the
Philippines. In the UNCTAD report on INFOCOMM COMMODITY
PROFILE: COCONUT, production of desiccated coconut is waning in
Vietnam, Thailand, Brazil and Sri Lanka due to product shift to
vegetable oil, environmental issues and disasters, etc. this
expresses a huge opportunity of a steadily increasing demand for
desiccated coconut. Aside from those reports, currently there are 8
coconut desiccator companies that are registered under DTI and
BETP which leaves for more room for companies like KF Nutrifoods
to strengthen the desiccated coconut production in the Philippines.

In addition to the main objective of the study, additional subobjectives of this study is to estimate the cost of production for developing a desiccated coconut
plant and to determine its production process through process descriptions and economic
analysis. Estimated production costs were derived from equipment manufacturers costs and
capital and operating costs based on the process flow diagrams and public posted market prices
of the equipment.

USES AND APPLICATION

Uses and Applications for desiccated coconut are used mainly by confectionery and biscuit
industries. It is used as a baking and confectionery ingredients for cakes, pastries, desserts,
chocolates, etc. It has a wide range of food applications aside from bakery and confections, it is also
applied on dairy products, savory, cereals, coatings, beverages, and so much more. This indicates that
the applications for desiccated coconut products are already wide and varied and the possibilities are
virtually unlimited as a growing demand for desiccated coconut is rising in US, Europe, Germany and
that includes China and India (with the new economies and improved buying power.)

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Another indicator of its increasing uses and applications are the widening diversification of
desiccated coconut product features and characteristics. An example of these are that of Franklin
Baker Desiccated Coconut product line which includes: extra fine, macaroon cut, medium, coarse,
natural blend, extra fancy shred, tender flake, special long thread, mill run chip, and SL chips. In
another company, Celebes coconut corporation their desiccated coconut products includes toasted,
sweetened, toasted and sweetened kinds of desiccated coconut aside from the regular desiccated
coconut (high fat and low fat).
In relationship with KF Nutrifoods venturing into desiccated coconut products, there will only
one main product that will be produced categorized as regular desiccated coconut (high fat) however,
not limited to it as it intends to diversify its products. The main goal is to be a supplier of desiccated
coconut to baking and confectionery manufacturers worldwide. Therefore, KF Nutrifoods will be flexible
to the demand of the buyer and its requested characteristics and features.

PRODUCT DEFINITION AND PROPERTIES

KF Nutrifoods properties will comply with the Philippine National Standard definition and
properties of desiccated coconut products under DTI (Department of Trade and Industry) Bureau of
Product Standards PNS/BAFPS 25:2007, ICS 67.080.10 with reference to Codex Standard for Grated
Desiccated Coconut (CODEX STAN 177-1991) revised 2011 covering International Food Standards.
PRODUCT DEFINITION:
2.1 Desiccated Coconut is the product:
a. prepared from substantially sound white kernel obtained from the whole nut of coconut
(Cocos Nucifera L.), having reached appropriate development for processing, without
oil extraction in conformity with Section 3.2.4 (c);
b. processed in an appropriate manner, undergoing operations such as: de-husking,
hatcheting, paring, washing, comminuting, drying and sifting;
c. described in points (a) and (b) from which oil has been partially extracted by
appropriate physical means in conformity with section 3.2.4 (c).
2.2 Sizing (optional)
Desiccated coconut may be sized according to their granulometry as follows:
a.

b.

c.

d.

Extra-fine desiccated coconut Desiccated coconut of which not less than 90% of the
weight shall pass easily through sieve with square apertures of 0.85mm, but of which
maximum 25% of the weight passes through a sieve of 0.50 mm aperture size.
Fine desiccated coconut Desiccated coconut of which not less than 80% of the weight
shall pass easily through sieve with square aperture size of 1.40 mm, but of which
maximum 20% of the weight passes through sieve of 0.71 mm square aperture size.
Medium desiccated coconut Desiccated coconut of which not less than 90% of the weight
shall pass through a sieve of square aperture size of 2.80 mm, but of which maximum 20%
of the weight passes through a sieve of 1.40 mm square aperture size.
Other sized desiccated coconut covers all other presentations including fancy cuts or
special cuts (i.e. tender or thin flakes, long and thin chips, extra fancy shreds, long shreds,
standard shreds, etc.)

3. Essential Composition and Quality Factors

3.1 Composition
3.1.1 Basic Ingredient

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Coconut as defined in Section 2.1

3.2 Quality Factors
3.2.1 Color and texture
The color shall be natural white to light creamy white. The texture shall be characteristic of the
product.
3.2.2 Flavor
The taste shall be characteristic of the product without off-flavors due to deterioration or
absorption of extraneous substances.
3.2.3 Odor
The odor shall be characteristic of the product, shall not be mouldy, cheesy, smoky,
fermented, or rancid, and shall not possess any undesirable odor.
3.2.4 Chemical and Physical Characteristics
PARAMETERS

REQUIREMENTS
0.3% m/m
measured as lauric acid

(a) Total acidity

(b) Moisture

(c) Oil content

4% m/m
60% m/m
for desiccated coconut as described in section 2.1.1
(a) and (b)
35 < 60% m/m for desiccated coconut as
described in section 2.1.1 (c)
2.5% m/m

(e) Ash
(f) Extraneous vegetable material: Harmless
vegetable matter associated with the
product.
(g) Foreign matter: Any visible and/or
apparent matter or material not usually
associated with the product.

15
fragments per 100g
Absence in 100g

3.3 Classification of Defectives

A container that fails to meet one or more of the applicable quality requirements, as set out in
Section 3.2, should be considered as a defective
3.4 Lot Acceptance
A lot should be considered as meeting the applicable quality requirements referred to in
Section 3.2 when the number of defectives, as defined in Section 3.3, does not exceed the
acceptance number (c) of the appropriate sampling plan, as describe in Section 10.
4. Food Additives
4.1 Antioxidants and preservatives used in accordance with Tables 1 and 2 of the Codex General
Standard for Food Additives (CODEX STAN 192-1995) for Food Category 04.1.22 Dried fruits are
acceptable for use in foods conforming to this standard.

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4.2 The antioxidant listed below is also permitted for use, under the conditions of good manufacturing
practices, in the products covered by this Standard.
INS No.
330

Name of Food Additive

Citric Acid

Maximum Level
GMP

5. Contaminants
5.1 The product covered by this standard shall comply with the maximum levels of the Codex General
Standard for Contaminants and Toxins in Food and Feed (CODEX STAN 193-1995)
5.2 The product covered by this standard shall comply with the maximum residue limits for pesticides
established by the Codex Alimentarius Commission.
6. HYGIENE
6.1 It is recommended that the products covered by the provisions of this Standard be prepared and
handled in accordance with the appropriate sections of the Recommended International Code of
Practice General Principles of Food Hygiene (CAC/RCP 1-1969), the Recommended International Code
of Hygienic Practice for Desiccated Coconut (CAC/RCP 4-1971) and other relevant Codex texts such as
codes of hygienic practice and codes of practice.
6.2 The products should comply with any microbiological criteria established in accordance with the
Principles for the Establishment and Application of Microbiological Criteria for Foods (CAC/GL 21-1997).
7. WEIGHT AND MEASURES
Containers shall be as full as practicable without impairment of quality and shall be consistent
with a proper declaration of contents for the product
8. PACKAGING, TRANSPORT AND STORAGE
Desiccated coconut shall be packaged, transported, and stored in accordance to the
Recommended International Code of Hygienic Practice for Desiccated Coconut (CAC/RCP 4-1971).

9. LABELLING
In addition to the requirements of the Codex General Standard for the Labelling of Pre-packaged Foods
(CODEX STAN 1-1985), the following specific provisions apply:
9.1 NAME OF THE PRODUCT
9.1.1 The name of the product should be "Grated Desiccated Coconut" preceded or followed by the
common or ordinary name legally accepted in the country of retail sale.
9.1.2 The name may indicate the grade of the product in accordance with the descriptions contained in
Section 3.2.4 (c).
9.1.3 The name should indicate the oil content of the product in accordance with the description
contained in Section 2.2
9.2

Labelling of Non-Retail Containers

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Desiccated coconut
world consumption is
at 5% at approximately
$ 0.3 billion

Information for non-retail

containers shall be given either on the container or in
accompanying documents, except that the name of the product,
lot identification, and the name and address of the manufacturer,
packer, distributor or importer, as well as storage instructions,
shall appear on the container. However, lot identification, and the
name and address of the manufacturer, packer, distributor or
importer may be replaced by an identification mark, provided that
such a mark is clearly identifiable with the accompanying
documents.
10. METHOD OF ANALYSIS AND SAMPLING

Provision

Method

Principle

Type

AOAC 950.49

Gravimetry

Described in the Standard

Counting extraneous
material with the naked
eye

IV

Ash
Extraneous
vegetable
material
Moisture

AOAC 925.40

Gravimetry
(loss on drying)

Oil content

AOAC 948.22

Gravimetry

ISO 660:2009; or AOCS Cd 3d-63 (09)

Titrimetry

Total Acidity of
Extracted Oil

Extraneous Vegetable Material

The determination is carried out by spreading 100g of the sample in a thin layer against a white
background and counting the extraneous material with the naked eye.

MARKET SURVEY WITH FUTURE ASPECTS

WORLD COCONUT INDUSTRY
The world consumes its coconuts as oil (55%), fresh (37%), desiccated (5%)and a small amount of a
long list of other products (by volume). The annual wholesale value of the coconut sector can be
estimated as approximatelyUSD 6 billion for 2006 comprised of; coconut oil USD 2.9 billion, fresh

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nutsUSD 2.2 billion, desiccated coconut USD 0.3 billion, other kernel products USD 0.3 billion, husk
products USD 0.3 billion, shell products USD 0.1 billion.

DESICCATED COCONUT MARKET DEMAND

Being a mass consumption item, desiccated coconut has a good market. United Nations
Conference on Trade and Development INFOCOMM Commodity Profile Report on Coconut showed
that the imports for desiccated coconut coming from top 5 countries (USA, UAE, Singapore, Germany,
Belgium) totals to 272, 223 tons in 2008.

By 2009, FAO (Food and Agriculture Organization of the United Nations) released a data on
trade import quantity on countries importing dessicated coconut and United States imports increased
by 4847 tons which is 15% increased from 2008. The same goes with other countries importing
desiccated coconuts.Furthermore, the data from 2008 indicates a total world importation of 272,223
tons and has increased to 283,321 in 2009 indicating a 4.07% increase in world importation of
desiccated coconut.

Year
2009
2009
2009

Country
United States of America
Singapore
Belgium

KF Nutrifoods, June 25, 2012

QUERY
Import Quantity
Import Quantity
Import Quantity

Page 8

Product
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated

Quantity
35856
27107
16372

2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009

Germany
Netherlands
United Arab Emirates
United Kingdom
Turkey
Poland
Australia
France
Russian Federation
Pakistan
Egypt
Canada
South Africa
Brazil
Spain
Saudi Arabia
WORLD

Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity
Import Quantity

Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated
Coconuts Desiccated

15612
13984
13781
13350
10228
8982
8847
8123
7563
7542
7396
6961
5525
5353
4042
3751
283,321

In addition to that, FAO data on imports of dessicated coconut worldwide from 2000 to 2009,
shows that the demand is stable and resilient over time as seen in the data by FAO on Total World
Import of Desiccated Coconut 2000 2009. It is to take note that there are some countries, like China,
and its imports on desiccated coconuts are not available in FAO data since 2000 up to present. It is to
presume that the consumption of desiccated coconuts is also growing in the emerging economies like
China.

Total World Import of Desiccated Coconut

350000
300000
250000
Import

200000
150000
100000
50000
0
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

COCONUT MARKET SUPPLY

The production of coconut in the Philippines has been favorably good as FAO data indicated
since 1992 2010. Asian and Pacific Coconut Community (APCC) published their market analysis on
January 1, 2011 Vol. XLI No. 1, expressed that the export quantity of desiccated coconut from the three
countries (Philippines, Indonesia and Sri Lanka) had an increasing trend of 4.14%/month in the year

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2010. Although there was a 5% decrease in production in comparison to 2009, the price of desiccated
coconut showed a significantly increasing trend in 2010 as opposed to the price in 2009.
PCA (Philippine Coconut Authority) reported the volume of coconut production from 2003
2010 averages at 14.675 Billion nuts yearly with a growth rate varying between -9.65% to 19.00%
annually. This can be translated to 2.4 Million MT being produced annually by the Philippines alone.

In Davao region, the supply of coconuts varies approximately between 2.4 - 3.4 Million tons
according to Philippine Coconut Authority and Bureau of Agricultural Statistics. In their volume of
production data (1990-2010) Davao del Sur produces an average of 674, 000 tons of coconut which is
second to Davao Oriental which produces and average of 1.5 million tons annually.
It is to note the table below shows that the volume of the production of coconuts in Davao del
Sur has a growth rate between 1 - 4% annually.

Other Crops: Volume of Production by Crop, Geolocation and Year (MT)

Coconut (with husk)
....Davao del Sur

2004

2005

748,345

751,908

2006

2007

2008

2009

2010

760,745

808,382

838,496

855,456

842,342

5241 nuts = 1 MT
In relationship with KF Nutrifoods supply analysis, the company has produced an average
estimate of 3600 MT of coconut shell charcoal in 2011 which made up approximately of 36,000 MT of
coconut shells annually or 3000 MT monthly. If 5% of the coconut shell supply is converted into whole
coconuts intended to produce desiccated coconuts that would give us a volume of 150,000 coconuts
monthly. Given with the whole scenario, that would be an estimated 0.04% of the overall total coconut
production of Davao Del Sur which gives us abundant supply of coconuts intended for desiccated
coconuts.
2010 = 4,414,148,394 Davao Del Sur Annual Coconuts Production Count
2010 = 1,800,000 GCF Annual Coconut Procurement
In regards to Philippine Development Plan 2011 2016 which recognizes the coconut as is an immense
source of food and non-food products the Philippine government intends to double exports of coconut products by
promoting value added products (refined coco oil, coco biodiesel, and oleochemicals) and ensuring that the supply of
coconut be available to processors. In addition to this, it also intends to improve the sectors credit access to promote
long-term financing for long gestation crops such as coconut. Hence, under strategy 2.1 of PDP 2011 2016 it is
stated that investments and employment shall be increased across an efficient value chain and to strengthen the

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countries agricultural exports by focusing resources on high value crops such as

coconuts.

The Philippine
government is
planning to focus on
other value added
products aside from
desiccated coconuts,
Overall, the price of
thus, affecting the
the desiccated coconut
supply of coconuts for
in the world market is
desiccators.
resilient and stable
from a 20 year survey
by different trade
agencies including
FAO.

In comparison to other
Asian countries that
shifted their
production to
vegetable oils,
worldwide demand for
desiccated coconut will
depend heavily on the
Philippines for supply

CURRENT RISKS OF TIGHTENING MARKET SUPPLY

Given that if only 0.04% market share of supply is to be procured by KF
Nutrifoods in Davao Del Sur area there are still several factors that are to be
considered to secure the supply of the coconut of the intended business. Still
holding true from the market report of Fresh Plaza (Global Fresh Produce News)
which puts special emphasis on crude oil as one of the main fundamentals
behind desiccated coconut market as biodiesel creates a strong linkage between
mineral oils and vegetable oils on the other side. This goes to say that if the crude
oil prices increases, biodiesel prices also increases with an immediate impact on
the underlying raw material availability and pricing as both the oil millers and
desiccated coconut producers have to compete for the same raw materials. In
theory, if there is a price increase in copra, coconut farmer producers are more
willing to sell their coconuts to the oil millers rather than the desiccators. Holding
true that despite the huge acreage of coconut-plantations, raw material supply
remains a huge burden for the Philippine desiccated coconut producers as they
are in continuous competition with coconut oil mills.
With worldwide demand for vegetable oils expected to increase at a phenomenal
rate in the coming years, it is clear that the present competition for raw material
will intensify further in the years to come all the more as the Philippine
Government seems to be unable to meet the targeted growth in coconut output
(target for 2010 is 3M tonnes with present output standing at approximately 2.7
M) which will widen the gap between supply and demand even further. Not to
mention the PDP 2011-2016 which intends to intensify the promotion of coco oil,
coco biodiesel, and oleochemicals. These trend are materializing in up to date as
desiccated coconut producers being sold out up to 2 to sometimes 3 months
ahead which leaves insufficient supply capacity once the demand increases
further for the next coming years. Although, we still have a high comparative
advantage among selected ASEAN countries like Indonesia, Malaysia, Thailand
and Vietnam for desiccated coconut , this still will affect the supply and the
market of raw materials domestically.
On the long term, it is evident that the producers in the various origins
will be unable to keep up with growing worldwide demand in especially vegetable
oils, which will leave less raw material for desiccated coconut production. In this
respect, the desiccated coconut world market will heavily depend on Philippine
coconut producers abilities to step up production to cater for the increased
demand as other origins, except maybe Indonesia, are ill equipped to make any
significant progress in stepping up desiccated coconut production.
Even though, we still have a high comparative advantage among
selected ASEAN countries like Indonesia, Malaysia, Thailand and Vietnam for
desiccated coconut production , this still will affect the supply and the market of
raw materials domestically.
WORLD MARKET ANALYSIS AND PRICE ANALYSIS
Export volumes of desiccated coconut from the main producing
countries such as the Philippines, Indonesia and Sri Lanka in 2010
increased and prices shifted up during the period concerned. The
export quantity of desiccated coconut from the three countries had an

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increasing trend of 4.14%/month in the same year. The total export of

the three countries in 2010 was 182,021 tons which was down from
192, 603 tons in 2009 or a decrease by 5%. However, the price of
desiccated coconut showed a significantly increasing trend in 2010 as
opposed to the price in 2009.

The price of desiccated

coconut has a direct
congruent relationship
with the coconut oil
market.

The Indonesian average priceincreased to US$1,478 F.O.B

Jakarta / Surabaya in 2010 from US$952 per ton in2009. The price was
also up by 43% to reach US$1,653 per ton in the Philippines as
opposed to US$1,153 a year ago. So did in Sri Lanka, the average price
in 2010 increased to US$1,644 per ton from US$1,188 per ton in 2009
or an increase by 38.4%. The average monthly price of DC for
Indonesia, the Philippines and Sri Lanka rose at a rate of 7.6%, 7.2%
and 4.2%, respectively in 2010.

Sri Lanka sold its desiccated coconut to the overseas market at

30,247 tons in 2010 as against 39,001 tons in the previous year or a
decrease by 22.4%. Meanwhile, Indonesia also faced an increasing
export volume to 37,596 tons during 2010 as against 29,249 tons a
year ago or up by 28.5%. However, the Philippines exported a lower
volume at 114,178 tons in 2010 as opposed to 123,353 tons last year
[2009] or a decline by 7.4%.
In the last five years [2006-2010], the Philippines exported
128,020 tons of DC annually. The EU market had the biggest share of
total export volume at 44%. It was followed by the American market
with 34.3% share where the USA and Canada were themain
destinations. The annual market share of DC from the Philippines to the
USA and

Philippines can dictate

a higher price rate for
desiccated coconut in
comparison to other
countries in the world.

Canada ranged from 35,778 tons to 45,856 tons in the last five
years, which is about onethird of the total export. The countries in Asia
and Pacific region such as Australia, Japan, Taiwan, Singapore, and
Korea had a market share of 20% of the total export.
The shipment of DC from Sri Lanka was 28,455 in 2010 which
mostly went to Middle East countries especially to United Arab
Emirates, Saudi Arabia, Iran, Oman and Jordan. The export share to
these destinations was 42.4% or about 12,065 tons.
The EU market was the second largest export destination of DC
from Sri Lanka with a share of 26.7%. Spain, Germany, France,
Portugal, United Kingdom, Italy, Poland, Greece and Belgium are the
main buying countries. The USA, Brazil, Chile, Mexico, Pakistan and
Australia are growing markets for the Sri Lankan desiccated
coconut.Indonesian exporters sold their DC mostly to the EU countries
for 2010 at about 42.8% of the total export. The second biggest market
was Asia and Pacific countries including Australia and New Zealand.
This region had a market share of 30.8% in which Singapore, China and
Australia were marketleaders. The American market,especiallyBrazil,
Chile and the USA have also shown agrowing demand for DC from
Indonesia.

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There is a need to
develop other high
value products that is
in line with desiccated
coconut production
rather than competing
on the lowest price of
nut buying.

Most industries that

starts of as desiccators
moved to increase
their profit with
integrated processing
procedures that results
in the utilization of the
whole coconut.

The price of desiccated coconut showed some congruence

with the price behavior of coconut oil in the world market. The two
prices [CNO and DC] were relatively high and were significantly
correlated at 70% -- meaning that about 70% of variation of DC prices
in the world market can be explained by the variation of prices of CNO.
A regression analysis of the prices [monthly price-data for the last five
years] indicates thatthe two prices are inelastic with an elasticity value
of 0.958. This elasticity value indicates that a ten-percent increase in
the price of CNO per ton [ref. CIF. Rotterdam price] could cause an
increase of 9.6% in the price of desiccated coconut. Currently, there is
an upward trend of vegetable oil prices including the price of coconut
oil in the world market. Consequently, for 2011, it is expected that the
price of desiccated coconut will also face an increasing trend.
In the period of January December 2010, Indonesian
pric150,000e of desiccated coconut grew at a rate of 7.6% per month
and with an average price of US$1,479 per ton. This was about 55.4%
higher than that of last year [US$952/ton]. Meanwhile, in the
Philippinesduring the said period, the price was US$1,653 per ton and
accelerated at a rate of 7.2% per month. The price was around 43.3%
higher than last years price at US$1,153 per ton. In the case of Sri
Lanka, the export price of DC averaged at US$1,644 per ton with a
monthly growth rate of 4.5%. This price was 38.4% more expensive
when compared to the average price in the same period last year.
Among the three main players, the Philippine DC exporters
offered the highest price to the world market. Its average price was
11.2% and 0.6% higher than that of Indonesian and the Sri Lankan
prices, respectively.
In regards to the domestic market, Franklin Baker FOB price is
currently (June 2012) estimated in between $1,278 - 1,323 /MT which
is being shared by Celebes Coconut Corporation and Peter Paul
Philippines desiccated coconut producers FOB prices. Their production
capability is estimated average between 9,600 14,400 MT annually
for Celebes Coconut and 18, 000 - 22,000 MT annually for Peter Paul
Philippines.
The need
As well as the opportunity, there is an increasing urgent need. The
currentindustry has high nut costs by international standards and is not
competitive in the mainstream commoditized coconut products of
desiccated coconut and oil,especiallyin relation to the very large, low
cost production capacity in the Philippinesand Indonesia. These
problems will be further aggravated by the upheavals in the coconut oil
markets.
High value added industries, outside of the commodity markets, will be
best placed to withstand the harsh market conditions within the
mainstream markets in the coming years as their competitive
advantage comes from the efficiency of utilization of the entire nut for
value added products and a diversity of end markets, as opposed to
simple competition on the lowest price of a nut.

KF Nutrifoods, June 25, 2012

Page 13

Commercial interests strongly aligned to industry interests

Most of the modern, integrated kernel processing businesses
began as desiccated coconut processors or oil millers. They gradually
added related product lines to make them the big integrated
coconut processing enterprises that they are today.
The commercial benefits of this business strategy are selfevident. At currentmarket prices, a desiccated business processing
10,000 nuts per day could increase its profits (EBIT7) from $180 to
$165 by investing an additional $60,000 $100,000 to take the first
step towards integrated kernel processing, initially selling coconut milk
and residue. With an incremental investment of around USD 0.5 0.7
million, and a move to full integrated production of high value products,
daily profits could rise to over $2285.
Figure 3: Rising profits with increased integrated processing

World coconut value

shows the 5% market
share of the desiccated
coconut in relationship
with other coconut
products.

This pathway takes advantage of the fact that there are similar
processing steps between coconut milk and desiccated coconut
production, so it iseasy to integrate these two product lines. Similarly,
liquid coconut milk processing and coconut water can share the same
UHT packaging or canning system, also assisting integration. Similarly,
the existing businesses selling high value finished products from husk
fiber, pith and shell have already identified the greater profit margins
that can be achieved in these finished products and have an interest in
expanding their business in these areas.
Technology and equipment are now widely available from
commercialequipment suppliers for all major products from integrated
kernel processing and high value husk fiber and pith products.

WORLD COCONUT MARKET VALUE

KF Nutrifoods, June 25, 2012

Page 14

Currently there are 14

desiccated
manufactures listed
under DTI list 2012
which gives room for
KF Nutrifoods
opportunities to
engage in desiccated
coconut production.

The world consumes its coconuts as oil (55%), fresh (37%), desiccated
(5%) and a small amount of a long list of other products (by
volume)The annual wholesale value of the coconut sector can be
estimated16as USD 6 billion for 2006 comprised of; coconut oil USD 2.9
billion, fresh nuts USD 2.2 billion, desiccated coconut USD 0.3 billion,
other kernel products USD 0.3 billion, husk products USD 0.3 billion,
shell products USD 0.1 billion.
Desiccated coconut markets
Desiccated coconut, is used both in the food processing
industry, for example in bakery and confectionary, as well as being
used directly by consumers. It is primarily and export led market.
Although world consumption of desiccated coconuts grew nominally by
1.5% per annum over 1998 2006, the actual volume of desiccated
coconut consumption and price of desiccated coconut varied
significantly between years, with a possible recovery in demand in the
recent years.
The main import markets are Europe (43% by volume), USA
(15%), Singapore (13%) and the Middle East (9%). The Philippines is
the dominant exporter with 50% market share by volume, followed by
Indonesia (25%) and Sri Lanka (17%) with all three countries with long
established industries. Vietnam is a recent entrant to the market with
approximately 4% market share24, reportedly gained largely in the
Middle East at the expense of Sri Lankan exporters.
Despite relatively stable demand and historic over capacity in
the industry, especially in the Philippines, there is currently not
significant over capacity in the desiccated coconut industry, for
example Philippine desiccated coconut mills are reported to be running
at an average of over 90% of capacity in recent years.

KF Nutrifoods, June 25, 2012

Page 15

A significant factor in this has been that a number of bigger and more progressive desiccated
coconut companies have diversified into new products and more integrated processing business
models. Examples include Peter Paul PhilippinesLtd which has the worlds largest desiccated coconut
mill and other major companies in Philippines, Indonesia, Sri Lanka, Malaysia and Thailand. However,
Indonesian businesses are reported to have been expanding production capacity in recent years to
compete more directly with the Philippines. Vietnams production capacity has also been growing.
This is likely to result in intensified competition in the industry and downward pressure on
prices. Producers with higher raw material costs, such as Sri Lanka and Vietnam will find it increasingly
hard to compete in this market.
PRESENT MANUFACTURERS IN THE REGION XI
-

Franklin Baker
Coco Davao, Primexcoco
Superstar coconut products co

MANUFACTURERS OF DESICCATED COCONUT IN THE PHILIPPINES

-

ATSON COCO, INC.

CELEBES COCONUT
CORPORATION
FRANKLIN BAKER CO. OF THE
PHILIPPINES
FRESH FRUITS DRINK
INGREDIENTS, INC./FIESTA
BRANDS, INC.
GLOBE COCO PRODUCTS
MANUFACTURING CORP.
PETER PAUL PHILIPPINE
CORPORATION
PRIMEX COCO PRODUCTS,INC.
SUPER STAR COCONUT

EXAMPLES OF BEST PRACTICE AT COMPANY

LEVEL
Individual businesses are proven examples of the commercial strength ofhigher value added business
models and industry strategies. Notable examples include Sambu Group (Indonesia), Renuka Group
(Sri Lanka), Peter PaulPhilippines, Wonderfarm (Vietnam), Tropicoir (Sri Lanka) and Hayleys Export (Sri
Lanka) as well as numerous Thai and Malaysian companies. Many of them share the same common
themes:

For kernel processing, the most successful businesses:

have incrementally evolved integrated processing business models, often starting
as simple DC or oil millers
differentiate their products through integrated processing and a continuous
process of diversification
now make, as a minimum, coconut milk/cream, coconut milk powder, as well as
traditional desiccated coconut and defatted coconut (residue).
have added coconut drinks and virgin coconut oil to their product range more
recently still retain production of original products, eg. DC, but with profit growth
driven by investment in high value products
can thrive, even in higher cost local industry, if using an integrated processing
business model

KF Nutrifoods, June 25, 2012

Page 16

To maintain competitiveness, research and development, quality control, and

customer service are major focuses of businesses in all three subsectorsInternational distribution networks are essential and Joint ventures (or long
term relationships) with partners in end markets are often an important part of
the success of export led companies
Domestic markets also have potential, if marketing activity is properly addressed
Manufacturing sites with good port access are an advantage
Businesses need to be of a medium scale, providing them:

management capacity to access export markets

sufficient volume to support a diversified product range

production volumes to achieve processing efficiency

resources to invest in ongoing product development

MAJOR PROCESSING ROUTES OF COCONUT KERNEL PRODUCTS

KF Nutrifoods, June 25, 2012

Page 17

TECHNICAL ASPECT
PROCESS OF MANUFACTURE

Coconuts
120,000

DEHUSKING
RC:360/hr @ 17 = 6120/hr)
DRC: 122,400 nuts
L:17

DESHELLING
RC: (360/hr @17 = 6120/hr)
DRC: 122,400 nuts
L:17

PARING
(240/hr @ 26 = 6240/hr)
124,800
L:26

DC CUTTER
WASHING BINS
L:1

STERILIZING TANK
L:1

GRADING MACHINE
L:2

RCO: 80-500 kg/hr @ 2

TCO:12000 kg DC/12 MT
L: 3

PACKAGING
L:3

DRYER
L:2

HIGH FAT DC

First step in the manufacture of desiccated coconut is the selection of coconuts. The quality of
desiccated coconut depends upong the quality of coconuts used. Fully matured coconuts of about 12
months are used for the prearparion of desiccated coconut. Fully matured nuts are stored with the
husk for about one month so that the water inside the kernel is absorbed. This also facilitates cocont
kernels to get separated from shell walls.
The coconuts are then dehusked and their shells are are removed. The brown portion of nuts
called testa is removed by scraping it off using a paring machine. These parings can be pressed out
after drying to get oil which can be used for soap making or for producing virgin coconut oil.

KF Nutrifoods, June 25, 2012

Page 18

Coconut kernel are broken into pieces, washed properly by going into the washing bins and
sterilizing tank. Afterwards, the sterilized kernel enters the desiccated coconut cutter to
bedisintegrated into various grades. The powder is then dried in a drier by spreading it out uniformly in
trays. The temperature in the drying chamber is maintained at about 180 O F and the powder is stirred
occasionnally during the drying process to ensure uniform drying. When powder is dried, it is cooled
and passed through a vibratory screens having different sizes (12, 14, and 16 mesh). The segregared
material is packed in oil proof, moisture proof polythene lined plywood boxes of 25 kgs. It may also be
packed in polybags of 250g , 500 g for retail sale.
During the process of manufacturing desiccated coconut, a number of byproducts such as
coconut shell, parings, and husks are obtained which can be converted into various items of great
items. Coconut Milk can also be obtained if we added a process of extraction after generating grated
coconut thus producing low fat desiccated coconut.
POLLUTION CONTROL
The main effluent produced in theprocess of desiccated coconut is theafter wash water having
dissolved solidsand coconut oil. The level of dissolvedsolids and oil is not significant and theeffluent
water could be safely used forirrigation purpose or drained out aftertrapping solids and oils. The water
havingdetergent used for cleaning equipment should be disposed of f separately.
Proper disposal facility should be made available for dumping refuge and perishable spoiled products
and a separate pit constructed for this purpose. Proper hygiene and sanitation will ensure environment
free of pollution
DETAILED PROCESS OF MANUFACTURE AND POTENTIAL PRODUCTS

MACHINERY UTILIZATION

KF Nutrifoods, June 25, 2012

Page 19

The Machinery Utilization in this study is at 60% in the first year and 75% in the second year.

BASIS AND PRESUMPTIONS

1000 nuts = 100 kls Desiccated Coconut
120,000 nuts daily = 43,800,000/annually = 4,380,000 kgs (4380 MT)
Ratio:
DC to PARINGS = 1.5%
DC to CSH = 3%
COCO to DC =52.4%
Working hours/Shift : 20 hours
No. of shift/day

: 1 day

Working days

: 365

Working Efficiency

: 75%

Margin Money

: 25% of capital investment

Rate of Interest

: 15%

Currency Exchange

: $1 = Php 42.00

Value of machinery and equipments :Taken on the basis of a particular supplier of machinery and
equipment on madeinchina.com and alibaba.com
Coconut processing machines (Dehusking, Deshelling, Paring)

Method Machine Works

(www.coconutmachine.com)
are provided by

Value of raw materials and others

KF Nutrifoods, June 25, 2012

: Based on the input of GCF president and Franklin Baker price

rates

Page 20

FINANCIAL ASPECTS
i) Land and Building
Particulars

UNIT

(i) Land

(ii) Building and other civil works

1
Total

Unit Price
50000
00
20000
00
Php

Amount in Pesos

Unit Price

Amount in Pesos

5,000,000
2,000,000
7,000,000

ii) Machinery and Equipments

Particulars

UNIT

(i) Coconut Dehusking Machines

17

(ii) Coconut Deshelling Machine @ 63,000

17

(iii) Coconut Paring Machine @ 147,000

26

(iv) Coconut Grinding Machine

(v) Washing bins

(vi) Sterilizer tank

(vii) Cabinet type hot air drier with blower, motor and other
accessories

20000
0
63000
14700
0
56000
0
10000
0
25000
0
42000

0
30000

3,400,000
1,071,000
3,822,000
560,000
400,000
1,000,000
840,000

(viii) Vibratory sifting machine

(ix) Platform weighing balance 2 @ 5040

10080

20,160

(x) Laboratory testing equipments

NS

15000

150,000

Php

11,863,160

Total

600,000

iii) Labor Cost

Designation

Unit

Unit Price

Amount in Pesos

a) Administrative
(i)

Manager / Food Technologist

20000

20,000

(ii)

Sales and Marketing

15000

30,000

(iii)

Clerk

10000

20,000

(i)

Supervisor

15000

75,000

(ii)

Chemist

12000

24,000

(iii)

Skilled workers

12000

60,000

(iv)

Semi-skilled workers

10000

60,000

(v)

Unskilled workers

60

9000

540,000

b) Technical

Monthly Salary / Wages

829,000

Php

Annual Salary / Wages

10,777,000

iv) Raw Materials

Raw Materials

KF Nutrifoods, June 25, 2012

Unit

Page 21

Unit Price

Amount in Pesos

(i)
P6.00/kl (156,000 kls)
(iv)

Fresh whole coconuts @ 120000/daily @

Labels and other packing aids

156000
NS

30
NS

4,680,000
100,000

Utilities

0
(i)

Electricity 3000 KWH @ P9.00/hr

(ii)

Water 800 KL @ P12.6 cu.m.

3000

800

12.6

10,080

Php

4,817,080

Total Recurring Expenditure

(Working Capital)Recurring Expenditure for 2
months

27,000

5,646,080
11,292,160

Total Capital Investment

FIXED CAPITAL
WORKING CAPITAL (2 MOS)
Php

18,292,160
16,938,240
35,230,400

FINANCIAL ANALYSIS
Cost of Production

Amount
67,752,960

Description
(i)

Total Recurring Expenditure

(ii)

Depreciation on building and other civil

350,000

works @ 5%
(iii)
equipments @ 10%
(vi)

Depreciation on machinery and

Interest on capital investment @ 15%

Php
$

Total

1,186,316
5,284,560
74,573,836
1,775,568
Amount

Turn Over (per year)

(i)
Desiccated coconut 4380MT @
$1278/MT = 60% Efficiency
(ii)

Coconut paring 657MT@ $520/MT

(iii)

Coconut shell 1314 MT@ $150

2628
657
1314
Total

Net profit (per year) (Before Income Tax)

Net Profit Ratio
Rate of Return
Break-even point
KF Nutrifoods, June 25, 2012

Page 22

1278
520
150
$
Php

3,358,584
341,640
197,100
3,897,324
163,687,608

$
Php

2,121,756
89,113,772
54.44%
119.00%
16.50%

FIXED COST
a) Depreciation on machinery and equipments
d) Depreciation on building and other civil works
e) Interest on total investment
f) Salary / Wages
Total

PRODUCT EXPANSION PLAN

MACHINERY SUPPLIERS
KF Nutrifoods, June 25, 2012

Page 23

1,186,316
350,000
5,284,560
10,777,000
17,597,876

A. Mesh-belt dryer for desiccated coconut

FOB Price: US $ 10,000 - 100,000 / Set
Port: Shanghai
Minimum Order Quantity: 1 Set/Sets
Supply Ability: 3 Set/Sets per Month
Payment Terms: L/C,T/T

Quick Details
Place of Origin: Jiangsu China
(Mainland)
Type: Dehumidifier

Brand Name: HC

Model Number: DW

Other Spec: According to

request

material: SS304

certification: ISO9001
Packaging & Delivery
Packaging Detail:

wooden case or custom requirement

Delivery Detail:

15 days

Specifications
the mesh belt dryer is low in the energy consumption
the mesh belt dryer is high capacity in the producing

DW series Mesh-Belt Dryer

Description: drying machine
The raw material can be spread on the converyer belt through suitable auxiliary mechanism such as
distributor,vibrating belt,pulverizer of granulator.The convey or passes one cannel or serveral channels consisting of
heating unit.Each heating unit is equipped with air heating and circle system.Each channel has one or sereral damp
exhaust system.When the conveyor passes it,hot air passes through raw material from up to low or against.In this
way it makes raw material dry uniformly.
Principle:
1.The materials are uniformly put on the mesh-belt by the material charger.
2.The mesh-belt uses generally 12-60 mesh stainless steel wire net and it is drawn and moved inside the drier by a
transmission device.

KF Nutrifoods, June 25, 2012

Page 24

3.The drier is composed of serveral units.For each unit,the hot air is circulated separately.Some exhausted gas is
discharged with a special moisture elimination blower.The waste gas is controlled through an adjustment valve.The
hot air passes through the mesh-belt covered with the material from the top to the bottom or against and this will
complete the heat and mass tranfer process.This process will bring the material water away.
4.The mesh-belt moves slowly,running speed can be freely adjusted according to the material temperature.The final
products after the drying will fall into the material collector continuously.The top and low circulation units can be freely
equiped according to the users demand.The unit number can be selected according to the demand.
Technical Parameters:

Type
DW-1.2-8 DW-1.2-10
Unit Number
4
5
Belt Width (m)
1.2
1.2
Drying Section Length (m)
8
10
Thickness of Material Covered (mm)
Temperature ()
Steam Pressure (Mpa)
Steam Consumption (Kg/h)
120-300 150-375
Drying time (h)
0.2-1.2
0.25-1.5
Drying Strength (Kg H2O/h)
60-160
80-220
Total Power of Blower (Kw)
9.9
12.1
Total Power of Equipment (Kw)
11.4
13.6

KF Nutrifoods, June 25, 2012

Page 25

DW-1.6-8 DW-1.6-10
4
5
1.6
1.6
8
10
10-80
60-130
0.2-0.8
150-375 170-740
0.2-1.2
0.25-1.5
75-220
95-250
9.9
12.1
11.4
13.6

DW-2-8 DW-2-10
4
5
2
2
8
10

180-500 225-600
0.2-1.2 0.25-1.5
100-260 120-300
18.2
22.2
19.7
23.7

KF Nutrifoods, June 25, 2012

Page 26

2. CE Approved coconut grinding machine

FOB Price: US $ 4,450 - 13,983 / Set
Port: QINGDAO PORT
Minimum Order Quantity: 1 Set/Sets
Supply Ability: 20 Set/Sets per Month
Payment Terms: T/T
Mr. zhang yunlongI'm Online
Chat Now!
Add to Inquiry Cart

Place Order via

Henan Province Sanxing Machinery Co., Ltd.

[ Henan, China (Mainland) ]

KF Nutrifoods, June 25, 2012

Page 27

Main Products: pcb recycling machine,eddy current separator,ultrafine grinding mill

Onsite Checked

No substantiated complaints in last 90 days

Supplier's last login time: Within 24 hours

Contact Details
View this Supplier's Website

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Product DetailsCompany Profile

Quick Details
Condition: New

Place of Origin: Henan

China (Mainland)

Brand Name: sanxing

Model Number: E500

name: coconut grinding

machine

capacity: 100-500kg/h

floor
space: 8*4*4.5(l*w*h)meters

warranty: 12months

power: 45kw

uses: all kinds of the wood

Packaging & Delivery
Packaging Detail:

according to customer's requirement

Delivery Detail:

8-15days after receiving the down payment

KF Nutrifoods, June 25, 2012

Page 28

Specifications
coconut grinding machine
1.no pollution
2.above 10 years experience
3.fineness 60-560 meshes adjustable
4.less power

CE approved coconut grinding machine

1. CE Approved coconut grinding machine (SAMPLE GRADES)

KF Nutrifoods, June 25, 2012

Page 29

environmental promotion cetification

5.TECHNICAL SPECIFICATIONS

KF Nutrifoods, June 25, 2012

Page 30

type

700

motor
power
30-37kw

fan power

rotary
speed

4kw

608*2*4.5
2990r/min 80-500kg/h 500meshe
M
s

output

fineness

floor
space

Home >Products >Machinery >Pharmaceutical Machinery >Other Pharmaceutical Machinery (21702)

KF Nutrifoods, June 25, 2012

Page 31

analyzer

1.5KW