INTEGRATED COCONT PROCESSING SYSTEM

(Virgin Coconut Oil (VCO), Charcoal, and Coconut Meat Production)

EXECUTIVE SUMMARY

PROJECT PROFILE

Implementing Entity: Romblon State College

Location: Barangay San Jose, Carabao Island, Romblon
Time Frame: For Immediate Implementation
Project Cost: Approximately P490,000.00

BACKGROUND AND RATIONALE

In the Asian and Pacific Coconut Community report last 1996, Philippines is the second largest coconut planted
country in the world with 3.1 million hectares of coconut plantations around the archipelago. Coconut produce and
products (especially copra and oil) has greatly supported the Philippine economy in the past three decades. During
that time coconut products contributed a huge portion of our country’s economy, which copra and coconut oil are of
the main traded products.

Today, with the reduced importance to the coconut industry and the emergence of alternative products in the world
market (such as palm oil), coconut farmers hardly benefit enough from its trade to even live decently. The
middlemen, who control the trade and dictate prices, hog the much bigger profits from the industry than farmers.
These planters, who more often than not, have the value of their labor unjustly compensated for.

Another factor to this occurrence is the absence or rejection of new technology into our coconut oil production; oil
manufacturers are still using the dry process with copra, which is done off-farm, in large oil mills. From the farm, the
copra goes through a series of traders who stores the raw materials in warehouses from two weeks to two months
and transports them to the mills for processing. Now, transport to large oil mills in relatively distant towns and cities
is so costly that the farmers get the brunt by these traders of the need to stabilize prices of finished coconut oil
products.

Escalated by the fact that other jobs are only concentrated in major towns and cities farmers in the coconut producing
regions are left with little options. They either maintain their production even with marginal income or divert to other
livelihood businesses, thereby leaving the vast coconut plantations untapped today. An area of such a situation is
Romblon and its neighboring islands and islets. With about 100M metric tons of coconut production lying idle or with
minimal consumption for both local and transported trade, this is ideal for a localized coco-based production project.

One coco-based product, Virgin Coconut Oil (VCO) has increased popularity as a health supplement both here and
abroad, and has a huge potential of being a major traded product especially in the world market which makes its
production viable. The retail price of VCO in Metro Manila supermarkets and health stores ranges from P200.00 per
liter to as much as P600.00 depending on quality. On international trade, the market for VCO in China is almost
unlimited, albeit at a relatively low price compared to the U.S. market.

This proposal aims to harness the potential of Romblon as a major production hub for the much valued VCO. One
particular barangay, San Jose in the Carabao Island, basically a coconut producing area in cooperation with
Romblon State College (RSC) and its consultants, proposes to establish a VCO Integrated Coconut Processing
System project. The System would benefit the community with job creation and adequate livelihood. The proposed
Integrated Coconut Processing System shall put in use, Better Technology for higher production and productivity
levels and Sustained Marketing approach to improve project viability and to ascertain continued community
development. This involves production, processing, and marketing of the project products consisting of but not
limited to VCO, Charcoal and Dried Coconut Meat.

PROJECT OBJECTIVE

The proposed Integrated Coconut Processing System will help create small businesses for VCO, Charcoal, and
Dried Coconut Meat production. Under the system, each farmer and his family will comprise a Farm Unit handling
initial processes of the VCO production. Each Farm Units shall be creating much needed livelihood and jobs directly
in the farms where the coconuts are grown. Instead of just selling raw materials, farmers are now producing coco-
based products which are more widely traded.

To generate more employment with minimal investment cost, while increasing production and maintaining quality of
VCO produced, Hydraulic Milk Extractors (Presses) and Multi-Purpose Biomass Fed Dryers are supplied as basic
equipments under the Integrated Coconut Processing System for Farm Units and Processing Hubs, respectively.

The Processing Hub incorporated in the introduced system, where all the daily produce (VCO, Charcoal and Dried
Coconut Meat) of all Farm Units can be sold, provides the Sustained Marketing ensuring the continued progress of
the community. This now translates to a managed community development with incalculable social benefits which is
the prime objective of the project.

PROJECT ACTIVITIES AND IMPLEMENTATION SCHEDULE

With the target implementation of February 2007, RSC is now pursuing much needed farmer trainings and
preparations. Trainings in the RCS campus include the proper operation of both the Hydraulic Milk Extractor, and
Multi-Purpose Biomass Fed Dryer for the Farm Units and Barangay Processing Hub described below. Proper VCO
production processes and quality assurance practices are also being taught to the prospective farmers that shall
comprise the project’s Farm Units operators.

For the project preparations, site clearing and arrangements of designated RCS campus grounds and barangay
designated sites are being allocated for the anticipated machineries installations. These include shelter preparation,
material stockpile location, establishment of aseptic locations and other areas for the VCO, charcoal and Dried
Coconut Meat production.

INPUT / RESOURCE REQUIREMENTS & ANALYSIS

Adoption of Hydraulic Milk Extractors and Multi-Purpose Biomass Fed Dryers into the System greatly improved
production cost and increase production efficiency. Designed to operate manually the Extractors is able to process
72nuts per hour with an average production of 12.5 coconuts per liter of VCO. Drying the refuse of coconut meat
(wet sepal) after milk extraction is necessary to avoid rancidity. Biomass Fed Dryers is able to force dry at rate of
20Kgs per hour of Wet Sapal. Thus, using both developed machineries requires neither electricity nor fossil fuels.

Using the machineries above, good site location is needed for project implementation. With mature coconuts as the
raw material for the proposed system, and Romblon area being one candidate location to implement the Integrated
Coconut Processing System, RSC consultants visited the province last November 2006 for an ocular of the possible
sites to start VCO Production. With sufficient coconut plantation density, a good number of coconut farmers and
available location to start the project, Barangay San Jose in cooperation with Romblon State College (RSC) was
advised to be a Barangay Cluster Processing Hub.

PROJECT BENEFICIARIES

Establishing such a livelihood project directly in the farming communities will directly benefit the lives of the coconut
farmers and their families. The proposed system will give much needed income to these communities that at present
illusive to them.

Starting with this Barangay Cluster will generate at least 50 estimated jobs. If the same approach be increased
relative to the actual potential of the province, benefits to the municipality will come in the form of additional taxes
generated by such business generated. The increased buying power of the people arising from the income from the
jobs created will spur trade and economic activity of the community thereby generating more income for both the
local government and other members of the community. A small investment can alleviate poverty.

IMPLEMENTING ARRANGEMENT

With the proposed system of coconut processing for this project, the Barangay Cluster Processing Hub is to handle a
minimum of eight (8) Farm Units which RSC shall be selecting. For continued development with Sustained Marketing
of all products produced Romblon State College with its consultants will continually provide Distribution to the Local
and Foreign markets. Forged with the main Project Objective RSC undertakes the propose Integrated Coconut
Processing Project described in the feasibility below.

Integrated Coconut Processing System

San Jose Barangay Cluster Bi-level Production and Processes
(For Farm Units and Barangay Processing Hub)

Farm Unit Level:

This is the fundamental production level responsible for the Initial Processing, with all its usual farm equipments and
the supplied Hydraulic Extractors that were specially designed to run manually. The Farm Unit shall process the
collected coconuts into Raw VCO, Charcoal and Wet Coconut Meat. Output from several of these Farm Units in a
Barangay Cluster with enough coconut production will in turn serve as raw material supplies to the next production
level.

Processing

WET-COCONUT
RAW VCO CHARCOAL MEAT

Farm Unit investment in machineries with existing manual graters would amount to P15,000.00, for single Farm Unit
that can process 500 nuts per day on an 8-hr workday. This production unit will employ 4-6 members of the farmer’s
family. Additional investment is needed for initial operations purposes.

Provided with the basic assumptions below a single Farm Unit will have a daily revenue of P2,469.70 listed in detail
below.
 Basic Assumptions: Farm Unit Transfer Prices:
Cost per Coconut Php -
Price of VCO Php 50.00 per Liter
Price of Sapal Php 2.00 per Kgs (Wet Coconut Meat )
Price of Charcoal Php 5.00 per Kgs

Daily Production Summary Income

Farm Unit Operation: 12.50 nuts/liter
# of coconuts per day 500 nuts Php -
Daily Produce:
VCO 40 liters Php 2,000.00
Wet Sapal 160 Kgs Php 320.00
Charcoal 30 Kgs Php 150.00
Farm Unit Gross Projected Revenue Php 2,470.00

Barangay Cluster Processing Hub Level:

In this level the daily produce of the predetermined number of Farm Units shall be collected and further processed.
For this proposed project the San Jose Barangay Cluster Processing Hub will handle eight (8) different Farm Units’
daily produce that are part of the proposed system by RSC and its consultants.

Processing activities at the Barangay level:

1. Raw VCO is collected, quality checked and shipped to the Main Plant for final processing prior shipment in
aseptic containers.
2. Charcoal is crushed, graded and packed for shipment.
3. Collected Wet Coconut Meat are force dried coconut through a system provided Multi-Purpose Biomass Fed
Dryer.

Collecting
& Processing

8-FARM UNIT COLLECTED COLLECTED DRY -COCONUT

PRODUCE VCO CHARCOAL MEAT

The investment for machineries for the proposed Barangay Cluster Processing Hub costs P270,000.00. In addition
to the Machinery costs an initial fund of P100,000.00 should be provided for the initial Operational Expenses, and
Revolving Funds required.

Provided with the basic assumptions below the Processing Hub will have a daily Income of P3,119.52 listed in detail
below.

Basic Assumptions: Barangay Processing Hub Transfer Prices:

Price of VCO Php 55.00 per Liter
Price of Sapal Php 6.00 per Kgs (Dried Coconut Meat)
Price of Charcoal Php 6.00 per Kgs
 Daily Production Summary Income
Barangay Processing Hub Operation: 0.5
# of Farm Units 8 Php (19,757.60)
Daily Produce:
VCO 320 liters Php 17,600.00
Wet Sapal 640 Kgs Php 3,840.00
Charcoal 240 Kgs Php 1,440.00
Farm Hub Gross Projected Revenue Php 22,880.00
Farm Hub Daily Projected Income Php 3,120.00

ESTIMATED BUDGETARY/REQUIREMENT

For the proposed project the main investment costs for the supplied Machineries and Operation Expenses. These
are summarized in the table below with an equivalent income projection operating a Barangay Cluster Processing
Hub with 6 Multi-Purpose Biomass Fed Dryers.

Barangay Cluster Project Costs:

Equpment Description Unit Cost No. of Units Total Cost

Initial Operating Fund (OPEX) Php 100,000.00

Cluster Required Machineries:
Hydraulic Press 15,000.00 8 Php 120,000.00
Biomass Dryer 45,000.00 6 Php 270,000.00
Total Cost of Machineries Php 390,000.00
Total Project Cost Php 490,000.00

Income Projection:
HUB Operations with 6 Dryers (at Max Operation 500nuts/day)

Monthly Income Php 78,000.00

Less Operation Costs: Php 34,200.00
Labor Cost (4 Persons) Php 33,000.00 (P330*25 @ person)
Equipment Maintenance Php 1,200.00 (10Kg Biomass per Dryer a day)

Monthly Income Net of Cost Php 43,800.00

Yearly Income Php 525,600.00

ROI (in Months) 11.2

INITIAL PROCESSING

Fresh coconuts are husked, split, and the meat grated and pressed using Hydraulic Milk Extractors to produce
coconut milk with the systematic use of tools and machineries designed for maximum efficiency and convenience for
the workers.

The oil and skim milk is then separated by allowing the milk to stand in aseptic containers for about 18-24 hours. The
next level production machineries process the decanted oil from the milk solution to finished VCO product.
SECONDARY PROCESSING

Force drying the collected wet coconut meat using the Multi-Purpose Biomass Fed Dryers will results to a half the
weight dried coconut meat and will prevent rancidity prior to transport to the Barangay Cluster Processing Hub.

The coconut shells turns to high-grade charcoal by retorts designed to carbonize more than double the yield of the
traditional charcoal making methods.

The next level production-unit machinery processes the vco, dried coconut meat, and charcoal.

MARKET

Doctor-certified studies, here and abroad, indicate that virgin coconut oil has beneficial effects on the health
accounting for the virgin coconut oil (VCO) is fast growing popularity among health food enthusiasts.

The demand in the developed nations like the United States is growing due to its growing popularity within the
organic and natural food consumers. Retail prices of virgin oil average at $20.00/liter. The existing demand in China
is so huge that we are unable to supply its requirement. However, their buying price is much lower than the U.S. or
the local market. Buying price is about $1.70/liter, in bulk. Local demand is still limited, although growing due to
favorable publicity. Prices in the retail market average at P400/liter in supermarkets or drugstore chains.

Charcoal is very much in demand in Japan and Korea. These are exported in granulated form and graded for a
variety of uses. The most important of which is as raw material for activated carbon manufacturing. We have had
exports to these countries for granulated coconut shell charcoal.

THE FACILITY

This project can be set up anywhere in the country where coconuts are planted. As the farm units are either
manually operated these can be placed as near as possible to the plantation.

The actual area required for the barangay cluster processing hub with six (6) biofed dryers plant is about 50 square
meters. However, if we include provisions for storage and preparation, a 200 sq.m. floor area is recommended.

Total coconut requirement for this Barangay Cluster Processing Hub and its eight Farm Units would be 4,000 pieces
daily. This translates to approximately 200 hectares of coconut growing land. This is the area needed to support the
proposed Integrated Coconut Processing System with their daily coconut requirements. The Barangay Hub may
operate another shift should there be more farm unit produce and adequate supply of coconuts.

CONCLUSION

As seen from above, the project has several advantages: higher incomes for coconut farmers and workers, more jobs
created in the locality and a higher income for the entire community. These translate into social and economic
benefits.

If the coconut production in the area were sufficient to sustain two shifts in the operations, it would take only a few
months to recover investment just from the additional income.
Aside from the economic benefits, what is more important is the social benefit that would accrue to the community.
More money earned and spent in local services and goods with the increased income will result in a more stable
atmosphere for the entire community.

The local government increased tax collections spent for social services will benefit more people. If the NGO or
church organization supervising the project can get all satellite producers organized, the hold of the corrupt politicians
who buy votes can be broken, resulting in better governance.