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DEFINITION OF THE INDUSTRY

During snack times, picnics or at dinner tables, people often indulge in sweetened jackfruit, macapuno, kaong, beans, nata de coco, ube jam, or halo-halo, pickled santol and mango, calamansi juice concentrate, soursop and avocado, puree and fried sweetened banana. Every meal, specially during summer, seems incomplete without any of these goodies.

Fresh fruit is varied and abundant in the country, specially during peak months. This situation is conducive to processing due to the low price of fruits. Fruits, once processed, make them easily available even during off-season in areas where supply may either be limited or where the product may not be available at all.

A major portion of the food processing sector is dominated by companies engaged in drying or dehydrating fruits. They also manufacture such products as canned pineapple and bottled jams, jellies, marmalades , nata de coco, kaong and jackfruit. Another substantial sector of the industry is engaged in the conversion of fruits, particularly mango, soursop, pineapple, citrus and passion fruits, purees, juices and concentrates. Others process products that may be packed in brine, made into sauces and pastes, pulped, pickled or frozen. Many export products are sold in bulk or institutional packages. Retail packs of these products are also sold in the local market.

(Detailed in Annex 1 are the specific HS codes and description of export products.)

II. MAJOR COMPONENTS OF THE INDUSTRY CLUSTER

For purposes of industry clustering and analysis, DTI Region VII has prioritized the processed tropical fruits sector.

The total capacity of Philippine fruit processing companies is difficult to ascertain due to limited data, hesitance of local companies to share information, and flexibility of these firms to reduce or increase their capacities depending on raw material availability and market demand.

While fruit production is concentrated in rural areas, most processing plants are located in the vicinity of urban areas like Metro Manila, Cebu and Davao. Mango processing is concentrated in Cebu, but there are small operations in Iloilo and Davao. Banana chips production is concentrated in Mindanao, but there are also companies established in the Visayas.

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III. INDUSTRY SIZE, LOCATION AND GROWTH

There are approximately thirty (30) companies in Cebu which are engaged in the manufacture and export of processed food. More than half of these export tropical fruits products. Others are in the processed/semi processed marine food products and various food products & foodstuff. Majority of these enterprises are small and medium-scale companies, with employment ranging from 25 to nearly 100 per food processing company. (Detailed in annex 2 is the List of some Cebu-based companies)

The industry estimates the number of direct and indirect beneficiaries of the processed food as almost 3,000 in Cebu. These fruit/vegetable processors were identified using the PSCC Code.

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IV. ECONOMIC IMPORTANCE OF THE INDUSTRY

Processed fruits belongs to the fourteen (14) priority export products identified under the Medium-Term Philippine Export Development (MTPEDP). As such, it receives full assistance and support from the government which sees the development and expansion of exports as key to sustain economic growth of the country.

The attention given by Cebu in developing the processed fruit sub-sector can be gauged from the myriad of opportunities that this product group presents in the world market. For instance, world trading of processed tropical fruits has grown by an average of 20 percent annually, or in value terms, has reached more than US$10 billion and growing fast.

Taking advantage of this surge in world demand for nourishing tropical "ethnic" food, Cebu contributed to the country’s economy posting total exports of US$156.67 million in 1998 from US$66.67 million in 1993, or an average annual rate of 16 per cent. (Please refer to Tables 1 & 2 for details. Although the percentage share of processed tropical fruits and vegetables has not been too consistent, it shares an improvement of 12% between 1991 to 1994 in Cebu.

However, the Information Network Center, Export Monitoring System 1998 presented another figure/data which are shown in table 3 & 4.

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Table I

Percentage Share to Processed Food
1991-1994

 

Year 1994

Year 1993

Year 1992

Year 1991

Total Processed Food Export Value

15,982,677

14,108,815

14,329,528

16,862,741

Percentage share (%) of processed fruits to Total Processed Food Exports

67%

66%

69%

55%

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Table 2

Processed Fruits & Vegetables
FOB Value in US Dollars
1991 - 1994

Product

Year 1994

Year 1993

Year 1992

Year 1991

Processed Fruits and Vegetables

10,631,099

9,316,311

9,936,017

9,2223,842

Source: BETP-EDP Unit
Makati City, Metro Manila

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Table 3

Comparative Annual Export
1994 - 1997

Cebu Port, MEPZ, PhilExport & Negros Port II

1994

1995

1996

1997

26,767,252

27,994,159

57,008,396

62,158,113

19.95%

4.58%

103.64%

9.03%

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Table 4
Export Monitoring System
1999

The processed food that were exported to other countries in 1999 were the following:

Item Code

Description

Volume

Value

2008.91

Banana Chips

4,302,074.81

3,901,104.44

0804.50-00

Guava

18,720.00

13,356.00

2009.80

Mango Juice

93,045.50

90,863.00

2007.19

Mango Puree

795,852.50

855,196.72

0801.30-00

Cashew Nuts

13,703.60

151,845.38

0804.50

Dried Mangoes

874,418.00

3,924,160.74

2008.80

Nata de Coco

50,248.00

49,989.00

2106.90-9

 

 

Other food preparation

631,410.60

972,571.52

Source: DTI – Region VII
Information Network Center
Export Monitoring System 1998

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V. Markets of the Industry

A. Local Market Volume

About half of the production of preserved fruits is consumed in the local market. One exception is the nata de coco. When there was a great demand of nata de coco in Japan, most of our production was exported to Japan.

Almost all of the production of banana chips is exported. Local consumption is limited due to the abundance of fresh bananas
(sab-a) , Making home production of these and substitute products like turon, banana cue, and pinasugbo is more practical for local consumption.

In 1993,much of the production of fruit puree was exported. Now some of the puree are diverted to the production of ice cream and fruit juices, products which are also exportable.

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B. Export Market

Foreign exchange earnings from processed fruits reached a total of US$103.64 million in 1994,a 9.76% improvement from the performance for the past four years (1991-1994). The industry’s target for export of the products under the Export Winner’ in 1998 is US$231.6 million, assuming no seasonal variation in demand and that there is sufficient inventory to supply demand. This figure was expected to contribute 0.84% to the Philippine export target of US$27.7 billion in 1998.

Export has accelerated in recent years as indicated in Table 3. The average annual growth rate from 1991 to 1994 9.76%.

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Table 3

Philippine Exports of Processed Fruits

Period

Value (Million US$)

1991

83.95

1992

78.76

1993

106.23

1994

103.64

Nata de coco, which was not in the list of major fruit export in 1992, dominated the scene in 1994 with its 21,59% share to the total processed fruit export. This is due to the unexpected huge volume of demand for the product in the Japanese market.

Together with nata de coco, four other processed fruit products made up 84% of the exports of the sector in 1994. These are banana chips (19.14%), mixed fruit preserves (12.55%), mango puree (12.11%) and dried mango (6.12%).

Processed fruits belong to a bigger sector. The total exports of the processed food sector reached US$438.48 million in 1994, augmenting sales by 9.76% for the last four years. Processed fruits exports accounted for about 23.645 of total exports of this sector for 1994.

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C. Infrastructure

The development of farm to market roads minimized the production cost of producers/processors and made the transport of products efficient. Establishing post harvest handling and storage facilities especially during peak season, also developed the industry, specifically the sub sector.

VI. Business Climate

Philippines is situated in a trading center of rich natural resources, is abundant in raw materials particularly tropical fruits.

A. Technology, Education and Training

Fruit processors employ food technologists to ensure that they meet the strictest quality expected of them. Cottage –sized companies supplying exporters are supervised by the companies for whom they sub-contract.

As in most processed food companies in the country, workers are trained by the companies themselves-especially when tightly guarded "trade secrets"; like food recipes have to be kept within the company.

From time to time, some national government agencies (e.g. DTI and the Philippine Trade Training Center (PTTC),training/educational institutions and non-government organizations conduct training on these matters:

  • food processing
  • production of certain food products
  • food packaging and labeling
  • good manufacturing practice (GMP)
  • marketing
  • international food related laws and regulations; and
  • quality standards

B. Labor and Equipment

Generally, the fruit processing business is more labor-intensive than capital intensive. However, there are fixed assets that do entail some investment, like machines , ovens and equipment on pureeing, drying and product testing evaluation.

Most of the machinery/equipment of SMEs are locally designed and fabricated . Automated assembly line production systems are seldom applied except in the production of dried mango, fruit purees, pineapple products and fruit juices.

In Cebu, mangoes, are dried using the oven and some are "sun dried". Other companies already undertake pureeing mechanically.

C. Financing

The Philippines has the highest loan interest rate in Asia compared to other countries. Aside from this, there are so many requirements and paper works before any businessmen can avail of loan.

D. Fiscal Incentives, Non-fiscal Incentives and NGO Services

The Export Development Plan (EDP) aims to improve the competitiveness of export companies by implementing reforms in the business environment.

Government intervention is recommended for the expansion of exports of processed fruits particularly in the following areas:

    1. Sugar Supply – Ensuring continuous supply of sugar to processors and exporters at world parity price, is a primary concern. All legislative actions threatening to curb the freedom of processors to choose to import should be stopped.
    2. Tariff Reforms- It is recommended that the tariff on all capital equipment and machineries, including laboratory, testing, and grading equipment, be lowered to three percent (3%).

      The industry association, Philippine Food processors and Exporters Organization, Inc.(PHILFOODEX), recommended duty-free importation of packaging products and raw materials which are not locally available. Tariff for those locally available is proposed to be lowered to three percent (3%).

      A consensus of participants in the National Export Summit, (NES) recommended 3% tariff for locally available raw materials and 5% for those not locally available. The NES was attended by representatives of exporting companies including those from the food and the packaging sectors, and of government agencies .

      Liberalization/Reforms in the shipping Sector for locally available raw materials and 5% for those not locally available.

      Liberalization/Reforms in the shipping ,stevedoring, arrastre and related services- Reforms in these industries are needed to ensure economical inter-island transport of raw produce and processed products. Efficient shipping and freight services will help broaden both the domestic market base of producers and also assist in the country’s international thrust.

      Development of production of fruit crops - Agricultural intervention is needed especially these areas:

      - Extension service to farmers especially in monitoring pest and disease outbreaks, enforcing quarantine laws, application of recommended production technologies (e.g. fruit bagging, tree dwarfing, integrated pest management, use of certified planting materials, pruning, flower induction, use of organic and bio-organic fertilizers and microbial insecticides, etc.) , and of handling techniques (e.g. use of plastic crates, hot water treatment maturity determination methods, dis-infection methods, storage systems, etc.)

      - establishment of breeding laboratories, seed farms and nurseries, possibly common service facilities (CSFs), to ensure available supply of quality planting materials.

      - establishment of CSFs for post harvest handling (for sorting grading, packing, storage) of fresh produce.

      organizing and strengthening farmer cooperatives and their linkage to financing and guarantee institutions.

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VIII. International Trade and Investments .

Processed fruits belong to a bigger sector, the processed food sector. Total exports of the processed food sector reached US$438.48 million in 1994, augmenting sales by 9.76%. Processed fruits exports accounted for about 23.64% of total exports of this sector for 1994.for the last four years.

Table 4

Highest Attained Volume of Phil. Exports of Selected
Processed Fruits form
1991 – 1994

Product

Volume (in MT)

Year Recorded

Banana chips

15,408

1994

Mango puree

7,963

1993

Nata de coco

15,785

1994

Mixed fruits preserved

16,215

1994

Juice or single fruit

7,378

1991

Cashew nuts0

3,645

1991

Mixtures of fruit and vegetable juices

909

1994

Other fruit puree and fruit paste

1,389

1994

Jams and marmalade

2,762

1994

Mango juice

3,100

1991

Sources : National Statistics Office and BETP

The volume of exports given in Table 4 indicates the Philippine’s capability to export selected processed fruits. The top five markets are still the traditional markets: United States, Japan, Hongkong, Korea and Singapore.

The United States has been a growing market and has maintained its position as the largest buyer of Philippine processed fruits, particularly banana chips, mango puree, dried mangoes, juice of any single fruit, and dried papaya. The United States is also the largest market for pineapple products (i.e. juices, juice concentrates and preserves).

Japan, the second largest market in 1994, used to rank third. The surge in demand of nata de coco which started in 1993 and still growing, is a major factor. Nata de coco exports to Japan contributed over US$20.39 million in 1994, from merely US$4,960 in 1987. The intensive promotion of nata de coco in Japan by Philippine companies have benefited other processed fruit products, whose exports to Japan have likewise grown. These are banana chips, mango puree, nata de pina, macapuno, jams and marmalades, dried mango, preserved mixtures of fruits, mango juice, and juice concentrates of any single fruit, preserved other fruits or parts, soursop juice, calamansi juice, palm fruit, macapuno and other fruit purees and pastes.

Korea, the top market in 1991 and 1992, placed fourth in 1993 and in 1994 due to its declining share.

Exports of processed fruits have increased at an average annual rate of 12.8% from 1986 to 1993. This followed the generally increasing trend of exports of processed food products, which have been growing at an average rate of 5.9% annually, over the same period.

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IX. Opportunities Driving the Industry

The food sector as shown in table 5 gives us an idea that it is growing fast except in 1995 were there is a slight increase due to the calamity done by typhoon "Ruping" on November of 1992. It is only in 1996 were the export market is encouraging.

REQUIREMENTS FOR GROWTH

Industry performance analysis revealed weaknesses in technology, sanitation and standards aspect of the industry-aside from poor facilities for research and development.

Industry strengths are in the willingness of local companies for modernization, technology transfer and ventures with the appropriate domestic/foreign principals. There is also a common appreciation of the need to improve the technology and quality of production to stay competitive.

Philippines food processors are too secretive in almost all aspects with regards to the industry especially in production. They are ready to accept programs from the government which are beneficial to the company but never share ideas especially in production. As a result, the industry grows slowly compared with other foreign countries.

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RECOMMENDATIONS/COURSES OF ACTION

  1. Food Processors should improve themselves, by not being too secretive especially when it comes to production.
  2. Salaries of production workers should not be based on minimum wage but should be based on productivity.
  3. Paper works and requirements in financing should be minimized to avoid long processing.
  4. Improve packaging of product and encourage them to attend seminar/technology training on export packaging which recently some of them attended.

    Some of the strategies identified for the development of the industry are:

    1. the conduct of study tours and trainings to improve technology,
    2. enhanced efforts for sanitation and other good manufacturing practices;
    3. increased quality-oriented efforts, and alignment of standards to that of the European market.

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Annex 1

III. INDUSTRY SIZE, LOCATION AND GROWTH

  1. PROFOOD INTERNATIONAL, INC.
    Highway, Mandaue City
    Contact : Mr. Justin Uy - President
    Mr. Jerry Uy -Export Manager
    Tel. No. (6332)3460-775,85209,82344
    Fax No. (6332) 86440
    Product: Dried fruits, purees, nectar and juices
  2. JOJO’S FOOD PRODUCTS
    72 Plaridel St., (POB 924) Cebu City
    Contact : Mr. Eugene Co – Export Manager
    Tel. No. 346-9572,346-3286,346-4054

    Fax No. 3462207
    Product: Dried Tropical fruits
  3. R & M PRESERVES
    441-1B V. Rama Ave. Guadalupe, Cebu City
    Mr. Angelo Ong - President
    Mrs. Elizabeth Siao-Ong – Asst. Gen. Manager
    Tel. No. 254-5738, 2543425,2545767
    Fax No. 54253
    Product: Fruit preserves, purees, juices
  4. CEBU LEGACY MARKETING CORP.
    Bo. Pilit, Cabancalan, Mandaue City
    Mr. Jaime Chua, Gen. Manager
    Tel. No. 346-2965-69
    Fax. No. 346-2767-68

    Product: Fresh mango, dried mango
  5. A & P FOODS CORP.
    Eddie Gothong Compound , Velasquez Ext.
    Subangdaku, Mandaue City
    Mr. Perry Co, Marketing Director
    Mr. Winston Sia- Operation Manager
    Telefax No. 345-0270
    Product : Tropical fruit purees
  6. BEEGYMEN FOOD PRODUCTS
    18Elisa Valle, Kanyon Road, Lahug, Cebu City
    Mr Ramon Yu, Gen. Manager
    Tel. No. 253-9458,70258
    Fax. No. 253-9458
    Product :Dried mangoes &Tropical fruit purees
  7. CAMILUZ ENTERPRISES, INC.
    787 Happy Valley Road, V. Rama Ave., Cebu city
    Contact : Mr. Camilo Go Siong, Pres./Gen. Manager
    Tel. No. 254-1572 - 73
    Fax. No. 53405,296-2258
    Product: Dried mangoes, purees and squid flakes
  8. INDAY’S DRIED MANGOES
    M. L. Quezon St., Cabangcalan, Mandaue City
    Contact : Mr. Vicente Tan - Manager
    Tel. No. 82407
    Fax. No. 346-3020
    Product : Dried mangoes and juices
  9. SEVEN D FOOD INTERNATIONAL, INC.
    Sacris Road, A.S. Fortuna St.,Mandaue City
    Contact: Eng’r. Francisco David , President
    Tel. 346-1221,346-1769
    Fax. No. (6332)346-0082
    Product: Dried mangoes, juice and puree
  10. YOUNG’S INTERNATIONAL TRADERs
    # 40-B Sindulan St., Mabolo, Cebu City
    Contact: Mr. Fred Tudtud – Manager
    Tel. No. 2532365
    Fax No. 3462612
    Product: Dried Mango and juices
  11. AGROLINE PHILIPPINES, INC.
    Kimba, Cansojong, Talisay, Cebu
    Contact Ms. Ilyn Chua – Marketing Manager
    Tel. No. 2962200,2720483
    Fax No. 2962200
    Product: Mango & pineapple puree concentrate
  12. BALLS FOOD PRODUCTS, INC.
    Canduman, Mandaue City
    Contact: Mr. Perry Ong – Gen. Manager
    Telefax No. 3466314
    Product: Dried mangoes &mango juice
  13. CEBU GRACE FOOD PRODUCTS
    # 38 Jose Abad Santos St., Villa Aurora
    Mabolo, Cebu City
    Contact: Ms. Cathrine Lopez – Manager
    Tel. No. 2313950
    Product : Dried Mangoes
  14. CELEBES AGRICULTURE CORP.
    6TH St. Cor. Lapulapu Ave., San Antonio Village,
    Lahug, Cebu City
    Contact : Mr. Rory Eddie Ong Yiu – President
    Mr. Joey Yepes – Liaison Officer
    Ms. Mila Lenpo – Cebu Representative
    Product: Banana Chips, coconut chips

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Annex 2

Specific HS codes and descriptions for export products

HDG. NO.
HARMONIZED SYSTEM CODE
DESCRIPTION
20.06 2006.00 Vegetables, fruits,nuts,fruit peel & other parts of plants, preserved by sugar (drained, glaced or crystallized):
  2006.00 10 Unshelled beans, olives and other vegetables except peas, shelled beans asparagus and sweet corn and mixture of vegetables preserved by sugar, whether or not frozen
  2006.00 90 Other
20.07   Jams, fruit jellies, marmalades, fruit or nut puree and fruit or nut pastes, being cooked preparations, whether or not containing added sugar or other sweetening matter.
  2007.10 00 Homogenized preparations Others
  2008.11 00 --Ground -nuts
  2008.19 00 -- Other , including mixtures.
  2008.20 00 -- Pineapples
  2007.91 00

--Citrus fruit

  2008.40 00 -- Pears
  2008.50 00 --Apricots
  2008.60 00 -- Cherries
  2008.70 00 -- Peaches
  2008.80 00 --Strawberries
-- Others, including mixtures other than those of subheading No. 2008.19
  2008.91 00 -- Palm hearts
  2008.92 00 -- Mixtures
  2008.99 00 Other
20.09   Fruit juices (including grape must) and vegetable juices, unfermented and not containing added spirit, whether or not containing added sugar or other sweetening matter.
    - Orange juice:
  2009.11 - Frozen
  2009.11 10 - Concentrates
  2009.11 90 - Other
  2009.19 - Other
  2009.19.10 Concentrates
  2009.19 90 - Other
  2009.20 00 - Grapefruit juices
  2009.30 00 - Juice of any other single citrus fruit
  2009.40 00 - Pineapple juice
  2009.50 00 - Tomato juice
  2009.60 00 - Grape juice (including grape must)
  2009.70 00 - Apple juice
  2009.80 00 - Juice of any other single fruit or vegetable
  2009.90 00 - Mixture of juices

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Annex 3

List of Products included in the Processed Tropical Fruits Export Winner and their corresponding PSCC.

G. Dried, dehydrated Fruits

PSCC DESCRIPTION
O58.96-14 banana chips or crackers
O57.97-06 dried mango
O57.97-06 dried papaya
O58.92-11 coconut chips, prepared or preserved,n.e.s.
O57.95-02 dried pineapple
O57.99-08 jackfruit
O57.30-02 dried banana (including plantains)
O59.30-19 juice of any other single citrus fruit, other than concentrate
O59.30-01 calamansi juice concentrate
O59.96-01 mixture of fruit or vegetable juices concentrate

A. Fruit Juice, Purees and concentrates

58.10-06 mango puree
O59.95-19 juice of any single fruit or vegetable, other than concentrates
O58.10-O9 other fruit puree and pastes, being cooked preparations, Whether or not containing added sugar or other sweetening matter
O59.95-11 mango juice other than concentrate
O59.10-04 orange juice, other than concentrates, not frozen
O59.30-09 juice of any other single citrus fruit, concentrate n.e.s
O58.10-07 soursop (guyabano) puree
O59.95-13 soursop (guyabano) juice,other than concentrate
O59.95-09 juice concentrate of any single fruit or vegetable, n.e.s.
O59.95-01 mango juice concentrate
O59.30-11 calamansi juice other than concentrate
O59.96-02 mixture of fruit or vegetable juices, other than concentrate
O59.95-03 soursop (guyabano) juice concentrate

B. Preserved Fruits

O58.96-12 nata de coco, prepared or preserved
O58.97-00 mixture of fruits or other edible parts of plants, or preserved
O58.10-03 jams and marmalades
O58.92-12 macapuno, preserved or prepared
O58.39-01 mango, uncooked or cooked by steaming or boiling in water, frozen, whether or not containing added sugar or other sweetening matter
O58.96-07 palm fruit (kaong) or edible parts thereof, prepared or preserved
O58.39-02 coconut, uncooked or cooked by steaming or boiling in water, frozen, whether or not containing added sugar or other sweetening matter.
O58.96-13 nata de pina, prepared or preserved
O58.96-19 other fruits or edible parts of plants, prepared or reserved n.e.s.
058.96-15 tamarind, prepared or preserved
058.96-16 fruit pulps, prepared or preserved
58.10-05 jellies, other than citrus fruit, being cooked

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