UNIVERSITY OF THE PHILIPPINES MINDANAO

SCHOOL OF MANAGEMENT

CATFISH INDUSTRY

(PESTLE ANALYSIS AND PORTERS FIVE FORCES)

MGT 191

ALIGATO, JESSI ANNE NAKOL V.

GARCIA, SHANDY C.

RUEDAS, PAUL MARTIN

FEBRUARY 23, 2017

INTRODUCTION

Catfish (hito)

Clarias microcephalus is a slippery and black fish that has a moustache. It

has different names that differ in many dialects or languages. It is called catfish in
English, hito in Ilocos, ito in Pampanga and it is referred to as pantat in the Visayan
language. The scientific name previously mentioned referred to the native type of
hito in the Philippines. Catfish are usually found in murky waters like streams,
swamps and rivers.

According to Surtida and Buendia (2000), in the Philippines, there are two
common varieties the native hito and the introduced hito. The native hito that has
been scarce in numbers while the introduced hito refers to the variety, the African
hito. The said introduced variety has been produced more commercially compared to
the native kind due to its larger sizes. Although, there are two varieties, claims have
been present that the taste is the same for both of the varieties.

In the past, catfish, particularly the native variety, were available for harvest in
the natural bodies of water such as streams and rivers. Currently, according to the
Philippine Statistical Authority (PSA) in its 2016 report on Fisheries Situationer, 66
percent of catfish production were from the inland fisheries subsector. The said
report signifies that catfish that are available to the public for consumption are
cultured ones. Last 2012, the top production for catfish on a national level was
centered in Ilocos province. In Davao City, the largest producers of catfish are found
in Brgy. Los Amigos, Tugbok District. Produce from these cultured farms are mainly
for the needs of local restaurants not just in Los Amigos but also to the top
restaurants in Davao City.
PESTLE Analysis

POLITICAL

The Catfish Industry in the Philippines is continuing to expand and develop

through the years. The Republic Act No. 8550 cited as "The Philippine Fisheries
Code of 1998" is responsible in improving the productivity of the country's fishery
sector and provide conservation and protection to aquatic resources. Its main
objectives include the following: (i) Conservation, protection and sustained
management of the country's fishery and aquatic resources; (ii) Poverty alleviation
and the provision of supplementary livelihood among municipal fisherfolk; (iii)
Improvement of productivity of aquaculture within ecological limits; (iv) Optimal
utilization of off-shore and deep-sea resources; and (v) Upgrading of post-harvest
technology (Department of Agriculture). Even so, the presence of this Act is not
enough to develop the Catfish Industry because majority of the fishes captured and
aquacultured are for the export market. According to the NIFTDC or National
Integrated Fisheries Technology Development Center, a fisheries technology and
development center in Dagupan City, the government should have program for the
expansion of the catfish industry in order to develop the industrys productivity in the
market.

The government created a program which attempts to depart from the old
production-oriented and technology-based paradigm, thus shifting from Aquaculture
development to Aquaculture for Rural Development (ARD). Under the Bureau of
Fisheries and Aquatic Resources (BFAR), ARD is supposed to have the following
features: (i) Community-based; (ii) Simple, environment-friendly technologies; (iii)
Low capital investment; and (iv) Market-focused. Under the seven components of the
program, production of catfish was mentioned: A fish apartelle or 14 Condo Model,
another modern aquaculture technology designed for urban aquaculture promoting
the culture and propagation of local indigenous and exotic species such as hito
(catfish), ulang, dalag and tilapia will be developed (Escober, n.d.).

In 2015, the Department of Agriculture (DA) turned over P24.8 million to the
city of Davao for projects by the City Agriculturist Office (CAO) and the Veterinarian
Office to develop the catfish industry and to prepare the farmers for the expected El
Nio season. But despite the initial support from the government, the catfish industry
did not receive enough support to address the problems that El Nio will cause.
Barangay Los Amigos, a barangay specializing in catfish production, reported that
growers have been forced to harvest fish that are not yet fully grown due to the
decrease in water sources. The eateries fronting the catfish production areas have
increased their prices as a result.

ECONOMIC

As one of the aquacultured species in the Philippines, Catfish (Hito) industry

is still continuing to grow; it is also budding and projected to expand in the coming
years. The fisheries and aquaculture industry employed an estimated 1.5 million
people in 2010 nationwide (FAO, 2014). But the percentage for the catfish industry is
unknown.

Table 1. Fisheries statistics

1980 1990 2000 2010 2011 2012

PRODUCTION (thousand tons) 1576.0 2209.0 2290.0 3356.5 3130.5 3113.7

Inland 276.4 318.7 263.8 493.7 498.8 505.9

Marine 1299.6 1890.3 2026.2 2862.8 2631.7 2607.9

Aquaculture 199.9 379.9 393.9 744.7 767.3 790.9

Inland 32.1 81.9 112.0 308.3 306.9 310.1

Marine 167.8 298.0 281.8 436.4 460.4 480.8

Capture 1376.0 1829.1 1896.1 2611.8 2363.2 2322.9

Inland 244.3 236.8 151.8 185.4 191.9 195.8

Marine 1131.7 1592.2 1744.4 2426.4 2171.3 2127.0

Source: Food and Agriculture Organization of the United Nations.

Fisheries and Aquaculture Department (2014)

Table 2. Catches of the major finfish species in inland fisheries subsector in
2012

As % of
Major Species Volume (tonnes)
total

Freshwater tilapia 47 439.27 38.8

Carp 26 807.82 21.9

Mudfish 10 703.17 8.7

Gourami 6 608.42 5.4

Freshwater catfish 5 768.40 4.7

Freshwater goby 5 412.21 4.4

Milkfish 4 601.09 3.8

Silver perch 2 196.90 1.8

Manila sea catfish 1 874.69 1.5

Freshwater eel 1 149.18 0.9

Others 9 901.20 8.1

Total 122 236.59 100.0

Source: Food and Agriculture Organization of the United Nations.

Fisheries and Aquaculture Department (2014)

As of 2012, the catfish production in the Philippines covers 4.7% of the total
number of produced fish. This shows that the Catfish Industry has a potential in the
market for the succeeding year provided that support from the government will be
given for the development of the industry.

In 2014, Barangay Los Amigos, Davao City produces at least six tons of hito
per day, most of which are sold to restaurants located along the main highway of
Davao leading to the northern part of Mindanao. In 2015, the catfish industry became
an alternative source of income since rice production has become insufficient as a
main source of income in Barangay Los Amigos.

SOCIOLOGICAL

Social factors have a great impact in the hito industry. Since, there is an
increasing demand and interests in this fish species and this has made the hito
industry very vibrant. Collective efforts were made by government and non-
government entities like Department of Agriculture through Bureau of Fisheries and
Aquatic Resources (BFAR) and the City Agriculturists Office who intervened to
aware the people about the fish and change the false perception that the fish came
from the canals and are inedible. They created festivals like the Pantatan Festival
here in Davao City. The Pantatan Festival of Barangay Los Amigos has been
celebrated for the past 10 years every last week of October and it helped the
barangay to be considered as one of the tourist destinations of the city. The festival
begins with a motorcade around Mintal and Los Amigos after which hito
smorgasbord with the guest with different recipes from grilled (sinugba), ginataan,
deep fried, siomai, lumpia, chicharon were tasted. The festivals highlight is a catfish
grilling event along the Davao-Bukidnon road where there is also a line of eateries
that serve hito prepared in various ways. The festival is also attended by officers and
personalities from the government and private sector to show their support and
thanksgiving to the growing industry of hito. Moreover, in coordination of the
Department of Tourism, they innovate dishes that are expected to be included in the
list of must-try, unique food. Today, consumers are patronizing cultured hito and
areas like Los Amigos are considered as tourist destinations.

TECHNOLOGICAL

Technological innovations are needed to promote and strengthen the hito

industry. The systems and technologies used has developed in the last decades due
to government and nongovernment financial aid. They vary from very simple facilities
like family ponds for domestic consumption in tropical countries like the Philippines.
Some examples of these pond are those found in Los Amigos, Davao City. To high
technology like the intensive closed systems for export production used mostly in
Asian countries and some in the United States. However, much of the countrys
technology are relatively simple, often based on small improvements and changes to
improve the yield and survival rates like improving seeds, oxygen levels and
prevention of diseases.

Hito are easy to farm in warm climate, leading to inexpensive production.

However, challenges such environment degradation which flooding problem in most
areas like in Los Amigos are inevitable. One solution they found is to improve their
irrigation system. Since, hito farms need a vast area to cultivate, they are usually
found in remote areas, and so farm-to-market roads are needed to safely and easily
market hito and to attract potential investors to invest in the industry. Post-harvest
facilities are also needed because most wholesalers of hito are restaurants and hito,
unlike other fish products, cant be refrigerated because it easily spoils and will
become inedible. Lastly, fish processors for those who do not want to grow hito so
that they can process them instead. In the Philippines, there is no known by-product
for hito, but in some countries like Vietnam have hito by-products to reduce waste
such as oil, catfish mince patties, and also as catfish meal.

Moreover in the advent of the technological age, most businesses turn to

social media as a form of advertisements. Social medias popularity has allowed the
increasingly interactive engagement, consequently people especially tourists are
increasingly interested in hito dishes and is now promoted as agri-tourism
destination such as in Los Amigos.

LEGAL

Legal factors could greatly affect the operations of the catfish industry. Legal
factors could hinder or improve through imposing legislations implemented by the
governing body and other organizations that have gain authority over the said
industry. In a news article published by Carillo (2014), it was stated the Los Amigos
Aqua Culture Producers Organization (LAACPO), Bureau of Fisheries and Aquatic
Resources (BFAR) and the city government were the governing bodies of the catfish
industry. The producers organization was formed by catfish farmers in the locality.
Its aim is to support the farmers to improve the said industry. BFAR and the city
government on other hand, passes mandates and regulations that can affect the
operations of the farmers. Currently, aside from the resolution of declaring the last
week of October as Pantatan Festival, there are no other resolutions that hinder or
affect the production of hito. In another perspective, the lack of other resolutions or
mandates gives power to the producers the freedom to trade with other cities without
restrictions. It can also be inferred that there is lack of safety standards set by the
respective governing bodies.

ENVIRONMENTAL

Environmental factors can affect production in many ways. This type of factor
includes ecological factors, environmental issues and regulations. PSA (2016)
published a report that production of catfish on a national level shows that there is
diminishing production output on the months of January to March from 2014 to 2016.
However, the values in production levels only shows the totality produced by the
aggregation of far mers from the different provinces. A decrease in national
production may not directly reflect the production of all farms in the provinces. For
such, a case in Davao City proves to be an example. Mr. Santander of LAACPO
stated that there observable increments in the production of catfish in Los Amigos.
The local industry has been booming in the perspective of the producers.

A concern under the environmental factor includes the fact that among the
two varieties common in the Philippines, one is an introduced variety. An introduced
variety is classified as a variety that is non-native or of foreign descent. It could
potentially affect the ecological aspect of the certain area wherein biodiversity could
be affected mostly in a negative way. Guerrero (2014) published a report regarding
on the potential impacts of freshwater fishes in the Philippines. Catfish is one of the
fishes examined in the report. According to the said report, catfish was classified a
beneficial species both on economic and social aspect of an area.
 Political Factors Importance:
Increasing >
Unchanged =
Decreasing <
Government support >
Programs and Policies >

Economic Factors Importance:

Increasing >
Unchanged =
Decreasing <
Market for the product >
Increasing demand >

Sociological Factors Importance:

Increasing >
Unchanged =
Decreasing <
Acceptance of low quality fish <
Lack of awareness <
Food safety and health problems due to <
low fish quality

Technological Factors Importance:

Increasing >
Unchanged =
Decreasing <
Lack of infrastructure (e.g. facility, <
machinery, tools, practices)
Inadequate processing facilities >
Lack of technological improvements (e.g. <
aquarium insulating boxes etc.)
Inadequate transport facilities >

Legal Factors Importance:

Increasing >
Unchanged =
Decreasing <
Organized body with jurisdiction over the >
industry
Regulatory resolutions and mandates >

Environmental Factors Importance:

Increasing >
Unchanged =
Decreasing <
Catfish production >
Introduced variety =

PORTERS FIVE FORCES

Threat of
New Entry

Supplier Competitiv Buyer

Power e Rivalry Power

Threat of
Substitutio
n
(Low)

Fig. 1 Porters Five Forces

SUPPLIER POWER

In Davao City, supplier power is high because only small number of dominant,
highly concentrated suppliers exists. With support from the Bureau of Fisheries and
Aquatic Resources (BFAR), farmers of catfish in Barangay Los Amigos were
encouraged to start the production of Catfish in the early 2000s. In 2014, the number
of catfish pond operators in the community of Barangay Los Amigos, Tugbok District,
Davao City has grown to 100 with a combined area of 160 hectares.

In 2016, The Davao City Fishery Office (CFO) distributed 30,000 tilapia and
30,000 hito fingerlings to Dabawenyo fishermen at the regional office of the Bureau
of Fisheries and Aquatic Resources (BFAR)-Davao covered court, Magsaysay
Avenue, Davao City (SunStar Davao, 2016).

BUYER POWER

The Catfish Industry in Davao City has been developing and most of the
buyers are restaurants and karinderias all around the area of Barangay Los Amigos
and also those restaurants that are close to the location of production. Buyer power
in the catfish industry is high since these buyers, the restaurants and karinderias
buys in bulk or in large amount for food processing.

COMPETITIVE RIVALRY

There is a growing number of catfish growers and restaurants which serve

catfish dishes, especially among the Visayan areas. However they remain
unaccounted for because they are either small or have not registered their operation
with government agencies. Moreover, there is an increasing demand on catfish and
its production due to its increasing popularity. And hito restaurants are emerging
everywhere with different styles and dishes of hito to attract customers.
THREAT OF NEW ENTRY

The catfish industry like all other fish industry need a high start-up cost,
maintenance cost, capital labor intensity, acquiring knowledge and skills, customer
loyalty, legal barrier, and access to raw materials which are variables that make it
difficult to break into the industry. A high start-up cost is a barrier because a new
entrant must finance the purchase of land for the pond area, materials needed for
cultivating hito and materials for post-harvest like aquariums. Farming catfish is labor
intensive and undergo numerous process from its fingerling stage to harvest stage,
so you need lot of employees which is the reason for a high maintenance cost.
Education and training, in terms of funding, can also act as a barrier to entry.
Another barrier is customer loyalty because established hito restaurants have
already a lot of loyal customers, so it is harder to compete in the industry and
succeed. Legal permits are also needed such as business permit, transportation
permit, registration, etc. Moreover, regular monitoring of the fishpond and the water
for fish health management is conducted by the government.

THREAT OF SUBSTITUTION

Hito production is a fairly new industry. Information regarding the start of the
industry mainly focused in Los Amigos which started a little over 10 years. So far,
hito does have any substitutes aside from pre-existing aquatic products before the
production of hito. Tuna and tilapia are common examples of pre-existing aquatic
products that are consumed by the citizens of Davao. Although, there is another
aquatic product that currently gaining popularity, known as live grouper. Its impact to
sales and production of hito has not been yet identified. For this type of force, threat
of substitution is low for the catfish industry. It can also be inferred that hito is the
substitute that threatens the pre-existing aquatic products in Davao City.
References:

Carillo, C. 2014. Business World Online. Catfish is bringing in the money for one
Davao community

PSA. 2016. Fisheries Situationer. January March 2016.

Surtida, M., Buendia, R. 2000. SEAFDEC Asian Aquaculture Vol. XXII. Growing
Catfish in the Philippines.

Escober, Jr. , J. E. (n.d.). Aquaculture for Rural Development (ARD) in the

Philippines:Privatization vs. Community Property Rights .

SunStar Davao. (2016). http://www.sunstar.com.ph/davao/local-

news/2016/10/24/60000-tilapia-hito-fingerlings-distributed-davao-505516

Department of Agriculture.http://www.da.gov.ph