ABSTRACT

The coconut industry is one of the country's major pillars in employment generation and foreign exchange
earnings. However, local production problems, the expansion in coconut hectarage of neighboring
countries, and recent developments in biotechnology research on other competing crops that have high
lauric oil content might affect its long-term sustainability and viability. In a highly liberalized global trade
environment, innovation and creativity in the country's coconut industry are needed for survival (Boceta,
1997). In order for the Philippines to be globally competitive, the country must exert all efforts to increase
coconut productivity, lower the cost of processing copra, coconut oil, desiccated coconut, and other
coconut products, improve the quality of copra and coconut oil, and develop downstream high value
coconut products through technological developments.

Indonesia has already dislodged the Philippines as the world's largest producer of coconut. Recently, the
Philippines' position as the top exporter of coconut oil in the world is also being threatened by the
increasing share of Indonesia in the world market. Unless the weaknesses and threats in the Philippine
coconut industry are faced, the country's share in the world market for coconut oil will continue to
diminish.

This paper, therefore, aims to present an industry profile with focus on domestic production,
consumption, external trade, problems/constraints, and market potentials; review past researches on
coconut, technologies generated, and the extent of participation of the private and public sectors; identify
research and technology gaps for the coconut industry; identify strengths and weaknesses in the
institutional structure of research and extension interface, as well as research complementation efforts;
and suggest recommendations and R & D agenda for the coconut industry.
 Introduction

The coconut industry is one of the country's major pillars in employment generation and foreign exchange
earnings. However, local production problems, the expansion in coconut hectarage of neighboring
countries, and recent developments in biotechnology research on other competing crops that have high
lauric oil content might affect its longterm sustainability and viability. In a highly liberalized global trade
environment, innovation and creativity in the country's coconut industry are needed for survival (Boceta,
1997). In order for the Philippines to be globally competitive, the country must exert all efforts to increase
coconut productivity, lower the cost of processing copra, coconut oil, dessicated coconut, and other
coconut products, improve the quality of copra and coconut oil, and develop downstream high-value
coconut products through technological developments.

Indonesia has already dislodged the Philippines as the world's largest producer of coconut. Recently,
the Philippines' position as the top exporter of coconut oil in the world is also being threatened by the
increasing share of Indonesia in the world market. Unless the weaknesses and threats in the Philippine
coconut industry are faced, the country's share in the world market for coconut oil will continue to
diminish. To address the issue on the global competitiveness of the country's coconut products and in line
with the objective of modernizing agriculture as stipulated under AFMA, there is a need to review past
research efforts and formulate a research plan for the coconut industry which will be used as basis by the
Department of Agriculture-Bureau of Research (DA-BAR) in setting priorities and properly allocating
resources among research program areas.
 Chapter 1

THE PROBLEM

Lambanog wine, also called coconut vodka, is an alcoholic beverage produced inthe Philippines. It is a
very popular alcoholic drink among men and women in the ruralareas of the Southern Tagalog provinces,
where it is widely produced. It is widelyenjoyed by the locals and festive occasions are almost incomplete
without it(www.sanpablounlimited.com). It is free from artificial chemicals because it is madepurely from
coconut sap. Lambanog processing starts with the pruning of the coconutflowers to let the sap drip from
the blossoms. The sap is then collected and cooked
using the fermentation process, producing coconut tuba. The tuba is distilled, cooled,
and filtered to produce the coconut wine. It may be added with fruit flavors such as berries, raisins,
calamansi, mango, and even gum flavor to offer a variety of taste.(Ascan, 2010)Lambanog wine is
produced in the Southern Tagalog region particularly in theprovinces of Quezon, Laguna, and Batangas.
The Quezon province produces most ofthe lambanog wine because of abundance in coconut plantations in
the area. In the province of Laguna, the Municipality of Liliw located in the eastern part, is considered as
the major lambanog producer and distributor. Lambanog wine production has been inexistence in Liliw
since the time of the Spanish colonization. Processors take advantage of the abundance of coconut trees in
the area. Lambanog wine production gives employment to many residents in Liliw. The market consists
of townsfolk as well asnearby towns.

1.2 Statement of the Problem

This study aimed to determine the feasibility of putting up of a Lambanogmanufacturing company in

General Santos City.Specifically, this study aimed to:
1. Determine the profile of the major players of the Lambanog industry along the following areas:
a. Services;
b. Capacity of industry;
c. Key success factors; and
d. The market;.

2. Conduct a structural analysis on the Lambanog industry considering the following aspects:

a. Barriers to Entry;
b. Threats of Substitute;
c. Bargaining Power of Supplier;d. Bargaining Power of Costumers; ande. Competition in the Industry;

3. Formulate strategies for a profitable Lambanog Manufacturing in General Santos City.

1.3 Significance of the Study

This study may be beneficial for the following persons:

The business-oriented persons

This study may give them insights one establishing Lambanog Industry in General Santos City as a good
income-generating business. The results may also help them in considering General Santos City as a
business-friendly urban place where they could start their planned business.

The coconut farmers

This study may help them in understanding that their coconut plantations could also be used for production of
Lambanog and not only buko products (buko juice, buko salad, buko pie, halo-halo, etc). They could
maximize theuse of their coconut plantations in producing Lambanog.

The alcoholic drinkers

This study may encourage them to choose Philippineproducts like Lambanog instead of other branded
alcoholic beverages. Lambanog is notonly the cheapest, but it is also the strongest (80-90% alcohol). And
also, if Lambanogis readily available in General Santos City, it would be easier to buy and much
cheaperthan other Lambanog brands from Luzon.

The government officials

This study may provide them awareness on the current performance of the coconut industry that should
be given more focus since the Philippines is a tropical country and they could make use of the coconuts
produced. It could also aid in formulation of laws regarding the industry.

The future researchers

This study may give them information and insight on the Lambanog industry and its feasibility within
General Santos City and neighboring areas. This may also enlighten them with new ideas concerning the
industry that may
Help in boosting the countrys economy.
Scope and Limitations

The study focused on the feasibility of putting up a Lambanog manufacturing industry in

General Santos City. The researchers gathered facts to describe the presents cenario of the
Lambanog industry in the Philippines. Data came from Mallari Distillery,Capistrano Distillery,
and Maitum, Sarangani Province. Moreover, readings from articles on the internet and journals
were used for additional information

For the proposed project, this covered the five aspects of the feasibility study namely

1.
Organizational aspect

deals with the type of business, form of businessorganization, organizational set-up, hiring,
utilization, and maintenance ofemployees.2.
Technical and operational aspects

includes the methods and means ofproduction resulting from the type and quantity of
manpower, machinery andequipment, raw materials and other supplies that will be used. It also
include thestudy of climate, soil requirements, and farming tools3.
Marketing aspect
- includes the operation and the status of the product, thepromotion and advertisement, the
pricing structure, projected sales and thechannel of distribution.4.
Financial aspect

covers the estimate of the total project cost, initial capitalrequirement, pre-operating cost,
sources of financing and financial evaluation.5.
Socio-economic aspect

includes the economic significance, its contribution togovernment in the form of taxes from the
workers, private and public business owners.

Research Design and Methodology

The research methodology of this study concerns with the ways and means of approaches to be
used to gather essential information related to the study. It includes research method, the
respondents, locale of the study, research instrumentation, and data gathering procedure.
 Research Method
This study employed the descriptive research design. It involves the description, recording,
analysis, and interpretation of the present nature, composition, or process of phenomena. It
focuses on prevailing conditions or how a person, group, or thingbehaves or functions in the
present. It often involves some type of comparison orcontrast.
This is the most appropriate design to be used in this study because it determines the feasibility
of putting up a Lambanog manufacturing in General SantosCity considering the organizational,
technical and operational, marketing, financial, andsocio-economic aspects. It also determined
profile of the players in the industry.

Respondents
The respondents of this study are the 3 major player
s in the Philippines
Lambanog Industry from Tayabas, Quezon Province, Mallari Distillery and CapistranoDistillery
and Vicada Distillery from Maitum, Sarangani Province.The Mallari and Capistrano Distillery
are just two of the big companies oflambanog in Manila. Vicada Distillery is owned and manage
by the Vicada family whichis a small business entity in Maitum Sarangani Province.
1.5.3 Locale of the Study
This study was conducted at General Santos City that is classified as a highly-urbanized first
class city. The city is the gateway to the opportunities, sights, soundsand culture
of SOCCSKSARGENregion. Backed with world class infrastructuretoday, GenSan and the
whole of SOCCSKSARGEN region can be reached by air, land,or sea. The city's major
economic activity is primarily anchored in two sectors namelythe agro-industry and fishing
industry. With the Agro-industry, endowed with rich volcanic soil, ample and welldistributed
rainfall all throughout the year and a typhoon-free climate, General SantosCity produces export
quality high valued crops suchas corn, coconut, pineapple, asparagus, bananaand rice. It also
yields quality exoticfruits, vegetables and cut flowers. The city is also a top producer and
exporter of qualitylivestock such as poultry, hogs, and cattle. But with the continuing growth in
populationand economy in the passing of time, a number of the city's agricultural lands
havegradually been converted into built up areas in order to address the relatively growingneed
of dwelling and viable spaces.
Research Instrumentation
The researchers used an interview guide and internet to gather information withtheir respondents.
An interview is a formal meeting in person, especially one arrangedfor the assessment of the
qualifications of an applicant. It is conversation, such as oneconducted by a reporter, in which
facts or statements are elicited from another.

It is
anaccount or a reproduction of such a conversation.Since the players are located far from the
researchers, the interview guidequestionnaire is sent through e-mail and the interview through
phone calls. The internetwas also utilized to substantiate comparison of industry in faraway
places.
1.5.5 Data Gathering Procedure
The researchers secured a communication letter to the players, requesting them to participate
in the study. Once the permission is granted, the researchers will send a questionnaire through e-
mail. For the interview, the respondents will set the date. There searchers conducted the
interview through question and answer method. After the data has been gathered, it will be
organized, analyzed and interpreted.

Chapter II
THE INDUSTRY AND ITS ANALYSIS
This chapter discusses profile of the major players in th
e Philippines Lambanog
industry. It discusses their services, the market, performance, the services they provideto their
clients. It also includes the identification of government agencies concerned andan analysis of
the strengths, weaknesses, opportunities and threats, and key successfactors of the Lambanog
industry.
2.1 Industry BackgroundIndustry Background
In 1996, the Philippines, Indonesia, and India accounted for 69.6% of the worlds
coconut production of 9.6 million metric tons. About 25.4%
of the Philippines arable
agricultural land was planted with coconut in 1997 (Sarian, 2010). Since then, efforts to
increase countrys competitive share of the coconut market have been underway,
including the push to plant more coconut trees, and to develop new coconut products.The
Philippine coconut industry is generally viewed as a monopoly, controlled by a very
privileged few. Small time coconut farmers livelihoods are being threatened as an
increasingly powerful United Coconut Planters Bank, has been buying out or absorbingmost of
the market share. In response, these farmers have become more organized andunited over the
past decade (Ravi, 2009). The lambanog industry, although it has beenaround for centuries, takes
up a fairly small share of the overall coconut industry.In recent years, the product has been
launched onto the world market, and it is hopedthat this industry will grow (Velasco, 2013). This
would, however, necessitate the

planting of more coconut trees, since production is dependent upon the amount of sapcollected
daily. The process of sap collection is largely dependent on the skill of the
mangagarit
, who have a very risky job. Although they are afforded health and housingbenefits due to the
risky nature of their work, their living situations and financialcompensation still leave room for
improvement. Unless more safety features areinstalled for them, it will be hard to attract new
workers for this position as publiceducation becomes more accessible, and other job opportunities
arise. As far as the environment is concerned, the lambanog industry does not poseany major threats,
since it is in their best interests to encourage more tree planting. Boththe product and the process do not
include any harmful chemicals; in fact, it is beingmarketed as an organic product.In the Philippines,
Quezon province is the major producer of lambanog winebecause of the abundance of coconut plantations
in the area. According to Villaflor(2005), there are 14 registered lambanog wine processors based on a list
provided bythe Department of Trade and Industry (DTI). Most of them are cottage small-scaleenterprises
with 4 to 25 employees. Some of the distillers get their supply of rawmaterials from their own coconut
farms while others rent out. The production capacity ofthese distilleries ranged from 25 gallons to as
much as 350 gallons of lambanog weekly.The three main distilleries in the country are also located in the
Quezon province - theMallari Distillery, the Buncayo Distillery, and the Capistrano Distillery (Vito,
2004).
2.1.3 Local
The Region 12 is endowed with rich natural resources and has the potential ofbecoming one of the fastest
developing regional economies in the country. The provinces of South Cotabato, Sarangani, Sultan
Kudarat, and General Santos City(SOCCSKSARGEN) had been provided with modern infrastructure
support under theSOCCSKSARGEN Area Development Project. The cities of Cotabato and General

Santos work as the regions main financial, business, and service centers.
Vicada family owns a coconut plantation in Maitum, Sarangani Province and theyare the only
entrepreneur that produces lambanog in their area. Their business startedin 2009 when the family decided
to make products out of coconut aside from copra. In2011, they expanded their small business by
distributing lambanog outside Maitum (thatincludes Maasim and Gensan). The expansion of the business
stopped there becauseof financial incapability which results to less exposure of the product in the market.
2.1.3.1 The Industry
Lambanog production is a thriving industry in coconut-producing provinces of thecountry like the
provinces of Laguna, Batangas, Albay, Cagayan, Camarines Sur, LaUnion, Pangasinan, and Quezon.

Lambanog plays an important role in the development of the coconut industry.The lambanog industry
provides another means of employment, and generatesadditional income for coconut farmers (Sanchez
1990). The revenue from the industry ishigh, but the exact figure is not available because some lambanog
operations are notregistered.In a coconut farm, the owner usually sets aside a certain number of palms to
betapped for lambanog production. The practice of nut and lambanog production assuresearnings for farm
owners. Studies have shown that lambanog operations generate morerevenues than nut farms (Coronado
1972; Suiza 1979). Lambanog far gives the highest

cash return in same area compared to farm solely for nut production. Its labor-intensiveoperation also
generates employment in the farm community.In the lambanog industry, it is common practice between
the coconut farm ownerand the lambanog producer to share equally the production cost and the product.
Thelandlord assumes the cost of cultivation and maintenance of the coconut palms whilethe lambanog
producer shoulders the cost of tapping and processing of lambanog.Coconut farmers prefer to produce
lambanog because it generates 3-4 timesmore income for them compared to copra making. However,
most of them have nochoice but to engage in copra production because they have no capital to operate
alambanog business. The biggest initial expense consists of the establishment of adistillation plant.
Running the business is also expensive because of the cost incurredfor labor, procurement of special kind
of bamboo poles suitable for the purpose,transportation, tools required, and in some cases rental of
coconut trees.In the total operating expenses, labor cost takes the largest share (70%-75%).Labor
expenses include the payment for the mananaggot or tapper (about 80% of thetotal labor cost) and
distillers or tagaluto (about 12% of the total labor cost). Of theremaining 25%-30% of the total operating
expenses, 90% goes to the procurement ofbamboo poles and 10% to the rental of the coconut trees,
transportation, tools, repair,and maintenance.Fandialan (1978) described the functions of the different
constituents of the laborforce. The manananggot takes charge of periodically cleaning the farm and the
palms,prepares the palms for tapping, trains the spadices to yield sap, taps dailyapproximately 110
spadices, and delivers the collected sap to the fermentation anddistillery plant. The distiller or tagaluto
who works seven hours daily supervises the

deposition of the sap in the fermentation contatiners, manages the fermentation of thesap, gathers fuel for
the distillery, distills the tuba, and packs the lambanog. The haulerdelivers the lambanog from
the production area to the entrepreneurs house and then to
the customers. Among the various operations involved in lambanog manufacture, the most time-
consuming is the tapping or collection of sap, which according to Suiza (1979)accounted for 58% of the
total labor requirement. This is followed by the distillery laborrequirement (22.6%). The other labor
requirements involve cleaning the upper portion ofthe palm to facilitate easy tapping (1.9%) and the
repair of the bamboo bridges (1%).The relative distribution of operating expenses in a lambanog
enterprise wasestimated by Fandialan (1978) as follows: 5.47% for rental of coconut trees, 69.77%
forlabor, 3.98 for transportation, 13.94% for supplies and materials, 0.39% for tools andequipment, 3.57%
for bank charges, 2.10% for depreciation, 0.30% for repair andmaintenance, and 0.48% for business tax.
The labor expenses were the highest, withrelative distribution of 3.99% for installation of bamboo
bridges, 81.16% for tapping,2.08% for hauling, 11.29% for distillation, and 1.48% for transporting the
product.Based on various studies of lambanog production, it can be estimated that for a5-hectare farm, the
manpower required to operate a lambanog business is as follows: 6-7 manananggot (tappers), 2 persons
who work for 2 hours per day to transport collectedsap to the distillery plant, 2 persons responsible for
distillation, and one person forbottling the product.The yield of sap from the Laguna Tall variety is based
on two spadices per palm,where one spadix has an average sap yield of 0.75 L per day. The months with
lowest(April to May) and highest (August to September) sap yield were taken into consideration. The
yield of lambanog is based on the 17.51% recovery efficieny. Thesap yield is comparable with those
reported in other countries: 1.49 L per day in Malaya(Marsden Skilton, 1931), 1.59 L per day in India
(Patten, 1938), and 1.58 L a day inCeylon (Nathanael, 1955)