Filipino companies pressed to pursue trade certification to seize Europe, organic market valued at $49.4 billion
January 29, 2019
Filipino companies were pressed to pursue trade certifications for coconut products to raise export earnings especially from organic food valued at $49.4 billion and will grow by 30-40% in 5 years due to countries’ Sustainable Development Goals (SDG).
Organic food products continue to grow with $3.5 billion in new sales in 2017 from the previous year. It now accounts for more than 5% of total food sales in the US.
”Consumption of organic food in the US grew by 6.4%. That’s 30-40 percent increase in consumption in 5 years. That’s not too far from now. And imagine the increase in demand in terms of volume. And somebody has to supply,” said Sanjaya K. Pathirage, Control Union regional manager.
The Organic Trade Association reported that even sales of non-organic food products increased by 7.4% in 2017.
Agreement on Sustainable Development Goals (SDG) signed by the United Nations’ 193 member-states is one of the major factors that will drive future market growth.
Giant companies Procter & Gamble, BASF, and Cargill have already collaborated on the production of sustainable certified coconut oil in the PhIlippines and Indonesia.
Under this German government-initiated program, companies are involving more than 10,000 farmers into their entire supply chain to help uplift farmers’ lives.
“They implement actions the world will agree on. It’s not just 193 member states, but the private sector committed to it,” said Pathirage.
For one, Unilever already integrated 15 sustainable goals into their entire overall strategic plan. It will bring health benefits to more than 1 billion people, reducing products’ adverse environmental impact while it taps the talent of 160,000 people.
“Global warming is real, glaciers are melting– Europe is hitting 40 degrees. People are complaining. These changes are interesting. It will change the way we do business,” he said.
Control Union, a global network of independent service companies, noted trade certifications will create important income from value added for coconut products.
“If you can meet requirements of your customers, you may also add value to your product
A certification program as ISO 9001 is used to implement quality system,” said Pathirage.
“Nobody will pay you a high price because you have ISO 9001. But having a quality management system will enable you to optimize capacity to improve efficiency.”
ISO 9001 improves quality on a management’s seven aspects—customer focus, leadership, engagement of people, process approach, improvement, evidence-based decision making, relationship management.
Obtaining quality management certification brings added profit as it cuts costs.
“When you lack a quality system, you have to add a lot of cost to rectify issues of quality. (You need to) optimize quality management against cost of failure.”
In a farm production, obtaining a trade certification for a small 2-hectare land may not make sense to generate improved income with cost equivalent to $250 per hectare, according to a Control Union study.
But consolidating land into a bigger 500 hectares will significantly cut certification cost down to a minimal $10 per hectare.
A cost-benefit study on virgin coconut oil (VCO) showed that certification cost for 2 hectares will bring $310 decrease in profit. However, a consolidated land of 10,000 hectares will generate VCO value of $18.673 million and increased profit of $868,550.
Ämong profit-increasing certification schemes Filipino companies may comply with are Global Good Agricultural Practice (GAP) and ISO 22,000.
“ISO 22000 is a food safety tool. Organic is increasing value. It helps increase volume of sales profitability and pricing. It helps you build topline. Fairtrade USA has now recognized coconut as product within their scheme, and they’re working towards improving it.”
Rainforest Alliance is GAP with focus on environmental sustainability and support for host farming communities. There are several other certification schemes for food safety – ISO 22,000, HACCP, IFS, GMP Plus and for occupational safety, OHSAS.
There are certification schemes for carbon foot printing, water foot printing, and food safety for certain religious groups, (Halal, Kosher). ISO 26,000 is related to Corporate Social Responsibility or CSR.
Transparency and reporting are also now a part of compliance to sustainability, community support, and related SDG goals.
Global Reporting Iniative (GRI) was first started by accounting firm Lloyds and Pryce Waterhouse.
“They used it as assurance tool, and we players moved into it. There are different assurance standards that companies got involved in. Singapore Exchange has mandated to people who are trading to either report or explain their sustainability related commitments.”
Malaysia, Indonesia, Hongkong followed suit with a mandate to public listed companies to communicate environmental-sustainability footprints.
Legal compliance in specific countries will also help companies access organic markets.
“There are legal constraints regarding marketing of organic products like it can’t enter Europe or America, so a legal framework in a geographical area becomes an important factor.”
The growth of the millennial generation and technology will also drive increased organic market.
“The way millennials make choices have changed a lot. The way they look at the world. The value they perceive is very different from previous generations. They want to make responsible decisions to make betterment of the planet.
Through internet and related technologies, the coconut craze has fast spread with reports of its good health benefits.
“This will change the way we interact with anything, with food, with whatever we consume. It will drive consumerism in a whole new level. Today before enjoying your meal, you put it on Facebook. It has given a different dimension on choices. I’m more interested now on how my friends are living their lives,” said Pathirage.
Facebook, Instagram, search engines, big data-small data enabled delivery of information different way or on a personal basis.
”It creates a personal experience right in front of you. Your choice is driven by these very unique special techniques that they use in marketing.” End (Growth Publishing for UCAP)
1. UN’s Sustainable Development Goals
2. Unilever Strategic Plan
3. VCO Cost-Benefit