Presentation by the GVC Center's Ajmal Abdulsamad on the coconut value chain at a regional stakeholder meeting in Georgetown, Guyana on April 22, 2016.

1. Coconut Global Value Chain
Regional Stakeholder Meeting, Georgetown, Guyana
Ajmal Abdulsamad
Duke University
Center on Globalization, Governance and Competitiveness
April, 2016

2. 2
Overview
• Global Value Chain Analysis?
• Global Market Trends & Opportunities
• Emerging Regional Value Chains
• Public-Private Alliance to Foster Inclusive
and Sustainable Industry Growth

3. 3
Why Global Value Chain Analysis?
• Industry development strategies need to be informed by a global
and local perspective
• Global market trends, firm strategies & buyer requirements
• Local industry capabilities
• Value chain stakeholders need strategic alignment and
coordination, particularly, in combining private investment and
policy action
• Stakeholders champion upgrading strategies that promote
inclusive and sustainable value chain growth

4. Coconut Value Chain, Global Market Trends &
Opportunities

5. 5
Coconut Value Chain: Input-Output Structure
Coconut Kernel
•Household
consumption
•Baking, alternative
dairy, and
confectionery
industries
•Cosmetics
•Personal care
•Pharmaceuticals
•Detergents
•Local fresh water
•Pasteurized &
packaged coconut
water (sports & natural
drinks)
Inputs Production Primary Processing
Advanced
Processing
Manufacturing End Market
Coconut husk
Coconut shell
Dried Kernel
Copra
•Virgin coconut oil
•Desiccated coconut
•Coconut milk & cream
Oleochemical (Fatty
Acids, Fatty Alcohols,
Glycerin)
Mature Coconuts
Processed & packaged coconut water & various
flavors
De-husked nuts
Crude
coconut oil
RBD coconut oil
Bottled
coconut water
Coconut coir &
pith
•Natural fiber composites
•Geotextile products
•Horticulture
•Construction
•Automotive
Charcoal & activated carbon
Air & water
filtration
Land
Water
Seedlings
Agrochemicals
Biodiesel
Copra Cake
Institutions:
1) Country Level: Coconut Board/Authority/Associations; Coconut Research Institutes; Ministries of Agriculture; Ministry of Trade & Industry; and Bureaus of Standards
2) Regional/Global Level: Asia Pacific Coconut Community; and Coconut Genetic Resources Network
Research &
Development
Legend:
Coconuts-food chain
Coconuts-chemicals chain
Coconuts-’sports drink’ chain
Coconut-coir Chain
Coconut-activated carbon chain
By-products
Tender Coconuts
Finance

6. 6
Global Market Trends: Coconut Products
No longer a vegetable oil
commodity
•RBD coconut oil: stagnation
3-4MMT, market share
from12% to just below 3%
Niche market:
• ‘naturalness’ in cosmetics,
personal care, and
detergent markets
• Competing only with palm
kernel oil
•Virgin Coconut Oil:
• Scale independent
• Favorable
environmental and
health profile
• Premium price
Global Market Share: Nine Major Vegetable Oils (1960-2010)
Source: APCC, Frost & Sullivan

7. 7
Global Market Trends: Coconut Products (Cont’d)
• Marketing strategy of lead firms
boosted consumer awareness and demand
for coconut products
• Coconut water
• US$1.36 billion in 2014
• 25% per year growth to US$4 billion in 2019
• Pepsi (Kero Coco, O.N.E, Tropicana Coco Quench),
Coca-Cola (Zico), & Vita Coco
• Alternative dairy (almond, soy, & coconuts)
• US$1.98 billion in 2014
• 18% per year growth to US$6.27 billion in
2021
• WhiteWave Foods Inc., Blue Diamond Growers
Inc., Living Harvest Foods Inc.
• Other products: coconut sugar, flour, etc.

8. 8
• Activated carbon and coir/natural
fiber from coconut shells and husks
• Coconut shell – activated carbon
market
• regulation of air emissions (mercury)
• US$ 2.35 billion in 2015
• 10% growth to US$3.92 billion in
2019
• Coconut husk
• Geotextile, horticulture & composite
materials
• 10-15% of potential enters commercial
markets mainly from India and Sri Lanka
• One lead firm, Scotts Miracle Gro, annually
utilizes US$108 million coir in its global
operations
The automotive industry has utilized natural fiber-based composite
materials for interior applications
YOY: year on year
Source: Frost & Sullivan
Global Market Trends: Coconut Products (Cont’d)

9. Firms and Value Chain Governance

10. 10
Lead Firms and Governance: Brand Manufacturers
Cosmetics, Personal & Home Care,
Pharmaceuticals
Firm HQ
Annual
Sale
U.S. 83
France 30
U.K. 64
U.S. 17
Germany 8
Packaged Food
Firm HQ
Annual
Sale
Switzerlan
d
100
U.S. 34
U.S. 67
U.K. 64
France 26
Beverages (Health & Wellness)
Firm HQ
Annual
Sale
U.S. 46
U.S. 67
Switzerlan
d
100
France 26
Austria 6
Note: 2014 sale figures in US$ billion
• Multiple business segments, focused on sustainability initiatives, naturally-derived ingredients, not an exclusive focus on ingredient
certification
• Mondelez International, launched in 2012, a 10-year commitment US$400 million program that finances sustainability
partnerships. In India, it supported intercropping in coconut plantations, working with 100,000 coconut farmers in four states

11. 11
Lead Firms and Governance: Brand Manufacturers
Firm HQ
Annual
Sale
Industry (Brand)
U.S. 2,500 Packaged Food
(LouAna)
U.S. 2,150 Packaged Food
(Spectrum)
U.S. 1,000 Packaged Food & Beverage
(Goya)
U.S. 250 Coconut Water, Coconut Oil
(VitaCoco)
U.S. 90 Coconut Oil
(nutiva)
U.S. 9 Packaged Food & Beverages
(COCOZIA, EPICUREX)
U.S 1.2 Personal Care
(Oxy)
U.S. N/A Nutraceutical
(Nature’s Way)
Note: 2014 sale figures in US$ million
Source: Euromonitor, PrivCo, OneSource

12. 12
Lead Firms & Governance: Standards & Certifications
•ISO 22000 (under revision) is a complete food safety and quality management system incorporating the elements of prerequisite programs
(Good Manufacturing Practice (GMP), Sanitation Standard Operating Procedure (SSOP), & HACCP and the quality management system.
**BASF, Cargill and GIZ partnership since 2011 introduced the world’s first ‘Rainforest Alliance certified’ copra produced in the Philippines.
Specialty
Industry Codes of Practice
(Brand manufacturers &
traders)
Mandatory Public Regulation: Food Safety
Management System
•Hazard Analysis & Critical Control Points (HACCP)
•ISO 22000 FSMS*
•(Codex International)
•Sustainable Sourcing Strategies
•Corporate Social Responsibility Programs
•Organic
•Fairtrade
•Rainforest Alliance**
•Mandatory (public) and voluntary (private) Standards for coconut food products
•Consumer demand for non-GMO
products is driving certification

13. Emerging Regional Value Chain

14. 14
Emerging Regional Coconut Value Chain
Non-oil Merchandize Exports, Nine Caribbean Countries
Production Primary Processing Advanced Processing Manufacturing End Market
Refined Coconut Oil
Markets:
St. Lucia (US$1.14
million); Jamaica
(US$1.53 million);
Antigua and Barbuda,
Dominica, St. Vincent
and the Grenadines
Markets:
United States,
and Dominican
Republic (< 10%)
Trinidad refines coconut oil
and exports under different
business relations to the
countries in the region
(US$2.7 million export in
2014)
Dominican Republic processes
coconuts into grated, cream
and milk
Guyana
Supplied approximately US$6
million coconuts and products
to Dominican Republic,
Trinidad, and other countries
in the region

15. 15
Growth Outcome
8,320
13,481
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2008 2014
ThousandUS$
Intra-regional Extra-regional
Desiccated coconut/kernel Products
HS Code: 080111
62%
28
4,905
237
1,642
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2008 2014
ThousandUS$
Intra-regional Extra-regional
174
folds
6,547
De-husked Coconuts
HS Code: 080119
Industry Level:
• Export growth of semi-processed and brand manufactured coconut products
• Including, coconut water & virgin coconut oil
• Growing interest in domestic and foreign investment
• Vertical integration – large commercial farms
Household Producer Level:
• Average farmgate prices have progressively increased more than tripling
7 folds
1,507
2,821
192
173
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2008 2014
ThousandUS$
Intra-regional Extra-regional
Refined RBD Coconut Oil & Fractions
HS Code: 151319
87%
-10%

16. 16
Emerging Regional Value Chain: Constraints to Investment and Growth
Liner Shipping Connectivity Index, Caribbean Countries and World Average, 2014
• International transport costs
• Comparative advantage in liner shipping connectivity
• Shipping a 20-foot container from Miami to
the Caribbean countries costs lower than from
the Dominican Republic
• High cross-border trade costs (customs & document
prep., terminal handling)
• Small scale & limited size and scope of related
R&D activities
• Staffing and research infrastructure
• Scale inefficiencies
• Higher R&D spending per Ag. GDP or farmer, but
still very small at aggregate level
• Absence of a regional quality control system for
agricultural health and food safety
• Tiered approach – CRSOQ and national bureaus
• Compliance voluntary
• Market access regulatory changes in the U.S.
Determinants of Intl. Transport Costs:
•Size of the economy
•Trade imbalance
•The capacity and efficient management of port infra.
•Type and value of traded goods
•Level of competition in shipping services
•The geographic distance

17. 17
In-country Main Constraints
• Better leverage capabilities of CARDI &
regional universities
• Domestic seedling supply is either non-existent or at best the waitlist
takes years to access the desired number and variety of seedlings
• Risk of lethal yellowing, red ring, red palm mite prevail across the
region although with some variations
• Tailored financial services to smallholder farmers is a common
challenge across the countries.
Access Planting
Material & Services
• A predominantly fragmented industry structure (weak value chain
linkages) and smallholder dominated farming system
• High transaction costs and scale inefficiencies in delivery of key
services –market information, technical extension, quality control and
finance
• Weak standardization and certification of the non-traditional products
• Small structure and weak end-market presence limits flow of consumer
market information to the local industry stakeholders and feed into the
weak market intelligence and export promotion.
Weak Industrial
organization
Lack of Statistics &
legacy of ‘copra
oil’ era
• Unavailability of reliable industry statistics about the plantations,
age-profile, production capacity, and trade is a major source of
investment risk
• Despite its rising contribution to the agricultural GDP of the target
countries, coconut industry does not have priority policy support.

18. 18
Options for Upgrading and Market Frontiers
Products Markets & Capabilities Small Islands
States
Continental
Caribbean
Regional Hubs
Countries
RBD Oil &
Fractions
Country/Regional Markets
Scale & Capital Intensive
Market linkages & connectivity
Human capital (chemical industry)
Trinidad & Tobago
(Regional Market)
Virgin Coconut
Oil
Country (small) & global markets
Processing scale independent
Food safety & quality control reg.
Market linkages & connectivity
Alternative
Dairy &
Desiccated
Global markets
Medium/large scale
Food safety & quality control reg.
Cold chain infrastructure
Market linkages & connectivity
Dominican Republic
(Extra-Regional
Markets)
Coconut Water Country/Regional/Global Markets
Scale independent
Cold chain infra. (packaging)
Food safety & quality control reg.
Market linkages, connectivity
Jamaica (Extra-
Regional Markets)
Husk Products Export–horticulture (volume and
stable supply of husks)
Guyana Dominican Republic
Shell Products Scale & capital intensive
Small-scale/country Scale-independent /Regional Industrial scale/global markets

19. 19
Realizing Potential Opportunities: Public-Private Alliances
Alliances of
Firms &
Producers
National Stakeholder
Platform
Regional Public-
Private Task Force
Global Lead Firm
Engagement
• Promote Intercropping, Interplanting,
and/or Replanting to enhance
productivity
• Strengthen Supply Chain Coordination
& Leadership
• Facilitate National Stakeholder
Platform
• Strengthen Value Chain Coordination &
Leadership
• Increase Seedling Supply & Technical
Services
• Introduce Innovative Financing Models
• Finance Catalytic Interventions to
Incentivize Business Partnerships for
Product Development, and Improved
Packaging, Quality Compliance, &
Market Promotion Activities
• Facilitate Public-Private Task Force to
Spearhead Joint Action at the Regional
Level
• Strengthen Value Chain Coordination
& Leadership
• Facilitate Regional Collaboration on
R&D and Seedling Supply
• Facilitate Regional Collaboration on
Quality Control Infrastructure for
Agricultural Health and Food Safety
• Facilitate mainstreaming of Procedures
and Documentation at Customs
• Facilitate Targeted Partnership with
Sustainability Programs of Global Lead
Firms
• Facilitate Lead Firm Engagement for
Targeted Market Promotion Activities
Focused on Coconut Products

20. 20
Realizing Potential Opportunities
Share risk
and
resources
Build size
and
presence
Develop new
competencies
Reach new
markets
Add value
to customers
Enhance
reputation
Security of
supply
•The level of local industry’s strategic
alignment determines inclusive and
sustainable growth
•A Learning industry will be a major
driver of competitiveness
•It is not the largest, or most well-
positioned, that will succeed, it is the
one most responsive to change
Need for Collaborative Partnership Across the Value Chain

21. 21
Ajmal Abdulsamad
E-mail: ajmal.abdulsamad@duke.edu
Center on Globalization, Governance and Competitiveness
Duke University
Thank You