Improving the Supply Chain of Tilapia Industry in the Philippines

IMPROVING THE SUPPLY CHAIN OF TILAPIA INDUSTRY IN THE PHILIPPINES

Wilfred E. Jamandre, Central Luzon State University (CLSU) Upton Hatch, North Carolina State University (NCSU) Remedios B. Bolivar, Central Luzon State University (CLSU) Russell Borski, North Carolian State University (NCSU) OBJECTIVES

1. Develop tilapia supply chain maps 2. Analyze tilapia supply chain performance 3. Identify areas for improvement in supply chain 4. Provide recommendations METHODOLOGY

INPUT PROCESS OUTPUT

 The Philippine Tilapia  SCM  Supply Chain Maps Industry  New Institutional  Performance of tilapia  Chain actors, key Economics: supply chain activities and roles,  Relationship Marketing  Areas for improvement  Flows of product,  Operations in the supply chain information and Management and payments Logistics (Other recommendations)  Costs and margins associated with each practice  External influences STUDY AREAS AND COVERAGE

• Regions I, III, IV, CAR and NCR • 5 hatchery and nursery operators • 28 farmers • 4 processors • 24 traders/consolidators/shippers • 11 institutional buyers Routes of SC mapped Supply Chain Players Number of Respondents Hatchery and Nursery Operators 3 Fish farmers 15 Bicol-Laguna-Batangas-Manila- Processors 2 Baguio (Chain 1): Traders/consolidators 8 Institutional buyers 5 Hatchery and Nursery Operators 2 Pampanga-Pangasinan-Ilocos and Fish farmers 13 Isabela - Baguio and Manila Processors 2 (Chain 2): Traders/consolidators 16 Institutional buyers 6 DATA GATHERED

• key players, their roles/activities/services • product grades and standards • product, information and payment flows • logistics issues • production and marketing • external influences DATA PROCESSING AND ANALYSIS Objectives Methods of Analysis (1) Provide an overview of the tilapia Synthesis of relevant studies and trends industry (2) Map out specific supply chains Flowchart analysis from downstream to upstream (3) Analyze the performance of the supply Descriptive statistics, and relevant chains performance metrics (qualitative and quantitative) (4) Identify areas for improvement in the supply chain

(5) Provide specific policy recommendations Results and Findings HIGHLIGHTS OF THE PHILIPPINE TILAPIA INDUSTRY • 12% of aquaculture GDP • 1.4 million workforce and fish producers • source of food and animal protein • 3.81 kgs per capita consumption • 10% average annual growth rate (2005-2008) • 14% of the total food expenditure

BAS (2010) and Rodriguez et.al. (2009)

Tagaytay HIGHLIGHTS OF THE PHILIPPINE TILAPIA INDUSTRY

• 258,663MT production (BAS 2010). • 80% from Regions III and IV • Top 5 provinces: – Pampanga (37.68%), Batangas (21.06%), Laguna (4.64%), Rizal (4.06%) and Bulacan (3.58%). • Culture environments: – 57% freshwater fishponds – 38% freshwater fish cages – 7% brackishwater fishpond – 1% freshwater fishpen (BFAR, 2004)

HIGHLIGHTS OF THE PHILIPPINE TILAPIA INDUSTRY • Types of tilapia: – Nile Tilapia

• 87% of total tilapia production in 2010 (BFAR, 2010) – Mozambique tilapia – GET Excel – GIFT - CLSU – FAST HIGHLIGHTS OF THE PHILIPPINE TILAPIA INDUSTRY • Industry’s growth drivers: – genetic improvement – stock management and cultural practices • Market niches: – product forms - fillet, dried, whole fish – outlets - supermarkets, food chains

Tagaytay TILAPIA SUPPLY CHAIN MAJOR PLAYERS

Live Form/Frozen

Traders Small-scale (Wholesaler, Consignacion, trader Viajero, Retailer) Retailer Hatchery Operators

Institutional Fish Producers Processors End-users Improved brood buyers stocks Ponds Improved Cages quality tilapia Supermarkets Pens Specialty shops Food Chains Nursery Restaurants Operators Live Form Fillet Bars, canteens, etc. Grilled Barbecued Specialty menus KEY CUSTOMERS

• Institutional Buyers (Supermarkets, Specialty Shops, Food Chains, Restaurants) • Household consumers PRODUCT FORMS

• Preferred by household customers – live form tilapia – size of 4-5 pieces per kg (200 - 250 g per fish) – Northern Luzon markets prefer darker-skinned tilapia – The common food recipes are charcoal grilled, fried, boiled and stew

• Preferred by hypermarkets – live form tilapia – size of 3-4 pieces per kg (250 – 350 g per fish) PRODUCT FORMS

• Specialty shops and food chains in major urban centers – tilapia fillet (350 g per pack) – whole frozen fish (2-3 pieces per kg) – dried fish (100 g per pack or 30-35 g per fish) – by-products of filleting - fish soups, tilapia belly and deep fried tilapia skin PRODUCT FORMS VOLUME REQUIREMENTS

• Major customers in Luzon – 5,335 kg average daily or 1, 947,275 kg (or ~ 1,947.28MT) yearly

• Annual national consumption requirement: – 323,850 MT (~ 1% )

MAJOR PLAYERS AND THEIR ACTIVITIES

• Processors – Fillet, dried, whole, frozen and choice portions or trimmings – Dressing recovery: • 1 kg raw tilapia (2-3 pieces) yields 30-35% fillet, 18% belly, 25% innards, 21% head and 1% skin MAJOR PLAYERS AND THEIR ACTIVITIES

• Wholesalers – shippers or viajeros

• Retailers – Resellers – Handle 100-150 kg of live form, daily (5-6 pieces per kg) MAJOR PLAYERS AND THEIR ACTIVITIES

Traders - buy, sell and distribute Consolidators - Supply supermarkets - Facilitators - Price monitor - Small-scale trading - Gatekeepers MAJOR PLAYERS AND THEIR ACTIVITIES

• Fish producers – produce marketable tilapia • 2.5 – 3 months (4-5 pieces per kg) • 3.5-4.5 months (2-3 pieces per kg) MAJOR PLAYERS AND THEIR ACTIVITIES

• Nursery operators • Maintain fry up to marketable sizes: - 22-20 on-season months (May, June, July, August) - 14-12 off-season (September, October, November, December) • Nile tilapia – better species

Bicol MAJOR PLAYERS AND THEIR ACTIVITIES

• Hatchery operators  Supply fry and fingerlings (400 thousand fry every 18 days)  Provide techno-guides to fish producer – customers  Handle about 3,000 breeders • GIFT –CLSU, GET -Excel)  Maintain nursery ponds MAJOR ROUTES MAJOR ROUTES

MAJOR SUPPLY MAJOR MAJOR DEMAND CENTERS TRANSSHIPMENT CENTERS POINT Hatcheries Angeles Fry Marketable fish Baguio City Pampanga Cordillera Administrative Dagupan City Region Laguna Cagayan Isabela Ilagan Marketable Valley Batangas fish Tilapia Fry La Union & Ilocos Provinces Malabon Camarines Sur Metro Manila PRODUCT FLOW (BICOL-LAGUNA/BATANGAS-MANILA/BAGUIO ROUTE)

(live form Trader Local market

(live form) Specialty shop - Monterrey Hatchery Grow-out pond (Manila, Tuguegarao) Nursery Semi-intensive Laguna F Laguna/Rizal i (frozen) n (live form) g Processors Fastfood shop e FRY r 3 months (live form/frozen) conditioning l Consolidator/Trader Supermarket n g (live form) Hatchery/Nursery s Cage operator Trader Local market Local market Batangas Batangas/Taal

(live form) Central fish (live form) FRY (live form) market (Malabon)

Hatchery Wholesale shipper Camarines Sur “viajero” (frozen) Manila Pangasinan (frozen) Baguio Supermarket PRODUCT FLOW (PAMPANGA – PANGASINAN - BAGUIO ROUTE)

Local market

Baguio Grow-out (live form) pond (live form) Ilocos Pampanga Trader

Central fish market Isabela FRY/FINGERLINGS Dagupan - Direct stocking

Hatchery/ (live form) Supermarket Nursery Consolidator/T Pampanga Pampanga rader Manila TILAPIA SUPPLY CHAIN: INFORMATION FLOW Hatchery Specialty Processor FRY Shop -Volume -Delivery schedule -Size -Source of fish Supermarket -Strain/Sex -Volume -Delivery schedule -Size Local market Nursery

FINGERLINGS MARKETABLE SIZE -Quantity -Volume -Delivery schedule -Delivery schedule -Size -Cost Wholesaler-Retailer -Strain/Sex -Price

Trader /Consolidator Producers Wholesaler MARKETABLE SIZE -Volume /”Viajero” -Price -Weight -Quality TILAPIA SUPPLY CHAIN: PAYMENT FLOW

Advanced cash

Hatchery Specialty Shop Processor CASH CASH Supermarket

Nursery CASH Post-dated checks,7 days

CASH Wholesaler- Trader/Consolidator Retailer Wholesaler/”Viajero” CASH Producers Terminal Market Cash, net after feed loan (1-2 days) Sales remittances, net Cash after trading capital

CASH Trader/Retailer Cash Local Retailer (small-scale) market Producers (non feed-borrowers) CASH Sales remittances MAJOR CONCERNS TRANSACTION COSTS

HATCHERIES/ FISH FARMERS HATCHERIES/ NURSERIES NURSERIES • Expensive inputs • In-transit mortality losses • Mislabeld inputs • High cost of outbound • Toll fees (“goodwill”) logistics

• Low fish recovery FISH FARMERS • High competition with - 25% in lakes and • 4% shrinkage allowance mixed sex fingerlings cages/pens - 60% in pond systems required by traders

• High mortality rates • Unpredictable climate • Overstocking patterns • Cost of waiting • Harvest delays

• Prolonged grow-out • Limited opportunities for period (8-10 months ) value-adding & processing • Lack of cold storage facilities MAJOR CONCERNS TRANSACTION COSTS

TRADERS TRADERS

• “Uncalibrated” weighing scale of • High logistics and transaction fish farmers costs: • Disrupted delivery schedules due • Search to defaulting “contract growers” • Assembly • Lag responses to price changes • Distribution • Absence of product grades and standards MAJOR CONCERNS TRANSACTION COSTS

PROCESSORS PROCESSORS

• Insufficient supply of • High cost of filleting raw materials • Low dressing recovery • Lack of blast freezers and other equipment • High opportunity costs • Presence of inexpensive due to untapped substitutes (e.g. river markets catfish, sea bass and others) MAJOR CONCERNS TRANSACTION COSTS

INSTITUTIONAL BUYERS INSTITUTIONAL BUYERS

• Off-season stock-outs • High cost of product from regular suppliers search • High opportunity cost RECOMMENDATIONS

(1) Encourage the establishment of more nursery and hatchery farms

(2) Conduct market promotion

(3) Motivate participation of small farmers in supply chains

(4) Institutionalize an accreditation/certification program for feed manufacturers, hatcheries and processors

(5) Strengthen farmers’ organizations Thank you. Funding for this research was provided by the

COLLABORATIVE RESEARCH SUPPORT PROGRAM

The AquaFish CRSP is funded in part by United States Agency for International Development (USAID) Cooperative Agreement No. EPP-A-00-06-00012-00 and by US and Host Country partners.

The contents of this presentation do not necessarily represent an official position or policy of the United States Agency for International Development (USAID). Mention of trade names or commercial products in this presentation does not constitute endorsement or recommendation for use on the part of USAID or the AquaFish Collaborative Research Support Program. The accuracy, reliability, and originality of the work presented are the responsibility of the individual authors. MARKET REQUIREMENTS FOR TILAPIA Specialty shops Supermarkets Volume Price Volume Price Description Size (g/pc) Size (g/pc) (kg/day) (PhP/kg) (kg/day) (PhP/kg) Live form Large 400-500 100 83 400-500 1000 112 Medium 300-400 100 77 300-400 1000 95

Fish fillet 250 -350 any amount 280 250 -350 g/pack any amount 312

Smoked 250-350g/pack any amount 209 250-350 g/pack any amount 330 Dried 30 any amount 150 X X X Butterfly 70 any amount 250 X X X fillet Fillet by-products: X X X Head I kg any amount 30 X X X Belly I kg any amount 50 X X X Skin I kg any amount 350 X X X TILAPIA SUPPLY AND UTILIZATION ACCOUNTS

SUPPLY (MT) UTILIZATION (MT) CONSUMPTION Feeds Net Food Per Capita Per Capita Production Imports Gross Supply Exports and Waste Processing Disposable kg/yr g/day 2001 135,627 0 135,627 0 4,069 0 131,558 1.69 4.63 2002 152,985 0 152,985 0 4,590 0 148,395 1.87 5.12 2003 168,132 0 168,132 0 5,044 0 163,088 2.01 5.51 2004 177,790 0 177,790 0 5,334 0 172,456 2.09 5.73 2005 195,504 0 195,504 0 5,865 0 189,639 2.22 6.08 2006 241,775 0 241,775 0 7,253 0 234,522 2.7 7.4 2007 278,819 20 278,839 52 8,365 0 270,422 3.05 8.36 2008 299,813 20 299,833 300 8,994 0 290,539 3.21 8.79 Source: Bureau of Agricultural Statistics, 2009 RETAIL AND WHOLESALE PRICES SPREADS, MEANS AND COVARIATIONS, 2001-2008

Month Prices Covariation Wholesale R-W Spread Retail Wholesale R-W Spread Retail (%) (%) (%) January 66.04 50.61 15.42 12.30 12.60 16.61 February 65.20 50.96 14.25 13.55 12.81 19.53 March 65.59 49.99 15.60 12.41 11.86 17.82 April 66.00 49.70 16.29 11.44 12.54 15.31 May 65.97 49.99 15.98 11.33 12.19 12.77 June 66.67 51.45 15.22 10.48 9.68 22.40 July 67.71 51.97 15.73 11.18 10.26 28.60 August 68.18 52.39 15.78 11.62 13.30 7.44 September 68.29 51.79 16.50 12.68 15.72 7.71 October 68.59 52.04 16.56 12.99 16.52 11.01 November 68.23 51.79 16.44 13.52 15.69 9.38 December 69.76 54.70 15.06 13.51 16.29 10.02 Means 67.18 51.45 15.74 12.25 13.29 14.88 Source: Bureau of Agricultural Statistics, Department of Agriculture (Various Issues) VALUE OF TILAPIA PRODUCTION

1991-1999 2000-2008 Mean 55.2777778 Mean 66.2111111 Standard Error 2.6509143 Standard Error 2.70703941 Median 57.02 Median 67.38 Mode #N/A Mode #N/A Standard Deviation 7.95274289 Standard Deviation 8.12111822 Sample Variance 63.2461194 Sample Variance 65.9525611 Kurtosis 1.35249253 Kurtosis -0.94247877 Skewness -0.5399786 Skewness 0.49269906 Range 28.49 Range 22.69 Minimum 39.78 Minimum 57.71 Maximum 68.27 Maximum 80.4 Sum 497.5 Sum 595.9 Count 9 Count 9 covariation 14.39% 12.27% Covari Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mean SD ation 1990 45.12 46.05 42.02 63.67 42.42 42.32 41.90 41.76 39.75 39.63 43.88 44.54 44.42 6.37 14.34 1991 49.62 48.66 50.76 51.51 50.05 50.99 50.09 50.15 50.05 48.46 48.99 48.74 49.84 0.98 1.96 1992 65.93 63.21 64.02 64.99 63.46 63.19 60.38 59.94 57.71 53.98 59.72 59.81 61.36 3.41 5.56 1993 67.74 69.76 68.10 68.60 60.02 64.00 62.53 60.90 58.86 59.58 60.27 61.65 63.50 3.99 6.29 1994 72.49 75.98 75.39 75.12 73.90 73.66 68.46 67.07 65.30 62.86 65.74 65.82 70.15 4.72 6.73 1995 77.84 80.47 77.60 78.93 75.64 73.04 69.10 66.77 64.36 61.42 63.61 65.47 71.19 6.81 9.57 1996 77.41 76.09 75.72 78.25 74.46 75.09 72.40 69.62 66.93 65.50 67.41 67.35 72.19 4.58 6.34 1997 75.77 77.86 78.79 79.82 78.43 77.61 72.26 70.48 66.75 66.04 66.91 67.67 73.20 5.40 7.38 1998 76.29 74.56 74.68 79.62 78.10 76.71 73.05 69.57 68.15 69.07 73.84 78.32 74.33 3.79 5.10 1999 96.44 98.69 98.02 95.41 103.59 87.80 82.86 78.28 74.89 71.35 71.10 71.20 85.80 12.30 14.33 2000 81.68 80.12 79.40 80.29 78.14 76.40 71.44 69.25 66.85 65.23 65.82 64.56 73.27 6.71 9.16 2001 72.80 73.71 71.72 78.99 77.40 77.61 75.35 74.81 71.36 70.09 69.78 70.59 73.68 3.15 4.28 2002 77.16 68.77 75.39 74.93 74.46 75.51 73.11 72.07 69.76 69.42 68.06 67.66 72.19 3.33 4.62 2003 75.95 75.84 73.96 74.92 73.99 75.54 73.03 71.74 70.62 70.88 71.17 70.96 73.22 2.08 2.84 2004 82.28 84.07 86.72 89.56 88.86 88.44 85.34 83.05 80.01 81.66 79.05 78.60 83.97 3.84 4.57 2005 91.36 90.79 90.55 91.28 88.69 89.73 85.04 83.68 81.25 81.25 81.86 81.57 86.42 4.34 5.02 2006 92.89 92.24 90.67 92.91 90.00 87.22 86.05 85.39 83.46 83.67 84.65 85.27 87.87 3.64 4.15 2007 98.30 97.25 95.50 98.00 95.32 93.83 89.94 89.09 86.92 87.62 88.81 88.50 92.42 4.35 4.70 2008 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Mean 77.74 77.59 77.32 79.83 77.21 76.25 73.28 71.77 69.63 68.83 70.04 70.44 SD 14.67 14.89 14.90 12.61 15.72 14.12 13.71 13.53 13.53 14.09 13.19 13.15 Covari 18.87 19.19 19.27 15.79 20.36 18.52 18.71 18.85 19.43 20.47 18.83 18.66 ation TILAPIA AVERAGE RETAIL PRICES (NOMINAL), 1990-2008 covaria Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Mean SD tion 1990 34.51 35.19 32.21 47.98 32.51 32.81 33.98 34.52 33.75 33.74 37.23 38.65 35.59 4.33 0.12 1991 37.95 37.18 38.91 38.82 38.35 39.53 40.62 41.45 42.50 41.25 41.56 42.29 40.03 1.80 0.04 1992 50.42 48.30 49.07 48.98 48.63 48.99 48.97 49.55 49.00 45.95 50.67 51.90 49.20 1.44 0.03 1993 51.81 53.30 52.20 51.70 45.99 49.62 50.71 50.34 49.98 50.72 51.13 53.49 50.92 1.97 0.04 1994 55.44 58.06 57.79 56.61 56.63 57.11 55.52 55.44 55.45 53.51 55.77 57.11 56.20 1.26 0.02 1995 59.53 61.49 59.48 59.48 57.96 56.63 56.04 55.19 54.65 52.29 53.97 56.81 56.96 2.71 0.05 1996 59.20 58.14 58.04 58.97 57.06 58.22 58.72 57.55 56.83 55.76 57.19 58.44 57.84 1.00 0.02 1997 57.95 59.49 60.39 60.15 60.10 60.17 58.60 58.26 56.68 56.22 56.77 58.72 58.63 1.49 0.03 1998 58.35 56.97 57.24 60.00 59.85 59.47 59.24 57.51 57.87 58.80 62.65 67.96 59.66 3.04 0.05 1999 73.76 75.41 75.13 71.90 79.38 68.07 67.20 64.71 63.59 60.74 60.32 61.78 68.50 6.48 0.09 2000 62.47 61.22 60.86 60.51 59.88 59.23 57.94 57.24 56.76 55.53 55.84 56.02 58.63 2.37 0.04 2001 55.68 56.32 54.97 59.53 59.31 60.17 61.11 61.84 60.59 59.67 59.20 61.25 59.14 2.27 0.04 2002 59.01 52.55 57.79 56.47 57.06 58.54 59.29 59.57 59.23 59.10 57.74 58.71 57.92 1.95 0.03 2003 58.09 57.95 56.69 56.46 56.70 58.57 59.23 59.30 59.96 60.34 60.38 61.57 58.77 1.65 0.03 2004 62.93 64.24 66.47 67.49 68.09 68.57 69.21 68.65 67.94 69.52 67.07 68.20 67.37 1.98 0.03 2005 69.87 69.37 69.41 68.79 67.96 69.57 68.97 69.17 68.99 69.17 69.45 70.78 69.29 0.67 0.01 2006 71.04 70.48 69.50 70.02 68.97 67.62 69.79 70.58 70.87 71.23 71.82 73.99 70.49 1.57 0.02 2007 75.18 74.31 73.2 73.85 73.04 72.75 72.94 73.64 73.8 74.59 75.35 76.79 74.12 1.20 0.02 2008 76.48 76.41 76.65 75.36 76.63 77.53 81.1 82.66 84.91 85.13 84.84 86.77 80.37 4.28 0.05 Mean 59.46 59.28 59.26 60.16 59.16 59.11 59.43 59.32 59.12 58.59 59.42 61.12 SD 11.22 11.38 11.42 9.50 12.05 10.95 11.12 11.18 11.49 11.99 11.19 11.41 Covaria 0.19 0.19 0.19 0.16 0.20 0.19 0.19 0.19 0.19 0.20 0.19 0.19 tion END CONSIGNACION

Dagupan and Malabon TRADERS

Wholesaler/Viajero Retailer FISH FARMS Batangas

Laguna • Bicol PRODUCT FLOW

HATCHERY CONSUMERS INSTITUTIONAL ACCOUNTS 18 days fry

live form (250 – 300 g/fish or 4-5 Tilapia fillet (450 – 750 g/fish NURSERY pieces/kg) or 2-3 pieces/kg FARMS

fingerlings

30-45 days Wet market MANILA MARKET COMMERCIAL Fishcage operators DISTRIBUTION ARM FARMS Laguna –Batangas Department store BACKYARD Grow-out periods FARMS • 2.5 - 3 months CONSOLIDATOR • 3.5-4.5 months WHOLESALER Malabon / Navotas consignacion