Value chain analysis of Virgin Coconut Oil (VCO) for domestic markets: The Banaban (Rabi Island) Case Study

Date: April 2018

prepared by: Lavinia Kaumaitotoya, Mark Sheehy - Pacific Island Farmers Organisation Network

Date: April 2018

Prepared By: Lavinia Kaumaitotoya, Mark Sheehy - Pacific Island Farmers Organisation Network

Value chain analysis of Virgin Coconut Oil (VCO) for domestic markets: The Banaban (Rabi Island) Case Study

Date: April 2018

Prepared By: Lavinia Kaumaitotoya, Mark Sheehy - Pacific Island Farmers Organisation Network Contents

1. Acronyms...... vi 2. Acknowledgements...... 1 3. Background to the Value Chain Analysis...... 2 4. Virgin Coconut oil for the domestic market...... 6 5. Case study – The Banaban Virgin Coconut Oil...... 9 5.1. The setting...... 9

5.2. Background to Rabi VCO production...... 11

5.3. Production – The Process...... 11

6. The domestic virgin coconut oil value chain map (Case study: Banaban VCO)...... 15 6.2. Step 1: Drawing the value chain map...... 16

6.3. Step 2: Putting facts and figures into the map...... 17

6.4. Step 3: Identifying what each actor contributes to the final product and the returns they receive...19

6.5. Step 4: Assessing the Market...... 24

6.6. Step 5: Assessing strengths and weaknesses along the chain and identifying ways to

take advantage of strengths and minimize weaknesses...... 27

6.7. Step 6: Developing a Plan to improve the Value Chain...... 31

7. Recommendations for Banaban Virgin Coconut Oil...... 32 7.1. Product Improvement and Development...... 32

7.2. Improving access to the VCO factory...... 33

7.3. Incentivising farmers to collect coconuts for VCO...... 33

7.4. Linking with public funded programs...... 34

7.5. Improving the facilities at the Banaban VCO factory...... 34

7.6. Exploring an increase in the direct sales pricing for VCO at Roadshows...... 35

7.7. The transportation links...... 35

7.8. The Banaban brand...... 35

7.9. Marketing to promote better health...... 36

iv CASE STUDY - RABI VCO 7.10. Improving access to finance...... 36

7.11. Scaling up of existing facilities...... 36

8. Key Lessons Learnt...... 39 8.1. Overcome remoteness and isolation by producing high quality VCO...... 39

8.2. Quality handmade VCO will sell despite increase of price...... 39

8.3. The importance of pulling the product through the value chain...... 40

8.4. The story behind the brand sells...... 40

8.5. Health and Nutritional benefits can sell your VCO product...... 41

9. Key Lessons to introduce Virgin Coconut Oil into the domestic PIC markets...... 42 9.1. Quality and consistent quality for the market...... 42

9.2. Increasing production to meet the domestic need...... 42

9.3. Partnering of small scale VCO operators to meet the market needs and formation of Farmer Organisations...... 42

9.4. Capacity building and exchange learning to meet production...... 42

9.5. Championing coconut oil as a domestic cooking oil...... 43

CASE STUDY - RABI VCO v 1. Acronyms

CIDP...... Coconut Industry Development Program PIC...... Pacific Island Countries PIFON...... Pacific Island Farmers Organisation Network SPC...... Secretariat of the Pacific Community VCO...... Virgin Coconut Oil

vi CASE STUDY - RABI VCO 2. Acknowledgements

This study was conducted by the Pacific Island Farmers Organisation Networkled by Lavinia Kaumaitotoya and supported by Mark Sheehy. The value chain assessment wasdone with interviews conducted with the following persons:

• Terikano Takesau, Manager, Banaban Virgin Coconut Oil • David Christopher, Executive Director, Rabi Island Council • Tikua Termata, Chairwomen, Ueen-roti Laselase Sector Club • Taramarawa Benson, Spokesmen, Eritabeta Village • Akineti Esene, Spokeswomen, Rakentai Farming Settlement • Rui Simon, Community Elder, Bani Farming Settlement • Mohammed Tasleem, transport provider, Savusavu • Tebuka Kareo, Womens Interest Officer, Rabi Council • Tama Taliu, MOA officer, Rabi • Nowdla , GM Namale Resort, Savusavu • Kitty Koyamaibole, Jean Michael Cousteau Resort, Savusavu • Pravin Changanlal, Proprietor, Chaganlal, Savusavu

Location of Fiji Islands. Rabi Island is part of the Fiji Islands and is located next to Fiji’s second largest island of Vanua Levu

CASE STUDY - RABI VCO 1 3. Background to the Value Chain Analysis

The process ofidentifying coconut value chains for The PIFON coconut product market study detailed investigation. concluded that there needs to be more emphasis on domestic markets for edible coconut oil - be As part of the of the SPC/EU Coconut Industry it VCO or food grade crude copra oil (CNO). The Development of the Pacific (CIDP) Project an report notes that over the last decade VCO has overview study was conducted of the market transformed itself from a niche export product, for Pacific Island coconut products and the which could readily command prices up to 5-times ability of the industries to respond. The Pacific that of crude coconut oil on global markets, to Island Farmers Organization Network (PIFON) a commodity that secured a reasonable price was commissioned to undertake the study. See premium, provided quality standards are met. Andrew McGregor and Mark Sheehy (2017): An These export price premiums are now often not overview of the market for Pacific Island coconut sufficient to meet the additional cost of producing products and the ability of industries to respond VCO by small enterprises in PICs. Thus, given (https://lrd.spc.int/reportspublications/doc_ that the PICs are all large importers of vegetable download/2481-market-study). oil, greater attention needs to be given to selling edible coconut oil on local markets. The Overview Market Study identified four (4) priority coconut value chains (VCs) for detailed The PIFON Overview Market Study reports that: follow up investigation. These were: VCO as an oil is suitable for consumption without the need for further processing. There are two • Virgin Coconut Oil (VCO) for the domestic broad types of VCO processing technologies: market – the specific VC case study selected was Banaban (Rabi Island) VCO from Fiji. • Fresh-dry VCO processing (which involves • Small scale high quality copra oil for the either: fresh dry; low pressure oil extraction; domestic market – the specific VC case study high pressure oil extraction; centrifuge oil selected was Chottu Coconut Products (CCP) extraction). in the Solomon Islands. • Fresh-wet VCO processing (which involves • Coconut cream freeze/yogurt – the specific either: the fresh wet: modified kitchen case study selected was the Samoa Coconut method; modified natural fermentation; Cluster centrifugal extraction). • Coconut timber veneer – the specific case study that was selected was the Valebasoga VCO is the purest form of coconut oil. It is clear/ timber company in Labasa, Vanua Levu, Fiji. colourless, contains natural Vitamin E and has not undergone atmospheric and hydrolytic oxidation The criteria used for selection of priority value as attested by its low peroxide value and low chains for detailed assessment was: free fatty acid (FFA) content. It has a mild to intense fresh coconut aroma (Balwalan p, 13). The • The selected product should have strong intensity of the scent depends on the process used market potential with identified comparative in its production. A common misconception that advantage for Pacific Island Countries (PICs) oil must be “cold pressed” be classified as VCO • The VC could be existing or emerging and this term is often used in the marketing of the • The VC should be inclusive of many product. smallholder farmers including women and youth Refined Coconut Oil (RBD) and VCO coconut • The VC should be replicable in multiple PICs oil have the same physical and chemical characteristics but have different sensory

2 CASE STUDY - RABI VCO attributes. VCO, according to Balwalan (2011), • carrier oil for aromatherapy and massage oils; is considered unique in that it is the only oil that and, is multi-functional. It has more uses than RBD • nutraceutical and functional food. coconut oil and can be utilised in all applications where crude and RBD coconut oil are traditionally Fiji currently imports around 17,000 tonnes of used. It is seen as a much better alternative vegetable oil with a landed value of some FJD than RBD or palm kernel oil if it is available in 20 million (Fiji Bureau of Statistics). If Fiji VCO reasonably large quantities at an affordable price. consumption reached 5% of total vegetable oil imports, this would represent a market of nearly The major uses for VCO are as a: 1,000 tonnes which is more than the total coconut oil exported in 2016 (p, 31). • hair and skin conditioner; The Banaban VCO value chain, located in Rabi • oil base for various cosmetic and skin care Island, off Vanua Levu Island in Fiji (see map products; below), was therefore chosen for this case study.

It was seen as a particularly interesting VC for The PIFON Coconut Market Study further investigation as it can be duplicated in similar highlighted that: communities around the Pacific and unlike other models, it has been successful despite From the PICs, Fiji Samoa and the Solomon Islands, its remoteness and has managed to tap and were early entrants into VCO export markets. present itself in the niche market for VCO. The Samoa’s Women in Business and Fiji’s Wainiyaku challenge for PIC VCO producers to be able secure Estate on Taveuni were amongst the first to secure a significant share of the domestic vegetable oil organic certification which was to provide them market which is overwhelming dominated by with a major advantage in terms of obtaining imports in all countries. That PICS import. recognition in the market. In the Solomon Islands,

CASE STUDY - RABI VCO 3 Kokonut Pacific Ltd (KPS), sourced its VCO supplies their throughput being insufficient to provide through its network of small village based direct an adequate return for the work input required VCO micro expellers. In subsequent years, and to create sustainable marketing and market further Pacific island entrants ventured into VCO linkages. This contributed to the consequence production – including Marshall Islands, PNG and that many of these small village based VCO Vanuatu. These have largely been small scale enterprises have fallen to the way side, the issue village-based operations and actual production of production and not being able to meet market and export figures are not available. target needs, the sustainability of cash holding Unlike RBD the scale of investment required for and finding the correct markets to sell small scale VCO s considerably smaller – classified as either VCO at a price that covers their cost output has medium, small or even micro - village scale. This become increasingly more difficult for them to coupled with the significantly higher price that remain viable in the current less favourable price has been received for VCO has made it feasible for environment. PIC producers, despite the substantially greater labour input requirements. The high prices Additionally, the attributes of strong leadership on offer encouraged governments, NGOs and with determination to see small scale VCO donors to promote village based VCO enterprises operations through its beginning years, with the with the expectation that markets would be struggles of finding the right markets has to be readily available. There was a misconception apparent to enable small scale or village based that VCO could be readily “pushed” through the VCO ventures to succeed. Many charitable and value chain, rather than being “pulled” through philanthropic efforts combined with volunteerism the value chain by larger processing exporting are strong characteristics that the successful companies, such as Wainiyaku Estate on Taveuni models portray. Such a case study can be seen who were connected to the market. A major from the continued success of the Banaban VCO challenge for micro, or village scale, producers that we will take a look at to see how this can be has been to achieve consistently high-quality oil replicated around the pacific with its success and that meets international standards. In the case lessons learnt.” of Fiji, it is reported that a particular challenge for micro village based VCO producers has been the Thus, it is expected that a detailed VC study for the consistent achievement of a final moisture content Banaban Virgin Coconut Oil would be of interest of 0.1% that is necessary to prolong shelf life. to all the PICs coconut SME’s that make virgin Even if quality standards are met, small producers coconut oil. have faced additional challenges relating to

Figure 1: Banaban staff at the bottling station for VCO

The Value Chain Methodology used for the Banaban Virgin Coconut Oil Case Study The CIDP value chain case studies follow the steps outlined in the PIFON value chain “tool kit” “Agricultural Value Chain Guide for the Pacific Islands: Making value chain analysis a useful tool in the hands of farmers, trader and policy makers” https://publications.cta.int/media/publications/ downloads/1837_PDF.pdf. This participatory approach was produced in response to an assessment of the value chain support needs of ACP counties, and provides a practical resource on how to analyse and upgrade value chains. It has been deliberately tailored to the needs of the participants in PIC value chains, as explained by the PIFON Manger at the Nadi Pacific Coconut Sector

4 CASE STUDY - RABI VCO Value Chain Workshop in July 2017 those whilst capitalizing on strengths and what is required to improve the chain for the benefit of all “The PIFON Value Chain (VC) analysis toolkit the participants. This VC analysis is not only for was written, so that VC could be understood and the participants in the chain (farmers, processors, taught by anyone including its member farmers marketers and consumers) but also for policy who came to hear of it and it wasn’t something makers and funding agencies (p 19).” that was ‘in the clouds’ that people could not grasp or understand. Simple steps were developed to make the toolkit for value chain analysis easy to The participatory value chain approach has six (6) understand. Value Chain Analysis is a simple and steps: systematic way of evaluating an existing chain and assessing if a chain is viable and what is required Step 1: Drawing the value chain map to improve it. The traditional agricultural Step 2: Putting facts and figures into the map extension model is that the technology is taken Step 3: Identifying what each actor contributes directly to the farmers but with PIFON’s emerging to the final product and the returns they agricultural extension model, the technology is receive taught to farmer organizations who then transfer Step 4: Assessing the market that to their farmer members, thus allowing more Step 5: Assessing strengths and weaknesses to be taught and to be reached. VC analysis along the chain and identifying actions allows anyone to do VC awareness to provide required some information to address the misinformation/ Step 6: Developing a plan to improve the value misconception and allow people to see where the chain weak links are along the chain so the focus is on

CASE STUDY - RABI VCO 5 4. Virgin Coconut oil for the domestic market

The domestic market for VCO in Fiji remains largely should seriously be targeted by Rabi VCO and untapped by local suppliers, as other vegetable oils other similar small-scale, local VCO producers. At are preferred for consumption and cooking needs. present, however, Rabi VCO is not able to meet the In the meantime, countries such as Sri Lanka and production volumes that their market is asking for- the Philippines have already managed to get their hence the need to scale-up the current operation. VCO products on to supermarket shelves in Fiji. This will be discussed in a later section of this Supply of the domestic market is one avenue that report

Figure 2: Banaban VCO Staff bottling the VCO Figure 3: Banaban VCO body lotion bottled and ready for sale or delivery.

Banaban VCO, like other locally produced VCO, • The price at which VCO is made available to is still largely targeted at the tourist market- the local market needs to be significantly Banaban VCO for instance, regularly supplies reduced. There are substantial savings the luxury Namale Island Resort, and Jean available to pass on to local consumers from Cousteau Resort’s boutique store and for use not having to incur transport and other in its Spa’s for messages, among others. A plus exporting costs. factor for Banaban VCO was the fact that staff • In Fiji, price relativities are currently distorted at Jean Cousteau Resort indicated a preference with canola and soya bean oil being subject for Banaban VCO. However,there needs to be to Commerce Commission price controls and a concerted effort towards marketing VCO as not subject to import duty. A major review not just being a “tourist product.” In Fiji’s case, ofthe regulatory arrangements is necessary. to achieve the levels of production required to • A substantial consumer education campaign supply, the local market requires a number of expounding the health benefits of cooking measures to be taken: with VCO. There needs to be an attitudinal

6 CASE STUDY - RABI VCO changelocally to coconut oil, such as has occurred internationally. To be successful, such a campaign would require the support of the major vegetable oil importing and distributing companies, and strong Government policies and backing.

Figure 4: Banaban VCO Body Soap before being Figure 5: Packaged VCO Soap ready for delivery packaged to retailers

The Philippines is an example of a country that has PICs don’t have the same levels of domestic successfully been able to combine both exporting production. The low level of domestic VCO supply of the domestic market. in PICs can be explained by a combination of factors: price, coconut oil’s reputation as an inferior product; and, the unfavourable labelling requirements for competing oils.

The retail price of VCO is significantly higher than the price of soya bean and canola oil. In the Pacific Islands, coconut oil generally has a reputation as poor man’s inferior product, compared with the other imported cooking oils. In Fiji, in the 1990s, Wainiyaku Estate on Taveuni pioneered the development of high quality coconut oil – first producing premium cold press copra oil, which was then followed by the manufacture of VCO. Organic certification was obtained for the export of their oil to the US market. A concerted effort Fig 6: VCO retailing in Manila (Source APCC was also made to sell Wainiyaku coconut oil on 2017) the local market, utilizing established distributors. However, local market sales proved not to be

CASE STUDY - RABI VCO 7 viable, due to food safety certification and labelling requirements for their product – despite the fact that the product was approved for importation into the USA. as a food product. In addition, the major imported oils (soya and canola) are subject to price control regulations and incurred zero tariffs. They are also not subject to ‘trans fat’ labelling regulations, as is now the case in a number of major markets

8 CASE STUDY - RABI VCO 5. Case study – The Banaban Virgin Coconut Oil

The prior sections provided a background of VCO This value chain analysis for the Banaban virgin and its place in the domestic PIC marketsincluding Coconut Oil in Fiji was carried out by the Pacific the opportunities in Fiji. This case study looks Island Farmers Organisation Network led by specifically at the Banaban VCO processinglocated Lavinia Kaumaitotoyawith MarkSheehy. The study on Rabi Island and how they have managed with involved close collaboration with Terikano Takesau their remote location have been able to secure Beriki, Manager of Banaban VCO, the project arm markets for its VCO oil domestically. for the Banaban Women’s Association.

5.1 The setting

1The year 1900 was just beginning when this small outcrop with a total area of only 595 hectares the indigenous race called the Banabans who had Banabans soon began to realise that their beloved lived peacefully on their tiny central Pacific island homeland was disappearing before their very suddenly found themselves thrust onto the world eyes. And so began an era of constant strife and stage. The richest deposits of phosphate of lime haggling over the Banaban’s disputed land issues had just been discovered by Albert Ellis a New or what would eventually be the stepping stones Zealander working for a London based company. on the path to annihilation. The forgotten story of the Banabans is a very special tale. One which in today’s society would After years of dissension between the Banabans, cause a world outcry and would never have been the British government and the lucrative allowed to happen. It’s a lesson we should tell phosphate fertiliser industry the Banabans our future generations to ensure that these tragic found themselves being forced into so called events in history are never repeated. It’s also a ‘Agreements’ enacting new British laws that would wonderful story of courage, determination and see the compulsory acquisition of their land. By hope as the Banabans come back from the very 1920 the original British owned Pacific Islands brink of extinction. Phosphate Company was sold at great profit to a joint venture consortium made up of the British, The beginning of the end Australian and New Zealand governments. This new company was called the British Phosphate With the discovery of phosphate, Albert Ellis Commission. quickly began negotiations with the Banabans to buy or lease land for his company. The ignorant and trusting Banabans were only too happy to The exile from their Homeland welcome new visitors and not understanding Immediately after the War in the Pacific was over, the language placed crosses on lengthy legal the Banabans were gathered up and transported documents signing their island away for 50 pounds to Rabi Island in the Fiji Group. Rabi had been per annum for the next 999 years. purchased for them by the British government from the Banaban’s own Provident Fund. Rabi is With the influx of European settlers to this remote considered a beautiful island with plenty of water,

1www.banaban.com (Banaban Historical Overview)

CASE STUDY - RABI VCO 9 and rich volcanic soil. But the Banabans first Rabi Council office, the Government offices for beginnings on Rabi were a great struggle. They Ministry of Fisheries, Ministry of Agriculture, the were originally left on the island in quickly erected Police Station, the Health Centre, the Post Office, army tents, with enough rations to only last the The Courts and the Ministry of Lands & Survey. community for two months. There is an Executive Director for the Rabi Council To make matters worse they had arrived on Rabi who has a Special Administrator who assist in the island in the middle of the cyclone season, and running and administration of the island of Rabi. the Banabans began to experience cold and There is no land-owning unit for this free hold wet weather for the first time. Their homeland land. The land is held in trust by the Rabi Council was situated right on the Equator and they had who give allotments to eligible Rabi islanders when never experienced such cold weather before. they come of age to reside and to farm. The general health of the people was at a very low ebb after surviving years of deprivation in There are pre-schools in all the villagers and Japanese work camps. Army tents provided no 3 primary schools in Tabwewa, Tabiang and protection against Fiji’s annual cyclone season and Buakonikai, with one high school in Tabiang, there they lost many of their aged and young people to is no banking centre in Rabi, with only the Post pneumonia. office providing essential cash services with money transfers to/from the mainland via BSP Rural Rabi Island Today Banking Services. There are 4 villagers on Rabi Island, named after There is no scheduled bus services however their original Banaban villages in the original private 3 tonne truck operators run regular Gilbert Isands, they are: services the length of the islands to provide essential transport services for the +3,000 people Tabwewa, Uma, Tabiang and Buakonikai Villages. living on Rabi. There are approximately +3,000 people on the The main source of income for Rabian’s is island, with 1,000 people each in the two big agriculture, with many planting yagona as a villagers of Tabwewa and Uma. In the villagers commercial crop. The island is largely self- where they live, they are divided into sectors. sufficient in its food with all families owning and Tabwewa has 9 sectors, Uma village has 7 sectors, planting for food security. There is an abundance Tabiang has 8 sectors and Buakonikai has 7 of coconut trees, many of which have grown sectors. The sectors consist of family units that naturally over the many years on the islands. The are closely related, who work together to farm, people use coconuts as a food source and make gather food, and cook, living. copra or to sell to the Banaban VCO Company as an alternative income source. The central “town” centre is Nuku which hosts the

Fig 7 and 8 : Downtown Nuku on Rabi Island

10 CASE STUDY - RABI VCO 5.2 Background to Rabi VCO production

The Banaban VCO Factory is the project arm Fiji. They were taught everything about the for the Banaban Women’s Association that has coconut tree, and each attendee graduated with an active membership from 18 sectors with a a cold press machine and an electronic coconut subscription-based membership of approximately scraper. Terakano simultaneouslylobbied with 300 women from around Rabi. the Cakaudrove Provincial Council and sought the approval of the Commissioner Northern’s The Banaban VCO factory was set up by Terakano assistance to fund their Banaban VCO factory Takesau, previous President of the Banaban facility setup. Government through its Look North Women’s Association. Terakanosaw the need to Project provided funding for the Banaban factory have a community project that would be able to facility to be built. The Rabi Council invested the employ women from her island to then generate amount of $13,000 for seed capital to pay for its funds and make a profit that is sustainable enough operational expenses and the Queensland based to fund other projects for its women’s group Nature Fiji Pty stepped in to further assist with sectors. $20,000 worth of VCO equipment to equip the factory for its initial start-up. The project was initiated in 2010. However, it would take many meetings, door knocking and Banaban Virgin Coconut Oil began processing and attending critical meetings with the community, officially began operating as a business in 2014. with the local Government representatives and Since their start, they have managed to secure with the Cakaudrove Provincial Council to be able markets from the luxury resorts of Namale and the to get the attention of the Government to obtain Cousteau Resort near Savusavu, the local shopping the necessary assistance to get the project going. chains for Dayaram and Changalal Limited, and In 2013,Terakano was nominated to participate in more importantly directly to domestic customers ‘The Whole nuts three-monthextensive training via “roadshows that kicked off their sales. Sales to course’ atMinistry of Agriculture’s Mua Coconut Tappoo’s, Bulachino, Suva Market retailers and the Centre at Mua on Taveuni. There were 14 other Value City outlets are other market outlets that participants from various communities around Banaban VCO continue to sell to.

5.3 Production – The Process

Figure 9 The Banaban Virgin Coconut Oil Factory in Nuku, Rabi Island that is managed and operated by the project arm of the Banaban Women’s Association, the building was built under a Government Look North Grant Project in 2013.

CASE STUDY - RABI VCO 11 The Stages involved in the production of VCO at the factory in Rabi include:

• Collection of coconuts • Scraping the nuts • Extraction of coconut milk. • Fermentation • Harvesting • Filtration • Extraction &sun drying of VCO • Packaging and delivery of the product Collection of Coconuts The production of Rabi VCO coconut oil starts with collection of nuts from the farmers. Currently, on Rabi there are around 1,500 coconut farmers. However, there are only around some fifty (50) farmers who are regular suppliers of nuts to the factory. The nuts, which are husked beforehand by the farmer, and brought to the VCO factory in Nuku, packed in 50 kilogram sacks. On arrival theyare weighed on arrival and the farmers paid $0.30 a kilo. Scraping The coconuts getstored in the storage shed where when the process for making VCO begins. The nuts are graded to ensure it is still a healthy coconut and split by hand with the coconut water separately collected into a bucket. This water is then used later in the process where it is mixed back into the coconut mill after the milk extraction of stage. Once the coconut is split the flesh is removed using one of the 3 electric scrapersat the factory. The electric scrapers are operated using generators that belong to the Rabi Council. At the time the VC study was undertaken, the generators run only for half a day hence the scrapping of the coconuts must always be done and completed Extraction of Coconut Milk before the shutdown of the generators so the After the flesh of the coconut is removed, it is then coconuts are scrapped as the first duty of each day put through the manually operated cold press. of processing. There is no electricity on t Rabi and The press extracts the milk by way of “Pascal’s the VCO facility depend solely on generators which Principle”. The coconut flesh is put through the the Rabi Council owns. The Banaban VCO shares in press twice in order to maximize the amount of the purchase ofthe diesel that runs the generators milk extracted, and VCO produced. The coconut essential to power the electric scrapers. The water initially separated at the beginning of the island has plentiful of sunshine so has the potential process is poured into the bucket with the scraped to have solar power to run their electric scrapers coconut which goes through the cold press. The or to purchase their own generator which will extracted coconut milk is funnelled into a clean allow Banaban VCO to control their own scrapping bucket where it is all collected in readiness for the operations in accordance with their orders. next stage of the VCO process.

12 CASE STUDY - RABI VCO Fermentation further enhanced by placing blankets or heavy cloth around the container of coconut to increase The extracted fresh coconut milk is taken to the temperature. Fermentation lasts for 24 hours after filtration and fermentation room. Filtering is which the coconut milk can clearly be seen to have through a manual process of sieving it through separated into distinct layers: The first curd, VCO, layers of fine cloth to remove any particles and Second Curd and the water which is used to make impurities. The milk is covered and put in a dry coconut vinegar. place to induce fermentation. The process is

Harvesting, filtering and Sun Drying of moisture that is present in the oils. The sun- drying process by Rabi VCO makes the difference VCO in their oils, allowing them to organically dry Following the 24 hours of fermentation, the top their oils under the sun for a period of upto 2 layer which is referred to as “the first curd” is weeks to allow their moisture content to be very removed, allowing access to the VCO below. The lowor nil The relatively low moisture content also VCO is then filtered again into another container contributes toward increasing the shelf-life of to remove any particles or impurities. The VCO is Rabi VCO and is what sets it apart from other VCO then placed in the sun in clean containers and left products. The time taken to properly dry the oils out to sun dry naturally in order to remove excess is never compromised and is a key stage in their processing steps.

CASE STUDY - RABI VCO 13 Packaging and Delivery of the Product VCO customers have raised issues with the 500ml bottles used, saying that they easily puncture. The final stage in the process is the packaging of One of the interventions planned following the the VCO. The VCO after sun drying is bottled in conclusion of this study will be to secure more 125ml, 200ml and 500ml bottles. Namale Resort suitable 500ml bottles, labelling and packaging in particular, takes delivery of their order in 12 for the VCO with targeted packaging for targeted litre buckets. Cousteau Resort has also indicated markets and allow price differentials for different that it would be happy to receive their regular products to contribute to increased sales and order of VCO in 12 litre buckets that is sold at a marketability in the long term. wholesale rate to the hotels. Some of Banaban’s

Fig 10: Sun drying of the Banaban VCO Fig 11 : Packing and preparing wholesale VCO in buckets

14 CASE STUDY - RABI VCO 6. The domestic virgin coconut oil value chain map (Case study: Banaban VCO)

Input Suppliers Equipment/ bottles/ Farmers essential oils / At least 1,500 households dependent packaging on coconut as a form of income – with some 50 households as regular suppiers of whole nuts for VCO Farm gate price for mature coconuts is $0.30 per kg for a husked nut

Boat Land Transfer Transport

Virgin coconut oil processor 2 categories i) Fresh dry VCO processing ii) Fresh wet VCO processing Mark-up- 50% - 100%

Retailers / Hoteliers / Wholesalers Mainly retailers, hotels who are around the Savusavu areas. Direct sales to customers at Roadshows Mark-up- 50% - 100%

CONSUMERS Increasing demand for virgin coconut oil due to quality, awareness of its health benefits and its strong market presence

CASE STUDY - RABI VCO 15 6.2 Step 1: Drawing the value chain map

Main Actors (Those who buy and sell the product Supporting Actors (those who provide services to as it moves along the chain) facilitate the movement of the product along the chain) Coconut farmers of Rabi • Rabi Council

VCO Rabi Workers • Essential Oil suppliers

• Bottle and label suppliers

• Transporters of VCO to wholesalers after delivery on arrival into Savusavu Transport – Boat / Truck to Savusavu • Quality Testing services (USP)

• Agro suppliers of VCO soap ingredients

Local Savusavu shops / Savusavu up market resorts Namale& Cousteau Resort / Daharam Supermarket / Changanlal Boutique Shop / Vanua Levu Road- shows / Bulachino Nadi

End users / consumers

16 CASE STUDY - RABI VCO 6.3 Step 2: Putting facts and figures into the map

• Ultimate target for Banaban VCO Factory is daily, to equate to 20liters per day, gives you 500 litres per month = equivalent of 5,000 100liters per week, to achieve 500 liters per nuts (double current production) month • Todays production target currently 300liters • Currently farmers pick and drop off coconuts per month = equivalent of 3,000 nuts at will, and when and if they have financial obligations. Before school, Christmas is when • Current maximum production is 250liters per nut collection is normally at its highest due to month = collection of 2,500 nuts that month the required financial requirements that have to cater for sales orders to be met by the farmers • 10% of bad nuts previously received, • The at will nut collection is also very per centage has since decreased since dependant on the transportation of nuts in introduction of collection of husked nuts the sacks by normal public transport where • Sales of 20cents a husked nut, previously many times the farmers if bringing their sacks offered 30cents a kilogram, but changed the on a busy time will be penalised for their rates for nut collection in 2015 cargo and are charged $2 a bag. • Nuts are brought in sacks, average sack • Farmers tend to choose to use transport that weight is 40/50 kg with approximatly 50-60 runs empty at mid day to avoid the penality of nuts, average sack is $12-$15 dependant on the $2 a bag cargo charge unless they urgently weight of nuts need to collect much needed cash for their • Current daily nut useage avearages 100-150 coconuts nuts daily • Average farmer will bring in 2-3 bags of • Current production averages 12-15liters coconuts per trip to the Banaban VCO factory. daily for a production of 5 business days with • Empty bottles are purchased per 100 @ generator being turned on for half a day $0.47cents for 500ml, $0-30cents per 200ml, • Production can be doubled if they have bottles are purchased at 500 bottle orders to full day electricity thus to have their own maximise freight and costs for one order generator would be advantageous. • Wholesale rates for 500ml’s offered to regular • Need to increase daily nut useto 200 coconuts wholesale customers is $20 a liter

CASE STUDY - RABI VCO 17 • Wholesale rates for buckets @ 12 liters a improving their production capacity bucket is $16 a liter, cost of one bucket is $7 a - Resolution: Banaban VCO to reimburse fuel bucket from plastic manufactorer landed cost when community in Rabi (inclusive of transport) • Banaban VCO providing an incentive of • Many coconut farmers prefer to sell their transport for farmers to deliver nuts to the coconuts to Rabi Council for copra to on factory as opposed to waiting as and at will for sold Copra Millers , dried copra is purchased delivery. The incentive becomes a pull factor @ $1 per kg, Many farmers opted this over for Banaban VCO, and arranging the dates for $20cents a nut to Banaban VCO. trasnportation allows Banaban VCO to dictate • Our team clarified the difference between their production to the farmers. Date of 7th sales to Rabi Council for copra as compared March set for first delivery. to Banaban VCO to farmes as we met with • An additional community onroute from farmers around Rabi during the visit: Rakantai(Yagona farming community with - 10/15 nuts = makes 1kg copra = $1-00 (Rabi coconut trees) also agreed to work with Council) Banaban VCO to schdule a day per month to - 1 / 2 husked nut = 1kg = $0-20cents, hence deliver a boat load of coconuts. Currently, this 10/15 nuts = $4/$7-00 (Banaban) community does not provide nuts to Banaban VCO, instead makes copra and sells to Rabi - Many farmers just assumed that the figure Council. The arrangement to reimburse the $1 a kg for copra was more than to sell to community boat use of its fuel was agreed Banaban VCO, when we gave them these too. This boatload will add to Banaban VCO’s actual figures, many were surprised and opted nut purchases and they are new farmers to to sell nuts to Banaban instead of working provide coconuts. hard on their copra for less money. Many said it was easier to husk a coconut then to • Banaban VCO does not own agenerator prepare for copra and is very dependant on the Rabi Council’s generator. The Rabi Council at the time of the - Further explained that 1sack = average study was using its standby generator since its 50coconuts, dependant on kg weight could normal one was unserviceable and awaiting fetch farmers $12-$15 a sack parts, the standby generator was switched - 2/3 average sacks = $40/$50 a day on only for half a day so Banaban VCO could only use its electric scappers for half a day. It • Visited a farming community at Rakantai, is adviseable that Banaban VCO work towards accessible by boat, the community has a boat owning their own generator so that they donated by Rabi Council. No incentive for control their production hours and not be farmers to provide coconuts to Banaban VCO reliant on Rabi Councils timings of turning on because of the distance. Thus a trial has been and off the generator according to their time. negotiated with Rabi VCO. This involves the following: • The 500ml bottle is not a good bottle for the tourism market as it punctures easily, this - Banaban VCO to pay for fuel to transport point has been raised by Tappoo’s and they coconuts to Nuku requested bottles that would not puncture. - Discussions on a set date every month that Likewise in our meetings with Cousteau the boat may travel to Nuku with coconuts for Resort, they requested better packaging by Banaban VCO to pay for fuel Banaban VCO, sighting other oils that were displayed on their shelves as examples. The - Rakuitia community will purchase fuel and hotel confirmed that Banaban VCO was of a ensure receipt to be refunded when they superior quality as rated by their staff who use travel to Nuku with coconuts oils daily for massages, they got many sample - An average of 30 bags of nuts can be VCO’s brought to their hotels however, over transported at any one time, =$450 for nut the years, they have trusted the Banaban VCO purchases, allows Banaban VCO time to also because of its consistent quality and prompt prepare their cash holding to pay the farmers delivery when orders were placed, a very rare . Many guests who frequent their hotel would - 30 bags of nuts @ 50nuts a bag will give you ask for the oils from their Boutique stores so 1500nuts, equivalent to 150litres immediatly

18 CASE STUDY - RABI VCO there was an opportunity for Banaban VCO to good labelling is essential, particualrly for the package specifically for their boutique stores. tourist market This was noted by Terikano. • VCO soaps is also made from the VCO oils • Packaging labels are printed locally in the that are of a less superior quality then the office by Terakano, the labels are put together sun dried ones, some are added with scented by using mocrosoft publisher and it has served essential oils and repackaged into the 200mls Banaban VCO well. Additionally, the first and 500ml bottles, others are set aside as labels were done with the assistance of Ken the key ingredient to making Banaban’s VCO and Stacey of Banaban VCO (Nature Pacific) soaps that include the coconut shell charcaols based out near Burleigh Heads Queensland, that are added to make charcoal soap, honey those were printed in bulk and they are on the induced to make honey VCO and charcoal, last roll of labels at the time of the site visit which is proving very popular with their to the factory to conduct this study. These market orders for Suva and Savusavu. need to be replaced as soon as possible – as

6.4 Step 3: Identifying what each actor contributes to the final product and the returns they receive.

Figure 12: Farmers Bringing their coconuts to the Figure 13: VCO production in progress at the Factory Factory

Figure 14: Customer – Cosmetics Manager at Figure 15: Products on Display at a Women’s Namale Island Resort. Ministry Roadshow

CASE STUDY - RABI VCO 19 Farmers the nearest bank is in Savusavu. Husked nuts are delivered in 50kg sack bags that can hold 40-50 Farmers are paid $0-20cents a husked nut on nuts dependant on size, the bags are weighed on delivery to Banaban VCO factory with farmers arrival and the farmer is paid. An average bag will receiving their cash then, however due to cash yield $12-$15 for the farmer, and when worked limitations on the island, at times they have had out, this is a better return for the farmer than to wait for sales of VCO to pay the farmers since copra

Figure 16: A farmer arriving with his bag of coconuts to the Banaban VCO factory

Local Transport to factory Market Each bag is charged $2 for delivery to VCO The main market for Banaban VCO is Savusavu. processing facility Nuku situated at the back of the There are two major supermarket chains that Rabi Council and Government buildings. purchase the VCO bottles and on inspection it was found that the shelves had run out of stock. Discussions with the owners of the supermarket Transport to Savusavu (main market) chains confirmed that the Banaban VC oils One has to catch a boat ride to get to the main were quite popular with many Savusavu locals island of Vanua Levu which takes approximately purchasing the VCO bottles in quantity numbers 30minutes in good weather and an hour during mostly as gifts when travelling out of Vanua Levu. bad weather. The boat ride charter for one way Whilst at the shop, a lady came in to request the is $70 and the boat can comfortably load supplies oils, when interviewed, she said she was traveling of Banaban VCO boxes per trip. On arrival at the to Suva by boat the next day and her family main island, one either times the normal public members had asked for the oils. The retail sale bus or organise a car pickup. The regular taxi price for the 200ml is $8 whilst the 500mls is $15 operator who services Banaban VCO guests and at Chaganlal’s and at Dayaram’s Supermarket too. special trips @ $150 one-way drive from Savusavu The other parties that purchase the VCO are small to Karoko (Rabi Landing Point). The taxi ride takes scale market vendors in Savusavu and in Suva 2 hours to/from Savusavu. Banaban VCO can who are located at MHCC, their prices vary for the load boxes onto the chartered punts thus if they 200mls from $8 to $10, whilst the 500mls retails at increased their production they would be able to $15-$20. reduce their unit cost of transport.

20 CASE STUDY - RABI VCO Banaban VCO also obtains orders through their dates and work their production towards these facebook page or by phone. It is only when calls Roadshows where at least 2 to 3 staff attend with are made for orders that these are targets that supplies of VCO that are always sold out. At the get priority towards the daily production at the Roadshows, the sale price for the VCO 200mls is factory floor. $5 and $10 for the 500mls, these are cheaper than VCO sold at the retail shops and locals know this so Banaban VCO participates annually in at least many of them attend the Roadshows to purchase 5 Roadshows that are organised by various their personal VCO’s at this cheaper price directly Government ministries around Vanua Levu, these from the Banaban VCO staff. When purchasing roadshows are frequented by locals who know that from the Roadshows, many of the locals buy Banaban VCO will be at the Roadshow to purchase upwards of 3 to 5 bottles to stock up for when the VCO locally. The factory has these Roadshow next Roadshow happens.

Actor (participant What the actor The cost of the ac- The reward the Actors Risk in the value chain) contributes to the tor’s contribution actor receives final product (share of the final selling price to the consumer - 500mls of VCO sells for $18-00) Farmer Picks coconuts @ $2 transport per - $0-20cents per Low to Moderate 40/50 a bag bag husked nut Injury Labour to pick the Labour to collect - $12/$15 a bag Not incentivised to coconut and husk the nuts with 40/50 nuts collect nuts unless Delivers bag to per 50kg bag there is a need to VCO factory -1 sack makes ap- have cash for liveli- proximately 4liters hood of VCO No scheduled Estimated share transport or boat of the customers to take nuts share of the con- No nuts after a sumer purchase cyclone (eg TC price: 18% that is Winston) shared amongst Competion for the the farmers farmers time from high priced yaqona Pests such as rhi- noceros betel Banaban VCO may not have cash available to imme- diately purchase nuts

CASE STUDY - RABI VCO 21 Banaban VCO Produces sun dried Purchase of nuts, $5 -200mls Moderate to high virgin coconut operating VCO $10 -500mls -Contamination of oil from the nuts factory, developed $16 -1 litre VCO collected and pack- VCO market, trans- wholesale -Shortage of nuts ages and sells: porting product to -No packaging/ - 200mls market, packaging $336 -200mls labelling materials - 500mls & labelling, gen- ctn(x48 btls) due remoteness of - VCO soaps erator fuel, operat- $240 -500mls ctn island ing cost average @ (x24 btls) -Cash flow short- $5,000 per month age $192 -wholesale -Non-payment or 12litres in bucket delayed by end customers Estimated share of the customers share of the con- sumer purchase price: 26% Input Suppliers Provides essential Essential oils @ Estimated share Moderate to high (Transporters, oil ingredients to AUD $80 per bottle of the customers packaging, and scent VCO in readi- airfreight from share of the con- Product will not be ingredient suppli- ness for market Australia sumer purchase able to be pack- ers) and customer price: 32% aged and delivered preference to market, thus far, $2 a 50kg bag Banaban VCO has Transports coco- containing 40-50 a good reputation nuts to the factory coconuts that of delivering on its in Nuku / trans- makes 4-5 litres of orders which is a ports packaged VCO strength because VCO in boxes that all these actors have been plastic play a vital role wrapped, bottled in connecting the and labelled by product to market. boat to Karoko, transports from $x for flat pack car- Karoko to Savusavu toons purchased or on route to @ 100 pieces from hotel/ Transports packaging factory to mainland in Viti in Suva Levu

Bottle suppliers Label stickers of 500ml bottles/ per 1000 @ flat pack boxes for $0.35cents a label packing 200ml or (from initialstart- 500ml upby Stacey from Brisbane)

Label stickers & plastic glue for labelling of 200ml & 500ml bottle

22 CASE STUDY - RABI VCO Retailers Sales of VCO prod- Transport costs to -200mls $8 Moderate (Dhayaram, ucts to the public deliver VCO prod- -500mls punctur- Chaganlal, Tap- ucts from Savusavu -500mls $15/$20 ing so loss of prod- poo’s, Bulachino, Shelf life and Post Office to uct due low quality Roadshows, and presentation/ mainland Viti Levu, Estimated share of plastic bottle small scale mar- marketing of VCO average cost of of the customers ket vendors in products $10 a cartoon share of the con- Banaban VCO not Savusavu and in sumer purchase able to supply big MHCC, Suva) Repackaging of price: 24% retail volumes Banaban VCO product to own marketing packag- ing

End user / Con- The end of the Low sumer value chain or the If the customer ‘Queen’ of the doesn’t purchase chain the product be- cause not happy with it, others will still buy as many in Vanua Levu where the oils sell know the product.

6.4.1 A summary of the distribution of the shares along the Banaban VCO domestic value chain

Actor Actor share of the final price to the con- sumer (%) Farmer 18% Banaban VCO Factory 26% Input Suppliers (Transporters, packaging, 32 % and ingredient suppliers) Retailers 24 % Total 100 %

CASE STUDY - RABI VCO 23 6.5 Step 4: Assessing the Market

The current marketing structure based on Banaban VCO but work needs to be done to source and purchase new 500ml’s bottles selling through the current channels for this market. Proposed bulk sales in the All of the VCO produced by Banaban VCO value vicinity of 20 boxes of 500mls or 120 litres of chain is sold through Savusavu to the two retail VCO was identified. l. However, realizing this shops, the Savusavu and Labasa small market demand is constrained by available cash flow vendors, the hotels along the way to Savusavu and to bulk purchase these bottles is transported out to Suva for the small market • The scope to tap into the retail shop is vendors and the other small retail outlets like Bula- available for Banaban VCO because of the chino and First Landing outlet in Nadi. There is still relationship already made with Makan’s Drugs scope to increase quantities to the current markets Wholesalers and RB Patel Shops who go to from Banaban VCO’s current average production of Rabi monthly to stock up their supermarkets 250 litres. During the course of mapping this chain, in Nuku. Initial discussions took place during visits were made to new communities to begin the course of this value chain mapping and delivering coconuts to the factory which can ef- it needs to be followed up after strategic fectively increase production to 400 or 500 litres of short-term plans have been put into place VCO per month, requiring coconut supply of over by Banaban VCO to enable it to scale up its 5,000 nuts however Banaban VCO is constrained operations to cater for larger bulk orders. by available cash flow to enable them to buy coco- nuts from the farmers. But given time, cash can be prepared in time to have cash ready to pay farmers It is assumed givenshort-term plans in place for to enable the factory to increase its production. the VCO factory, that it will shortly be able to cater Market scoping for expansion to increase sales for for bulk orders and tap into the domestic retail the factory and to increase sales to farmers for supermarkets. However, available cash flow is a increased livelihood can happen based on the fol- constraint that needs to be addressed There are lowing considerations: many retail outlets. To tap into just one will open the doors for other smaller VCO operators to co- • The supermarkets in Savusavu had not put in exist with Banaban VCO as partners to supply the their orders and there was no follow up, if a market. This is the domestic market and supply follow up order system is started by Banaban must be consistent to be able to match the orders VCO instead of waiting for the orders to be on this larger scale. The main issue here would be phoned in, orders to existing customers will the quality of the VCO provided by the co-partner. increase on its own Poor quality would undermine the high quality reputation of Banaban VCO • There is interest from both Namale Resort and Jean Cousteau Resorts to include (new product range) for their sales shops at the The market for edible vegetable oil selling resorts the 200mls range of oils, these are in retail shops and supermarkets sold in cartoons of 48 bottles a cartoon or the equivalent of 10 litres a carton, each hotel. There are several other hotels along the Savusavu road from Karoko to Savusavu that can be visited to showcase and possibly sell this range • Additionally, Jean Cousteau Resort mentioned that it was interested in purchasing VCO in wholesale buckets (12 litres a bucket) for its massage and spa use. A similar demand can Fiji like other PIC’s imports large quantities of veg- be expected from other resorts located also etable oils for cooking purposes. According to the on the Hibiscus Highway Andrew McGregor and Mark Sheehy (2017): Fiji imported 16,675 tonnes of vegetable oil - landed • Materialisingthe interestexpressed by the value USD 20.7 m in 2015, with the imports of Tappoo’s chain hinges on new bottling for the vegetable largely dominated by low priced palm 500ml range. The Company is keen to order

24 CASE STUDY - RABI VCO oil and soya bean oil sourced mainly from Malay- The PIFON Overview Market Study notes: sia and Indonesia;In the Philippines VCO is now a common product in supermarkets and pharmacies It is only in recent years that the health value of – not the case in PICs. This is one of the reasons lauric oils has been recognised and promoted. why the value chain mapping was conducted to This has been able to offset the consumer resist- study the possibility of entering the domestic ance to tropical oils generated by the American retail markets which can be achieved however the Soybean Association (ASA) starting in the 1980’s. pricing mechanism for VCO has to modestly fall in Klurfeld (1991) notes that changes in dietary price so that it can compete on an economies of intake of fats and oils which occurred over the past scale basis where the unit price is reduced how- century comprised an increasing consumption of ever because the overall volume has increased, saturated and partially hydrogenated trans-fats the revenue expectation for small processing VCO which can increase the risk of coronary hear dis- factories like Banaban VCO can still make substan- ease by raising level of “bad” cholesterol and low- tial profits for the community and the collection ering levels of “good” cholesterol. It was on this of nuts will be exponentially increased with direct basis the claim was made that tropical oils, such benefits members. as coconut oil, were harmful to public health and such erroneous claims continue to be made. Yet the chemical composition of lauric acid is neutral in terms of cholesterol. Therefore, it is now widely accepted that the consumption of palm kernel and coconut oil as a source of dietary fat does not pose any additional risks for coronary artery disease when consumed in realistic amounts, as part of a healthy diet (McGregor and Sheehy 2017 p 9)

Therefore, a significant substitution of coconut oil for the currently imported vegetable oils would bring with it public health benefits to Fiji and the Cold pressed VCO according to the PIFON Over- PIC’s. This substitution would bring with it signifi- view Market Report is seen to be superior in terms cant economic benefits for VCO small scale opera- of health and nutritional considerations than the tors like Banaban VCO. If high quality VCO was mainstream cooking oil sold in supermarkets. Co- able to capture at least only 10% of the imported conut oils is a high lauric acid vegetable oil (lauric vegetable oil market it would represent a market of acid content of approx. 50%) and as more consum- at least 1,700tonnes of VCO domestically pro- ers become aware of this, and its taste, nutritional duced. that could be worth (using a market rate of and health benefits of cooking with good qual- $15 a litre) nett +$25.5 m. ity edible (to be tested) VCO oil, more will use it Fiji has the capacity to produce this amount given domestically. It is common throughout the Pacific that in 2017 it exported 26.2 tonnes, of VCO (Bu- Islands that coconut oil is generally regarded as an reau of Statistics) however with the recent impact inferior cooking oil preferring instead to buy im- of cyclones, particularly severe TC Winston in Feb ported oils because of the stigma associated with 2016 , the figure dropped drastically in 2016 to the domestic home-made coconut oils largely used 4.3tonnes. The impact was most severe in south- only for skin and health care. This attitude needs ern Taveuni, Fiji’s main coconut producing area. to be reversed with quality coconut oils products Such an initiative to substitute coconut oil with to be made more available and become promoted. imported vegetable oils will revive the dying coco- nut industry and provide much needed livelihood There are many small scale VCO operators dotted options for many of the islands that are dotted around Fiji that was set up by Ministry of Agricul- with coconut trees. It would also provide an incen- ture, Ministry of Rural Development and Ministry tive for communities, farms and farmers to carry of Women departments who are churning out VCO out tree planting for new coconut trees which is primarily for skin care range however if they are slowly being revived and initiated by the Ministry taught the basics of ensuring that their VCO quality of Agriculture, and a much-needed market for the is maintained and in particular minimum moisture struggling small scale VCO operators. The Minis- of 0.1% not exceeded. These units are currently try of Agriculture has begun a coconut replanting strugglingto achieve the standards required to program providing 100nuts of 6month old coconut displace some of the imported vegetable oils. seedlings to farmers for replanting from its Nausori

CASE STUDY - RABI VCO 25 Research Station. • Decrease in prices for small scale producers of VCO. VCO operators to be taught the value chain map and appreciate that economies of scale will bring in the required revenue for their SME’s through improved costs per unit. • A significant increase in consumer appreciation of the positive feature of quality VCO (health and nutrition, together with suitability for cooking) This will require substantial education and promotion efforts with support from Government to initiate and push such a program. • A significant increase in the consistent Fig 14: Wholesale packed Banaban VCO packed availability of quality VCO. The quality in buckets ready for shipment for Namale Resort standards produced by Banaban VCO is said to be superior by current users. Objective quality To work to achieve such an objective for Fiji to testing by the USP/IAS Laboratory of VCO will replace 10% of current vegetable oil imports with need to be undertaken. Quality analysis, with locally produced high quality VCO edible oil, will follow-up recommendations by Dr Richard require critical developments to occur. These are: Beyer, is also recommended.

The determinates of domestic market demand for the Banaban VCO product

What consumers care about? Performance of value chain in meeting demand (Score 1-10-10 being high) and why Quality of the VCO 9 – Feedback from those that were interviewed general felt very strong about the quality of the oils rating it as very high, consistent (Clarity, smell/odour and taste) and best in the market compared to other VCO’s that have been brought in as samples. 9-The smell and sight of a crystal-clear oil without any colour is as- sumed of a high quality, customers also prefer that the VCO should not have any smell or distinct odour, however customers prefer that distinct flavours added to the oil to provide it a scent for body oils is very popular, with many choosing to purchase scented VCO’s for body use. Packaging and labelling 6- the 500mls bottle is not very thick so got t comments that the bottles need to be changed to more durable and stronger quality that can ‘weather’ storage and constant handling over time. 6-Labelling does not stick over time when the bottle gets oily and tends to fall off, the printing on the labels fade over time and loses its colours. Recommendation: -To improve on branding and packaging of the bottles, source new 500ml bottles to satisfy customer requests -Branding of Banaban VCO to include new labelling and packaging options with colourful and more permanent printing of labels that are printed on stronger sticker quality paper that will last longer over time

26 CASE STUDY - RABI VCO What consumers care about? Performance of value chain in meeting demand (Score 1-10-10 being high) and why Source / Story behind the VCO 9-The background story behind the product is very strong and raises a strong feeling of the islands that customers relate too. The story of Climate change and action of the displaced Banaban’s tug at the heart so the emotional connection by the customer and empathy assist to sell the product. This is the reason, the Banaban VCO has a very strong brand following for its oils. The story also helps to galvanise the community especially women who relate very easily to the plight of the Rabi Islanders. The oils are a local favourite again due to the connection of the island feeling and Savusavu being the town that Rabi Islanders call home, many Savusavu residents feel that Rabi Islanders are their relatives and thus purchase the oils as a form of identity and gift from their part of the island when leaving Vanua Levu to travel to Viti Levu and other parts of Fiji, regionally or internation- ally. The sense of ownership and patriotism helps to sell the Banaban VCO oils very successfully and everyone always wants to be on a win- ning team which the Banaban Women’s Association has successfully done with their VCO operation. Price of the VCO, 200mls & 9 – Price is reasonable given the consistency in the quality of the oils 500mls that has been made from the factory over the years. Banaban VCO was one of the first VCO’s to break into the domestic market before VCO became widely known, the strong brand and the story behind it carries a lot of its weight and what helped to sell the VCO in the first place, so customers didn’t flinch when the price went up at the Labasa Roadshow, the increase was minimal which wasn’t felt as What consumers care about? Performance of value chain in meeting demand (Score 1-10-10 being high) customers still rushed to purchase their oils. When customers were and why queried about the price, we were assured that it was quality that was Quality of the VCO 9 – Feedback from those that were interviewed general felt very being purchased and it was still a good deal compared to other quality strong about the quality of the oils rating it as very high, consistent oils that were available in the market with a reference comparison (Clarity, smell/odour and taste) and best in the market compared to other VCO’s that have been made to Pure Fiji oils, where the Banaban VCO was seen as authentic brought in as samples. and handmade so the price was well placed and very reasonable. 9-The smell and sight of a crystal-clear oil without any colour is as- sumed of a high quality, customers also prefer that the VCO should not have any smell or distinct odour, however customers prefer that 6.6 Step 5: Assessing strengths and weaknesses along the chain distinct flavours added to the oil to provide it a scent for body oils is very popular, with many choosing to purchase scented VCO’s for body and identifying ways to take advantage of strengths and minimize use. weaknesses Packaging and labelling 6- the 500mls bottle is not very thick so got t comments that the bottles need to be changed to more durable and stronger quality that when they first opened their doors, since then, the can ‘weather’ storage and constant handling over time. Banaban VCO has built up a steady market of its 6-Labelling does not stick over time when the bottle gets oily and local clientele who expect Banaban VCO to be sold tends to fall off, the printing on the labels fade over time and loses its at all Roadshows that is held on the island of Vanua colours. Levu. The Banaban VCO is very commonly sold at roadshows so their main clientele who are the Recommendation: locals look forward to attending local roadshows -To improve on branding and packaging of the bottles, source new to purchase Banaban VCO oils. The staff at the 500ml bottles to satisfy customer requests Banaban VCO process are very popular at these roadshows because they also provide impromptu -Branding of Banaban VCO to include new labelling and packaging Strengths entertainment at their stalls to attract potential options with colourful and more permanent printing of labels that are Roadshows and direct sales from Banaban buyers to them. The Roadshow is a common printed on stronger sticker quality paper that will last longer over time Factory ground where it interlinks suppliers/ farmers and Roadshows and direct sales from the Banaban potential buyers enabling this very important inter- Factoryby staff is a tradition that started their sales action to take place.

CASE STUDY - RABI VCO 27 Niche marketing other parts of Fiji because also of its remoteness, it relies solely on generators that run for a period The Banaban VCO oil has a unique quality that the of time that powers up the island communities. hotels of Namale and Jean Cousteau have recog- On Nuku, which is the base and headquarters of nised, they state that their staff who use oils daily, the Rabi Council, it has a generator that is capable rate Banaban VCO as a high quality VCO compared of supplying electricity to the Nuku community to others domestically that they have purchased including the Government offices, the Rabi Council and used, their preference is the Banaban range. and the Banaban VCO factory. More recently dur- Currently Banaban VCO sell wholesale in buckets ing the site visit for the VC study, the main genera- but the opportunity exits to provide exclusive tor had not been working since December 2017, hotel bottled packaging that can be sold in the and efforts were being made to source the part for hotel boutique shops as customers of the hotel the generator to be operational. In the meantime, often go into the duty free outlet and ask for the a standby generator with less capacity was being massage oils that were used on them. Discussions used for certain hours during the day and early during the interviews with the hotel staff dictates evening. For the Banaban VCO factory staff, they that Banaban VCO need to repackage their bottles had to work their coconut scrappers as soon as the with their story and their brand as the hotels are power was switched on to allow them to maxim- willing to provide them priority shelf space to sell ise the hours that the generator was in use. It is their VCO. Additionally, one hotel in particular, Jean recommended that they purchase or source their Costeau use VCO bottles when they travel for their own generator so that they are able to control hotel roadshows at international markets, it is very their production of VCO. Additionally, there is the useful to pack the small bottles on the go as part option to introduce solar power as an alternative of their roadshow kits because they sell their story because of the length of the day and the sun light along with the Banaban VCO story. It assists them hours available to the island. and is a specific niche market that needs more work to be tapped too increase sales for both the hotel and Banaban VCO. Pest and Disease The 1980s and 1990s saw a major decline in co- The Health benefits of the VCO conut for copra exports which in turn discouraged coconut production and replanting in the Industry. The health benefits of the VCO is now more widely In Rabi, there is no large coconut plantations as co- known, thanks in part to initial marketing cam- conuts grow abundantly all over the island where paigns through the roadshows that needed the they have grown from fallen nuts. During the staff to always explain the benefits of VCO, today VC trip, one can see the new coconuts that have the public is better informed and with this has sprung up and again grow in abundance all around, grown the demand for the product, it is a niche the trees do not belong to anyone as the land own- product and customers will drive and attend the ing rights are communal and belong largely in trust Roadshows or go to specific shops that sell VCO. to the Rabi Council who administers the island Banaban VCO helped to set this trend and must and its people. Many of the old coconut trees are take continued advantage of this market to supply neglected and grow wildly in the middle of the continously to feed this consumer need where island where it is dense jungle, whilst the more the imported VCO’s from Philippines and Sri Lanka accessible trees are those that grow around the have now tapped into , in 2016, 25.8 tonnes and in boundaries of the villagers, communities and along 2017 71.1 tonnes of VCO were imported into Fiji. the shoreline. The island like most of Fiji was hit by (Bureau of Stats) A contract with just one leading the Oryctes rhinoceros and inadequate pest con- wholesaler will be able to have their VCO in major trol efforts by the Ministry of Agriculture brought a retail outlets however the production of the VCO thriving copra industry to a halt in the early 90’s. a oils to meet the demand is an area that this report a major effort launched by the Ministry and backed addresses for Banaban VCO to be able to pull the by the Rabi Council was able to stem the damages commodity through the chain to them to allow caused the Rhinoceros beetle, there are still subtle them to control their production. symptoms of the damage that is visible through- out the island, however very encouraging is the Weakness replanting and the young coconut trees that are visible if one travels by sea. Remoteness / Rural Electrification Rabi Island does not have electricity as opposed to

28 CASE STUDY - RABI VCO again as their part of the island was hit, during this trip, visits have been made to new farmers on the other side of Rabi to allow Banaban VCO to always get nuts from both sides or if in the case of post cyclone, get nuts from either side of the island that is not devasted by effects of natural disasters. Co- conuts when hit by cyclones, many times lose all its fruiting and nuts and it can take upwards of a year to be able to fruit again dependant on the damage to the tree for nuts to bear again.

After Tropical Cyclone Winston, there were no sales of the VCO in their main market of Savusavu as people were affected by the devastation of the cyclone in their personal lives that spending on Figure 15: Coconut Trees on Rabi Island leisure items like VCO’s was not a priority. Ba- naban VCO staff travelled to Suva and attended the Roadshows in Suva to facilitate sales of their oils, Vulnerability to natural disasters and climate Suva being more accessible to expendable income change and not largely affected by the cyclone was able Rabi is a remote island in Fiji and is vulnerable to to attract sales. This caused a shortfall in cash so natural disasters which include the impending ef- the staff and farmers were not paid till sales were fects of climate change. The coconut industry has made because customers also didn’t pay for the been negatively impacted by numerous cyclones pre-ordered sales that were delivered to Labasa over the years. During Cyclone Winston which and Suva. Lessons were learnt from this which has went past Rabi island, the effect was felt more strengthened the financial procedures for Banaban on the main island of Vanua Levu; the coconut VCO and it has recovered learning strong financial farmers that usually supplied nuts had to wait out acumen along the way. till coconuts began fruiting to be able to supply

1 Week after Cyclone 18 Weeks after Cyclone

CASE STUDY - RABI VCO 29 Road to Banaban VCO Factory a road whenever the road contractors visited Rabi annually to carry out maintenance works on the There is no road to the Banaban VCO factory, just Rabi Island road that stretched the island. David a pathway that has been frequently travelled, (Executive Chair), confirmed that there are plans because of its frequent use both by vehicle and by in place to build a proper road for the factory as foot, it is riddled with muddy holes and an eyesore he was aware of the economic driver that the when walking to the factory. This fact was pointed Banaban VCO had on the Rabi Economy. out to the Executive Chairman of the Rabi Council and the request by Banaban VCO factory to build

Fig 16 and 17: Temporary road access to the Banaban VCO factory behind the Rabi Island Council

Non-payment by customers Banaban VCO is dependent on its cash sales and show in Suva after 2 months to facilitate sales of doesn’t hold a high cash flow, funds flow quickly in their oils. Suva customers were not affected by TC from sales, and flows out again to purchase coco- Winston and customers are more affluent with -ex nuts, if one does not flow, it drastically affects the pendable income were able to afford and purchase other. There was an incidence where orders were oils to allow cash flow again for Banaban VCO delivered to customers on Vanua Levu and pay- operations. This is the risk for SME’s that operate ment was not made to Banaban VCO which seri- in with minimum cash flow liquidity that keeps ously impacted cash flow to the effect that farmers the operations afloat, this was a hard lesson that could not be paid for the delivery of their nuts and Banaban VCO has learnt and now require upfront staff, efforts to sell the VCO locally in the Savusavu purchase deposits for any new customers whilst markets did not materialise because Savusavu their old customers enjoy the comfort of on time residents had just been affected by TC Winston, delivery for their orders with prompt payment that so staff travelled to Suva and attended the Road- normally follows.

30 CASE STUDY - RABI VCO 6.7 Step 6: Developing a Plan to improve the Value Chain

Actor Short Term Plan Long Term Plan Farmers -Changing factors to ‘pull’ the coconuts through the -Work with communities and villag- value chain eg Transportation pickup ers for specific pick up days from their communities/villagers where -Organise community boats to pick up coconuts on Banaban VCO staff travel and pay scheduled days farmers at pick up point -Coordinate with village communities for transport -Connect Banaban Women’s As- pick up on specific days for nuts sociation with partners who work -Incentivising to collect more nuts by providing in the craft space to assist with ready cash collected at farm gate. capacity building/training, marketing of raw coconut products to enhance livelihoods Banaban -Purchase of Generator for factory -New Product Development VCO -Upgrade of road access to factory -Promotion and awareness on the use of VCO as a cooking oil -Renovations to factory to include drying shed -Acquiring new equipment for the -Branding consultant for new brand, labels and factory online website page -Hiring of additional staff to increase production of VCO -Source new 500ml bottles -Seek funding grant for transporting -Increase pricing of 200mls and 500ml bottles nuts to the factory -Demostrattion of VCO for domestic cooking oil -Rebrand Banaban VCO and change purposes labelling with specific emphasis on Tourism market targeting niche ho- tels for higher upper market yield

Retailers -Provide retailers with a better option of the -To negotiate with a wholesaler to 500mls bottle produce for supermarket outlets

CASE STUDY - RABI VCO 31 7. Recommendations for Banaban Virgin Coconut Oil

Several recommendations have been identified to improve the productivity, efficiency and competitiveness of the Banaban Virgin Coconut Oil value chain actors. These are discussed below.

7.1 Product Improvement and Women’s Association. Development Changing the mindset of farmers from VCO as a cooking oil the ‘Push’ to the ‘Pull” factor through the chain The VCO on its own does not have an odour, whilst visiting Rabi Island, the team was introduced and There is no incentive for the farmers to collect exposed to cooking with VCO, it was unique in that nuts at regular intervals as the burden of coconuts the food had a distinct coconut taste to it, as if the being delivered to the factory is the farmers at his/ ingredients had been flavoured with coconut, and her own time and initiative. Many of the farmers the aroma of the food smelt deliciously of coconut. interviewed had motivation for cash to pay for an VCO is not known for cooking domestically, but event, a debt or to purchase an item, so the ability rather only for use as a body oil. The promotion to obtain ready cash from coconut sales to Ba- and the awareness of it as a cooking oil can easily naban VCO is a good alternative and a quick cash be done and with such a strong brand following earner for the islanders. The farmers interviewed that the Banaban Oil has, it should be easy (as our confirmed it takes a day to pick and husk coconuts team was) to change mindsets to using VCO as a and usually between the hours of 10am to 3pm cooking and nutritional oil. The health benefits of before school children return home, where on VCO is already very widely known, it’s just that no average 2-3 bags can be collected. If transport was one cooks with the oils because we have always arranged to the various villagers or communities had the option to use the imported oils that line for a certain day to pick up coconuts, the farmers the shelves of the retail end of the supermarkets, confirmed that they would certainly ensure nuts however changing it to VCO should not be much will be ready for collection instead of when they of a problem. At the time of writing this report, no wanted cash. They confirmed that this was better testing had been done for VCO as a cooking. as they would know exactly the day and be ready, because collection of the nuts would also mean their getting paid at their village without incurring Coconut raw materials as jewellery and costs for transportation to travel to Nuku. Farmers artifacts said that they would be motivated to collect nuts to time the schedule of the pick up of the nuts and In Rabi, work has progressed with the Women’s wanted to know when this could happen Interest Officer of the Rabi Island Council to Transporting harvested coconuts in sacks to the encourage the women members of the Banaban factory in downtown Nuku either by boat or buses Women’s Group to use the raw coconuts to make is the mode of delivery for farmers. To deliver their earrings, belts and coconut ornaments that is then coconuts, farmers pay for their transportation at given to the Banaban VCO group who take these $2 a bag, during the visit to Rabi, it was an op- items to their Roadshows to sell as well. However, portunity for Banaban VCO to talk to new farmers they need the equipment, capacity building and and communities to provide nuts to the factory. training to assist them to push this initiative out to Additionally, discussions at the village communi- the women members. The lack of equipment like ties confirmed that if transport was arranged to drills, and small machines for shaping, sizing etc collect nuts on specific days, the villagers would with the necessary tools to complete the works be committed to pick up nuts in time for collection can go along way to making this product a very by the arranged transport. In effect, by doing this, feasible and viable avenue too for the Banaban

32 CASE STUDY - RABI VCO Banaban VCO was changing the mindset of the access the wheelbarrow to wheel their harvested farmers to pulling the coconuts to the factory as coconuts from Nuku downtown roadside to the opposed to the farmers pushing their coconuts to factory (approximately 100meters) this will make it the factory. By arranging transport, Banaban VCO convenient and easier on the farmers especially to will be able to dictate the days and times of collec- the women and elderly. tion of the nuts to the factory and logistically work out their production accordingly to their require- ments and orders. The costs for the transport 7.3 Incentivising farmers to would still be surcharged to the farmers and could collect coconuts for VCO be deducted from the cost of the bags as is the current practise but Banaban VCO would be in Farmers collect nuts and take it to Nuku where the control of their production. Banaban VCO factory is when they are in need of cash, however another way is to create the ‘pull’ 7.2 Improving access to the VCO factor for the farmers to schedule themselves to collect coconuts in readiness for the factory’s pro- factory duction needs. This pull factor can easily be put in place by Banaban VCO factory organising transport The Banaban VCO factory is located in Nuku, the (either by road or boat) to collect nuts directly Centre that hosts the Rabi Town council office and from the communities yet still have the farmers Government facilities. Transport to Nuku is reliable to pay for the transport costs. In doing this, the as all vehicles pass and stop here for Post office Banaban VCO will prompt the farmers to collect services, Rabi Council administrative work, Police, and husk coconuts in readiness for the transport Court etc. In Rabi, the mode of transportation is schedule to arrive at their communities and in an- via 3ton trucks that have seatings that serve as ticipation of being paid cash in their villagers, thus public transport and these run frequently in the saving them the cost of riding into town to deliver morning to cater for school and work runs, adhoc the coconuts at their will. This cash incentive for mid-day runs and then again after school and farmers to be paid at th ‘far-+m gate’ is good for work. During the adhoc runs, farmers can (if space the farmers as it will take care of their livelihood permitting) load their sacks of coconuts which are much quicker whilst allowing Banaban VCO to have onto these buses down to Nuku at a rate of $2 per the necessary nuts to increase their production. bag, then carry the sacks for some 100 meters to the factory situated to the back of the Council of- fices. There is no road access to the factory where generally people drive through or walk to the fac- tory, the way has become very muddy. What is needed is to build a road access to the fac- tory to allow easier access for farmers to get to the factory. Plans are in place to build a road so discus- sions were held to reiterate the importance that access to the factory has for the local community. If a road is built, farmers can have their coconuts dropped off at factory gate which will encourage the harvest of more sacks rather than currently as A Banaban VCO staff at the coconut collection they are required to carry it from the roadside to station at Banaban VCO factory the factory.

Additionally, a wheelbarrow can be purchased and have this readily available so that farmers may

CASE STUDY - RABI VCO 33 villagers for the times required to carry out pickups 7.4 Linking with public funded from the communities or villages, the ordering programs of the nuts can be worked out by the production output requirements for the month and nuts can The Ministry of Agriculture, Ministry of Women, come in time for production so that the nuts do Ministry of Trade and Tourism, and the Ministry of not stay too long in the storage sheds and become Rural Development all have various programmes bad. Presently 10% of nuts are rejected when that are Government funded and aimed at sup- opened up and this cannot be determined if it goes porting growth of SME’s in remote and rural areas. bad whilst in storage at the factory or from pickup It is hoped that this study will assist to focus on points. The more frequent the pickup of coconuts Banaban VCO factory on their needs and require- also the less likely there would be nuts on the ments and equally to other community-based ground to sprouting “vara” so the less likely that SMEs that are operating like Banaban VCO fac- the percentage will increase but rather decrease. tory. The Banaban Women’s Association has 18 Presently the shed that houses the nuts is always community women’s sectors affiliated to it, with overrun with nuts (at the time of the visit) and so approximately 300 members, the women in these the bathroom was used to store the additional co- sectors collect coconuts and earn a reasonable conuts that came in through the Christmas period. living from the sale of nuts to the factory. Gov- Collection from the communities will allow Ba- ernment funded initiatives that assist livelihood naban VCO to also control the nuts being received, programs can be matched to community SME’s as this way, ensuring whatever nuts are in possession they help the broader community, in this aspect, are stored correctly for longer shelf life. the Banaban VCO factory needs assistance with the The rains affect the sun drying processing for the purchase of their generator, renovations to their VCO, it is proposed that renovations to the side of factory to cater for a drying shed that will boost the factory building can be undertaken to allow their production, a vehicle and a boat for picking an additional shaded area to allowfor drying. This of nuts from the communities. As the production drying area will allow the staff to permanently of nuts increases, so too will the livelihoods and leave the containers out until and when it has the cash receipts for the Banaban Women farmer reached its required levels for market readiness. members. There is no separate waiting area for customers who come to the factory to purchase oils that is sold from the factory, everyone who buys from the 7.5 Improving the facilities at factory have to walk through the production area and wait outside the office, often watching the the Banaban VCO factory processing in full stride. An opportunity exists to Proper storage facilities are needed for storing co- build a sidewalk from the front gate to the office conuts to extend the shelf life of the nuts that are with shelter overhead where the public can seat delivered to the factory andensure the availability and wait to be served without walking through for production for the VCO factory as required by the production area. The office can then be made their market orders. Farmers working in collabora- larger so that it offers a specific area to display and tion with VCO factory staff, can liaisein advance sell the VCO’s sold and separate the office from through the use of their phones to contact the administration.

Fig 16 and 17: The processing area at the Banaban VCO Factory and the sun drying area

34 CASE STUDY - RABI VCO There may be some funding partners who support 7.6 Exploring an increase in the purchase of vehicles for community SME’s the direct sales pricing for VCO at that need to be researched and be matched to the needs of the Banaban VCO community as the sales Roadshows and collection of the nuts address livelihoods at the grassroots level. The pricing for the 200ml bottles is $5, 500mls $7 at the factory, these are the same retail prices that Additionally, the Government under the PM’s of- is sold at the Roadshows and in all the times they fice and the Rabi Island Council issues community have attended the Roadshows, all their VCO has al- boats to the Rabi Community and in this context, ways been sold out. A recommendation to include either party may be approached to assist the a portion of the cost of the transport, and costs to Banaban VCO arm to donate or fund a boat for the support the travel expenses of attending the Road- use by the Banaban VCO factory for the purpose show be tagged to the current prices of the 200mls of collection of nuts from the remote communities and the 500mls bottles and allow more flexibility whilst also addressing livelihood needs. and difference with pricing at factory and at the Roadshow. The issue that all VCO bottles taken to the Roadshows would eventually all be sold before 7.8 The Banaban brand the end of the Roadshow also augurs well with the recommendation to increase the purchase price so Banaban VCO has been in the market since 2013, that the value at the factory remains similar when in the early days, Roadshows which was the way the price value is examined across the value chain. the factory sold its products printed copies of the At the Roadshow in Labasa that was being held the health benefits of VCO and campaigned about the week after the VC visit to the factory, more bot- health benefits of the oil. Once the consumers tles were being prepared to be packed to sell and understood the health benefits, selling the oil for the new proposed pricing of 200mls $7, 500mls skin and cosmetic purposes was easy. Since 2013 $10 would be used. At the time of writing the when Banaban VCO began production, the quality report, the Roadshow team reported back that the of their VCO has not changed, their manual cold new pricing did not impact the sales of the VCO press production technique has never changed It because people came to purchase because of the was found that the Banaban VCO held the least strong brand and quality of the VCO that was sold, per cent age of moisture content and it is this thus the new pricing was initiated and acceptable quality that the Spa staff at Namale Resort alluded to the consumer. too. The quality of the Banaban oil is of a very high quality and their preference for Banaban VCO is one that the Banaban VCO factory and its staff 7.7 The transportation links are proud off, to be acquainted with such a strong product that people can relate too. The Banaban The transporting of nuts to the Banaban VCO fac- VCO oil is one of the first VCO oils that broke into tory is at the expense of the farmers currently, it is the market and many Fijian locals know about it. at their cost and done at their will when they are Today the factory also produces VCO soaps, char- ‘pushed’ to earn a livelihood from the sales of the coal and honey soaps, but with the strong Banaban nuts to the factory. brand attached to it, the retailers who order these soaps are keen to order more because of its local A proposal that Banaban VCO liaise more closely popularity. with the communities and villagers that it collects nuts from and organise transport (3-ton truck by road or community boat by sea) for specific dates where nuts can be collected as and when their need arises dependant on their production requirements and cash flow to purchase the nuts. When Banaban VCO establish a transportation link with the communities either by road or by boat, they are able to determine the quality at the farm gate of their coconuts, dictate the time of pickup and control their overall production line from the collection of nuts.

CASE STUDY - RABI VCO 35 often have opportunity windows for grant offers 7.9 Marketing to promote better that assist SME’s to put their hand up for small health grants to push such bottleneck issues to be solved through very specific interventions, however the -is The Banaban VCO is a strong brand in the local and sue will be connecting these SME’s to this platform domestic markets in Fiji, many are attracted to the so that they are aware of what is being offered Banaban story, whilst others are attracted to the and what they can ask for without much pressure VCO health benefits. Since 2010, Roadshows was on their operations and the ability to work with the way the factory sold its products in the early the funder’s request. The group is interested in days, and staff printed many copies of the health becoming members of PIFON but need to take the benefits of VCO and campaigned about the health matter to their AGM for a consensus vote of ac- benefits of the oil. Once the consumers under- tion. Through the PIFON network, the association stood the health benefits, selling the oil was easy. will be able to network and meet other members Today the factory also manufactures soaps, char- of PIFON for exchange learning. coal and honey VCO soaps, these are being sold as health soaps to the local domestic market which is proving very popular. 7.11 Scaling up of existing facilities

7.10 Improving access to finance The Banaban VCO factory in Nuku was built under a Government fund that was initiated under the The linking of small VCO operators like Banaban Look North Project in 2010, it has been 8 years VCO and others to the National Centre for Small now and the factory continues to increase its pro- Medium Enterprise Development (NCSMEDSBEC) duction levels each year. and the Building Capacity for Small Business Enterprise with the Fiji Development Bank At present, the VCO facility on Rabi produces (FDB) provides avenue for the SME’s and around 250 - 3500 litres of VCO per month. This is community NGO’s to access financing to with a staff of four people with 3 coconut scrap- improve transportation and purchase labelling ers and 1 hydraulic cold press. The aim in the long and packaging materials to assist their product term, would be to have the necessary production development. Banaban VCO should also be able capacity to produce that same amount on a weekly to access working capital from FDB, NCSMED, basis. A number of measures can be taken to to assist with their activity implementation and facilitate this: their current issues. These agencies also provide training and capacity building on finance and risk • Increasing the number of coconuts delivered management that will assist the operation. to the factory. • Acquiring additional equipment for production Similarly, development partner fund implementers • Increasing staff numbers

Figure 17: Weighing of Coconuts Figure 18: Coconuts in storage at Rabi VCO Factory.

36 CASE STUDY - RABI VCO In the course of the value chain mapping exercise, The farmers responded very positively to this sug- the consultants visited various villages and settle- gestion and expressed readiness to begin supplying ments on the Island, to talk to the coconut farmers. on this basis. This is one practical example of the At present there are only 50 to 60 regular suppli- commodity (coconuts), being “pulled through” the ers to the factory, out of a potential 1000 or more. value chain. Many of these farmers prefer to supply copra to Copra Millers in Savusavu, who pay $1 a kg. Copra With the increased supply of coconuts, and subse- production however, is quite labour intensive and quent rise in potential production levels, the need requires more nuts per kg of copra. The realiza- for additional equipment will arise. The initial aim tion that in terms of returns per labour input. , would be to double the number of electric scrapers there are better returns when harvesting coconuts from 3 to 6 and purchase an additional hydraulic for VCO production led to greater enthusiasm on cold press for the extraction of coconut milk. The the part of the farmers to supply coconuts to Rabi Scrapers and cold press can be purchased from VCO. Lack of transport, is another limiting factor Mechanical Services Ltd at Walu Bay in Suva, who which needs to be addressed if coconut supply is quoted a price of $1,485 per coconut scraper and to be increased. A viable solution could be be the $598 for the cold press, with the total coming to use of community boats to pick up coconuts from $5053. the farmers in the settlements on a monthly basis.

Figure 19: Electric coconut Scrapers at Rabi VCO Figure 20: Hydraulic Cold Press for Extraction of Coconut Milk

Recently, the rains that fall during the wet sea- levels according to how it is tested for market son affects the production of the sun drying and readiness. inhibits the process of sun drying, staff are unable to properly dry the VCO and it takes much longer Additionally, there is no separate waiting area for as the process of manually taking out the contain- customers who come to the factory to purchase ers continually outside to dry then inside when it oils from the office, all who come to the fac- rains. The proposal that renovations to the side of tory, walk through the production areas and wait their building be undertaken to allow the drying around outside the office. There is an opportunity area to have a roof can eliminate this problem and to build a sidewalk from the front gate straight to be known as the drying area. This drying area will the office with shelter overhead where the public allow the staff to permanently leave the contain- can seat and wait to be served. The office can be ers out until and when it has reached its potential

CASE STUDY - RABI VCO 37 made larger so that it offers a specific area to dis- Resorts, and Tappoo’s Duty Free. play and sell the VCO’s that are being sold locally from the factory and separate the Managers desk A marketing or branding consultant can be sourced to the back to allow the confidential records of the to assist Banaban VCO better position its product business to be separated from public access. through attractive eye-catching labels and market- ing story telling so that it goes well with the high The 500ml bottles supplier needs to change to quality of the oils it produces. Banaban VCO to a more strong and durable bottle, with similar then connect with programs like MDF (Market characteristics of the present bottle, addition- Development Fiji) or the SME funds within the ally, there is the opportunity for Banaban VCO to MOA to fund their branding rollout. Additionally, properly brand itself through a marketing initiative an online presence of a website that is linked to its under funding support to purchase new 500ml facebook page can further attract additional sales bottles and better packaging materials to cater for for the Banaban VCO brand the specific requests made by Cousteau & Namale

38 CASE STUDY - RABI VCO 8 Key Lessons Learnt

asked how they felt about the price increase, they 8.1 Overcome remoteness and stated that it was value for money and worth it isolation by producing high quality since they knew that the VCO were manually made by hand and old-fashioned sun-dried processing. VCO This market caters for about 2,000litres of the VCO, which is 75% of present annual production at cur- Banaban VCO has been able too since it began rent rate, and this market is existent because the operations maintain its quality VCO production VCO is not available through the retail shops, it can with testing done by USP/IAS. This is the selling disappear if customers know that VCO will be avail- point for Banaban VCO because their remoteness able more readily through retail shops. makes it difficult for them to compete however they have achieved this stature by the comments received from their customers, ensuring quality VCO is consistently produced. This is done by not deviating from their process and painstakingly using manual methods without any shortcuts to achieve this level. They have proved that they can survive in this business and is a good model for other remote island SME’s to study and achieve. This will be particularly important if Banaban VCO taps into the domestic retail market where it may need to partner with other small scale cold pressed VCO community operators to produce similar quality VCO to cater for the domestic retail market that has a potential of over 1,700 tonnes of oil at a modest value of $1.7 m 8.2 Quality handmade VCO will sell despite increase of price

A test was done to increase the price of the 200ml and the 500ml Banaban VCO at the February Roadshow held in Labasa to take into account the transportation and travel expenses required when travelling for a roadshow. The price was bumped up by $3 and $5 respectively and rounded off to 200ml at $8, 500mls at $15, however customers at the Roadshow were acceptable to the price change and still purchased the oils because of its quality. Several customers were interviewed about the price change and their response was it was a quality oil that was not readily available except at Roadshows so they were still there to purchase it and stock up in time for the next Roadshow. What

CASE STUDY - RABI VCO 39 8.3 The importance of pulling 8.4 The story behind the brand the product through the value sells

chain The history of the Banaban people and how they were relocated from Kiribati to Fiji’s Rabi Island is Processing centres must always ensure that a heart wrenching story of how people through they are pulling the product they are processing no fault of theirs were made to rewrite their lives through the value chain. When doing this, they on Rabi Island. Consumers relate to stories and will have control over their production and be able will get emotionally attached, additionally since to dictate and maintain their position in the mar- the Banaban VCO is the operational arm of the ket. For the Banaban VCO, whilst conducting the Banaban Women’s Group, women who are gener- value chain mapping, explained this process to the ally the consumers and the ones who make the VCO staff and worked to assist them to change the decisions with shopping will and can easily be push to a pull factor simply by arranging transpor- attached to stories that sell a product. Story telling tation from the villages and communities that is has become the norm in this age of technology scheduled around their production targets. Push- where climate change is a topic widely told, retold ing the product meant that the farmers held the and circulated on social media. Customers once upper hand and delivered coconuts as and when they hear the story will buy the product purely they needed cash which left Banaban VCO vulner- for its story and knowing that they are making a able to shortages in nuts where there were times conscious and emotional purchase that is helping when the staff had to go out to collect nuts them- women and families back in Rabi to make ends selves to ensure they maintained their production meet and meeting their livelihood needs. targets. Now with transportation committed to pick up from points, the farmers will be ready with their coconuts to deliver to the factory.

Fig 21: Downtown Nuku with the church in the Fig 22: Kindergarten children on Rabi that was background damaged during TC Nigel

40 CASE STUDY - RABI VCO domestically. It is common throughout the Pacific 8.5 Health and Nutritional Islands that coconut oil is generally regarded as an benefits can sell your VCO product inferior cooking oil preferring instead to buy im- ported oils because of the stigma associated with Since 2013 when Banaban VCO first hit the Fiji the domestic home-made coconut oils largely used market, then no one knew about VCO, its health only for skin and health care. This attitude needs and nutritional benefit, VCO was a new product to be reversed with quality coconut oil products to and locals were used to seeing oils with its normal be made more available and become promoted. light-yellow colour. The introduction of VCO and its clear see through liquid was introduced to the In recent years the health value of lauric oils needs local market, the clear visual see through liquid to be promoted. The chemical composition of lau- became an instant hit and sales with popularity ric acid is neutral in terms of cholesterol. It is now soared, virgin coconut oil was the new buzz word. widely accepted that the consumption of coconut There needs to be a substantial promotional effort oil as a source of dietary fat does not pose any as a priority to promote the health benefits of additional risks for coronary artery disease when VCO for VCO to capture a share of the cooking oil consumed in realistic amounts, as part of a healthy market. There is some promotion by the cottage diet (McGregor and Sheehy 2017 p 9) industry VCO players in the market but this effort needs more investment into it to help sell the VCO To substitute coconut oil for the currently imported benefits. The promotion of ‘to take a spoon a day vegetable oils will bring with it public health ben- to keep the doctor away’, has stirred some public efits to Fiji and the PIC’s. This substitution willalso interest for VCO.VCO - a domestic cooking oil bring significant economic benefits for VCO small scale operators and if able to capture at least 10% VCO according to the PIFON Overview Market Re- of the imported vegetable oil market it would rep- port is seen to be superior in terms of health and resent a market of +1,700tonnes of VCO domesti- nutritional considerations than mainstream cook- cally produced with a landed nett worth of +$2 m . ing oil sold in supermarkets. Coconut oils is a high If Banaban VCO worked with the recommendations lauric acid vegetable oil (lauric acid content of ap- provided, and is able to position itself towards this prox. 50%) and as more consumers become aware domestic retail market, it should be able to capture of this, its taste, nutritional and health benefits 25-30% of the market for itself and its members. of cooking with quality edible oil, more will use it

CASE STUDY - RABI VCO 41 9 Key Lessons to introduce Virgin Coconut Oil into the domestic PIC markets

9.1 Quality and consistent 9.3 Partnering of small scale quality for the market VCO operators to meet the market

The challenge remains for small scale VCO opera- needs and formation of Farmer tors to ensure that quality production is main- Organisations tained through its production processors for a quality VCO. The success of the Banaban VCO oil No one small scale VCO operator can achieve has been their consistent quality VCO that has this alone, partnerships and sharing will need to helped them to grow their market and overcome be forged for the greater economic good of the their “tyranny of isolation”. Lessons learnt from domestic market in the PIC’s. The market is huge the value chain mapping can be adopted to other and there is a share of the pie for everyone. The small scale VCO operators with probable assistance challenge will be to work together and share key through the CIDP program to conduct learningex- success factors with each other, exchange learnings change with the Banaban VCO factory opera- with Banaban VCO to ensure quality is prominent, tions to arrive at the quality that the market will labelling and packaging, group negotiated rates for purchase.. It can be argued that this approach will purchase of key ingredients, labelling and packag- be helping the Banaban VCO competitors how- ing materials, standard bottling that will withstand ever the overall objective is to collectively tap into the handling and shelf life, collective promotional the domestic retail market to displace imported and advertising campaigns to buy, cook and eat vegetable oils currently being imported into Fiji local, and shared resources are some of the collec- which is a far larger market that Banaban VCO or tive benefits to be gained from such a partnership. other cottage industry VCO will only achieve if they worked together. The emphasis on quality cannot be compro- mised, for this matter, capacity building, exchange 9.2 Increasing production to learnings, promotional awareness will need to be invested into such an initiative. The impact to meet the domestic need produce 1.7m litres for small scale VCO operators to achieve is huge, but this is the real fact that Fiji Yet another challenge to the small scale VCO and other PIC’s have 80% of their agriculture made operators is to scale up production to meet the up of small holder farmers who live in villagers and domestic market requirement. A tentative figure remote community islands. Clustering and group- of 1,700 tonnes of VCO is needed if the market ing them into Farmer organisations to organising will capture 10% of current imported vegetable oil them to produce for this market will be logistically market per annum, this represents 1.7m litres of a huge task that can be achieved by breaking them VCO requiring 107m coconuts for production. The down into their communities/provinces/sectors. . last Agriculture Census with a specific notation on coconut census in Fiji is unknown at the time of writing this report and whether Fiji has the base 9.4 Capacity building and to cover this production otherwise the opportu- exchange learning to meet nity exits for an extensive replanting program to achieve this target and more. The economic shared production benefits to the small scale VCO operators is a nett worth of +$25.5 M The tangible target to replace 10% of current im- ported vegetable oils of 1.7m litres of VCO, will be a big jump in local production. The last recorded national statistic for VCO is taken from Bureau of

42 CASE STUDY - RABI VCO Statistics 2017 figures of 26.2 tonnes of exported demonstrated to small scale VCO operators) VCO, prior to that 2016 recorded an export figure • In many PICs coconut oil generally has a of 4.3tonnes of VCO therefore Fiji is capable of prevailing “inferior” product image cooking producing this figure domestically. The challenge – a concerted effort needs to be made to will be to produce it consistently whilst maintaining reverse this image for VCO quality and cohesion in the market as there will be many players because of the way the farmers and • A reform of the local regulatory requirements the small scale VCO currently operate. A private for the sale of vegetable oils. sector initiative to grow the sector is possible with - Price control on the major vegetable oils partnerships, the provision of capacity building and exchange learnings, key learnings and success - Unjustified food safety requirements factor sharing, with focused targeting in partner- The PIFON Overview Market Report stated that co- ship with retailers and all parties can be achieved conut oil is seen to be superior in terms of health to meet the production needs. If this happens, and nutritional considerations than mainstream then 10% is only the starting point, to increase and cooking oil sold currently in supermarkets. Coco- substitute this segment of imported vegetable oils, nut oils is a high lauric acid vegetable oil (lauric is worth the landed nett worth of $20m (Bureau of acid content of approx. 50%) and as more consum- Stats, 2015) ers become aware of this, its taste, nutritional and health benefits more will use it domestically. 9.5 Championing coconut oil as It is common throughout the Pacific Islands that a domestic cooking oil coconut oil is generally regarded as an inferior cooking oil preferring instead to buy imported oils The purpose of value chain mapping Banaban VCO because of the stigma associated with the domes- was to analyse it as a viable optionas the PIFON co- tic home-made coconut oils largely used only for conut product market study concluded that there skin and health care. This attitude needs to be needs to be more emphasis on domestic markets reversed with quality coconut oil products to be for edible coconut oil - be it VCO or food grade made more available and become promoted. crude copra oil (CNO). In recent years the health value of lauric oils has The report notes that over the last decade VCO been recognised and promoted. The chemical has transformed itself from a niche export product, composition of lauric acid is neutral in terms of which could readily command prices up to 5-times cholesterol. It is now widely accepted that the that of crude coconut oil on global markets, to consumption of coconut oil as a source of dietary a commodity that secured a reasonable price fat does not pose any additional risks for coro- premium, provided quality standards are met. The nary artery disease when consumed in realistic report concluded that greater attention needs amounts, as part of a healthy diet (McGregor and to be given to selling edible coconut oil on lo- Sheehy 2017 p 9) cal markets. It further states that to significantly achieve increased domestic sales, a combination of The report has substantiated that VCO can be measures need to take place: a good viable option as a domestic cooking oil given the many interventions needed to push it • A significant reduction in the price VCO through. The work needs to be championed for it is made available to the local market (not to work and this report recommends that the CIDP exporting brings with it large cost savings, Program find a champion among its PIC islands to and the rational of economies of scale be get it started.

CASE STUDY - RABI VCO 43 44 CASE STUDY - RABI VCO CASE STUDY - RABI VCO 45 46 CASE STUDY - RABI VCO CASE STUDY - RABI VCO 47 48 CASE STUDY - RABI VCO