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What Are Current Challenges for Exporting?
The Department of Science and Technology: Industrial Technology Development Institute (DOST-ITDI) of the Philippines will work with the Davao Food Terminal Complex (DFTC) to reduce food spoilage. The DOST plans to improve packaging technology and logistics. The project is expected to reduce the spoilage of various commodities such as pomelo, durian, mango, mangosteen, lettuce, and broccoli. This project aims to reduce product damage and spoilage by at least 20% of reported losses. The Philippines is stagnating in durian production, but there is a window of opportunity to come into export markets between the Thai and Malaysian seasons. Due to favorable climatic conditions, Durian's potential is significant and could lead to higher profit margins for Philippine farmers.
What Is the SWOT Analysis for Philippine Durian?
Strength: Large production, variety
Weakness: Unstable political situation, less structured infrastructure
Opportunities: New services, change of government
Threats: COVID-19
How Is the Supply Chain Formed for Processed Durian?
Farm -> Factory -> Export/Trading company
Most farmers do not own packing houses, food processing facilities, or trucks. Therefore, do not export directly. Most have limited knowledge when it comes to export processes and client communication. Farmers are usually not involved in the process after harvesting. Intermediaries play a considerable role in the value chain as farmers are not confident enough with their crops, communications, and negotiations. Big farms usually own packing facilities or affiliations with other companies that can provide packing facilities for them, but not all. The value chain of processed durian starts from the consolidation and buying of fresh durian as the main ingredient for food processing and involves food processors and other service providers. The processing of durian could be categorized into two, namely: primary and secondary processing. The primary processing of durian refers to the processing of durian fruit aiming to lengthen its shelf life and preserve its form, which involves fruit extraction and freezing. Two main products in primary processing are the vacuum-packed frozen durian mainly used for processing and the blast frozen durian processed for export. While on the other hand, secondary processing refers to food processing, transforming durian into different value-added products. Secondary processed durian products refer to durian jam, candies, and other pastries. Secondary processing involves using other food ingredients such as milk, flour, and sugar to produce different durian delicacies.
Value Chain Map of Processed Durian – Food Products
Source: Department of Agriculture Philippines
How Is the Supplier Network?
The supplier network is strong with co-ops between farmers and usually ensures that suppliers have a signed contract/MOU with suppliers (co-ops/farmers). There is a competitive oligopoly, especially among several large firms that are dominant in searching for the best price-output combination. Dole and Del Monte are the two major multinational companies involved in processing. The fresh durian chain involves input suppliers, farmers, traders, consolidators, wholesalers, arriendos, retailers, and consumers. Traders pick up the fresh durian from farmers and bring these to wholesalers, retailers, and processors, and some also sell directly to consumers. However, some of the traders’ role in the value chain of fresh durian starts from farming – specifically in the harvesting of durian, as this activity requires high skills from durian pickers. A few traders are also engaged in contract buying with durian farm owners who take charge of fruit care to trade. On the other hand, some farmers with harvesting skills and transportation access bring their harvest directly to traders, processors, and consumers.
Value Chain Map of Fresh Durian
Source: Department of Agriculture Philippines
Which Countries Are Competing Countries in the Durian Market?
The Philippine durian market faces high competition from countries such as China, Thailand, Malaysia, and Indonesia. Other competing countries include Vietnam, South Korea, and Taiwan. Asian countries mainly dominate the durian market.
Where Are Major Producing Regions?
Widely known and described in Southeast Asia as the "king of fruits," the Durian is distinctive for its large size, unique odor, and formidable thorn-covered husk. It is rich in vitamins and minerals. The smell of the flesh is believed to be linked to bacteriostatic indole compounds. Eating Durian is alleged to restore the health of ailing humans and animals.
Common durian varieties registered by the Bureau of Plant Industry (BPI) - National Seed Industry Council (NSIC): Chanee, Monthong, Atabrine, Mamer, GD 69, Lacson Uno, Alcon Fancy, Arancillo, Oboza, Puyat, SMIARC #2 and Duyaya. However, the Durian Industry Council of Davao City (DICDC) prefers and promotes the Puyat variety because of its mild smells, sturdier, thicker flesh, and is the preference of the market, especially export. On the other hand, some processors prefer the native varieties because of their intense aroma, while others use mixed types in processing, particularly for candies and pastillas.
Durian is prominently produced in Davao Region due to its competitive advantage over other regions in the Philippines regarding soil type, favorable agro-climatic conditions, and large durian plantations. Other top durian producing regions are ARMM and SOCCSKARGEN.
During the peak season of fruiting, processors buy and stock durian flesh in a privately-owned storage facility for the future availability of raw materials during lean months. Accordingly, high peak buying of processed durian products is during "Ramadan," national congresses, summit and trade fairs held in the region.
Frozen Durian, through blast freezing, has reached export markets and poses high-income potential. According to players, there is still tremendous untapped market potential for Davao city's Durian, of which advanced processing technologies and logistic supports are very much needed.
Durian is now gaining popularity internationally for its distinct taste, specifically in China and countries with dense tourist populations such as Hong Kong and Singapore.
Which Countries Are Top Destinations for Philippine Durian?
Top Export Destinations of Fresh Durian From Philippines
Source: Tridge
The top destinations for Philippine durians were Singapore, Japan, and Thailand in 2021. Singapore marked the highest increase in export value, reaching USD 260.7K and 48.23% market share, with a 248.19% 5-year growth.
How Is the Export Process?
Pre-export: For fresh produce, suppliers usually harvest them “unripe or semi-ripe” as they need to consider the travel days before it reaches the client’s destination. For frozen/processed, they usually check if their warehoused products are still in excellent condition as they need to undergo several stages. Before the pandemic, farmers usually bought 1-2x per year from the other farms/farmers to accommodate the client’s order. Most of Philippine’s durian export are sent via airfreight except for Vietnam. Durian from the Philippines to Vietnam are send via sea cargo. A portion of export to Japan are also sent via sea cargo.
What Kinds of Regulations Are There for Exporting?
Different importing countries have their standards. Some may require corporate or product images on the canned goods or vacuumed frozen goods, while others have to do with issues like language, content labeling, and measurement systems. Even before the pandemic, some countries implemented strict regulations such as quarantine protocols before releasing the product to the buyer, as some countries do not want to receive any insects from the Philippines, such as black ants. Also, an approved protocol is required from Importing Countries. Retailers in China also request a GlobalGap certificate for fresh durian from the Philippines.
What Are the Required Certifications and Grade of Durian?
The classification based on variety is the primary factor in purchasing and buying of fresh durian in the inter-regional trade and regional trade. Class A are within 1.5 to 4 kg and follows the expected shape of the variety either oval or ovoid. Varieties with high market demand are the Puyat, Duyaya and COB varieties which are considered as class A. Class B follows the same size but are slightly deformed. Class B durian includes the varieties of Arancillo, D101, GD69 and Chanee.
The country of import may require special documents for a variety of reasons. Business Registration, Updated Business Permit, and any FDA cert, Bill of Lading, Commercial Invoice, Consular Invoice, Certificate of Conformity or Origin, Shipping Bill, Inspection Certification - Product labeling and packaging, Export Cert, Export Packing List and Insurance Cert.
What Are Common Quality Related Issues?
Quality-related issues are quantity verification, deformed packaging, and overripe fruits for fresh orders. The quality of durian in retail stores dramatically depends on how the product is handled during transfer and transport. Even if the durian fruit is sturdy and solid, handling and transporting can cause damage to the fruit, and this is one of the many reasons contributing to damage and losses. For export to China, GlobalGap certification is required. As implemented, like with other product certifications such as for fair trade and organic products, the process of certifying halal is being undertaken by a third-party certifying body. The certifying body inspects the business/enterprises and attests to product standards and guidelines related to product processes, systems, or persons. Foremost, it must conform to the requirements and regulations set by the Philippine Accreditation Bureau (PAB).
At What Stage during the Supply Chain Is a Quality Check Held?
Specific inspections are held along the process, from export preparation to logistics. Suppliers do not go by the book only but are also based on QA and Health Protocols. They also conduct Due Diligence for clients (and vice-versa) who want to engage in business with them – exportation, importation, food tolling, and registration.
-Suppliers usually recommend third-party inspection contractors to ensure that their clients are satisfied with their services as they offer the most neutral opinion about their commodities (from food packing up to the shipment).
-Buyers can have site visits within the country and can also have samples shipped to them
*Claims
-Managing defects starts with setting expectations or developing product criteria and specifications with the client during the sourcing (before the contract signing).
-This is why in their quotation, they always include the clause – “In case of quality discrepancy, the Buyer allows maximum 3% of container volume as permissible allowance for bad order.”
-All claims and quality discrepancies should be filed by the BUYER within seven (7) working days after the goods arrive at the destination port. Suppliers are focused on support and improvement, ensuring they continuously improve their relationships with their clients/partners.
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