Four stories of small business resilience in the PhilippinesSep 30, 2020
Between 2015 and 2019, People in Need (PIN) implemented the Enhancing Sustainable Income in the Philippines (ESIP) project, funded by Swiss Solidarity and co-executed with Alliance2015 NGO partners Helvetas and ACTED. The objective of the project was to increase the incomes and resilience of 12,000 small farmers in Eastern Samar, one of the poorest and most vulnerable provinces in the Philippines. Eastern Samar was hit hard by super typhoon Yolanda in late-2013, one of the strongest recorded tropical cyclones ever to make landfall, killing over 6,000 people and affecting 11 million throughout the country.
In March 2020, several months after the conclusion of the ESIP project, the number of people infected by COVID-19 in the Philippines began to increase, leading to the implementation of strict measures to keep the virus from spreading throughout the archipelago of over 7,000 islands. All transport between the islands stopped, strict community quarantines was imposed – which restricted people from traveling outside their own neighbourhoods – and most public services were halted. Shops were forced to close and many people were unable to continue working.
In June 2020, PIN decided to check in with some of the smaller agricultural enterprises it had supported under the ESIP project, to see how these young start-ups were coping with the pandemic. What follows are the stories of four small agribusiness start-ups in Eastern Samar.
Staying positive from one crisis to another – the story of Triple L
Hazel and Roberto Cabe managed a one-hectare banana plantation in the municipality of Quinapondan. In 2016, under the name Triple L, they experimented with home-based processing of banana chips with just 50 kilos of bananas, worth about €30. One year after the production of their first experimental batch, and as their product gained popularity in the neighbourhood, the Cabes decided to set-up a small production facility. They purchased bananas from local farmers, who were happy to have a steady buyer for their products. Gradually, the business grew, and the couple soon had to take on additional employees to keep up with the rising demand.
In 2017, as part of PIN’s ESIP project, Hazel received training in product development, business management, marketing, and other business-related topics. PIN connected the Cabes to a variety of microfinance institutions and new potential buyers. In 2019, with support from PIN, the couple signed a large contract with a distributor to 190 outlets, mostly supermarkets in the country’s capital, Manila. They also attracted an investor willing to invest in a second production facility. By the end of 2019, they were processing two-and-half tonnes of bananas on a monthly basis, with a value of approximately €9,000. With construction of the second facility underway, the Cabe’s future looked promising.
Then, on Christmas Eve 2019, Eastern Samar was again hit by a large typhoon. Though the death toll of 50 was not comparable to that of Yolanda, typhoon Ursula completely wiped out the banana farms in the province. Hazel had to be creative, and bought more expensive bananas from Davao on the island of Mindanao, more than 400 kilometres away. Though the costs were far higher than buying the bananas locally, at least production could restart. Eventually, Hazel found cheaper bananas from Leyte province, which is closer than Davao.
However, just when things were looking up, the COVID-19 pandemic began. As Triple L sells most of its products to Manila, the lockdown of the island had devastating effects. Transport of fresh bananas from Leyte to Samar and banana chips from Samar to Manila became impossible and, as the shelf life of banana chips is relatively short, Triple L was forced to sell much of its stock on the local market for far less than it was worth. Even so, much of the company’s stock was lost. Cut off from both her suppliers as well as her customers, Hazel had no option but to close down operations and send her 21 employees home. It wasn’t until mid-June, with the partial easing of transport restrictions and the first banana harvest in Samar, that she managed to restart production on a smaller scale. She also explored selling her products online, but with limited success.
Despite the impacts of both a typhoon and a pandemic, Hazel is optimistic about her future. She has proven to be a strong businessperson and is sure that the market will return. She has revived her Facebook page for online sales, and is contracting with various courier services to ship the company’s products to different parts of the Philippines.
One important lesson Hazel learned the hard way is that to survive future external shocks, she should become less dependent on one key buyer and distributor. To this end, she found a new distributor in August to cover new parts of the country, and she has negotiated a more profitable two-year contract.
Aided by increased demand for healthy products – the story of DIPS
Discar Indigenous Products (DIPS) was established in January 2014, just after super typhoon Yolanda hit Eastern Samar. Diana Discar, a resident of Salcedo in Eastern Samar, saw an opportunity in the production of salabat (ginger) and turmeric drinks to augment her family’s income and to help other local typhoon victims, particularly women and farmers.
Discar began with two kilos of ginger and a starting capital of only €10. She started by selling her salabat wrapped in cellophane to small vendors in the public market in Borongan City, the provincial capital of Eastern Samar. People liked Discar’s products and demand for them grew. Through participation in local trade fairs, her products got attention from outside the local community. Discar eventually received further training and support in product development through the ESIP project, and she began to participate in larger, national trade fairs.
Her big break came when, with the support of PIN, she signed her first marketing contract with a national distributor to deliver Ginger 45 Turmeric and Salabat, the product’s trade name, to upscale supermarkets in Manila. Thanks to this opportunity, Discar upgraded her production facility, hired additional workers, and gradually increased her production to 900 kilos of ginger and turmeric (worth about €2,000) per month.
With the onset of the COVID-19 pandemic, however, restrictions were imposed on the province and Discar had no choice but to close her operations. Luckily, she was able to reopen a month later by adhering to the strict health protocols instituted by the government. The biggest challenges she faced were the decreased supply of raw materials and access to transportation. Since farmers grow turmeric and ginger as side products, each farmer only produces limited quantities of these items. With the threat of the pandemic and skyrocketing transport costs, farmers were simply not willing or able to deliver their raw materials to DIPS. Moreover, due to restrictions on transport to Manila and other major market areas, Discar could not deliver the products to her customers. This meant renting vehicles at higher costs and accepting lower profits, which caused her cash flow to dry up quickly.
Despite these challenges, Discar managed to scale up production, negotiate better terms for transport costs with farmers, and make innovations to the methods of payment. As an added benefit, Ginger 45 Turmeric and Salabat are considered by some locals as an immunity booster to help fight COVID-19, spurring increased demand for her product.
When the schools closed, our market disappeared – the story of ASAPKAPA
After typhoon Yolanda hit Eastern Samar in late-2013, a group of farmers in Guiuan created the ASAPKAPA association (Alyansang Samahan para sa Kaunlaran at Pangkabuhayan) with support from the Department of Agriculture. The objective was to promote the production of cassava, a popular root crop, and to add value with the production of cassava chips. The members received basic training and start-up capital for their businesses. With the support of PIN’s ESIP project, ASAPKAPA managed to gradually expand its market, specifically targeting school canteens. Though sales remained relatively low at approximately 8,000 packs of cassava chips per month, the additional €600 each month provided important income for the association’s 25 members and guaranteed them a steady market for their cassava crop.
However, COVID-19-related restrictions imposed by the government in mid-March 2020 included the immediate shutdown of all schools. School canteens, ASAPKAPA’s main customers, disappeared overnight. Another important market for ASAPKAPA were trade fairs that offer the opportunity for small associations to showcase their products to a wider audience. ASAPKAPA had been preparing for a large trade fair that was to take place in March 2020, and had invested in additional production to showcase their products. When COVID-19 restrictions were imposed, the trade fair was cancelled. As cassava chips have a short shelf-life, most of ASAPKAPA’s stock was wasted and the association lost 80% of its capital. With the loss of most of its market base, ASAPKAPA ceased production and its eight employees were laid off. The members of the association providing ASAPKAPA with fresh cassava were forced to sell their cassava on the local markets, where prices are low, and competition is fierce.
These events forced ASAPKAPA’s members to look into other business opportunities. The COVID-19 crisis has led to growth in the market for products that are considered immunity boosters, and in order to lessen their dependency on the fresh cassava market, ASAPKAPA members decided to diversify into different vegetables and into the blue ternate flower, which is used locally as a natural food colouring and traditional medicine. Blue ternate flower tea, caffeine-free and high in antioxidants, is considered to be a health-stimulating drink. ASAPKAPA’s current facilities can be used for production of this tea, and the association is looking into new channels for their traditional products. To restart its operations, ASAPKAPA sought assistance from the government’s programme for small businesses affected by the pandemic.
Although the COVID-19 crisis has severely affected both the association and its individual members, the creativity demonstrated by the association gives them hope for the future. PIN will continue to support ASAPKAPA with advises through this difficult time.
People seek healthy products in times of crisis – the story of Island’s Best
Calamansi is a citrus fruit popular in South Asia, and is often used in traditional Filipino cuisine as a condiment, beverage, and marinade. In 2009, Rosario Amoroto and her husband Carmelito, decided to experiment with the processing of calamansi concentrate under the name Island’s Best Food. With start-up capital of only €10, they received support from local government stimulation programmes and managed to steadily grow their business and diversify their product range to calamansi juice, jelly, and extract.
PIN’s ESIP project provided the couple with additional support and capacity-building, eventually helping Island’s Best get a contract with a distributor to 70 supermarkets in Manila. Connecting the company to microfinance institutions enabled them to upgrade their production facilities, and business began to flourish, with an average of six tonnes of calamansi fruit processed on a monthly basis and sales figures of approximately €14,000 per month. Island’s Best provided jobs to seven local employees as well as a steady market for a number of farmers, who could now send their children to school.
Like every start-up that PIN visited, Island’s Best had to shut down their production facility in March 2020 due to the pandemic, but they were able to reopen a month later. As calamansi is considered an immunity booster, the demand for the concentrate has grown considerably during the pandemic. Nevertheless, Island’s Best struggled as the prices of the fresh calamansi doubled while the government froze prices for consumers to avoid inflation. So in fact Island’s Best prices of input raw material doubled whereas their sales prices were frozen. Transport costs grew exponentially and it became difficult to get packaging materials from the capital. As the company’s Manila-based clients cancelled their orders, Rosario reorganised the production facility and found new customers. She decided to concentrate on calamansi concentrate and introduced smaller packages that were in high demand.
Thanks to the Amoroto’s creativity, and despite lower profit margins, they managed to increase production and not only hire additional employees, but also to guarantee a market for more small-scale farmers. They were also able to support some of their former staff with cash and goods during the crisis. Although the pandemic is still far from over, restrictions are gradually being lifted, and Rosario hopes she will be able to re-enter the lucrative Manila market while holding on to her new clientele. She is seeking capital to further expand her business in the near future.