Supply Chain
How 2 Community-Focused Models Are Creating Value for Filipino Coconut Farmers

Over the past several years, coconut products have grown in popularity in the Western world. From organic coconut water and virgin coconut oil to coconut-based shampoos, many brands are turning to this tropical ingredient in their sustainable products — and much of it comes from the Philippines.

In fact, according to Christopher Ilagan — the Corporate Affairs Director for Cargill, who leads the Philippines Partnership for Sustainable Agriculture’s Coconut Working Group — coconut has become a major economic driver in the country.

“We have 3.5 million farmers and 25 million direct and indirect jobs; and coconuts are the third-largest crop by production volume,” Ilagan told Sustainable Brands®.

However, there are several challenges. Coconut trees across the country are aging and, according to Ilagan, producing only a fraction of their potential. Lack of income is also leading many farmers to encourage their children to move to the cities and pursue other careers.

“The average age of the Filipino farmer is 57, and probably older for coconut farmers,” Ilagan said. “We need to think about, how do we keep the talent within the coconut sector?”

In some cases, poverty is leading to a higher risk of exploitation or even human trafficking — showing the dire consequences of economic underdevelopment. But two ethical coconut companies are working to tackle this head on by creating new, community-centric models for producing coconuts — ensuring both a supply of sustainable coconut for their products, but also better livelihoods for farmers and workers.

Lionheart Farms

Image credit: Lionheart Farms

Lionheart Farms was founded by food industry exec Christian Moeller and former investment banker Anders Haagen in 2015, after the two saw a real need for a better way to grow and produce coconut products. Moeller, during his initial field visits, saw how the current model was exploiting farmers — forcing them to grow for low prices and giving them no opportunity to benefit from

“Farmers are being treated only as a commodity supplier; and that’s why you have these structural challenges,” Moeller told SB. “Aging trees, no replanting, income levels below subsistence. Farmers are collapsing.”

Lionheart Farms created a more integrated model, generating revenue from higher-value coconut products. The company created a partnership with an indigenous community on the island of Palawan, renting their land for 50 years. In exchange, Moeller’s team helps bring in investment and access to global markets while providing jobs, ownership and other opportunities.

“Every family from the community that contributes gets to have one job; and we give a 50 percent share of the harvest value. We also offer community programs focused on education and medical assistance,” Moeller says.

Today, Lionheart now has 3,500 hectares of coconut palms in 20 50-hectare plots surrounded by natural forests — designed in a way to allow for biodiversity corridors on the land. All coconut processing is done in a factory that was built on site, not in faraway factories; the factory also mostly employs locals — allowing for greater income opportunities.

In fact, Lionheart has adapted its business model to integrate with the traditional values of the Palawan indigenous communities — including putting tribal elders on their board and ensuring that local community members are not only present at every meeting, but that decisions are made collectively.

“In the Palawan cultural tradition, everyone has a right to come to a meeting,” Moeller explains, adding that this was unlike any other business he’d worked on; “but in the end, it has been helpful in terms of transparency and trust.”

Dignity Coconuts

Image credit: Dignity Coconuts

Meanwhile, Dignity Coconuts operates in the Bicol region in southeast Luzon island — in a remote, poor region three hours from the closest city. For the company’s president, Erik Olson, the origins of his work came from his non-profit background and a desire to address the root causes of human trafficking.

“This area was incredibly poor and had high risk for trafficking,” Olson told Sustainable Brands. “We had heard rumors that girls had been trafficked; and we also suspect that there have been children forced to do internet porn to make ends meet.”

It is now increasingly accepted that the best way to address the root causes of human trafficking is through providing education and economic opportunities to those in vulnerable communities. And that is what Dignity Coconuts, founded in 2010, seeks to do.

Like Lionheart, the company placed its production facility within the farming community. But due to the remoteness of the region and the lack of roads and other infrastructure, this was easier said than done — and ended up taking five years.

“We had to ford seven rivers to get to this area,” Olson recalls. “Sometimes, we had to take the cement bags and form a fire bridge to get them across the river, when the water was too high.”

At times, he questioned whether it was worth it; but in retrospect, the benefits have outweighed the costs.

“We’re so glad we did it,” he says. “We’re closer to the farmers; we know each of them by name.” There are business benefits, too: “We can organic certify, work with them on a daily basis, and build trust.”

Notably, both Dignity and Lionheart benefit the communities by providing a path to producing the higher-value coconut products growing in popularity in shelves in the US and Europe. In the Philippines, the most commonly produced product is what is called RBD coconut oil — a processed product made from copra (dried coconut meat) that can be easily transported without the need for refrigeration or special equipment. Filipino traders play a key role in collecting whole coconuts and copra to sell to local and global trading companies. It’s cheap and comparable to any other vegetable oil.

Neither Lionheart Farms nor Dignity Coconuts produces RBD coconut oil. Instead, Lionheart produces coconut nectar, sugar and aminos; while Dignity offers a unique, raw coconut oil.

“Our model works because harvesting the coconut and turning it into these high-value products [is] a good investment,” says Anders Haagen, Lionheart’s other co-founder.

Dignity has only been producing coconut oil for five years; and, due to operational challenges and the pandemic, has yet to be profitable. But it’s seeing growing production and an opportunity to expand both its financial and social impacts.

“We’ve identified a dozen different locations where there’s a good amount of coconut and a community that’s in need that we want to help,” Olson says. In order to do that, they need more retailers and partners. “We’re ready to grow. If we get into another 1,000 or 10,000 retailers, then we could have multiple plants.”

Creating truly sustainable models that involve local communities is a serious and often challenging commitment. But, as Dignity Coconuts and Lionheart Farms show, the benefits can be tremendous — both for the business and those in long-underserved, rural growing regions.