Global coconut milk demand creating lucrative prospect for agro processors

Some of the many brands of canned coconut milk manufactured and sold globally.

Guyana’s coconut industry may still have a long road to travel if earnings from the sector are to impact meaningfully on the country’s economy, but the portents for coconut and coconut by product sales on the global market in the period are sufficiently encouraging to justify the renewed interest in the sector by both farmers and investors.

In recent years, the focus of production and investor attention has been on taking advantage of a growing regional demand for coconut water, with some local exporters finding lucrative markets (the supposed food safety considerations that led to the rejection by the Trinidad and Tobago authorities of at least one batch of coconut water from Guyana, notwithstanding). Coconut water may still be one of the drinks of choice among health-conscious regional consumers, but globally, there has been, as well, a rising popularity for coconut milk as reflected in a recent study of the industry undertaken by MarketResearchNest, a one-stop-shop for market research products and services, covering recent marketing, and other trends.

The January 2019 report points to growth in the global coconut market at a Compound Annual Growth Rate (CAGR) of around 8% over the next five years, topping US$14,800 million in 2024, up from an anticipated US$10,100 million this year.  North America and Asia, it says, remain the most significant production regions for coconuts, occupying more than 48% of the market share, in terms of revenue. At the same time, according to the report, more than 41% of coconut products are produced in the North America market, dominance of which it is expected to retain over the forecasted 2019 – 2023 period.

But it is the report’s revelations on the prospects for the coconut milk sub-sector over the next five years that are by far the most eye-catching. According to the study, coconut milk is expected to attract the biggest by-product returns from the coconut industry over the period (coconut milk refers to the thick white liquid extract of coconut which is obtained by grating and then extracting the liquid from coconut meat).

The expansion of the size of the global coconut milk industry over the next four to five years, the report says, will be influenced largely by its increasing application in the food and beverage and agricultural sectors. Increased demand will also be influenced by the growing global vegetarian population. Medical opinion holds that coconut milk strengthens the body’s immune system, as well as reduces incidences of illness. Additionally, farmers use coconut milk to accelerate the rate of crop growth.  The sum of all these factors is projected to fuel the coconut milk market growth during the conjectured period.

A key restraint for the coconut milk market, however, is the limited sources of tender coconuts that are required for the preparation of the milk. It is this circumstance, arguably, that opens up a potentially lucrative niche market for likely new players in the sector.

Segmented

The potential revenue streams from the product are exciting. The coconut milk market is segmented into powder, liquid and others. The liquid form has been identified as the leading segment with a major share, on account of its ready-to-drink and ready-to-use property. The market is also segmented on the basis of packaging—by boxes, bottles, vacuum packs, cans, and others. Bottle packaging has secured the biggest share of the global market, owing to its ‘on -the -go’   packaging. There is further segmentation on the basis of application, viz. convenience foods, beverages, bakery and confectionery, dairy and frozen dessert, among others.  Bakery and confectionery account for a large share, resulting from its wide application in various industries.

As with other coconut products, North America holds a substantial market share for coconut milk, while the market in the Asia-Pacific is expected to generate a significantly increased level of revenue in the period ahead, with China and Japan among the prominent consumers.  The projected increase in the regional growth rate in Asia is based on the growing demand for health drinks containing lesser calories. Additionally, both the import and export of coconut milk in the developed economies in the region have been noted to be growing at a steady pace, which has proved to be highly beneficial for the market growth in Asia-Pacific.

Arguably, Guyana’s (and the Caribbean’s) best hopes of ‘cashing in’ on the coconut milk industry reposes in investment in the high-quality coconuts, which the report says the sector requires.

About two years ago, a database managed by the National Agricultural Research and Extension Institute, placed the number of active coconut farmers in Guyana at approximately sixteen hundred, the sizes of their holdings ranging from less than two acres to about three thousand acres, with a cumulative national acreage estimated at about 25,000 acres. An estimated 81% of farmers reportedly fall within categories of less than two to six acres.

If the local coconut industry is to ‘cash in’ on the demand for higher quality coconuts to feed the wider coconut milk industry, its most significant short-term challenge reposes in the high cost of the comprehensive rehabilitation of the industry, which is urgently required. A report published in the December 1, 2017 issue of the Stabroek News, put rehabilitation costs at around $375 per acre “for initial rehabilitation works”, which it says “involves at least 15 hours of excavator-driven clearing of trees, shrubs, and two main drains.” According to the article, “there are also considerable costs associated with fertilizing (whether inorganic or by composting coconut waste), and replacing old trees with improved varieties. The replacement cost could be as low as $250 per seedling or $700 per seedling, depending on the market being targeted.” Those are only initial costs associated with positioning the local coconut industry to provide the high quality ‘nuts’ required for the production of coconut milk.

Inventiveness

If the prevailing inventiveness manifested in the local agro-processing industry points to prospects for the emergence of coconut milk as part of the sector, the costs associated with production are likely to prove challenging for the preponderance of small businesses that inhabit the agro-processing ‘zone.’ For sure, coconut milk is already produced in Guyana, the volumes limited mostly to its domestic use in family cooking. Equipment required for the production of home-cooked food is limited to a domestic grater, containers in which to hold the milk and a sieve through which to separate the liquid from the husk. While the production process remains essentially the same, the production of coconut milk in commercial quantities is a much more elaborate and more importantly costly exercise involving specialized (and costly) equipment and factory conditions that take account of both convenience and safety and health considerations. 

The fat and oil levels in coconut milk and cream is dependent on the amount of water added during the extraction process. As more water is added, fat levels are lowered in the resulting product.

To extract coconut milk at home, consumers usually buy grated kernel and mix with water, as water is especially helpful in manual extraction. The mixture is then poured into a sieve or a muslin cloth where it is squeezed by hand. This extraction can be repeated a few times by adding water to maximize the soluble material extracted from the kernel. With each subsequent extraction, the oil level of the resulting coconut milk decreases, which varies according to the amount of water added to the mixture. Extracted coconut milk can either be used immediately, or left to stand. Upon standing, it separates into two distinct layers – the oil-rich phase (cream) on top, and the water- rich (“whey”) below.

To extract coconut milk for industrial manufacturing purposes, mature coconuts go through de-shelling and paring processes, after which pieces of the kernels are sent into industrial scale cutters and grinders. In integrated plants, the grated coconut kernel then goes into a series of screw presses to extract coconut milk. The residual kernel from this first press is then mixed with water before it is pressed again to increase extraction yield.

After extraction, coconut milk is filtered to remove large contaminants. It can then be standardized to a pre-determined level of fat and blended with other ingredients. Finally, coconut milk is pasteurized and filled into packages for transportation to global markets.

All of this must be attended by significant investment in suitable plants and machinery. China and India are among the world’s major manufacturers of plants associated with the production of coconut milk.

The expansion of Guyana’s agro processing sector to include the manufacture of coconut milk in commercial quantities will require significantly higher levels of investment than that which applies in other areas of the sector. Securing meaningful access to the international market will not only mean having to compete with numerous long-standing and globally popular brands, but also satisfying the exacting standards associated with the food safety laws in importing countries. It is, however, one of the many options for the country’s coconut industry to contemplate as it goes through its revival process.

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