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Name: Jacqueline Hansen | Supervisor: Gurli Jakobsen Date of submission: 20.10.2014

Number of characters incl. spaces: 181.197 = 79,9.

Department of Management, Politics and Philosophy MSoc organizational innovation and entrepreneurship Copenhagen Business School

SOCIAL

ENTERPRISES

IN THE PHILIPPINES

- An exploratory qualitative study

of Agricultural Social Enterprises

tapping into niche markets, while

ensuring opportunities for the poor

to become self-sufficient.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 2!

Executive Summary

!

In the developing world, poverty is a critical issue. While charity and interventions from NGOs are well intentioned, they often bring ‘here and now’ solutions rather than sustainable ones. At the same time, globalization affects the vulnerable poor. Social Enterprises have emerged as a response to the social and environmental crisis, with individuals and organizations providing innovative and sustainable solutions.

The purpose of this thesis is to research how agricultural social enterprises in the Philippines can reach a niche market while ensuring opportunities for the poor to become self-sufficient.

From a social constructivist perspective, using a hermeneutic analysis strategy, this thesis explores the concept of Social Enterprises, particularly in the context of the developing world. Contextualizing qualitative empirical findings in theoretical framework of value chain and ‘Social Enterprises with the Poor as Primary Stakeholders’(SEPPS)

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 3! Acknowledgement

I would like to first and foremost thank colleagues and Social Enterprise experts from the Philippines who taught what I know today about Social Entrepreneurship; Lisa Dacanay (ISEA), Gomer Padong (PhilSEN), the friends at FSSI, Darleen Gela for her endless support and discussions on the topic, Jay Abello (Film maker &

documentarist) for the in depth conversation about the sugar cane industry, Betty More and Anders Haagen (Healthy Sweets) and Earl Parreno (PRESENT coalition &

Alter Trade).

Fellow students from CBS, friends and family in Copenhagen and Manila.

This thesis is dedicated to my Mom.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 4!

Table&of&Content&

Executive!Summary...2!

Acknowledgement ...3!

1.Introduction...8!

1.1!Problem!Statement ...9!

1.1.1!Research!Question ... 10!

1.2!Motivation... 11!

1.3!Structure!of!the!Thesis ... 12!

2.!Methodology... 13!

2.1!Research!Design ... 13!

2.2!Qualitative!Research... 15!

2.3!Theory!of!Science!I!Social!Constructivism ... 15!

2.4!Empirical!Framework... 16!

2.4.1!Data!Collection ... 16!

2.4.2!Case!Study ... 18!

2.4.3!Qualitative!Interview... 19!

2.5!Theoretical!Framework ... 21!

2.5.1!Value!chain... 21!

2.5.2!SEPPS... 22!

2.6!Methodological!Delimitations ... 22!

3.!Literature!Review... 23!

3.1!The!Social!Enterprise!background ... 23!

3.2!Social!Enterprises!in!the!21st!Century ... 25!

3.3!The!Academic!Paradigm ... 25!

3.4!Social!Enterprise!School!of!Innovation ... 27!

3.5!The!NorthISouth!Divide... 27!

3.6!Blended!Value!Proposition... 28!

3.7!Call!for!Future!Initiatives ... 29!

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 5!

4.!Empirical!foundation... 30!

4.1!Introduction!to!Cases ... 30!

4.1.1!Case!I:!Healthy!Sweets ... 30!

4.1.2!Case!II:!ALTER!TRADE ... 32!

4.3!Challenges!of!Tapping!into!Niche!Markets ... 33!

4.3.1!Production... 33!

4.3.2!Defining!and!reaching!markets ... 36!

4.4.3!Philippine!Government!Support... 44!

4.4!Creating!Opportunities!for!the!Poor!to!Become!SelfIsufficient ... 45!

4.4.1!Organizing!the!Workers ... 45!

4.4.2!Empowerment,!Key!to!Social!Impact... 46!

4.4.3!Capability!Building!in!the!Communities... 48!

4.5!Central!topics... 50!

5.!Theoretical!framework... 51!

5.1!Value!Chain... 51!

5.1.1!Definition!of!Value!Chain ... 51!

5.1.2!Why!is!Value!Chain!Analysis!Important ... 52!

5.1.3!Trienekens!Value!Chain!Framework ... 53!

5.1.4.!Framework!for!Developing!Country!Value!Chain!Analysis... 56!

5.1.5!Value!Chain!Constraints ... 62!

5.1.6!Value!Chain!Upgrading ... 64!

5.2!Social!Entrepreneurship!with!the!Poor!as!Primary!Stakeholders... 65!

5.2.1!Primary!Stakeholders... 66!

5.2.2!Transactional!and!Transformational!Roles ... 66!

5.2.3!SEPPS!models:!Control,!Collaboration!&!Empowerment... 67!

5.2.4!Shift!to!Empowerment!Model... 69!

5.3!Theory!Foundation!as!Analysis!Model ... 70!

6.!Analysis... 71!

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 6!

6.1!The!Characteristics!of!a!Social!Enterprise ... 71!

6.1.1!Alter!Trade!vs.!Healthy!Sweets ... 71!

6.1.2!Social!Enterprises!School!of!Thought... 73!

6.1.3!Tensions!between!the!counterparts ... 74!

6.1.4!Tapping!Into!Third!Sector!Approach... 75!

6.1.5!Main!Distinctions... 76!

6.2!Value!Chain!Analysis ... 76!

6.2.1!Mapping!the!Value!Chains ... 76!

6.2.2!Overcoming!Barriers!to!Entry ... 78!

6.2.3!Network!that!Makes!an!Impact... 83!

6.2.4!The!Strength!of!Governance... 84!

6.2.5!Upscale!and!Upgrade ... 85!

6.2.6!Solidarity!Market!as!Key!Condition... 88!

6.3!Engaging!the!Poor!as!Primary!Stakeholders... 89!

6.3.1!Coordination!of!the!Primary!Stakeholders ... 89!

6.3.2!Transform!Lives... 90!

6.3.3!Development!over!Time... 91!

6.3.4!Social!Impact!is!Community!Development ... 92!

6.3.5!Focus!on!community!development ... 93!

7.!Conclusion ... 93!

8.!Bibliography ... 97!

9.!Appendix ... 99!

Appendix!1:!Earl!Parreno ... 100!

Appendix!2:!Gomar!Padong ... 110!

Appendix!3:!Betty!More... 118!

Appendix!4:!Anders!Haagen ... 122!

Appendix!5:!!Social!Entrepreneurship!Bill!(2013),!Senate!Bill!no.!1026 ... 126!

Appendix!6.!10!Fair!Trade!Principals,!WFTO!Asia... 127!

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 7!

!

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 8!

1.Introduction

The Philippines is an archipelago of 7,107 islands with beautiful beaches and great natural resources. With 300 hundred years of colonization by Spain and influences from several foreign countries, the Philippines has only been independent since 1945 and is yet to ‘find its feet’.

The socio-economic situation is a great challenge despite the growing economy and a high GDP growth. The booming industries are outsourcing services such as call- centers and IT, recently promoting the Philippines to a middle-income country. Yet, studies show that the majority of the wealth goes to the 14 richest families (Serrano, 2012 & Diokno, 2012), stagnating a heavily increasing population of poor people.

Despite pushing to become an industrialized economy, agriculture is still a major sector responsible for 20% of the domestic GDP. The Philippines’ agriculture sector is made up of 4 sub-sectors: farming, fisheries, livestock, and, forestry, with farming and fisheries being the largest (Habito et al, 2005)

One of the challenges in the agricultural sector is that its activities are dominant in the rural area wherein 70% of the country’s poor rely on agriculture as their main source of livelihood and employment (Habito et al, 2005, Serrano, 2012). This is a global phenomenon and is an increasing challenge in developing countries, especially with a prediction of a world population of 9 billion people by 2050 with large risks of a global food crises and the increase of global warming which inevitably will affect the poor. This has already manifested, with the super typhoon in 2013 devastating most of the Visayas area affecting millions of people, majority of whom are poor. There is undeniably a real need for sustainable solutions.

Nonetheless, many initiatives have been launched to solve these problems, many of which goes under the umbrella of Social Enterprises, because of the potential of these organisations in creating profit, solving a social problem and providing sustainable solutions.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 9! These Social Enterprise initiatives emerge from across sectors largelyas a response to the Philippines biggest problem: Poverty.

1.1 Problem Statement

In the 1520’s the Spaniards arrived and colonized the Philippines for 300 years, setting up of Haciendas, which dominate the farming sector where the native Filipinos have/and are working under very poor conditions. The Haciendas are large land holdings owned by Spanish families, such as sugar plantation, banana plantations and even mines and factories. Many natives would serve one Hacienda family for generations, yet never be able to break the circle of poverty (Diokno, 2012).

Today, some Haciendas do offer better conditions for the farmers, but some still exploit cheap labor.

After the 1986 Peoples Power Revolution the comprehensive agrarian reform program was passed, having a focus point on giving small native communities and Indigenous People their right to ancestral land. These groups are better known as the Agrarian Reform Beneficiaries (ARB’s). This was a major paradigm shift that was very idealistic and accepted as a fair solution and a possible solution to poverty (Diokno, 2012).

Unfortunately this was, and still is, a challenging undertaking, managed by the Department of Agriculture (DAR).

Many are still struggling to get their lands and to prove their right to their ancestral land, while those who have gotten land back are not able to farm their small piece of land for several reasons including the following; they rarely have initial investment capital to start a production farm. They lack management and financial skills and corruption is embedded throughout the system. The farmer’s own land of 2-3 hectares, which is generally too small to generate any decent income, let alone profit.

The pressure of lacking skills in running their farm, sometimes forces land beneficiates to either lease or sell back to their former Hacienda, with a big risk to remain a poor farmer (PhilSEN & Diekno, 2012).

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 10! The challenges in assisting the poor farmers to overcome the above are enormous, however, the increased interest in Social Enterprises as a means present new ways of organizing the farmers and run the agri-business.

Social Enterprises in agriculture can be the means to “creating the environment for basic capabilities and opportunities for the poor to become self-sufficient” (Dacanay, 2005) and there is a favorable potential for development.

In agribusiness, products such as coconut, banana and sugar dominates the local and export markets because these crops grow very well in the Philippines. Some of these sectors have had great success in conventional export markets. Thus, considering the conditions of the poor and include the Social Enterprise concepts on these agribusiness strategies, tap into what is defined as a niche market, which in this thesis context is defined as segment within fair trade and organic food products. The niche market focuses on either the welfare of their suppliers (fair trade) and/or environment (organic), and has direct access to a specific segment of conscious end-consumer, which in this context can benefit the agricultural Social Enterprises in a developing country, both due to the social inequality (better trade agreements with fair trade) and environmental and health impact (organic) on a agribusiness community.

1.1.1 Research Question

These many and diverse challenges, with social impact issues on the one hand and tapping into a niche market on the other, has led me to the following research question:

How can an agricultural Social Enterprise in the Philippines, tap into the niche market while ensuring opportunities for the poor to become self-sufficient?

1.1.1.1 Deepening the Research Question

With the Research Question I want to express the recognition of interest and curiousness over the paradox that the Philippines have great agricultural land – yet it struggles to reach the niche market. That’s why I in this thesis want to shed light with two agricultural Social Enterprises cases in the Philippines compare, and analyze the

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 11! mechanisms and their roles as Social Enterprises towards their beneficiaries, who are the poor as primary stakeholders and their role as actors in a global value chain.

To help answering my research question, I have put forward 3 sub questions that will guide my empirical foundation and frame the analysis.

Sub questions:

1. What characterizes an agricultural business’s as Social Enterprises?

a. On what foundation does Social Enterprise emerge?

b. What are the expectations of the role of a Social Enterprise in the Philippines?

2. How does an agricultural Social Enterprise work with value chain actors and elements in order to tap into a potential niche market?

a. What are the biggest challenges of reaching a North/niche market?

b. What is their relationship with (potential) niche market?

3. How does an agricultural Social Enterprise create opportunity for the poor to become self-sufficient?

a. What are the roles of the poor in the Social Enterprise?

b. What are the tensions/challenges in engaging the poor?

1.2 Motivation

A review of existing literature on social entrepreneurship reveals a relatively new notion of field and a lack of a unified consensus on the concept.

Social Enterprises face, like any other enterprise, the challenges of tapping into the market with threat of competitors, understanding consumer demands, implementing the right marketing strategies, and creating a profit (or break-even). At the same time, Social Enterprises have to sustain their social mission and avoid sacrificing it for profitable goals.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 12! Jed Emerson explains that the sole reason for Social Enterprises existence is social

and/or environmental solutions and mission, however, whilst research on

entrepreneurship, management and strategies are widely explored, very little research has been conducted on how the social is integrated and embedded in the enterprise and to how far extent social impact should/could cover.

When is a Social Enterprise social? Some may argue that every enterprise and

business more or less is social, creating jobs and adding value to society. Thus, social entrepreneurs argue that they solve a social problem in society, either through their product / service that they offer or through the way they offer it. Thus, academically, the lack of research in this particular field of Social Entrepreneurship motivates my research to shed light on a less developed area.

A personal motivation for this thesis has been driven by my many trips to the Philippines, where my mother is from. Growing up in Denmark with a solid welfare system, health care and education, I always pondered how a country like the

Philippines, so rich in natural resources and fertile land, can be suffering from large scale poverty. In 2012 I was an intern at ‘Institute of Social Entrepreneurship’ ISEA and learned about the great diversity of Social Entrepreneurship and entrepreneurs pushing for innovative solutions to overcome the overwhelming challenge of overcoming poverty.

Finally, there is a practical motivation in potentially supporting agricultural Social Enterprises and others alike, to understand their social dimension and how they can have the social embedded in their enterprise whilst tapping into a market.

1.3 Structure of the Thesis

Chapter 1. Introduction. This chapter goes through the background, objectives and purpose of this thesis followed by problem statement, research question, motivation and thesis structure.

Chapter 2. Methodology. This Chapter provides an explanation of the approach and research question. It explains the case selection, introduction to the two cases, collection methods, the approach for the analytical framework, and its reliability, validation and delimitations of the thesis.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 13! Chapter 3. Literature Review. Introduces a brief overview of the different notions of Social Entrepreneurship and what other concepts belong under this ‘umbrella’. This thesis picks up from the existing literature standing point, in order to take the analysis further and strives to fill out the ‘gap’ in the literature.

Chapter 4. Empirical foundation.

This chapter will present the empirical findings, presentation of the two cases, followed by data that are divided into topics relevant to the analysis.

Chapter 5. Theoretical Framework.

The chapter presents Value Chain concepts and Social Entrepreneurship with the Poor as Primary stakeholders (SEPPS) theories set the foundation for the theoretical framework that will support and guide the analysis. This chapter unfolds into the analysis model.

Chapter 6. Analysis.

In the analysis, I compare and apply the empirical findings within the theoretical framework. There are 3 analysis sections that follow the 3 sub-questions and leads to an anchored argument for the main conclusion.

Chapter 7. Conclusion.

This chapter provides a reflection and discussion of the key points of the thesis. In this chapter, the research question will be answered. It also includes the final conclusion, perspective and further studies.

2. Methodology

The following chapter presents the research design, the method of data collection, and the framing of empirical research such as the choice of informants and interview method. In addition, this chapter provides my choice of theoretical framework, including a criticism of such.

2.1 Research Design

The thesis is set out to explore the agricultural social enterprise by understanding its role in the value chain, while ensuring opportunities for the poor to become self-

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 14! sufficient. The research design is dynamic, where references of data spans over different course of time (Andersen, 2009).

The initial stages of the research have been very explorative, seeking to define unclear problems, hence the inductive nature. Creating a turning point in the analysis, which is built on an induction approach with the empirical evidence points out issues and challenges under this matter (Ghaurig et al, 2005).

By using exploratory research (Ghaurig et al, 2005), I set out to identify the problem and challenges, thus discovering how they might be dealt with. Moreover, the exploratory research setting is framed to be open to discover and underlying issues and challenges that in a more disciplined and structured research may have not been identified. Due to the nature of the thesis and the underexplored area as a whole, it only comes natural to use exploratory research approach.

As illustrated in figure 1, The thesis is built on a multiple case research design, exploring the environment of CASE I: Healthy Sweets and CASE II: Alter Trade, through identifying and comparing their distinct approaches and challenges.

Moreover, drawing knowledge through qualitative interviews with key informants from the industry in order to map out the general concerns of a social enterprise in the farming sub-sector.

I have chosen a theoretical framework based on two main theories; Value Chain and

‘Social Enterprise with the Poor as Primary Stakeholders’ (SEEPS) that will set the frame for the analysis by applying empirical findings.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 15! Figure 1. The structural composition of the thesis, created by the author

2.2 Qualitative Research

I have taken a qualitative research approach, which tends to represent a small sample of the market, however, tend to collect a larger amount of data such as interviews and observations.

Qualitative research is characterized by containing a lot of subjective information, which makes it hard to create any form of generalizations, thus, researchers can shed light on underlying and ‘hidden’ issues on a specific matter (Ghaurig et. al, 2005)

This thesis aims to look at mechanism, interactions and interpretations between organizations and market, through a case study method and qualitative interviews, that all goes under the framing of qualitative research.

2.3 Theory of Science - Social Constructivism

The research sets out from a standing point of Social Constructivism as the scientific paradigm, where the core principles are; that knowledge and information are not the final truth, however, that actors and mechanism within the research are constructed by a social setting or influence by norms and/or sets of social constructed values (Berger

& Luckmann et al, 1997).

The fact that, the concept of ‘Social Entrepreneurship’ is a relatively new phenomena (read more in literature review), where many practitioners argue that they have practiced ‘Social Entrepreneurship’ long before it was given a name and before the concept itself was brought to life, and sprung from practitioner into the academia, indicates the social construction of the term ‘Social Entrepreneurship’, defining it as what we want to in a social setting, context, language and consensus.

Social constructivism is an underlying approach to constructivism and is a particular way of thinking and working on the basis of that man learns nothing directly, but through the contexts we attend. Reality is shaped and interpreted by humans; that means the truth or reality is constructed (Holm, 2011). Social constructivism is interested in how and why we humans learn, understand and describe our reality.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 16! According to the social constructivist approach, language is an excellent tool for communicating social meaning, but we are unable to describe the world as a separate reality, that is what the reality is in isolation. The language is considered as being metaphorical, generally, as we always want to understand the language from our social background and relationships (Holm, 2011).

The ontological view of Social Entrepreneurship is yet a currently ongoing debate and development and is lies within several of layers e.g. When are we actually making a sustainable impact on poverty reduction? Followed by a cultural context that is very much socially constructed. There is no single truth or dimension of Social Entrepreneurship. Reality is an interpretation or rather many interpretations and is interpreted differently by everyone.

My epistemological approach, is taking these layers of social construction into account. The consensus will differ from the Philippines to Denmark. Moreover, aligning the social construction along the value chain will be determined by a social structure of actors, and activities along the chain will have different social construction towards the same goal.

2.4 Empirical Framework

Following section explains my empirical approach and how I have categorized my major findings.

2.4.1 Data Collection

Primary data is the data that is collected firsthand and is considered to be of original nature (Kothari, 2004). In this thesis, primary data contains of four qualitative interviews, which are presented in section 2.4.3.2

The secondary data will thus underpin my primary data. The used secondary qualitative data deals with topics that are relevant for answering the research question.

It consists mainly of books, reports and articles that deal with social economy and social innovation from different aspects. The material consists of both theoretical as well as practical experience, so the data contributes to the thesis illustrates the problem area from both theory and practice.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 17!

• Articles from acknowledged newspapers and/or published by relevant organizations such as Social Watch Philippines

• The Case webpage

• Books by specialists such as, Jed Emerson and Lisa Dacanay

• Observations from visiting the farm and Conferences attended at my time as an intern for Institute for Social Entrepreneurship in Asia (ISEA).

The literature review is considered as secondary data because the data is built on research conducted by others. In the context of this thesis it plays a significant role because the review frames the concepts, consensus and paradigm on the researched field of ‘Social Entrepreneurship’. Moreover, the literature review serves as a foundation for further reflections and for developing insightful questions on the topic (Yin, Third edition: 9). In other words, it is with the knowledge of the literature review that has set the frame for the interviews, with an attempt the fill out the

‘knowledge gap’ in existing literature.

Due to my previous internship in the Philippines, observations have been a part of the initial explorative research. In this thesis, observation has only played the purpose of giving me an introduction and an overall insight of the industry and is not directly used as valid for final conclusions. Thus, observations have been a minor intergraded part in the analysis, since the observations is a part of me as a researcher and will affect my overall approach to the analysis.

2.4.1.1 Hermeneutical Spiral

The process of working with the data, particularly from the interviews, has been an interpretive process, where I’ve been seeking to understand the whole context, in order to understand the

categorized part of the text. A text is understood from a whole and context the other way around, learning to understand the parts of the text. This way, interpretation takes place in a constant shift between the textual universe and

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 18! interpret the universe (Andersen, 2009).

Figure 2:

The Hermeneutical Spiral. Source: Andersen, 2009 This process of enlightenment and interpretation is best described as the Hermeneutical circle (Andersen, 2009).

2.4.2 Case Study

The case study as a method for research has over the past decades evolved, with different mechanism and interpretations. In case study it is possible to go into depth looking at how one aspect is in a given context. In my research I want to cover the contextual conditions, which I find relevant for this thesis. This research design is defined as

“an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident”

(Yin, 1994: 13)

I have chosen two cases that are both Agricultural social enterprises, particularly in the farming sector.

I use a case study comparison approach where Alter Trade has had decades more of experience in fair trade and export market. It has undergone much trial and error to get where they are today, compared to Healthy Sweets, who only initiated in 2009. In other words, they are both agricultural Social Enterprises with a sugar product, but they differ on several elements, such as how they address different issues and

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 19! challenges. However, it is from this distinction that I attempt to learn from, in other words this approach is called theoretical sampling, where getting a deepening understanding of the mechanism studied in the cases, can be translated into an analytical frame (Glaser et al, 1967).

The case study method has been subject to criticism from researchers in various fields. In particular, it has been criticized for 1) being unable to contribute to scientific development because one cannot generalize based on a single case, 2) being usable only to generate hypotheses, 3) producing less valuable knowledge than general, theoretical knowledge, 4) containing a bias towards verification, and 5) being unable to develop general propositions and theories (Flyvbjerg, 2001: 66-67).

However, in a later paper by Flyvbjerg, ‘Five misunderstandings about case study research’ (2006) he picks up on the general criticism of these conventional ideas are misleading and argues that:

”Case study is a necessary and sufficient method for certain important research tasks in the social sciences, and it is a method that holds up well when compared to other methods in the gamut of social science research methodology”

(Flyvbjerg, 2006: 241)

I argue that the case study method is both relevant and valid in my research. With the relatively new phenomena of Social Entrepreneurs, particularly in a developing country context, it is relevant to do a case study comparison and investigate underlying issues. This way these issues can be addressed and potentially be solved.

2.4.3 Qualitative Interview

The thesis primary qualitative data consists of four different personal interviews.

Two of which are from Case I, Healthy Sweets, the director Mrs. Betty More and Healthy Sweets Danish Angel Investor of processing technology Mr. Anders Haagen, who is based in Hong Kong as the Managing director of BTG Pactual investment bank.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 20! Moreover, I interviewed Earl Parreno, former (1999-2009) Director of Alter Trade Mr. Parreno is moreover the founding member of ‘Poverty Reduction through Social Entrepreneurship Coalition’ (PRESENT Coalition), who drafts and advocates for the legislation of the ‘Social Enterprise Bill’. The position includes Mr. Parreno as a key informant, due to his expert knowledge on the field.

Lastly, I interviewed key informant, Development Cooperation and Advocacy coordinator, Gomer Padong from ‘Philippines Social Enterprise Network Inc.’

(PhilSEN). PhilSEN is a network of NGOs and social businesses for the poor, promoting social entrepreneurship and market development in the Philippines through development of applicable models and strategies, exchange of experiences, lobby, and other means, organized in 1999 with the Mission to build a critical mass of social enterprises and people’s enterprises in the Philippines.

All interviews were conducted in the Philippines, except for Mr. Haagen, who I had the chance to interview in Denmark.

Because the specific challenges were not identified prior to the research, qualitative interviews seemed logical, rather than questionnaires and focus groups, to hopefully obtain the unexpected information. Each of the interviews were semi-structured interviews (Ghauri et al, 2002) to keep a red threat towards the overall topic, but still give the respondent freedom to talk and present information I might not know I needed. In addition, this served to give the opportunity to present more sensitive information (e.g. corruption). This information can be beneficial to better understand the challenges faced by the rural poor, how to deal with them, and potentially how to solve them.

I acknowledge that interviews are often characterized by some level of power asymmetry between the researcher and the interviewee and thus, that the interview is not a reciprocal interaction between two equal parties (Kvale, 2003).

2.4.3.1 Analyzing the Interviews

In order to be able to compare the data from each of the interviews, I systematically categorized the findings into topics, inspired by the coding technique used in grounded theory approach, however, coding is generally used more when handling a greater amount of interviews. In practice, I first transcribed the interviews, then I

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 21! made summary with sections of topics, followed by a comparison of these topics to identify the topics which all the respondents had emphasized. The topics then become the frame for the empirical foundation.

Moreover, the data was analyzed with a hermeneutic view, which means that even if arguments are made in a certain way, I am aware that other people may have different ways of understanding the data, the theories, and the combination of them.

2.5 Theoretical Framework

The choice of theories is anchored in the research question as well as the sub- questions. It is not the intention that the theory controls the empirical data. Also, it is not the purpose to deductively test the theory in the analysis but the theoretical considerations involved help focus the analysis and pinpoint patterns and support relationships in the data. The function of the theories is thatthey set a foundation for analysis, categorizing and evaluation (Reineken et al, 2013).

Since the research question ranges in a field between Entrepreneurship and social mission, I have therefore chosen to use the following theories; Value Chain Analysis and Social Entrepreneurship with the poor as primary stakeholders.

2.5.1 Value chain

The Value Chain is traditionally presented as a chain of activities affecting the end product provided to the consumer, e.g. a simple supply chain with activities that influence the value of the end product (Porter, 1985). However, with an increasing global economy, the purpose of the value chain and value chain analyses includes horizontal, vertical chains as well as links that cross over in various patterns.

This thesis attempts to connect value chain global interaction, identify actors in the chain, and analyze potential upgrade and governance, buyer- driven or producer driven product, which will be elaborated in chapter 5.1.

Trienekens (2011) suggests a theoretical framework for agricultural Value chain analysis in developing countries, which is based on other Value Chain researchers like Gereffi and Kaplinsky. By reason of the direct relevance to this thesis, I have chosen to use Trienekens (2011) recommendation for a Theoretical framework for

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 22! agricultural Value Chain in developing countries that can work as a valuable tool for identifying challenges and upgrading opportunities.

On the other hand, Trienekens theoretical value chain framework and the composition is quite new. The challenge in this thesis context, is the limitation of access to knowledge and information that stretches all the way to the consumer. The value chain is analyzed through the lens of the Social Enterprise in the developing country.

However, the value chain can still support in identifying tendencies and comparison with the implantations of the empirical findings.

2.5.2 SEPPS

Social Entrepreneurship with the Poor as Primary Stakeholders – SEPPS, is a stakeholder theory that investigates to the roles of the poor in an organization, and how they move from worker role to empowerment.

SEPPS identifies the roles of the poor in stakeholder theory that is an extension of the European corporate stakeholder models: Control and Collaboration Model, put forward as a contribution to Social Enterprises in the South and as an enhancement of stakeholder theory.

SEPPS was presented by Dr. Lisa Dacanay in her dissertation in 2012, which makes the SEPPS new and unexploited, that may give unexpected challenges in an operational context. However, the SEPPS emerged from case-based theory building of six different Social Enterprises in the Philippines, and can therefore be seen as relevant to this thesis due to the context of the research setting. In addition, it will be intriguing to test an untested theory since, to my knowledge no one has as of now used it in a master thesis research.

2.6 Methodological Delimitations

Within the scope of this thesis a delimitation is the absence of the end-consumer, which may in a given context be relevant, since the end-consumer are the actors at the very end of the value chain and investigation in consumer behavior in the niche market could potentially impact the whole value chain. Thus, the niche market presents the end of the value chain.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 23! In addition, I was not able to get any primary data from the beneficiaries, due to my limited time in the Philippines. Understanding how the beneficiaries as stakeholders perceive the intended social impact and the limit have when and how they perceive that they have ‘stepped out’ of poverty and/or are empowered. However, I build the analysis about the beneficiaries through the interviews from the management and secondary data from Dacanay (2012).

Furthermore, it is not in the scope of this thesis to discuss the term empowerment, but rather to understand it as a means to goal of becoming self-sufficient, as explained in SEPPS.

3. Literature Review

The review is a brief overview, intended to grasp current concepts in the existing discourse within the relative new phenomena of Social Entrepreneurship. The concepts presented present a frame for the research field and in addition set an anchored part of the analysis. In other words, this thesis picks up from the existing literature standing point, in order to take the analysis further and possibly fill out a missing ‘gap’ on the existing literature.

3.1 The Social Enterprise background

The term Social Entrepreneurship first emerged in the 1980’s from the work of ASHOKA, an organization founded by Bill Drayton. Their goal was to provide seed money to entrepreneurs with a social mission. ASHOKA quickly became a global institution who, until today, is still a major player in the field of Social Entrepreneurship (Dees, 2007 & Mair et al, 2006).

The term Social Entrepreneurship sprung from practitioner level into the academe in the US in the 1990’s and has ever since become increasingly popular (Perrini, 2006 &

Emerson 2003).

However, being a relatively new concept in a scholarly aspect, it has recently been integrated in university programs in the last decade. Social Entrepreneurship is still undergoing improvements and lacks a unifying paradigm. The literature presents

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 24! various forms and structures of Social Enterprise and conceptual differences between definitions (Mair et al, 2006).

The field of Social Entrepreneurship involves studies of entrepreneurship, innovation, sociology, and organizational theory. They are all under the process of being researched, structured and redefined (Mair et al, 2006).

Due to the many shapes of Social enterprises, many practitioners and organizations might already be and been for years, a Social enterprise. One of the more common and very earliest forms, dating back to the 1700’s, are cooperatives. Cooperatives are self-help groups that are organized by its members who each contribute with a required shared capital and accept and approve a fair share of risks and benefits for this joint undertaking (Alter, 2007 & Dees, 2006).

Then in the 1980's, a major change within the business sector that impacted directly on social issues emerged- Fair trade. The slogan “Trade not aid” became commercialized and accepted into mainstream masses as an undertaking that will ensure poor farmers fair payment and reasonable working conditions (Emerson, 2003).

The consumer started to become more aware of the product they would purchase and gain knowledge about the company behind. This lead to Corporate Social Responsibility (CSR), which quickly became a popular undertaking by corporations to manage social projects under their company’s brand name but not limited to social impact projects linked with the company. This could also be completely different and perform as a charity event by the corporation.

Today, every large-scale company has a CSR scheme. It is argued whether CSR becomes a marketing arm for certain companies to keep up a good reputation since it is not a core of the business (Emerson, 2003 & Perrini, 2006).

On the other hand, non-profit organizations became entrepreneurial when they are in the need to generate income. These ventures would usually be related to a social mission, but the main purpose is to generate an income (Emerson, 2003).

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 25! 3.2 Social Enterprises in the 21st Century

A major paradigm shift happened when microfinancing became widespread through Muhammed Yunus and Graneem Bank providing financial services for the poor, particularly women. And today, Graneem has Graneem Telecom and Graneem Energy (Mair et al,). A new term evolved when civil society organizations started to create income-earning ventures; Base of the Pyramid (BOP). This refers to looking into the ‘the fortune at the bottom’ working with the poorest people and empowering them through business (Alter, 2007 & Perrini 2006).

It slowly became acceptable to earn money from the poor if the goal is to fight poverty. These initiatives shared common indicators of interest. They were there to make a change, but at the same time responding to the market needs. They were Philanthropists in business suits. Suddenly, new buzzwords appeared: ‘venture philanthropist’, ‘Philanthropreneurs’, ‘social innovators’, ‘business angels’, and more.

Traditionally, it had been the government funding solutions for social problems.

Now, leading business innovators from the private sector responded to the paradigm shift by investing in the BOP and embracing the value of social change in their corporate business in order to create a sustainable economy. These new business start- ups, created new strategies and concepts such as, the multiple bottom lines and Blended Value Proposition and the Social Return on Investment (SROI) (Emerson, 2003).

Nowadays, it has become more acceptable to question the market forces and the roles of private sector enterprises. As Peter Drucker formulates it:

“We are learning very fast that the belief that free market is all it takes to have a functioning society – or even a functioning economy – is pure delusion.”

(Kortel, 1999: 151).

3.3 The Academic Paradigm

With Social Entrepreneurship being an unconventional concept, numerous researches have come to embrace it. Early researches focused on the personality of the social entrepreneur and were saying that social entrepreneurs possess very special traits such as special leadership skills (Alter et al, 2007), a passion to realize their vision and a

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 26! strong ethical fiber (Drayton, 2002) that made them different from other actors in the business sector.

But then, reservations were later made regarding the focus on the person, the social entrepreneur, pointing out that it would be more effective to study not just the personality but to include other factors including underlying activities of social entrepreneurship and the latter may provide more valuable insights.

Following this line of argument, a number of researches have emphasized the entrepreneurial process, e.g. ‘how entrepreneurs act’, as a way of differentiating between social initiatives and social ‘entrepreneurial’ initiatives (Dees, 1998). Then came the researches focusing on ‘social value creating’ nature of the opportunities entrepreneurially discovered and exploited in order to distinguish social entrepreneurship from other entrepreneurial phenomena (Guclu, Dees, & Anderson, 2002).

These researches illustrate that the choice of the social entrepreneur whether to opt for not-for-profit or for-profit depends on the particular business model and the specific social needs to be addressed. Furthermore, in social entrepreneurship, a relative priority is given to social wealth creation rather than economic wealth creation.

Although it is recognized that the former is a by-product of the latter (Venkatarman, 1997) the main focus in social entrepreneurship is on social value.

Therefore, to understand social entrepreneurship, it should not be just through a purely economic sense but also the social context and the local environment (Mair et.al.2006).

From research conducted to understand the difference of social entrepreneurship to entrepreneurship in the business sector, Social Entrepreneurship is described as

“the discovery of opportunities to generate social impact and the identification of mechanism to do so in a financially sustainable way”

(Hockerts, 2010: 178)

Thus, both market and mission is important in Social Entrepreneurship. It cannot be avoided though that there will be tension between the two along the way. A possible

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 27! way of addressing this

“Could be one of continuous innovation whereby social ventures keep innovating their way out of the tension between market and mission”

(Hockerts, 2010: 177) 3.4 Social Enterprise School of Innovation

There are two recognized Social Entrepreneurship schools of thought, one identified as American school of thought and the other as European school of thought. The American school of thought includes Social Innovation School and Earned Income School. These are defined by ’extraordinary persons’ who seek innovative or market based solutions. Such circumstances tend to be a response to cutbacks in federal funding or market based economy as business tools to solve social or environmental problems (Dacanay, 2012) e.g. innovate technology enterprise.

The European school of thought has its tradition in multi-stakeholder initiatives to solve socio-economic problems. In the last decade, it has been a response to crises of welfare states (the finance crises). It has recognized Social Entrepreneurship as a means to relief of socio-economic problems.

Unlike the American School of thought, European School of thought is not market based but social enterprises are created to strengthen social economy (Dacanay, 2012). Hence, the Social Economy School emerged from the European school of thought, which includes associations, cooperatives, mutual organizations, and foundations.

3.5 The North-South Divide

There exists inequality across nations worldwide and this is commonly known as the North-South Divide or the Rich-Poor Divide. Though economy is not the only indicator that distinguishes countries belonging to the North and the South, there are other indicators that are directly or indirectly related to the economic state of the country. An example of this set of indicators is the Human Development Index (HDI), a measurement of the quality of life of the citizens. Subsequently, those countries in the North have higher HDI as compared to countries in the South (Dacanay, 2012).

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 28! Efforts have been initiated to close the gap between this divide with countries improving their economies and with global initiatives as well including the United Nations’ Millennium Development Goals. However, the North market with its developed economies is still recognized with serving the majority of the population and leaving the marginalized as the minority. Thus the financial crises challenging the status. While in The South, like the Philippines, there is a large-scale failure of state and market institutions and the marginalized, particularly the poor, who are the majority (Dacanay, 2012).

In this thesis, the reader may take note, that the social mission in this context is aimed at poverty reduction. Herein, poverty is not merely understood as low income, but as a complex and multidimensional phenomenon with ‘capability deprivation’ (Dacanay, 2012: 294).

3.6 Blended Value Proposition

The most popularized contemporary concept within Social Entrepreneurship, was coined by Jed Emerson (2003), who explains that even an isolated business man, hiding in his own big house will not be able to have the money without a transactional social capital that then (as in a circle), will be spend money that goes back in to the interactive social capital (Emerson, 2003: 23).

Organizations must first accept this notion of already having Blended Values within their organization and that it is not a trade-off between the two. Philanthropically organization will have monitory activities and create economic value as well as for- profit business has a weight of social value. The next step is to maximize both values.

“In truth, the core nature of investment and return is not a trade-off between social and financial interest, but rather the pursuit of an embedded value proposition composed of both”

(Emerson, 2003:26)

In the emerging of this new paradigm, new approaches, understanding and challenges also emerge. Social responsible Investors (and other investors) are looking towards the measurable tools their return, which creates a need for a common understanding

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 29! of how to measure the intangible value impact, in order to have a better understanding of all the elements of the value creation.

Traditionally, impact measurement tools by the non-government sector have been conducted with evaluations through anecdotes. A more increasingly popular measurement tool is the Human development Index, which is based on statistics. A more recent tool is the Social Return of Investment (SROI), a proxy monitory measurement system measuring prior and after an intervention.

On the other hand, philanthropic donors and Social impact funders must understand the nature of ROI and how that may generate new innovative opportunities (Emerson, 2003). Traditionally, social impact and financial return are seen as two separate measures and that it is either/or. Due to the norm of pushing towards a single bottom- line oriented

“Investors and managers don’t know how to play in a space that expands the framework to include other than strictly financial metrics” (Emerson, 2003:37).

Jed Emerson stresses that dividing social and financial return and choosing between the two is “inherently wrong”. Emerson claims that the separation of the two components, social and financial, is an artificial separation and that in reality these two are very much connected (Emerson, 2003 & Dees, 2006).

3.7 Call for Future Initiatives

Emerson pushes for three future actions and implementations, in order to up-scale and maximize the Blended Value Proposition.

First, he expresses the need for breeding what he calls 21st century managers, who focus less on start-up. He stresses that when some may start as Social Entrepreneurs, they must evolve into 21st century managers who are equipped for sustainable management of blended Values. This must be followed by a ‘Social Management Information and tracking system’ that can measure the new creation of value like the Social Return of Investment (SROI) and other measurement tools and documentation.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 30! Emerson stresses for a continuous push for Blended Value Proposition, which produces the greatest social and economic value, with in a single corporation, investment opportunity or community.

However, in current literature, there seem to be no clear strategic tools for how to practically implement the Blended values. SROI is a post-measurement tool, and practically quite comprehensive tasks to undertake, especially for a SME. This thesis seeks to make a small contribution to the notion of Blended Value Proposition. The research question encompasses the double-sided nature of social enterprises, and may for that reason investigate further into how these can be addressed.

4. Empirical foundation

This chapter presents the empirical foundation consisting of secondary data from Dacanay’s dissertation research, primary data from key informants, and major findings from the two cases representing agricultural social enterprises in the Philippines. The findings are divided into three sections, 4.1 introduction of cases, followed by section 4.2 challenges of tapping into niche markets, related to value chain issues and section 4.3 Creating opportunities for the poor to become self- sufficient, related to SEPPS.

Each section has sub-sections of topics that have been systematically extracted from the transcribed data by identifying topics and issues they have in common and/or emphasize. These topics are directly relevant and will be elaborated in the analysis.

4.1 Introduction to Cases

This section gives an introduction of my two cases and has the purpose to give the reader a short introduction and getting a handle of the enterprises and define the distinctions. Furthermore, it works as the foundation for the following sections and the analysis.

4.1.1 Case I: Healthy Sweets

Already in 1996, Betty More and her family acquired an agricultural land were there had been coconuts and banana plantation, in Panabo province, Davao region.

However, the production was low because the land had long been applied with

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 31! chemical inputs that ultimately eroded its natural fertility. So when they took over, they decided to convert the land into an organic farm. They start using organic and locally available materials in order to transform the soil to become more fertile and organic. Moreover, they planted a diversity of fruits and vegetables along with integrated livestock.

Within two years their production had increased and brought double the income from coconuts and bananas, while they could supply food for their household from their other planted vegetables.

But then the global financial crisis happened, and like many others, Healthy Sweets was affected to.

“The onset of the financial crisis in 2008 pulled down the price of the coconut. The price of the whole nut dropped from P8.00 per kilo to P3.00 per kilo.

This situation compelled us to look for viable alternatives and coconut sugar production was seen as the best option because of its health benefits and income potentials.”

(Business plan Appendix) They had to come up with new production that fit their land and a food product that had, in their opinion, a better potential in the market. In addition, Mrs. More had for many years been working with KATAKUS1, a women empowering social enterprise, set up to make paper out of fruit fibers. Community development and sustainable endeavors had always been embedded in Mrs. More’s values. However, KATAKUS was also affected by the finance crises of 2008. They sold lots of lampshades, booklets etc. to the European market, with specific solidarity support in Holland, but they too decreased in sales and clients where no longer interested in buying fruit fiber products. As a respond to all of this Mrs. More, together with her husband Mr. Ervin More, initiated the family-run social Enterprise in 2009. With the increased focus on coco sugar as a healthy alternative, due to its very low glycemic index, as well as a positive potential for a market share, coco sugar become their main product at Healthy Sweets.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

1!http://womenkraftIkatakus.weebly.com!

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 32! 4.1.2 Case II: ALTER TRADE

Alter Trade Corporation traces its existence to the 1980’s when Negros was hit by a socio-economic crisis brought about by the collapse of sugar prices in the world market. Widespread hunger gripped Negros being a mono-crop region- after prices of sugar plunged in the world market.

Negros was then recipient of international aid, which later on proved to be unsustainable, thus giving rise to the concept of “trade not aid”. Particularly a cooperative in Japan reached out to Alter Trade by making sustainable impact through

“trade not aid”.

Alter Trade, is a derivative from alternative trade. Alter Trade Corporation (ATC) is founded as a fair trade organization guided by the fusion of the principles of social development and social enterprise through people to people trade.

People-to-people trade is the heart of its mission and the core of its activities. It is both commercial and visionary between producers and consumers hence, a simultaneous trading business and development process. This is the key element, which distinguishes Alter Trade’s approach from other development cooperation.

Alter Trade partners with agrarian reform sugarcane farmers and marginalized Balangon banana growers in Negros, Panay, Bohol, Northern Luzon, Northern Mindanao, South Cotabato and North Cotabato. It also works with various non- government organizations (NGOs) in the aforementioned regions.

Alter Trade boasts of its main products of organic muscovado sugar and naturally grown Balangon bananas that are sold locally and also exported to Japan, Korea, Germany, France, Switzerland, United States of America, Australia and Asian Countries.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 33! Figure 3: Map of the Philippines

4.3 Challenges of Tapping into Niche Markets

This section is the empirical foundation, related to challenges of social enterprises tapping into a market and can be defined as value chain activities, and divided into following topics; ‘Production’, ‘Defining and reaching markets’, ‘Certifications of international standards’, ‘Supply, Demand, Quality and Volume’, ‘Towards international markets and ‘Government support’.

4.3.1 Production

The production/processing is the typically the beginning of most agricultural supply chains. It’s where, in this thesis context, the beneficiaries operates and where the product is created and that is why it is relevant to introduce the production/processing structures for the analysis of the beneficiaries and value chain.

Healthy Sweets runs a whole year-round production and they started with a production area and a 3-hectare farm. Now, there are farmers who supply sap/syrup.

Coconut farms are also being rented out from farmers at a higher price as compared when they do copra production (More, 2013).

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 34! Figure 4. Source: Healthy Sweets Coco sugar processing, created by the author, based on Healthy Sweets Business plan (2012)

Figure 4 show the processing of coco sugar. The sap is tapped from the coconut flower buds (and not from the coconut) and drips into the small container and is collected every four hours. This can potentially yield 1.5 – 2.5 liters per 24-hour day.

Tapping 240 days is estimated 480 liters sap turning into 60 kilo of coco sugar per tree, per year (Sarian, Manila Bulletin, 2014). It is classified as the new billion peso industry and much more profitable than copra (the coconut) (Philippine Coconut Authority, 2012).

Healthy Sweets has been provided free training from the Department of Science and Technology (DOST) in making the coco sugar, but there do exist more sophisticated methods, which are harder to reach. Mr. Haagen has looked into better options on making lower moist content and making coco sugar cubes. However, this required further investments, so as for now it is only in the research stage until the buyers increase their orders.

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 35! In order to support neighboring farmers, Healthy Sweets provided coconuts to 30 hectares of farmland owned by small coconut farmers, who all are Agrarian Reform Beneficiaries.

The coco sugar producers of Davao Region have conducted a value chain analysis of the industry of which Healthy Sweets is now implementing the recommendations together with the Philippine Coconut Authority. In addition, a Roadmap for the Coco Sugar Industry cluster is being developed for submission to the National Economic Development Authority (More, 2013).

Currently, Healthy Sweets is able to produce up to 12 tons of coco sugar after a 3 months preparation time to activate the neighboring partner farms. However, currently the orders are not that big.

Figure 5: Muscovado sugar production, Source: Created by the auther, based on Grand Muscovado Production (http://www.grandmuscovado.com)

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 36! Alter Trade started Muscovado is an unrefined brown sugar, locally known as “Moist Sugar”, and classified as a healthier sugar than white sugar, because of its unrefined chemical free process.

Harvesting the sugar cane happens anywhere between 5-16 months for the crop to be ready, typically an annual harvest between June and December. It is hard manual labor, cutting and carrying the almost 2 meters long canes onto the trucks and bring them to the crushing and processing facilities. The rest of the year, the sugar workers will not have much else to attend to, which is why sugar cane, at the end of the day, is known as the ‘lazy man’s crop’ (Abello, 2013).

Muscovado sugar is made from boiling the juice extracted from sugarcane until it evaporates, leaving only 30 percent of the original volume, which is then dried and allowed to solidify into dark brown sugar. Notwithstanding, Alter Trade managed to heavily increase their production, through better crushing machines:

“With the growing demand for Muscovado, Alter Trade Manufacturing Corporation (ATMC) was set up in 1992 and a modern muscovite plant capable of crushing 30 tons of sugar cane per day with juice extraction at about 70% was constructed. With this, Muscovado production reached 500 tons per year. The ATMC mill provided a market for the cane of the sugar workers who already owned their lands as agrarian reform beneficiaries”

(Dacanay, 2012:76).

The native Balangon banana grows in the backyard of people in the uplands (mountains), which grows wild and naturally, for Alter Trade pick up and buy from the banana growers on a daily operation (Parreno, 2013).

4.3.2 Defining and reaching markets

One main activity Alter Trade and Healthy Sweets is to try to identify and reach the right market and the challenges and issues with tapping into these markets.

Parreno (Alter Trade), states that locally, there is a very limited market for fair trade products. There are only few families in the Philippines who can pay the premium often associated with a socially produced product. There is a dysfunction between fair trade producers and fair trade consumers. Personal estimate is 1 to 20 wherein

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Thesis: “Agricultural Social enterprises in the Philippines” by Jacqueline Hansen 37! fair trade producers are growing 20 fold while fair trade consumers are growing very slowly (Parreno, 2013). If this continues, there will be over supply.

“That is why the export market is targeted. Although fair trade products are becoming popular, it still has not entered the mainstream market.”

(Parreno, 2013) Twenty-five years ago, Japan proposed a “trade not aid” track towards developing the communities. Originally, muscovado sugar was the first product of Alter Trade being symbolic to the peoples struggle in Negros2 where Alter Trade communities are located. Unfortunately, it had a limited market and limited application at that time.

With Japan, who consumes limited sugar, as partner, Alter Trade had to look for other opportunities. Two years later, after searching for a product for the Japan market, Alter Trade decided on the Balangon banana based on the Japanese’ love for banana and because of the sweet-sour (koku) taste which the Japanese are very fond of. At the start, shipment was about two to three hundred tons a year. It then picked up to around two thousand tons a year (Parreno, 2013).

In 1989, with the muscovado sugar, Alter Trade was able to tap into the fair trade movement in Europe

”The European Fair Trade Association (EFTA), GEPA3 (a fair trade company in Germany), and OS3 (now Claro Fair Trade) formally introduced the idea of Fair Trade to Alter Trade during their visits to Negros.”

(Dacanay, 2012:76)

Moreover, GEPA was the one who, in the early 1990’s, encouraged Alter Trade to produce organic muscovado sugar due to an increase in demand of organic produce in Europe.

”With support from Bread for the World, a Protestant church-based development agency from Germany, Alter Trade started its Bio-Organic Conversion Program in 1994. It was in this year that the first certified organic Muscovado sugar was sold to GEPA”

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

2!When the world sugar prices hit the lowest point in 1984, the people suffered famine affecting many poor farmers.

3 GEPA - "Gesellschaft zur Förderung der Partnerschaft mit der Dritten Welt mbH“ // "Society for the Promotion of Partnership with the Third world”!

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