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MARKET POTENTIAL OF RICE BRAN AS AN INGREDIENT TO NATURAL PRODUCTS OF SELECTED MANUFACTURERS IN SELECTED AREAS IN CALABARZON, 2012

ABIGAILE LYNNE EMRADURA AGUILA

Submitted to the Faculty of the Department of Agricultural Economics, College of Economics and Management, University of the Philippines Los Banos in partial fulfillment of the requirements for graduation with the degree of

BACHELOR OF SCIENCE IN AGRICULTURAL ECONOMICS Major in Agricultural Marketing and Prices

August 2012

BIOGRAPHICAL SKETCH

Abigaile Lynne Emradura Aguila was born in Tondo, Manila on 31stof August 1991. She was the eldest among the four daughters of Ricardo Hernandez Aguila and Evelyn Emradura Aguila. She pursued her primary and secondary education in North Marie Montessori Academy in Calamba City, Laguna. She graduated as the class valedictorian in elementary and as the class salutatorian in high school. She was the former editor-in-chief of The Summit, a school paper. She was a qualifier in the Division Schools Press Conference (DSPC) and Regional Schools Press Conference (RSPC) in headline writing and copy reading in 2006 and 2007. She was also a member of Youth Environmental Steward (YES) - Bayer Calamba and Gawad Kalinga 1 Milyong Bayani (GK 1MB). In June 2008, she pursued her tertiary education in University of the Philippines Los Banos and took up Bachelor of Science in Agricultural Economics Major in Agricultural Marketing and Prices. She was twice a college scholar (2nd semester of 2008-2009 and 2011-2014) and an honour roll (2nd semester of 2009-2010 and 20102011, and 1st semester of 2011-2012). She was also one of the members of the group finalist of the Entrep Student Challenge, a business plan competition sponsored by Summit Media Philippines, on October 2010. After all of her achievements in academics, knowledge skills, principles and values attained from UPLB, she is looking forward to start and secure a career in the field of marketing and research, in aim to support her family. She wants to pursue her masters after gaining relevant experiences regarding her field of studies. She also wants to be an exemplary entrepreneur two years from now, venturing in the food and natural ingredient business.

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ACKNOWLEDGEMENT If there is no pain, there is no gain. In life, we have to experience different kinds of pain, hardships, difficulties and even consequences in order to learn and gain something from it. I can relate this known quotation to my experiences in doing this thesis. Honestly, doing this thesis was the hardest challenges that I have encountered in my college life. I was definitely under stress and pressure upon doing this market potential study. There were times that I am about to give up but still, my adviser, Dr. Salvador P. Catelo, always give me inspiring and motivating words, to still continue, do my best and work beyond my limits. I believe that all of the challenges that we encounter in our daily lives are puzzle pieces that complete us as a firm and experienced person. I am so grateful that many people did not let me down during the time that I am doing this thesis. Thank you for the moral, financial and intellectual support that these people offered me. I would like to extend my gratefulness to my dearest adviser, Dr. Salvador Dong P. Catelo, for all the values in life that you have taught me. Thank you for always boosting my confidence and motivating me especially in times of great pressures. Thank you for all the patience, time and effort that you gave me. I will never forget the advices, life stories and principles that you shared to me. I will always treasure the lessons about decision making, responsibility, professionalism, time management, opportunity costs, feasibility studies, research, policy making, and even non-academic matters pertaining to life and love. Sir, you are more than just a professor, you are also a friend and a mentor to me. Thank you to my panelists, Dr. Marilyn Elauria and Dr. Al Manilay, for all the constructive criticisms, suggestions and comments regarding my outline. Thank you for not making me so nervous and uneasy during my manuscript defense. Thank you to my dearest scribes, my close friends, Monica Ferrer and Miah Naanod, for always being there during my outline and manuscript defense. More than that, thanks for the moral and spiritual support. Thank you to all the people in CEM library, the AgEcon faculty and staff, the people in CEM OCS for being kind to me whenever I ask for your assistance. Thank you to Sir Vista, Sir Gordoncillo, Sir Yorobe, Sir Bates, Maam Piadozo, Maam Delos Reyes, and Maam Rapera for believing that I can do and finish this thesis. Thank you to all my friends in UPLB, especially to my co-advisees, Miah, Monica, ate PH and ate Tin, to my AgEcon batchmates, Kelvin, Efrille, Ka Yan, Jed, Rovi, Jessica, Matthew, Gab, Joyce, and Alec. You helped me enjoy my academic life in spite of stress and pressure. Thank you to my closest friend, Kelvin, for the continuous moral support and motivation. You are such an optimistic person and a good friend.
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Thank you to Sir Catelos RAs, ate Carol and ate Seph, for always being there for me when I need assistance. Thank you for updating me whenever Sir is around. Thank you to all the company-respondents who cooperatively participated in the survey. Thank you for giving me necessary data regarding my study. Thank you for your time and effort. Thank you to my best friend, Shaira Regmalos, for always being there for me when I am down. Thank you for the moral support, encouragement and advices. Thank you to my special friend, Aaron Noelle, for inspiring and motivating me to finish my thesis. Thank you for the love and moral support. Thank you to my siblings, Claudette, Kyla and Yzah, for reducing my stress, making my day, and supporting me with all of my challenges in life including this one. Thank you so much to my dearest parents, Mr. Ricardo Aguila and Mrs. Evelyn Aguila. Ma and Pa were the biggest reason why I am striving so hard to finish this because I want you to be proud of me. There is no word that can express my deepest gratitude and appreciation on all of your efforts including moral and financial support. I dedicate this to you. Thank you for always loving, encouraging and understanding me in spite of my shortcomings as your daughter. Thank you and I love you both. Thank you GOD for giving me this rare kind of opportunity. Thank you for being always at my side. Thank you for all of the blessings, guidance, love, and even the challenges which make us a better person. Without You, this thesis is not possible. Thank You so much and I love You GOD!

ABIGAILE LYNNE EMRADURA AGUILA

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ABSTRACT This study was an effort to determine the market potential of rice bran as ingredient to natural products of selected manufacturers in selected areas in CALABARZON, 2012. Specifically, it aimed to: (1) identify the major physical and business attributes of rice bran that the selected local natural manufacturers consider; (2) identify the sourcing practices that the selected local natural ingredient manufacturers are willing to undertake; (3) determine the marketing arrangements that the selected local natural ingredient manufacturers are willing to engage in; (4) estimate the willingness to pay (WTP) of selected local natural ingredient manufacturers toward different forms of rice bran; and (5) recommend measures that can harness the market potential of rice bran as a natural ingredient. For the period 2000-2011, total rice bran supply, which was determined as 8-10% of the total rice paddy production, showed an increasing trend. Moreover, rice bran is used in the production of feeds, organic fertilizers and natural products. The WTP was used to determine if rice bran as an ingredient to natural products has market potential. Moreover, elicitation method was utilized to determine the selected local natural ingredient manufacturers WTP toward the different forms of rice bran. Moreover, continuous rating on physical and business attributes of rice bran and descriptive analysis by the aid of frequency counts and measures of central tendency were employed to primary and secondary data. It was found out that the majority of the company-respondents belonged to corporations and have just started in the natural ingredient industry, with 1-5 years of experience in operation. Huge fragment were into nutraceuticals and non-CHPI members. Rice bran as an ingredient to natural products has market potential since this study revealed that majority of the company-respondents were aware that rice bran is a natural ingredient and has potential to be income-generating. Also, majority of them have plan to venture into rice bran utilization. With respect to marketability and acceptability of rice bran as an ingredient to natural products, majority of them prioritized nutritive value as one of the physical attributes and price as one of the business attributes. With respect to WTP of the company-respondents towards the different forms of rice bran, refined rice bran oil has the highest minimum and maximum values, amounting to 286.00 PHP/L- 697.40 PHP/L. It was followed by crude rice bran oil (56.88 PHP/L83.33 PHP/L), stabilized rice bran (9.20 PHP/kg- 12.88 PHP/kg) and raw rice bran (4.29 PHP/kg- 6.00 PHP/kg). With respect to perceived demand growth of rice bran in the next 5-10 years, majority of them have aggressive growth perception of 5-10%. For sourcing practice and marketing arrangement, majority preferred local sourcing and long contract with local rice bran producers.

Although rice bran as an ingredient to natural products has market potential, the company complained of the following problems: (1) lack of information on prices, forms of rice bran and extractable products from rice bran; (2) lack of available technology on stabilization and extraction of oil from rice bran; (3) costly investment on the technology for rice bran utilization; (4) uncoordinated arrangement between rice bran sources (farmers, millers) and local natural ingredient manufacturers; (5) lack of consumers knowledge of rice bran for human consumption/ human use; and (6) lack of studies on the economic uses and value of rice bran. Given these, it was recommended to: (1) establish public information sites and awareness programs regarding rice bran; (2) provide quality preserving-and-enhancing facilities for rice bran; (3) encourage government to take initiative and encourage private sectors in funding and commercialization; (4) stimulate tax incentives; (5) promote contract arrangement; and (6) facilitate further studies on the economic aspect of rice bran utilization.

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TABLE OF CONTENTS

TITLE

PAGE NO. i ii iii v vii ix xi xi 1 1 5 5 6 7 15 18 19 19 19 20 24 25 25 25 26 31

Title Page Biographical Sketch Acknowledgment Abstract Table of Contents List of Tables List of Figures List of Appendices INTRODUCTION Background of the Study Statement of the Problem Significance of the Study Objectives of the Study REVIEW OF RELATED LITERATURE CONCEPTUAL FRAMEWORK HYPOTHESES OF THE STUDY RESEARCH METHODOLOGY Types of Data and Method of Data Collection Selection of Study Area of Respondents Method of Data Analysis Limitations of the Study RESULTS AND DISCUSSION Industry Notes of the Rice Bran-User Industries The Philippine Natural Ingredient Industry Rice Bran-User Industries Rice Bran Utilization vii

TITLE

PAGE NO. 34 34 40 41 43 47 48 50 51 53 55 56 59 61 63 65 67

Local Rice Bran Supply Demographic Characteristics of Company-Respondents Plan to Venture in Rice Bran Utilization Awareness on Rice Bran as a Natural Ingredient and Awareness on Rice Bran as Potential Income Generator Physical and Business Attributes of Rice Bran Acceptability of the Different Forms of Rice Bran Sourcing Practices of Rice Bran Marketing Arrangements in Rice Bran Utilization Perceived Demand Growth of Rice Bran Willingness to Pay for the Different Forms of Rice Bran Results of Cross Tabulation Analyses Plan to Venture and Awareness on Rice Bran as a Natural Ingredient Plan to Venture and Awareness on Rice Bran as Potential Income Generator Ownership Status and Awareness on Rice Bran as a Natural Ingredient Ownership Status and Awareness on Rice Bran as Potential Income Generator Years of Operation and Awareness on Rice Bran as a Natural Ingredient Years of Operation and Awareness on Rice Bran as Potential Income Generator PROBLEMS ENCOUNTERED SUMMARY AND CONCLUSION RECOMMENDATIONS BIBLIOGRAPHY APPENDICES viii

70 73 79 83 86

LIST OF TABLES

TABLE NO. 1

TITLE

PAGE NO. 35

Total volume of rice paddy and rice bran production (in metric tons), Philippines, 2000-2011 Distribution of company-respondents by ownership status, years of operation and membership in selected area in CALABARZON, 2012 Distribution of the company-respondents plan to venture in rice bran utilization and awareness on rice bran in selected areas in CALABARZON, 2012 Distribution of the company-respondent s consideration on the physical and business attributes of rice bran in selected areas in CALABARZON, 2012 Rating on the physical and business attributes considered by the company-respondents in selected areas in CALABARZON, 2012 Distribution of the acceptability of the different forms and company-respondents preference in sourcing practices of rice bran in selected areas in CALABARZON, 2012 Distribution of the company-respondents preference in marketing arrangement in rice bran utilization and perceived demand growth of rice bran in the next 5-10 years in selected areas in CALABARZON, 2012 Measures of central tendency and willingness to pay of the company-respondents towards different forms of rice bran in selected areas in CALABARZON, 2012

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TABLE NO. 9

TITLE

PAGE NO. 58

Cross tabulation analysis of company-respondents plan to venture in rice bran utilization and awareness on rice bran as a natural ingredient in selected areas in CALABARZON, 2012 Cross tabulation analysis of company-respondents plan to venture in rice bran utilization and awareness on rice bran as potential income generator in selected areas in CALABARZON, 2012 Cross tabulation analysis of company-respondents ownership status and awareness on rice bran as a natural ingredient in selected areas in CALABARZON, 2012 Cross tabulation analysis of company-respondents ownership status and awareness on rice bran as potential income generator in selected areas in CALABARZON, 2012 Cross tabulation analysis of company-respondents years of operation and awareness on rice bran as a natural ingredient in selected areas in CALABARZON, 2012 Cross tabulation analysis of company-respondents years of operation and awareness on rice bran as potential income generator in selected areas in CALABARZON, 2012

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LIST OF FIGURES

FIGURE NO. 1

TITLE

PAGE NO. 15

Conceptual framework of the market potential of rice bran as an ingredient to natural products of selected manufacturers in selected areas in CALABARZON, 2012 Local rice bran supply by utilization, Philippines

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The processes of stabilizing rice bran and extracting crude and refined rice bran oil Company-respondents by nature of business in selected Areas in CALABARZON, 2012

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LIST OF APPENDICES

APPENDIX

TITLE

PAGE NO.

Survey Questionnaire

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MARKET POTENTIAL OF RICE BRAN AS AN INGREDIENT OF NATURAL PRODUCTS OF SELECTED MANUFACTURERS IN SELECTED AREAS IN CALABARZON, 20121
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Thesis manuscript submitted in partial fulfillment of the requirements for graduation with the degree of Bachelor of Science in Agricultural Economics, Major in Agricultural Marketing and Prices from theDepartment of Agricultural Economics, College of Economics and Management, University of the Philippines Los Baos. Prepared under the supervision of Dr. Salvador P. Catelo.

ABIGAILE LYNNE E. AGUILA

INTRODUCTION

Background of the Study

According to United States-Food and Drug Authority (US-FDA), natural ingredients are ingredients extracted directly from plants and animal parts as contrary to being chemically- processed or synthetically produced. Few examples of these natural ingredients are Papain from Papaya, Corosolic acid from Banaba, Bixin from Atsuete, Moringa oil from Malunggay, and Gamma oryzanol and Rice bran oil from Rice bran (Arroyo, M.A. et al, 2010). There are many different natural ingredients located and planted in the Philippines and these range from root crops, plants, seeds, nuts, flower, fruits, grasses, herbs, and even marine life.

Furthermore, natural ingredients are not new in the Philippines since these ingredients were traditionally used ever since the early Filipino era when pharmaceutical products have not fully taken off in the Philippine market. Most of these ingredients are used primarily in feed milling, organic fertilizer making, food processing, cosmetics, and

pharmaceuticals. However, new categories like nutraceuticals and cosmeceuticals are continuously expanding the natural ingredient industry.

Natural ingredients are mainly used in three major sectors in the industry namely, cosmeceutical, pharmaceutical and functional food sectors. Cosmeceutical is one of the emerging sectors in the natural ingredient industry that caters to cosmetic products. It includes one or more bioactive ingredients that provide positive psychological effect on cellular level. These ingredients are used to confer drug-like benefits including vitamins, phytochemicals, enzymes, antioxidants and essential oils. On the other hand, pharmaceutical has been long established to produce both chemical and natural-based products which provide medical benefit to chronic and lifestyle diseases. This sector includes huge companies that usually use medicinal and aromatic plants, vegetable alkaloids, herbal medicines and herbal supplements. Functional food industry is also one of the emerging industries that produce conventional foods that are consumed as part of usual diet. These functional food products have psychological benefits to consumers. It could reduce the risk of chronic diseases further than basic nutritional functions. The natural ingredients used in this sector include natural colours, flavours and sweeteners, vegetable oils and fats, stabilizers and emulsifiers, preservatives and antioxidants.

Nutraceutical is a subsector under the functional food that caters in purifying and isolating products from foods that are generally sold in medicinal forms, usually associated with food. Aside from psychological benefits, they also provide protection against chronic and lifestyle diseases. The ingredients supply substances that bring health

and medical benefits, taking account of disease prevention and treat against several kinds of diseases (Agri Food Trade Service, 2011).

To date, there is confusion among the consumers regarding their understanding of nutaceuticals and pharmaceuticals. Consumers often mistakenly perceive nutraceutical products as pharmaceuticals. Hence, Department of Health (DOH) disperses information on the differences between the two sectors. Accordingly, nutraceuticals refer to naturallybased supplements while pharmaceuticals can be naturally-based, chemically-based and a combination of synthetic and natural ingredients. Moreover, in USA, Food and Drug Authority (FDA) do not approve nutraceuticals since it do not bear with the set standards regarding quality and encapsulation; whereas pharmaceuticals do (International Quick Search Directory, 2012).

The natural ingredient industry has a growing global and Philippine market. The global health and nutrition sector alone has an approximately 4 billion USD sales in 2009. The demand for cosmetics and medicine grows annually by about 10% while the demand for organic and natural ingredients increases by approximately 3% annually (Department of Agriculture Biotechnology Program, 2010). More people recognize the benefits from natural ingredients such as slowing down ageing, enhancing beauty, promoting digestive health, promoting cognitive health, addressing allergens, and preventing occurrence and risks of lifestyle and chronic diseases. Every consumer is in search for wellness due to changing environmental conditions and demographic change.

Nevertheless many local natural ingredient manufacturers are hesitant to embark on natural ingredient utilization due to their lack of technical and market studies. For

instance, rice bran is one of the natural ingredients that have potential for business. It has high fiber, vitamin and mineral, high protein and oil content (Food and Agriculture, 2011). Ironically, a huge proportion of rice bran produced yearly in the country is wasted. Only 10% is used in the fertilizer industry and 36% in the feed milling industry, leaving 54% of it untapped (Food and Agriculture Organization, 1997). In contrast, rice bran is efficiently used in Thailand and China as functional food. They extract oil from rice bran and process them into healthy consumable oil.

According to IRRI (2009), 100 kilograms of rice can approximately generate 8-10 kilograms of rice bran, or an 8%-10% recovery rate. Rice bran can supply a mixture of proteins, crude fiber, fat, and ash. It has high nutritive value since it is also a source vitamin B complex, vitamin E, anti-oxidants and it also lowers cholesterol in the body(International Rice Research Institute, 2009). However, due to non-stabilization of rice bran, it is still discarded or used as an animal feed despite its high content of bioactive substances (Helal, A.M., 2009).

Rice bran is slowly getting known in cosmetics, pharmaceuticals, nutraceuticals, and food processing sectors. It is used in soap, lotion, make-up, and aromatic oil in cosmetics production. For pharmaceuticals andnutraceuticals, it is commonly utilized in the production of herbal and dietary products; while in food processing, it is used as Stabilized Rice Bran (SRB), an ingredient for processed meat products, cereal products, and pastries. However, most of the manufacturers and/ or processors are sourcing their rice bran from abroad. (Department of Agriculture Biotechnology Program, 2010).

5 Statement of the Problem A typical setting of rice production in the Philippines is where farmers are paying for the milling services done by the rice millers and their utmost concern is to have their rice milled. Under the present set-up, farmers have no concern on the residual of rice milling as they leave them in rice mills. Actually, rice bran, as a pointed out earlier, can be utilized as ingredient to feeds and organic fertilizer production. If only rice bran could be utilized appropriately, the farmers and/ or the millers could generate additional income. The lack studies particularly, the economic aspect of rice bran, leaves a vacuum towards its commercialization. Many manufacturers remain reluctant in venturing into this natural ingredient because of its unclear demand-supply situation (Department of Agriculture Biotechnology Program, 2010).

Significance of the Study Conducting a market potential study may establish a new market dimension for rice bran as input to production and promote its efficient utilization. Creating a new market for rice bran as a natural ingredient can partly solve the agricultural issue of underutilization of by-products of agricultural operation. It will also help to understand better the problems that are encountered by manufacturers and processors. Hence, a better policy direction and support system can be facilitated in the rice industry.

Objectives of the Study The study was conducted to explore the market potential of rice bran as an ingredient to natural products of selected manufacturers in selected areas in CALABARZON. Specifically, it aimed to: 1. identify the major physical and business attributes of rice bran that the local natural ingredient manufacturers consider; 2. identify the sourcing practice that the selected local natural ingredient manufacturers are willing to undertake; 3. determine the marketing arrangement that the selected local natural ingredient manufacturers are willing to engage in; 4. estimate the willingness to pay of selected local natural ingredient manufacturers towards the different forms of rice bran;and 5. recommend measures that can harness the market potential of rice bran as a natural ingredient.

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REVIEW OF LITERATURE

Philippine Rice Industry: Production Rice plays a central role in the Philippines. It has social, political, economic, technical and environmental implications to every Filipino. It is an irreplaceable meal on every Filipinos table. However, due to inefficient rice production of the country, importation is an option to meet the demand of the Filipinos (World Mission Magazine, 2004). According to Bureau of Agricultural Statistics, rice production has tripled from 2.32 million metric tons in 1970 to 16.82 million metric tons in 2008 which was reported to be at its peak. However, in 2009 and 2010, rice production fell to 3.27% and 3.04%, respectively, due to typhoons that damaged palay crops in Central and Southern Luzon. Still, many Filipinos are engaged in the rice industry since it is the countrys staple crop and its local rice production is necessary for meeting the increasing demand for rice. Moreover, the annual per capita rice consumption is 119.080 kg as of 2009 (Bureau of Agricultural Statistics, 2009). The general increasing trend of rice production in the country opens the opportunity of venturing on businesses that will promote food sustainability. Utilization of by-products of rice production adds profit in the agricultural sector and promotes new industries which are utilizing these by-products. Moreover, losses are lessened and additional profits are incurred.

Rice Bran as Rice Milling By-product Throughout the modern world, rice is consumed in its polished form and it is a staple food in most countries in Asia, including Philippines, Thailand, and Vietnam. The outer-layer of brown rice is the rice bran which is obtained as a by-product of most rice milling industries. During the process of rice polishing, the rice bran, containing bran and the germ of the kernel, is removed from the brown rice. It constitutes 10% of the total rice paddy. The raw rice bran rapidly becomes rancid, especially when not stabilized right after 24 hours. The rancidity is due to the active enzyme, lipase that is produced during the milling. The rancidity of rice bran makes way for the underutilization of this byproduct and it also loses its high nutritive value and palatability (Johnson, I. and Williamson, G., 2003). A key process to resolve the issue of rapid rancidity of rice bran is by subjecting it into stabilization, where the lipase enzyme will be destructed, the product will be dehydrated and sterilized. The advantages of stabilizing rice bran are it reduces bacterial contamination, fights molds, aflatoxins and yeasts; it ruptures oil cells allowing for texturization and shaping. Moreover, it enhances palatability without damaging its nutritive value (Applewhite, T. H., 1989).

Status of Rice Milling and the Use of its By-products Rice milling industries generate significant quantities of by-products including rice husks, rice bran and broken kernels. These by-products are usually underutilized and are subjected to burning and/ or raw ingredients to feed stuffs. (Toriyama, K. et al, 2005)

cited a report on the aspects of rice milling and processing in developing countries. Usually, value-addition is the ultimate goal of every business entity involved in the scenario. With value-addition, different food and feed manufacturers are taking advantage to utilize the by-products and to produce in-demand food commodities. In the Philippines, there are several rice millers and most of them are located in the rice-producing regions of Central Luzon and Western Visayas. (Yoshizaki, S., 2002) as cited by Toriyama in the report on the scientific perspective for the 21st century. It provided a list of factors causing inefficient rice milling and processing. The following factors are the characteristics of the yielding rice variety, limited equipment and facilities, unsuitable milling equipment, inadequate facility management, and socio-economic factors highlighting poor farm roads yielding losses during transportation and handling. The local rice millers are usually the major sources of raw rice bran. They usually source additional income from selling rice by-products, including rice husks and rice hulls to feed manufacturers and organic feed utilizers. In developing countries, rice bran stabilization has become a trend due to the increasing demand for economical foods with high nutritive value. Food industries utilize stabilized rice bran as an emulsifier for processed meat products. They already substituted rice bran to soya or soy since soy has recorded several allergic reactions to the consumers and it placed second among all allergens recognized worldwide. Processed meats emulsified with stabilized rice bran (SRB) give adequate nutrient requirement of every consumer (Hoogenkamp, H.W., 2010). Moreover, Food and Agriculture Organization (FAO) foresees a price hike on the dairy and meat products. This will lead to uprising food costs for at least ten years from

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now, especially in the developing countries India and Philippines (Food and Agriculture Organization, 2009). With this, every food business entity is finding its way to produce nutritive but economical foods by using by-products of the agricultural production.

The Philippine Nutraceutical Industry The emergence of nutraceutical industries expanded as the new millennium started. According to Philippine Council for Health Research and Development (PCHRD, 2011), the nutraceutical market in the country is getting stronger as the trend goes towards organic and natural foods and medications. Moreover, the growth is due to the dependence of the third world countries, including the Philippines, to traditional medicines. Wherein, 40%-80% of the population depends on traditional medications. The Department of Science and Technology (DOST) through PHCRD has been undertaking researches on medicines, specifically herbal medicines which led to the establishment of local herbal medicine processing facilities. The government has took part on the development of the nutraceutical industry through funding several research programs that aim to develop organic and herbal food products, food supplements and medications.

Related Studies on the Utilization of Rice Bran as an Input to Production One of the objectives of agricultural economists is to utilize the resources well and to maximize profits given a certain limited amount of resources. Every firm is in line with the objective of profit maximization. In relation with the situation of rice bran industry, there is an existing underutilization of rice bran which causes for the

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inefficiency of the available resources used. In order to improve rice brans efficiency of use, appropriate utilization must be employed. There are several studies showing reasons and ways to utilize rice bran. (Helal, A.M., 2009) conducted a feasibility study for the prospective of utilizing rice bran in Egypt which is also a rice-producing country in the Arab region. He cited that the country has been producing an average volume of 8 million metric tons of rice annually and given this opportunity, rice bran utilization through stabilization is the general objective of the study. Rice bran stabilization is planned to be in industrial and laboratory scale. The specific objective of the feasibility study is to develop rice bran nutraceutical products as an aid to fight some common illnesses. The study was supported by the government and it was initiated by the agricultural sector of the Egypt. (Elmont, R. J., 2010) conducted a pre-feasibility study on adding value to raw rice bran by stabilization. The specific objective of the study is to develop a competitive domestic private sector in Suriname that can contribute to sustainable development and to facilitate gradual integration of Suriname in the regional and International economy. Its specific objectives are to improve competitive capacity of the rice sector and it byproducts and identify strengths, weaknesses, opportunities, and threats of the agro-food industry. The initial step of conducting the study was the fact-finding on the data on the rice processing and availability of rice bran, rice bran prices, and market demand for rice bran in the region. An interview to the rice millers and major feed producers was conducted. Moreover, a logic framework was also prepared for the study. The study found that the through technological aid and laboratory experiments, value addition is possible for raw rice bran. It is especially through stabilization of the raw rice bran.

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Prospective markets for stabilized rice bran (SRB) are determined and the current situation of the production side of the study was modeled. There are concrete evidences of rice bran utilization in the developing countries such as Thailand and China. The Philippines has conducive environment and economy to establish a new market for rice bran as an input to nutraceuticals. Primarily, the use of natural ingredients was initiated by the herbal industry of the Philippines way back 2001. The country is most likely to follow the footsteps of developing countries in the utilization of the by-products of agricultural production and the use of natural ingredients in medicines and food products. The emergence of different herbal entities in the country has led to influence the Filipinos in consuming products with natural ingredients in light for prolonging good quality of life. Willingness to Pay (WTP) It is an analytical tool for determining the maximum amount that an individual is willing to pay for a certain good or service. It establishes the price of a certain product that is not yet available in the market (George, S., 2010). It is usually done with goods that are not yet available in the market. In the case of goods that are not yet available in the market, the willingness to pay (WTP) reflects the potential demand for a certain product. There are several approaches to measure WTP and these are as follows:

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Dichotomous Choice Method

This is the most common approach wherein the data will be collected is through personal surveys of consumers. Certain questions will be asked regarding the consumers present attitude, awareness and demographic profile in which questions can only be answered by a yes or a no or a success or failure. This approach level-offs the awareness and knowledge of the respondents about rice bran. It is not an outright question about WTP.

Bidding Game Approach

In this approach, respondents will be randomly assigned a particular bid from a range of predetermined bids. The bid that will be assigned could be higher or lower level bid. The respondent will be asked to answer yes or no to every particular bid and proceed until the highest bid will be recorded. One of the advantages of this approach is that a maximum WTP can be obtained (DelaCerna, A.K., Undated).

Payment Card Approach- in this approach, the respondent will choose his maximum WTP value out of the range of WTP values for a certain good. Benchmark version of the payment cards will be provided containing average WTP amount for other goods. WTP for a certain good could be affected by biases (Mitchell & Carson, 1984 as cited by DelaCerna, A.K., Undated).

Open-ended/ Elicitation Method- this method includes asking the respondents of their maximum WTP for a certain good without any reference value mentioned to

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them. This is the most convenient method but could create a wide range of answers and at worse, no responses (DelaCerna, A.K., Undated). Regarding the literature cited in this study, it can be observed that there is a lack of studies regarding the economics, specifically the market potential of rice bran. Most of the studies in the literature were focusing on the technical aspects of rice bran. Indeed, there were experiments and technical analysis of rice bran but there were no studies pertaining to the prices, marketability and acceptability of rice bran. With this, there is really a need to study the market potential of rice bran in order to establish a glimpse of what rice bran could offer in the market and also to have clear glimpse of the supply and demand situations of rice bran.

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CONCEPTUAL FRAMEWORK

Market potential is an interplay between future demand and supply of a certain product. The demand is primarily dictated by the total number of potential rice bran-users who are usually affected by the following factors: (1) awareness on rice bran as a natural ingredient; (2) awareness on rice bran as a potential income generator; (3) marketability and acceptability by the buying population of rice bran as a natural ingredient; and (4) availability of good quality rice bran. The demand of rice bran is directly affected by the respondents awareness on rice bran as a natural ingredient and as potential income generator. It is presumed that the company-respondents that are aware of characteristics of rice bran can potentially utilize the product as an ingredient in the natural ingredient industry. Moreover, the physical and business attributes of rice bran are reflected on its marketability and acceptability as a natural ingredient. This study focused on the main attributes that the manufacturers consider in utilizing the rice bran as a natural ingredient in their production. The main physical attributes include color, scent and purity, nutritive value and storage ability; while the business attributes include accessibility, price, assured supply, and government regulations and policies. The assessment regarding these attributes was utilized in order to aid both manufacturers and producers on what things to prioritize and consider in rice bran utilization. Also, the sourcing practices of rice bran and the marketing arrangements in rice bran utilization were determined in order to determine the most preferred sourcing practice and marketing arrangement of the company-respondents. Importation, local

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Supply of rice bran

Market potential of rice bran

as a natural ingredient

Demand of rice bran

Milled rice -Volume of rice production -Rice bran recovery rate

Number of rice bran users

Awareness on rice bran -As a natural ingredient -As potential income generator

Marketability & Acceptability of rice bran as a natural ingredient -Physical attributes -Color, scent & purity -Nutritive value -Storage ability -Business attributes -Accessibility -Reasonable price -Assured supply -Government regulations &policies

Sourcing practice of rice bran -Importation -Sourcing from local producers -Combination (both)

Marketing arrangements in rice bran utilization -Longer contract with local producers -Produce own supply of inputs -Produce own supply of inputs, process & distribute mfgd goods

Figure 1.Conceptual framework of the market potential of rice bran as an ingredient to natural products of selected manufacturers in selected areas in CALABARZON

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sourcing and a combination of importation and local sourcing were considered the main sourcing practices of rice bran; while long contract with local producers, production ofown supply of inputs, and production of own supply of inputs, processing and distribution of manufactured goods. The type of sourcing practices of rice bran and the type of marketing arrangements in rice bran utilization can affect the potential demand of rice bran as a natural ingredient. The more costs incurred in sourcing out and marketing of rice bran can negatively affect the potential demand of rice bran. On the other hand, the supply side is directly affected by the volume of rice production and the rice bran recovery rate; whereas, in the Philippines, the rice bran recovery rate ranges from 8%-10% (International Rice Research Institute, 2009). The local rice and rice bran production are lateral with each other. Obtaining the following data regarding the potential demand and supply of rice bran, the willingness to pay (WTP) for the different forms of rice bran can be estimated. The causal relationship between the said factors affecting the demand and supply are very much important in assessing if rice bran as a natural ingredient has market potential.

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HYPOTHESES OF THE STUDY

1. Nutritive value is the most considered physical attribute of rice bran while color, scent and purity are the least considered physical attributes of rice bran. Price is the most considered business attribute of rice bran while government regulations and policies is the least considered business attribute of rice bran. 2. Company-respondents prefer to source locally rather than to import rice bran. 3. Company-respondents prefer to have long contract with local rice bran producers; and 4. Refined rice bran oil has the highest willingness to pay, followed by crude rice bran oil, stabilized rice bran and raw or fresh rice bran.

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RESEARCH METHODOLOGY

Types of Data and Method of Data Collection

This study utilized primary and secondary data. Primary data were obtained through personal interviews of companies or manufacturers of natural ingredients with an aid of a pretested questionnaire. Data for collection included the characteristics of the companies such as type of ownership (OS), years of operation (YO) and nature of the business. Moreover, other information such as preference of sourcing practices in utilizing rice bran, marketing arrangement in utilizing rice bran and perceived demand growth for rice bran in the next five years were gathered.

On the other hand, secondary data focused on the prices of rice bran, number of rice bran user-industries and the profile of the study areas. The list of the companies were gathered from the Department of Trade and Industry (DTI), while production and marketrelated data were obtained from the Bureau of Agricultural Statistics (BAS), National Statistics Office (NSO), Central Bank, Food and Agriculture Organization (FAO) and other international organizations.

Selection of the Study Area and Respondents

This study was done in CALABARZON (Region 4A) since most local natural ingredient manufacturers are located in that region. Thirty (30) companies were interviewed via purposive and quota sampling method.

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Method of Data Analysis

Descriptive Analysis

In characterizing the company-respondents, tabular and graphical methods aided by frequency counts, measures of central tendency and dispersion were employed.

Elicitation Method

Datawere collected through personal surveys of consumers or self-administered questionnaire. The elicitation method specifically used open-ended question(s) pertinent to the respondents maximum and minimum willingness to pay for the product. There were no price guidelines or hints used in eliciting the company-respondents WTP for the different rice bran forms. Moreover, before asking the company-respondents WTP, they were informed about the different forms of rice bran and processes in rice bran utilization. This method also yields the actual value of the respondents WTP. It accounts for willingness to pay without bias.

Rating Scale

A continuous numerical rating scale was employed to determine the companyrespondents priority regarding the different physical and business attributes of rice bran. The rating scale involved a continuous numerical rating with 1 as the highest or most prioritized and 5 as the lowest or least prioritized. In this rating scale, the companyrespondents can have two or more attributes with the same rating in which, it reflects that the company prioritizes two or more attributes at the same time.

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Delphi Method

The perceived demand growth for rice bran in the next five years was determined through the Delphi method. The different operators of local natural ingredient manufacturing companies were asked about their perception on the growth of rice bran demand. The perceived demand growth of rice bran that has the highest frequency reflected the perceived demand growth of rice bran that the local natural ingredient manufacturers foresee.

Statistical Analysis

The following statistical tests and analyses were carried out to draw a meaningful inference: Fishers Exact Test of Independence

This methodology is usually done if Pearson Chi square test cannot be utilized in interpreting for accurate results. Moreover, this test is done if the two major Pearson Chi square limitations, namely, having an expected frequency of less than 1 and having 20% of the total cells frequency of less than 5, are met. Statistical programs such as STATA software, SPSS software, SAS software, and QI Macros are needed in running this test.

Furthermore, this test is known to determine if there is an association between the two variables. In short, this test determines whether one variable is independent of the other variable. This test is usually done at 5% and 10% alphas. Whereas, when the probability value of the Fishers exact statistic is less than 5% (=0.05), then the test

22

allows for the rejection of the null hypothesis; otherwise, the null hypothesis is accepted. Fishers exact test is also known for yielding more accurate results than Pearson Chi square test. The data used in this test are in a row and column form, usually in a contingency table. A 2 by 2 table is commonly used in doing this test of independence since this is the simplest. However, the same test can be done for more than 2 by 2 tables (McDonald, J.H.2009). The null and alternative hypotheses for Fishers exact test of independence were as follows:

Ho: the relative proportions of one variable are independent of the second variable

Ha: the relative proportions of one variable are dependent of the second variable

Say, for awareness on rice bran as a natural ingredient (AW1) and plan to venture in rice bran utilization (VENTURE), the hypotheses were:

Ho: Plan to venture in rice bran utilization (VENTURE) is independent of awareness on rice bran as a natural ingredient (AW1) or simply, the two variables are independent of each other

Ha: Plan to venture in rice bran utilization (VENTURE) is dependent of awareness on rice bran as a natural ingredient (AW1) or simply, the two variables are dependent of each other

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The probability associated with the occurrence of the respondents answer were obtained and added. The data were group into a 2 by 2 table such as (only for 2 variables):

Total

Group I

A+B

Group II

C+D

Total

A+C

B+D

Moreover, the exact probability was obtained using the formula below:

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Limitations of the Study The study focused on the market potential of rice bran as a natural ingredient in selected areas in CALABARZON. Since there is a difficulty in locating the potential and current users of rice bran in CALABARZON, only 30 company-respondents were included in the survey in this study. Moreover, there were approximately 100 registered small, medium and large scale natural ingredient manufacturers in CALABARZON. Nevertheless, only 30 company-respondents were willing to be interviewed. These companies were of more or less 30% of the total population of natural ingredient manufacturers in CALABARZON. Also, limitations regarding the use of elicitation method in estimating WTP were considered wherein the estimates might lead to an understatement of WTP due to lack of knowledge of the prices, costs and benefits, and free-riding (Ahmed, S.U.&Gotoh, K., 2006).1

The methodology used was sourced from Ahmed, S.U. & Gotoh, K., 2006. The Choice of Elicitation Method in CVM and their Impact on Willingness to Pay in Environmental Assessment. Retrieved 25 February 2012 from http://www.lb.nagasaki-u.ac.jp/reports/kougaku/pdf/37_68_05.pdf.

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RESULTS AND DICUSSIONS

Industry Notes of the Rice Bran-User Industries

The Philippine Natural Ingredient Industry

The Philippine natural ingredient industry is composed of different growers, producers and manufacturers all over the country who are engaged into the production, manufacturing and distribution of products that contain ingredients derived directly from plants or animal sources. It is a huge enlarging industry where rice bran belongs. This industry has been growing over the past few years due to several factors namely, growing population, aging population, increasing health-consciousness among the population, climate change and increasing awareness for a healthy lifestyle. The natural ingredient industry, dealing with herbal medicine and supplements, can be segmented into three categories which are the Food Industry or the Functional food nutraceuticals, cosmetics industry or cosmeceuticals and pharmaceutical industry (Department of Agriculture Biotechnology Program, 2010).

The three different sectors that mainly utilize natural ingredients are the cosmeceuticals, pharmaceuticals, and functional food sector. These sectors have inherent characteristics that make them distinct from each other. Cosmeceuticals refer to cosmetic products that include one or more bioactive ingredients that provide psychological effect on cellular level. Cosmeceuticals include the use of natural colours, vegetable oils, fats and waxes, essential oils and oleoresins, vegetable saps and extracts, and raw plant and materials. These natural ingredients are utilized in the production of different cosmetic

5 26

products ranging from soap, lotion, fragrance, oils, make-up, beauty enhancers, among others. Pharmaceuticals refer to medicinal products that can be of natural or synthetically-based. Pharmaceuticalsinclude medicines and supplements that provide curative and preventive effect among consumers illness. Pharmaceuticals also include the use of medicinal and aromatic plants, vegetable sap extracts, vegetable alkaloids, herbal medicines, and herbal supplements. On the other hand, functional foods refer to ingredients that are consumed as a part of a usual diet. It provides psychological benefits and aid in prevention of lifestyle and chronic diseases. Functional foods include the utilization of natural colours and flavours, sweeteners, vegetable oils and fats, emulsifiers and stabilizers, antioxidants, preservatives, and nutraceuticals. Indeed, nutraceutricals is under the functional food sector. It refers to product that is in purified form obtained from foods that usually in medicinal forms. These nutraceutical products are not commonly associated with food but still, it provides psychological benefit and resistance against chronic diseases (Natural Ingredients Market and Industry Study, 2012 as cited by Department ofAgriculture Biotechnology Program, 2010).

Rice Bran-User Industries

The Philippines has been producing rice for more than a century. It is considered as Philippines staple food. With the large production of rice in the country, agricultural wastes such as rice bran and rice husks/ rice hulls are incorporated. The common practice of Filipino farmers is to bring their palay harvest into the rice millers.According to Philippinesrice.com, as of 2010, the rice milling fee isPhp 65.00 / 50-kg bag of rice. Most of the farmers concern is just to have their rice milled. Most of them have no intention

27

on the agricultural wastes. On the other hand, the rice millers make money out of it by selling it to the feed millers for Php 5-12 / kg (International Rice Research Institute, 2009). The feed millers are very particular with the quality of rice bran they are buying. Most of them only consider good quality rice bran, they neglect low ones. Quality is a very crucial consideration for the feed millers since the raw (fresh) rice bran will further be subjected into different kinds of milling process. Most of the time, although rice millers want to sell all of the rice bran (agricultural wastes), they cannot do it since the issue of rancidity and quality comes in. Rice bran easily becomes rancid in no less than 24 hours. If the bulk of rice bran becomes rancid or is nearly becoming rancid, the rice millers usually burn it. According to International Rice Research Institute (IRRI), the rice bran is 8-10% of the total rice paddy production. Almost 36% of the rice bran supply of the country goes to the feed milling industries, 10% for inorganic fertilizer industry and almost 54% of it is untapped (Food and Agriculture Organization, 1997). It can be seen that there is a huge untapped volume of rice bran in the Philippines causing the underutilization of potential agricultural products. Rather than going into a waste, rice bran has potential to be income-generating. Several studies show that it can be income generating since itcan be used in many ways as long as it is stabilized.Also, it is high in fiber and a perfect source of protein.

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Feed Milling Industries One of the industries that use large amount of rice bran is the feed milling industries in the Philippines. It is composed of the poultry, livestock and aquaculture subsectors. There are about 494 registered feed manufacturing companies in the Philippines ranging from commercial (mixed) feed manufacturers, non-commercial feed

manufacturers and feed ingredient manufacturers. Based on (Avilla, H. F. et al, Undated), 37.3% - 38.3% rice bran is utilized for producing huge amount of mixed feeds. Moreover, 50% - 55% of the rice bran used in feed milling is imported (Food and Agriculture Organization, 1997). Rice bran is one of the most utilized major feed stuff together with yellow corn, corn bran, wheat bran, copra meal, soybean oil and fish meal (FAO, 1997). Generally, manufactured feeds have relatively high prices. The high prices of manufactured feeds are directly dependent on the import prices of ingredients and feed stuffs, availability and seasonality of the ingredients.

Fertilizer Industry The fertilizers known to be used by most farmers are the inorganic fertilizers which accounts for a huge volume of local fertilizer production. This includes urea, complete, ammonium sulfate, monoammonium phosphate, potash and diammonium phosphate production. On the other hand, organic fertilizers are used by some of the farmers but most of it is used in aquaculture, specifically for fishponds. Animal manures, agricultural by-products and processing residues are the organic fertilizer ingredients used in agriculture. Rice bran is one of these organic ingredients, specifically D3 class of

29

rice bran (third class). D3 class of rice bran is usually used in fishponds although their utilization is not common.

Natural Ingredient Industry The Philippine natural ingredient industry is composed of the different growers, producers, manufacturers and distributors of ingredient derived naturally from plant and animal sources. The natural ingredient industry is a growing industry in partnership with some private and public sectors of the society namely, Chamber of Herbal Industries of the Philippines, Inc. (CHIPI), Department of Agriculture (DA), Department of Trade and Industry (DTI), Department of Health (DOH), Food and Drugs Authority (FDA), University of the Philippines Los Banos (UPLB), University of the Philippines Manila Institute of Pharmaceutical Sciences, Philippine Institute of Traditional and Alternative Health Care (PITAHC), and some private herbal companies and wellness companies. Rice bran is one of the considered potential natural ingredients to be further utilized by the members of the natural ingredient industry. There are several companies who could potentially utilize rice bran as ingredient to their products. These companies could use rice bran in the production of the following: nutraceuticals, cosmeceuticals, essential and massage oils, extracted cooking oils, food additives and fortificants. For clearer understanding, there is a need to differentiate the following classifications of use. The following definitions of the different classifications of use are provided below: Nutraceuticals- natural food and health products providing health and medical benefits;

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Cosmeceuticals-cosmetic products with active ingredient having health benefit; Essential and massage oils-aroma therapeutic oils, scented oil with the purpose of providing therapeutic or calming effect, oils used in body massage; Extracted cooking oils- oil intended for consumption, for food preparation, for cooking; Food additive and fortificants- ingredients used as emulsifiers or extenders, additive ingredient with nutritive value As a matter of fact, Gamma Oryzanol and Rice Bran oil are the second most frequent natural ingredients based on global demand and interest for several natural ingredients (Department of Agriculture Biotechnology Program, 2010). Moreover, there are several unique natural ingredients in the Philippines sourced from marine, fruit and berries. However, founded studies are more focused on rice since it is our staple crop. We have here our local credible research centers known in Asia such as the International Rice Research Center (IRRI) and the Philippine Rice Research Institute (Phil Rice). In the case of the Philippines, although there is a rice bran product craze, research and development including the market potential and technical aspect of rice bran is still weak. Unlike any other natural ingredient, there is no need for it to be propagated since it is a by-product of rice production. What makes the natural ingredient industry problematic is the fact that the country has inadequate access to appropriate technologies of processing and utilizing it. The most common use of rice bran among these companies are seen on the spa products, cosmeceutical products, specifically rice bran soap, rice bran essential oils, rice bran conditioner and rice bran massage cream, etc. (oryspa.com). More than this, rice

31

bran has greater potential towards nutraceuticals. There were numerous studies claiming that rice bran can be further used in oil extraction to produce rice bran oil, emulsifying agent in processed meat products and stabilized rice bran as supplement in encapsulated and/ or powdered forms (Kahlon, T.S. et al, 1996).

Rice Bran Utilization The local supply of rice bran is computed as 8-10% of the total rice paddy. The usual practice in Philippine rice farming is the selling of recovered rice bran to feed millers and burning it if it easily becomes subjected to rancidity. There were too few studies in the Philippines regarding the utilization of rice bran. However FAO provides an estimated data, wherein, an estimate of 36% of the local rice bran supply goes to the feed milling industry, an estimate of 10% of it goes to the fertilizer industry while the remaining 54% is left behind untapped (Food and Agriculture Organization, 1997).

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Figure 2.Local rice bran supply by utilization, Philippines.

Source: Aquaculture Feed and Fertilizer Resource Atlas of the Philippines. FAO Corporate Document Repository.Food and Agriculture Organization, 1997.

Rice bran can be used in such different forms. It can be subjected into different processes such as stabilization to deactivate the lipase enzyme causing rapid rancidity and to keep its nutritive value; solvent extraction to extract crude and refined rice bran oil with a 0.60% rate of recovery and the enzymatic extraction to extract crude and refined rice bran oil with 2.80% rate of recovery (Villanueva, R.B. Natural Ingredient Industry: Status and Needs. Philippine Biodiversity Meets Biotechnology).

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Figure3. The processes of stabilizing rice bran and extracting crude and refined rice bran oil.

RAW (FRESH) RICE BRAN

Stabilization

Solvent Extraction Desolvenizing Toasting Defatted RB

Enzymatic Extraction Distilled water addition pH adjustment (+NHCl plus cellulose, hemicellulose) Shaking Water Bath (80rpm)

Acid Treatment Heating (125-135C, 13 hrs, hum 11-15%) Hold heating (9799C, 3 mins) Cooling Granulating Stabilized RB (granular, fine, extra fine) Caustic soda

Solvent Evaporation Crude RB Oil

Degumming Neutrali -zing Bleaching Dewaxin g Deodorizing Wintering Refined RB Oil Sulfuric acid

pH adjustment (7.0 +NNaOH, a-amylase, protease) Shaking (overnight) Hot plate heating (50C, 30 mmins) Centrifugation (8000rpm, 4C, 20mins) Scraping

RB Oil Collections

Sources: Sirikul,A, Moongngarm, A and Khaengkhan, P., 2009.

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Local Rice Bran Supply The Philippines is not accustomed of utilizing rice bran for human consumption. It is usually utilized for animal feeds and organic fertilizers. The rest of it, especially those that are rapidly becoming rancid was just burned in bulk. There are no available data regarding the local supply of rice bran but it can be computed as eight to nine percent (8.0-10.0%) of the volume of total rice paddy production (International Rice Research Institute, 2010). It can be seen that there is an increasing trend of rice and rice bran production in 2000-2008. However, the production of rice in the country during 2009 and 2010 declined which also resulted to a decline in rice bran production. There was a 3.27% decline in rice bran production in 2009 and 3.04% decline in rice bran production in 2010. However, production increased by 5.78% in 2011. Demographic Characteristics of the Company-Respondents The demographic characteristics of the company-respondents include their ownership status, years of business operation, nature of business, and membership. Regarding ownership status, the company-respondents have varying statuses which were ranging from corporation, partnership and sole proprietorship. Furthermore, corporations are known to have shareholders, who are considered as the owner of the business. Different persons were known to be the owners who take shares of the organization. It has the advantages of limited liability, permanency, transferability of ownership and easy access to capital. On the other hand, partnership is somewhat similar to sole proprietorship except for the fact that two individuals have the claim

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Table 1.Total volume of rice paddy and rice bran production (in metric tons), Philippines, 2000-2011.

Year

Rice Paddy Production

Rice Bran Used for Organic Fertilizers2

Rice Bran Used for Feeds2

Untapped Rice Bran2

Total Rice Bran Supply3

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

12,389,412.00 12,954,870.00 13,270,653.00 13,499,884.00 14,496,784.00 14,603,005.00 15,326,706.00 16,240,194.00 16,815,548.00 16,266,417.00 15,772,318.55 16,684,062.00

401,416.95 419,737.79 429,969.16 437,396.24 469,695.80 473,137.36 496,585.27 526,182.29 544,823.76 527,031.91 511,023.12 540,563.61

111,504.71 116,593.83 119,435.88 121,498.96 130,471.06 131,427.05 137,940.35 146,161.75 151,339.93 146,397.75 141,950.87 150,156.56

602,125.42 629,606.68 644,953.74 656,094.36 704,543.70 709,706.04 744,877.91 789,273.43 817,235.63 790,547.87 766,534.68 810,845.41

1,115,047.08 1,165,938.30 1,194,358.77 1,214,989.56 1,304,710.56 1,314,270.45 1,379,403.54 1,461,617.46 1,513,399.32 1,463,977.53 1,419,508.67 1,501,565.58

(Source:

Bureau of Agricultural Statistics, 2011)

Total rice bran supply for feeds, organic fertilizers, and untapped based on Figure 2, page 32. 3 Total rice bran supply computed as 9.0% of the total rice production. Nine per cent was used for conservative purposes (still in the range of 8-10%).

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of ownership of the business. Profits and losses are shared proportion to the capital contribution of each partner; while sole proprietorship is the simplest form of business. It is when a single individual owns the firm. It has unlimited liability and it is not a taxable business entity unlike corporations. Majority or 19 (63.33%) of the company-respondents were corporations while 7 (23.33%) of the company-respondents and 4 (13.33%) of the company-respondents were sole proprietorship firms and partnership firms, respectively. In the natural ingredient industry, specifically in cosmetics and herbal products production, many of the known firms were of corporation. There were few partnership and sole proprietorship firms. Moreover, corporations provide the huge production of cosmetics, herbal products, essential and massage oils and food additive ingredients in the Philippines. Regarding years of operation, the interviewed company-respondents have varied years of operation of their businesses which ranged from 1 to 23 years, with an average 8 years of operation. Since the natural ingredient industry has just started after the millennium, there were many company-respondents who have just started in the business with less than 10 years of business operation experience. Moreover, majority or 13 (43.30%) of the companies have no more than five years of business operation; followed by companies with 6-10 years of business experience which comprised 10 (33.30%) of them, companies with 11-15 years of business experience which comprised 4 (13.30%) of them; companies with 16-20 years of business experience which comprised 2 (6.700%) of them; and company with more than 20 years of experience which comprised only 1 (3.30%) of them.

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The most known association of companies engaged in the production, research and development, manufacture, distribution and trading of herbal products and natural ingredients is the Chamber of Herbal Industries of the Philippines Incorporated (CHIPI). It was organized in 2001 initially by 12 companies. Today, the association accounts for 70% of the local herbal and natural market in the Philippines. It actually made 600 USD including exports in 2007 as stated by the Department of Trade and Industry. Moreover, the organization has full support in the local natural ingredient industry. It has the role to promote responsibility in giving safe and effective quality products to consumers, to show responsibility in product promotion, to be vigilant against unscrupulous players destroying the overall reputation of the industry, and to assist and guide young and starting companies in practicing product responsibility and achieving competitiveness (Chamber of Herbal Industries of the Philippines Incorporated, 2012). Regarding the membership of the company-respondents, the survey data shows that majority or 22 (73.33%) of the company-respondents were non-CHIPI members. While 8 (26.67%) of the company-respondents were members of CHIPI. The result obtained from the survey was opposite with what is expected. Furthermore, membership with CHIPI has several advantages such as trainings, seminars, conventions, and also connections provided by the organization to its members. Membership with CHIPI also provides association with the Department of Agriculture in terms of research and development purposes. Given the following privileges, there were still companies that were not part of CHIPI but indeed, they were interested to be part of it now knowing the benefits they can get from it.

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Table 2.Distribution of the company- respondents by ownership status, years of operation and membership, selected areas in CALABARZON, 2012.

ITEM Ownership Status Corporation Partnership Sole Proprietorship Total

Frequency Count

Percentage (%)

19 4 7 30

63.33 13.33 23.33 100.00

Years of Operation 1-5 years 6-10 years 11-15 years 16-20 years >20 years Total 13 10 4 2 1 30 43.30 33.30 13.30 6.70 3.30 100.00

Membership CHIPI Member Non-CHIPI Member Total 8 22 30 26.67 73.33 100.00

Regarding the nature of business, every company has different nature of businesses. Some may only have one nature but some may have several nature of business, making one company to have several responses regarding nature of its business. Namely, cosmetic or cosmeceuticals, pharmaceuticals, nutraceuticals, essential and massage oil production, and food additives and fortificant

39

production were the nature of businesses that the company-respondents were involved. For further discussion, the cosmeceutical sector is involved in the production of cosmetic products that includes one or more bioactive ingredient that has affirmative psychological effect in cellular level. The pharmaceutical sector is involved in the production of medicinal products that can be either of natural or synthetically-based ingredients. The nutraceutical sector is involved in the production of food that is usually in medicinal forms. These products have psychological benefit and it prevents occurrence of chronic diseases. The essential and massage oil sector is a small sector involved in the production and extraction of crude and refined oil from natural products. Lastly, the food additive and fortificant sector is a subsector under the functional food sector which is involved in the production of stabilizers, emulsifiers and preservatives used in preserving and lengthening the shelf-life of natural food products (Department of Agriculture Biotechnology Program, 2010). Furthermore, the survey data with multiple response, show that the majority or 18 (60.00%) of the company-respondents were into nutraceuticals. It was followed by 12 (40.00%) company-respondents who were into cosmetics. On the other hand, 10 (33.33%) company-respondents were into essential and massage oil production, 8 (26.67%) were into pharmaceuticals, 4 (13.33%) were into spirulina and organic rice production and utilization, and only 1 (3.33%) was into food additive/fortificants/ enhancer production.

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Figure 4.Company-respondents by nature of business, selected areas in CALABARZON, 2012.

Plan to Venture in Rice Bran Utilization For the companies plan to venture, the data were gathered in order to determine the future users and utilizers of rice bran. Moreover, this determinedif rice bran as a natural ingredient has a market potential. It was expected that many companies have plan to venture in rice bran utilization. Moreover, not all of the surveyed companies were planning to venture into the utilization of rice bran. Majority or 21 (70.00%) of the company-respondents have plan to venture in utilizing rice bran; while only 9 (30.00%) of the company-respondents have no plans to venture in rice bran utilization.

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5

Awareness on Rice Bran as a Natural Ingredient and Awareness on Rice Bran as Potential Income Generator It was expected that majority of the company-respondents are aware that rice bran is a natural ingredient and it can potentially be income generating. Likewise, the survey for the company-respondents awareness that rice bran is a natural ingredient shows that still 4 (13.30%) of the company-respondents were not aware on rice bran as a natural ingredient. While majority or 26 (86.70%) of the company-respondents were aware on rice bran as a natural ingredient. The result of the survey was close to what has been expected. The same pattern can be seen with the survey on the company-respondents awareness on rice bran as potential income generator having a majority or 22 (73.30%) of the company-respondents believe that rice bran can potentially be income generating and only 8 (26.70%) of the company-respondents did not believe that rice bran can potentially be income generating. It can also be noted that most of the 8 respondents that did not believe on the potential income generating capability of rice bran have the usual perception that rice bran is a waste that is commonly burned in farms and rice mills.4

Statement based on the Department of Agricultures Biodiversity meets Biotechnology, Producers, growers and manufacturers summit. 18 February 2012. Sulo Hotel, Diliman, Quezon City.

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Table 3.Distribution of the company-respondents plan to venture in rice bran utilization and awareness on rice bran, selected areas in CALABARZON, 2012.

ITEM

Frequency Count

Percentage (%)

Plan to Venture in Rice Bran Utilization To venture Not to venture Total 21 9 30 70.00 30.00 100.00

Awareness on Rice Bran as a Natural Ingredient Aware Not aware Total 26 4 30 86.70 13.30 100.00

Awareness on Rice Bran as Potential Income Generator Aware Not aware Total 22 8 30 73.30 26.70 100.00

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Physical and Business Attributes of Rice Bran

Like consumers, local manufacturers look at the physical and business attributes of rice bran before venturing into its utilization. The behaviour of every consumer towards product consumption is basically based on product quality, price, availability and accessibility (Zeithaml, V.A, 1988). In this study, the local natural ingredient manufacturersmainly look at the physical attributes of rice bran such as color, scent and purity, nutritive value and storage ability; and business attributes namely, accessibility, availability, price and government regulations and policies.

Specifically, for the physical attributes of rice bran, color, scent and purity are considered since these attributes are the main physical attributes to look for in rice bran. The local natural ingredient manufacturers prefer light brown brans. In terms of scent, manufacturers prefer rice bran that has no rancid smell or rancid scent since rice bran with rancid-like smell promotes rapid rancidity. In terms of purity, manufacturers do not consider to have adulterated ingredients in processing, what they want is pure rice bran that is free from sand particles, dirt, dust and adulterants. Nutritive value of the bran is the manufacturers foremost concern; this is mainly the reason why rice bran is demanded. Nutritive value and rancidity is related whereas, bran that are rancid has lesser nutritive value. With this, manufacturers prefer fresh rice bran. Rice brans storage ability is also one of the considered attributes. Manufacturers prefer bran with long storage capacity and this is exhibited by brans that are appropriately dried and stored in mill houses. For the business attributes of rice bran, accessibility is one of the most important attribute since manufacturers seek for accessible ingredients. With accessibility, the

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location of the supply of rice bran is always checked. Moreover, availability is also connected with accessibility. Manufacturers usually look at this attribute with great importance since this makes production possible. It must be noted that if rice bran has no stable availability, manufacturers will be too hesitant to venture in utilizing it. On the other hand, price is also one of the considered attributes and it reflects the quality of the product; generally, the higher price, the greater quality. If the price of refined rice bran oil is too high for the manufacturers since its extraction cost is high, they might be hesitant to venture in rice bran utilization. Lastly, government regulations and policies is also a considered attribute. If the government regulations and policies regarding the production, manufacture and trade of rice bran and rice bran products are friendly to all of those concerned, then, manufacturers will be more willing to venture in rice bran utilization. Moreover, the consistency of government regulations and policies is also considered by manufacturers since if there are consistent regulations and policies, they will not experience difficulty in complying with it.

Looking at the survey regarding considerations on the physical and business attributes of rice bran, it was found out that all (100.00%) of the company-respondents considered color,scent and purity, nutritive value, storage availability, accessibility, availability, and price. Only 17 (61.70%) of the company-respondents considered government regulations and policies as business attributes of rice bran. The result of the survey is very helpful for the producers of rice bran since this could be a guide for them regarding what to consider for in the production of rice bran. If all of these attributes were met by the producers, then, there could be a concrete agreement between the two parties: producers and manufacturers.

45

Table4.Distribution of the company-respondents consideration on the physical and business attributes of rice bran, selected areas in CALABARZON, 2012.

ITEM

Frequency Count

Percentage (%)

Consideration on the Physical Attributes of Rice Bran Color, scent and purity Nutritive value Storage ability 30 30 30 100.00 100.00 100.00

Consideration on the Physical Attributes of Rice Bran Accessibility Availability Price Govt regulations and policies 30 30 30 17 100.00 100.00 100.00 60.71

Besides the considerations of the company-respondents on the physical and business attributes of rice bran, the average rank of each and every attribute was also considered since this reflects the attributes that the local manufacturers considered according to priority. Looking at the survey, in terms of the physical attribute of rice bran, nutritive value is the most prioritized with an average rank of 1.17, followed by color, scent and purity with an average rank of 1.80 and storage ability, being the least with an average rank of 2.07. While for the business attributes of rice bran, price is the

46
5

most prioritized attribute among the four with an average rank of 1.28, followed by assured supply with an average rank of 1.43, accessibility with an average rank of 1.90. Among the stated business attributes, the least was government regulations and policies with an average rank of 2.64. Majority of the company-respondents were privatelyowned, only three were of government-owned. This was one of the reasons why majority of the company-respondents gave least priority to government regulations and policies. Furthermore, the rank of physical and business attributes of rice bran were all in good values except for government regulations and policies. The result of this survey is helpful for the producers since this could be a guide for them on what attribute(s) to prioritize in order to meet what the manufacturers want. Clearly, if rice bran should prosper as an industry, producers and manufacturers must see to it that the following attributes discussed about should be met.

Table 5. Rating of the physical attributes and business attributes considered by the company-respondents, selected areas in CALABARZON, 2012.

Physical Attributes

Average Rating

Business Attributes

Average Rating

Color, scent & purity Nutritive value Storage ability

1.80 1.17 2.07

Accessibility Price Assured supply Government regulations & support

1.90 1.28 1.43 2.64

47

Acceptability of the Different Forms of Rice Bran Rice bran comes in different forms and products such as raw or the so called fresh rice bran which comes directly from rice farms or rice mills, stabilized rice bran which is a processed form, crude rice bran oil extracted from the raw rice bran, and refined rice bran oil which is subjected to a longer process. Every respondent has varied acceptance on the different forms of rice bran. Based on the survey regarding the acceptability of the different forms of rice bran, wherein company-respondents provided multiple responses, majority or 20 (66.67%) of the company-respondents found stabilized rice bran acceptable to be used. It was followed by 19 (63.33%) of them found refined rice bran oil acceptable to be used. While 15 (50.00%) of them found crude rice bran oil acceptable to be used and the least acceptable form was raw rice bran with 14 (46.67%) of them. Given this survey results, it can be deduced that many companies or firms are most likely willing to invest in the utilization of stabilized rice bran and refined rice bran oil. With this, the government must have concrete measures to support the stabilization of rice bran and extraction of rice bran oil. Apparently, according to the companyrespondents, there is a need for a concrete technology to stabilize rice bran; whereas, many manufacturers wanted to invest on it. It can also be noted that most of the respondents who belongs to those who did not find refined rice bran oil acceptable to be used, stated that it is expensive for them to invest on the product.5

Statement based on the Department of Agricultures Biodiversity meets Biotechnology, Producers, growers and manufacturers summit. 18 February 2012. Sulo Hotel, Diliman, Quezon City.

48 5 Sourcing Practices of Rice Bran There are different sourcing practices in rice bran utilization and these are importation, sourcing locally from local producers, and both or a combination of the said two sourcing practices. Surveyed company-respondents have different preferred sourcing practice. Moreover, the survey data shows that majority or 23 (76.67%) of the companyrespondents preferred to source locally from local producers. While 5 (16.67%) of the company-respondents preferred to import rice bran ingredients and only 2 (7.00%) of the company-respondents preferred to practice both or combination of local sourcing and importation. Most company-respondents preferred to source from local producers in order to help local farmers/ producers to generate income. Importation is a resort if there is no assurance of supply yet the there is a concrete demand for rice bran. In aim to aid the producers of rice bran, specifically, the farmers, the government must support the marketing arrangement that the local manufacturers desire by giving incentives for producers to produce and incentives for manufacturers to source out.

49 5 Table 6.Distribution of the acceptability of the different forms and companyrespondents preference insourcing practices of rice bran, selected areas in CALABARZON, 2012 . ITEM Frequency Count Percentage (%)

Acceptability of the Different Forms of Rice Bran Raw rice bran Stabilized rice bran Crude Rice Bran Oil Refined Rice Bran Oil 14 20 15 19 46.67 66.67 50.00 63.33

Sourcing Practices of Rice Bran Importation Local sourcing from producers Both Total 5 23 2 30 16.67 76.67 7.00 100.00

5 50

Marketing Arrangements in Rice Bran Utilization There are different marketing arrangements in utilizing rice bran and these are contract with local producers, producing own supply of inputs (backward integration), and producing own supply of inputs, process and distribute manufactured goods (vertical integration). Every respondent has different preferred marketing arrangement which fit their nature of business. Moreover, the survey data shows that majority or 16 (53.33%) of the company-respondents preferred to have longer contract with local producers, followed with 10 (33.33%) of the company-respondents who preferred to produce own supply of inputs, process and distribute manufactured goods; while only four (13.33%) of the company-respondents preferred to produce own supply of inputs. Majority of the company-respondents preferred to have longer contract with local producers in order to help local farmers/ producers in uplifting their current situation.6 With the marketing arrangement that the local manufacturers want regarding rice bran utilization which was to have a longer contract with local producers, the government must be in full support of this since this will generate consistent income for the farmer or miller producers. However, before going with a certain king of agreement between the producer and the manufacturers, it is essential to consider the physical and business attributes of rice bran that the producers must met. In order for the producers and manufacturers to have a longer contract, a full cooperation between the two parties including the government is a must.

Statement based on the Department of Agricultures Biodiversity meets Biotechnology, Producers, growers and manufacturers summit. 18 February 2012. Sulo Hotel, Diliman, Quezon City.

5 51

Perceived Demand Growth of Rice Bran There is difficulty in assessing the fate of rice bran in the next five to ten years and with this, Del Phi method was used. The experts in the industry were asked about their perceived demand growth of rice bran in the next 5 to 10 years. Moreover, the survey data shows that majority or 12 (29.30%) of the company-respondents perceived that the growth of rice bran in the next 5-10 years will be 5-10%. Seven (17.10%) of the company-respondents perceived that the growth of rice bran in the next 5-10 years will be 11-15%; five (12.20%) company respondents forecasted that it will be 16-20%; three (7.30%) of the company-respondents perceived that it will be greater than 20% and only two (4.90%) forecasted that rice bran will be growing less than 5% in the next 5-10 years. There was no perception that rice brans growth will neither remain the same nor decrease in the next 5-10 years. All of the perceived demand growth of rice bran in the next 5-10 years was all of increasing pattern. There was no forecast that it will remain nor decrease since the early 2010, rice bran has been increasingly recognized globally. This is also because of the increasing health-consciousness and eager for proper lifestyle of Filipinos through time (Hoogenkamp, H.W., 2010).

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5

Table 7.Distribution of the company-respondents preference in marketing arrangement in rice bran utilization and perceived demand growth of rice bran in the next 5-10 years, selected areas in CALABARZON, 2012.

ITEM

Frequency Count

Percentage (%)

Marketing Arrangement in Rice Bran Utilization Longer contract with local rice bran producers Produce own supply of inputs Produce own supply of inputs, process and distribute manufactured goods Total 30 100.00 10 4 33.33 13.33 16 53.33

Perceived Demand Growth of Rice in the Next 5-10 Years Remain the same <5% 5-10% 11-15% 16-20% >20% Decrease Total 0 2 12 7 5 3 0 29 0 6.90 41.38 24.14 17.24 10.34 0 100.00

53

Willingness to Pay for the Different Forms of Rice Bran In a desire to establish a potential market for rice bran, there is a need to determine the willingness to pay of the respondent-companies for the different forms of rice. Specifically, there is a need to determine their minimum and maximum willingness to pay. This will determine if there is really a demand for the different forms of rice bran. The willingness to pay for the different forms of rice bran was obtained through elicitation method or open-ended question. This was done since it yields actual minimum and maximum WTP of the respondents. The WTP values for the different forms of rice bran were obtained by asking the company-respondents to provide the value that they are willing to give up in order to use different forms of rice bran. The survey data show that the average minimum WTP for raw rice bran was 4.29 Php/kg; 9.20 Php/kg for stabilized rice bran; 56.88 Php/L for crude rice bran oil and 286.00 Php/L for refined rice bran oil. On the other hand, the average maximum willingness to pay was 6.00 Php/kg for raw rice bran, implying that the cost of utilizing it should not exceed 6.00 Php. For stabilized rice bran, the cost of utilizing it must not exceed 12.88 Php/kg; while for crude and refined rice bran oil, the cost of utilizing these ingredients should not exceed 83.33 Php/L and 607.40 Php/L, respectively. It can be observed that refined rice bran oil has the highest minimum and maximum WTP, followed by crude rice bran oil, stabilized rice bran and raw rice bran. The values that the company-respondents provided were based on the quality and processing phases that rice bran forms and products were subjected. The higher their WTP reflects the complexity and longer process that the ingredients are subjected to and this also reflects the value of

5 54

the ingredient. The WTP for the different forms of rice bran provides ideal acceptable prices for the different forms of rice bran. Moreover, the company-respondents minimum and maximum WTP deviated with their mean at a range of only 2.21-2.53 for raw rice bran, and 28.65-28.75 for crude rice bran oil. On the other hand, company-respondents minimum and maximum WTP deviated widely with their mean at a range of 3.22-5.49 for stabilized rice bran, and 128.94-438.21 for refined rice bran oil. It was observed that refined rice bran oil was widely deviated from the mean, accounting that the several of the company-respondents have no enough knowledge of the price(s) of refined rice bran oil. However, the deviations of the WTPs were found to be acceptable, having values that did not exceed the mean WTPs.

55 5 Table 8.Measures of central tendency and willingness to pay of the company-respondents towards different forms of rice bran, selected areas in CALABARZON, 2012.

Forms of Rice Bran

WTP1

Mean (WTP-Php/kg or L)

Standard Deviation

Raw (Fresh)

Min Max Min Max Min Max Min Max

4.29 6.00 9.20 12.88 56.88 83.33 286.00 607.14

2.21 2.53 3.22 5.49 28.65 28.75 128.94 438.21

Stabilized

Crude Rice Bran Oil

Refined Rice Bran Oil

1- Willingness to pay in peso (Php) terms

Cross Tabulation Analyses

The relationship between variables was determined through Chi square analysis of independence. However, there were limitations with the procedure; first, there were expected frequencies that were less than and second, greater than 20% of the overall cells have expected frequencies less than 5. In order to resolve the limitations of Chi square analysis of independence, the Fishers exact test of independence was used. Still, the interpretation is the same with Chi square test of independence. Different cross tabulations were made for the hypothesized significant variables and these variables were as follows:

56

1. Plan to venture in rice bran utilization (VENTURE) and Awareness on rice bran as a natural ingredient (AW1) Plan to venture in rice bran utilizations association with awareness on rice bran as a natural ingredientwas determined in order to guarantee the hypothesis that there is an association between the said two variables (VENTURE and AW1). For these variables, Fishers exact test of independence was utilized. It yielded an exact value of 0.026 which was less than 5% level of confidence (=0.05), allowing for the rejection of the null hypothesis. Thus, we can state that the company-respondents plan to venture on rice bran utilization (VENTURE) is associated/ dependent on their awareness on rice bran as a natural ingredient (AW1). Simply, the two variables are associated with each other at 5% and 10% alpha. It can be concluded that the awareness on rice bran as a natural ingredient determines the company-respondents plan to venture in rice bran utilization. It can be observed that still, there were 9 company-respondents who were aware of rice bran as a natural ingredient. However, even if they were aware of it, they have no plan to venture in rice bran utilization most probably due to the following factors: Specialization the company concentrates and focuses only in producing one product that has stable and/ or increasing trend of demand; Capital and credit constraints- companies may experience restrictions regarding the capital and credit that they need in order to venture in rice bran utilization. Even if they want to venture in rice bran utilization, they cannot since they have the said constraints;

57 5 Acceptability of rice bran- some companies may be aware that rice bran is a natural ingredient but they do not consider rice bran acceptable to be utilized in their production; View about profit- some companies have certain view about rice bran that it has no potential to be income generating; and Manufacturers perception that rice bran is not yet an established industry- though there were companies that were aware that rice bran is a natural ingredient, some of these companies were still hesitant to venture in rice bran utilization since they thought that rice bran is not yet a founded industry in the country.

58

Table 9.Cross tabulation analysis of company-respondents plan to venture in rice bran utilization and awareness on rice bran as a natural ingredient, selected areas in CALABARZON, 2012.

Awareness on rice bran as a natural ingredient

Plan to venture in rice bran utilization

Venture Aware 17a (14.70)b 0 (2.30) 13

Not to venture 9 (11.30) 4 (1.70) 17

Total 4

Not aware

26

Total

30

Value

Df

Asymptotic sig. (2-sided)

Exact sig. (2sided)

Pearson Chi square Fishers exact

6.016c

1 -

0. 014 -

0.026 0.026**

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 2 cells (50.00%) have expected frequencies of less than 5. The minimum expected frequency is 1.73. * ** *** significant at 1% alpha; significant at 5% alpha; and significant at 10% alpha

59 5 2. Company-respondents plan to venture in rice bran utilization (VENTURE) and awareness on rice bran as potential income generator (AW2) Generally, the company would venture into a business mainly because of its profit motive. In this study, it was hypothesized that the company-respondents plan to venture in rice bran utilization is dependent on their awareness that rice bran has potential to be income generating. Simply, knowing that rice bran can generate income, they would plan to venture in rice bran utilization. Furthermore, the survey results show that the Fishers exact test yielded an exact p-value of 0.049 which was less than 5% (=0.05), allowing for the rejection of the null hypothesis. Thus, we can state that the company-respondents plan to venture on rice bran utilization (VENTURE) is associated/ dependent on their awareness on rice bran as potential income generator (AW2). Simply, the VENTURE and AW2 are associated with each other at 5% and 10% alpha. It can be concluded that awareness on rice bran as potential income generator determines the companyrespondents plan to venture in rice bran utilization. The result of the survey regarding VENTURE and AW2 supports what was stated in the literature, that profit motive is the primary reason why firms venture in a certain kind of business. It can be observed that still, there were 7 company-respondents who were aware of rice bran as potential income generator. However, even if they were aware of it, they have no plan to venture in rice bran utilization most probably due to the following factors mentioned in the prior cross tabulation (see page 54).

60

Table 10.Cross tabulation analysis of company-respondents plan to venture in rice bran utilization and awareness on rice bran as potential income generator, selected areas in CALABARZON, 2012.

Awareness on rice bran as potential income generator

Plan to venture in rice bran utilization

Venture Aware 15a (12.50)b 2 (4.50) 17

Not to venture 7 (9.50) 6 (3.50) 13

Total 22

Not aware

Total

30

Value

Df

Asymptotic sig. (2-sided)

Exact sig. (2sided)

Pearson Chi square Fishers exact

4.455c

1 -

0. 035 -

0.049 0.049**

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 2 cells (50.00%) have expected frequencies of less than 5. The minimum expected frequency is 3.47. * ** *** significant at 1% alpha; significant at 5% alpha; and significant at 10% alpha

61

3. Ownership status (OS) and Awareness on rice bran as a natural ingredient (AW1) This study hypothesized that the company-respondents ownership status has an association with their awareness on rice bran as a natural ingredient. Specifically, it was hypothesized that corporation is more aware of rice bran since it has facilities and research and development department that could provide them updates and information about innovative products. On the other hand, partnership and sole proprietorship were not that aware since they might lack on facilities and research and development department that could update and provide them information regarding new products. However, the survey results show that Fishers exact test yielded a value 1.667 with an exact p-value of 0.578 which was greater than 5% (=0.05), allowing for the acceptance of the null hypothesis. Therefore, the company-respondents awareness on rice bran as a natural ingredient is not associated with their ownership status. Simply, OS and AW1 are independent of each other. It is sufficient to say that the awareness of the company-respondents on rice bran is not determined by their ownership status.

62 5 Table 11.Cross tabulation analysis of company-respondents ownership status and awareness on rice bran as a natural ingredient, selected areas in CALABARZON, 2012. Ownership status Awareness on rice bran as a natural ingredient

Aware Corporation Partnership Sole proprietorship Total 16a (16.50)b 3 (3.50) 7 (6.1) 26

Not aware 3 (2.50) 1 (0.50) 0 (0.90) 4

Total 19 4 7 30

Value

Df

Asymptotic sig. (2-sided)

Exact sig. (2sided)

Pearson Chi square Fishers exact

1.647c 1.667

2 -

0. 439 -

0.578 0.578

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 4 cells (66.70%) have expected frequencies of less than 5. The minimum expected frequency is 0.53. * ** *** significant at 1% alpha; significant at 5% alpha; and significant at 10% alpha

63

4. Ownership status (OS) and awareness on rice bran as potential income generator (AW2) It was hypothesized priorly that the company-respondents awareness on rice bran as potential income generator has an association with their ownership status. The hypotheses between the two variables, OS and AW2 were the same as above (see page 61). However, the survey results show that the Fishers exact test it yielded a value of 0.796 with an exact p-value of 0.833, allowing for the acceptance of the null hypothesis. Thus, the company-respondents awareness on rice bran as potential income generator is not associated with their ownership status. Simply, OS and AW2 are independent of each other. It is sufficient to say that the awareness of the company-respondents on rice bran is determined by their ownership statuses.

64

Table 12.Cross tabulation analysis of company-respondents ownership status and awareness on rice bran as potential income generator, selected areas in CALABARZON, 2012.

Ownership status

Awareness on rice bran as potential income generator

Aware Corporation 13 a (13.90) b 3 (2.90) 6 (5. 10) 22

Not aware 6 (5. 10) 1 (1. 10) 1 (1.90) 8

Total 19

Partnership

Sole proprietorship

Total

30

Value

Df

Asymptotic sig. (2-sided)

Exact sig. (2-sided)

Pearson Chi square Fishers exact

0.789c 0.796

2 -

0. 674 -

0.833 0.833

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 3 cells (50.00%) have expected frequencies of less than 5. The minimum expected frequency is 1.07.

565

5. Years of operation (YO) and awareness on rice bran as a natural ingredient (AW1) This study hypothesized that the company-respondents number of years of business operation (YO) is associated with awareness on rice bran as a natural ingredient (AW1). Specifically, as the number of years of operation increases, the more that the company-respondent is aware of rice bran. However, the survey results show that the Fishers exact test yielded a value of 5.473 with an exact p-value of 0.205 which was greater than 5% (=0.05), allowing for the acceptance of the null hypothesis. Thus, the company-respondents awareness on rice bran as a natural ingredient is not associated with their years of operation. Simply, the two variables YO and AW1 are independent of each other. Then, it is sufficient to say that the company-respondents awareness on rice bran is not determined by their years of operation.

566

Table 13. Cross tabulation analysis of company-respondents years of operation and awareness on rice bran as a natural ingredient, selected areas in CALABARZON, 2012.

Years of operation

Awareness on rice bran as a natural ingredient

Aware 1-5 years 10 a (11.30) b 10 (8.70) 4 (3.50) 1 (1.70) 1 (0.90) 26

Not aware 3 (1.70) 0 (1. 30) 0 (0.50) 1 (0.30) 0 (0.10) 4

Total 13

6-10 years

10

11-15 years

16-20 years

>20 years

Total

30

Value

Df

Asymptotic sig. (2-sided)

Exact sig. (2sided)

Pearson Chi square Fishers exact

5.703c 5.473

4 -

0.222 -

0.250 0.205

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 8 cells (80.00%) have expected frequencies of less than 5. The minimum expected frequency is 0.13.

67

6. Years of operation (YO) and awareness on rice bran as potential income generator (AW2) This study hypothesized that the company-respondents years of operation has an association with their years of operation. The specific hypotheses between YO and AW2 were the same as mentioned above (see page 65). However, the survey results show that the Fishers exact yielded a value of 2.325 with an exact p-value of 0.770, allowing for the acceptance of the null hypothesis. Therefore, the company-respondents awareness on rice bran as potential income generator is not associated with their years of operation. Simply, YO and AW2 are independent of each other. It is sufficient to say that the company-respondents years of operation do not determine their awareness on rice bran.

5 68

Table 14. Cross tabulation analysis of company-respondents years of operation and awareness on rice bran as potential income generator, selected areas in CALABARZON, 2012.

Years of operation

Awareness on rice bran as potential income generator

Aware 10 a (9.50) b 7 (7.30) 2 (2.90) 2 (1.50) 1 (0.70) 22

Not aware

Total

1-5 years

3 (3.50) 3 (2.70) 2 (1.10) 0 (0.50) 0 (0.30) 8

13

6-10 years

10

11-15 years

16-20 years

>20 years

Total

30

Value Pearson Chi square Fishers exact 2.347a 2.325

Df 4 -

Asymptotic sig. (2-sided) 0.672 -

Exact sig. (2sided) 0.770 0.770

a- Values of observed frequencies b- Values of expected frequencies are inside the parenthesis c- 8 cells (80.00%) have expected frequencies of less than 5. The minimum expected frequency is 0.27.

69

Indeed, given the results above between the different variables, it can be concluded that the only variables to be associated with the company-respondents plan to venture in rice bran utilization (VENTURE) are their awareness on rice bran as a natural ingredient (AW1) and awareness on rice bran as potential income generator (AW2). The results of the survey regarding AW, AW2 and VENTURE, were close to what was expected. It was confirmed that the company-respondents will venture in rice bran utilization because of profit motive. Moreover, the profit-motive in this study is reflected by the company-respondents awareness on rice bran as potential income generator. The results of the survey regarding OS, YO, and awareness on rice bran, were far from what was expected. Wherein, it is sufficient to conclude basing from the non-parametrical statistical test(s), that ownership status (OS) and years of operation (YO) are not associated or with awareness on rice bran as a natural ingredient and as potential income generator.

70

PROBLEMS ENCOUNTERED

The local natural ingredient manufacturers encountered a host of problems, to include among are the following: Lack of information regarding prices, forms of rice bran, and extractable products from rice bran Based on the survey, majority of the company-respondents mentioned the lack of accessibility of price information on different products that can be extracted from rice bran, especially rice bran oil.7As a matter of fact, few government institutions are allowing for the access regarding the information on rice bran and its prices. These institutions include Department of Agriculture and other public sectors.

Lack of available technology on stabilization and extraction of oil from rice bran Three of the company-respondents admitted that there was lack of technology to utilize rice bran.7Only Thailand, a major rice and rice bran oilexporting country, has efficient technology in rice bran utilization. The government of Thailand subsidizes Thailands rice and rice bran oil production. On the other hand, the Philippines, which only started to discover the wonder of rice bran oil, has no means to avail the efficient technology in rice bran utilization. Costly investment on the technology for rice bran utilization

Statistics were based on the survey and the problems were raised and opened up by the company-respondents. Not all of the company-respondents stated and mentioned problems regarding rice bran utilization.

571

Three of the company-respondents stated that investment on technology for rice bran utilization is costly.8 Since the technology has been introduced just recently in the country, the costs involved may be relatively higher compared to Thailand and India. Moreover, these countries invested on a costly technology in rice bran utilization but through time, it pays them to have the technology, especially in specializing in production of rice bran oil.

Uncoordinated arrangement between rice bran sources (farmers/ rice millers) and local natural ingredient manufacturers, who are the potential users of rice bran as a natural ingredient. Based on the survey and the summit on natural ingredients, six of the company-respondents opened up their foreseen and experienced problem in the natural ingredient industry that could also be found in rice bran utilization and this is the unreliability of the producers.8 The usual problem in the Philippines is the lack of trust of the local natural ingredient manufacturers to the local producers, who are the farmers and rice millers. Manufacturers stated that the producers become unreliable in terms of supplying rice bran. Some of these producers are only after profit and not after quality.

Statistics were based on the survey and the problems were raised and opened up by the company-respondents. Not all of the company-respondents stated and mentioned problems regarding rice bran utilization.

5 72

Consumers perception on rice bran which is only for feeds makes the local natural ingredient manufacturers and also the consumers hesitant on using/ utilizing the product for human consumption/ human use. Half (50%) of the company-respondents raised their thoughts regarding rice bran. 9Specifically, they said that consumers are bombarded with their perception that rice bran are only for animal consumption. However, as science and technology evolves, things innovate and things differ. It is hard for several to accept that rice bran can also be consumed by humans.

Lack of public or government-funded and private funded studies on the economic uses and value of rice bran. Different pieces of information are needed to determine the market potential of rice bran as a natural ingredient. However, there are only few local studiesthat were done to understand better the economic importance of rice bran. In turn, many remain undecided whether to venture or not.

Statistics were based on the survey and the problems were raised and opened up by the company-respondents. Not all of the company-respondents stated and mentioned problems regarding rice bran utilization.

73

SUMMARY AND CONCLUSION

This study was conducted in order to determine the market potential of rice bran as an ingredient to natural products of selected manufacturers in selected areas in CALABARZON. Specifically, it aimed to: (1) identify the major physical and business attributes of rice bran that the local natural ingredient manufacturers consider; (2) identify the sourcing practices that the selected local natural ingredient manufacturers are willing to undertake; (3) determine the marketing arrangements that the selected local natural ingredient manufacturers are willing to engage in; (4) to estimate the willingness to pay (WTP) of selected local natural ingredient manufacturers towards the different forms of rice bran; and (5) recommend measures that can harness the market potential of rice bran as a natural ingredient. To meet the objectives, a total of 30 local natural ingredient company-respondents were interviewed. Results of the interview revealed the following: (1) while six for every 10 respondents belonged to corporations, two were sole proprietors and the rest operated a business partnership with others; (2) their years of operation ranged from 1 to 23 years, with an approximately 8 years of operation; (3) companies who have 1-5 years of business operation comprised 43.30% of them, companies with 6-10 years of operation comprised 33.30% of them, companies with 11-15 years, 16-20 years and greater than 20 years of operation comprised 13.30%, 6.70% and 3.30% of them, respectively; (4) companies have varying nature of business and some were specializing on one product while others have diversified mode of production wherein, they were into several nature of businesses. The company-respondents have provided multiple responses regarding

5 74

their nature of business. Furthermore, a huge percentage of production in the herbal industry can be accounted for the nutraceutical industry, a blooming industry in the Philippines; (5) among the company-respondents, 18 of them were into nutraceuticals, 12 were into cosmetics, 10 of them were into essential and massage oil production, 8 of them were into pharmaceuticals, and 4 of them were into spirulina and organic rice production; while only 1 of them was into food additive/ fortificants/ enhancers production; and (6) not all of the surveyed companies were members of Chamber of Herbal Industries of the Philippines, Inc. (CHIPI) since 73.33% of them were CHIPImembers and the remaining 26.67% were non-CHIPI members. Moreover, CHIPI members have several advantages than non-CHIPI members and these were the trainings, seminars, conventions, and even connections provided by the organization in exchange of an annual fee and cooperation. Companies who have plan of venturing into rice bran utilization comprised 56.67% of them.Some companies who have plan to venture in rice bran utilization have diversified mode of production, specifically, out 17 companies, 64.71% comprised them. Companies who were aware of rice bran as a natural ingredient comprised of 86.70%; while companies who were not aware of it comprised 13.30% of them. Moreover, awareness on rice bran as potential income generator was also determined. Companies who were aware of rice bran as potential income generator comprised 73.30% of them. The marketability and acceptability of rice bran as a natural ingredient was assessed by considering the different physical and business. For physical attributes, nutritive value was the most considered attribute with an average rank of 1.17. It was

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seconded by color, scent and purity with an average rank of 1.80; while storage ability was third with average rank of 2.07. For business attributes, the most considered attribute was price with an average rank of 1.28. It was followed by assurance of supply with an average rank of 1.43, and accessibility with an average rank of 1.90. The least of the business attribute was government regulations and policies with an average rank of 2.64. The company-respondents provided the value that they are willing to give pay in order to use different forms of rice bran. It was observed that refined rice bran oil was highly valued, having the highest minimum and maximum WTP of Php286.00/kg and Php607.40/kg, respectively. It was followed by crude rice bran oil with minimum and maximum WTP of Php56.88/kg and Php83.33/kg, respectively; stabilized rice bran with minimum and maximum WTP of Php9.20/kg and Php12.88/kg, respectively; and raw rice bran with minimum and maximum WTP of Php4.29/kg and Php6.00/kg, respectively. The minimum and maximum WTP of the company-respondents deviated with their mean at a range of only2.21-2.53 for raw rice bran, and 28.65-28.75 for crude rice bran oil; while for stabilized rice bran and refined rice bran oil, minimum and maximum WTP deviated widely at a range of 3.22-5.49 and 128.94-438.21, respectively. It can be observed that refined rice bran oil was widely deviated from the mean, accounting that the several of the company-respondents have no enough knowledge of the price(s) of refined rice bran oil. The company-respondents WTP values suggest that refined rice bran oil has the highest market potential, yielding the highest minimum and maximum WTP values of Php286.00/kg and Php607.40/kg, respectively. Companies have varying choices of the forms of rice bran to use. Based on the survey, 66.67% of the companies found that stabilized rice bran (SRB)was acceptable to

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be used; while63.33% of the companies found that refined rice bran oil was acceptable to be used. Fifty percent of them found that crude rice bran oil was acceptable to be used and the other 46.67% found that raw rice bran was acceptable to be used. Companies have different preferences regarding sourcing practices in rice bran utilization. Companies who preferred to source locally from producers comprised 76.67% of the; while companies who preferred to import rice bran comprised 16.67% of them. Companies who preferred to practice a combination of the two prior practices comprised only 7.00% of them. Still, majority (76.67%) of them wanted to help local producers of rice bran in the country. Companies who resorted to import rice bran expected to have uninsured supply and/ or unreliable sources in the country. Different marketing arrangements in rice bran utilization were provided to the local natural ingredient manufacturers. Every company-respondent has different choice of marketing

arrangement. Companies who preferred to have longer contract with local rice bran producers comprised 53.33% of them; while companies who preferred to produce own supply of inputs comprised 33.33% of them. Moreover, companies who preferred to produce own supply of inputs, process and distribute goods comprised 13.33% of them. For the companies that preferred for longer contract with local producers of rice bran, they aim to help local producers regarding income generation and at the same time to cut down costs of production. There is a need to determine the demand of rice bran in the future, specifically in the next 5-10 years. This is also needed to assess the market potential of rice bran as a natural ingredient in the Philippines. All of the respondents believed that the demand for rice bran will keep on growing in the future. Almost five percent of them anticipated that

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rice bran will grow less than 5% in the next 5-10 years; while 29.30% of them anticipated that rice bran will grow 5-10%. Others were more aggressive with their forecast, seeing that17.10% of them see that rice bran will grow 11-15% in the next 5-10 years, 12.20% of them see that rice bran will grow 16-20% in the next 5-10 years, and 7.30% of them see that rice bran will grow higher than 20% in the next 5-10 years. The optimistic estimates of the foreseen demand growth of rice bran encourage further and continuous production and utilization of rice bran in the natural ingredient sector of the society.

Cross tabulation analysis, Pearson chi square test of independence and Fishers exact test of independence were conducted to determine any association between ownership status (OS) and awareness levels (AW1 and AW2) and years of operation (YO) and awareness levels (AW1 and AW2). The analysis was also made to determine if there were difference on the choices among the different ownership status and years of operation. Based on the results, the company-respondents plan to venture on rice bran utilization is dependent on their awareness on rice bran as a natural ingredient and as potential income generator. The Fishers exact test revealed that the company-respondents ownership status and years of operation have nothing to do with their awareness on rice bran as a natural ingredient and as potential income generator.

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With the furnished data on the market potential of rice bran, it can be concluded that rice bran has the market potential since many of the respondents have plan to venture in rice bran utilization in the near future. Also, a rough forecast was made, seeing that many manufacturers and individuals will be interested In rice bran. Nevertheless, the market potential of rice bran is still in risk if the following constraints and problems regarding technology and information will not be resolved. Moreover, with respect to the attributes of rice bran, the producers and manufacturers should focus with the main considerations that could make their way to successful utilization of rice bran.

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RECOMMENDATIONS

Public information sites and Awareness program regarding rice bran Since the government wants to emphasize the economic use of rice bran, it would be better to establish a public website solely for the information regarding rice bran. This kind of information scheme will benefit the producers of rice bran, the local natural ingredient manufacturers and other entities that are interested with it. Moreover, this kind of strategic plan could promote the physical and business attributes of rice bran. Furthermore, it is suggested that membership in the website will be implemented in order to determine and track the following entities who have interest in rice bran utilization. In order to have unlimited access of the website, the interested groups/individual must sign in the information sheet which requires for their primary profile. Furthermore the content of the website could dwell with information such as different forms or grades of rice bran, current prices of rice bran, supply of rice bran, products extracted from rice bran, products made of rice bran, nutritive value of rice bran, technology in utilizing rice bran, etc. Also, this kind of information scheme could aid the government with its aim to promote natural ingredients and biotechnology. This kind of strategy may entail costs but this could bind the government and the private sector towards one goal, which is to promote natural ingredients, including rice bran in the country. After the strategic information scheme, the government in cooperation with the private sector, specifically, natural ingredient sector, could conduct a series of seminar regarding awareness on rice bran and rice bran utilization. The seminars could obtain the insights and perceptions of the participants regarding rice bran and its utilization.

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Enhancing facilities for rice bran In preparation for utilizing rice bran, its attributes namely, color, scent and purity, nutritive value and storage ability must be enhanced. This could only be possible if the producers/ suppliers of rice bran have appropriate and enhanced storage and transportation facilities. Having an enhanced storage and transportation facilities could make way for a better quality of rice bran. This recommendation is most important to secure the nutritive value of rice bran through proper storage. Proper storage of rice bran lessens the occurrence of rancidity. With this, the major quality of rice bran is being prolonged. In order to have a premium quality of rice bran, the producers must invest on enhanced storage and transportation facilities. However, if producers cannot provide the facilities solely, the government must aid them to do so.

Government initiative and private sectors funding and commercialization In order to have the means for the technology for rice bran utilization such as stabilizing facilities, extracting facilities and dryers, the government is encouraged to make an initiative for the research and development (RND) of rice bran and rice bran utilization. The government is suggested to fund studies and researches regarding rice bran in order to have a glimpse of what is in store for them. Also, RND is barely needed in order for the private sector, specifically the natural ingredient industry, to decide on whether to venture on rice bran utilization. With enough RND initiated by the government, it will be the private sectors turn to do the action towards the findings regarding the potential of rice bran and rice bran utilization. As long as there is an

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opportunity for them to gain profit from rice bran utilization, the private sector could partly fund the technology for it. Furthermore, if the RND and technology becomes successful as it initially take off, the private sector could commercialize the technology for utilizing rice bran and other interested groups will be encouraged to venture in this kind of business.

Tax incentives In order to have the means for the technology for utilizing rice bran such as stabilizing facilities, extracting facilities and dryers, the government could offer tax incentives for the private entities that will be investing and pioneering on the said technology. Specifically, a tax holiday could be done in order to encourage the natural ingredient manufacturers in investing for the technology for rice bran utilization. Technology is a must weapon for successful production. This kind of government tax incentive(s) could alleviate the costs or burden for the interested group of local natural ingredient manufacturers.

Contract arrangement One of the problems in utilizing rice bran is the unorganized arrangement between local producers of rice bran and local natural ingredient manufacturers. In order to resolve this problem, local producers of rice bran and local natural ingredient manufacturers could embark into a contract arrangement in supplying rice bran. With this, the quality standards can be considered by the producers since in contract arrangement, the manufacturer sets specified quality standards in a certain amount of

82 5 money that the two parties would agree on. A failure of meeting the standards set by the manufacturers would be a loss incurred by the producers. Furthermore, this kind of arrangement between producers and manufacturers could establish consistency with the quality of rice bran. However, for this kind of marketing arrangement to happen, there must be a stable rice bran supply and the producers must have the capacity to meet the manufacturers standards.

Further studies on the economic aspect of rice bran utilization Studies regarding the technical aspect, specifically the nutritional information of rice bran are found to be numerous. However, there are only few studies which pertain to the economic side of rice bran utilization. With the governments goal of assessing the real market potential of rice bran in the country, further studies is proposed to be conducted in cooperation with the potential companies who desire to utilize rice bran. Thorough surveys and research is indeed needed in assessing the fate of rice bran utilization in the country. This could also benefit the government in terms of prioritizing programs in agriculture. If studies would conclude that rice bran for human consumption in the Philippines has no market potential, then the government will have a glimpse of the reality. It will not risk allocating budget on rice bran utilization.

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BIBLIOGRAPHY

AGRI-FOOD TRADE., 2011. The Philippines Markets for Functional Foods, Nutraceuticals and Organic Foods: An Introduction for Canadian Producers and Exporters. Retrieved 16 September 2011 from http://www.atssea.agr.gc.ca/ase/5843-eng.htm Ahmed, S.U. &Gotoh, K., 2006.The Choice of Elicitation Method in CVM and their Impact on Willingness to Pay in Environmental Assessment.Retrieved 25 February 2012 from http://www.lb.nagasakiu.ac.jp/reports/kougaku/pdf/37_68_05.pdf. Applewhite, T. H., 1989. Vegetable Protein Utilization in Human food and Animal Feed Stuff.Proceeding of the World Congress.American Oil Chemists Society. Singapore. Avila, H.F., Navarro, A.G., Alcasid,R.N., Bonifacio, O.S., Joco, L.M., & Ranjhan, S.K., Undated. Urea Molasses Mineral Block Production. Department of Agriculture. FAO. Manila, Philippines. Arroyo, M.A. et al, 2010. Capitalizing on Global Demand for Philippine Natural Ingredients. Hybridigm Consulting Inc BUREAU OF AGRICULTURAL STATISTICS, 2011.Rice Production. Retrieved 29 July 2011 fromhttp://countrystat.bas.gov.ph/index.asp?cont=selection&pageid =pxweb/dialog/varval.asp&ma=A10PNVCP&path=pxweb/database/main/MEGA /&lang=1 Chamber of Herbal Industries of the Philippines Incorporated., 2012. Retrieved 10 May 2012 at http://chipi.org.ph/ DelaCerna, A.K.R. Undated. Consumers Willingness to Pay for Organic Rice in General Santos City. School of Management University of the Philippines Mindanao. Retrieved 15 October 2011 from http://www.scribdcom/doc/ 32361610/Undergrad-Thesis-Consumers-Willingness-to-Pay-for-Organic-Ricein-General-Santos-City Department of Agriculture-Biotechnology.Biotech for Life.Increasing Farmers IncomesThe Biotech way. 2011. Retrieved 29 April 2012 from http://www.biotechforlife.com.ph/ z_arch_increasing.htm)

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Elmont, R.J., 2010. A Study of the Possibilities to Add Value to Improve the Utilization of RiceBran in Suriname-(ACP Project: 09 ACPSUR 007). Suriname Business Forum. Elmont, R. J., 2010. A Study on the Possibilities to Add Value to and Improve the Utilizationof Rice Bran in Suriname. Suriname Business Forum. Retrieved 23 August 2011 from http://www.surinamebusinessforum.org/smartcms/ downloads/pdf/A_STUDYPOSIBILTIES_TO_IMPROVE_THE_UTILIZATION _OF_RICE_BRAN_IN_SURINAME-final%20draft.pdf FOOD AND AGRICULTURE ORGANIZATION (FAO), 2009. Retrieved 08 August 2011fromhttp://www.ft.com/ cms/s/0/68f8d2b8-77d3-11df-82c300144feabdc0.html FOOD AND AGRICULTURE ORGANIZATION, 1997. Feed Resources. Retrieved 30 July 2011 from http://www.fao.org/DOCREP/003/W6928E/w6928e05.htm. George, S. 2010. Willingness to Pay for Locally Grown and Organically Produced Fruits and Vegetables in Dominica.Graduate School of Clemson University. Retrieved 15 October 2011 from http://etd.lib.clemson.edu/documents/1285780089/George_ clemson_0050M_ 10751.pdf Helal, A.M., 2009. Rice Industrial City: Rice Residue Management of Rice Bran, Straws and Hulls. Faculty of Pharmacy, Cairo University. Retrieved 23 August 2011 fromhttp://neareast.fao.org/App_Uploads/NE2010010672/Files/EXPERTCONSU LTATION-AGR.pdf Hoogenkamp, H.W., 2010. Stabilized Rice Bran.An Innovative Ingredient for Meat Emulsions and Beyond. Retrieved 30 June 2011 from Accessed at http://henkhoogenkamp. com/Articles/Stabi lized%20Rice %20Bran19.pdf. Hybridigm Consulting, Inc. Department of Agriculture Biotechnology Program, 2010.Capitalizing on the Global Demand for Philippine Natural Ingredients.Department of Agriculture. INTERNATIONAL RICE RESEARCH INSTITUTE, 2009. Rice Knowledge Bank. Retrieved 29 July 2011 from http://www.knowledgebank.irri.org/rkb/index. php/rice-milling/byproducts-and-their utilization. International Quick Search (IQS) Directory, 2011. Industry Information: Pharmaceutical Packaging Equipments. Retrieved 29 July 2011

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fromhttp://www.iqsdirectory.com/packaging packaging-equipment/

-equipment

/pharmaceutical-

Johnson, I. and Williamson, G., 2003. Phytochemicals Functional Foods.WoodheadPublishing Ltd. North America, Boca Raton, Florida, USA. McDonald, J.H.2009.Fishers Exact Test of Independence.Handbook for Biological Statistics. Retrieved 27 March 2012 at http://udel.edu/~mcdonald/statfishers.html Philippine Council for Health Research and Development (PCHRD)., 2011. Local Nutraceutical Market Growing Stronger.Retrieved 16 September 2011 from http://www.pchrd.dost. gov.ph/index.php/news-archive/245 Sirikul A, Moongngarm A and Khaengkhan P., 2009. Comparison of proximate composition, bioactive compounds and antioxidant activity of rice bran and defatted rice bran from organic rice and conventional rice. Asian Journal of Food and Agro-Industry, 2(04): 731-743. ISSN 1906-3040. Toriyama, K. et al, 2005. Rice is Life: Scientific Perspectives for the 21st Century. International Rice Research Institute. Metro Manila, Philippines. WORLD MISSION MAGAZINE. 2004. Retrieved 10 Aug 2011 from http://www.world mission. ph/11December04/Philippines.htm Yoshizaki, S., 2002. Report on the Local Survey on Rice Distribution and Management in the Philippines, ODA Project for Improving Rice Distribution in Asia. Japan Grain Inspection Association. Zeithaml, V.A., 1988. Consumer perceptions of price, quality, and value: A means-end model and synthesis of evidence. Retrieved 10 June 2011from https://hec.unil.ch/docs/files/ 123/997/zeithaml88-1.pdf

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APPENDIX A. SURVEY QUESTIONNAIRE

Interview Schedule No. _____ Date: ____________________

UNIVERSITY OF THE PHILIPPINES LOS BANOS College of Economics and Management College, Laguna

MARKET POTENTIAL OF RICE BRAN AS AN INGREDIENT TO NATURAL PRODUCTS OF SELECTED MANUFACTURERS IN SELECTED AREAS IN CALABARZON, 2012

Disclaimer: All the information that will be provided by the company-respondents will be treated with great confidentiality and for academic purposes only. Note: Kindly furnish thequestionnaire completely. Please provide specific answers to the blanks provided and check on the choices given for each question. I. Plan to Venture

1. Knowing that rice bran is a natural ingredient and has the potential to be incomegenerating, are you planning to venture into rice bran utilization? ( ) YES ( ) NO 2. Are you planning to venture into rice bran utilization in the next 5-10 years? ( ) YES ( ) NO

II.

Awareness on Rice Bran ( ) YES ( ) NO ( ) NO

1. Are you aware that rice bran is a natural ingredient?

2. Are you aware that rice bran has potential to be income ( ) YES generating?

III.

Physical and Business Attributes of Rice Bran

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1. What are the important attributes that you consider for your rice bran? Based from your preference, kindly rate the given attributes below with 1 as most important attribute and 5 as the least important one. Attributes Physical Color, Scent and Purity Nutritive Value Storage Ability Business Accessibility Price Assured Supply Government support and policies Rating

III.

Acceptability of the Different Forms of Rice Bran

1. Which of the following forms of rice bran is acceptable to be used in your future
natural ingredient production? *Kindly check on the following choices. You can select more than one answer. () () 2. Raw (Fresh Rice Bran) Stabilized Rice Bran (SRB) () () Crude Rice Bran Oil Refined Rice Bran Oil

For the rice bran forms you did not choose in question no. 1 of III, what are the possible reasons why you find them not acceptable to be used in your future natural ingredient production? ________________________________________________________________ ________________________________________________________________ ________________________________________________________________

IV.

Willingness to Pay on the Different Forms of Rice Bran

1. Without having prior information and guide on the market prices of the different
forms of rice bran, kindly indicate the minimum and maximum amount that you would be able and willing to pay (WTP) for a kilogram of the different forms of rice bran. Forms of Rice Bran Raw (Fresh) Rice Bran Stabilized Rice Bran (SRB) Crude Rice Bran Oil Refined Rice Bran Oil Minimum WTP (Php/kg or L) Maximum WTP (Php/kg or L)

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V.

Sourcing Practices and Marketing Arrangements in Rice Bran Utilization

1. Which of the following sourcing practices do you prefer to practice in rice bran
utilization? ( ) Import ( ) Buy from local producers ( ) Both Why do you think so? ______________________________________________

2. Which of the following marketing arrangements do you prefer to engage in rice

bran utilization? ( ) Long contract with local rice bran producers () Production of own supply of inputs () Production of own supply of inputs, processing and distribution of manufactured good

VI.

Perceived Demand Growth of Rice Bran

1. Based on your experience/ knowledge of the pharmaceuticals, nutraceuticals, cosmetics and food industries, how do you assess the growth of demand for the rice bran in the next 5 years? ( ) will remain the same ( ) will increase by 6-10% ( ) will increase by 16-20% ( ) will decrease ( ) will increase by 5% ( ) will increase by 11-15% ( ) will increase by 20%

2. What could be the limiting factor(s) for the production and growth of the demand of rice bran? (Please Check) Forms of Rice Bran Raw Stabilized Rice Rice bran oil Others, please Limiting Factor/s (fresh) rice bran bran (refined) specify oil (crude) Production Quality and purity concerns Unstable ingredient supply Unreliable producers of raw materials Lack of affordable technology solutions Others, please specify

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VII. 1.

Problems Encountered in Rice Bran

What are the current problems that you encountered in the utilization of rice bran? _____________________________________________________________ _____________________________________________________________ _____________________________________________________________

VIII.

Company Profile

Name of the Company: ______________________________________ Contact Number:___________________________________________ Email address: _____________________________________________ Years of operation _____________ Nature of the Company (Please Check) ( ) Cosmetics (soap, lotion & other personal care products) ( ) Pharmaceuticals (medicines and health benefits products derived from chemicals) ( ) Nutraceuticals (dietary supplements with medical benefits derived from food such as citrus, turmeric) ( ) Food additive/ Fortificants (ingredients for sausages, hotdogs, patties, etc.) ( ) Cooking oils (vegetable oil, rice bran cooking oil, etc) ( ) Essential and Massage Oils (citronella oil, pili oil, etc) ( ) Others, please specify: ___________________________________ 7. Places of Operation ( ) Within the province/city/town ( ) Abroad ( ) Outside the province/city/town 8. Ownership Status_______________________________ 9. Estimated No. of workers ________________________ 10. Is your company a member of CHIPI? ( ) Yes ( ) No If yes, please include the date of membership (optional) ______________

1. 2. 3. 4. 5.

THANK YOU FOR YOUR COOPERATION & GOD BLESS!

Abigaile Lynne Emradura Aguila