EXECUTIVE SUMMARY

VISION
A dynamic corporation that is a topnotch producer of wood and agricultural products
competitive to international demand and quality standard, with gained reputation of
strong commitment on the value of ecological sustainability.

MISSION
To harness maximum work efficiency, standard of production quality and effective
resource management through its highly motivated people to ensure its stakeholders
with just return of investments, and to generate employment and livelihood
opportunities in the country side.

COMPANY SUMMARY

A. Ownership
RNF Summit Industries is owned by Dr. Ramon N. Floresta DVM who
is also the proprietor and General Manager of the company.
B. Company History
RNF Summit Industries is a Wood Processing and Agribusiness
Plantation Development located at the Municipality of Makilala, Province of
Cotabato. It was established in 1993 with a starting capital of Php 50,000.00
for a mini sawmill business.
Through the years, Mr. Floresta decided to diversify the company. In
2004, he invested 100 hectares for rubber production. In 2008, he invested 50
hectares for banana production and in 2009, he invested 250 hectares for
palm oil production.
This diversification has led the company and Dr. Ramon Floresta to
garner numerous awards and achievements. In 2003, Dr. Floresta was given
an Outstanding Alumni Award by the University of Mindanao. In 2003-2004,
he was awarded Most Outstanding Agribusiness Entrepreneur by the Land
Bank of the Philippines Region XII and ARMM. In 2005, he was again
awarded Most Oustanding Agribusiness Entrepreneur by the Land Bank of the
Philippines but on a National Level. In 2006, the Bureau of Internal Revenue
RDO 180 awarded Dr. Floresta as a top income tax payer. In 2009, he was a
National Finalist for the Presidential award for Oustanding MSMEs in the
Department of Trade and Industry. Furthermore, Dr. Floresta became a
national finalist in the Land Bank of the Philippines Gawad Entrepreneur SME
Kayamanan ng Pamayanan Award in 2010 and was also featured as one of
the Ten Outstanding Entrepreneur of the Philippines by Entrepreneur
Magazine.

Currently, they are working on the preparation of the research study for
their Palm Oil Project. By 2012, they will be processing the permits and
licenses of the palm oil processing plant and by 2013, they plant to start
implementing their Palm Oil Project.
C. Location and Facilities
RNF Summit Industries is located at Bulacanon, Makilala. The facilities
that will be discussed in this study are those that are involved in the
production of Palm Oil products.
For the Palm Oil Mill, the facilities are the Fresh Fruit Bunch (FFB)
Reception and Storage, the Sterilization Station, Threshing Station, Pressing
Station, Clarification Station, Depericarper Station and Kernel Recovery
Station.
They also have have a Palm Kernel Oil Mill, Refinery, Fractionation,
Hydrogenation, and Hydrogen Plant facilities which are involved in the
production of the palm oil products.

PRODUCTS AND SERVICES

A. Product and Service Description

Palm oil is the most traded oil in the world. In order to add more value,
extensive milling, crushing and refining facilities are required to make it fit for
human consumption and serve the growing demand for oils. It is commercially
traded in various forms such as crude palm oil, refined breach deodorized
(RBD) palm oil, RBD palm olein, palm stearin and palm kernel oil which will be
defined in detail below.

Crude Palm oil is derived from milling the mesocrap which produces
49% oil.

Crude Palm Kernel Oil and the Palm Kernel Cake is derived from
crushing the kernel which produces 50 % of palm kernel oil.

RBD Palm Oil is derived from refining the crude palm oil (CPO). These
RBD Palm Oils are suitable material for margarine, shortening,
vanaspati, frying fats and ice cream.

RBD Palm Olein are divided into two types which are the Standard
Grade and the Super Olein.

Palm Stearin is the more solid fraction obtained by fractionation of palm

after crystallization at controlled temperature. This is the co-product of
palm olein. This is a very useful source of fully natural hard fat
component for products such as shortenings, pastry margarine,
vanaspati, etc. which are good substitutes to tallow for animal feeds
and olechemicals and as partial replacement of tallow in soap.

Palm Kernel Oil is obtained from the kernel of the oil palm fruit. It
resembles coconut oil in composition and characteristics, suitable for
both edible and inedible applications.

Palm Kernel Olein is the liquid component obtained from fractionation

suitable for table margarines.

Palm Kernel Stearin is the more solid fraction of palm kernel oil
obtained from fractionation suitable for confectionery fats.

Other products of RNF Summit Industries are wood pallets, wood

mouldings, panel doors and housing components, classroom desks and
chairs and also agribusiness such as Cavendish banana and also natural
rubber
While RNF Summit Industries are still in the process of research for
the Palm Oil Project, the other products such as wood are being sold to
major markets such as Unifrutti wherein they supply wooden shipping
pallets, CITI Hardware where they are the exclusive distributor of housing
components. Other products such as Cavendish banana are being sold to
DOLE Stanfilco and Lapanday, palm oil fresh fruit bunch are sold to
KENRAM and AGUMIL, while rubber products are being sold to
STADENCO & FARMA.
B. Process Description
This document describes and provides basic information on the
different production processes in the Palm Oil Processing Plant.
PALM OIL MILL
A. FRUIT RECEPTION
In order to obtain goodquality palm oil, it is essential that the damage
to the fruit is kept minimal and therefore, the handling of the fresh fruit
bunches (FFB) from the field to the sterilizers must be carried out with utmost
care. At the mill, the FFB is generally discharged from the lorries, or
trailers,onto a loading ramp for the filling of the sterilizer cages, which have a
nominal capacity of 2.5 tons.
A flow diagram of the palm oil milling process is shown in the figure below.

B. STERILIZATION
Sterilization is carried out by placing the sterilizer cages in horizontal
vessels at a steam pressure of3 barg (143 C) and the time under steam is
approximately 60 to 90 mins. The objectives of sterilization are:
1. Prevention of further rises in the free fatty acid (FFA) of the oil due to
enzymatic reaction
2. Facilitation of mechanical stripping
3. Preparation of the pericarp for subsequent processing
4. Preconditioning of the nuts to minimize kernel breakage
C. THRESHING/STRIPPING

The objective of threshing/stripping is the separation of the sterilized

fruit from the bunch stalks. There are two basic actions involved in separating
the fruits: (1) a small vigorous shaking, and (2) beating. Although many
machines have been evolved over the years, only the drum type is ingeneral
use. The drum stripper consists of a long horizontal drum made up of small
channel section or T bars spaced far enough apart to permit the escape of the
fruit yet close enough to prevent the passage of the stalks or spikelets. Drum
diameters vary from 1.8 to 2 m and lengths from 3 to 5 m and they usually
rotate at about 2025 rpm. The cage is fitted with lifting bars, and as the cage
rotates the bunches are lifted up and then drop back under the action of
gravity, and by this action the fruits are shaken out. As this action is repeated
many times over, with the bunches turning round and round as they pass
along the drum, good stripping is obtained.
D. DIGESTION
The object of digestion is to reheat the sterilized fruits, loosen the
pericarp from the nuts, and to break the oil cells before passing to the oil
extraction unit. The best digestion conditions are obtained by mixing the fruits
at a temperature between 95 to 100C for approximately 20 mins. The
digester is generally a vertically arranged cylindrical vessel fitted with a central
shaft carrying a number of radial arms. Heating may be from a steam jacket or
direct steam injection.
E. OIL EXTRACTION
Oil extraction is generally carried out using continuous screw presses
comprising a perforated horizontal cage of a figure 8 cross section in which
two screws or worms run. A cone at the discharge end of the cage controls
the pressure to ensure a minimum of residue oil in the press cake with an
acceptable amount of broken nuts.

There are two products from the press:

1. a mixture of oil, water, and solids, and
2. a press cake containing fibers and nuts
The presses used to extract the palm oil are lowpressure screw
presses. A low pressure screw press is a mechanical device that uses a
horizontal screw with increasing body diameter to impart pressure on the palm
fruit as it proceeds along the length of the screw. The barrel surrounding the
screw(s) is perforated along its length, allowing the increasing internal
pressure to first expel air and then expel the oil through the barrel. The
expelled oil is collected in a trough under the screw(s), and the deoiled
material discharges at the end of the screw. Lowpressure screw presses can
reduce residual oil in palm fruit fibers to 5% while keeping palmkernel
breakage rates below 15%.
F. CLARIFICATION
The crude oil from the press has an average composition of 66% oil,
24% water, and 10% nonoily solids (NOS). Because of the high proportion of
solids, it has to be diluted with water to obtain satisfactory settling. After
dilution, the crude oil is screened to remove fibrous materials and then
pumped to a continuous settling tank where it separates into two parts, i.e., oil
and sludge. The top oil is skimmed off and passed to a centrifugal purifier
followed by a vacuum dryer and finally a cooler before being pumped to the
storage tanks. The sludge has an oil content of approximately 10%, and this is
reclaimed and fed back to the main settling tank. The oil fed to the storage
tanks has a moisture content between 0.1 and 0.12% and impurities less than
0.02%.
G. OIL STORAGE

It is recommended that storage tanks are internally coated with epoxy

materials to prevent iron pickup. To prevent damage by overheating of the oil,
the temperature of the oil during storage and transit is closely controlled
between 32 and 40C. The unloading or loading temperature is between 50
and 55C, and for heating to this temperature the maximum rate is 5C per 24
hrs.
H. NUT AND FIBER SEPARATION
When the oil is extracted from the digested fruit, a cake of nuts and
fiber is produced. This is fed, via a breaking conveyor, to a vertical column
having an upward airflow at a velocity of 6 m/s. At this velocity all the fiber is
moved upward or held in suspension, and the nuts drop to the bottom of the
column. The fiber is led to a cyclone for use as a boiler fuel while the nuts
pass to a rotating polishing drum installed at the bottom of the column. This
drum can also be used to remove any large pieces of stalks, stones, or metal
that has gotten into the system.
I.

NUT CRACKING
When a nut has been properly conditioned, its shell will crack cleanly in
two or more pieces, and the kernel will be released. Nut cracking machines
are almost invariably of the centrifugal type in which the nuts are given
velocity by being fed through a rotor and are caused to crack by being flung
against a stator ring. However, the latest development has been the
introduction of the ripple mill, which consists of a balanced rotor of the squirrel
cage design and two pieces of semicircular ripple plates with ripple
configurations. The performance of the ripple mill is determined by the speed
and clearance of the rotor, and the rotor provides the velocity to force the nuts
between the stationary ripple plate and the rotor. The main advantage claimed
for the ripple mill is that nut conditioning may not be necessary.

J. KERNEL AND SHELL SEPARATION

This is normally achieved in two operations. First, a winnowing system
is used to remove the small pieces of shell and dirt followed by hydrocyclones
or claybaths. The action of a hydrocyclone is somewhat similar to that of an
air cyclone. By imparting a circular motion to the fluid by means of the
tangential entry, heavy particles are thrown by centrifugal force to the wall of
the cylinder. After tracing a helical path these particles find their way out
through the bottom of the cyclone while the lighter particles after taking part in
an initial downward circular movement gradually move toward the center of
the cylinder and start moving upward leaving the cyclone via the overflow
tube. Although it is mainly the difference in densities that enables the
hydrocyclones to act as a shell and kernel separator, the size and shape of
the particles have some effect, i.e., flow resistance. The specific gravity of
undried kernels is about 1.07 and that of shell about 1.17. Therefore in a clay
and water mixture of specific gravity 1.12 (about 24 Twaddell), the kernels will
float and the shell will sink; this is the principle on which the claybath
separator works. Many models were developed from manually operated to
completely automatic versions. As suitable clays were not always readily
available, salt solutions and even dilute molasses were tried for the
suspension. The claybath is quite an efficient separator as long as the density
of the suspension is maintained at the correct value.
K. KERNEL DRYING
The moisture content of fresh kernels is about 20%. If bagged or stored
in this condition fresh kernels would soon become moldy. In addition there
would be a rapid increase in the FFA of palm kernel oil (the oil content of dried
kernels can be over 50%). Tests have shown that if the moisture content is
reduced to about 7%, kernels can be safely stored and transported without
deterioration due to mold growth.

10

L. BAGGING AND/OR STORAGE OF KERNELS

After drying, the kernels are usually bagged, approximately 12 bags to
the ton, and stored in sheds awaiting transportation to the kernel crushing
plants. However, with the increase in the costs of bags and handling, there is
a tendency to go over to bulk storage and transportation.

PALM KERNEL OIL MILL

The mechanical extraction process is used when processing difficult materials
(copra and palm kernel) in hot, tropical climates. The apparatus used to
mechanically extract the oil fraction from the meal fraction is a full press or Expeller1
press (Anderson International trademark). A full press is a mechanical device that
uses a horizontal screw with increasing body diameter to impart pressure on the
oleaginous material as it proceeds along the length of the screw. The barrel
surrounding the screw is slotted along its length, allowing the increasing internal
pressure to first expel air and then expel the oil through the barrel. The expelled oil is
collected in a trough under the screw, and the deoiled oleaginous material cake
discharges at the end of the screw. The full press has one function, to deoil the
oleaginous material as low as possible. The key to fullpress performance is to apply
maximum pressure to a thin cross section of the oleaginous material to squeeze out
as much of the oil as possible.
As a result, full presses create tremendous heat. It is common for full presses
to use watercooled shafts and watercooled or oilcooled barrels to dissipate the
heat to maintain adequate internal friction and pressure. Most full presses are
capable of processing 10 to 100 tons of oleaginous materials per day. The fraction of
oil removed in the full press is laden with fine meal particles, typically in the range of
5 15% by weight. These meal particles are typically separated from the oil using the
traditional method of pumping the oil into a tank with 30 to 60 minutes of residence
time to allow the heavier meal particles

11

to settle and be continuously dredged from the base of the tank. After gravity
separation, the oil is then pumped a pressure leaf filter for final meal particle
separation. Meal particles separated from the clean oil stream are saturated with oil
and recycled back into the process ahead of the full press.

REFINERY
A. STORAGE AND PREHEATING
Crude palm oil (CPO) or crude palm kernel oil (CPKO) stored in the
refinery day tank, at an ambient temperature of 30 50 C, is pumped to the
refinery at a controlled rate. Crude oil passes first through an economizer that
recovers the heat from the hot refined, bleached, deodorized (RBD) oil leaving
the deodorizer, to increase the temperature of the incoming crude oil to the
required degumming temperature of 90120 C. During startup, the crude oil
heater operates alternatively to increase the crude oil temperature using steam.
B. DEGUMMING
The preheated crude oil is then dosed with 0.060.1% food grade
phosphoric acid (0.85% concentration) and passes through an inline static mixer
before discharging into the degumming tank. The degumming tank is designed to
allow for thorough mixing and the required retention time for the degumming
reaction to proceed. Crude oil contains finely dispersed and dissolved
undesirable components (phosphatides or gums) that serve as emulsifiers
making the succeeding refining and deodorizing operations difficult. The
degumming process is carried out to remove these components by thoroughly
mixing crude oil with phosphoric acid that converts the gums into a hydratable
form and coagulates the gums into sludge that can be easily removed by
filtration. Degumming is carried out at an operating temperature of 90120 C
under thorough mixing to effectively allow for the degumming process to proceed.

12

C. BLEACHING
The bleaching operation is carried out mainly to reduce the color agents
(carotene and chlorophyll) inherently contained in oil by the use of an adsorbing
media such as bleaching earth. Bleaching earth, also called Fullers Earth, is
made from naturally occurring minerals, which have bleaching capacity made
active after a specific treatment. Crude oil from degumming is sent to the slurry
tank where fresh bleaching earth is added. The bleaching earth is proportioned
into the slurry tank automatically by an automatic proportioning system.
Thoroughly mixed oil and earth slurry from the tank is then heated to the required
bleaching temperature of 100130 C by a steam heater before discharging to the
bleacher. The bleacher is a vertical vessel designed with multiple agitated
compartments and is operated under vacuum and a high temperature to allow
effective bleaching reaction to occur and to remove considerable amounts of
moisture and air. In this operation, majority of the color agents are adsorbed and
largely improves the color of the oil. Slurry from the bleacher is then pumped to
the bleaching filters to obtain bleached oil free of solids and gums. The vertical
leaf pressure filter is a vertical vessel with stacked filter leaves inside. Bleached
oil passes through the filter leaves and collects in an internal header and exits the
filter while the bleaching earth accumulates on the outside of the filter leaves
forming a gradually thickening layer of cake. The cake formed after the filtration
operation is removed from the leaves by mechanical agitation and steam, and
discharges into the bottom of the filter and is collected. Bleached oil from the
filters is then sent to an intermediate storage tank.

D. DRYING/DEAERATION

13

Bleached oil from the intermediate storage tank is pumped first through
a polishing filter to ensure that no solids are carried over to the succeeding
operations. The presence of bleaching earth fouls the deodorizer, reduces the
oxidative stability of the oil, and serves as a catalyst for dimerization and
polymerization.

Bleached

oil

at 80120

C,

is

sprayed

inside

the

dryer/deaerator which operates under vacuum to reduce the amount of

moisture, air, and other volatile components.
E. REFINING/DEODORIZING
The final steps in the refining process are designed to produce an oil
with bland flavor and odor and good shelf life. Deodorization/refining is a
vacuum steam distillation process for the purpose of removing trace
constituents that give rise to undesirable flavors, colors, and odors in oil. The
refining of oil is simply a removal of the relatively volatile components from oil
through direct contact with steam. This is feasible because of the
considerable difference in volatility between the undesirable components and
oil. Deodorization/refining is carried out under vacuum to facilitate the removal
of volatile substances, avoid undue hydrolysis of fat, and to make the most
efficient use of steam. This operation is carried out at high temperatures (230
260 C) that allow for heat bleaching to occur through the thermal destruction
of carotenoid pigments. The use of direct steam ensures the removal of
residue free fatty acids, aldehydes and ketones which are responsible for
unacceptable odor and flavors.
Bleached oil from the dryer is first heated to 230260 C by the thermal
oil heat exchanger. The heated oil is then sent to a preflash vessel, which
operates under vacuum, allowing for the volatile components to vaporize and
separate from the liquid oil. Both the vapor and liquid phases are then sent to
the feed stage of the column. Oil cascades downward through the packed bed
while the flashed volatiles rise up to the reflux and stripping sections of the
column. Steam is introduced at the bottom of the column and directly heats up

14

and contacts the downcoming oil. The volatile components remaining in the oil
convert to vapor and rise up with the steam. Palm fatty acid distillates (PFAD)
or Palm Kernel Fatty Acid Distillates (PKFAD) are condensed and recovered
in the stripping section of the column, and sent to storage. RBD Palm Oil or
RBD Palm Kernel Oil leave the bottom of the column, cooled through the
economizer and/or coolers, and finally sent to storage.
FRACTIONATION
The triglycerides of palm oil consist of a combination of fatty acids with
different chain length as well as degrees of unsaturation. This results in the
presence of substantial quantity of both low and highmelting triglycerides.
Crystallization of the oil under controlled cooling followed by separation will
yield a lowmelting liquid phase (olein) and a highmelting solid phase
(stearin). Factors affecting the crystallization process are oil composition,
polymorphism, and cooling condition.
Oil Composition
Palm oil contains about 48% of diglycerides, which can form a
eutectic mixture with the triglycerides resulting in lower solid content. This can
slow down the rate of crystallization. The monoglycerides, present at less than
1% in palm oil, have no significant effect on the crystallization.
Polymorphism
Palm oil triglycerides are polymorphic and thus can crystallize in
several forms. The polymorphic forms are designated as a, b0, and b in the
order of increasing stability and melting points. Upon cooling, palm oil initially
crystallizes in the a form, which gradually transforms in the order of ab0b
form. To have good separation, it is desirable to have b0form crystals

15

because b0 crystals agglomerate into large, firm clusters resulting in good

subsequent filtration.
Cooling Rate
Cooling rate affects the nucleation and crystal growth of the oil. As the
oil is cooled, it becomes supersaturated. When the temperature is sufficiently
low (about 32 36C), saturated glycerides will crystallize, and these crystals
act as nuclei for further crystallization of the lower melting glycerides, resulting
in formation of larger clusters of crystals. Slow cooling rate and proper stirring
speed is essential for the formation of the desired crystal form.
Dry Fractionation
This is usually carried out semicontinuously using neutralized,
neutralized and bleached, or fully refined palm oil. It does not require the use
of any chemicals or additives. The oil is kept homogenized at about 70C to
destroy any presence of crystal in order to induce crystallization in a
controlled manner during subsequent cooling. Crystal formation and growth
occur as the oil is agitated and cooled using chilled water circulation. The
cooling program is controlled by setting the temperature differential between
the oil and chilled water, and also the time of cooling. When the temperature
reaches the desired temperature, which is dependent on the quality of olein
required (but usually about 20C), the cooling is stopped and the thick partially
crystallized mass is ready for filtration. The filtration systems now used in the
industry are membrane filters. The membrane filter, which actually is a filter
press equipped with a membrane plate, is used because it gives a high yield
of olein (about 70 75%) and a harder stearin compared to that of about 65%
obtainable from Florentine or rotary drum filters.

16

Double Fractionation
Double fractionation is carried out for the production of palm olein with
higher iodine value of above 60 or for the production of palm midfraction
(PMF), which contains a high proportion of oleodipalmitin used for production
of palmbased cocoa butter equivalent. Usually the first olein obtained is
recycled back to the plant for further cooling, crystallization, and filtration. The
second stearin obtained is termed palmmidfraction. Special and skillful control
of the crystallization of both stages is critical in achieving the desired quality of
the products.

HYDROGENATION
Hydrogenation is a means of converting liquid oils to semisolid plastic
fats suitable for margarine, shortening, heavyduty frying fats, and other
specialty products. Liquid oils containing an undesirable component can be
selectively hydrogenated to modify the component, followed by a physical
separation of the undesirable component. Hydrogenation consists of direct
addition of hydrogen at the double bonds in the fatty acid chains of the
triacylglycerol, or oils. For hydrogenation to take place, gaseous hydrogen,
liquid oil, and nickel catalyst are placed in a specially designed reaction vessel
under controlled temperature and pressure. By definition, a catalyst is a
substance or a compound that alters the speed of a chemical reaction without
becoming a part of the reaction. The catalyst is not changed in composition or
chemical structure. Nickel catalyst is the most common catalyst currently used
in the hydrogenation of fats and oils. Commercially available nickel catalyst
contains 2225% active catalyst supported by a totally saturated or
completely hydrogenated fat. The oil, catalyst, and gaseous hydrogen mixture
is agitated to promote the introduction of hydrogen into the oil and to renew
the oil continuously at the catalyst surface. The rate or speed at which the
reaction takes place and the type of product produced to give a particular

17

solid fat index (SFI) curve, iodine value, and melting point depends on the
following process variables
1. Starting temperature of the oil
2. Activity of the catalyst
3. Concentration of the catalyst
4. Hydrogen uptake rate
5. Reaction temperature
6. Oil quality
7. Hydrogen purity
8. Degree of agitation
When the reaction is complete and the end point is confirmed, the batch is
cooled and filtered to remove all the catalyst and other impurities. The oil may also
be post bleached with filteraid and bleaching clay. The number of double bonds in a
fatty ester radical significantly affects both physic al and chemical properties of the
triacylglycerol. The highly unsaturated (three double bonds) linolenic acid (18:3) is
unstable to oxidation, and undesirable odors and flavors can develop. The rate of
oxidation 18:3 is 15fold greater than that of oleic acid (18:1). If the linolenic ester is
hydrogenated to linoleic (18:2), the relative oxidation rate is tenfold greater than that
of 18:1. The oxidation rate of 18:1 is tenfold greater than that of stearic acid (18:0),
and the oxidation potential is completely eliminated if hydrogenation proceeds to
18:0 (totally saturated, or all double bonds removed). The relative rates of 18:3 and
18:2 hydrogenation are, respectively, 40fold and 20fold greater than that of 18:1.
Proper hydrogen gas distribution and agitator design is important. Stratification of
reacted and unreacted areas in the converter, as a result of improper agitation or
hydrogen distribution, will add to unpredictability in basestocks from batch to batch. A
semicontinuous hydrogenation plant main features are:

1. Preheating and measuring tank

18

2. Reactor or converter
3. Drop tank
4. Heatrecovery system
5. Steam generation via reactor cooling
6. Singlestep filtration
By arranging all the vessels for gravity drop, very rapid turnover of batches in
the reactor results. In this manner, the reactor is used for reaction only; all heating,
cooling, and filtration is accomplished external to the reactor. For example, if the
average iodine value (IV) drop for all basestocks produced can be achieved in one
hour, then a single system can deliver 24 batches per day (a 24hour period). This
system also demonstrates the latest technologies in heat recovery by heat exchange
of the hot oil in the drop tank with the incoming cold oil and by steam generation for
reactor cooling. The hydrogenation department becomes a net exporter of steam,
the ultimate form of energy conservation. The complete process is controlled by
programmable logic controllers (PLCs), giving precise control that leads to extreme
consistency from batch to batch. It is important that the raw material to the
Hydrogenation Plant is dry, clean, and free of impurities. The hydrogenation reactor
is prepared first by pulling vacuum on the reactor to remove air in the system. The
vacuum is provided by a steam jet ejector system. The oil or fat raw material is
pumped to the plant in a measured amount to fill up the reactor. The oil inside the
reactor is then heated up through the internal pipe coils. Steam is used to heat up
the heat exchanger to increase the temperature of the oil to the required processing
temperature. Steam flow is stopped and all the valves are closed when the
processing temperature has been achieved. The vacuum is stopped as well. A small
amount of oil is directed to the catalyst tank during the filling up of the reactor. Nickel
catalyst powder is then mixed to the oil inside the catalyst tank which dissolves the
catalyst powder. This catalyst slurry is then sucked into the reactor

Analysis is done on the raw material during filling up of the reactor to

determine the initial iodine value (IV). This data is then used to determine the

19

amount of IV drop required in the reaction and subsequently the amount of hydrogen
required. The hydrogen volume required is then set on the gas batch controller.
Hydrogen gassing then starts. The IV will drop rapidly during the initial gassing
phase but will slow down as the reaction proceeds to completion. Pressure likewise
builds up as the reaction goes to completion. Hydrogenation is an exothermic
reaction. Thus the process will have to be cooled down to the process temperature.
The pipe coils serves to both heat up and cool down the oil or fatty acid. Tempered
water is then pumped to the pipe coils to cool down the reaction. The temperature of
the tempered water is controlled by another heat exchanger which is cooled down by
means of cooling water. Samples are taken during regular intervals during the
reaction to determine the rate of reaction. This is also used to determine the end
point of the product, either to stop the process or continue gassing. When the
desired IV is achieved, the gassing of hydrogen is stopped. The cooling down of the
oil is continued until the filtration temperature is achieved. Excess hydrogen gas is
vented out from the reactor. The hydrogenated oil is then pumped out from the
reactor into the flashing vessel into the receiver tank. The hydrogenated oil or fatty
acid is then pumped to the catalyst filter to remove out the spent catalyst which is
trapped inside the filter cake. The filter is specifically designed for catalyst filtration.
The hydrogenated product then passes through a polishing filter before going out to
the storage tank.

HYDROGEN PLANT

20

The system shall include three parts: hydrogen generator, hydrogen purifier,
electrical and control unit. The purity of hydrogen should reach to 99.99% and the
concentration of impurities should also meet certain requirements, so, a hydrogen
purifier is needed. The working pressure is 16 bar. It is controlled by PLC and touch
screen. In order to keep the pressure of the hydrogen purifier stable and to remove
the dissociative water from hydrogen before it flows into the purifier, one hydrogen
buffer is needed to be installed between hydrogen generator and hydrogen purifier.
The hydrogen purifier includes two dryers operating alternately: while one is working,
the other is in regeneration mode. Once the standby dryer finishes regeneration, it
will switch automatically turn to working mode. The sieve in the dryer works to
absorb water from the gas. The principle of regeneration is to increase the
temperature in dryer to 300 bringing the impurities out of the system The total
system includes a hydrogen generator, hydrogen purifier, electrical and control unit,
and storage tank. The hydrogen generator includes all of the equipment needed,
including an electrolyser, auxiliary equipment frame, water tank, electrolyte tank,
feedwater pump, and lye making pump. In this unit, water is decomposed into
hydrogen and oxygen through electrolysis. The chemical equation is shown below:
2H2O 2H2 + O2
The hydrogen, oxygen, and electrolytes are then sent to the hydrogen and
oxygen separators installed in the auxiliary equipment frame, where hydrogen and
oxygen are separated from the electrolytes under the action of gravity. The hydrogen
and oxygen gases then pass through the coolers and cooled to a temperature of
30~40C. The cooled gases then pass through the demisters to remove condensed
water before the hydrogen and oxygen are supplied out. The pressure of the system
is raised and maintained at the set pressure by means of a regulation valve. The
electrolyte from the bottom of the hydrogen and oxygen separators is pumped back
to the electrolyser after filtering and cooling. The purity of hydrogen from the
electrolysis of water is relatively easier to attain as the composition of the impurities
is mostly oxygen and water. There is a hydrogen buffer between the hydrogen
generator and the hydrogen purification equipment used to remove dissociative

21

water from the hydrogen and to keep the pressure of the hydrogen purification unit
stable. Hydrogen flows into the purifier though this buffer. The action of purification
equipment is to purify the hydrogen by the removal of oxygen through a chemical
reaction under the action of a catalyst. Water is removed by way of adsorption.

MARKET ANALYSIS SUMMARY

22

A. Market Segmentation
The Philippine palm oil industry serves three types of consumers. The
industrial market makes up the majority with 40%, while the institutional/food
service number around 25% and the household consumers take 35% of the
whole.
PALM/COCONUT

Industrial Market
(40%)

Instant Noodles
Manufacturers
2,600 MT /month

Snack Foods
Manufacturers
3,900 MT/month

Institutional/Food
Service (25%)

Hotels/Restauran
ts

Consumer (35%)

Traditional/Wet
Market (80%)

Modern TradeKey Accounts

Supermarkets
(20%)

FastFood Chains

Bakery/Dairy
Fats Products
Manufacturers
10,000
MT/month

Ice Cream/Dairy
Manufacturers
2,000 MT/moth

Confectionary
Fats 1000
MT/month

Alone, it can only produce around 70,000 MT per year which, essentially, does
not meet the expected demands locally which explains the countrys active

23

importation of oils. Back in September 2010, the Philippines was recorded to have
bought about 10 various vegetable oils from 18 countries, with Malaysia, Singapore
and Indonesia accounting for 63%. This year, the country is still likely to import
beyond 100 MT.

The company seeks to address the growing demand for palm oil in the
domestic market and hopefully lessen the need for importation.

The Industrial and Institutional Segment

24

Theres no question that palm oil has established itself commercially well as a
commodity with a lineup of industrial and institutional buyers. In the Philippines,
industrial and institutional companies make up a big percentage of its monthly
importation and consumption.

25

BUYERS in tons/month consumption

INDUSTRIAL
Company
Monde Nissin Corp.
Nestle Philippines
SMC
WL Foods
Stateline Food
JBC Food
Liwayway Food Corp.
Regent Food Corp.
Leslie Food Corp.
INSTITUTIONAL
Jollibee Corp.
Golden Arches
KFC
Greenwich/Chowking

Consumption (MT)
3000
5000
2000
2000
1000
600
1500
500
400
1000
1000
1000
300

26

Industrial companies make use of palm oil in a number of ways and the demand
varies accordingly.

Biscuits, Crackers
Breads, industrial, unpackaged
Pastries, croissants, buns
Cakes, industrial, unpackaged
Total

Industry Volume
(MT)
58,250
114,435
40,083
27,378
240,146

Oils
&
Fats
Usage
%
(MT)
11%
6,408
5%
5,722
22%
8,818
26%
7,118
12%
28,066

Toffees, Caramel, Butterscotch

Chewing, Bubble Gums
Cocoa Butter Substitute
Total

61,991
10,274
31,874
104,139

10%
2%
35%
17%

6,199
205
11,156
17,560

Ice Cream
Coffee Whitener, Cream
Total

73,015
7,200
80,215

20%
20%
20%

14,603
1,440
16,043

Extruded Snacks
Cream Fillings
Total

23,468
15,955
39,423

20%
20%
20%

4,694
3,191
7,885

TOTAL INDUSTRY SIZE

463,923

15%

69,554

Products

To a certain extent, palm oil is used as a frying medium for snacks and instant
noodles and a raw material for margarine, shortenings, blended oils, ice cream and
confectionary products, to name a few. Institutional/Food service corporations,
meanwhile, use palm oil solely for cooking and frying.
The Consumer Segment

27

The consumer segment is usually the end buyer of palm oil and palm oil
based products. In its natural form, palm oil is commonly used for cooking and it is
retailed in supermarkets, small stores and traditional/wet markets. About 70% of the
consumer segments prefer to buy from wet markets and sari-sari stores because of
convenience, purchase flexibility and inexpensiveness.

As shown in the chart below, 59 to 63% of the consumer market has shown a
preference for buying oil products from sari-sari stores for a period of five years,
while 12% to 15% favor purchasing them from supermarkets and 10% to 11% go to
market stalls. All in all, there is growth to be considered in the three distribution
methods emphasized.

28

Total Cooking Oil: Market Share by Channel National Philippines

Now, among those retailed the consumer segments seem to have an affinity for
unbranded oil products than the branded counterparts.

Locally, there has been an observable increase in consumption of unbranded oil

products from 2008 to 2010 under the consumer segment.

MARKET
SHARE
YTD Sep 2008 YTD Sep 2010 (Total Philippines)

29

BY

BRAND

% Changes vs.
YA: +10%

% Changes vs.
YA: +6%

86

80
85

77
76

80

This, along with a study by the University of Asia and the Pacific stating that palm
oils domestic demand will continue to increase 5% until 2020, leads us to believe
that there is a lucrative business waiting after the introduction of a new budgetfriendly, good quality, well-distributed palm oil product to the consumer market
population.

B. Target Market Strategy

Two Marketing Strategies are to be implemented for the 3 channels of the
Industry.
I.

Positioning Strategy
This Strategy is being done by using STP (Segmentation,
Targeting and Positioning) which entails identifying the different needs
and groups in the consumer channel, targeting the needs and group
that it can satisfy and support the required demand, and position

30

products so that the target market recognizes the companys distinctive

offering and image.
II.

Service Strategy
This strategy is done by using the four core elements RSRF
(Reliability, Surprise, Recovery and Fairness) for the Institutional and
Industrial Channels. Reliability in terms of maintaining accuracy and
dependability on promised quality, quantity, and timeliness of delivery.
Surprise, which is done by finding ways to provide extra effort to satisfy
customers. Recovery, which involves regaining customers confidence
through a concerted effort to solve a problem in case of failures in
commitment. And Fairness in business transactions that require a level
of playing field for the company and the customer through efficient
manufacturing facility and competitive pricing (tangibles), prompt
attention to customer needs (responsiveness), competency on product
and service offered (assurance), and extended care and individualized
attention.

III.

Market Trends
As mentioned earlier, the Philippine palm oil industry has three
significant consumer segments the industrial (40%), consumer (35%)
and institutional/food service sector (25%). According to statistics,
domestic consumption of palm oil has been experiencing increases in
the last ten years, especially in the industrial sector. Based on the data
provided by the United States Department of Agriculture, the
Philippines has increased its use of palm oil by 110.96% from 2000 to
2011. It has come a long way from the late 1970s when palm oil first
rose to popularity. As of 2010, the Philippines have recorded palm oil
consumption of 582,139 MT. In terms of household influence, the palm
oil has improved in popularity since its food use growth in 2003-2005.

31

Back then, consumption was only at 100,000 to 110 MT. As of 2007,

local consumption has been 200,000 MT and above; with only 60,000
MT sourced from local farms. With this, palm oil importation has been
set for majority of the demand (beyond 100 MT), making palm oil
market penetration a timely and lucrative venture.

Theres no denying that the palm oil market is extensive, considering

its usefulness. And it would be to the companys advantage if it were able to
tap all market segments available. But for the time being, it wishes to
32

penetrate the household consumers segment with TBD palm olein, since
quality requirements are less rigorous and the competition is less active.

IV.

Market Needs
Presently, there are only a few palm oil manufacturers in the
Philippines that are able to meet the demand of the country. This is the
reason why importation is inevitable. And with additional education on
the pros of using palm oil, the demand is sure to rise within the coming
years. This calls for additional industry players. The company seeks to
gain a significant market share by providing:

V.

Affordable and quality palm oil

Timely and practical service

Consumer segment targeted marketing interventions

Main Competitors
The domestic supply of vegetable oils is not enough to cater the
demand of the countrys growing population. Over the years,
Philippines have been a major importer of palm oil in order to meet the
needs of the domestic market. According to the National Statistics
Office, in 2005, figures showed that Philippines imported a total of
222,766 MT vegetable oils which is 80.7 percent higher than the total
volume imported in the previous year. In 2010, the country imported
9.68 billion pesos ($221 million) worth of palm oil which is equivalent to
205,000 tonnes. Indonesia and Malaysia are the main suppliers of
33

palm oil in the country. In 2010, import from Indonesia was 525 MT and
import from Malaysia totaled 135 MT.

CIIF Oil Mills Group

The Coconut Industry Investment Fund Oil Mills Group is the top
player of the Philippines coconut industry. It is the biggest and most
integrated conglomerate in the industry which owns five companies
traditionally engaged in the business of coconut oil milling and refining
- Legaspi Oil Company, Inc., San Pablo Manufacturing Corporation
(SPMC) , Cagayan de Oro Oil Co., Inc. , Southern Luzon Coconut Oil
Mill, Inc. and Granexport Manufacturing Corporation.
The Minola Refining Corporation (MRC), is a joint-venture
between CIIF and Mitsubishi Corp. It started its operation in 2000 and
is located at Cocochem Agro-Industrial Park. The multi-seed physical
refining plant is fully automated with sixteen 30-ton stainless steel
tanks and two 500-ton multi-seed steel tanks. In 2010, (SPMC), a
market leader in edible oil domestic industry, has completed acquisition
of the 40 percent stake of Mitsubishi Corp. of Japan of its unit Minola
Refinery Corp. (MRC). It has a dominant market position of 25 percent
in 2009 and had a total sales of 95,000 MT. Their local products include
RBD coconut oil, winterized corn oil, premium vinegar, table margarine,
RBD partially hydrogenated coconut oil, emuflex DP biscuit improver,
bakery margarine, cake oil, vegetable shortening, and butter flavored
fat.

34

In 2008, PT Smart Tbk., a firm which has a 26-percent share in

the vegetable oil market in Indonesia, signed a memorandum of
agreement with MRC for the distribution of palm olein-based cooking
oil marketed under the brand Mitra.

The Mitra cooking oil is 100-

percent palm oil and is cholesterol-free.

Local Scene

Legaspi Oil Co., Inc.

Legaspi Oil Co., Inc., a subsidiary of CIIF which is located in Sasa, Davao
City, manufactures, trades, distribute and wholesale of cooking oil, fertilizers,
sugar, grain, white spirit, base oil and biodiesel oil. It has a number of main
global customers which include USA, UK, Germany, Middle East, Africa, some
Southeast Asian countries and India. Moreover, it also serves as a regional
sales and marketing operations arm in Southern Mindanao for MRC known
brands - Minola Premium Coconut Oil, Minola Palm Olein, Minola Table
Margarine & Mitra Palm Oil.

Local Wholesalers
There are only two main wholesaler of cooking oil in Davao City, which are
strategically located in the downtown area. Monteverde Trading is a
wholesaler of Minola Premium Coconut Oil, which has an average monthly
wholesale price of P 68.00 per kilo. Bangoy Trading in Davao City, which is
located not a kilometer away from Monteverde Trading offers the same
product at a lesser wholesale price of P62.00 per kilo. This price is offered at
a minimum purchase of 10 kilos. Bangoy Trading sells the product at P64.00
per kilo if not bought in large bulk. Furthermore, it also sells Mitra Palm Oil
which has similar pricing schemes with the preceding product. Buyers provide
their

own

containers

when

35

buying

the

products.

Local Retailers
Public markets have a number of retail stores that sell repacked cooking
oils. Both trading firms are nearby the Agdao Public Market which is a major
customer of cooking oil. Retailers in this market sell Minola Coconut Oil at an
average price of P 96 per kilo. Another large group of customers is located in
Bankerohan Public Market. The average retail price of coconut oil is P66.00
per kilo. Retailers also have small packaging for half kilo (P33.00), 375ml
(P25.00) and 175ml (P10.00).

36

STRATEGY AND IMPLEMENTATION

A. Value Proposition
A B2C (Business-to-Customer) strategy will be used to introduce
branded product to the modern trade segment of the consumer channel, or
enters a new geographic market such as the traditional/wet trade segment
of the consumer market.
The Pricing Formula:

Supply Chain Cost (SCC) = Raw Materials Cost + Packaging

Material Cost + Production Cost + Overhead Cost + Logistics

Selling Cost = Supply Chain Cost + VAT + Gross Margin (based

on % Gross Sales Cost of Sales of SCC)

The B2B (Business-to-Business) strategy will be used when

offering product or services to other businesses. B2B penetration pricing
will be used in selling products such as CPO to local refineries or Palm
based cooking oilds to institutional or industrial channels at competitive
prices to gain immediate access to a customer base.
The Pricing Formula

Total Cost = Cost of Material + Cost of Manufacturing +

Overhead (Operational Cost)

Selling Price = Total Cost + Desired Profit (% on Sales)

37

B. Marketing Strategy
The product will target distributors and retailers. Product launching
will be held in wet supermarkets and in barangays, a caravan will set
up with the product logo with promo personnel with lively music. The
purpose is to fully inform the public of the new product, its nutritional
values and not to mention the pricing of the product. During the event
launching day, different fun games will be conducted and winners will
be given merchandising materials bearing the company and the
product logo.
As part of the marketing strategy during the launching event day,
a team of sales agent will be scouting prospective retailers and
distributors: The first established distributors and retailers would be
given free 20 litre containers to store the product, each distributor
would be given a container, equivalent to their monthly committed
volume, and the same would be followed for the retailers.
Sales agents will conduct extensive surveys for restaurant
chains, factories and manufacturing firms which has cooking & frying
are one of its main procedures to the products they are selling.

38

C. MARKETING MIX
Product
Functionality
Palm oil is a common cooking ingredient in the tropical belt of Africa,
Southeast Asia and parts of Brazil. Its increasing use in the commercial food
industry in other parts of the world is buoyed by its lower cost and the high
oxidative stability (saturation) of the refined product when used for frying.
Nutritional Facts

In comparison with the worlds popular oils, it can be seen from the
nutrition facts table above, that palm oil is a good source of calories, palm oil
helps fill the gap of the ever increasing demand of calories, with the current
food production problem of the world, palm oil will certainly help in addressing
the need of an individuals daily calorie intake. Palm oil (olein) is a Trans fat
free, provides the same fat that is required for pastries, cookies, crackers and
other items that require long shelf stability and a particular mouth feel or

39

texture.

The oil is odourless and tasteless, perfect for consumers and

manufacturers alike looking for healthy oil for cooking and baking needs it is
rich in antioxidants. It has the ability to reverse blockage of the carotid artery
and platelet aggregation thereby reducing the risk of stroke, arteriosclerosis
and other heart disease problems. It helps prevents certain types of cancer.
Palm fruit oil increases 'good' HDL, compared to other saturated oils, such as
coconut oil.
Appearance
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the
fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm
Elaeis guineensis; palm kernel oil is derived from the kernel (seed) of the oil palm
and coconut oil is derived from the kernel of the coconut (Cocos nucifera). Palm oil is
naturally reddish in color because it contains a high amount of beta-carotene.
Palm oil, palm kernel oil and coconut oil are three of the few highly saturated
vegetable fats. Palm oil is semi-solid at room temperatures. Palm oil contains several
saturated and unsaturated fats in the forms of glyceryl laurate (0.1%, saturated),
myristate (1%, saturated), palmitate (44%, saturated), stearate (5%, saturated),
oleate (39%, monounsaturated), linoleate (10%, polyunsaturated), and linolenate
(0.3%, polyunsaturated). Palm kernel oil and coconut oil are more highly saturated
than palm oil. Like all vegetable oils, palm oil does not contain cholesterol (found in
unrefined animal fats), although saturated fat intake increases both LDL[6] and HDL
cholesterol.
The listed parameters below are the factors that affect the oils, texture, taste,
odour and colour.

40

Packaging
The Product will be packed in 20 litre plastic containers, transparent so that
the oil can be seen inside, sealed with a twist opening at the top with a melted plastic
sealant.
Brand
The Brand is named RNF because the target market of the product is the
Wholesalers and Retailers, so brand catchiness is not of importance, and RNF is the
name of the Parent Firm of the company which is RNF Summit Industries, thus
marketing to institutional buyers will not be difficult.
Warranty
The warranty of the product is dependent on the products shelf life.
Shelf life 24 months from the date of manufacture provided. The product is stored in
original un-opened packing, in a cool dry and odour free area with ambient
temperature not above 30C and below 60% relative humidity.
Service Support
Free delivery purchase of goods with a minimum purchase of 700 liters.

Discounts

41

For every 20,000 litres purchased directly from the plant, P1.00 per kilo will be
given.
Financing
Check/Cash on Delivery

Channel Members
Distributors and Retailers
Distributors would be used in marketing the product in key areas which are
located around 300 aerial kilometres radius; the said key areas are regions, Cities,
and key municipalities. The key areas are then auctioned to businessmen that are
willing to distribute our products. The areas that would not be handled by distributors,
are now be given to retailers, which are at the market level already, all of the
parameters and conditions would apply to the retailers, these parameters are price,
delivery, payment and promotion.
Channel Motivation
The channel motivators for the channel members are that the product is of
Guaranteed Quality sold at a lower price, supply is stable and sufficient.
Market Coverage
All market classes are assumed to buy the product; these are classes A, B, C
and D
Locations
Within the 300 aerial kilometres radius from the plant is the marketing area.
These are the REGIONS 9, 10, 11, 12 and ARMM

Logistics

42

Allowable delivery area is 300 aerial kilometre radius from the plant.
Message
Filipino-Made at the highest calibre of quality, at an economical price.

FINANCIAL PLAN

43

I.

General Assumptions

II.

Capital Cost Estimate

III.

Balance Sheet

IV.

Cash Flow

V.

Profit and Loss

VI.

Financial Ratios

The following Financial Data can be seen at the tables attached

44