A Feasibility Study of Establishing a 1000 sqm. Oregano Farm and Tea-Processing Facility in Putho-Tuntungin, Los Baños, Laguna

Date

4-2011

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Jeanette Angeline B. Madamba

Committee Member

Agnes T. Banzon, Loida E. Mojica, Reynaldo L. Tan

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Abstract

There has been a worldwide trend towards health and wellness. In line with this is the shift from synthetic medicine to herbal or traditional medicine. In the Philippines, there has been an increase in demand for tea. However, the tea plant (Camellia sinensis), is not being grown in the country. The government viewed this as an opportunity and so it tapped research agencies to look for potential substitutes to the tea plant. The Quezon Agricultural Experiment Station (QAES) in Tiaong, Quezon came up with oregano tea, processed from the plant Coleus aromaticus Benth. The market responded positively to the newly developed product. As a consequence, a number of investors started thinking of putting up an enterprise that produces oregano tea. However, not too many information is known about the farming and processing of oregano or its actual viability; thus this study.

This study aimed to present the oregano farm and tea-processing facility and Los Banos as its planned area of operation, determine the market, production, organizational and financial viability of the intended business, identify potential risks and problems in venturing in the said business, and recommend specific actions based on the findings of the study.

The researcher’s key informant was Dr. Estela Tano of QAES. She was the proponent of the research on oregano. She also serves as the director of Green Rescue Organic, a producer of oregano tea. Other data sources were interviews, consumer surveys, books, and the internet.

The proposed project and corresponding components have been introduced – Dr. Ruben Villareal (potential investor), the general public and local government of Los Baños, CA-FSC UPLB, the Quezon Agricultural Experiment Station, and the potential market. The proposed business will be composed of a farm and a processing-facility. The business’ final product is oregano tea.

Los Baños, the planned area of operation, was examined on various aspects: geo- topographical, socio-economic, legal-political, and in terms of its infrastructure. The site was proven to be ideal for the intended business venture.

The market aspect of the proposed business was examined for the potential demand and competitors. Product, promotion, distribution, and pricing strategies were proposed as deemed effective and fitting by the researcher. The product will be packaged in tea bags and then in a wooden box. One box will contain 14 bags and will be priced at PhP 110.

The target market of the business are middle- and upper-income households. The potential market size is high, however, it is expected that it can only be attained after a few years since the product is fairly new to the market.

The production aspect proved that the business is viable in terms of equipment and materials requirement. The proposed business will occupy a total of 1000 sqm of which, 180 sqm. will be occupied by the processing facility. The discussion of the production aspect was divided into the farm and processing component. The farm, at full capacity, can produce 470 kg of fresh leaves suitable for processing (per week). On the other hand, the processing plant, at full capacity, can produce 3,158 boxes per week.

In a year, the farm will have two cropping cycles as the productive life of the plant lasts 6 months. On the side of processing, one day corresponds to one cycle.

Raw materials sourcing especially the planting materials for oregano can be very well carried out since the supplier is located in Tiaong, Quezon.

In terms of organizational requirements, it has been shown that the area is rich with manpower aside from the fact that Los Baños’ unemployment rate is relatively high and so there will be no problem in recruiting fittingly talented people for the positions. The business will be composed of the owner-manager, a supervisor, a salesman, two farm utility personnel and two processing utility personnel. Apart from their monthly salary, these employees will also be given 13th month bonuses, and SSS and PhilHealth coverages. A part-time accountant is expected to report in the office once a month to consolidate reports.

Finally, under the financial aspect, the assumptions that were used to evaluate the profitability and viability of the proposed business have been enumerated. Fixed asset requirements, working capital, and pre-operational expenses have been summed up to compute for the initial investment which is PhP 1,621,950. This will be fully financed by Dr. Ruben Villareal. Projection of the income and cash flow statements of the proposed business was carried to measure the extent of viability and attractiveness of the proposed business. Different scenarios using sales and production level as critical factors were created to evaluate the feasibility of the business. The result of this sensitivity analysis is 1 against 3 scenarios favoring the unprofitability of the proposed business. The IRRs of the four scenarios are 12.51%, 14.29%, 10.14%, and 7.61% (cost of capital is 14%). Taking into consideration the payback period which is computed at 6.22 years as the shortest, will further render the business as unattractive especially since it is only a 10-yr project. Therefore, it was recommended that the proposed project be rejected.

Language

English

LC Subject

Herbs--Therapeutic use--Philippines

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2011 M17 V55

Notes

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Document Type

Thesis

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