An Analysis of Espasol Producers on Nagcarlan, Laguna

Date

4-2010

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

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Abstract

Espasol is a product classified as “kakanin” and as “pasalubong” product. It is a native delicacy popular in the town of Nagcarlan. Since the development of the product in the late 1940s, its process of production, as well as its product form, undergone minimal changes and was not able to effectively adapt to the changing tastes and preferences of the consumers. Thus, this study aimed to present and analyze the current status of espasol producers in Nagcarlan, Laguna. The problems and prospects existing in the enterprises were identified and possible recommendations were suggested for the existing businesses, prospective entrants, stakeholders, and supporting institutions.

There are 21 identified producers of espasol in Nagcarlan but only 18 were interviewed. A series of personal interview, as well as personal observation, were used as tools for data collection. In addition, some espasol wholesalers/retailers and end consumers for espasol were interviewed. Conversely, secondary data were sourced from related and reliable textbooks and internet sites, various government institutions, previous Special Problem reports, thesis, and journals.

The espasol enterprise in Nagcarlan developed due to the availability of food crops in the locality, particularly coconut, and as a complement to the tourist industry. In terms of organization, most businesses started out as family enterprises. More so, the enterprise is dominated by micro and small enterprises.

There are two variants of espasol: the common espasol (rice-based) and the cassava espasol. Aside from the cassava variant of espasol, the product is also differentiated in terms of weights, prices, and packaging.

Supplier agreement is not common for the espasol producers. In general, only those with supplier ties have their raw materials delivered to the production area. Location of suppliers is mainly in the locality of Nagcarlan. But nearby towns and provinces also serve as options for sourcing the raw materials for espasol. There are two modes of payments in the supply sourcing aspect: the cash basis and the credit basis. In the credit basis, one unique paying scheme is the consignment mode of payment.

The process of making common espasol and cassava espasol are almost the same except that the glutinous rice is substituted with cassava and flour. There are two machines essential in the production of espasol: the grating machine (kayuran) and the grinding machine (gilingan).

In terms of demand, demand for espasol is high during summer, Christmas and other Holidays. The length of marketing channel varies in the distribution of espasol to its final consumer. Some are in a zero-level channel, while others involve the use of one to many selling intermediaries. The buyers of espasol differ on the type of variant. On the other hand, location of buyers also differs for the two variants. For the common epasol, 55.17 percent of the 48,780 packs of espasol produced per month is absorbed by San Pablo, Tagaytay and Los Baños. On the other hand, 54.59 percent of the packs of cassava espasol produced per month is absorbed by Cavite, Marikina and Nagcarlan. In general, most of the espasol producers use the competitive-based pricing system. A pack of common (rice-based) espasol is commonly sold at Php 20.00 for end consumers and Php 30.00 for institutional buyers. Cassava espasol, on the other hand, is sold at Php 8.00 to Php 9.00 per pack. Mode of payment, on the other hand, is either cash or credit. Consignment is also practiced by the sales agents.

Espasol production is a business which is more of a labor intensive than a capital intensive. So, a considerably small amount of money is needed to start an espasol business. Aside from this, there are micro-credit institutions available that assist the espasol producers. Economically speaking, the espasol business is a very profitable venture with because of the high profit margin.

The current status of the espasol enterprise is still at the growth stage, especially with the addition of cassava espasol as new variant. There are numerous areas for growth and improvement in this enterprise that needs to be tapped. And in order to ensure the success of the business, the following competitive factors are essential: (1) high quality of products in terms of freshness and taste; (2) stability of supply; (3) use of advanced production technology; (4) product innovation; (5) good relationship with stakeholders of the business; (6) high market share; (7) good promotional activities; (8) good distribution channels; and (9) wide breadth of product line.

In terms of competition, the degree of rivalry between competing firms is medium. Threat of new entrants, as well as threat of substitutes, is high. On the other hand, bargaining power of buyers is high; while bargaining power of suppliers is low during regular production days and high during peak season.

The main problem in the industry is spoilage. Espasol has a maximum of one week shelf life. With this problem, geographic reach is limited to domestic markets near the province of Laguna. Other problems in the enterprise include: (1) fluctuations in the prices of sugar; (2) lack of loyal suppliers resulting to shortage of supply, quality inconsistency and inability to lessen the impact of increase in prices of raw materials; (3) low switching cost between brands of espasol; (4) low cost of substitution between pasalubong food products; (5) manually operated production which enhances spoilage; and (6) presence of unreliable suppliers who do not pay their debts.

Prospects in the industry, on the other hand, include: (1) unsaturated domestic market; (2) untapped international market; (3) improving technology for food processing; (4) presence of supporting institutions; (5) product innovation in terms of packaging and taste; (6) concentric diversification; and (7) market niching in response to the increasing trend of bringing the native delicacies like espasol in groceries and shopping malls.

Suggested recommendations for the study include establishing supplier agreements to ensure stable supply and lower prices at high quality of raw materials, especially sugar.

This strategy will entail the use of a JIT system in the procurement of raw materials. A semi-mechanized production is also advised. Improvements in the packaging of espasol is also emphasized in order to increase the appeal, value, marketability, and most importantly shelf life of espasol. In terms of marketing, taking advantage of the unsaturated domestic market opens a profitable opportunity for the espasol producers. Continuity on the use of sales agents (intermediaries) and retails stores are also pointed out to be effective marketing strategies. More over, it was found out in the study that the espasol business is very profitable. Thus, prospective entrants should not hesitate to venture in this type of business. Lastly, coordinating and cooperating with supporting institutions in the research and development aspect of the business to improve production processes and the product itself is recommended.

Language

English

LC Subject

Rice cakes industry, Business enterprises

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2010 M17 N83

Notes

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Document Type

Thesis

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