The coconut is iconic. Practically synonymous with warm weather, sunny beaches, and relaxation, the tropical allure of coconut has endeared consumers all over the world. Although fresh, whole coconuts are not the most common of household purchases, the sheer variety of coconut products is improving accessibility and making coconut a favorite among health-conscious consumers.

Coconut in international import markets has seen strong growth in recent years, in large part thanks to the popularity of value-added products like coconut water, milk, and oil. Coconut is also used in a range of beauty and health products for skin and hair care. Sales of coconut products have exploded in the past decade, with coconut water briefly becoming a celebrity-backed health craze.


Coconut water has been an explosive product in recent years.

However, this rapid rise in demand has put strain on the world’s coconut producers. Still a largely informal sector in terms of production, many coconut plantations around the world are aging, and genetic resources are difficult to access. Supply chains in Indonesia and the Philippines (the world’s top producers) are still woefully lacking, reducing incomes for farmers and causing waste and inefficiency. Environmental concerns are also rising, as global warming is causing more severe weather events in Southeast Asia.


Coconut from Indonesia maintains a strong hold on the global coconut market, providing over half of the world’s exports in 2018. However, the cracks are beginning to show in Indonesia’s coconut supply chain, and concerns over quality, export value, and social impact continue to rise. This litany of problems has cast a shadow on the future of Indonesian coconut production.

“Small holders are not capturing a sufficient share of the profit in the supply chain,” said Indonesian trade minister Thomas Lembong. There are too many middlemen involved for the farmers to profit, said the minister, and the sector has done a poor job of implementing modern copra and oil production. On the island of Sulawesi, where most Indonesian coconut production takes place, producers of copra still utilize crude homemade kilns.

In general, the coconut sector in Indonesia (and, really, the world at large) suffers from a lack of formalization and integration. Mostly conducted by smallholder farmers, coconut production in Indonesia lacks a coordinated system for secure genetic resources, and few registered coconut nurseries exist. The varieties used in cultivation are generally Tall, with the Mapagnet, Tenga, and Bali varieties dominating. However, there is room for improvement in the tracking of genetic resources.

In addition, Indonesia coconut is often young coconut, and is stored for a significant amount of time before being transported. Producers in Malaysia say that Indonesian coconut pales in comparison to theirs, and it is estimated that up to 20% of coconut shipped from Indonesia to Malaysia cannot be used.


Indonesia is producing less coconut, even as demand rises. 

Indonesia in particular lacks certain critical supply chain factors such as cold storage capabilities. Mature, de-husked coconuts can be stored for up to two months at temperatures of 0 C° to 1.5 C°, allowing them to withstand long transport times. Young coconuts can be stored up to a month at 3 C° to 6 C°, and room-cooling, forced-air cooling, and hydrocooling are all acceptable methods of pre-cooling. However, the Indonesian supply chain has significant gaps in terms of these solutions.

Lastly, one of Indonesia’s most immediate problems (and, again, a problem for the global coconut industry as a whole), is the rapid aging of existing coconut resources. 11.7% of Indonesia’s coconut trees are categorized as senile, meaning that they have passed the most productive phase of their lives. Without a scalable strategy for re-planting in place, coconut production in Indonesia seems fated to decline, even as global demand for coconut rises.

Very little about coconut production in Indonesia seems promising. With many farmers subsisting on as little as $1 per day, a large-scale exit from coconut production certainly seems possible. A lack of technology, formalization, genetic resources, and knowledge of best practices are hindering Indonesia’s production – not to mention the increasing frequency of severe weather events caused by global warming.

The Philippines

Many of the challenges facing Indonesia are also true in the Philippines, the world’s number two producer of coconut. USAID’s Green Invest project notes that more organization is needed “to stave of disruptions in the global coconut supply chain,” especially on the part of the world’s top two exports. With aging trees, a highly informal labor sector, and the ever-present threat of natural disaster, the Philippines might not be such a reliable source of production in the future.

In the Philippines especially (and in Southeast Asia generally), smallholder coconut producers are finding themselves muscled out by large-scale pal oil plantations. Palm oil, which is a much more industrialized crop than coconut, has become the top-selling oil in Philippine grocery stores, despite the country’s high level of coconut production. With palm oil heavily subsidized by the governments of Indonesia and the Philippines, coconut producers are finding themselves increasingly at risk.


Coconut producers are being muscled out by palm oil. 

In terms of government subsidies and other forms of support, many feel that Indonesia and the Philippines have turned a blind eye to coconut, and are overlooking an opportunity to build stronger supply chains and retain more value-added processing domestically. With the focus on palm oil increasing (thanks in no small part to money of the large-scale industrial plantations), coconut appears to have been left by the wayside from a governmental perspective.

Another major problem in the Philippines is the lack of genetic resources. Low yield has been a perennial problem for coconut producers in the Philippines, where average nut yield is a mere 43 nuts per tree per year. The Philippine Coconut Authority has seen some success breeding dwarf x tall hybrid varieties, but the secure and formalized distribution of these resources to producers is still sorely lacking.

The Philippines, like Indonesia, has serious challenges to confront if it desires to continue dominating the global coconut exports market. With an aging population of trees, limited genetic resources, and scant support from governments, the coconut industry in these two top countries is in jeopardy. Only time will tell if these countries will be able to scale up and formalize their industries, because if not, other origins will be happy to eat up their market share.

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