Keeping the seaweed industry afloat

Benson U. Dakay, Shemberg's chief executive officer, is hopeful that the company's first year under an eight-year rehabilitation process in 2003, would start the resurgence of the local seaweed industry, to the benefit of thousands of farmers in southern Philippines.
"Things are looking bright for the local seaweed industry," Dakay said.

The challenge is tough though. While Shemberg realized a net income of P106 million in 2002, it had to pay P308 million in interest and bank charges, owing to a huge dollar-denominated debt that depleted the income of the company after the plunge of the peso in 1998.

Most of this was attributed to the dollar loans of Shemberg equivalent to around P3.5 billion before the Asian crisis, when the company sought to modernize its operations by establishing Shemberg Biotech Corp.

Creditor banks agreed to rehabilitate Shemberg in 2000 and a local court in Cebu approved the plan in May 2002. As of December 2002, the Mandaue City-based company had incurred a P1.189-billion deficit, with its long-term debt standing at P273 million. Despite the tough challenge, Dakay believes that his company, along with the local seaweed industry as a whole, is on its way to a strong recovery.

"There is no other way but to go up," Dakay insisted.

Pete Borja, public relations director of Shemberg, said the improved prices of seaweed would propel the company through the corporate restructuring process and enable it to buy more raw materials from seaweed farmers.

Data from the Seaweed Industry Association of the Philippines show that the average buying price of Eucheuma cottonii seaweed, which Shemberg procures from farmers, went up by more than three times from P10.44 a kilo in September 1997 to P37.50 a kilo in May 2004.

Seaweed production also surged from 84,000 metric tons in 1997 to 118,460 MT in 2001 to 127,693 MT in 2003. Moreover, local seaweed production is expected to post double-digit growth in 2004.

Total seaweed harvest area also expanded from only 43,306 hectares in 2001 to 58,420 hectares in 2003. Most of these areas are in the waters of Tawi-Tawi, Sulu, Basilan and the Zamboanga peninsula. Seaweed farming, however, also thrives in the Bicol region, Visayas and other parts of Mindanao.

Borja claimed that Shemberg, which prides itself as a world-class producer of carrageenan, has proven in the past that it could rise beyond the challenges.

"The complexity of the challenges of the 21st Century and the speed at which they morph and metamorphose notwithstanding, Shemberg is not daunted. We can draw strength, courage and determination from our vast, rich and long experience in the carrageenan business," Borja, quoting a company statement, said.

Shemberg introduced commercial seaweed farming in the Philippines in 1966 and became the first local supplier of carrageenan to the world. Shemberg actually is not a foreign company. Each letter of the word stands for the initials of the names of eight children of Ernesto Dacay Sr., the founder of the Dacay Group who established the Lion-Tiger mosquito coil brand, and his wife Mary. Benson, the second son, eventually became company chief executive.

Shemberg's main product lines now include raw seaweeds, traditionally refined and natural grade carrageenan. The company supplies raw materials for food, dairy, air freshener, oral, personal care, cosmetics, pharmaceutical, biotechnology and other industrial and consumer product applications.

Carrageenan is a hydrocolloid extracted from red seaweeds. Refined carrageenan undergoes an elaborate process that involves drying, cleaning, bagging, dissolving, filtration, precipitation and grinding into powder. The natural grade carrageenan, however, is not dissolved.

Unknown to many, carrageenan is an effective agent used in the processing of sausages, ham, hamburger, chocolate milk, ice cream, frozen desserts, low-fat cheese, milk pudding, salad dressing, beverage mixes, toothpaste, gummy candies, pet foods, air freshner gels, dessert gel, cough syrup, hard capsules and even beer.

At present, Shemberg remains the largest producer of semi-refined carrageenan and refined carrageenan. In 2003, the company exported 5,917 MT of semi-refined carrageenan worth $25.949 million, up from $24.458 million in 2002.

The company's refined carrageenan exports reached 1,415 MT worth $11.665 million in 2003, although they were slightly lower than the previous year's $11.867 million. At present, Shemberg has eight carrageenan refineries located in various parts of the Philippines.

It was only in 1994 that the Department of Trade and Industry chose the company as top exporter. Before this, the company already caught the attention of the government and the local business circle after becoming a major supplier of raw materials for Colgate.

In 1988, Dakay was selected as one of the Ten Most Outstanding Young Men of the Philippines in the field of aquaculture. In the same year, his company received the Golden Shell Award for its exemplary export performance.

Dakay was only 33 years old when he received the TOYM award. He was born in Cebu on March 26, 1955, and graduated from the University of San Carlos with a degree in accounting in 1978. But he would quickly insist that he learned most of his business instincts from his father, Ernesto. Benson, himself, is now a father of four.

Borja pointed to Benson Dacay as the one responsible for three major feats that benefited the local seaweed and carrageenan industry. The first included the acceptance of the United States Food and Drug Administration of the Philippine natural grade carrageenan as a nontoxic food additive in 1990.

This put Shemberg in a collision course with American carrageenan producer FMC Biopolymer, a row that remains to be settled to this day.

The second was the country's successful campaign for the classification of PNG as a food additive in the Food Codex Alimen­tarius and the Codex Committee on Food Additives and Contaminants. This defined PNG as carrageenan.

The third is the country's successful campaign to include the PNG or the Processed Eucheuma Seaweed in the European Union food additives' list. Borja said these achievements, spearheaded by Dacay, provided the key break for the PNG's continued stay in the world market of carrageenan.

Borja said Dakay's ultimate mission is for Shemberg to become "the world's foremost supplier of all types of carrageenan." At present, the company carries the slogan, "The World's Most Versatile Carrageenan Producer," in most of its advertising materials.

Apart from being honcho of Shemberg, Dakay presently heads the SIAP, an organization of over 30 seaweed processors mostly based in Cebu.

The Benson-led SIAP, realizing that its revenues are propelled by seaweed production at the farmers' level, now seeks to implement a social program for seaweed farmers. The program would involve providing the farmers with social and medical insurance and connect them with government financing institutions for production loans.

"Seaweed is a key to turn poor people into entrepreneurs. It is a high-value aquaculture product that can change the livelihood of marginalized farmers," Borja said.

To help seaweed farmers recoup their losses in the past, Shemberg and SIAP are now joining hands to tap available public funds. For one, the Department of Budget and Management reportedly approved the allocation of P632 million for projects under the Agricultural Competitiveness Enhancement Fund, the safety net established by government to shield the farm and fishery sectors from the effects of trade liberalization.

The association also talks to the Land Bank of the Philippines and Quedan Rural Credit Guarantee Corp. to provide loans payable in 12 months to seaweed farmers and traders. The initial target was to provide a loan of almost P550 million to 23,880 families or P23,000 a farmer this year alone.

In its commodity road map, SIAP hopes to explore additional 205,194 hectares for seaweed farming on top of the existing 43,306 hectares. Borja said Shemberg and SIAP seek to bridge the farmers' lack of access to technology, financing and market for the seaweed farming.

Borja said the goal is not far-fetched considering the robust performance of the seaweed sector in 2003. The number of families who directly or indirectly benefited from the industry went up from 108,265 families in 2001 to 116,084 families in 2003. At the same time, the total value of seaweed exports climbed from $131.625 million to $141.135 million over the same period.