Virgin Coconut Oil (VCO) is a relatively new product on world markets both in terms of supply and demand. The market is exciting in its enormous potential but how can the copra experience of instability with wide price fluctuations be avoided as this niche product is ‘commodified’? What are the fundamental differences between copra-oil and VCO?

The origins of VCO contrast with the large-scale plantations established to produce copra for export. VCO started in village households. Domestic kitchens used a range of processes to make coconut oil for edible, topical, ceremonial or religious purposes and for sale in local markets. It has been an adjunct to subsistence farming for centuries. As a smallholder product, consolidation for export was difficult and supply was limited. However, as VCO became known as a raw, natural food, it appealed to a health-conscious international market.

High VCO prices in niche health-food stores attracted large desiccated coconut (DC) factories which had very low barriers for entry into this market. The extra costs of passing DC through an expeller were negligible and provided companies with two new products: VCO and edible Coconut Flour. This led to boom times with VCO becoming a new ‘superfood’. This has been the experience of the Philippines, Thailand and, latterly, Sri Lanka. But, is this just another coconut ‘boom – bust’ cycle or is it a ‘sea-change’ for the industry? How can it be sustained?

This paper explores the many significant global changes that radically alter the potential market for VCO in the 21^st Century as against the experience of copra in the second half of the last century. These changes include rapid growth of population, of urbanisation and of income levels and the rise of the middle class in many coconut-producing countries. These factors are likely to increase the domestic demand for VCO while demand in many high income countries continues to increase as changes in global communications through the internet and mobile phones now allow the widespread and speedy dissemination of information.

This paper concludes by examining the supply challenges for a coconut industry where the resource is largely in the hands of smallholders. It calls for continued innovation in the development of technologies that facilitate the value-chain links between scattered rural communities and urban consumers in domestic and international markets.