Republic of the Philippines FM-TS-TTC F04

DEPARTMENT OF SCIENCE AND TECHNOLOGY Revision 3

Cordillera Administrative Region 29-September-2015
Km.6, La Trinidad, Benguet

PROJECT PROPOSAL

I. PROJECT PROFILE

A. TITLE OF THE PROJECT: Upgrading of Peanut Butter Processing

B. INDUSTRY SECTOR/NICHE: Food Processing

C. PROPONENT/COOPERATOR: Inglayan di Ibila

D. PROJECT SITE: Bila, Bauko, Mountain Province

E. PROJECT DURATION: October 2016 – September 2017

F. TOTAL PROJECT COST: Php 512,160.00

G. AMOUNT REQUESTED: Php 362,000.00

II. PROJECT PROPOSAL PROPER

A. RATIONALE

This project proposal was crafted as a result of the Manufacturing Productivity Extension
(MPEX) Program of the Department of Science and Technology (DOST), the continued support of
the Local Government Unit of Bauko (LGU Bauko) to the development of small and medium scale
enterprises (SMEs) in the Municipality, and the commitment of the members of the Inglayan di Ibila
(IDI) to sustain profitability of their business on peanut butter production.

The MPEX Program of the DOST aims to increase productivity of SMEs in the Philippine
manufacturing sector. Areas involved in the improvement of productivity include capacity utilization,
financial systems and controls, human resource utilization, machine and equipment utilization,
maintenance of plant, manufacturing systems, materials management system, process and operations,
product design and packaging, product layout, quality control assurance system, safety and
housekeeping practices facilities, wastage levels, and work organizations. To implement this program
in the Municipality of Bauko, the DOST contracted the services of the Covenant Consultants
International Incorporated (CCI). Initial result of which was to increase the business productivity of
IDI through acquisition of equipment and pet bottles.

The DOST has been one of the major partners of the LGU-Bauko in the poverty alleviation in
terms of provision of livelihood projects to its constituents especially that statistics shows that in
every ten individuals, six are on or below the poverty threshold. Under its program to support
development of SMEs, the LGU-Bauko assists civil society organizations in their registration with the
DOLE, SEC or CDA, crafting of project proposals to be submitted to funding agencies, and
monitoring of businesses which were already funded to assess their compliance and for other funding
assistance, among others.

The Municipality of Bauko is the top producer municipality of agricultural products in

Mountain Province. Aside from vegetables and rice, there’s a large production of corn and peanut.

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Peanut have mass production during rainy season. Due to abundant supply of peanut, the IDI sought
the interventions of the DOST and LGU-Bauko in 2014. It resulted to the production of peanut butter
which is now the subject of this proposal for possible enhancement through provision of equipment
and pet bottles.

The collaboration of the above stakeholders is expected to achieve increased enterprise

productivity and financial stability of the business. Above all, the empowerment of the rural workers
will have its share to having stronger and better society.

B. OBJECTIVES

B.1 General

Generally, the project aims to uplift the economic status of the beneficiaries thru upgrading a
community-based peanut butter processing.

B.2 Specific

1. To upgrade the processing facilities for the production of Peanut Butter through the
provision of the following S&T related equipment:
a. 2 units of Stainless Grinder (Heavy Duty)

b. 1 unit Induction sealer

c. 3 units Stainless Tables

d. 2 units Stainless Rack/Open Cabinet

e. 4,000 pieces of Pet Bottles

2. To reduce postharvest cost and losses of peanut growers in the Municipality;
3. To increase income of beneficiaries from (baseline of income to target income);
4. To increase production from (present production) to 17,100 bottles of Creamy Peanut
Butter, and 17,100 bottles of Crunchy Peanut Butter in a year; and
5. To generate employment from (present employment to target employment).

C. PROJECT DESCRIPTION

The enhancement project will be established in Bila, Bauko, Mountain Province. Their
processing center already exists as the organization is already producing, however, on a small-scale
basis. While all the members are planting and harvesting peanut, large tracks of peanut gardens are
found in barangays Bagnen Proper, Balintaugan, Bagnen Oriente, Otucan Norte, Otucan Sur,
Guinzadan barangays and Tapapan.

Another add-on livelihood opportunity of the project is on organic fertilizer production out of
the peanut shells.

C.1Technical Aspect

Production Process

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1. Planting and harvesting peanuts. Peanuts are planted in April or May depending upon the
climate. Peanuts are harvested beginning in late August, but mostly in September and
October.
2. Peanuts from the pickers are delivered to warehouse for cleaning.
3. Shelling and processing. Shelling consists of removing the shell (hull) of peanuts with the
least damage to the seeds. The moisture of the unshelled peanuts is adjusted to avoid
excessive brittleness of the shells and kernels and reduce the amount of dust in the plant. The
size-graded peanuts are passed between a series of rollers adjusted to the variety, size, and
condition of the peanuts, where the peanuts are cracked. The cracked peanuts then repeatedly
pass over screens, sleeves, blowers, magnets, and destoners, where they are shaken, gently
tumbled, and air blown, until all the shells and other foreign material (rocks, mud balls, metal,
shrivels) are removed.
4. The shelled peanuts are graded for size in a size grader. The peanuts are lifted and then
oriented on the perforations of the size grader. The larger peanuts (the “overs”) are sent to one
trough, while the “troughs” are guided towards another trough. The peanuts are then graded
for color, defects, spots, and broken skins.
5. The peanuts are shipped in large bulk containers or sacks to peanut butter manufacturers.
(Inedible peanuts are diverted as oil stock in semi bulk form.) To ensure proper size and
grading, the truckloads transportating peanuts to peanut manufacturers are sampled
mechanically. If edible peanuts need to be stored for more than 60 days, they are placed in
refrigerated storage at 34 to 40 degrees Fahrenheit (2 to 6 degrees Celsius), where they may
be held for as long as 25 months. Shelled, the remaining peanuts weigh 30 to 60 percent less,
occupy 60 to 70 percent less space, and have a shelf life about 60 to 75 percent shorter than
unshelled peanuts.
6. Making peanut butter. The peanut butter manufacturers first dry roast the peanuts. Dry
roasting is done by either the batch or continuous method. In the batch method, peanuts are
roasted in 400-pound lots in a revolving oven heated about 800 degrees Fahrenheit (426.6
degrees Celsius). The peanuts are heated at 320 degrees Fahrenheit (160 degrees Celsius) and
held at this temperature for 40 to 60 minutes to reach the exact degree of doneness. All the
nuts in each batch must be uniformly roasted.
7. Cooling and blanching. A photometer indicates when the cooking is complete. At the exact
time cooking is completed, the roasted peanuts are removed from heat as quickly as possible
in order to stop cooking and produce a uniform product. The hot peanuts then pass from the
roaster directly to perforated metal cylinder (or blower-cooler vat), where a large volume of
air is pulled through the mass by suction fans. The peanuts are brought to a temperature of 86
degrees Fahrenheit (30 degrees Celsius). Once cooled, the peanuts pass through a gravity
separator that removes foreign materials.
8. The skins (or seed coats) are now removed with either heat or water. The heat
blanching method has the advantage of removing the hearts of the peanuts, which contain a
bitter principle.
9. The blanched nuts are mechanically screened and inspected on a conveyor belt to remove
scorched and rotten nuts are other undesirable matter. Light nuts are removed by blowers;
discolored nuts by a high-speed electric color sorted, and metal parts by magnets.
10. Grinding. Most of the devices used for grinding peanuts into butter are built they can be
adjusted over a wide range-permitting the variation in the quantity of peanuts ground per hour
the fineness of the product, and the amount of oil freed from the peanuts. To prevent
overheating, grinding mills are cooled by a water jacket. Peanut butter is usually made by two
grinding operations. The first reduces the nuts to a medium grind and the second to a fine,
smooth texture. For fine grinding, clearance between plates is about .032 inch (.08
centimeter). The second milling uses a very high-speed comminutor that has a combination
cutting-shearing and attrition action and operates at 9,600rpm. This milling produces a very
fine particle with a maximum size of less than 0.01 inch (.025 centimeter). To make chunky
peanut butter, peanut pieces approximately the size of one-eight of a kernel mixed with
regular peanut butter, or incomplete grinding is used by removing a rib from the grinder. At
the same time the peanuts are fed into the grinder to be milled, about 2 percent salt, dextrose,

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 and hydrogenated oil stabilizer are fed into the grinder in a continuous, horizontal operation,
with about plus or minus 2 percent accuracy, and are thoroughly dispersed.
11. Peanuts are kept under constant pressure from the start to the finish of the grinding
process to assure uniform grinding and to protect the product from air bubbles. A heavy screw
feeds the peanuts into the grinder. This screw may also deliver the deaerated peanut butter
into containers in a continuous stream under even pressure. From the grinder, the peanut
butter goes to stainless steel hopper, which serves as an intermediate mixing and storage
point. The stabilizer peanut butter is cooled in this rotating refrigerated cylinder (called a
votator), from 170 to 120 degrees Fahrenheit (76.6 to 48.8 degrees Celsius) or less before it is
packaged.
12. Packaging. The stabilizer peanut butter is automatically packed in jars, capped, and
labeled. Since proper packaging is the main factor in reducing oxidation (without oxygen no
oxidation can occur), manufacturers use vacuum packing. After it is put into final containers,
the peanut butter is allowed to remain undisturbed until crystallization throughout the mass is
completed. Jars are then placed in cartons and placed in product storage until ready to be
shipped out to retail or institutional customer.

How about the Cost & Return Analysis with the present situation?

Production Volume, Capacity, and Cost of Production

Products Target Annual Production Expected Sales Generated

(1st Year) (1st Year)
Creamy Peanut Butter 17,100 Bottles 1,197,000.00
Crunchy Peanut Butter 17,100 Bottles 1,282,500.00
Total: 2,479,500.00

Volume of production and sales generated are expected to increase by 20% annually.

C.2 Financial Aspect

The proposed project shall be implemented following a counter parting scheme from
the proponent, the Department of Science and Technology and the Municipal Government of Bauko.
The DOST shall provide the needed equipment and pet bottles. Meanwhile, the proponent will
shoulder operational cost of the project and the housing and maintenance for the equipment. The
Municipal Government of Bauko shall provide technical support and market linkaging assistance thru
the Office of the Mayor through the Public Employment Service Officer.

Assumptions:
1. Cost of Raw Materials increases by an average to 5% every year to reflect inflationary effects.
2. Increase in the cost of raw materials is proportionate to the increase in sales.
3. Sales increases by 20% every year.
4. Retail price increases by five pesos every year
5. Beginning raw materials inventory is equivalent to one month cost of direct raw materials.
6. Expenses for marketing, utilities, transportation and licenses and permits remain to be the same for
the succeeding years
7. No capital outlay for the succeeding years
8. 80% cash dividends to members per year
9. An amount of Php 30,160.00 will be contributed by the members to cover-up initial cost of raw
materials.
10. The tools and equipment have a ten-year lifespan with no salvage value.

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 Abante Bauko Movement Incorporated-INGLAYAN DI IBILA
Schedule of Sales
For Fiscal Years 2017, 2018, 2019
First Year Second Year Third Year
Creamy Peanut Butter
First Year (1,425 bottles/month x Php 70.00/bottle x 12
months) 1,197,000.00
Second Year (1,710 bottles/month x Php 75.00/bottle x 12
months) 1,539,000.00
Third Year (2,052 bottles/month x Php 80.00/bottle x 12
months) 1,969,920.00
Crunchy Peanut Butter
First Year (1,425 bottles/month x Php 75.00/bottle x 12
months) 1,282,500.00
Second Year (1,710 bottles/month x Php 80.00/bottle x 12
months) 1,641,600.00
Third Year (2,052 bottles/month x Php 85.00/bottle x 12
months) 2,093,040.00
Total Sales 2,479,500.00 3,180,600.00 4,062,960.00

Abante Bauko Movement Incorporated-Inglayan Di Ibila

Schedule of Cost of Goods Manufactured
For the Year Ended December 31, 2017, 2018, 2019

First Year Second Year Third Year

Direct materials
Beginning raw materials inventory 30,160.00 38,001.60 47,882.02
Add: Raw materials purchased 361,920.00 456,019.20 574,584.19
Raw materials available 392,080.00 494,020.80 622,466.21
Less: Ending raw materials inventory 30,160.00 38,001.60 47,882.02
Raw materials transferred to
production 361,920.00 456,019.20 574,584.19
Direct labor 806,400.00 806,400.00 806,400.00
Factory overhead
Indirect materials 0.00 0.00 0.00
Indirect labor 0.00 0.00 0.00
Processing center utilities 36,000.00 36,000.00 36,000.00
Cost of goods manufactured 1,204,320.00 1,298,419.20 1,416,984.19

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 Abante Bauko Movement Incorporated-Inglayan Di Ibila
STATEMENT OF CASH FLOW
For the Year Ended December 31, 2017, 2018, 2019

Year 1 Year 2 Year 3

Receipts
Members 30,160.00
Customers 2,479,500.00 3,180,600.00 4,062,960.00
Total Receipts 2,509,660.00 3,180,600.00 4,062,960.00

Disbursements
COGM 1,204,320.00 1,298,419.20 1,416,984.19
Operating expenses 584,970.00 827,770.32 1,133,288.32
Taxes 270,414.00 400,707.14 564,661.05
Dividends 306,412.80 493,538.67 728,997.15
Total
2,366,116.80 3,020,435.33 3,843,930.71
Disbursements

Starting Cash 30,160.00 173,703.20 333,867.87

Receipts 2,509,660.00 3,180,600.00 4,062,960.00
Disbursements 2,366,116.80 3,020,435.33 3,843,930.71
Ending Cash 173,703.20 333,867.87 552,897.16

Abante Bauko Movement Incorporated-Inglayan Di Ibila

Projected Balance Sheet

1st Year 2nd Year 3rd Year

Current Assets
Cash 173,703.20 333,867.87 552,897.16
Raw Materials Inventory 30,160.00 38,001.60 47,882.02
Total Current Assets 203,863.20 371,869.47 600,779.18

Long Term Assets

Equipment 299,800.00 299,800.00 299,800.00
Tools 68,000.00 68,000.00 68,000.00
Total Acquisition Cost 367,800.00 367,800.00 367,800.00
Less: Accumulated Depreciation 36,780.00 73,560.00 110,340.00
Net Long Term Assets 331,020.00 294,240.00 257,460.00

TOTAL ASSETS 534,883.20 666,109.47 858,239.18

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 Liabilities 0.00 0.00 0.00
Capital
Beginning Capital 458,280.00 534,883.20 666,109.47
Additional capital for raw materials 7,841.60 9,880.42
Add: Net Income 383,016.00 616,923.34 911,246.44
Less: Dividends 306,412.80 493,538.67 728,997.15
Total Equity 534,883.20 666,109.47 858,239.18
TOTAL LIABILITIES AND CAPITAL 534,883.20 666,109.47 858,239.18

C.3 Market Aspect

There has been an established demand for peanut butter not only in the locality but outside the
province because of health considerations—peanuts having low calories and high protein content. In fact, the
current production could hardly meet the demand thus creating a gap. This shows the bright prospect for
peanut production and processing. Peanut is also considered a tourism product of Bauko municipality along
with Arabica Coffee, heirloom rice and fruit wine. Thus, effort to promote these products in the market is
currently being undertaken thru attendance to trade fairs and exhibits.

From fresh to processed edibles, indeed, there is a wide variety of foods available in the
market. With the growing trend of having a healthy lifestyle, the organization, however, believes that they
have an edge over other food products considering that they are to produce a crunchy variety of peanut butter
alongside with the creamy variety. With the nutritional content label to be put on all products, it will attract
more consumers.

While the proposed provision of peanut roaster is highly needed to meet the high market
demand, the presence of an induction sealer is most important to prevent breakage during the transport of
products. This is towards better marketing of the peanut butter to other places in the region.

The organization plans to promote their products through the print media, tarpaulins in every
market outlet, on the Facebook account and website of LGU-Bauko. LGU-Bauko shall also help in the
marketing through correspondences to different private and public agencies.

The LGU, on the other hand, strategizes that during events it will host; it would be purchasing
the livelihood products of the Municipality.

Table 1. Market Outlets

BARANGAY MARKET OUTLETS NUMBER OF DELIVERY
BOTTLES TO BE SCHEDULE
DELIVERED
Abatan -Luis Hora Memorial -100 bottles (50 bottles -Monthly
Regional Hospital Creamy, 50 bottles
Crunchy)
-Abatan Barangay -100 bottles (50 bottles
Public Market Creamy, 50 bottles -Monthly
Crunchy)
-Municipal Trading -2000 bottles (1,000
Center bottles Creamy, 1,000 -Monthly
bottles Crunchy)

Mabaay -Mabaay Public Market -100 bottles (50 bottles -Monthly

Creamy, 50 bottles

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 Crunchy)

Mt. Data -Pension House, -100 bottles (50 bottles -Monthly

Amkaweng Creamy, 50 bottles
Crunchy)

Sadsadan -MSL Cooperative -20 bottles (10 bottles -Monthly

Creamy, 10 bottles
Crunchy)
Sinto -Mt. Data Lodge -50 bottles (25 bottles -Monthly
Pasalubong Center Creamy, 25 bottles
Crunchy)
Abatan 90 -Market Place -50 bottles (25 bottles -Monthly
Creamy, 25 bottles
Crunchy)
Bontoc, Mountain Province -Mt. Province -150 bottles(75 bottles -Monthly
Pasalubong Center Creamy, 75 bottles
Crunchy)
Baguio City -Health 101 -80 bottles (40 bottles -Monthly
Restaurants Creamy, 40 bottles
Crunchy)
Baguio City Public -100 bottles (50 bottles -Monthly
Market Creamy, 50 bottles
Crunchy)
C.4 Environmental/Waste Disposal

Peanuts generate voluminous shell which is usually thrown; however, the organization
through the advocacy of the Municipal Mayor has an eco-composting receptacle that produces rich organic
fertilizer.

D.PROJECT COMPONENTS / STRATEGIES OF IMPLEMENTATION

1. Institutional Support Generation

Networking plays an important role in project implementation. This creates an avenue

where resources of other potential agencies could be tapped to produce desired output. The project
shall be implemented in coordination with other agencies such as Department of Trade and Industry
for marketing concerns and Department of Science and Technology for appropriate S&T
interventions.

2. Sustainability Measure

The project will adopt a roll over fund scheme to ensure project sustainability. A
certain percentage of the income of the proponent shall be set-aside for the maintenance and repair of
the equipment. The group shall also be strengthened as partners in development thru provision of
organizational management trainings by the Local Government Unit. Policies shall be formulated by
the group to ensure care and maintenance of the equipment and sustainability of the project in
general.

E. IMPLEMENTING SCHEDULE

ACTIVITIES OCT- DEC JAN- MAR SEP

NOV 2016 FEB 2017 2017

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 2016 2017
Project Proposal Preparation and Approval X
Signing of MOA with project beneficiaries X
Procurement of equipment and tools X
Establishment and Maintenance X X
Monitoring and Evaluation X X X X

F. BUDGETARY REQUIREMENT
I. PROPOSED AMOUNT IN PESOS
DOST-CAR OTHER COOPERATO OTHER TOTAL
PARTICULARS DOST R’S AGENCIES
AGENCY COUNTERPA (MLGU)
(Specify) RT
II. I. PS
Monitoring Cost 60,000.00 60,000.00

Marketing Personnel 50,000.00 50,000.00

(including the display
area at the Bauko
Pasalubong Center)
II. MOOE
Travelling Expenses of 10,000.00 10,000.00
LGU Staff

Raw materials 30,160.00 30,160.00

III. CO
2 units of Stainless 160,000.00 205,000.00
Grinder (Heavy Duty)

1 unit Induction sealer 50,000.00 70,000.00

3 units Stainless Tables 54,000.00 60,000.00

2 units Stainless
Rack/Open Cabinet 30,000.00 30,000.00

4,000 pieces of Pet

Bottles 68,000.00 68,000.00

TOTAL 362,000.00 30,160.00 120,000.00 512,160.00

Insert Inventory of Existing Equipment & Materials of the Project

G. PROJECT MANAGEMENT

The operation of the business shall be the responsibility of the proponents with technical
assistance from the Municipal Local Government and Department of Science and Technology. The group
shall see to it that approved project lay-out and standards shall be followed. Policies for the sustainability of
the project shall be formulated by the proponent.

H. EXPECTED OUTPUT

With the approval and implementation of this project, it is expected that:

1. Needed facilities are provided and maintained;
2. Production and income of beneficiaries in the community increased;

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 3. Sustainable farming practice intensified and advocated to increase peanut production to at
least 15%
4. Produced 17,100 bottles of Creamy Peanut Butter, and 17,100 bottles Crunchy Peanut
Butter in a year.
5. Jobs generated for members of the community as operator of the facility;
6. Creation of an additional livelihood option from organic fertilizer production.

I. MONITORING AND EVALUATION

The monitoring and evaluation activities shall be done regularly by the PSTC-Mt. Province
with the S&T Focal Person of the Municipality. Documentation of the success and failures of the
project is also important to serve as learning points for future project. Reports shall be submitted to
the PSTC and DOST-CAR for their reference.

Prepared by:

RENAN JAKE D. OYANG-O

S&T Coordinator
Public Employment Service Officer

Reviewed by:

GWYNCEL KAY A. BACWADEN

OIC, PSTD Mountain Province

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