Seaweed a Godsend for Filipinos : Trade: The fat substitute carrageenan could be a big boost to the economy. But U.S. producers are trying to derail imports.

Some Filipinos call it a “wonder powder”--a seaweed derivative that’s being used as a substitute for fat in meat. It also binds the substances in toothpaste and shampoos. It gives body to dairy products, puddings and pie fillings. And now, boosters say, it may do wonders for the faltering economy of the Philippines.

Carrageenan, as the product is officially known, is suddenly hot because of McDonald’s Corp.’s April introduction of the McLean Deluxe, a low-fat sandwich with a meat patty containing the food additive. Although the McDonald’s sandwich contains a carrageenan made by an American firm, Filipinos believe that demand for the additive will increase dramatically as other meat processors look for a low-fat product to sell to health-conscious American consumers.

U. S. sales from one Philippine manufacturer are already beginning to rise because the product is 15% to 20% cheaper than that produced by American manufacturers.

The most common form of the Philippine additive--known as Philippine Natural Grade or PNG--and the raw seaweed used for carrageenan processing worldwide is already one of the Philippines’ top exports. About 400,000 Filipinos make a livelihood in the carrageenan industry. Ninety percent are seaweed-harvesting farmers and the rest processing plant workers.

Philippine PNG producers and the government say carrageenan may soon help buoy the struggling Philippine economy. Worldwide, about 70% of the seaweed used in the production of the additive is harvested off the island shores of the Philippines and Indonesia, according to some estimates.

Carrageenan sales are all the more important to the Philippines because sales of coconuts, the country’s leading agriculture export, have been sliding dramatically. Since reaching a sales peak of $269 million in 1984, export revenues from coconut have dropped about 50%, largely because of concerns about its cholesterol content. Many coconut farmers will probably turn to seaweed harvesting, said Bernardo Mitra, an agriculture analyst at the Philippine Embassy.

“By marketing carrageenan, we can really help our farmers,” Mitra said. “Also, some of our poorest families are involved in the fishery sector of our economy. . . . (Carrageenan sales) can help them, and it can be a very effective way of improving our economy.”

Added Gil Roy Gorre, a spokesman for the Philippine Consulate in Los Angeles: “It’s important to employ people on coastal areas because it helps stem the tide of immigration to overcrowded urban areas.”

American producers of carrageenan are not eager to see the Philippine product make further inroads in the United States. They recently lost a bid to force Philippine producers to change the label on their product. Contending that the Philippine product is “crushed seaweed” or “seaweed flour” that is not as refined as the U.S.-produced additive, they said it failed to meet the standards necessary for it to be called carrageenan--a seaweed extract. It should be banned until the Filipinos change their labels, they said.

The Federal Drug Administration recently sided with the Filipinos, ruling that their product is prepared by extraction from seaweed and can continue to carry the carrageenan label.

The distinction was critical for the Filipinos because it’s not easy to sell “ground seaweed” to image-conscious food processors.

Fresh from a regulatory victory that gives them access to the burgeoning American carrageenan market, Philippine producers are making plans to expand their industry in a bid to boost U.S. sales.

“This (FDA) approval has created a lot of excitement in our industry,” said Benson Dakay, president of Shemberg Corp., the largest PNG producer in the Philippines. “Considering the sales we expect to generate in the United States, demand for the seaweed will grow. That means the number of Filipino seaweed farmers might rise from about 350,000 to 1 million within the next two years. That’s a lot of new employment.”

Shemberg had $2 million in U.S. sales in 1990 and is expecting revenue to reach $5 million in 1991. Dakay, who is also president of the Seaweed Industry Assn. of the Philippines, says he expects Shemberg’s U.S. sales to climb to $20 million in 1992.

With the FDA seal of approval, the entire Philippine-based carrageenan industry stands to benefit. The country’s export sales to the United States totaled $3 million in 1990, but could rise to about $40 million in 1992, according to the agricultural trade section of the Philippine Embassy in Washington.

With that kind of sales increase, the Philippines’ worldwide export revenue from carrageenan--valued at $50 million in 1990--could reach $90 million in 1991, making it one of that country’s top exports.

Now that McDonald’s has made the first bid for health- and weight-conscious hamburger lovers, the U.S. carrageenan market, estimated to be a $100-million business, could double over the next two years, industry sources believe.

“McDonald’s is a food product leader,” Dakay said. “More beef processors are now considering carrageenan. A whole new market is about to open.”

Said Vicente Zaragoza, managing director of the Santa Ana-based Carrageenan Marketing Corp., Shemberg’s U.S. distributor: “Since the introduction of the McLean, we’re getting 100 calls a day about carrageenan. Over the next six months, I expect many other (beef processors) to come up with their . . . own low-fat patty.”

While the extraction process was refined by the Japanese about 20 years ago, some in Ireland’s coastal communities have long boiled seaweed to create a food filling. Boiling is still part of one process for extracting carrageenan. After the plants are cleaned, dried and boiled into a goo, carrageenan is extracted and commonly sold in a powder or chip. The major American producers have a more extensive process, using a chemical such as alcohol to extract the substance. The Filipinos use a mechanical extraction process.

Handicapped by a foreign bank debt of about $29 billion, the Philippines needs to boost exports to generate more taxable revenue. The country had a trade deficit of $3.9 billion in 1990. In addition, the economy has been wracked by political uncertainty and natural disasters the past two years. Hundreds of thousands of people lost their livelihood when farms, shops, offices and factories were swept away by the eruptions of Mt. Pinatubo. The country’s unemployment rate is now about 17%.

Philippine President Corazon Aquino had been trying to link the continued U.S. military presence in her country to U.S. help with the Philippine economy, according to White House officials, but the Bush Administration has tried to keep the issues separate. The two administrations last month reached a $2.2-billion agreement allowing the United States to continue to use Subic Bay Naval Base. The Philippine Senate is expected to vote on the pact later this month.

Philippine government officials say they raised the carrageenan issue and other trade matters during the military bases talks after the FDA last year decided to review a July, 1990, decision to allow U.S. food processors to use Philippine PNG. The Atlanta-based International Food Additives Council and two big American carrageenan producers--FMC Corp of Chicago (which supplies McDonald’s) and Hercules Inc. of Wilmington, Del.--had asked for the review.

FMC Corp.’s Washington-based lobbyist, Harold Russell, says many domestic carrageenan producers suspect that the U.S. State Department may have pressured the FDA into approving the sale of Philippine PNG. Russell said FMC wants the FDA to prevent Philippine companies from marketing PNG as carrageenan. He said the PNG contains cellulose, protein and metals.

“The consumer should be informed that . . . our product is an extract of seaweed,” Russell said. “Our product is pure carrageenan, but (PNG) contains ground (seaweed) leaf.”

Filling a Void:

The U.S. Food and Drug Administration recently ruled that Phillipine carrageenan, a low calorie food additive derived from seaweed, can be sold to processors in the United States. With American demand for low-fat food on the rise, Phillipine companies expect to boost sales of their food additive filler dramatically and bolster the Phillipines’ economy.

1990 Carrageenan exports to the U.S.: $3 million

1990 Carrageenan exports worldwide: $50 million

1992 (projected) Carrageenan exports to the U.S.: $40 million

1992 (projected) Carrageenan exports worldwide: $90 million

Source: Phillipines Embassy, Agricultural Section