World Grain -- December 2015 - (Page 52)

FEATURE: INDONESIA'S MILLING GIANT MAY EXPAND ket is now oversaturated with capacity. Franky disputes the point. "I believe there is no excess capacity, but there is a lot RIFRPSHWLWLRQ´KHVDLG³PLOOLRQWRQQHVRIDQQXDOZKHDW HTXLYDOHQW RI ZKHDW ÀRXU RXWSXW LV DERXW  RI FDSDFLW\ that's the average," he explained. "But a spike in demand near 5DPDGDQRIWRPHDQVWKHLQGXVWU\QHHGVWKDWH[FHVV if it wants to expand to service this spike. I don't believe there Indonesia in numbers In his keynote speech to delegates at the Sixth Annual Southeast Asia District Conference and Expo, organized by the International Association of Operative Millers, Franciscus 'Franky' Welirang explained just how competitive the Indonesian milling market has become over the last two decades. Pre-deregulation in 1998, the archipelago of some 250 million people and 17,000 islands had just five mills operated by Bogasari, Eastern Pearl Flour Mills and Sriboga Raturaya & Pangan Mas. By 2009, there were 12 mills, mostly focused on Java, the most populous of Indonesia's islands. From 2010-14, another 16 mills were opened and, in 2015 and 2016, Welirang said another three mills would open up, taking the total to 31. By next year he predicted Indonesia's annual total wheat milling capacity would reach 11.2 million tonnes. Meanwhile, wheat consumption increased from 6.2 million tonnes in 2011 to 7.4 million tonnes in 2014. "This year is the only year that we haven't seen growth," he said. "That is down to changes in government policy and the slowdown of the economy, and the slowdown of the global and Chinese economies. At the mid-year point, growth was -0.9% but I think over the full year growth will be flat. "But 20 years down the line, the annual growth average will be about 5% every year." He said some 200 large companies currently account for about 34% of total flour consumption in Indonesia, with more than 55,000 SMEs representing 66% of consumption. "The big companies keep growing, but some have built their own mills and expanded horizontally," he added. "So of the 31 flour mills, some now supply their own production." Wheat imports to Indonesia mainly come from Australia, which tends to supply around 60% of the market. Canada is next with 21% followed by the U.S. with 6.6% and Ukraine with 1.9%. "We get some from Russian and India, but Black Sea wheat is a filler wheat rather than a main wheat. With today's technology, anything can happen with pre-mixes and enzymes so the mix is changing as people look for lower costs." He said the rapid expansion of Indonesia's milling sector had not come about without difficulties. "There are a lack of milling schools in Southeast Asia which means millers must study in Europe and America." He said Bogasari runs its own training program but rivals tended to invest less in training. "They often just pick up our people!" he added. 52 is excess capacity, but there is competition and sometimes new market entrants have been dumping. But that's competition." EDUCATING THE MARKET He said Bogasari and Indofood tried to differentiate their products on quality and by understanding the milling and processing businesses better than rivals, as well as understanding what products people in Indonesia want now and in the fuWXUHDVGLHWDU\GHPDQGHYROYHVDQGWKHPDUNHWIRUPRUHÀRXU based consumer goods expands. "We're trying to educate the market," he explained. "There DUHWZRWKLQJVWRWKLQNDERXWZLWKPLOOLQJ±ÀRXUVSHFL¿FDWLRQ DQGÀRXUFKDUDFWHU,I\RXXVH$XVWUDOLDQZKHDWWKHQLWKDVDQ $XVWUDOLDQFKDUDFWHU%XW86DQG&DQDGLDQZKHDWVDUHYHU\ GLIIHUHQW DQG WKDW UHVXOWV LQ D GLIIHUHQW ÀRXU FKDUDFWHU DQG D different end product. ³7KHQLQWHUPVRIDSSOLFDWLRQRUVSHFL¿FDWLRQ²PDNLQJ WKHHQGSURGXFW²\RXQHHGWRXQGHUVWDQGKRZWKHVHÀRXUV are applied, how soft or crunchy it is or you want it to be. When competing, getting this right is important, and some new millers don't understand this. They'll just buy cheap ZKHDW6RLISHRSOHGRQ¶WNQRZKRZWRPL[DQGWKHQEX\WKH ZURQJZKHDWWKH\JHWWKHZURQJTXDOLW\HQGSURGXFW6RPH new market entrants have found this out the hard way." He also said there was ample room for further expansion in Indonesia, both to serve domestic and international markets. ³7KHUH LV SOHQW\ RI RSSRUWXQLW\ WR H[SRUW RXU ÀRXUEDVHG SURGXFWVWRWKHUHVWRI6RXWKHDVW$VLDZKHUHRIWHQWKHPLOOLQJ sectors are not as competitive as in Indonesia," he said. "Over WKHODVWVHYHQ\HDUV,QGRQHVLDLVSURGXFLQJPRUHÀRXUEXWZH QHHG EHWWHU SRUW IDFLOLWLHV VR ZH FDQ H[SRUW SURFHVVHG ÀRXU EDVHGSURGXFWVWR6RXWKHDVW$VLD:HDVDQLQGXVWU\DUHGRLQJWKDWDOUHDG\DQGWRWDOH[SRUWVRIZKHDWÀRXUE\SURGXFWV DQGZKHDWÀRXUEDVHGSURGXFWVKDYHJURZQLQYDOXHWR PLOOLRQDQGLQWKHQH[WIHZ\HDUVWKLVZLOOUHDFKELOOLRQ6R we are a very important industry for the economy and exports will play a growing role in this in the future." Looking forward, he said Bogasari would strive to maintain LWV  PDUNHW VKDUH E\ EHLQJ FRPSHWLWLYH RQ ERWK TXDOLW\ and price. "We want market growth," he added. "We don't want to be alone; competition is good. I think that's the challenge, how to grow the market in general and keep our market share. We want to see growing bakeries, growing noodle, biscuit and FDNHPDUNHWV:HZDQWWRUHDFKPRUH60(VDQGZH¶OODOVR grow by serving big industry. That's the business philosophy. ³7KH IDUPHUV DQG WKH ÀRXU SURGXFW LQGXVWU\ DUH JURZLQJ DQGWKHFRQVXPHULVKDSS\$QGWKDW¶VJRRG´ Michael King, a freelance journalist and editor, has been writing about shipping, transport and commodities for more than a decade. Currently based in Indonesia, he can be reached at: Michael@borderline.eu.com. We want to hear from you - Send comments and inquiries to worldgrain@sosland.com. For reprints of WG articles, e-mail reprints@sosland.com. December 2015 / World Grain / www.World-Grain.com http://www.World-Grain.com

Table of Contents for the Digital Edition of World Grain -- December 2015

World Grain -- December 2015
Table of Contents
From the Editor-in-chief - Milling differs from Warren Buffett
Calendar of Events
Second Oilseed Congress scheduled for Feb. 9-10
News Review - Tiger pulls financial support from Dangote Flour Mills
European Parliament rejects national GMO bans
Olam 3Q operational earnings up
Wilmar’s oilseed, grain segment earnings surge
Ardent Mills stake to stay with ConAgra Brands
Noble Agri reports loss in quarter
The Andersons reports loss on Grain Group decline
IGP Institute names interim associate director
Cargill’s new South Korean feed mill is its largest in the world
ADM opens two plants in China
GSFMO privatizes its flour mills
GrainCorp 2015 earnings down
Tiger Brands year-end earnings offset by international operations
Cargill makes executive leadership changes
Glencore agricultural production up
Grain Market Review - Oilseeds
Country Focus - Spain
Feature - Going from margin to mainstream
Feature - Record Turnout in Dubai
Feature - IAOM takes show to Indonesia
Feature - Indonesia's milling giant may expand
Indonesia in numbers
Feature - An end to the bear market?
Feature - Big turnout expected for IPPE 2016
Feature - Shaping the global feed industry
Feed Operations - Bucket elevator selection and installation tips
Supplier News
Product Showcase
World Grain Archive
Ad Index/Reader Information Form International Faxback Program

World Grain -- December 2015

http://digital.world-grain.com/sosland/wg/2020_02_01
http://digital.world-grain.com/sosland/wg/2020_01_01
http://digital.world-grain.com/sosland/wg/2019_12_01
http://digital.world-grain.com/sosland/wg/2019_11_01
http://digital.world-grain.com/sosland/wg/2019_10_01
http://digital.world-grain.com/sosland/wg/2019_09_01
http://digital.world-grain.com/sosland/wg/2019_08_01
http://digital.world-grain.com/sosland/wg/2019_07_01
http://digital.world-grain.com/sosland/wg/2019_06_01
http://digital.world-grain.com/sosland/wg/2019_05_01
http://digital.world-grain.com/sosland/wg/2019_04_01
http://digital.world-grain.com/sosland/wg/2019_03_01
http://digital.world-grain.com/sosland/wg/2019_02_01
http://digital.world-grain.com/sosland/wg/2019_01_01
http://digital.world-grain.com/sosland/wg/2018_12_01
http://digital.world-grain.com/sosland/wg/2018_11_01
http://digital.world-grain.com/sosland/wg/2018_10_01
http://digital.world-grain.com/sosland/wg/2018_09_01
http://digital.world-grain.com/sosland/wg/2018_08_01
http://digital.world-grain.com/sosland/wg/2018_07_01
http://digital.world-grain.com/sosland/wg/2018_06_01
http://digital.world-grain.com/sosland/wg/2018_05_01
http://digital.world-grain.com/sosland/wg/2018_04_01
http://digital.world-grain.com/sosland/wg/2018_03_01
http://www.nxtbook.com/sosland/wg/2018_02_01
http://www.nxtbook.com/sosland/wg/2018_01_01
http://www.nxtbook.com/sosland/wg/2017_12_01
http://www.nxtbook.com/sosland/wg/2017_11_01
http://www.nxtbook.com/sosland/wg/2017_10_01
http://www.nxtbook.com/sosland/wg/2017_09_01
http://www.nxtbook.com/sosland/wg/2017_08_01
http://www.nxtbook.com/sosland/wg/2017_07_01
http://www.nxtbook.com/sosland/wg/2017_06_01
http://www.nxtbook.com/sosland/wg/2017_05_01
http://www.nxtbook.com/sosland/wg/2017_04_01
http://www.nxtbook.com/sosland/wg/2017_03_01
http://www.nxtbook.com/sosland/wg/2017_02_01
http://www.nxtbook.com/sosland/wg/2017_01_01
http://www.nxtbook.com/sosland/wg/2016_12_01
http://www.nxtbook.com/sosland/wg/2016_11_01
http://www.nxtbook.com/sosland/wg/2016_10_01
http://www.nxtbook.com/sosland/wg/2016_09_01
http://www.nxtbook.com/sosland/wg/2016_08_01
http://www.nxtbook.com/sosland/wg/2016_07_01
http://www.nxtbook.com/sosland/wg/2016_06_01
http://www.nxtbook.com/sosland/wg/2016_05_01
http://www.nxtbook.com/sosland/wg/2016_04_01
http://www.nxtbook.com/sosland/wg/2016_03_01
http://www.nxtbook.com/sosland/wg/2016_02_01
http://www.nxtbook.com/sosland/wg/2016_01_01
http://www.nxtbook.com/sosland/wg/2015_12_01
http://www.nxtbook.com/sosland/wg/2015_11_01
http://www.nxtbook.com/sosland/wg/2015_10_01
http://digital.world-grain.com/sosland/wg/2015_09_01
http://digital.world-grain.com/sosland/wg/2015_08_01
http://digital.world-grain.com/sosland/wg/2015_07_01
http://digital.world-grain.com/sosland/wg/2015_06_01
http://digital.world-grain.com/sosland/wg/2015_05_01
http://www.nxtbook.com/sosland/wg/2015_04_01
http://www.nxtbook.com/sosland/wg/2015_03_01
http://www.nxtbook.com/sosland/wg/2015_02_01
http://digital.world-grain.com/sosland/wg/2015_01_01
http://www.nxtbook.com/sosland/wg/2014_12_01
http://www.nxtbook.com/sosland/wg/2014_11_01
http://www.nxtbook.com/sosland/wg/2014_10_01
http://www.nxtbook.com/sosland/wg/2014_09_01
http://www.nxtbook.com/sosland/wg/2014_08_01
http://www.nxtbook.com/sosland/wg/2014_07_01
http://www.nxtbook.com/sosland/wg/2014_06_01
http://www.nxtbook.com/sosland/wg/2014_05_01
http://www.nxtbook.com/sosland/wg/2014_04_01
http://www.nxtbook.com/sosland/wg/2014_03_01
http://www.nxtbook.com/sosland/wg/2014_02_01
http://www.nxtbook.com/sosland/wg/2014_01_01
http://www.nxtbook.com/sosland/wg/2013_12_01
http://www.nxtbook.com/sosland/wg/2013_11_01
http://www.nxtbook.com/sosland/wg/2013_10_01
http://www.nxtbook.com/sosland/wg/2013_09_01
http://www.nxtbook.com/sosland/wg/2013_08_01
http://www.nxtbook.com/sosland/wg/2013_07_01
http://www.nxtbook.com/sosland/wg/2013_06_01
http://www.nxtbook.com/sosland/wg/2013_05_01
http://www.nxtbook.com/sosland/wg/2013_04_01
http://www.nxtbook.com/sosland/wg/2013_03_01
http://www.nxtbook.com/sosland/wg/2013_02_01
http://www.nxtbook.com/sosland/wg/2013_01_01
http://www.nxtbook.com/sosland/wg/2012_12_01
http://www.nxtbook.com/sosland/wg/2012_11_01
http://www.nxtbook.com/sosland/wg/2012_10_01
http://www.nxtbook.com/sosland/wg/2012_09_01
http://www.nxtbook.com/sosland/wg/2012_08_01
http://www.nxtbook.com/sosland/wg/2012_07_01
http://www.nxtbook.com/sosland/wg/2012_06_01
http://www.nxtbook.com/sosland/wg/2012_05_01
http://www.nxtbook.com/sosland/wg/2012_04_01
http://www.nxtbook.com/sosland/wg/2012_03_01
http://www.nxtbook.com/sosland/wg/2012_02_01
http://www.nxtbook.com/sosland/wg/2012_01_01
http://www.nxtbook.com/sosland/wg/2011_12_01
http://www.nxtbook.com/sosland/wg/2011_11_01
http://www.nxtbook.com/sosland/wg/2011_10_01
http://www.nxtbook.com/sosland/wg/20111_09_01
http://www.nxtbook.com/sosland/wg/2011_08_01
http://www.nxtbook.com/sosland/wg/2011_07_01
http://www.nxtbook.com/sosland/wg/2011_06_01
http://www.nxtbook.com/sosland/wg/2011_05_01
http://www.nxtbook.com/sosland/wg/2011_04_01
http://www.nxtbook.com/sosland/wg/2011_03_01
http://digital.world-grain.com/sosland/wg/2011_02_01
http://digital.world-grain.com/sosland/wg/2011_02_01
http://digital.world-grain.com/sosland/wg/2011_01_01
http://digital.world-grain.com/sosland/wg/2010_12_01
http://digital.world-grain.com/sosland/wg/2010_11_01
http://digital.world-grain.com/sosland/wg/2010_10_01
http://digital.world-grain.com/sosland/wg/2010_09_01
http://digital.world-grain.com/sosland/wg/2010_08_01
http://digital.world-grain.com/sosland/wg/2010_07_01
http://digital.world-grain.com/sosland/wg/2010_06_01
http://digital.world-grain.com/sosland/wg/2010_05_01
http://digital.world-grain.com/sosland/wg/2010_04_01
http://digital.world-grain.com/sosland/wg/2010_03_01
http://digital.world-grain.com/sosland/wg/2010_02_01
http://digital.world-grain.com/sosland/wg/2010_01_01
http://digital.world-grain.com/sosland/wg/2009_12_01
http://digital.world-grain.com/sosland/wg/2009_11_01
http://digital.world-grain.com/sosland/wg/2009_10_01
http://digital.world-grain.com/sosland/wg/2009_09_01
http://digital.world-grain.com/sosland/wg/2009_08_01
http://digital.world-grain.com/sosland/wg/2009_07_01
http://digital.world-grain.com/sosland/wg/2009_06_01
http://digital.world-grain.com/sosland/wg/2009_05_01
http://digital.world-grain.com/sosland/wg/2009_04_01
http://digital.world-grain.com/sosland/wg/2009_03_01
http://digital.world-grain.com/sosland/wg/2009_02_01
http://digital.world-grain.com/sosland/wg/2009_01_01
http://digital.world-grain.com/sosland/wg/2008_12_01
http://digital.world-grain.com/sosland/wg/2008_11_01
http://digital.world-grain.com/sosland/wg/2008_10_01
http://digital.world-grain.com/sosland/wg/2008_09_01
http://digital.world-grain.com/sosland/wg/2008_08_01
http://digital.world-grain.com/sosland/wg/2008_07_01
http://digital.world-grain.com/sosland/wg/2008_06_01
http://digital.world-grain.com/sosland/wg/2008_05_01
http://digital.world-grain.com/sosland/wg/2008_04_01
http://digital.world-grain.com/sosland/wg/2008_03_01
http://digital.world-grain.com/sosland/wg/2008_02_01
http://digital.world-grain.com/sosland/wg/2008_01_01
http://digital.world-grain.com/sosland/wg/2007_12_01
http://digital.world-grain.com/sosland/wg/2007_11_01
http://digital.world-grain.com/sosland/wg/2007_10_01
http://digital.world-grain.com/sosland/wg/2007_09_01
http://digital.world-grain.com/sosland/wg/2007_08_01
http://digital.world-grain.com/sosland/wg/2007_07_01
http://digital.world-grain.com/sosland/wg/2007_06_01
http://digital.world-grain.com/sosland/wg/2007_05_01
http://digital.world-grain.com/sosland/wg/2007_04_01
http://digital.world-grain.com/sosland/wg/2007_03_01
http://digital.world-grain.com/sosland/wg/2007_02_01
http://digital.world-grain.com/sosland/wg/2007_01_01
http://digital.world-grain.com/sosland/wg/2006_12_01
http://digital.world-grain.com/sosland/wg/2006_11_01
http://digital.world-grain.com/sosland/wg/2006_10_01
http://digital.world-grain.com/sosland/wg/2006_09_01
http://digital.world-grain.com/sosland/wg/2006_08_01
http://digital.world-grain.com/sosland/wg/2006_07_01
http://digital.world-grain.com/sosland/wg/2006_06_01
http://digital.world-grain.com/sosland/wg/2006_05_01
http://digital.world-grain.com/sosland/wg/2006_04_01
http://digital.world-grain.com/sosland/wg/2006_03_01
http://digital.world-grain.com/sosland/wg/2006_02_01
http://digital.world-grain.com/sosland/wg/2006_01_01
http://digital.world-grain.com/sosland/wg/2005_12_01
http://digital.world-grain.com/sosland/wg/2005_11_01
http://digital.world-grain.com/sosland/wg/2005_10_01
http://digital.world-grain.com/sosland/wg/2005_09_01
http://digital.world-grain.com/sosland/wg/2005_08_01
http://digital.world-grain.com/sosland/wg/2005_07_01
http://digital.world-grain.com/sosland/wg/2005_06_01
http://digital.world-grain.com/sosland/wg/2005_05_01
http://digital.world-grain.com/sosland/wg/2005_04_01
http://digital.world-grain.com/sosland/wg/2005_03_01
http://digital.world-grain.com/sosland/wg/2005_02_01
http://digital.world-grain.com/sosland/wg/2005_01_01
http://digital.world-grain.com/sosland/wg/2004_12_01
http://digital.world-grain.com/sosland/wg/2004_11_01
http://digital.world-grain.com/sosland/wg/2004_10_02
http://digital.world-grain.com/sosland/wg/2004_10_02
http://digital.world-grain.com/sosland/wg/2004_10_01
http://digital.world-grain.com/sosland/wg/2004_09_01
http://digital.world-grain.com/sosland/wg/2004_08_01
http://www.nxtbookMEDIA.com