TRENDS IN THE INDONESIAN FLOUR MILLING SECTOR By: Franciscus Welirang Chairman of APTINDO (Association of Flour Producers in Indonesia) Director of PT Indofood Sukses Makmur Tbk (Bogasari Flour Mills) AGIC Indonesia Jakarta, March 5th, 2019 PRE & POST DEREGULATION OF INDONESIAN WHEAT FLOUR INDUSTRY – THE HISTORY PRE Deregulation POST Deregulation (BULOG Era) SUBJECT Total 1970-1998 1999-2009 2010-2014 2015 - 2018 Total 4 4 + 7 = 11 11 + 15 = 26 27+ 4 (-3) 28 Cilegon (3); Tangerang (2); Jakarta (1); Jakarta & Gresik (1); Medan (2); Cilegon (1); Java: 23 Surabaya (1); Tangerang (1); Bekasi (2); Cilegon (-1) Outside Java: 5 Location Makassar (1); Sidoarjo (3); Gresik(3); Tangerang (-1); (Centralized in Semarang (1); Medan (1); Sidoarjo (1); Bekasi (-1); Java ) Cilacap (1); Cilegon (1) Mojokerto (1); Surabaya (1); Semarang (1) Total of Wheat Mill Capacity : +/- 11.8 million MT/year 2 INDONESIAN FLOUR MILLS LOCATION - 2019 (28 Factories) Bogasari Sriboga Wilmar group Agri First Halim Sari (Jakarta; Tng Semarang Medan Medan Cibitung; Surabaya) Manunggal Eastern Pearl Cerestar group Perkasa (Makassar & Cerestar/Harves Cilacap Cilegon) Wings group tar (Cilegon, Gresik, Mdn) Agrofood, Jakaranatama Mojokerto Medan Pioner Sidoarjo Wilmar (Dumai) Purnomo Sidoarjo Mustafamesindo, Batam (relocate) Asia Raya Sidoarjo Crown Tangerang Pakindo Sidoarjo Bungasari Cilegon Murti Jaya Gresik Nutrindo (Mayora) Wilmar Total Cap: +/- 11.8 (Gresik) Cilegon million MT/year Pundi Fugui / Mill Agro Centralized in Java Kencana, Jakaranatama Horizon Sariinti Paramasuka Surabaya Cilegon Bogor Bekasi Semarang (Gresik, Jakarta 3 New Flour Mills in 2018 PT MILL AGRO INDONESIA (Location: Surabaya, East Java) New Flour Mills in 2019 (under construction) • PT Wilmar Nabati Indonesia (Location: Dumai, South Sumatera) • PT Bungasari Flour Mills (Location: Cilegon, West Java ) 4 Feed Mills in Indonesia Charoen Pokphand-Medan 0,58 mT/Year Comfeed – Medan 0,390 mT/year Sierad – Surabaya – Mabar – Medan 0,410 mT/year Sinta Prima- Japfa Comfeed– 0,576 m T/year 0,58 mT/Year Surabaya – 1,2 m T/year Gold Coin – Medan 0,150 mT/year Wonokoyo-Surabaya Malindo – Medan 0,180 mT/year CP, Comfeed, Cargill 0,5 mT/Year 1 mT/year Charoen Pokphand – Cheil Jedang-Surabaya Surabaya – 1,7 m T/year 0,4 mT/year Charoen Pokphand – Jakarta Comfeed, Panca Patriot 1,35 mT/Year 0,170 mT/year CP, Comfeed, Cargill – Makassar 0, 676 mT/year Lampung 0,800 mT/year Wonokoyo-CJK 0,3 mT/Year Malindo Makassar Panca Patriot – 0, 280 mT/year CJ Kalimantan- 0,240 mT/year Gold Coin- 0,3 mT/year Cargill – Surabaya Malindo Gresik– 0,168 mT/year 0,120 mT/year 0,250 mT/year New Hope -0,4 mT/year Gold Coin-Surabaya Cheil Jedang-0,480 mT/year 0,072 mT/year Malindo Grobogan– 0,300 mT/year Panca Patriot Malindo – 0,240 mT/year New Hope 0,146 mT/year Cargill-0,085 mT/year 0,3 mT/year Universal-0,600 mT/year Japfa Comfeed-1,3 mT/year Matahari 0,100 mT/year + 0.240mT/year Total Cap: +/- 20 CJ Semarang-0,3 mT/year million MT/year INDONESIAN WHEAT FLOUR CONSUMPTION 6 INDONESIAN WHEAT FLOUR CONSUMPTION , 2014-2018 YEAR 2014 2015 2016 2017 2018 000 000 000 000 SUBJECT % % % % 000 MT % MT MT MT MT DOMESTIC 5,431 98.0 5,455 99.5 5,841 98.9 6,275 99.9 6,519 99.96 SUPPLY IMPORTS 197 2.0 27 0.5 64 1.1 8.5 0.1 2.3 0.04 Total 5,628 100 5,482 100 5,905 100 6,24 100 6,522 100 Wheat Equivalent 7,405 7,213 7,769 8,056 8,361 GROWTH 5.09% - 2.60% 7.72% 6.41% 3.79% Indonesian Wheat Flour Consumption : 2017 : 6.2 MMT, Wheat grain equivalent 7.98 MMT 2018: 6.5 MMT, Wheat grain equivalent 8.36 MMT Small Medium Enterprises - Traditional management - Family-owned business - Community oriented, tradition-minded Big & Modern Industry - High-tech machinery - Professional management - Publicly-listed company 9 SME 10 • Seasonal: Lebaran, Christmas • Household helping families’ economy • Hobbyist • No Employee, Family members only • Get the order from their own closed community only • No Distribution Network 11 • Millennials • Newly set up company • Individual or partnership own • Good Marketing Strategy • On-line Distribution • Good Management • Highly awareness for end product presentation 12 • Gen X, Y • From Generation to Generation • Family Style Business • Less Marketing Strategy • Limited Distribution network • Simple Management Sytle • Basic end product presentation 13 • Gen X, Y • From Generation to Generation • Family Style Business • Less Marketing Strategy • Limited Distribution network • Simple Management Sytle • Basic end product presentation • Limited Financial support 14 • Gen X, Y • Good Management • Good Marketing Strategy • Own Customer Network • Legal Company • Modern end product presentation 15 BIG MODERN INDUSTRY PROFILE • Gen Baby Boomers, X, Y • Professional Management • Strong Organization Structure • Strong Marketing Strategy • Customer Network • Strong Logistic and Distribution System • Strong Financial Support • Advanced Technology • E-Commerce and Digitalization 16 17 18 19 20 21 22 23 24 25 26 27 FLOUR CATEGORY AMONG SME SME LOOK FOR CONSISTENT QUALITY AS THEY THINK IT IS IMPORTANT FOR CONSISTENCY & CONTINUITY OF THEIR PRODUCTION 1. QUALITY 2. PRICE 3. AVAILABILITY 4. IMAGE 5. SERVICES Copyright Copyright © 2017 The Nielsen Company. Confidential and proprietary. INDONESIAN WHEAT GRAIN IMPORT & WHEAT FLOUR IMPORT 29 INDONESIAN WHEAT GRAIN IMPORTS Period: 2016 - 2018 2016 2017 2018 No COUNTRY OF ORIGIN QTY (MT) QTY (MT) QTY (MT) % 1 AUSTRALIA 3,499,715 5,103,677 2,419,709 24.0% 2 UKRAINE 2,469,437 1,984,999 2,419,769 24.0% 3 CANADA 1,658,441 1,686,052 1,973,706 19.5% 4 RUSSIA FEDERATION 991 1,222,026 1,228,320 12.2% 5 UNITED STATES 938,665 1,150,145 904,174 9.0% 6 ARGENTINA 1,289,198 152,312 677,953 6.7% 7 MOLDOVA, REPUBLIC OF 4,690 63,792 57,271 0.6% 8 Others 673,536 71,132 415,398 4.1% TOTAL 10,534,673 11,434,134 10,096,299 100% Growth, yoy 42.1% 8.5% -11.7% Country of Origin: Australia, Ukraine, Canada, Russia 30 Source: BPS (Central Bureau of Statistic Indonesia) INDONESIAN WHEAT FLOUR IMPORTS (HS 1101.00.11 - FOOD) 2017 2018 No COUNTRY OF ORIGIN MT 000 USD MT 000 USD % 1 SINGAPORE 8,499 2,970 1,248 587 53.6% 2 JAPAN 3 10,049 886 636 38.1% 3 TURKEY 9 22 150 45 6.4% 4 PHILIPPINES 0 0 0 0 0.0% 5 KOREA, REPUBLIC OF 4,664 1,358 0 0 0.0% 6 Others 9 22 43 30 1.8% TOTAL 13,183 14,422 2,327 1,298 100% CIF, USD/MT 1,094 558 2018 VS 2017 -82.3% Country of Origin: Singapore & Japan (Japanese Flour/special flour) Compared to 2017, wheat flour import for food down by 82.3% 31 Source: BPS (Central Bureau of Statistic Indonesia) INDONESIAN EXPORT OF: WHEAT FLOUR; BY PRPODUCT & WHEAT FLOUR BASED PRODUCTS 32 INDONESIAN WHEAT FLOUR EXPORTS (HS code 1101.00.11 & 1101.00.19) Period: 2016-2018 COUNTRY OF 2016 2017 2018 No DESTINATION MT 000 USD MT 000 USD MT 000 USD 1 EAST TIMOR 15,634 7,417 17,262 7,406 17,296 7,293 2 PHILIPPINES 28,047 10,790 29,488 10,049 12,505 4,170 3 PAPUA NEW GUINEA 5,131 2,035 14,995 3,178 9,908 4,096 4 KOREA, REPUBLIC OF 6,789 2,982 3,800 1,545 3,535 1,470 5 MYANMAR 874 334 14,192 5,660 3,013 888 6 SINGAPORE 2,163 906 1,331 539 2,213 654 7 MALAYSIA 1,896 676 1,890 729 461 174 8 VIET NAM 1,318 751 6,572 1,976 0 0 9 Others 429 424 1,937 1,136 1,671 643 10 TOTAL 62,281 26,315 91,467 32,217 50,602 19,388 FOB, USD/MT 423 352 383 Growth yoy (%) 22.4% -39.8% Primary Destinations: EAST TIMOR, PHILIPINNES, PNG, & KOREA Compared to 2017 (yoy), wheat flour export value down by 39.8 % 33 Source: BPS (Central Bureau of Statistic Indonesia) INDONESIAN BY PRODUCT EXPORTS: 2016 - 2018) (HS Code 2302.30.10 & 2302.30.90) 2016 2017 2018 2018 vs 2018 vs No Country of Destination FOB FOB FOB 2017 2017 QTY, MT QTY, MT QTY, MT (000USD) (000USD) (000USD) (QTY) (USD) 1 VIET NAM 302,201 51,529 312,465 51,895 126,959 21,654 -59.4% -58.3% 2 CHINA 11,652 2,485 25,969 4,894 96,490 20,203 271.6% 312.8% 3 SAUDI ARABIA 45,100 7,724 44,000 6,899 69,500 10,969 58.0% 59.0% 4 KOREA, REPUBLIC OF 90,123 18,196 66,000 10,376 46,596 7,961 -29.4% -23.3% 5 THAILAND 68,519 11,301 7,150 1,151 22,400 3,935 213.3% 241.8% 6 PHILIPPINES 21,835 3,659 7,952 1,285 17,356 3,181 118.2% 147.6% 7 JAPAN 9,459 3,213 8,262 1,394 17,189 3,040 108.1% 118.1% 8 OTHERS 873 155 184 68 2,000 778 986.7% 1043.1% Total 549,762 98,263 471,981 77,962 398,489 71,721 -15.6% -8.0% Primary Destinations: CINA, VIETNAM, SAUDI ARABIA, SOUTH OF KOREA Compared to 2017, by product export value down by 9% 34 Source: BPS (Central Bureau of Statistic Indonesia) INDONESIAN WHEAT FLOUR BASED PRODUCTS EXPORTS (2017-2018) 2017 2018 2018 vs 2017, % No HS CODE WHEAT FLOUR BASED PRODUCTS VALUE VALUE (000 QTY, MT QTY, MT QTY VALUE (000 USD) USD) 1 19053220 Wafers 98,759 275,288 136,080.0 307,153.4 37.8% 11.6% 2 19023040 Oth instant noodles, stuffed, whether or not 107,183 179,373 132,567.8 207,188.3 23.7% 15.5% 3 19053110 Sweetcooked biscuits, or othwise not prepared containing cocoa 58,197 187,831 50,872.4 177,636.5 -12.6% -5.4% 4 19053120 Sweet biscuits, containing cocoa 38,612 72,737 41,498.6 79,993.4 7.5% 10.0% 5 19059090 oth baker wares 9,646 26,120 9,565.5 26,834.8 -0.8% 2.7% 6 19059010 Unsweetened teething biscuits 8,170 16,968 12,231.4 24,516.2 49.7% 44.5% 7 19023090 Transparent vermicelli, stuffed, whether or not 15,017 25,243 13,116.0 21,189.3 -12.7% -16.1% 8 19021990 Pasta,cooked whether or othwise or notprepared cooked or stuffed or 7,680 9,298 6,857.6 7,719.7 -10.7% -17.0% 9 19059080 Otherotherwise crisp prepared, savoury foodother products 2,550 5,521 3,326.2 7,076.3 30.4% 28.2% 10 19053210 Waffles 1,668 5,012 1,051.8 3,305.9 -36.9% -34.0% 11 19059030 Cakes 303 1,107 829.6 2,637.9