Competitive Strengths &
Business Strategies Print ThisPrint this page

The Group believes that its business benefits from the following competitive strengths which have contributed to its position as one of Indonesia's major vertically-integrated agribusiness groups:

Competitive Strengths

One of the largest plantation companies in Indonesia with strategically located and largely contiguous plantations
Extensive vertically integrated operations
Among the leaders in market share in Indonesia, a high-growth market and one of the world's most populous countries, supported by strong brands and loyalty

As of 31 December 2020, the Group has approximately 253,0361 ha planted with oil palms, of which approximately 18% was planted with young tree below 7 years old, which we expect will contribute to the increase of our future production of CPO as these younger trees approach maturity and/or peak production. Our oil palm plantations are strategically located in close proximity to each other and to our processing mills, near deep draft port facilities, and in largely contiguous land, which contribute to more efficient management, and lower transportation and other costs. Substantially all of our plantations are located on flat or mildly undulating terrain, which also reduces our planting, maintenance and harvesting costs.

The Group is a vertically integrated agribusiness with operations spanning the entire supply chain from research and development, seed breeding, oil palm cultivation and milling of palm oil to production and marketing of branded cooking oil, margarine and shortening. We believe our high degree of vertical integration and the large scale of our operations provide us with synergies and competitive benefits in the form of cost efficiencies and stronger relative bargaining positions. Our oil palm plantations supply the bulk of internal CPO requirements to our downstream edible oils and fats division, and reduces our exposure to third party purchases of CPO.

We have 27 palm oil mills across our estates, with a total combined capacity of 7.0 million tonnes of FFB per year. We are increasingly investing in our own supply chain, including bulking stations, tugboats and barges, fleet of trucks and road tankers to ensure an efficient supply chain of CPO.

We also own and operate integrated refining and fractionation facilities strategically located in major Indonesian cities (i.e. Jakarta, Surabaya, Medan, and Bitung). The Group has a total annual processing capacity of 1.7 million tonnes of CPO. Our large business volume enables such facilities to operate at high utilization rates which generate the desired economies of scale. By owning much of our production chain, we are able to achieve greater coordination and efficiency in terms of planning, logistics, production and merchandising.

We have built strong brands over decades of operations in Indonesia and our deep appreciation and intimate understanding of the Indonesian consumer market, including consumer tastes, spending and other preferences, has allowed us to foster loyalty from our customers in our brands. We believe that the trust and loyalty that we have developed in our brands provide us with a competitive advantage in maintaining a large customer base and the selling price of our products. Furthermore, our strong reputation facilitates our ability to develop and market new products or extensions of existing products as we believe customers are more likely to rely on a trusted brand when experimenting with new products. In addition, our well-developed brands and reputation allow us to avoid excessive advertising costs, as our products and brand names already are well-known in the market, and allow us to negotiate favorable terms with distributors given the popularity of our products.

Our brands have won multiple awards over the years. For example, we were awarded:

  1. The Indonesia Living Legend Brands (IBBA) by SWA Magazine;
  2. Indonesia WOW Brand by Markplus Inc; and
  3. One of Indonesia's most valuable brands by SWA Brand Finance.
Access to extensive distribution network across Indonesia
Established research and development (R&D) capabilities and seed breeding program
Experienced management, marketing and technical team

We distribute our branded products throughout the Indonesian archipelago through the distribution channels of our parent company, as well as third-party distributors. In addition, our products are exported to countries including Asia, Africa, Middle East and Australia. We continue to maintain and grow our relationships with third-party distributors in order to gain wider distribution for our products. We also leverage on the Indofood's stock points throughout Indonesia for the distribution of products. Each stock point is generally located in areas with a high density of retail outlets and/or near traditional markets serving the retail outlets. We believe that the large number of stock points and their proximity to demand centers provides us with a significant competitive advantage, allowing faster and more frequent deliveries than our competitors, which enhances product availability and freshness. The stock point system also allows us to limit our distribution and transportation costs.

We believe that our R&D efforts will assist us to achieve high production yields and cost efficiencies. For example, we have developed high yielding oil palm seeds through our research efforts. Our dedicated R&D team carries out research focused on breeding of seedlings to improve FFB yield. We believe that we will be able to continue to leverage our strong and historically successful R&D and seed breeding programs to improve production costs and environmental sustainability and to maximize profit in the long run.

Our experienced management, marketing and technical team has demonstrated the ability to successfully build and integrate our various operating activities through their years of experience, as shown by their successful track record in managing our business. In particular, our management, marketing and technical team has led the process through which we have developed a complementary mix of products, built brand recognition and loyalty, managed price volatilities and identified new business opportunities, including locating suitable sites for the cultivation of oil palms and the establishment of refineries and processing plants. Our senior management team possesses extensive industry experience in Indonesia, with an average of more than 15 years of experience in agribusiness. Under the guidance of our senior management, we have expanded our business in recent years, including by entering the sugar business, and our total planted area has increased from approximately 61,000 hectares in 2005 to approximately 303,149 hectares as of 31 December 2020.

2016 Business Strategies And Expansion

2021 Business Strategies And Expansion

Plantation Division
Edible Oils & Fats Division

As a cost-effective producer, our focus in 2021 is to prioritise our capital investment in growth areas, improve cost control, and pursue innovations that can raise plantation productivity.

We will continue with ongoing efforts to digitalise work processes, streamline manpower requirements, and simplify standard operating procedures for greater cost efficiency.

Our planned activities include replanting on older oil palm plots in Riau and North Sumatra, increasing FFB yields through active crop management, and maximizing productivity through increased mechanisation. Anticipating higher FFB production from the newly developed areas, we are expanding production capacity in East Kalimantan with the construction of a 45-tonnes-per-hour FFB mill which will be ready in 2021. We will also improve the yield of our sugar cane plantations in South Sumatra by planting higher-yielding seed cane varieties and improving fertilisers and agronomy management.

With the growing demand for consumer EOF products, we will increase production capacity to capture opportunities and strengthen market share. We are continuing with the competitive pricing strategy to entrench Bimoli's market leadership and strengthen Delima as our second brand and Amanda brand to support the government's Domestic Mandatory Obligation (DMO) program.

We will drive volume growth through a higher frequency of marketing campaigns, direct sales in modern trade and trade promotions in general trade. The product packaging for Bimoli will be refreshed with a new bottle design.

The current distribution system will be complemented by various e-commerce platforms to increase market reach and penetration. We will develop new products at competitive price points, improve customer service, enhance product labelling and packaging, and increase efficiency through process automation. The global supply chain and distribution networks will be enhanced to extend our market reach domestically and internationally.

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