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INTERFLO
UR HO
LDINGS
LTD
OVERVIEW Ø Macro economic & dietary trends.
Ø The flour milling industry in S/E Asia.
Ø The positioning of the Australian wheat
industry
Ø Potential innovations
Ø Closing comments on some challenges
INTERFLO
UR HO
LDINGS
LTD
The “Asia Story” is well known…
Ø Economic growth across the region, urbanisation, rapid expansion of the middle classes, increased domestic consumption, increased household wealth & discretionary expenditures.
Ø Strong positive growth story and high expectations
of continuing improved outcomes.
INTERFLO
UR HO
LDINGS
LTD
As the middle class develops, wheat flour consumption grows and market segments
multiple…
Broadening of diets, inclusion of wheat flour products as a standard part of a typical diet, within traditionally rice dominated diets. Wheat noodles have become a staple and ubiquitous food item, cakes & flour-based sweets are standard everyday items, and bread is the fastest growing segment
INTERFLO
UR HO
LDINGS
LTD
Bogasari FM – Surabaya
Eastern Pearl FM – Makassar
Sriboga FM– Semarang
Panganmas FM – Cilacap
Bogasari FM – Jakarta
PETA LOKASI INDUSTRI TEPUNG TERIGU INDONESIA SEBELUM DEREGULASI (ERA BULOG)
INTERFLO
UR HO
LDINGS
LTD
6
Bogasari FM – Surabaya
Eastern Pearl FM – Makassar
Sriboga FM– Semarang
Panganmas FM – Cilacap
Fugui Flour & Grain – Gresik
Bogasari FM – Jakarta
Pundi Kencana - Cilegon
Purnomo Sejati – Sidoarjo
Asia Raya – Sidoarjo
Pakindo Jaya – Sidoarjo
Berkat Indah Gemilang - Tangerang
Agri First – Medan
Cerestar - Cilegon
Lumbung Nasional - Bekasi
Halim Sarigandum-Medan
Golden Grand - Cilegon
Bumi Alam Segar - Bekasi
Horizon - Bekasi
Jakaranatama – Medan
Pioner Flour MiIls Sidoarjo Mustafa Mesindo -
Tangerang
Bungasari FM
Wilmar Group - Gresik
Crown Flour Mills - Tangerang
Note :
Pre-deregulation
Post-deregulation
Next – to be establish
PETA LOKASI INDUSTRI TEPUNG TERIGU INDONESIA - 2013
Sarana Prima Makmur - Banjarmasin
Total Kap. Giling: +/- 8.2 jt MT/Thn Terpusat di JAWA
Agrofood makmur Mandiri, Mojokerto
INTERFLO
UR HO
LDINGS
LTD
MFM strategic locations
FFM Mill 1
SBFM Mill 2
FFM Mill 2
PFM
SBFM Mill 1
UMFM
MFM Mill 1
MFM Mill 2
KFM
Peninsular Malaysia – Location of all Flour Mills
INTERFLO
UR HO
LDINGS
LTD
Milling capacity growth continues in EVERY market in S/E Asia…..
Ø Many businesses extrapolating the growth trend out 5-10 years
and building capacity ahead of the demand curve. Ø This consists of growth within existing players in
the flour industry, and new milling capacity from new players, typically with links to downstream processing and retail or to stockfeed milling. Ø Decentralised industry structure based around
manufacturing locations and transport economics.
INTERFLO
UR HO
LDINGS
LTD
Traditional margins being squeezed, are causing changes in grist and sales
management….
Ø With much more milling capacity coming online, margins are being compressed in a battle for market share and throughput. Ø There appears to be a general movement towards higher ash, lower gluten products – optimising extraction and using less expensive wheat. Ø These cheap general purpose flours or 2-minute noodle flours have tight margins on sales but give bulk efficiency to a flour mill. Ø Therefore alternative origin cargoes (IMW, RUS, etc) enable cheaper grists in a competitive low pro GP and low pro noodle wheat market.
INTERFLO
UR HO
LDINGS
LTD
As a general comment, Australian wheat has a well established competitive position in S/E Asia built up
over 70+ years….
Although not always the best match for product quality, Australian wheat is consistently available, with reliable quality parameters across a gluten range of 23-32%, enabling usage in a broad range of applications. Ø High extraction, low screenings, whiter noodle
colour, used in a range of products. Ø Most GP flours and noodle flours in SE Asia are
based on a combination of AH, APW and ASW. Ø Most 2-minute noodles are based on APW/ASW + a percentage of cheap filler wheat.
INTERFLO
UR HO
LDINGS
LTD
For the bread segment, the boot is on the other foot, and has been for a long
time…. Bread flours are a
different story, which is a big area of opportunity for Australian producers. Apart from APH which is not typically price competitive with DNS/CWRS.
INTERFLO
UR HO
LDINGS
LTD
Other origin wheats are becoming more important and less “opportunistic" in the
buying program….... Ø Other origin wheats are utilised to then push the
base quality over the required standard or product parameter. (i.e., lifting gluten in noodle flours) Ø Cost competitiveness of alternative origins,
especially on the low protein and lower quality products
Ø Sometimes referred to as “Filler Wheat” due to on/
off availability and perceived inconsistency of quality parameters, phytosanitary issues and darker noodle colours.
Ø However are typically $10/mt+ cheaper than lowest
on a CNF basis through lower costs of production and supply chain improvements.
INTERFLO
UR HO
LDINGS
LTD
Taking everything into account, there are opportunities for wheat quality innovation…..
Ø Innovation with wheat variety end-product performance.
Ø High yielding Australian varietal ASW or even feed
wheat that can satisfy cheap bulk flour for 2-minute noodles. Ø An AH wheat that gives better water absorbtion and
extensibility and prices PNW wheats out of the grist
Ø Australian Club wheat (soft) that can be blended or substitute for SWW, with good solvent retention.
INTERFLO
UR HO
LDINGS
LTD
This is a very interesting time for the Australian wheat industry on a number of
fronts…
Ø Ability to satisfy increasing demand within SE Asia and other regions with larger Australian production?
Ø Millers will increasingly have to turn to alternative origins, strengthening buying patterns and channels and becoming more familiar with new origins.
Ø Even more than in the past, the importance of front-end
shipments (December-April) immediately following harvest. i.e. prior to the Black Sea new crop increases.
Ø Cost competiveness and supply chain flexibility is decreasing. Eg) Rabo study; port allocation systems
Ø And the industry structure is yet to evolve to allow price signals up and down the supply chain. The BHCs’ have significant market power….
INTERFLO
UR HO
LDINGS
LTD
INTERFLO
UR HO
LDINGS
LTD
FLOUR FORTIFICATION INITIATIVE
A Public-Private-Civic-Investment in Each Nation
INTERFLO
UR HO
LDINGS
LTD
The Problem Ø Two billion people – over 30% of the world’s
population – are anemic, many due to iron deficiency.
Ø An estimated 300,000 neural tube birth defects occur every year globally. Most of these could be prevented.
Ø Vitamin and mineral deficiency contributes to more than one-third of all deaths in children under age 5.
INTERFLO
UR HO
LDINGS
LTD
A Proven Solution
Ø Fortifying grains with iron improves iron status, which in turn helps children develop physically and mentally. Iron is also critical for productivity and the health of a pregnant mother and her unborn child.
Ø Every year, an estimated 38,417 serious birth defects such as spina bifida are prevented globally where flour is fortified with folic acid. That’s an average of 105 healthier babies a day.
Ø Comparing the cost of fortification with the cost of treating children with spina bifida, countries report a cost:benefit ratio of at least 1:12.
Ø In three consecutive sessions, the Copenhagen Consensus panel of leading economists ranked providing vitamins and minerals among their top three most cost-effective investments.
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