Yale Integrated Leadership Case Competition 2016 - Presentation by National University of Singapore Business School

PALM OIL 2016

YALE SOM INTEGRATED LEADERSHIP CASE COMPETITION

THE SINGAPORE LIONS

Slide #2

3 COUNTRIES

21 YEARS OF WORK EXPERIENCE

4 UNIQUE FUNCTIONS

4 ACADEMIC BACKGROUNDS

13 UNIQUE LANGUAGES

AG

EN

DA OUTCOMES

PROBLEM ANALYSIS

RECOMMENDATIONS

CONCLUSION

Slide #3

Products & Markets

Focus on Palm Oil Industry

Q&A

OUTCOMES PROBLEM ANALYSIS RECOMMENDATION CONCLUSION

Slide #4

Build Wilmar into an agriculture industry leader.Trailblaze industry standards in economic

and environmental sustainability.Secure two major geographies.USD 4.5 billion increase in revenue in 5 years.


Slide #5

How can Wilmar position itself to achieve sustainable growth while maintaining its reputation and influencing

the market and stakeholders?


Slide #6

POSITIONING

REPUTATION

SUSTAINABLE GROWTH STAKEHOLDER MANAGEMENT

PRODUCTS MARKETSGOVT NGOs

CUSTOMERS SUPPLIERS

COMMUNITY

Wilmar needs to reposition itself to experience breakthrough!


Slide #7

PALM OIL INDUSTRY : P.E.S.T.E.L ANALYSIS

POLITICAL ENVIRONMENT SOCIAL TECHNOLOGICAL ECONOMY LEGAL

Industry is supported by government.

International political pressures.

Slash and burn leads to global warming.

Poses threats to tropical forest and wildlife habitat.

Palm oil account for 20% of the Indonesian exports.

Industry has developed the economy significantly.

Effect of deforestation on local community.

Issues related to corruption due to unclear land allocation rules.

Digital mapping to reduce ambiguity in land rights.

Varying guiding principles for sustainable growth.

Ambiguity in land ownership rights.


Slide #8

-100, -100

-20, 50

50, -20

Un

sust

ain

able

P

ract

ices

0, 0

Unsustainable Practices Sustainable PracticesSu

stai

nab

le

Pra

ctic

es

Oth

er P

laye

rs

A CLASSIC “CHICKEN GAME” PROBLEM


Slide #9

-50, -20

Mitigating chicken game takes courage! Remove our own option and reduce incentive for others

Sustainable PracticesO

ther

Pla

yers

Un

sust

ain

able

P

ract

ices

0, 0

Sust

ain

able

P

ract

ices


Slide #10

PRODUCT MIX : REDUCE RISK & FOCUS ON GROWING PRODUCT LINES

*Source- Annual Report

Revenue by Company Divisions1. 15% focus on sugar as a product line

from 6%.

2. Focus on consumer products,

centered in New Zealand & Australia.

3. Maintain palm oil focus, to reduce

risk from variations in oil price

fluctuations.


Slide #11

MARKET MIX : FOCUS ON GROWING MARKETS

*Source- Annual Report

Revenue by Geographies 1. Increase revenue from Indian

market to 10% by riding on the

growing demand wave.

2. Continue focus on Africa, to help

build brand image in the long term &

benefit from a growing economy.

3. Leverage acquisition of Goodman

Fielder Limited to increase revenue

from NZ and Australia to 7%.

Europe


Slide #12

THE TROIKA : THREE GUIDING PRINCIPLES

TRACEABILITY

TRANSPARENCY AWARENESS


Slide #13

INDONESIAN PALM OIL INDUSTRY : TRANSFORMATION ROADMAP

We propose a transformation roadmap taking into account Wilmar’s guiding principles and various stakeholders.

Trace the industry outliers

1

Share information

2

Evaluate & Penalize

3

Wilmar Certification

4

Continuous Monitoring

5

Educate & Awareness Campaign

6

12 months 6 months 18th months onwards


Slide #14

Renew old relationships to progress

Stakeholders Action Goal Risk Proposed Mitigation

Government - National Level

1) Renew relationship with Norwegian

Fund Managers

2) Form new agricultural monitoring

board to tackle legal obstacles

Utilize the $1 billion funding - left with

95%

Ignorance of Norwegian Fund Managers Set up a memorandum of understanding

that Indonesia will pilot this solution

through Wilmar and Sumatran

government

Government - District LevelWork with Wilmar and its suppliers to

test this solution

Promote green awareness and distinct

its competitive advantage

Unwillingness to collaborate Showcase potential profit and loss

through lack of monitoring efforts

WilmarProvide list of suppliers to agricultural

monitoring board

Advancing the test of monitoring

technology

Pushback from suppliers Delayed full penalization until year

2018

NGOsBegin monitoring the process of

technology implementation to ensure

fairness and progress

Political and Bureaucratic obstacles Continuous international pressure. If

project on track, continuous praise.


Slide #15


Government - District andAgricultural Monitoring Board

Identify outliers and punish

suppliers by restricting purchase.

Will stop purchasing by 2018 if still

doesn’t meet standard of NDPE.

Identify and encourage suppliers

that meets standard of NDPE

“Spank and thank”

Punish and stop palm oil suppliers

from unsustainable palm oil

practices.

Encourage and build suppliers with

sustainable palm oil practices

Public or Supplier backlash Educate and Awareness Campaign

NGOsSuppliers moving to other players Continue value chain identification

if supplier move to other players,

continuous spank and thank.

WilmarIncreased price of palm oil Product portfolio recalibration

Balancing positive and negative reinforcement is key to compliance


Slide #16


Government - National, Government - District,Agricultural Monitoring Board, andNGOs

Seeing that Wilmar is a pilot for

new monitoring technology and

practices sustainability in

agricultural activity. Wilmar should

be certified as Greenpeace

ambassador and be branded

superior to competitors

Continuous monitoring of palm oil

practices situation in Sumatra.

To encourage new industry

standards amongst palm oil

industry

Begin to penalize companies which

doesn’t adhere to the new industry

standards

Follow up implementation risk

when other organization request

for same certification

Continuous 18 months phased

program for other palm oil industry

players

WilmarReview pricing strategy for palm oil

to ensure stable cost structure

Ensure cost structure stability and

financial sustainabilityCustomer backlash

Wilmar as industry leader and

recipient of new certification will

be pricing leader

Time to set new industry benchmark


Slide #17


Government - National, Government - District,Agricultural Monitoring Board, andNGOs

To spread this transformation

model to other districts in

Indonesia

Utilize the rest $1 billion funding to

implement changes in other

districts

Pushback from other district

government

Pivot opinions using earlier proven

benefits of the program

Wilmar

Educate customers and consumers

to continuously make known the

new business position of Wilmar’s

palm oil

Reinforce and advocate the new

industry standard

Requires Investment Take long term approach to

potential future business growth

Reinforce and communicate the new industry standard


Slide #18

NEW PRODUCT & MARKET MIX WILL HELP INCREASE REVENUE

TRANSFORMATION ROADMAP WILL ESTABLISH WILMAR AS INDUSTRY LEADER

Secure two major geographies.USD 4.5 billion increase in revenue.

Slide #19

THANK YOU

AP

PE

ND

IXSugar Forecast : Consumption expected to outpace production

AP

PE

ND

IXWilmar is Australia’s largest raw

sugar producer and refiner. The

Group produces about 50% of

Australia’s raw sugar and its 75%-

owned refinery joint venture

supplies about 75% of Australia’s

and New Zealand’s sugar

requirements and also exports to

many Asia Pacific markets.

Australia’s sugar production is to

increase 300,000 tons to 5.0 million

based on higher area and yield.

Exports are slightly higher at 3.7

million tons on greater exportable

supplies as consumption remains

flat

*Source- Sugar: World Markets

and Trade (USDA)*Source- Annual Report 2015

Increase Sugar Production through presence in Australia

AP

PE

ND

IXRevenue forecasting

Current revenue 2015: USD $38 billion

Increase in revenue from Sugar & consumer products : Approx. 12% (8%+4%)->

Approx. USD $4.5 billion

Increase in revenues from markets in India and NZ/Australia:

Approx. 11% ->Approx. USD $4.18 billion.

Expected growth from new acquisition: Approx. 70% revenue increase from

acquisitions over 5 years, to take complete control of sales.

AP

PE

ND

IXPalm oil industry profit shrink - 2015 data: In palm oil refining, which accounts for

48 per cent of group pre-tax profit, Wilmar is facing tougher competition from

refiners in Indonesia adding capacity to take advantage of government tax

incentives aimed at developing local industry. Wilmar’s refining margins shrank in

the fourth quarter.

Why Africa is important:

Africa: World’s second fastest growing economy.

29% revenue growth in 5 years.

20% of the world’s population from Africa in 2050.

70% of the population into agriculture - good base for integrated leadership

development model.