DEMANDS OF THE ASIAN MARKET

Transcription

1 DEMANDS OF THE ASIAN MARKET

2 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

3 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.

4 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

5 PETA LOKASI INDUSTRI TEPUNG TERIGU INDONESIA SEBELUM DEREGULASI (ERA BULOG) Sriboga FM Semarang Eastern Pearl FM Makassar Bogasari FM Jakarta Bogasari FM Surabaya Panganmas FM Cilacap

6 PETA LOKASI INDUSTRI TEPUNG TERIGU INDONESIA Jakaranatama Medan Berkat Indah Gemilang - Tangerang Cerestar - Cilegon Halim Sarigandum- Medan Agri First Medan Sarana Prima Makmur - Banjarmasin Crown Flour Mills - Tangerang Mustafa Mesindo - Tangerang Bogasari FM Jakarta Sriboga FM Semarang Panganmas FM Cilacap Bogasari FM Surabaya Eastern Pearl FM Makassar Note : Purnomo Sejati Sidoarjo Asia Raya Sidoarjo Pre-deregulation Post-deregulation Next to be establish Agrofood makmur Mandiri, Mojokerto Pioner Flour MiIls Sidoarjo Golden Grand - Cilegon Pundi Kencana - Cilegon Horizon - Bekasi Bumi Alam Segar - Bekasi Fugui Flour & Grain Gresik Pakindo Jaya Sidoarjo Total Kap. Gil +/- 8.2 jt MT/T Terpusat di JA Bungasari FM Lumbung Nasional - Bekasi Wilmar Group - Gresik

7 Peninsular Malaysia Location of all Flour Mills MFM strategic locations SBFM Mill 2 UMFM MFM Mill 1 KFM FFM Mill 1 PFM SBFM Mill 1 FFM Mill 2 MFM Mill 2

8 M Uni BD Uni IFV F M

9 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.

10 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 flou mill. Ø Therefore alternative origin cargoes (IMW, RUS, etc) enable cheaper grists in a competitive low pro GP and low pro nood wheat market.

11 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.

12 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.

13 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.

14 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.

15 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.

16 FLOUR FORTIFICATION INITIATIVE A Public-Private-Civic-Investment in Each Nation

17 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.

18 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.

19 Grain Fortification Legislation 79 countries require fortification of wheat flour, maize flour, and/or rice November Source: Flour Fortification Initiative. To request data,