Nestle Begins Construction of $200m Factory in Indonesia

Jakarta Globe, September 13, 2011

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Geneva. Swiss food giant Nestle said on Monday it began construction of a $200 million (146.7 million euros) factory in Indonesia which will produce infant cereals, chocolate malt drinks and milk powder.

“Our decision to invest USD 200 million in Karawang is consistent with the growth in demand and our confidence in the rapidly developing economy of Indonesia,” Arshad Chaudhry, President Director of Nestle Indonesia said in a statement.

The factory in the town of Karawang, West Java, will create over 600 jobs and is expected to open in early 2013, the company added.

Agence France-Presse

Procter & Gamble to build first plant in Indonesia

Antara News, Wed, August 10 2011

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Jakarta (ANTARA News) - Procter & Gamble will invest up to US$100 million to build its first plant in Indonesia in Karawang, West Java, P&G Home Product Indonesia External Relations Manager, Junita Kartikasari said.

The fast moving consumer goods producing plant (PMCG) will be completed with modern facilities to produce baby diapers Pampers, she said.

She said it would be the first plant in Indonesia that will recieve a "Leadership in Energy and Environmental Design (LEED)" certificate.

LEED is a system of international certification issued by the US Environment-Friendly Construction Council.

The certificate is given to buildings that meet environmental criteria. P&G has earlier announced that all of its new facilities would be LEED-certified.

PGHP president director Mohamed Ismail at the laying of a corner stone of the plant said Indonesia is an important market for baby treatment industry.

The ceremony was also attended by industry minister MS Hidayat who expressed hope on the occasion that the new plant would spur national FMCG industrial growth.

He said the government fully supported the construction of the plant which shows that business opportunity in Indonesia is wide open.

Mohamed said six of 11 countries with the biggest baby population are in Asia. Indonesia is one of them with 17 million babies aged under 48 months.

"A lot of babies I think would need correct treatment especially when their parents have to adapt to a modern life style. At the time practical, healthy and trusted will be badly needed," he said.

The plant will take around two years to construct before it could fully operate.

In the next five years P&G expects demand for baby diapers in the country would reach around eight millions. The plant is expected to create around 400 jobs.

P&G hopes its products would reach hospitals and midwives. Its products at present are consumed by around 4.4 billion people in the world such as Pampers, Tide, Ariel, Always, Whisper, Pantene, Mach3, Bounty, Dawn, Fairy, Gain, Pringels, Charmin, Downy, Iams, Crest, Oral-B, Duracell, Olay, Head&Shpulders, Wella, Gillette, Braun, Fusion, Ace, Febreze and Ambi Pur.

P&G is operating in 80 countries and its producs could be found in more than 180 countries.

Editor: Priyambodo RH

South Korea Tobacco Firm Takes Over Indonesian Company

Jakarta Globe, July 23, 2011

Seoul. South Korean tobacco company KT&G said Thursday it had bought a controlling stake in Indonesian firm Trisakti to tap into one of the world's biggest markets.

KT&G on July 14 signed a deal to buy a 60 percent stake in Indonesia's sixth-largest tobacco firm for 140 billion won ($132.6 million), the company said in a statement.

Trisakti sold three billion sticks of cigarettes last year, KT&G said, citing a confidentiality agreement for its refusal to give more details of the deal.

The Southeast Asian nation of some 240 million people has one of the world's highest smoking rates with almost 70 percent of men aged over 20 indulging.

KT&G sought to benefit from Trisakti's sales networks and production of kretek, a clove cigarette popular among Indonesian smokers, the Maeil Business Newspaper quoted a senior executive as saying.

"We saw Trisakti's business potential due to its share of more than 90 percent in the local kretek market," it quoted KT&G executive Kang Cheol-Ho as saying in a meeting with investors on Wednesday.

KT&G, a former state--run monopoly once known as Korea Tobacco and Ginseng, was privatised in 2002. It has about 60 percent of South Korea's tobacco market.

AFP

Major firms launch initiative to fight malnutrition in kids

Rangga D. Fadillah, The Jakarta Post, Jakarta | Tue, 06/14/2011

The Indonesian government welcomed on Monday a public private partnership (PPP) initiative to fight malnutrition in Indonesian children called Project Laser Beam (PLB), which is supported by the United Nations World Food Program (WFP) and several globally renowned enterprises.

The secretary of the Office of the Coordinating People’s Welfare Minister, Indroyono Soesilo, said the initiative was critical to help the country end child hunger and poverty, particularly in East Nusa Tenggara and Papua, two of the poorest provinces.

“The government of Indonesia is committed to lifting people out of poverty and giving every Indonesian child a healthy start in life. PLB will kick off very soon under the coordination of my office,” he said at a press conference on the sidelines of the World Economic Forum on East Asia in Jakarta.

He expressed his gratitude to Unilever, Kraft Foods, DSM and Global Alliance for Improved Nutrition (GAIN) as well as to three local companies — PT Tiga Pilar Sejahtera, GarudaFood and Indofood – for their participation in PLB.

“PLB is a creative new pillar in the fight to end child malnutrition, which we believe will be a major contributor to attain the Millennium Development Goals [MDGs],” said Indroyono who is also a candidate for the Food and Agriculture Organization’s director general for the 2012-2015 period.

PLB is a five-year, US$50 million project that aims to eradicate child malnutrition. The initial focuses of the initiative will be Indonesia and Bangladesh where child malnutrition rates are unacceptably high.

In Indonesia, more than 37 percent of under fives go to bed hungry, while in Bangladesh, the rate reaches 48 percent.

Pradeep Pant, Asia Pacific president director of Kraft Foods, said his company contributed around $10 million to the initiative. He elaborated that PLB would cover programs, such as teaching locals about sustainable farming, assisting them to create micro enterprises and providing nutrition education to mothers and children.

“In my opinion, this initiative is likely to succeed because it has three required pillars, which are sustainability, big scale and conducted repeatedly,” he said.

Unilever chief executive officer Paul Polman argued that participating in the initiative was very important for his company’s business. Ending child malnutrition and preparing children to be healthier and more prosperous in the future would be a way for the company to expand its market.

“Our business won’t work if the market doesn’t work,” he said.

The continued commitment of Unilever, Kraft Foods and several new local and international partners demonstrated confidence that the world was on the right track in fighting hunger in a new and innovative way, said the director for public policy, communications and private partnerships of WFP, Nancy Roman.

“When the government and businesses work together, we can do more than what we can do individually,” she said.

German Metro Chain to Enter Indonesian Market

Jakarta Globe, June 12, 2011           

Berlin. Germany's giant Metro distribution chain Friday announced it is extending its international business empire to Indonesia where it wants to open some 20 supermarkets.

(Photo courtesy of Metro AG's Web site)

Its Cash-and-Carry division will soon be opening a wholesale distribution superstore in Jakarta, the firm said in a statement.

Metro has set up a joint venture with Indonesia's Sintesa holding, but its shops will not be able to bear its international trade logo as others already operate under that name in Indonesia.

The firm said it was looking for a new name to go by in Indonesia.

Metro is already active in 34 countries and its Cash-and-Carry division operates some 700 stores in 30 of them.

Agence France-Presse

P&G plans to invest $100 million in Indonesia oleochemicals

Reuters, JAKARTA | Mon May 23, 2011

(Reuters) - Procter & Gamble Co (P&G) (PG.N) will invest $100 million in the oleochemical sector in Indonesia, the country's industry minister MS Hidayat said on Monday.

"P&G is anticipating the need for 200,000 tonnes of fatty alcohol in the coming ten years from Indonesia," Hidayat said following a meeting with P&G officials at his office.

"To meet the need they are preparing at least $100 million to set up a joint venture with the local partner in the sector," Hidayat added.

High commodity prices and government efforts to boost downstream industries have started to attract investment in Indonesia over the past year.

Indonesia plans to offer fiscal incentives and restructure its export tax policy on crude palm oil, after it steadily hiked the tax to 25 percent in February from just 3 percent a year ago, to do more to spur downstream processing in the country.

The country is still reliant on exports of raw materials, and is aiming to move up the value chain.

Agriculture companies are looking to take advantage of growing wealth within Southeast Asia's biggest economy.

Indonesia's economy grew by 6.5 percent in the first quarter of 2011 from a year earlier, data showed in early May, due in part to strong domestic consumption.

(Reporting by Yayat Supriatna; Writing by Michael Taylor; Editing by Muralikumar Anantharaman)

Germany's Metro Group to open local outlet in 2012

Rangga D. Fadillah, The Jakarta Post, Jakarta | Tue, 03/22/2011

German-based retail giant Metro Group said on Tuesday it would open the first of about 20 planned retail outlets in Indonesia by 2012.

Metro Group chief executive officer Eckhard Cordes said in a press statement that over the past several years, Asian countries, including Indonesia, have emerged as potential targets for retailers seeking to expand their businesses.

“The presence of Metro Cash & Carry in Indonesia will create great momentum for our business expansion in the Asian market,” he said.

Cordes said Metro would open around 20 Metro Cash & Carry outlets across Indonesia, with the first to open in 2012, if the economic conditions in Asia remained stable.

In the past 15 years, Metro Cash & Carry has opened stores in China, India, Japan, Vietnam and Pakistan. Indonesia would be the 31th country in the world that to have Metro Cash & Carry outlets, according to the release.

“With …a fast-growing economy and strong domestic consumption, Indonesia offers abundant potential for our retail business,” Metro Group management council member WH Muller said.

L'oreal building ‘largest factory’ in Jababeka

The Jakarta Post, Jakarta | Thu, 02/17/2011

Paris-based cosmetics giant L’Oreal says it is building a factory that will be the largest factory in the Jababeka industrial area in Cikarang, West Java. The company has allocated US$50 million for project construction.

PT L'Oreal Indonesia president director Jean-Christophe Letellier said Thursday in Jakarta that the factory was expected to have a production capacity of 300 million units per year as soon as it commenced operations, adding that capacity would expand to up to 500 million units by 2015.

He said 25 percent of the products would be targeted at the domestic market, while the rest would be exported.

“The construction began in October last year and is expected to be complete in October this year,” Letellier said, as quoted by tempointeraktif.com.

The factory is being built on a 200-hectare area, he added.

Nestle Indonesia to Invest $100 Million to Make Milo

Bloomberg/Businessweek, By Claire Leow, December 09, 2010

Dec. 9 (Bloomberg) -- Nestle SA, the world’s largest food company, will invest $100 million in Indonesia to make Milo chocolate-flavored products and Cerelac weaning formula as purchasing power grows in Southeast Asia’s biggest economy.

The company’s factory in West Java will be ready by the end of 2012 and initially employ about 300 people, PT Nestle Indonesia President Director Arshad Chaudhry said in an interview in Jakarta on Dec. 6. Nestle will buy about 10,000 tons of cocoa powder annually from local farmers to make Milo, he said. Indonesia is the world’s third largest cocoa producer.

Nestle, which in August raised its full-year forecast as demand in emerging markets boosted first-half sales faster than analysts estimated, will focus on nutrition and wellness products, Chief Financial Officer Jim Singh said then. The maker of KitKat and Nescafe is targeting Indonesian households with a monthly income of between 800,000 rupiah ($89) and 1.45 million rupiah, whose purchasing power is rising, Chaudhry said.

These markets represent “people who are continuously seeking good solutions for providing them nutritious food with the limited money that they would have,” he said. “Products like Milo fit into this well.”

Nestle aims to replicate the success it has had with milk formulas such as its Ideal milk powder, which can be sold in packets for 1,000 rupiah, Chaudhry said. Milk powder and products such as Dancow, Bear Brand sterilized milk and Ideal contribute about half of Nestle Indonesia’s annual sales of about $1 billion, he said.

Dairy Products

After the new factory is operational there are plans to add capacity between 2013 and 2015 to provide for domestic needs, Chaudhry said at a press conference today.

Nestle Indonesia’s largest investment is in Kejayan, East Java, where it expanded milk production with a $100 million investment last year. The factory processes about 700,000 liters of milk bought from 33,000 dairy farms in East Java daily.

This factory, “one of the top 10 factories for Nestle” by volume, will also supply some of the milk needed to make Milo products at the new plant, the executive said.

Nestle has gained 10 percent this year while the Swiss Market Index has lost 0.6 percent. Still, the Vevey, Switzerland-based company’s stock trails the 14 percent climb by Northfield, Illinois-based Kraft Foods Inc., its closest rival.

Fox’s Candy

Nestle Indonesia was established in 1971 and employs about 2,600 people. It has another factory in Lampung, South Sumatra province, producing Nescafe soluble coffee and coffee mixes, and buys about 10,000 tons of green coffee a year from about 10,000 local coffee farmers, he added. Nestle has a plant in Cikupa, Tangerang making confectionery such as Fox’s candy.

Milo is a chocolate-flavored beverage marketed in Southeast Asia as an energy drink, and Nestle Indonesia sells about 15,000 to 20,000 tons of the product a year, a business that is growing 20 percent annually, Chaudhry said.

“We expect similar type of growth in the coming years,” he said. Besides the beverage, other Milo products include Choco Blazz, introduced this year as a snack bar, he said.

Nestle currently ships Milo to Indonesia from factories in Malaysia and Singapore.

Cerelac Formula

With the new factory, Nestle Indonesia will also seek local suppliers for red rice and mung beans for its Cerelac formula, Chaudhry said. Mung beans are an important source of vegetable protein for developing countries.

Other Nestle products contributing to the $1 billion annual sales in Indonesia include Nestea packets selling for 500 rupiah each, said Chaudhry, who worked in Pakistan, Switzerland and China before moving to Indonesia in September 2009.

“When you have limited money, you are very interested to spend that money wisely especially because getting sick is not an option,” he said. “When you get sick, you have to spend more money. To avoid that, there is a great deal of focus in purchasing products which show them good quality and good nutrition.”

--With assistance from Eko Listiyorini in Jakarta. Editors: Suresh Seshadri, Frank Longid.

To contact the reporter on this story: Claire Leow in Singapore at cleow@bloomberg.net; Eko Listiyorini at elistiyorini@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

Nestle Indonesia president director Arshad Chaudry, right, says the world’s largest food company will invest $100 million in Indonesia to make Milo chocolate-flavored products and Cerelac weaning formula as purchasing power grows in Southeast Asia’s biggest economy. (Antara Photo)

Related Article:

Nestle Indonesia to Invest $100 Million to Make Milo, Cerelac

Lotte to Make Final Bid for Indonesian Matahari’s Markets

Jakarta Globe, Saeromi Shin & Shinhye Kang | November 30, 2010

Jakarta. Lotte Group, the parent of South Korea’s biggest retailer, will make a final offer for Matahari Putra Prima’s hypermarkets to compete with Carrefour in Indonesia.

As part of Asian expansion plans, South Korea’s
Lotte Group will make a final offer for Matahari’s
hypermarkets. Wal-Mart and French retailer Casino
Guichard-Perrachon have also expressed interest
in the sale. (JG Photo)

“We’ve come a long way and we’ll make a final bid,” Hwang Kag Gyu, executive vice president of international and new business planning at Lotte, said in an interview on Monday. “There’s ample liquidity so funding won’t be a big problem.”

The purchase would give Lotte as many as 49 of the combination department store-supermarkets in an economy forecast to expand 6 percent this year. Units of Seoul-based Lotte, whose assets include petrochemical operations, are expanding in China, Vietnam, Indonesia and Russia to tap faster growth and rising affluence in developing markets.

Matahari may sell most or all of its food-retailing business, valued at $700 million to $1 billion, people with knowledge of the deal said earlier this month.

Wal-Mart Stores and French retailer Casino Guichard-Perrachon are among the retailers that have looked at Jakarta-based Matahari’s assets, according to the people.

“Lotte has coveted the Indonesian market because of its relatively friendly mood toward foreign capital and consumption-oriented economy,” Lee Ji Young, an analyst at LIG Investment & Securities, said by phone on Tuesday.

“Lotte also has a good track record with its existing Indonesian operation, so I think this kind of interest makes sense.”

Deadline May Move

Matahari was unchanged at 1,440 rupiah at the 4 p.m. close of trading in Jakarta, after earlier climbing as much as 4.2 percent, the most in more than a week.

Lotte Shopping, whose department stores and discount shops make it South Korea’s biggest retailer, fell 0.1 percent to 473,500 won.

Matahari operates 49 hypermarkets in Indonesia, while Lotte, the parent of Lotte Shopping, has 21 outlets, Tong Yang Securities Inc. said in a Nov. 4 report.

A purchase of all Matahari stores would let the South Korean company overtake Carrefour, with 61 outlets, as the largest hypermarket operator in the Southeast Asian nation, the brokerage said.

The deadline for final bids is likely to be delayed from an original schedule of early December, Hwang said, without specifying a new date.

Possible Stake Sale

There is also a possibility that bidders may acquire a stake in Matahari instead of buying the hypermarket assets, Hwang said, adding that the result of the bidding is due next year.

Lotte Shopping said on Nov. 12 it had submitted a letter of intent to buy Matahari’s hypermarket business.

Danny Kojongian, Matahari’s director of corporate communications, declined to comment. “We are still awaiting the result of the study from Merrill Lynch,” he said on Monday.

Casino and Lotte were considering a binding offer for the food-retailing business of Matahari after proceeding to the second round of the auction, two people with knowledge of the deal said earlier this month.

Matahari said in October it hired Bank of America’s Merrill Lynch unit to analyze its business and follow up on interest by companies outside Indonesia for an investment or partnership.

The company sold control of its department-store arm to a unit of CVC Capital Partners for 7.2 trillion rupiah ($795 million) in January.

China, Southeast Asia

Lotte Group seeks acquisitions in China and Southeast Asia as sales overseas in the next decade are likely to expand two to three times faster than in its domestic market, Hwang said.

Lotte aims to open at least 15 new discount stores in China next year, and Hwang has ordered the group’s team in China to look at department stores it may acquire, he said.

“You should first lead the Asian markets to be a global name,” Hwang said. Honam Petrochemical, a Lotte unit, said in July it would acquire Malaysia’s Titan Chemicals for 1.5 trillion won ($1.3 billion) in cash.

Overseas Growth

Lotte Group has said it will increase revenue from overseas markets to 30 percent of the total by 2018 from an estimated 12 percent for this year.

Shin Kyuk Ho founded Lotte Group in Japan in 1948 as a bubble-gum maker.

The Korean-Japanese businessman opened his first confectionery plant in South Korea after the normalization of relations between the two Asian nations, building Lotte into a food and leisure group spanning hotels, candy making and an amusement park in the capital.

Lotte Group has about 60 affiliated companies including South Korea’s biggest beverage maker Lotte Chilsung Beverage, KP Chemical and Lotte Card.

Bloomberg

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KPPU Says All Clear for Unilever Acquisition

Jakarta Globe | October 14, 2010

Jakarta. The Business Competition Supervisory Commission says it has no objection for Unilever Indonesia Holding BV to acquire Sara Lee Body Care Indonesia after it found no evidence of monopolizing practices.

The commission, also known as the KPPU, began a comprehensive evaluation of the companies’ products on July 9, particularly roll-on deodorants and men’s hair cream, after a preliminary study failed to reach a conclusion.

Under competition regulations, the merged company is not allowed to have more than a 50 percent share of the market for its products.

On Thursday, the KPPU said in an e-mailed statement that its evaluation had found no anticompetitive behavior that would negatively affect consumers because the markets for each product made it difficult to fix prices.

With roll-on deodorants, the proposed merger was found not to impact on other players’ entry into the market.

“Making deodorants does not require highly sophisticated technology, so the barriers to enter the market is relatively low,” the KPPU said.

As for men’s hair cream, the commission said the already saturated market would not allow for one company to dominate the market.

Franky Jamin, general manager at Unilever Indonesia, said the KPPU had never objected to the takeover bid.

In September 2009, Unilever’s parent company announced that it would acquire Sara Lee’s personal care brands in a deal worth $1.9 billion.

The KPPU requires companies to notify it of proposed mergers and acquisitions, or face billions of rupiah in fines.

Fast-Food Giant Cuts Ties With Sinar Mas

Jakarta Globe, September 02, 2010

In this file photo Greenpeace activists display a large banner with a message "APP stop destroying tiger forest" at the PT. Tebo Multi Agro concession. APP, Indonesia's largest pulp and paper producer is a division of Sinar Mas. Burger King, the international fast food company, has cut ties with Sinar Mas after Greenpeace’s successful campaign against the Indonesian group’s land-clearing practices. (AFP Photo/Romeo Gacad)

US fast food giant Burger King said on Thursday that it would no longer buy palm oil from Sinar Mas or its subsidiaries, after Greenpeace’s successful campaign against the Indonesian group’s land-clearing practices.

Burger King joins the likes of Unilever, Nestle and Kraft in shunning Sinar Mas in a move that will increase pressure on other corporate buyers of its palm oil products, such as Pizza Hut, KFC and Dunkin’ Donuts.

The news comes on the same day that Burger King, the second-largest US fast-food chain, announced that it had agreed to be bought by investment firm 3G Capital for $24 per share, or about $3.26 billion.

Indonesia is the biggest producer of palm oil, which is used in everything from biscuits to cosmetics, but environmentalists say plantations are behind deforestation blamed for habitat loss and greenhouse gas emissions.

Burger King said a recent independent audit of Sinar Mas palm oil unit Smart’s land-clearing practices — commissioned by Sinar Mas in response to the Greenpeace allegations — revealed activities “inconsistent with our corporate responsibility commitments.

“We believe the report has raised valid concerns about the sustainability practices of Sinar Mas’s palm oil production and its impact on the rainforest,” Burger King said on its Facebook page.

“As part of our … corporate responsibility program, Burger King Corp. is committed to sourcing our products from sustainable suppliers.”

It said it was looking for a new palm oil supplier for its 176 restaurants supplied by Sinar Mas.

“In addition, we are notifying our suppliers of our intent to discontinue the use of palm oil supplied by Sinar Mas in the manufacturing of our products.”

Sinar Mas Agro Resources and Technology has been struggling to repair its image after a Greenpeace campaign led several foreign buyers to cancel major contracts.

Greenpeace says the company is clearing high-value peat forest against Indonesian law and failing to wait for environmental studies before starting operations in sensitive areas of Borneo.

The company has acknowledged mistakes have been made in small areas, but denies it is a “forest destroyer.”

Rampant deforestation, much of it illegal, is a major reason Indonesia is the world’s third-biggest emitter of greenhouse gases and is driving species like Sumatran tigers to extinction.

Smart’s credibility took a blow last month when auditors Control Union Certification and BSI Group, authors of the independent verification report, complained that it had misrepresented elements of their findings.

The company had trumpeted their report as evidence that Greenpeace’s allegations were false, but the auditors said the probe’s “key findings” included that it had violated Indonesian law on forest management.

It also found that Smart had initiated operations on almost 38,000 hectares of land on Borneo before mandatory environmental studies had been completed.

Greenpeace welcomed Burger King’s announcement.

Greenpeace forest campaigner Rolf Skar wrote in a blog: “This is another blow for Sinar Mas, which had hoped its self-commissioned audit would convince corporate customers and the media that it was a sustainable company."

Smart president director Daud Dharsono has rejected any suggestion the company was trying to dodge the findings of its own audit or mislead shareholders.

Agence France-Presse

End of deal: A Burger King franchise is seen on Sept. 2, 2010, in Los Angeles. The US hamburger chain has said it will stop buying palm oil from an Indonesian company accused of destroying rainforests. – AP/Damian Dovarganes

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CJ Cheiljedang to spend us$300 mln on lysine plant Indonesia

Antara News, Tuesday, August 31, 2010 03:10 WIB

Seoul (ANTARA News/Yonhap/OANA) - CJ CheilJedang Corp., South Korea`s biggest food company, said Monday that it will spend US$300 million to build a lysine plant in the eastern part of the island of Java, Indonesia.

Earlier in the day, CJ CheilJedang broke ground on the plant in Jombang. When completed in 2012, it will produce 100,000 tons of lysine and 50,000 tons of threonine a year, the company said in a statement.

Lysine and threonine are essential amino acids for animal feed.

"We will continue to increase our investment to secure a combined annual production capacity of 550,000 tons of lysine by 2013 and grab a 30 percent share of the global lysine market," Kim Jin-soo, chief executive of CJ CheilJedang, was quoted as saying at the ceremony.

CJ CheilJedang predicted that the plant will raise the company`s global lysine market share to 25 percent, beating its two bigger rivals: China`s GBT and Japan`s Ajinomoto.

GBT currently leads the global lysine market estimated at $2.5 billion, followed by Ajinomoto.

CJ CheilJedang also started producing tryptophan, one of the 20 standard amino acids, in its Indonesian plant last month, challenging Ajinomoto`s 70 percent share of the $100-million global tryptophan market.

Cargill Supports Unilever's Drive to Use Sustainable Palm Oil

Source: Cargill, Inc., 29/07/2010

29 July 2010 — Cargill has entered into a supply agreement to provide Unilever's European operations with 10,000 metric tonnes of segregated refined palm oil, certified by the Round Table for Sustainable Palm Oil (RSPO).

This means that the oil will have been certified as sustainable, having been segregated at every step in the supply chain. Cargill’s new offering will strengthen its ability to provide sustainable palm oil products to meet customers’ requirements and will complement its existing certified RSPO Mass Balance palm oil offering.

“Our agreement with Unilever is the result of both companies’ strong commitment to supporting responsible supply chains”, said Paul Naar, head of Cargill’s food businesses in Europe. “As the demand for certified sustainable palm oil continues to grow, we are combining our supply chain expertise and industry knowledge to provide customers with choices to meet their particular requirements. We are very pleased to partner with Unilever and see this as a big step forward in the drive towards palm oil sustainability.”

"Unilever is ahead of plan to achieving 100 percent sustainable palm oil by 2015 with over 35 percent already being RSPO certified this year", said Marc Engel, Chief Procurement Officer at Unilever. "Today's announcement marks another important milestone in our journey to 100 percent sustainable palm oil, as Cargill's physically segregated certified oil will be delivered in our factories and used in our products. We are very pleased that Cargill, as one of our strategic partners, is sharing our vision on sustainable palm oil and enabling this for us."

Cargill’s offering of fully segregated refined palm oil follows the RSPO certification of the company’s European and Malaysian oil refineries. PT. Hindoli in Sumatra, Indonesia received its RSPO certification in February 2009 and Cargill is currently working to certify its other palm plantation in Indonesia, Harapan Sawit Lestari. Cargill fully supports the RSPO process to promote the growth and use of sustainable palm oil throughout the supply chain. The company has set a goal of buying 60 percent of its total crude palm oil from RSPO members by the end of 2010. It is encouraging its third-party suppliers to join RSPO and attain certification and its eventual goal is to have a 100 percent RSPO certified supply chain.

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Unilever to Boost Indonesia Spending Amid P&G Threat

Businessweek, By Jeroen Molenaar, June 23, 2010, 5:52 AM EDT

June 23 (Bloomberg) -- Unilever plans to boost the amount it spends building factories in Indonesia over the next two to three years as it adds products to fend off Procter & Gamble Co. in the world’s fourth-most-populous country.

Expenditure will “significantly increase” to about 200 million euros ($242 million), Jan Zijderveld, head of Unilever’s southeast Asian unit, said in an interview. A personal-care factory in Indonesia is among four to five plants that the maker of Dove soap aims to open in southeast Asia this year, he said.

“We’re growing fast in this part of the world,” Zijderveld said by telephone from Singapore. “Part of the challenge is to cope with this growth.”

Unilever, the world’s second-largest maker of consumer products, gets about 50 percent of its 39.8 billion euros of annual revenue from emerging markets. With P&G cutting prices in countries including China and India, the London-and Rotterdam- based company is relying on new versions of products such as a Citra body cream soap bar to keep sales growing.

“Developing markets give Unilever an edge,” said Martin Deboo, an analyst at Investec Securities in London. “If as a company you’re exposed to high growth markets, your growth is higher. That’s just simple arithmetic.”

Shares of PT Unilever Indonesia rose 2.3 percent to 17,800 rupiah in Jakarta trading, closing at the highest level in almost 19 years. Unilever NV stock in Amsterdam traded at 23.50 euros as of 11:30 local time, a 0.4 percent decline.

Price Cuts

According to a June 9 report from the World Bank, economies in developing nations will grow as much as 6.2 percent annually from 2010 to 2012, almost three times faster than high-income countries. Growth in the East Asia and Pacific region will be 8.7 percent this year and 7.8 percent in 2011, the report said.

“The world is not flat,” Zijderveld said. “It’s sloping towards Asia, so many competitors are also seeing this and coming here and doubling down.”

In India, Unilever’s home and personal-care sales rose 5.5 percent in the first quarter, lagging behind the 18 percent growth in food revenue. The maker of Rin washing powder was forced to lower prices to counter price cuts on P&G’s Tide Naturals detergent. P&G, which started selling its Tide brand in the country 41 years after Unilever introduced Rin, reported a 30 percent increase in Tide shipments in that quarter.

In Touch

“In tough economic times you have to be even more in touch with your consumer and understand what they want and need,” Deb Henretta, P&G’s group president for Asia, said by e-mail.

Pricing isn’t confined to India and has been spreading to other countries in the region, particularly in Unilever’s laundry and hair categories, according to Zijderveld.

“We will not walk away from a fight,” the executive said. “But it’s one of the weapons that we have in our arsenal and it’s not the healthiest weapon. The name of the game is to grow these markets.”

Zijderveld, who joined Unilever in 1988 and has worked in Europe and the Middle East, sends sales representatives to visit 1 million shops in his region every week to market new products from Omo detergents in Vietnam to Lifebuoy soap in Australia. Unilever gets a growing proportion of its 4 billion euros of sales in southeast Asia, Australia and New Zealand from new introductions or renewed versions of brands, he said.

Old Spice

Three months after P&G introduced an Old Spice deodorant stick in Indonesia, Unilever responded with a new format of its Rexona deodorant lotion and stick, Zijderveld said.

Increased competition in southeast Asia is causing Unilever to react faster to customer needs. An anti-bacterial version of Surf washing powder was introduced in the Philippines this year, only five months after Zijderveld walked the slums of Manila and noticed some consumers were using anti-bacterial soap. Such a process used to take as long as two years, he said.

“Speed is a key difference between the developing world and the developed world,” Zijderveld said. “We build a factory in Indonesia in seven months. Everything is fast here.”

Helped by the introduction of products such as Pepsodent toothpaste in the Philippines, sales growth in Unilever’s Asia, Africa and central and eastern European division has accelerated for three consecutive quarters and rose 7.6 percent, excluding acquisitions and currency swings, in the first quarter.

Yet Unilever has also cut prices in that division for two straight quarters and may lower them another 2.5 percent in this quarter, according to a Bloomberg survey of three analysts.

“The challenge for them is to continue to compete to preserve volume growth,” said Pierre Tegner, an analyst at Oddo & Cie. in Paris. “That’s key for them.”

--With assistance from Mark Clothier in Detroit. Editors: Paul Jarvis, Chris Staiti

To contact the reporter on this story: Jeroen Molenaar in Amsterdam at jmolenaar1@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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Godrej Consumer buys Indonesian co for Rs 1,200 cr

Rs 600-cr Megasari makes household items.

Business Line, Our Bureau, Mumbai, April 6

Godrej Consumer Products (GCPL) has acquired Indonesia-based PT. Megasari Makmur Group for an estimated Rs 1,200 crore, its biggest buy so far. HSBC was the advisor to the transaction.

The Rs 600-crore Megasari group is a manufacturer and distributor of household products which include household insecticides, wet tissues and air fresheners. It is less than 15 years old and has plants in West Java.

Megasari is also the second largest player in the household insecticide market in Indonesia having a 35-per-cent share in the category with brands such as the Rs 250-crore Hit (household insecticide) followed by smaller brands Stella (air fresheners) and Mitu (babycare).

Interestingly, one of Godrej's own insecticide brands is called Hit.

Mr A. Mahendran, Director, FMCG Portfolio Cell for the Godrej Group, told Business Line, “The funding for the acquisition has been done through a mix of debt and internal accruals.”

Biggest deal

This is the biggest deal for the group so far and also makes it the third largest acquisition by an Indian company after the Tetley and Glaceau buyouts made by the Tata Group. For GCPL, this is the fifth acquisition. It recently bought the Nigerian personal-care company Tura, two hair care brands in South Africa, and the UK-based Keyline brands. More buys are in offing with the group keen on building a global presence.

In fact, according to analysts, mid-sized Indian FMCG companies are well positioned to go in for similar acquisitions especially when the rest of the world is still recovering from the 2009 global crisis.

Mr Mahendran said, “We will be taking our own products and leveraging the distribution strengths to emerge the leader in Asia's household insecticide business. We are already the leaders in the category in India, but are No 3 globally in this category after SC Johnson and Reckitt Benckiser.”

A cross-functional team comprising Godrej and Megasari employees will be headed by Mr Naveen Gupta, who will help integrate the operations of the two companies.

Mr. Adi Godrej, Chairman, GCPL, said: “Megasari Group provides us a strong platform to establish a significant foothold in Indonesia, which is among the largest consumer markets in Asia. As an emerging market multinational, this acquisition is an important step in our global 3 by 3 strategy, that is, presence in three continents — Asia, Africa and Latin America — through three core categories — home care, personal wash and hair care.”

GCPL has a 49 per cent stake in Godrej Sara Lee and is in the process of buying out the balance in the company. It is also acquiring the global assets of Sara Lee's household insecticide business.

GCPL has already got shareholder approval to raise up to Rs 3,000 crore through a combination of debt and equity which would be used for international acquisitions as well as to buy out Sara Lee.

The GCPL scrip was up 2.19 per cent on Tuesday and closed at Rs 277.60

Related Article:

Indian Group Snaps Up Indonesian Insecticide Maker Megasari