TRENDS IN THE INDONESIAN

FLOUR MILLING SECTOR

By: Franciscus Welirang

Chairman of APTINDO (Association of Flour Producers in Indonesia)

Director of PT Indofood Sukses Makmur Tbk (Bogasari Flour Mills)

AGIC Indonesia

Jakarta, March 5th, 2019

2

SUBJECT

PRE Deregulation (BULOG Era)

POST Deregulation

Total

1970-1998 1999-2009 2010-2014 2015 - 2018

Total 4 4 + 7 = 11 11 + 15 = 26 27+ 4 (-3) 28

Location

Jakarta & Surabaya (1); Makassar (1); Semarang (1);

Cilacap (1);

Gresik (1); Tangerang (1); Sidoarjo (3); Medan (1); Cilegon (1)

Cilegon (3); Tangerang (2);

Medan (2); Bekasi (2); Gresik(3);

Sidoarjo (1); Mojokerto (1); Semarang (1)

Jakarta (1); Cilegon (1); Cilegon (-1)

Tangerang (-1); Bekasi (-1);

Surabaya (1);

Java: 23 Outside Java: 5 (Centralized in

Java )

Total of Wheat Mill Capacity : +/- 11.8 million MT/year

PRE & POST DEREGULATION OF INDONESIAN WHEAT FLOUR INDUSTRY – THE HISTORY

3

Eastern Pearl

(Makassar &

Cilegon)

Sriboga

Semarang

Manunggal

Perkasa

Cilacap

Bogasari

(Jakarta; Tng

Cibitung;

Surabaya)

Purnomo

Sidoarjo

Asia Raya

Sidoarjo

Pakindo

Sidoarjo

Agri First

Medan

Halim Sari

Medan

Horizon

Bekasi

Cerestar/Harves

tar (Cilegon,

Gresik, Mdn) Jakaranatama

Medan

Pioner

Sidoarjo

Mustafamesindo,

Batam (relocate)

Nutrindo

(Mayora)

Cilegon

Mill Agro

Surabaya

Crown

Tangerang

Total Cap: +/- 11.8

million MT/year

Centralized in Java

Agrofood,

Mojokerto

Murti Jaya

Gresik

Bungasari

Cilegon

Pundi

Kencana,

Cilegon

Sariinti

Semarang

Fugui /

Paramasuka

(Gresik, Jakarta

Wilmar

(Dumai)

Wilmar group

Cerestar group

Wings group

INDONESIAN FLOUR MILLS LOCATION - 2019 (28 Factories)

Wilmar

(Gresik)

Jakaranatama

Bogor

4

New Flour Mills in 2018

PT MILL AGRO INDONESIA

(Location: Surabaya, East Java)

New Flour Mills in 2019 (under construction)

• PT Wilmar Nabati Indonesia

(Location: Dumai, South Sumatera)

• PT Bungasari Flour Mills

(Location: Cilegon, West Java )

CP, Comfeed, Cargill –

Makassar 0, 676 mT/year

CP, Comfeed, Cargill

1 mT/year

Feed Mills in Indonesia

Japfa Comfeed–

Surabaya – 1,2 m T/year

Malindo – 0,240 mT/year

Cargill – Surabaya

0,120 mT/year

Gold Coin-Surabaya

0,072 mT/year

Mabar – Medan 0,410 mT/year

Panca Patriot

0,3 mT/year

Japfa Comfeed-1,3 mT/year

Sinta Prima- 0,58 mT/Year

Sierad – Surabaya –

0,576 m T/year

New Hope -0,4 mT/year

Charoen Pokphand – Jakarta

1,35 mT/Year

Charoen Pokphand –

Surabaya – 1,7 m T/year Comfeed, Panca Patriot

0,170 mT/year

Charoen Pokphand-Medan 0,58 mT/Year

Cheil Jedang-0,480 mT/year

New Hope 0,146 mT/year

Matahari 0,100 mT/year

Wonokoyo-Surabaya 0,5 mT/Year

Comfeed – Medan 0,390 mT/year

Gold Coin-

0,168 mT/year

Cargill-0,085 mT/year

Cheil Jedang-Surabaya

0,4 mT/year

Malindo – Medan 0,180 mT/year

Gold Coin – Medan 0,150 mT/year

Lampung 0,800 mT/year

Universal-0,600 mT/year

+ 0.240mT/year

Malindo Grobogan–

0,300 mT/year

Panca Patriot –

0,240 mT/year

Malindo Makassar

0, 280 mT/year

Malindo Gresik–

0,250 mT/year

CJ Semarang-0,3 mT/year

CJ Kalimantan-

0,3 mT/year

Wonokoyo-CJK 0,3 mT/Year

Total Cap: +/- 20

million MT/year

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INDONESIAN WHEAT FLOUR CONSUMPTION

YEAR 2014 2015 2016 2017 2018

SUBJECT 000 MT

% 000 MT

% 000 MT

% 000 MT

% 000 MT %

DOMESTIC SUPPLY

5,431 98.0 5,455 99.5 5,841 98.9 6,275 99.9 6,519 99.96

IMPORTS 197 2.0 27 0.5 64 1.1 8.5 0.1 2.3 0.04

Total 5,628 100 5,482 100 5,905 100 6,24 100 6,522 100

Wheat Equivalent 7,405 7,213 7,769 8,056 8,361

GROWTH 5.09% - 2.60% 7.72% 6.41% 3.79%

Indonesian Wheat Flour Consumption : 2017 : 6.2 MMT, Wheat grain equivalent 7.98 MMT 2018: 6.5 MMT, Wheat grain equivalent 8.36 MMT

INDONESIAN WHEAT FLOUR CONSUMPTION , 2014-2018

Small Medium Enterprises - Traditional management - Family-owned business - Community oriented, tradition-minded

Big & Modern Industry

- High-tech machinery

- Professional management

- Publicly-listed company

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SME

11

• Seasonal: Lebaran, Christmas

• Household helping families’ economy

• Hobbyist

• No Employee, Family members only

• Get the order from their own closed

community only

• No Distribution Network

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• Millennials

• Newly set up company

• Individual or partnership own

• Good Marketing Strategy

• On-line Distribution

• Good Management

• Highly awareness for end product presentation

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• Gen X, Y

• From Generation to Generation

• Family Style Business

• Less Marketing Strategy

• Limited Distribution network

• Simple Management Sytle

• Basic end product presentation

14

• Gen X, Y

• From Generation to Generation

• Family Style Business

• Less Marketing Strategy

• Limited Distribution network

• Simple Management Sytle

• Basic end product presentation

• Limited Financial support

15

• Gen X, Y

• Good Management

• Good Marketing Strategy

• Own Customer Network

• Legal Company

• Modern end product presentation

16

• Gen Baby Boomers, X, Y

• Professional Management

• Strong Organization Structure

• Strong Marketing Strategy

• Customer Network

• Strong Logistic and Distribution

System

• Strong Financial Support

• Advanced Technology

• E-Commerce and Digitalization

BIG MODERN INDUSTRY PROFILE

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18

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FLOUR CATEGORY AMONG SME

SME LOOK FOR CONSISTENT QUALITY AS THEY THINK IT IS IMPORTANT FOR CONSISTENCY &

CONTINUITY OF THEIR PRODUCTION

1. QUALITY

2. PRICE

3. AVAILABILITY

4. IMAGE

5. SERVICES

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INDONESIAN WHEAT GRAIN IMPORT &

WHEAT FLOUR IMPORT

30

Country of Origin: Australia, Ukraine, Canada, Russia

Source: BPS (Central Bureau of Statistic Indonesia)

INDONESIAN WHEAT GRAIN IMPORTS Period: 2016 - 2018

QTY (MT) QTY (MT) QTY (MT) %

1 AUSTRALIA 3,499,715 5,103,677 2,419,709 24.0%

2 UKRAINE 2,469,437 1,984,999 2,419,769 24.0%

3 CANADA 1,658,441 1,686,052 1,973,706 19.5%

4 RUSSIA FEDERATION 991 1,222,026 1,228,320 12.2%

5 UNITED STATES 938,665 1,150,145 904,174 9.0%

6 ARGENTINA 1,289,198 152,312 677,953 6.7%

7 MOLDOVA, REPUBLIC OF 4,690 63,792 57,271 0.6%

8 Others 673,536 71,132 415,398 4.1%

TOTAL 10,534,673 11,434,134 10,096,299 100%

Growth, yoy 42.1% 8.5% -11.7%

2018No COUNTRY OF ORIGIN

2016 2017

31 31

Source: BPS (Central Bureau of Statistic Indonesia)

Country of Origin: Singapore & Japan (Japanese Flour/special flour) Compared to 2017, wheat flour import for food down by 82.3%

INDONESIAN WHEAT FLOUR IMPORTS (HS 1101.00.11 - FOOD)

MT 000 USD MT 000 USD %

1 SINGAPORE 8,499 2,970 1,248 587 53.6%

2 JAPAN 3 10,049 886 636 38.1%

3 TURKEY 9 22 150 45 6.4%

4 PHILIPPINES 0 0 0 0 0.0%

5 KOREA, REPUBLIC OF 4,664 1,358 0 0 0.0%

6 Others 9 22 43 30 1.8%

TOTAL 13,183 14,422 2,327 1,298 100%

CIF, USD/MT 1,094 558

2018 VS 2017 -82.3%

No COUNTRY OF ORIGIN2017 2018

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INDONESIAN EXPORT OF: WHEAT FLOUR; BY PRPODUCT &

WHEAT FLOUR BASED PRODUCTS

33

Source: BPS (Central Bureau of Statistic Indonesia)

Primary Destinations: EAST TIMOR, PHILIPINNES, PNG, & KOREA Compared to 2017 (yoy), wheat flour export value down by 39.8 %

INDONESIAN WHEAT FLOUR EXPORTS (HS code 1101.00.11 & 1101.00.19) Period: 2016-2018

MT 000 USD MT 000 USD MT 000 USD

1 EAST TIMOR 15,634 7,417 17,262 7,406 17,296 7,293

2 PHILIPPINES 28,047 10,790 29,488 10,049 12,505 4,170

3 PAPUA NEW GUINEA 5,131 2,035 14,995 3,178 9,908 4,096

4 KOREA, REPUBLIC OF 6,789 2,982 3,800 1,545 3,535 1,470

5 MYANMAR 874 334 14,192 5,660 3,013 888

6 SINGAPORE 2,163 906 1,331 539 2,213 654

7 MALAYSIA 1,896 676 1,890 729 461 174

8 VIET NAM 1,318 751 6,572 1,976 0 0

9 Others 429 424 1,937 1,136 1,671 643

10

TOTAL 62,281 26,315 91,467 32,217 50,602 19,388

FOB, USD/MT 423 352 383

Growth yoy (%) 22.4% -39.8%

2017 2018No

COUNTRY OF

DESTINATION

2016

34 Source: BPS (Central Bureau of Statistic Indonesia)

Primary Destinations: CINA, VIETNAM, SAUDI ARABIA, SOUTH OF KOREA Compared to 2017, by product export value down by 9%

INDONESIAN BY PRODUCT EXPORTS: 2016 - 2018) (HS Code 2302.30.10 & 2302.30.90)

QTY, MTFOB

(000USD)QTY, MT

FOB

(000USD)QTY, MT

FOB

(000USD)

1 VIET NAM 302,201 51,529 312,465 51,895 126,959 21,654 -59.4% -58.3%

2 CHINA 11,652 2,485 25,969 4,894 96,490 20,203 271.6% 312.8%

3 SAUDI ARABIA 45,100 7,724 44,000 6,899 69,500 10,969 58.0% 59.0%

4 KOREA, REPUBLIC OF 90,123 18,196 66,000 10,376 46,596 7,961 -29.4% -23.3%

5 THAILAND 68,519 11,301 7,150 1,151 22,400 3,935 213.3% 241.8%

6 PHILIPPINES 21,835 3,659 7,952 1,285 17,356 3,181 118.2% 147.6%

7 JAPAN 9,459 3,213 8,262 1,394 17,189 3,040 108.1% 118.1%

8 OTHERS 873 155 184 68 2,000 778 986.7% 1043.1%

Total 549,762 98,263 471,981 77,962 398,489 71,721 -15.6% -8.0%

2018 2018 vs

2017

(QTY)

2018 vs

2017

(USD)

No Country of Destination

2016 2017

35

Primary Destinations: China, Malaysia, Philippines, Myanmar, Vietnam, Australia, Thailand, USA, East Timor, Hongkong, Singapore. Compared to 2017, Wheat Flour Based product export rise by 17.2%

INDONESIAN WHEAT FLOUR BASED PRODUCTS EXPORTS (2017-2018)

QTY, MTVALUE

(000 USD)QTY, MT

VALUE (000

USD)QTY VALUE

1 19053220 Wafers 98,759 275,288 136,080.0 307,153.4 37.8% 11.6%

2 19023040 Oth instant noodles, stuffed, whether or not

cooked or othwise prepared

107,183 179,373 132,567.8 207,188.3 23.7% 15.5%

3 19053110 Sweet biscuits, not containing cocoa 58,197 187,831 50,872.4 177,636.5 -12.6% -5.4%

4 19053120 Sweet biscuits, containing cocoa 38,612 72,737 41,498.6 79,993.4 7.5% 10.0%

5 19059090 oth baker wares 9,646 26,120 9,565.5 26,834.8 -0.8% 2.7%

6 19059010 Unsweetened teething biscuits 8,170 16,968 12,231.4 24,516.2 49.7% 44.5%

7 19023090 Transparent vermicelli, stuffed, whether or not

cooked or othwise prepared

15,017 25,243 13,116.0 21,189.3 -12.7% -16.1%

8 19021990 Pasta, whether or not cooked or stuffed or

otherwise prepared, other

7,680 9,298 6,857.6 7,719.7 -10.7% -17.0%

9 19059080 Other crisp savoury food products 2,550 5,521 3,326.2 7,076.3 30.4% 28.2%

10 19053210 Waffles 1,668 5,012 1,051.8 3,305.9 -36.9% -34.0%

11 19059030 Cakes 303 1,107 829.6 2,637.9 173.9% 138.2%

12 19051000 Crispbread 783 1,927 1,016.2 2,072.8 29.7% 7.6%

13 19059020 Oth unsweetened biscuits 1,019 1,133 1,356.3 1,687.5 33.1% 48.9%

14 19059040 Pastries 862 1,420 716.1 993.9 -16.9% -30.0%

15 19054090 Rusk, toasted bread & sim toasted product,

containing added sugar, honey, eggs, fats,

557 1,428 412.5 985.3 -26.0% -31.0%

16 19021100 Pasta, whether or not cooked or stuffed or

otherwise prepared, containing eggs

144 191 154.3 196.4 7.0% 2.6%

17 19054010 Rusk, toasted bread & sim toasted product, not

containing added sugar, honey, eggs, fats,

73 252 28.8 78.3 -60.3% -69.0%

18 19022010 Pasta, Stuffed with meat or meat offal 62 362 14.0 69.4 -77.6% -80.8%

19 19059070 Communion wafers, sealing wafers, rice paper

and similar products

10 28 3.1 8.8 -70.2% -68.4%

20 19022030 Pasta, Stuffed with fish, crustaceans or

molluscs

0 0 13.9 7.8 #DIV/0! #DIV/0!

TOTAL 351,295 811,240 411,712.1 871,351.8 17.2% 7.4%

Growth yoy, % 12.3% 14.3% 17.2% 7.4%

2018 2018 vs 2017, %No HS CODE WHEAT FLOUR BASED PRODUCTS

2017

36 36

1. Total export 2018: 963.4 million USD

2. It will be 1 Billion USD in the next few years

3. In the future, Indonesia will become a center of Wheat flour Industries in

East Asia region

EXPORT VALUE OF WHEAT FLOUR, BY PRODUCTS & WHEAT FLOUR BASED PRODUCTS, 2010 –2018

Wheat FlourWheat Flour

Based Product

By

Products

Total (000

USD)2010 18,703 329,159 71,660 419,522 -

2011 18,296 416,077 71,043 505,416 20.5%

2012 26,297 441,871 88,055 556,223 10.1%

2013 37,063 513,128 105,762 655,953 17.9%

2014 39,952 605,683 109,907 755,542 15.2%

2015 35,290 608,117 92,972 736,379 -2.5%

2016 26,315 700,535 98,228 825,078 12.0%

2017 32,217 811,240 77,962 921,418 46.6%

2018 20,312 871,352 71,721 963,385 4.6%

2018 vs

2017 (%)-37.0% 7.4% -8.0% 4.6%

YearExport Value in .000 USD FOB

Growth,

yoy (%)

CONCLUSION:

1. Flour Mill Industries growth since 1998:

• 1970 – 1998 (Bulog Era) : 4 Flour Mills

• in 2017 (post deregulation): 28 Flour Mills

(centralized in Java, 23 flour mills)

• Total Wheat Milling Capacity: 11.8 Million MT

2. Indonesian Wheat Flour Consumption:

• 2018: 6.52 MMT, rise by 3.79%

(Wheat equivalent : 8.36 MMT)

3. Export value in 2018: • wheat flour export 2018 : 19.4 mio USD (down by 39.8% compared to

2017)

• wheat flour based products export 2018: 871.4 mio USD (rise by 7.4%

compared to 2017)

• by products export 2018 : 19.4 mio USD (down by 39.8% compared to

2017)

4. Total export value 2018: 963.4 mio USD, rise by 4.6% compared to

2017. It will be in 1 Billion USD for the next few years.

5. Wheat Flour Based Customers Group: Households, SME, Industry

38