FGV Holdings Berhad BFM 83

FGV HOLDINGS BERHAD

ADVANCING THE NEW HORIZON

FGV HOLDINGS BERHAD

FGV manages 197 estates located across Malaysia.

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FGV HOLDINGS BERHAD

ONE OF THE LARGEST CRUDE PALM OIL PRODUCERS IN THE WORLD EMBARKS ON A NEW JOURNEY TO EXPAND ITS BRANDED CONSUMER PRODUCTS BUSINESS.

ADVANCING THE NEW HORIZON PROJECT MANAGED BY: NEIL STOWE

FGV Holdings Berhad (FGV), which produces 3 million metric tonnes (MT) of Crude Palm Oil (CPO) every year, is one of the largest single CPO producers in the world contributing approximately 15% of Malaysia’s total CPO production per annum. It’s a company that was listed as recently as 2012 where it was the second-largest Initial Public Offering (IPO) in the world, just after Facebook.

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Salman Ghazali, FGV’s Group Chief Strategy Officer.

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owever, the FGV of today is building a new growth frontier by making a critical and necessary structural shift in its business focus to ensure sustainable returns, provide better-paying jobs to its employees, and ultimately create positive externalities to the Malaysian economy as a whole.

“We’re reallocating our resources to invest more in higher value-add products; branded consumer products,” says Salman Ghazali, FGV’s Group Chief Strategy Officer who leads the Group Strategy Division, which is responsible for the group’s overall strategy and business plan, investments and divestments, and business development activities.

“The key megatrends are clear. You need to shift. It is a natural progression for any high middle-income developing nation to structurally shift its economy’s factors of production towards building higher valueadd business activities to further increase income per capita, thus achieving developedcountry status,” Salman added.

A DIVERSE OFFERING

FGV is a fully integrated palm oil producer, maximising its palm value chain presence via its Plantation downstream business which is responsible for all refining and processing activities related to the conversion of CPO and Palm Kernel (PK) into higher valueadd products.

As for FGV’s Sugar Sector, it operates mainly through its 51% owned listed subsidiary,

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PHOSPHATE RESOURCES LIMITED Christmas Island has a storied history of supplying high-quality phosphate rock for over 120 years. Phosphate Resources Limited (PRL) was established 30 years ago – its purpose to deliver Christmas Island Rock Phosphate (CIRP) to customers across Asia Pacific.

While CIRP demand has remained strong over this time PRL has developed into a vibrant, integrated and diverse group of businesses, while significantly improving and modernising operations on Christmas Island.

PRL now has interests in mining, agriculture, fertiliser, energy, asset management, maintenance services, and logistics. Its’ operations are spread throughout the South East Asian and Australasian regions. As an ASX-listed company, the majority of PRL’s shareholder are from Christmas Island and South-East Asia.

Today the company offers a range of quality, well-established rock phosphate brands including CIRP and ALPHOS, supplying fertiliser manufacturers and agri-business customers across Indonesia, Malaysia, Australia and New Zealand.

The location on Christmas Island enables PRL to ship to customers within two to five days sailing to most ports across Asia-Pacific, giving it a competitive edge over other suppliers.

PRL has a strong commitment to sustainability, reflected at the community and employee level, through its’ values and ethics, and how it operates its businesses environmentally, socially and financially.

PRL is very proud of its long-standing relationships with key customers including, FELDA, NAFAS, Agrifert, Wilmar, CSBP, Ballance, Ravensdown, the Commonwealth of Australia and the Community of Christmas Island. www.cirp.com.au

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FGV manages a total land bank of 439,725 hectares in Malaysia and Indonesia.

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FGV HOLDINGS BERHAD

MSM Malaysia Holdings Berhad (MSM), which is the leading refined sugar producer in Malaysia.

Whereas, FGV’s Logistics & Support Business Sector currently owns one of the world’s largest and most modern storage facilities for edible oil with a total capacity of more than 1.1 million MT through its 12 liquid terminals located in Malaysia, Indonesia, and Pakistan.

FGV has also embarked on integrated farming activities as its fourth sector, the Integrated Farming Sector. The business components include other cash crops, paddy and rice, animal nutrition and protein, livestock, as well as dairy farming.

FGV is already a relatively well-known consumer products player in the country where it markets and sells a wide range of branded consumer food products but mainly in the cooking ingredients and dairy product segment. Brands such as SAJI, ADELA, SERI PELANGI, and BRIGHT COW are already among the most preferred products among Malaysian consumers. Moving forward, FGV wants to expand its product categories to include confectionery, nutritional snacks, beverages, convenient food, and even pet food.

FGV owns one of the largest oil palm research centres in Southeast Asia, positioning itself as the leader of innovation and scientific research in the oil palm industry.

“RAW MATERIAL PRODUCING COUNTRIES SUCH AS MALAYSIA HAVE QUITE AN ADVANTAGE OVER INTERNATIONAL COMPANIES BECAUSE THE RAW MATERIALS COME FROM US IN THE FIRST PLACE.” BUSINESSFOCUSMAGAZINE.COM

“Moving forward, the most important sector will be our Consumer Products Sector. It will be the ultimate product consolidator and brand builder, which is pretty much inspired by the ‘Sogo Shosha’ business model. We want to sell a wide range of branded consumer products in various product categories. We want to build strong international brands that are able to cut across different consumer lifestyles, cultures, and nations,” Salman explains.

NEW GROWTH FRONTIER: BRANDED CONSUMER PRODUCTS

Like FGV, Malaysia’s entire plantation industry is facing the same challenges that require it to adapt to the declining-returns environment due to the growing national income per capita, which leads to higher cost structures. Cost continues to increase at 3 to 4% per annum and sometimes more, while CPO prices remain relatively stagnant with very minimal

annual growth mimicking population growth.

“Malaysia is a small country, so we need to almost immediately have international presence due to the smaller local market base of fewer than 32 million people, making it highly dependent on exports to reach economies of scale,” Salman says. “This means our risk profile is higher when it comes to venturing into new unchartered territory such as this. Despite all the risks, it needs to happen. The potential returns are there for the taking, but Malaysia is a small country, so it will be challenging of course and requires time to execute.”

However, Salman is quick to point out that Malaysian companies do have some level of advantage over international consumer products players due to its upstream presence.

“Raw material producing countries such as Malaysia have quite an advantage over international companies because the raw materials come from us in the first place,” he

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FGV HOLDINGS BERHAD

Aerial view of FGV’s bulking facilities in Pasir Gudang, Johor.

points out. “Other multinationals buy these raw materials from us.

Whereas for companies such as FGV, we own the raw materials, so it’s a matter of converting the raw materials into our own high value-add branded consumer products, which we will then market and sell to endconsumers ourselves through our distribution channels.”

Competition with multinationals will be more on brand awareness, and product and lifestyle attractiveness rather than price positioning as Salman points out.

“The biggest obstacle will be in terms of our ability to build a strong brand name as it requires a different way of thinking and approach” admits Salman. “If you look at Nestle, approximately 6% of their revenue stream is

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SAJI cooking oil is one of the most preferred cooking oil brands in Malaysia.

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FGV HOLDINGS BERHAD

spent on advertisements and promotions (A&P), and only 2% on R&D,” he added.

“We created a Chief Consumer Products Officer position and have brought in consumer products experts to start executing the plans developed and build a workforce that has the right DNA to be successful in the consumer products space.

It requires a lot of work to build and enhance FGV’s capabilities,” Salman elaborated.

OTHER KEY GROWTH INITIATIVES

At FGV, the plan is to go beyond what the company is currently doing. “We have also

made good progress in terms of building our own end-toend agribusiness supply chain with our latest new investment in GOGOPASAR which is an e-Commerce grocery marketplace that will digitalise FGV’s route to market which is in line with the government’s National E-Commerce Roadmap mission to future-proof existing businesses and to expand local market access.”

Also, FGV had recently ventured into India. FGV Pre Unique, a joint-venture company between FGV and Pre-Unique Pvt Ltd, aims to penetrate India’s food products market.

“IF YOU LOOK AT NESTLE, APPROXIMATELY 6% OF THEIR REVENUE STREAM IS SPENT ON ADVERTISEMENTS & PROMOTIONS (A&P), AND ONLY 2% ON R&D.” The SAJI brand has a domestic market share of 34% in the cooking oil segment via our subsidiary Delima Oil Products (DOP).

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