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Competitive Strengths
We have two main business divisions, our Cocoa Ingredients Division and our Branded Consumer
Division. Each division builds on our long-established core expertise in cocoa and its products, but
operates in a different competitive environment. We believe that our complementary business divisions
strengthen our overall business model through diversification. Each business has a different dynamic
and may be affected by different external factors.
Cocoa Ingredients Division
The competitive strengths of our Cocoa Ingredients Division include the following:-
Established and long-standing relationships with international customers
We are a supplier of cocoa ingredients to reputable, international food and beverage manufacturers such as Nestlé, Cadbury, the Mars Group, Arnott's, A.B Foods, Barry Callebaut and the Meiji Group. These seven customer groups accounted for 28.9% of the revenue of our Cocoa Ingredients Division for the year ended 31 December 2003 and 33.1% of the revenue of our Cocoa Ingredients Division for the six months ended 30 June 2004.We have established good relationships with these customers and have been supplying them consistently over a long period of time. For example, we were first appointed as a supplier of cocoa powder to Nestlé in Thailand in 1992. Today, we sell cocoa ingredients to Nestlé in 18 countries, out of all our production facilities in six countries. We have received awards from some of our customers like the Nestlé group, for achieving high product quality. We believe that our willingness to work closely with our customers, to help them achieve their objectives and overcome challenges and our flexibility in changing our own practices to cater to their needs, helps to differentiate us from our competition.
High and consistent product quality under our Delfi brand
We believe that our long-standing relationships with international food and beverage companies are
also due to our ability to meet their stringent requirements in terms of product quality, consistency and
delivery. These qualities are encapsulated under our well-known "Delfi" brand which we use for
substantially all the sale of our cocoa ingredients products. We have been applying the "Delfi" brand to
our cocoa ingredients products since 1990 and believe that the brand has acquired a strong reputation
in the industry for quality products.
Internationally certified and high quality manufacturing processes
We have made significant investments in quality assurance systems in order to consistently achieve high manufacturing standards. Our plants in Brazil and Mexico which were acquired from Nestlé in 2003 currently still follow the Nestlé quality standard which we believe, is based on Good Manufacturing Practice standards and HACCP (Hazard Analysis and Critical Control Point), among other quality standards. All of our other cocoa processing plants follow Good Manufacturing Practice standards and are HACCP certified. We have a policy of purchasing equipment which we believe to be the best of its kind, for our manufacturing facilities. We are selective in our choice of equipment and may choose a more expensive supplier if we believe that the quality of their product is superior.Our plants are audited regularly by our major customers, most of whom have exacting quality assurance standards. We believe that our stringent quality assurance processes and our ability to deliver high quality products consistently are critical to our ability to continue servicing our existing client base and to meet the demands of prospective customers. For example, our products are used by customers for sale into the United States, the European Union and Japan, which impose stringent requirements for food products.
In-house technical and product development expertise
We have established in-house technical and product development expertise. We design our own plants and, in some cases, fabricate and assemble machinery and equipment. We have in-house engineering and food technology capabilities. Our in-house process engineers design and implement processes and software for our production facilities, developing production techniques and process control systems to improve quality and efficiency.Our expertise enables us to offer our customers a high degree of flexibility in meeting their needs and product specifications, whilst still meeting their stringent quality requirements and achieving cost efficiencies.
International manufacturing operations
We have cocoa processing plants in Indonesia, Malaysia, Thailand, the Philippines, Brazil and Mexico.
We believe that the international scale of our manufacturing operations and reputation set us apart from
smaller players in the market and provides us with a competitive advantage when marketing to
international customers. We believe that physical proximity to our markets is advantageous as we are
better able to work closely with our customers, and to attract other customers to our products. We also
reduce our exposure to any single location by spreading out our production facilities.
The production facilities we have across different countries also enable us to achieve cost efficiency by providing us with the flexibility to transfer semi-processed products from one plant to another plant within the Group for further processing as may be required to meet specific customer requirements. We expect our plants to eventually specialise in certain types of cocoa beans and/or cocoa powders. We expect specialisation to yield greater cost efficiency. For example, we would be able to reduce the varieties of beans we need to stock at each plant and transfer different types of cocoa cake between plants as required.
Benefits of economies of scale
As one of the largest cocoa bean processors globally, we are able to spread our capital expenditure and fixed costs across the large volumes of cocoa ingredients that we produce, thus reducing our production cost per metric ton of product manufactured. We believe that the scale of our operations allows us to remain cost competitive and provides us with a competitive advantage over smaller players.
Experienced and proven management team
Our Chief Executive Officer, Mr. John Chuang has over 25 years of experience and his involvement in the cocoa and consumer products business started in 1974 through his family-run business. Our Cocoa Ingredients Division is led by Mr Ee Kim Seng (President, Cocoa Ingredients Division), Mr Ng Sin Heng (Director, Commercial) and Ms Lim Seok Bee (Director of Quality Assurance, Technology and Operations) each of whom has over 20 years' experience in the cocoa and chocolate industry.Our senior management team have a proven track record in running the Cocoa Ingredients Division and some of them have also previously worked for other major cocoa products companies. We place great emphasis on teamwork and close communication. We believe that our team possesses the appropriate mix of multi-disciplinary skills and experience necessary for us to grow the business in a competitive environment. In particular we believe our team has strong technical skills, experience in quality assurance and the ability to provide effective customer solutions.
Track record of growth and financial performance
We established our operations in Thailand and the Philippines in 1988 and 1989 respectively and started manufacturing cocoa ingredients for third party sale in 1991. Since then, our Cocoa Ingredients Division has grown significantly and we have also added manufacturing plants in Malaysia, Brazil and Mexico. We believe that our track record of operational growth positions us well to continue to realise future growth opportunities for our business.
Branded Consumer Division
The competitive strengths of our Branded Consumer Division include the following: -
Market leader for chocolate confectionery products in Indonesia
We are the market leader for branded chocolate confectionery products in Indonesia. We have a leading
share of 56.9% in the urban grocery market for chocolate confectionery in Indonesia for the 12 month
period ended March/April 2004 (Source: ACNielsen). Our top two products, "SilverQueen" and "Delfi
Top", have a total share of 44.4% in the urban grocery market for moulded/enrobed chocolate in
Indonesia for the 12 month period ended March/April 2004 (Source: ACNielsen). We also have a share
of 54.2% in the urban grocery market for dragees in Indonesia for the 12 month period ended March/
April 2004 (Source: ACNielsen).
Established portfolio of household brands in Indonesia
We have an established portfolio of chocolate confectionery brands which are household names in Indonesia and which are familiar to generations of Indonesians. For example, our "SilverQueen" and "Ceres" brands were introduced in the 1950s, "Selamat" in the 1970s and "Delfi" in the 1980s. These brands continue to appeal to a large cross section of the Indonesian community, and in particular young adults, teenagers and children.We also have a number of sub-brands for different product categories under the "Delfi" and "Selamat" master brands e.g. "Delfi Cha Cha" for dragee, "Delfi Top" for enrobed chocolate wafer and "Selamat Briko" for chocolate wafer. We believe that our use of master and sub-brands results in consumers associating new products that we introduce with the quality assurance of our established master brands. It also gives rise to the indirect promotion of other products under the master brand, through the promotion of a sub-brand. We have in total a portfolio of eight master brands and 19 key sub-brands.
In-house product and brand development expertise
We have dedicated in-house product and brand development staff who regularly keep abreast of
changing consumer preferences by conducting or monitoring market research in consumer preferences
and industry trends. We also assess consumer preferences through discussions with our distributors
and the management or proprietors of the modern and traditional outlets in which our products are sold.
We use the information and market data that we receive to develop new products, sub-brands,
packaging or product sizes to stimulate or meet consumer demand. We introduced over 97 new stock
keeping units or SKUs in 2003 which included new products and different sizes and packaging for
existing products, some of which have resulted in significant increases in sales.
We have also played a key role in promoting and significantly increasing the sales of some of the third party brands in the countries in which we distribute them. Our track record in helping to develop these brands is a key advantage in our efforts to add new brands to our portfolio.
Extensive sales and distribution network
We have an extensive sales and distribution network covering the Indonesian archipelago, which we
have established over many years. Based on data provided to us by our distributors, we believe we have
access through our distributors and sub-distributors to over 70,000 modern and traditional retail outlets.
In addition, our distributors in turn supply our products to wholesalers, retailers and other distributors
throughout Indonesia, thereby substantially increasing our reach. We had a total of 103 stock points as
of 30 June 2004 across Indonesia. These stock points are principally owned by our distributors.
We also have a dedicated team which is focused on the distribution of our products to modern retail outlets in Jakarta and Bali. This team works closely with hypermarkets, supermarkets, minimarts and drugstores in these two cities. We believe our extensive sales and distribution network provides us with a distinct competitive advantage, in particular for the distribution of our products outside the urban markets.
We believe that our network represents a significant barrier to entry to new market entrants, and a challenge to existing confectionery producers who do not have the breadth of our distribution network across the Indonesian archipelago.
Well-known portfolio of third party brands
We also distribute third party branded consumer food products in Indonesia, Singapore and Malaysia. In most cases, we are the exclusive distributors for these products in the countries in which we distribute them. These products are household names and include Fisherman's Friend (Indonesia), Toblerone (Indonesia), Guylian (Singapore, Indonesia and Malaysia), Loacker (Singapore and Indonesia), Tabasco (Indonesia), Lea and Perrins (Indonesia) and Walkers (Malaysia and Indonesia). We generally enjoy good gross margins for the distribution of these products, and leverage on our existing distribution networks to distribute these products. Our portfolio of third party brands allows us better access to modern trade outlets such as supermarkets and hypermarkets and enables us to maximise use of our extensive distribution network.
Experienced and proven management team
The senior management team of our Branded Consumer Division, led by Messrs. Joseph Chuang (Executive Director and President, Branded Consumer Division) and William Chuang (Executive Director and President, Joint Ventures and Chief Operating Officer, Branded Consumer Division), Mr Susanto Purwo (Director, Manufacturing, PT Perusahaan Industri Ceres) and others, have extensive experience in the consumer chocolate business and have a proven track record in running the Branded Consumer Division. We believe that they also possess the appropriate mix of multi-disciplinary skills and experience necessary for us to grow the business in a competitive environment, particularly in the areas of continued marketing and product development activities as well as the identification of consumer preferences and industry trends.
Long established operations and track record of growth
We have over 50 years of history and experience in the manufacture of chocolate products dating back
to the Chuang family-run chocolate and cocoa business. Over the years, we have developed our
engineering and manufacturing capabilities to produce a wide range of product types, which include
moulded, enrobed, extruded and panned products, as well as wafers and biscuits. Our manufacturing
expertise allows us to produce a large range of quality products consistently to cater to consumer
preferences.
We have grown our business to become the market leader for chocolate confectionery in Indonesia. In tandem with our production growth, our revenue and profitability have also increased. We believe that our long standing track record of business expansion and growth provides us with valuable experience to continue to realise future growth opportunities for our business.