Olam to invest $3.5B to strengthen business

Olam’s operations extend across the value chain, including buying from an extended network of 4.7 million farmers, managing orchards, plantations and farms, processing and ingredients innovation

Global food and agri-business Olam International has announced its 2019-2024 strategic plan that capitalises on key trends shaping the sector. Driven by consumers and advances in technology, these trends include increasing demand for healthier foods, traceable and sustainable sourcing, e-commerce and the rise of “purpose” brands.

Olam plans to invest US$3.5 billion (including maintenance capex) to strengthen businesses with high growth potential, while releasing US$1.6 billion by responsibly divesting certain businesses and assets lying outside the strategic priorities over the course of this plan. 

According to company statement, “Olam has already established global leadership positions in multiple specialty agri-products and food ingredients, with defensible strategies for more mainstream bulk products. Olam’s operations extend across the value chain, including buying from an extended network of 4.7 million farmers, managing orchards, plantations and farms, processing and ingredients innovation. This new strategy builds on the current business model which has yielded strong results and growth across Olam’s diversified portfolio.”

Sunny Verghese, Co-Founder and Group CEO said, “With our focus on farm-gate origination, end-to-end traceability, sustainability, digital initiatives and innovations like AtSource1, Olam is already primed to start capturing growth from this fast-changing landscape. Now, following a comprehensive review, our strategy is fully focused on harnessing these health and ethical sourcing trends, as well as changing consumer preferences. Crucially, our strategy will allow us to play a leading role in re-imagining global food and agri-supply chains for the better – sourcing raw materials within the earth’s capacity to regenerate and transforming those materials to deliver food, feed and fibre for a growing population.” 

1. Shekhar, Executive Director and Group COO said, “This is a pivotal moment for Olam to refocus on our strengths and capitalise on new opportunities. By executing on our refreshed strategic plan, we aim to be a global food and agri-business supporting our customers’ growing need for sustainable and transparent supply chains with a clear focus on tomorrow’s consumer preferences.” 

Lim Ah Doo, Chairman of the Board added, “The Board fully endorses this strategic plan that builds on Olam’s existing capabilities and sets a strong foundation for future growth. In addition, the Company is in the process of appointing financial advisors to explore various options to maximise value for shareholders. This exercise is expected to be completed by Q4 2019.” 

The strategy sets out four pathways for growth: 

1. Strengthen, streamline and focus the business portfolio with a planned investment of US$3.5 billion (including US$1 billion maintenance capex) in 12 prioritised high potential growth businesses and releasing US$1.6 billion from de-prioritising and divesting four businesses – Sugar, Rubber, Wood Products, Fertiliser – and other assets that no longer fit with Olam’s strategic priorities. The divestments will be completed in a responsible and orderly fashion during this plan period.
2. Drive margin improvement by enhancing cost and capital efficiency.
3. Generate additional revenue streams by offering differentiated products/servicessuch as AtSource, risk management solutions, value-added services, ingredients and product innovation; and from both existing and new channels such as co-manufacturing, the food service sector and e-commerce for small and medium sized customers.
4. Explore partnerships and investments in new engines for growth by assessing opportunities to deliver to the consumers and farmers of tomorrow.

Olam has identified four enablers to execute these strategic pathways: 

1. Achieve operational excellence through tracking metrics that matter, digital dashboards and performance scorecards, execution discipline and continuous improvement.
2. Continue to keep sustainability at the heart of the business and re-generate food and farming landscapes while capitalising on changing consumer preferences (‘right-for-me’, ‘right-for-the-planet’, ‘right-for-the-producer’).
3. Lead the industry’s digital transformation and disruption by identifying, validating and deploying initiatives to capture and create value.
4. Attract, retain and inspire top talent by embedding Olam’s Purpose and investing in people development programmes.