Olam’s new six-year strategy to create value from tomorrow’s consumer landscape

18 February 20193 min reading

Olam plans to invest US$3.5 billion to enhance its leadership position and capture value from key emerging consumer trends; de-prioritises selected businesses to release US$1.6 billion of cash for reinvestment.

Global food and agri-business Olam International 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.

Olam has already established global leadership positions in multiple speciality 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.

Co-Founder and Group CEO, Sunny Verghese 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.”

The strategy sets out four pathways for growth:

• 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 businesses2 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.

• Drive margin improvement by enhancing cost and capital efficiency.

• Generate additional revenue streams by offering differentiated products/services such 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.

• Explore partnerships and investments in new engines for growth by assessing opportunities to deliver to the consumers and farmers of tomorrow.

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