Source: The Conversation

Palm oil has been one of the world’s most produced consumed oil which has been used in a variety of food, cosmetics, hygiene products, and can be used as source for biofuel or biodiesel. Not to mention that this highly stable oil is cheap, and production efficient. Globally, Indonesia and Malaysia dominate the world market, which supplies 85% of global palm oil supply, with Indonesia having the most oil palm plantations in the world with more than 700 plantations across Indonesia. 

With the prospects of the palm oil in Indonesia, what are the opportunities of the fragrance industry? What are its prospects? What are its current developments? Read more to find out!

Overview of the Indonesian Palm Oil Industry

The majority of Indonesia’s palm oil output is exported, in which the most important export destinations include China, India, Pakistan, Malaysia, and the Netherlands. Although the numbers are very insignificant, Indonesia also imports some palm oil, primarily from India. 

The oil palm plantation sector turned out to be one of the biggest contributors to the Indonesian economy, as throughout 2019, crude palm oil output reached 51.8 million tonnes. Currently, palm oil production is concentrated on two of its five major islands; Borneo and Sumatra, in which these two islands accounted for two-thirds of all palm oil produced in Indonesia. In addition, plantations there are largely divided into three types: government owned; independent and nucleus estate small holders; and large private-owned plantations. 

Since palm oil is land intensive and much of Indonesia’s rainforest had been cleared to make way for plantations, the environmental impact of palm oil cultivation has increased in recent years. In 2019, only a fraction of the palm oil production in Indonesia was certified sustainable, and the growing awareness of the environmental cost of palm oil has led to consumer backlash in the Western Market. There is currently growing fear over accelerated deforestation to clear land for more plantations, as the Indonesian government continues to promote palm oil based biodiesel – even as others refuse to recognize it as renewable fuel. 

International Companies Who Have Successfully Penetrated the Indonesian Market

1. Cargill 

Cargill, Inc. is a privately owned American global food corporation based in Minnesota and incorporated in Delaware. Founded in 1865, it is the largest privately held corporation in the United States in terms of revenue. Having headquarters in Jakarta, their revenue topped USD 107 billion in 2016 and a forecast of USD 110 billion at the end of 2017. The business began in 1974 and now employs 190,000 employees to work the 41,000 hectares of the palm oil plantations in Indonesia. In addition, plasma farmers were also asked to collaborate with employees to teach sustainable palm oil practices like improving quality of harvests, improving land use, and promoting efficient work practices. 

2. Wilmar International

Wilmar International is an international company based out of Singapore and is the largest producer of palm oil in the world. THey own 242,403 hectares of palm oil plantations in Malaysia and Indonesia, with 65% of that land in Indonesia. They were applauded by Greenpeace for their efforts in becoming a more sustainable palm oil company by adopting a “No Deforestation, No Peat Land, No Exploitation Policy” in 2014. It is reported that the company’s revenue was over USD 41 billion  in 2016, and is included in the top 10 Indonesian palm oil companies who produce the most palm oil. 

3. Socfin Group

With 38,737 hectares of cultivated land and a total of 9 palm oil plantations in Indonesia, Scofindo’s 2016 revenue was USD 29.7 million with palm oil production totalling 360,885 tonnes including 20,798 tonnes from smallholder oil palm farmers. They are a holding company which is listed on the Luxembourg Stock Exchange, and has direct and indirect interest in oil palm and rubber plantation operations and marketing of oil palm seeds in Asia and Africa. 

Future Prospects of the Palm Oil Industry 

Domestic palm oil production is projected to rise by about 55% to 25 million tonnes in 2035. Despite the excellent performance of this industry, sustainability is still an issue. With that, in the sort to medium term, ensuring sustainability in the palm oil industry is the only realistic approach to reducing environmental impact, which could be achieved through engagement with stakeholder groups, and national and international communities. 

In addition, better waste management is also needed, particularly of empty fruit branches and polluting wastewater from the mills. Lastly and most importantly, we have to increase market demand for sustainable palm oil, particularly in India and China. This should be done through incentives like reducing transaction costs of switching to sustainable products. 

Enter the Indonesian Fragrance Industry with BRIGHT Indonesia

With the constant shift of consumer behavior and demands, it would need a lot of in-depth research about the Indonesian fragrance industry. Therefore, to enter the Indonesian market, you would need the right local partner to assist you. 

BRIGHT Indonesia is an ideal business partner for you. We will assist you on the ground, including virtual assistants during the mission, logistical planning, and detailed communication. It can cause your company to focus on developing partnership cooperation rather than the hassles of the business trip.

BRIGHT Indonesia provides several services such as Market Insight Research, Business Partnership Engagement, Management and Strategy Consulting, and Foreign Direct Investment. The services will help your business to:

1. Assist you in expanding and developing your business by identification of potential partners.
2. Secure the agreement between client companies and future Indonesian business partners by providing a list of potentially suitable partners, arranging business meetings, and acting as a liaison.

3. Supporting our foreign client companies from the private sector with developing corporate or business unit strategies or helping your company from public sector organizations with public policy.
4. Link client companies both from the private and public sectors in global foreign direct investment (FDI) through training and assisting your company in entering FDI source countries to gather investment for your company’s local markets.

For more information, email info@brightindonesia.net.