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.
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
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
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.
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.
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
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
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.