Interview with Mr Bambang Sutantio of Cimory Dairy

Technology Partnerships | Joint Ventures

Cimory Dairy | Mr Bambang Sutantio

In Europe, the majority of dairy products and milk are from fresh milk so this was a niche market that I chose to explore for Indonesia Mr Bambang Sutantio, President Director
Cisarua Mountain Dairy or Cimory was established in 2006 as a subsidiary of Makro Group providing high quality dairy products such as milk and yoghurt. What was the background to the founding of the company and what are the current strategies being followed for future expansion? Cimory is part of Makro group and within the group we focus on protein based industries. There are four manufacturing sections; meat, milk, egg and soya protein. We entered the business from the meat industry and our most recent venture is in soya protein. Cimory is one of the units of the group and is focused on the dairy industry. We began as a small dairy company as milk consumption in Indonesia is still low; data is hard to come by but it is estimated at 11kg per person. I therefore decided to focus on the best nutritional value dairy products which are those from fresh milk bases. The big multinationals are producing dairy products for the Indonesian market but are using a milk powder base. This has a lower nutritional value as it has been subject to two heat treatments; once when it is freeze dried at the origin and again when it is re-combined so it loses a lot of nutritional value. In Europe, the majority of dairy products and milk are from fresh milk so this was a niche market that I chose to explore for Indonesia. I believe that fresh milk is the best so that is why I focus on it, we began small but after only six years Cimory has expanded to production on an industrial scale. Distribution networks are the most important thing in Indonesia due to the country’s poor infrastructure. We are currently expanding to Indonesia’s main cities and opening up our own distribution network across 10 cities in Java, Sumatra, Sulawesi and Kalimantan. Dairy products are not a traditional element of the Indonesian diet but consumption of dairy goods is rising steadily. What is your outlook on the future development of the sector? It could be said that dairy is not a traditional part of the Asian diet but I think that is due to the price. Studies show that after income per capita surpasses 3,000 to 4,000 USD per head, then consumers move from carbohydrate based to protein based diets. Before, protein was only really consumed via tofu and tempe as meat is expensive but this is changing; China showed the same trend during the country’s development. Indonesian consumers tend to show a preference for imported brands over those that are locally produced. What challenges do you face in effectively positioning the Cimory brand? Indonesians prefer imported brands as they trust the quality more. Once local companies can prove that they can compete on quality then their attitudes change.	Cimory was actually started with a Dutch partner and the aim was to have a ‘foreign image’ even though it was actually me as a local Indonesian that was mainly behind it. We use foreign technology but it is my knowledge of the dairy industry that has enabled us to prove that our quality is just as good. You mentioned that the company uses foreign technology in its manufacturing processes. In what areas do you believe you could benefit from technology partnerships with potential foreign partners? I would say that the Indonesian market is huge but there is a lack of refrigeration and cold chain logistics for fresh milk and yoghurts for example. We cannot cover the whole of Indonesia or even the whole of Java with a cold chain. Now we have built a new UHT manufacturing facility with aseptic filling lines so the product can stand for a long time without refrigeration; this is not new technology but it is a necessity in a market such as Indonesia. The UHT line has a capacity of 16,000 litres per hour and another factory we have constructed is in Central Java for bottling sterilised milk. Both facilities are focused on distributing in areas of Indonesia without cold chain logistics. What new dairy products can we expect to see from Cimory in the near future? At the moment we believe we are a medium sized company with the largest product range such as set yoghurts, fresh milk and yoghurt drinks. We are the only company in Indonesia producing natural cheddar as we are committed to taking all the milk from our farmers and with the excess we produce cheddar. The market for fresh cheese in Indonesia is very small; processed cheese is more popular so we plan to produce more processed cheese, cream cheese as well as fresh cream for the local market. How is the company positioned for joint ventures with partners and investors looking to come in Indonesia’s dairy sector? We are open. We have been approached by private equity companies in the past. We believe that we want to grow independently and then in the next three to four years we plan to be publicly listed. Our interest would be in a partner with knowledge of the dairy industry as opposed to a purely financial arrangement. Rather than taking equity in our existing companies I think it would be better to set up separate joint venture companies and greenfield projects. Our vision is to grow the protein intake of Indonesians be it dairy, meat or soya protein. Our focus is on high quality products and to stay on the niche of high nutritional value and value added products.

In Europe, the majority of dairy products and milk are from fresh milk so this was a niche market that I chose to explore for Indonesia

Mr Bambang Sutantio, President Director

Cisarua Mountain Dairy or Cimory was established in 2006 as a subsidiary of Makro Group providing high quality dairy products such as milk and yoghurt. What was the background to the founding of the company and what are the current strategies being followed for future expansion?

Cimory is part of Makro group and within the group we focus on protein based industries. There are four manufacturing sections; meat, milk, egg and soya protein. We entered the business from the meat industry and our most recent venture is in soya protein. Cimory is one of the units of the group and is focused on the dairy industry.

We began as a small dairy company as milk consumption in Indonesia is still low; data is hard to come by but it is estimated at 11kg per person. I therefore decided to focus on the best nutritional value dairy products which are those from fresh milk bases. The big multinationals are producing dairy products for the Indonesian market but are using a milk powder base. This has a lower nutritional value as it has been subject to two heat treatments; once when it is freeze dried at the origin and again when it is re-combined so it loses a lot of nutritional value. In Europe, the majority of dairy products and milk are from fresh milk so this was a niche market that I chose to explore for Indonesia. I believe that fresh milk is the best so that is why I focus on it, we began small but after only six years Cimory has expanded to production on an industrial scale.

Distribution networks are the most important thing in Indonesia due to the country’s poor infrastructure. We are currently expanding to Indonesia’s main cities and opening up our own distribution network across 10 cities in Java, Sumatra, Sulawesi and Kalimantan.

Dairy products are not a traditional element of the Indonesian diet but consumption of dairy goods is rising steadily. What is your outlook on the future development of the sector?

It could be said that dairy is not a traditional part of the Asian diet but I think that is due to the price. Studies show that after income per capita surpasses 3,000 to 4,000 USD per head, then consumers move from carbohydrate based to protein based diets. Before, protein was only really consumed via tofu and tempe as meat is expensive but this is changing; China showed the same trend during the country’s development.

Indonesian consumers tend to show a preference for imported brands over those that are locally produced. What challenges do you face in effectively positioning the Cimory brand?

Indonesians prefer imported brands as they trust the quality more. Once local companies can prove that they can compete on quality then their attitudes change.

Cimory was actually started with a Dutch partner and the aim was to have a ‘foreign image’ even though it was actually me as a local Indonesian that was mainly behind it. We use foreign technology but it is my knowledge of the dairy industry that has enabled us to prove that our quality is just as good.

You mentioned that the company uses foreign technology in its manufacturing processes. In what areas do you believe you could benefit from technology partnerships with potential foreign partners?

I would say that the Indonesian market is huge but there is a lack of refrigeration and cold chain logistics for fresh milk and yoghurts for example. We cannot cover the whole of Indonesia or even the whole of Java with a cold chain. Now we have built a new UHT manufacturing facility with aseptic filling lines so the product can stand for a long time without refrigeration; this is not new technology but it is a necessity in a market such as Indonesia. The UHT line has a capacity of 16,000 litres per hour and another factory we have constructed is in Central Java for bottling sterilised milk. Both facilities are focused on distributing in areas of Indonesia without cold chain logistics.

What new dairy products can we expect to see from Cimory in the near future?

At the moment we believe we are a medium sized company with the largest product range such as set yoghurts, fresh milk and yoghurt drinks. We are the only company in Indonesia producing natural cheddar as we are committed to taking all the milk from our farmers and with the excess we produce cheddar. The market for fresh cheese in Indonesia is very small; processed cheese is more popular so we plan to produce more processed cheese, cream cheese as well as fresh cream for the local market.

How is the company positioned for joint ventures with partners and investors looking to come in Indonesia’s dairy sector?

We are open. We have been approached by private equity companies in the past. We believe that we want to grow independently and then in the next three to four years we plan to be publicly listed. Our interest would be in a partner with knowledge of the dairy industry as opposed to a purely financial arrangement. Rather than taking equity in our existing companies I think it would be better to set up separate joint venture companies and greenfield projects.

Our vision is to grow the protein intake of Indonesians be it dairy, meat or soya protein. Our focus is on high quality products and to stay on the niche of high nutritional value and value added products.

Global Business Guide Indonesia - 2013