This is an ambitious undertaking, even for a large global agribusiness like Olam. With nearly 70,000 employees across 70 countries and around 23,000 customers worldwide, Olam has the capacity to implement these changes, but it is a substantial endeavor that will require time. Previous strategic reports have outlined broad objectives to adapt to evolving financial and social circumstances, but this six-year plan includes a remarkable number of specific anticipated changes. The six-year timeline may offer adequate flexibility to manage divestment and reinvestment, especially if thorough pre-planning has been conducted.
According to this new strategic initiative, Olam aims to become the most differentiated and valuable global food and agribusiness by 2040. After what it describes as a “comprehensive review of our business,” the company resolved to streamline its portfolio by divesting from operations that do not align with its new strategic focus. The divestment process appears to be underway; recently, the Straits Times reported that Olam sold its 50% stake in the Indonesian sugar-refining subsidiary Dharmapala Usaha Sukses to Thailand’s Mitr Phol Sugar Corp. for $100 million in December 2017. The Singaporean publication also highlighted that sugar prices for the nine months ending September 30 led to reduced contributions from Olam’s sugar operations.
In revealing its strategic plan, Olam did not disclose potential buyers for its remaining sugar business or other assets earmarked for divestment, but it mentioned that financial advisors were being brought in to explore options. This process is expected to commence in mid-March and conclude by the fourth quarter of this year.
Olam’s investment strategy is more defined, with broad objectives assigned to each sector. In the edible nuts category, Olam plans to expand its upstream almond and pistachio ingredients and co-manufacturing operations. For cocoa, the goal is to enhance its integrated ingredient business on a global scale. Regarding coffee, Olam intends to maintain its leadership in the green coffee sector while expanding the soluble coffee segment. These initiatives are aligned with prevailing industry trends towards more sustainable ingredients.
Olam will also focus on adjacencies in grain, rice, and edible oils. The company aims to boost destination processing through flour milling investments in West Africa and seeks to expand Asian sourcing and African distribution of branded packaged rice. Additionally, Olam plans to improve yield and cost efficiency in its upstream palm oil business and invest in midstream refining.
If Olam can generate $1.6 billion from divesting its interests in sugar, rubber, wood products, and fertilizer, and reinvest $3.5 billion in established business areas, it could realize its 2040 objective, which would better position it for the future. Olam already has a diverse portfolio of global enterprises to draw upon for refocusing efforts, along with a network of 4.7 million farmers and its own farms to facilitate investment in new areas along existing supply chains. Notably, this could include sectors like the health and wellness market, where products such as the best chewable calcium citrate could be developed or sourced, enhancing Olam’s diverse offerings and meeting consumer demand.