At just 36 years old, Chandy Kusuma is running a huge empire, FKS Food & Agri, that boasted US$5 billion ($6.73 billion) in turnover in its FY2020 ended Dec 31, 2020. The farm-to-plate and agriculture conglomerate employs over 7,000 staff and has planted its flag in several Southeast Asian countries and beyond.
Founded in Indonesia in 1992 by Kusuma’s father Edy, FKS Food & Agri started as a business-to-business (B2B) company that manufactured and distributed fish oil and milled feed to chickens and cattle.
“From there, we had access [and contacts] to the feed producers, such as Charoen Pokphand Foods, Japfa and Malindo. These are our client base — from the producers like them, all the way to the self-mixers or local farmers,” says the younger Kusuma, who has taken over his father as CEO of FKS Food & Agri, in an interview with The Edge Singapore.
“Because of these customers, we started providing other services — looking into their other needs, such as raw materials. We started to focus on importing raw materials to them, like corn, soybean meals, distiller’s dried grains with solubles [DDGS] and more. That way, we are able to service our customers ‘door-to-door’ across multiple products,” he adds.
In 1998, after the Indonesian government opened up the market to allow the import of commodity products, FKS Food & Agri started expanding its focus to also service F&B players. “That’s when the group started getting into flour milling, corn milling, sugar refining and soybean milling [and] bring more products into the market and service big food manufacturers, such as Unilever, Indofood, Mayora, as well as independent F&B players,” explains Kusuma.
Straight to consumers
After FKS Food & Agri established itself as a B2B player, it was time for the group to expand its presence in the consumer market. In 2020, the group acquired a 65% stake in Indonesian-listed consumer food company Tiga Pilar Sejahtera (TPSF), which was renamed FKS Food Sejahtera upon the acquisition.
The way FKS Food & Agri’s CFO Ferdinand Sutanto sees it, “the consumer business is new and I think it has a huge potential, given Indonesia’s large population of over 270 million people”.
Furthermore, from a business standpoint, going into the consumer market would mean better profit margins as compared to the B2B segment. “We are interested in the consumer goods segment because it has more attractive margins. When you look at commodity trading, at the end of the day, it’s a volume game to gain the margins and that makes this segment riskier,” reasons Sutanto.
In a Feb 15 unrated report by RHB Research, analyst Michael Setjoadi says: “Positive synergy is expected as FKS Food & Agri is leaning towards a soft commodities business and logistics. FKS Food Sejahtera is leaving its rice business to focus only on snacks and basic foods. Balance sheet and P&L [profit & loss] turnaround will happen this year as interest expense should drop 90%.”
“We believe FKS Food Sejahtera will receive competitive pricing on raw materials from FKS Food & Agri compared to obtaining it from existing suppliers,” adds Setjoadi, who notes that the latter owns a 65% stake in FKS Food Sejahtera, while KKR owns about 6% and Fidelity less than 5%.
FKS Food & Agri’s focus is on reviving the strong brands under FKS Food Sejahtera’s belt through marketing and increasing product distribution to revive its market share. Additionally, new products will be introduced into the market and FKS Food Sejahtera expects a FY2021 net profit after tax of IDR150 billion ($14.12 million) upon a net margin of 8%, bringing the company back into the black from a loss in 2020.
Overall, Setjoadi believes that this target is achievable and the stock is trading cheaply among its local consumer staple peers. As at Sept 22, shares in FKS Food Sejahtera traded at IDR204, 45.5% lower year-to-date, giving it a P/E of 1.09 times.
Although FKS Food & Agri is not listed, it has another listed subsidiary, FKS Multi Agro — also its flagship company. Listed on the Indonesia Stock Exchange in 2002, FKS Multi Agro is currently the largest and leading food and feed ingredients supplier in Indonesia.
Kusuma explains that FKS Multi Agro was listed for the flagship company to secure opportunities within the market by listing primary shares to gain capital. “This listing was more like a technical listing,” says Kusuma.
Sutanto adds that this listing not only helped the company gain the capital needed for expansion, it also helped improve its public image. “Back in the day, when the market had just opened up and we could start importing commodities, there were a lot of opportunities to grab. Therefore, there was a capital requirement at that point in time, and going public and attracting capital investment helped to solidify the group’s position, as there was some form of validation from the market,” he says.
As at Sept 22, shares in FKS Multi Agro traded at IDR8,025, 206.3% higher year-to-date with a P/E of 9.45 times.
Feeding the world
Before Kusuma took over the helm at FKS Food & Agri some 11 years ago, the group was a one-man show run by his father. As Kusuma rose to the top, he began to appreciate the big shoes he needed to fill — and expand.
Apart from venturing into the consumer space as a new business direction, Kusuma intends to slowly but surely plant the group’s flag around the world.
Already, it has established its headquarters in Singapore that manages the group’s merchandising, logistics and procurement, as well as a new research and development centre in Singapore. “We have set up a R&D centre here in Singapore. It’s something new and it is still under development. We will continue to put effort into this and hopefully they will come up with new great products,” says Kusuma, who adds that the group is looking into creating new plant-based products to ride on the global trend of sustainable food and food security.
While trying to expand its portfolio of products to provide food security solutions, the group, as a whole, has food safety policies, and standards are one of its top priorities, Sutanto says. “We invest heavily in systems where it is automated from the vessel directly to the warehouse, where usually there will be some sort of double handling and human contact at every different point,” he adds.
He adds that the group has invested in three port facilities where it uses equipment such as conveyor belts to transport products from one point to another, minimising human contact.
As the group establishes itself with high food security standards and solidifies its reputation within the market, it is also time for it to cast out its net to other seas. Last year, FKS Food & Agri acquired a 51% stake in Brazilian sugar manufacturer Tietê Agroindustrial from Proterra Investment Partners.
Why Brazil? Kusuma explains: “This is in our line of business. We have been importing raw materials from Brazil and we had this opportunity where the timing is right for us to enter and we have the right team to run the show for us. So, as an opportunist, we can put this all together and support our destination programme.”
As much as geographical expansion is in the group’s books, for now, its main focus is the Southeast Asian market. “For now, Southeast Asia is a big enough market. We don’t want to overstretch ourselves and Indonesia will remain our key market,” explains Sutanto.
He adds that if the group does expand into a different market, its plan is to replicate what the group is doing today so that it can share its expertise and not start something new from scratch as that would take up more capital and resources.
On the outlook, Kusuma intends to grow its fast moving consumer goods (FMCG) segment. “Today, it is still relatively smaller compared to the rest [of the other revenue segments in the group], but my ambition is to bring it up into a significant portion, as it has higher margins. That will be our main focus. But that does not mean we are leaving the other businesses aside. Given the growth that we are seeing in Indonesia, as well as Southeast Asia, we will continue to grow as well on the B2B side of the business,” says Kusuma.
Photo: The Edge Singapore/ Albert Chua
