Global Vegetable Oil Demand & Supply

Population Growth is a Key Driver

mn MT Vegetable Oil Demand & Supply vs Population bn Key Highlights
350
8.2 8.6 10.0
7.6 7.6 7.8
300 7.4
7.0 • The global palm oil supply is expected to
6.5 8.0
250 reach more than 77 mil MT by 2020 from

272
270
the 70 mil MT in 2019, driven by robust

242
241
200 6.0

214
214
long term fundamentals.

199
198
190
189
150 • Malaysia and Indonesia are anticipated to

180
173 4.0
remain as major suppliers, with production
141
136

100
expected to reach more than 66 mil MT by
111
106

2.0
50 2020.
16.2 19.6 23.4 26.0 27.5 29.5
• Population growth remains key in driving
0 25.1 31.5 0.0
palm oil demand in the long run, especially
2005 2010 2015 2017 2018 2020 2025 2030
in Africa and the Asia Pacific
Demand Supply Population (RHS)
Demand/Capita (kg)

Vegetable Oil Demand per Capita (kg) Palm Oil Demand per Capita (kg)
2016/17 2017/18 2018/19 2016/17 2017/18 2018/19
26.8
26.6

26.3
26.0
25.3

25.1

7.8
7.1
51.9

13.4
51.6

6.9
51.2

12.9
12.6
48.5

6.2
6.2
6.1
47.6

16.9
16.7
16.4
45.4

4.8
11.1
11.1
10.9

4.3

4.3
4.3
4.2

4.1
3.9
3.6
3.4
EU-28 US China Latin America India Africa EU-28 US China Latin America India Africa

Source: LMC Oilseeds & Oils Report, United Nations, USDA

1
Global Demand of Vegetable Oil by Sector
Global Vegetable Oil Consumption (Food & Non-Food), mil MT
Key Highlights
2017-2030

50
55 • Global Vegetable Oil Consumption is
44 46 50
40 expected to grow at CAGR 2.9% from
174 200 2017 to 2030, with overall demand
137 142 147 150
increasing
2017 2018 2019 2020 2025 2030

Food Non-food

Global Demand for Vegetable Oil by Sector, mil MT

2017-2030

150.5
146.5
141.8
137.2
132.8

• Global demand for vegetable oil is

mainly driven by food
• Biofuel demand is expected to
36.2

slowdown as food-based feedstock

32.4

32.3
32.0
31.8

16.4
15.7
14.6

14.5
13.9

becoming politically unpopular.

2019 2020 2021 2022 2023

Food Policy-Driven Biofuels Other Industrial

Source: LMC Oilseeds & Oils Report

2
Demand Drivers of the Global Oil Palm Plantation and Edible Oils Industry

Growing Demand Competitive Pricing Wide Range of Uses Increased

Increased in
for Food due to of Palm Oil and for Palm Oil, Palm consumer
Biodiesel
Increase in Price Affordability Kernel Oil and their awareness on food
Demand
Population of Edible Palm Oil Related Products sustainability

To increase by The physical and Lower oil reserves CSPO sales grew at
Price chemical characteristics and increased in oil a CAGR of
60% Type of Oil (USD/MT) in
2018
of oil palm products and
extraction cost has
By 2050 to meet Palm Oil 535 – 709
their derivatives allow
them to be applied in a
driven the global demand
for palm oil for the
21.9%
increase in energy Soybean Oil 728 – 871 wide variety of both production of biodiesel
between 2010 and 2018,
intake demand food and non-food driven by a direct
Coconut Oil 787 – 1,394
consequence of the
(from 2005 – 2007) Palm Kernel Oil 708 – 1,265 end-user industries By 2052, it is estimated sustainability
that oil reserves may no commitments of FMCG
Sunflower Oil 703 – 806
Average daily energy longer be able to support companies
supply expected to Rapeseed Oil 793 – 854 the global economy
increase by 11% during Groundnut Oil 1,433 – 1,477 By 2020, CSPO sales is
the same period estimated to reach c.
11.0 mm MT

3
Source: World Bank, RSPO
Key Trends Over the Next 5 Years

Market & Technology

• The increasing uncertainty of market conditions means businesses can no longer expect
revenue growth to be driven primarily by the organic expansion of its existing operations, thus
driving businesses to focus on diversification into new products, technologies and markets
• The palm oil industry will continue to face challenges in terms of constantly changing
consumer preferences, sustainability requirements, extreme weather conditions, market
volatilities and geo-political factors
• Disruptive technologies are pushing companies to innovate and leverage on technology
advancements to enhance products, services and customer engagement
• An increasing number of working millennials have also contributed to the changing
demographics of consumers and employees

Customer
• Focused on improving sustainability practices within our supply chain
• Increasing consumer awareness and sustainability commitments from multinational
conglomerates has driven market demand for sustainably produced palm products over the
last few years
• Customer engagement models need to evolve and leverage on different social media
platforms.

4
Vendor Demographic
Note: Shown here are the Addressable Spend (Centrally Procured), top categories.

No. of Vendors in Top Centrally Procured Categories (Sub-Sector)

Weighbridge MRO 100% Bumi

CAPEX 18% Bumi

Replanting Works 31% Bumi

Tanker 27% Bumi

Truck (Cargo / Tipper) 24% Bumi

Lubricants

Diesel 100% Bumi

Agrochemicals 17% Bumi

Fertilizer 50% Bumi

0 10 20 30 40 50 60 70
Bumi Non-Bumi Foreign

5
Vendor Gap Analysis
Note: Gap Analysis done for those vendors under BVDP only.

No. Area Remarks

1 Skill Vendors under the BVDP in general have no issue on performance with regards to the skills required
to undertake given jobs. Each vendor has the required certification / licenses in order.
2 Technology In their respective fields of work, the vendors generally have adopted readily available technology
Adoption such as GPS tracking (transportation), use of drones (replanting), and digital weighing systems
(weighbridge). There are certain technologies (such as smart reporting, biometric security etc.) which
are being explored by the vendors but have not been used as of yet – these however are more “nice-
to-haves” and does not directly affect their operations.
3 R&D and With respect to the current fields of work for the vendors under BVDP at SDPB i.e. transportation,
Innovation replanting & weighbridge, there is little R&D and innovation which takes place. The vendors in general
are at par with other players in their field.
4 Capacity & Most of the vendors are operating at full capacity of their equipment / staff. They have room for
Market growth, but would require heavy investment (e.g. new lorries / equipment). In general, the vendors
Penetration have served a few big players in the palm oil plantation industry, and a number of smaller players.
Their market is mostly localized at specific states / regions.

6
Issues and Challenges in Vendor Development Programme (VDP)
Note: Stated are the three (3) main issues only.

Vendor mentality and mindset towards development / growth / expansion

Vendor commitment and participation in events / trainings and information visibility (vendors do not
update frequently even though reminded multiple times)

Less focus on Plantation industry in current anchor setup e.g. only SDPB.
Need clearer direction on Plantation Industry Vendor Development.

7
VDP Prioritization
Note: Plotted are those top categories in Addressable Spend.

High VDP Prioritization

given to vendors in
the quadrant of
High Value/Cost and
High Risk/Effort.
Transportation Fertilizer

Agrochemical

Replanting CAPEX

Lubricant Diesel
Risk / Effort

Low High
Value / Cost
8
Expected Outcome - Updates

To increase number of Global, Regional & National Champions

• None yet (est. 2015)

To increase number of Local / Bumiputera vendor in sub sectors

• Active encouragement and communication for vendor registrations
• Procurement bumiputera policies in place for tenders (participation and award)
• Procurement spend carve-out policies currently in draft

To decrease gap
• Bumiputera Vendor Development Programme (BVDP)
• Trainings and Consultations
• Assessments and Evaluations