Japfa’s Poultry Division is one of the most vertically integrated poultry operations in Indonesia. Its proven business strategy has become what is today a blueprint of success which the Company is using in diversifying into other food businesses and expanding into new markets overseas.
The Poultry division is Japfa’s largest revenue contributor accounting for approximately 83% of annual net sales. It is involved in three principal stages of the production chain: feed production, DOC breeding and chicken processing.
The domestic poultry industry continues to offer one of the brightest growth prospects in Indonesia. The country’s per capita consumption of chicken is currently among the lowest in Asia. For a predominantly Moslem population, poultry forms the major meat diet.
Historically, poultry production in Indonesia has risen at an average rate of 15% per annum in the period from 1989 to the start of the economic crisis in 1997. Post crisis the growth trend has recommenced, underpinned by an increasing population and increased preference for poultry meat.
For a company to truly succeed in the poultry business, it needs to fully integrate its upstream and downstream operations.
This comprises six production activities: raw materials procurement, feed production, DOC breeding, chicken farming, chicken dressing and processing, and distribution.
This comprises six production activities: raw materials procurement, feed production, DOC breeding, chicken farming, chicken dressing and processing, and distribution.
In Indonesia, altough there are more than 15 feed companies, two top players (including Japfa) control more than 70% of the total supply.
In a typical poultry feed operation, raw materials account for 90% of the production cost. In 1 kg of poultry feed, half is made up of corn. The remaining ingredients are soybean, rice bran and fish meal. The price of corn thus has a significant effect on the business cost of a feed manufacturer. In addition, only with economies of scale can a feed miller secure raw materials at competitive prices in the international and local grain markets. Furthermore, the transportation cost per unit of raw materials is reduced by volume purchases.
The economic crisis resulted in a rationalization of the key players in the DOC market. Japfa has emerged from the crisis with a larger share of the market. Because of the strong underlying demand for DOCs, there is ample room for growth in both Broiler DOCs and Layer DOCs into the future.
Downstream poultry production involve the processing and distribution of slaughtered chicken. Almost 85% of poultry in Indonesia are sold as live birds and fresh meat at the traditional wet markets, some of which also act as slaugther yards.
The distribution trend is however fast changing. In recent years, Indonesia’s rapidly growing consumer market has fostered the emergence of fast-food restaurants all over the country. In line with this development, there is also increased demand for poultry processed foods, like chicken nuggets.
Feed Production & Milling
With a total production capacity of about 1.6 million tons per annum, Japfa is one of the leading feed manufacturers in the country commanding over one third of the total market. Of the total feed produced by Japfa today, 10% is used for internal breeding opeations while the rest is sold to local farmers and independent distributors.
The Company attributes its success in feed production to five critical factors: a sophisticated feed technology system, an excellent feed formulation strategy, a strong raw materials procurement capability, a high capacity utilization rate, and unrivalled distribution network.
With a total production capacity of about 1.6 million tons per annum, Japfa is one of the leading feed manufacturers in the country commanding over one third of the total market. Of the total feed produced by Japfa today, 10% is used for internal breeding opeations while the rest is sold to local farmers and independent distributors.
The Company attributes its success in feed production to five critical factors: a sophisticated feed technology system, an excellent feed formulation strategy, a strong raw materials procurement capability, a high capacity utilization rate, and unrivalled distribution network.
Japfa places equal emphasis on producing high quality feed and maintaining quality consistency of its feed. The Company boasts of an advanced feed technology system which enables it to implement a stringent quality assurance program. By conducting regular bench-marking activities such as laboratory tests, Japfa stays assured that the quality of its feed is constantly higher than that of its major competitor.
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