Move away from trans fats and focus on clean label spurs AAK's APAC expansion drive
Part of AAK’s strategy for both these countries is to focus on applications within the chocolate and confectionery fats, as well as dairy, and special nutrition segments.
"By investing in these facilities we are dedicated to support our customers in the region and give them access to AAK's global solutions,” said Torben Friis Lange, President Asia, AAK.
Strong regional growth
In Asia-Pacific, AAK also has a presence in Australia, China, India, Malaysia, Singapore and other parts of Japan, in addition to the new Tokyo centre.
Michael Skriver, South East Asia regional director, AAK Singapore, and representative director, AAK Miyoshi Japan, told us the firm has seen strong organic growth in all the Asian markets and had “good development in our core segments”.
Skriver said, with the recent move by some regional governments to take the US and EU’s lead in banning the use of partially-hydrogenated oils, AAK is in prime position to seize market opportunities as it is “one of the first producers of vegetable oils and fats to develop a non-trans fat solution”.
He said the firm believes that other countries around the world will follow suit.
“Also, the demand of consumers seeking for clean label has been increasing as we see the trend is coming to Asia. This is why we continue to develop and further improve our range with the next-generation of non-trans vegetable oils and fats,” he added.
As for Turkey and the Middle East, he said the firm saw “a great year with many strong improvements”, and it is in a “leading position”.
AAK currently has about 737 employees in Asia-Pacific.
In the third quarter of this year, AAK will open a new Innovation Centre in Singapore that will function as the Asia headquarters.
“The past year has without a doubt been exceptional for AAK. We have seen a number of significant achievements, including a higher organic growth compared to the underlying market and another record-high operating profit,” said Skriver.
“Food ingredients, primarily driven by the special nutrition and dairy segments, was a main contributor to the increase. Chocolate & Confectionery Fats reported a double-digit year-on-year improvement despite some production and supply chain challenges during the second half of the year.
“The positive trend from previous years continued and last year demonstrated a strong financial performance with an improvement of operating profit by 11%.”
New Japan innovation centre
In early 2016, AAK formed a partnership with Miyoshi Oils & Fats Co. and established a new company for the Japanese market, AAK Miyoshi Japan.
According to Skriver, it was “designed to deliver best-in-class products, customer innovation, technical resources and enhanced local supply chain capabilities”.
“This allowed us to better collaborate with Japanese customers — from idea to product launch —following global trends,” he said.
The new customer innovation centre, scheduled to open in Q4 2018, specially caters to processed food manufacturers in Japan and aims to create a ‘co-development’ approach.
“We approach Japanese customers who would like to blend in new ideas from around the globe, while not losing local Japan originality,” said Shriver.
There are two main ‘directions’ for the Centre: 1) Supporting customers who want to take products created based on trends in Japan to be exported and promoted in other markets; and 2) supporting and inspiring customers based on international trends.
“AAK’s core business is producing vegetable oils and fats solutions based upon natural and renewable raw materials across many industries. For Japan, chocolate and confectionery consumption is huge and it is one of the main areas of focus,” said Skriver.
“On top of that, special nutrition solutions (lipid nutrition, medical infant and health food) is also another main business focus that AAK is tapping into the potential of Japan’s elderly and dietary nutrition markets.”
“With a local innovation centre, we can develop and provide fast value-adding vegetable oil solutions in close collaboration with our local customers, enabling them to achieve long-lasting business results…”
Japan has one of the highest proportions of senior citizens, and which emphasizes healthy diet. Skriver said Japan also has one of the largest markets in the world for high-end, especially indulgent and healthy, solutions in the chocolate segment.
Location key in the Philippines
As for the Philippines, Skriver said it was chosen being one of the fastest-growing economies in Asia that is driven by strong domestic consumption.
“With a fast-growing economy, the demand for speciality and semi-speciality edible oils in Philippines is expected to grow strongly,” he said.
The Philippine plant, scheduled to be operational by year’s end, will be located on land owned by oils and fats refinery San Pablo Manufacturing Company in Batangas, around 100km south of Manila.
Skriver said the reason for this is that it would be closely located to many of their key customers and “offers very good inbound and outbound logistics for the Philippine market”, as well as being in close proximity to a container harbour and jetty for bulk vegetable oil shipping.
AAK’s Philippine presence will also strengthen its efforts in sustainable sourcing. While AAK has been sourcing coconuts from India and Sri Lanka since the 1930s, the Philippines is now one of the biggest coconut producers in Asia.
“There is a growing demand for sustainable and traceable coconut oil on the global market. The traditional coconut supply chain is long and complex because the growing areas are far away from the mills that extract the oil from the dried coconuts (copra),” said Skriver.
“With the presence in the Philippines, AAK and the mill can directly pick up copra from the farmers and provide training and equipment, as a means to ensure that a bigger share of the value goes to the farmers.
“We will also source coconut oil to other AAK mills in China, India, US and Europe.”
Initially, the Philippine customisation plant will focus on supplying products for the chocolate and confectionery fats and dairy, and special nutrition segments.