Agri-business Olam to invest US$3.5 billion in new six-year strategy

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Agri-business Olam International set out its new six-year strategy on Friday, with plans to invest US$3.5 billion, including maintenance capex, to boost the businesses it has targeted as having high growth potential.

“Driven by consumers and advances in technology, these trends include increasing demand for healthier foods, traceable and sustainable sourcing, e-commerce and the rise of ‘purpose’ brands,” it said. “This new strategy builds on the current business model which has yielded strong results and growth across Olam’s diversified portfolio.”

The plan also includes US$1.6 billion of capital to be “released” via divestments of certain businesses and assets outside the new priorities, Olam said in a filing to SGX on Friday.

Olam said the investments would target 12 prioritized businesses: Edible nuts, cocoa, grains and animal feed, coffee, cotton, spices, edible oils, infrastructure and logistics, dairy, rice, packaged foods and commodity financial services.

It added that it would de-prioritize and divest four businesses: Sugar, rubber, wood products and fertilizer, as well as other assets that no longer fit the strategic priorities.

Olam also aimed to drive margin improvement by improving cost and capital efficiency.

The strategy includes generating additional revenue streams via differentiated products and services, such as AtSource, which is a sustainable sourcing and traceability service for agricultural raw materials and food ingredients, as well as risk management services and ingredient and product innovation, Olam said.

Olam said it would offer value-added services, including organic certification.

It also pointed to opportunity from co-manufacturing, the food-service sector and e-commerce for small- and medium-sized customers.

Sunny Verghese, co-founder and CEO of Olam, said that after a comprehensive review, the strategy was to focus on health and ethical sourcing trends and changing consumer preferences.

“Our strategy will allow us to play a leading role in re-imagining global food and agri-supply chains for the better – sourcing raw materials within the earth’s capacity to regenerate and transforming those materials to deliver food, feed and fibre for a growing population,” he said in the statement.

 

 

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