Joint venture success in Indonesia provides ASEAN template for CPC
Founded in 1860, Consolidated Pastoral Company (CPC) is an Australian-managed agrifood business. CPC operates 16 cattle stations across 5.5 million hectares of land in Australia and owns 80 per cent of PT Juang Jaya Abdi Alam (JJAA), a joint venture that runs two feedlots in Indonesia. United Kingdom-based private equity firm Terra Firma is the major shareholder in CPC, which has an enterprise value of $850 million.
CPC has a successful record in Indonesia, having formalised its presence in the market through PT JJAA in 2000. PT JJAA operates a feedlot in South Sumatra with capacity for 28,000 head of cattle and a feedlot in North Sumatra with capacity for 7,500 head of cattle. The venture employs 180 permanent and contract employees plus about 300 casual daily workers.
CPC plans to export 25,500 head of live cattle from its Australian cattle stations to Indonesia in financial year 2017.
The joint venture has given CPC access to the largest economy in Southeast Asia and a population of more than 258 million people.
'The population is largely Muslim, so there was particularly strong demand for beef in Indonesia,' explains Troy Setter, Chief Executive Officer, CPC. 'In addition, the cost of finishing cattle – sending them to feedlots to fine-tune their diets ahead of slaughter – is lower than in northern Australia.
'Lower labour costs and the proximity of the Port of Darwin to Indonesia also presented considerable advantages,' Setter adds.
CPC's investment in Indonesia through PT JJAA also includes a corporate social responsibility program for villages surrounding the joint venture's feedlots. These programs include road, bridge and water infrastructure and financial assistance for development.
Setter points out that working with high-quality joint venture partners – in CPC's case, the owners of the remaining 20 per cent of PT JJAA – is another key to success.
'Investing time in-country and in-market is also important,' he says. 'Over the last 20 years we have put a lot of work into ensuring both our Indonesian and Australian teams understand each other and what we're trying to achieve.
'Taking time to build strong personal relationships is key to Indonesian business and culture and we've actually applied some of the lessons we've learned there to the way we do business in Australia.'
CPC's operations in ASEAN are limited to Indonesia at present. However, Setter acknowledges the business is considering opportunities to enter new markets in ASEAN and potentially beyond.
'Looking forward, there's no reason why we can't supply into other markets and that is part of our strategic planning over the next couple of years,' he says.
'We've learned a lot in Indonesia about cattle feeding, meat marketing and promotion, tropical agriculture, tropical food production and marketing, and we've considered numerous opportunities to mirror our business in other ASEAN markets,' Setter says. 'We're still working on finding the right opportunity and right partner. While a partner is not a 'must have' for us, it is our preferred way of developing markets in the region.'