KAKAO KONEK

NOV 2012

DAVAO, PHILIPPINES

Daniel Liew

Armajaro Asia

1 This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

OVERVIEW OF THE ARMAJARO GROUP

• Armajaro is a progressive and successful commodities and

financial services business, headquartered in London.

Founded in 1998, Armajaro has three main business activities

:

• Commodities – coffee, cocoa, sugar and cotton origination,

trading and distribution

• Asset management – commodities and other alternative asset

investment management

• Structured products – arranging and dealing in bespoke

financial instruments

• Over 1,000 people work for Armajaro and its various

subsidiaries and associated companies around the world

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OVERVIEW OF THE ARMAJARO GROUP

• Armajaro is a leading supplier of cocoa beans and cocoa products to

international chocolate manufacturing industry

• The Group as a whole turnover about 10% of annual world volume

• Armajaro has wholly-owned sourcing operations in the world’s key cocoa

producing origins including Ivory Coast, Ghana, Indonesia and Nigeria

• Armajaro’s associate company, Theobroma produces, trades and distribute

semi-finished cocoa products to the confectionery industry

• Armajaro is also a leading supplier of green Robusta coffee to the world’s

major coffee manufacturers and roasters

• Armajaro Trading Limited is headquartered in London with regional

marketing, sales and procurement management offices in Kuala Lumpur,

New York, Singapore and etc

• Armajaro cocoa operations in Asia are based in Malaysia, Singapore,

Vietnam and Indonesia. We also sourced cocoa through our agents in PNG,

Solomon Islands and Vanuatu

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INTRODUCTION TO THE ARMAJARO GROUP

Cocoa

Coffee

Sugar

Coffee

Cocoa

Coffee

Coffee

Sugar

USA

Costa Rica

Colombia

Ecuador

Coffee

Peru

Brazil

CoffeeCocoa Cocoa Cocoa Coffee Cocoa Cocoa Coffee Coffee Coffee

Sierra Leone Liberia Ivory Coast Ghana CameroonNigeria UgandaBurundi Tanzania Kenya

Cocoa

Coffee

Indonesia

Cocoa

Coffee

Sugar

Malaysia /

Singapore

Cocoa

Papua New

Guinea

Cocoa Coffee

United Kingdom

Sugar

Vietnam

CoffeeCoffeeWarehouseTheobroma

ChinaIndiaGermanyNetherlands

Offices

Agents

Agents

AgentsAgent

Cotton Cocoa Cotton

Cocoa

Coffee

Sugar

Thailand

Sugar

New

Zealand

Sugar

Agents

MEDAN

LAMPUNG

SURABAYA

JAKARTA

MAKASSAR

PALU

KOLAKA

JAYAPURA

SIGLI

PORT OPERATION

INTERIOR CENTRE

ARMAJARO CENTRES – SULAWESI, SUMATRA, JAVA, IRIAN JAYA

5 This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

ARMAJARO CENTRES - SULAWESI

PORT OPERATION

INTERIOR CENTRE

KOLAKA

MAKASSAR

PALU POSO

PARIGI

DONGGALA

TINOMBO

KOTA RAYA

PALOLO

POLMAN

MASAMBA

SP 5

LAMBUNU

PASANGKAYU

GIMPU

BUNTA

TENTENA / TOMATA

TOLAI

6 This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

ARMAJARO CENTRES - SUMATRA

SIGLI LHOKSEUMAWE

KUTACANE

LAMPUNG

SRI BAWONO

PADANG CERMIN

MEDAN

INTERIOR CENTRE

PORT OPERATION

7 This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

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Current Cocoa Activities in Indonesia – organizational

structure

Established network in Indonesia from farm level to export

This is the property of Armajaro KL. No distribution or copies of this is allowed without the consent of Armajaro KL.

Southeast Sulawesi Capacity : 1.500 mt

Central Sulawesi Capacity : 4.500 mt

South Sulawesi Capacity : 6.000 mt

Aceh Capacity : 650 mt

Medan Capacity : 3.000 mt

Lampung Capacity : 2.500 mt

Strategic Partner

South Sulawesi - Masamba South Sulawesi - Masamba West Sulawesi - Polman

Central Sulawesi - Poso Central Sulawesi - KotaRaya SouthEast Sulawesi – SP5

• Is a dedicated team specializing in Development and Sustainability across cocoa commodity operations in Indonesia

• Owning the relationship from farm to brand – “value creation” • Help empowering farmers to improve yields and working conditions

Development and Sustainability (D&S)

Nanggroe Aceh

Darussalam

North

Sumatera

West

Sumatera

Bengkulu

Riau Island

Bangka

Belitung

Lampung

Jakarta

Banten

West Java

Jokjakarta East Java

Bali

NTB

NTT

West

Sulawesi

South

Kalimantan

East

Kalimantan

Central

Kalimantan

West

Kalimantan North

Maluku

Maluku

South

Sulawesi

South East

Sulawesi

Central

Sulawesi

North

Sulawesi

Gorontalo

Papua

West

Irian Jaya

Central Java

D&S Activities Areas -

2012

UTZ Certified Farmers The first UTZ Certified Indonesian cocoa beans

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

Demand – stable with upward trend

• Chocolate is relatively inexpensive – less

affected by periodic economic downturns

• No similar substitutes – unlike coffee vs. tea

• In longer term, we should see increase

consumption due to :

• Population growth – more people to consume

cocoa products

• Usage diversifications into non-edible products –

cosmetics, spa etc

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

• Change in consumer taste in non traditional chocolate consuming countries – China and India

• ICCO 2009 data – annual per capita chocolate consumption

• Germany – 11.34kg

• United Kingdom – 10.94kg

• Denmark – 7.39kg

• USA – 5.09kg

• Japan – 2.15kg

• China – 0.10kg

• India – 0.10kg

• Just additional 100grams of annual consumption from both China and India would increase world bean demand by 230,000mt

KEY FACTORS INFLUENCING SUPPLY AND DEMAND

• Supply – more erratic in short term and slowly

declining

• Wild weather pattern – prolonged draught and

flood

• Ageing trees in main producing countries – Ivory

Coast, Indonesia

• Difficulty in combating cocoa disease – CPB,

VSD – in adequate farmers training – financial

constraints, attitude

• Competition from other crops - oil palm

PROJECTION OF SUPPLY AND DEMAND

• Production - violent swings in production cycle – especially 2011/12

season – favorable weather conditions in Ivory Coast – world top

producer at 1.3 million mt – also marred by deadly civil war which

disrupted cocoa trades, domestically and internationally

• Demand – steadily increased despite economic uncertainties since

2008

EMERGING AND POTENTIAL ORIGIN COUNTRIES

Philippines – annual production 6,000mt

• Large population – 94 million – potential

for work force and market

• Large coconut acreage – 2,000,000

hectare ?? – potential for inter-crop with

coconut

• Already experienced in cocoa

EMERGING AND POTENTIAL ORIGIN COUNTRIES

Vietnam – annual production - 3,000mt

• Large population – 88 million – potential

for work force and market

• Availability of agricultural land – cocoa

acreage only 22,000 hectare – room for

more

• Good connectivity with international ports –

due to coffee and industrial items exports –

cheap freight

EMERGING AND POTENTIAL ORIGIN COUNTRIES

South Pacific Islands

• Papua New Guinea – already an established origin – 50,000mt

• Solomon Islands – 7,000mt

• Vanuatu – 1,500mt

• Known for bean quality

• Located off major international sea traffic – logistically difficult and expensive

• Combined population of these 3 countries only 7.8 million – too small

CURRENT ISSUES IN COCOA

• Competition from other crop like oil palm for work force, land and government support

• Ageing trees – low yield – but replanting would mean loss of income for farmers -need alternative income in the interim period

• Industrialization – lack of interests by the younger generation in agri-business – example – Malaysia !

CURRENT ISSUES IN COCOA

• Competition from other cocoa origin –

price sensitive grinders would look for best

value for money – would learn about and

try cocoa from other origins – Ecuador,

West African – threat to traditional Asian

origin like Indonesia

• Increased political / environmental scrutiny

– accusation of child labour, deforestation

etc

CURRENT ISSUES IN COCOA

• Heavy concentration of supply – Ivory

Coast and Ghana account for more than

60% of annual world supply – need to

diversify – opportunity for other origins

• Hot money – funds injection by central

banks spill over into commodities market –

more volatile swings in market – driving up

food prices – what should we do ?

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