Wednesday, January 09, 2008

CPI organic palm oil captures niche

CPI organic palm oil captures niche

End-to-end quality control key to success


Taking control of the entire organic production process is the key to selling organic palm oil overseas, says Karoon Nuntileepong, the managing director of Chumporn Palm Oil Industry Plc (CPI). ''We have to operate the entire process to ensure that our products have no chemicals involved,'' he said. ''This is the key to success in penetrating the niche organic market.''

CPI, the country's largest palm oil producer, is gearing up to develop organic production to enjoy selling prices that are 20% higher than for conventional palm oil.

Generally, chemical fertiliser is essential for plantations to boost crop yields, but they are not allowed in organic products. This means organic palm oil yields are about 5% to 10% below those of normal palm oil.

Demand for organic palm oil overseas has increased strongly in line with health concerns among high-income consumers.

''We put more effort into producing high quality organic palm oil as its price is 20% higher than the prices normal products, while our investment costs are still low,'' said Mr Karoon.

Organic palm oil generates 30 million baht for CPI each year. It requires only 4,000 to 6,000 baht per rai per year more than regular palm oil to produce.

Mr Karoon attributed the low investment costs to the fact that CPI has put money into knowledge-based technologies in existing plantations.

Fertiliser for organic plantations costs 5-10% less than in conventional plantations because many chemical fertilisers have been replaced with natural residue. The company also uses natural predators such as owls to kill rodents.

Mr Karoon said the company's organic palm yield was currently a modest 1,000 tonnes per year. It could be stretched to 2,000 tonnes if demand rises.

CPI's palm trees are grown on a 20,000 rai in Chumporn province. Since 2003, 3,800 rai have been reserved for growing the organic crop.

CPI's overall production capacity is 110,000 tonnes per year. Initially, Mr Karoon said that Italy-based Organic Palm Oil Co was its sole client before it started marketing to the Netherlands and Germany.

An Italian client previously sourced organic palm oil from Malaysia, the world's largest palm oil producer. But the Malaysian producer was unable to ensure its palm oil was purely organic throughout the whole production process, opening up an opportunity for CPI.

Most Malaysian producers did not have fully integrated palm oil plants with their own plantations, resulting in poor quality control.

''Unlike others, we possess a plantation, crushing mill and refinery operated by ourselves, so we can control the quality from upstream to downstream processes,'' said Mr Karoon.

Global organic palm oil markets are still in their infancy, and would need more time to be developed, he added. European countries were key export markets as customers warmly welcome all organic foods.

CPI shares closed yesterday on the Stock Exchange of Thailand at 3.60 baht, down 20 satang, in thin trade.

No comments: