Australian food groups expand into Indonesia

Australian food groups expand into Indonesia

SYDNEY (Reuter): A recently announced investment by biscuit- maker Arnotts Ltd. marks growing Australian interest in investing in Indonesia's fast-growing processed food market, analysts said yesterday.

The A$25 million to A$30 million (US$18.75 million to $22.5 million) investment announced on Aug. 24 is the largest by an Australian company in food processing in Indonesia and Arnotts' first move into Asia.

"Indonesia is being looked at pretty carefully by all (Australian food groups)," said Raewyn Ellis-Doff, analyst at Macquarie Equities Ltd.

"Places with huge populations and rising incomes are providing a very rapidly growing income base," Ellis-Doff said. "It is getting to a level of income where it becomes interesting for Australian companies."

Barely a week after Arnotts announced its investment, the group became the center of speculation that it was about to be taken over by 64.5 percent owner Campbell Soup Co.

Arnotts' positioning in the Asian market is seen by market analysts as the main trigger for the possible full bid.

The formation of PT Helios Arnotts Ltd by the 130-year-old Australian company through a 50 percent stake in Helios Foods, part of Indonesia's big Kalbe Farma group, was the type of move by Arnotts which had been expected for years.

Asia

But while it has been a long time coming, Arnotts says the move will be the first in a series of Asian investments.

Managing director Paul Bourke told Reuters last week Arnotts was engaged in feasibility studies for biscuit-making in China. This would be through its own operation rather than in conjunction with state-owned Chinese ventures.

Arnotts was also focusing on establishing ventures in Thailand and the Philippines and would be connected with moves into Vietnam and the Philippines by Helios, he said.

The Australian company is also working on distribution networks in Indonesia, Thailand, the Philippines, Vietnam, India and Pakistan.

By the year 2000, Arnotts expects 50 percent of its projected annual sales of A$1 billion ($750 million) to be in Asia.

Bourke declined to put a dollar figure on the size of Arnotts' investment in Indonesia. The A$25 million to A$30 million figure was provided to Reuters by market sources.

At this level it would just outrank Goodman Fielder Ltd's A$20 million ($15 million) joint-venture fats and oils operation PT Sinar Meadow International, on the outskirts of Jakarta.

Indonesia's fast food and processed food sector, as it grows at rates of at least 50 percent a year, has whetted the appetites of a range of Australian food groups.

Smartindo Snacks, a second food joint venture recently established by Goodman Fielder, is already expanding. Graeme Thomson, Goodman Fielder's group manager of corporate relations, said a staged expansion of Smartindo was planned.

New products launched at Smartindo in the last couple of months include both Western-style lines -- mainly potato-based crisps -- and "ethnic" snack products, Thomson said.

Coca-Cola Amatil Ltd, which already has market access to most of the country, is beginning work on a new A$100 million ($75 million) bottling plant outside Jakarta.

Burns, Philp & Co Ltd, which has had two A$5 million to A$10 million ($3.75 million to $7.5 million) yeast plants near Jakarta since 1979, is planning a larger, modernized yeast plant in a significant upgrade of its Indonesian presence.