Kokola secures plastic packaging supply amid geopolitical conflicts
Gresik, East Java - PT Mega Global Food Industry (Kokola Group), one of the food producers, is prioritising the securing of plastic packaging material supplies to maintain production continuity amid shortages of plastic raw materials due to global geopolitical turmoil.
The company states that the crisis in the Middle East region, particularly affecting the Strait of Hormuz route, has triggered a shortage of naphtha as the main raw material for plastic. This situation has led to a surge in plastic packaging prices.
“Now, fellow media colleagues surely all know that we are facing a shortage of packaging materials. The raw material is from petroleum plastic. The supply chain is indeed disrupted,” said Kokola Group President Director Richard Cahadi during a media visit in Gresik, East Java, on Friday.
He explained that packaging is a crucial component for the food industry because without packaging, products cannot be marketed. Disruptions in packaging supplies could potentially hinder the entire business chain of the company.
To anticipate this, Kokola Group is prioritising supply security, including ensuring funding readiness. This is because suppliers are now tending to demand upfront payments amid global supply uncertainty.
He added that these steps are supported by collaboration with the Export-Import Financing Agency (LPEI) and the Directorate General of Financing and Risk Management (DJPPR) of the Ministry of Finance.
“Because with this shortage, all suppliers demand upfront payment. If we are not supported by LPEI and DJPPR, we will definitely have difficulty with cash flow to buy raw materials first,” said Richard.
The current increase in plastic packaging material prices is said to reach 40-45%. However, the company can only make product price adjustments in the range of 5-10% to maintain market competitiveness.
In addition, the company is also implementing efficiencies in the production line and seeking alternative packaging models to reduce costs. Richard assured that there are no efficiencies in terms of workforce.
Amid these pressures, industry players still see opportunities. Disruptions in several countries are seen to open new markets for Indonesian food products, especially in the Asia-Pacific region, which is Kokola Group’s main market.
Nevertheless, Richard assesses that the biggest challenge for businesses currently is the uncertainty of prices and supplies that fluctuate sharply.
“If it’s uncertainty, that’s the hardest. That’s the challenge; for entrepreneurs, it’s just the uncertainty,” he said.
In a separate opportunity, Industry Minister Agus Gumiwang Kartasasmita conveyed that the domestic upstream to downstream plastic industry provides assurance of stock availability for domestic needs.
He stated that from a meeting between his side and the upstream to downstream plastic industry held in Jakarta on Thursday (16/4), optimism emerged regarding the availability of plastic stocks domestically.
“We received assurance from the industry that plastic stocks should not be a problem. I underline the word ‘should’, because the government continues to monitor global developments closely that impact production and stocks in this subsector,” said Agus in a confirmed statement.