By Suzi Fraser Dominy
The evolution of Bogasari from domestic volume flour producer to international top-end flour miller in three decades is a success story, driven by extraordinary leadership
As the world’s largest archipelago consisting of 13,677 islands, Indonesia is home to more than 230 million culturally and ethnically diverse people, some 27% of whom struggle below the poverty line; almost half are packed on to the island of Java. In 1971, before Bogasari introduced high quality domestic flour to Indonesia, rice was, as it remains today, the traditional staple food.
The quality of imported flour prior to the establishment of local flour mills, was subject to poor storage conditions and could take six or seven months to reach the end user, which did nothing to stimulate demand. It was often infested and flavor and baking quality severely compromised. Such bread as was available then was too expensive for the vast majority of Indonesians, keeping annual per capita consumption at a modest 0.3 kilograms.
The rise of Bogasari was driven by extraordinary leadership: Piet Yap has built an empire not so much by meeting market demand but by aggressively creating it — and has changed the eating habits of a nation in the process.
Bogasari opened its first flour mill in Tanjung Priok, North Jakarta in November 1971 and a second less than a year later in Tanjung Perak, Surabaya (Indonesia’s second largest city), each with a capacity of 650 tonnes/day. Its three brands of wheat flour — Cakra Kembar, Kunci Biru and Sengitiga Biru, for noodle, bread and all-purpose baking, respectively — rapidly became household names. Improved distribution networks, consistent supply and quality, and technical training encouraged locally made bakery items, fresh pasta and instant noodles to start to appear on the market — and at a more affordable price, Indonesians rapidly developed a taste for them. Consumption rocketed, growing by around 15% a year, driving a massive increase in Bogasari’s production capacity.
The early rapid growth gradually gave way to slower but sustained expansion, and when WG visited the company in the mid-1990s, Bogasari — by then one of Asia’s biggest flour millers — had just embarked on an expansion program, unprecedented in scale in the milling industries (See World Grain, January/February 1996; ).
As a result Bogasari today grinds 10,500 tonnes wheat/day (7,500 tonnes flour) at its Jakarta mill — the largest in the world — and 5,600 tonnes wheat/day (4,200 tonnes flour) in the Surabaya plant. From its original modest 1,300 tonnes/day total output from two mills, Bogasari now has the capacity to grind some 16,100 tonnes of wheat a day.
In March 2003, PT Bogasari inaugurated a US$6.9 million flour blending facility in Singapore, opening the door of international expansion to Indonesia’s preeminent flour miller.
BUILDING A MARKET FOR FLOUR
An important part of Bogasari’s unparalleled success lies in its efforts to engage with its customers. The Indonesian market is characterized by many thousands of small craft bakers, noodle and snack food makers and other entrepreneurs. From the beginning, Bogasari provided theoretical and practical training in customers’ premises and later went on to establish a baking school, which today is incorporated in the Bogasari Training Centre, established in cooperation with Italian milling engineer, Ocrim SpA, in Jakarta in 1981. The center includes a 70 tonne/day pilot mill and trains millers and bakers both from within the company and from throughout Southeast Asia. A network of 20 regional bakery training centers has since been established and has trained some 20,000 bakers.
Bogasari’s market research efforts have in recent years led it to focus on the noodle market. Bogasari encouraged the noodle makers to form associations and several now operate as collectives, providing a means of collecting, distributing and paying for flour. Marketing support, financial loan programs and training in quality, storage, hygiene, product development, equipment operation and maintenance is also available.
As a result, trust and respect have been built between Bogasari and these small businesses. Noodle production now thrives, providing an income to more than 7,000 people. Together with demand from its own production facilities, noodle flour today accounts for 60% of Bogasari’s flour market.
In 1998 the National Logistics Agency (BULOG) relinquished its monopoly on wheat importation and flour distribution. Piet Yap, the inexhaustible head of Bogasari, has since then given close attention to the procurement of the more than 3 million tonnes of wheat that Bogasari’s mills grind each year.
The company sources wheat from throughout the world, but in 2002 it entered an unprecedented agreement with the Australian Wheat Board (AWB) to jointly promote co-branded flour in a campaign that includes television and print advertising and road shows to Indonesian cities and provinces.
The AWB-Bogasari agreement established minimum percentages of AWB wheat to be used in Bogasari’s grist, and included AWB baking and milling training programs for Southeast Asian customers. AWB and Bogasari will also run collaborative research and development programs that will further encourage consumption of wheat-based products in Indonesia.
GROWING DEMAND FOR VALUE-ADDED
This move reflects the rapidly expanding market for household flour in Indonesia, driven by a growing middle class that wants more sophisticated bakery products. To meet demand, Bogasari now supplies 0.5 kg and 1 kg packages of flour and premixes to supermarkets, in addition to 25 kg bags of tailor-made specialty flour for craft bakers and bulk deliveries for industrial bakers. Specialty flours are made at a dedicated plant in Jakarta and a flour-blending plant in Surabaya.
In March 2003, Bogasari took its flour blending expertise to Singapore with the establishment of its first overseas plant and gained a significant foothold in the sophisticated flour markets of Asia Pacific, such as Singapore, Thailand and Japan, with the aim of increasing contributions from overseas sales to 5% from the current 2%, over the next five years.
Various flours from the Jakarta plant are shipped by container to Bogasari International (BSI), the new 12-tonne-per-hour blending plant on a 4,510 square-meter site in Tuas, a port and industrial area of Singapore. Here they are blended to produce specialty flours.
The facility also houses a research and development team to develop new products to meet specific client requirements. Investment in Singapore in frozen dough products, premixes, ingredients trading and other flour-based products is planned for the future.
The emergence of Bogasari as an international player should not however obscure its dominance of the domestic market, of which it commands an estimated 70% share.
Indonesians now consume per capita 15 kg of wheat-based foods on average each year — a remarkable increase from the 0.3 kg of 30 years ago, but still a long way behind most Asian countries, much less the western world. There is still a great deal of room for growth: many analysts expect to see the average annual consumption rise to 20 kg per person in the next five years, a trend Bogasari can take pride in having played a major role in creating.
Piet Yap — a milling legend
Piet Yap, the 74-year-old Indonesian executive and one of the founders of Bogasari, has become a legend throughout the wheat and milling industry worldwide as a pioneer of modern flour milling in Southeast Asia, and in the business community at large for his entrepreneurial drive.
In 2001 Yap was made a Knight of the Republic of Italy — Cavaliere al Merito della Repubblica Italiana — as a result of his long relationship with Italian milling engineer, Ocrim SpA of Cremona, which has supplied the vast majority of the milling equipment to Bogasari since its beginning 34 years ago.
Yap, who speaks English, Indonesian, Chinese and Dutch, is a self-made man. Born into a humble family in Padang, western Sumatra, Indonesia, he describes himself as being "born a sugar trader."
Yap’s family is involved in his other interests that include gold mining (run by his son Tim Yap), real estate development and manufacturing. His daughter, Wendy, previously had a Wendy’s fast-food franchise in Indonesia. She is now the president of Jakarta’s largest bread manufacturing factory, owned by PT Nippon Indosari Corporation (NIC) — though Yap says that he has hopes that one day she will be involved in the wheat grain business.
The bakery uses Japanese machinery and technology to produce around 350,000 loaves of bread a day from four production lines. Sari Roti and Boti brand bread is supplied to almost 80% of the supermarkets, mini marts and other outlets in Jakarta and the surrounding area. The bread is also distributed and sold in cities around Jakarta.