Current Situation and Problem

Asian Agri, founded in 1979, is one of Asia’s largest integrated palm oil producers. Asian Agri exported about 3 million tonnes of palm oil in 2009, and currently manages 28 oil palm plantations, 19 palm oil mills and four refineries. The company is also a strong advocate for sustainable palm oil production and usage, and is currently a member of the Roundtable on Sustainable Palm Oil (RSPO). Sukanto Tanoto, founder of Asian Agri, is currently facing a dilemma in the future developments of Asian Agri. Although he believes that palm oil has a bright future ahead, there are many challenges faced by the company in its expansion such as the increasing difficulty in acquiring land in Indonesia, and the rising pressure from the international NGOs.

Future of Palm Oil and Asian Agri Tanoto is right on the bright future of palm oil. Firstly, palm oil, also known as the “golden corp” of Southeast Asia, is the most economic edible oil to produce given its highest yield and lowest cost of production compared to other edible oil. Secondly, with the fast-growing population around the world, and the need to drive economic growth in developing nations such as China and India, the demand for food and fuel is expected to grow significantly, thus the same for palm oil. Thirdly, there are many rising health concerns with trans fat, and many consumer packaged goods (CPG) companies and consumers are seeking to limit trans fat consumption. Thus palm oil being trans fat free is an inexpensive alternative for this. Lastly, with the growing needs for biodiesel, palm oil will eventually become an important part of the renewable fuels.

With the growing importance of palm oil, Asian Agri should attempt to strengthen its position in the industry and to promote the global use of palm oil. Viable strategies for the company include the following.