Becoming the Best and
Largest
Outline
Challenges to Rubber Sustainability A Rubber Processor’s View in Indonesia
How Kirana Megatara
Respond to Challenges Smallholders Partnership Program
Kirana Megatara Group in Brief Role in the Indonesia Processor Industry
Conclusions and Suggestions
Sustainability Challenges for A Rubber Processor
Plant-ation
Collector/ Trader
Rubber Processor
TSR Merchant
Tire Maker
Continuous and consistent supply of raw materials • Price fluctuation • Climatic or seasonal swings
: low yield seedlings, inefficient tapping
Low and varying quality of raw materials • High contamination • Use of improper coagulants
New sources of rubber production
• Competition from other agribusiness, e.g. palm oil business
Low Productivity and Production Growth
Country
Production (000 tons)
Share
5 Yr Ave. Growth
Planted Areas (000 Ha)
5 Yr Ave. Growth
Productivity (kg/Ha/yr)
1. Thailand 3,625 34.47 % 4.12 % 2,785 1.01 % 1,725
2. Indonesia 3,040 28.91 % 2.96 % 3,466 0.31 % 1,099
3. Malaysia 956 9.09 % -2.11 % 1,075 -3.25 % 1,450
4. India 919 8.74 % 1.18 % 760 3.51 % 1,753
5. Vietnam 860 8.18 % 6.85 % 853 7.87 % 1,720
6. China 775 7.37 % 9.15 % 1,110 4.47 % 1,053
Total ANRPC 10,516 100.00 % 3.36 % 10,599 1.08 %
Association of Natural Rubber Producing Countries (ANRPC) (11 members), 2012
Despite having the largest area of rubber producing trees in the world, the productivity falls below those of Thailand, Malaysia and China.
Annual growth of planted areas is much less than other producing countries
*Source: Natural Rubber Trend Statistics ANRPC May 2012. Vol. 4, and Rubber Board of Indonesia.
Contamination of Natural Rubber
SOIL WATER
SAND
TWIGS, STRINGS,
ETC.
Smallholders firmly believe that overall weight is the key determinant of the transacted price – not the DRC (dry rubber content).
Traders can always find willing processors to accept low graded materials
2007 2008 2009 2010 2011 2012 Ave. growth
1. Damaged trees 59 46 112 82 79 84 19.47 %
2. Unripe trees 579 609 614 590 585 533 -1.53 %
3. Productive trees 2,775 2,768 2,708 2,773 2,792 2,884 0.79 %
Breakdown of Planted Areas (000 ha), 2007 – 2012*
* Indonesia Estate Statistics, Rubber 2010-2012 (Directorate General of Estates, Ministry of Agriculture
Replanting Rubber Trees
Replanting efforts for old and damaged trees are still below expected needs. In areas where palm oil plantations exist, smallholders are turning to palm oil
trees, particularly if they feel that will earn better
KIRANA MEGATARA
Nusira Pantja Surya
Kirana Sapta
Tirta Sari Surya
Djambi Waras
Kirana Windu
Kirana Musi
Persada Kirana Permata
Komering Jaya
Perdana
Karini Utama
New Kalbar
Processor
Kirana Prima
Kirana Putra Karya
Anugerah Bungo Lestari
Kirana Megatara Group
Vision: To be the Most
Preferred Rubber Solution in
the World
Mission: Sustainable Green
Rubber Solution that Prospers
with the Nation
Has 15 rubber processors with more than 4,000 employees, and five plantation subsidiaries with 5,000 employees
Oldest processor was founded in 1968. Newest processor came on line in 2012
Thailand Indonesia
No. of Rubber Processors 47 130
Top 10 Processors 64 % 34 %
Top 20 Processors > 70 % 57 %
Market Concentration
KIRANA MEGATARA
18%
TL, 4%
LR, 11%
NF, 3%
SOE, 1% AS, 3%
IT, 5%
ST, 4%
BS,2%
SR, 1%
MK, 2% PS, 3%
OTHERS 43%
Rubber processor industry is relatively more fragmented than that in Thailand.
The industry is very competitive , yet it still attract new entrants to this day.
Kirana Megatara Group is the market leader commanding 18 percent market share of crumb rubber exports
C. Kalimantan 219,153
W. Kalimantan 293,741
Aceh 112, 604 N. Sumatra
508,925
Sumbar 120,204
Bengkulu 63,973
Ba-Bel 26,132
Lampung 82.894
S. Kalimantan 120,073
E. Kalmtn 32,039
Riau 446,447
Jambi 383,217
S. Sumatra 676,117
Kirana Megatara Processors
Rubber Sources (tons) and Our Processors’ Locations
Smallholder Partnership Program was launched a few years ago in a concerted fashion across the KM Group • Developed into a corporate wide program out of separate CSR activities
managed independently by member plants
• Inspired by the successful continuous partnership forged between and its groups of smallholders for over 15 years
13
Today the group has partnerships with more than 150 smallholder groups • Each group consists of an average of 20 farmers
has the largest number of working partnership with smallholder groups, contributing more than 7% of its raw material needs
Origin of the Program
KIRANA MEGATARA
Small-holder
Small=holder
s
Small-holder
s Small-holder
Lead small-holder
Technical Assistance
Supply Coagulated Latex
Smallholders Partnership Framework
3 PHASE ENGAGEMENT
Link and Setup
Capability Enhancement
Empowerment
PHASE ACTIVITIES AIMS
Link and Setup
1. Outreach activity – Group Gathering Establishment of KM
Partnership 2. On-site counseling
3. Purchase trials and MOU
Capability Enhancement
4. High-yield seedlings Increased productivity, quality improvement,
and good business practice
5. On-site technical training
6. Technical assistance
7. Aids for fertilizers, tools, etc.
Empowerment 8. Managerial assistance Establishment of local
cooperatives 9. Mutual business development
Phases of Engagement
Suggestions
Need a that involves the whole rubber value chain : tire maker, rubber processor, intermediate trader, and rubber producer
Approach should be Must be demanded by tire makers TSR Traders Rubber
processors Traders Rubber producers
is necessary in shaping the
business environment Establishing standards for sustainability Develop suitable supervisory mechanisms and/or incentives for rubber
producers and processors
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