Right Time, Right Place

A conversation with Khoon Hong Kuok

Wilmar International Limited was founded in 1991 as Wilmar Trading Pte Ltd in Singapore with an initial capital of $100,000. It is now Asia’s leading agribusiness group with a market capitalisation of US$16 billion and a turnover in 2018 of nearly $45 billion. That’s not bad for a relative newcomer in what is traditionally considered to be a slow growth industry.

I caught up with Khoon Hong Kuok, the co-founder and CEO of Wilmar, in Beijing, where he told me that this was the first interview he had ever given. I asked him the secret of Wilmar’s success.

“Right time, right place and plenty of luck,” he replied. “In 1991 when I started Wilmar, Malaysia and Indonesia produced 9.0 million tonnes of palm oil compared to 62.5 million tonnes in 2018. In 1991, China imported 136,000 tonnes of soybeans compared to 84 million tonnes in 2018. These developments enabled us to become a major palm oil trader and a major agriculture commodity processor.”

“NGO’s have criticised Wilmar over sustainability and the environment. How would you respond?” I asked.

“In the old days palm oil plantations were burning forests to clear land and some even discharged effluents in the rivers. Today most major plantation group adopt sustainable practices. The NGOs have been a force for good in this.

“We are the biggest player in palm oil. So even though we stopped planting oil palm in new areas many years ago—and we were among the earliest to adopt sustainable practices—the NGOs still criticised us for buying palm oil from other producers who were burning to develop new areas. The NGOs attack the big names like us, not the smaller producers who sell to us.

“Having seen the deterioration in the environment due to burning and other irresponsible practices of some plantations, we decided to take a lead even if we had to sacrifice some business. The accusation that palm oil is not environmentally friendly is no longer fair.”

“What about labour issues?” I asked.

“Palm plantations bring good jobs deep into inland areas far from the towns. You need engineers, agronomists, and accountants—a lot of people. We need about 0.2 people for every hectare of palm. So if you have 10,000 hectares you need about 2,000 and if you include their families, it supports a lot of people. To attract and retain staff, you have to build good housing for your employees, as well as schools and clinics. In those rural areas the government does not usually provide good facilities.”

“I have been told that you could increase palm oil production without increasing the area…that with better trees you could double production. Is that true?” I asked.

“With better seedlings, technology and management, the yield of new palm plantations today are much higher than the past. This is especially so in Africa where production can be increased significantly by re-planting the old plantations thus minimizing deforestation.”

“You have concentrated your energies in Asia and Africa. Why don’t you invest in the West?”

“We have a strong position in Asian and African countries with over 4.5 billion people. The population and economic growth of these countries are among the highest in the world, and per capita consumption of agri-commodities is increasing. The population of North, Central, South America and Western Europe combined is less than 1.5 billion and per capital consumption is not increasing much.

“We do not have the financial resources, brands and distribution network of the food giants in the West. We don’t want to go to markets where we have no comparative advantage.”

“How do you see the Chinese market developing?” I asked.

“The Chinese are the fussiest people in the world when it comes to food. China will soon become not only the biggest but also the most sophisticated food market in the world.

“To succeed in a very competitive country like China you have to produce, market and distribute the best quality product at the lowest cost. Our integrated plants mean that our production costs are lower than our competitors, and our bigger volumes and multiple locations give us lower marketing and distribution costs.”

“You are known for working 16 hours a day. How do you manage to grow into such a big business but still maintain control over it?”

“I work 16 hours on some days but not every day. If I were to drop dead tomorrow our existing business would continue successfully. People think I spend a lot of time running our existing businesses. I don’t. The time I do spend is to ensure we have sound risk management, to ensure we have good people managing it and to make sure our operations work closely with each other to bring out the full synergies of our group.”

“Have you tried to persuade your children to come into the business?”

“I believe that you must let your children pursue their interests. Our job is pretty tough; you have to have a passion for it. The decision in my case is simpler because I don’t have a controlling interest in Wilmar. My children do not have the birthright to take over from me. They can only do so if they are good enough.”

“Thank you Khoon Hong for your time and insights!”

© Commodity Conversations ®

This is an extract of a conversation that is published in my new book Out of the Shadows – The New Merchants of Grain available soon on Amazon

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