Khonburi Sugar Plc (KBS) was established in 1965 by Tawil Tawintermsup under the name Nong Yai Industry Co Ltd in Chon Buri’s Nong Yai district, with a cane crushing capacity of 1,500 tonnes a day. Listed on the Stock Exchange of Thailand in May 2011, today KBS crushes more than 20,000 tonnes of cane daily and counts major companies including Coca-Cola among its customers. Executive director Issara Twiltermsup discusses the company’s strategy and outlook.What is KBS’s business model?
KBS has one sugar mill with a crushing capacity of 23,000 tonnes of sugar cane per day located in Nakhon Ratchasima. We consider ourselves to be a high-quality manufacturer, especially in white and refined sugar, and we operate at very high production efficiency and flexibility in order to service our customers well.
Who are KBS’s customers?
The Thai government sets the domestic quota to ensure there is enough sugar to meet the country’s needs. Domestically we sell about 25% and it goes to customers in the beverage industry such as Coca-Cola. We also sell to the modern trade companies _ Tesco, Big C and MaxValu _ as an original-equipment manufacturer for them and to convenience stores _ Makro and 7-Eleven _ around our factory area. We export the remaining 75% to traders that usually lock up commitments a year in advance.
Will KBS look at add additional alternative energy plants to its facilities?
We are replacing our current 15-megawatt power plant with a newer 35-MW biomass electricity plant. The total investment of the project is 1.6 billion baht, and we expect to commission the plant in the first quarter of 2014. This new plant uses the same amount of bagasse as the previous one, but we are able to extract more units of energy. This helps us with energy saving in the plant and allows us to generate additional revenues of 200-400 million baht per year.
What differentiates KBS from its competitors?
The two core elements that separate us from our competitors are quality and flexibility. We are one of the five suppliers to Coke, which demonstrates we have a very high quality of sugar and an extensive list of accreditations for our firm so that we can sell to any customer in the market.
Second, we are very flexible regarding packaging, which may sound normal in industries, but within the sugar industry it is not. Traditionally the only packaging available is a 50-kilogramme bag, but we offer a variety of packaging range from 500-gramme bags to one-tonne sacks. Thus we provide more options to our customers, and when combined with the quality of our sugar, these are the key elements that separate KBS from other sugar players in Thailand.
What impact do government measures have on the industry and KBS?
The sugar industry in Thailand is already heavily regulated in terms of quotas and price-setting domestically. The current system in place by royal decree ensures farmers are treated fairly, and it does protect both us, a sugar factory, and the farmer by ensuring that demand and supply remain consistent.
Why did KBS become a public company? What were the plans for the additional funds raised?
This industry is very capital-intensive and has expanded tremendously since we first begun. As a company we were burdened by 1997-98 crisis and saw many potential opportunities and projects that we missed because we were still improving our balance sheet. So we had worked hard as a company to improve our performance and decided to list on the stock market to increase capital to fund the expansion of our business further, in both the sugar mill and the electricity plant project.
What are the biggest risks facing your business?
The biggest risk is harvesting sugar cane and ensuring that the quality is up to our standards. We tackle this by investing in both our people and technology, because in the future when we want to expand we need able people; thus, we retain and train our people to prepare for the future.
What impact will the Asean Economic Community have on your business?
Thailand basically is the only country in the AEC that exports sugar, and within the region we have some of the most efficient mills. So if all the quotas and tariffs are removed within the region, we can then export to the Philippines and Indonesia, though admittedly we would not be surprised to see local governments protect their industries.
Where do you see KBS in five years from now?
Our goal is to increase our market share within the industry, expanding mainly through being more efficient. As the key to this business is cane growing, we have been investing in our own R&D team, working closely with farmers to improve cane yields. It takes up to seven years to see results from the development team, but we are already observing improvements in sugar cane yields thanks to our research, and we expect to see further improvements in the future.