Rice is probably the most important cereal in the world. It is the staple diet for millions of people; it contributes more food energy and protein per hectare than any other cereal, with more rice produced than any other crop.

Each year, close to 600 million tonnes of paddy [350 million tones of milled rice] is produced with over 90% of the production being concentrated in Asia, where both the climate and the relatively low costs of production are favorable. China and India account for almost two thirds of this production, with Thailand, Vietnam, Indonesia, Pakistan and Myanmar making up the balance.

The producing countries are also large consumers of rice. International Trade in rice is only 25 to 27 million metric tonnes, of which 85% is imported into African and Asian countries. One of the unique features of international trade in rice is that it is from one developing country to the other.

Olam's role in the International Rice Business

Olam is one of the leading players in the Global Rice Business. Olam participates in the entire value chain from sourcing, shipping, and logistics management through to marketing and distribution and has therefore a unique competitive position.

A physical presence in the major exporting countries enables Olam to develop a deep insight into the market dynamics and establish strong and sustainable relationships with the exporters in these countries. Olam is one of the leading buyers of rice from Thailand and India.

The over-riding concern for quality is evidenced by the importance Olam places on quality control procedures. Olam's trained inspectors closely monitor the quality and the packing at its suppliers mills and / or warehouses prior to export.

Olam's shipping operation uses a combination of time and voyage charters to achieve the flexibility and secure the competitive freight rates required in the business. Olam manages between 12-15 vessels for the Rice Business at any one time - with at least 4 ships loading and discharging each month. With this expertise in shipping and logistics management, Olam ensures timely and cost effective delivery of rice to its customers.

In the destination markets for rice, the geographic spread of Olam's export sourcing activities and the infrastructure employed, most notably the warehouses, both in the port cities and up-country locations, is used for the distribution of rice. In a number of countries, Olam imports rice on its own account and distributes it through its large base of distributors/wholesalers. In addition suppliers of the export commodities, in many cases, are also buyers of rice - the customer therefore enjoys a privileged relationship with value and service enhanced.

Olam's carefully nurtured relationship with major rice importers enables it to fully utilize its sourcing and shipping capabilities. Some of the importers in the developing countries experience significant difficulties in arranging the required financing to secure the imports of rice and/or are subject to very high interest rates. Olam has been able to design customized financial packages to meet specific requirement of such importers and create for itself a distinctive competitive advantage.

Over the last decade, Olam has successfully positioned many of its brands in both the par-boiled and white rice segments. Mama Africa, Gangan, First Choice, Champion are today household names in the West African markets.

Olam's future strategy

There are significant opportunities for pursuing growth across adjacent geographies in Africa and Asia. Olam's rice business, with its strong presence in both the sourcing and destination markets, is ideally positioned to pursue this growth profitably.

In addition, Olam's and the Rice Business' strength will serve as a foundation for expansion into other cereals.