What was the vision behind Evyap moving to Malaysia?
Evyap is an FMCG company focusing on personal care products, mainly bar soap. In 2010, Evyap Group made a strategic decision to shift the feedstock for its soaps from tallow to palm oil. Palm oil had in recent years become an important feedstock in the FMCG industry, and in terms of supply chain security, palm oil is the future given there is more than 75 million tons of global production. Evyap sells over 100,000 tons of bar soap per year. In this context, getting the supply chain right is crucial. Traditionally, bar soap was made from tallow, but as the business scaled, it was deemed too risky to base the whole supply chain on a single source of oil. Tallow is not readily available in Turkey and is relatively expensive. Evyap decided to open a factory in either Indonesia or Malaysia, as these countries are together responsible for the vast majority of global palm oil production. Eventually, the group opted for Malaysia because of several factors, including the ease of doing business, the infrastructure, and overall supply chain reliability. For a good bar soap to be made from palm oil, a good oleochemical factory is required for splitting columns and distillation. When building the factory, we decided to create more capacity so we could engage in the oleochemical market. Oleochemistry studies the use of animal and plant fats.
Could you tell us more about the role of oleochemical & contract manufacturing in your business operations?
We started with a capacity of 300,000 tons and in January 2019 added another 80,000. Initially, 40% of the plant capacity was distributed to our bar soap production, and the remainder was sold externally. Today, we have grown the oleochemical business significantly thanks to our excellent sales team and efficient production. I am glad to say that our internal dependency has reduced tremendously to the extent that bar soap requires only a quarter of our total oleochemicals output, and 75% is sold to the open market.
What are your key markets and how do you differentiate yourself from competition?
Our key export markets for bar soap include Turkey and Turkic countries, Central Asia, the Middle East, Iraq, Iran, Egypt, Russia, and the Ukraine. The oleochemicals, such as fatty acids and glycerine, are sold everywhere in the world. Our capacity is mid-sized, so we enjoy economies of scale. We serve approximately 300-400 customers globally, and are looking to expand this base further. It is important to have a sound understanding of the market's potential. We do a lot of research on oleochemical, bar soap demand, potential customers, and their needs and wants. We always aim to fulfill and exceed our customers' requirements, as sometimes they need customization. Evyap started as a B2C consumer goods company and has carried the same customer-oriented mentality and mindset to its B2B business. Coming from the personal care industry, we are used to tweaking products to provide solutions. Most big players like Procter & Gamble and Unilever have switched from tallow to palm oil, although some large players such as Biersdorf have not made the switch. We do contract manufacturing as part of our portfolio, and some of these companies are not only our competitors, but also our customers. Our team continuously tries to convey the benefits of palm oil to these companies, and most of the industry has accepted a future in which palm oil will play an important role and has moved full steam ahead with palm oil.
What are the main challenges faced in the oleochemical sector in Malaysia?
The main challenge in the oleochemical industry is that it is still in a state of overcapacity. The global supply capacity is around 13 million tons, while demand lags behind at around 8 million tons. The lingering capacity is putting a damper on the industry in terms of profitability. The second challenge is that we continue to have a disparity in palm oil prices with Indonesia, where it remains cheaper than Malaysia by 3-4%. Oleochemicals are essentially a commodity where even a marginal difference in the cost of raw materials plays a significant role in the profitability of your business. That being said, we remain positive about the ease of doing business in Malaysia. Malaysia is developed and competitive and industry is appreciative of this.