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Company banks on agarwood exports
YUTHANA PRAIWAN
Ornate scent bottles carrying precious and highly prized agarwood oil. |
Asia Forestry Management Co (AFM), Thailand's largest agarwood producer, plans to build its brand overseas, aiming for growth at the same blistering pace as Red Bull.
''I am looking at the success of Thailand's wealthiest man, Chaleo Yoovidhya, as he grew his empire by exporting products to overseas markets,'' said AFM founder Chokechai Lavichant. ''I wish I could do just a bit of what he has done.''
Mr Chokechai aims to follow in the Red Bull founder footsteps by developing a presence in the export rather than domestic market. However, his company's production will be based in Thailand along with its agarwood plantations.
''We will push our brand so overseas clients are aware of our aroma oil as the premium product from Thailand,'' said Mr Chokechai.
Overseas demand for agar oil extract is already on the rise, especially in the Middle East, where clients will pay almost any price for this oil, considered one of the best for making perfumes and fragrances in cosmetics.
Beyond the Middle East, South Asia and Japan are also prominent markets, said Mr Chokechai, who adds that agarwood extract is a luxury product because of its limited availability.
''An agar oil extract is the best-seller among scented oil extract products,'' he said. ''Our sales agents consider it premium-grade stuff.''
Sections of dark wood where trees react to fungal infection are harvested for agar oil. |
AFM founder Chokechai Lavichant examines saplings on his company's plantation. |
Agarwood products are widely known as oud, the term used in the Middle East, where agarwood has been highly prized for centuries. The oil is also a base for fragrance production in Europe and is used in Japan's pharmaceutical industry. Agarwood residue is the main raw material for scented joss sticks.
In the global market, premium agar oil extract is priced between 5,000 and 8,000 baht per tora (12cc) or 400,000 to 700,000 baht per litre.
AFM started to build its agarwood plantation four years ago after gathering financial support from private investors. It has just refined the first production of oil from the first crop of its agarwood plantation early this year.
Mr Chokechai said AFM has its factory on a 500-rai agarwood plantation in Trat, which it plans to expand to double capacity to 1,000 tora a month.
''The expansion is part of a plan to make our domestic production and our plantation stable and more viable, and then we will progressively work on marketing activities,'' he said.
Commercial production of agar was prohibited in Thailand for centuries. The trees that produce the valuable oil remained on a list of protected plants until seven years ago, when the country recognised the product's economic potential.
Since then, agarwood has become an industry. However, plantations require huge capital.
''We managed to raise funds from investors last year by offering two options _ a return of 21.4% for two years' investment and 168% for four years' investment,'' said Mr Chokechai.
As a result, the company gained its first capital of 20 million baht, which helped it start manufacturing last year. Next year it plans to raise an additional 50 million baht for the next stage.
Mr Chokechai said that in natural conditions, agarwood takes from 10 to 40 years to be productive, and that less than 5% of plants produce oil, depending on soil quality and humidity.
But with artificial cultivation oil can be extracted within three years, making the business commercially viable.
The company has an agar oil export licence from the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), which guarantees its production will not cause deforestation.
Exim Bank's research division reported that the agarwood industry has risen to an export value of 20 billion baht for Thailand during 2006-07.
Major players in the industry include the hospital tycoon Boon Vanasin and former defence minister Gen Chettha Thanajaro.
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