In the McKinsey Quarterly of August 1993, John Stuckey and David White went to great lengths to warn against the dangers of vertical integration in a company's business.
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The primary message was, "don't vertically integrate unless it is absolutely necessary to create or protect value."
The article goes on to detail a litany of potential pitfalls and admonishments, suggesting that the pair of writers were not big fans of the exercise.
Companies embark on the process of vertical integration for a variety of reasons. One of the key advantages is that a vertically integrated company will own its own supply chain, and in so doing can create value at each and every link – in a good model, each member of the supply chain will produce a different product or service.
This is relatively easy to achieve as long as there is a market for whatever products the vertically integrated company is producing.
Ideally, the perfect business model will have a series of associated companies chomping at the bit to buy and use whatever is being produced. Prices can be controlled since, at the end of the business day, when accounts are reckoned, one part of a company isn't going to overcharge another for a product. What would be the point?
Undercharging isn't an option either, since books have to be balanced and costs met. In a utopian business world, prices will be agreed upon that make good financial sense for all the parties concerned.
Control of the supply chain cannot be overemphasised in terms of its importance to a successful vertically integrated business model. Control can help to reduce costs, improve efficiency, ensure quality, and keep variables in check.
One major problem with vertically integrated business models is that the chain is only as strong as its weakest link, and if, for example, demand at any stage fails to meet expectation, there can be a disastrous knock on effect that compromises the integrity of the entire apparatus.
However, the process can and does work, and Asia Plantation Capital presents a perfect case in point, by embracing every positive aspect of the vertical integration scenario, while avoiding the pitfalls – taking control at all relevant junctures in the supply chain and maximising the potential advantages.
With the buzzy 'from soil…to oil…to you' motto echoing through the corridors of Asia Plantation Capital and its associated companies, they present a remarkable tale of sustainability, renewability and environmental awareness that also represents an excellent opportunity for investors and stakeholders.
The process starts with the purchase of land, and ends with the adornment of an extraordinary fragrance. All the steps in between, and the processes required to make sure that the links in the supply chain are secure, are taken care of by Asia Plantation Capital.
From Soil…
Asia Plantation Capital grows Aquilaria trees – a species illegally logged to the point of near extinction, and now on the CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora) list of endangered species – on plantations it owns.
They harvest those trees in an ethical and sustainable manner, and extract from them a substance worth more than gold.
To Oil…
The Aquilaria tree, when infected by a certain type of mould, creates a dark resin in response to the attack, and it is this substance (Oud) that produces the value.
Oud has been used in religious and cultural rites for thousands of years, and is cherished for its aroma and medicinal qualities.
When distilled, Oud can be turned into an essential oil that has been used in fragrances since time immemorial.
The Oud that of Asia Plantation Capital's Aquilaria trees produce is of the highest quality, and with vertical integration in mind, the company set up its own distillery, thereby securely fastening two links in the chain.
Asia Plantation Capital owns the plantations on which the trees are grown (another link), and has set up a research and development advisory board to secure the proprietary technology required to optimise growth and yield (yet another very important and significant link).
It should be mentioned that the trees don't only produce Oud oil, but also wood chips and various other offshoots that are in high demand and used around the world in the form of incense, and even on their own for their fragrant properties.
Asia Plantation Capital grows and nurtures its own saplings, planting only the healthiest and hardiest, thereby retaining control even at the embryonic stage of the process. Control, as ever, is crucial.
After the Oud is distilled, however, the latter stages of the chain begin to come in to play. Oud oil is in increasingly high demand around the world, and part of an industry estimated to be worth between US$6 billion and US$12 billion annually.
To You…
The fragrance world simply can't get enough of it right now, and you will find Oud as a constituent ingredient in many of the world's most famous perfumes. It has become the 21st Century ingredient of choice, with Houses such as Yves St Laurent, Dior and Tom Ford clambering on to the bandwagon.
Add to these venerable names a relatively new kid on the block in the form of Fragrance Du Bois – a perfumery that is creating some of the most unusual and intoxicating fragrances ever to hit the market.
Fragrance Du Bois is part of the Asia Plantation Capital Group of Companies, and is the final link in the chain. Fragrance Du Bois has already established flagship boutiques in Singapore and Kuala Lumpur, with several more on the horizon.
With a coterie of Master Perfumers formulating fragrances and adding their signatures to Fragrance Du Bois' products, the company has, in a very short time, established itself as a major player, with originality and innovation at the heart of everything it creates.
What Fragrance Du Bois' Master Perfumers enjoy the most is the quality of the Oud that they are able to work with. It is guaranteed to be 100% pure, organic, of the highest grade and with a transparent provenance. The perfumers themselves know exactly where it has come from, and exactly how it is made.
Just as importantly, they know that the Oud has been produced, and sourced, in an ethical manner, with sustainability being a key factor both in terms of an overall philosophy as well as a guaranteed supply further down the chain.
If control is a major factor in a successful vertically integrated business model, then Asia Plantation Capital seems to have established the ultimate blueprint. Its various companies buy the land, own the land, grow the trees, extract the resin and produce the wood chips and oil, before supplying them to a growth industry in which its retail outlets are heavily involved.
You could be forgiven for thinking that the management at Asia Plantation Capital read Stuckey and White's article back in 1993 shortly before embarking on a vertically integrated business model that appears to be not far short of perfection.
The warnings, it seems, have been heeded, the pitfalls avoided, and something quite special has been created. A business model for the current age that fulfils many of the requirements for an alternative investment that embraces the all-important triple bottom line; people, planet and profit.
Notes for Editors:
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About Asia Plantation Capital
Established officially in 2008 (although operating privately since 2002), Asia Plantation Capital is the owner and operator of a diverse range of commercial plantation and farming businesses across the Asia-Pacific region and around the world, and is part of the Asia Plantation Capital Group of associated companies.
About Fragrance Du Bois
Fragrance Du Bois is a niche luxury perfume house born from the richest essences of nature, crafted by fifth generation perfumers from the 17th century French traditions of Grasse. All Du Bois fragrances are created using 100% pure, organic Oud oil and other sustainably-sourced ingredients from plantations managed by award-winning company, Asia Plantation Capital.
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