Sugar, rice, and oil are integral parts of daily life, from agricultural products to the dining table, involving complex procurement and logistics processes. According to Statista data, global consumption of these three food items has steadily increased in recent years. Headquartered in Singapore, Davis Commodities is one of Asia's most prominent agricultural commodity trading companies. The business has expanded its operations to regions including Africa, leveraging its robust supply chain management capabilities. The company successfully went public on the NASDAQ with stock code DTCK in September 2023.
Building a Complete Supply Chain with Light Assets
The progression of Davis Commodities from a private enterprise to being listed on NASDAQ undoubtedly reflects its successful advantages. For nearly 25 years, Davis Commodities has been dedicated to agricultural product trading. Through a light asset model, it has established close collaborations with warehouses and logistic companies in the supply chain, creating a robust global network for food and beverage distribution. Davis Tan, the founder of Davis Commodities, stated, "Our strength lies in establishing a robust supply chain management system, forging close partnerships with major distributors worldwide, and building our brands such as Maxwill and Taffy to enhance value." For instance, during the pandemic, transportation costs surged over five times when many truck drivers could not work, and shippers couldn't return containers. High transportation costs posed immense pressure on many companies. Still, we swiftly adapted by switching to bulk shipping and unloading at different ports to ensure goods reached various customers at affordable prices.
Innovative Collaboration Models for Competitive Advantage
Davis Tan continued, "Davis Commodities has developed a unique factory collaboration model with raw material suppliers, enabling the company to secure a steady supply while reducing procurement costs. By adopting a contract manufacturing approach and utilizing a significant portion of factory capacities, we negotiate capacity planning and quality management with them and provide support."
Doing business always involves a mix of opportunities and challenges. Davis Tan expressed that financing has been a persistent challenge over the past 20 years. Despite having many viable orders, we had to limit our growth rate to control cash flow and risks prudently. The decision to go public was made to strengthen our capital structure further and facilitate bank financing. Before the IPO, Davis Commodities operated using its funds without borrowing from banks. However, post-listing, we needed to optimize our capital structure appropriately to create higher value for the company's shareholders.
Specializing in Agricultural Commodity Trading for 25 Years
Davis Tan has over 33 years of rich experience in commodity trading since 1991. When asked about the reasons for establishing Davis Commodities, he said, "Initially, I worked for a British company with a history of nearly 200 years, which owned a sugar mill in Singapore and was involved in export trade. Between 1996 and 1998, I made $8 million annually for the company and was the only one familiar with futures trading. However, the company lacked a profit-sharing mechanism internally, and there was a significant class bias at the time. I started my own business to pursue a more promising career path."
In April 1999, Davis Tan left his previous company to prepare for the establishment of Davis Commodities while maintaining a good relationship with his former employer. By 2000, Davis Commodities collaborated with a sugar mill in Thailand to primarily market high-quality Thai sugar products in Singapore and Asian markets. Later, Middle Eastern sugar traders recognised our expertise in the sugar business. They approached us for agency work. Over time, Davis Commodities expanded its product line to include rice and palm oil, essential daily food items for people.
Expect Improved Performance Next Year
Looking ahead, Li Peng Leck, Chairwoman and Executive Director of Davis Commodities, stated in the interview, "China is a vast market, and we will enhance our local operations to sell agricultural products such as syrups, reducing intermediate distribution links with the long-term goal of improving gross profit margins and profitability. Recently, we signed two 2-year contracts for syrup supply totaling $82 million and $310 million."
"We also plan to establish a palm oil factory in the Philippines, producing products in 20 or 25-liter packages for export to Africa. Simultaneously, we will establish an anticipated company in Brazil for procurement and exports. Those plans will help reduce costs."
Over the past 25 years, Davis Commodities has focused exclusively on agricultural product trading-related operations. With considerable room for growth globally, it plans to leverage its advantages in logistics, distribution, and extensive customer base to further expand the downstream food and beverage distribution business in the future. With diverse development plans in place, when asked about the setback in the Indonesian business last year due to government policy changes, she mentioned that as policies remain unclear, predicting significant improvements in related businesses in the short term is challenging. However, with plans gradually being implemented, there is confidence in improving gross profit margins and profitability next year.
About Davis Commodities
Davis Commodities (NASDAQ: DTCK) is a leading agricultural trading company founded in 1999 and headquartered in Singapore. The company specializes in trading sugar, rice, and oil and distributes agricultural products to over 20 countries and regions, including markets in Asia, Africa, and the Middle East. With a robust supply chain and logistics network, Davis Commodities is committed to delivering quality products to customers worldwide. The company owns two well-known brands, Maxwill and Taffy.
