From Fragmented Mills to an Integrated Sugar Platform: Consolidation, Operational Turnaround, and Farmer-Centred Value Creation in Indonesia’s State-Owned Sugar Industry

Abstract

This study examines how corporate consolidation can be translated into operational turnaround in state-owned agro-industry, using Indonesia’s sugar industry and PT Sinergi Gula Nusantara (SGN) as an illustrative context. SGN is distinctive because 36 sugar mills formerly managed by seven plantation companies were consolidated into a single sugar subholding while the resulting production network remained highly dependent on sugarcane supplied by independent farmers. The study employs a qualitative literature review rather than a systematic literature review, synthesising research published from 2020 onward on post-merger integration, state-owned enterprise governance, operational excellence, working-capital management, agri-food supply-chain
integration, contract farming, organisational change, resilience and sugarcane production. The synthesis indicates that structural consolidation alone does not create sustainable value. Turnaround emerges when consolidation is converted into functional integration through governance harmonisation, factory-network coordination, process standardisation, working-capital discipline, farmer-centred supply arrangements, leadership and organisational learning. SGN’s early experience illustrates the relevance of these mechanisms: the company assumed management of 36 mills following the 2022 spinoff and reported positive profitability, improved recovery performance and EBITDA above IDR1 trillion in 2023 despite climate-related raw-material pressures. The article develops an integrated consolidation-to-turnaround framework and identifies trade-offs involving centralisation, local autonomy, profitability, liquidity, farmer value capture, efficiency, resilience and public value. The framework offers implications for restructuring state-owned agroindustrial enterprises in emerging economies.