Barry Callebaut Sustains Growth in Difficult Times

21 Jan 2015 --- The Barry Callebaut Group, the world’s leading manufacturer of high-quality chocolate and cocoa products, grew its sales volume by 0.2% to 465,046 tonnes during the first 3 months of fiscal year 2014/15 (ended on November 30, 2014).

Top-line growth was driven by key region Western Europe, the Gourmet & Specialties Products business (+3.8%) as well as Region Asia Pacific (+9.3%). The positive growth was achieved in an overall challenging market environment.

A spokesman for the company told FoodIngredientsFirst: “Whilst we do not give an outlook at this point in time for 2015, what I can say for our Q1 is that Western Europe as a whole performed very well. The same goes for our Asia Pacific region. Furthermore, the business with our Gourmet customers was a growth driver in Q1.

“However, when you look at the figures of all our regions you will see that their respective growth was well-above the underlying markets.”

In the period under review, the global chocolate confectionery market continued to slow down and volumes decreased by 1.8%. For Barry Callebaut, the ongoing focus on better customer segmentation and product mix improvement paid off with a sustained good overall margin development for chocolate products.

Sales revenue increased by 15.1% to CHF 1,743.6 million, driven by higher cocoa bean prices combined with a more favorable product mix.

Juergen Steinemann, CEO of the Barry Callebaut Group, said: “As anticipated, we saw a slow start in our new fiscal year, yet we grew well above the market. I am satisfied that our largest region, Western Europe, resumed growth, capitalizing on last year’s capacity investments. We continue to focus on margin improvements. We have completed the integration of the acquired cocoa business and are now working on strengthening our position as the global leader in cocoa processing and origination enhancing our integrated service and product offering to our customers.”

Looking ahead, Steinemann said: “We have a robust portfolio of new volumes coming on stream in the second semester across all our three growth drivers, emerging markets, outsourcing and Gourmet. Also, we are on track to achieve further improvement in our chocolate product margins. Despite the current volatile currency environment, the fundamentals of our company are not affected. Subject to currency translation impacts, we confirm our mid-term targets.”

In respect of the discontinuation of the minimum exchange rate of the Swiss Franc against the Euro, the group reports that it is not severely impacted. The Barry Callebaut Group conducts 99% of its business outside of Switzerland and therefore has limited operational exposure to the Swiss franc. Furthermore, the Group hedges all relevant exposure arising from operational and financing transactions. However, the company’s reporting currency is the Swiss franc, thus there could be a currency translation impact on the reported figures.

“We have limited operational exposure to the Swiss franc. Only when translating back the various currencies we are doing business with into our reporting currency, the Swiss franc, you will see an impact on the reported figures, the translation effect. However, it is too early to give exact figures on this,” the spokesperson continued.

In December 2014, Barry Callebaut officially inaugurated its seventh factory in Latin America in Santiago de Chile confirming the Group’s commitment to expansion in emerging, fast-growing chocolate markets. Responding to increased customer demand and to accommodate further growth in the region, Barry Callebaut is currently expanding its Brazilian chocolate factory in Extrema. To foster the Gourmet business in the Middle East, the Group built its 17th Chocolate Academy center in Dubai.

With increasing demand for chocolate products in warmer climates, Barry Callebaut launched new chocolate recipes with higher thermo tolerance. While safeguarding taste, applicability and workability the chocolates have a melting point which is up to 4° Celsius higher than normal.

Despite a difficult Russian market, overall sales volume growth in Region Europe increased by 0.8% to 205,660 tonnes. In Western Europe, Barry Callebaut’s sales volume picked up again after the installment of new capacity, while the Group continued to focus on increasing product margins. Growth was driven by both the Food Manufacturers Products and the Beverages business. The Gourmet business was in line with prior year.

The EEMEA region was impacted by the difficult political and economic situation in Russia, which affected the Food Manufacturers Products business. The Gourmet business, mainly driven by the global brand Callebaut, was strong.

Overall sales revenue in Region Europe grew by +9.5% to CHF 762.8 million, as a result of a more favorable product mix and higher cocoa bean prices.

Volume growth in Region Americas was flat at +0.2%. In NAFTA, the confectionery industry increased retail prices due to higher cocoa bean prices. This had a temporary negative impact on consumption and thus demand declined. Offsetting this decline, volume growth was driven by Barry Callebaut’s NAFTA regional accounts (local customers) and the business in South America, which again recorded a strong, double-digit growth in both the Food

Sales revenue in the Region went up by 22.0% to CHF 387.5 million due to higher cocoa bean prices as well as a more favorable product mix and currency translation effects.

In Asia Pacific, the Group’s sales volume kept its growth momentum, increasing by 9.3%. Overall, sales revenue increased by 20.7% to CHF 75.7 million as a result of the good volume growth, a good product mix and higher cocoa bean prices.

In the segment Global Cocoa, sales volume decreased by 1.8% to 125,261 tonnes as the cocoa products (cocoa liquor, butter and powder) were mainly used for internal processing needs rather than for sale to third party customers given the still challenging market. Sales revenue grew by 18.1% to CHF 517.6 million, reflecting higher cocoa bean prices.

The integration of the acquired cocoa business has been completed. The Barry Callebaut Group is now working on strengthening its position as the global leader in cocoa processing (grinding and pressing) and origination (bean sourcing) enhancing its integrated service and product offering.

After reaching a three year high in September at GBP 2,112, cocoa terminal market prices dropped to GBP 1,896 at the end of November. An expected good main crop due to favorable weather conditions in West Africa as well as reduced fears of a potential outbreak of Ebola in the two most important cocoa origins, Côte d’Ivoire and Ghana, had an easing effect on prices.

“We do not see a global chocolate crisis. We see only a temporary contraction of the global market, mainly based on the recent price increases of some of the major consumer companies triggered by higher cocoa bean price. We see the mid- long-term growth outlook of the chocolate market not changed. 

“We still see many growth opportunities in emerging, as well as in developed markets.” The spokesperson concluded.

The world sugar market briefly recovered at the beginning of October. Nevertheless, overall, prices continued to decrease due to good surplus stocks from previous campaigns and funds building a short position. European sugar prices further decreased due to high stock levels.

Market prices for dairy products continued to drop as a result of the continued strong global milk production; milk powder prices almost hit a 5-year low. Lower demand from China and the Russian food ban for European products led to a high market surplus leading, prices to further decline.

By Kelly Worgan