KEY INTERVIEW: Dynamics on the Cocoa Market

03 Nov 2014 --- Marcel Nouel, Product Line Manager, Cocoa Powder at Cargill discusses the rebranding of the Gerkens cocoa brand and other issues on the cocoa & chocolate market, including Cargill’s planned acquisition of ADM’s chocolate business and the Ebola threat in West Africa.

Cargill’s cocoa & chocolate business recently announced plans to revitalize its’ global Gerkens Cacao brand, highlighting its premium nature and key benefits. Cargill is targeting manufacturers in the confectionery, dairy (e.g. ready to drink, ice cream, desserts), bakery (e.g. cakes and biscuits) and instant mixes & drinks sectors as part of the campaign, which will cover Europe, Asia, the Middle East, North America, the USA and Brazil. The campaign brings a new focus on the significant benefits Gerkens provides to the customer, with the ability to be uniquely tailored for a broad range of applications, along with consistent performance and effective innovation.

The Gerkens brand has a strong heritage and was founded in 1928. It was acquired by Cargill in 1986 and now forms part of the company’s Cocoa & Chocolate business. Marcel Nouel, Product Line Manager, Cocoa Powder at Cargill discusses the rebranding and other issues on the cocoa & chocolate market, including Cargill’s planned acquisition of ADM’s chocolate business and the Ebola threat in West Africa.

What is behind the rebranding strategy?
At Gerkens, we interviewed a number of customers across the globe and asked for their opinions on the brand. What we found was that they appreciated the Dutch connection and the emotions that that evoked and the perspective that we have on understanding markets. They would appreciate having it rejuvenated somewhat with a stronger emphasis on what they are looking for when buying from us.
What we picked up on was an increased demand for uniqueness. So a lot of customers are feeling the pressure to develop differentiating products that are more original. So we are getting more requests for signature flavors and tailored solutions. Through the investments we have done in the past few years [e.g. an US$82 million investment upgrade to its cocoa processing facility in Wormer, the Netherlands], we have been able to show that through blending, you can develop an almost unlimited range of cocoa powders that meet the needs of customers for a slightly different flavor or color.

What are some trending items in terms of signature flavors?
Over the ages, users of cocoa powder state that they want “more chocolaty” or “darker” or some other firm of differentiation. In French supermarkets, for example, you will see that the chocolate desserts are much darker than in UK supermarkets, where they have a preference for more milky desserts. So the preference differs.
It also depends on the application you use. For example, if you want to use a “chocolate flavored” claim on breakfast cereals, you would need to use cocoa powders with a higher fat content. Across all cocoa applications, a lot of companies have their own specific requirements; whether in terms of masking off-flavors in applications which contain high contents of nutritional additives, e.g. protein, certain vitamins and minerals, or demands for a milkier flavor in dairy. From a labeling perspective, it could be a chocolate claim or a sustainably certified cocoa claim [e.g. UTZ certified]. The way that we work is through the breadth of our range, but it could also be through working with our customers at our seven application labs. For example, if a customer would like to have a cake with a strong chocolaty profile, they would need to formulate that differently than a dairy dessert with a strong chocolate flavor. Different ingredients and interactions are used.

What are the emerging applications for cocoa powder?
Where we see a lot of cocoa applications is in dairy, bakery and confectionery. We see a growing interest in dairy applications, which is an application where the impact of cocoa powder is best felt. You could think about ready to drink products, for example. An interesting area where we see development is in the health area, through protein and fitness drinks. And we see strong growth in Asia Pacific, for example, where it is mostly in bakery and confectionery applications. Consumers are getting more disposable income in those regions and manufacturers are targeting those areas. So you would see range extensions of products that were originally standard are now becoming sandwich biscuits or chocolate flavored biscuits. You also see a growth in chocolate spreads across the world, an area where consumers like that kind of product; both in North America, but also in other markets. Instant beverages remain a strong area for cocoa powder. Their key selling argument is that they are a way to get children to drink milk and make it more appetizing. Some major companies have very strong positions and are enjoying strong growth, but another region where you see growth for these types of products is Africa.

What about your expansion plans?
One of Cargill’s business units is Cocoa & Chocolate and within that we produce chocolate; which consists of cocoa liquor and cocoa butter. The products that we market under the Gerkens brand are the cocoa powders. We initially started with a factory in Holland and have been expanding that recently. In 2000 we built a factory in the Ivory Coast. In 2008 we built one in Ghana and we are currently building a sizeable factory in Indonesia to come on stream by the end of 2014. It has a production capacity of 70,000 tons and the possibility to blend different powder types.
Besides that we have a factory in Rouen (France) and another in Berlin (Germany) all producing the Gerkens cocoa powder brand and all with their own specifics. In Ghana, we produce 100% Ghana based cocoa powders and the Ghana bean is well known as a very flavorful cocoa bean. We produce single origin cocoa powders in Ivory Coast, for example, for a high impact cocoa powder. Then in Holland, we have the possibility to blend these powders and get unlimited possibilities for our customers.

How will you benefit from the ADM chocolate business acquisition?
The strategy that we following with our customers is for us to be a global player in the cocoa and chocolate area. The ability to acquire the ADM chocolate business, [still under review by the authorities so not yet finalized] gives us a broader asset base and the ability to better serve our customers in North America and Europe. By combining the capabilities that we already have in those areas with those of the sizeable ADM chocolate business, we will be able to bring better products for our customers.

You mentioned your production in Ghana and Ivory Coast. What is your strategy with regards to the Ebola outbreak in West Africa?
We employ over 600 people in Ivory Coast and Ghana, so the first thing to take into account is the safety of our employees. We are spending a lot of time on training and education to ensure that they can continue to operate in a safe way. It is important to note that Ebola is not transmitted through air, water and food. Secondly, the disease is currently restricted to Mali, Liberia, Sierra Leone and Guinea. They are neighboring countries, but we believe that the Ivory Coast and Ghana authorities are taking good measures and embracing significant campaigns to educate the public and set up quarantine centers, so we rely on their work. We work closely together with local governments and for the development of the outbreak and we rely on information from the WHO and the CDC and follow their advice and guidance. In terms of our mitigation, it is good to note that we have a diverse asset footprint which gives us flexibility.
The outbreak has led to a lot of market speculation. Cocoa is traded on the futures exchange and when prices move up and down there is a lot of guessing about the reason behind it. There have been reports in the media that some of this impact is down to the Ebola outbreak.

There is a big trend around traceability and consistency labeling. What is your strategy from this regard?
We are increasingly seeing more emphasis on producing food in a controlled and safe way, which is driven by food safety incidents. So besides having a lot of versatility in our production, we have also ensured that we have implemented the highest product safety levels. So if you look at microbiological checks and certification, this is something that we see an increased demand for from our customers. This is something that we are investing in, also at our Indonesian facilities. You can imagine that harvests of cocoa beans are not always the same, but you can mitigate this by blending beans and by blending cocoa powders. Customers are asking for consistency and they want to be sure that they get it.

By Robin Wyers