Barry Callebaut signals global chocolate revival
Swiss group says innovation and sharp fall in cocoa prices will drive growth
Global chocolate sales are poised for a revival as industry innovation and tumbling cocoa bean prices spur growth, the chief executive of the world’s biggest supplier of chocolate and cocoa products has forecast.
Antoine de Saint-Affrique, chief executive of Switzerland’s Barry Callebaut, said sales had accelerated in recent months and would return to a “normal rhythm” of growth. “From a market dynamics standpoint, I’m absolutely convinced the worst is over,” he told the Financial Times.
The world’s confectionery companies, many of which are Barry Callebaut’s customers, have been hit in recent years by the trend for healthier foods as well as higher cocoa prices. Global chocolate confectionery market volumes declined 1.5 per cent in 2015 and 0.4 per cent last year, according to Euromonitor.
However, cocoa bean prices have reversed direction over the past year, falling roughly 40 per cent.
“We are passing the prices up and down to our customers,” said Mr de Saint-Affrique, although it would take time before retail prices also fell. “That’s why I’m telling you, I’m rather optimistic . . . We are going to get back in positive territory.”
He expected chocolate companies to offer more discounts and promotions “to ignite” the market. “It should go back to what was a normal rhythm of growth, which is somewhere around 1-2 per cent,” he added.
Price falls would be only one factor driving a recovery, however. Innovations were another, such as chocolate-covered protein bars. “As with many things, they taste better when you put chocolate in,” said Mr de Saint-Affrique.
This month, Nestlé, the world’s largest food and drink company, announced it was opening a new factory in Japan to expand production of KitKat chocolate bars in flavours such as pistachio and raspberry.
Barry Callebaut has expanded production of “heat resistant” chocolate, for sale in hotter countries. Its latest push is in providing a variety of chocolate mixtures for more than 1,200 small ice-cream parlours in Italy.
Confectionery makers would also expand into new markets, said Mr de Saint-Affrique. “There are still plenty of places where they are still at the discovery stage of chocolate.”
Jean-Philippe Bertschy, analyst at Vontobel, said Mr de Saint-Affrique’s projection for volume growth was “a bit aggressive”.
He added: “The US and German market have declined in volume by an average of 1 per cent since 2011 — and the UK and France were flat. Of course, there is significant growth potential in emerging markets, but China has been a very challenging market so far and it remains to be seen if the Chinese — or consumers in other Asian markets — will really eat more chocolate in coming years.”
Last week, Barry Callebaut reported its sales volumes rose 2.8 per cent to 1.4m tonnes in the nine months to May 31, with growth accelerating to 5.5 per cent in the final three months of the period. The increase was flattered as Barry Callebaut completed a programme of ending less-profitable cocoa contracts, but the group reaffirmed its medium-term target of an average volume growth rate of 4 to 6 per cent.
The falls in cocoa bean prices follow good harvests in the main producing countries, Côte d’Ivoire and Ghana. But they have meant lower revenues for the government as well as farmers. “You don’t want prices to stay low for a long time,” Mr de Saint-Affrique warned. Barry Callebaut last year said it would make its production entirely “sustainable” by 2025 with the help of bean-tracking technology created by SAP, the German software group.