Chocolate manufacturer Barry Callebaut is focusing on emerging markets to maintain its growth in the face of a slowdown in established markets.
Speaking after the Swiss-based group posted a full-year net profit of CHF176.8m (US$195.1m), compared to CHF 251.7m in the same period last year, CEO Juergen Steinemann said double digit growth in Latin America and Asia Pacific bolstered a slowdown in America and Europe.
Emerging markets comprised 15% of total sales volume five years ago, whereas it is 23% today. Conversely, mature markets dropped 83% to 61% in the same period.
Steinemann said: “We were able to grow twice as fast as the global chocolate market and our operational and net profit grew even faster.”
Other significant developments for the company over the year include the signing of four new long-term partners, including Kraft Foods, and the extension of one existing one.
In April, the company acquired the remaining 40% of BC Malaysia, formerly known as KLK Cocoa, as part of its effort to to increase the company’s footprint in Asia. It also divested chocolate producer Stollwerck, because, as a B2B supplier, it does not dovetail with Barry Callebaut’s existing operations.
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By GlobalDataCFO Victor Balli said the full-year profits were heartening, but severely affected by the strong Swiss franc, the currency Barry Callebaut reports in, saying: “Translation had an important negative impact on our numbers.”
Profits were also hit by high cocoa prices, largely due to the conflict in the Ivory Coast, although prices eased after the conflict ended in May, further helped by a bumper crop.
To secure growth, Steinemann outlined a 7-step plan – develop long-term partnerships and outsourcing, accelerate growth in the company’s gourmet offering, maintain investment in research and development, ensure a sustainable cocoa supply, expand in emerging markets, simplify processes and structures in main markets and manage and develop talent.
A sustainable cocoa supply is of key importance because of the growth in consumption and the company estimates an extra 1m tonnes of cocoa will be needed next year – 300,00 by Barry Callebaut alone. It aims to achieve this by improving the production techniques, education and health of the farmers who supply them.
“Cocoa is a fragile and sensitive crop grown in some of the poorest countries in the world, global demand for cocoa and chocolate is on the rise, particularly in emerging markets,” Steinemann said.
“We have to do more to ensure the safety of our cocoa crop, as an industry and as Barry Callebaut. We as market leader need to further accelerate our impact on cocoa co-operatives and farmer communities. As the world’s leading chocolate company we have to take a lead role in securing sufficient supplies of quality-grade, responsibly grown cocoa today and tomorrow.”
Looking ahead Steinemann said: “We expect the global macroeconomic and financial environment to remain rather fragile and volatile. We assume the chocolate confectionery and gourmet markets will grow further next year, but at a lower rate of 1% to 2%.
“Raw material prices will stay rather high and remain volatile. Nevertheless, based on our robust business model, we remain confident that we will achieve our mid-term financial goals and are therefore confirming our guidance.”