Since selling its consumer units over the last few years, business-to-business chocolate maker Barry Callebaut has been treading a new path focused on its “core” business with industrial and artisanal customers. Michelle Russell caught up with Barry Callebaut marketing director for western Europe, Sofie De Lathouwer at this year’s ISM confectionery show in Cologne to find out more about its strategy for growth.
just-food: How vital is innovation in helping a company grow?
De Lathouwer: Innovation for us is fundamental, it’s in our genes to innovate because we are the leader in our industry. It can be related to cost savings, regulation, health claims. For example, we are waiting for final approval from the European Commission on flavanol rich chocolates and how we can communicate the claims. Other innovations are on sugar reduction and how can we replace sugar with alternatives. Sugar prices are on the rise and in the future we need to look even more at alternatives … such as natural fruit sugars.
just-food: How much of an impact has raw material price increases had on Barry Callebaut and its ability to innovate?
De Lathouwer: Commodity prices have a big impact. Around 80% of the cost of chocolate is raw material so that’s enormous. Increases in sugar and cocoa prices has an immediate effect. Some things you really cannot influence and that’s the most difficult part of our business. How can you solve it? What you can do is look for different product formulations. One of the strengths of the R&D power we have is a team of people who can look and say … this is the recipe for the customer and based on the ingredients we can maybe switch in order to find a stable price.
Some of our customers will change the chocolate covering and add more filling, or vice versa. There is also a smart solution if nut prices go up. Hazelnuts will always be more expensive than almonds so you can mix nuts or do a full change. With pricing you need to take into account sugar, milk, cocoa and nuts. Everything is fluctuating so enormously, you have to bring everything together and look to the final product for the customer.
just-food: Would you consider using zero-calorie sweetenr stevia as an alternative ingredient?
Sofie De Lathouwer: It is important to know that stevia is a very bitter sweetener so you cannot put it in chocolate as a replacement. It’s not possible, nobody would eat it. For stevia in chocolate, you would need to have a product where the sugar is already replaced or is light in calories … and then put stevia on top. For the time being, it’s not compatible with standard chocolate but I think there will be answers for the future.
just-food: Do you feel there is more pressure now for food manufacturers and confectioners to offer something with a functionality or health benefit?
Sofie De Lathouwer: A lot of people are making noise about sugars, but if you put on your package that it is reduced sugar or reduced fat, then consumers think it will not be tasty. Companies do it in a silent way because they are afraid of people thinking it will not taste the same. I get a lot of questions about what we’re doing with fat and sugar reduction. It needs to be tasty, that’s the first thing for us and then second the functionality and the benefit it brings to you.
just-food: Consumer sentiment has been relatively low in most global markets, particularly in Europe. To what extent has Barry Callebaut been impacted by this?
Sofie De Lathouwer: We are still innovating. We want to explore all possibilities with chocolate, whether it’s a cheaper or a more expensive solution. We are trying to test our capabilities in innovation power but secondly, chocolate is still – although we’re not living in the most comfortable situation economy-wise – a comfort for most people. Chocolate is probably one of the best industries to have survived the crisis because people like to have their reward. If you look to Europe it remains stable, and if you look to other regions like the emerging markets, you see an increase [in consumption] as well, so we have to make sure we have innovation people on every continent that are cooperating well with each other and communicating what each market wants.
just-food – Barry Callebaut has already expanded its business in the region in 2013 with the acquisition of Sweden-based ASM Foods. The company said it hopes to use its acquisition of ASM to act as a springboard for growth in Scandinavia. Can you expand on what the company’s plans are?
De Lathouwer: It’s still a bit early to say because the acquisition was only announced last week and we have to work towards the integration. ASM really is an amazing company … they offer a great flexibility, they offer smart solutions in terms of delivering small batches in liquid, and that’s something we can learn from them as that is what companies want. If you want to personalise and customise, you do not do it with big batches. They are also specialised in fillings and in compounds, they’re also very specialised in products for bakery, ice cream and confectionery sectors, these are three big segments in Scandinavia.
just-food: Are we likely to see any more deals from Barry Callebaut in Europe this year?
De Lathouwer: I don’t know. We’ve already made some great acquisitions so we will see. Maybe we will look to another region because you need to integrate and bring the synergies all together and you cannot do that in one day. We’ve sold our consumer business and we’ve been doing a lot of outsourcing deals with customers, it takes years.
just-food: That deal followed the acquisition of Singapore-based Petra Foods’ cocoa ingredients business.
De Lathouwer: With Petra Foods, strategically we need more chocolates to make, so that means we need more cocoa. We need to have more factories that can support us in making more chocolate. Secondly, we are in the Asia and Latin America markets mainly. And it is in the new emerging markets where we need more support. Having people in these markets with the factories will enhance this expansion. What we are seeing with the big customers is they are asking for combined deals, meaning they want to buy the chocolate and they want to buy the cocoa and that’s also why this really fits into our strategy. We always want to grow but you simply do not always do it finding new customers. It’s also through acquiring new facilities.
just-food: You did secure two large supply deals with Unilever and Grupo Bimbo last year. Is there much potential for more outsourcing agreements?
Sofie De Lathouwer: I believe there is, for sure. But people need to define their priorities. We are the expert in making the semi-finished products for our customers we are a B2B player, that’s our strength, not in consumer. We may be good in presenting and searching for the insight but we are the one who likes to inspire our customers and support them fully.