Swiss chocolate company Barry Callebaut is to purchase a 60 per cent share of Malaysia's KL Kepong Cocoa Products in a move designed to increase its sourcing capacity in Asia.
KLK Cocoa, a subsidiary of the plantations and manufacturing group Kuala Lumpur Kepong Berhad, is one of the region's leading cocoa and chocolate manufacturers with annual sales of RM500 million (€99m).
Barry Callebaut said the deal will allow it to access an established customer base in Asia as well as step up sourcing of cocoa beans in Indonesia to feed new manufacturing plants in Japan and China.
Asia is a rapidly growing market for chocolate confectionery producers, with volumes expected to increase by 30 per cent over the next four years, according to Euromonitor data. But until last year Barry Callebaut still made almost 90 per cent of its sales in Europe and North America. It has now embarked on a strategy to increase its presence in Asia where demand is rising rapidly from a low base.
"Asia has been a blank spot on the map for us that we wanted to fill," said Patrick De Maeseneire, chief executive of the firm. "The new presence in Malaysia will serve as a strong basis to further expand our footprint in Asia and to facilitate cocoa bean sourcing from neighbouring Indonesia."
Barry Callebaut would be able to significantly reduce transport costs by sourcing more beans from Indonesia rather than West Africa to supply its growing chocolate production in Asia. In January it opened a chocolate factory near Shanghai with capacity for 25,000 tonnes. China is expected to become the world's largest chocolate market in the future.
It has also signed an agreement with Japan's Morinaga to acquire a modern chocolate factory, coupled with a long-term supply agreement, doubling its sales volumes in the high-end Japanese consumer market.
Indonesian cocoa beans are also significantly less expensive than beans from the leading suppliers, Ivory Coast and Ghana, because of their lower quality. Laurent Pipitone, senior statistician with the International Cocoa Organisation, says a tonne of Indonesian beans costs on average $200 less than the same amount from West Africa because they tend to be poorly fermented.
"But the demand for quality in Asia is on average lower than in European markets so Indonesian beans are being used in this market and the US," he told FoodNavigator.com.
KLK said it will also benefit from the deal, which gives it access to Barry Callebaut's chocolate expertise as well as the Swiss firm's cocoa sourcing network in West Africa.
The company employs about 360 people and has an annual production capacity of 70,000 metric tonnes for cocoa products and 10,000 tonnes for chocolate. It supplies multinationals across Malaysia, Japan, India and Australia as well as its own brands, KLK Cocoa, Selbourne and Mayer.
Terms of the deal were not revealed. It is expected to close by the end of April, subject to the approval of Malaysian government authorities. KLK Cocoa will then change its name to Barry Callebaut Malaysia.