With rising commodity prices and a weak US dollar, several companies are offloading under performing arms in an attempt to keep margins high. The company first announced the sale of Brach's, a sugar candy and chocolate products manufacturer, to US-based Farley's & Sathers in September, after the slow growth of the US private label market led to poor sales. "We acquired Brach's because we wanted to get access to the large US retailers and manufacture private label chocolate for the US market," said Patrick De Maeseneire, chief executive officer for Barry Callebaut. "However the market for private label products in the US has not developed in the same way as in Europe." Brach's has annual gross sales of CHF303m (€184.7m), with sugar candy accounting for 75 per cent of revenue, Barry Callebaut said.
However, sales revenue for Brach's was down 4.5 per cent was down 4.5 per cent to CHF760.3m (€460m) for the nine months ended 31 May, compared to CHF796.5m (€481m) the previous year. President of Farley's & Sathers Dennis Nemeth said the purchase marks the company's "continued commitment" to the candy business. "In addition to broadening our current portfolio of brands, this acquisition will allow opportunities to increase manufacturing capacity," he added. Both companies decided not to disclose the financial details of the transaction.
Barry Callebaut's strategy to focus on chocolate is clearly paying off, as the company reported growth in full year 2006/7 that outstripped the chocolate sector at large. Total sales of CHF 4,106.8m (€2,467.63m) were recorded for the year, while operating profit was up 9.8 per cent to CHF 324m (€194.7m).
During the period the company also made big deals with two other major chocolate manufacturers, Nestle and Cadbury, which are expected to increase sales volumes by around 60,000 tonnes over the next two years.