Nutresa chocolate arm rocked by rising cocoa costs
The group’s chocolate arm, its third largest operating area behind cold cuts and biscuits, grew sales 5% in the second quarter to COP 245.1bn ($130m). However, EBITDA for the chocolate division plummeted 23.1% to COP 26.3bn ($14m).
The cocoa impact
“In chocolate the effect is basically because of the raw material, cocoa has had its impact – that’s why we have the decrease,” said Nutresa CFO Jose Domingo Penagos during the company’s earnings call yesterday.
“Cocoa grew in price 44%, so this has a big impact on our profitability in chocolates,” he said.
According to the International Cocoa Organization (ICCO), the averages daily cocoa prices for July 2014 stood at $3,196 up 38% on last year.
Cocoa accounts for 4.4% of Grupo Nutresa’s overall raw material costs, which come mostly from labor charges and packaging materials.
The company’s CEO Carlos Ignacio Gallego said in the webcast that this meant the company would not be affected by El Niño weather phenomenon, which has the potential to devastate the cocoa supply.
“The effects of El Niño on traditional raw materials are included in our prices,” he said.
Wholesale price hike?
We asked the company if it planned to raise wholesale chocolate prices to offset the rising cost of cocoa following similar moves from Hershey, Nestlé and Mars Chocolate.
Gallego said that the firm would seek to maintain profitability at between 12% and 14 for the chocolate business. Q2 EBITDA margin for the chocolate division was at 10.8%.
Aguirre said Nutresa would consider product launches, while monitoring raw material supplies and the actions of competitors before taking a decision to raise wholesale chocolate prices.
“Eventually, and if we consider it necessary, we make adjustments in the prices of our products, guaranteeing, though, their affordability,” he said. He refused to be drawn on whether this was a necessary moment to hike prices.
Market share gains
Despite its EBITDA slowdown, Nutresa achieved a record market share in chocolate and biscuits in its main market Colombia over the past year.
It grew chocolate confectionery market share in Colombia 1.2% for the 12 months up to May 2014 to reach a commanding 66.9% share, according to Nielsen data. The company’s chocolate brands include Jet, Gol and Jumbo. Nutresa’s next closest chocolate competitor Colombia held 7.9% share.
Nutresa also extended its lead in the Colombian biscuits sector ahead of Mondelēz and Nestlé by growing its share 1.2% over the period to 55%. Nestlé trailed the market leader on 12.2%.
Nutresa has a chocolate manufacturing facility in Costa Rica, Mexico and Peru as well as two in Colombia.
