Just over a year after its acquisition of Germany's Stollwerck, Swiss chocolate producer Barry Callebaut is to buy the US group Brach's, further strengthening its position in the consumer segment and opening up opportunities in the world's largest confectionery market.
Barry Callebaut will acquire Brach's Confections Holding and a new state-of-the-art factory in Vernell, Mexico, for $16 million (€14.5m) from Germany's KJ Jacobs, one of the Swiss group's own shareholders. The Swiss group will also provide financing of up to $48 million over the next four to five years to restructure the US business.
Brach's is one of America's leading confectionery manufacturers with sales of approximately $340 million in 2002. The company is best known for its StarBrites Mints, Milk Maid Caramels and Maple Nut Goodies.
Barry Callebaut said that the Brach's business would give it access to new distribution channels and the opportunity to strengthen and to extend relationships with large retailers in the United States - the world's single largest consumer market and one of its priority geographic markets.
Barry Callebaut has traditionally been a producer of cocoa products and ingredients, but the acquisition of Stollwerck in 2002 gave it a major presence in the consumer sector for the first time. The Brach's deal will further increase the company's presence in this sector, lifting sales from this division by 45 per cent to around a third of total group turnover.
In addition, it will raise Barry Callebaut's American sales revenues by approximately 60 per cent to 31 per cent of the total. Combined sales from Brach's and Barry Callebaut are likely to be around $3.0 billion this year.
Combining Brach's and Stollwerck will give Barry Callebaut's Consumer Products business unit sales of around SF1.4 billion (€909m) this year in sales revenues in fiscal 2002/03. The Swiss group has been keen to expand its presence in the high added value consumer products segment, in part as a means of reducing its presence in the semi-finished products sector which is more susceptible to the vagaries of commodity price fluctuations.
At first Brach's and Stollwerck will continue to operate as separate business units, although Barry Callebaut said that it planned to merge the companies in the longer term. The group said it expected to make SF12-15 million a year in cost savings and cross-selling opportunities such as the distribution of Stollwerck's European premium chocolate products through Brach's in the US and the sale of Brach's confectionery products in Europe.
"With an aided awareness of 93 per cent, Brach's is a household name in the United States. The acquisition of Brach's allows us to accomplish two strategic objectives at once: first, the substantial expansion of our activities in the United States, the world's single largest consumer market, and, second, the creation of an attractive platform to further build our consumer confectionery business, with ultimately a global reach in mind," said Patrick De Maeseneire, CEO of Barry Callebaut.
The expansion of the consumer products business has prompted Barry Callebaut to reorganise its business, grouping together its Cocoa, Sourcing & Risk Management and Food Manufacturers units into a new Industrial business stream and merging the Gourmet & Specialties and Consumer Products units, including both Stollwerck and Brach's, into a new Food Service/Retail stream.