Manufacturers make big sales growth for Callebaut

By Jess Halliday

- Last updated on GMT

Related tags Barry callebaut Chocolate

Barry Callebaut has reported growth in full year 2006/7 that
outstrips the chocolate sector at large, largely driven by sales to
food manufacturers with which it has several big new deals.

The Swiss chocolate giant reported total sales of CHF 4,106.8m (c €2,467.63m) for the year.

Operating profit (EBIT) was up 9.8 per cent to CHF 324m (€194.7m).

In its industrial business segment, volume sales of food manufacturers were 654,394 tonnes (up 11.5 per cent); volume sales of cocoa to third-party customers were 142,062 (up 10.7 per cent).

Sales revenue for whole segment was CHF 2,574.2m (€1,546.6m) - up 15 per cent.

"Food manufacturers continue to be the driving force for volume gain," said Patrick De Maeseneire, CEO, who also claimed the company "grew twice as fast as the global chocolate market".

According to Euromonitor International, the global chocolate confectionery market grew by 3.5 per cent between 2006 and 2007, and is valued at around CHF 90bn (c €54bn).

The year was marked by big deals with two major European chocolate manufacturers, Nestle and Cadbury Schwepps, which together are expected to increase sales volumes by around 60,000 tonnes over the next two years.

Bundled in with the Nestle deal, Barry Callebaut also acquired a chocolate factory in Dijon, France, and equipment for the production of cocoa liquor and liquid chocolate at the Nestle chocolate factory in San Sisto, Italy.

The impact of manufacturers and the trend towards outsourcing in chocolate is not only limited to Europe.

In July it signed a long-term supply agreement with Hershey, which also comes with production equipment - a deal said to propel it into the number one slot as industrial chocolate supplier in the region.

It is also eyeing the acquisition of a cocoa-processing factory near Philadelphia, is building a new plant in Mexico, and is planning to increase production at other sites too - all measures that will help it meet outsourcing demand.

The company is clearly refocusing on chocolate as its core business area; in September it agreed to sell its loss-making sugar-candy subsidiary Brach's to Farley's and Sathers Candy Company.

The deal is expected to close this month.

Barry Callebaut is also focusing on opportunities in emerging markets.

Asia and the rest of the world reported increase in sales revenue of 11.6 per cent to CHF 201.6m (€121.2m).

Again, rapid growth in the food manufacturing business was flagged, as a result of "intensified sales efforts".

The company is also expecting great things of Russia, where an affluent new middle class is driving growth in luxury products.

In the year, it opened a new chocolate factory and it expects to triple sales volumes there in the next three years.

Despite all the positive wheeling and dealing, there is one cloud over the silver lining that is Barry Callebaut's annual results that cannot be ignored: raw material costs.

Earlier in the year it warned that deterioration of combined (cocoa) ratio and the cost environment would have a negative impact on operating result.

In the event, operating profit took a CHF30m hit.

But it could have been worse.

The business model is credited with allowing it to compensate for a major part of the higher costs.

De Maeseneire said: "Our cost environment will remain challenging amid high raw material prices, but we have responded to these pressures by optimising our cost structure and increasing sales prices."

According to the London Cocoa Terminal Market, cocoa prices were just under GBP1,000 (c €1,434) per tonne in September 2007.

The high in recent years was over GBP1,600 (€2,296) in late 2002.

Related topics Markets Outsourcing

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