Deal sees Barry Callebaut double existing business with Kraft

By Jane Byrne

- Last updated on GMT

Related tags: Barry callebaut, Kraft foods, Cadbury plc, Chocolate

Industrial chocolate supplier Barry Callebaut has secured a key, long-term supply contract with Kraft Foods, which will see the Swiss firm invest €51m to expand production capacity in North America, the Ivory Coast, Malaysia and Europe.

The two companies announced the signing of a ‘long-term global master product agreement’, which means that the Swiss supplier will more than double its existing business with the US food group. The deal also includes some Cadbury liquid chocolate deliveries.

The parties did not disclose financial details.

Raphael Wermuth, communications spokesperson for Barry Callebaut, told this publication that the pact involving the supply of liquid chocolate and semi finished cocoa products puts Kraft, maker of the Milka and Oreo brands, among its largest clients.

“The company’s biggest outsourcing deal prior to this agreement was with Hershey at 80,000 metric tonnes (mt) per year,”​ he added.

Swiss food group Nestlé sources 43,000 mt of its annual chocolate needs from the Zurich-based chocolate group.

Barry Callebaut said that the additional production volumes will be built up gradually over a period of three years, starting immediately. Industry sources estimate that the planned capacity expansion could boost current production volumes for the Swiss firm by 4 to 5 per cent.

Outsourcing trends

Juergen Steinemann, CEO of Barry Callebaut, stated that the deal with Kraft reflected a continuing chocolate-industry trend toward outsourcing and partnerships.

Kepler Equities analyst Jon Cox told ConfectioneryNews.com that an increasing number of chocolate companies are outsourcing their primary processing and Barry Callebaut, as the leading supplier, is well placed to benefit.

He said that the liquid chocolate supplier's agreement with Kraft was not surprising as the US food group needed to realign its supply chain following on from its acquisition of Cadbury in February this year.

Share surge

Shares of the Zurich-based chocolate group, which have gained 15 per cent so far this year, rose nearly 7 per cent on the Swiss stock exchange on the back of the deal.

In June, Barry Callebaut reported buoyant third quarter sales volume gains of 11.3 per cent, based it said upon growth in Asia-Pacific and the luxury chocolate category.

Year-to-date figures showed sales volumes were up 8.9 per cent to 975,044 tonnes and sales revenue grew 11.7 per cent. Third quarter sales revenue had also increased by 11.7 per cent.

Progress in emerging markets, notably Asia-Pacific, along with the implementation of the major outsourcing contracts, signed in 2007, and market share gains, were said to be key volume growth drivers.

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