Barry Callebaut grows above chocolate confectionery market in Q1

By Oliver Nieburg contact

- Last updated on GMT

Barry Callebaut grows volumes in Europe, but North America demand hit by big brands raising chocolate prices
Barry Callebaut grows volumes in Europe, but North America demand hit by big brands raising chocolate prices

Related tags: Chocolate confectionery, Chocolate, Theobromine, Switzerland, Barry callebaut

Leading cocoa processor Barry Callebaut has reported volume growth ahead of the global chocolate confectionery market in its first quarter.

In the company’s three-month sales figures released today, the Swiss-based firm reported growth in sales volumes of 0.2% to 265,046 metric tons (MT). Volumes in the global chocolate confectionery over the same period market fell 1.8%, according to Nielsen.

European capacity investments pay off

Barry Callebaut posted sales revenue gains of 15.1% for the quarter to CHF 1.7bn ($2bn), driven by higher cocoa bean prices and growth in Western Europe.

Barry Callebaut CEO Juergen Steinemann said: “As anticipated, we saw a slow start in our new fiscal year, yet we grew well above the market. I am satisfied that our largest region, Western Europe, resumed growth, capitalizing on last year’s capacity investments.”

Geographical Breakdown

[3 months up to Nov. 30, 2014]

Europe
Sales Revenue – CHF 762.8 ($881m) +9.5%
Sales Volume – 205,660 MT +0.8%

Americas
Sales Revenue – CHF 387.5m ($448m) +22%
Sales Volume – 115,930 MT +0.2%

Asia Pacific
Sales Revenue – CHF 75.7m ($86.8m) +20.7%
Sales Volume – 19,195 MT +9.3%

The company grew sales revenue 9.5% in Europe following production investments in Belgium and the UK. It will grow capacity further by the end of 2016 with two modern chocolate production lines at its plant in Lodz, Poland for an investment of $28.3m.

Chocolate price hikes hurt demand in North America

Sales revenues in the Americas rose 22% in Q1, driven by growth in South America. However, volumes were flat at +0.2%.

“In NAFTA [North American Free Trade Agreement], the confectionery industry increased retail prices due to higher cocoa bean prices. This had a temporary negative impact on consumption and thus demand declined,”​ said Barry Callebaut.

Nestlé, Hershey, Mondelēz International and Mars Chocolate North America all introduced chocolate confectionery price hikes in the first half 2014 in response to rising input costs, particularly from cocoa.

Last week, the US National Confectioners Association (NCA) reported that fourth quarter North American cocoa processing had dropped 2%​ to 122,886 MT after eight consecutive quarters of growth. Jonathan Parkman, joint head of Agriculture at Marex Financial, attributed the slump to weaker demand after the chocolate price hikes.

Commodities Outlook

cocoa bag_istock

Barry Callebaut said that cocoa prices had started ease after fears allayed that Ebola would reach the primary cocoa growing countries Ghana and Côte d’Ivoire. Cocoa terminal prices hit a three year high in September 2012 of £2,112 per MT, but fell to £1,896 per MT by the end of November.  Barry Callebaut added that sugar prices were continuing to decrease due to strong surplus stocks, while milk powder prices were at five-year lows due to reduced demand in Russia and China.

Building momentum in Asia

In Q1, Barry Callebaut grew sales volumes 9.3% in Asia-Pacific, while the overall chocolate confectionery industry grew Asia Pacific volumes by just 0.8% over the same period, according to Nielsen.

Callebaut CEO
Barry Callebaut CEO Juergen Steinemann announced in November that he would step down at the end of fiscal 2014/15 after six years in the role.

The Cocoa Association of Asia has yet to report its Q4 grind figures, but the second largest cocoa processing nation Malaysia has already reported a 21% drop.  Marex Financial expects a 7% decline in Asia’s Q4 cocoa grind.

Swiss franc impact

Barry Callebaut said the Swiss National Bank’s decision to abandon a cap on the Swiss franc against the euro had limited impact on its business since 99% of sales came outside of Switzerland. However, it said that there could be a currency translation impact on reported figures.

The company reaffirmed its mid-term targets of 6-8% average volume growth per year and EBIT per tonne restored to levels before its acquisition of Petra Foods’ ingredients division.

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