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Home » World’s Largest Chocolate Maker Eyes U.S. Supply Deals

World’s Largest Chocolate Maker Eyes U.S. Supply Deals

Chocolate
June 3, 2019
Bloomberg

The world’s largest bulk-chocolate maker is eyeing supply deals in the U.S. as the market consolidates and consumer tastes change.

Barry Callebaut AG sees supplying chocolate directly to consumer brands, or outsourcing, as an important driver of the company’s U.S. growth, said Peter Boone, the Swiss company’s president for the Americas region. Changing consumer tastes are also an opportunity for the Zurich-based firm, which launched its ruby chocolate in the U.S. and Canada earlier this month.

The American snacks market has been challenging for companies like Nestle SA, which sold its U.S. confectionery unit to Ferrero SpA. The Italian confectioner also agreed to buy Kellogg Co.’s cookies and fruit-snack brands including Keebler and Famous Amos. In January, Barry Callebaut said consolidation in the U.S. market would provide opportunities to fuel growth in the region.

“We love to partner up with the big players, and we are always ready to accept a call when one of the big players wants to partner up and outsource chocolate to us,” Boone said in an interview at the Sweets & Snacks Expo in Chicago last month. “We always see that as an important driver of our growth.”

Boone said there are always ongoing outsourcing discussions, but he declined to provide further details. Still, Barry Callebaut said in an investor presentation last month that it planned to add an average 30,000 to 40,000 metric tons a year of outsourcing to its books globally over the next two years.

Offering new products to meet changing tastes can also be an important growth driver for Barry Callebaut, Boone said.

The company announced the invention of ruby chocolate in September 2017. The naturally pink, berry-flavored chocolate was the first new kind since white bars started being sold in the 1930s. Barry Callebaut has started supplying it in the U.S. and Canada after making a splash in Asia and selling it in Europe.

Millennial consumers have turned against sugar and are increasingly focused on sustainably-sourced products that are also innovative and tasty. That’s pushed chocolate makers to innovate. Barry Callebaut is now the top producer of reduced-sugar chocolate products. The company also makes dairy-free chocolate, a form adopted by Unilever in its vegan Magnum ice cream.

“This part of our business is really flying, so I see it as a growth opportunity,” TJ Mulvihill, vice president of marketing for Barry Callebaut in the Americas, said in the same interview. “Based on consumers’ choice and lifestyle, whether that’s something that they are required to consume differently or they are just making a lifestyle choice, we have an opportunity to step in.”

Barry Callebaut, which buys one in every four beans, is keeping its ruby chocolate recipe secret, but Boone said it’s all about understanding the 10,000 compounds in the cocoa that drive taste, color and other characteristics. The company also says it has more than enough “ruby beans” to supply clients and that it knows what farms are most likely to have more supplies. The beans come from Ecuador, Brazil and Ivory Coast, he said.

“I’m absolutely sure that if we need, we will find other countries that we can source from as well,” Boone said.

It will take some time before some of the big American brands adopt the ruby variety as they need to familiarize themselves with the product, Boone said. The product also still needs approval by the U.S. Food and Drug Administration to be sold labeled as chocolate. Early trials are being marketed under the name ruby cacao.

Volumes for industry-wide chocolate sales expanded globally for eight consecutive quarters through January, rebounding after declines in 2017, Barry Callebaut said in April, citing figures from analytics firm Nielsen. Volume in North America will probably keep growing at a rate of about 1 percent annually, in line with population growth. The value of products sold will likely see an acceleration, with growth at 3 percent to 4 percent, Boone said.

To keep up with demand, Barry Callebaut says it’s investing in its footprint across North America, Boone said. While he declined to provide details, he said there are always “two, three or four lines going into our network.”

“We want to grow far beyond the market, and we need to keep in front of that,” Boone said. “That’s why we need capacity. That’s why we need factories that are ready to take it up.”

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