Barry Callebaut engages Ivory Coast, Ghana on cocoa legislation

SWITZERLAND – Barry Callebaut, the global chocolate and cocoa product manufacturer, is in talks with the governments of Ivory Coast and Ghana to amend replanting restrictions on cocoa trees, a move aimed at bolstering supply amid rising cocoa prices. 

The Zurich-based company’s CEO, Peter Feld, noted in a Nov. 6 earnings call that legislation enacted in 2018 prohibits farmers in these countries from replanting cocoa trees, a policy originally intended to prevent oversupply and stabilize prices. 

However, Feld argued that the current cocoa market dynamics require a shift in strategy, particularly given favorable weather patterns that suggest improved harvests next year.

“We see a significant improvement versus last year,” Feld said, adding that while weather conditions have improved, current production levels are still below those seen in the 2022-23 season. 

Despite these prospects, fixed farmgate prices and limited productivity improvements in Ghana continue to present obstacles. The farmgate price recently rose to US$3,000 per tonne, potentially reducing farmers’ incentives to increase planting.

As Barry Callebaut explores legislative change in West Africa, the company is also looking to South America, where high-tech farms are beginning to play a greater role. 

In Brazil, Barry Callebaut is collaborating with high-tech farms, a model Feld believes could eventually be scaled to other regions. Feld highlighted that the company has spent the past eight years developing high-tech farming methods in Ecuador, which could serve as a template for increasing cocoa productivity.

Mixed financial results amid supply constraints and price volatility

For the fiscal year 2023-24, Barry Callebaut’s financial results reflected the pressures of fluctuating cocoa prices and supply chain constraints. 

Cocoa bean prices on the terminal market oscillated between £2,869 (US$3,696) and £9,835 per tonne, closing at £5,322 (US$6890.39) per tonne on Aug. 31, representing a 131% price increase over the previous year. 

Despite this, the company’s sales volume remained largely flat at 2,279,811 tonnes, only a slight decline from the previous year’s 2,280,925 tonnes. 

Meanwhile, sales revenue surged by 23% to 10.39 billion Swiss francs (US$11.86 billion), driven by the rising cocoa prices. 

However, operating profit declined by 32% to 446 million Swiss francs, impacted by non-recurring items, including Brazilian indirect tax credits and costs related to the company’s “Next Level” investment initiative.

The global chocolate business saw a marginal volume increase of 0.3%, aided by growth in the private label sector and a nearly 10% boost in the gourmet segment. 

While the North American market experienced a volume decline of 1.8% due to reduced demand among large food manufacturers, other regions, including the Middle East and Africa, saw a 5.2% increase. Sales in Latin America rose by 7.2%, with Brazil leading growth.

The cocoa segment was less resilient, with sales volume decreasing by 1.4%, hindered by supply constraints impacting cocoa butter and cocoa liquor sales.

Investments and operational restructuring under “BC Next Level”

As part of its broader reorganization under the “BC Next Level” strategy, Barry Callebaut has focused on digitalization and operational standardization. 

The company is optimizing its manufacturing network by closing plants in Norderstedt, Germany, and Port Klang, Malaysia, with plans underway to close its Intra site in Italy. 

Feld stated that these measures, along with a reduction of 25% in the company’s product range, are designed to improve productivity and streamline operations. 

Barry Callebaut has also rolled out a standardized operational framework across its factories, introducing key performance indicators and additional food safety measures.

Reflecting on the results, Feld praised the resilience of Barry Callebaut’s global teams, noting the unprecedented supply challenges and the operational changes necessary to navigate them. 

“Our teams faced an unprecedented cocoa supply and demand environment while delivering our BC Next Level strategic investment program to boost services for our customers globally,” he said.