Shift towards private-label chocolate steadies Barry Callebaut's sales

Sales increased by 14% in local currencies (up 6.1% in Swiss francs) to 2.24 billion Swiss francs ($2.58 billion) as the group passed on some of the increase in raw material prices to its customers by offering more private label products.

The Q1 rise compares with 579,000 tonnes in the same period a year ago, when a salmonella outbreak at its biggest factory in Wieze, Belgium, in June 2022 hampered production.

"Barry was able to deliver on market expectations, which is key in this challenging period of rebuilding investor trust," Vontobel analyst Jean-Philippe Bertschy told Reuters, adding the company has undertaken "significant" refinancing measures to address rising cocoa prices.

In a statement, Barry Callebaut said the global volume performance was - as expected - suppressed by the weak growth environment for Fast-Moving Consumer Goods (FMCG) companies as global corporate account customers managed cost inflation.

Consumer shift

This was partly mitigated as the world’s largest chocolate and cocoa supplier said it was able to capture the consumer shift towards private label products through its diversified business model. In line with these trends, Food Manufacturers declined -0.8%, while Gourmet and Specialties volume grew +9.1% against the soft prior year comparator.

Peter Feld, CEO of the Barry Callebaut Group, said: “We are focused on delivering on our promise to offer the best chocolate solutions and best in-class services to our customers globally every day. This is key for our future and for our performance in the current challenging market environment.

"At the same time, we are investing in areas most important for our customers, which will make Barry Callebaut stronger and more resilient with our strategic investment program, BC Next Level, which positions the Group for sustainable, profitable growth and allows for a more attractive financial profile. The implementation of BC Next Level is well underway with our new operating model announced, and new leadership team in place, and the majority of the planned measures already initiated. “

Regional performance

As a strategic move under the BC Next Level operating model, Barry Callebaut has transitioned from three to five chocolate regions to enhance proximity to markets and customers. The new regions now include Western Europe, Central & Eastern Europe, North America, Latin America, Asia Pacific Middle East & Africa.

Region Western Europe

Sales volume in Western Europe grew +4.7% to 193,715 tonnes ahead of the declining underlying regional chocolate confectionery market (-3.4%) but against the lower prior-year comparison base due to the Wieze incident.

Region North America

Sales volume in North America experienced a slow start with a decline of -4.0% to 140,091 tonnes in the first three months of fiscal year 2023/24, in a declining, underlying regional chocolate confectionery market (-6.6%)2. Food Manufacturers in the region were impacted by weaker consumer demand, impacting FMCG growth, partly offset by new business. Gourmet & Specialties saw signs of recovery, including solid growth in Mexico. Sales revenue in the region amounted to CHF 516.3 million, up +1.5% in local currencies (-5.2% in CHF).

Region Latin America

Sales volume in Region Latin America also declined -1.3  % to 14,820 tonnes in the first three months of fiscal year 2023/24, in a regional chocolate confectionery market up +1.1%2. Mid-single-digit growth in Brazil was offset by weaker demand in the rest of the region. Sales revenue amounted to CHF 49.8 million, up +0.8% in local currencies (-2.7% in CHF).

Global Cocoa prices

Prices for cocoa beans on the New York exchange (ICE) hit the highest in 46 years (+68% ) last November as expectations of a supply deficit on the back of a lower 2023-24 West African crop were confirmed mainly by lower cocoa bean arrivals in Cote d’Ivoire and Ghana. This resulted in both New York and London Cocoa continuing their move higher, with cocoa bean differential markets also increasing.

Barry Callebaut said its sales volume in Global Cocoa amounted to 115,055 tonnes, down by -1.1% in the first three months of fiscal year 2023-24. Sales revenue amounted to CHF 540.8 million, up +19.6% in local currencies (+13.6% in CHF).

Other commodities

The world market price for sugar was, on average, +40.5% higher than in the prior-year period due to an emerging world balance deficit. The projected deficit was due to large revisions in crop output in El Niño-impacted regions like in India and Thailand, but the price eased after the quarter end. In Europe, sugar prices were, on average, 16.2% lower than in the prior year due to the expected gains in the 2023/24 beet sugar output and the more robust emergence of cheaper Ukrainian sugar imports.

Dairy prices decreased on average by -26.5% compared to the first three months of the prior year but increased on average +7.7% versus the prior quarter. In a quarter during which North Hemisphere (US & Europe) milk output turned markedly negative versus 2022 levels, dairy markets around the world reacted accordingly, with dairy prices during the period rising across the board and despite concerns around weak demand.