Barry Callebaut: double chocolate

The Swiss company is moving into consumer chocolate manufacturing by buying Stollwerck, Germany's third largest manufacturer. The country is the second largest market for chocolate in Europe, but competition is hard and only slow market growth is expected. On the plus side, the deal should bring real cost savings

The world's largest industrial chocolate supplier, Barry Callebaut, has acquired Stollwerck in a $153 million deal. Until now, the company has always made a point of avoiding consumer chocolate manufacturing to avoid competing with its clients.

This decision follows a change in Barry Callebaut's overall strategy. Klaus Jacobs, the German-born entrepreneur now based in Switzerland who owns 69.9% of Barry Callebaut, wants to make the company a leader in the total German cocoa and chocolate market.

The German consumer chocolate market is certainly worth targeting, being the second largest in Europe behind the UK. Molded bars account for approximately a third of the German chocolate market, which is where Stollwerck has traditionally been the strongest, with well-known brands such as Gubor and Sarotti. However, it is also an extremely competitive market, and is growing very slowly. Barry Callebaut will have to compete with Ferrero, which leads the market with 34.5% and Kraft, part of Philip Morris.

Barry Caillebaut's former strategy was to produce high-quality industrial chocolate at a lower cost than any of its competitors, but this approach has not protected the company. Its other main business is the provision of semi-finished cocoa and chocolate products to other manufacturers, but it is wise to move away from this area, as price fluctuations in the market leaves it vulnerable.

Stollwerck should benefit from Barry Caillebaut's expertise in sourcing and upstream manufacturing processes. But the main benefit will be the lower costs that come from forward integration, which could provide a competitive advantage in the retail market.