Taking Giant Steps

May 1, 2007
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Taking Giant Steps

Leading Barry Callebaut executive deconstructs supply initiative with The Hershey Company.
When it was announced earlier this spring that Barry Callebaut and The Hershey Company would join forces for a major supply alliance, the venture was frequently and rightly described as a “partnership of giants.” Hershey is North America’s largest confectionery manufacturer, and Barry Callebaut is the world’s leading manufacturer of cocoa, chocolate and confectionery products. So it’s no wonder that the move is producing some industry-wide reverberations.
Here’s what Massimo Garavaglia, Barry Callebaut’s president of Food Manufacturers and Gourmet & Specialties North America, told Confectioner about how this monumental venture will work and what it means to both companies.
Patrick De Maeseneire, CEO of Barry Callebaut, has described this long-term agreement with Hershey as a “milestone” for the company. Does Barry Callebaut participate in similar ventures with candy makers in other markets or is this a first?
Barry Callebaut’s agreement with Hershey is indeed a milestone for our company as it will completely transform our business in the Americas by doubling our production capacity of industrial chocolate in the region. The agreement with Hershey also will make Barry Callebaut the No. 1 industrial chocolate maker in the United States.
The outsourcing trend within the chocolate industry has been apparent in Europe for some time and is only now reaching the United States. Thanks to its innovative strength and cost leadership, Barry Callebaut has succeeded in firmly establishing itself as the industry’s outsourcing partner of choice on both sides of the Atlantic Ocean. In addition to the Hershey agreement, Barry Callebaut announced in February a planned long-term agreement to supply liquid chocolate and produce some consumer products for Nestlé in the European market, including France, Italy and Russia. Overall, the major part of the growth Barry Callebaut has registered in its Food Manufacturers business unit can be attributed to outsourcing.
It’s not unusual for a food manufacturer to work with a supplier on product development initiatives. However, does this supply alliance take such cooperation to the next level?
We believe there is great potential for this partnership, and this agreement will enable both of our companies to work together to drive long-term growth in the global chocolate market.
As part of Barry Callebaut’s agreement with Hershey, both companies will meet jointly on a regular basis to discuss research and development initiatives. Specifically, we believe there is a great deal of opportunity to develop new, innovative chocolate products, especially in the premium segment. This might include origin chocolate, fair trade chocolate, and chocolate with health and wellness benefits, and this is an area where Barry Callebaut is leading the industry. In  fact, Cacao Barry, Barry Callebaut’s group company in France, was among the first chocolatiers in the world to bring single-origin chocolates to the market thanks to our presence in Africa.  
What areas of current Barry Callebaut research do you consider most groundbreaking and/or most significant?
Barry Callebaut is focusing its innovation efforts in three key areas that are important to consumers and to our customers. Those are health and wellness, the taste experience and indulgence, and convenience.
We know that consumers want to have choices, and they want to experience different tastes. With nearly 1,700 different recipes, Barry Callebaut is well positioned to satisfy this demand. Right now, the taste experience is the most important driver of product innovation. Dark chocolate sales have risen 42 percent in the last five years, and Barry Callebaut is continuing to introduce new origin chocolate products. The latest is a Cacao Barry Millesime 2006 chocolate made from beans from a family-owned, remote farm in Peru — something  very exclusive for our gourmet customers.
Consumers are also increasingly health conscious, so Barry Callebaut is continuing to look at ways to bring out the healthful benefits of the cocoa bean in our products. One example is Barry Callebaut’s polyphenol-rich Acticoa chocolate, which combines good taste with a guaranteed minimum polyphenol content. It has the highest antioxidant effectiveness of any chocolate currently available in the market.  
Finally, convenience is important to our customers, so Barry Callebaut is looking at innovations in the ready-to-use and ready-to-sell segments. We recently introduced a ready-to-use mousse product under the Callebaut brand that is an industry first.
Will the expanded production capacities the Hershey agreement makes possible for Barry Callebaut benefit the company’s other North American customers?
Yes, as part of the supply agreement with Hershey, Barry Callebaut will be expanding and optimizing our factory network in North America. Not only will we construct a new factory in Monterrey, Mexico, and take over parts of Hershey’s factory in Robinson, Ill., we will be adding production capacity to Barry Callebaut facilities in American Canyon, Calif., and St. Hyacinthe, Quebec.
While a significant portion of this production capacity will be dedicated to supplying Hershey, all of our North American customers will benefit. The capacity expansion will also allow Barry Callebaut to further grow in the important markets of North America. Let’s not forget that the United States is the largest consumer confectionery market in the world.
How will the venture with Hershey enhance Barry Callebaut’s already progressive sustainability initiatives?
The two companies will work together on cocoa sustainability efforts supporting on-the-ground programs and industry efforts in the world’s cocoa-growing regions.  Barry Callebaut also will work with Hershey on corporate social responsibility projects on the ground in West Africa.
Give us Americans the benefit of Barry Callebaut’s global perspective, please. What are some of the ways in which the U.S. chocolate market differs most substantially from the European market?
Western Europe, especially Switzerland, Belgium and France, have a very long chocolate tradition and history. These are also the countries where the major chocolate inventions were made. The U.S. chocolate market is slightly less mature than the European chocolate markets. However, Barry Callebaut will use its innovative power to further grow the North American chocolate markets. We’re the only chocolate manufacturer that unites Swiss, Belgian and French chocolate under one roof, which allows us to bring the world’s premium chocolates to our customers. And with close to 1,700 active recipes, Barry Callebaut can meet every local taste preference.

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