Barry Callebaut stands at a cocoa crossroads

Today’s unexpected news regarding Barry Callebaut’s decision to appoint a new CEO is certainly one that could prove a major landmark moment for the sector in terms of its broader direction.

Why is this the case? Well, when the business which is the largest single cocoa and chocolate company, following a period of broader instability in the industry, decides to make a change at the top of the company, it’s certainly a moment to sit up and take notice.

The business, which has its headquarters in Switzerland, and main manufacturing base in Belgium, continues to hold an enviable position at the top of the tree supplying leading players in the market, from Nestle, through to Unilever and everyone in between, yet there are significant question marks over its future direction.

Indeed, Confectionery Production had been due to meet its CEO Peter Feld at this year’s ISM event, yet he is now seemingly leaving the business later this week, with former Unilever boss Hein Schumacher taking up the reins in very quick succession from early next week.

Was this a move some while in the making? It’s hard to say, but with share value dipping notably in the business over the past year, as it sucked up a series of challenging financial results that revealed a weakness in conventional cocoa supply chains that had been hit by a combination of poor yields, disease, and a long-term lack of infrastructure investment, and it is clear that all has not been well for the industry for some while. Wider analysis has painted it as a cocoa crisis which has been somewhat lost amid the blizzard of wider international news headlines of geopolitical events over the past year.

But as Barry Callebaut itself admitted, the conditions of the past two years have been very much ‘the perfect storm’ for the sector.

However, the same major challenges persist that once did 20 years ago in terms of child labour still proving a major test for the industry, with the last NORC study funding 1.5 million minors still being at risk of the worst forms of labour, which in a large part remains intrinsically linked to the underlining poverty that persists within Ghana and Ivory Coast. 

While the governments of those nations have moved to increase the ‘farm gate’ prices paid to agricultural workers, it is still a long way short of them being able to sustain a living wage.

The industry has been moving towards sustainability in its sourcing practices over the past two decades, but for many observers, the pace of change has not been anywhere near what it should be – though Barry Callebaut has reportedly, according to its own figures, helped lift 500,000 farmers out of poverty during that period with community engagement and support, which is a solid marker. But now the test is to reach the two or three million others out there.

So what is the answer there? Firstly, major businesses such as the top 5 cocoa and chocolate companies should all set about a programme of paying notably more for their cocoa – as well as us all as consumers paying more as well. But in an era dominated by shareholder interests, is this realistically going to happen when financial margins dominate all major headlines?

As for Barry Callebaut itself, it is now at something of a crossroads. Peter Feld had been tasked with slimming down the business, putting it on a course of digitialisation where it was fit to meet a future where it isn’t the only option for consumers amid the emergence of alternative ingredients (lab grown cocoa), that pose a major test for the sector. 

In its press release today, the company acknowledged that this transformation had yet to be completed, and only time will tell if it will accomplish those goals, but for many sector observers, one of the key things the company needs to get back to achieving is delivering on innovation.

Its last major launch in Italy, its second generation chocolate was given a global fanfare, only for it never to properly see the light of day. It may yet make a re-appearance under new leadership. So with global events being especially finely balanced, it will be interesting to see what choices the business makes in its path to find a more stable footing amid an ever-restless world.

Neill Barston, editor, Confectionery Production

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