ZURICH, SWITZERLAND – The integration of a cocoa ingredients business has begun to reap profits for Barry Callebaut AG. Soon, the focus may turn to innovation as well as integration.

“Through the acquisition we have become the biggest in cocoa ingredients, so also in powder, but we have a lot of discussions internally,” said Juergen, Steinemann, chief executive officer of Zurich-based Barry Callebaut, in an April 3 earnings conference call. “I make a distinction between being the biggest and being the leader. The biggest is not necessarily the leader.”

He said Barry Callebaut may be known as the leader in chocolate, but not so in cocoa powder, even with a stronger sourcing dimension gained from acquiring the cocoa ingredients division from Singapore-based Petra Foods Ltd. last June.

“We have global customers now, but we are not yet seen as an innovator (in cocoa powder),” he said. “So we need to put more money and more people in innovation. ADM and Cargill are very strong brands, Gerkens for example, and we need to show now that we are also – that we are innovators in this field.”

The acquired manufacturing assets and supply chain network of the cocoa business are integrated fully, Barry Callebaut said while giving half-year financial results April 3. The cocoa powder brand migration is under way.

 “The integration of the acquired cocoa business is from Monday morning to Sunday night in my mind,” Mr. Steinemann said. “This is the first thing I think about and the last thing I think about. It’s the biggest capital we ever spent.”

The integration involves two companies with factories on four continents, he said.

“Optimizing the supply chain flows and capacity utilization, therefore, is a major challenge, but it is also a huge opportunity,” Mr. Steinemann said. “For example, we used the excess capacity in the former Petra factory in Hamburg (Germany) to produce Barry Callebaut’s cocoa powder. By that, we avoided additional CapEx and capacity extension in cocoa.”

The acquired cocoa business contributed 12.9 million Swiss francs ($14.5 million) to Barry Callebaut’s operating profit in the six months ended Feb. 28, said Victor Balli, chief financial officer of Barry Callebaut AG, in the April 3 call. He added he is confident a contribution of 30 million Swiss francs may be achieved for the full fiscal year.

“We see some of the portfolio improvement coming through for second half,” Mr. Balli said. “We see some of the supply chain optimization coming through second half. We see some of the sourcing benefits coming through second half.”

Barry Callebaut will report both stand-alone results, which exclude the cocoa ingredients business acquired from Petra Foods, and total results for the remainder of this fiscal year.

“From next year onwards, however, we will only show consolidated figures as it will become more and more difficult to separate out the two businesses, which are now fully being integrated,” Mr. Balli said.

In the six months ended Feb. 28, Barry Callebaut had sales volume of 876,297 tonnes, which was up 17.6% from 745,256 tonnes in the same time period of the previous year. The new cocoa business contributed more than 100,000 tonnes in the six months. Stand-alone sales volume, which excludes the new business, grew 3.1%.

“On the stand-alone business, volume in emerging markets went up by almost 18% versus prior year,” Mr. Steinemann said. “Including the acquired cocoa activities, it’s up 60% in emerging markets. Emerging markets on a stand-alone basis now represent 28% of our total sales volume, up from 22% for the same period last year.”

Mr. Steinemann cited The Nielsen Co. data showing the global chocolate market grew 3.2% in the past six months.

Sales revenues over the six-month period were 2,906.9 million Swiss francs ($3,259.5 million), up from 2,391.6 million Swiss francs ($2,681.7 million). EBIT of 190.4 million Swiss francs ($213.5 million) was up from 174.9 million Swiss francs ($196.1 million). Stand-alone EBIT increased by 8.8%.

In the Region Americas, sales volume increased by 8.5% to 217,517 tonnes, and sales revenue increased 7.3% to 608.8 million Swiss francs.