The world’s largest maker of bulk chocolate is boosting production capacity in the Americas to meet rising demand from the ice cream industry.
Barry Callebaut AG, whose clients include Hershey Co. and Nestle SA, plans to increase factory capacity in the region by 15% in the next 18 to 20 months, said Steve Woolley, the company’s president for the Americas. A new facility in Canada will account for half of that, with the rest coming from expansion of existing plants.
The Swiss company, which is little known to consumers, supplies ingredients to about one in every four chocolate and cocoa products consumed around the world. Barry Callebaut produced record volume in the Americas in the year through August and expects more growth ahead, even as historic food inflation hammers consumers who are already grappling with soaring household bills and a looming threat of recession.
“We’ve kind of hit a wall on the capacity that we have in our network, and because of the growth we’re seeing, we’re very bullish on the future,” Woolley said in an interview at the company’s regional headquarters in Chicago. “We’re seeing a big increase in ice cream, so we wanna make sure that we invest behind that as well.”
Barry Callebaut has started building a new facility in Brantford, Ontario, its third in Canada and first to be built in the Americas since 2008. The location, about 100 kilometers (62 miles) southwest of Toronto, was chosen based on manufacturing costs and proximity to customers, Woolley said in an earlier interview. The company also benefits from cheap Canadian electricity and can skirt US tariffs on two sugar substitutes it needs to import from China.
The Brantford factory will produce 50,000 metric tons of sugar-free chocolate in a bid to meet demand from health-conscious consumers.
“I’m pre-diabetic and I love chocolate, which is a big problem for me,” Woolley said. “If you go back 10 years ago, innovation has come a long way, and today when my wife puts a piece of sugar-free chocolate in front of me versus a regular chocolate, I don’t tell much of a difference.”
The other 50,000 tons of expansion will come from existing facilities in the region, which include five plants in the US and two in Mexico. The additional output will be focused on compound chocolate, which uses less cocoa and is key to making things like ice cream and donut coatings.
The cocoa that to feed these factories will be processed both in the region and at producing countries, though Woolley isn’t ruling out an expansion of bean-grinding in the Americas. Barry Callebaut is the world’s largest cocoa processor. Rival Cargill Inc. stopped processing at one of two units in Pennsylvania as well as in Wisconsin, according to a company spokeswoman.
Trading Down
Barry Callebaut’s output in the Americas increased 6.4% to almost 650,000 tons of chocolate and compounds in the year through August. Even with soaring inflation and a looming recession, consumers are trading down to private label and store brands, parts of the industry the company also supplies.
Woolley said customers who had stocked up due to supply chain issues are pushing out orders “a little bit.” Demand is likely to be flat in the first quarter and maybe the second, though he expects a “very strong” second half of the fiscal year.
“Now it’s more about getting through the inventories of our customers and then once we get through that, I don’t see any issue going forward,” he said. “At the end of the day, regardless of the mood you’re in or the challenge that you’re facing, a piece of chocolate is a great way to end your day.”
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