Olam Exclusive Q&A: “Asian Demand for Cocoa Powder Is Increasing”

Olam has recently announced the acquisition of Indonesia’s largest cocoa processor, BT Cocoa, in their aim to become the largest global consumer of cocoa powder. To find out more about its strategy and product ranges, WorldBakers asked the experts from Olam.

WB: Does BT Cocoa have cocoa ranges dedicated to the baking industry in its portfolio? Does it plan to develop such products/ ranges?

Olam: “BT Cocoa produces an array of cocoa powders that already perform very well in baking applications, creating the necessary flavor, color and texture in recipes. BT Cocoa’s state-of-the-art facilities and development laboratory support the production of cocoa ingredients that ensure consistency when utilized in application as well as the innovation of new ingredients to respond to consumer trends. Alongside BT Cocoa’s existing range of cocoa powders, we will also consider introducing new brands, like our value-driven cocoa powders brand Huysman, in order to best support the quality and demand needs of our customers.”

WB: What are the current worldwide challenges of cocoa production and trade?

Olam: “Global demand for cocoa is growing rapidly, with chocolate consumption at about 6 million metric tones in 2018 and expected to increase over the next five years. Asian demand for cocoa powder in particular is increasing with a 5 year CAGR projection of 8%. Growth in snack food categories like sweet biscuits and cookies is driving this trend, which accounted for 40% of new product development in Asia in 2018,. The acquisition of BT Cocoa is intended to meet this high demand by combining the processing capabilities of BT Cocoa with the cocoa bean sourcing, cocoa ingredient development and innovation and supply chain solutions of Olam Cocoa.”

WB: Does Olam plan to make important investments in new processing plants or in equipment for the existing ones?

“Olam Cocoa will continue to be aware of and explore business opportunities that support the business’ strategic and long term growth plans.”

WB: How does Olam position itself regarding the existing requirements for fairtrade in the cocoa supply chain?

Olam: “As a world leader in traceable cocoa bean sourcing and a leading processor of cocoa ingredients, Olam Cocoa has an important contribution to make in improving the future of cocoa farming. We recognize that the entire cocoa industry faces huge challenges related to farmer incomes, deforestation and child labor. Despite collective efforts across the industry, many of these issues remain. Smallholder farmers have not experienced enough improvement in incomes, child labor is still common, and forests continue to be degraded.

In order to actively address these issues, our activities extend to numerous long-term programs, either Olam Cocoa led, through global joint efforts, or through partnerships in origin with Rainforest Alliance/UTZ and Fairtrade. These programs include a range of interventions that help farmers sustainably increase their productivity, from coaching in Good Agricultural Practices to providing access to agricultural inputs and finance.

We also consider diversification of income as a key factor in increasing total household earnings in cocoa growing communities. Because of this, we work with youth associations and women’s groups to support additional sources of income, such as beekeeping, soap making, intercropping and the development of community pruning teams. Alongside that, we also work with local farming cooperatives to not only pay sustainability premiums to farmers but to also channel investment into social infrastructure projects that help prevent child labor, such as building schools and providing essential school supplies.”

A Strong Strategic Fit

The acquisition meets increasing customer demand for full integration within the cocoa supply chain by bringing together Olam and BT Cocoa.

Olam Cocoa offers services from origin sourcing, trading, risk management, value chain processing and supply chain solutions, to sustainability, research and development, and cocoa ingredient innovation. BT Cocoa supplies size and scale in Indonesian cocoa processing with a total installed cocoa bean grind and cocoa mass capacity of 150,000 metric tones and a facility equipped with the latest processing technology.

Olam Cocoa has been working closely with BT Cocoa for nearly three years through a Business Collaborative Agreement and has already made considerable financial and operational improvements, including helping BT Cocoa achieve a 30% reduction in energy consumption.

This acquisition supports the worldwide positive growth trend of chocolate and cocoa ingredient consumption and the expectation that the need for cocoa processing will continue to grow, supported by additional investment in cocoa producing and consuming countries, according to the company.

Trends in Cocoa Ingredients

In 2018, global chocolate consumption was above 6 million metric tones and is expected to increase in the next five years. Indonesia is currently the world’s sixth largest cocoa producing country and Asia is set to become the second largest consumer of cocoa ingredients in the world led by China, India, Japan and the Philippines. Asian demand for cocoa powder in particular is increasing with a 5 year CAGR projection of 8%.

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