Barry Callebaut SWOT and PESTLE Analysis

Strength

1. Truly global presence in terms of manufacturing and sales providing competitive advantage: The Barry Callebaut group operates over 60 factories all around the world. The cocoa factories are majorly located in the cocoa origin countries and chocolate factories are located in their customer hubs. Cocoa is sourced from countries lying along the equator in Africa, Asia, and Latin America. The group serves its customers in 140 countries. As a result, Barry Callebaut makes up 25% of all the chocolate and cocoa products consumed in the world. Their customer network includes the entire food industry ranging from global and local food manufacturers, chocolate artisans, and other professionals users of chocolate. The group has adopted a cost-plus pricing model which adjusts to price fluctuations in raw materials, thus passing the raw material costs directly to the customers. As a part of their expansion plan, in May 2020, the company acquired Australia’s GKC Foods, a seller of many chocolate consumer brands in Australia. In June 2020, the company introduced a fourth production line in its factory in Singapore to meet increasing demand from South Asian countries.

2. Mastering all stages in the chocolate value chain: The group operates on a fully integrated value chain from sourcing of raw materials, the cocoa beans, to the production of high-quality chocolate and cocoa products. Since the group does not own any plantations of their own, they source the raw materials from already existing cooperatives, retailers, or government bodies in cocoa origin countries. This enables them to provide their customers with products and services in line with the market needs, ahead of trends and realize their cost leadership strategy. Core activities of the group include cocoa bean processing and, cocoa product and chocolate manufacturing. Their main customer audiences include Food and Beverage Manufacturers, Artisans and Chefs, and the Vending sector.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Deteriorating environment conditions due to cocoa and chocolate production: A study by researchers at the University of Manchester states that, in order to produce and supply 635.6 kilotons of chocolate products to consumers, the UK produces 2.1 million tons of greenhouse gases a year. This contributes to 2.4% of the greenhouse gas emissions of the UK’s entire food and drink sector. The study found that the major hotspots for environmental degradation are the raw materials used for chocolate production, especially milk powder, sugar, and cocoa derivatives. The production of milk powder for milk chocolates is very energy-intensive. It is estimated that West Africa contributes to 70% of the world’s cocoa beans grown. Climate change is expected to boost temperatures and cause dry spells in the coming decades in the region. Also, it is becoming increasingly difficult to keep up with the growing demand of chocolate products since it can take up to a year for a cocoa tree to produce the cocoa present in just half a pound of chocolate. Farmers also resort to deforestation rather than reusing the same land.

2. Focusing on initiatives for sustainable supply of cocoa: Chocolate companies heavily rely on sustainable sourcing of cocoa to deliver high-quality cocoa and chocolate items on time. These companies are exposed to several risks like declining productivity due to trees at the end of their life cycle, ageing farmers, lack of interest in younger farmers, usage of cocoa fields for other crops and climatic changes which could disrupt the smooth supply of cocoa beans in mid to long term. Barry Callebaut has a long history of commitment to practicing sustainability in the sourcing of cocoa beans. They believe that the growth of the cocoa and chocolate industry depends on ensuring the sustainability norms while making it attractive and viable for farmers to pursue cocoa farming today and tomorrow. The group launched a movement in 2016, named Forever Chocolate, which aims at making all aspects of cocoa sourcing sustainable by 2025.

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