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Cargill buys stronger position in EU chocolate ingredients

30-Jun-2004

US agri-giant Cargill has carved a deeper position in the European chocolate market after Swiss firm Nestlé sold two cocoa processing activities to the acquisitive private company.

Under the terms of the agreement, the world's largest food company and the maker of KitKat, Smarties and Rolo will hand over its cocoa bean processing activities in York, UK and Hamburg, Germany.

The acquisition builds on Cargill's entry into the European market last October when the firm made its first major investment in chocolate manufacturing buying French cocoa and chocolate ingredients company OCG Cacoa, described at the time as a 'strategic fit'.

Involvement in the European chocolate industry for Cargill - one of the top five global processors of cocoa beans with over 100,000 employees - largely revolves around supplying liquor, butter and powder. The Nestlé acquisitions - cocoa processing facilities - will entrench this position further.

European cocoa players that may feel the competitive impact of Cargill growth are Swiss firm Barry Callebaut and US company ADM Cocoa.

For Nestlé, the cocoa divestment reflects an ongoing decisive move by the firm to move away from processing and transforming raw materials itself, to outsourcing suppliers for the ingredients.

"Overall, after the Cargill purchase only about 25 per cent of cocoa beans will be treated by ourselves," a spokesperson for Nestlé told FoodNavigator.com.

"An evolution in the market has shown that global suppliers today offer competitive prices through economies of scale - that means there is no need for us to it anymore."

According to the Swiss firm, this latest move is just a further step in an ongoing trend to move away from transforming the raw materials in-house and to outsourcing the job to suppliers, making considerable savings (not disclosed) along the way.

In recent years, similar divestitures have been made in Italy, Malaysia, the Netherlands, the United States, Brazil and Mexico. "This started about the mid-1990s when the suppliers started to get really international," said the spokesperson.

Cargill already supplies Nestlé globally with a range of ingredients such as vegetable oils and speciality starches. This latest Nestlé-Cargill deal - due for completion in early July - will see the US firm providing the long-term supply of cocoa products to a number of Nestlé's European confectionery businesses. Nestlé assserted that as part of the agreement, Cargill will also take over the staff at these activities.

Installed in the equivalent market in the US for over 10 years with the ingredients firm Wilbur Chocolate company, last October Cargill bought the premium chocolate supplier Peter's Chocolate from Nestlé USA. Cargill also has processing operations, Cargill Cacau and Gerkens Cocoa, in the Netherlands and Brazil. A processing plant is under construction in the Ivory Coast, the world's largest producer of cocoa beans.

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