Barry Callebaut: A Giant Chocolate Maker Faces Challenges
Barry Callebaut, a name that might not ring a bell but is behind many popular chocolate products, is going through a tough phase. Founded 30 years ago by Klaus Jacobs, who merged France’s Cacao Barry and Belgium’s Callebaut, the company has grown to become the largest chocolate manufacturer in the world. Based in Zurich, Barry Callebaut purchases about 25% of the global cocoa harvest each year and produces chocolate for well-known brands like Magnum, Nestlé’s KitKat, and Cadbury’s products.
After Jacobs passed away in 2008, his family became the primary shareholders, holding roughly a third of the company. However, recent years have been less than favorable for them. The company has been grappling with declining sales and increasing debt. Over the past five years, their stock price has halved. While some of these issues were internal, the broader chocolate industry faced significant setbacks in 2023-24 due to climate change, which led to severe crop failures and skyrocketing cocoa prices. Prices surged from about $2,500 per tonne to a peak of $12,000 in 2024, currently stabilizing around $4,000.
In January, Barry Callebaut appointed Hein Schumacher, a former Unilever executive, as its new CEO—the fourth in just six years. By April, he announced that the company’s operating profit for the year ending in August would drop by a “mid-teens” percentage, contrary to earlier expectations of growth. This news triggered a 16% fall in the company’s stock price.
Can Schumacher bring Barry Callebaut back on track? On June 2, he shared his plans, aiming for a medium-term sales growth of 2-4% annually. This target might seem modest compared to past performances, but it signifies a positive shift after experiencing a 6.8% drop in sales the previous financial year. His focus will be on ten growth markets, including Brazil and Indonesia, as well as enhancing the Gourmet division, which supplies high-quality chocolate to chefs and restaurants, and a specialized segment that creates heat-resistant chocolate.
Reactions to Schumacher’s plan have been mixed. Bank Vontobel considers it a vital step toward recovery, noting that he is actively engaging with the company’s largest clients to understand their needs. In contrast, analysts at Helvetische Bank are skeptical, suggesting the company may remain in a turnaround phase for years.
Regaining investor confidence won’t be a quick task. Recently, Nicolas Jacobs, a board member, sold shares worth approximately SFr14 million, which some see as a sign of doubts about a speedy recovery.
Despite the challenges, there is little disagreement about the strength of Barry Callebaut’s fully integrated business model, which oversees everything from cocoa bean harvesting to chocolate production. Schumacher’s predecessor had aimed to separate the cocoa processing unit from the more stable chocolate business, but disagreements led to his exit. Some experts believe splitting the operations may have been problematic.
Caution is essential as the company moves forward. Schumacher recognizes the potential threats from economic uncertainties and geopolitical issues affecting consumer behavior. Additionally, forecasts indicate that a strong El Niño could negatively impact cocoa harvests and drive bean prices higher again. For now, Schumacher is given the benefit of the doubt, but the effectiveness of his strategies remains to be seen.
