Olam Insights

By Yeong Chye, Global Cocoa Business Head (APAC), Olam Cocoa

In the APAC region, our cocoa products sales were stronger in 2016, especially for cocoa powder. We achieved record sales levels, in part due to the addition of 33 new customers and the execution of 69 different cocoa product development and innovation customer projects. We also launched three new product concepts. All of these actions were supported by the superior efforts of our sales team, resulting in both a good volume of sales and improved margins.

The demand for cocoa butter was also strong due to supply issues in the US and Europe. The cocoa butter ratio traded to a high of about 2.8 during the peak of the shortage crisis before it eased back to 2.2 by early December 2016.

The retail business in Asia can be broadly divided into five major categories. They are: Beverages, Baked Goods and Biscuits, Chocolate Confectionery, Ice Creams and Desserts, and Cereal Products. With the exception of the chocolate confectionery category, which has seen a market slowdown, the rest of the categories remained buoyant on continued economic growth, especially in developing countries such as China, Indonesia, the Philippines and Thailand. As a result of this, the overall consumption of cocoa products has been maintained as it is driven by cocoa powder. Most of our major customers in the region have reported good products sales despite sentiment being impacted by Brexit and a rising interest rate environment.

On market trends, we saw a change in eating habits from locally produced sweets to more chocolate confectionery products, especially in countries such as Indonesia and India.  Due to rising income and affluence, consumers are now more health conscious and discerning regarding the quality of the products they purchase. We saw a sharp increase in the number of cafés and bakeries in major cities and this in turn has driven up the demand for baked goods, pastries and beverages.

The most important trend is the continued rise of e-commerce activities. This is changing the way consumers shop and how companies position, market and deliver their products and manage their inventories.

All of these trends present opportunities for Olam Cocoa.  Demand for cocoa products will continue to increase in tandem with consumer demand for beverage, confectionery and baked goods, smaller package sizes and premixed products. Interest in Vendor Managed Inventory (VMI) systems is also increasing as customers expand their own e-commerce platforms.

Our processing capacity in Singapore has now maxed out. As we needed additional footprint to support our growth in Asia, we have recently partnered with BT Cocoa Indonesia to provide us with an expanded platform from which to grow our APAC cocoa business.