Bloomberg News

Cocoa Processing Increases in Indonesia as Cargill Expands (2)

July 22, 2013

Cocoa processors in Indonesia will probably boost output by 25 percent to a record next year to meet Asia’s growing demand for confectionery and chocolate drinks, spurring higher imports by the third-largest grower.

Grindings, an indication of demand, will climb to 500,000 metric tons, said Piter Jasman, chairman of the Indonesia Cocoa Industry Association, which represents 14 processors. That compares with 400,000 tons this year and 310,000 tons in 2012, according to group data.

Processing increased after Indonesia taxed bean exports in 2010 and as rising incomes across Asia boost demand for chocolate. Higher grindings may support bean futures in New York and help extend a global deficit. Chocolate confectionery sales in the Asia-Pacific region will grow this year at more than twice the global pace, according to London-based consumer researcher Euromonitor International Ltd.

“When it comes to capacity for grinding, the long-term strategy is moving towards Asia,” said Francisco Redruello, a senior food analyst at Euromonitor. “It’s where the strongest growth for chocolate is coming from and at the same time we see strong demand at country level.”

Sales in the region will expand by 5.2 percent this year to 859,300 tons, compared with global growth of as much as 2.2 percent, the company estimates. The Asian market, worth $13 billion last year, had a compound annual growth rate of 8.2 percent since 2008, Bloomberg Industries data show.

New Capacity

Cargill Inc. plans to invest $100 million to build a 70,000 ton processing facility in Gresik, East Java, the first such plant in Asia, the company said May 7. The factory, expected to be operational in mid-2014, will process beans into products including liquor, butter and powder. Barry Callebaut AG (BARN), the world’s biggest maker of bulk chocolate and a supplier to Nestle SA (NESN), is building a plant in South Sulawesi.

“Consumers’ taste buds and preferences for better quality and better-tasting chocolate” are contributing to the increased demand, Jean-Louis Guillou, country representative at PT Cargill Indonesia, said by e-mail July 18.

Higher grindings may boost imports. The bean harvest will probably be little changed at 450,000 tons next year, pushing purchases as high as 100,000 tons from 40,000 tons this year, according to the Indonesian Cocoa Association, a growers group.

As investments pour in and processors expand, installed capacity is set to climb by 14 percent to 800,000 tons in 2014 from this year, Jasman said by e-mail July 10. He’s the founder of grinder PT Bumitangerang Mesindotama, known as BT Cocoa.

China, India

Slowing economic growth in China and India, the two most-populous countries, may curb expansion in chocolate consumption, raising the risk that less capacity may be needed and potentially increasing pressure on margins. China’s economy slowed for a second quarter through June, while India’s grew 5 percent in the last fiscal year, the lowest in a decade.

“We don’t expect any significant slowdown in the growth for chocolate confectionery, especially in China, which is the driving force in Asia-Pacific,” said Redruello. “If you look at the GDP figures for the second quarter, you will see that most of the slowdown is related to industrial output and to capital investment,” he said.

Sales of chocolate confectionery in China will rise by 6.1 percent this year to 178,900 tons, Euromonitor estimates. Indian sales will climb by 16 percent to 129,000 tons and those in Indonesia will increase by 4.2 percent to 71,600 tons.

Processing in Asia rose 2 percent to 153,792 tons in the second quarter from a year earlier, the Cocoa Association of Asia said July 17. In Europe, grindings rose 6.1 percent in the same quarter and North America had a 12 percent jump.

Cocoa for September delivery in New York declined 0.9 percent to $2,343 a ton by 10:22 a.m. in London, up 4.7 percent in the past year. Demand for beans will exceed output in the year started in October 2012, with Citigroup Inc. estimating a shortage of 55,000 tons and the International Cocoa Organization seeing a 60,000 ton deficit.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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