Cadbury Nigeria announces 18% growth in Q1

Written by Austin Imhonlele Wednesday, 04 May 2011 00:00

As global cocoa industry, which is a major raw material for Cadburys products, is forecast to reach 4.8 million metric tons by 2015, the arm of the company in Nigeria has announced the filing of its first quarter (Q1) results for 2011 with the regulatory authorities.

For the three months ending March 31, the unaudited results show a turnover of N7.59 billion, indicating an 18 percent growth against the corresponding period in 2010. The company also reported a gross profit of N2.4 billion in the same period (a 55% growth on the Q1, 2010 figure of N1.5bn).

In a statement to announce the filing, Kufre Ekanem, Cadbury Nigerias corporate affairs manager, said we are pleased with the performance in first quarter of 2011, especially the sustained growth in our gross sales numbers. However, as a result of a higher phasing of marketing expenditure to Q1 this year, we had a drop in operating profit compared to last year coupled with a one-off exceptional charge taken in the reporting period.

Analysts have observed that the global cocoa industry that is a major raw material for Cadburys products is forecast to reach 4.8 million metric tons by 2015. Its supply and demand dynamics have changed rapidly following recovery from the 2007 to 2009 market trend. The market dominance of Europe and North America is being challenged by Pacific Asia, but West Africa, the source of over 70 percent of the worlds cocoa, is ever more critical to this change.

The end of post-election crisis in Ivory Coast with 40 percent of the commodity calls for reassessment of speculative and future market outlook.

The industry has also recovered from the impact of the 2008-2009 global recession, and drop in demand for the product, especially in the US and Europe.

Today, the Asia-Pacific region is projected as the fastest growing regional market for cocoa, with Malaysia leading the pack. The key drivers of change are increasing global awareness

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Cadbury Nigeria announces 18% growth in Q1

Written by Austin Imhonlele Wednesday, 04 May 2011 00:00

about the benefits of eating chocolates (major global players & the Bill and Melinda Foundation introduced more scientifically backed nutritive and cancer-fighting capabilities of cocoa-rich chocolates), and surging consumption of cocoa-rich chocolates, particularly in developing countries.

As cocoa-based products manufacturers reduced the size of their products due to increased cocoa prices (from $2,954.33 in January to $3,137.33/per ton in April, New York futures), demand slowed, significantly doming major actors such as Archer Daniels Midland Company, Barry Callebaut AG, Belcolade NV, Cargill Cocoa & Chocolate, Dagoba Organic Chocolate, Mars UK, Aarhus Oliefabrik, etc.

Increased purchases of less-quality chocolates by the consumers also reduced demand for cocoa, hurting market leaders (Hershey, Ferrero, Mars, Cadbury, Schweppes, and Nestle).

The decline in the West is being offset by the growth in demand for cocoa in India, Thailand and China. How their cocoa manufacturers have continued to capture a considerable chunk of the market compared with their western counterparts is a lesson in process innovation. Their growing appetite for chocolates is perhaps the most important driver of future growth for cocoa.

Yet, the cocoa market, especially in West Africa, faces supply constraints, because of inability of farmers to produce enough to cater for the growing demand, lack of investment especially in Nigeria and Ivory Coast, aging of trees, absence of replanting programmes, and administrative bottlenecks and corruption among the cocoa authorities (heightening the risk of black pod diseases).

Production is however growing in Cameroon, Indonesia, Nigeria, but declined in Ghana and Brazil. The imbalance should ease as Ivorian cocoa comes back to the market given President Allassane Ouattaras lifting the cocoa export ban he imposed early in 2011, and as Fair Trade and Ethical Trade labels expand. The speculative behaviour of a hedge funds forecasting global supply deficit or production surplus to 2016, thus needs re-assessment.

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