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De-Zaan-cocoa

ADM sells global cocoa business to Olam for $1.3-billion

Archer Daniels Midland Company (ADM) in mid-December 2014 announced it was selling its global cocoa business to Olam International for $1.3-billion. This propels the Singaporean coffee-to-cashews trader to the top ranks of cocoa processors by volume alongside Barry Callebaut of Switzerland and US-based Cargill, as it aims to tap into growth in demand from emerging market consumers for chocolate-based products.

Gerard Manley, global head of cocoa for Olam, said: “We believe that cocoa and chocolate are on the up, and that there will be a shortfall of processing capacity because of the demand that we’re seeing.”

Cocoa prices reached three-year highs in 2014, helped by rising demand from Asia’s growing middle classes, who are expected to help push global confectionery sales to a record this year at almost $200bn.

The move by Olam into the processing of cocoa rather than just growing cocoa beans for sale to others mirrors similar moves made by the Singapore-listed company in coffee, where it makes instant coffee from beans that it grows.

In September ADM sold its chocolate business to Cargill for $440m. Meanwhile, the Chicago-based company has pushed into businesses it believes will be less vulnerable to the swings of commodity markets. In October, it purchased Wild Flavors, a speciality food and drinks flavour company, for €2.3bn, the largest acquisition in its 112-year history.

“We are continuing to actively manage our portfolio to create shareholder value by improving returns and dampening the volatility of our earnings,” said ADM Chairman and CEO Patricia Woertz.

“This transaction will allow us to redeploy capital to investments that offer improved returns potential and less volatility than the cocoa business, or distribute excess capital to shareholders, or a combination of both.”

One of the world’s largest processors and suppliers of cocoa liquor, powder and butter, ADM’s worldwide cocoa business comprises cocoa processing assets made up of 8 factories with total capacity of 600,000 MT, 10 warehouses, 2 usines, 4 innovation centres, the iconic deZaan brand and its 2,150 plus customer franchise, and a marketing network across 16 countries.

The sale encompasses ADM’s entire global cocoa business, including processing facilities in Mississauga, Canada; Koog aan de Zaan and Wormer, Netherlands; Mannheim, Germany; Ilhéus, Brazil; Abidjan, Côte d’Ivoire; Kumasi, Ghana; and Singapore. Also included are ADM’s buying stations in Brazil, Cameroon, Côte d’Ivoire, and Indonesia, as well as the company’s deZaan and UNICAO brands.

The majority of the approximately 1,550 colleagues in ADM’s cocoa business will transfer to Olam with the sale.

The proposed sale, which is contingent on customary regulatory approvals, is expected to close during the second quarter of 2015.

Manley added: “Today we have created a clear path to achieving our goal to fully integrate our supply chain strengths with the global manufacturing and R&D capability of ADM Cocoa to provide a seamless offering to our customers. Having worked in cocoa for 30 years, I recognise the value of the deZaan cocoa brand and the high regard in which it is held, thanks to its tradition of excellence and 100 year heritage. The experience and expertise of both companies combined will enable us to attain our expected synergies as we move quickly to integrate our businesses.”

Source: FT.com; Food Ingredients First

* ADM Cocoa has been represented in SA by Carst & Walker, www.carst.co.za

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