Shares in Barry Callebaut jumped to their highest in more than two years after the chocolate giant revealed a landmark contract with Kraft Foods, owner of brands such as Mila and Oreo as well as the Cadbury portfolio.

The groups have signed a so-called master agreement, under which Barry Callebaut will provide Kraft with most of its cocoa products and industrial chocolate, worldwide.

The deal will more than double Barry Callebaut's business with US-based Kraft Foods, the world's second largest food company, and was, according to the Swiss-based group, "amongst the largest strategic deals our company has ever signed".

Barry Callebaut shares jumped 8.7% to SFr765.00 in early deals, their highest since April 2008, before losing some ground to close up 6.0% at SFr746.00.

Lucrative trend

Juergen Steinemann, the Barry Callebaut chief executive, said the contract "means that we have succeeded in firmly establishing ourselves as a leading supplier for cocoa and chocolate products to the international food industry".

Indeed, it was "evidence of the ongoing outsourcing and partnership trend in the chocolate industry".

Barry Callebaut makes chocolate under outsourcing deals with a number of producers, including Hershey and Nestle, although the details of the tie-ups, including the latest Kraft deal, are kept confidential.

The deals spare confectionary groups the cost of maintaining and upgrading manufacturing facilities. Indeed, Barry Callebaut said that the Kraft deal would prompt it to invest $65m over the next two years in its own plants in Canada, Europe, Ivory Coast, Malaysia and the US.

Beating the market 

For Barry Callebaut, the deals allow it to reap economies of scale, and outpace a market expected to show volume growth of, at best 2%, in 2010 and 2011, according to UBS analyst Joern Iffert.

Mr Iffert foresees the Swiss group's volumes growing by 7% this year and 7.2% in 2010.

Kraft, meanwhile, is under pressure to improve its performance follow its �11.5bn takeover of Cadbury, and is on September 15 to unveil a "strategic roadmap to sustainable, top-tier growth".

Thursday's agreement includes some Cadbury liquid chocolate deliveries Barry Callebaut was already responsible for.