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Olam touts 'exceptional' Asia cocoa demand outlook

Olam International unveiled $61m plans to set up a cocoa plant in Indonesia, stoking the growth of processing in countries where the bean is grown, with those providing a gateway to the growing Asian market particularly popular.

The Singapore-based agricultural trader said that it expected in early 2016 to open the new facility, which will have capacity for 60,000 tonnes a year.

The plant will be Olam's fifth cocoa processing site, with the group on Thursday saying that it has begun "trial production" at a 60,000-tonne operation in Ivory Coast, the world's top cocoa growing country.

 But the plant will be Olam's first in Asia, and indeed be a "hub" for a region which it believes is placed for strong growth in demand from levels which, on a per capita basis, are low compared with Western levels.

"We strongly believe that we are entering a phase of exceptional growth in Asian demand, which will redefine the consumption trends for cocoa," the group's head of cocoa, Gerry Manley, said.

Move to origin

While cocoa grinding has historically taken place largely in the major chocolate markets of Europe and the US, processors have proven increasingly willing to shift operations to cocoa producing nations, to exploit cheaper labour.

With developing country chocolate consumption growing, the move has played to market dynamics too.

The International Cocoa Organization forecasts cocoa grinding this year growing by some 4% in Africa and 3% in Asia, while gaining 2% in Europe and 1% in North America.

Indonesia spree

Within Asia, while Malaysia has historically been the regional centre for grinding, it has increasingly lost out to Indonesia, which imposes a tax on exports of raw beans, of which it has a rich supply, being the world's top producer outside West Africa.

US-based Cargill is this year opening a cocoa plant with 70,000-tonne annual capacity in east Java.

Barry Callebaut, the Swiss chocolate giant, last year opened a $33m plant on the island of Sulawesi, with initial capacity of 30,000 tonnes.

Olam said that its Indonesian plant would grind "primarily" domestically-grown beans, sourced from the group's own plantations and a network of 32,000 farmers, although some crop from Africa would be imported too.

It said that the project would enable it to "leverage the strength of its Indonesian cocoa sourcing network and participate in the growth of Asian cocoa consumption".

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