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Investor Relations

Extracting value from bean to product

By Tejinder Singh Saraon, Global Head of Processing, Olam Cocoa

With contributions from Jeff Pfalzgraf, Global Head of Manufacturing, Olam Cocoa and Yeong Chye, Global Business Head (APAC), Olam Cocoa

Prior to last year’s ADM cocoa acquisition, we operated two main cocoa processing facilities, one in Côte d’Ivoire and one in Spain. Now the expanded Olam Cocoa business has moved us from being the top 10 to a top three global position and our global manufacturing footprint has grown to include 12 advanced cocoa processing, milling and refining facilities.

As an integrated operation, we are now able to extract greater synergies and value from having both cocoa bean sourcing and cocoa processing. The stability and security of our cocoa bean supply in turn creates stability and security for our manufacturing operations because our sourcing capabilities exceed those of our processing capacity. This situation means our integrated cocoa product and support services offering put us on a growth and market position trajectory that is superior to those of our competitors.

Our manufacturing teams are constantly working to extract greater value from all areas of our processing activities. This includes cost optimisation, cost and mechanical efficiencies, worksite safety improvements and streamlined productivity in all factories. The economies of scale that we can now capitalise on are also significant so that the cost footprints of our facilities remain competitive. On the revenue front, we are working towards new efficiency benchmarks and are investing in our factories with the latest technologies to meet product demand,  generate capacity growth and establish better premiums.

As Eric Nederhand, our General Manager and Head of EU Cocoa Processing, recently commented, “2016 was a transitional year full of changes. It did take a while to shift our mindset from working in an environment where everything was centrally organised, to a much more optimal organisation at Olam Cocoa, where responsibilities are decentralised and delegated to locations and individuals. As we progressed through this past year, we really saw the benefits of combining the best attributes of each operation, resulting in a significant increase in product sales and factories running at capacity again. One major source of improvement was implementing Sales and Operation Planning (S&OP) together with four cross-functional Olam teams, resulting in greater cooperation and communication between the sales, logistics and production.”

Factory asset utilisation retains some dependency on the relative economics of the region in which the particular processing facility is located, as well as on the demand outlook for various cocoa products and on our own projections of future demand. Fortunately, our broad asset spread helps us to respond quickly to the individual economic situations of the country in which each factory is located, emerging trends and market fluctuations, as well as to quickly support customers anywhere in the world.

In addition to processed cocoa ingredients, we provide cocoa bean solutions to customers. The advantage this creates for the processing side is that, because of our supply infrastructure, we are able to focus exclusively on the quality of the cocoa products we produce without having to worry about the supply security of the cocoa beans we are receiving into the factory.

This is important because customers often have differing requirements in terms of the quality specifications of the cocoa products which they are putting into their applications. Customer needs drive the cocoa bean usage in each factory. Uniquely, our vast origination footprint means we can, in direct response to market demand, dynamically optimise the blends of the cocoa beans going into production. This capability supports the needs of our customers and assists us in internally managing and improving our own operations.

Due to our expanded cocoa processing footprint, our major advantage now is that we are able to manage the production of cocoa products within very competitive cost structures and create added value in the process. This is because we control both ends of the cocoa supply chain, as well as all of the logistics within that chain and during each step. As the global demand for cocoa products increases, we will continue to extract greater value from our cocoa processing operations for the benefit of our customers.