Natra Cocoa and Chocolate has reported flat sales in its first half results due to weak consumer spending in Europe and a blip in chocolate consumption in its growth driver Asia.
Natra’s cocoa and chocolate business recorded flat first half (H1) sales at €152.58m ($204.1m), while operating profit grew 3.2% to €4.80m ($6.4m).
European consumption and Canadian plant
The company’s consumer division - which sells finished chocolate products such as countlines and tablets for private label clients - saw a 2.3% dip in sales.
“This decline was mainly due to a weak consumer spending in Europe, the effect on sales of the product portfolio rationalization performed in recent quarters, as well as changes in the order flow in the US market after the announcement of the upcoming start of production in Canada,” said the company in its financial statement.
Natra has invested €12m ($15.4m) on a rented plant in Toronto, Canada for its private label division that it claims will double North America sales within two years. The factory will be operational in H1 2014.
Chocolate declines on out-of-season Asian consumption
Natra’s consumer goods division - which accounts for 75% of sales in Natra’s cocoa and chocolate business - reported increased sales of spreads and tablets, but large falls in chocolate and countlines.
The company said this was mainly because it had slimmed its portfolio to concentrate on more profitable products.
“Regarding the chocolates range, it is worth remembering that turnover is highly affected by the seasonality of the consumption of this product in Asia, Natra’s main growing market in this category. Therefore, one must analyze the evolution of this category for the whole year, in which the company expects a significant growth in the second half of the year,” said the firm.
Cocoa grinds suggest slowing Asian chocolate consumption
Asian second quarter cocoa grind figures released in July - an indicator of chocolate demand in the region – slowed to a modest 2% growth due to economic slowdown in China, the region’s growth driver.
Natra has pinpointed China for future growth and is aiming to triple sales in the Chinese market in the next three years to €28m ($37m).
Asia Pacific only accounts for 1.5% of Natra Cocoa and Chocolate’s consumer goods division sales with 89.5% coming in the EMEA region and 9.1% in America. However, the Asia Pacfic region registered a much steeper sales decline than other regions of 20.3%.
That said, the industrial goods division – which sells ingredients such as cocoa powder and butter and chocolate coatings to manufacturers - grew sales in Asia Pacific by 21% in H1.
“As expected, this division’s sales were especially marked by the recovery of cocoa butter and cocoa paste and the correction of the cocoa powder line, after two years of strong growth by excess demand in the market,” said Natra.
Natra’s overall operating profit grew 33% to €7.16m ($9.6,), but this included the contribution of non-chocolate subsidiary Natraceutical, a business specializing in food supplements for pharmacies, which grew significantly in H1.