Desire for chocolate a boost for Guan Chong

The company is eyeing factory expansion outside South-East Asia to meet the rising global craving for chocolate

by SHAHEERA AZNAM SHAH / pic by RAZAK GHAZALI

GUAN Chong Bhd is looking to build its maiden cocoa bean grinding factory outside South-East Asia, as the company aims to expand production to meet the rising global craving for chocolate and its related products.

Guan Chong, which is the world’s fourth-largest cocoa processor, has a combined production capacity of about 250,000 metric tonnes (MT) annually from its two facilities in Pasir Gudang, Johor, and Batam, Indonesia.

The craze for chocolate and related products is also propelling the demand for cocoa beans, with the US and Europe being the top-consuming regions for cocoa powder and cocoa butter — key ingredients in various delicacies and drinks. Chocolate has also found new fans in China and India, sleyrocketing to skyrocket demand for processed cocoa beans.

Guan Chong CEO Brandon Tay (picture) said the country that will host the company’s fourth cocoa bean grinding factory will be in the region with the highest consumption of confectionery products. He said the country will also be able to provide adequate supplies of cocoa beans to support the factory.

“We have been looking to build a new plant for almost a year now as we have fully utilised our factories, including the new factory in Pasir Gudang, Johor.

“Brazil has the biggest consumer market among the producing countries, but it does not have enough supply of beans. Ivory Coast produces the largest volume of beans, while Ghana produces the best quality,” he told The Malaysian Reserve in an interview recently.

He said the cost of building a new processing factory, including installing grinding facilities, is capital-intensive, but the company is constantly evaluating to expand its operation.

“Building a new cocoa grinding plant requires about €40 million (RM184 million) and takes about two years to complete, depending on where you build it.

“We are confident to double our current production within five years as the company has been able to grow both production and revenue,” he said, adding that the rise in global population has boosted the demand for chocolate.

“Chocolate consumption is growing at about 3% annually and to supply an additional volume between 3% and 5% requires 150,000MT of beans. So, it is only justifiable to expand our production,” he said.

Besides its two processing plants in Pasir Gudang, Johor, and Batam, Indonesia, the company also operates cocoa cake grinding, butter melting and deodorising facilities in the US through its subsidiary Carlyle Cocoa Co LLC.

The company’s market capitalisation has been rising in the last 12 months. Yesterday, the company’s stock closed at RM3.71, valuing the company at RM1.77 billion. Its share price had increased from a 52-week low of RM1.75 to reach a high of RM4.24.

According to the International Cocoa Organisation, Ivory Coast and Ghana are the two largest cocoa-producing countries, producing 1.96 million MT and 905,000MT of cocoa beans respectively last year.

Brazil and Ecuador remain the largest producers in South America with 204,000MT and 285,000MT respectively annually. The former is ranked seventh among other cocoa-producing countries, while Ecuador is fourth.

Cocoa bean production reached 4.65 million MT last year. Its price has also been on the rise, reaching about US$2,527 (RM10,411) yesterday from a low of US$1,895 in January this year.

The government is also targeting RM6 billion worth of exports for the cocoa industry by 2020. Last year, Malaysia’s cocoa-related industry exported products worth RM5.5 billion.