Analysis: Cargill's expected cocoa coup rattles confectioners, dealers

Wed Oct 9, 2013 7:21pm EDT
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By Marcy Nicholson

NEW YORK (Reuters) - This past summer, European authorities took just six weeks to approve Barry Callebaut's $950 million purchase of Petra Foods' PEFO.SI cocoa business, a deal that created the world's largest cocoa company with a quarter of the $10 billion market.

The European Commission decided the deal did not require deeper look partly because two other firms provided stiff enough competition in the niche industry.

Now, those two rivals, Cargill Inc CARG.UL and Archer Daniels Midland Co (ADM.N: Quote), are hammering out the final terms of a deal in which Cargill would buy ADM's cocoa operations, sources said.

The move threatens to concentrate at least half of the global 4-million tonne market in the hands of Callebaut and Cargill.

Acquiring ADM's cocoa operations, which span Abidjan in Ivory Coast to Singapore, would put Cargill roughly on par in size with the newly expanded Callebaut.

That has dealers, grinders and confectioners worrying the combination of Cargill and ADM's cocoa operations may exert too much influence over the prices it pays for beans and how much it charges for its products.

It would be a "formidable prospect" for independent grinders and merchants, said Jeff Rasinski, corporate director of procurement for Blommer Chocolate Co, the biggest grinder in North America, in an email to Reuters.

Another wave of consolidation may raise antitrust flags too. While Callebaut's merger sailed through the European Commission, Cargill is unlikely to be so fortunate, legal experts say.   Continued...