Case Study #14: Barry Callebaut Targets Sweet Teeth with the Melt-Resistant and Low-Calorie Vulcano

While Homer Simpson may NOT be the target customer for Barry Callebaut’s low-calorie, melt-resistant Vulcano chocolate, there may be a niche of customers who feel the same way about Vulcano that Homer feels about chocolate (courtesy of Entertonement):



Barry Callebaut competes in the confectionary market. Overall, this market is fairly recession resilient as consumer demand for low-price indulgences remain strong. However, demand for these indulgences may decrease as retail prices increase. Monsoon rains in India are weaker than normal, raising concerns that sugar crop output will be weak and the amount of sugar needed by the world's top consumer will require it to import more than last year's record levels. Black pod disease, flooding in the Ivory Coast and expectations of El Nino weather threaten to devour cocoa crops (Peer, Melinda “Sugar and Cocoa Slump”, Forbes.com, July 16, 2009). These environmental impacts will undoubtedly increase costs to the manufacturer. These costs will be passed through the supply chain, making customers pay quite a few cents more to relish in a low-price indulgence. This may have an adverse affect on demand.

Barry Callebaut, is the largest producer of chocolate, having an annual output of 1.1million tons of cocoa and chocolate products. The company notices that chocolate consumption is declining: People in the eight largest western European countries are consuming 2% less chocolate. People in the United States are consuming 8% less chocolate (Calpuny, Alice “Miracle Chocolate from Swiss Maker?”, Businessweek, July 17, 2009). Instead of reducing prices or deploying aggressive point-of-sale tactics for existing products, the company decides to innovate Vulcano, a bar or cookie that is 90% few in calories than regular chocolate and melt-resistant within 131 degrees.


The company is interested in targeting emerging markets, such as India and China, where a growing number of consumers are spending a greater portion of their wallet share on multi-product indulgences. From personal experience, I can say that it gets very hot during the summer in India. For those Indian consumers who like to indulge bite-by-bite over a few hours, the Vulcano may be a good product. Barry Callebaut feels it can be successful with a growing number of health-conscious Americans.

Barry Callebaut intelligently anticipates, and then reacts to a delta in demand. The Vulcano concept was presented to the investors in March 2008 when it was in development stages (Calpuny). Assuming a twelve month functional due diligence process prior to development, Vulcano most likely received functional resources in 2007 (if not earlier). Economic and market conditions have changed dramatically over the past few years, and the Vulcano strategy evolves as a result. One of the food engineers, Simon Cantz, tells Swiss television: “'Suddenly we realized we'd produced a very special chocolate, of a crispy light consistency, like an airy foam, and we thought let's see if we can develop this further'.” Spokeswoman Gaby Tschofen says: “'It's called Vulcano because it can be eaten when it's hot, and it's airy and full of bubbles like molten rock.” By no means am I a food engineer, but assuming Vulcano is 90% lower in calories and therefore lighter, it may require less sugar and cocoa. This is a way for Barry Callebaut to reduce costs by minimizing its dependency on a raw material that may surge in price for the remainder of 2009 because of inclement and hazardous environmental factors.

A few, but not most, sweet toothed customers will have the Homer Simpson reaction to chocolate. Macro assumptions on global confectionary consumption should not be the basis for generating profitable sales in the long-term. The company has tremendous research to do on brand equity. Barry Callebaut only makes 20% of its own chocolate brands. It mostly produces Nestle, Hershey’s and Cadbury products. Based on brand research, the company can begin sub-segmentation activities to uncover profitable segments across developed and emerging markets. Currently, Vulcano is being reviewed by Barry Callebaut’s industry clients, a sign that further pre-operations diligence may take place once or if the product is absorbed by someone else.