United Cacao Ltd SEZC (LON:CHOC) Chief Executive Officer Dennis Melka caught up with DirectorsTalk for an exclusive interview to discuss the cacao market, the Peruvian elections and the significance of the recent Mars acquisition
Q1: Dennis, could you give us an update on the cacao market?
A1: Yes, a couple of day ago Cote D’Ivoire put out a release that the mid-crop for the upcoming season was going to be down about 12% which is really incredible news and this is coming from the world’s largest producer of cacao. The world’s 3 largest producers are Cote D’Ivoire, Ghana and Indonesia so you know have officially all 3 main production markets in a serious state of contraction, in Indonesia they’re hitting record lows, Ghana is already in trouble with respect to production and now Cote D’Ivoire after a long period of silence announces that their mid-crop is going to be down 12%. So I think this again confirms everything that we’ve been speaking about for the last couple of years of a very challenged production side because of the inefficiencies of the market that exists out in Africa mainly smallholders’ lack of capital and low yield so I think again this is something that the market as a commodity looks very promising for United Cacao Ltd SEZC in the next several years.
Q2: Now another important area is the Peruvian elections, what can you tell me about them? What’s going on there?
A2: As we spoke about earlier you had a run-off, no candidate got above 51% so there is a second election coming up in June. Both candidates are pro-market, pro-development, centre of right candidates, the first one Keiko Fujimori and the second one Pedro Pablo Kuczynski, both again as we spoke about earlier are wonderful choices for President, each come with a pro-business agenda that will really drive Peru forwards with respect to infrastructure and roads and continued development of the agricultural sector. So we think that the June result either way will be incredibly positive for the country.
Q3: Something that’s been in the news at the moment was the recent Mars transaction, what are your thoughts there, what’s the significance?
A3: Very, very interesting. Here we have a global branded confectionary company going upstream into production of the actual bean, this is very unique. I actually never quite anticipated something like this, I always imagined the grinders, the people who process the beans, ultimately would seek up between production platforms but here we have one of the world’s leading chocolate brands going upstream and they’re going upstream where, in Latin America which is precisely the only growth region that’s entire industry. Obviously in Ecuador they made their acquisition, I think Ecuador again bordering Peru, same growing climate, same area so I think it very much validates our business plan that Latin America, this Peruvian-Ecuadorian basin is absolutely the right place to be growing cacao. The other interesting point of the acquisition they did was most of those hectares, of the 500 hectares they purchased, were of CCN51 so I think this is again an incredible validation of that genetic variety of cacao, again United Cacao Ltd SEZC are very aggressively using the CCN51, it’s only available in Peru and Ecuador so it’s about high yields, high output with ultimately minimises land usage and maximises production. So I think that acquisition of that estate in Ecuador with the CCN variety very much is a nice validation and good to see that happening and again it was being done in Latin America which is the only place in world where you can freehold land for cacao agricultural investment so it was interesting to see and I think it’s a good sign for the future.
