ICP: Ismail El Khalil Presents the Ivory Coast-Based Cocoa Bean Processing Company

Interview with Ismail El Khalil, Founder and CEO of ICP (Ivory Cocoa Products)

What is your assessment of the cocoa sector globally and in Ivory Coast?

Ivory Coast is the biggest producer of cocoa in the world. Production is estimated to be between 1.8 and 2 million tons of cocoa per year. This amounts to about 40 percent of world production. Out of this, the capacity installed for processing is approximately 650,000 to 750,000 tons. The government wants to increase this capacity to reach at least 50 percent of world production, totaling approximately 900,000 tons. To achieve this, new tax breaks for processors have been introduced, which were quite overdue. If this policy continues, we will surpass the goal of 50 percent production. Many people want to invest in cocoa processing locally.

Can you provide more detail about this incentive?

We pay the same taxes that bean exporters pay. To the US, we pay 14.6 percent, equivalent to all cocoa processors. They have reviewed this and have suggested 13.6 percent for cocoa liquor (also known as cocoa mass), 11 percent for butter and cake, and 9.6 percent for powder.

Has this incentive been implemented?

These new taxes would normally be applied at the beginning of the year on the 1st of January; however, due most likely to administrative issues, they have been postponed to the 1st of April. We have signed the agreements with the government and we will wait.

When the incentives are implemented in April, will this make the sector more attractive? Will it cause more investors to enter this field?

Our current capacity is 50,000 tons per year. We have a small structure, unlike other big multinationals, and it is very efficient and effective.

It will be more attractive for existing processors that are already in Ivory Coast. The conditions that must be met in order to benefit from these tax breaks are that you must already have a factory or plant, and you must increase the capacity of the plant according to your capacity. For example, if your capacity is less than 50,000 per year you must increase your capacity over 5 years by 15 percent per year. If it is above 50,000, you must increase by 10 percent, and above 100,000, you must increase by 7.5 percent. For those who are already in the field and already processing cocoa in Ivory Coast, it gives them an incentive to increase their capacity. For newcomers who are not in the field of cocoa processing, it is a challenge because it is not an easy job. Anyone can buy and install machines, but the commercial side is quite complicated.

What will the impact be on the sector?

Factories are more mechanized than before, some even fully automatic. Therefore, it will not contribute greatly to the job market in Ivory Coast. Concerning added value, we will use more electricity, more energy, and they will buy parts locally. So, it will contribute a great deal to the economy.

Will this affect your end price?

Of course, but this depends on the world market.

How do you situate yourself towards competition in Ivory Coast? What are your competitive advantages?

Our competitive advantage is our structure. Our current capacity is 50,000 tons per year. We have a small structure, unlike other big multinationals, and it is very efficient and effective.

What is the history behind ICP (Ivory Cocoa Products)? What do you want the company to achieve?

We entered the cocoa sector because Ivory Coast is the biggest producer of cocoa in the world. It’s a local, raw material. We thought, why not transform it locally and export it, instead of exporting it in its raw form. We developed this idea and we found a marketing partner who was willing to buy the whole production and assist us technically to start the plant.

During this process, did the BOAD (West African Development Bank) finance your initial investment?

We were assisted by the BOAD and other banks as well.

Are there any areas you are exploring now for expansion?

We are not looking to expand as ICP (Ivory Cocoa Products) itself, but we are looking to build another factory as partners with Eurofind. We will do this through loans, our proper means, and banks.

What are the major challenges you face in terms of the development of your business in this field?

The major challenges that we have locally are all manageable. The only challenge is the world market. The previous forecast was that demand would outstrip supply. It was estimated that by 2020, there will be a production deficit of one million tons. This was based on the fact that the emerging markets, the BRICS, were increasing their chocolate consumption, which now seems to not be the case. This can be attributed to the world economic crisis. China’s growth has fallen, Brazil is in a crisis, and India may be the only hope for these BRICS. Chocolate is consumed largely by the middle class, so in order for chocolate consumption to increase, you need growth in the middle class. Due to the financial crisis of 2008 and other factors, this did not happen.

What is your prospective on this matter?

Ivory Coast increased its production because world prices increased greatly from 2011 to present. The CCC (Coffee and Cocoa Council) should not discourage production, but they should put a cap on production increase in order to stabilize the cocoa market and cocoa prices. They should not encourage more production because it will affect world prices, which will eventually negatively affect the farmer himself.

What is the current situation for the farmers?

The farmers’ situation now is much better than it was before the new reforms were introduced. For example, the current price we pay the farmer is 1,100 CFA francs, which was due to the increase in world cocoa prices. Now that the cocoa price has decreased, this price will go down as well. So, for the farmer that is currently paid 1,100 francs, when the new price for the mid-crop is set at the end of this month, it will be much less. But this is the new policy and the new reform. The farmer was guaranteed to be paid 60 percent of the world price. It was a good idea. Before these reforms, the government had an official price for the farmer and no one respected it. Now, it is essentially respected. The farmer is paid better than before, which is why he takes better care of his plantation and why we have better quality. This high quality is one of the positive points of this reform. Before, the quality was very bad, but it has now improved greatly.

What is your vision for the future of ICP (Ivory Cocoa Products)?

ICP (Ivory Cocoa Products) has doubled its capacity in just 3 years. We started with a capacity of 25,000 tons and we have increased it to 50,000 tons, which is very good. In respect to capacity increase, we have an upcoming project as partners to install another plant. We want to venture into other crops, such as cashew. We also aim to go further down the processing line into chocolate, which will all depend on the market. Industrial chocolate is very complicated and requires more elaboration and preparation.

Is there already a local company that produces chocolate?

Cémoi is a chocolatier that produces couverture and industrial chocolate for their own proper production. They have their own brand in France and Europe. They are the biggest industrial chocolatiers in the world.

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