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Preserved and processed foods

General characteristics of the industry

Products derived from coffee and cocoa certainly comprise the most important sector of the Ivorian economy. This industry takes care of the local processing of the two main agro-industrial products of the country. Since API was taken over by Saco, and Procaci (today Unicao) was bought by Safica, the sub-sector has been dominated by five main companies. Two of them (Chocodi and Saco) are controlled by the French group Cacao Barry, and one (Capral) by the Swiss group Nestlé. The government has substantial stakes in all the companies in the industry. They are also extremely specialized.

Thus, Chocodi, Saco and Unicao mainly engage in cocoa processing, whereas Capral and the Société Africaine de Torrefaction (SAT) specialize in coffee processing. The majority of the output from the sub-sector is destined for export markets, local consumption being very low (less than 10 per cent on average).

History of the firms in the sample

Capral-Nestlé (Compagnie Africaine de Préparation Alimentair)

Capral-Nestlé was founded in 1962 to undertake the local processing of coffee. It started with an initial investment of about 5 billion f.CFA, an installed capacity of 4 5(N) tons per year and a total staff of fewer than 100 employees. The state and some private individuals provided some of Capral's capital, which is dominated by Nestlé's 80 per cent holding. Its main product is instant coffee:

In addition to the fiscal advantages provided by the 1959 investment code, a setting-up agreement signed with the government allowed the firm to buy green coffee at local prices, which are sometimes as low as one third or one quarter of world prices. However, in 1984 the government put an end to this arrangement and the fiscal advantages under the investment code expired at the same time.

Capral has been an exporting firm since its creation. Its export rate was already around 80 per cent at the end of the 1970s. The firm has also enjoyed a rapid increase in sales, which have risen from 7 billion f.CFA in 1977 to more than 25 billion today. Its production capacity has also grown very rapidly, reaching more than 9000 tons per year at the end of the 1970s, The company thus has more than 60 per cent of the green coffee processing capacity in the Ivory Coast.

Capral has close relations with its mother firm, especially regarding the international promotion and distribution of its products, technology and training (Nestlé's training centre provides training for Capral's executives). But the firm has total freedom in the management of human resources, the purchase of local materials and supplies and minor adjustments to the machinery.

Saco (La Société Africaine de Cacao)

The company was set up as early as 1962 with government and French private funds (65 per cent of the starting capital belonging to Cacao Barry) of 1.155 billion f.CFA. Saco's essential aim was the local processing of the non-exportable cocoa beans. The maximal exploitation of the installed capacity, 35 500 tons a year, soon required big investments that led to an increase in the capital, which has now reached 1.73 billion f.CFA. Saco also benefited from the advantages of the 1959 investment code and an agreement with the government allowing it to purchase its raw material at local cost prices, according to a special marketing and pricing scheme operated by Caistab, the marketing board in charge of coffee selling.4

Saco had a monopoly for about 10 years, after which many state-created companies started trading in the sector. One such was API, set up in 1973 with a production capacity of 35 000 tons per year. Another was Procaci, established in 1974 with a capacity of 30 000 tons per year. Chocodi (1976) had a capacity of only 7 000 tons per year. But in the middle of the 1980s nearly all of these newcomers disappeared. Saco took over API while Safica took over Procaci, which in the meantime had become Unicao. Thus Saco is today both the pioneer and the heir of most of the local cocoa-bean processing activities and the production of various by-products.

Performance of the firms


Capral's production, as can be seen in Table 11.14, grew quickly till the mid-1980s and then stagnated. The production of instant coffee for instance, which was 7.8 billion f.CFA in 1975, reached more than 24 billion in 1985 and then fell to 22.7 billion in 1990.

The product range was extended in 1981 with the introduction of chocolate drinks and new kinds of instant coffee. The firm also introduced more varied packaging (bulk packs, tins of various sizes and individual sachets). The individual doses of instant coffee and chocolate drinks, in particular, were a great success. These innovations were Introduced by Capral itself as a response to the needs of the market.

Table 11.15 shows that Capral is very efficient in both domestic and export markets. Exports are mainly instant coffee destined for Africa, the Middle East and Greece. The company has regularly increased the portion of its products which are exported while strengthening its mastery of the domestic market. Its domestic market share increased from 82 per cent in 1975 to more than 83 per cent, on average, between 1980 and 1990. The involvement of Capral in both the domestic and export markets challenges the conventional views according to which export orientation strategies are opposed to domestic market development.

Table 11.14 Sales and products for Capral (million f.CFA)

  1975 1980 1985 1990
Instant coffee 7 801.8 10 427.4 24002.6 22 706.7
Chocolate beverages - - 501.4 677.9
Dolca - - - 6.0
Other products - 108.2 249.2 -
Total 7 801.8 10 535.6 24 753.2 23 390.6

Table 11.15 Market shares for Capral (%)

  1975 1980 1985 1990
Total sales exported 81.85 82.70 83.25 84.72
Share of domestic market - 81.30 86.70 87.70
Share of export market 95.47 88.01 95.26 91.59

Table 11.16 Performance of the factors of production for Capral

  1980 1985 1990
Productivity/employee 11.20 9.18 20.50
Productivity of physical assets 1.40 1.80 1.45
Average staff unit cost (f.CFA x 1 700) 1.70 0.93 1.63

Note: See Table 11.4 for definitions of these ratios.

Table 11.17 Protection, comparative advantage and financial performance for Capral (%)

  1980 1985 1990
Protection: ERP      
Domestic market 49.00 93.00 60.00
Export market -58.00 -77.00 -58.00
Total activity -52.00 -73.00 -5.2.00
Comparative advantage: DRC 0.26 0.18 0.20
Financial profitability: Net result/owners' equity 18.95 4.45 43.50
Activity profitability: Net result/net sales 4.94 -0.49 6.84

Note: See Table 11.5 for definitions..

Productivity per employee (Table 11. 1 6) increased regularly (except in 1985) and reached high levels (11.7 on average) with a peak of 20.5 in 1990. This productivity level is well above the average staff unit cost, which averages 1.4.

Table 11.17 shows that Capral is very much unprotected. In fact, in spite of the high protection of its domestic market, the lack of protection for its exports, which are the larger part of its sales, means that the company faced an average negative protection of about 60 per cent from 1980 to 1990. The relatively important negative protection of its export markets (an anti-export bias) did not prevent the company from recording good performances in export activities. Capral is very efficient, benefiting from a net comparative advantage (with a DRC below 0.3 on average). The company also enjoyed good financial performances, except in 1985 (with a return on equity of about 30 per cent on average).


Saco's production, as can be seen in Table 11.18, grew rapidly till the middle of the 1980s, and then fell back. When it was set up, Saco manufactured three main products: butter, paste and cocoa presses, and incidentally some cocoa powder. The three main products represented more than 98 per cent of sales. Butter averaged more than 57 per cent of total sales, followed by cocoa paste. In 1980 Saco abandoned cocoa powder production in order to concentrate on its three main products.

From 1985 Saco's operations suffered a decline, particularly noticeable in the export market. This can be explained by the fall in world cocoa prices and the reduction in some advantages it enjoyed as regards the deductions from world prices relating to the quality and size of the processed cocoa beans. These factors, which have to some extent counterbalanced the advantages of Saco relating to the cost of raw materials, must be reflected in the competitiveness of its exports.

The data in Table 11.19 confirms Saco's export orientation. In fact, almost all its output is exported (the figures take into account changes in the stock level). One can note the fluctuation in Saco's markets, including the domestic market, despite its dominant position there. From 55 per cent in 1975, its domestic market share fell in 1980-85 to just 47 per cent, due to the arrival of new companies in the sector, and improved after 1985 to more than 75 per cent. Saco was thus the main beneficiary of the disappearance of companies such as Procaci and API.

Table 11.18 Sales and products for Saco

  1975 1980 1985 1990
Cocoa butter 6 093.4 6 868.3 23 574.0 11 420.8
  (8 057) (5 859) (10 753) (14 740)
Cocoa paste 3 111 2 847.2 9 823.9 2 578.8
  (6 965) (3 595) (7 808) (6 538)
Cocoa 1 407.4 921.1 5 112.6 2 114.7
  (8 671) (3 907) (13 092) (17 147)
Miscellaneous (cocoa powder) 205.5 414.3 - -
  (1 580) (1 364) - -
Total 10 817.3 11 050.9 38 510.5 16 114.3

Note: Figure in parentheses show production volume. in tons.

Table 11.19 Market shares for Saco (%)

  1975 1980 1985 1990
Total sales exported 99.20 99.20 99.50 99.40
Share of domestic market 55.00 47.30 47.00 76.00
Share of export market 95.47 88.01 95.26 91.59

Table 11.20 Performance of the factors of production for Saco

  1975 1980 1985 1990
Productivity/employee 5.98 6.34 13.50 5.99
Productivity of physical assets 1.98 2.18 2.33 0.68
Average staff unit cost (f.CFA x 17 000) 0.36 0.84 1.80 2.10

Note: See Table 11.4 for definitions of these ratios.

Saco's productivity per employee (Table 11.20) is very high, between 5 and 6 on average with a peak of 13.5 in 1985. This performance, among the best in Ivorian industry, is particularly remarkable when compared to the low average staff unit cost of between 0.4 and 2. The productivity of the physical assets, although slightly weaker, remains at acceptable levels (between 0.6 and 2.3). Thus we can say that Saco uses the factors of production efficiently. This is in accordance with the company's focus on controlling production costs and tight management of the plant.

Saco faced negative protection (Table 11.21), of -4 5 per cent on average between 1980 and 1990, in spite of the relatively high protection of its domestic market (especially in 1980). This is caused by the negative protection of its export market, the core of the firm's sales. But it seems that this constant negative protection is not a decisive factor in Saco's profitability, which fluctuates tremendously. The financial results are determined rather by changes in the structure of the industry. Thus the profitability of the company, which was good until 1975 (the monopoly period) and after 1985 (quasimonopoly), clearly decreased between 1975 and 1985 (a competitive period).

Whereas the financial difficulties of 1980 were in large measure compensated for by an increase in capital (+50 per cent), the collapse of 1990 (due mainly to the deep crisis affecting the whole cacao industry) has required drastic solutions such as staff reductions and frequent temporary lay-offs. The poor financial results from 1990 are also partly due to the fall in exports, provoked inter alia by the lack of support from Caistab although world prices were constantly below local cost prices. Caistab could not face the growing demand for reimbursements and ran into arrears. Such a situation obliged Saco to run into heavy short-term debt.

Table 11.21 Protection, comparative advantage and financial performance indicators for Saco (%)

  1975 1980 1985 1990
Protection: ERP        
Domestic market   OP 15.00 32.00
Export market   -51.00 -50.00 -38.00
Total activity   -51.00 -50.00 -38.00
Comparative advantage: DRC 0.25 0.18 0.34  
Financial profitability:        
Net result/owners' equity 20.65 -0.03 33.00 -27.20
Activity profitability:        
Net result/total sales 2.20 -0.01 1.48 -2.90

Note: See Table 11.5 for definitions.

In spite of a high negative protection and financial vicissitudes, Saco has a DRC under 0.5, showing a comparative advantage in its sector - a proof that it is a high-performing company.

Strategies and capabilities of the firms


Capral devotes considerable resources to financing investments (Table 11.22). Investment in physical capital, which represented less than 20 per cent of the total in 1975, rose to 70 per cent and 67 per cent in 1985 and 1990 respectively. These peaks in the acquisition of physical capital are linked to the capacity increases of the 1980s.

The company shows here the characteristics of a subsidiary which produces under licence and also devotes significant resources to foreign technical assistance (Table 11.23). In fact Capral, producing instant coffee under a Nestlé licence, pays heavy fees for that. Moreover, the company needs regular technical assistance from the mother firm to carry out these activities, for the selection, installation and maintenance of machinery and the training of executives (training of employees being generally done on the spot). Training to improve the local mastery of the working processes is one of the company's main concerns. Capral's management gives a great deal of attention to the definition of workers' tasks, to workers' skills and their progress in gaining proficiency and the systematic retraining of the whole workforce (employees, supervisory staff and executives). Spending in this area increased from 13 million f.CFA in 1980 to 17 million in 1985 and 21 million in 1990.

Capral has limited possibilities in terms of marketing strategy: its exports (the main part of the firm's sales) are handled by Nestlé-WTC, the trading subsidiary of the Nestlé group. Nestlé-WTC manages the export markets and is in charge of the international promotion of Capral products. It is only the domestic market that is managed by Capral itself. This explains the high commissions paid on sales, more than the advertising expenses. Nevertheless, there has been a steady growth in advertising expenses, while these commissions have not increased. This is a sign of the systematic efforts made by the company to strengthen its position on the domestic market while also striving for strong positions on the export market.

Table 11.22 Investment strategy indicators for Capral (million f.CFA)

  1975 1980 1985 1990
Investment in physical assets 23.7 80.9 242.5 1 394.8
Total investment 242.6 459.8 343.5 2 078.0

Table 11.23 Indicators of the management of technology and human resources for Capral (million f.CFA)

  1980 1985 1990
Royalties on licences and patents 732.4 1 491.5 1 337.8
Disinvestment 1.7 9.5 1. 1
Training costs 13.3 17.4 21.2
  (1.20%) (1%) (009%)
Technical assistance fees 23.4 20.5 36.4
  (200%) (1.2%) (1.6%)

Note: Figures in parentheses show percentage of total wages.

Table 11.24 Investment strategy indicators for Saco (million f.CFA)

  1975 1980 1985 1990
Investment in physical assets 68.5 55.7 191.4 107.7
Total investment 93.6 78.8 737.0 382.8

Table 11.25 Indicators of technology and human resources management for Saco (million f.CFA)

  1980 1985 1990
Royalties on licences and patents 0.0 0.0 0.0
Disinvestment 1.6 16.8 31.7
Training costs 1.4 3.4 26.1
  (0.60) (0.02) (1.40)
Technical assistance fees 319.9 819.0 683.9
  (140.00) (51.00) (40.00)

Note: Figures in parentheses show percentage of total wages.


Saco has invested regularly since its creation, with total investments peaking at more than 700 million f.CFA (Table 11.24). Until 1985 physical capital was the most important component of total investments (more than 70 per cent in 1985). Since then these investments have become a smaller portion (25 per cent) of the total, showing that investments in trading and marketing activities have become much more important. Saco's investments are generally self-financed.

The processing of the non-exportable grades of cocoa (those with high numbers of black or small beans) required Saco to find an appropriate technology and a method of strictly controlling the production and quality control processes. Since cocoa grinding and pressing techniques are generally standardized, technology management will have to focus mainly on the selection, adaptation, management and maintenance of equipment on the one hand and cost and quality control on the other. Saco uses the basic Dutch process', a set of free processes which are not subject to licences and patents and which are widely known all over the world. The selection of machines and the management of the plant are mainly done through Cacao Barry, Saco's mother company, using the group's international network. This technical assistance entails high fees (Table 11.25).

Saco puts much emphasis on cost and quality control. To this end, it has installed a computerized device which provides the firm with day-to-day cost indicators and monthly reviews of the production units. This helps in assessing the technical performance of the various factories and in improving the organization of the working processes. These efforts have, for instance, permitted the Zone 4 unit to increase its throughput from 35 000 tons to 42 000 tons per year. In addition, the technical control helps the company to increase its flexibility, making it easier to meet the various standards and specifications required by some markets. This reinforces its export capacities.

Management of human resources is also seen as a major priority at Saco. Efforts are made to increase the adaptability, discipline and motivation of the workers. Professional training programmes. were increased from 1990, in response to the need to reduce the numbers of employees and control costs. The costs of these programmes. which had been around 1.4 million f.CFA, rose to 26 million f.CFA in 1990.

The company exports most of its production. The exports are destined in the first place for Cacao Barry, to supply its production subsidiaries in Europe and the US. Saco also exports to Asia and Australia but even there its operations are organized through Barry's international trading services. This explains the size of the commissions on sales, which were particularly high after 1985. In fact Saco's main customers are factories, so that its possibilities for sales and marketing innovation are very limited.

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