Nutella-maker Ferrero seeks to crack Turkish grip on hazelnuts

WINNIPEG - Reuters

Chocolate makers’ dependence on hazelnuts from a single major producer, Turkey, has sent Italy’s Ferrero SpA searching for new suppliers to satisfy consumer cravings, from eastern Canada to Chile and Australia.

The farmer recruitment efforts of Ferrero, one of the world’s biggest hazelnut buyers for its Nutella spread, may loosen Turkey’s grip on the $2.8 billion industry, which is prone to volatile prices and tight supplies.

Turkey, at odds with the United States over a failed coup last year, produces 70 percent of the world’s hazelnuts, leaving buyers such as Ferrero, Kraft Heinz Co, Mondelez International Inc, and Nestle SA vulnerable.

Last month, Ottawa contributed nearly C$500,000 to a project testing tree varieties in the province of Ontario. Ferrero is helping fund the project and hopes to see farmers plant 25,000 acres of hazelnut trees by 2027, from about 400 currently.

An Ontario farmer can earn 10 times more per acre from hazelnuts than corn, according to one estimate.

Expansion efforts are also underway in Serbia, Chile, Australia, South Africa and the U.S. state of New Jersey, said Barb Yates, an agronomist with Ferrero in Canada.

New places to plant hazelnuts

“Everyone is looking for new places to plant hazelnuts,” said Jaime Armengolli, owner of Chilean grower and processor Agricola La Campana. “Yields are good. Costs are low. Growers are very optimistic.”

Chile’s shelled hazelnut exports topped 6,500 tons in 2016, nearly five times the previous year’s exports, according to government statistics.

Frost in 2014 damaged Turkey’s crop and spiked prices, alarming buyers who use hazelnuts in chocolates, pralines and liqueur.

Then this spring, the state-run Turkish Grain Board (TMO) bought large volumes to prop up sagging prices.

“(Ferrero) realized having all their eggs in one basket was a danger,” said Adam Johnston, who trades hazelnuts at Scotland-based Freeworld Trading.

Ferrero’s strategy is not driven by short-term events, and the company expects Turkey to remain a major producer, said Ferrero spokeswoman Francesca Fulcheri.

But the global expansion has cast a chill over the Turkish industry, where farms are small, use costly manual labor and produce relatively small yields.

“Turkey’s hazelnut sector is already threatened and will deteriorate unless we are able to increase efficiency and decrease the cost,” said Kadir Durak, a board member at Turkish processor Durak Hazelnuts.

Hazelnut kernel prices can swing as much as 10 percent per week, and currently sell for about $5,600 per ton, down from more than $17,000 in 2015, according to Freeworld.