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From beans to business (Amended)
HE has made a living off music, horses, chocolate, human resources and sports media, and chairs the boards of some of the biggest names in the world. But Andreas Jacobs, chairman of Barry Callebaut, the largest chocolate processor in the world, was at one point the aimless youth, quite unsure of what to do with his life. One year at Insead in Fontainebleau changed that. "Before that, I was in a public university. In a public university you meet a lot of people who don't know what to do and they are not really serious about working and being passionate about things," he says.
It was a different scene at Insead, the graduate business school. "First of all, there were very smart people around me. Secondly, you could feel that they all had some ambition to change something in life and thirdly, they came from all over the world in one room."
It is no surprise that the 51-year-old has now turned into a strong advocate for graduate business education, newly stepping into the role of chairman of Insead since the beginning of this year. "Insead really changed my life," he tells BT in an interview at the school campus in Singapore.
The debate over whether an MBA is still relevant in today's world is one that has raged and ebbed. For Mr Jacobs, the programme is still invaluable for the climb up the corporate ladder. "Statistics show very clearly that if you do an MBA, your salary increase could be significant," he points out.
In Mr Jacobs' view, the value of MBA programmes comes in the way it throws young people of various nationalities together. "It creates creativity and understanding of different cultures." Pointing to himself, he says: "I was a German studying law. Can you imagine how over-structured I was? So I had this French girl in my course and she was completely different - she had all this imagination and creativity I was lacking.
"And then you add someone from China or someone from the US and someone from Brazil - you can imagine what type of training that alone is. That's something you don't get at home in China, or in US. At that age, and this environment - it's great learning."
Mr Jacobs was in Singapore for the opening of Insead's S$55 million Leadership Development Centre on the campus, which raises its capacity by 50 per cent. Asked about his plans for the French business school, he says there will be no major changes for now. "It's a big learning and listening phase."
Nevertheless, funding will be an area of focus. "The more I listen to the colleagues here, the more I realise the need for independence and for quality." A top-notch graduate business school has to attract the best from all over the world, including those who might not be able to afford such education.
"For the son of the poor farmer in Ivory Coast, to get him into Insead you need scholarship. If you add this all up that's a lot of money. And you need state of the arts facilities, that's why we need money."
The decision to take up the chairman role at Insead was part of a desire to "do something deeper in life" after having focused on running the family investment fund at Jacobs Holdings for the past 15 years. The Jacobs family is one of Germany's leading business families. Holding 50.1 per cent of the world's largest cocoa producer Barry Callebaut through family investment firm Jacobs Holdings, it is well established in the cocoa circles, and was a one-time owner of the Toblerone brand.
Mr Jacobs' father, Klaus Jacobs, who was originally from Bremen in Germany and later became a Swiss citizen, had built the business empire. Taking over the reins of the family's coffee trading business, Jacobs Senior moved it to Zurich before merging it with two chocolate companies to create Jacobs Suchard, which was to become Europe's biggest chocolate and coffee seller, and maker of Toblerone.
Despite growing up in one of the most well-known families in the cocoa business, Andreas Jacobs got into the business through a roundabout route.
Not knowing what to do, he read law at the universities of Freiburg im Breisgau, Munich and Montpellier.
"Law felt like a good common denominator," he says. But "halfway through, I realised I didn't want to be a lawyer".
After finishing a postgraduate degree in European competition law, he took up an MBA from Insead, and then worked for three years at consulting firm Boston Consulting Group (BCG).
One would think that Jacobs Junior - the second of five children - would have been expected to join the family business.
But that was not the case, as his parents told their children to do what they thought best, and where they could succeed. As Mr Jacobs sees it, many of his decisions in his early years had in fact been made against his father's wishes.
"He wanted me to go to Stanford, I went to Insead. Then he said you go to McKinsey and I went to BCG. Everything was the other way round," he says with a chuckle.
The invitation to join the family business, by the way, is not extended to any and every member of the Jacobs clan.
"We want successful family members who have enjoyed a good education and proven to be good managers or good board members outside of our own family business," Mr Jacobs had said at a conference in 2010.
But after seven years spent buying small bankrupt companies and fixing them, he eventually heeded his father's call, taking over various executive functions in the Jacobs family empire in 2000, and on the board of Barry Callebaut - the latest incarnation of Jacobs Suchard - in 2003. "It was something special that your father calls you and says I think you can do it, so please help me."
The Barry Callebaut story
At Barry Callebaut, Mr Jacobs has overseen one of the most significant transformations for the Zurich-based firm in recent years in its journey to become the largest producer of bulk chocolate.
While relatively little known outside the cocoa industry, Barry Callebaut processes the cocoa for one in four chocolates, and makes a fifth of all chocolates globally. The Switzerland-based firm buys cocoa beans from farmers in countries such as Cote d'Ivoire and Ghana, makes them into products such as cocoa liquor, cocoa powder and cocoa butter, before selling them on to confectionary companies such as Mars, Cadbury, Mondelez and Hersheys.
In 2013 Barry Callebaut completed the acquisition of the cocoa ingredients division of Singapore-listed Petra Foods, in a bid to position itself for the growing consumption of chocolate in Asia.
This was not for a lack of growth in its traditional markets of US and Europe. Sales for Barry Callebaut have grown more than 9 per cent every year, above the global rate of 1-2 per cent, says Mr Jacobs.
But demand will grow by just 1 per cent a year in these markets, compared to annual growth of 5 per cent in Asia till 2018, according to estimates by Euromonitor. The Middle East and Africa will have the fastest annual growth of 6 per cent, while Latin America will hit 4.5 per cent.
Emerging markets in the Asia Pacific, South America and Africa are thus where the cocoa processor will train its eyes next. It has opened its first chocolate factory in Chile, and is also eyeing one in India.
The acquisition of Petra Food's cocoa ingredient business helped to boost its presence in Asia, where it now has nine factories, compared to only one factory in Asia six years ago.
It also added more than 1,800 staff and seven factories on four continents to the firm, propelling Barry Callebaut to being the biggest cocoa processor in the world, with 50 manufacturing facilities across Europe, Africa, Americas, and Asia Pacific.
While a massive operation, the integration of both businesses has been smooth. The acquired business, which recorded a loss before the deal, made operating profit of 28 million Swiss francs (S$40 million) for the year ended Aug 31, 2014. "We were ahead of schedule in synergies, and we were able to turn the business around," says Mr Jacobs.
"The good news is, at the end of the day there's only two key criteria, which is that we didn't lose any employees, we didn't lose any customers."
The next step, as Mr Jacobs sees it, is to keep Barry Callebaut on its toes despite being the biggest in the industry, and to continue to innovate on its products and stay ahead of competition.
"The danger - referring to a case that is always taught in Insead - is to be like Kodak. They basically ignored the digital revolution. Being the biggest means you got to be awake and be faster and smarter than what innovation is coming. The future is to see where we want to be in 2020, what the customer requires and what it means for R&D and innovation pipeline," he says.
Barry Callebaut will focus on cocoa powder, used in compound chocolate coatings that is especially popular in Asia.
"We will improve the quality of cocoa powder, especially for high-end chocolate type products... There is a lot of innovation going into that to make them have better consistency and better smoothness."
No more beans
But a challenge for the entire chocolate industry looms. The world will run out of cocoa beans by 2020 if the industry fails to ramp up production, Barry Callebaut and Mars have warned. The shortfall between the amount of cocoa the world wants, and how much it can produce, would swell to one million metric tonnes - a quarter of total production now.
Prices for cocoa reached a peak of £2,000 (S$4,180) per metric tonne in August last year; before the end of 2007, they barely rose above £1,300.
For the industry, the need to ensure that cocoa farming remains sustainable and economically viable is now a matter of some urgency.
"There is competition for crops on the ground, so the only way to add one million tonnes is to help farmers improve their yield per hectare, meaning that you got to go into the bushes and teach them to improve the yield, teach them to have better farmer practices."
On top of that, the overall livelihood of the farmers has to be lifted.
"You have to work on general education, medical supply and education of children so that the next generation can be better trained."
Otherwise, youths headed to the cities in search of better opportunities would mean empty farms left behind.
To cope with such a threat, the largest players in the cocoa industry such as Barry Callebaut, Ferrero and Singapore-listed Olam are now in an unprecedented collaboration to help the farming communities by improving access to fertilisers, improving planting material, eliminating child labour and providing basic education.
The initiative, CocoaAction, launched last year, would help, says Mr Jacobs.
"Will we reach one million extra? I believe so. We have done a lot of tests to increase the yield, and there are massive chances for improvement. Yes we have a shortage, but we have a solution to the shortage."
Coming full circle
Besides Barry Callebaut, the Jacobs family also established the recruitment agency Adecco. In 1996 Klaus Jacobs merged Swiss firm Adia Personnel Services with French rival Ecco to form the world's largest staffing company.
The family, however, sold off its shares in Adecco last year as it sought to diversify its investment holdings, selling first a 16 per cent stake in March, followed by the rest of its holdings in September.
The funds that will need to be ploughed back as investment will now be managed by Mr Jacobs' brothers, freeing up time for him to take up the Insead chairman post.
"So I will focus on the chocolate and that would allow me to take over the job here in Insead," says Mr Jacobs.
In doing so, it would mark a full circle of giving started by his father, who dropped off the billionaire charts after transferring most of his wealth to a foundation focused on developing and empowering young people.
"Both my father and my grandfather had a profound interest in other people," says Mr Jacobs. "My father in particular was a strong believer in lifelong learning in order to unlock one's full potential.
"I have a similar motivation... The challenging yet rewarding position as chairman of Insead will allow me to give back to the school - and through this hopefully to many people in different stages of their careers and also their personal lives."
Chairman, Barry Callebaut
Born December 1963
1983-1988 Read law at universities of Freiburg im Breisgau, Munich and Montpellier
1990 Completed post-graduate degree at University of Freiburg im Breisgau. Obtained a Masters from Insead in Fontainebleau
1991-1993 Worked as a consultant at Boston Consulting Group
1992 Started own venture buying bankrupt companies and fixing them
2000 Takes over several executive functions of the Jacobs family business
2003 Joined family investment firm Jacobs Holdings
2004 Appointed chairman of Jacobs Holding AG
2005 Appointed chairman of Barry Callebaut
2015 Appointed chairman of Insead
An earlier version stated that Klaus Jacobs was Mr Andreas Jacobs' grandfather. He is, in fact, Mr Jacobs' father. The article above has been revised to reflect this.