The US tariffs will negatively impact the margin for Guan Chong Bhd (GCB) US-bound products, especially cocoa butter and liquor.
Trump tariffs has affected both countries, Malaysia and Cote d’ Ivoire. These are also the 2 countries where GCB has processing plants dedicated mainly to supply to GCB’s US market.
In 2024, GCB has 28% butter, 15% liquor, 9% cake, and 3% powder exposure to the US market. According to an analyst, “Butter and liquor, which are higher margin products, face the highest US tariffs and exposure, directly pressuring GCB’s profitability.”
GCB’s export volume to the US comprises primarily of cocoa butter and liquor, and it is mitigating the tariff impact by diversifying exports to the EU and UK. GCB’s Schokinag (Germany) and UK operations provide alternative markets with no/low tariff exposure. The Côte d’Ivoire plant is running at 100% capacity supplying half of its production to EU chocolate factories. Meanwhile, its UK facility increased capacity to 22,000 metric tonnes in the 2nd half of 2024.
Impact of tariffs can be also mitigated via a ratio-based pricing model which protects GCB profit despite cocoa price volatility. Eventually, this could also translate to higher cost for chocolate producers and for its end-consumers.
