By Ana Ionova
LONDON (Reuters) - A number of small trade houses are beefing up their cocoa teams, as a wave of high-profile exits left the sector highly concentrated, presenting more physical trading opportunities.
Cocoa has seen the exit of major entities including Noble Group and ADM (N:ADM) in recent years, as increased volatility squeezed trade margins. Others significantly reduced operations and exposure.
The handful of remaining large firms, such as Olam and Ecom, have filled the gap by taking a bigger market share while expanding trading and processing, leaving fewer choices for cocoa buyers and suppliers.
But the consolidation has left space for smaller trading firms including Sopex, CCT, Petroforce and Rockwinds, which have made strategic hires in recent months to boost physical trading.
Antwerp-based Sopex recently recruited Maxime Alary and Nicolas Moura from Touton's cocoa trading team, several industry sources said.
Geneva-based CCT International SA, a subsidiary of Ivory Coast exporter Coex CI, has also tapped Alexandre Gedrinsky to head its cocoa operations, sources said. Gedrinsky previously held roles at Barry Callebaut and Transmar, according to his LinkedIn (NYSE:LNKD) profile.
Earlier this year, French group Rockwinds brought over Frederic Coudray, who has been on the cocoa trading desks of firms such as Olam, ADM and Barry Callebaut.
Meanwhile, Geneva-based trader Petroforce has been building a cocoa team from scratch over the last two years under the guidance of industry veteran Deminda Bandara, who previously held posts at Ecom and Itochu Europe.
CCT did not respond to a request for comment. Sopex declined to comment. Touton was not immediately available for comment.
Petroforce, whose core business is oil, recruited Charles Gautier as a cocoa trader earlier this year as part of its plans to build a separate soft commodity operation under the name Agroforce. Gautier spent seven years at Nestle.
"During the past few years, with renewed consolidation in the industry, customers felt they have been left out by the larger trading companies, so was the case for (the) supplier chain," said Bandara, managing director of the firm's agricultural arm.
CHASING MARGINS
The moves to bolster cocoa teams come after a string of exits. In 2017, the sector lost another player when Transmar Group, a major buyer and processor of cocoa beans, filed for bankruptcy protection.
"We went through this concentration a few years ago. But I think now we're doing the opposite," said Matthew Stolz, president of Rockwinds.
"There's a limit to how big you can become in cocoa. For a smaller firm, there are more opportunities, there are many more potential suppliers and buyers."
Notably, most of the ongoing expansion in cocoa is happening in physical trading, as margins in that space remain attractive even as trading on the futures market becomes more challenging.
Earlier this year, after four decades in the cocoa market, veteran Anthony Ward shuttered his CC+ hedge fund, pointing to the rise of high-frequency, computer-driven trading as a key factor.
"It's becoming increasingly difficult to justify moves in the futures markets," another source said. "And there's been good margins on the physical side. So maybe that's where teams are looking to expand."