Barry Callebaut has reported a drop in its full-year net profit; a worse than expected reduction.

The Swiss-based company, which is also the world's biggest industrial chocolate maker, has thus

reduced its sales growth targets in an effort to try and maintain profit margins.

Additionally, the company will cut its production capacity in Port Klang, Malaysia, with

immediate effect and shut down its cocoa factory in Bangpakong, Thailand, by end January 2016

- and indication that overcapacity and falling demand in Asia are hurting profits.

According to the company's full-year 2014/15 results report, "A challenging market environment

characterized by a historically low combined cocoa ratio triggered by grinding overcapacity and

low demand for cocoa products had a negative impact on profitability".

Since early 2014, cocoa grinders globally have faced a dismal combined ratio - the processing

margin for both cocoa butter and powder - while cocoa bean prices soared to four-year highs. As

a consequence, many large chocolate companies have raised their retail prices, affecting

consumers and demand in the process.

The cocoa demand in Asia has been hit particularly hard, despite it being an emerging market for

chocolate. Even Hershey Co., for whom Barry Callebaut provides chocolates, has noted slowed

growth in China for the past five quarters. This was because cocoa grinding, which separates the

beans into powder and butter, has fallen in Asia.

Asian cocoa bean processing has been relocating from Malaysia, whereby global companies,

such as Olam International Ltd. and Cargill, have opened their cocoa processing facilities in

Indonesia in 2014. Meanwhile, some independent and older grinders have reportedly closed

down in recent years as they were unable to compete.

Question: Explain how the knowledge of elasticity can help Barry Callebaut in its decision

making