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Analyst Insight

Lindt will continue to outdo competitors after 2015 sales triumph, says analyst

By Oliver Nieburg+

14-Jan-2016
Last updated on 14-Jan-2016 at 17:22 GMT2016-01-14T17:22:12Z

Lindt may look to strenghten in Brazil and South Africa next to further premium chocolate lead, says Bank Vontobel analyst. Photo: iStock - thamerpic
Lindt may look to strenghten in Brazil and South Africa next to further premium chocolate lead, says Bank Vontobel analyst. Photo: iStock - thamerpic

Lindt & Sprüngli has reported 2015 sales growth far above the overall chocolate market and one analyst believes it will continue to outpace multinational premium chocolate competitors in the coming year.

The firm reported group sales of CHF 3.65 bn ($3.64bn), up 7.9% in Swiss francs or 7.1% in organic growth.

It claimed market share gains in all its key markets and said it has “significantly” outperformed the overall chocolate market

This came despite higher commodities prices, a strong Swiss franc and weaker consumer sentiment following terror threats and rising unemployment rates, the firm said.

“A hot summer and the late onset of winter deepened this somber mood,” it added.

‘Stunning’ numbers

Analyst Jean-Philippe Bertschy of Bank Vontobel told ConfectioneryNews:“If you look at the market they are in, the Lindt figures are stunning.” 

According to Bertschy, volume sales in the global chocolate confectionery market fell 2-3% in 2015, while one of Lindt’s major European competitors Mondelēz reporting low chocolate sales growth in its latest results.

He said Lindt had profited from continuity as its management team has been in place for some time.

Strong NPD and packaging innovation as well as a growing presence in emerging markets were other drivers, he said, while Lindt’s global own stores network had helped build brand loyalty.

The analyst expects Lindt will register 7% organic growth in 2016, far ahead of the overall chocolate market.

Lindt 2015 organic growth
  • Europe - +5.4%
  • NAFTA -+7.9% (inc. Russel Stover)
  • Rest of the World – +11.4% 

Analyst: Brazil and South Africa should be focal points

“Lindt will definitely want to focus on Brazil and South Africa – two markets that are exploding right now,” said Bertschy.

In 2015 Lindt added 16 Lindt boutiques at prime locations in Brazil, where it has a joint venture with Brazilian premium chocolate specialist the CRM Group.

Lindt also has a sales office and own-store presence in South Africa and last year introduced its Hello brand to the market.

Bertschy added that China, Japan, Russia and the Middle East presented further opportunities for Lindt.

But Jack Skelly, food analyst at Euromonitor International said Lindt had profited from “almost nonchalantly” ignoring the Chinese and Indian markets that have seen value sales of chocolate grow by 13% and 27% CAGRs respectively between 2010 and 2015.

“Lindt has demonstrated that, whilst others have rushed to enter fast-growing markets, a strategy that focuses on clearly positioned branding which targets high-spend markets can indeed be successful,” he said.

Russell Stover to reap benefits soon

Lindt said its integration of US business Russell Stover was on track. The Swiss group acquired the boxed chocolate specialist in July 2014 , helping it leapfrog Nestlé in the US chocolate market.

In the NAFTA region (US, Canada and Mexico), Lindt reported 7.9% organic growth in 2015, but Bertschy said without Russell Stover, the Lindt group (Lindt and Ghirardelli) saw 9% organic growth for the region.

He said there was a slowdown in the second half compared to H1, but the results were still far beyond the overall chocolate market.

His analyst note said Lindt was doing “tremendous work” at Russell Stover and would reap the benefits from H2 2016 onwards.

Premium space heats up

The global premium chocolate market is poised for a compound annual growth rate of around 8% in the coming years, according to Nestlé estimates, while mainstream chocolate is expected to grow around 5%.

Bertschy said competition would heat up for Lindt, the global leader in the premium chocolate space.

In June last year, Ferrero acquired UK premium chocolate maker Thorntons , which like Lindt also has a retail network.

Analysts have also suggested a potential merger between Hershey and Ferrero – which has been dismissed by Hershey as “speculation”.

Nestlé also upped its game in premium chocolate last year by introducing  “super premium” Swiss brand Cailler in travel retail and via Amazon in the US, UK, Germany and China.

But Bertschy said: “It will be difficult for Cailler to tap into that market [premium chocolate].”

He said Cailler had under CHF 100m ($99.8m) annual sales in Nestlé’s home market Switzerland and would struggle to compete globally with Lindt, which is strong in e-commerce (around CHF 20m annual sales) and travel retail.

“For the big groups it could be very difficult for them…You could say Godiva is successful but it is a different model,” concluded the Bank Vontobel analyst.

Sales for Turkish conglomerate Yildiz Holding’s Godiva brand come predominantly via its own retail network, but it also has a growing e-commerce presence.

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