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North America shores up Lindt performance in H1

Lindt North America sales helped by recent Ghirardelli squares launch as well as Lindor and Excellence
Lindt North America sales helped by recent Ghirardelli squares launch as well as Lindor and Excellence

Lindt & Sprüngli has reported sales and net profit gains in the first half of 2014 driven by performance in North America.

Group sales grew 6% to CHF 1.2bn ($1.3bn), while net profits rose 14.3% to CHF 55.8m ($61.5m). Lindt grew across the board, but reported its biggest gains in North America.

Lindt net profits propelled by North America

 “All three North American subsidiaries with the Lindt and Ghirardelli brands contributed to this good result and increased their market shares yet again. Growth was once more boosted by Lindor and Excellence and also by the Squares from Ghirardelli,” said the firm in its semi-annual report.

Lindt’s H1 sales in North America registered organic sales growth of 13.7% in North America to CHF 322m ($355m).

North America was already Lindt’s largest market and accounted for 26.8% of sales during the period – ahead of the second largest Germany, which made up 19.1%. Lindt operates 50 retail stores throughout the US. It also has two wholesale subsidiaries, Lindt USA and Ghirardelli.

Lindt sales by region H1 2014. Source: Lindt semi-annual report 2014

The company hopes to make further inroads in the US after acquiring Russell Stover last month , which saw it overtake Nestlé as the country’s third largest chocolate manufacturer. It called the buy the “biggest and strategically most important acquisition in the company’s history”.

Up in Europe

Lindt also grew H1 sales in Europe by 6.9% and reported market share gains in Germany, France, the UK and Switzerland.

It reported improvements in Italy, but said traditional retail channels were still under pressure. In Australia, Lindt claimed it had further consolidated its lead of the premium chocolate segment.

The firm recently entered a joint venture with CRM Group , Brazil’s market leader for premium chocolate retail. Lindt will establish three Lindt stores in the country and said the move in the world’s fifth largest chocolate market signalled its intent for ongoing expansion into new and fast-growing emerging countries.

Added capacity

Lindt recently expanded its production facilities in Switzerland, Germany, France, and the US , allowing it to have wider distribution for its Hello brand among other products in H1.

The company has also commissioned a Lindor facility at the company’s headquarters in Kilchberg, Switerland. It previously ditched plans to expand the Kilchberg site in 2012, but reported “continuously rising demand” that would give “excellent basis for prospecting the new markets in the emerging countries”.

Lindt will continue to invest in manufacturing sites for the remainder of 2014 at an estimated cost of CHF 250m ($276m) for the full year.

Lindt added three factories to its US operation when it acquired Russell Stover (Kansas, Colorado and Texas). The company already operated facilities in Stratham, New Hampshire for Lindt USA (pictured) and in San Francisco, California, for Ghirardelli.

Commodity costs and price hikes

Lindt recently added a new line to produce Excellence indivually wrapped chocolate diamonds at its US headquarters in New Hampshire.

Lindt, like all other chocolate company’s in recent financial announcements, reported pressure from commodity prices.

“This applies in particular to cocoa beans and cocoa butter where the anticipation of a harvest shortfall resulted in higher prices. The price of milk and – due to climate factors – also of hazelnuts and almonds rose sharply,” it said in its semi-annual report.

The firm said it made moderate price adjustments on selected products in H1. The company’s chairman and CEO Ernest Tanner previously said the firm wouldn't need to implement widespread wholesale raise prices because of Lindt’s premium positioning.

Mondelēz , Nestlé , Mars Chocolate North America and Hershey have all introduced wholesale price hikes in H1 in response to rising input costs, particularly for cocoa.

 Lindt reaffirmed its full year outlook. It said, excluding the Russell Stover business, it expected full-year organic sales growth of 6 to 8% and EBIT-margin 20 to 40 basis points higher than in the previous year.

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