Lindt 2014 profits rise as it tightens US stranglehold
The group today released its 2014 annual report. Net income was up 10.2% to CHF 342.6m ($344m), while the group grew above the overall chocolate market with sales up 17.4% to CHF 3.4bn ($3.4bn).
#3 US chocolate player
Ernst Tanner, chairman and CEO of Lindt, said: “With the acquisition of Russell Stover in the USA, Lindt & Sprüngli has become one of the top three chocolate manufacturers in the worldwide biggest chocolate market and the absolute leader for premium and seasonal products….The integration of Russell Stover into the group of companies will take the utmost priority in 2015.”
The North American market represented 37% of Lindt’s sales in 2014. The region was among Lindt’s fastest growing markets in fiscal 2014 as sales climbed 12.8% to $1.06bn.
Lindt said the US economy grew throughout the year, spurring growth in chocolate.
“The good developments in the chocolate market are being driven by the over-proportional growth of the premium segment,” said the company in its annual report.
US potential and performance
Lindt sees further potential in the $20bn US chocolate market, where it has leapfrogged Nestlé and now sits in third place behind Mars and Hershey.
The US chocolate market has grown in value 3% annually since 2009 and the country’s per capita chocolate consumption is among the top 20 top chocolate-consuming nations worldwide at 5.2 kg per capita.
Lindt operates three subsidiaries in the country: Lindt & Sprüngli USA on the East Coast, Ghirardelli on the West Coast and now Russell Stover in the Mid-West.
Lindt & Sprüngli USA sales grew 17.6% in 2014 driven by the company’s Hello brand launch. Ghirardelli also grew with sales up 12.5% due to the brand’s appeal to younger consumers.
Russell Stover – acquired in July last year –contributed $270m to North American sales in the third quarter.
Lindt is financing the Russell Stover acquisition – an estimated $1.4bn -through a bond loan in three tranches with maturities of three, six and ten years.
‘In control of our destiny’
Before the Russell Stover buy, analysts speculated that Lindt could be an acquisition target for Nestlé.
The company’s annual report said: “We wish to remain in control of our destiny. Independence through superior performance will allow us to maintain this control.”
Price hikes and cocoa outlook
Lindt sustainable cocoa targets
Lindt & Sprüngli has committed to ensuring its Ghanaian cocoa supply chain is fully verified by 2016. By 2020, it hopes its global cocoa supply is 100% traceable and verified.
Lindt chief Tanner had previously told Reuters that his firm could weather rising cocoa costs due to its premium positioning. However the company raised wholesale.
The company’s annual report said: “Although Lindt & Sprüngli always endeavors to hold its prices as stable as possible through efficient cost management and optimized purchasing policy, some punctual adjustments nevertheless had to be made.”
Tanner said high commodity prices would continue to present a great challenge.
The International Cocoa Organization (ICCO) recently predicted the cocoa market will return to deficit for the 2014/15 season. It forecasts a supply and demand deficit of 17,000 metric tons (MT) for the cocoa year due to adverse weather in West Africa.
