Lindt bucks the trend with sweet performance

Related tags Lindt Chocolate Types of chocolate Chocolatiers Lindt & sprüngli

Swiss chocolatier Lindt & Sprüngli has reported its
highest-ever rate of organic growth for 2004, with its focus on
premium products allowing it to buck the general trend towards
reduced consumption of chocolate in favour of healthier
alternatives, writes Chris Jones.

Lindt said that organic growth in local currency terms in 2004 was 12.5 per cent, the highest level ever achieved by the company. Growth in Swiss francs was slightly lower, at 12 per cent, with the gains made in euro-dominated markets not quite enough to offset the further decline in the US dollar against the franc.

With sales topping CHF2 billion also for the first time, 2004 was a truly record year for the Swiss group, with every division (with the exception of Poland, where currency fluctuations took their toll) contributing to the excellent performance.

Despite the impact of the weak dollar, the company's performance in the US was highlighted as being particularly good. "Overall the US confectionery market showed only marginal growth of around 1.5 per cent. In contrast, driven by substantially increased marketing investments on the part of Lindt and Ghirardelli, the premium segment witnessed exceptionally strong growth,"​ the company said.

Lindt did not give a breakdown of sales by region, but analysts Goldman Sachs​ estimate that the company's sales for North and South America reached around CHF455.5 million, some 12 per cent ahead of the previous year.

With most European market growing faster than in previous years, and sales in duty-free benefiting from a positive trend in the tourist industry, there were good results elsewhere as well. Business was also boosted by the poor summer weather - which favours chocolate consumption - and by the fact that there were more trading days than in 2003.

"The above-average sales performance by Lindt & Sprüngli bears testimony to the company's consistent brand management strategy, annually rising investments in marketing, and the continuous pace of introducing innovations,"​ the company said in a statement.

All three of Lindt's key product segments - tablets, pralinés and seasonal products - contributed to the good performance, reflecting the ongoing shift towards high-quality confectionery products, a strategy which Lindt first launched a decade ago.

Full financial results for the chocolatier will be released on 15 March, but Lindt said that it expected the percentage increase in EBIT and net income to be higher than the growth in sales.

"Lindt exceeded expectations last year by capitalising this trend, and the use of dark chocolate in its products may also prove beneficial, enabling it to tap into both the luxury and health-motivated audiences,"​ according to market analysts Datamonitor​.

Changes in consumer behaviour, lifestyles and needs are impacting the chocolate market and driving the premium segment, according to Datamonitor. Consumers feel they have added time pressures with subsequent stress levels leading them to trade up and gain comfort and enjoyment through indulgent, luxury items such as chocolates.

"On the back this, Lindt has gained market share from ordinary chocolate brands such as Cadbury-Schweppes. The European market for premium chocolate is forecast to grow by 13 per cent over the next four years and is expected to be worth $2.9 billion come 2008."

While growing health awareness among consumers is influencing their purchase behaviour, taste remains the dominant influence on product choice as consumers are not prepared to sacrifice sensory benefits for added health advantages, Datamonitor said.

"However luxury chocolate has the advantage of being perceived to be of a higher quality than mainstream chocolate. Dark chocolate especially has a healthier perception among consumers as it contains more cocoa, less fat and fewer additives."

Thorntons goes for quality push

Lindt's focus on premium products is being copied by Thorntons, the UK chocolate maker and retailer, which also reported first half trading figures this week. Although total company sales reached £119.7 million, up 9.5 per cent, this was mainly due to the decision to focus on higher quality products sold through the mainstream retail trade.

Thorntons has worked hard to combat the somewhat shabby image of many of its stores in recent years, revamping many outlets and tinkering with café-style stores, but the damage to its once upmarket image - already under fire from the arrival of Continental-style chocolatiers such as Godiva - has been harder to repair.

The move to sell its products through other retail outlets seems to have helped, however, with this part of the Thorntons business clearly showing the biggest growth in the first half of the year. Thornton's own shop sales were down 0.3 per cent on a like-for-like basis to £85.4 million, although they rallied slightly over Christmas with a 0.8 per cent gain. Franchise sales were down 4.1 per cent on a like-for-like basis.

But sales of Thorntons products to other retailers increased by £9.8 million to £13.4 million, an increase of 270 per cent on last year, while private label sales rose by 2.7 per cent to £9.1 million.

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