Lindt notches up record sales, mass market threat lurks

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Related tags: Lindt, Chocolate, Kraft foods

Swiss chocolatier Lindt and Sprüngli has announced record sales
figures during 2004, on the back of improved export sales and
burgeoning consumer demand for premium chocolate products in
Western Europe, Tom Armitage reports.

Lindt, which counts Lindor and Ghirardelli chocolates among its key brands, notched up total group sales of CHF2.016 billion (€1.3 billion) - an increase of 12 per cent on the previous year's sales of CHF1.800 billion (€1.16 billion), taking the group past the two billion mark for the first time in its seventy year history.

Lindt's high capital investment during 2004 has helped it to accelerate growth faster than many of its rivals. Consequently, its operating profits increased by 16.3 per cent, from CHF182.4 million in 2003 to CHF216.1 million - in line with analysts' expectations.

"2004 has been a very good year for Lindt. It currently remains one of the most innovative chocolate manufacturers operating in the market and has exploited its circumstances well,"​ one analyst told​.

Lindt's premium, adult-orientated market position has largely helped it to side-step the recent furore directed at mass-market US and European confectionery manufacturers - many of which have been accused of contributing to the rising number of obesity and diet-related health problems among children.

Despite achieving strong domestic sales growth of around 12.6 per cent (by comparison, Switzerland's CHF814 million chocolate industry increased by 6.8 per cent during 2003-4), Lindt's 2004 strategy focused primarily on developing overseas markets, where premium chocolate is becoming increasingly popular.

In the UK, for instance, sales soared by 31 per cent on the previous year and the US and Canada collectively saw value sales growth average around 15 per cent, compared to 2003.

Traditionally, chocolate with a high cocoa content has failed to find favour with UK and other non-Continental European consumers, although increased advertising spend and improvements to Lindt's sales distribution networks have successfully reversed this situation.

France, Germany and Italy remained Lindt's biggest customers, accounting for 53.9 per cent (or CHF1.087 billion) of total sales in 2004.

Conversely, Poland was the only country where sales dipped considerably (a 15 per cent decline), stemming from a confectionery market on the verge of saturation, together with a flagging overall demand for chocolate.

Analysts expect Lindt's typical long-term growth rate to be in the high single digits, although suggest that its 12 per cent 2005 growth target may be somewhat ambitious.

In the coming years, however, Lindt's market position may become increasingly compromised.

According to research analysts Mintel​, the European premium chocolate sector will soon become inundated with lower-priced offerings from mass market producers, including Nestlé and Kraft Jacobs Suchard (KJS) - notching up the pressure on Lindt, one of the world's leading luxury chocolate manufacturers.

Meanwhile, Lindt's share price has fared slightly better than compatriot chocolatier rival Barry Callebaut (the world's leading supplier of bulk chocolate), increasing by 3.3 per cent during 2005, compared to Callebaut's figure of around 1.9.

"In view of the growth achieved both in sales and earnings, the board of directors will be asking the general meeting on 28 April 2005 to approve a 28.6 per cent increase in the dividend to CHF180 (CHF140, 2003) per registered share, and CHF18 (CHF14, 2003) per participation certificate,"​ Lindt said in a statement earlier this week.

Related topics: Manufacturers

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