Lindt continues to punch above ‘stagnating’ chocolate market in H1

By Oliver Nieburg

- Last updated on GMT

Lindt outperforms global chocolate market with growth in established and developing markets
Lindt outperforms global chocolate market with growth in established and developing markets

Related tags Switzerland Cocoa solids Chocolate Lindt

Lindt & Sprüngli has reported strong sales growth in the first half of the year driven by its North American business and recent Russell Stover acquisition as global chocolate markets slow or decline.

The company yesterday posted its semi-annual sales and recorded +17.4% sales growth to CHF 1.4bn ($1.5bn), including contributions from Russell Stover, acquired in July last year.

Success in face of slowing chocolate markets

“Despite slowing and, in some cases, stagnating chocolate markets and record-high prices for raw materials, as well as an extremely strong Swiss franc, this result again confirms the success of our long-term strategy,”​ said Lindt in a release.

According to Nielsen, volumes in the global chocolate confectionery market dropped 2.1% between September 2014 and May 2015.

The International Cocoa Organization (ICCO’s) average cocoa price for June 2015 stood at $3,239 per metric ton, 2% higher than July last year and a 5% rise on May 2015.

Lindt said it faced challenges from record-high raw material prices, but claimed investment in brand and production capacity had helped it offset the impact.

Last year the Swiss chocolate maker expanded factories in Switzerland, Germany, France, and the US​, allowing wider distribution for its Hello brand among other products.

Analyst insight

Jon Cox, head of European consumer equities at Kepler Cheuvreux, told ConfectioneryNew that Lindt had once again posted "an excellent set of organic sales figures".

"It is clearly gaining market share as it is seen as the international benchmark for premium chocolate, it is innovative in terms of product, while its retail expansion is probably contributing 2 percentage points to growth."

Jean-Philippe Bertschy of Bank Vontobel wrote in an analyst's note that Lindt's growth was "literally phenomenal in a very depressed chocolate market".

"Lindt is gaining significant market shares in all markets. Moreover, the company is likely to benefit from falling cocoa butter, sugar and dairy prices," said Bertschy as he maintained his Buy rating.

Market performance

Lindt recently entered a series of emerging markets, which have helped it negate slowing growth in the developed markets. Last year, it entered a joint venture joint retail venture with CRM Group​ in Brazil and also recently established subsidiaries in China, Russia and South Africa.

“Key markets for chocolate such as Switzerland and Europe are largely saturated, with very little growth,” ​said Lindt in its release. However, the firm reported sales growth above the market average in the UK, U.S. Switzerland, France and Germany. “With sales growth in the high double digits, Lindt & Sprüngli in Australia is doing particularly well,” ​said Lindt in its release.

Russell Stover, acquired by Lindt last year for a reported $1.4bn, grew in double digits in the first half of the year, the firm reported. But, Cox said: "It is too early to say on Russell Stover. I personally think the brand is not in the same class as Lindt."

Lindt & Sprüngli maintained its 6-8% target for annual organic growth this financial year and hopes to increase EBIT margin between 20 to 40 basis points.

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