Lindt & Sprüngli posts improved performance, amid inflation-linked ingredients price rises

Lindt & Sprüngli Group has reported a key 10.1% sales growth to CHF 2.09 billion for the first half of 2023, acknowledging that price rises had been required against a backdrop of soaring ingredients costs, reports Neill Barston.

According to the company’s latest figures, net income amounted to CHF 204.5 million, and its outlook for the financial year has been revised upwards, projecting growth of 7-9%, despite supply chain issues continuing to impact on the wider sector.

The Swiss firm has made notable strides in recent years, which have been topped with the creation of its ‘Home of Chocolate’ which has been welcoming visitors from around the world for the past three years.

As the business noted, its European sales increased 8.9%, to CHF 1billion, with notable growth in German and French markets, despite price-sensitive customers and a high like-for-like basis. Italy and the UK, also important and established core markets, even achieved double-digit growth. The Swiss market also performed particularly well.

Furthermore, the North America region confirmed the Group’s strategic focus on the territory, which saw double-digit organic sales growth of +11.2% to CHF 798.1 million. All five operations in North America grew, particularly Lindt & Sprüngli USA, which strengthened its position as the leading chocolate company in the premium segment in the world’s largest chocolate market.

The markets in the “Rest of the World” segment also achieved strong organic growth of +11.1% to CHF 281.7 million. Particular mention should be made of the companies in Japan and Brazil as well as the “Global Travel Retail” division, which posted double-digit growth rates.

As the company noted, raw material and energy costs were volatile in light of the persistently tense global political situation. While energy prices and the security of supply was still a major issue at the start of the year, the Group currently expects the situation to ease – subject to developments in the coming winter.

However, the prices of raw materials and intermediate products, such as sugar and packaging materials, remain high. At the same time, the world market price for cocoa has been rising continuously since the end of 2022 and hit a long-term high. In fact, this increase is so significant that it outstrips the easing seen in some other raw materials.

Significantly, the company acknowledged that this was likely due to the fact that its premium ranges high-quality chocolate recipes contain large amounts of cocoa. In response, it has offset some of the cost increases incurred so far through efficiency improvements and long-term hedging for cocoa and other raw materials. In some cases, however, these increases also had to be passed on to trade partners with price increases.

Notably, the Global Retail organisation achieved above-average success in the first half of the year. Shopping in the Group’s around 500 own retail shops is particularly attractive to consumers, this is thanks to the exclusive experience they offer. In addition, tourism is continuing to rebound, meaning that sales in the Group’s own shops in all market regions have grown in the double-digit range. This was also attributable in part to positive mix effects, as consumers selected high-quality products with correspondingly higher added value more frequently than in the previous year.

Overall, sales in the global chocolate market trended upward. Due to inflationary effects and the resulting subdued consumer sentiment, volumes stagnated or declined slightly depending on the product group and market. In our product mix, the trend towards gift packaging, pralines and hollow figures continues, meaning that the Group continues to benefit from their higher added value. While double-digit growth was seen in particular in sales of Lindor, Lindt’s Gold Bunny for Easter, which remains among its most high profile flagship product series.