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Lindt & Sprüngli: Global Confectionery’s Feel-Good Story

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For confectionery manufacturers, Lindt is currently something of a shining city on a hill. It continues to make what the majority of its competitors have found very difficult to achieve, ie high growth in the US and Western Europe, the world’s most lucrative chocolate markets, look easy. Not only that, but the company continues to almost nonchalantly ignore the hero worship often given to China and India – which saw overall value sales of chocolate grow by 13% and 27% CAGRs respectively over 2010 and 2015 – and maintains a minimal presence in both.

Lindt has demonstrated that, whilst others have rushed to enter fast-growing markets, a strategy focusing on clearly positioned branding that targets high-spend markets can indeed be successful. With value spend per capita expected to grow in both Western Europe and the US in the next five years, Lindt is in a strong position to capitalise on future growth.

Lindt’s portfolio suits shifting consumer habits in the West

Certainly, many manufacturers are struggling with declining volume sales in the West, with per capita volume sales falling at a 1% CAGR in the US and flat in Western Europe between 2010 and 2015. Yet, per capita spend is increasing in both markets, at CAGRs of 3% and 2% respectively over the same time period. Whilst some of this is a result of manufacturers increasing unit prices to absorb increased input costs, it also belies the growing popularity of premium chocolate, which Lindt specialises in.

Value Shares of Chocolate Confectionery by Product Type: 2015 & Value Shares of Impulse Products: 2015


Source: Euromonitor International

Not only that, but Lindt’s chocolate portfolio is geared towards high-growth products. Impulse products such as countlines are largely underperforming in the West, whilst planned purchases such as tablets and seasonal chocolate are outperforming overall chocolate confectionery sales. This looks set to continue; Western Europe’s overall chocolate confectionery market will rise at a 1% CAGR between 2015 and 2020, whilst seasonal chocolate and tablets will each see 2% CAGR increases in constant value over the same period. More retailers are banning the sale of confectionery at checkouts which, in combination with the growth of e-commerce, will mitigate sales prospects for impulse chocolate.

83% of Lindt’s chocolate portfolio is focussed on what could be termed planned purchase products; indeed, a critical view would be that the company is too reliant on planned purchase goods. Hence, the company launched its Hello! countline range in the UK in 2013 to slightly rebalance the equation. Alongside Ferrero, Lindt has a well-defined target audience to whom its products appeal – those consumers looking to spend above average on higher quality chocolates.

Why Lindt has decided to ignore China and India

Lindt is the sole leading global confectionery player that has a minor presence in Asia Pacific; its sales outside the US and Western Europe fall into its “Rest of the World” segment, the majority of which consists of sales generated in Australia, Russia and Brazil.

This makes perfect sense given Lindt’s focus on premium. Despite impressive growth, India’s per capita spend on chocolate confectionery remains low at US$1.50, compared with US$57.00 in the US. The average unit price of chocolate is US$1.20 per 100g in India; cheap chocolate, let alone premium products, remains beyond the spending power of many Indians. In Asia Pacific, Lindt’s target audience simply does not exist in large enough quantities to justify a large presence. Another criticism may be that Lindt’s absence from this market puts the company on the back foot when it eventually decides to move in. There may be some truth in this, but with all the logistical costs entering a market entails, a critical mass, whereby entry would be optimal, remains a long way off.

5-year forecast is optimistic

Lindt’s retailing strategy is yet another advantage over its rivals, and it is using this strategy to expand its presence in markets such as Brazil and Australia. It is in danger of overstretching, however, if the company saturates its image by selling its products in too many store locations, or creates too many brands, which would ultimately dilute the premium message. Even if this is the case, with premium sales growing in the US and Western Europe, and a portfolio well matched to current retail trends, the next five years look bright for Lindt.

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