Lindt & Sprüngli posts 4.4% rise in profit, expecting diffcult 2009

Posted by James Ferre on 18th March 2009

Chocolate maker Lindt & Sprüngli has reported an increase in profit of 4.4% for 2008, but could record their first profit drop in a decade this year. Despite the turbulence, the company said they would maintain high marketing spend as they believe it will serve them well in the following years.

The strategy of premiumisation had proven beneficial and would help the company when market conditions improve, they advised. “Despite the difficult market environment, which deteriorated especially in the second half of the year 2008, Lindt & Sprüngli managed to grow above average and further strengthened its market position with the gain of market shares,” Lindt advised. “This shows that the premium strategy pursued by Lindt & Sprüngli continues to prove successful. Especially pleasing is the fact that Lindt and Ghiradelli were once again the fastest growing chocolate brands in the USA.”

Several countries, such as England, Spain and Italy, were particularly hard hit by the financial crisis, the company noted, which resulted in a number of insolvencies or even bankruptcy filings on the part of important distribution channels and had an impact on the turnover in these countries.

“In the year 2008, the chocolate industry was not only confronted with a steadily deteriorating consumer sentiment, but also with highly volatile commodity prices and currency influences,” Lindt reported. “The aggravation of the economic conditions will grow more acute in the current year and affect the situation on the employment markets, which will have a negative impact on consumer sentiment.”

Lindt & Sprüngli is expecting that commodity prices, especially for cocoa beans, as well as various currencies will continue to be highly volatile.

Their strategies for dealing with the crisis include possibly increasing marketing support in markets with a high growth potential and new geographies, investments in production facilities in the USA, development of synergies in terms of production, logistics and administration as well as restructuring of the own US retail chain.

The Swiss-based chocolate producer said they were not expecting to reach long-term growth targets this year, but remained optimistic about future trading conditions.

“Lindt & Sprüngli continues to trust in its proven and successful business model and consciously accepts the temporarily decrease in profits due to restructuring costs while at the same time increasing the investments in brand and market position,” they stated. “The Group is confident that this strategy will further strengthen the already solid foundation of the company in view of a secure and successful future.”