Lindt & Sprüngli: Sales and profit growth in an exceptionally challenging environment

In an extremely challenging market and economic environment, the Lindt & Sprüngli Group confirms its medium to long-term growth target of 6% to 8% and a continuous improvement in terms of operating profit margin of 20 to 40 base points. Due to largely adverse currency developments, Lindt & Sprüngli’s organic growth of +7.9% in local currency terms resulted in an equivalent sales increase in Swiss francs of +2.9% to CHF 1.17 billion. This continuing solid growth is above the market average and Lindt & Sprüngli is gaining further market shares.


A weakening economy and fear of inflation are beginning to impact consumer sentiment, especially in the US. As part of the massive global increase in commodity prices, procurement markets have shown exceptionally strong upward movements since 2007, in particular since the early part of 2008. The price of milk already doubled in the second half of 2007. The price of cocoa on the London futures market has risen by more than 70% from early January to June 2008. To make matters worse, the economy was faced with continuous increases in energy and transportation costs.


Lindt & Sprüngli as well, was not completely left unscathed by this difficult business environment. This necessitated price increases over the past few months for both regular and seasonal products which, in turn and as expected, led to reduced volume growth. The currencies particularly relevant to the group’s business—the USD, CAD, and GBP—have lost as much as 15% against the CHF in comparison with the same period last year.


Against the background of this challenging global market and economic environment, the efficiency of the strategy pursued for years now focusing on the exclusive positioning in the premium chocolate segment and providing uncompromising product quality has proved to be an extremely valuable and sound base for ongoing business success.


When analyzing the Group’s earnings in the first half of 2008, it is important to bear in mind the seasonal and gift-oriented nature of the premium chocolate business: the Lindt & Sprüngli Group makes less than 40% of its annual sales during the first half of each year, but at the end of June these sales are charged with around half of the fixed costs of production, administration and marketing. This means that the profitability of the Lindt & Sprüngli Group in relation to sales in the first half of the year cannot be equated with its profitability over the year as a whole.


Based on the sales development, in combination with price increases from the first half of 2008 and thanks to optimized cost control and additional improvements in efficiency, the operating profit (EBIT) rose by CHF 3.5 m or +11.6% to CHF 33.6 m and the semi-annual net income by CHF 1.0 m or +4.6% to CHF 22.9 m.